<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CALAIR CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6749 76-0566170
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
2929 ALLEN PARKWAY, SUITE 2010
HOUSTON, TEXAS 77019
(713) 834-2950
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
CALAIR L.L.C.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6749 76-0566172
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
C/O CALFINCO INC.
2929 ALLEN PARKWAY, SUITE 2010
HOUSTON, TEXAS 77019
(713) 834-2950
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
CONTINENTAL AIRLINES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4512 74-2099724
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
JEFFERY A. SMISEK, ESQ.
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
CONTINENTAL AIRLINES, INC.
2929 ALLEN PARKWAY, SUITE 2010
HOUSTON, TEXAS 77019
(713) 834-2950
(Name, address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
Copy to:
SCOTT N. WULFE
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-2750
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SENIOR NOTE(1) PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 1/8% Senior Notes due 2008......... $112,300,000 100% $112,300,000 $33,129
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantee of 8 1/8% Senior Notes due
2008(2)............................ $112,300,000 N/A N/A N/A(3)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Continental Airlines, Inc. has irrevocably and unconditionally guaranteed on
a unsecured senior basis the 8 1/8% Senior Notes Due 2008 of Calair L.L.C.
and Calair Capital Corporation.
(3) Pursuant to Rule 457(n), no separate fee is required to be paid in respect
of guarantee of the 8 1/8% Senior Notes Due 2008, which is being registered
concurrently.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 31, 1998
PROSPECTUS
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
OFFER TO EXCHANGE
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ALL OUTSTANDING 8 1/8% SENIOR NOTES DUE 2008
PAYMENT FULLY AND UNCONDITIONALLY GUARANTEED ON AN UNSECURED, SENIOR BASIS BY
CONTINENTAL AIRLINES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED
---------------------
Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental" or the
"Company"), a Delaware corporation, and Calair Capital Corporation ("Calair
Capital" and, together with Calair, the "Issuers"), a Delaware corporation and a
wholly owned subsidiary of Calair, hereby offer, upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal," and together with this Prospectus, the
"Exchange Offer"), to exchange up to $112,300,000 aggregate principal amount of
their 8 1/8% Senior Notes due 2008 (the "Exchange Notes"), which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental and
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for a like principal amount of their
outstanding 8 1/8% Senior Notes due 2008, which are fully and unconditionally
guaranteed on an unsecured, senior basis by Continental (the "Old Notes"). The
form and terms of the Exchange Notes are identical in all material respects to
the form and terms of the Old Notes, except that the Exchange Notes do not
contain terms with respect to transfer restrictions (other than transfer
restrictions relating to certain Employee Retirement Income Security Act of
1974, as amended ("ERISA"), matters) or interest rate increases. The Exchange
Notes will evidence the same debt as the Old Notes and will be issued under and
be entitled to the benefits of the same Indenture (as defined herein). The
Exchange Notes and the Old Notes are collectively referred to herein as the
"Notes."
The Notes are unsecured, senior obligations of the Issuers ranking pari
passu in right of payment with all other existing and future unsecured and
unsubordinated obligations of the Issuers. The Old Notes have been, and the New
Notes will be upon original issue, fully and unconditionally guaranteed on an
unsecured, senior basis by Continental (the "Parent Guarantee"). The Parent
Guarantee is an unsecured, senior obligation of Continental ranking pari passu
in right of payment with all other existing and future unsecured and
unsubordinated obligations of Continental, and senior in right of payment to all
existing and future obligations of Continental expressly subordinated in right
of payment to the Parent Guarantee. The Notes and the Parent Guarantee are
effectively subordinated in right of payment to any secured senior obligations
of the Issuers and Continental, respectively, with respect to the assets of the
Issuers and Continental, respectively, securing such
(Cover continued on next page)
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED AND BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1998
<PAGE> 3
obligations. The Notes and the Parent Guarantee are also effectively
subordinated to all existing and future liabilities of the subsidiaries of the
Issuers and Continental, respectively. As of March 31, 1998, Continental had
$2.0 billion (including current maturities) of long-term debt and capital lease
obligations on a consolidated basis of which approximately $1.4 billion was
secured long-term debt and capital lease obligations of Continental and $146
million was long-term debt and capital lease obligations of Continental's
subsidiaries, and on a pro forma basis giving effect to the issuance of the Old
Notes, the Issuers would have had no indebtedness outstanding other than the
Notes. The terms of the Notes and the Parent Guarantee do not limit the Issuers'
or Continental's or any of their respective subsidiaries' ability to incur
additional indebtedness or to mortgage or pledge any of their respective assets
or to pay dividends or make other distributions on, or redeem or repurchase,
capital stock. See "Capitalization" and "Description of the Notes -- Ranking."
The Old Notes were sold by the Issuers on April 17, 1998 to the Initial
Purchasers (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchasers only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and to non-U.S. persons pursuant to offers and sales that occurred outside
the United States within the meaning of Regulation S under the Securities Act,
each of whom agreed to comply with certain transfer restrictions and other
conditions. Accordingly, the Old Notes may not be offered, resold or otherwise
transferred unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy the
obligations of the Issuers and the Company under the Registration Rights
Agreement (as defined herein) entered into with the Initial Purchasers in
connection with the offering of the Old Notes (the "Old Notes Offering").
The Exchange Notes will bear interest at the rate of 8% per annum, payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1998,
to holders of record on the March 15 and September 15 immediately preceding such
interest payment date. Holders of Exchange Notes of record on September 15, 1998
will receive interest on October 1, 1998 from the date of issuance of the
Exchange Notes, plus an amount equal to the accrued interest on the Old Notes
from the date of issuance of the Old Notes, April 17, 1998, to the date of
exchange thereof. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the Exchange Notes.
The Issuers and the Company will accept for exchange any and all Old Notes
that are validly tendered on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be , 1998 (30 calendar
days following the commencement of the Exchange Offer), unless the Exchange
Offer is extended. Tenders of Old Notes may be at any time prior to 5:00 p.m.,
New York City time, on the business day prior to the Expiration Date (as defined
herein), unless previously accepted for exchange. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain conditions which may
be waived by the Issuers and the Company and to the terms and provisions of the
Registration Rights Agreement. Old Notes may be tendered only in denominations
of $1,000 principal amount and integral multiples thereof. The Issuers and the
Company have agreed to pay the expenses of the Exchange Offer. See "The Exchange
Offer."
Based on interpretations of the Securities Act by the staff of the
Securities and Exchange Commission (the "Commission" or "SEC"), as set forth in
no-action letters issued to third parties, including Exxon Capital Holdings
Corporation, SEC No-Action Letter (available April 13, 1989), Morgan Stanley &
Co. Incorporated, SEC No-Action Letter (available June 5, 1991) and Shearman &
Sterling, SEC No-Action Letter (available July 2, 1993) (collectively, the
"Exchange Offer No-Action Letters"), the Issuers and the Company believe that
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold or otherwise transferred by holders thereof (other than a
Participating Broker-Dealer (as defined below), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to engage in, a
distribution of such Exchange Notes and have no arrangement with any person to
participate in a distribution of such Exchange Notes. By tendering the Old Notes
in exchange for Exchange Notes, each holder will represent to the Issuers or the
Company that:
2
<PAGE> 4
(i) it is not an affiliate of the Issuers or the Company (as defined in Rule 405
under the Securities Act) or a broker-dealer tendering Old Notes acquired
directly from the Issuers or the Company for its own account; (ii) any Exchange
Notes to be received by it will be acquired in the ordinary course of its
business; and (iii) it is not engaged in, and does not intend to engage in, a
distribution of such Exchange Notes and has no arrangement or understanding to
participate in a distribution of the Exchange Notes. If a holder of Old Notes is
an affiliate of the Issuers or the Company or is a broker-dealer who purchased
Old Notes directly from the Issuers for its own account or is engaged in or
intends to engage in a distribution of the Exchange Notes or has any arrangement
or understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder may not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer (a
"Participating Broker-Dealer") must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. Pursuant to the Registration Rights Agreement, the Issuers and the
Company have agreed that until the close of business 180 days after the
Expiration Date they will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Neither the Issuers nor the Company will receive any proceeds from the
Exchange Offer. No underwriter is being utilized in connection with the Exchange
Offer.
To the extent Old Notes are tendered and accepted in the Exchange Offer,
the aggregate principal amount of Old Notes outstanding will decrease with a
resulting decrease in the liquidity in the market for the Old Notes. Upon
consummation of the Exchange Offer, holders of the Old Notes who were eligible
to participate in the Exchange Offer but who did not tender their Old Notes will
not be entitled to certain rights under the Registration Rights Agreement and
such Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity in the market for the Old Notes could be adversely
affected.
The Exchange Notes generally will be freely transferable (subject to the
restrictions discussed elsewhere herein) but will be a new issue of securities
for which there is not initially a market. Accordingly, no assurance is given as
to the development or liquidity of or the trading market for the Exchange Notes.
Chase Securities Inc., Credit Suisse First Boston and Morgan Stanley Dean Witter
(the "Initial Purchasers") have advised the Issuers and Continental that they
currently intend to make a market, if permitted by applicable laws and
regulations, in the Exchange Notes; however, the Initial Purchasers are not
obligated to do so, and any such market making may be discontinued at any time
without notice. The Issuers do not intend to apply for a listing of the Exchange
Notes, on any securities exchange or for their quotation through any automated
dealer quotation system.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS OR THE
COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY
JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE
IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
CONTINENTAL AIRLINES, INC., 2929 ALLEN PARKWAY, SUITE 2010, HOUSTON, TEXAS
77019, ATTENTION: SECRETARY, TELEPHONE (713) 834-2950. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1998.
3
<PAGE> 5
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE FUTURE
FINANCIAL POSITION OF THE ISSUERS OR CONTINENTAL, AS WELL AS CERTAIN OF THOSE
RELATING TO TRANSACTIONS REGARDING OR WITH NORTHWEST AIRLINES, INC.
("NORTHWEST") ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH EACH OF THE ISSUERS AND
CONTINENTAL BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, NEITHER THE ISSUERS NOR CONTINENTAL CAN GIVE ANY
ASSURANCE THAT SUCH EXPECTATIONS WILL BE CORRECT. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH EXPECTATIONS ARE DISCLOSED
UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
4
<PAGE> 6
AVAILABLE INFORMATION
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Issuers and the Company with the
Commission under the Securities Act. This Prospectus omits certain of the
information set forth in the Registration Statement. Reference is hereby made to
the Registration Statement and to the exhibits relating thereto for further
information with respect to the Issuers and the Company and the securities
offered hereby. Statements contained herein concerning the provisions of
contracts or other documents are not necessarily complete, and each such
statement is qualified in its entirety by reference to the copy of the
applicable contract or other document filed with the Commission. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the public reference facilities
of the Commission described below.
As a result of the Exchange Offer, Calair will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Calair Capital is not
currently, and as a result of the Exchange Offer will not become, subject to the
periodic reporting and other informational requirements of the Exchange Act.
Information with respect to Calair Capital will be provided, to the extent
required by the Commission, in the required filings made by Calair and
Continental. Continental is subject to the informational requirements of the
Exchange Act and in accordance therewith files periodic reports and other
information with the Commission. Such reports and other information concerning
Continental may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the regional offices of the Commission
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and at Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material 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. ("NYSE"), 20 Broad
Street, New York, New York 10005.
While any Old Notes remain outstanding and are "restricted securities"
within the meaning of Rule 144(a)(3), each Issuer will make available, upon the
request of any holder of an Old Note or a prospective purchaser thereof
designated by such holder, such information as is specified in paragraph (d)(4)
of Rule 144A, to such holder or prospective purchaser, in order to permit
compliance by such holder with Rule 144A in connection with the resale of such
Note by such holder unless, at the time of such request, the applicable Issuer
is subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act. Any such request should be directed to the Issuers c/o CALFINCO Inc., 2929
Allen Parkway, Suite 2010, Houston, Texas 77019, Attention: Secretary, telephone
(713) 834-2950.
The Indenture provides that Continental will file on a timely basis with
the Commission, to the extent such filings are accepted by the Commission and
whether or not Continental has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that
Continental would be required to file if it were subject to Section 13 or 15 of
the Exchange Act. Continental will also be required (a) to file with the Trustee
copies of such reports and documents within 15 days after the date on which
Continental files such reports and documents with the Commission or the date on
which Continental would be required to file such reports and documents if
Continental were so required, and (b) if filing such reports and documents with
the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at Calair's cost copies of such reports and documents to
any holder of Notes promptly upon written request. The Issuers will not be
required to file, provide or furnish with or to any Person any report or
information except as required by Section 13 or 15 of the Exchange Act and as
described above.
5
<PAGE> 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Continental 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 19, 1998, (ii) Continental's Current Reports on Form 8-K dated
January 25, February 20, March 3, April 21, and July 30, 1998, and (iii)
Continental's Quarterly Report on Form 10-Q for the quarter ended March 31,
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
Exchange Offer hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Continental will provide without charge to 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) 834-2950. In order to ensure timely delivery of the
documents, any request should be made by , 1998.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS, THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS OR THE COMPANY SINCE THE
DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL,
NOR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
6
<PAGE> 8
PROSPECTUS SUMMARY
The following summary information does not purport to be complete and is
qualified in its entirety by reference to, and should be read in conjunction
with, the more detailed information and financial statements, and the related
notes thereto, included elsewhere or incorporated by reference in this
Prospectus. As used in this Prospectus, the terms "Continental" and "Company"
refer to Continental Airlines, Inc. and its subsidiaries, unless the context
indicates otherwise.
THE ISSUERS
Calair, a Delaware limited liability company, was formed on March 31, 1998,
for the purpose of acquiring certain takeoff and landing rights (collectively,
the "Slots") at Chicago O'Hare Airport ("Chicago O'Hare"), Ronald Reagan
Washington National Airport ("Washington National") and LaGuardia Airport
("LaGuardia") from Continental, pursuant to the Transaction (as defined herein).
Upon the closing of the Transaction, the members in Calair consisted of CALFINCO
Inc. ("Calfinco"), a wholly owned subsidiary of Continental, and Chase Equity
Associates, L.P. ("CEA"), an affiliate of Chase Securities Inc., one of the
Initial Purchasers. Upon the closing of the Transaction, Calfinco and CEA owned
member interests in Calair of 76% and 24%, respectively. Pursuant to the
Transaction, Calair acquired the Slots from Continental on April 17, 1998 and
Continental leased the Slots back from Calair for a 10-year period. Calair
Capital, a Delaware corporation and a wholly owned subsidiary of Calair, was
formed specifically to effect the Old Notes Offering. The Notes are joint and
several obligations of Calair and Calair Capital, although Calair received all
the net proceeds of the Old Notes Offering, and are fully and unconditionally
guaranteed by Continental. Calair Capital is a shell company with no operations.
Consequently, financial statements of Calair Capital are not included in this
Prospectus because they are not meaningful. The consolidated financial
statements of Calair reflect the operations of the Issuers.
The principal executive offices of Calair are located at 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, and the telephone number is (713)
834-2950. The principal executive offices of Calair Capital are also located at
2929 Allen Parkway, Suite 2010, Houston, Texas 77019, and the telephone number
is (713) 834-2950.
CONTINENTAL
Continental is a major United States air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth largest United
States airline (as measured by revenue passenger miles for the first six months
of 1998) and, together with its wholly owned subsidiaries, Continental Express,
Inc. ("Express") and Continental Micronesia, Inc. ("CMI"), each a Delaware
corporation, serves 193 airports worldwide. As of June 30, 1998, Continental
flew to 131 domestic and 62 international destinations and offered additional
connecting service through alliances with leading airlines.
Recent Developments
The Company recently announced its unaudited 1998 second quarter and year
to date results of operations. The Company reported pre-tax income of $275
million for the second quarter of 1998, as compared to $208 million for the 1997
quarter, on operating revenue of $2.0 billion for the second quarter of 1998 as
compared to $1.8 billion for the 1997 quarter. After taxes and a $4.0 million
extraordinary charge, the Company reported net income of $163 million ($2.68
basic and $2.06 diluted earnings per share) for the second quarter of 1998
compared to $128 million ($2.22 basic and $1.63 diluted earnings per share) in
the comparable period of 1997.
The Company reported pre-tax income of $412 million for the first six
months of 1998, as compared to $332 million for the 1997 period, on operating
revenue of $3.9 billion for the first six months of 1998 as compared to $3.5
billion for the 1997 period. After taxes and a $4.0 million extraordinary
charge, the Company reported net income of $244 million ($4.08 basic and $3.12
diluted earnings per share) for the first six months of 1998 compared to $202
million ($3.50 basic and $2.58 diluted earnings per share) in the comparable
period of 1997. See "Continental -- Recent Developments."
7
<PAGE> 9
The principal executive offices of Continental are located at 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, and the telephone number is (713)
834-2950.
THE TRANSACTION
Continental sold the Slots to Calair for $151.1 million pursuant to the
terms of a Sale Agreement (as defined herein) between Continental and Calair.
The acquisition of the Slots was funded with a combination of debt and equity,
which included $31.7 million in capital contributions from Calfinco, $10.0
million in capital contributions from CEA and the net proceeds of the Old Notes
Offering. Continental and Calair executed a Slot Lease Agreement (as defined
herein) pursuant to which Continental agreed to lease the Slots back from Calair
for a 10-year period. Pursuant to the terms of a Redemption Option Agreement (as
defined herein) between Calair and CEA, Calair has the right to redeem 50% of
CEA's member interest (i.e., 12% of Calair) on April 17, 2003, the fifth
anniversary of the closing date of the acquisition, and has the right to redeem
all of CEA's member interest (either 12% of Calair if Calair has previously
exercised its fifth anniversary redemption option, or 24% otherwise) upon the
occurrence of certain events described in the Redemption Option Agreement and
the Company Agreement (as defined herein) and on April 17, 2008, the tenth
anniversary of the closing date of the acquisition of the Slots. The acquisition
and lease of the Slots and the execution of the Transaction Documents (as
defined herein) are collectively referred to herein as the "Transaction."
THE EXCHANGE OFFER
Exchange and Registration
Rights Agreement......... Pursuant to an Exchange and Registration Rights
Agreement among the Issuers, Continental and the
Initial Purchasers (the "Registration Rights
Agreement"), each of the Issuers and Continental
have agreed for the benefit of the holders of the
Notes, at no cost to such holders, either (i) to
effect the Exchange Offer to exchange the Old Notes
for the Exchange Notes issued by the Issuers, which
have terms identical in all material respect to the
Old Notes (except that the Exchange Notes do not
contain terms with respect to transfer restrictions
(other than transfer restrictions relating to
certain ERISA matters) or interest rate increases
as described below and the Exchange Notes are
initially available only in book-entry form) or
(ii) (a) if any changes in law or applicable
interpretations thereof by the staff of the
Commission do not permit the Issuers to effect the
Exchange Offer, (b) if for any other reason the
registration statement filed in connection with an
Exchange Offer (the "Exchange Offer Registration
Statement") is not declared effective within 180
days after the closing date of the Old Notes
Offering (the "Closing Date") or if the Exchange
Offer is not consummated within 210 days after the
Closing Date, (c) at the request of a holder (other
than an Initial Purchaser) not eligible to
participate in the Exchange Offer or (d) at the
request of an Initial Purchaser under certain other
circumstances described in the Registration Rights
Agreement, to register the Notes for resale under
the Securities Act through a shelf registration
statement (the "Shelf Registration Statement"). In
the event that neither an Exchange Offer
Registration Statement nor a Shelf Registration
Statement has been declared effective by the
Commission (each, a "Registration Event") on or
prior to the 210th day after the Closing Date, the
interest rate per annum payable in respect of the
Notes shall be increased by 0.50%, from and
including such 210th day to but excluding the
earlier of (i) the date on which a Registration
Event occurs and (ii) the date on which all of the
Notes otherwise become
8
<PAGE> 10
transferable by holders of the Notes (other than
affiliates or former affiliates of the Issuers or
Continental) without further registration under the
Securities Act. If the Shelf Registration Statement
(if filed) ceases to be effective at any time
during the period specified by the Registration
Rights Agreement for more than 60 days, whether or
not consecutive, during any 12-month period, the
interest rate per annum payable in respect of the
Notes shall be increased by 0.50% from the 61st day
of the applicable 12-month period such Shelf
Registration Statement ceases to be effective until
such time as the Shelf Registration Statement again
becomes effective (or, if earlier, the end of such
period specified by the Registration Rights
Agreement). The Registration Statement of which
this Prospectus is a part constitutes the Exchange
Offer Registration Statement. See "The Exchange
Offer -- Terms of the Exchange Offer."
The Exchange Offer......... Exchange Notes are being offered in exchange for an
equal principal amount of Old Notes. As of the date
hereof, $112,300,000 aggregate principal amount of
Old Notes is outstanding. Old Notes may be tendered
only in integral multiples of $1,000.
Resale of Exchange Notes... Based on interpretations of the Securities Act by
the staff of the Commission, as set forth in
no-action letters issued to third parties,
including the Exchange Offer No-Action Letters, the
Issuers and the Company believe that the Exchange
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred
by holders thereof (other than a Participating
Broker-Dealer), without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, and do not intend to engage in, a distribution
of such Exchange Notes and have no arrangement with
any person to participate in a distribution of such
Exchange Notes. By tendering the Old Notes in
exchange for Exchange Notes, each holder will
represent to the Issuers and the Company that: (i)
it is not an affiliate of the Issuers or the
Company (as defined under Rule 405 of the
Securities Act) or a broker-dealer tendering Old
Notes acquired directly from the Issuers or the
Company for its own account; (ii) any Exchange
Notes to be received by it were acquired in the
ordinary course of its business; and (iii) it is
not engaged in, and does not intend to engage in, a
distribution of such Exchange Notes and has no
arrangement or understanding to participate in a
distribution of the Exchange Notes. If a holder of
Old Notes is an affiliate of the Issuers or the
Company or is a broker-dealer who purchased Old
Notes directly from the Issuers for its own account
or is engaged in or intends to engage in a
distribution of the Exchange Notes or has any
arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired
pursuant to the Exchange Offer, such holder may not
rely on the applicable interpretations of the staff
of the Commission and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
secondary resale transaction. Each Participating
Broker-Dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter"
9
<PAGE> 11
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-
making activities or other trading activities. The
Issuers and the Company have agreed that, starting
on the Expiration Date and ending on the close of
business 180 days after the Expiration Date, they
will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for
sale or register the Exchange Notes prior to
offering or selling such Exchange Notes. The
Issuers and the Company have agreed, pursuant to
the Registration Rights Agreement and subject to
certain specified limitations therein, to register
or qualify the Exchange Notes for offer or sale
under the securities or "blue sky" laws of such
jurisdictions as may be necessary to permit the
holders of Exchange Notes to trade Exchange Notes
without any restrictions or limitations under the
securities laws of the several states of the United
States.
Consequences of Failure to
Exchange Old Notes....... Upon consummation of the Exchange Offer, subject to
certain exceptions, holders of Old Notes who do not
exchange their Old Notes for Exchange Notes in the
Exchange Offer will no longer be entitled to
registration rights and will not be able to offer
or sell their Old Notes, unless such Old Notes are
subsequently registered under the Securities Act
(which, subject to certain limited exceptions, the
Issuers and the Company will have no obligation to
do), except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and
applicable state securities laws. See "Risk
Factors -- Risk Factors Relating to the Issuers,
the Exchange Notes and the Exchange Offer --
Consequences of Failure to Exchange" and "The
Exchange Offer -- Terms of the Exchange Offer."
Expiration Date............ 5:00 p.m., New York City time, on ,
1998 (30 calendar days following the commencement
of the Exchange Offer), unless the Exchange Offer
is extended, in which case the term "Expiration
Date" means the latest date and time to which the
Exchange Offer is extended.
Interest on the Exchange
Notes.................... The Exchange Notes will accrue interest at the
applicable per annum rate set forth on the cover
page of this Prospectus, from the last date on
which interest was paid on the Old Notes
surrendered in exchange therefor or, if no interest
has been paid, from the date of issuance of the Old
Notes. Interest on the Exchange Notes is payable on
April 1 and October 1 of each year.
Conditions to the Exchange
Offer.................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer
is subject to certain customary conditions, which
may be waived by the Issuers and the Company. See
"The Exchange Offer -- Certain Conditions to the
Exchange Offer." Except for the requirements of
applicable federal and state securities laws, there
are no federal or
10
<PAGE> 12
state regulatory requirements to be complied with
or obtained by the Issuers and the Company in
connection with the Exchange Offer.
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes to be exchanged and any other
required documentation to the Exchange Agent (as
defined herein) at the address set forth herein or
effect a tender of Old Notes pursuant to the
procedures for book-entry transfer as provided for
herein. See "The Exchange Offer -- Procedures for
Tendering" and "-- Book Entry Transfer."
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes and
a properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date. To
withdraw a tender of Old Notes, a written notice
(telegram, telex, facsimile transmission or letter)
of withdrawal must be received by the Exchange
Agent at its address set forth herein under "The
Exchange Offer -- Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes and
Delivery of Exchange
Notes.................... Subject to certain conditions, any and all Old
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date will be accepted for exchange.
The Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer -- Terms
of the Exchange Offer."
Tax Considerations......... The exchange of Exchange Notes for Old Notes should
not be a sale or exchange or otherwise a taxable
event for federal income tax purposes. See "Tax
Considerations."
Exchange Agent............. Bank One, N.A. is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer.
Fees and Expenses.......... All expenses incident to the consummation of the
Exchange Offer and compliance with the Registration
Rights Agreement will be borne by the Issuers and
the Company. See "The Exchange Offer -- Fees and
Expenses."
Use of Proceeds............ There will be no proceeds payable to the Issuers or
Continental from the issuance of the Exchange Notes
pursuant to the Exchange Offer. The net proceeds
from the Old Notes Offering (approximately $110
million), together with capital contributions from
Calfinco and CEA, were used by Calair to purchase
the Slots from Continental in connection with the
11
<PAGE> 13
Transaction. Continental used the proceeds from the
sale of the Slots for general corporate purposes.
See "The Private Placement and Use of Proceeds."
SUMMARY OF TERMS OF EXCHANGE NOTES
The Exchange Offer relates to the exchange of up to $112,300,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
Exchange Notes. The Exchange Notes will be entitled to the benefits of the same
Indenture that governs the Old Notes and will govern the Exchange Notes. The
form and terms of the Exchange Notes are the same in all material respects as
the form and terms of the Old Notes, except that the Exchange Notes do not
contain terms with respect to transfer restrictions (other than transfer
restrictions relating to certain ERISA matters) or interest rate increases. See
"Description of the Notes."
Issuers.................... Calair L.L.C. and Calair Capital Corporation.
Securities Offered......... $112,300,000 principal amount of 8 1/8% Senior
Notes due 2008.
Maturity Date.............. April 1, 2008.
Interest Payment Dates..... April 1 and October 1, commencing on October 1,
1998.
Sinking Fund............... None.
Mandatory Redemption....... None.
Optional Redemption........ The Notes are redeemable at the option of the
Issuers, in whole or in part, at any time and from
time to time, on not less than 20 nor more than 60
days' prior notice, at a redemption price equal to
the sum of (i) the principal amount thereof on the
redemption date, (ii) accrued and unpaid interest
thereon, if any, to the redemption date (subject to
the right of holders of record on relevant record
dates to receive interest due on an interest
payment date), plus (iii) a Make-Whole Premium, if
any. See "Description of the Notes -- Redemption."
Parent Guarantee........... Continental has fully and unconditionally
guaranteed, pursuant to the Indenture, the due and
punctual payment of the principal of, premium, if
any, and interest on, the Notes when the same shall
become due, whether by acceleration or otherwise.
See "Description of the Notes -- Parent Guarantee."
Ranking.................... The Notes are unsecured, senior obligations of the
Issuers ranking pari passu in right of payment with
all other existing and future unsecured and
unsubordinated obligations of the Issuers. The
Parent Guarantee is an unsecured, senior obligation
of Continental ranking pari passu in right of
payment with all other existing and future
unsecured and unsubordinated obligations of
Continental, and senior in right of payment to all
existing and future obligations of Continental
expressly subordinated in right of payment to the
Parent Guarantee. The Notes and the Parent
Guarantee are effectively subordinated in right of
payment to any secured senior obligations of the
Issuers and Continental, respectively, with respect
to the assets of the Issuers and Continental,
respectively, securing such obligations. The Notes
and the Parent Guarantee are effectively
subordinated to all existing and future liabilities
of the subsidiaries of the Issuers and Continental,
respectively. As of March 31, 1998, Continental had
$2.0 billion (including current maturities) of
long-term debt and capital lease obligations on a
consolidated basis of
12
<PAGE> 14
which approximately $1.4 billion was secured
long-term debt and capital lease obligations of
Continental and $146 million was long-term debt and
capital lease obligations of Continental's
subsidiaries, and on a pro forma basis giving
effect to the issuance of the Old Notes, the
Issuers would have had no indebtedness outstanding
other than the Notes. See "Description of the
Notes -- Ranking."
Absence of a Public
Market................... The Exchange Notes generally will be freely
transferable (subject to the restrictions discussed
elsewhere herein) but will be a new issue of
securities for which there is not initially a
market. Accordingly, no assurance is given as to
the development or liquidity of or the trading
market for the Exchange Notes. The Initial
Purchasers have advised the Issuers and Continental
that they currently intend to make a market, if
permitted by applicable laws and regulations, in
the Exchange Notes; however, the Initial Purchasers
are not obligated to do so, and any such market
making may be discontinued at any time without
notice. The Issuers do not intend to apply for a
listing of the Exchange Notes, on any securities
exchange or for their quotation through any
automated dealer quotation system.
RISK FACTORS
For a discussion of risk factors that prospective holders of the Exchange
Notes should consider carefully before tendering their Old Notes in the Exchange
Offer, see "Risk Factors" beginning on page 16.
13
<PAGE> 15
SUMMARY FINANCIAL AND OPERATING DATA OF CONTINENTAL
The following tables summarize certain consolidated financial data and
certain operating data with respect to Continental. The following selected
consolidated financial data for the three months ended March 31, 1998 and 1997
are derived from the unaudited consolidated financial statements of Continental
incorporated by reference in this Prospectus. The following selected
consolidated financial data for the years ended December 31, 1997, 1996 and 1995
are derived from the audited consolidated financial statements of Continental
incorporated by reference in this Prospectus. Continental's selected
consolidated financial data should be read in conjunction with, and are
qualified in their entirety by reference to, such consolidated financial
statements, including the notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------- -----------------------------
1998(1) 1997(1) 1997(1) 1996(1) 1995(1)
------- ------- ------- ------- -------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
Financial Data -- Operations:
Operating Revenue......................................... $1,854 $1,698 $7,213 $6,360 $5,825
Operating Expenses........................................ 1,704 1,552 6,497 5,835(2) 5,440(3)
------ ------ ------ ------ ------
Operating Income.......................................... 150 146 716 525 385
Nonoperating Expense, net................................. (13) (22) (76) (97) (75)(4)
------ ------ ------ ------ ------
Income before Income Taxes, Minority Interest and
Extraordinary Loss...................................... 137 124 640 428 310
Net Income................................................ $ 81 $ 74 $ 385 $ 319 $ 224
====== ====== ====== ====== ======
Earnings per Common Share................................. $ 1.38 $ 1.28 $ 6.65 $ 5.75 $ 4.07
====== ====== ====== ====== ======
Earnings per Common Share Assuming Dilution............... $ 1.06 $ .96 $ 4.99 $ 4.17 $ 3.37
====== ====== ====== ====== ======
Ratio of Earnings to Fixed Charges(5)..................... 1.83 1.88 2.07 1.81 1.53
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ---------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Data (Jet Operations Only)(6):
Revenue passenger miles (millions)(7)..................... 12,072 10,891 47,906 41,914 40,023
Available seat miles (millions)(8)........................ 17,523 15,832 67,576 61,515 61,006
Passenger load factor(9).................................. 68.9% 68.8% 70.9% 68.1% 65.6%
Breakeven passenger load factor(10)....................... 60.6% 59.0% 60.0% 60.7%(13) 60.8%
Passenger revenue per available seat mile (cents)(11)..... 9.12 9.29 9.19 8.93 8.20
Operating cost per available seat mile (cents)(12)........ 9.14 9.27 9.07 8.77(13) 8.36
Average yield per revenue passenger mile (cents)(14)...... 13.23 13.51 12.96 13.10 12.51
Average length of aircraft flight (miles)................. 1,015 925 967 896 836
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------
1988 1997 1996
----------- ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Financial Data -- Balance Sheet:
Assets:
Cash and Cash Equivalents, including restricted cash and
cash equivalents of
$16, $15 and $76, respectively(15)...................... $ 669 $1,025 $1,061
Short-term Investments.................................... 184 -- --
Other Current Assets...................................... 823 703 573
Total Property and Equipment, Net................... 2,574 2,225 1,596
Routes, Gates and Slots, Net.............................. 1,410 1,425 1,473
Other Assets, Net......................................... 305 452 503
------ ------ ------
Total Assets........................................ $5,965 $5,830 $5,206
====== ====== ======
Liabilities and Stockholders' Equity:
Current Liabilities....................................... $2,346 $2,285 $2,104
Long-Term Debt and Capital Leases......................... 1,721 1,568 1,624
Deferred Credits and Other Long-Term Liabilities.......... 674 819 594
Minority Interest(16)..................................... -- -- 15
Continental-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely
Convertible Subordinated Debentures(17)................. 242 242 242
Redeemable Preferred Stock(18)............................ -- -- 46
Common Stockholders' Equity............................... 982 916 581
------ ------ ------
Total Liabilities and Stockholders' Equity.......... $5,965 $5,830 $5,206
====== ====== ======
</TABLE>
(See footnotes on the following page.)
14
<PAGE> 16
- ---------------
(1) No cash dividends were paid on common stock during the periods shown.
(2) Includes a $128 million fleet disposition charge recorded in 1996
associated primarily with the Company's decision to accelerate the
replacement of its DC-9-30, DC-10-10, 727-200, 737-100, and 737-200
aircraft. In connection with its decision to accelerate the replacement of
such aircraft, the Company wrote down its Stage 2 aircraft inventory, that
is not expected to be consumed through operations, to its estimated fair
value and recorded a provision for costs associated with the return of
leased aircraft at the end of their respective lease terms.
(3) Includes a $20 million cash payment in 1995 by the Company in connection
with a 24-month collective bargaining agreement entered into by the Company
and the Independent Association of Continental Pilots.
(4) Includes a pre-tax gain of $108 million ($30 million after tax) on the
series of transactions by which the Company and its subsidiary, Continental
CRS Interests, Inc., transferred certain assets and liabilities relating to
the computerized reservation business of such subsidiary to a newly-formed
limited liability company and the remaining assets and liabilities were
sold.
(5) For purposes of calculating this ratio, earnings consist of earnings before
taxes, minority interest and extraordinary loss plus interest expense (net
of capitalized interest), the portion of rental expense representative of
interest expense and amortization on previously capitalized interest. Fixed
charges consist of interest expense and the portion of rental expense
representative of interest expense. For the 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. Calair and Calair Capital were formed on March 31,
1998 and therefore, there is no ratio of earnings to fixed charges for
Calair or Calair Capital.
(6) Includes operating data for CMI, but does not include operating data for
Express' regional jet operations or turboprop operations.
(7) The number of scheduled miles flown by revenue passengers.
(8) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(9) Revenue passenger miles divided by available seat miles.
(10) The percentage of seats that must be occupied by revenue passengers in
order for the airline to break even on an income before income taxes basis,
excluding nonrecurring charges, nonoperating items and other special items.
(11) Passenger revenue divided by available seat miles.
(12) Operating expenses divided by available seat miles.
(13) Excludes a $128 million fleet disposition charge. See Note (2) for
description of the fleet disposition charge.
(14) The average revenue received for each mile a revenue passenger is carried.
(15) Restricted cash and cash equivalents agreements relate primarily to
workers' compensation claims and the terms of certain other agreements.
(16) In July 1997, the Company purchased the minority interest holder's 9%
interest in Air Micronesia, Inc., the parent of CMI.
(17) The sole assets of such Trust are convertible subordinated debentures, with
an aggregate principal amount of $249 million, which bear interest at the
rate of 8 1/2% per annum and mature on December 1, 2020. Upon repayment,
the Continental-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
(18) Continental redeemed for cash all of the outstanding shares of its Series A
12% Cumulative Preferred Stock in 1997.
15
<PAGE> 17
RISK FACTORS
Prospective holders of the Exchange Notes should consider carefully the
following factors as well as the other information and data included in this
Prospectus before tendering their Old Notes in the Exchange Offer.
RISK FACTORS RELATING TO CONTINENTAL
Leverage and Liquidity
Continental is more leveraged and has significantly less liquidity than
certain of its competitors, several of whom have substantial available lines of
credit and/or significant unencumbered assets. Accordingly, Continental may be
less able than certain of its competitors to withstand a prolonged recession in
the airline industry and may not have as much flexibility to respond to changing
economic conditions or to exploit new business opportunities.
As of March 31, 1998, Continental had approximately $2.0 billion (including
current maturities) of long-term debt and capital lease obligations and had
approximately $1.2 billion of Continental-obligated mandatorily redeemable
preferred securities of subsidiary trust and common stockholders' equity.
Subsequent to their issuance in April 1998, the Old Notes have been reflected as
indebtedness on Continental's consolidated balance sheet due to Continental's
76% ownership interest in Calair. Common stockholders' equity reflects the
adjustment of Continental's balance sheet and the recording of assets and
liabilities at fair market value as of April 27, 1993 in accordance with the
American Institute of Certified Public Accountants' Statement of Position 90-7--
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7"). As of March 31, 1998, Continental had $653 million in cash and
cash equivalents (excluding restricted cash and cash equivalents of $16 million)
and $184 million in short-term investments. Continental has significant
encumbered assets.
For 1997, Continental incurred cash expenditures under operating leases
relating to aircraft of approximately $626 million, compared to $568 million for
1996, and $236 million relating to facilities and other rentals, compared to
$210 million in 1996. Continental expects that its operating lease expenses for
1998 will increase over 1997 amounts. In addition, Continental has capital
requirements relating to compliance with regulations that are discussed below.
See "-- Risk Factors Relating to the Airline Industry -- Regulatory Matters."
As of July 17, 1998, Continental had firm commitments with The Boeing
Company ("Boeing") to take delivery of a total of 132 jet aircraft during the
years 1998 through 2005 with options for an additional 61 aircraft (exercisable
subject to certain conditions). These new aircraft will replace older, less
efficient Stage 2 aircraft and allow for growth of operations. The estimated
aggregate cost of the Company's firm commitments for the Boeing aircraft is
approximately $5.9 billion. As of July 17, 1998, Continental had completed or
had third-party commitments for a total of approximately $982 million in
financing for its future Boeing deliveries, and had commitments or letters of
intent from various sources for backstop financing for approximately one-third
of the anticipated remaining acquisition cost of such Boeing deliveries. The
Company currently plans on financing the new Boeing aircraft with a combination
of enhanced equipment trust certificates, lease equity and other third-party
financing, subject to availability and market conditions. However, further
financing will be needed to satisfy the Company's capital commitments for other
aircraft and aircraft-related expenditures such as engines, spare parts,
simulators and related items. There can be no assurance that sufficient
financing will be available for all aircraft and other capital expenditures not
covered by firm financing commitments. Deliveries of new Boeing aircraft are
expected to increase aircraft rental, depreciation and interest costs while
generating cost savings in the areas of maintenance, fuel and pilot training.
The Company has experienced certain delays in delivery of new Boeing aircraft,
due to production delays at Boeing. Although the Company has thus far been able
to manage the capacity constraints caused by such delays by extending leases on
other aircraft leased by the Company, there can be no assurance that additional
delivery delays will not adversely affect the Company's operations.
As of July 17, 1998, Express had firm commitments for 22 Embraer ERJ-145
("ERJ-145") regional jets and a letter of intent to purchase 25 ERJ-135 regional
jets, with options for an additional 150 ERJ-145 and 50
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ERJ-135 aircraft exercisable through 2008. Neither Express nor Continental will
have any obligation to take any such aircraft that are not financed by a third
party and leased to the Company. The Company expects to account for all of these
aircraft as operating leases.
Continental's History of Operating Losses
Although Continental recorded net income of $81 million in the first
quarter of 1998, $385 million in 1997, $319 million in 1996 and $224 million in
1995, it had experienced significant operating losses in the previous eight
years. In the long term, Continental's viability depends on its ability to
sustain profitable results of operations.
Aircraft Fuel
Since fuel costs constitute a significant portion of Continental's
operating costs (approximately 11.2% for the three months ended March 31, 1998
and 13.6% for the year ended December 31, 1997), significant changes in fuel
costs would materially affect Continental's operating results. Fuel prices
continue to be susceptible to international events, and Continental cannot
predict near or longer-term fuel prices. Historically, the Company has entered
into petroleum call options to provide some short-term protection against a
sharp increase in jet fuel prices. In light of declining fuel prices and the
high cost of call options with strike prices at spreads above current prices
normally purchased by the Company, the Company's petroleum call option contracts
currently provide protection only against significantly higher fuel prices with
respect to approximately three months of the Company's fuel needs, in the event
of a fuel supply shortage resulting from a disruption of oil imports or
otherwise.
Labor Matters
In June 1998, a five-year collective bargaining agreement, retroactive to
October 1997, was ratified by the Continental pilots, who are represented by the
Independent Association of Continental Pilots ("IACP"). The agreement becomes
amendable in October 2002. The Company began accruing for the increased costs of
the new agreement in the fourth quarter of 1997. The Company estimates that the
increased costs for the Continental pilots will be approximately $113 million
for 1998. Also in June 1998, the pilots at Express, who are also represented by
the IACP, rejected a new five-year agreement which had been submitted to them
for ratification. The parties will resume bargaining with respect to a revised
Express contract with the assistance of the National Mediation Board in the
third quarter of 1998. While it is not possible to predict the outcome of those
negotiations, the Company does not believe they will have a material financial
impact on the Company. The Company's dispatchers, represented by the Transport
Workers' Union ("TWU"), ratified a new five-year collective bargaining agreement
in June 1998. The agreement becomes amendable in October 2003. Collective
bargaining negotiations, which began in the fall of 1997, are ongoing with the
International Brotherhood of Teamsters for an initial collective bargaining
agreement covering Continental's mechanics and related employees. While it is
not possible to predict the outcome of those negotiations, the Company does not
believe they will have a material financial impact on the Company. In September
1997, Continental announced that it intends to bring all employees to industry
standard wages (the average of the top ten air carriers as ranked by the DOT,
excluding Continental) within 36 months. The announcement further stated that
wage increases will be phased in over the 36-month period as revenue, interest
rates and rental rates reach industry standards. Continental estimates that the
increased wages will aggregate approximately $500 million over the 36-month
period.
Certain Tax Matters
At December 31, 1997, Continental had estimated net operating loss
carryforwards ("NOLs") of $1.7 billion for federal income tax purposes that will
expire through 2009 and federal investment tax credit carryforwards of $45
million that will expire through 2001. As a result of the change in ownership of
Continental on April 27, 1993, the ultimate utilization of Continental's NOLs
and investment tax credits will be limited. Reflecting this possible limitation,
Continental has recorded a valuation allowance of $617 million at December 31,
1997.
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Continental had, as of December 31, 1997, deferred tax assets aggregating
$1.1 billion, including $631 million of NOLs. Realization of a substantial
portion of the Company's remaining NOLs required the completion by April 27,
1998 of transactions resulting in recognition of built-in gains for federal
income tax purposes. The Company consummated several such transactions resulting
in the elimination of reorganization value in excess of amounts allocable to
identifiable assets. In addition, the deferred tax asset related to these NOLs
and the related valuation allowance (each totaling $164 million) were eliminated
in the first quarter of 1998. To the extent the Company were to determine in the
future that additional NOLs of the Company's predecessor could be recognized in
the Company's consolidated financial statements, such benefit would reduce other
intangibles.
As a result of NOLs, the Company will not pay United States federal income
taxes (other than alternative minimum tax) until it has recorded approximately
an additional $515 million of taxable income following December 31, 1997.
Section 382 of the Internal Revenue Code ("Section 382") imposes limitations on
a corporation's ability to utilize NOLs if it experiences an "ownership change."
In general terms, an ownership change may result from transactions increasing
the ownership of certain stockholders in the stock of a corporation by more than
50 percentage points over a three-year period. Based on information currently
available, the Company does not believe that the Air Partners Transaction (as
defined herein) will result in an ownership change for purposes of Section 382.
Continental Micronesia
Because the majority of CMI's traffic originates in Japan, its results of
operations are substantially affected by the Japanese economy and changes in the
value of the yen as compared to the dollar. Appreciation of the yen against the
dollar during 1994 and 1995 increased CMI's profitability, while the decline of
the yen against the dollar, that began in 1996 and has continued through the
first six months of 1998, has reduced CMI's profitability. As a result of
increased fuel costs in 1996 and 1997 and the continued weakness of the yen
against the dollar and a weak Japanese economy, CMI's operating earnings have
declined significantly since 1995 and are not expected to improve materially
absent a significant improvement in the Japanese economy and the yen exchange
rate.
To reduce the potential negative impact on CMI's dollar earnings, CMI, from
time to time, purchases average rate options as a hedge against a portion of its
expected net yen cash flow position. Such options historically have not had a
material effect on Continental's results of operations or financial condition.
Any significant and sustained decrease in traffic or yields (including due to
the value of the yen) to and from Japan could materially adversely affect
Continental's consolidated profitability.
Principal Stockholder
As of June 30, 1998, Air Partners, L.P. ("Air Partners") held approximately
14% of the common equity interest and 51% of the general voting power of the
Company, having exercised its remaining warrants in April 1998. Various
provisions in the Company's Certificate of Incorporation and Bylaws currently
provide Air Partners with the right to elect one-third of the directors in
certain circumstances; these provisions could have the effect of delaying,
deferring or preventing a change in the control of the Company. On January 26,
1998, the Company announced that Air Partners had entered into an agreement to
dispose of its interest in the Company to an affiliate of Northwest.
Risks Regarding Continental/Northwest Alliance
On January 26, 1998, the Company and Northwest announced a long-term global
alliance (the "Northwest Alliance") involving schedule coordination, frequent
flyer reciprocity, executive lounge access, airport facility coordination,
code-sharing, the formation of a joint venture among the two carriers and KLM
Royal Dutch Airlines ("KLM") with respect to their respective trans-Atlantic
services, cooperation regarding other alliance partners of the two carriers and
regional alliance development, certain coordinated sales programs, preferred
reservations displays and other activities.
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Successful implementation of the alliance and the achievement and timing of
the anticipated synergies by the Company are subject to certain risks and
uncertainties, some of which are beyond the control of the Company, including
(a) competitive pressures, including developments with respect to existing and
potential future competitive alliances; (b) customer perception of and
acceptance of the alliance, including product differences and benefits provided;
(c) whether the Northwest pilots approve those aspects of the alliance requiring
their approval, and the timing thereof; (d) potential adverse developments with
respect to regional economic performance; (e) costs or difficulties in
implementing the alliance being greater than expected, including those caused by
the Company's or Northwest's workgroups; (f) contractual impediments to the
implementation by the Company of certain aspects of the alliance; and (g)
non-approval or delay by regulatory authorities or possible adverse regulatory
decisions or changes. There can be no assurance that the alliance will be fully
and timely implemented or continued, or that the anticipated synergies will not
be delayed or will be achieved.
At July 30, 1998, the alliance between Continental and Northwest continues
to be reviewed by the Department of Justice and the Department of
Transportation, and the parties have provided additional information to both
reviewing agencies. Continental cannot predict the timing or outcome of these
governmental processes.
Corporate Governance Agreement
The Company announced on January 26, 1998 that Air Partners, the holder of
approximately 14% of the Company's equity and approximately 51% of its voting
power (after giving effect to the exercise of warrants), had entered into an
agreement to dispose of its interest in the Company to an affiliate of Northwest
(the "Air Partners Transaction"). In connection with the Air Partners
Transaction, the Company has entered into a corporate governance agreement with
certain affiliates of Northwest, designed to assure the independence of the
Company's board of directors and management during the six-year period of the
governance agreement. During the term of the governance agreement, the
securities of the Company beneficially owned by Northwest and its affiliates
will be deposited into a voting trust and generally voted as recommended by the
Company's board of directors (a majority of whom must be independent directors
as defined in the agreement) or in the same proportion as the votes cast by
other holders of the Company's voting securities. However, pursuant to the
governance agreement, those shares may be voted as directed by the Northwest
affiliate in connection with certain matters, including with respect to mergers
and certain other change in control matters and the issuance of capital stock
representing in excess of 20% of the voting power of the Company prior to
issuance requiring a stockholder vote. In addition, in connection with the
election of directors, those shares shall be voted for the election of the
independent directors; provided that with respect to elections of directors in
respect of which any person other than the Company is soliciting proxies, the
shares may be voted, at the election of Northwest's affiliate, either as
recommended by the Company's board of directors or in the same proportion as the
votes cast by other holders of the Company's voting securities. As a result of
the provisions of the corporate governance agreement, the ability of the Company
to engage in a change in control transaction other than with Northwest or an
affiliate thereof, or to issue significant amounts of capital stock under
certain circumstances, is limited.
Shareholder Litigation
Following the announcement of the Northwest Alliance, the Air Partners
Transaction and the related corporate governance agreement between the Company
and certain affiliates of Northwest (collectively, the "Northwest Transaction"),
to the Company's knowledge as of July 30, 1998, six separate lawsuits were filed
against the Company and its Directors and certain other parties (the
"Shareholder Litigation"). The complaints in the Shareholder Litigation, which
were filed in the Court of Chancery of the State of Delaware in and for New
Castle County and seek class certification, and which have been consolidated
under the caption In re Continental Airlines, Inc. Shareholder Litigation,
generally allege that the Company's Directors improperly accepted the Northwest
Transaction in violation of their fiduciary duties owed to the public
shareholders of the Company. They further allege that Delta Air Lines, Inc.
submitted a proposal to purchase the Company which, in the plaintiffs' opinion,
was superior to the Northwest Transaction. The Shareholder
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Litigation seeks, inter alia, to enjoin the Northwest Transaction and the award
of unspecified damages to the plaintiffs.
While there can be no assurance that the Shareholder Litigation will not
result in a delay in the implementation of any aspect of the Northwest
Transaction, or the enjoining of the Northwest Transaction, the Company believes
the Shareholder Litigation to be without merit and intends to defend it
vigorously.
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
Industry Conditions and Competition
The airline industry is highly competitive and susceptible to price
discounting. Continental has in the past both responded to discounting actions
taken by other carriers and initiated significant discounting actions itself.
Continental's competitors include carriers with substantially greater financial
resources (and in certain cases, lower cost structures), as well as smaller
carriers with lower cost structures. Airline profit levels are highly sensitive
to, and during recent years have been severely impacted by, changes in fuel
costs, fare levels (or "average yield") and passenger demand. Passenger demand
and yields have been affected by, among other things, the general state of the
economy, international events and actions taken by carriers with respect to
fares. From 1990 to 1993, these factors contributed to the domestic airline
industry's incurring unprecedented losses. Although fare levels have increased
subsequently, significant industry-wide discounts could be reimplemented at any
time, and the introduction of broadly available, deeply discounted fares by a
major United States airline would likely result in lower yields for the entire
industry and could have a material adverse effect on the Company's operating
results.
The airline industry has consolidated in past years as a result of mergers
and liquidations and may further consolidate in the future. Among other effects,
such consolidation has allowed certain of Continental's major competitors to
expand (in particular) their international operations and increase their market
strength. Furthermore, the emergence in recent years of several new carriers,
typically with low cost structures, has further increased the competitive
pressures on the major United States airlines. In many cases, the new entrants
have initiated or triggered price discounting. Aircraft, skilled labor and gates
at most airports continue to be readily available to start-up carriers.
Competition with new carriers or other low cost competitors on Continental's
routes could negatively impact Continental's operating results.
Regulatory Matters
In the last several years, the United States Federal Aviation
Administration (the "FAA") has issued a number of maintenance directives and
other regulations relating to, among other things, retirement of older aircraft,
security measures, collision avoidance systems, airborne windshear avoidance
systems, noise abatement, commuter aircraft safety and increased inspections and
maintenance procedures to be conducted on older aircraft. Continental expects to
continue incurring expenses for the purpose of complying with the FAA's noise,
aging aircraft and other regulations. In addition, several airports have
recently sought to increase substantially the rates charged to airlines, and the
ability of airlines to contest such increases has been restricted by federal
legislation, the Department of Transportation ("DOT") regulations and judicial
decisions.
Management believes that Continental benefitted significantly from the
expiration of the aviation trust fund tax (the "ticket tax") on December 31,
1995. The ticket tax was reinstated on August 27, 1996, expired again on
December 31, 1996 and was reinstated again on March 7, 1997. In July 1997,
Congress passed tax legislation reimposing and significantly modifying the
ticket tax. The legislation includes the imposition of new excise tax and
segment fee tax formulas to be phased in over a multi-year period, an increase
in the international departure tax and the imposition of a new arrivals tax, and
the extension of the ticket tax to cover items such as the sale of frequent
flyer miles. Management believes that the ticket tax has a negative impact on
the Company, although neither the amount of such negative impact directly
resulting from the reimposition of the ticket tax, nor the benefit previously
realized by its expiration, can be precisely determined.
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Additional laws and regulations have been proposed from time to time that
could significantly increase the cost of airline operations by imposing
additional requirements or restrictions on operations. Laws and regulations have
also been considered that would prohibit or restrict the ownership and/or
transfer of airline routes or takeoff and landing slots. Also, the availability
of international routes to United States carriers is regulated by treaties and
related agreements between the United States and foreign governments that are
amendable. Continental cannot predict what laws, regulations and amendments may
be adopted or their impact, and there can be no assurance that laws, regulations
and amendments currently proposed or enacted in the future will not adversely
affect Continental.
Seasonal Nature of Airline Business
Due to the greater demand for air travel during the summer months, revenue
in the airline industry in the third quarter of the year is generally
significantly greater than revenue in the first quarter of the year and
moderately greater than revenue in the second and fourth quarters of the year
for the majority of air carriers. Continental's results of operations generally
reflect this seasonality, but have also been impacted by numerous other factors
that are not necessarily seasonal, including the extent and nature of
competition from other airlines, fare wars, excise and similar taxes, changing
levels of operations, fuel prices, foreign currency exchange rates and general
economic conditions.
Year 2000
The Company uses a significant number of computer software programs and
embedded operating systems that are essential to its operations. As a result,
the Company implemented a Year 2000 project in early 1997 to ensure that the
Company's computer systems will function properly in the year 2000 and
thereafter. The Company anticipates completing its Year 2000 project in early
1999 and believes that, with modifications to its existing software and systems
and/or conversions to new software, the Year 2000 issue will not pose
significant operational problems for its computer systems.
The Company has also initiated communications with its significant
suppliers and vendors with which its systems interface and exchange data or upon
which its business depends. The Company is coordinating efforts with these
parties to minimize the extent to which its business will be vulnerable to their
failure to remediate their own Year 2000 issues. The Company's business is also
dependent upon certain governmental organizations or entities such as the
Federal Aviation Administration ("FAA") that provide essential aviation industry
infrastructure. There can be no assurance that the systems of such third parties
on which the Company's business relies (including those of the FAA) will be
modified on a timely basis. The Company's business, financial condition or
results of operations could be materially adversely affected by the failure of
its systems or those operated by other parties to operate properly beyond 1999.
To the extent possible, the Company will be developing and executing contingency
plans designed to allow continued operation in the event of failure of the
Company's or third parties' systems.
The total cost (excluding internal payroll costs) of the Company's Year
2000 project is currently estimated at $12 million and will be funded through
cash from operations. The cost of the Company's Year 2000 project is limited by
the substantial outsourcing of its systems and the significant implementation of
new systems following its emergence from bankruptcy in 1993. The costs of the
Company's Year 2000 project and the date on which the Company believes it will
be completed are based on management's best estimates and include assumptions
regarding third-party modification plans. However, in particular due to the
potential impact of third-party modification plans, there can be no assurance
that these estimates will be achieved and actual results could differ materially
from those anticipated.
RISK FACTORS RELATING TO THE ISSUERS, THE EXCHANGE NOTES AND THE EXCHANGE OFFER
No Operating History; Limited Purpose; Limited Income
At the time of the Old Notes Offering, the Issuers were newly formed
special purpose entities with no prior operating history. The Company Agreement
limits the business of Calair to leasing and/or selling the Slots, managing,
protecting and conserving the Slots and other Calair property, performing and
complying
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with the Transaction Documents, owning the stock of Calair Capital and
activities related or incidental thereto or otherwise permitted under the
Company Agreement. Calair Capital was formed by Calair specifically to effect
the Old Notes Offering, acting as agent for Calair, and does not have any
material assets or conduct operations of its own. The sole sources of revenue
for Calair are rental payments received by Calair from Continental under the
Slot Lease Agreement and proceeds from the sale of any of the Slots that may be
sold in the future. See "The Transaction." Consequently, Calair's ability to
make payments of interest on the Notes in the amounts and on the dates
contemplated herein depends upon the receipt by Calair of payments under the
Slot Lease Agreement. Regular rental payments under the Slot Lease Agreement
will not be sufficient to enable Calair to repay the principal of the Notes upon
maturity. At maturity of the Notes, it is anticipated that Calfinco will make a
voluntary capital contribution to Calair to fund repayment of the principal of
the Notes. However, Calfinco is under no obligation under the Company Agreement
to do so. If Calfinco does not make such a capital contribution in an amount
equal to the principal balance of the Notes prior to maturity and Calair is not
otherwise able to pay the Notes, Continental will be obligated to make payment
under the Parent Guarantee with respect to the Notes. Therefore, purchasers of
the Notes should rely on Continental's payments under the Slot Lease Agreement
and the Parent Guarantee for payments of interest, principal and other amounts
due under the Notes.
Absence of Certain Covenants
The terms of the Notes and the Parent Guarantee do not limit the Issuers'
or Continental's or any of their respective subsidiaries' ability to incur
additional indebtedness, to mortgage or pledge any of their respective assets,
to sell assets or to pay dividends or make other distributions on, or redeem or
repurchase, capital stock. In addition, the Notes do not contain provisions that
would give holders of the Notes the right to require the Issuers to repurchase
their Notes in the event of a change of control of the Issuers or Continental or
a decline in the credit rating of Calair's, Calair Capital's or Continental's
debt securities resulting from a takeover, recapitalization or similar
restructuring or any other reason.
Absence of Public Market
The Exchange Notes are new securities for which there presently is no
market. Although the Initial Purchasers have advised the Issuers and Continental
that they currently intend to make a market, if permitted by applicable laws and
regulations, in the Exchange Notes, they are not obligated to do so and any such
market making may be discontinued at any time without notice in the sole
discretion of the Initial Purchasers. In addition, such market making activity
may be limited during the pendency of the Exchange Offer or the effectiveness of
any shelf registration statement in lieu thereof. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. The Issuers do not intend to apply for a listing of the Exchange Notes on
any securities exchange or for their quotation through any automated dealer
quotation system.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfers and exchanges of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuers and the Company do not currently
anticipate that they will register the Old Notes under the Securities Act
subsequent to the Exchange Offer. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected. See "Transfer Restrictions
on Old Notes."
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THE ISSUERS
Calair, a Delaware limited liability company, was formed on March 31, 1998,
for the purpose of acquiring the Slots from Continental, pursuant to the
Transaction. Upon the closing of the Transaction, the members in Calair
consisted of Calfinco, a wholly owned subsidiary of Continental, and CEA, an
affiliate of Chase Securities Inc., one of the Initial Purchasers. Upon the
closing of the Transaction, Calfinco and CEA owned member interests in Calair of
76% and 24%, respectively. Pursuant to the Transaction, Calair acquired the
Slots from Continental on April 17, 1998 and Continental leased the Slots back
from Calair for a 10-year period. Calair Capital, a Delaware corporation and a
wholly owned subsidiary of Calair, was formed specifically to effect the Old
Notes Offering acting as agent for Calair and does not have any material assets
or conduct operations of its own. Accordingly, holders of the Notes should look
to Calair, rather than Calair Capital, as the principal obligor on the Notes.
The Notes are joint and several obligations of Calair and Calair Capital,
although Calair received all the net proceeds of the Old Notes Offering, and are
fully and unconditionally guaranteed by Continental. See "The Transaction."
Calair Capital is a shell company with no operations. Consequently, financial
statements of Calair Capital are not included in this Prospectus because they
are not meaningful. The consolidated financial statements of Calair reflect the
operations of the Issuers.
CONTINENTAL
Continental is a major United States air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth largest United
States airline (as measured by revenue passenger miles for the first six months
of 1998) and, together with its wholly owned subsidiaries, Express and CMI, each
a Delaware corporation, serves 193 airports worldwide. As of June 30, 1998,
Continental flew to 131 domestic and 62 international destinations and offered
additional connecting service through alliances with leading airlines.
RECENT DEVELOPMENTS
The Company recently announced its unaudited 1998 second quarter and year
to date results of operations. The Company reported pre-tax income of $275
million for the second quarter of 1998, as compared to $208 million for the 1997
quarter, on operating revenue of $2.0 billion for the second quarter of 1998 as
compared to $1.8 billion for the 1997 quarter. After taxes and a $4.0 million
extraordinary charge, the Company reported net income of $163 million ($2.68
basic and $2.06 diluted earnings per share) for the second quarter of 1998
compared to $128 million ($2.22 basic and $1.63 diluted earnings per share) in
the comparable period of 1997.
The Company reported pre-tax income of $412 million for the first six
months of 1998, as compared to $332 million for the 1997 period, on operating
revenue of $3.9 billion for the first six months of 1998 as compared to $3.5
billion for the 1997 period. After taxes and a $4.0 million extraordinary
charge, the Company reported net income of $244 million ($4.08 basic and $3.12
diluted earnings per share) for the first six months of 1998 compared to $202
million ($3.50 basic and $2.58 diluted earnings per share) in the comparable
period of 1997.
THE TRANSACTION
Pursuant to the Transaction, Continental sold the Slots to Calair for
$151.1 million pursuant to the terms of a Sale Agreement between Continental and
Calair. The Transaction was funded with a combination of debt and equity, which
included $31.7 million in capital contributions from Calfinco, $10.0 million in
capital contributions from CEA and the net proceeds of the Old Notes Offering.
Continental and Calair executed a Slot Lease Agreement pursuant to which
Continental leased the Slots back from Calair for a 10-year period. Pursuant to
the terms of a Redemption Option Agreement between Calair and CEA, Calair has
the right to redeem 50% of CEA's member interest (i.e., 12% of Calair) on April
17, 2003, the fifth anniversary of the closing date of the Transaction, and has
the right to redeem all of CEA's member interest (either 12% of Calair if Calair
has previously exercised its fifth anniversary redemption option, or 24%
otherwise) upon the
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occurrence of certain events described in the Redemption Option Agreement and
the Company Agreement and on April 17, 2008, the tenth anniversary of the
closing date of the Transaction.
Set forth below is a summary of certain provisions of each of the Company
Agreement, the Sale Agreement, the Slot Lease Agreement and the Redemption
Option Agreement, which are collectively referred to herein as the "Transaction
Documents." The summary herein of certain provisions of each of the Transaction
Documents does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of each such agreement. The
Issuers will provide a copy of each such agreement to holders of Exchange Notes
upon request.
THE COMPANY AGREEMENT
Pursuant to an amended and restated limited liability company agreement
entered into between Calfinco and CEA (the "Company Agreement"), Calfinco is the
initial managing member of Calair and owns a 76% member interest, and CEA owns a
24% member interest. Calair is managed by the managing member, who has full
power and authority to manage the business and affairs of Calair as set forth in
the Company Agreement and performs all acts necessary and desirable to the
objects and purposes of Calair. The exercise of the foregoing duties are subject
only to (i) the rights of CEA to approve certain extraordinary decisions
specified in the Company Agreement ("Extraordinary Decisions") and (ii) the
rights of any liquidator of Calair in the event of a dissolution, winding up or
liquidation of Calair, which liquidator under certain circumstances may not be
Calfinco. Such Extraordinary Decisions include, among other things and subject
to certain exceptions, Calair's ability to incur indebtedness (other than the
Notes and payables associated with Calair expenses), to engage in certain
extraordinary transactions with respect to the Slots, to cause or permit the
incurrence of liens against Calair's assets, to cause Calair's dissolution, to
cause Calair to merge or consolidate with another entity, to enter into
transactions with affiliates, or to institute voluntary bankruptcy proceedings
in respect of Calair. However, if CEA does not approve any of the foregoing
actions that Calfinco desires to take, except in certain circumstances, at
Calfinco's direction, Calair has the right to redeem all of CEA's member
interest, as provided in the Redemption Option Agreement. See "-- The Redemption
Option Agreement" below. Except as provided in the Company Agreement, CEA shall
have no right, power or authority to take part in the management or control of
Calair.
CEA agreed not to transfer its member interest to any other air carrier or
any affiliate thereof. CEA also agreed not to transfer its member interest to
any other entity, except to affiliates of CEA, without granting Calfinco a right
of first refusal with respect to such transfer. Upon the willful mismanagement
of Calair by Calfinco or upon the occurrence of certain events such as the
default by Continental under the Slot Lease Agreement, the default by Calair or
Continental under the Indenture (as defined herein) or related documents and the
exercise of any remedy thereunder, including acceleration of the Notes, by the
Trustee (as defined herein), a default or misrepresentation by Calair under the
Transaction Documents, the Indenture or related documents, the bankruptcy of
Continental or Calfinco, or certain other events, CEA has the right after notice
to Calfinco, and provided Calair does not exercise its right to redeem all of
CEA's member interest within specified periods after such notice (see "-- The
Redemption Option Agreement" below) to remove Calfinco as the managing member
and to be substituted as the managing member of Calair.
Calfinco has the right (but is not obligated) to make additional capital
contributions to Calair to enable Calair to exercise Calair's redemption rights
under the Redemption Option Agreement. Calair's cash available for distribution
net of amounts necessary to pay interest on the Notes, certain amounts to be
held in respect of redemptions of CEA's member interest, and expenses, will
generally be distributed, and its taxable income, loss and other tax items will
generally be allocated, in accordance with the members' ownership percentages.
Calair may loan cash, otherwise available for distribution to the members of
Calair, to Continental without CEA's consent under certain circumstances. If
Calair has not redeemed all of CEA's member interest on or before April 17,
2008, the tenth anniversary of the closing date of the Transaction, CEA has the
right to require the liquidation of Calair.
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THE SALE AGREEMENT
Under the Sale Agreement entered into between Calair and Continental (the
"Sale Agreement"), Continental sold to Calair substantially all of Continental's
current takeoff and landing rights at Chicago O'Hare (29 slots), Washington
National (41 slots) and LaGuardia (32 slots) for $151.1 million. Takeoff and
landing rights of the type sold to Calair are defined in the Federal Aviation
Regulations, Title 14, Code of Federal Regulations, Part 93, Subpart S. See
"-- Information and Industry Regulation Relating to the Slots." Continental
transferred the Slots by a Deed of Conveyance and warranted title to the Slots
but will otherwise transfer the Slots on an "as is, where is' basis.
THE SLOT LEASE AGREEMENT
Under the Slot Lease Agreement entered into between Calair and Continental
(the "Slot Lease Agreement"), Continental leased the Slots from Calair for a
term of 10 years at a rate equal to approximately $16.3 million per annum,
payable in arrears on April 1 and October 1 of each year of such term, subject
to adjustment as described below. Continental agreed to keep the Slots free of
encumbrances, other than encumbrances arising pursuant to subleases, licenses
and Slot trades permitted by the Slot Lease Agreement.
The leased Slots are used by Continental and by other entities to which
Continental may sublease or license one or more leased Slots or with which
Continental may engage in a temporary exchange of Slots, in each case consistent
with industry practice. Use of the leased Slots is at the sole cost, risk and
expense of Continental. Continental agreed to indemnify Calair against certain
claims and taxes relating to the use of the Slots. If (i) Continental fails to
pay rent within 10 days after written notice thereof, (ii) Continental makes a
general assignment for the benefit of creditors or consents to the appointment
of a trustee or receiver for itself or for a substantial part of its property,
or a trustee or receiver is appointed for Continental or for any of the leased
Slots, or for substantially all of Continental's property without Continental's
consent and such appointment is not dismissed within 60 days or bankruptcy,
reorganization or insolvency proceedings are instituted by or against
Continental, and if instituted against Continental, are not dismissed, stayed or
withdrawn for 60 days, or (iii) Continental fails to comply with any covenant of
the Slot Lease Agreement (other than to pay rent), and such failure continues
for 30 days after notice thereof, Calair has the right to terminate the Slot
Lease Agreement. Upon such termination, Calair has the right to recover all rent
accrued to date, together with the discounted present value of the remaining
rent to be paid under the Slot Lease Agreement, or alternatively, to recover the
remainder of the rent to be paid over the remaining term of the Slot Lease
Agreement as it becomes due, less any net amount received from reletting the
Slots.
Under certain circumstances, Continental has the right to cause Calair to
sell Slots to persons who are not affiliates of Calair or Continental or to
request that Calair exchange Slots with persons who are not affiliates of
Continental. If any of the Slots are sold, the consideration payable for such
purchase shall be a combination of immediately available funds and Slots (in a
tax-free exchange pursuant to Section 1031 of the Internal Revenue Code) having
a value equal to the fair market value of the purchased Slots, as determined by
an appraisal prepared by an appraiser acceptable to both members of Calair
within 30 days prior to the purchase. Swapped Slots and substitute Slots are
included as Slots subject to the Slot Lease Agreement immediately upon the swap
or exchange.
THE REDEMPTION OPTION AGREEMENT
Under the Redemption Option Agreement entered into between Calair and CEA
(the "Redemption Option Agreement"), CEA granted Calair the right to redeem all
or, in the case of clause (i) below, a portion of the member interest of CEA
(and its successors and assigns) under the following circumstances:
(i) 50% of CEA's member interest (i.e., 12% of Calair) on April 17,
2003, the fifth anniversary of the closing date of the Transaction;
(ii) all of CEA's remaining member interest (i.e., 12% of Calair if
Calair has exercised its option described in clause (i) above or 24%
otherwise) on April 17, 2008, the tenth anniversary of the closing date of
the Transaction;
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<PAGE> 27
(iii) all of CEA's member interest, within certain time periods after
(a) CEA refuses to approve an Extraordinary Decision proposed by Calfinco
under the Company Agreement; provided such redemption right shall not be
exercisable until after the second anniversary of the closing of the
Transaction, (b) Calfinco has received notice that, as a result of the
occurrence of one of the events entitling CEA to do so under the Company
Agreement, CEA has elected to remove Calfinco as managing member, (c)
Calfinco has received notice that CEA has, pursuant to the Company
Agreement, elected to terminate and liquidate the Company, (d) foreclosure
of any security interest granted by CEA on its member interest, or (e)
Calair becomes aware that CEA has transferred CEA's member interest in a
manner not permitted by the Company Agreement. If Calair has not redeemed
all of CEA's member interest on or before the tenth anniversary of the
closing date of the transaction, CEA will have the right to require the
liquidation of Calair.
The purchase price for any of the foregoing redemption options depends upon
the date of exercise, the appraised fair market value of the Slots, and the
particular circumstances giving rise to the redemption option. However, in all
events it is anticipated that if Calair exercises such option, all the available
cash of Calair will not be sufficient to pay the redemption purchase price.
Accordingly, Calair will be dependent upon the voluntary capital contributions
of Calfinco to fund any shortfall. Calfinco is not obligated to make any such
voluntary capital contributions to Calair.
INFORMATION AND INDUSTRY REGULATION RELATING TO THE SLOTS
In an attempt to alleviate airport congestion, the FAA promulgated special
air traffic rules in 1968 that applied to five high density airports, John F.
Kennedy International Airport ("JFK"), LaGuardia, Newark International, Chicago
O'Hare and Washington National. The high density rule was designed to limit the
number of Instrument Flight Rule ("IFR") operations (i.e., takeoffs and
landings) permitted per hour and to require that each operation be supported by
a specific authorization called a "slot." A slot is generally defined as a
single arrival or departure. It takes two slots to effect a transit or
turnaround flight at any airport. Under the regulatory regime promulgated in
1968, slots for operations at a high density airport were allocated by a
committee of air carriers operating at the airport. Although the "high density
rule" was initially established as a temporary measure for the years 1968
through 1972, the FAA retained it indefinitely at Chicago O'Hare, JFK, LaGuardia
and Washington National in order to continue to alleviate congestion.
In December 1985, the FAA adopted a buy-sell rule, permitting holders of
certain slots to transfer them for any consideration. The buy-sell regulations,
which remain in effect (as amended from time to time) provide that, except for
international and essential air service slots, permanent slots may be purchased,
sold, traded, or leased, in any number, at any high density airport, subject to
confirmation by the FAA.
Pursuant to the 1985 regulations, the FAA in 1986 distributed slots to
carriers in a lottery. Carriers awarded slots in the lottery were thereafter
free to buy, sell, trade or lease these slots, subject to FAA confirmation.
However, the FAA has the right to reduce the number of slots, cancel slots for
operational reasons and reallocate slots. The FAA also has the right to withdraw
a slot if the slot is not used at least 80% of the time during any two-month
period. The Department of Transportation from time to time exempts airlines from
the slot regulations at airports other than Washington National to provide
essential air service between slot-controlled airports and small communities, to
provide foreign air transportation, and, under exceptional circumstances, for
new entrants to institute service.
At Washington National, federal law limits the number of hourly operations
and prohibits non-stop flights exceeding 1,250 miles with certain exceptions
such as Houston and Dallas/Ft. Worth. This limit on distance is known as a
"perimeter rule" and was originally put in place to divert traffic demand to the
less congested Dulles Airport. The perimeter rule effectively limits utilization
of Washington National slots to their fullest potential since inherently
lucrative long haul non-stop services are effectively barred from the airport.
LaGuardia, like Washington National, is limited to domestic services and also
has a 1,500 mile perimeter rule with the exception of services to Denver.
Runways at LaGuardia are restricted in length (only 7,000 feet) and by weight so
four engine wide-body services are prohibited. O'Hare is one of the world's
busiest airports and number one in the United States in terms of both aircraft
operations and passengers
26
<PAGE> 28
enplaned. Unlike Washington National and LaGuardia, O'Hare is also a major
international hub so there is demand for slots from both domestic and foreign
carriers.
Various amendments to the slot system and the perimeter rules, proposed
from time to time by the FAA, members of Congress and others, could, if adopted,
significantly affect operations at the high density traffic airports,
significantly change the value of the slots, expand slot controls to other
airports or eliminate slots entirely. If adopted, certain of such proposals
could restrict the number of flights, limit transfer of the ownership of slots,
increase the risk of slot withdrawals or eliminate slots entirely, which could
in turn result in charges to Continental's financial statements. Continental
cannot predict whether any of these proposals will be adopted or the impact that
the adoption of any such proposal would have on the value of the Slots or the
business or operations of Calair.
MANAGEMENT OF THE ISSUERS
Calair is managed by Calfinco, its managing member, pursuant to the Company
Agreement. Calair has no directors, officers or employees. The following table
sets forth certain information concerning the executive officers and directors
of Calfinco. All such executive officers are directors of Calair Capital and
hold the same positions in Calair Capital as they hold in Calfinco.
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gordon M. Bethune......................... 56 Chairman of the Board and Chief Executive Officer
Gregory D. Brenneman...................... 36 President, Chief Operating Officer and Director
Lawrence W. Kellner....................... 39 Executive Vice President, Chief Financial Officer
and Director
Jeffery A. Smisek......................... 43 Executive Vice President, General Counsel,
Secretary and Director
</TABLE>
Gordon M. Bethune has served as Chairman of the Board and Chief Executive
Officer of Calfinco since December 1995 and as Chairman of the Board and Chief
Executive Officer of Continental since September 1996 and as Director of
Continental since August 1994. From November 1994 to September 1996, Mr. Bethune
served as President and Chief Executive Officer and from February 1994 to
November 1994 as President and Chief Operating Officer of Continental.
Commencing in 1988, he served in various positions with The Boeing Company,
including Vice President and General Manager of the Commercial Airplane Group
Renton Division, Vice President and General Manager of the Customer Services
Division and Vice President of Airline Logistics Support.
Gregory D. Brenneman has served as President and Chief Operating Officer
and Director of Calfinco since December 1995 and as President and Chief
Operating Officer of Continental since September 1996 and as Director of
Continental since June 1995. From May 1995 to September 1996, he served as Chief
Operating Officer and from February to April 1995 as a consultant to
Continental. Prior to that time, he served in various positions, including Vice
President, with Bain & Company, Inc., a consulting firm, for more than five
years. Mr. Brenneman is also a Director of Browning-Ferris Industries, Inc.
Lawrence W. Kellner has served as Executive Vice President and Chief
Financial Officer of Calfinco since November 1996 and as Senior Vice President
and Chief Financial Officer of Calfinco from December 1995 to November 1996. He
has also served as Executive Vice President and Chief Financial Officer of
Continental since November 1996. From June 1995 to November 1996, he served as
Senior Vice President and Chief Financial Officer of Continental. From November
1992 to May 1995, Mr. Kellner served as Executive Vice President and Chief
Financial Officer of American Savings Bank, F.A. Mr. Kellner is also a Director
of Belden & Blake Corporation.
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<PAGE> 29
Jeffery A. Smisek has served as Executive Vice President, General Counsel
and Secretary of Calfinco since November 1996 and as Senior Vice President,
General Counsel and Secretary of Calfinco from December 1995 to November 1996.
He has also served as Executive Vice President, General Counsel and Secretary of
Continental since November 1996. Mr. Smisek served as Senior Vice President and
Secretary of Continental from April 1995 to November 1996 and as General Counsel
of Continental since March 1995. Prior to that time, Mr. Smisek was a Partner
with the law firm of Vinson & Elkins L.L.P. for more than five years. Mr. Smisek
is also a Director of Tuboscope Inc.
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Issuers on April 17, 1998 to the Initial
Purchasers in a transaction not registered under the Securities Act in reliance
upon Section 4(2) of the Securities Act. The Old Notes were thereupon offered
and sold by the Initial Purchasers only to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) and pursuant to offers and sales
that occurred outside the United States within the meaning of Regulation S under
the Securities Act. The net proceeds from the Old Notes Offering (approximately
$110 million), together with capital contributions from Calfinco and CEA, were
used by Calair to purchase the Slots from Continental in connection with the
Transaction. Continental used the proceeds from the sale of the Slots for
general corporate purposes.
Neither the Issuers nor the Company will receive any proceeds from the
Exchange Offer.
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<PAGE> 30
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents
and the capitalization (including current maturities) of Continental as of March
31, 1998, and as adjusted to give effect to (i) the receipt of the net proceeds
from the issuance of the Old Notes and (ii) the Transaction. See "The Private
Placement and Use of Proceeds," "The Transaction" and the consolidated financial
statements of Continental appearing in Continental's Quarterly Report (Form
10-Q) for the three months ended March 31, 1998 incorporated by reference
herein.(1)
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------
ACTUAL AS ADJUSTED
-------- -------------
(IN MILLIONS OF DOLLARS
EXCEPT SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents, including restricted cash and
cash equivalents of $16................................... $ 669 $ 789
Short-term investments...................................... 184 184
------ ------
$ 853 $ 973
====== ======
Current Maturities:
Long-term debt............................................ $ 228 $ 228
Capital leases............................................ 45 45
------ ------
Total............................................. 273 273
------ ------
Long-term Debt.............................................. 1,541 1,551
8 1/8% Senior Notes due 2008................................ -- 112
Capital Leases.............................................. 180 180
------ ------
Total............................................. 1,721 1,843
------ ------
Continental-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely Convertible
Subordinated Debentures(2)................................ 242 242
Common Stockholders' Equity:
Class A common stock -- $.01 par (50,000,000 shares
authorized; 8,379,464 shares issued and outstanding)... -- --
Class B common stock -- $.01 par (200,000,000 shares
authorized; authorized; 51,066,488 shares issued)...... 1 1
Additional Paid-in Capital................................ 647 647
Retained Earnings......................................... 357 357
Treasury Stock -- 439,000 Class B shares.................. (26) (26)
Other..................................................... 3 3
------ ------
Total Common Stockholders' Equity................. 982 982
------ ------
Total Capitalization (including Current
Maturities)...................................... $3,218 $3,340
====== ======
</TABLE>
- ---------------
(1) Calair was formed on March 31, 1998 and held no debt as of that date.
(2) The sole assets of such Trust are convertible subordinated debentures, with
an aggregate principal amount of $249 million, which bear interest at the
rate of 8 1/2% per annum and mature on December 1, 2020. Upon repayment, the
Continental-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
29
<PAGE> 31
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration Statement and
a copy of which is available as set forth under the heading "Available
Information."
TERMS OF THE EXCHANGE OFFER
The Issuers and Continental entered into the Registration Rights Agreement
with the Initial Purchasers pursuant to which each of the Issuers and
Continental agreed, for the benefit of and at no cost to the holders of the
Notes, to the extent not prohibited by any applicable law or interpretation of
the staff of the Commission, (i) to use its best efforts to file with the
Commission within 120 days after the Closing Date the Exchange Offer
Registration Statement with respect to the offer to exchange the Notes for the
Exchange Notes, which will have terms identical in all material respects to the
Notes entitled to make such exchange (except that the Exchange Notes will not
contain terms with respect to transfer restrictions (other than transfer
restrictions relating to certain ERISA matters) or interest rate increases as
described herein and the Exchange Notes will be available only in book-entry
form), (ii) to use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective by the Commission within 180 days after the
Closing Date, (iii) to use its best efforts to cause such Exchange Offer
Registration Statement to remain effective until the closing of the Exchange
Offer and (iv) to consummate the Exchange Offer within 210 days after the
Closing Date. Promptly after the Exchange Offer Registration Statement has been
declared effective, the Issuers and Continental will offer the Exchange Notes in
exchange for surrender of the Notes. The Issuers and Continental will keep the
Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Notes. For each Note duly tendered pursuant to the Exchange Offer
and not validly withdrawn by the holder thereof, the holder of such Note will
receive an Exchange Note having a face amount equal to that of the tendered
Note.
Based on interpretations of the Securities Act by the staff of the
Commission, as set forth in no-action letters issued to third parties, including
the Exchange Offer No-Action Letters, the Issuers and the Company believe that
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold or otherwise transferred by holders thereof (other than a
Participating Broker-Dealer), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not engaged in, and do not intend to engage in, a distribution
of such Exchange Notes and have no arrangement with any person to participate in
a distribution of such Exchange Notes. By tendering the Old Notes in exchange
for Exchange Notes, each holder will represent to the Issuers and the Company
that: (i) it is not an affiliate of the Issuers or the Company (as defined under
Rule 405 of the Securities Act) or a broker-dealer tendering Old Notes acquired
directly from the Issuers or the Company for its own account; (ii) any Exchange
Notes to be received by it were acquired in the ordinary course of its business;
and (iii) it is not engaged in, and does not intend to engage in, a distribution
of such Exchange Notes and has no arrangement or understanding to participate in
a distribution of the Exchange Notes. If a holder of Old Notes is an affiliate
of the Issuers or the Company or is a broker-dealer who purchased Old Notes
directly from the Issuers for its own account or is engaged in or intends to
engage in a distribution of the Exchange Notes or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder may not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each Participating
Broker-Dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer in connection with
resales of Exchange Notes received in exchange for Old Notes where such Old
Notes were acquired by such Participating Broker-Dealer as a
30
<PAGE> 32
result of market-making activities or other trading activities. The Issuers and
the Company have agreed that, starting on the Expiration Date and ending on the
close of business 180 days after the Expiration Date, they will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution." To comply with the securities
laws of certain jurisdictions, it may be necessary to qualify for sale or
register the Exchange Notes prior to offering or selling such Exchange Notes.
The Issuers and the Company have agreed, pursuant to the Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the Exchange Notes for offer or sale under the securities or "blue sky"
laws of such jurisdictions as may be necessary to permit the holders of Exchange
Notes to trade Exchange Notes without any restrictions or limitations under the
securities laws of the several states of the United States.
If (i) any changes in law or applicable interpretations thereof by the
staff of the Commission do not permit the Issuers to effect the Exchange Offer,
(ii) if for any other reason the Exchange Offer Registration Statement is not
declared effective within 180 days after the Closing Date under certain
circumstances or the Exchange Offer is not consummated within 210 days after the
Closing Date, (iii) at the request of a holder (other than an Initial Purchaser)
not eligible to participate in the Exchange Offer or (iv) at the request of an
Initial Purchaser under certain other circumstances described in the
Registration Rights Agreement, each of the Issuers and Continental will, in lieu
of effecting the registration of the Exchange Notes pursuant to the Exchange
Offer Registration Statement and at no cost to the holders of Notes, (a) as
promptly as practicable, file with the Commission the Shelf Registration
Statement covering resales of the Notes, (b) use its best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
by the 180th day after the Closing Date (or promptly in the event of a request
by any holder or Initial Purchaser pursuant to clause (iii) or (iv) above,
respectively) and (c) use its best efforts to keep effective the Shelf
Registration Statement for a period of two years after its effective date (or
for such shorter period as shall end when all of the Notes covered by the Shelf
Registration Statement have been sold pursuant thereto or may be freely sold
pursuant to Rule 144 under the Securities Act). The Issuers and Continental
will, in the event of the filing of a Shelf Registration Statement, provide to
each holder of the Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement for such Notes has become effective and take certain other actions as
are required to permit unrestricted resales of such Notes. A holder of Notes who
sells such Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver the prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of such Notes will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement.
In the event that no Registration Event has occurred on or prior to the
210th day after the Closing Date, the interest rate per annum payable in respect
of the Notes shall be increased by 0.50% from and including such 210th day to
but excluding the earlier of (i) the date on which a Registration Event occurs
and (ii) the date on which all of the Notes otherwise become transferable by
holders of the Notes (other than affiliates or former affiliates of the Issuers
or Continental) without further registration under the Securities Act. In the
event that the Shelf Registration Statement (if filed) ceases to be effective at
any time during the period specified by the Registration Rights Agreement for
more than 60 days, whether or not consecutive, during any 12-month period, the
interest rate per annum payable in respect of the Notes shall be increased 0.50%
from the 61st day of the applicable 12-month period such Shelf Registration
Statement ceases to be effective until such time as the Shelf Registration
Statement again becomes effective (or, if earlier, the end of such period
specified by the Registration Rights Agreement).
31
<PAGE> 33
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean , 1998 (30 calendar days
following the commencement of the Exchange Offer), unless the Issuers and the
Company, in their sole discretion, extend the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. Notwithstanding any extension of the Exchange Offer, if the Exchange
Offer is not consummated by November 13, 1998, the interest rate borne by the
Notes is subject to increase. See "-- Terms of the Exchange Offer."
In order to extend the Expiration Date, the Issuers and the Company will
notify the Exchange Agent of any extension by oral or written notice and will
notify the holders of the Old Notes by means of a press release or other public
announcement prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Such announcement may state that
Issuers and the Company are extending the Exchange Offer for a specified period
of time.
The Issuers and the Company reserve the right (i) to delay acceptance of
any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer
and not permit acceptance of Old Notes not previously accepted if any of the
conditions set forth herein under "-- Certain Conditions to the Exchange Offer"
shall have occurred and shall not have been waived by the Company, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, or (ii) to amend the terms of the Exchange Offer in any manner deemed by
it to be advantageous to the holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the Exchange Agent. If the
Exchange Offer is amended in a manner determined by the Issuers and the Company
to constitute a material change, the Issuers and the Company will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of the Old Notes of such amendment.
Without limiting the manner in which the Issuers and the Company may choose
to make public announcement of any delay, extension, amendment or termination of
the Exchange Offer, the Issuers and the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to an appropriate news agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at the rate of 8 1/8% per annum,
payable semi-annually on April 1 and October 1 of each year, commencing October
1, 1998, to holders of record on the March 15 and September 15 immediately
preceding such interest payment date. Holders of Exchange Notes of record on
September 15, 1998 will receive interest on October 1, 1998 from the date of
issuance of the Exchange Notes, plus an amount equal to the accrued interest on
the Old Notes from the date of issuance of the Old Notes, April 17, 1998, to the
date of exchange thereof. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(iii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE
32
<PAGE> 34
USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUERS OR THE
COMPANY. Delivery of all documents must be made to the Exchange Agent at its
address set forth below. Holders may also request their respective brokers,
dealers, commercial banks, trust companies or nominees to effect such tender for
such holders.
The tender by a holder of Old Notes will constitute an agreement among such
holder, the Issuers and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Issuers or any other person
who has obtained a properly completed bond power from the registered holder.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such owner's
name or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by bond powers and a proxy which authorizes such person
to tender the Old Notes on behalf of the registered holder, in each case as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuers and
the Company, evidence satisfactory to the Issuers and the Company of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Issuers and the Company in their sole discretion, which determination
will be final and binding. The Issuers and the Company reserve the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
which, if accepted, would, in the opinion of the Issuers and the Company or
their counsel, be unlawful. The Issuers and the Company also reserve the
absolute right to waive any conditions of the Exchange Offer or irregularities
or conditions of tender as to particular Old Notes. The Issuers' and the
Company's interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Issuers and the Company shall determine. Neither the Issuers, the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost to such holder
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by the Exchange Agent to the tendering holders of Old Notes, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Issuers and the Company reserve the right in their sole
discretion, subject to the provisions of the Indenture, to (i) purchase or make
offers for any Old Notes that remain outstanding subsequent to the Expiration
Date or, as set forth under "-- Certain Conditions to the Exchange Offer," to
terminate the Exchange Offer in accordance with the terms of the Registration
Rights Agreement and (ii) to the extent permitted by applicable law, purchase
Old Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Notes properly tendered will be accepted, promptly after the Expiration
Date, and the Exchange Notes will be issued promptly after acceptance of the Old
Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes of
the Exchange Offer, Old Notes shall be deemed to have been accepted as validly
tendered for exchange when, as and if the Issuers and the Company have given
oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or nonexchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in place for sending a signed, hard copy of the Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes,
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach
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<PAGE> 36
the Exchange Agent before the Expiration Date, or the procedures for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if (i)
the tender is made through an Eligible Institution, (ii) prior to the Expiration
Date, the Exchange Agent receives from such Eligible Institution a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) and
Notice of Guaranteed Delivery, substantially in the form provided by the Company
(by facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes, the registration number(s) of such Old Notes
and the amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery, the Letter of Transmittal (or
facsimile thereof) together with the certificates for all physically tendered
Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and any other documents required by the Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent and (iii) the
certificates for all physically tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the business day prior to the Expiration Date.
For a withdrawal to be effective, a written notice (telegram, telex,
facsimile transmission or letter) of withdrawal must be received by the Exchange
Agent prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date at one of the addresses set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), (where certificates for Old
Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder and a statement
that such holder is withdrawing its election to have such Old Notes exchanged.
If certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuers and the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the holder thereof without cost to such
holder (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with such Book-Entry Transfer Facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering" and "-- Book-Entry Transfer" above at any time on or prior to the
Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer shall not be subject to any conditions, other than that
the Exchange Offer, or the making of any exchange by a holder, does not violate
applicable law or any applicable interpretation of the SEC. Each holder of Old
Notes (other than Participating Broker-Dealers) who wishes to exchange such Old
Notes for Exchange Notes in the Exchange Offer shall represent that (i) it is
neither an "affiliate" of any of the Issuers or the Company within the meaning
of Rule 405 under the 1933 Act, nor a broker-dealer tendering
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<PAGE> 37
Old Notes acquired directly from the Issuers or the Company for its own account,
(ii) any Exchange Notes to be received by it were acquired in the ordinary
course of business and (iii) it has no arrangement with any Person to
participate in the distribution (within the meaning of the 1933 Act) of the
Exchange Notes.
Notwithstanding any other term of the Exchange Offer, Old Notes will not be
required to be accepted for exchange, nor will Exchange Notes be issued in
exchange for any Old Notes, and the Issuers and the Company may terminate or
amend the Exchange Offer as provided herein before the acceptance of such Old
Notes, if because of any change in law, or applicable interpretations thereof by
the Commission, the Issuers and the Company determine that it is not permitted
to effect the Exchange Offer. The Issuers and the Company have no obligation to,
and will not knowingly, permit acceptance of tenders of Old Notes from
affiliates of the Issuers and the Company (within the meaning of Rule 405 under
the Securities Act) or from any other holder or holders who are not eligible to
participate in the Exchange Offer under applicable law or interpretations
thereof by the Commission, or if the Exchange Notes to be received by such
holder or holders of Old Notes in the Exchange Offer, upon receipt, will not be
tradable by such holder without restriction under the Securities Act and the
Exchange Act and without material restrictions under the "blue sky" or
securities laws of substantially all of the states of the United States.
EXCHANGE AGENT
Bank One, N.A., the Trustee under the Indenture, has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance and
inquiries for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail, Hand or Overnight Courier Facsimile Transmission Number
Bank One, N.A. 614-244-5185
235 West Schrock Road or 614-244-5188
Westerville, OH 43271-0184
Attention: Corporate Trust Operations (For Eligible Institutions Only)
Lora Marsch Confirm by Telephone
(If by Mail, Registered or 614-248-4856
Certified Mail Recommended)
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuers and the Company. The principal solicitation for tenders
pursuant to the Exchange Offer is being made by mail; however, additional
solicitations may be made by telegraph, telephone, telecopy or in person by
officers of the Issuers and the Company and regular employees of the Company.
The Issuers and the Company will not make any payments to brokers, dealers
or other persons soliciting acceptances of the Exchange Offer. The Issuers and
the Company, however, will pay the Exchange Agent reasonable and customary fees
for its services and will reimburse the Exchange Agent for its reasonable out-
of-pocket expenses in connection therewith. The Issuers and the Company may also
pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of the
Prospectus and related documents to the beneficial owners of the Old Notes, and
in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Issuers and the Company, including fees and expenses of the Exchange
Agent and Trustee and accounting, legal, printing and related fees and expenses.
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The Issuers and the Company will pay all transfer taxes, if any, applicable
to the exchange of Old Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or Old Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Notes tendered, or if tendered Old Notes are registered in the name
of any person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF EXCHANGE
NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. See "Transfer Restrictions on Old
Notes." In general, the Old Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Issuers and the Company do not currently anticipate that they will
register the Old Notes under the Securities Act subsequent to the Exchange
Offer. Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer
No-Action Letters, the Issuers and the Company believe that the Exchange Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than a broker-dealer who
acquires such Exchange Notes directly from the Issuers and the Company for
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or any holder that is an "affiliate" of the
Issuers or the Company as defined in Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders are not engaged in, and do not
intend to engage in, a distribution of such Exchange Notes and have no
arrangement with any person to participate in a distribution of such Exchange
Notes. By tendering the Old Notes in exchange for Exchange Notes, each holder,
other than a broker-dealer, will represent to the Issuers and the Company that:
(i) it is not an affiliate of the Issuers or the Company (as defined under Rule
405 of the Securities Act) or a broker-dealer tendering Old Notes acquired
directly from the Issuers or the Company for its own account; (ii) any Exchange
Notes to be received by it will be acquired in the ordinary course of its
business; and (iii) it is not engaged in, and does not intend to engage in, a
distribution of such Exchange Notes and has no arrangement or understanding to
participate in a distribution of the Exchange Notes. If a holder of Old Notes is
engaged in or intends to engage in a distribution of the Exchange Notes or has
any arrangement or understanding with respect to the distribution of the
Exchange Notes to be acquired pursuant to the Exchange Offer, such holder may
not rely on the applicable interpretations of the staff of the Commission and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Each
Participating Broker-Dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. The Issuers and the Company have agreed that, starting on the
Expiration Date and ending on the close of business 180 days after the
Expiration Date, they will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution." To comply with the securities laws of certain jurisdictions, it
may be
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necessary to qualify for sale or register the Exchange Notes prior to offering
or selling such Exchange Notes. The Issuers and the Company have agreed,
pursuant to the Registration Rights Agreement and subject to certain specified
limitations therein, to register or qualify the Exchange Notes for offer or sale
under the securities or "blue sky" laws of such jurisdictions as may be
necessary to permit the holders of Exchange Notes to trade Exchange Notes
without any restrictions or limitations under the securities laws of the several
states of the United States.
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued and the Old Notes were issued under an
indenture dated as of April 1, 1998 (the "Indenture"), among Calair and Calair
Capital, as joint and several obligors, Continental, as guarantor, and Bank One,
N.A., as trustee (the "Trustee"), a copy of which has been filed as an exhibit
to the Registration Statement and a copy of which is available as set forth
under the heading "Available Information." The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Indenture,
including the definitions of certain terms contained therein. For definitions of
certain capitalized terms used in the following summary, see "-- Certain
Definitions." Capitalized terms not otherwise defined below or elsewhere in this
Prospectus have the meanings given to them in the Indenture. References to the
Notes include the Old Notes and the Exchange Notes unless the context otherwise
requires.
GENERAL
The Notes mature on April 1, 2008, are limited to $112.3 million aggregate
principal amount and are unsecured, senior obligations of the Issuers. Each
Exchange Note will bear interest at the rate set forth on the cover page hereof
from its date of issue or from the most recent interest payment date to which
interest has been paid or duly provided for, payable on October 1, 1998, and
semiannually thereafter on April 1 and October 1 in each year until the
principal thereof is paid or duly provided for to the Person in whose name the
Exchange Note (or any predecessor Note) is registered at the close of business
on the March 15 or September 15 next preceding such interest payment date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Issuers in The City of New York maintained for such purposes (which
initially will be the Corporate Trust Office of the Trustee c/o First Chicago
Trust Company of New York, 14 Wall Street, 8th Floor, Suite 4607, New York, New
York 10005); provided, however, that, at the option of the Issuers, interest may
be paid by check mailed to the address of the Person entitled thereto as such
address shall appear on the security register. The Exchange Notes will be issued
only in registered form without coupons and only in denominations of $1,000 and
any integral multiple thereof. No service charge will be made for any
registration of transfer or exchange or redemption of Notes, but the Issuers may
require payment in certain circumstances of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
THE PARENT GUARANTEE
Pursuant to the Indenture, Continental has unconditionally guaranteed the
due and punctual payment of the principal of, premium, if any, and interest on
the Notes when the same shall become due, whether by acceleration or otherwise.
The Parent Guarantee is enforceable without any need first to enforce the Notes
against either of the Issuers.
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RANKING
The Notes are unsecured, senior obligations of the Issuers ranking pari
passu in right of payment with all other existing and future unsecured and
unsubordinated obligations of the Issuers. The Parent Guarantee is an unsecured,
senior obligation of Continental ranking pari passu in right of payment with all
other existing and future unsecured and unsubordinated obligations of
Continental, and senior in right of payment to all existing and future
obligations of Continental expressly subordinated in right of payment to the
Parent Guarantee. The Notes and the Parent Guarantee are effectively
subordinated in right of payment to any secured senior obligations of the
Issuers and Continental, respectively, with respect to the assets of the Issuers
and Continental, respectively, securing such obligations. The Notes and the
Parent Guarantee are also effectively subordinated to all existing and future
liabilities of the subsidiaries of the Issuers and Continental, respectively. As
of March 31, 1998, Continental had $2.0 billion (including current maturities)
of long-term debt and capital lease obligations on a consolidated basis of which
approximately $1.4 billion was secured long-term debt and capital lease
obligations of Continental and $146 million was long-term debt and capital lease
obligations of Continental's subsidiaries, and on a pro forma basis after giving
effect to the issuance of the Old Notes, the Issuers would have had no
indebtedness outstanding other than the Notes.
The Indenture contains no limitations on the ability of the Issuers or
Continental or any of their respective Subsidiaries to incur additional
indebtedness in the future or to mortgage or pledge any of their respective
assets or to pay dividends or make other distributions on, or redeem or
repurchase, capital stock.
SINKING FUND
The Notes are not entitled to the benefit of any sinking fund.
REDEMPTION
The Notes are redeemable at the option of the Issuers, in whole or in part,
at any time and from time to time, on not less than 20 nor more than 60 days'
prior notice, at a redemption price equal to the sum of (i) the principal amount
thereof on the redemption date, (ii) accrued and unpaid interest thereon, if
any, to the redemption date (subject to the right of holders of record on
relevant record dates to receive interest due on an interest payment date), plus
(iii) a Make-Whole Premium, if any.
"Make-Whole Premium" is defined, with respect to a Note, as the excess, if
any, of (A) the present value of the required interest and principal payments
due on such Note on or after the redemption date, computed using a discount rate
equal to the Treasury Rate plus 25 basis points, over (B) the sum of the then
outstanding principal amount of such Note plus the accrued and unpaid interest
thereon, if any, paid on the redemption date.
"Treasury Rate" is defined as the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days prior
to the redemption date (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining Average Life of the Notes; provided, however, that if the Average
Life of the Notes is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Average Life of the Notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected not more than 60 days prior to the redemption date by
the Trustee pro rata, by lot, or by such other method as the Trustee will deem
fair and appropriate; provided, however, that no such partial redemption will
reduce the principal amount of a Note not redeemed to less than $1,000. Notice
of redemption will be mailed, first-class postage prepaid, at least 20 but not
more than 60 days before the redemption date to each holder of Notes to
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<PAGE> 41
be redeemed at its registered address. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for redemption
and accepted for payment.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Reports
Continental will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not Continental has a
class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that Continental would be required to file
if it were subject to Section 13 or 15 of the Exchange Act. Continental is also
required (a) to file with the Trustee copies of such reports and documents
within 15 days after the date on which Continental files such reports and
documents with the Commission or the date on which Continental would be required
to file such reports and documents if Continental were so required, and (b) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at Calair's cost
copies of such reports and documents to any holder of Notes promptly upon
written request. The Issuers are not required to file, provide or furnish with
or to any Person any report or information except as required by Section 13 or
15 of the Exchange Act and as described under "Available Information."
Consolidation, Merger and Sale of Assets
None of Calair, Calair Capital or Continental will, in a single transaction
or through a series of transactions, consolidate with or merge with or into any
other Person, or permit any Person to consolidate with or merge into Calair,
Calair Capital or Continental, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets to
any other Person or Persons if such transaction or series of transactions, in
the aggregate, would result in the sale, assignment, conveyance, transfer, lease
or other disposition of all or substantially all of the properties and assets of
Calair and its Subsidiaries, Calair Capital and its Subsidiaries or Continental
and its Subsidiaries on a consolidated basis to any other Person or group of
affiliated Persons, unless at the time and immediately after giving effect
thereto (i) either (a) Calair, Calair Capital or Continental will be the
continuing corporation (or, in the case of Calair, the continuing limited
liability company or the continuing corporation) or (b) the Person (if other
than Calair, Calair Capital or Continental) formed by such consolidation or into
which Calair, Calair Capital or Continental is merged or the Person or group of
affiliated Persons that acquire by sale, assignment, conveyance, transfer, lease
or disposition all or substantially all the properties and assets of Calair and
its Subsidiaries, Calair Capital and its Subsidiaries or Continental and its
Subsidiaries on a consolidated basis (the "Surviving Entity") (1) will be a
corporation (or, in the case of the successor to Calair, a limited liability
company or a corporation) duly organized and validly existing under the laws of
the United States of America, any state thereof or the District of Columbia and
(2) will expressly assume, by a supplemental indenture in form satisfactory to
the Trustee, Calair's or Calair Capital's obligation for the due and punctual
payment of the principal of, premium, if any, and interest on all the Notes (or
Continental's obligations under the Parent Guarantee, as the case may be) and
the performance and observance of every covenant of the Indenture on the part of
Calair, Calair Capital or Continental, as the case may be, to be performed or
observed; and (ii) immediately before and immediately after giving effect to
such transaction or series of transactions, no Event of Default will have
occurred and be continuing. Notwithstanding anything to the contrary contained
in this paragraph, Calair Capital shall not merge into, or consolidate with, any
entity if, as a result thereof, no Issuer would be a corporation.
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, Calair, Calair Capital,
Continental or the Surviving Entity shall deliver to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Opinion of Counsel stating
that such consolidation, merger, sale, assignment, conveyance, transfer, lease
or other disposition, and if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, comply with the requirements
of the Indenture and that all conditions precedent therein provided for relating
to such transaction have been complied with.
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In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, the holders of the Notes do
not have the right to require the redemption thereof or any similar rights.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of any installment of interest on any Note
when it becomes due and payable and continuance of such default for a
period of 30 days;
(ii) default in the payment of the principal of or premium, if any, on
any Note at its Maturity (upon acceleration, optional redemption, required
purchase or otherwise);
(iii) default in the performance, or breach, of the "Consolidation,
Merger and Sale of Assets" covenant;
(iv) default in the performance, or breach, of any covenant of the
Issuers or Continental contained in the Indenture (other than a default in
the performance, or breach, of a covenant which is specifically dealt with
in clauses (i), (ii) or (iii) above) and continuance of such default or
breach for a period of 60 days after written notice shall have been given
to the Issuers or Continental by the Trustee or to the Issuers, Continental
and the Trustee by the holders of at least 25% in aggregate principal
amount of the Notes then outstanding;
(v) the Parent Guarantee shall for any reason cease to be, or shall be
asserted in writing by Continental or either Issuer not to be, enforceable
in accordance with its terms and the terms of the Indenture; and
(vi) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to either Issuer or Continental.
If an Event of Default (other than as specified in clause (vi) above) shall
occur and be continuing, the Trustee or the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Issuers and Continental (and to the Trustee if such notice is given by the
holders), may, and the Trustee upon the written request of such holders shall,
declare the principal of, premium, if any, and accrued interest on the Notes to
be immediately due and payable, and upon any such declaration of acceleration
all such amounts payable in respect of the Notes shall be immediately due and
payable. If an Event of Default specified in clause (vi) above occurs and is
continuing, then the principal of, premium, if any, and accrued interest on the
Notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
At any time after such a declaration of acceleration, but before a judgment
or decree for payment of the money due has been obtained by the Trustee, the
holders of at least a majority in aggregate principal amount of the outstanding
Notes, by written notice to the Issuers, Continental and the Trustee, may
rescind such declaration and its consequences if (a) the Issuers or Continental
have paid or deposited with the Trustee a sum sufficient to pay (i) all overdue
interest on all Notes, (ii) all unpaid principal of and premium, if any, on any
outstanding Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (iii) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate prescribed therefor by the Notes, and (iv) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; (b) all Events of Default, other than the non-payment of amounts of
principal of, premium, if any, or interest on the Notes that has become due
solely by such declaration of acceleration, have been cured or waived; and (c)
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. No such rescission shall affect any subsequent default
or impair any right consequent thereon.
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The holders of at least a majority in aggregate principal amount of the
outstanding Notes, by notice to the Trustee, may waive all past Defaults and
Events of Default and their consequences under the Indenture (except a default
in the payment of the principal of, premium, if any, or interest on any Note, or
in respect of a covenant or provision under the Indenture which cannot be
modified or amended without the consent of the holder of each outstanding Note
affected thereby) if (i) all existing Events of Default, other than the
nonpayment of principal of, premium, if any, and interest on the Notes that have
become due solely by such declaration of acceleration, have been cured or waived
and (ii) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 30 days after it occurs unless such Default
or Event of Default has been cured. Except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Notes, the
Trustee may withhold the notice to the holders of such Notes if the board of
directors, the executive committee or a trust committee of its directors and/or
officers in good faith determines that withholding the notice is in the interest
of the holders of the Notes.
The Issuers and Continental are required to furnish to the Trustee annual
statements as to the performance by the Issuers and Continental of their
obligations under the Indenture and as to any default in such performance. The
Issuers and Continental are also required to notify the Trustee within five
Business Days of actual knowledge by a Responsible Officer of the Issuers of an
Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Issuers may, at their option and at any time, elect to have their
obligations under the Notes discharged with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Issuers will be deemed to have
paid and discharged the entire indebtedness represented by the outstanding Notes
and to have satisfied all of their other obligations under such Notes and the
Indenture insofar as such Notes are concerned except for (i) the rights of
holders of outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (ii) the
Issuers' obligations to issue temporary Notes, register the transfer or exchange
of any Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an
office or agency for payments in respect of the Notes and segregate and hold
such payments in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee and (iv) the defeasance provisions of the Indenture. In addition,
the Issuers may, at their option and at any time, elect to have their
obligations released with respect to certain covenants set forth in the
Indenture, and any omission to comply with such obligations will not constitute
a Default or an Event of Default with respect to the Notes ("covenant
defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Issuers must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient (as indicated in an opinion of a
nationally recognized firm of independent public accountants in the case of
deposit of U.S. Government Obligations or a combination of cash and U.S.
Government Obligations) to pay and discharge the principal of, premium, if any,
and interest on the outstanding Notes on the Stated Maturity (or redemption
date, if applicable) of such principal, premium, if any, or installment of
interest; (ii) no Default or Event of Default with respect to the Notes will
have occurred and be continuing on the date of such deposit or, insofar as an
event of bankruptcy under clause (vi) of "Events of Default" above is concerned,
at any time during the period ending on the 91st day after the date of such
deposit; (iii) such defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under, the Indenture or any
other material agreement or instrument to which any Issuer or Continental is a
party or by which any of them is bound; (iv) in the case of defeasance, the
Issuers and Continental shall have delivered to the Trustee an Opinion of
Counsel stating that the Issuers and Continental have received from, or there
has been published by, the Internal Revenue Service a ruling, or since April 1,
1998, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion shall confirm
that, the holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a
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result of such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred; (v) in the case of covenant defeasance, the
Issuers and Continental shall have delivered to the Trustee an Opinion of
Counsel to the effect that the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred; and (vi) the Issuers shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have been complied
with.
SATISFACTION AND DISCHARGE
Except as otherwise provided in the Indenture, the Issuers and Continental
may terminate their obligations under the Notes and the Indenture if: (i) all
Notes previously authenticated and delivered (other than destroyed, lost or
stolen Notes that have been replaced or Notes that are paid pursuant to the
Indenture or Notes for whose payment money or securities have theretofore been
held in trust and thereafter repaid to the Issuers, as provided in the
Indenture) have been delivered to the Trustee for cancellation and the Issuers
and Continental have paid all sums payable by them hereunder; or (ii)(A) the
Notes mature within one year or all of them are to be called for redemption
within one year under arrangements satisfactory to the Trustee for giving the
notice of redemption, (B) the Issuers irrevocably deposit in trust with the
Trustee during such one-year period, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds
solely for the benefit of the holders for that purpose, cash or U.S. Government
Obligations sufficient (in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee in the case of deposit of U.S. Government Obligations
or a combination of cash and U.S. Government Obligations), without consideration
of any reinvestment of any interest thereon, to pay principal, premium, if any,
and interest on the Notes to maturity or redemption, as the case may be, and to
pay all other sums payable by it hereunder, (C) no Default or Event of Default
with respect to the Notes shall have occurred and be continuing on the date of
such deposit, and (D) the Issuers and Continental have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, in each case stating that
all conditions precedent provided for herein relating to the satisfaction and
discharge of the Indenture have been complied with.
With respect to the foregoing clause (i), the Issuers' and Continental's
obligations under the Indenture relating to compensation of the Trustee and
indemnity shall survive. With respect to the foregoing clause (ii), the Issuers'
and Continental's obligations under the Indenture relating to registration,
transfer and exchange of the Notes, defaulted interest, payment on the Notes,
maintenance of office or agency, compensation of the Trustee and indemnity,
replacement of the Trustee, application of trust money, repayment and
reinstatement shall survive until the Notes are no longer outstanding.
Thereafter, only the Issuers' and Continental's obligations under the Indenture
relating to compensation of the Trustee and indemnity, repayment and
reinstatement shall survive. After any such irrevocable deposit, the Trustee
upon request shall acknowledge in writing the discharge of the Issuers' and
Continental's obligations under the Notes and the Indenture except for those
surviving obligations specified above.
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by a supplemental
indenture entered into by the Issuers, Continental and the Trustee with the
consent of the holders of a majority in aggregate outstanding principal amount
of the Notes then outstanding; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Note
affected thereby: (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount of, or
premium, if any, or interest thereon or change the place or currency of payment
of principal of, or premium, if any, or the interest on any Note, or impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of redemption, on or after the redemption date)
of any Note; (ii) reduce the percentage in principal amount of outstanding
Notes, the consent of whose holders
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is required for any supplemental indenture, for any waiver of compliance with
certain provisions of the Indenture or for waiver of certain Defaults and their
consequences provided for in the Indenture; (iii) waive a default in the payment
of principal of, premium, if any, or interest on the Notes, (iv) modify the
Parent Guarantee or the related section in the Indenture in any manner adverse
to the interests of the holders of the Notes; (v) modify any of the provisions
relating to supplemental indentures requiring the consent of holders or relating
to the waiver of past defaults or relating to the waiver of certain covenants,
except to increase the percentage of outstanding Notes required to take such
actions or to provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of the holder of each outstanding Note
affected thereby; or (vi) except as otherwise permitted under the covenant
described above under "-- Certain Covenants -- Consolidation, Merger and Sale of
Assets" consent to the assignment or transfer by any Issuer or Continental of
any of its rights or obligations under the Indenture.
Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Issuers, Continental and the Trustee may modify or amend the
Indenture: (a) to evidence the succession of another Person to any of the
Issuers or Continental or any other obligor or guarantor on the Notes, and the
assumption by any such successor of the covenants of the Issuers or Continental
or such obligor or guarantor in the Indenture and in the Notes in accordance
with the covenant described above under "-- Certain Covenants -- Consolidation,
Merger and Sale of Assets"; (b) to add to the covenants of the Issuers or
Continental or any other obligor or guarantor upon the Notes for the benefit of
the holders of the Notes or to surrender any right or power conferred upon the
Issuers or Continental or any other obligor or guarantor upon the Notes, as
applicable, under the Indenture or the Notes; (c) to cure any ambiguity, or to
correct or supplement any provision in the Indenture or the Notes which may be
defective or inconsistent with any other provision in the Indenture or the Notes
or make any other provisions with respect to matters or questions arising under
the Indenture or the Notes; provided that, in each case, such provisions shall
not adversely affect the interests of the holders of the Notes; (d) to comply
with the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; (e) to add a
guarantor of the Notes under the Indenture (in addition to Continental); (f) to
evidence and provide the acceptance of the appointment of a successor Trustee
under the Indenture; or (g) to mortgage, pledge, hypothecate or grant a security
interest in favor of the Trustee for the benefit of the holders of the Notes as
additional security for the payment and performance of the obligations of the
Issuers and Continental under the Indenture, in any property or assets.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain covenants and provisions of the
Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent Person
would exercise under the circumstances in the conduct of such Person's own
affairs.
The Indenture and, upon consummation of the Exchange Offer, the provisions
of the Trust Indenture Act, incorporated by reference therein contain
limitations on the rights of the Trustee thereunder, should it become a creditor
of the Issuers or Continental, to obtain payment of claims in certain cases or
to realize on certain property received by it in respect of any such claims, as
security or otherwise. The Trustee is permitted to engage in other transactions;
provided, however, that if it acquires any conflicting interest (as defined in
the Trust Indenture Act) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture and the Old Notes are, and the Exchange Notes will be,
governed by, and construed in accordance with, the laws of the State of New
York. Upon consummation of the Exchange Offer, the Indenture will be subject to
the provisions of the Trust Indenture Act that are required to be part of the
Indenture and will, to the extent applicable, be governed by such provisions.
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CERTAIN DEFINITIONS
"Average Life" means, as of the date of determination with respect to any
indebtedness, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from the date of determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such Person's capital stock, and any rights (other than
debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of the Indenture.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"GAAP" means generally accepted accounting principles in the United States,
as applied from time to time by any Person in the preparation of its
consolidated financial statements.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note becomes due and payable as therein or herein provided, whether at
the Stated Maturity with respect to such principal or by declaration of
acceleration, call for redemption or purchase or otherwise.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other indebtedness, means the
date specified in the instrument governing such indebtedness as the fixed date
on which the principal of such indebtedness, or any installment of interest
thereon, is due and payable.
"Subsidiary" means, with respect to any other Person, any Person a majority
of the equity ownership or Voting Stock of which is at the time owned, directly
or indirectly, by such Person or by one or more other Subsidiaries or by such
Person and one or more other Subsidiaries.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
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TAX CONSIDERATIONS
The following is a summary of certain federal income tax consequences under
the Internal Revenue Code of 1986, as amended (the "Code"), of the ownership and
disposition of the Notes. The summary is based upon the laws, regulations,
rulings and judicial decisions in effect on the date of this Prospectus, all of
which are subject to change at any time (possibly on a retroactive basis).
Unless otherwise specifically noted, this summary applies only to those persons
who acquired the Old Notes for cash in the Old Notes Offering and who hold the
Notes as capital assets. This summary does not discuss all aspects of federal
income taxation that may be relevant to investors in light of their particular
investment circumstances, nor does it address the consequences to certain types
of holders subject to special treatment under the federal income tax laws (for
example, tax-exempt organizations, dealers in securities, financial
institutions, life insurance companies or persons holding Notes as part of a
hedging or "conversion" transaction or a straddle). This summary also does not
discuss the consequences to a holder under state, local or foreign tax laws,
which may differ from the corresponding federal income tax laws. Holders of
Notes are advised to consult their own tax advisors regarding the particular tax
considerations pertaining to them with respect to ownership and disposition of
the Notes, including the effects of applicable federal, state, local, foreign
and other tax laws to which they may be subject, as well as possible changes in
the tax laws.
Except as the context otherwise requires, references in the summary to the
Notes apply to Old Notes and Exchange Notes received therefor (see "-- The
Exchange Offer").
PAYMENTS OF INTEREST
A holder of a Note generally will be required to report as ordinary income
for federal income tax purposes interest received or accrued on the Note in
accordance with the holder's method of tax accounting.
SALE, EXCHANGE OR RETIREMENT OF NOTES
A holder's tax basis in a Note generally will equal the purchase price paid
therefor, increased by market discount previously included in income by such
holder and reduced by any amortized premium and any principal payments on the
Note. Upon the sale, exchange or retirement (including redemption) of Note, a
holder of a Note generally will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange or retirement of the Note
(other than in respect of accrued and unpaid interest on the Note) and the
adjusted tax basis in the Note. Such gain or loss generally will be capital gain
or loss, except to the extent of any accrued market discount.
Under current law, net capital gains of individuals generally are subject
to the following maximum federal tax rates: (i) twenty-eight percent, for
property held more than one year but not more than eighteen months; (ii) twenty
percent, for property held more than eighteen months; and (iii) beginning in the
year 2006, eighteen percent, for property acquired after the year 2000 and held
for more than five years. The deductibility of capital losses is subject to
limitations.
THE EXCHANGE OFFER
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not constitute a taxable exchange for federal income tax purposes because
the Exchange Notes will not be considered to differ materially in kind or extent
from the Old Notes. Rather, the Exchange Notes will be treated as a continuation
of the Old Notes in the hands of the holder, with the results that (i) a holder
will not recognize taxable gain or loss as a result of exchanging Notes for
Exchange Notes pursuant to the Exchange Offer, (ii) the holding period of the
Exchange Notes will include the holding period of the Old Notes exchanged
therefor and (iii) the adjusted tax basis of the Exchange Notes immediately
after the exchange will be the same as the adjusted tax basis immediately prior
to the exchange of the Old Notes exchanged therefor.
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FOREIGN HOLDERS
The following is a general discussion of certain United States federal
income tax consequences of the ownership and sale or other disposition of the
Notes by a holder that, for federal income tax purposes, is not a "United States
person" (a "Foreign Person"). For purposes of this discussion, a "United States
person" means a citizen or resident (as determined for United States federal
income tax purposes) of the United States; a corporation, partnership or other
entity created or organized in the United States or under the laws of the United
States or of any political subdivision thereof; an estate the income of which is
includible in gross income for U.S. federal income tax purposes, regardless of
its source; or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust. Resident alien individuals will be subject to United States federal
income tax with respect to the Notes as if they were United States citizens.
If the income or gain on the Notes is "effectively connected with the
conduct of a trade or business within the United States" by the Foreign Person
holding the Note, such income or gain will be subject to tax essentially in the
same manner as if the Notes were held by a United States person, as discussed
above, and in the case of a Foreign Person that is a foreign corporation, may
also be subject to the federal branch profits tax.
If the income on the Notes is not "effectively connected," then under the
"portfolio interest" exception to the general rules for the withholding of tax
on interest paid to a Foreign Person, a Foreign Person will not be subject to
United States tax (or to withholding) on interest on a Note; provided that (i)
the Foreign Person does not actually or constructively own 10% or more of a
capital or profits interest in Continental within the meaning of Section
871(h)(3) of the Code, and (ii) the Company, its paying agent or the person who
would otherwise be required to withhold tax received either (a) a statement (an
"Owner's Statement") on the Internal Revenue Service's Form W-8, signed under
penalties of perjury by the beneficial owner of the Note, in which the owner
certifies that the owner is not a United States person and which provides the
owner's name and address, or (b) a statement signed under penalties of perjury
by a financial institution holding the Note on behalf of the beneficial owners,
together with a copy of each beneficial owner's Owner's Statement. Recently
finalized regulations, which generally will become effective on January 1, 2000,
add certain alternative certification procedures. A Foreign Person who does not
qualify for the "portfolio interest" exception would be subject to United States
withholding tax at a flat rate of 30% (or a lower applicable treaty rate upon
delivery of requisite certificate of eligibility) on interest payments on the
Notes.
If the gain on the Notes is not "effectively connected" with the conduct of
a United States trade or business, then gain recognized by a Foreign Person upon
the redemption, sale or exchange of a Note (including any gain representing
accrued market discount) will not be subject to United States tax unless the
Foreign Person is an individual present in the United States for 183 days or
more during the taxable year in which the Note is redeemed, sold or exchanged,
and certain other requirements are met, in which case the Foreign Person will be
subject to United States tax at a flat rate of 30% (unless exempt by applicable
treaty upon delivery of requisite certification of eligibility). Foreign Persons
who are individuals may also be subject to tax pursuant to provisions of United
States federal income tax law applicable to certain United States expatriates.
BACKUP WITHHOLDING
In general, a 31% backup withholding tax will apply to payments received
with respect to Notes if the holder (i) fails to provide a taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is
notified by the Internal Revenue Service that he or she failed to report
properly payments of interest and dividends and the Internal Revenue Service has
notified the Issuers that he or she is subject to backup withholding, or (iv)
fails, under certain circumstances, to provide a signed statement, certified
under penalties of perjury, that the TIN provided is correct and that he or she
is not subject to backup withholding. The amount of any backup withholding
deducted from a payment to a holder is allowable as a credit against the
holder's federal income tax liability, provided that certain required
information is furnished to the Internal Revenue Service. Certain holders
(including, among others, corporations and foreign individuals who comply
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with certain certification requirements described above under "Foreign Holders")
are not subject to backup withholding. Holders should consult their tax advisors
as to their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption.
TRANSFER RESTRICTIONS ON OLD NOTES
Each purchaser of Old Notes from the Initial Purchasers, by its acceptance
thereof, was deemed to have acknowledged, represented to and agreed with the
Issuers, Continental and the Initial Purchasers as follows:
1. It understands and acknowledges that the Notes have not been registered
under the Securities Act or any other applicable securities law and that the
Notes are being offered for resale in transactions not requiring registration
under the Securities Act or any other securities laws, including sales pursuant
to Rule 144A, and, unless so registered, may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act or any other applicable securities laws, pursuant to an exemption
therefrom or in a transaction not subject thereto and in each case in compliance
with the conditions for transfer set forth in paragraph (4) below.
2. It is not an "affiliate" (as defined in Rule 144 under the Securities
Act) of the Issuers or Continental or acting on behalf of the Issuers or
Continental, and it is either (i) a "qualified institutional buyer" as defined
in Rule 144A (a "QIB") and is aware that any sale of the Notes to it will be
made in reliance on Rule 144A and such acquisition will be for its own account
or for the account of another QIB or (ii) not a "U.S. person" as defined in
Regulation S or purchasing for the account or benefit of a U.S. person (other
than a distributor) and is purchasing Notes in an offshore transaction in
accordance with Regulation S.
3. It acknowledges that none of the Issuers, Continental, the Initial
Purchasers nor any person representing the Issuers, Continental or the Initial
Purchasers has made any representation to it with respect to the Issuers or
Continental or the Old Notes Offering, other than the information contained in
the Offering Memorandum relating to the Old Notes, which has been delivered to
it and upon which it is relying in making its investment decision with respect
to the Notes. It has had access to such financial and other information
concerning the Issuers and Continental and the Notes as it has deemed necessary
in connection with its decision to purchase the Notes, including an opportunity
to ask questions of and request information from the Issuers and Continental and
the Initial Purchasers.
4. It is purchasing the Notes for its own account, or for one or more
investor accounts for which it is acting as a fiduciary or agent, in each case
not with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act, subject to any requirement of law
that the disposition of its property or the property of such investor account or
accounts be at all times within its or their control and subject to its or their
ability to resell such Notes pursuant to Rule 144A or any other available
exemption from registration under the Securities Act. It agrees on its own
behalf and on behalf of any investor account for which it is purchasing the
Notes, and each subsequent holder of the Notes by its acceptance thereof will
agree, to offer, sell or otherwise transfer such Notes prior to the date which
is two years after the later of the date of original issue of such Notes and the
last date that the Issuers or any affiliate of the Issuers was the owner of such
Notes (or any predecessor thereto) (the "Resale Restriction Termination Date")
only (i) to the Issuers, (ii) pursuant to a registration statement that has been
declared effective under the Securities Act, (iii) for so long as the Notes are
eligible for resale pursuant to Rule 144A, to a person it reasonably believes is
a QIB that purchases for its own account or for the account of a QIB to whom
notice is given that the transfer is being made in reliance on Rule 144A, (iv)
pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S, (v) to an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is an
institutional investor (an "Institutional Accredited Investor") purchasing for
its own account or for the account of such an Institutional Accredited Investor,
in each case in a minimum principal amount of the Notes of $250,000, or (vi)
pursuant to any other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any requirement of
law that the disposition of its property or the property of such investor
account or accounts be at all times within its or their control. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to be
made
48
<PAGE> 50
pursuant to clause (v) above prior to the Resale Restriction Termination Date,
the transferor shall deliver a letter from the transferee substantially in the
form of Annex A of the Offering Memorandum relating to the Old Notes to the
Issuers and the Trustee, which shall provide, among other things, that the
transferee is an Institutional Accredited Investor that is acquiring such Notes
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Issuers and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Notes pursuant to clauses (iv), (v) or (vi) above to require the delivery
of an opinion of counsel, certifications and/or other information satisfactory
to the Issuers and the Trustee. Each purchaser acknowledges that each Note will
contain a legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE
CASE OF ANY OF THE FOREGOING CLAUSES (A) THROUGH (F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
5. If it is an insurance company, the funds to be used to purchase the
Notes by it constitute (x) assets of an insurance company general account
maintained by it and the acquisition and holding of each such Note by such
account satisfies the requirements of United States Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 95-60 or (y) assets of an
insurance company pooled separate account satisfying
49
<PAGE> 51
the conditions of PTCE 90-1. If it is not an insurance company, no part of the
funds to be used to purchase the Notes to be purchased by it constitute assets
of any trust or other entity which contains, or is deemed to contain, the assets
of any employee benefit plan such that the use of such assets constitutes a
non-exempt prohibited transaction under ERISA or the Code. As used in this
paragraph, the term "employee benefit plan" shall have the meaning assigned to
such term in Section 3 of ERISA.
6. It acknowledges that the Issuers, Continental, the Initial Purchasers
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that, if any of the
acknowledgments, representations or agreements deemed to have been made by it by
its purchase of Notes is no longer accurate, it shall promptly notify the
Issuers, Continental and the Initial Purchasers. If it is acquiring any Notes as
a fiduciary or agent for one or more investor accounts, it represents that it
has sole investment discretion with respect to each such account and that it has
full power to make the foregoing acknowledgments, representations and agreements
on behalf of each such account.
50
<PAGE> 52
BOOK-ENTRY; DELIVERY AND FORM
THE GLOBAL NOTE
The Exchange Notes will be issued in the form of one or more global notes
in registered form, without interest coupons (collectively, the "Global Note").
The Global Note will be deposited on the Expiration Date with, or on behalf of,
The Depository Trust Company ("DTC") and registered in the name of Cede & Co.,
as nominee of DTC, or will remain in the custody of the Trustee pursuant to the
FAST Balance Certificate Agreement between DTC and the Trustee.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTE
DTC has advised the Issuers that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking organization"
within the meaning of the New York Banking Law, (iii) a member of the Federal
Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (v) a "clearing agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the), banks and
trust companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. Investors who are not Participants may
beneficially own securities held by or on behalf of DTC only through
Participants or Indirect Participants.
The Issuers expect that pursuant to procedures established by DTC (i) upon
deposit of the Global Note, DTC or its nominee will credit the accounts of
Participants with payments in amounts proportionate to their respective
beneficial interests in the Global Note as shown on the records of DTC or such
nominee and (ii) ownership of beneficial interests in the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the interests of Participants) and
the records of Participants and the Indirect Participants (with respect to the
interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the Trustee thereunder.
Accordingly, each holder owning a beneficial interest in a Global Note must rely
on the procedures of DTC and, if such holder is not a Participant or an Indirect
Participant, on the procedures of the Participant through which such holder owns
its interest, to exercise any rights of a holder of Notes under the Indenture or
such Global Note. The Issuers understand that under existing industry practice,
in the event that the Issuers request any action of holders of Notes, or a
holder that is an owner of a beneficial interest in a Global Note desires to
take any action that DTC, as the holder of such Global Note, is entitled to
take, DTC would authorize the Participants to take such action and the
Participants would authorize holders
51
<PAGE> 53
owning through such Participants to take such action or would otherwise act upon
the instruction of such holders. Neither the Issuers nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of Notes by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to such Notes.
Payments with respect to the principal of, and premium, if any, and
interest on, any Notes represented by a Global Note registered in the name of
DTC or its nominee on the applicable record date will be payable by the Trustee
to or at the direction of DTC or its nominee in its capacity as the registered
holder of the Global Note representing such Notes under the Indenture. Under the
terms of the Indenture, the Issuers and the Trustee may treat the persons in
whose names the Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving payment thereon and for any and all other
purposes whatsoever. Accordingly, neither the Issuers nor the Trustee has or
will have any responsibility or liability for the payment of such amounts to
owners of beneficial interests in a Global Note (including principal, premium,
if any, and interest). Payments by the Participants and the Indirect
Participants to the owners of beneficial interests in a Global Note will be
governed by standing instructions and customary industry practice and will be
the responsibility of the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds.
CERTIFICATED NOTES
If (i) the Issuers notify the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
Notes in definitive form under the Indenture or (iii) upon the occurrence of
certain other events as provided in the Indenture, then, upon surrender by DTC
of the Global Note, Certificated Notes will be issued to each person that DTC
identifies as the beneficial owner of the Notes represented by the Global Note.
Upon any such issuance, the Trustee is required to register such Certificated
Notes in the name of such person or persons (or the nominee of any thereof) and
cause the same to be delivered thereto.
Neither the Issuers nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Issuers and the
Company have agreed that, starting on the Expiration Date and ending on the
close of business 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). In addition, until such date, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Issuers and the Company will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
52
<PAGE> 54
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuers and the
Company will promptly send additional copies of this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Issuers and the Company have agreed in the Registration Rights Agreement to pay
all expenses incident to the Exchange Offer other than commissions or
concessions of any brokers or dealers and to indemnify the holders of the Old
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Exchange Notes in
connection with the Exchange Offer are being passed upon for Calair, Calair
Capital and Continental by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements (including the financial statement
schedule) of Continental Airlines, Inc. appearing in Continental Airlines,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1997,
incorporated by reference in this Prospectus and the Registration Statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The consolidated balance sheet of Calair L.L.C. as of March 31, 1998
appearing in this Prospectus and the Registration Statement has been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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<PAGE> 55
INDEX TO FINANCIAL STATEMENT
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Calair L.L.C. Consolidated Balance Sheet.................... F-3
Notes to Consolidated Balance Sheet......................... F-4
</TABLE>
F-1
<PAGE> 56
REPORT OF INDEPENDENT AUDITORS
The Member
Calair L.L.C.
We have audited the accompanying consolidated balance sheet of Calair
L.L.C. (a Delaware limited liability company) as of March 31, 1998. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of Calair
L.L.C. at March 31, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
March 31, 1998
F-2
<PAGE> 57
CALAIR L.L.C.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
ASSETS
<TABLE>
<S> <C>
Cash........................................................ $1,000
------
Total Assets...................................... $1,000
======
MEMBER'S EQUITY
Member's Equity............................................. $1,000
------
Total Member's Equity............................. $1,000
======
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE> 58
CALAIR L.L.C.
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1 -- ORGANIZATION
Calair L.L.C. ("Calair"), a Delaware limited liability company, and its
wholly owned subsidiary, Calair Capital Corporation ("Calair Capital"), were
formed in March 1998 for the purpose of acquiring certain take-off and landing
rights at Chicago O'Hare Airport, Ronald Reagan Washington National Airport in
Washington, D.C. and LaGuardia Airport (collectively, the "Slots") from
Continental Airlines, Inc. ("Continental"). Calair has not commenced operations.
Under a proposed transaction, Continental will sell the Slots to Calair for
$151.1 million. The transaction will be funded with a combination of debt and
equity, which will include (i) $31.7 million in capital contributions from
CALFINCO Inc. ("Calfinco"), a wholly owned subsidiary of Continental
(representing a 76% equity interest in Calair), (ii) $10.0 million in capital
contributions from Chase Equity Associates, L.P. ("CEA") (representing a 24%
equity interest in Calair) and (iii) net proceeds of approximately $113 million
from an offering of Senior Notes due 2008 (the "Senior Notes"). The Senior Notes
will be fully and unconditionally guaranteed by Continental. At closing,
Continental will lease the Slots back from Calair for a 10-year period pursuant
to the terms of a Slot Lease Agreement between Calair and Continental.
Pursuant to the terms of a Redemption Option Agreement between Calair and
CEA, Calair will have the right to redeem 50% of CEA's member interest (i.e. 12%
of Calair) at the fifth anniversary of the closing date of the transaction and
will have the right to redeem all of CEA's member interest (either 12% of Calair
if Calair has previously exercised its fifth anniversary redemption option, or
24% otherwise) upon the occurrence of certain events described in the Redemption
Option Agreement and the Company Agreement and at the tenth anniversary of the
closing date of the transaction. If Calair has not redeemed all of CEA's member
interest on or before the tenth anniversary of the closing date of the
transaction, CEA will have the right to require the liquidation of Calair.
NOTE 2 -- PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet of Calair includes the accounts of Calair
and its wholly owned subsidiary, Calair Capital. All intercompany transactions
have been eliminated in consolidation.
NOTE 3 -- CAPITAL TRANSACTION
Calfinco, the sole member, acquired its equity in Calair for $1,000 in
cash.
F-4
<PAGE> 59
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS OR CONTINENTAL SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................... 5
Incorporation of Certain
Documents by Reference.................... 6
Prospectus Summary.......................... 7
Risk Factors................................ 16
The Issuers................................. 23
Continental................................. 23
The Transaction............................. 23
Management of the Issuers................... 27
The Private Placement and
Use of Proceeds........................... 28
Capitalization.............................. 29
The Exchange Offer.......................... 30
Description of the Notes.................... 38
Tax Considerations.......................... 46
Transfer Restrictions on Old Notes.......... 48
Book Entry; Delivery and Form............... 51
Plan of Distribution........................ 52
Legal Matters............................... 53
Experts..................................... 53
Calair Financial Statement.................. F-3
</TABLE>
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
PROSPECTUS
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
OFFER TO EXCHANGE
8 1/8% SENIOR NOTES DUE 2008, WHICH
HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING 8 1/8%
SENIOR NOTES DUE 2008
FULLY AND UNCONDITIONALLY GUARANTEED BY
<TABLE>
<S> <C>
CONTINENTAL LOGO
AIRLINES
</TABLE>
Dated , 1998
------------------------------------------------------------
------------------------------------------------------------
<PAGE> 60
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Continental Airlines, Inc.
Continental Airlines, Inc.'s Certificate of Incorporation and Bylaws
provide that Continental Airlines, Inc. will indemnify each of its directors and
officers to the full extent permitted by the laws of the State of Delaware and
may indemnify certain other persons as authorized by the Delaware General
Corporation Law (the "GCL"). Section 145 of the GCL provides as follows:
"(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
II-1
<PAGE> 61
(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 such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For purposes of this section, references to 'the corporation' shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to 'other enterprises' shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner 'not
opposed to the best interests of the corporation' as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
The Certificate of Incorporation and Bylaws also limit the personal
liability of directors to Continental Airlines, Inc. and its stockholders for
monetary damages resulting from certain breaches of the directors' fiduciary
duties. The Bylaws of Continental Airlines, Inc. provide as follows:
"No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or
II-2
<PAGE> 62
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL, or (iv) for any transaction from which the Director
derived any improper personal benefit. If the GCL is amended to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of Directors of the Corporation shall be
eliminated or limited to the full extent permitted by the GCL, as so amended."
Continental Airlines, Inc. maintains directors' and officers' liability
insurance.
Calair L.L.C.
Calair L.L.C.'s Amended and Restated Company Agreement provides as follows:
Subject to limitations set forth in such Agreement, "(a) the Company
hereby agrees, to the fullest extent permitted by Law, to indemnify, hold
harmless and pay, and (b) the Company Liquidator, or any receiver or
trustee of the Company (each of the foregoing Persons being an
'Indemnitor') (in the case of the Company Liquidator, receiver or trustee,
to the extent of Company Property) shall indemnify, hold harmless and pay,
all Expenses ('Indemnified Amounts') of any Member, and the direct and
indirect members, partners, shareholders and other equity holders of any
Member, and the successors and permitted assignees of each such Person
(whether pursuant to an assignment for security or otherwise) and creditors
of and surety providers with respect to, any of the foregoing, and their
respective successors and assigns (whether pursuant to an assignment for
security or otherwise) and each of the respective directors, officers,
employees, administrators and agents of any of the foregoing (each an
'Indemnified Person'), which may be incurred or realized by or asserted
against such Indemnified Person, relating to, growing out of or resulting
from:
(i) Company Obligations. Any failure by the Company to perform or
observe each of its covenants and obligations under this Agreement or
any other Operative Document to which it is a party (collectively, the
'Covered Documents'), including Indemnified Amounts resulting from or
arising out of or in connection with enforcement of the Covered
Documents (or determining whether or how to enforce any Covered
Documents, whether through negotiations, legal proceedings or
otherwise), or responding to any subpoena or other legal process or
informal investigative demand in connection herewith or therewith; or
(ii) Representations and Warranties. Any inaccuracy in, or any
breach of, any written certification, representation or warranty made by
or on behalf of the Company in any Covered Document or in any written
report or certification required hereunder or under any other Covered
Document, in each case (A) if but only if such certification,
representation or warranty is made as of a specific date, as of the date
as of which the facts stated therein were certified, represented or
warranted and (B) in all other cases, as of any date or during any
period to which such certification, representation or warranty may be
applicable; or
(iii) Investigations; Litigation; Proceedings. Any investigation,
litigation or proceeding, whether or not such Indemnified Person is a
party thereto, that (A) relates to, grows out of or results from any
action or omission, or alleged action or omission, by or on behalf of or
attributable to the Company and (B) would not have resulted in
Indemnified Amounts incurred or realized by or asserted against such
Indemnified Person but for the Covered Documents or the transactions
thereunder or contemplated thereby."
Calair L.L.C.'s Amended and Restated Company Agreement also provides as
follows:
"The Company may maintain insurance, at its expense, to protect itself
and any Member, or agent of the Company or another limited liability
company, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Company would have the
power to indemnify such person against such expense, liability or loss
under the [Delaware Limited Liability Company] Act."
II-3
<PAGE> 63
Calair Capital Corporation.
The Bylaws of Calair Capital Corporation provide as follows:
"Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a 'proceeding'), by
reason of the fact that he or she or a person of whom he or she is the
legal representative, is or was or has agreed to become a director or
officer of the Corporation or is or was serving or has agreed to serve at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while serving or
having agreed to serve as a director or officer, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to serve in the capacity which
initially entitled such person to indemnity hereunder and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by
the board of directors of the Corporation. The right to indemnification
conferred in this Article VI shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however,
that, if the Delaware General Corporation Law requires, the payment of such
expenses incurred by a current, former or proposed director or officer in
his or her capacity as a director or officer or proposed director or
officer (and not in any other capacity in which service was or is or has
been agreed to be rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
indemnified person, to repay all amounts so advanced if it shall ultimately
be determined that such indemnified person is not entitled to be
indemnified under this Section or otherwise."
For a discussion of Section 145 of the Delaware General Corporation Law,
see "Indemnification of Directors and Officers -- Continental Airlines," above.
Calair Capital Corporation's Certificate of Incorporation limits the
liability of directors to Calair Capital Corporation and its stockholders for
monetary damages resulting from breaches of the directors' fiduciary duties,
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 Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following instruments and documents are included as Exhibits to this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<C> <S>
3.1 -- Certificate of Formation of Calair L.L.C., dated March
30, 1998.
3.2 -- Amended and Restated Company Agreement of Calair L.L.C.,
dated as of April 17, 1998.
3.3 -- Certificate of Incorporation of Calair Capital
Corporation, dated March 30, 1998.
</TABLE>
II-4
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<C> <S>
3.4 -- Bylaws of Calair Capital Corporation, dated March 31,
1998.
4.1 -- Form of 8 1/8% Senior Notes due 2008 (included as Exhibit
B to Exhibit 4.2 below).
4.2 -- Senior Notes Indenture, dated as of April 1, 1998, among
Calair L.L.C. and Calair Capital Corporation, as Issuers,
Continental, as Guarantor, and Bank One, N.A., as
Trustee.
4.3 -- Exchange and Registration Rights Agreement, dated as of
April 17, 1988, among Calair L.L.C. and Calair Capital
Corporation, as Note Issuers, and Continental Airlines,
Inc., as Guarantor, and Chase Securities Inc., Credit
Suisse First Boston Corporation and Morgan Stanley & Co.
Incorporated, as Purchasers.
5.1 -- Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008.
8.1 -- Tax Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008 (contained in Exhibit 5.1 above).
10.1 -- Sale Agreement between Continental Airlines, Inc. and
Calair L.L.C. dated as of April 17, 1998.
10.2 -- Slot Lease Agreement between Continental Airlines, Inc.
and Calair L.L.C. dated as of April 17, 1998.
10.3 -- Redemption Option Agreement between Calair L.L.C. and
Chase Equity Associates, L.P. dated as of April 17, 1998.
12.1 -- Statement regarding the computation of earnings to fixed
charges of Continental Airlines, Inc.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 above).
24.1 -- Powers of attorney executed by certain directors and
officers of Continental.
24.2 -- Powers of attorney executed by certain directors and
officers of CALFINCO Inc., as managing member of Calair
L.L.C.
24.3 -- Powers of attorney executed by certain directors and
officers of Calair Capital Corporation.
25.1 -- Statement of Eligibility and Qualification on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Registered Holders and Depository Trust
Company Participants.
99.4 -- Form of Letter to Clients.
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described under Item 20 above,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
II-5
<PAGE> 65
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on July 30, 1998.
CONTINENTAL AIRLINES, INC.
By: /s/ LAWRENCE W. KELLNER
----------------------------------
Lawrence W. Kellner
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and Chief July 30, 1998
- ----------------------------------------------------- Executive Officer (Principal
Gordon M. Bethune Executive Officer) and Director
/s/ LAWRENCE W. KELLNER Executive Vice President and July 30, 1998
- ----------------------------------------------------- Chief Financial Officer
Lawrence W. Kellner (Principal Financial Officer)
* Vice President and Controller July 30, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
Michael P. Bonds
Director July , 1998
- -----------------------------------------------------
Thomas J. Barrack, Jr.
Director July , 1998
- -----------------------------------------------------
Lloyd M. Bentsen, Jr.
* Director July 30, 1998
- -----------------------------------------------------
David Bonderman
* Director July 30, 1998
- -----------------------------------------------------
Gregory D. Brenneman
Director July , 1998
- -----------------------------------------------------
Patrick Foley
* Director July 30, 1998
- -----------------------------------------------------
Douglas H. McCorkindale
* Director July 30, 1998
- -----------------------------------------------------
George G.C. Parker
</TABLE>
II-7
<PAGE> 67
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director July 30, 1998
- -----------------------------------------------------
Richard W. Pogue
Director July , 1998
- -----------------------------------------------------
William S. Price III
* Director July 30, 1998
- -----------------------------------------------------
Donald L. Sturm
* Director July 30, 1998
- -----------------------------------------------------
Karen Hastie Williams
* Director July 30, 1998
- -----------------------------------------------------
Charles A. Yamarone
*By /s/ LAWRENCE W. KELLNER
-------------------------------------------------
Lawrence W. Kellner
Attorney-in-fact
July 30, 1998
</TABLE>
II-8
<PAGE> 68
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on July 30, 1998.
CALAIR CAPITAL CORPORATION
By: /s/ LAWRENCE W. KELLNER
----------------------------------
Lawrence W. Kellner
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and Chief July 30, 1998
- ----------------------------------------------------- Executive Officer (Principal
Gordon M. Bethune Executive Officer) and Director
* Director July 30, 1998
- -----------------------------------------------------
Gregory D. Brenneman
/s/ LAWRENCE W. KELLNER Executive Vice President and July 30, 1998
- ----------------------------------------------------- Chief Financial Officer
Lawrence W. Kellner (Principal Financial Officer)
and Director
* Director July 30, 1998
- -----------------------------------------------------
Jeffery A. Smisek
* Vice President and Controller July 30, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
Michael P. Bonds
</TABLE>
*By /s/ LAWRENCE W. KELLNER
--------------------------------
Lawrence W. Kellner
Attorney-in-fact
July 30, 1998
II-9
<PAGE> 69
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on July 30, 1998.
CALAIR L.L.C.
By: CALFINCO Inc.
Managing Member
By:/s/ LAWRENCE W. KELLNER
--------------------------------
Lawrence W. Kellner
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and Chief July 30, 1998
- ----------------------------------------------------- Executive Officer (Principal
Gordon M. Bethune Executive Officer) and Director
of CALFINCO Inc., Managing
Member
* Director of CALFINCO Inc., July 30, 1998
- ----------------------------------------------------- Managing Member
Gregory D. Brenneman
/s/ LAWRENCE W. KELLNER Executive Vice President and July 30, 1998
- ----------------------------------------------------- Chief Financial Officer
Lawrence W. Kellner (Principal Financial Officer)
and Director of CALFINCO Inc.,
Managing Member
* Director of CALFINCO Inc., July 30, 1998
- ----------------------------------------------------- Managing Member
Jeffery A. Smisek
* Vice President and Controller July 30, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
Michael P. Bonds of CALFINCO Inc., Managing
Member
</TABLE>
*By /s/ LAWRENCE W. KELLNER
--------------------------------
Lawrence W. Kellner
Attorney-in-fact
July 30, 1998
II-10
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
3.1 -- Certificate of Formation of Calair L.L.C., dated March
30, 1998.
3.2 -- Amended and Restated Company Agreement of Calair L.L.C.,
dated as of April 17, 1998.
3.3 -- Certificate of Incorporation of Calair Capital
Corporation, dated March 30, 1998.
3.4 -- Bylaws of Calair Capital Corporation, dated March 31,
1998.
4.1 -- Form of 8 1/8% Senior Notes due 2008 (included as Exhibit
B to Exhibit 4.2 below).
4.2 -- Senior Notes Indenture, dated as of April 1, 1998, among
Calair L.L.C. and Calair Capital Corporation, as Issuers,
Continental, as Guarantor, and Bank One, N.A., as
Trustee.
4.3 -- Exchange and Registration Rights Agreement, dated as of
April 17, 1988, among Calair L.L.C. and Calair Capital
Corporation, as Note Issuers, and Continental Airlines,
Inc., as Guarantor, and Chase Securities Inc., Credit
Suisse First Boston Corporation and Morgan Stanley & Co.
Incorporated, as Purchasers.
5.1 -- Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008.
8.1 -- Tax Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008 (contained in Exhibit 5.1 above).
10.1 -- Sale Agreement between Continental Airlines, Inc. and
Calair L.L.C. dated as of April 17, 1998.
10.2 -- Slot Lease Agreement between Continental Airlines, Inc.
and Calair L.L.C., dated as of April 17, 1998.
10.3 -- Redemption Option Agreement between Calair L.L.C. and
Chase Equity Associates, L.P. dated as of April 17, 1998.
12.1 -- Statement regarding the computation of earnings to fixed
charges of Continental Airlines, Inc.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 above).
24.1 -- Powers of attorney executed by certain directors and
officers of Continental.
24.2 -- Powers of attorney executed by certain directors and
officers of CALFINCO Inc., as managing member of Calair
L.L.C.
24.3 -- Powers of attorney executed by certain directors and
officers of Calair Capital Corporation.
25.1 -- Statement of Eligibility and Qualification on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Registered Holders and Depository Trust
Company Participants.
99.4 -- Form of Letter to Clients.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF FORMATION
OF CALAIR,
L.L.C.
This Certificate of Formation, dated March 30, 1998, has been duly
executed and is filed pursuant to section 18-201 of the Delaware Limited
Liability Company Act (the "Act") to form a limited liability company (the
"Company") under the Act.
1. NAME. The name of the Company is Calair L.L.C.
2. REGISTERED OFFICE; REGISTERED AGENT. The address of the
registered office required to be maintained by section 18-104 of the Act is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801.
The name and the address of the registered agent for service of process
required to be maintained by section 18-104 of the Act are:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801.
3. DISSOLUTION. The latest date on which the Company is to
dissolve is December 31, 2050.
EXECUTED as of the date written first above.
CALFINCO INC.
Sole Member
By: /s/ JEFFREY J. MISNER
-----------------------------------
Jeffrey J. Misner
Vice President-Treasury Operations
Authorized Person
<PAGE> 1
EXHIBIT 3.2
CALAIR L.L.C.
-----------------------------------
AMENDED AND RESTATED
COMPANY AGREEMENT
DATED AS OF
APRIL 17, 1998
-----------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1
DEFINED TERMS; RULES OF CONSTRUCTION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 No Presumption Against Any Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Use of Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Headings and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2
ORGANIZATIONAL MATTERS
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Limited Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Prohibited Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 Certificate of Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Cancellation Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Independent Activities; Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Managing Member's Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Liability to Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3
MEMBERS
3.1 Rights of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Member Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Management Rights of CEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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3.4 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Meetings of the Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Conduct of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Consent in Lieu of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(g) No Meeting Required for Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Covenant Not to Dissolve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.8 Termination of Status as Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Continuing Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Transferee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4
MANAGEMENT
4.1 Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Initial Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Authority of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Restrictions on Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Impossibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Possession of Company Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Bankruptcy, Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Extraordinary Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(i) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(j) Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(k) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(l) Tax and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(m) Admission of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(n) Operative Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(o) Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(s) Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(t) Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 CEA's Rights upon Certain Extraordinary Events . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Separate Identity and Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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4.6 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 No Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.8 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5
COMPANY CAPITAL
5.1 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Closing Date Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Additional Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 Voluntary Capital Contributions by Calfinco . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 No Withdrawal of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 No Interest on Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Company Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6
ALLOCATIONS
6.1 Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Gross Income Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Qualified Income Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(f) Expense Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Curative Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Other Allocation Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Tax Allocations: Code Section 704(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7
DISTRIBUTIONS AND REDEMPTIONS
7.1 Proceeds from the Sale of Slots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2 Other Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8
ACCOUNTING; BOOKS AND RECORDS; REPORTS
8.1 Accounting; Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Access to Books, Records, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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(a) Partnership Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Section 754 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Periodic Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Quarterly Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9
TRANSFERS OF MEMBER INTEREST
9.1 Restriction on Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Calfinco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) CEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Calfinco's Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3 Conditions to Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Securities Law Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Investment Company Act Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) No Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.4 Prohibited Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.5 Admission as Substituted Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.6 Distributions with Respect to a Transferred Member Interest . . . . . . . . . . . . . . . . . . . 24
SECTION 10
POWER OF ATTORNEY
10.1 Managing Member as Attorney-in-Fact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Nature of Special Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 11
DISSOLUTION AND WINDING UP
11.1 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Company Termination Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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11.3 No Restoration of Deficit Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.5 Rights of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.6 The Company Liquidator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Resignation of Company Liquidator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.7 Liquidation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Termination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Sale of Company Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Repayment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Liquidating Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.8 Form of Liquidating Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 12
INDEMNIFICATION
12.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.2 Nonexclusive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.4 Limitations on Indemnification Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Limitation by Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Misconduct, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) No Duplication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.5 Payments; No Reduction of Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.6 Procedural Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Defense of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) Settlement of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Indemnification Despite Negligence of Indemnified Person . . . . . . . . . . . . . . . . . 31
12.7 Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.8 Survival of Indemnification Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13
MISCELLANEOUS
13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.6 Counterpart Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.7 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.9 Fair Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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Schedules
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Schedule 5.7 Assets of the Company
Exhibits
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Exhibit A Definitions
Exhibit B Transferee Certificate
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<PAGE> 8
CALAIR L.L.C.
AMENDED AND RESTATED
COMPANY AGREEMENT
THIS AMENDED AND RESTATED COMPANY AGREEMENT ("Agreement") is dated as
of April 17, 1998, by and between CALFINCO INC., a Delaware corporation
("Calfinco"), and Chase Equity Associates, L.P., a California limited
partnership ("CEA").
W I T N E S S E T H:
In consideration of the premises and intending to be legally
bound by this Agreement, the parties hereby agree as follows:
SECTION 1
DEFINED TERMS; RULES OF CONSTRUCTION
1.1 Definitions. As used in this Agreement, each capitalized term
defined in the preamble, any Sections of this Agreement or in Exhibit A shall
have the meaning ascribed to such term therein.
1.2 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding."
1.3 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP applied consistently,
except with respect to Capital Accounts and items entering into the computation
of Capital Accounts, and except to the extent otherwise specified in the terms
hereof.
1.4 No Presumption Against Any Party. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed against any particular
party, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by each of the parties and their counsel and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all
parties hereto.
1.5 Use of Certain Terms. Unless the context of this Agreement
requires otherwise, the plural includes the singular, the singular includes the
plural, and "including" has the inclusive meaning of "including, without
limitation." The words "hereof," "herein," "hereby," "hereunder," and other
similar terms of this Agreement refer to this Agreement as a whole and not
exclusively to any particular provision of this Agreement. All pronouns and
any variations thereof shall be deemed to refer to masculine, feminine, or
neuter, singular or plural, as the identity of the Person or Persons may
require.
<PAGE> 9
1.6 Headings and References. Section and other headings are for
reference purposes only, and shall not affect the interpretation or meaning of
any provision of this Agreement. Unless otherwise provided, references to
Articles, Sections, Schedules, and Exhibits shall be deemed references to
Articles, Sections, Schedules, and Exhibits of this Agreement. References in
this Agreement and in Exhibit A to this Agreement and to any other Operative
Document or any other agreement include this Agreement and the other Operative
Documents and agreements as the same may be modified, amended, restated or
supplemented from time to time pursuant to the provisions hereof or thereof as
permitted by the Operative Documents, including any exhibits and schedules
thereto. A reference to any Law shall mean that Law as it may be amended,
modified or supplemented from time to time, and any successor Law. A reference
to a Person includes the successors and assigns of such Person, but such
reference shall not increase, decrease or otherwise modify in any way the
provisions in this Agreement governing the assignment of rights and obligations
under or the binding effect of any provision of this Agreement.
SECTION 2
ORGANIZATIONAL MATTERS
2.1 Formation. The Company was formed as of March 31, 1998 as a
limited liability company under the Act. This Agreement amends and restates
the terms upon which the Company is organized and upon which its business is
authorized and intended to be conducted. The Company shall be treated for
federal income tax purposes as a partnership, upon the terms and conditions in
this Agreement.
2.2 Members. Calfinco and CEA are the initial Members of the
Company. The names of and addresses for notice to the Members, as of the date
hereof, are as follows:
Calfinco: CALFINCO Inc.
2929 Allen Parkway, Suite 1588
Houston, Texas 77019
Attention: Vice President - Corporate Finance
Telecopy No.: 713-834-2448
with a copy to the attention of Managing
Attorney-Finance at the above address, Suite 1466;
telecopy no: 713-834-5161
CEA: Chase Equity Associates L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York 10017-2591
Attn: Brian J. Richmand
Telecopy No.: 212-622-3101
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with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Brian S. Rosen, Esq.
Telecopy No.: 212-310-8007
2.3 Name. The name of the Company shall be Calair L.L.C. All
business of the Company shall be conducted in such name.
2.4 Powers. The Company shall possess and may exercise all of the
powers and privileges granted by the Act or by any other Law or by this
Agreement, together with any powers incidental thereto, so far as such powers
and privileges are necessary or convenient to the conduct, promotion or
attainment of the permitted business purposes or activities of the Company.
2.5 Purpose. (a) Limited Purpose. The purposes of the Company
are to (i) acquire the Slots, (ii) lease and/or sell the Slots, (iii) manage,
protect and conserve the Company Property, (iv) enter into the Operative
Documents, (v) own all of the issued and outstanding capital stock of Calair
Capital Corporation, a Delaware corporation, (vi) engage in activities related
or incidental to, and necessary or appropriate for, any of the foregoing, as
permitted by this Agreement, and (vii) engage in such additional business
activities as are permitted under this Agreement or otherwise as the Members
may unanimously agree in writing.
(b) Prohibited Acts. Notwithstanding any other provision of this
Agreement or any provision of Law that otherwise so empowers the Company,
except as provided in Sections 4.3(j), 4.4 and 11.1, the Company shall not (i)
dissolve or liquidate, in whole or in part; (ii) merge or consolidate with any
other enterprise; (iii) transfer all or substantially all of the Company
Property; or (iv) amend this Agreement or any Operative Document to alter in
any manner, or to delete, this Section 2.5.
2.6 Principal Place of Business. The initial principal place of
business of the Company shall be c/o Continental Airlines, Inc., 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, Attention: Corporate Secretary. The
Managing Member may not change the principal place of business of the Company
to any other place without the prior written consent of CEA, such consent not
to be unreasonably withheld; provided, however, that, in any event, such
location shall be within the United States and such location shall be within a
state that permits the qualification as a foreign limited liability company of
a limited liability company organized under the Laws of the State of Delaware,
and the Company duly qualifies to do business under the applicable Laws of such
state. The registered office of the Company in the State of Delaware is
located at The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801.
2.7 Term. The term of the Company shall commence on the date its
certificate of formation described in Section 18-201 of the Act is filed with
the Secretary of State of the State of
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Delaware in accordance with the Act and shall continue until the winding up and
liquidation of the Company and its business is completed following a
Termination Event, as provided in Section 11.2
2.8 Fiscal Year. The fiscal year of the Company for financial
statement and federal income tax purposes shall be the same and shall end on
December 31 of each year, except as may be required by the Code.
2.9 Certificate of Formation. The Managing Member is hereby
designated as an "Authorized Person," within the meaning of the Act, to
execute, deliver and file any amendments, restatements, corrections or
cancellation of the Company's certificate of formation, all in accordance with
the provisions of this Agreement.
2.10 Agent for Service of Process. The registered agent for
service of process on the Company in the State of Delaware shall be The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801 or any successor as appointed by
the Managing Member in accordance with the Act.
2.11 Cancellation Certificates. Upon the happening of any event
specified in Section 18-203 of the Act with respect to the Company, the
Managing Member (or, if any Company Liquidator has been appointed, such Company
Liquidator) shall promptly execute and cause to be filed certificates of
cancellation in accordance with the Act and the Laws of any other states or
other jurisdictions in which the Managing Member or such Company Liquidator, as
the case may be, deems such filing necessary or advisable.
2.12 Compensation and Expenses. Except as otherwise expressly
provided in this Agreement, and except as otherwise contemplated by the
Operative Documents, no Member or Affiliate of any Member shall receive any
salary, fee, or draw for services rendered to or on behalf of the Company or
otherwise in its capacity as a Member, nor shall any Member or Affiliate of any
Member be reimbursed by the Company for any expenses incurred by such Member or
Affiliate on behalf of the Company or otherwise in its capacity as a Member.
2.13 Independent Activities; Transactions with Affiliates.
(a) Managing Member's Activities. The Managing Member and any of
its officers and directors (each a "Managing Entity") shall be required to
devote only such time to the affairs of the Company as the Managing Member
determines in its reasonable discretion may be necessary to manage and operate
the Company, and each Managing Entity shall be free to serve any other Person
in any capacity that such Managing Entity may deem appropriate in its
discretion.
(b) Other Activities. Each Member acknowledges that each other
Member and the Affiliates of the other Members are free to engage or invest in
an unlimited number of activities or businesses, any one or more of which may
be related to the activities or businesses of the Company, without having or
incurring any obligation to offer any interest in such activities or businesses
to the Company or any Member, and neither this Agreement nor any activity
undertaken pursuant to this Agreement shall prevent any such Affiliate of any
such Member from engaging in such activities, or require any Member to permit
the Company or any such Affiliate of any such Member to
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participate in any such activities, and as a material part of the consideration
for the execution of this Agreement by each Member, each Member hereby waives,
relinquishes, and renounces any such right or claim of participation. No
Member shall have or owe any fiduciary duty to any other Member, by virtue of
its Member Interest in the Company, or otherwise; provided, however, that each
Member agrees to act with good faith in performing its obligations under this
Agreement.
2.14 Liability to Third Parties. The debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company; and no
Member shall be obligated personally for any such debt, obligation or liability
of the Company solely by reason of being a Member of the Company.
SECTION 3
MEMBERS
3.1 Rights of Members. Members shall have the rights and
obligations provided in this Agreement and, to the extent consistent with this
Agreement, the Act.
3.2 Member Interests. The Members shall have the following rights
under this Agreement (in addition to the other rights granted hereunder):
(a) the right to receive Distributions and to share in the Profits
and Losses of the Company, in accordance with their Sharing Ratios, all to the
extent provided in this Agreement;
(b) the right to receive liquidating Distributions to the extent
provided in Section 11;
(c) the right to vote upon, approve or consent to actions of the
Company and to participate in the management of the Company, all to the extent
provided in this Agreement; and
(d) the right to appoint the Company Liquidator as provided in
Section 11.6.
3.3 Management Rights of CEA. Except as expressly provided
herein, CEA shall have no right, power or authority to take part in the
management or control of the Company or its business and affairs or to act for
or bind the Company in any way.
3.4 Voting Rights. Except as provided in Section 18-213 of the
Act, the Members shall have the right to vote only on those matters
specifically reserved for their vote that are set forth in this Agreement.
3.5 Meetings of the Members. (a) Notice. Meetings of the Members
shall be called upon the written request of any Member. The request shall
state the nature of the business to be transacted. Notice of any such meeting
shall be given to all Members not less than five (5) Business Days nor more
than thirty (30) days prior to the date of such meeting. Members may vote in
person, by proxy or by telephone at such meeting.
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(b) Record Date. For the purpose of determining the Members
entitled to vote on, or to vote at, any meeting of the Members or any
adjournment thereof, the Member requesting such meeting may fix, in advance, a
date as the record date for any such determination. Such date shall not be
more than thirty (30) days nor less than seven (7) Business Days before any
such meeting.
(c) Proxy. Any Member may authorize any Person or Persons to act
for it by proxy on all matters in which such Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by such Member or its attorney-in-fact.
No proxy shall be valid after the expiration of eleven (11) months from the
date thereof unless otherwise provided in the proxy. Every proxy given by a
Member shall be revocable at the pleasure of the Member executing it unless
otherwise expressly stated in such proxy.
(d) Consents. The approval or consent of any Member required
under this Agreement may, except as expressly provided to the contrary in this
Agreement, be given or withheld in the sole and absolute discretion of such
Member.
(e) Conduct of Meeting. Except as expressly provided herein, each
meeting of Members shall be conducted by the Managing Member or such other
Person as the Managing Member may appoint pursuant to such rules for the
conduct of the meeting as the Managing Member or such other Person deems
appropriate.
(f) Consent in Lieu of Meeting. In the event the consent of any
Member is required for any action to be taken by the Company, such consent may
be given at a meeting, which may be conducted by conference telephone call, or
provided in writing, executed by the Member necessary to authorize such action
at a meeting.
(g) No Meeting Required for Certain Actions. Any action, consent
or approval that by the terms of this Agreement may be taken by any Member
acting alone may be taken without the necessity of calling or holding a meeting
of Members.
3.6 Partition. To the fullest extent permitted under applicable
Law, each Member waives any and all rights that it may have to maintain an
action for partition of any Company Property.
3.7 Covenant Not to Dissolve. Except as otherwise permitted by
this Agreement, to the fullest extent permitted under applicable Law, each
Member hereby covenants and agrees not to (a) take any action to file a
certificate of dissolution or its equivalent with respect to itself, (b)
exercise any power under the Act to dissolve the Company or (c) petition for
judicial dissolution of the Company.
3.8 Termination of Status as Member. (a) Certain Events. A
Person shall cease to be a Member only upon the first to occur of:
(i) The Transfer of all of its Member Interest, provided
that the transferee of such Member Interest is admitted as a
substituted Member in accordance with this Agreement.
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(ii) The involuntary Transfer by operation of Law of its
Member Interest (which shall not relieve the transferor from any
liability under this Agreement, including liabilities for an
unpermitted resignation).
The happening of the foregoing events shall not cause a dissolution of the
Company except as provided in Section 11. Except to the extent specifically
set forth herein, upon the termination of a Person's status as a Member, such
Person shall not be entitled to any Distributions from the Company, including
any Distribution based on the fair value of such Person's Member Interest. A
Member shall not cease to be a Member solely as a result of the happening of
any of the events specified in 18-304(a) of the Act.
(b) Resignation. No Member may resign from the Company except (i)
upon cancellation of the certificate of formation as provided in Section 18-203
of the Act or (ii) incident to a Permitted Transfer pursuant to which the
Transferee is admitted as a Member.
(c) Continuing Obligations. Any debts, obligations, or
liabilities in damages to the Company of any Person who ceases to be a Member
shall be collectible by any legal means and the Company is authorized, in
addition to any other remedies at Law or in equity, to apply any amounts
otherwise distributable or payable by the Company to such Person to satisfy
such debts, obligations, or liabilities.
(d) Transferee. Except as otherwise provided in this Agreement,
in the event a Person ceases to be a Member without having Transferred all of
its Member Interest in accordance with this Agreement (including upon removal
or resignation), such Person shall be treated as an unadmitted transferee of an
interest as a result of a Transfer (other than a Permitted Transfer) of a
Member Interest pursuant to Section 9.5.
SECTION 4
MANAGEMENT
4.1 Management of the Company. (a) Managing Member. The
management of the Company shall be vested in the Managing Member and except as
otherwise provided in this Agreement in Sections 2.5, 4.3, 4.4, 4.5 and 11, the
Managing Member shall have full power and authority to manage the business and
affairs of the Company to the extent provided in the Act, and no other Member
shall have any such management power and authority.
(b) Initial Managing Member. Calfinco shall be the initial
Managing Member. CEA shall have the right to replace Calfinco as the Managing
Member (i) if Calfinco Transfers its Member Interest to a Person that is not an
Affiliate of Calfinco, or (ii) as provided in Section 4.4.
(c) Authority of the Managing Member. The Managing Member shall
have the authority on behalf and in the name of the Company to perform all acts
necessary and desirable to the objects and purposes of the Company, subject
only to the restrictions expressly set forth in this Agreement (including
Sections 4.3 and 4.4 ) and subject to the rights of the Company Liquidator to
liquidate the
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<PAGE> 15
Company and take all actions incidental thereto during the Liquidation Period.
Subject to such restrictions, the authority of the Managing Member shall
include the authority to:
(i) engage in transactions and dealings on behalf of the
Company, including transactions and dealings with any Member or any
Affiliate of any Member;
(ii) call meetings of Members or any class or series
thereof;
(iii) make Distributions on account of Member Interests in
accordance with the provisions of this Agreement and the Act,
provided, that all such Distributions shall be in cash unless
otherwise consented to by all Members;
(iv) appoint (and dismiss from appointment) officers,
attorneys and agents on behalf of the Company, and engage (and dismiss
from engagement) any and all persons providing legal, accounting or
financial services to the Company, or such other Persons as the
Managing Member deems necessary or desirable for the management and
operation of the Company;
(v) incur and pay all expenses and obligations incident
to the operation and management of the Company;
(vi) subject to the provisions of Section 11, effect a
dissolution of the Company after the occurrence of a Termination Event
and, to the extent provided in Section 11, act as Company Liquidator
for the purpose of winding up the Company's affairs, all in accordance
with the provisions of this Agreement and the Act;
(vii) bring and defend (or settle) on behalf of the Company
actions and proceedings at law or equity before any court or
governmental, administrative or other regulatory agency, body or
commission or any arbitrator or otherwise;
(viii) prepare or cause to be prepared reports, statements
and other relevant information for distribution to Members as may be
required by this Agreement or the Act and any additional information
determined to be appropriate by the Managing Member from time to time;
(ix) execute, deliver and perform the Company's
obligations under any Operative Documents to which the Company is a
party, including any certificates and other documents and instruments
related thereto;
(x) prepare and file all necessary returns and statements
and pay all taxes, assessments and other impositions applicable to the
Company Property pursuant to Section 8.2; and
(xi) execute all other documents or instruments, perform
all duties and powers and do all things for and on behalf of the
Company in all matters necessary or desirable for or incidental to the
foregoing.
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4.2 Reliance by Third Parties. Persons dealing with the Company
are entitled to rely conclusively upon the power and authority of the Managing
Member set forth in this Agreement.
4.3 Restrictions on Authority. Except as provided in Section 11,
the Managing Member shall not be authorized to take any of the actions set
forth in this Section 4.3 without the prior written approval of the other
Member. The Managing Member covenants and agrees that it shall not, without
such approval:
(a) Contravention. Do any act in contravention of this Agreement
or, when acting on behalf of the Company, engage in activities other than those
contemplated by Section 2.5(a);
(b) Impossibility. Do any act that would make it impossible to
carry on the ordinary business of the Company, except as otherwise expressly
provided in this Agreement;
(c) Litigation, Etc. Confess a judgment against the Company or
settle on behalf of the Company actions and proceedings at law or in equity
before any court, any governmental, administrative or other regulatory agency,
body or commission or any arbitrator or otherwise (i) to which the Members or
any of their Affiliates is a party in opposition to the Company or (ii) as a
result of which it is reasonably likely that the rights, assets or interests of
the Company or its Members as such would be materially adversely affected;
(d) Possession of Company Property. Possess Company Property or
assign rights in Company Property, for other than a Company purpose;
(e) Liability. Perform any act that would cause, or knowingly
fail to perform any act which failure would cause, any Member to be obligated
personally for any debt, obligation, tax or liability of the Company in any
jurisdiction solely by reason of such Member being a Member of the Company;
(f) Bankruptcy, Insolvency. Cause or permit the Company
voluntarily to take any action of the type referred to in clauses (i)(c) or
(ii) of the definition of "Voluntary Bankruptcy," or clause (iii) of the
definition of "Voluntary Bankruptcy," insofar as such clause (iii) refers to
clauses (i)(c) or (ii) of such definition;
(g) Indebtedness. Cause or permit the Company to incur, assume or
obligate itself for any Indebtedness, except that the Company may enter into
and incur obligations under the Operative Documents (and any refinancings of
the Credit Documents as described in Section 4.3(r)) and accounts payable
associated with Company Expenses incurred in the ordinary course of business;
(h) Extraordinary Transactions. Make any material change to the
Slots other than (i) like-kind exchanges of one or more of the Slots pursuant
to Section 13 of the Slot Lease, and (ii) sales pursuant to Section 13 of the
Slot Lease to or at the direction of Calfinco, or its Affiliates, of Slots
whose aggregate sales price, when combined with the aggregate sales price, of
all Slots previously sold to or at the direction of Calfinco, or its
Affiliates, do not exceed $50,000,000; provided, that any sale of Slots
permitted by this clause (h) shall be at a price not less than the fair market
value of the Slots at the time of sale, as set forth in an appraisal prepared
by an appraiser
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<PAGE> 17
reasonably acceptable to all Members, dated within thirty (30) days of the sale
of such Slots; and provided, further, that any such sale or exchange must be to
a Person that is not an Affiliate of Calfinco and must be otherwise in
accordance with the provisions of Section 13 of the Slot Lease, unless
concurrently with such sale to Calfinco or an Affiliate of Calfinco all of
CEA's remaining Member Interest is being redeemed;
(i) Liens. Cause or permit the Company to incur or suffer to
exist any Liens on any of its assets, except for Permitted Liens;
(j) Dissolution. Cause or permit the Company voluntarily to take
any of the actions described in Section 2.5(b);
(k) Merger. Cause or permit the Company to merge or consolidate
with or into any other Person;
(l) Tax and Accounting Matters. Except as may be required by Law,
cause or permit changes in any tax position or policy of the Company, or cause
or permit changes in or adoption of any accounting position, practice or policy
(including a change in its fiscal year) of the Company not in accordance with
GAAP;
(m) Admission of Members. Cause or permit the admission of any
Member to the Company other than pursuant to Section 9;
(n) Operative Documents. Cause or consent to (i) any termination
or cancellation of, (ii) any assignment, delegation or other transfer of the
Company's or any other Person's rights or obligations under, or (iii) any
amendment, modification, supplement or waiver of the Company's or any other
Person's rights or obligations under, this Agreement or any other Operative
Document to which the Company is a party;
(o) Affiliate Transactions. Cause or permit the Company to enter
into any contracts (including any indemnification agreements) or transactions
with any Member or any Affiliate of any Member, other than as expressly
provided for or contemplated by this Agreement (including Sections 4.3(r) and
4.8) or by any other Operative Document;
(p) Renewal of Slot Lease. Cause or permit the renewal of the
Slot Lease upon the expiration of the original term thereof;
(q) Exercise of Slot Lease Remedies. Exercise any remedy under
Section 11 of the Slot Lease Agreement other than pursuant to Sections
11(a)(ii) and (b) of the Slot Lease;
(r) Prepayment or Refinancing of Indebtedness. Cause or permit
the Company to prepay any of the Company's Indebtedness; provided, that the
Managing Member shall have the right, without the approval of the other Member,
to refinance the Company's Indebtedness with any Person, including, at any time
after the third (3rd) anniversary of the Closing Date, with any Member or an
Affiliate of a Member, upon terms no less favorable to the Company and the
Members than the terms
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<PAGE> 18
of such refinanced Indebtedness; provided further, that if the Company's
Indebtedness has been refinanced with a Member or an Affiliate of a Member, the
terms of such refinancing shall include a requirement that, upon a default
thereunder, the holders of such Indebtedness shall not take any action to
enforce any remedies with respect to such default for one hundred eighty (180)
days after written notice to all Members of such default;
(s) Distributions. Cause or permit Distributions to the Members,
except as expressly provided in this Agreement; or
(t) Reimbursement. Cause or permit the Company to reimburse any
Member for any liability, loss, cost or Expense other than as expressly
provided for in or contemplated by this Agreement or any other Operative
Document.
4.4 CEA's Rights upon Certain Extraordinary Events. (a) Upon the
occurrence of any of the following (each, a "Trigger Event"):
(i) Calfinco, as the Managing Member, shall have engaged
in willful misconduct in managing or otherwise conducting the business
and affairs of the Company; or
(ii) the occurrence of any of the events described in
clauses (iii) through (xi) of the definition of Termination Event;
CEA shall have the right to notify Calfinco of the occurrence of a Trigger
Event (a "Trigger Event Notice"), and if (x) such Trigger Event is not cured or
otherwise resolved to CEA's satisfaction within five (5) Business Days after
delivery of the Trigger Event Notice, and (y) the Company does not exercise its
redemption option provided in paragraph 3 of the Redemption Option Agreement,
and consummate such redemption in accordance with the provisions of the
Redemption Option Agreement, CEA shall have the right to remove Calfinco as the
Managing Member and to be substituted for Calfinco as the Managing Member. CEA
may rescind any Trigger Event Notice by delivery of a rescission notice to
Calfinco prior to the fifth (5th) Business Day after delivery of the Trigger
Event Notice to Calfinco.
(b) Upon the occurrence of any Termination Event (other than
those Termination Events listed in clauses (i) and (ii) of the definition of
Termination Events) at any time, CEA shall have the right (i) to cause the
Company to terminate the Slot Lease, (ii) to act as the Company Liquidator or
appoint an experienced third party, institutional liquidator to act as the
Company Liquidator, and (iii) to cause a liquidation of the Company in
accordance with Section 11.
4.5 Separate Identity and Operations. The Managing Member shall
cause the Company to conduct its business and operations separate and apart
from that of any Member or any Affiliates of any Member, including (i)
segregating Company Property and not allowing funds or other assets of the
Company to be commingled with the funds or other assets of, held by, or
registered in the name of, any Member or any Affiliates of any Member, (ii)
maintaining books and financial records of the Company separate from the books
and financial records of any Member or any Affiliates of any Member, and
observing all Company procedures and formalities, including maintaining minutes
or records of meetings of the Company and acting on behalf of the Company only
pursuant to due
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<PAGE> 19
authorization of the Members (including any authorization as is given in this
Agreement), (iii) causing the Company to pay its liabilities from assets of the
Company and (iv) causing the Company to conduct its dealings with third parties
in its own name and as a separate and independent entity.
4.6 Compliance with Agreement. The Managing Member shall cause
the Company to comply with all of the obligations of the Company set forth in
this Agreement and the other Operative Documents to which it is a party.
4.7 No Employees. The Managing Member shall not permit the
Company to have any employees.
4.8 Affiliate Transactions. Except as otherwise provided in this
Agreement, the Managing Member, when acting on behalf of the Company, is hereby
authorized to deal with any Member, acting on its own behalf, or any Affiliate
of any Member, provided that any such transaction, other than any transaction
otherwise permitted or contemplated by the Operative Documents, shall be made
on terms and conditions that, taken as a whole, are no less favorable to the
Company than if the transaction had been made with an independent third party
and shall be in the ordinary course of the Company's business. The Members
agree that the Operative Documents (and the transactions contemplated thereby)
shall satisfy this third party standard and the Members hereby authorize the
Managing Member to cause the Company to enter into the Operative Documents to
which the Company is a party (and to consummate the transactions contemplated
thereby).
4.9 Compliance with Laws. The Managing Member shall cause the
Company to comply with all applicable Laws except for such non-compliance as is
attributable solely to any action taken or omitted to be taken by the other
Member.
SECTION 5
COMPANY CAPITAL
5.1 Capital Accounts. A Capital Account shall be established for
each Member on the books of the Company. Upon the making of the initial
Capital Contributions pursuant to Section 5.2, the initial Capital Account of
Calfinco shall be $31,666,667, the initial Capital Account of CEA shall be
$10,000,000 in each case reflecting the initial Capital Contribution of each
such Member to the Company. The Capital Account of any such Member shall be
maintained in accordance with the following provisions:
(i) To each Member's Capital Account there shall be
credited such Member's Capital Contributions made pursuant to Sections
5.2 or 5.4, as the case may be, such Member's distributive share of
Profits, any items in the nature of income or gain that are specially
allocated to such Member pursuant to this Agreement, and the amount of
any Company liabilities paid, discharged or assumed (pursuant to an
enforceable instrument of
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<PAGE> 20
assumption and release) by such Member or any Affiliate of such Member
or that are secured at the time of distribution by the Company
Property distributed to such Member.
(ii) To each Member's Capital Account there shall be
debited the amount of cash and the fair market value of any Company
Property distributed to such Member pursuant to Sections 7 or 11, such
Member's distributive share of Losses and any items in the nature of
expenses or losses that are specially allocated to such Member
pursuant to Section 6 and the amount of the liabilities of such Member
assumed by the Company or that are secured by any property contributed
by such Member to the Company.
(iii) In the event all or any portion of any Member
Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the Transferred Member
Interest.
(iv) In determining the amount of any liability for
purposes of clauses (i) and (ii) of this Section 5.1, there shall be
taken into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations.
The Managing Member shall maintain the Members' Capital Accounts in accordance
with the terms and provisions of this Agreement. However, in the event any
Member disputes in an appropriate judicial proceeding the determination of its
Capital Account, an independent de novo determination of the Members' Capital
Accounts shall be made .
5.2 Closing Date Contribution. On the Closing Date, Calfinco
shall make a Capital Contribution to the Company in cash in the amount of
$31,666,667 and CEA shall make a Capital Contribution to the Company in cash in
the amount of $10,000,000, subject to the satisfaction (or waiver in writing by
each Member) of the following terms and conditions:
(a) Execution and delivery of the Operative Documents.
(b) No Termination Event or event which, with the giving of notice
or passage of time (or both), would constitute a Termination Event shall have
occurred and be continuing before or after giving effect to any such Capital
Contribution.
(c) Opinions of Vinson & Elkins and other parties acceptable to
Calfinco and CEA shall have been delivered to the Company and the Members.
Such opinions shall be addressed to the Company and the Members.
5.3 Additional Contributions. Except as provided in Section 5.2
and as provided by Section 18-607 of the Act, no Member shall have any
obligation of any kind to make Capital Contributions to or assume or pay
liabilities of the Company. No additional Capital Contribution, in and of
itself, including any Capital Contribution pursuant to Section 5.4, shall
increase the contributing Member's Sharing Ratio or otherwise effect such
Member's Member Interest, except for such Member's right to receive repayment
of any additional Capital Contribution referred to in clause (i) of Section 5.4
and in accordance with the provisions of Section 7.2.
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5.4 Voluntary Capital Contributions by Calfinco. In addition to
Capital Contributions described in or required by Section 5.2, Calfinco may
make additional Capital Contributions (i) to fund any exercise of the Company's
redemption options under the Redemption Option Agreement, or (ii) to pay any
make whole premium, expenses, or other amounts in excess of the outstanding
principal balance of any Indebtedness of the Company that is incurred in
prepaying or refinancing such Indebtedness.
5.5 No Withdrawal of Capital. Except as otherwise provided in
this Agreement, no Member shall demand or receive a return of its Capital
Contributions. Under circumstances requiring a return of any Capital
Contributions, no Member shall have the right to receive property other than
cash except as may be specifically provided in this Agreement.
5.6 No Interest on Capital. No Member shall receive any interest
or draw with respect to its Capital Contributions or its Capital Account,
except as otherwise provided in this Agreement.
5.7 Company Assets. After giving effect to the transactions on
the Closing Date, the Company Property shall consist of the assets listed on
Schedule 5.7.
SECTION 6
ALLOCATIONS
6.1 Profits and Losses. (a) After giving effect to the special
allocations set forth in Sections 6.2 and 6.4 and subject, in the case of
Losses, to the limitation set forth in Section 6.1(b) Profits and Losses for
any Fiscal Year shall be allocated to the Members in accordance with their
respective Sharing Ratios.
(b) The Losses and items of deduction or loss allocated pursuant
to Sections 6.1(a) and 6.2 shall not exceed the maximum amount of Losses and
items of deduction and loss that can be so allocated without causing any Member
to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. All
Losses and items of deduction or loss in excess of the limitations set forth in
this Section 6.1(b) shall be allocated, first, to the Members to whom amounts
of Losses and items of deduction or loss can be allocated without causing such
Members to have an Adjusted Capital Account Deficit at the end of the Fiscal
Year, ratably in proportion to the amounts that can be so allocated, and the
balance, if any, to Calfinco.
6.2 Special Allocations. The following special allocations shall
be made in the following order to the extent items of income, gain, loss or
deduction are available:
(a) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year that is in excess of the
sum of (i) the amount such Member is obligated to restore pursuant to any
provision of this Agreement, and (ii) the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation
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pursuant to this Section 6.2(a) shall be made only if and to the extent that
such Member would have a deficit Capital Account in excess of such sum after
all other allocations provided for in this Section 6 have been made as if this
Section 6.2(a) and Section 6.2(b) were not in the Agreement.
(b) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of
the Regulations, items of Company income and gain shall be specially allocated
to each such Member in an amount and manner sufficient to eliminate, to the
extent required by the Regulations, the Adjusted Capital Account Deficit of
such Member as quickly as possible, provided that an allocation pursuant to
this Section 6.2(b) shall be made only if and to the extent that such Member
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Section 6 have been tentatively made as if this Section
6.2(b) were not in the Agreement.
(c) Minimum Gain Chargeback. Notwithstanding any other provision
hereof to the contrary, if there is a net decrease in Minimum Gain for a
taxable year (or if there was a net decrease in Minimum Gain for a prior
taxable year and the Company did not have sufficient amounts of income and gain
during prior years to allocate among the Members under this Section 6.2(c)),
items of income and gain shall be allocated to each Member in an amount equal
to such Member's share of the net decrease in such Minimum Gain (as determined
pursuant to Section 1.704-2(g)(2) of the Regulations). This Section 6.2(c) is
intended to constitute a minimum gain chargeback under Section 1.704-2(f) of
the Regulations and shall be interpreted consistently therewith.
(d) Member Nonrecourse Deductions. Member Nonrecourse Deductions
attributable to Member Nonrecourse Debt shall be allocated to the Members
bearing the economic risk of loss for such Member Nonrecourse Debt as
determined under Section 1.704-2(b)(4) of the Regulations. If more than one
Member bears the economic risk of loss for such Member Nonrecourse Debt, the
Member Nonrecourse Deductions attributable to such Member Nonrecourse Debt
shall be allocated among the Members according to the ratio in which they bear
the economic risk of loss. This Section 6.2(d) is intended to comply with the
provisions of Section 1.704-2(i) of the Regulations and shall be interpreted
consistently therewith.
(e) Member Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any provision hereof to the contrary except Section 6.2(c)
(dealing with Minimum Gain), if there is a net decrease in Member Nonrecourse
Debt Minimum Gain for a taxable year (or if there was a net decrease in Member
Nonrecourse Debt Minimum Gain for a prior taxable year and the Company did not
have sufficient amounts of income and gain during prior years to allocate among
the Members under this Section 6.2(e), items of income and gain shall be
allocated to each Member in an amount equal to such Member's share of the net
decrease in Member Nonrecourse Debt Minimum Gain (as determined pursuant to
Section 1.704-2(i)(4) of the Regulations). This Section 6.2(e) is intended to
constitute a partner nonrecourse debt minimum gain chargeback under Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(f) Expense Allocation. Any deduction attributable to the payment
of the amounts described in Section 12.7 shall, without duplication, be
allocated 100% to Calfinco. Any deduction
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attributable to the payment of other Company Expenses shall, without
duplication, be allocated in accordance with the Member's Sharing Ratios.
6.3 Curative Allocations. The allocations set forth in Sections
6.1(b), 6.2(a) and 6.2(b) (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 6.3.
Therefore, notwithstanding any other provision of this Section 6 (other than
the Regulatory Allocations), the Managing Member shall make such offsetting
special allocations of Company income, gain, loss or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Member's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of this Agreement and all Company items were
allocated pursuant to this Section 6 without regard to the Regulatory
Allocations.
6.4 Other Allocation Rules. (a) For purposes of determining the
Profits, Losses, or any other items allocable to any period, Profits, Losses,
and any such other items shall be determined on a daily, monthly, or other
basis, as determined by Calfinco using any permissible method under Code
Section 706 and the Regulations thereunder.
(b) The Members hereby agree to be bound by the provisions of this
Section 6 in reporting their shares of Company income, and loss for income tax
purposes, except as may otherwise be required by Law.
6.5 Tax Allocations: Code Section 704(c). (a) Except as otherwise
provided in this Section 6.5, each item of income, gain, loss, deduction and
credit determined for federal income tax purposes shall be allocated among the
Members in the same manner as each correlative item of income, gain, loss,
deduction and credit is allocated to the Members for purposes of maintaining
their respective Capital Accounts.
(b) Income, gain, loss, and deduction with respect to property
contributed to the Company by a Member or revalued pursuant to Section
1.704-1(b)(2)(iv)(f) of the Regulations shall be allocated among the Members in
a manner that takes into account the variation between the adjusted tax basis
of such property and its book value, as required by Section 704(c) of the Code
and Section 1.704-1(b)(4)(i) of the Regulations, using the remedial allocation
method permitted by Section 1.704-3T(d) of the Regulations or, if agreed to by
all Members, the traditional method with curative allocations permitted by
Section 1.704-3(c) of the Regulations.
(c) Any elections or other decisions relating to such allocations
shall be made by Calfinco in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section 6.5 are
solely for purposes of federal, state and local taxes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Profits, Losses, other items, or Distributions pursuant to any
provision of this Agreement.
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(d) Except as otherwise provided in this Agreement, all items of
Company income, gain, loss, deduction and any other allocations not otherwise
provided for, shall be divided among the Members in the same proportions as
they share Profits or Losses, or amounts specially allocated pursuant to
Sections 6.2 or 6.3, as the case may be, for the Fiscal Year.
SECTION 7
DISTRIBUTIONS AND REDEMPTIONS
7.1 Proceeds from the Sale of Slots. (a) Except as provided in
Section 11, the Managing Member shall cause the Company to Distribute, retain,
invest, and lend the proceeds from the sale of any Slots, including any cash
proceeds received in any like-kind exchange described in Section 13(b)(5) of
the Slot Lease, as follows: (i) first the Company shall Distribute to each
Member an amount sufficient to pay such Member's Taxes in respect of such sale;
(ii) second, (A) if such proceeds are received prior to the fifth (5th)
anniversary of the Closing Date, the Company shall retain the amount by which
$12,392,200 exceeds all amounts then being held by the Company (the "Retained
Proceeds") in respect of the purchase prices the Company would be obligated to
pay if it exercised the redemption options under Paragraphs 1 and 2 of the
Redemption Option Agreement, (B) if such proceeds are received after the fifth
(5th) anniversary of the Closing Date, and if the Company has exercised and
consummated the redemption option under Paragraph 1 of the Redemption Option
Agreement, the Company shall retain the amount by which $6,834,200 exceeds the
Retained Proceeds, and (C) if such proceeds are received after the fifth (5th)
anniversary of the Closing Date, and if the Company has not exercised and
consummated the redemption option under Paragraph 1 of the Redemption Option
Agreement, the Company shall retain the amount by which $13,668,400 exceeds the
Retained Proceeds, and such retained amount shall be invested in Cash
Equivalents, and used by the Company to pay the purchase price for CEA's Member
Interest, if the Company chooses to exercise its redemption option(s) pursuant
to the Redemption Option Agreement; and (iii) the balance, if any, shall be
held by the Company, invested in Cash Equivalents, and at the discretion of the
Managing Member, be lent to any Member or an Affiliate of a Member solely in
accordance with the provisions of Section 7.1(b).
(b) Any Indebtedness of a Member or an Affiliate of a Member shall
be evidenced by a promissory note or other evidence of the Indebtedness
providing that (i) the interest rate payable in respect thereof shall be the
blended rate earned by the Company on all Cash Equivalents held pursuant to
Section 7.1(a)(ii), plus 225 basis points, such interest rate to change as and
when the blended rate on such cash equivalents changes and (ii) the
Indebtedness shall be due and payable upon the occurrence of a Termination
Event or, if the senior, unsecured, long-term debt rating of the borrowing
Member, or the borrowing Affiliate of the Member, as the case may be, is lower
than BB by S&P, or lower than Ba2 by Moody's Investors Service, Inc.
(c) Any portion of the proceeds from the sale of Slots that is
Distributed to CEA shall be credited to the amount payable to CEA upon the
redemption, if any, of CEA's Member Interest pursuant to the Redemption Option
Agreement.
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7.2 Other Cash. On each Payment Date, the Managing Member shall
cause the Company to Distribute to the Members all cash on hand of the Company
(other than any proceeds from the sale of any Slots) that will not be required
to pay amounts due or to become due (i) under the Credit Documents on such
Payment Date, (ii) in respect of the Company's redemption of CEA's Member
Interest under the Redemption Option Agreement, or (iii) in respect of Company
Expenses; provided, however, that not more than (a) $3,575,000 may be held by
the Company in respect of the redemption, if any, to be made by the Company on
the fifth anniversary of the Closing Date, and (b) $3,575,000 may be held by
the Company in respect of the redemption, if any, to be made by the Company on
the Tenth Anniversary. Except as provided in Section 11, all cash available
for Distribution, other than the cash described in Section 7.1, shall be
distributed first, in repayment of any additional Capital Contributions made
pursuant to Section 5.4(i), and second, to each of the Members in accordance
with their Sharing Ratios on each Payment Date, after giving effect to any
redemption of any portion of CEA's Member Interest on such Payment Date. If
the Company has redeemed a portion of CEA's Member Interest pursuant to the
Redemption Option Agreement following the immediately preceding Distribution of
available cash pursuant to this Section 7.2, the Distribution following such
redemption shall be paid to each Member based upon such Member's average
Sharing Ratio for the period since the immediately preceding Distribution.
SECTION 8
ACCOUNTING; BOOKS AND RECORDS; REPORTS
8.1 Accounting; Books and Records. (a) Maintenance. The Company
shall maintain at its principal place of business or, upon notice to the
Members, at such other place within the United States as the Managing Member
shall determine, separate books of account for the Company, which shall include
a record of all costs and expenses incurred, all charges made, all credits made
and received, and all income derived in connection with the conduct of the
Company and the operation of its business in accordance with this Agreement.
(b) Accounting Methods. The Company shall use the accrual method
of accounting in preparation of its annual reports and for tax purposes and
shall keep its books and records accordingly.
(c) Access to Books, Records, Etc. Any Member or any agents or
representatives of such Member, at the Company's expense, may visit and inspect
any of the properties of the Company and examine any information it may
reasonably request and make copies of and abstracts from the Company financial
and operating records and books of account of the Company, and discuss the
affairs, finances and accounts of the Company with the Managing Member and its
officers, all at such reasonable times (i.e., during normal business hours, at
reasonable intervals and upon reasonable notice). In addition, any Member may
discuss the affairs, finances and accounts of the Company with the independent
accountants of the Company at reasonable intervals and with the knowledge of
the Managing Member where feasible. The Company hereby authorizes its
independent accountants to engage in such discussions with Members. The rights
granted to a Member pursuant to this Section 8.1(c) are expressly subject to
compliance by such Member with the reasonable confidentiality procedures and
guidelines of the Company, as such procedures and
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guidelines may be established by the Managing Member in its reasonable judgment
from time to time.
8.2 Tax Matters. (a) Partnership Reporting. All returns filed by
the Company in respect of federal, state and local income taxes shall be filed
on the basis that the Company is a partnership for federal, state and local
income tax purposes unless otherwise (x) required by law, or (y) unanimously
agreed by all Members. The Members shall take all steps pursuant to applicable
Regulations and applicable state or local law in order to achieve partnership
classification for the Company for federal, state and local income tax purposes
and, in this connection, CEA will join in the making of any election requested
in good faith by the Managing Member in furtherance of this objective.
(b) Tax Matters Member. The Managing Member is authorized, in the
case of material elections with the consent of the other Member, not to be
unreasonably withheld, to make any and all elections for federal, state, and
local tax purposes. If the other Member fails to respond within a reasonable
period of time, under the circumstances to a written request by the Managing
Member for consent to an election sought to be made for the Company, the
Managing Member may treat such failure to respond as consent to such request.
The Managing Member is authorized, to the extent provided in Code Sections 6221
through 6231, to represent the Company and the Members before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Company or the Members in their capacities solely as Members, and to file any
tax returns and execute any agreements or other documents relating to or
affecting such tax matters, including agreements or other documents that bind
the Members with respect to such tax matters or otherwise affect the rights of
the Company and the Members. The Managing Member is specifically authorized to
act as the "tax matters partner" under the Code and in any similar capacity
under state or local Law. Notwithstanding the generality of the foregoing, the
Tax Matters Member shall make regular and current reports to the other Member
on the status of all representations of the Company and the Members before
taxing authorities and courts of competent jurisdiction. Furthermore, without
the prior written consent of CEA (which consent shall not be unreasonably
withheld), the Tax Matters Member may not enter into any agreements or
documents that would affect the amount, timing or character of any items of
income, gain, loss, deduction or credit allocated to or otherwise realized by,
the other Member.
(c) Tax Information. Necessary tax information shall be delivered
to each Member as soon as practicable after the end of each Fiscal Year of the
Company but not later than 90 days after the end of each such Fiscal Year. The
Managing Member shall cause tax returns to be filed for the Company prepared,
at the Company's expense, in accordance with the Code and the Regulations.
(d) Section 754 Election. If a distribution of the Company's
property as described in Code Section 734 occurs or if a transfer of a Member
Interest as described in Code Section 743 occurs, upon the written request of
any Member, the Company shall elect, pursuant to Code Section 754, to adjust
the basis of the Company's properties.
8.3 Periodic Reporting. The Company shall furnish or cause to be
furnished to each Member, at the Company's expense, the following:
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(a) Annual Reports. Within ninety (90) days after the end of each
Fiscal Year beginning with the Fiscal Year ending December 31, 1998, the
following:
(i) a Compliance Certificate executed by a senior
financial or senior accounting officer of the Managing Member;
(ii) balance sheets (which shall, at the request of any
Member, be audited) as of the last day of such Fiscal Year and the
preceding Fiscal Year and income statements (which shall, at the
request of any Member, be audited) and statements of cash flows for
such periods and the notes associated with each, for the Company; and
(iii) a statement of the Member's Capital Account balances
at the end of the Fiscal Year and a statement of the changes therein
since the end of the prior Fiscal Year (or the Closing Date, in the
case of the Fiscal Year ending December 31, 1998).
(b) Quarterly Reports. Within thirty (30) days after the close of
each Fiscal Quarter (other than the final Fiscal Quarter of any Fiscal Year)
and within ninety (90) days after the close of the final Fiscal Quarter of each
Fiscal Year, the following:
(i) unaudited statements of cash flows of the Company for
such Fiscal Quarter and the notes associated therewith;
(ii) balance sheets of the Company as of the end of such
Fiscal Quarter and for the comparable quarter of the prior year, if
applicable;
(iii) income statements of the Company for such Fiscal
Quarter, for the year to date ending such Fiscal Quarter and for the
comparable periods of the prior Fiscal Year, if applicable;
(iv) a certification by the Managing Member that the
statements described in Section 8.3(b)(i) include all adjustments
necessary in the opinion of the Managing Member for fair presentation
of the results of such Fiscal Quarter.
(c) Other Notices. A notice of the occurrence of any Termination
Event or any event which, with the giving of notice or passage of time (or
both), would constitute a Termination Event and the action that the Managing
Member has taken or proposes to take with respect thereto, promptly, but in any
event no later than two (2) Business Days after the Managing Member has actual
knowledge of such occurrence.
(d) Additional Information. Promptly following any such request,
such other information as is reasonably requested by any Member.
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SECTION 9
TRANSFERS OF MEMBER INTEREST
9.1 Restriction on Transfers. Except as otherwise permitted by
this Agreement, no Member shall pledge or Transfer all or any portion of its
Member Interest.
9.2 Permitted Transfers. (a) Calfinco. Subject to the conditions
and restrictions set forth in Section 9.3, all, but not less than all of the
Member Interest of Calfinco may be Transferred to any single Person or in the
case of the foreclosure of any collateral security interest, to any trustee,
collateral agent, or other Person acting on behalf of one or more financial
institutions.
(b) CEA. Subject to Calfinco's right of first refusal set forth
in Section 9.2(c) and the conditions and restrictions set forth in Section 9.3,
all, but not less than all of the Member Interest of CEA may be Transferred to
any single Person or in the case of the foreclosure of any collateral security
interest, to any trustee, collateral agent, or other Person acting on behalf of
one or more financial institutions; provided, however, that, in no event, shall
CEA transfer its Member Interest to any foreign or domestic air carrier or to
any Affiliate of such an air carrier. Without limiting the generality of the
foregoing, any Transfer by CEA of all of its Member Interest to any Affiliate
of CEA that is not a foreign or domestic air carrier or an Affiliate of such an
air carrier and in compliance with Section 9.3, shall be a Permitted Transfer.
(c) Calfinco's Right of First Refusal. If CEA receives a bona
fide offer to Transfer its Member Interest that CEA desires to accept (an
"Offer"), CEA shall deliver to Calfinco a complete copy of the Offer, together
with a letter from the chief financial officer (or equivalent) of the offeror,
certifying that the offeror's net worth, determined in accordance with GAAP, is
greater than $10,000,000. Calfinco shall have twenty (20) days to review the
Offer and to decide whether to acquire CEA's Member Interest upon the terms of
the Offer. If Calfinco decides to acquire CEA's Member Interest upon the terms
of the Offer, Calfinco shall so notify CEA within such 20 day period, and
Calfinco shall be obligated to acquire CEA's Member Interest upon such terms.
If Calfinco notifies CEA that Calfinco has decided not to acquire the Member
Interest upon the terms of the Offer, or if Calfinco fails to notify CEA of
Calfinco's decision within such twenty (20) day period, Calfinco shall be
deemed to have waived Calfinco's right to acquire CEA's Member Interest
pursuant to the Offer, and CEA shall be free to Transfer its Member Interest to
the offeror pursuant to the Offer. If CEA fails to Transfer its Member
Interest to the offeror pursuant to the Offer within one hundred twenty (120)
days following the expiration of such twenty (20) day period, or if the Offer
is modified or extended, Calfinco's right of first refusal hereunder shall
again apply to any new offer from any offeror or to the modified or extended
Offer. The price for CEA's Member Interest payable pursuant to any Offer that
CEA is entitled to accept pursuant to the terms of this Section 9.2(c) must be
stated in terms of cash or cash and a promissory note, and if the terms of the
Offer provide for all or a portion of the purchase price to be paid with a
promissory note, Calfinco's promissory note shall be deemed to be equivalent to
any promissory note to be provided by the offeror; provided, however, that any
such promissory note shall be on the same terms and conditions as the offeror's
promissory note. Notwithstanding anything in this Section 9.2(c) to the
contrary, this Section 9.2(c) shall not apply to a Transfer by CEA of its
Member Interest to an Affiliate of CEA.
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9.3 Conditions to Permitted Transfers. A Transfer shall not be
treated as a Permitted Transfer under (i) Section 9.2(a) unless and until the
following conditions set forth in clauses (b) and (f) are satisfied, or (ii)
Section 9.2(b), if applicable, unless and until the following conditions are
satisfied:
(a) Documentation. The transferor and transferee shall execute
and deliver to the Company such documents and instruments of conveyance as may
be necessary or appropriate, in the reasonable opinion of counsel to the
Company, to effect such Transfer and to confirm the agreement of the transferee
to be bound by the provisions of this Agreement.
(b) Tax Information. The transferor and transferee shall furnish
the Company with the transferee's taxpayer identification number, sufficient
information to determine the transferee's initial tax basis in the Transferred
Member Interest, and any other information reasonably necessary to permit the
Company to file all required federal and state tax returns and other legally
required information statements or returns. Without limiting the generality of
the foregoing, the Company shall not be required to make any Distribution
otherwise provided for in this Agreement with respect to any Transferred Member
Interest until it has received such information.
(c) Securities Law Opinion. Such Transfer will be exempt from all
applicable registration requirements, including the requirements under the
Securities Act, and any applicable state securities Law, and will not violate
any applicable Laws regulating the Transfer of securities, and, except in the
case of a Transfer of a Member Interest to another Member or to a Wholly Owned
Affiliate of the transferor or of any other Member or, unless waived by the
Required Members, the transferor shall provide an opinion of counsel to such
effect. Such counsel and opinion shall be reasonably satisfactory to the
non-transferring Members.
(d) Investment Company Act Opinion. Such Transfer will not cause
the Company to be deemed to be an "investment company" under the Investment
Company Act, and the transferor shall provide an opinion of counsel to such
effect. Such counsel and opinion shall be reasonably satisfactory to the
non-transferring Members, and the Members shall provide to such counsel any
information available to the Members, as the case may be, and relevant to such
opinion.
(e) Certificates. The transferee of the Member shall execute a
Transferee Certificate.
(f) Expenses. The Company shall be reimbursed by the transferor
and/or transferee for all Company Expenses that it reasonably incurs in
connection with such Transfer.
(g) No Withholding Tax. Neither the transferee nor any Person who
owns a direct or indirect interest in the transferee and who may be treated for
federal tax purposes as a partner in the Company is a nonresident alien
individual, foreign partnership, foreign corporation or other foreign person
with respect to whom (taking into account statutory or treaty exemptions)
distributions, allocations or payments from the Company are subject to
withholding tax at a rate in excess of zero percent under Sections 1441, 1442,
1446 or any other provision of the Code imposing U.S. federal tax withholding
requirements upon distributions, allocations or payments by a partnership to a
foreign person.
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9.4 Prohibited Transfers. Except for involuntary transfers as
described in Section 3.8(a)(ii), any purported Transfer of a Member Interest
that is not a Permitted Transfer shall be null and void and of no effect
whatsoever; provided, however, that, if the Company is required to recognize a
Transfer that is not a Permitted Transfer, the transferor shall be deemed no
longer to have a Member Interest and the interest received by the transferee
shall be strictly limited to the transferor's rights to allocations and
Distributions as provided by this Agreement with respect to the Transferred
Member Interest, which allocations and Distributions may be applied (without
limiting any other legal or equitable rights of the Company) to satisfy any
debts, obligations, or liabilities for damages that the transferor or
transferee of such Member Interest may have to the Company. In the case of a
Transfer or attempted Transfer of a Member Interest that is not a Permitted
Transfer, the parties engaging or attempting to engage in such Transfer shall
indemnify and hold harmless the Company and the other Members from all cost,
liability, and damage that any of such indemnified Persons may incur (including
incremental tax liability and attorneys' fees and expenses) as a result of such
Transfer or attempted Transfer and efforts to enforce the indemnity granted
hereby.
9.5 Admission as Substituted Members. Subject to the other
provisions of this Section 9, a transferee of a Member Interest may be admitted
to the Company as a substituted Member only upon satisfaction of the conditions
set forth below:
(i) The Member Interest with respect to which the
transferee is being admitted was acquired by means of a Permitted
Transfer;
(ii) The transferee becomes a party to this Agreement as a
Member and executes such documents and instruments as the other
Members may reasonably request as may be necessary or appropriate to
confirm such transferee as a Member in the Company, including such
transferee's agreement to be bound by the terms and conditions of this
Agreement; and
(iii) Unless the requirements of this Section 9.5(iii) have
been waived by the Members consenting to such admission, the
transferee pays or reimburses the Company for all reasonable legal,
filing, publication and other costs that the Company incurs in
connection with the admission of the transferee as a Member with
respect to the Transferred Member Interest.
9.6 Distributions with Respect to a Transferred Member Interest.
If any Member Interest is Transferred in compliance with the provisions of this
Section 9, all Distributions on or before the date of such Permitted Transfer
shall be made to the transferor, and all Distributions thereafter shall be made
to the transferee. Solely for purposes of making such Distributions, the
Company shall recognize such Permitted Transfer not later than the end of the
calendar month during which it is given notice of such Permitted Transfer;
provided, however, that if the Company is given notice of a Permitted Transfer
at least fourteen (14) days prior to the Permitted Transfer, the Company shall
recognize such Permitted Transfer as of the date of such Permitted Transfer,
and provided, further that if the Company does not receive a notice stating the
date such Member Interest was Transferred and such other information as the
Member may reasonably require within thirty (30) days after the end of the
Fiscal Quarter during which the Permitted Transfer occurs, all Distributions
shall be made to the Person who, according to the books and records of the
Company, on the last day of the Fiscal Quarter during which the Permitted
Transfer occurs, was the record owner of the Member Interest.
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Neither the Company nor Calfinco shall incur any liability for making
Distributions in accordance with the provisions of this Section 9.7, whether or
not Calfinco or the Company has knowledge of any Transfer of ownership of any
Member Interest.
SECTION 10
POWER OF ATTORNEY
10.1 Managing Member as Attorney-in-Fact. Each Member hereby
makes, constitutes, and appoints the Managing Member and, effective as of the
Liquidation Start Date, the Company Liquidator, severally, with full power of
substitution and resubstitution, its true and lawful attorney-in-fact for it
and in its name, place, and stead and for its use and benefit, to sign,
execute, certify, acknowledge, swear to, file, publish and record (i) all
certificates of the Company, amended name or similar certificates, and other
certificates and instruments (including counterparts of this Agreement in the
form identical to the original counterpart thereof manually executed by such
Member (as amended, restated or modified in accordance with clause (ii) below))
that Calfinco or the Company Liquidator may deem necessary to be filed by the
Company under the Laws of the State of Delaware or any other state or
jurisdiction in which the Company is doing or intends to do business approved
by the Members; (ii) any and all amendments, restatements or modifications to
this Agreement and the instruments described in (i), as now or hereafter
amended, which Calfinco or the Company Liquidator may deem necessary to effect
a change or modification of the Company in the form approved by the Members in
accordance with the terms of this Agreement, including amendments, restatements
or modifications to reflect (A) the exercise by any Member of any power granted
to it under this Agreement, (B) any amendments adopted by the Members in
accordance with the terms of this Agreement, (C) the admission of any
substituted Member and (D) the disposition by any Member of its Member Interest
in the Company; (iii) all certificates of cancellation and other instruments
that Calfinco or the Company Liquidator deems necessary or appropriate to
effect the dissolution and termination of the Company pursuant to the terms of
this Agreement and (iv) any other instrument that is now or may hereafter be
required by law to be filed on behalf of the Company or is deemed necessary by
Calfinco or the Company Liquidator to carry out fully the provisions of this
Agreement in accordance with its terms; provided, however, that nothing in this
Section 10 shall authorize or be deemed to authorize any such attorney-in-fact
to take any action for or in the name, place or stead of any Member, or
otherwise referred to in this Section 10 with respect to any Member, to the
extent such action requires the consent of such Member pursuant to the terms of
this Agreement and such Member has not so consented. Each Member authorizes
each such attorney-in-fact to take any further action that such
attorney-in-fact shall consider necessary in connection with any of the
foregoing, hereby giving each such attorney-in-fact full power and authority to
do and perform each and every act or thing whatsoever requisite to be done in
connection with the foregoing as fully as such Member might or could do
personally, and hereby ratifying and confirming all that any such
attorney-in-fact shall lawfully do or cause to be done by virtue thereof or
hereof.
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<PAGE> 32
10.2 Nature of Special Power. The power of attorney granted
pursuant to this Section 10:
(i) is a special power of attorney coupled with an
interest and is irrevocable;
(ii) may be exercised by any such attorney-in-fact by
listing the Members executing any agreement, certificate, instrument,
or other document with the single signature of any such
attorney-in-fact acting as attorney-in-fact for such Members; and
(iii) shall survive and not be affected by the subsequent
Bankruptcy, insolvency, dissolution, or cessation of existence of a
Member and shall survive the delivery of an assignment by a Member of
the whole or a portion of its Member Interest in the Company (except
that where the assignment is of all of such Member's Member Interest
in the Company and the assignee is admitted as a substituted Member,
the power of attorney shall survive the delivery of such assignment
for the sole purpose of enabling any such attorney-in-fact to effect
such substitution) and shall extend to such Member's or assignee's
successors and assigns.
SECTION 11
DISSOLUTION AND WINDING UP
11.1 Liquidation. (a) Termination Events. The Company shall
dissolve and commence winding up and liquidating upon, and only upon, the
occurrence of (i) a Termination Event, and (ii) the failure of the Company
either (1) to exercise and consummate its redemption option provided in
paragraphs 5 or 7, as applicable, of the Redemption Option Agreement, or (2) to
exercise and consummate its redemption option provided in paragraph 6 of the
Redemption Option Agreement within thirty (30) days after Calfinco's receipt of
a Termination Notice. The date of the Company's dissolution and commencement
of winding up shall be referred to as the "Liquidation Start Date".
(b) Company Termination Notice. At any time on or after the
occurrence of any Termination Event, either Member may elect to deliver to the
other Member a notice (a "Termination Notice") of such event. Such Termination
Notice shall be effective on the date specified in the Termination Notice as
its effective date (which shall be no earlier than the fifth Business Day after
delivery to the other Members), or if no date is specified, the Termination
Notice shall be effective the fifth Business Day after it is delivered to the
other Members, unless (x) such Termination Event has been cured on or before
such effective date or otherwise resolved to all Members' satisfaction on or
before such effective date, or (y) the Company has exercised and consummated
its redemption option (1) provided in paragraphs 5 or 7, as applicable, of the
Redemption Option Agreement, or (2) the Company has exercised and consummated
its redemption option provided in paragraph 6 of the Redemption Option
Agreement within thirty (30) days after Calfinco's receipt of a Termination
Notice. Any such Termination Notice may be rescinded by the Member giving such
notice prior to its effectiveness by delivery of a rescission notice to the
other Members.
11.2 Winding Up. Upon the occurrence of the Termination Event, the
Company shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Members, and no Member shall take any action with
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<PAGE> 33
respect to the Company that is inconsistent with the winding up of the
Company's business and affairs; provided, however, that all covenants contained
in this Agreement and obligations provided for in this Agreement shall continue
to be fully binding upon the Members until the Company Property has been
distributed pursuant to this Section 11.2 and the certificate of formation has
been canceled pursuant to the Act. The Company Liquidator shall be responsible
for overseeing the winding up and dissolution of the Company (including taking
any actions required by Section 11.7), shall take full account of the Company's
liabilities and the Company Property, and shall cause the Company Property or
the proceeds from the Disposition thereof, to the extent sufficient therefor,
to be applied and distributed, to the maximum extent permitted by Law, in the
following order:
(i) First, as provided in Section 18-804(a)(1) of the
Act; and
(ii) Second, the balance, if any, to the Members in an
amount equal to their Capital Account balances, after
giving effect to all contributions, Distribution, and
allocations made for all periods through the end of
the Liquidation Period.
11.3 No Restoration of Deficit Capital Accounts. Notwithstanding
anything in this Agreement to the contrary, if a Termination Event has occurred
and the Company is wound up in accordance with Section 11.2, no Member shall be
obligated to make any Capital Contributions to the Company in respect of a
deficit balance in its Capital Account, and such deficit shall not be
considered to be a debt owed to the Company or to any other Person for any
purpose whatsoever.
11.4 No Constructive Liquidation. In the event the Company is
liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations but no Termination Event has occurred, the Company Property shall
not be liquidated, the Company's liabilities shall not be paid or discharged,
the Company's affairs shall not be wound up, and no adjustments to the Members'
Capital Accounts shall be made (except as otherwise specifically provided in
Section 6).
11.5 Rights of Members. Each Member shall look solely to the
Company Property for the return of its Capital Contribution and shall have no
right or power to demand or receive property other than cash from the Company.
11.6 The Company Liquidator. (a) Definition. The "Company
Liquidator" shall mean the Managing Member, or a Person appointed by the
Managing Member, unless a Termination Event (other than a Termination Event
listed in clauses (i) and (ii) of the definition of Termination Event) has
occurred, in which case, the "Company Liquidator" shall mean CEA (regardless of
whether CEA has elected to become the Managing Member) or any Person appointed
as Company Liquidator by CEA. The Company Liquidator shall have the rights set
forth in Section 18-803(b) of the Act and shall have the exclusive right, power
and authority to effect the dissolution, winding up and liquidation of the
Company. The actions of the Company Liquidator shall for all purposes be the
actions of the Company.
(b) Fees. In the event that the Company Liquidator is other than
the Managing Member or an Affiliate of the Managing Member, the Company is
authorized to pay a reasonable fee to the
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<PAGE> 34
Company Liquidator for its services performed pursuant to this Section 11 and
to reimburse the Company Liquidator for its reasonable costs and expenses
incurred in performing those services.
(c) Resignation of Company Liquidator. At any time, any Company
Liquidator may, in its discretion, resign as Company Liquidator and the Member
then entitled to appoint the Company Liquidator shall appoint a replacement
Company Liquidator.
11.7 Liquidation Procedures. The Company Liquidator shall commence
the winding up of the Company's business and in so doing may, among other
things, cause one or more of the following to occur:
(a) Termination of Lease. If the Slot Lease is then subject to
termination, the Company Liquidator shall cause the Company to terminate the
Slot Lease.
(b) Sale of Company Property. (i) The Company Liquidator shall
commence the sale and/or liquidation of Company Property in such order as the
Company Liquidator shall determine in its reasonable, good faith judgment to be
best calculated to obtain the highest price for the Company Property; and (ii)
the Company Liquidator may engage on behalf of the Company one or more agents
to conduct sales of the Company Property.
(c) Repayment of Indebtedness. From the proceeds of the sale of
the Company Property, the Company Liquidator shall repay the Indebtedness under
the Credit Facility and all other Indebtedness of the Company.
(d) Liquidating Distributions. All Distributions to be made
pursuant to Section 11.2 shall be made by the Company Liquidator from time to
time immediately after repayment of the Indebtedness of the Company from the
proceeds of the liquidation of Company Property.
11.8 Form of Liquidating Distributions. In addition to the
Distributions made by the Managing Member pursuant to Section 4.1(c)(iii), the
Company Liquidator shall make all liquidating distributions in cash.
SECTION 12
INDEMNIFICATION
12.1 Indemnification. Subject to the limitations set forth in
Section 12.4, (a) the Company hereby agrees, to the fullest extent permitted by
Law, to indemnify, hold harmless and pay, and (b) the Company Liquidator, or
any receiver or trustee of the Company (each of the foregoing Persons being an
"Indemnitor") (in the case of the Company Liquidator, receiver or trustee, to
the extent of Company Property) shall indemnify, hold harmless and pay, all
Expenses ("Indemnified Amounts") of any Member, and the direct and indirect
members, partners, shareholders and other equity holders of any Member, and the
successors and permitted assignees of each such Person (whether pursuant to an
assignment for security or otherwise) and creditors of and surety providers
with respect to, any of the foregoing, and their respective successors and
assigns (whether pursuant to an assignment for security or otherwise) and each
of the respective directors, officers, employees,
-27-
<PAGE> 35
administrators and agents of any of the foregoing (each an "Indemnified
Person"), which may be incurred or realized by or asserted against such
Indemnified Person, relating to, growing out of or resulting from:
(i) Company Obligations. Any failure by the Company to
perform or observe each of its covenants and obligations under this
Agreement or any other Operative Document to which it is a party
(collectively, the "Covered Documents"), including Indemnified Amounts
resulting from or arising out of or in connection with enforcement of
the Covered Documents (or determining whether or how to enforce any
Covered Documents, whether through negotiations, legal proceedings or
otherwise), or responding to any subpoena or other legal process or
informal investigative demand in connection herewith or therewith; or
(ii) Representations and Warranties. Any inaccuracy in,
or any breach of, any written certification, representation or
warranty made by or on behalf of the Company in any Covered Document
or in any written report or certification required hereunder or under
any other Covered Document, in each case (A) if but only if such
certification, representation or warranty is made as of a specific
date, as of the date as of which the facts stated therein were
certified, represented or warranted and (B) in all other cases, as of
any date or during any period to which such certification,
representation or warranty may be applicable; or
(iii) Investigations; Litigation; Proceedings. Any
investigation, litigation or proceeding, whether or not such
Indemnified Person is a party thereto, that (A) relates to, grows out
of or results from any action or omission, or alleged action or
omission, by or on behalf of or attributable to the Company and (B)
would not have resulted in Indemnified Amounts incurred or realized by
or asserted against such Indemnified Person but for the Covered
Documents or the transactions thereunder or contemplated thereby.
12.2 Nonexclusive Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 12 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of this Agreement, other contract, determination of the Managing
Member, or otherwise.
12.3 Insurance. The Company may maintain insurance, at its
expense, to protect itself and any Member, or agent of the Company or another
limited liability company, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Company would have the power to indemnify such person against such expense,
liability or loss under the Act.
12.4 Limitations on Indemnification Obligations. The indemnities
provided herein shall be subject to the following limitations:
(a) Limitation by Law. Such sections shall be enforced only to
the maximum extent permitted by Law.
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<PAGE> 36
(b) Misconduct, Etc. No Person, and no controlling Affiliate of
such Person in its own right (but without prejudice to the claims of Persons
who are Indemnified Persons by reason of a relationship to such controlling
Affiliate (such as an agent, employee, creditor or surety of such controlling
Affiliate)) shall be indemnified from any liability solely caused by or
resulting from (i) the actual fraud, willful misconduct, bad faith or gross
negligence of such Person or (ii) any inaccuracy in, or breach of, any written
certification, representation or warranty made by such Person in any Covered
Document or in any written report or certification required hereunder or under
any other Covered Document unless such inaccuracy or breach is attributable to
any written information provided by Calfinco or its Affiliates, in each case
under this clause (ii) (A) if, but only if, such certification, representation
or warranty is made as of a specific date, as of the date as of which the facts
stated therein were certified, represented or warranted and (B) in all other
cases, as of any date or during any period to which such certification,
representation or warranty may be applicable.
(c) No Duplication. Indemnified Amounts under this Section 12
shall be without duplication of any amounts payable under indemnification
provisions of any other Operative Document or any amounts actually paid
thereunder.
12.5 Payments; No Reduction of Capital Account. Any amounts
subject to the indemnification provisions of this Section 12 shall be paid by
the applicable Indemnitor within ten (10) Business Days following demand
therefor, accompanied, as may be appropriate in the context, by supporting
documentation in reasonable detail. Payments to a Member pursuant to this
Section 12 shall not reduce the Capital Account of such Member. To the extent
the Company is required to indemnify any Person hereunder, each such
Indemnified Party shall be a creditor of the Company to the extent of the
Indemnified Amounts owing to such Indemnified Party hereunder from time to
time. Payment shall be made to the bank account or at another location as such
Indemnified Person shall designate in writing or as is expressly required under
any Operative Document the obligations under which are the subject of any such
payment, not later than 1:00 pm (New York time) on the date for such payment in
immediately available funds.
12.6 Procedural Requirements.
(a) Notice of Claims. Any Indemnified Person that proposes to
assert a right to be indemnified under this Section 12 will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such Indemnified Person, or the incurrence or realization of Indemnified
Amounts, in respect of which a claim is to be made against the relevant
Indemnitor under this Section 12, notify the relevant Indemnitor of such
incurrence or realization or of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served, but the omission so to
notify the relative Indemnitor promptly of any such incurrence, realization,
action, suit or proceeding shall not relieve (x) any Indemnitor from any
liability that it may have to such Indemnified Person under this Section 12 or
otherwise, except, as to such Indemnitor's liability under this Section 12, to
the extent, but only to the extent, that such Indemnitor shall have been
prejudiced by such omission, or (y) any other Indemnitor from liability that it
may have to any Indemnified Person under the Operative Documents.
(b) Defense of Proceedings. In case any such action, suit or
proceeding shall be brought against any Indemnified Person and it shall notify
the relevant Indemnitor of the commencement
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<PAGE> 37
thereof, such Indemnitor shall be entitled to participate in, and to assume the
defense of, such action, suit or proceeding with counsel reasonably
satisfactory to such Indemnified Person, and after notice from such Indemnitor
to such Indemnified Person of such Indemnitor's election so to assume the
defense thereof and the failure by such Indemnified Person to object to such
counsel within ten (10) Business Days following its receipt of such notice.
Such Indemnitor shall not be liable to such Indemnified Person for legal or
other expenses incurred after such notice of election to assume such defense
except as provided below and except for the reasonable costs of investigating,
monitoring or cooperating in such defense subsequently incurred by such
Indemnified Person reasonably necessary in connection with the defense thereof.
Such Indemnified Person shall have the right to employ its counsel in any such
action, suit or proceeding, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless:
(i) the employment of counsel by such Indemnified Person
at the expense of such Indemnitor has been authorized in writing by
such Indemnitor;
(ii) such Indemnified Person shall have concluded in its
good faith (which conclusion shall be determinative unless a court
determines that conclusion was not reached in good faith) that there
is or may be a conflict of interest between such Indemnitor and such
Indemnified Person in the conduct of the defense of such action or
that there are or may be one or more different or additional defenses,
claims, counterclaims, or causes of action available to such
Indemnified Person (it being agreed that in any case referred to in
this clause (ii) such Indemnitor shall not have the right to direct
the defense of such action on behalf of the Indemnified Person);
(iii) such Indemnitor shall not have employed counsel to
assume the defense of such action within a reasonable time after
notice of the commencement thereof; or
(iv) any counsel employed by such Indemnitor shall fail to
timely commence or maintain the defense of such action,
in each of which cases the fees and expenses of counsel for such Indemnified
Person shall be at the expense of such Indemnitor; provided that without the
prior written consent of such Indemnified Person no Indemnitor shall settle or
compromise, or consent to the entry of any judgment in, any pending or
threatened claim, action, investigation, suit or other legal proceeding in
respect of which indemnification may be sought under this Section 12, unless
such settlement, compromise or consent includes an unconditional release of
such Indemnified Person from all liability for Expenses arising out of such
claim, action, investigation, suit or other legal proceeding.
(c) Settlement of Claims. No Indemnified Person shall settle or
compromise, or consent to the entry of any judgment in, any pending or
threatened claim, action, investigation, suit or other legal proceeding in
respect of which any payment would result hereunder or under the other
Operative Documents without the prior written consent of the relevant
Indemnitor, such consent not to be unreasonably withheld or delayed.
(d) Indemnification Despite Negligence of Indemnified Person. THE
INDEMNITY OBLIGATIONS OF THIS SECTION 12 SHALL EXPRESSLY INCLUDE ANY
INDEMNIFIED AMOUNTS
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<PAGE> 38
ATTRIBUTABLE TO THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY
INDEMNIFIED PERSON, BUT SHALL EXCLUDE ANY SUCH INDEMNIFIED AMOUNTS ATTRIBUTABLE
TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON. IT
IS THE INTENT OF THE PARTIES HERETO THAT THE INDEMNIFIED PERSONS, SHALL, TO THE
EXTENT PROVIDED IN THIS SECTION 12, BE INDEMNIFIED FOR THEIR OWN ORDINARY, SOLE
OR CONTRIBUTORY NEGLIGENCE.
12.7 Tax Indemnity. If as a result of any audit of the Company's
federal, state, or local income tax returns, the Company, CEA, any of the
Company's or CEA's direct or indirect members, partners, or shareholders, or
the successors or permitted assignees of any of them, is determined by final
order or judgment, not subject to appeal, to be liable for any interest or
penalties in respect of the underpayment of any federal, state, or local income
tax, Calfinco, any Affiliate of Calfinco to whom the Slots are Transferred,
through one or more successive Transfers, and any successor to Calfinco, if
Calfinco is dissolved, merged, or consolidated with another Person, shall pay
or shall reimburse the Company, CEA, direct and indirect members, partners,
shareholders and the successors and permitted assignees of each such Person, or
any of them, for all such interest and penalties.
12.8 Survival of Indemnification Obligations. All indemnities
provided for in this Agreement shall survive the Transfer of any Member
Interest and the liquidation of the Company. After any such Transfer or
liquidation, the provisions of this Section 12 shall inure to the benefit of
each Transferring Member with respect to Indemnified Amounts arising in respect
of the period during which such Transferring Member was a Member (including
with respect to actions taken or omitted to be taken, and events occurring and
circumstances existing, during such period).
SECTION 13
MISCELLANEOUS
13.1 Notices. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be
in writing or by facsimile and shall be deemed to have been delivered, given,
and received for all purposes (a) if delivered personally to the Person or to
an officer of the Person to whom the same is directed, or (b) when the same is
actually received (if a Business Day, or, if not, on the next succeeding
Business Day), if sent either by courier or delivery service or certified mail,
postage and charges prepaid, or by facsimile, if such facsimile is followed by
a hard copy of the facsimiled communication sent by certified mail, postage and
charges prepaid, addressed as follows, or to such other address as such Person
may from time to time specify by notice to the Members:
(i) If to the Company, to the address set forth in the
first sentence of Section 2.6, with copies sent to the Managing Member
at its address set forth in Section 2.2;
(ii) If to a Member, to the address set forth in Section
2.2; and
(iii) If to the Company Liquidator, at the address
specified by such party.
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<PAGE> 39
13.2 Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term and provision of this Agreement shall be
binding upon and inure to the benefit of the Members and their respective
permitted successors, transferees, and assigns (including any assignee for
security purposes or Person holding a security interest). This Agreement and
the rights and obligations hereunder may not be assigned to any Person other
than a Permitted Transferee.
13.3 Severability. Except as otherwise provided in the succeeding
sentence, every provision of this Agreement is intended to be severable, and,
if any term or provision of this Agreement is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement. The preceding sentence of this
Section shall be of no force or effect if the consequence of enforcing the
remainder of this Agreement without such illegal or invalid term or provision
would be to cause any Member to lose the benefit of its economic bargain.
13.4 Construction. The terms of this Agreement are intended to
embody the economic relationship among the Members and shall not be subject to
modification by or conform with any actions by any governmental authority
except as this Agreement may be explicitly so amended.
13.5 Governing Law. The Laws of the State of Delaware shall govern
the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Members.
13.6 Counterpart Execution. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
13.7 Specific Performance. Each Member agrees with the other
Members that the other Members would be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their
specific terms and that monetary damages would not provide an adequate remedy
in such event. Accordingly, it is agreed that, in addition to any other remedy
to which the nonbreaching Members may be entitled, at law or in equity, the
nonbreaching Members shall be entitled to injunctive relief to prevent breaches
of the provisions of this Agreement and specifically to enforce the terms and
provisions of this Agreement in any action instituted in any court of the
United States or any state thereof having subject matter jurisdiction thereof.
13.8 Amendments. Amendments, restatements and corrections to and
cancellations of this Agreement may be proposed by any Member by notice to the
Company and the Managing Member. Following such proposal, the Managing Member
on behalf of the Company shall submit to the Members a verbatim statement of
any proposed amendment, restatement, correction or cancellation and shall seek
the written vote of the Members thereon or shall call a meeting to vote thereon
and to transact any other business that it may deem appropriate. A proposed
amendment, restatement, correction or cancellation shall be adopted and be
effective as an amendment, restatement, correction or cancellation of this
Agreement only if such amendment, restatement, correction or cancellation
receives the affirmative vote of all the Members.
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<PAGE> 40
13.9 Fair Price. EACH MEMBER AGREES THAT THE PROCEDURES SET FORTH
IN SECTION 11.7 ARE INTENDED TO ENSURE THAT A FAIR PRICE FOR THE COMPANY
PROPERTY IS RECEIVED IN RETURN FOR ANY DISPOSITIONS THEREOF.
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<PAGE> 41
IN WITNESS WHEREOF, the parties have entered into this
Agreement as of the day first above set forth.
Calfinco: CALFINCO INC.
By: /s/ JEFFREY J. MISNER
--------------------------
Jeffrey J. Misner
Vice President
CEA: CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners,
its General Partner
By: /s/ BRIAN RICHMOND
--------------------------
Brian Richmond
General Partner
34
<PAGE> 42
Schedule 5.7
Assets of the Company after giving effect to Closing Date transactions
1. Rights under that certain Slot Lease Agreement, dated as of April 17,
1998, between the Company and Continental Airlines, Inc.
2. Rights under that certain Redemption Option Agreement, dated as of
April 17, 1998 between the Company and Chase Equity Associates, L.P.
3. Rights in the following Slots:
<TABLE>
<CAPTION>
A. CHICAGO O'HARE
-----------------
TIME SLOT NO.
---- --------
<S> <C> <C>
1. 07:15 7240*
2. 07:15 8270
3. 08:15 7664
4. 08:45 7742
5. 09:45 7796
6. 10:15 7475
7. 10:15 8659
8. 11:15 7971*
9. 11:45 8506*
10. 11:45 7439*
11. 12:15 8426*
12. 13:15 7609*
13. 13:45 7178*
14. 13:45 7377
15. 14:15 7320*
16. 14:15 8071*
17. 14:45 8316*
18. 14:45 7682
19. 15:15 8640
20. 15:45 7970*
21. 16:15 8327
22. 16:15 7659
23. 16:45 7924*
24. 16:45 8290
25. 17:15 7591*
26. 17:45 7743
27. 18:15 8200*
28. 18:15 7977
29. 18:15 7635*
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
-1-
<PAGE> 43
<TABLE>
<CAPTION>
B. WASHINGTON NATIONAL
----------------------
TIME SLOT NO.
---- --------
<S> <C> <C>
1. 07:00 1209*
2. 07:00 1270
3. 07:00 1568
4. 08:00 1610
5. 08:00 1498*
6. 09:00 1637
7. 09:00 1453
8. 09:00 1335*
9. 10:00 1026
10. 11:00 1120*
11. 11:00 1067*
12. 11:00 1020
13. 12:00 1572*
14. 12:00 1368
15. 13:00 1069*
16. 13:00 1656
17. 13:00 1068
18. 14:00 1545
19. 14:00 1615
20. 14:00 1520
21. 15:00 1600
22. 15:00 1054
23. 15:00 1164*
24. 16:00 1156
25. 16:00 1111*
26. 16:00 1527*
27. 17:00 1071*
28. 17:00 1280
29. 18:00 1324*
30. 19:00 1095*
31. 19:00 1129*
32. 19:00 1294*
33. 19:00 1550*
34. 19:00 1301
35. 20:00 1279
36. 20:00 1640*
37. 20:00 1288*
38. 20:00 1448*
39. 21:00 1647
40. 21:00 1558
41. 21:00 1239
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
-2-
<PAGE> 44
<TABLE>
<CAPTION>
C. LAGUARDIA - DEPARTURE
------------------------
TIME SLOT NO.
---- --------
<S> <C> <C>
1. 07:00 3851*
2. 08:30 3595*
3. 08:30 3336
4. 09:30 3181*
5. 10:00 3198*
6. 11:00 3663*
7. 12:00 3833
8. 13:00 3331
9. 13:30 3808
10. 14:30 3379*
11. 15:30 3363*
12. 16:30 3805
13. 17:00 3090*
14. 17:00 3274*
15. 17:30 3412*
16. 18:30 3398*
17. 19:30 3572
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
-3-
<PAGE> 45
<TABLE>
<CAPTION>
D. LAGUARDIA - ARRIVAL
----------------------
TIME SLOT NO.
---- --------
<S> <C> <C>
1. 08:30 3077*
2. 09:00 3087
3. 10:30 3827*
4. 12:30 3582
5. 13:30 3108*
6. 15:30 3618*
7. 16:00 3091*
8. 16:00 3810*
9. 17:00 3678*
10. 17:30 3288*
11. 18:00 3173*
12. 18:30 3800
13. 19:00 3620*
14. 19:30 3679*
15. 21:30 3053*
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
-4-
<PAGE> 46
EXHIBIT A
TO
AMENDED AND RESTATED COMPANY AGREEMENT
Definitions
"Act" means the Delaware Limited Liability Company Act.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts that such
Member is obligated to restore pursuant to any provision of the
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of each of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations; and
(b) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any executive officer, director or general partner of such Person
or (iii) any Person who is an executive officer, director, general partner, or
trustee of any Person described in clauses (i) and (ii) of this sentence. For
the purpose of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or agency or otherwise.
"Agreement" means the document to which this Exhibit A is attached.
"Bankruptcy" means, with respect to any Person, a Voluntary Bankruptcy
or an Involuntary Bankruptcy.
"Business Day" means any day of the year except Saturday or Sunday and
that is a day on which banks are not required or authorized by law to close in
New York City, Wilmington, Delaware or Houston, Texas.
A-1
<PAGE> 47
"CAL" means Continental Airlines, Inc., a Delaware corporation.
"CAL Sale Agreement" means that certain Sale Agreement, effective as
of the Closing Date, between CAL and the Company, pursuant to which CAL agrees
to sell the Slots to the Company.
"Calfinco" means CALFINCO Inc., a Delaware corporation and the initial
managing member of the Company.
"Capital Account" means the capital account established for each
Member pursuant to Section 5.1 of the Agreement.
"Capital Contribution" means, with respect to any Member, the amount
of money and the initial fair market value of any property (other than money)
contributed to the Company by such Member (or its predecessors in interest)
with respect to the Member Interest in the Company held by such Member.
"Cash Equivalents" means cash and any of the following: (i) amounts
credited to current accounts, deposit accounts, time deposits, insured
certificates of deposit or freely marketable and transferable debt obligations
of any United States bank that is a member of the United States Federal Reserve
System and whose short-term unsecured and non-credit enhanced debt obligations
are rated at least A-1 and P-1 by S&P and Moody's, respectively, or any then
equivalent rating announced by S&P or Moody's, respectively, and which is not
subject to currency controls; (ii) U.S. Treasury securities or any other
freely negotiable and marketable debt securities issued by the government of
the United States or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of the same; and (iii)
any commercial paper issued in the United States by a Person whose short-term
unsecured and non-credit enhanced debt obligations are rated at least A-1 and
P-1 by S&P and Moody's, respectively, or any then equivalent rating announced
by S&P or Moody's, respectively (other than such commercial paper issued by CAL
or its Affiliates); provided, however, that items described in clauses (i)
through (iii) shall not constitute Cash Equivalents unless (A) such items are
denominated in Dollars, (B) if issued by a non-governmental entity, such items
are issued by an issuer whose long-term debt obligations are rated at least
"A-" by S&P, "A3" by Moody's, or any then equivalent rating announced by S&P or
Moody's, respectively, or an equivalent investment grade rating from a
nationally recognized debt rating agency, (C) such items are not issues the
interest or dividend on which is exempt from federal income tax (or would be so
exempt if the issue were held by a citizen or resident of the United States or
a domestic corporation (as defined in Section 7701(a) of the Code)) and (D) if
other than cash, such items have a remaining maturity of not longer than ninety
(90) days.
"CEA" has the meaning set forth in the introduction of the Agreement.
"Closing Date" means the date that the Members make their initial
Capital Contributions pursuant to Section 5.2 of the Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company" means Calair L.L.C.
A-2
<PAGE> 48
"Company Expenses" means, without duplication, all interest, costs,
expenses, indemnities, fees (including reasonable attorneys' and accountants'
fees), Taxes and other payment obligations incurred or owing by the Company
(excluding any liquidating distributions of a Member's Capital Account pursuant
to Section 11 of the Agreement).
"Company Liquidator" has the meaning set forth in Section 11.6 of the
Agreement.
"Company Property" means, at any time, all assets owned at such time
by the Company, and shall include both tangible and intangible property.
"Compliance Certificate" means a written certification that no
Termination Event has occurred and is continuing, or if any such event has
occurred and is continuing, the action that the Company is taking or proposes
to take with respect to such event signed by a senior financial or accounting
officer of the Managing Member.
"Covered Documents" has the meaning specified in Section 12.1(i) of
the Agreement.
"Credit Documents" means the Indenture and the other documents
executed as further evidence of, security for, or in connection with the
Indebtedness evidenced by the Indenture.
"Disposition" means any sale, exchange, lease, conversion or other
disposition of any Company Property. "Dispose" and "Disposed" shall have the
correlative meanings.
"Distribution" means any distribution or dividend or return of capital
or any other distribution, payment, remittance or delivery of property or cash
in respect of, or the redemption, retirement, purchase or other acquisition,
directly or indirectly, of, any Member Interest now or hereafter outstanding or
the setting aside of any funds for any of the foregoing purposes. "Distribute"
and "Distributed" shall have the correlative meanings.
"Dollars" and the sign "$" each mean the lawful money of the United
States.
"Expenses" means (i) any and all judgments, damages or penalties with
respect to, or amounts paid in settlement of, claims (including negligence,
strict or absolute liability, liability in tort and liabilities arising out of
violation of laws or regulatory requirements of any kind), actions, or suits,
and (ii) any and all liabilities, obligations, losses, costs, expenses
(including reasonable fees and disbursements of counsel and claims, damages,
losses, liabilities and expenses relating to environmental matters) and
disbursements but excluding Taxes.
"Fiscal Quarter" means (i) the period commencing on April 1, 1998 and
ending on June 30, 1998 and (ii) any subsequent period commencing on each of
January 1, April 1, July 1 and October 1 and ending on the earlier to occur of
(x) the last date before the next such date and (y) the date on which all
Company Property is distributed pursuant to Section 11.2 of the Agreement and
Company's certificate of formation has been canceled pursuant to the Act.
"Fiscal Year" means (i) the period commencing on January 1 1998 and
ending on December 31, 1998 and (ii) any subsequent period commencing on
January 1 and ending on the
A-3
<PAGE> 49
earlier to occur of (x) the next December 31 and (y) the date on which all
Company Property is distributed pursuant to Section 11.2 of the Agreement and
the Company's certificate of formation has been canceled pursuant to the Act.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hedge Agreements" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements, currency
future or option contracts and other similar agreements.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) all obligations of such
Person for the deferred purchase price of property or services, (iii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iv) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (whether or not the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (v) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (vi) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, (vii) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any partnership or member or other equity interests of such
Person, (viii) all obligations of such Person in respect of Hedge Agreements,
(ix) all other financial obligations of such Person under any contract or other
agreement to which such Person is a party, (x) all Indebtedness of other
Persons of the type described in clauses (i) through (ix) above guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (A) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the
holder of such Indebtedness against loss, (C) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such services
are rendered) or (D) otherwise to assure a creditor against loss, and (xi) all
Indebtedness of the type described in clauses (i) through (x) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property (including accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for payment of such Indebtedness.
"Indemnified Amount" has the meaning specified in Section 12.1 of the
Agreement.
"Indemnified Person" has the meaning specified in Section 12.1 of the
Agreement.
"Indemnitor" has the meaning specified in Section 12.1 of the
Agreement.
"Indenture" means that certain indenture dated as of the Closing Date,
among certain parties, including the Company and Calair Capital Corporation, as
issuers, and Bank One Texas, N.A., as
A-4
<PAGE> 50
trustee, pursuant to which notes in the aggregate principal amount of
$115,000,000 will be issued, evidencing Indebtedness borrowed by the Company to
pay a portion of the consideration for the purchase of the Slots.
"Investment Company Act" means the United States Investment Company
Act of 1940.
"Involuntary Bankruptcy" means, with respect to any Person, without
the consent or acquiescence of such Person, the entering of an order for relief
or approving a petition for relief or reorganization or any other petition
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or other similar relief under any present or future
bankruptcy, insolvency or similar Law, or the filing of any such petition
against such Person that shall not be dismissed or stayed within sixty (60)
days, or, without the consent or acquiescence of such Person, the entering of
an order appointing a trustee, custodian, receiver or liquidator of such Person
or of all or any substantial part of the property of such Person that shall not
be dismissed or stayed within sixty (60) days.
"Law" means any law, treaty, statute, rule, regulation, order, code,
judgment, decree, injunction, writ, requirement or decision of or agreement
with or by any government or governmental department, commission, board, court,
authority or agency having jurisdiction of the matter in question.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other), priority, security interest or other
security device or arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any financing or similar
statement or notice filed under the Uniform Commercial Code (as in effect from
time to time in the relevant jurisdiction), or any other similar recording or
notice statute, and any lease having substantially the same effect as any of
the foregoing).
"Liquidation Period" means the period commencing on the Liquidation
Start Date and ending on the date of the Disposition of all of the Company
Property and any proceeds received from the sales of the Company Property
pursuant to Section 11.7.
"Liquidation Start Date" has the meaning set forth in Section 11.1 of
the Agreement.
"Losses" has the meaning set forth in the definition of Profits and
Losses.
"Managing Member" means the Member designated as the Managing Member
pursuant to Section 4.1(b) of the Agreement, as such Member may be replaced as
provided therein.
"Member" means either Calfinco or CEA, or any permitted successor to,
or Permitted Transferee of, either Calfinco or CEA.
"Member Interest" means an interest in the Company described in
Section 3.2 of the Agreement.
A-5
<PAGE> 51
"Member Nonrecourse Debt" - the meaning assigned to the term "partner
nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Debt Minimum Gain" shall have the meaning assigned
to the term "partner nonrecourse debt minimum gain" term in Section
1.704-2(i)(2) of the Regulations.
"Member Nonrecourse Deductions" shall have the meaning assigned to the
term "partner nonrecourse deductions" in Section 1.704-2(i)(1) of the
Regulations.
"Minimum Gain" shall have the meaning assigned to that term in Section
1.704-2(d) of the Regulations.
"Moody's" means Moody's Investors Service, Inc. and any successor
rating agency.
"Nonrecourse Deductions" shall have the meaning assigned to that term
in Section 1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" shall have the meaning assigned to that term
in Section 1.752-1(a)(2) of the Regulations.
"Offer" shall have the meaning set forth in Section 9.2(c) of the
Agreement.
"Operative Documents" means, collectively, the Organizational
Documents of the Company, the CAL Sale Agreement, the Slot Lease, the
Redemption Option Agreement, and the Credit Documents.
"Organizational Documents" means, with respect to any Person, any
certificate of incorporation, charter, by-laws, memorandum of association,
articles of association, partnership agreement, limited liability company
agreement (including the Agreement), certificate of limited partnership,
certificate of formation, certificate of trust, trust agreement, indenture or
other agreement or instrument under which such person is formed or organized
under applicable Laws.
"Payment Date" means the first Business Day of each April and October
in each year, commencing the first Business Day of October 1998.
"Permitted Liens" means (i) bankers' rights of set-off for uncollected
items and routine fees and expenses arising in the ordinary course of business,
(ii) Liens created by or pursuant to, or expressly permitted under, any
Operative Document, (iii) Liens for taxes and other governmental charges and
assessments (and other Liens imposed by Law) not yet delinquent or being
contested in good faith and by proper proceedings and as to which appropriate
reserves (in the good faith judgment of the relevant Person) are being
maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors, (iv) restrictions
on transfers of securities or voting under applicable Laws, and (v)
restrictions on the transfer of assets of the Company under the Agreement and
any other Operative Documents.
A-6
<PAGE> 52
"Permitted Transfer" means any Transfer of a Member Interest permitted
by Section 9.2 of the Agreement.
"Permitted Transferee" means any Person to which a Member Interest is
Transferred pursuant to a Permitted Transfer.
"Person" means any individual, partnership (whether general or
limited), corporation (including a business trust), joint stock company,
limited liability company, trust, estate, association, custodian, nominee,
joint venture, or other entity, or a government or any political subdivision or
agency thereof.
"Prime Rate" means the rate of interest from time to time announced by
The Chase Manhattan Bank at its principal office in the United States as its
prime commercial lending rate (or comparable rate, if such bank does not so
designate a "prime commercial lending rate") such Prime Rate to change when and
as such prime commercial lending rate (or such comparable rate) changes.
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits
or Losses pursuant to this definition of "Profits" and "Losses" shall
be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(g) of the
Regulations and not otherwise taken into account in computing Profits
or Losses pursuant to this definition of "Profits" and "Losses" shall
be subtracted from such taxable income or loss;
(iii) In the event the carrying value of any Company
Property is adjusted, the amount of such adjustment shall be taken
into account as gain or loss from the Disposition of such asset for
purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any Disposition of
Company Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the
carrying value of the property Disposed of, notwithstanding that the
adjusted tax basis of such property differs from its carrying value;
(v) All Taxes paid or accrued by the Company shall be
treated as deductions in computing Profits and Losses; and
(vi) Any items that are specially allocated pursuant to
Section 6.2 of the Agreement shall not be taken into account in
computing Profits or Losses.
A-7
<PAGE> 53
The amounts of the items of income, gain, loss or deduction available to be
specially allocated pursuant to Section 6.2 of the Agreement shall be determined
by applying rules analogous to those set forth in clauses (i) through (v) above.
"Redemption Option Agreement" means that certain Redemption Option
Agreement dated as of the Closing Date, between the Company and CEA.
"Regulations" means the income tax regulations, including temporary
regulations, promulgated under the Code.
"Regulatory Allocations" shall have the meaning set forth in Section
6.3 of the Agreement.
"Retained Amounts" shall have the meaning set forth in Section 7.1(a)
of the Agreement.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc. and any successor rating agency.
"Securities Act" means the Securities Act of 1933, as amended.
"Sharing Ratio" means, in the case of CEA, twenty-four percent (24%),
unless and until (i) the Company redeems one-half ( 1/2) of CEA's Member
Interest pursuant to Section 1 of the Redemption Option Agreement, in which
case, CEA's Sharing Ratio after such redemption will be twelve percent (12%),
or (ii) the Company redeems CEA's entire remaining Member Interest pursuant to
paragraphs 2, 3, 4, 5, 6, 7, or 8 of the Redemption Option Agreement, in which
case CEA's Sharing Ratio after such redemption will be zero (0). Calfinco's
Sharing Ratio, at any particular time, shall equal one hundred percent (100%)
minus CEA's Sharing Ratio at such time.
"Slot Lease" means that certain Slot Lease Agreement, effective as of
the Closing Date, between CAL and the Company, pursuant to which the Company
leases the Slots to CAL.
"Slots" means the "Leased Slots" as defined in the Slot Lease.
"Tax Matters Member" means Calfinco when acting pursuant to its
authority under Section 8.2(b) of the Agreement.
"Taxes" or "Tax" means any and all taxes (including net income, gross
income, franchise, value added, ad valorem, gross receipts, leasing, excise,
fuel, excess profits, sales, use, property (personal or real, tangible or
intangible) and stamp taxes), levies, imposts, duties, charges, assessments, or
withholdings of any nature whatsoever, general or special, ordinary or
extraordinary, now existing or hereafter created or adopted, together with any
and all penalties, fines, additions to tax and interest thereon.
"Tenth Anniversary" means the tenth (10) anniversary of the Closing
Date.
A-8
<PAGE> 54
"Termination Event" means the occurrence of any of the following
events; provided, that, in the case of clauses (iii) through (xi), (A) CEA has
delivered to Calfinco a Trigger Event Notice, (B) such event has not been cured
or otherwise resolved to CEA's satisfaction, within five (5) Business Days
after the delivery of such Trigger Event Notice, and (C) such Trigger Event
Notice has not been rescinded by CEA, in CEA's sole discretion, in accordance
with Section 4.4(a) of the Agreement:
(i) The unanimous vote of the Members to dissolve, wind
up, and liquidate the Company;
(ii) Any event that makes it unlawful or impossible to
carry on the business of the Company, or the Delaware court of
Chancery has entered a final decree of dissolution of the Company
pursuant to Section 18-802 of the Act;
(iii) The Transfer by Calfinco of all or any portion of its
Member Interest other than pursuant to a Permitted Transfer;
(iv) The occurrence of an event of default under any
Credit Document or under any document executed in connection with the
refinancing of the Indebtedness evidenced by the Credit Documents, and
(if any such Indebtedness is held by Persons who are not Affiliates of
the Managing Member) the exercise of any remedy, including
acceleration, in respect of such default;
(v) If the Company has received the "Redemption Notice"
as provided in the Redemption Option Agreement and the Company does
not notify CEA of the Company's election to redeem CEA's entire Member
Interest in accordance with the Redemption Option Agreement within ten
(10) Business Days after receipt of the Redemption Notice, at any time
after the expiration of such ten (10) day period;
(vi) If the Company has not acquired CEA's entire Member
Interest on the Tenth Anniversary in accordance with the Redemption
Option Agreement, at any time after the Tenth Anniversary;
(vii) CAL shall fail to pay any rent under the Slot Lease
when due and such failure shall continue unremedied for ten (10) days;
(viii) As long as Calfinco is the Managing Member, Calfinco
shall have willfully caused the Company to Transfer Slots in violation
of the Agreement; or CAL or Calfinco shall have failed to perform any
covenant or other obligation, other than as described in clause (vii)
above, contained in any Operative Document, including any failure to
cause the Company to pay Distributions pursuant to Section 7.2 of the
Agreement, and the failing party shall have failed to commence the
cure of such failure within thirty (30) days after such party shall
have been notified of such failure by CEA, or thereafter Calfinco
shall have failed to proceed diligently with such cure to completion;
(ix) Any certification, representation or warranty made or
deemed made by Calfinco under or in connection with the Agreement or
any other Operative Document shall
A-9
<PAGE> 55
prove to have been incorrect in any material respect when made and
such material inaccuracy is continuing;
(x) the failure of CAL to repay the Indebtedness
described in Section 7.1(a)(iii) of the Agreement, when due; and
(xi) the Bankruptcy of CAL or Calfinco.
"Termination Notice" has the meaning set forth in Section 11.1(b) of
the Agreement.
"Transfer" means, with respect to any Member Interest, as a noun, any
voluntary or involuntary transfer, sale, assignment of an interest in or other
disposition of such Member Interest (other than a retirement or redemption of
such Member's Member Interest), and, as a verb, voluntarily or involuntarily to
transfer, sell, assign or otherwise dispose of, such Member Interest (other
than to retire or redeem such Member's interest), including, in each case, any
transfer by operation of law, merger, bankruptcy or otherwise. The adjective
"Transferred" has the correlative meaning. "Transfer" does not include any
pledge, hypothecation, collateral assignment, or other creation of a security
interest, but does include any foreclosure of any such security interest.
"Transferee Certificate" means a certificate executed by a prospective
transferee of a Member Interest in accordance with Section 9.3(e) of the
Agreement and in the form of Exhibit B thereof.
"Trigger Event" has the meaning specified in Section 4.4(a) of the
Agreement.
"Trigger Event Notice" has the meaning specified in Section 4.4(a) of
the Agreement.
"United States" and "U.S." each mean the United States of America.
"Voluntary Bankruptcy" means, with respect to any Person: (i) (a) the
inability of such Person generally to pay its debts as such debts become due,
(b) the failure of such Person generally to pay its debts as such debts become
due, or (c) an admission in writing by such Person of its inability to pay its
debts generally or a general assignment by such Person for the benefit of
creditors; (ii) the filing of any petition by such Person under 11 U.S.C.
Section 101 et seq. seeking to adjudicate itself a bankrupt or insolvent, or
the filing of an answer or other pleading admitting or failing to contest the
allegations of a petition filed against it in any proceeding of this nature, or
seeking for itself any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or its debts
under any Law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for such Person or for any substantial part of its property; or (iii)
an action taken by such Person to authorize any of the actions set forth above.
"Wholly Owned Affiliate" of any Person means (i) an Affiliate of such
Person 100% of the capital stock (or its equivalent in the case of entities
other than corporations) of which is owned beneficially by such Person,
directly or indirectly through one or more Wholly Owned Affiliates, or by any
Person who, directly or indirectly, owns beneficially 100% of the capital stock
(or its equivalent in the case of entities other than corporations) of such
Person, or (ii) an Affiliate of such
A-10
<PAGE> 56
Person who, directly or indirectly, owns beneficially 100% of the capital stock
(or its equivalent in the case of entities other than corporations) of such
Person, provided that, for purposes of determining the ownership of the capital
stock of any Person, de minimis amounts of stock held by directors, nominees
and similar persons pursuant to statutory or regulatory requirements shall not
be taken into account.
A-11
<PAGE> 57
EXHIBIT B
TO
AMENDED AND RESTATED COMPANY AGREEMENT
Transferee Certificate
This Transferee Certificate is executed on this _____ day of ______,
199__, by each person or entity whose name appears in the signature blocks set
forth below (the "Transferee") in favor of Calair L.L.C., a Delaware limited
liability company ("Calair") and [the remaining Member] (the "Remaining
Member").
RECITALS
[The selling Member] (the "Selling Member") and the Remaining Member
are parties to that certain Company Agreement dated April __, 1998, among the
Remaining Member and the Selling Member (the "Company Agreement").
Pursuant to an agreement between the Selling Member and the
Transferee, the Selling Member is transferring its Member Interest to the
Transferee.
In order to satisfy the conditions set forth in Section 9.3(a) of the
Company Agreement, the Transferee has agreed to execute and deliver this
Transferee Certificate in favor of Calair and the Remaining Member.
AGREEMENTS
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Transferee hereby certifies and agrees as follows:
1. DEFINED TERMS. Any capitalized term used herein but not
defined shall have the meaning given such term in the Company Agreement.
2. CERTIFICATIONS. The Transferee hereby represents and
warrants, as of the date hereof, to Calair and the Remaining Member:
(a) Hart-Scott-Rodino Matters. The Transferee does not,
directly or indirectly, have (i) the right to 50% or more of the
profits of Calair or (ii) the right, in the event of a dissolution of
Purchaser, to 50% or more of the assets of Calair.
(b) Investment Company Matters. The Transferee is not an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the
B-1
<PAGE> 58
Investment Company Act of 1940, as amended, or an "investment advisor"
within the meaning of the Investment Advisers Act of 1940, as amended.
(c) Investor Sophistication. Transferee (i) acknowledges
that it has performed all due diligence that it desires to perform to
enable it to evaluate the risks and merits of consummating the
transactions contemplated by the Company Agreement and the Operative
Documents, and (ii) is financially capable of owning, and bearing the
risks of ownership of, a Member Interest in Calair.
(d) Securities Law Matters. Transferee is acquiring the
Member Interests for its own account, for investment purposes only and
not with a view to the distribution or resale thereof.
(e) ERISA Matters. The Transferee is not (i) an
"employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, or (ii)
an Entity that holds the assets of any such plan.
3. COVENANTS. Transferee covenants and agrees with Calair and
the Remaining Member that from and after the date hereof, Transferee will not
transfer all or any portion of its interest in Calair to another Person, or
take or fail to take any other action, if the effect thereof would be to cause
the representations and warranties of Transferee set forth in Sections 2(b) and
(e) above to cease to be true and correct as of the date of such transfer,
action or inaction.
EXECUTED as of the day and year first written above.
TRANSFEREE
By:
----------------------
Name:
----------------------
Title:
----------------------
B-2
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
CALAIR CAPITAL CORPORATION
FIRST: The name of the corporation is Calair Capital Corporation.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, The Corporation Trust Center in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is Ten Thousand (10,000) shares of
Common Stock of the par value of One Cent ($.01) per share.
FIFTH: The name of the incorporator is Jeffrey J. Misner and his
mailing address is 2929 Allen Parkway, Suite 2010, Houston, Texas 77019.
SIXTH: The name and mailing address of the director, who shall serve
until the first annual meeting of stockholders or until his successor is
elected and qualified, are as follows:
NAME ADDRESS
---- -------
Jeffrey J. Misner 2929 Allen Parkway
Suite 2010
Houston, Texas 77019
The number of directors of the corporation shall be as
specified in, or determined in the manner provided in, the bylaws. Election of
directors need not be by written ballot.
SEVENTH: In furtherance of, and not in limitation of, the powers
conferred by statute, the Board of Directors is expressly authorized to adopt,
amend or repeal the bylaws of the corporation.
EIGHTH: Whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in
<PAGE> 2
a summary way of the corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the corporation, as the case may be,
and also on the corporation.
NINTH: No director of the corporation shall be 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 Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
TENTH: The corporation shall have the right, subject to any express
provisions or restrictions contained in the certificate of incorporation or
bylaws of the corporation, from time to time, to amend the certificate of
incorporation or any provision thereof in any manner now or hereafter provided
by law, and all rights and powers of any kind conferred upon a director or
stockholder of the corporation by the certificate of incorporation or any
amendment thereof are subject to such right of the corporation.
I, the undersigned, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring that this is my
act and deed and that the facts herein stated are true, and accordingly have
hereunto set my hand this 30th day of March, 1998.
/s/ JEFFREY J. MISNER
---------------------------------------
Jeffrey J. Misner
Incorporator
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
CALAIR CAPITAL CORPORATION
A Delaware Corporation
Date of Adoption:
March 31, 1998
<PAGE> 2
CALAIR CAPITAL CORPORATION
BYLAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article I
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article II
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Quorum; Adjournment of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Notice of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Stock List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 9. Voting; Elections; Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 10. Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 11. Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 12. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Article III
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1. Power; Number; Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Place of Meetings; Order of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Regular Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. Vacancies; Increases in the Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 9. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 10. Action Without a Meeting; Telephone Conference Meeting . . . . . . . . . . . . . . . . . . . . 7
Section 11. Approval or Ratification of Acts or Contracts by Stockholders . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Article IV
Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. Designation; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Procedure; Meetings; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Substitution of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Article V
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Number, Titles and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Powers and Duties of the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Powers and Duties of the Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7. Powers and Duties of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 10. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 11. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 13. Action with Respect to Securities of Other Corporations . . . . . . . . . . . . . . . . . . . . 10
Article VI
Indemnification of Directors, Officers, Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. Right to Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. Indemnification of Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Right of Claimant to Bring Suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Nonexclusivity of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Savings Clause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article VII
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Certificates of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Regulations Regarding Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 5. Lost or Destroyed Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Article VIII
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3. Notice and Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Facsimile Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Reliance upon Books, Reports and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Article IX
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 5
DELAWARE BYLAWS
OF
CALAIR CAPITAL CORPORATION
Article I
Offices
Section 1. Registered Office. The registered office of the
Corporation required by the General Corporation Law of the State of Delaware to
be maintained in the State of Delaware, shall be the registered office named in
the original Certificate of Incorporation of the Corporation, or such other
office as may be designated from time to time by the Board of Directors in the
manner provided by law. Should the Corporation maintain a principal office
within the State of Delaware such registered office need not be identical to
such principal office of the Corporation.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
Article II
Stockholders
Section 1. Place of Meetings. All meetings of the stockholders shall
be held at the principal office of the Corporation, or at such other place
within or without the State of Delaware as shall be specified or fixed in the
notices or waivers of notice thereof.
Section 2. Quorum; Adjournment of Meetings. Unless otherwise
required by law or provided in the Certificate of Incorporation or these
bylaws, the holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at any meeting of stockholders for the transaction of
business and the act of a majority of such stock so represented at any meeting
of stockholders at which a quorum is present shall constitute the act of the
meeting of stockholders. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Notwithstanding the other provisions of the Certificate of
Incorporation or these bylaws, the chairman of the meeting or the holders of a
majority of the issued and outstanding stock, present in person or represented
by proxy, at any meeting of stockholders, whether or not a quorum is present,
shall have the power to adjourn such meeting from time to time, without any
notice other than announcement at the meeting of the time and place of the
holding of the adjourned meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at such meeting. At such adjourned
meeting at which a quorum shall be
<PAGE> 6
present or represented any business may be transacted which might have been
transacted at the meeting as originally called.
Section 3. Annual Meetings. An annual meeting of the stockholders,
for the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Delaware, on such
date, and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting, which date shall be within thirteen (13) months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
Section 4. Special Meetings. Unless otherwise provided in the
Certificate of Incorporation, special meetings of the stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board (if
any), by the President or by a majority of the Board of Directors, or by a
majority of the executive committee (if any), and shall be called by the
Chairman of the Board (if any), by the President or the Secretary upon the
written request therefor, stating the purpose or purposes of the meeting,
delivered to such officer, signed by the holder(s) of at least ten percent
(10%) of the issued and outstanding stock entitled to vote at such meeting.
Section 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors of the Corporation
may fix, in advance, a date as the record date for any such determination of
stockholders, which date shall not be more than sixty (60) days nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If the Board of Directors does not fix a record date for any meeting
of the stockholders, the record date for determining stockholders entitled to
notice of or to vote at such meeting shall be at the close of business on the
day next preceding the day on which notice is given, or, if in accordance with
Article VIII, Section 3 of these bylaws notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. If,
in accordance with Section 12 of this Article II, corporate action without a
meeting of stockholders is to be taken, the record date for determining
stockholders entitled to express consent to such corporate action in writing,
when no prior action by the Board of Directors is necessary, shall be the day
on which the first written consent is expressed. The record date for
determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6. Notice of Meetings. Written notice of the place, date and
hour of all meetings, and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be
-2-
<PAGE> 7
given by or at the direction of the Chairman of the Board (if any) or the
President, the Secretary or the other person(s) calling the meeting to each
stockholder entitled to vote thereat not less than ten (10) nor more than sixty
(60) days before the date of the meeting. Such notice may be delivered either
personally or by mail. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation.
Section 7. Stock List. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in the name of such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The stock list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
Section 8. Proxies. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to a corporate action in
writing without a meeting may authorize another person or persons to act for
him by proxy. Proxies for use at any meeting of stockholders shall be filed
with the Secretary, or such other officer as the Board of Directors may from
time to time determine by resolution, before or at the time of the meeting.
All proxies shall be received and taken charge of and all ballots shall be
received and canvassed by the secretary of the meeting who shall decide all
questions touching upon the qualification of voters, the validity of the
proxies, and the acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the meeting, in which
event such inspector or inspectors shall decide all such questions.
No proxy shall be valid after three (3) years from its date, unless
the proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one; or,
if an even number attend and a majority do not agree on any particular issue,
each proxy so attending shall be entitled to exercise such powers in respect of
the same portion of the shares as he is of the proxies representing such
shares.
Section 9. Voting; Elections; Inspectors. Unless otherwise required
by law or provided in the Certificate of Incorporation, each stockholder shall
have one vote for each share of stock entitled to vote which is registered in
his name on the record date for the meeting. Shares registered in the name of
another corporation, domestic or foreign, may be voted by such officer, agent
or proxy as the bylaw (or comparable instrument) of such corporation may
prescribe, or in the absence of such
-3-
<PAGE> 8
provision, as the Board of Directors (or comparable body) of such corporation
may determine. Shares registered in the name of a deceased person may be voted
by his executor or administrator, either in person or by proxy.
All voting, except as required by the Certificate of Incorporation or
where otherwise required by law, may be by a voice vote; provided, however,
that upon demand therefor by stockholders holding a majority of the issued and
outstanding stock present in person or by proxy at any meeting a stock vote
shall be taken. Every stock vote shall be taken by written ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
All elections of directors shall be by ballot, unless otherwise provided in the
Certificate of Incorporation.
At any meeting at which a vote is taken by ballots, the chairman of
the meeting may appoint one or more inspectors, each of whom shall subscribe an
oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his ability.
Such inspector shall receive the ballots, count the votes and make and sign a
certificate of the result thereof. The chairman of the meeting may appoint any
person to serve as inspector, except no candidate for the office of director
shall be appointed as an inspector.
Unless otherwise provided in the Certificate of Incorporation,
cumulative voting for the election of directors shall be prohibited.
Section 10. Conduct of Meetings. The meetings of the stockholders
shall be presided over by the Chairman of the Board (if any), or if he is not
present, by the President, or if neither the Chairman of the Board (if any),
nor President is present, by a chairman elected at the meeting. The Secretary
of the Corporation, if present, shall act as secretary of such meetings, or if
he is not present, an Assistant Secretary shall so act; if neither the
Secretary nor an Assistant Secretary is present, then a secretary shall be
appointed by the chairman of the meeting. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order. Unless the chairman of the meeting of
stockholders shall otherwise determine, the order of business shall be as
follows:
(a) Calling of meeting to order.
(b) Election of a chairman and the appointment of a secretary if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of a
quorum.
(e) Reading and settlement of the minutes of the previous meeting.
(f) Reports of officers and committees.
(g) The election of directors if an annual meeting, or a meeting
called for that purpose.
(h) Unfinished business.
(i) New business.
(j) Adjournment.
-4-
<PAGE> 9
Section 11. Treasury Stock. The Corporation shall not vote, directly
or indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes.
Section 12. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action permitted or required by law, the
Certificate of Incorporation or these bylaws to be taken at a meeting of
stockholders, may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than a unanimous written consent shall be given by the Secretary to those
stockholders who have not consented in writing.
Article III
Board of Directors
Section 1. Power; Number; Term of Office. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors, and subject to the restrictions imposed by law or the Certificate of
Incorporation, they may exercise all the powers of the Corporation.
The number of directors which shall constitute the whole Board of
Directors, shall be determined from time to time by resolution of the Board of
Directors (provided that no decrease in the number of directors which would
have the effect of shortening the term of an incumbent director may be made by
the Board of Directors). If the Board of Directors makes no such
determination, the number of directors shall be the number set forth in the
Certificate of Incorporation. Each director shall hold office for the term for
which he is elected, and until his successor shall have been elected and
qualified or until his earlier death, resignation or removal.
Unless otherwise provided in the Certificate of Incorporation,
directors need not be stockholders nor residents of the State of Delaware.
Section 2. Quorum. Unless otherwise provided in the Certificate of
Incorporation, a majority of the total number of directors shall constitute a
quorum for the transaction of business of the Board of Directors and the vote
of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 3. Place of Meetings; Order of Business. The directors may
hold their meetings and may have an office and keep the books of the
Corporation, except as otherwise provided by law, in such place or places,
within or without the State of Delaware, as the Board of Directors may from
time to time determine by resolution. At all meetings of the Board of
Directors business shall be transacted in such order as shall from time to time
be determined by the Chairman of the Board (if any), or in his absence by the
President, or by resolution of the Board of Directors.
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Section 4. First Meeting. Each newly elected Board of Directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which
a quorum shall be present, held next after the annual meeting of stockholders,
the Board of Directors shall proceed to the election of the officers of the
Corporation.
Section 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by resolution of the Board of Directors. Notice of such regular
meetings shall not be required.
Section 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board (if any), the President
or, on the written request of any two directors, by the Secretary, in each case
on at least twenty-four (24) hours personal, written, telegraphic, cable or
wireless notice to each director. Such notice, or any waiver thereof pursuant
to Article VIII, Section 3 hereof, need not state the purpose or purposes of
such meeting, except as may otherwise be required by law or provided for in the
Certificate of Incorporation or these bylaws.
Section 7. Removal. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided that, unless
the Certificate of Incorporation otherwise provides, if the Board of Directors
is classified, then the stockholders may effect such removal only for cause;
and provided further that, if the Certificate of Incorporation expressly grants
to stockholders the right to cumulate votes for the election of directors and
if less than the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to
elect him if then cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election of the class of
directors of which such director is a part.
Section 8. Vacancies; Increases in the Number of Directors. Unless
otherwise provided in the Certificate of Incorporation, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, although
less than a quorum, or a sole remaining director; and any director so chosen
shall hold office until the next annual election and until his successor shall
be duly elected and shall qualify, unless sooner displaced.
If the directors of the Corporation are divided into classes, any
directors elected to fill vacancies or newly created directorships shall hold
office until the next election of the class for which such directors shall have
been chosen, and until their successors shall be duly elected and shall
qualify.
Section 9. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board of Directors shall have the authority
to fix the compensation of directors.
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Section 10. Action Without a Meeting; Telephone Conference Meeting.
Unless otherwise restricted by the Certificate of Incorporation, any action
required or permitted to be taken at any meeting of the Board of Directors, or
any committee designated by the Board of Directors, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee. Such consent
shall have the same force and effect as a unanimous vote at a meeting, and may
be stated as such in any document or instrument filed with the Secretary of
State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation,
subject to the requirement for notice of meetings, members of the Board of
Directors, or members of any committee designated by the Board of Directors,
may participate in a meeting of such Board of Directors or committee, as the
case may be, by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such a meeting shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
Section 11. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the
stockholders, or at any special meeting of the stockholders called for the
purpose of considering any such act or contract, and any act or contract that
shall be approved or be ratified by the vote of the stockholders holding a
majority of the issued and outstanding shares of stock of the Corporation
entitled to vote and present in person or by proxy at such meeting (provided
that a quorum is present), shall be as valid and as binding upon the
Corporation and upon all the stockholders as if it has been approved or
ratified by every stockholder of the Corporation. In addition, any such act or
contract may be approved or ratified by the written consent of stockholders
holding a majority of the issued and outstanding shares of capital stock of the
Corporation entitled to vote and such consent shall be as valid and as binding
upon the Corporation and upon all the stockholders as if it had been approved
or ratified by every stockholder of the Corporation.
Article IV
Committees
Section 1. Designation; Powers. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, including, if they shall so determine, an executive committee, each
such committee to consist of one or more of the directors of the Corporation.
Any such designated committee shall have and may exercise such of the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation as may be provided in such resolution, except that
no such committee shall have the power or authority of the Board of Directors
in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders
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a dissolution of the Corporation or a revocation of a dissolution of the
Corporation, or amending, altering or repealing the bylaws or adopting new
bylaws for the Corporation and, unless such resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Any
such designated committee may authorize the seal of the Corporation to be
affixed to all papers which may require it. In addition to the above such
committee or committees shall have such other powers and limitations of
authority as may be determined from time to time by resolution adopted by the
Board of Directors.
Section 2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Section 1 of this Article shall choose its own chairman, shall keep
regular minutes of its proceedings and report the same to the Board of
Directors when requested, shall fix its own rules or procedures, and shall meet
at such times and at such place or places as may be provided by such rules, or
by resolution of such committee or resolution of the Board of Directors. At
every meeting of any such committee, the presence of a majority of all the
members thereof shall constitute a quorum and the affirmative vote of a
majority of the members present shall be necessary for the adoption by it of
any resolution.
Section 3. Substitution of Members. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. In
the absence or disqualification of a member of a committee, the member or
members present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member.
Article V
Officers
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a President, one or more Vice Presidents (any one or more
of whom may be designated Executive Vice President or Senior Vice President), a
Chief Financial Officer, and a Secretary and, if the Board of Directors so
elects, a Chairman of the Board and such other officers as the Board of
Directors may from time to time elect or appoint. Each officer shall hold
office until his successor shall be duly elected and shall qualify or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided. Any number of offices may be held by the same person,
unless the Certificate of Incorporation provides otherwise. Except for the
Chairman of the Board, if any, no officer need be a director.
Section 2. Salaries. The salaries or other compensation of the
officers and agents of the Corporation shall be fixed from time to time by the
Board of Directors.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed, either with or without cause, by the vote of
a majority of the whole Board of Directors at a special meeting called for the
purpose, or at any regular meeting of the Board of Directors,
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provided the notice for such meeting shall specify that the matter of any such
proposed removal will be considered at the meeting but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 5. Powers and Duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates the Chairman of the Board as chief executive
officer. Subject to the control of the Board of Directors and the executive
committee (if any), the chief executive officer shall have general executive
charge, management and control of the properties, business and operations of
the Corporation with all such powers as may be reasonably incident to such
responsibilities; he may agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of the Corporation
and may sign all certificates for shares of capital stock of the Corporation;
and shall have such other powers and duties as designated in accordance with
these bylaws and as from time to time may be assigned to him by the Board of
Directors.
Section 6. Powers and Duties of the Chairman of the Board. If
elected, the Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors; and he shall have such other powers
and duties as designated in these bylaws and as from time to time may be
assigned to him by the Board of Directors.
Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
if there be no Chairman of the Board, preside at all meetings of the
stockholders and (should he be a director) of the Board of Directors; and he
shall have such other powers and duties as designated in accordance with these
bylaws and as from time to time may be assigned to him by the Board of
Directors.
Section 8. Vice Presidents. In the absence of the President, or in
the event of his inability or refusal to act, a Vice President designated by
the Board of Directors shall perform the duties of the President, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the President. In the absence of a designation by the Board of Directors of a
Vice President to perform the duties of the President, or in the event of his
absence or inability or refusal to act, the Vice President who is present and
who is senior in terms of time as a Vice President of the Corporation shall so
act. The Vice Presidents shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 9. Chief Financial Officer. The Chief Financial Officer
shall have responsibility for the custody and control of all the funds and
securities of the Corporation, and he shall have such
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other powers and duties as designated in these bylaws and as from time to time
may be assigned to him by the Board of Directors. He shall perform all acts
incident to the position of Chief Financial Officer, subject to the control of
the chief executive officer and the Board of Directors; and he shall, if
required by the Board of Directors, give such bond for the faithful discharge
of his duties in such form as the Board of Directors may require.
Section 10. Assistant Treasurers. Each Assistant Treasurer shall
have the usual powers and duties pertaining to his office, together with such
other powers and duties as designated in these bylaws and as from time to time
may be assigned to him by the chief executive officer or the Board of
Directors. The Assistant Treasurers shall exercise the powers of the Chief
Financial Officer during that officer's absence or inability or refusal to act.
Section 11. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of directors and the
stockholders, in books provided for that purpose; he shall attend to the giving
and serving of all notices; he may in the name of the Corporation affix the
seal of the Corporation to all contracts of the Corporation and attest the
affixation of the seal of the Corporation thereto; he may sign with the other
appointed officers all certificates for shares of capital stock of the
Corporation; he shall have charge of the certificate books, transfer books and
stock ledgers, and such other books and papers as the Board of Directors may
direct, all of which shall at all reasonable times be open to inspection of any
director upon application at the office of the Corporation during business
hours; he shall have such other powers and duties as designated in these bylaws
and as from time to time may be assigned to him by the Board of Directors; and
he shall in general perform all acts incident to the office of Secretary,
subject to the control of the chief executive officer and the Board of
Directors.
Section 12. Assistant Secretaries. Each Assistant Secretary shall
have the usual powers and duties pertaining to his office, together with such
other powers and duties as designated in these bylaws and as from time to time
may be assigned to him by the chief executive officer or the Board of
Directors. The Assistant Secretaries shall exercise the powers of the
Secretary during that officer's absence or inability or refusal to act.
Section 13. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the chief executive
officer shall have power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of security holders of or
with respect to any action of security holders of any other corporation in
which this Corporation may hold securities and otherwise to exercise any and
all rights and powers which this Corporation may possess by reason of its
ownership of securities in such other corporation.
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Article VI
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she or a person
of whom he or she is the legal representative, is or was or has agreed to
become a director or officer of the Corporation or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while serving or
having agreed to serve as a director or officer, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment) against all
expense, liability and loss (including without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to serve in the capacity which initially entitled such person to
indemnity hereunder and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the board of directors of the Corporation.
The right to indemnification conferred in this Article VI shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law requires, the
payment of such expenses incurred by a current, former or proposed director or
officer in his or her capacity as a director or officer or proposed director or
officer (and not in any other capacity in which service was or is or has been
agreed to be rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such indemnified person, to
repay all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Section or
otherwise.
Section 2. Indemnification of Employees and Agents. The Corporation
may, by action of its Board of Directors, provide indemnification to employees
and agents of the Corporation, individually or as a group, with the same scope
and effect as the indemnification of directors and officers provided for in
this Article.
Section 3. Right of Claimant to Bring Suit. If a written claim
received by the Corporation from or on behalf of an indemnified party under
this Article VI is not paid in full by the Corporation
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within ninety days after such receipt, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation
to indemnify the claimant for the amount claimed, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 4. Nonexclusivity of Rights. The right to indemnification
and the advancement and payment of expenses conferred in this Article VI shall
not be exclusive of any other right which any person may have or hereafter
acquire under any law (common or statutory), provision of the Certificate of
Incorporation of the Corporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any person who is or was serving as 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
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each director
and officer of the Corporation, as to costs, charges and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Article VI that shall not have been invalidated and to the fullest extent
permitted by applicable law.
Section 7. Definitions. For purposes of this Article, reference to
the "Corporation" shall include, in addition to the Corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger prior to (or, in the case of an entity
specifically designated in a resolution of the Board of Directors, after) the
adoption hereof and which, if its separate existence had continued, would have
had the 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
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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 the provisions of this Article with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
Article VII
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the Certificate of Incorporation, as shall be approved
by the Board of Directors. The Chairman of the Board (if any), President or a
Vice President shall cause to be issued to each stockholder one or more
certificates, under the seal of the Corporation or a facsimile thereof if the
Board of Directors shall have provided for such seal, and signed by the
Chairman of the Board (if any), President or a Vice President and the Secretary
or an Assistant Secretary or the Chief Financial Officer or an Assistant
Treasurer certifying the number of shares (and, if the stock of the Corporation
shall be divided into classes or series, the class and series of such shares)
owned by such stockholder in the Corporation; provided, however, that any of or
all the signatures on the certificate may be facsimile. The stock record books
and the blank stock certificate books shall be kept by the Secretary, or at the
office of such transfer agent or transfer agents as the Board of Directors may
from time to time by resolution determine. In case any officer, transfer agent
or registrar who shall have signed or whose facsimile signature or signatures
shall have been placed upon any such certificate or certificates shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued by the Corporation, such certificate may nevertheless be issued by
the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue. The stock certificates shall
be consecutively numbered and shall be entered in the books of the Corporation
as they are issued and shall exhibit the holder's name and number of shares.
Section 2. Transfer of Shares. The shares of stock of the
Corporation shall be transferable only on the books of the Corporation by the
holders thereof in person or by their duly authorized attorneys or legal
representatives upon surrender and cancellation of certificates for a like
number of shares. Upon surrender to the Corporation or a transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware.
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Section 4. Regulations Regarding Certificates. The Board of
Directors shall have the power and authority to make all such rules and
regulations as they may deem expedient concerning the issue, transfer and
registration or the replacement of certificates for shares of capital stock of
the Corporation.
Section 5. Lost or Destroyed Certificates. The Board of Directors
may determine the conditions upon which a new certificate of stock may be
issued in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in their discretion, require the owner of such certificate
or his legal representative to give bond, with sufficient surety, to indemnify
the Corporation and each transfer agent and registrar against any and all
losses or claims which may arise by reason of the issue of a new certificate in
the place of the one so lost, stolen or destroyed.
Article VIII
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
such as established from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation. The Secretary shall
have charge of the seal (if any). If and when so directed by the Board of
Directors or a committee thereof, duplicates of the seal may be kept and used
by the Chief Financial Officer or by the Assistant Secretary or Assistant
Treasurer.
Section 3. Notice and Waiver of Notice. Whenever any notice is
required to be given by law, the Certificate of Incorporation or under the
provisions of these bylaws, said notice shall be deemed to be sufficient if
given (i) by telegraphic, cable or wireless transmission or (ii) by deposit of
the same in a post office box in a sealed prepaid wrapper addressed to the
person entitled thereto at his post office address, as it appears on the
records of the Corporation, and such notice shall be deemed to have been given
on the day of such transmission or mailing, as the case may be.
Whenever notice is required to be given by law, the Certificate of
Incorporation or under any of the provisions of these bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or the bylaws.
Section 4. Resignations. Any director, member of a committee or
officer may resign at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of its receipt by the chief executive officer or Secretary. The
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acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
Section 5. Facsimile Signatures. In addition to the provisions for
the use of facsimile signatures elsewhere specifically authorized in these
bylaws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors.
Section 6. Reliance upon Books, Reports and Records. Each director
and each member of any committee designated by the Board of Directors shall, in
the performance of his duties, be fully protected in relying in good faith upon
the books of account or reports made to the Corporation by any of its officers,
or by an independent certified public accountant, or by an appraiser selected
with reasonable care by the Board of Directors or by any such committee, or in
relying in good faith upon other records of the Corporation.
Article IX
Amendments
If provided in the Certificate of Incorporation of the Corporation,
the Board of Directors shall have the power to adopt, amend and repeal from
time to time bylaws of the Corporation, subject to the right of the
stockholders entitled to vote with respect thereto to amend or repeal such
bylaws as adopted or amended by the Board of Directors.
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EXHIBIT 4.2
EXECUTION COPY
CALAIR L.L.C.
and
CALAIR CAPITAL CORPORATION,
as Issuers,
and
CONTINENTAL AIRLINES, INC.,
as Guarantor,
and
BANK ONE, N.A.,
as Trustee
Senior Notes Indenture
Dated as of April 1, 1998
8 1/8% Senior Notes due 2008
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<S> <C>
TIA Sections......................................................................Indenture Sections
SS. 310(a)(1).............................................................................7.10
(b)............................................................................7.03; 7.08
SS. 311 ..................................................................................7.03
SS. 313(a)................................................................................7.06
(c)............................................................................7.05; 7.06
SS. 315(a)................................................................................7.02
(d)............................................................................7.02
SS. 316(a)................................................................................6.06
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
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ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE...........................................................1
SECTION 1.01. Definitions...............................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.........................................7
SECTION 1.03. Rules of Construction.....................................................................7
ARTICLE TWO THE SECURITIES.......................................................................................8
SECTION 2.01. Form and Dating...........................................................................8
SECTION 2.02. Restrictive Legends......................................................................10
SECTION 2.03. Execution, Authentication and Denominations..............................................12
SECTION 2.04. Registrar and Paying Agent...............................................................14
SECTION 2.05. Paying Agent to Hold Money in Trust......................................................14
SECTION 2.06. Transfer and Exchange....................................................................15
SECTION 2.07. Book-Entry Provisions for Global Securities..............................................16
SECTION 2.08. Special Transfer Provisions..............................................................17
SECTION 2.09. Replacement Securities...................................................................20
SECTION 2.10. Outstanding Securities...................................................................20
SECTION 2.11. Temporary Securities.....................................................................21
SECTION 2.12. Cancellation.............................................................................21
SECTION 2.13. CUSIP, CINS and ISIN Numbers.............................................................21
SECTION 2.14. Defaulted Interest.......................................................................22
ARTICLE THREE REDEMPTION........................................................................................22
SECTION 3.01. Right of Redemption......................................................................22
SECTION 3.02. Notices to Trustee.......................................................................22
SECTION 3.03. Selection of Securities to Be Redeemed...................................................23
SECTION 3.04. Notice of Redemption.....................................................................23
SECTION 3.05. Effect of Notice of Redemption...........................................................24
SECTION 3.06. Deposit of Redemption Price..............................................................24
SECTION 3.07. Payment of Securities Called for Redemption..............................................24
SECTION 3.08. Securities Redeemed in Part..............................................................24
ARTICLE FOUR COVENANTS..........................................................................................24
SECTION 4.01. Payment of Securities....................................................................24
SECTION 4.02. Maintenance of Office or Agency..........................................................25
SECTION 4.03. Reports..................................................................................25
SECTION 4.04. Compliance Certificates..................................................................25
SECTION 4.05. Rule 144(d)(4) Information...............................................................26
ARTICLE FIVE SUCCESSOR CORPORATION..............................................................................26
SECTION 5.01. Consolidation, Merger and Sale of Assets by the Issuers..................................26
SECTION 5.02. Successor Substituted....................................................................27
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ARTICLE SIX DEFAULT AND REMEDIES................................................................................27
SECTION 6.01. Events of Default........................................................................27
SECTION 6.02. Acceleration.............................................................................28
SECTION 6.03. Other Remedies...........................................................................29
SECTION 6.04. Waiver of Past Defaults..................................................................29
SECTION 6.05. Control by Majority......................................................................29
SECTION 6.06. Limitation on Suits......................................................................29
SECTION 6.07. Rights of Holders to Receive Payment.....................................................30
SECTION 6.08. Collection Suit by Trustee...............................................................30
SECTION 6.09. Trustee May File Proofs of Claim.........................................................30
SECTION 6.10. Priorities...............................................................................31
SECTION 6.11. Undertaking for Costs....................................................................31
SECTION 6.12. Restoration of Rights and Remedies.......................................................31
SECTION 6.13. Rights and Remedies Cumulative...........................................................31
SECTION 6.14. Delay or Omission Not Waiver.............................................................32
ARTICLE SEVEN TRUSTEE...........................................................................................32
SECTION 7.01. General..................................................................................32
SECTION 7.02. Certain Rights of Trustee................................................................32
SECTION 7.03. Individual Rights of Trustee.............................................................33
SECTION 7.04. Trustee's Disclaimer.....................................................................33
SECTION 7.05. Notice of Default........................................................................33
SECTION 7.06. Reports by Trustee to Holders............................................................34
SECTION 7.07. Compensation and Indemnity...............................................................34
SECTION 7.08. Replacement of Trustee...................................................................34
SECTION 7.09. Successor Trustee by Merger, Etc.........................................................35
SECTION 7.10. Eligibility..............................................................................35
SECTION 7.11. Money Held in Trust......................................................................35
SECTION 7.12. Withholding Taxes........................................................................35
ARTICLE EIGHT DISCHARGE OF INDENTURE............................................................................36
SECTION 8.01. Termination of Issuers' Obligations......................................................36
SECTION 8.02. Issuers' Option to Effect Defeasance or Covenant Defeasance..............................36
SECTION 8.03. Defeasance and Discharge of Indenture....................................................36
SECTION 8.04. Defeasance of Certain Obligations........................................................37
SECTION 8.05. Conditions to Defeasance or Covenant Defeasance..........................................37
SECTION 8.06. Application of Trust Money...............................................................38
SECTION 8.07. Repayment to Issuers.....................................................................38
SECTION 8.08. Reinstatement............................................................................39
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS................................................................39
SECTION 9.01. Without Consent of Holders...............................................................39
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SECTION 9.02. With Consent of Holders..................................................................40
SECTION 9.03. Revocation and Effect of Consent.........................................................41
SECTION 9.04. Notation on or Exchange of Securities....................................................41
SECTION 9.05. Trustee to Sign Amendments, Etc..........................................................41
SECTION 9.06. Conformity with Trust Indenture Act......................................................42
ARTICLE TEN PARENT GUARANTEE OF NOTES...........................................................................42
SECTION 10.01. Unconditional Parent Guarantee..........................................................42
ARTICLE ELEVEN MISCELLANEOUS....................................................................................43
SECTION 11.01. Trust Indenture Act of 1939.............................................................43
SECTION 11.02. Notices.................................................................................43
SECTION 11.03. Certificate and Opinion as to Conditions Precedent......................................45
SECTION 11.04. Statements Required in Certificate or Opinion...........................................45
SECTION 11.05. Rules by Trustee Paying Agent or Registrar..............................................46
SECTION 11.06. Payment Date Other Than a Business Day..................................................46
SECTION 11.07. Governing Law...........................................................................46
SECTION 11.08. No Adverse Interpretation of Other Agreements...........................................46
SECTION 11.09. No Recourse Against Others..............................................................46
SECTION 11.10. Successors..............................................................................46
SECTION 11.11. Duplicate Originals.....................................................................46
SECTION 11.12. Table of Contents, Headings, Etc........................................................46
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INDENTURE, dated as of April 1, 1998, among CALAIR L.L.C., a
Delaware limited liability company ("Calair"), and CALAIR CAPITAL CORPORATION, a
Delaware corporation ("Calair Capital" and, together with Calair, the "Note
Issuers"), as joint and several obligors, CONTINENTAL AIRLINES, INC., a Delaware
corporation, as guarantor (the "Guarantor" and, together with the Note Issuers,
the "Issuers"), and BANK ONE, N.A., a national banking association, as trustee
(the "Trustee").
RECITALS
The Note Issuers have duly authorized the execution and
delivery of this Indenture to provide for the issuance of up to $112,300,000
aggregate principal amount of the Note Issuers' 81/8% Senior Notes due 2008 (the
"Initial Notes") issuable as provided in this Indenture and, if and when issued
in exchange for notes as provided in the Registration Rights Agreement (as
defined herein), 81/8% Senior Notes due 2008 (the "Exchange Notes" and, together
with the Initial Notes, the "Notes"). The Guarantor has duly authorized the
execution and delivery of this Indenture to provide for its guarantee (the
"Parent Guarantee" and, together with the Notes, the "Securities") of the Notes.
All things necessary to make this Indenture a valid agreement of the Issuers, in
accordance with its terms, have been done, and the Issuers have done all things
necessary to make the Securities, when executed by the Issuers and authenticated
and delivered by the Trustee hereunder and duly issued by the Issuers, the valid
obligations of the Issuers as hereinafter provided. This Indenture is subject
to, and shall be governed by, the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be a part of and to govern indentures qualified
under the Trust Indenture Act of 1939, as amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" means, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Registrar, Paying Agent, authenticating
agent or co-Registrar.
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"Agent Members" has the meaning provided in Section 2.07(a).
"Average Life" means, as of the date of determination with
respect to any indebtedness, the quotient obtained by dividing (a) the sum of
the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such indebtedness multiplied by
(ii) the amount of each such principal payment by (b) the sum of all such
principal payments.
"Board of Directors" means, with respect to any Person, the
board of directors of such Person or any committee of such board of directors
duly authorized to act with respect to this Indenture or the managing member of
such Person.
"Board Resolution" means, with respect to any Person, a copy
of a resolution, certified by the Secretary or Assistant Secretary of such
Person or the Secretary or Assistant Secretary of the managing member of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, in the City of
Houston, Texas or in the city of the Corporate Trust Office of the Trustee, are
authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or other
equivalents (however designated) of such Person's capital stock, and any rights
(other than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of this Indenture.
"Certificated Securities" has the meaning provided in Section
2.07(b).
"Closing Date" means the date on which the Initial Notes are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Company Agreement" means the Amended and Restated Limited
Liability Company Agreement of Calair, as amended, supplemented or modified from
time to time.
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular time,
be principally administered, which office is, at the date of this Indenture,
located at 100 East Broad Street, 8th Floor, Columbus,
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Ohio 43215, and in New York City, c/o First Chicago Trust Company of New York,
as agent for the Trustee, 14 Wall Street, 8th Floor, Suite 4607, New York, New
York 10005.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees,
and their respective successors.
"ERISA" has the meaning provided in Section 2.08(e).
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means any notes of the Note Issuers, as
defined in the first paragraph of the recitals hereof, containing terms
identical to the Initial Notes (except that such Exchange Notes (i) shall be
registered under the Securities Act, (ii) will not provide for an increase in
the rate of interest (other than with respect to overdue amounts) and (iii) will
not contain terms with respect to transfer restrictions, other than the transfer
restrictions provided for in Section 2.08(e) relating to certain ERISA matters)
that are issued and exchanged for the Initial Notes pursuant to the Registration
Rights Agreement and this Indenture.
"GAAP" means generally accepted accounting principles in the
United States, as applied from time to time by any Person in the preparation of
its consolidated financial statements.
"Global Securities" has the meaning provided in Section 2.01.
"Guarantee" means, as applied to any obligation, (a) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (b) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means the party named as such in the first
paragraph of this Indenture until a successor or successors replace it pursuant
to Article Five of this Indenture and thereafter means the successor or
successors.
"Holder" or "Securityholder" means the then registered holder
of any Security.
"IAI Global Security" has the meaning provided in Section
2.01.
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"Indenture" means this Indenture as originally executed or as
it may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Initial Notes" has the meaning provided in the first
paragraph of the Recitals hereof.
"Initial Purchasers" means Chase Securities Inc., Credit
Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act.
"Interest Payment Date" means each semiannual interest payment
date on April 1 and October 1 of each year, commencing October 1, 1998.
"Issuers" means the parties named as such in the first
paragraph of this Indenture until a successor or successors replace them
pursuant to Article Five of this Indenture and thereafter means the successor or
successors.
"Issuer Order" means a written request or order signed in the
name of an Issuer (i) by its Chairman, a Vice Chairman, its President, its Chief
Financial Officer or a Vice President, or by the Chairman, a Vice Chairman, the
President, the Chief Financial Officer or a Vice President of its managing
member, and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, or by the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary of its managing member, and delivered to the Trustee;
provided, however, that such written request or order may be signed by any two
of the officers or directors listed in clause (i) above in lieu of being signed
by one of such officers or directors listed in such clause (i) and one of the
officers listed in clause (ii) above.
"Maturity" means, with respect to any Security, the date on
which any principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity with respect to such principal
or by declaration of acceleration, call for redemption or purchase or otherwise.
"Make-Whole Premium" has the meaning provided in Section 3.01.
"Non-U.S. Person" means a person who is not a U.S. Person.
"Note Issuers" means the parties named as such in the first
paragraph of this Indenture until a successor or successors replace them
pursuant to Article Five of this Indenture and thereafter means the successor or
successors.
"Officer" means (i) the Chairman of the Board, the Vice
Chairman of the Board,
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the President, any Vice President or the Chief Financial Officer of the
applicable Person or such Person's managing member, and (ii) the Treasurer or
any Assistant Treasurer, or the Secretary or any Assistant Secretary of the
applicable Person or such Person's managing member; provided, however, that
Officer may also mean any two of the Persons listed in clause (i) above.
"Officers' Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed in
clause (ii) of the definition thereof; provided, however, that any such
certificate may be signed by any two of the Officers listed in clause (i) of the
definition thereof in lieu of being signed by one Officer listed in clause (i)
of the definition thereof and one Officer listed in clause (ii) of the
definition thereof. Each Officers' Certificate (other than certificates provided
pursuant to TIA Section 314(a)(4)) shall include the statements provided for in
TIA Section 314(e).
"Offshore Global Security" has the meaning provided in Section
2.01.
"Opinion of Counsel" means, with respect to any Person, a
written opinion signed by legal counsel who may be an employee of or counsel to
such Person. Each such Opinion of Counsel shall include the statements provided
for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04,
except that, for the purposes of Article Eight, the Paying Agent shall not be
any of the Issuers or a Subsidiary of the Issuers or an Affiliate of any of
them. The term "Paying Agent" includes any additional Paying Agent.
"Parent Guarantee" means the Guarantor's unconditional
guarantee of the payment of the Notes as more fully described in Article Ten.
"Permanent Offshore Global Security" has the meaning provided
in Section 2.01.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Principal" of a debt security, including the Securities,
means the principal amount due on the Stated Maturity as shown on such debt
security.
"Private Placement Legend" means the legend initially set
forth on the Securities in the form set forth in Section 2.02.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Redemption Date" means, when used with respect to any
Security to be redeemed, the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price," when used with respect to any Security to
be redeemed, has
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the meaning provided in Section 3.01.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated April 17, 1998, between the Issuers and the
Initial Purchasers.
"Registration Statement" means the Registration Statement as
defined and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the March 15 or September 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" has the meaning provided in Section
2.01.
"Release Date" has the meaning provided in Section 2.01.
"Responsible Officer," (i) when used with respect to any
Person or such Person's managing member other than the Trustee, means any vice
president, any assistant vice president, the secretary, any assistant secretary,
the treasurer and any assistant treasurer and (ii) when used with respect to the
Trustee, means any vice president, any assistant vice president, any secretary,
any assistant secretary, the treasurer, any assistant treasurer and any trust
officer or assistant trust officer employed in the conduct of the Trustee's
corporate trust business, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means any of the Notes referred to in the first
paragraph of the recitals hereof, together with the guarantee thereof, that are
authenticated and delivered under this Indenture. For all purposes of this
Indenture, all Initial Notes and Exchange Notes shall vote together as one
series of Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning provided in Section 2.04.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined
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and described in the Registration Rights Agreement.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable, and, when used with respect to any other indebtedness, means
the date specified in the instrument governing such indebtedness as the fixed
date on which the principal of such indebtedness, or any installment of interest
thereon, is due and payable.
"Subsidiary" means, with respect to any Person, any other
Person a majority of the equity ownership or Voting Stock of which is at the
time owned, directly or indirectly, by such Person or by one or more other
Subsidiaries or by such Person and one or more other Subsidiaries.
"Temporary Offshore Global Security" has the meaning provided
in Section 2.01.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended.
"Treasury Rate" has the meaning provided in Section 3.01.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of Article Seven of this Indenture and thereafter means such
successor.
"United States Bankruptcy Code" means the Bankruptcy Reform
Act of 1978, as amended and as codified in Title 11 of the United States Code,
as amended from time to time hereafter, or any successor federal bankruptcy law.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Securities, and shall also include a depository
receipt issued by a bank or trust company as custodian with respect to any such
U.S. Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account of
the holder of a depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by such
depository receipt.
"U.S. Person" has the meaning ascribed thereto in Rule 902
under the Securities
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Act.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any Person (irrespective of whether or not, at the time,
stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities; "indenture security holder" means a
Holder or a Securityholder; "indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and "obligor"
on the indenture securities means the Issuers or any other obligor on the
Securities. All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP:
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in
the plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(vii) all references to Sections or Articles refer to Sections
or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE SECURITIES
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SECTION 2.01. Form and Dating. The Initial Notes, the
Guarantor's guarantee thereof, and the Trustee's certificate of authentication
shall be substantially in the form annexed hereto as Exhibit A. Any Exchange
Notes, the Guarantor's guarantee thereof, and the Trustee's certificate of
authentication shall be substantially in the form annexed hereto as Exhibit B.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule, agreements to which the Issuers are subject, if any, or
usage. The Issuers shall approve the form of the Securities and any notation,
legend or endorsement on the Securities. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the forms of the
Securities annexed hereto as Exhibit A and Exhibit B shall constitute, and are
hereby expressly made, a part of this Indenture. Each of the Issuers and the
Trustee, by its execution and delivery of this Indenture, expressly agrees to
the terms and provisions of the Securities applicable to it and to be bound
thereby.
Initial Notes offered and sold to QIBs pursuant to Rule 144A
shall be issued in the form of one or more permanent global notes in definitive,
fully registered form, without interest coupons, substantially in the form set
forth in Exhibit A (the "U.S. Global Security"), deposited with the Trustee, as
custodian for the Depositary, and registered in the name of Cede & Co., as
nominee of the Depositary, or remain in the custody of the Trustee pursuant to
the FAST Balance Certificate Agreement between the Depositary and the Trustee.
The U.S. Global Security will be duly executed by the Issuers and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of the
U.S. Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary
or its nominee, as hereinafter provided.
Initial Notes offered and sold in offshore transactions to
Non-U.S. Persons in reliance on Regulation S shall be issued in the form of one
or more temporary global notes in registered form, without interest coupons,
substantially in the form set forth in Exhibit A (the "Temporary Offshore Global
Security"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Issuers and authenticated by the Trustee as hereinafter
provided. Beneficial interests in the Temporary Offshore Global Security will be
exchanged for beneficial interests in a corresponding single permanent global
note in registered form (the "Permanent Offshore Global Security," and together
with the Temporary Offshore Global Security, the "Offshore Global Security")
within a reasonable period after the expiration of the Restricted Period (the
"Release Date") upon the receipt by the Trustee or its agent of a certificate
certifying that the Holders of the beneficial interests in the Temporary
Offshore Global Security are non-U.S. Persons within the meaning of Regulation S
or U.S. Persons who purchased such interests pursuant to an exemption from, or
in transactions not subject to, the registration requirements of the Securities
Act (a "Regulation S Certificate"), substantially in the form set forth in
Exhibit C. Upon receipt by the Trustee or Paying Agent of a Regulation S
Certificate, (i) with respect to the first such Regulation S Certificate, the
Issuers shall execute and upon receipt
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of an Issuer Order for authentication, the Trustee shall authenticate and
deliver to the custodian, the applicable Permanent Offshore Global Security and
(ii) with respect to the first and all subsequent Regulation S Certificates, the
custodian shall exchange on behalf of the applicable beneficial owners the
portion of the applicable Temporary Offshore Global Security covered by such
Regulation S Certificates for a comparable portion of the applicable Permanent
Offshore Global Security. Upon any exchange of a portion of a Temporary Offshore
Global Security for a comparable portion of a Permanent Offshore Global
Security, the custodian shall endorse on the schedules affixed to each of such
Offshore Global Security (or on continuations of such schedules affixed to each
of such Offshore Global Security and made parts thereof) appropriate notations
evidencing the date of transfer and (x) with respect to the applicable Temporary
Offshore Global Security, a decrease in the principal amount thereof equal to
the amount covered by the applicable certification and (y) with respect to the
applicable Permanent Offshore Global Security, an increase in the principal
amount thereof equal to the principal amount of the decrease in the applicable
Temporary Offshore Global Security pursuant to clause (x) above. The Offshore
Global Security will be deposited with the Trustee, as custodian for the
Depositary, duly executed by the Issuers and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Offshore Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Initial Notes which are offered and sold to Institutional
Accredited Investors (other than QIBs and Non-U.S. Persons) shall be issued in
the form of a permanent global note in registered form, without interest
coupons, substantially in the form set forth in Exhibit A (the "IAI Global
Security"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Issuers and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the IAI Global Security may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
The U.S. Global Security, the Offshore Global Security and the
IAI Global Security are sometimes collectively herein referred to as the "Global
Securities."
The definitive Securities shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
Officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 2.02. Restrictive Legends.
Unless and until (i) an Initial Note is sold under an
effective Registration Statement or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, the U.S. Global Security and
the IAI Global Security shall bear the following legend (the "Private Placement
Legend") on
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the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CALAIR L.L.C. ("CALAIR"),
CALAIR CAPITAL CORPORATION ("CALAIR CAPITAL," AND TOGETHER WITH CALAIR, THE
"ISSUERS") OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) ABOVE TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF THE FOREGOING CLAUSES
(A) THROUGH (F), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUERS
AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE
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RESTRICTION TERMINATION DATE.
The Offshore Global Security shall bear the following legend
on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CALAIR L.L.C. ("CALAIR")
OR CALAIR CAPITAL CORPORATION ("CALAIR CAPITAL" AND, TOGETHER WITH CALAIR, THE
"ISSUERS") OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D), (E) OR (F) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN THE CASE ANY OF THE FOREGOING CLAUSES (A) THROUGH (F), A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND THE TRUSTEE. THIS LEGEND WILL BE
REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND
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INCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE OFFERED TO
PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE DATE OF
THE CLOSING OF THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
The Temporary Offshore Global Security shall also bear the
following legend on the face thereof:
THIS GLOBAL SECURITY IS A TEMPORARY GLOBAL SECURITY FOR
PURPOSES OF REGULATION S UNDER THE SECURITIES ACT. NEITHER THIS TEMPORARY GLOBAL
SECURITY NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS
PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL SECURITY SHALL
BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE
REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE
INDENTURE.
The Global Securities, whether or not an Initial Note, shall
also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE ISSUERS OR THE
ISSUERS' AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
REPRESENTATIVE OF DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 2.07 AND 2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations. An
Officer of each of the Note Issuers shall execute the Notes for each of the Note
Issuers by
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facsimile or manual signature in the name and on behalf of each of the Note
Issuers. An Officer of the Guarantor shall endorse the Parent Guarantee included
in the Notes by facsimile or manual signature in the name and on behalf of the
Guarantor to evidence the Guarantor's Parent Guarantee of the obligations
thereunder, and any reference herein to the execution of a Note by the Guarantor
shall be interpreted as a reference to such endorsement.
If an Officer whose signature is on a Security held that
office at the time of execution of the Security but no longer holds that office
at the time the Trustee or authenticating agent authenticates the Security, the
Security shall be valid nevertheless. A Security shall not be valid until an
authorized signatory of the Trustee or authenticating agent manually signs the
certificate of authentication on the Security. The signature shall be conclusive
evidence that the Security has been authenticated under this Indenture.
The Trustee or an authenticating agent shall upon receipt of
an Issuer Order authenticate for original issue Initial Notes in the aggregate
principal amount of up to $112,300,000 plus any Exchange Notes that may be
issued pursuant to the Registration Rights Agreement; provided that the Trustee
shall receive an Officers' Certificate and an Opinion of Counsel of the Issuers
in connection with such authentication of Securities. The Opinion of Counsel
shall be substantially to the effect that:
(a) the form of such Securities is in conformity with the
provisions of this Indenture;
(b) an indenture supplemental hereto, if any, when executed
and delivered by the Issuers and the Trustee, will constitute a valid and
binding obligation of each Issuer;
(c) such Notes, when authenticated and delivered by the
Trustee and issued by the Note Issuers in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
binding obligations of each Note Issuer in accordance with their terms and will
be entitled to the benefits of this Indenture, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles;
(d) the Parent Guarantee on such Notes, when executed by the
Guarantor in the manner and subject to any conditions specified in such Opinion
of Counsel, will constitute a valid and binding obligation of the Guarantor in
accordance with its terms and will be entitled to the benefits of this
Indenture, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equitable principles; and
(e) that each Issuer has been duly incorporated in, and is a
validly existing corporation or limited liability company in good standing under
the laws of, the State of Delaware.
Such Issuer Order shall specify the amount of Securities to be
authenticated and
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the date on which the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
the amount set forth above except for Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, other
Securities pursuant to Section 2.06, 2.09 or 2.11.
The Trustee may appoint an authenticating agent to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such authenticating
agent. An authenticating agent has the same rights as an Agent to deal with the
Issuers or an Affiliate of any of the Issuers.
The Securities shall be issuable only in registered form
without interest coupons and only in denominations of $1,000 in principal amount
and any integral multiple of $1,000 in excess thereof.
SECTION 2.04. Registrar and Paying Agent.
The Issuers shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency where Securities may be presented for payment (the "Paying
Agent") and an office or agency where notices and demands to or upon the Issuers
in respect of the Securities and this Indenture may be served, which shall be in
the Borough of Manhattan, The City of New York; provided, however that at the
option of the Note Issuers, interest may be paid by check mailed to the address
of the Person entitled thereto as such address shall appear on the Security
Register (as defined below). The Issuers shall cause the Registrar to keep a
register of the Securities and of their transfer and exchange (the "Security
Register"). The Issuers may have one or more co-Registrars and one or more
additional Paying Agents.
The Issuers shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Issuers shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Issuers fail to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands for so long as such failure shall continue and shall be
entitled to compensation therefor pursuant to Section 7.07. The Issuers may
remove any Agent upon written notice to such Agent and the Trustee; provided
that no such removal shall become effective until (i) the acceptance of an
appointment by a successor Agent to such Agent as evidenced by an appropriate
agency agreement entered into by the Issuers and such successor Agent and
delivered to the Trustee or (ii) notification to the Trustee that the Trustee
shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Issuers, any Subsidiary of the
Issuers, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands; provided, however,
that neither the Issuers, a Subsidiary of the Issuers nor an Affiliate of any of
them shall act as Paying Agent in connection
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with the defeasance of the Securities or the discharge of this Indenture under
Article Eight.
The Issuers initially appoint the Trustee as Registrar, Paying
Agent, authenticating agent and agent for service of notice and demands. If, at
any time, the Trustee is not the Registrar, the Registrar shall make available
to the Trustee before each Interest Payment Date and at such other times as the
Trustee may reasonably request, the names and addresses of the Holders as they
appear in the Security Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
than 12:30 p.m. New York City time on each due date of the principal, premium,
if any, and interest on any Securities, the Note Issuers or the Guarantor, as
the case may be, shall deposit with the Paying Agent money in immediately
available funds sufficient to pay such principal, premium, if any, and interest
so becoming due. The Note Issuers or the Guarantor, as the case may be, shall
require each Paying Agent, if any, other than the Trustee to agree in writing
that such Paying Agent shall hold in trust for the benefit of the Holders or the
Trustee all money held by the Paying Agent for the payment of principal of,
premium, if any, and interest on the Securities (whether such money has been
paid to it by the Note Issuers or the Guarantor, as the case may be, or any
other obligor on the Securities), and that such Paying Agent shall promptly
notify the Trustee in writing of any default by the Note Issuers or the
Guarantor, as the case may be, (or any other obligor on the Securities) in
making any such payment. The Note Issuers or the Guarantor, as the case may be,
at any time may require a Paying Agent to pay all money held by it to the
Trustee and account for any funds disbursed, and the Trustee may at any time
during the continuance of any payment default, upon written request to a Paying
Agent, require such Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed. Upon doing so, the Paying Agent shall have
no further liability for the money so paid over to the Trustee. If the Note
Issuers or the Guarantor, as the case may be, or any Subsidiary of the Note
Issuers, the Guarantor or any Affiliate of any of them acts as Paying Agent, it
will, on or before each due date of any principal of, premium, if any, or
interest on the Securities, segregate and hold in a separate trust fund for the
benefit of the Holders a sum of money sufficient to pay such principal, premium,
if any, or interest so becoming due until such sum of money shall be paid to
such Holders or otherwise disposed of as provided in this Indenture, and will
promptly notify the Trustee in writing of its action or failure to act as
required by this Section 2.05.
SECTION 2.06. Transfer and Exchange. The Securities are
issuable only in registered form. A Holder may transfer a Security by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Indenture. No such transfer shall be
effected until, and such transferee shall succeed to the rights of a Holder only
upon, registration of the transfer by the Registrar in the Security Register.
Prior to the registration of any transfer by a Holder as provided herein, the
Issuers, the Trustee, and any agent of the Issuers or the Trustee shall treat
the person in whose name the Security is registered as the owner thereof for all
purposes whether or not the Security shall be overdue, and neither the Issuers,
the Trustee, nor any such agent shall
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be affected by notice to the contrary. Furthermore, any Holder of or beneficial
owner of an interest in a Global Security shall, by acceptance of such Global
Security, be deemed to have agreed that transfers of beneficial interests in
such Global Security may be effected only through a book-entry system maintained
by the Depositary (or its agent), and that ownership of a beneficial interest in
the Security shall be required to be reflected in a book entry. When Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Securities of
other authorized denominations (including on exchange of Securities for Exchange
Securities), the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; provided that no
exchanges of Securities for Exchange Securities shall occur until a Registration
Statement shall have been declared effective by the Commission and that any
Securities that are exchanged for Exchange Notes shall be cancelled by the
Trustee. To permit registrations of transfers and exchanges in accordance with
the terms, conditions and restrictions hereof, the Issuers shall execute and the
Trustee shall authenticate Securities at the Registrar's request. No service
charge shall be made to any Holder for any registration of transfer or exchange
or redemption of the Securities, but the Issuers may require payment by the
Holder of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
other similar governmental charge payable upon transfers, exchanges or
redemptions pursuant to Section 2.11, 3.08, or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 3.03 or Section 3.08 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of or exchange any Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Securities. (a)
The U.S. Global Security and Offshore Global Security initially shall (i) be
registered in the name of the Depositary for such Global Securities or in the
name of Cede & Co., as nominee of the Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Section 2.02. Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under any Global Security, and the Depositary may be treated by the Issuers, the
Trustee and any agent of the Issuers or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Issuers, the Trustee or any agent of the
Issuers or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a beneficial owner of any Security.
(b) Transfers of a Global Security shall be limited to
transfers of such Global
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Security in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in a Global Security may be
transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 2.08. Securities in definitive form
("Certificated Securities") shall be issued to each Person that the Depositary
identifies as the beneficial owner of the Securities represented by a Global
Security, if (i) the Issuers notify the Trustee in writing that the Depository
is no longer willing or able to act as Depositary for each Global Security or
the Depositary ceases to be registered as a clearing agency under the Exchange
Act and a successor depositary is not appointed by the Issuers within 90 days of
such notice or cessation, (ii) the Issuers execute and deliver to the Trustee an
Officers' Certificate stating that they elect to cause the issuance of
Securities in definitive form under this Indenture or (iii) an Event of Default
has occurred and is continuing and the Registrar has received a request to the
foregoing effect from the Depositary.
(c) Any beneficial interest in one of the Global Securities
that is transferred to a Person who takes delivery in the form of an interest in
any other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in such other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
(d) In connection with any transfer pursuant to paragraph (b)
of this Section 2.07 of a portion of the beneficial interests in a Global
Security to beneficial owners who are required to hold Certificated Securities,
the Registrar shall reflect on its books and records the date and a decrease in
the principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Issuers shall execute, and the Trustee shall authenticate and deliver, one
or more Certificated Securities of like tenor and amount.
(e) In connection with the transfer of an entire Global
Security to beneficial owners pursuant to paragraph (b) of this Section 2.07,
the Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuers shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Security an equal aggregate principal
amount of Certificated Securities of authorized denominations.
(f) Any Certificated Security delivered in exchange for an
interest in the U.S. Global Security pursuant to paragraph (d) or (e) of this
Section 2.07 shall, except as otherwise provided by paragraph (c) of Section
2.08, bear the legend regarding transfer restrictions applicable to the
Certificated Security set forth in Section 2.02.
(g) The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
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SECTION 2.08. Special Transfer Provisions. (a) The following
provisions shall apply with respect to any proposed transfer of a U.S. Global
Security or an IAI Global Security or a beneficial interest therein prior to the
expiration of the Resale Restriction Termination Date (as defined in Section
2.02 hereof):
(i) a transfer of a U.S. Global Security or an IAI Global
Security or a beneficial interest therein to a QIB (as defined herein)
shall be made upon the representation of the transferee that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a "qualified institutional buyer" within the meaning of Rule
144A under the Securities Act and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Issuers as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) a transfer of a U.S. Global Security or an IAI Global
Security or a beneficial interest therein to an institutional
accredited investor shall be made upon receipt by the Trustee or its
agent of a certificate substantially in the form set forth in Exhibit D
hereof from the proposed transferee and, if requested by the Issuers or
the Trustee, the delivery of an opinion of counsel, certification
and/or other information satisfactory to each of them; and
(iii) a transfer of a U.S. Global Security or an IAI Global
Security or a beneficial interest therein to a Non-U.S. Person shall be
made upon receipt by the Trustee or its agent of a certificate
substantially in the form set forth in Exhibit E hereof from the
proposed transferee and, if requested by the Issuers or the Trustee,
the delivery of an opinion of counsel, certification and/or other
information satisfactory to each of them.
(b) The following provisions shall apply with respect to any
proposed transfer of an Offshore Global Security or a beneficial interest
therein or a Certificated Security prior to the expiration of the Restricted
Period:
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(i) a transfer of the Offshore Global Security or a beneficial
interest therein or a Certificated Security to a QIB shall be made upon
the representation of the transferee that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Issuers as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) a transfer of the Offshore Global Security or a
beneficial interest therein or a Certificated Security to an
institutional accredited investor shall be made upon receipt by the
Trustee or its agent of a certificate substantially in the form set
forth in Exhibit D hereof from the proposed transferee and, if
requested by the Issuers or the Trustee, the delivery of an opinion of
counsel, certification and/or other information satisfactory to each of
them; and
(iii) a transfer of the Offshore Global Security or a
beneficial interest therein or a Certificated Security to a Non-U.S.
Person shall be made upon, if requested by the Issuers or the Trustee,
receipt by the Trustee or its agent of an opinion of counsel,
certification and/or other information satisfactory to each of them.
Prior to or on the expiration of the Restricted Period,
beneficial interests in the Offshore Global Security may only be held through
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), or Cedel Bank, societe anonyme ("Cedel") (as
indirect participants in DTC) unless exchanged for interests in the U.S. Global
Security or the IAI Global Security in accordance with the transfer and
certification requirements hereof. During the Restricted Period, interests in
the Offshore Global Security, if any, may be exchanged for interests in the U.S.
Global Security, the IAI Global Security or for Certificated Securities only in
accordance with the certification requirements described in this Article Two.
After the expiration of the Restricted Period, interests in
the Offshore Global Security or a Certificated Security may be transferred
without requiring certification set forth in Exhibit D or any additional
certification.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Issuers and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of
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the Securities Act.
(d) General. By its acceptance of any Securities bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Securities set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture. The Registrar shall not register a transfer of any
Security unless such transfer complies with the restrictions on transfer set
forth in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Issuers shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
(e) ERISA. The following provision shall apply with respect to
any proposed transfer of a Global Security or a beneficial interest therein or a
Certificated Security:
a transfer of a Global Security or a beneficial interest
therein or a Certificated Security to any transferee thereof shall be made upon
the representation of the transferee that (i) if it is an insurance company, the
funds to be used to purchase the Notes by it constitute (x) assets of an
insurance company general account maintained by it and the acquisition and
holding of each such Note by such account satisfies the requirements of United
States Department of Labor Prohibited Transaction Class Exemption ("PTCE") 95-60
or (y) assets of an insurance company pooled separate account satisfying the
conditions of PTCE 90-1, and (ii) if it is not an insurance company, no part of
the funds to be used to purchase the Notes to be purchased by it constitute
assets of any trust or other entity which contains, or is deemed to contain, the
assets of any employee benefit plan such that the use of such assets constitutes
a non-exempt prohibited transaction under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). As used in this paragraph, the term
"employee benefit plan" shall have the meaning assigned to such term in Section
3 of ERISA.
(f) No Obligation of the Trustee. (i) The Trustee shall have
no responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depositary or other Person with respect to
any ownership interest in the Securities, with respect to the accuracy of the
records of the Depositary or its nominee or of any participant or member thereof
or with respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders under the Securities shall be given or made only
to the registered Holders (which shall be the Depositary or its nominee in the
case of a Global Security). The rights of beneficial owners in any Global
Security shall be exercised only through the Depositary subject to the
applicable rules and procedures of the Depositary. The Trustee may rely and
shall be fully protected and indemnified pursuant to Section 7.07 in relying
upon information furnished by the Depositary with respect to
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any beneficial owners, its members and participants.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including without limitation any transfers between or
among Depository participants, members or beneficial owners in any Global
Security) other than to require delivery of such certificates and other
documentation of evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
SECTION 2.09. Replacement Securities. If a mutilated Security
is surrendered to the Trustee or if the Holder claims that the Security has been
lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee
shall authenticate a replacement Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding; provided that the
requirements of the second paragraph of Section 2.10 are met. If required by the
Trustee or the Issuers, an indemnity bond must be furnished that is sufficient
in the judgment of the Trustee to protect the Issuers, the Trustee or any Agent
from any loss that any of them may suffer if a Security is replaced. The Issuers
may charge such Holder for their expenses and the expenses of the Trustee in
replacing a Security. In case any such mutilated, lost, destroyed or wrongfully
taken Security has become or is about to become due and payable, the Issuers in
their discretion may pay the principal of, premium, if any, and interest accrued
on such Security instead of issuing a new Security in replacement thereof.
If, after the delivery of such replacement Security, a bona
fide purchaser of the original Security in lieu of which such replacement
Security was issued presents for payment or registration such original Security,
the Trustee shall be entitled to recover such replacement Security from the
person to whom it was delivered or any person taking therefrom, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Trustee, the Issuers or any Agent in connection therewith.
Every replacement Security is an additional obligation of the
Issuers and shall be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Securities. Securities outstanding
at any time are all Securities that have been authenticated by the Trustee
except for those cancelled by it, those delivered to it for cancellation and
those described in this Section 2.10 as not outstanding.
If a Security is replaced pursuant to Section 2.09, it ceases
to be outstanding unless and until the Trustee and the Issuers receive proof
satisfactory to them that the replaced
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Security is held by a bona fide purchaser.
If the Paying Agent (other than an Issuer or an Affiliate of
an Issuer) holds on the maturity date money sufficient to pay the principal of,
premium, if any, and interest accrued on Securities payable on that date, then
on and after that date such Securities cease to be outstanding and interest on
them shall cease to accrue.
A Security does not cease to be outstanding because an Issuer
or one of its Affiliates holds such Security, provided, however, that, in
determining whether the Holders of the requisite principal amount of the
outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Securities owned by an Issuer or any other
obligor upon the Securities or any Affiliate of an Issuer or of such other
obligor shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not an Issuer or any other obligor upon the Securities or any Affiliate of an
Issuer or of such other obligor.
SECTION 2.11. Temporary Securities. Until definitive
Securities are ready for delivery, the Issuers may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have insertions, substitutions,
omissions and other variations determined to be appropriate by the Officers
executing the temporary Securities, as evidenced by their execution of such
temporary Securities. If temporary Securities are issued, the Issuers will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Issuers designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Issuers shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall be entitled to the same benefits under
this Indenture as definitive Securities.
SECTION 2.12. Cancellation. A Note Issuer at any time may
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which a Note Issuer may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Note Issuers have not issued and
sold. The Registrar and the Paying Agent shall forward to the Trustee any
Securities surrendered to them for transfer, exchange or payment. The Trustee
shall cancel all Securities surrendered for transfer, exchange,
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payment or cancellation and shall dispose of them in accordance with its normal
procedure. The Note Issuers shall not issue new Securities to replace Securities
they have paid in full or delivered to the Trustee for cancellation.
SECTION 2.13. CUSIP, CINS and ISIN Numbers. The Note Issuers
in issuing the Securities may use "CUSIP," "CINS," "ISIN" or other
identification numbers (if then generally in use), and, if so, the Trustee shall
use CUSIP numbers, CINS numbers, ISIN numbers or other identification numbers,
as the case may be, in notices of redemption or exchange as a convenience to
Holders; provided that any such notice shall state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on the Securities;
provided further that failure to use "CUSIP," "CINS," "ISIN" or other
identification numbers in any notice of redemption or exchange shall not effect
the validity or sufficiency of such notice.
SECTION 2.14. Defaulted Interest. If the Issuers default in
a payment of interest on the Securities, they shall pay, or shall deposit with
the Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect to
the payment of any defaulted interest, shall mean the 15th day next preceding
the date fixed by the Issuers for the payment of defaulted interest, whether or
not such day is a Business Day. At least 15 days before the subsequent special
record date, the Issuers shall mail to each Holder and to the Trustee a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest to be paid.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. The Note Issuers may, at
their option at any time and from time to time, redeem Securities, in whole or
in part, at a redemption price equal to the sum of (i) the principal amount
thereof on the Redemption Date, plus (ii) accrued and unpaid interest thereon,
if any, to the Redemption Date, plus (iii) the Make-Whole Premium, if any, with
respect thereto (the "Redemption Price"). "Make-Whole Premium" means, with
respect to any Security, the excess, if any, of (A) the present value of the
required interest and principal payments due on such Security on or after the
Redemption Date, computed using a discount rate equal to the Treasury Rate plus
25 basis points, over (B) the sum of the then outstanding principal amount of
such Security plus the accrued and unpaid interest thereon, if any, paid on the
Redemption Date. "Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a
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constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) which has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the then remaining Average Life of the Securities; provided,
however, that if the Average Life of the Securities is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the Average Life of the Securities is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
SECTION 3.02. Notices to Trustee. If the Note Issuers elect to
redeem Securities pursuant to Section 3.01, they shall notify the Trustee and
the Depositary in writing of the Redemption Date and the amount of Securities to
be redeemed. The Note Issuers shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least ten days before mailing the
notice to Holders required pursuant to Section 3.04 (unless a shorter period
shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Securities to Be Redeemed. In the
case of any partial redemption, selection of the Securities for redemption will
be made by the Trustee not more than 60 days prior to the Redemption Date in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed or, if the Securities are not listed
on a national securities exchange, pro rata or by lot or by such other method as
the Trustee shall deem fair and appropriate; provided that no Security of $1,000
in principal amount or less shall be redeemed in part.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption. Securities in
denominations of $1,000 in principal amount may only be redeemed in whole. The
Trustee may select for redemption portions (equal to $1,000 in principal amount
or any integral multiple thereof) of Securities that have denominations larger
than $1,000 in principal amount . Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Note Issuers and the Registrar promptly
in writing of the Securities or portions of Securities to be called for
redemption.
SECTION 3.04. Notice of Redemption. With respect to any
redemption of Securities pursuant to Section 3.01, at least 20 days but not more
than 60 days before a Redemption Date, the Note Issuers shall mail a notice of
redemption by first class mail, postage pre-paid, to each Holder whose
Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
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(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
(e) that, unless the Issuers default in making the redemption
payment, interest on Securities called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price upon surrender of the Securities to the
Paying Agent;
(f) if any Security is being redeemed in part, the portion of
the principal amount (equal to $1,000 in principal amount or any integral
multiple thereof) of such Security to be redeemed and that, on and after the
Redemption Date, upon surrender of such Security, a new Security or Securities
in principal amount equal to the unredeemed portion thereof will be reissued;
and
(g) that, if any Security contains a CUSIP, CINS, ISIN or
other identification number as provided in Section 2.13, no representation is
being made as to the correctness of the CUSIP, CINS, ISIN or other
identification number either as printed on the Securities or as contained in the
notice of redemption and that reliance may be placed only on the other
identification numbers printed on the Securities. At the Note Issuers' request
(which request may be revoked by the Note Issuers at any time prior to the time
at which the Trustee shall have given such notice to the Holders), made in
writing to the Trustee at least ten days before it is required to mail the
notice to Holders required by this Section 3.04, the Trustee shall give such
notice of redemption in the name and at the expense of the Note Issuers. If,
however, the Note Issuers give such notice to the Holders, the Note Issuers
shall concurrently deliver to the Trustee an Officers' Certificate stating that
such notice has been given.
SECTION 3.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price. Upon surrender of any
Securities to the Paying Agent, such Securities shall be paid at the Redemption
Price. Notice of redemption shall be deemed to be given when mailed, whether or
not the Holder receives the notice. In any event, failure to give such notice,
or any defect herein, shall not affect the validity of the proceedings for the
redemption to whom such notice was properly given.
SECTION 3.06. Deposit of Redemption Price. On or prior to
10:00 A.M. New York City time on any Redemption Date, the Note Issuers shall
deposit with the Paying Agent (or, if the Note Issuers are acting as their own
Paying Agent, shall
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segregate and hold in trust as provided in Section 2.05) money sufficient to pay
the Redemption Price of all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date that have been
delivered by the Note Issuers to the Trustee for cancellation.
SECTION 3.07. Payment of Securities Called for Redemption. If
notice of redemption has been given in the manner provided above, the Securities
or portion of Securities specified in such notice to be redeemed shall become
due and payable on the Redemption Date at the Redemption Price stated therein,
and on and after such date (unless the Issuers shall default in the payment of
such Securities at the Redemption Price, in which case the principal, until
paid, shall bear interest from the Redemption Date at the rate prescribed in the
Securities), such Securities shall cease to accrue interest. Upon surrender of
any Security for redemption in accordance with a notice of redemption, such
Security shall be paid and redeemed by the Note Issuers at the Redemption Price;
provided that installments of interest shall be payable to the Holders
registered as such at the close of business on the relevant Regular Record Date
that is on or prior to the Redemption Date.
SECTION 3.08. Securities Redeemed in Part. Upon surrender of
any Security that is redeemed in part, the Issuers shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security equal in principal
amount to the unredeemed portion of such surrendered Security.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. The Note Issuers, as
joint and several obligors, shall pay the principal of, premium, if any, and
interest, including additional interest, if any, as provided in the Registration
Rights Agreement, on the Securities on the dates and in the manner provided in
the Securities and this Indenture. An installment of principal, premium, if any,
or interest shall be considered paid on the date due if the Trustee or Paying
Agent (other than any Issuer, a Subsidiary of any Issuer, or any Affiliate of
any of them) holds on that date money designated for and sufficient to pay the
installment. If any Issuer or any Subsidiary of any Issuer or any Affiliate of
any of them, acts as Paying Agent, an installment of principal, premium, if any,
or interest shall be considered paid on the due date if the entity acting as
Paying Agent complies with the last sentence of Section 2.05. As provided in
Section 6.09, upon any bankruptcy or reorganization procedure relative to the
Note Issuers, the Trustee shall serve as the Paying Agent for the Securities.
The Note Issuers, as joint and several obligors, shall pay interest on overdue
principal, premium, if any, and interest on overdue installments of interest, to
the extent lawful, at the rate per annum specified in the Securities.
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SECTION 4.02. Maintenance of Office or Agency. The Note
Issuers shall maintain in the Borough of Manhattan, The City of New York, an
office or agency (which may be an office of the Trustee, Registrar or
co-Registrar or any Affiliate of any of them) where Securities may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Issuers in respect of the
Securities and this Indenture may be served. The Note Issuers shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Note Issuers shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or serviced at the address of the Trustee set forth in Section 11.02.
SECTION 4.03. Reports. The Guarantor shall file on a timely
basis with the Commission, to the extent such filings are accepted by the
Commission and whether or not the Guarantor has a class of securities registered
under the Exchange Act, the annual reports, quarterly reports and other
documents that the Guarantor would be required to file if it were subject to
Section 13 or 15 of the Exchange Act. The Guarantor shall also (a) file with the
Trustee copies of such reports and documents within 15 days after the date on
which the Guarantor files such reports and documents with the Commission or the
date on which the Guarantor would be required to file such reports and documents
if the Guarantor were so required, and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, supply at Calair's cost copies of such reports and documents to
any Holder of Securities promptly upon written request.
SECTION 4.04. Compliance Certificates. (a) Each Issuer shall
deliver to the Trustee, within 90 days after the end of its fiscal year, an
Officers' Certificate stating whether or not the signers know if any Default or
Event of Default has occurred during such fiscal year. Such certificates shall
contain a certification from the principal executive officer, principal
financial officer or principal accounting officer of each Issuer that a review
has been conducted of the activities of such Issuer and such Issuer's
performance under this Indenture and that, to the best knowledge of such
officer, such Issuer has complied with all conditions and covenants under this
Indenture. For purposes of this Section 4.04, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If any such officer knows of a Default or Event
of Default, the certificate shall describe any such Default or Event of Default
and its status.
(b) Each Issuer shall deliver to the Trustee, within 90 days
after the end of its fiscal year, a certificate signed by such Issuer's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of the Indenture and the
Securities as they relate to accounting matters, (ii) that they have read the
most recent Officers' Certificate delivered to the Trustee pursuant to paragraph
(a) of this Section 4.04 and (iii)
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whether, in connection with their audit examination, anything came to their
attention that caused them to believe that the Issuers were not in compliance
with any of the terms, covenants, provisions or conditions of Article Four and
Section 5.01 of this Indenture as they pertain to accounting matters and, if any
Default or event of Default related thereto has come to their attention,
specifying the nature and period of existence thereof; provided that such
independent certified public accountants shall not be liable in respect of such
statement by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
(c) The Issuers shall notify the Trustee in writing within
five Business Days if any Responsible Officer of any Issuer acquires actual
knowledge of an Event of Default.
SECTION 4.05. Rule 144(d)(4) Information. While any Securities
remain outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act, each Note Issuer will make available, upon
the request of any Holder or a prospective purchaser thereof designated by such
Holder, such information as is specified in paragraph (d)(4) of Rule 144A, to
such holder or prospective purchaser, in order to permit compliance by such
holder with Rule 144A in connection with the resale of such Security by such
holder unless, at the time of such request, the applicable Note Issuer is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Consolidation, Merger and Sale of Assets by the
Issuers. None of the Issuers will, in a single transaction or through a series
of transactions, consolidate with or merge with or into any other Person, or
permit any Person to consolidate with or merge into such Issuer, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any other Person or Persons if such transaction
or series of transactions, in the aggregate, would result in the sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of such Issuer and its
Subsidiaries on a consolidated basis to any other Person or group of affiliated
Persons, unless at the time and immediately after giving effect thereto (i)
either (a) such Issuer will be the continuing corporation (or, in the case of
Calair, the continuing limited liability company or the continuing corporation)
or (b) the Person (if other than such Issuer) formed by such consolidation or
into which such Issuer is merged or the Person or group of affiliated Persons
that acquire by sale, assignment, conveyance, transfer, lease or disposition all
or substantially all the properties and assets of such Issuer and its
Subsidiaries on a consolidated basis (the "Surviving Entity") (1) will be a
corporation (or, in the case of the successor to Calair, a limited liability
company or a corporation) duly organized and validly existing under the laws of
the United States of America,
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any state thereof or the District of Columbia and (2) will expressly assume, by
a supplemental indenture in form satisfactory to the Trustee, such Note Issuer's
obligation for the due and punctual payment of the principal of, premium, if
any, and interest on all the Securities or the Guarantor's obligations under the
Parent Guarantee, as the case may be, and the performance and observance of
every covenant of this Indenture on the part of such Issuer to be performed or
observed and (ii) immediately before and immediately after giving effect to such
transaction or series of transactions, no Event of Default will have occurred
and be continuing. Notwithstanding anything to the contrary contained in this
paragraph, Calair Capital shall not merge into or consolidate with any entity
if, as a result thereof, no Note Issuer will be a corporation.
In connection with any such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposition, such Issuer or the
Surviving Entity shall deliver to the Trustee, in form and substance reasonably
satisfactory to the Trustee, (A) an Opinion of Counsel stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or other
disposition, and if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with the requirements of this
Indenture and that all conditions precedent therein provided for relating to
such transaction have been complied with; and (B) an Opinion of Counsel stating
(i) that the obligations of the Guarantor under this Indenture remain
enforceable, or, in the case of a consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition by the Guarantor in which the
Guarantor is not the Surviving Entity, that the Surviving Entity has directly
assumed as obligor the obligations of the Guarantor under this Indenture and the
obligations of the Surviving Person as the new guarantor under this Indenture
are enforceable, or (ii) in the case of consolidation or a merger by a Note
Issuer with, or sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of such Note Issuers' properties and
assets to, the Guarantor, that the Guarantor has directly assumed as obligor the
obligations of such Note Issuer under this Indenture.
SECTION 5.02. Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer or other disposition of all or
substantially all of the property and assets of any Issuer in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or merger or to which such sale, conveyance, transfer or other
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, such Issuer with the same effect as if such successor
Person had been named as a Note Issuer or Guarantor, as the case may be, herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall
occur with respect to the Securities if any of the following shall
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occur:
(a) default in the payment of any installment of interest on
any Security when it becomes due and payable and continuance of such default for
a period of 30 days;
(b) default in the payment of the principal of or premium, if
any, on any Security at its Maturity (upon acceleration, optional redemption,
required purchase or otherwise);
(c) default in the performance, or breach, of the provisions
of Section 5.01;
(d) default in the performance, or breach, of any covenant of
the Issuers contained in this Indenture (other than a default in the
performance, or breach, of a covenant which is specifically dealt with in clause
(a), (b) or (c) above) and continuance of such default or breach for a period of
60 days after written notice shall have been given to the Issuers by the Trustee
or to the Issuers and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding;
(e) the Parent Guarantee shall for any reason cease to be, or
shall be asserted in writing by any Issuer not to be, enforceable in accordance
with its terms and the terms of this Indenture;
(f) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of any Issuer in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of any Issuer or for all or
substantially all of the property and assets of any Issuer or (C) the winding up
or liquidation of the affairs of any Issuer and, in each case, such decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or
(g) any Issuer (A) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, consents to the entry of an order for relief in an involuntary case
under any such law, or commences a voluntary dissolution, winding up or
liquidation pursuant to its charter, by-laws or other organizational documents
or pursuant to applicable law (B) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official of any Issuer or for all or substantially all of the
property and assets of any Issuer or (C) effects any general assignment for the
benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in clause (f) or (g) of Section 6.01 that occurs
with respect to any Issuer) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding, by written notice to the Issuers (and to the
Trustee if such notice is given by the Holders), may, and the Trustee upon the
written request of such Holders shall, declare the
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principal of, premium, if any, and accrued interest on the Securities to be
immediately due and payable. Upon any such declaration of acceleration, such
principal of, premium, if any, and accrued interest shall be immediately due and
payable. If an Event of Default specified in clause (f) or (g) of Section 6.01
occurs and is continuing, then the principal of, premium, if any, and accrued
interest on the Securities then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration, but
before a judgment or decree for the payment of the money due has been obtained
by the Trustee, the Holders of at least a majority in aggregate principal amount
of the outstanding Securities, by written notice to the Issuers and to the
Trustee, may rescind such declaration and its consequences if (a) the Issuers
have paid or deposited with the Trustee a sum sufficient to pay (i) all overdue
interest on all Securities, (ii) all unpaid principal of and premium, if any, on
any outstanding Securities that has become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the
Securities, (iii) to the extent that payment of such interest is lawful,
interest upon overdue interest and overdue principal at the rate prescribed
therefor by such Securities, (iv) all sums paid or advanced by the Trustee under
this Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; (b) all Events of Default,
other than the non-payment of amounts of principal of, premium, if any, or
interest on the Securities that has become due solely by such declaration of
acceleration, have been cured or waived; and (c) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, premium, if any, or
interest on the Securities, to enforce the performance of any provision of the
Securities or this Indenture or to bring actions on behalf of the Holders of the
Securities against third parties. The Trustee may maintain a proceeding even if
it does not possess any of the Securities or does not produce any of them in the
proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
6.02, 6.07 and 9.02, the Holders of at least a majority in aggregate principal
amount of the outstanding Securities, by notice to the Trustee, may waive all
past Defaults and Events of Default and their consequences (except a Default in
the payment of principal of, premium, if any, or interest on any Security as
specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or
provision of this Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected thereby) if (i) all
existing Events of Default, other than the nonpayment of principal of, premium,
if any, or interest on the Securities that have become due solely by such
declaration of acceleration, have been cured or waived and (ii) the rescission
would not conflict with any judgment or decree of a court of
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competent jurisdiction. Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Securities may,
subject to Section 7.02(iv), direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders of Securities not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any direction received from Holders of Securities pursuant
to this Section 6.05.
SECTION 6.06. Limitation on Suits. A Holder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(i) the Holder gives the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate
principal amount of outstanding Securities make a written
request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee
indemnity satisfactory to the Trustee against any costs,
liabilities or expenses which may be incurred in compliance
with such request;
(iv) the Trustee does not comply with the request
within 60 days after receipt of the written request and the
offer of indemnity; and
(v) during such 60-day period, the Holders of a
majority in aggregate principal amount of the outstanding
Securities do not give the Trustee a direction that is
inconsistent with the request.
For purposes of Section 6.05 and this Section 6.06, the
Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Securities have concurred in any request or direction of the Trustee to pursue
any remedy available to the Trustee or the Holders with respect to this
Indenture or the Securities or otherwise under the law. A Holder may not use
this Indenture to prejudice the rights of another Holder or to obtain a
preference or priority over such other Holder.
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SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security to receive payment of the principal of, premium, if any, or
interest on such Security, or to bring suit for the enforcement of any such
payment, on or after the due date expressed in such Security, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of principal, premium or interest specified in clause (a) or
(b) of Section 6.01 occurs and is continuing, the Trustee may recover judgment
in its own name and as trustee of an express trust against the Issuers or any
other obligor of the Securities for the whole amount of principal, premium, if
any, and accrued interest remaining unpaid, together with interest on overdue
principal, premium, if any, and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at the rate
specified in the Securities, and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Issuers (or any other obligor of the Securities), its creditors or its
property and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Securities or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
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Second: to the Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium, if any, and interest,
respectively; and
Third: to the Issuers or any other obligors of the Securities,
as their interests may appear, or as a court of competent jurisdiction may
direct. The Trustee, upon prior written notice to the Issuers, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court may
require any party litigant in such suit to file an undertaking to pay the costs
of the suit, and the court may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Issuers, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Issuers, Trustee and the Holders shall continue as though no
such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities in Section 2.09, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing
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upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article Six or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of the
Trustee shall be as provided by the TIA and as set forth herein. Whether or not
herein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA
Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document and may
in good faith conclusively rely as to the truth of the statements and the
correctness of the opinions therein;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such certificate, opinion and/or an accountants' certificate;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any attorney or
agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction;
(v) the Trustee shall not be liable for any action it take
or omits to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance with
the direction of the Holders of a majority in principal amount of
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the outstanding Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; provided that the
Trustee's conduct does not constitute negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(vii) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Issuers personally or
by agent or attorney;
(viii) any request or direction of the Issuers mentioned
herein shall be sufficiently evidenced by an Issuer Order and any resolution of
any Board of Directors may be sufficiently evidenced by a Board Resolution; and
(ix) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in
its commercial banking or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Issuers or their Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to TIA Sections 310(b) and
311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the
Securities, (ii) shall not be accountable for the Issuers' use or application of
the proceeds from the Securities and (iii) shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event
of Default occurs and is continuing and if such Default or Event of
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Default is known to an officer assigned to administer corporate trust matters of
the Trustee, the Trustee shall mail to each Holder in the manner and to the
extent provided in TIA Section 313(c) notice of the Default or Event of Default
within 30 days after it occurs, unless such Default or Event of Default has been
cured; provided, however, that, except in the case of a default in the payment
of the principal of, premium, if any, or interest on any Security, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after each December 31, beginning with December 31, 1998, the Trustee shall mail
to each Holder as provided in TIA Section 313(c) a brief report that complies
with TIA Section 313(a) dated as of such December 31, if required by TIA Section
313(a).
SECTION 7.07. Compensation and Indemnity. The Issuers shall
pay to the Trustee from time to time such compensation as shall be agreed upon
in writing for its services. The compensation of the Trustee shall not be
limited by any law on compensation of a trustee of an express trust. The Issuers
shall reimburse the Trustee upon request for all reasonable out-of-pocket
expenses (including costs of collection) and advances incurred or made by the
Trustee. Such expenses shall include the reasonable compensation and expenses of
the Trustee's agents and counsel. The Issuers shall indemnify the Trustee for,
and hold it harmless against, any loss or liability or expense incurred by it
without negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Securities, including, without limitation, the costs and expenses of
investigating or defending itself against any claim or liability and of
complying with any process served upon it or any of its officers in connection
with the exercise or performance of any of its powers or duties under this
Indenture and the Securities.
To secure the Issuers' payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of, premium, if any, and
interest on particular Securities. If the Trustee incurs expenses or renders
services after the occurrence of an Event of Default specified in clause (h) or
(i) of Section 6.01, the expenses and the compensation for the services will be
intended to constitute expenses of administration under the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.08. Replacement of Trustee. A resignation or
removal of the Trustee and appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.08. The Trustee may resign at any time by so
notifying the Issuers in writing at least
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30 days prior to the date of the proposed resignation. The Holders of a majority
in principal amount of the outstanding Securities may remove the Trustee by so
notifying the Trustee in writing and may appoint a successor Trustee with the
consent of the Issuers. The Issuers may at any time remove the Trustee, by
Issuer Order given at least 30 days prior to the date of the proposed removal
if: (i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee
is adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer
takes charge of the Trustee or its property; or (iv) the Trustee becomes
incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Issuers. If the successor Trustee does not deliver its written acceptance
required by the next succeeding paragraph of this Section 7.08 within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers or the Holders of a majority in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder. If the Trustee is no
longer eligible under Section 7.10, any Holder who satisfies the requirements of
TIA Section 310(b) may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. The Issuers
shall give notice of any resignation and any removal of the Trustee and each
appointment of a successor Trustee to all Holders. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Issuers' obligations under Section 7.07 shall continue indefinitely for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee corporation
or national banking association without any further act shall be the successor
Trustee with the same effect as if the successor Trustee had been named as the
Trustee herein.
SECTION 7.10. Eligibility. This Indenture shall always have
a Trustee who satisfies requirements of TIA Section
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310(a)(1). The Trustee shall have a combined capital and surplus of at least
$25,000,000 as set forth in its most recent published annual report of
condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
in writing with the Issuers. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except for
money held in trust under Article Eight of this Indenture.
SECTION 7.12. Withholding Taxes. The Trustee, as agent for
the Issuers, shall exclude and withhold from each payment of principal and
interest and other amounts due hereunder or under the Securities any and all
withholding taxes applicable thereto as required by the federal law of the
United States or the law of the State of New York or any political subdivision
thereof ("U.S. Taxes"). The Trustee agrees to act as such withholding agent and,
in connection therewith, whenever any present or future U.S. Taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect of the Securities, to withhold such amounts and timely pay the same to
the appropriate authority in the name of and on behalf of the holders of the
Securities, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each holder of a Security appropriate documentation
showing the payment thereof, together with such additional documentary evidence
as such holders may reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Issuers' Obligations. Except as
otherwise provided in this Section 8.01, the Issuers may terminate their
obligations under the Securities and this Indenture if:
(i) all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities that have been replaced or
Securities that are paid pursuant to Section 4.01 or Securities for whose
payment money or securities have theretofore been held in trust and thereafter
repaid to the Note Issuers, as provided in Section 8.07) have been delivered to
the Trustee for cancellation and the Issuers have paid all sums payable by them
hereunder; or
(ii) (A) the Securities mature within one year or all of them
are to be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (B) the Note Issuers
irrevocably deposit in trust with the Trustee during such one-year period, under
the terms of an irrevocable trust agreement in form and substance satisfactory
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to the Trustee, as trust funds solely for the benefit of the Holders for that
purpose, cash or U.S. Government Obligations sufficient (in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee in the case of deposit of
U.S. Government Obligations or a combination of cash and U.S. Government
Obligations), without consideration of any reinvestment of any interest thereon,
to pay principal, premium, if, any, and interest on the Securities to maturity
or redemption, as the case may be, and to pay all other sums payable by it
hereunder, (C) no Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit, (D) such
deposit will not result in a breach or violation of, or constitute a default
under, this Indenture or any other material agreement or instrument to which any
of the Issuers is a party or by which any of the Issuers is bound and (E) the
Issuers have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, in each case stating that all conditions precedent provided for herein
relating to the satisfaction and discharge of this Indenture have been complied
with.
With respect to the foregoing clause (i), the Issuers'
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Issuers' obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06,
2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.06, 8.07 and 8.08 shall
survive until the Securities are no longer outstanding. Thereafter, only the
Issuers' obligations in Sections 7.07, 8.07 and 8.08 shall survive. After any
such irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Issuers' obligations under the Securities and this
Indenture except for those surviving obligations specified above.
SECTION 8.02. Issuers' Option to Effect Defeasance or Covenant
Defeasance. The Issuers may, at their option and at any time, with respect to
the Securities, elect to have either Section 8.03 or Section 8.04 applied to all
outstanding Securities upon compliance with the conditions set forth below in
this Article Eight.
SECTION 8.03. Defeasance and Discharge of Indenture. Upon the
Issuers' exercise under Section 8.02 of the option applicable to this Section
8.03, the Issuers will be deemed to have paid and will be discharged from any
and all obligations in respect of the Securities on the date the conditions set
forth in Section 8.05 are satisfied (hereinafter, a "defeasance"). For this
purpose, such defeasance means that the Issuers shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Securities,
and to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Issuers, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of outstanding Securities to
receive, solely from the trust fund described in Section 8.05 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any, on) and interest on such Securities when such payments are due, (B) the
Issuers' obligations with respect to such Securities under Sections 2.02, 2.03,
2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.02,
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7.07 and 7.08, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Eight. Subject to compliance with this
Article Eight, the Issuers may exercise their option under this Section 8.03
notwithstanding the prior exercise of their option under Section 8.04 with
respect to the Securities.
SECTION 8.04. Defeasance of Certain Obligations. Upon the
Issuers' exercise under Section 8.02 of the option applicable to this Section
8.04, the Issuers may omit to comply with any term, provision or condition set
forth in Section 4.03 or 4.04 with respect to the outstanding Securities on and
after the date the conditions set forth in Section 8.05 are satisfied
(hereinafter, a "covenant defeasance"). For this purpose, such covenant
defeasance means that, with respect to the outstanding Securities, the Issuers
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document, and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.01(d), but, except as specified
above, the remainder of this Indenture and such Securities shall be unaffected
thereby.
SECTION 8.05. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section 8.03 or
Section 8.04 to the outstanding Securities:
(a) The Issuers shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 who shall agree to comply with the provisions of this Article Eight
applicable to it), under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A) cash in
United States dollars, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient (as
indicated in an opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee in the case of deposit of U.S. Government Obligations or a combination
of cash and U.S. Governmental Obligations) to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and discharge,
the principal of (and premium, if any) and interest on the outstanding
Securities on the Stated Maturity (or Redemption Date, if applicable) of such
principal (and premium, if any) or installment of interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to said payments with respect to
the Securities:
(b) No Default or Event of Default with respect to the
Securities shall have
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occurred and be continuing on the date of such deposit or, insofar as paragraphs
(f) and (g) of Section 6.01 hereof are concerned, at any time during the period
ending on the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of such
period);
(c) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which any Issuer is a party or by
which any Issuer is bound;
(d) In the case of an election under Section 8.03, the Issuers
shall have delivered to the Trustee an Opinion of Counsel stating that (x) the
Issuers have received from, or there has been published by, the Internal Revenue
Service a ruling, or (y) since April 1, 1998, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(e) In the case of an election under Section 8.04, the Issuers
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Securities will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant defeasance and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such covenant defeasance had not
occurred; and
(f) The Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 8.03 or the covenant defeasance under Section 8.04 (as the case may be)
have been complied with.
SECTION 8.06. Application of Trust Money. Subject to Section
8.08, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.03 or 8.04, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Securities and this Indenture to
the payment of principal of, premium, if any, and interest on the Securities;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 8.07. Repayment to Issuers. Subject to Sections 7.07,
8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Note Issuers upon request any excess money held by them at any time and
thereupon shall be relieved from all liability with respect to such money. The
Trustee and the Paying Agent shall pay to the Issuers any money held by them for
the payment of principal, premium, if any, or
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<PAGE> 49
interest that remains unclaimed for two years; provided that the Trustee or such
Paying Agent before being required to make any payment may cause to be published
at the expense of the Issuers once in a newspaper of general circulation in the
City of New York or mail to each Holder entitled to such money at such Holder's
address (as set forth in the Security Register) notice that such money remains
unclaimed and that after a date specified therein (which shall be at least 30
days from the date of such publication or mailing) any unclaimed balance of such
money then remaining will be repaid to the Issuers. After payment to the
Issuers, Holders entitled to such money must look to the Issuers for payment as
general creditors unless an applicable law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
SECTION 8.08. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.03 or 8.04, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Issuers' obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.03
or 8.04, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01, 8.03 or 8.04, as the case may be; provided that, if the
Issuers have made any payment of principal of, premium, if any, or interest on
any Securities because of the reinstatement of its obligations, the Issuers
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Issuers, when
authorized by resolutions of their respective Boards of Directors, and the
Trustee may amend or supplement this Indenture or the Securities without notice
to or the consent of any Holder:
(a) to cure any ambiguity, or to correct or supplement any
provision in this Indenture or the Securities which may be defective or
inconsistent with any other provision in this Indenture or the Securities or
make any other provisions with respect to matters or questions arising under
this Indenture or the Securities; provided that, in each case, such provisions
shall not adversely affect the interests of the Holders;
(b) to evidence the succession of another Person to any of the
Issuers or any other obligor or guarantor on the Notes and the assumption by any
such successor of the covenants
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herein and in the Securities in accordance with Article Five hereof;
(c) to add to the covenants of the Issuers or any other
obligor or guarantor upon the Securities for the benefit of the Holders of the
Securities or to surrender any right or power conferred upon the Issuers or any
other obligor or guarantor upon the Securities, as applicable, under this
Indenture or the Securities;
(d) to comply with any requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the TIA:
(e) to add a guarantor of the Securities (in addition to
Continental);
(f) to evidence and provide for the acceptance of appointment
hereunder of a successor Trustee; or
(g) to mortgage, pledge, hypothecate or grant a security
interest in favor of the Trustee for the benefit of the Holders as additional
security for the payment and performance of the Issuers' obligations hereunder,
in any property or assets, including any of which are required to be mortgaged,
pledged or hypothecated, or in which a security interest is required to be
granted to the Trustee pursuant to this Indenture or otherwise.
SECTION 9.02. With Consent of Holders.
Subject to Sections 6.04 and 6.07 and without prior notice to the Holders, the
Issuers, when authorized by their respective Boards of Directors (as evidenced
by Board Resolutions), and the Trustee may amend this Indenture and the
Securities with the written consent of the Holders of a majority in principal
amount of the Securities then outstanding, and the Holders of a majority in
principal amount of the Securities then outstanding by written notice to the
Trustee may waive future compliance by the Issuers with any provision of this
Indenture or the Securities.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount of, or
premium, if any, or interest on, any Security, or change the place or currency
of payment of principal of, or premium, if any, or interest on, any Security, or
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption on or after the
Redemption Date) of any Security;
(ii) reduce the percentage in principal amount of outstanding
Securities, the consent of whose Holders is required for any supplemental
indenture, for any waiver of compliance with certain provisions of this
Indenture or for waiver of certain Defaults and their consequences provided for
in this Indenture;
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<PAGE> 51
(iii) waive a default in the payment of principal of, premium,
if any, or interest on the Securities;
(iv) modify any of the provisions of this Section 9.02, except
to increase the percentage of outstanding Securities required to take certain
actions hereunder or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Security affected thereby;
(v) except as otherwise permitted under Section 5.01, consent
to the assignment or transfer by any Issuer of any of its rights or obligations
under this Indenture; or
(vi) modify the Parent Guarantee or Article Ten of this
Indenture in any manner adverse to the interests of the holders of the
Securities.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Note Issuers shall mail to the Holders affected
thereby a notice briefly describing the amendment, supplement or waiver. The
Issuers will mail supplemental indentures to Holders upon request. Any failure
of the Note Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent.
Until an amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the Security of the
consenting Holder, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to its
Security or portion of its Security. Such revocation shall be effective only if
the Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver shall
become effective on receipt by the Trustee of written consents from the Holders
of the requisite percentage in principal amount of the outstanding Securities.
The Note Issuers may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
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SECTION 9.04. Notation on or Exchange of Securities . If an
amendment, supplement or waiver changes the terms of a Security, the Trustee may
require the Holder to deliver such Security to the Trustee. At the Note Issuers'
expense, the Trustee may place an appropriate notation on the Security about the
changed terms and return it to the Holder and the Trustee may place an
appropriate notation on any Security thereafter authenticated. Alternatively, if
the Note Issuers or the Trustee so determine, the Note Issuers, in exchange for
the Security, shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel and an Officers' Certificate stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture. Subject to the preceding sentence,
the Trustee shall sign such amendment, supplement or waiver if the same does not
adversely affect the rights, duties or immunities of the Trustee under this
Indenture or otherwise. The Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver that affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
PARENT GUARANTEE OF NOTES
SECTION 10.01. Unconditional Parent Guarantee. The Guarantor
hereby unconditionally guarantees to each Holder of a Note the due and punctual
payment of the principal of and premium, if any, and interest on, and any
Redemption Price with respect to, such Note, when and as the same shall become
due and payable, whether at maturity, by acceleration or redemption or
otherwise, in accordance with the terms of such Note and this Indenture. In case
of the failure of the Note Issuers punctually to pay any such principal, premium
or interest payment or Redemption Price, the Guarantor hereby agrees to cause
any such payment to be made punctually when and as the same shall become due and
payable, whether at maturity, upon acceleration or redemption or otherwise.
The Guarantor hereby agrees that its obligations hereunder
shall be as principal and not merely as surety, and shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or failure to enforce the provisions of any such Note or
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<PAGE> 53
this Indenture, or any waiver, modification, consent or indulgence granted to
the Note Issuers with respect thereto (unless the same shall also be provided to
the Guarantor), by the Holder of such Note or the Trustee, the recovery of any
judgment against either of the Note Issuers or any action to enforce the same,
or any other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger, insolvency or bankruptcy of any or both of the Note Issuers, any right
to require a proceeding first against either of the Note Issuers, protest or
notice with respect to any such Note (except as required hereunder) or the
indebtedness evidenced thereby and all demands whatsoever, and covenants that
this Parent Guarantee will not be discharged except by payment in full of the
principal, premium, if any, and interest on, and any Redemption Price in respect
of, the Notes and the complete performance of all other obligations contained in
the Notes.
The Guarantor hereby irrevocably agrees that any claim or
other rights that it may now have or hereafter acquire against the Note Issuers
that arise from the existence, payment, performance or enforcement of the Note
Issuers' obligations under the Notes or this Indenture, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, any right to participate in any claim or remedy of the Holder
of any Notes against the Note Issuers, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Note Issuers, directly
or indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim or other rights, shall be
subordinated and postponed in right of payment to the prior payment and
performance in full of all of the Note Issuers' obligations under the Notes or
this Indenture. If any amount shall be paid to the Guarantor in violation of the
preceding sentence and the obligations of the Note Issuers guaranteed by the
Guarantor pursuant hereto shall not have been paid in full, such amount shall be
deemed to have been paid to the Guarantor for the benefit of, and held in trust
for the benefit of, the Holders of Notes entitled to the benefit of this Parent
Guarantee, and shall forthwith be paid to the Trustee. The Guarantor
acknowledges that it will receive direct and indirect benefits from the issuance
of the Notes and that the agreement set forth in this paragraph is knowingly
made in contemplation of such benefits.
Upon the consolidation or merger of the Note Issuers with or
into the Guarantor, and the assumption by the Guarantor, in accordance with the
provisions of this Indenture, of the Note Issuers' obligations for the due and
punctual payment of the principal of and premium, if any, and interest on, and
any Redemption Price with respect to, all of the Notes and the performance and
observance of every covenant of this Indenture on the part of the Note Issuers
to be performed or observed, and the satisfaction of all other conditions to
such consolidation or merger herein provided, the Guarantor shall be discharged
from its obligations under this Article Ten.
ARTICLE ELEVEN
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MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939. Prior to the
effectiveness of the Registration Statement, this Indenture shall incorporate
and be governed by the provisions of the TIA that are required to be part of and
to govern indentures qualified under the TIA. Upon effectiveness of the
Registration Statement, this Indenture shall be subject to the provisions of the
TIA that are required to be a part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 11.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Note Issuers:
Calair L.L.C.
Calair Capital Corporation
c/o Continental Airlines, Inc.
2929 Allen Parkway
Suite 2010
Houston, TX 77019
Attention: Chief Financial Officer and
General Counsel
Telephone: (713) 834-2950
Telecopy: (713) 834-2687
if to the Guarantor:
Continental Airlines, Inc.
2929 Allen Parkway
Suite 2010
Houston, TX 77019
Attention: Chief Financial Officer and
General Counsel
Telephone: (713) 834-2950
Telecopy: (713) 834-2687
if to the Trustee:
For notices generally:
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Bank One, N.A.
100 East Broad St.
8th Floor
Columbus, OH 43215
Attention: Corporate Trust Department
Telephone: (614) 248-6229
Telecopy: (614) 248-5195
For payment of the Securities:
Bank One, N.A.
c/o First Chicago Trust Company
of New York, as agent for Bank One, N.A.
14 Wall Street
8th floor, Suite 4607
New York, NY 10005
Attention: John Bergin
Telephone: (212) 240-8878
Telecopy: (212) 240-8938
The Note Issuers, the Guarantor or the Trustee, by notice to
the others may designate additional or different addresses for subsequent
notices or communications. Notices shall be effective only upon receipt.
Any notice or communication mailed to a Holder shall be mailed
to him at his address as it appears on the Security Register by first class mail
and shall be sufficiently given to him if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received,
and except as otherwise provided in this Indenture, if a notice or communication
is mailed in the manner provided in this Section 11.02, it is duly given,
whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
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In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 11.03. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by any of the Issuers to the Trustee
to take any action under this Indenture, the applicable Issuer shall furnish to
the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion .
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in
such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with; provided,
however, that, with respect to matters of fact, an Opinion of Counsel may rely
on an Officers' Certificate or certificates of public officials.
SECTION 11.05. Rules by Trustee Paying Agent or Registrar.
The Trustee may make reasonable rules for action by or at a meeting of Holders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.06. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Payment Date, Stated Maturity or date of
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maturity of any Security shall not be a Business Day, then payment of principal
of, premium, if any, or interest on such Security, as the case may be, shall be
made on the next succeeding Business Day with the same force and effect as if
made on the Interest Payment Date, Payment Date, Redemption Date, or at the
Stated Maturity or date of maturity of such Security; provided that no
additional interest in respect thereof shall accrue for the period from and
after such Interest Payment Date, Payment Date, Redemption Date, Stated Maturity
or date of maturity, as the case may be, to the next succeeding Business Day.
SECTION 11.07. Governing Law. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 11.08. No Adverse Interpretation of Other Agreements .
This Indenture may not be used to interpret another indenture, loan or debt
agreement of any of the Issuers or any Subsidiary of any of the Issuers. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.09. No Recourse Against Others. No recourse for
the payment of the principal of, premium, if any, or interest on any of the
Securities, or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the Issuers
contained in this Indenture, or in any of the Securities, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator or against any past, present or future partner, shareholder, other
equity holder, officer, director, employee or controlling person, as such, of
the Issuers or of any successor Person, either directly or through the Issuers
or any successor Person, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Securities.
SECTION 11.10. Successors. All agreements of the Issuers in
this Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 11.11. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 11.12. Table of Contents, Headings, Etc.
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The Table of Contents, Cross-Reference Table and headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof and shall in no way modify or restrict
any of the terms and provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, as of the date first written above.
CALAIR L.L.C.
By: CALFINCO Inc., its Managing Member
By: /s/ JEFFREY J. MISNER
-------------------------------------------
Name: Jeffrey J. Misner
Title: Vice President -
Treasury Operations
CALAIR CAPITAL CORPORATION
By: /s/ JEFFREY J. MISNER
-------------------------------------------
Name: Jeffrey J. Misner
Title: Vice President - Treasury Operations
CONTINENTAL AIRLINES, INC.,
as Guarantor
By: /s/ GERALD LADERMAN
-------------------------------------------
Name: Gerald Laderman
Title: Vice President - Corporate Finance
BANK ONE, N.A.
as Trustee
By: /s/ RUTH H. FUSSELL
-------------------------------------------
Name: Ruth H. Fussell
Title: Vice President - Corporate Trust Dept.
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EXHIBIT A
FORM OF FACE OF INITIAL NOTE
[Global Note Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE ISSUERS OR THE
ISSUERS' AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 2.07 AND 2.08 OF THE INDENTURE.
[Legend for U.S. Global Security and the IAI Global Security]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CALAIR L.L.C. ("CALAIR"),
CALAIR CAPITAL CORPORATION ("CALAIR CAPITAL," AND TOGETHER WITH CALAIR, THE
"ISSUERS") OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
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RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR
(F) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF THE
FOREGOING CLAUSES (A) THROUGH (F), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE ISSUERS AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
[Legend for Offshore Global Security]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CALAIR L.L.C. ("CALAIR")
OR CALAIR CAPITAL CORPORATION ("CALAIR CAPITAL" AND, TOGETHER WITH CALAIR, THE
"ISSUERS") OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
56
<PAGE> 62
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D), (E) OR (F) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN THE CASE ANY OF THE FOREGOING CLAUSES (A) THROUGH (F), A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND THE TRUSTEE. THIS LEGEND WILL BE
REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A)
THE DAY ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS
(AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL
OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
[Legend for Temporary Offshore Global Security]
THIS GLOBAL SECURITY IS A TEMPORARY GLOBAL SECURITY FOR
PURPOSES OF REGULATION S UNDER THE SECURITIES ACT. NEITHER THIS TEMPORARY GLOBAL
SECURITY NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS
PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL SECURITY SHALL
BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE
REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE
INDENTURE.
57
<PAGE> 63
CALAIR, L.L.C.
CALAIR CAPITAL CORPORATION
8 1/8% Senior Note Due 2008
[CUSIP ______] [CINS ______]
No.
$____________
CALAIR L.L.C., a Delaware limited liability company, and
CALAIR CAPITAL CORPORATION, a Delaware corporation, as joint and several
obligors (together, the "Note Issuers," which term includes any successor under
the Indenture hereinafter referred to), for value received, promise to pay to
___________, or its registered assigns, the principal sum of [___________]
($[__________]) on April 1, 2008.
Interest Payment Dates: April 1 and October 1, commencing
October 1, 1998.
Regular Record Dates: March 15 and September 15.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, each Note Issuer has caused this Note to
be signed manually or by facsimile by its respective duly authorized officers.
CALAIR L.L.C.
By:CALFINCO Inc.,
Its Managing Member
By:______________________________
Name:
Title:
CALAIR CAPITAL CORPORATION
By:______________________________
Name:
Title:
58
<PAGE> 64
This is one of the 8 1/8% Senior Notes due 2008 referred to in
the within-mentioned Indenture.
Dated: April , 1998 BANK ONE, N.A.,
as Trustee
By:_________________________________
Authorized Signatory
59
<PAGE> 65
CONTINENTAL AIRLINES, INC., a Delaware corporation (the "Guarantor")
hereby acknowledges the joint and several obligations of its subsidiaries CALAIR
L.L.C., a Delaware limited liability company, and CALAIR CAPITAL CORPORATION, a
Delaware corporation, under the Indenture and this Note, and will cause such
Note Issuers to comply with their obligations under the Indenture and this Note.
The Guarantor hereby unconditionally guarantees to each Holder of this Note the
due and punctual payment of the principal of and premium, if any, and interest
on, and any redemption payment with respect to, this Note.
CONTINENTAL AIRLINES, INC.
By:
------------------------------
Name:
Title:
60
<PAGE> 66
[REVERSE SIDE OF INITIAL NOTE]
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
8 1/8% Senior Note due 2008
1. Principal and Interest.
The Note Issuers will pay the principal of this Note on April
1, 2008.
The Note Issuers promise to pay interest on the principal
amount of this Note on each Interest Payment Date, as set forth below, at the
rate per annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the March 15, or September 15,
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing October 1, 1998.
The Holder of this Note is entitled to the benefits of the
Exchange and Registration Rights Agreement, dated as of April 17, 1998, among
the Note Issuers, the Guarantor and the Initial Purchasers named therein (the
"Registrations Rights Agreement"). In the event that no Registration Event (as
defined in the Registration Rights Agreement) has occurred on or prior to the
210th day after the Closing Date, the interest rate per annum payable in respect
of the Notes shall be increased by 0.50%, effective from and including the 210th
day after the Closing Date, to but excluding the earlier of (i) the date on
which a Registration Event occurs and (ii) the date on which there cease to be
any Registrable Securities (as defined in the Registration Rights Agreement). In
the event that the Shelf Registration Statement (if it is filed), after it is
declared effective by the Commission, ceases to be effective at any time during
the period specified by Section 2(b)(B) of the Registration Rights Agreement for
more than 60 days, whether or not consecutive, during any 12-month period, the
interest rate per annum payable in respect of the Notes shall be increased by
0.50% from the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective until such time as the Shelf
Registration Statement again becomes effective (or, if earlier, the end of the
period specified by Section 2(b)(B) of the Registration Rights Agreement).
Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from April 17,
1998 provided that, if there is no existing default in the payment of interest
and this Note is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
The Note Issuers shall pay interest on overdue principal and
premium, if any, and
<PAGE> 67
(to the extent lawful) interest on overdue installments of interest at the rate
per annum borne by the Notes.
2. Method of Payment.
The Note Issuers will pay principal as provided above and
interest (except defaulted interest) on the principal amount of the Notes as
provided above on each April 1, and October 1 to the persons who are Holders (as
reflected in the Security Register at the close of business on the March 15 and
September 15 immediately preceding the Interest Payment Date), in each case,
even if the Note is cancelled on registration of transfer or registration of
exchange after such record date; provided that, with respect to the payment of
principal, the Note Issuers will not make payment to the Holder unless this Note
is surrendered to a Paying Agent.
The Note Issuers will pay principal, premium, if any, and as
provided above, interest in money of the United States of America that at the
time of payment is legal tender for payment of public and private debts. If a
payment date is a date other than a Business Day at a place of payment, payment
may be made at that place on the next succeeding day that is a Business Day and
no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Note Issuers may change any authenticating
agent, Paying Agent or Registrar without notice. The Note Issuers, any
Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar.
4. Indenture; Limitations.
The Note Issuers issued the Notes under an Indenture dated as
of April 1, 1998 (the "Indenture"), among the Note Issuers, as joint and several
obligors, Continental Airlines, Inc., as Guarantor, and Bank One, N.A., as
trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
The Notes and the Parent Guarantee are general unsecured,
unsubordinated indebtedness of each of the Note Issuers and the Guarantor,
respectively, rank pari passu in right of payment with all existing and future
unsecured, unsubordinated indebtedness of each of the Note Issuers and the
Guarantor, respectively, and will be senior in right of payment to all existing
and future subordinated indebtedness of each of the Note Issuers and the
Guarantor, respectively. The Indenture limits the original aggregate principal
amount of the Notes to $112,300,000 plus any Exchange Notes that may be issued
pursuant to the Registration Rights Agreement.
2
<PAGE> 68
5. Redemption.
The Note Issuers may, at their option at any time and from
time to time, redeem Securities, in whole or in part, at a redemption price
equal to the sum of (i) the principal amount thereof on the Redemption Date,
plus (ii) accrued and unpaid interest thereon, if any, to the Redemption Date,
plus (iii) the Make-Whole Premium, if any, with respect thereto. The Trustee
shall not be responsible for calculating any Make-Whole Premium with respect to
any Notes to be redeemed.
"Make-Whole Premium" means, with respect to any Security, the
excess, if any, of (A) the present value of the required interest and principal
payments due on such Security on or after the Redemption Date, computed using a
discount rate equal to the Treasury Rate plus 25 basis points, over (B) the sum
of the then outstanding principal amount of such Security plus the accrued and
unpaid interest thereon, if any, paid on the Redemption Date.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining Average Life of the Securities; provided, however, that if the
Average Life of the Securities is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Average Life of
the Securities is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed will be selected not more than 60 days prior to the
Redemption Date by the Trustee pro rata, by lot, or by such other method as the
Trustee will deem fair and appropriate; provided, however, that no such partial
redemption will reduce the principal amount of a Note not redeemed to less than
$1,000.
6. Notice of Redemption.
Notice of redemption will be mailed, first-class postage
prepaid, at least 20 days but not more than 60 days before the Redemption Date
to each Holder of Notes to be redeemed at such Holder's last address as it
appears in the Security Register. Notes in original denominations larger than
$1,000 may be redeemed in part; provided that Notes will only be issued in
denominations of $1,000 principal amount or integral multiples thereof. On and
after the Redemption Date, interest will cease to accrue on Notes or portions of
Notes called for redemption, unless the Note Issuers default in the payment of
the Redemption Price.
3
<PAGE> 69
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount and integral multiples thereof. A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Notes selected for redemption. Also, it need not
register the transfer or exchange of any Notes for a period of 15 days before a
selection of Notes to be redeemed is made.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Note Issuers. After that, Holders entitled to the
money must look to the Note Issuers for payment, unless an applicable law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Note Issuers deposit with the Trustee money or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes to the Stated Maturity (or
Redemption Date, if applicable), the Note Issuers and the Guarantor will be
discharged from certain covenants set forth in the Indenture and, in certain
circumstances, will be discharged from the Indenture and the Notes, except for
certain sections thereof.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Note Issuers and the Guarantor, among other things, to consolidate, merge or
sell all or substantially all of their
4
<PAGE> 70
respective assets.
13. Successor Persons.
Generally, when a successor person or other entity assumes all
the obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of any installment of interest on any
Security when it becomes due and payable and continuance of such default for a
period of 30 days; (b) default in the payment of the principal of or premium, if
any, on any Security at its Maturity (upon acceleration, optional redemption,
required purchase or otherwise); (c) default in the performance, or breach, of
the provisions of Section 5.01; (d) default in the performance, or breach, of
any covenant of the Note Issuers or the Guarantor contained in the Indenture
(other than a default in the performance, or breach, of a covenant which is
specifically dealt with in clause (a), (b) or (c) above) and continuance of such
default or breach for a period of 60 days after written notice shall have been
given to the Issuers by the Trustee or to the Issuers and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Securities then
outstanding; (e) the Parent Guarantee shall for any reason cease to be, or shall
be asserted in writing by a Note Issuer or the Guarantor not to be, in full
force and effect and enforceable in accordance with its terms and the terms of
the Indenture; (f) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of any of the Note Issuers or the Guarantor
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
any of the Note Issuers or the Guarantor or for all or substantially all of the
property and assets of any of the Note Issuers or the Guarantor or (C) the
winding up or liquidation of the affairs of any of the Note Issuers or the
Guarantor and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (g) any of the Note Issuers or
the Guarantor (A) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of any of the
Note Issuers or the Guarantor or all or substantially all of the property and
assets of the Note Issuers or the Guarantor or (C) effects any general
assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default
specified in clause (f) or (g) above that occurs with respect to any of the Note
Issuers or the Guarantor) occurs and is continuing under the Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Issuers (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the principal, premium, if any, and accrued interest
on the Notes to be immediately due and
5
<PAGE> 71
payable. If an Event of Default specified in clause (f) or (g) above occurs and
is continuing, the principal of, premium, if any, and accrued interest on the
Notes then outstanding shall ipso facto become and be due and payable without
any declaration or other act on the part of the Trustee or any Holder. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
15. Trustee Dealings with Issuers.
The Trustee under the Indenture, in its commercial banking or
any other capacity, may make loans to, accept deposits from and perform services
for the Issuers or their respective Affiliates and may otherwise deal with the
Issuers or their respective Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of any of the Note Issuers or the Guarantor or of any successor
Person shall have any liability for any obligations of any of the Note Issuers
or the Guarantor under the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
18. Governing Law.
THE NOTE AND THE GUARANTEE THEREOF SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the
6
<PAGE> 72
Committee on Uniform Security Identification Procedures the Note Issuers have
caused CUSIP numbers to be printed on the Notes and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Note Issuers will furnish to any Holder upon written
request and without charge a copy of the Indenture. Requests may be made to
Calair L.L.C. or Calair Capital Corporation, both care of Continental Airlines,
Inc., 2929 Allen Parkway, Suite 2010, Houston, Texas 77019, Attention: Corporate
Secretary.
7
<PAGE> 73
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip
code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Note on the books of the Note Issuers. The agent may substitute
another to act for him or her.
Date: Your Signature:
Signature Guarantee:
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
Sign exactly as your name appears on the other side of this Security.
8
<PAGE> 74
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No. __________________ Please
print or typewrite name and address including zip code of assignee
_____________________________________________ the within Note and all rights
thereunder, hereby irrevocably constituting and appointing
_________________________ attorney to transfer said Note on the books of the
Note Issuers with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL SECURITIES
OTHER THAN EXCHANGE NOTES, OFFSHORE GLOBAL SECURITIES AND
CERTIFICATED SECURITIES]
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of an effective Registration
Statement or (ii) the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or
other Registrar shall not be obligated to register this Note in the name of any
Person other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.08 of the Indenture
shall have been satisfied.
Date: _____________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
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<PAGE> 75
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Note Issuers as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
- -----------------------------------------------
NOTICE: To be executed by an executive officer
Dated: _____________
2
<PAGE> 76
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal amount Signature of
in Principal in Principal of this Global authorized officer
Date of Amount of this Amount of this Note following such of Trustee or
Exchange Global Note Global Note decrease or increase Notes Custodian
- -------- ----------- ----------- -------------------- ----------------
<S> <C> <C> <C> <C>
</TABLE>
3
<PAGE> 77
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
[Global Note Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUERS OR THEIR AGENTS FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO HEREIN.
CALAIR, L.L.C.
CALAIR CAPITAL CORPORATION
8 1/8% Senior Note Due 2008
[CUSIP ______] [CINS ______]
No.
$____________
CALAIR L.L.C., a Delaware limited liability company, and
CALAIR CAPITAL CORPORATION, a Delaware corporation, as joint and several
obligors (together, the "Note Issuers," which term includes any successor under
the Indenture hereinafter referred to), for value received, promise to pay to
___________, or its registered assigns, the principal sum of [___________]
($[__________]) on April 1, 2008.
Interest Payment Dates: April 1 and October 1, commencing
October 1, 1998.
Regular Record Dates: March 15 and September 15.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth
1
<PAGE> 78
at this place.
IN WITNESS WHEREOF, each Note Issuer has caused this Note to
be signed manually or by facsimile by its respective duly authorized officers.
CALAIR L.L.C.
By: CALFINCO Inc.,
Its Managing Member
By:
---------------------------------------
Name:
Title:
CALAIR CAPITAL CORPORATION
By:
------------------------------------------
Name:
Title:
This is one of the 81/8% Senior Notes due 2008 referred to in
the within-mentioned Indenture.
Dated: April , 1998 BANK ONE, N.A.,
as Trustee
By:
-----------------------------------
Authorized Signatory
CONTINENTAL AIRLINES, INC., a Delaware corporation (the
"Guarantor") hereby acknowledges the joint and several obligations of its
subsidiaries CALAIR L.L.C., a Delaware limited liability company, and CALAIR
CAPITAL CORPORATION, a Delaware corporation, under the Indenture and this Note,
and will cause such Note Issuers to comply with their obligations under the
Indenture and this Note. The Guarantor hereby unconditionally guarantees to each
Holder of this Note the due and punctual payment of the principal of and
premium, if any, and interest on, and any redemption payment with respect to,
this Note.
CONTINENTAL AIRLINES, INC.
By:
----------------------------------
Name:
Title:
<PAGE> 79
[REVERSE SIDE OF EXCHANGE NOTE]
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
8 1/8% Senior Note due 2008
1. Principal and Interest.
The Note Issuers will pay the principal of this Note on April
1, 2008.
The Note Issuers promise to pay interest on the principal
amount of this Note on each Interest Payment Date, as set forth below, at the
rate per annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the March 15 or September 15
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing October 1, 1998.
Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from April 17,
1998 provided that, if there is no existing default in the payment of interest
and this Note is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
The Note Issuers shall pay interest on overdue principal and
premium, if any, and (to the extent lawful) interest on overdue installments of
interest at the rate per annum borne by the Notes.
2. Method of Payment.
The Note Issuers will pay principal as provided above and
interest (except defaulted interest) on the principal amount of the Notes as
provided above on each April 1 and October 1 to the persons who are Holders (as
reflected in the Security Register at the close of business on the March 15 and
September 15 immediately preceding the Interest Payment Date), in each case,
even if the Note is cancelled on registration of transfer or registration of
exchange after such record date; provided that, with respect to the payment of
principal, the Note Issuers will not make payment to the Holder unless this Note
is surrendered to a Paying Agent.
The Note Issuers will pay principal, premium, if any, and as
provided above, interest in money of the United States of America that at the
time of payment is legal tender for
<PAGE> 80
payment of public and private debts. If a payment date is a date other than a
Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day and no interest shall accrue for the
intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Note Issuers may change any authenticating
agent, Paying Agent or Registrar without notice. The Note Issuers, any
Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar.
4. Indenture; Limitations.
The Note Issuers issued the Notes under an Indenture dated as
of April 1, 1998 (the "Indenture"), among the Note Issuers, as joint and several
obligors, Continental Airlines, Inc., as Guarantor, and Bank One, N.A., as
trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
The Notes and the Parent Guarantee are general unsecured,
unsubordinated indebtedness of each of the Note Issuers and the Guarantor,
respectively, rank pari passu in right of payment with all existing and future
unsecured, unsubordinated indebtedness of each of the Note Issuers and the
Guarantor, respectively, and will be senior in right of payment to all existing
and future subordinated indebtedness of each of the Note Issuers and the
Guarantor, respectively. The Indenture limits the original aggregate principal
amount of the Notes to $112,300,000 plus any Exchange Notes that may be issued
pursuant to the Registration Rights Agreement.
5. Redemption.
The Note Issuers may, at their option at any time and from
time to time, redeem Securities, in whole or in part, at a redemption price
equal to the sum of (i) the principal amount thereof on the Redemption Date,
plus (ii) accrued and unpaid interest thereon, if any, to the Redemption Date,
plus (iii) the Make-Whole Premium, if any, with respect thereto. The Trustee
shall not be responsible for calculating any Make-Whole Premium with respect to
any Notes to be redeemed.
"Make-Whole Premium" means, with respect to any Security, the
excess, if any, of (A) the present value of the required interest and principal
payments due on such Security on or after the Redemption Date, computed using a
discount rate equal to the Treasury Rate plus 25 basis points, over (B) the sum
of the then outstanding principal amount of such Security plus the accrued and
unpaid interest thereon, if any, paid on the Redemption Date.
2
<PAGE> 81
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining Average Life of the Securities; provided, however, that if the
Average Life of the Securities is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Average Life of
the Securities is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed will be selected not more than 60 days prior to the
Redemption Date by the Trustee pro rata, by lot, or by such other method as the
Trustee will deem fair and appropriate; provided, however, that no such partial
redemption will reduce the principal amount of a Note not redeemed to less than
$1,000.
6. Notice of Redemption.
Notice of redemption will be mailed, first-class postage
prepaid, at least 20 days but not more than 60 days before the Redemption Date
to each Holder of Notes to be redeemed at such Holder's last address as it
appears in the Security Register. Notes in original denominations larger than
$1,000 may be redeemed in part; provided that Notes will only be issued in
denominations of $1,000 principal amount or integral multiples thereof. On and
after the Redemption Date, interest will cease to accrue on Notes or portions of
Notes called for redemption, unless the Note Issuers default in the payment of
the Redemption Price.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount and integral multiples thereof. A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Notes selected for redemption. Also, it need not
register the transfer or exchange of any Notes for a period of 15 days before a
selection of Notes to be redeemed is made.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
3
<PAGE> 82
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Note Issuers. After that, Holders entitled to the
money must look to the Note Issuers for payment, unless an applicable law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Note Issuers deposit with the Trustee money or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes to the Stated Maturity (or
Redemption Date, if applicable), the Note Issuers and the Guarantor will be
discharged from certain covenants set forth in the Indenture and, in certain
circumstances, will be discharged from the Indenture and the Notes, except for
certain sections thereof.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Note Issuers and the Guarantor, among other things, to consolidate, merge or
sell all or substantially all of their respective assets.
13. Successor Persons.
Generally, when a successor person or other entity assumes all
the obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of any installment of interest on any
Security when it becomes due and payable and continuance of such default for a
period of 30 days; (b) default in the payment of the principal of or premium, if
any, on any Security at its Maturity (upon acceleration, optional
4
<PAGE> 83
redemption, required purchase or otherwise); (c) default in the performance, or
breach, of the provisions of Section 5.01; (d) default in the performance, or
breach, of any covenant of the Note Issuers or the Guarantor contained in the
Indenture (other than a default in the performance, or breach, of a covenant
which is specifically dealt with in clause (a), (b) or (c) above) and
continuance of such default or breach for a period of 60 days after written
notice shall have been given to the Issuers by the Trustee or to the Issuers and
the Trustee by the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding; (e) the Parent Guarantee shall for any reason cease
to be, or shall be asserted in writing by a Note Issuer or the Guarantor not to
be, in full force and effect and enforceable in accordance with its terms and
the terms of the Indenture; (f) a court having jurisdiction in the premises
enters a decree or order for (A) relief in respect of any of the Note Issuers or
the Guarantor in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
any of the Note Issuers or the Guarantor or for all or substantially all of the
property and assets of any of the Note Issuers or the Guarantor or (C) the
winding up or liquidation of the affairs of any of the Note Issuers or the
Guarantor and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (g) any of the Note Issuers or
the Guarantor (A) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of any of the
Note Issuers or the Guarantor or for all or substantially all of the property
and assets of the Note Issuers or the Guarantor or (C) effects any general
assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default
specified in clause (f) or (g) above that occurs with respect to any of the Note
Issuers or the Guarantor) occurs and is continuing under the Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Issuers (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the principal, premium, if any, and accrued interest
on the Notes to be immediately due and payable. If an Event of Default specified
in clause (f) or (g) above occurs and is continuing, the principal of, premium,
if any, and accrued interest on the Notes then outstanding shall ipso facto
become and be due and payable without any declaration or other act on the part
of the Trustee or any Holder. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of at least a majority in principal amount of the
Notes then outstanding may direct the Trustee in its exercise of any trust or
power.
15. Trustee Dealings with Issuers.
The Trustee under the Indenture, in its commercial banking or
any other capacity, may make loans to, accept deposits from and perform services
for the Issuers or their respective Affiliates and may otherwise deal with the
Issuers or their respective Affiliates as if it were not the Trustee.
5
<PAGE> 84
16. No Recourse Against Others.
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of any of the Note Issuers or the Guarantor or of any successor
Person shall have any liability for any obligations of any of the Note Issuers
or the Guarantor under the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
18. Governing Law.
THE NOTE AND THE GUARANTEE THEREOF SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Note Issuers have caused CUSIP
numbers to be printed on the Notes and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Note Issuers will furnish to any Holder upon written
request and without charge a copy of the Indenture. Requests may be made to
Calair L.L.C. or Calair Capital Corporation, both care of Continental Airlines,
Inc., 2929 Allen Parkway, Suite 2010, Houston, Texas 77019, Attention: Corporate
Secretary.
6
<PAGE> 85
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip
code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Note on the books of the Note Issuers. The agent may substitute
another to act for him or her.
Date: Your Signature:
Signature Guarantee:
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
Sign exactly as your name appears on the other side of this Security.
7
<PAGE> 86
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No. __________________ Please
print or typewrite name and address including zip code of assignee
_____________________________________________ the within Note and all rights
thereunder, hereby irrevocably constituting and appointing
_________________________ attorney to transfer said Note on the books of the
Note Issuers with full power of substitution in the premises.
<PAGE> 87
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note
have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal amount Signature of
in Principal in Principal of this Global authorized officer
Date of Amount of this Amount of this Note following such of Trustee or
Exchange Global Note Global Note decrease or increase Notes Custodian
- -------- ----------- ----------- -------------------- ----------------
<S> <C> <C> <C> <C>
</TABLE>
2
<PAGE> 88
EXHIBIT C
Form of Certificate to be Delivered
Upon Termination of Restricted Period
---------- ---, ----
BANK ONE, N.A.
235 West Schrock Road
Westerville, OH 43081
Attention: Corporate Trust Operations
Re: Calair L.L.C. and Calair Capital Corporation (the "Note Issuers")
81/8% Senior Notes due 2008 (the "Securities")
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of April 1, 1998
(the "Indenture"), between the Note Issuers, Continental Airlines, Inc. (the
"Guarantor") and together with the Note Issuers, the "Issuers") and Bank One,
N.A. Capitalized terms used herein and to otherwise defined have the meanings
set forth in the Indenture.
[For purposes of acquiring a beneficial interest in the Permanent
Offshore Global Security upon the expiration of the Restricted Period,][For
purposes of receiving payments under the Temporary Offshore Global Security],
the undersigned holder of a beneficial interest in the Temporary Offshore Global
Security issued under the Indenture certifies that it [is not a U.S. person as
defined by Regulation S under] [purchased such interest pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of] the
Securities Act of 1933, as amended.
We understand that his certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
Very truly yours,
[Name of Holder]
By:
-----------------------------------
Authorized Signature
1
<PAGE> 89
EXHIBIT D
Form of Certificate to be Delivered in Connection
with Transfers Non-QIB Institutional Accredited Investors
Transferee Letter of Representation
---------- ---, ----
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
c/o Bank One, N.A., as Trustee
235 West Schrock Road
Westerville, OH 43081
Attention: Corporate Trust Operations
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $_________
principal amount of the 81/8% Senior Notes due 2008 (the "Notes") of Calair
L.L.C. and Calair Capital Corporation (the "Issuers").
Upon transfer, the Notes would be registered in the name of the new
beneficial owners as follows:
Name:
Address:
Taxpayer ID Number:
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")), purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We and any accounts for which we are acting, are each able to bear the
economic risk of our or its investment.
<PAGE> 90
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date that is two years after the later of the date of
original issue of such Notes and the last date on which the Issuers or any
affiliate of the Issuers was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Issuers,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a person we reasonably believe
is a qualified institutional investor under Rule 144A (a "QIB") that purchases
for its own account or for the account of a QIB and to whom notice is given that
the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of Rule 501 (a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Notes of
$250,000 or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property of
such investor account or accounts be at all times within our or their control
and in compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to be
made pursuant to clause (e) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee substantially in
the form of this letter to the Issuers and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of Rule 501 (a)(1), (2), (3) or (7) under the
Securities Act and that it is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Issuers and the Trustee reserve the right prior to the
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Notes pursuant to clause (d), (e) or (f) above to require the delivery of
an opinion of counsel, certifications or other information satisfactory to the
Issuers and the Trustee.
TRANSFEREE:
BY:
2
<PAGE> 91
Upon transfer the Notes would be registered in the name of the new
beneficial owner as follows:
<TABLE>
<CAPTION>
NAME Address Taxpayer ID Number:
<S> <C> <C>
</TABLE>
Very truly yours,
[Name of Transferor]
By:
--------------------------------------
Name: Signature Medallion Guaranteed
3
<PAGE> 92
EXHIBIT E
Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S
---------- ---, ----
BANK ONE, N.A.
235 West Schrock Road.
Westerville, OH 43081
Attention: Corporate Trust Operations
Re: Calair L.L.C. and Calair Capital Corporation (the "Note Issuers")
81/8% Senior Notes due 2008 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of U.S. $__________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (i) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States or (ii)
the transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made by us, any affiliate of
ours, or any Person acting on our or their behalf, in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act . In addition, if the sale is
made during a restricted period and the provisions of Rule 903(c)(3) or Rule
904(c)(1) of Regulation S are applicable thereto, the undersigned confirms that
such sale has been made in accordance with the applicable provisions of Rule
903(c)(3) or Rule 904(c)(1), as the case may be.
<PAGE> 93
You and the Note Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------
Authorized Signature
<PAGE> 1
Exhibit 4.3
EXECUTION COPY
================================================================================
Exchange and Registration Rights Agreement
Dated as of April 17, 1998
among
Calair L.L.C. and
Calair Capital Corporation,
as Note Issuers,
and
Continental Airlines, Inc.,
as Guarantor,
and
Chase Securities Inc.,
Credit Suisse First Boston Corporation and
Morgan Stanley & Co. Incorporated,
as Purchasers
================================================================================
<PAGE> 2
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of April 17, 1998, among (i) Calair
L.L.C., a Delaware limited liability company ("Calair"), and Calair Capital
Corporation, a Delaware corporation ("Calair Capital" and, together with
Calair, the "Note Issuers"), (ii) Continental Airlines, Inc., a Delaware
corporation (the "Guarantor" and, together with the Note Issuers, the
"Issuers"), and (iii) Chase Securities, Inc., Credit Suisse First Boston
Corporation and Morgan Stanley & Co. Incorporated (together, the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated April 14, 1998, among the Issuers and the Purchasers (the "Purchase
Agreement"), which provides that the Note Issuers will issue and sell
$112,300,000 principal amount of 8?% Senior Notes due 2008 (the "Initial
Notes"). The Initial Notes will be fully guaranteed on an unsecured, senior
basis by the Guarantor. The Initial Notes together with such guarantee are
referred to herein as the "Initial Securities". In order to induce the
Purchasers to enter into the Purchase Agreement, the Issuers have agreed to
provide to the Purchasers and their successors, assigns and direct and indirect
transferees the exchange and registration rights set forth in this Agreement.
The execution and delivery of this Agreement is a condition to the closing
under the Purchase Agreement.
In consideration of the foregoing, the Issuers and the
Purchasers agree as follows:
1. Definitions. The definitions set forth in this
Agreement shall apply equally to both singular and plural forms of the terms
defined. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Agreement" shall have the meaning set forth in the preamble
of this Agreement.
"Business Day" shall mean any day on which the New York Stock
Exchange, Inc. is open for trading and banks in The City of New York
are open for business; references to "day" shall mean a calendar day.
"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
"DTC" shall mean the Depository Trust Company or any other
depositary appointed by the Issuers; provided, however, that any such
depositary must have an address in the Borough of Manhattan, in The
City of New York.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
<PAGE> 3
2
"Exchange Offer" shall mean the exchange offer by the Issuers
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean a
Registration Statement on Form S-4 (or, if applicable, on another
appropriate form) filed with the SEC pursuant to Section 2(a) of this
Agreement, and all amendments and supplements to such Registration
Statement, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"Exchange Securities" shall mean the securities to be issued
under the Indenture, together with the guarantee thereof by the
Guarantor provided for in the Indenture, and otherwise containing
terms identical in all material respects to the Initial Securities
(except that, with respect to the Exchange Securities, (i) interest
thereon shall accrue as set forth in Section 2(a) hereof, (ii) the
transfer restrictions thereon (other than the transfer restrictions
provided for in Section 2.08(e) of the Indenture relating to certain
ERISA matters) shall be eliminated, (iii) certain provisions relating
to an increase in the stated rate of interest thereon shall be
eliminated and (iv) such Exchange Securities shall initially be
available only in book-entry form) to be offered to Holders of Initial
Securities in exchange for Initial Securities pursuant to the Exchange
Offer.
"Holders" shall mean each of the Purchasers, for so long as
they own any Registrable Securities, and each of their successors,
assigns and direct and indirect transferees who become owners of
Registrable Securities.
"Indenture" shall mean the indenture relating to the
Securities entered into among the Issuers and the Trustee and dated as
of April 1, 1998.
"Initial Notes" has the meaning set forth in the preamble of
this Agreement.
"Initial Securities" has the meaning set forth in the preamble
of this Agreement.
"Issuers" shall have the meaning set forth in the preamble of
this Agreement and shall include the Issuers' respective successors.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
provided that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Issuers or any "affiliate" (as such
<PAGE> 4
3
term is defined in Rule 405 under the 1933 Act) of an Issuer (other
than the Purchasers or subsequent holders of Registrable Securities if
such subsequent holders are deemed to be affiliates solely by reason
of their holding of such Registrable Securities) shall be disregarded
in determining whether such consent or approval was given by the
Holders of such required percentage or amount.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Note Issuers" shall have the meaning set forth in the
preamble of this Agreement and shall include the Note Issuers'
respective successors.
"Participating Broker-Dealer" shall have the meaning set forth
in Section 3(f) of this Agreement.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities
covered by a Shelf Registration Statement, and by all other amendments
and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Purchasers" shall have the meaning set forth in the preamble
of this Agreement.
"Registrable Securities" shall mean the Initial Securities;
provided, however, that the Initial Securities shall cease to be
Registrable Securities when (i) a Shelf Registration Statement with
respect to such Initial Securities shall have been declared effective
under the 1933 Act and such Initial Securities shall have been
disposed of pursuant to such Shelf Registration Statement, (ii) such
Initial Securities shall have been sold to the public pursuant to
paragraph (k) of Rule 144 (or any similar provision then in force, but
not Rule 144A) under the 1933 Act or may then be sold to the public
pursuant to said Rule 144 (or any similar provision then in force) by
Holders other than "affiliates" or former "affiliates" (as such term
is defined in paragraph (a) of Rule 144) of the Issuers, (iii) such
Initial Securities shall have ceased to be outstanding or (iv) such
Initial Securities have been exchanged for Exchange Securities upon
consummation of the Exchange Offer.
<PAGE> 5
4
"Registration Default" shall have the meaning set forth in
Section 2(b) of this Agreement.
"Registration Event" shall mean the declaration of the
effectiveness by the SEC of an Exchange Offer Registration Statement
or a Shelf Registration Statement.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Issuers with this
Agreement, including without limitation: (i) all SEC, stock exchange
or NASD registration and filing fees, (ii) all fees and expenses
incurred in connection with compliance with state or other securities
or blue sky laws and compliance with the rules of the NASD (including
reasonable fees and disbursements of counsel for any underwriters or
Holders in connection with state or other securities or blue sky
qualification of any of the Exchange Securities or Registrable
Securities), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and
other documents relating to the performance of and compliance with
this Agreement, (iv) all rating agency fees, (v) all fees and expenses
incurred in connection with the listing, if any, of any of the
Registrable Securities on any securities exchange or exchanges, (vi)
all fees and disbursements relating to the qualification of the
Indenture under applicable securities laws, (vii) the fees and
disbursements of counsel for the Issuers and of the independent public
accountants of the Issuers, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, (viii) the fees and expenses of the
Trustee and any paying agent (including related fees and expenses of
any counsel to such parties); and (ix) any reasonable fees and
disbursements of the underwriters, if any, and the reasonable fees and
expenses of any special experts retained by the Issuers in connection
with any Registration Statement, in each case as are customarily
required to be paid by issuers or sellers of securities, but excluding
fees of counsel to the underwriters or the Holders and underwriting
discounts and commissions and transfer taxes, if any relating to the
sale or disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement
of the Issuers which covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement,
and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission, as
from time to time constituted or created under the 1934 Act, or, if at
any time after the execution of this
<PAGE> 6
5
instrument such Commission is not existing and performing the duties
now assigned to it under the TIA, then the body performing such duties
on such date.
"Shelf Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Issuers pursuant to the provisions of
Section 2(b) of this Agreement which covers some or all of the
Registrable Securities on an appropriate form under Rule 415 under the
1933 Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Staff" shall mean the Staff of the Division of Corporation
Finance of the SEC.
"TIA" shall have the meaning set forth in Section 3(l) of this
Agreement.
"Trustee" shall mean Bank One, N.A.
2. Registration under the 1933 Act. (a) Exchange Offer
Registration. To the extent not prohibited by any applicable law or applicable
interpretation of the Staff, each of the Issuers shall use its best efforts (A)
to file with the SEC within 120 days after the Closing Date an Exchange Offer
Registration Statement covering the offer by the Issuers to the Holders to
exchange all of the Registrable Securities for Exchange Securities, (B) to
cause such Exchange Offer Registration Statement to be declared effective by
the SEC within 180 days after the Closing Date, (C) to cause such Registration
Statement to remain effective until the closing of the Exchange Offer and (D)
to consummate the Exchange Offer within 210 days after the Closing Date. Upon
the effectiveness of the Exchange Offer Registration Statement, the Issuers
shall promptly commence the Exchange Offer, it being the objective of such
Exchange Offer to enable each Holder (other than Participating Broker-Dealers)
eligible and electing to exchange Registrable Securities for Exchange
Securities (assuming that such Holder is not an affiliate of any of the Issuers
within the meaning of Rule 405 under the 1933 Act, acquires the Exchange
Securities in the ordinary course of such Holder's business and has no
arrangements or understandings with any person to participate in the Exchange
Offer for the purpose of distributing the Exchange Securities) to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the 1933 Act and without material restrictions under the
securities laws of a substantial proportion of the several states of the United
States.
In connection with the Exchange Offer, the Issuers shall:
<PAGE> 7
6
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than
30 days after the date notice thereof is mailed to the Holders (or
longer if required by applicable law);
(iii) use the services of DTC for the Exchange Offer
with respect to Initial Securities evidenced by global notes;
(iv) permit Holders to withdraw tendered Registrable
Securities at any time prior to the close of business, New York City
time, on the last Business Day on which the Exchange Offer shall
remain open, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange, and a statement that such Holder is
withdrawing its election to have such Registrable Securities
exchanged;
(v) use their best efforts to ensure that (i) any
Exchange Offer Registration Statement and any amendment thereto and
any Prospectus forming part thereof and any supplement thereto
complies in all material respects with the 1933 Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration Statement
and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any
Exchange Offer Registration Statement, and any supplement to such
Prospectus (as amended or supplemented from time to time), does not
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in light of
the circumstances under which they were made, not misleading; and
(vi) otherwise comply in all respects with all
applicable laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Issuers shall:
(i) accept for exchange Registrable Securities duly
tendered and not validly withdrawn pursuant to the Exchange Offer in
accordance with the terms of the Exchange Offer Registration Statement
and the letter of transmittal which is an exhibit thereto;
<PAGE> 8
7
(ii) cancel or cause to be canceled all Registrable
Securities so accepted for exchange by the Issuers; and
(iii) promptly cause to be authenticated and
delivered Exchange Securities to each Holder of Registrable Securities
equal in amount to the Registrable Securities of such Holder so
accepted for exchange.
Interest on each Exchange Security will accrue from the last
date on which interest was paid on the Registrable Securities surrendered in
exchange therefor or, if no interest has been paid on the Registrable
Securities, from the Closing Date. The Exchange Offer shall not be subject to
any conditions, other than that the Exchange Offer, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the Staff. Each Holder of Registrable Securities (other than
Participating Broker-Dealers) who wishes to exchange such Registrable
Securities for Exchange Securities in the Exchange Offer shall represent that
(i) it is neither an "affiliate" of any of the Issuers within the meaning of
Rule 405 under the 1933 Act, nor a broker-dealer tendering Registrable
Securities acquired directly from the Issuers for its own account, (ii) any
Exchange Securities to be received by it were acquired in the ordinary course
of business and (iii) it has no arrangement with any Person to participate in
the distribution (within the meaning of the 1933 Act) of the Exchange
Securities.
(b) Shelf Registration. (i) If, because of any change in
law or applicable interpretations thereof by the Staff, the Issuers are not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
or (ii) if for any other reason the Exchange Offer Registration Statement is
not declared effective within 180 days after the Closing Date or the Exchange
Offer is not consummated within 210 days after the Closing Date (a
"Registration Default"), or (iii) upon the request of any Holder (other than a
Purchaser) who is not eligible to participate in the Exchange Offer, or (iv)
upon the request of any Purchaser (with respect to any Registrable Securities
which it acquired directly from the Issuers) following the consummation of the
Exchange Offer if such Purchaser shall hold Registrable Securities which it
acquired directly from the Issuers and if such Purchaser is not permitted, in
the opinion of counsel to such Purchaser, pursuant to applicable law or
applicable interpretation of the Staff, to participate in the Exchange Offer,
the Issuers shall, at their expense:
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the
Registrable Securities by the Holders from time to time in accordance
with the methods of distribution elected by the Majority Holders of
such Registrable Securities and set forth in such Shelf Registration
Statement, and use its best efforts to cause such Shelf Registration
Statement to be declared effective by the SEC by the 180th day after
the Closing Date (or promptly in the event of a request by any Holder
pursuant to clause (iii) above or any Purchaser pursuant to clause
(iv) above). In the event that the Issuers are required to file a
Shelf Registration Statement
<PAGE> 9
8
upon the request of any Holder (other than a Purchaser) not eligible
to participate in the Exchange Offer pursuant to clause (iii) above or
upon the request of any Purchaser pursuant to clause (iv) above, the
Issuers shall file and have declared effective by the SEC both an
Exchange Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Securities and a Shelf Registration
Statement (which may be a combined Registration Statement with the
Exchange Offer Registration Statement) with respect to offers and
sales of Registrable Securities held by such Holder or such Purchaser
after completion of the Exchange Offer. If the Issuers file a Shelf
Registration Statement pursuant to Section 2(b)(i) or (ii) hereof,
they will no longer be required to effect the Exchange Offer;
(B) use their best efforts to keep the Shelf Registration
Statement continuously effective, in order to permit the Prospectus
forming part thereof to be usable by Holders, until the end of the
period referred to in Rule 144(k) (or one year from the Closing Date
if such Shelf Registration Statement is filed upon the request of any
Purchaser pursuant to clause (iv) above) or such shorter period as
shall end when all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf
Registration Statement or may be freely sold pursuant to Rule 144
under the Securities Act; and
(C) notwithstanding any other provisions hereof, use
their best efforts to ensure that (i) any Shelf Registration Statement
and any amendment thereto and any Prospectus forming part thereof and
any supplement thereto complies in all material respects with the 1933
Act and the rules and regulations thereunder, (ii) any Shelf
Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Shelf Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from time to
time), does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements, in
light of the circumstances under which they were made, not misleading.
The Issuers further agree, if necessary, to supplement or
amend the Shelf Registration Statement if reasonably requested by the Majority
Holders with respect to information relating to the Holders and otherwise as
required by Section 3(b) below, to use their best efforts to cause any such
amendment to become effective and such Shelf Registration Statement to become
usable as soon as practicable thereafter and to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly
after its being used or filed with the SEC.
The Issuers shall be allowed a period of five days, beginning
on the first day a
<PAGE> 10
9
Registration Default occurs, to cure such Registration Default before the
Issuers will be required to comply with the requirements of Section 2(b).
(c) Expenses. The Issuers, jointly and severally, shall
pay all Registration Expenses in connection with the registration pursuant to
Section 2(a) or 2(b) and, in the case of any Shelf Registration Statement, will
reimburse the Holders or Purchasers for the reasonable fees and disbursements
of one firm or counsel designated in writing by the Majority Holders to act as
counsel for the Holders of the Registrable Securities in connection therewith.
Each Holder shall pay all expenses of its counsel, other than as set forth in
the preceding sentence, underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The Issuers
will be deemed not to have used their best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if any Issuer
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable
Securities covered thereby not being able to exchange or offer and sell such
Registrable Securities during that period unless (A) such action is required by
applicable law or (B) such action is taken by the Issuers in good faith and for
valid business reasons (not including avoidance of the Issuers' obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, so long as the Issuers promptly comply with the requirements of Section
3(j) hereof, if applicable.
(ii) An Exchange Offer Registration Statement
pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to
Section 2(b) hereof will not be deemed to have become effective unless it has
been declared effective by the SEC; provided, however, that if, after it has
been declared effective, the offering of Registrable Securities pursuant to a
Registration Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or
court, such Registration Statement will be deemed not to have been effective
during the period of such interference, until the offering of Registrable
Securities pursuant to such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that no
Registration Event has occurred on or prior to the 210th day after the Closing
Date, the interest rate per annum payable in respect of the Registrable
Securities shall be increased by 0.50%, effective from and including such 210th
day, to but excluding the earlier of (i) the date on which a Registration Event
occurs and (ii) the date on which there cease to be any Registrable Securities.
In the event that the Shelf Registration Statement (if it is filed), after it
is declared effective by the SEC, ceases to be effective at any time during the
period specified by Section 2(b)(B) hereof for more than 60 days, whether or
not consecutive, during any 12-month period, the interest rate payable in
respect of the Registrable Securities shall be increased by 0.50% per annum
from the 61st day of the
<PAGE> 11
10
applicable 12-month period such Shelf Registration Statement ceases to be
effective until such time as the Shelf Registration Statement again becomes
effective (or, if earlier, the end of the period specified by Section 2(b)(B)
hereof).
3. Registration Procedures. In connection with the
obligations of the Issuers with respect to the Registration Statements pursuant
to Sections 2(a) and 2(b) hereof, the Issuers shall:
(a) prepare and file with the SEC a Registration
Statement, within the time period specified in Section 2, on the
appropriate form under the 1933 Act, which form (i) shall be selected
by the Issuers, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling
Holders thereof and (iii) shall comply as to form in all material
respects with the requirements of the applicable form;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period; cause each Prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act;
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities when a Shelf Registration Statement
with respect to the Registrable Securities has been filed and advise
such Holders that the distribution of Exchange Securities will be made
in accordance with the method elected by the Majority Holders; (ii)
furnish to each Holder of Registrable Securities included within the
coverage of the Shelf Registration Statement at least one copy of such
Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so
requests in writing, all reports, other documents and exhibits
(including those incorporated by reference) at the expense of the
Issuers, (iii) furnish to each Holder of Registrable Securities
included within the coverage of the Shelf Registration Statement, to
counsel for the Holders and to each underwriter of an underwritten
offering of Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto as such Holder or underwriter may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities; and (iv) subject to the
last paragraph of this Section 3, consent to the use of the Prospectus
or any amendment or supplement thereto by each of the selling Holders
of Registrable Securities included in the Shelf Registration Statement
in connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto;
(d) use their best efforts to register or qualify the
Registrable Securities or
<PAGE> 12
11
cooperate with the Holders of Registrable Securities and their counsel
in the registration or qualification of such Registrable Securities
under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement and each underwriter of an underwritten
offering of Registrable Securities shall reasonably request in writing
to cooperate with the Holders in connection with any filings required
to be made with the NASD, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such Holders
to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holders; provided, however, that
in no event shall any Issuer be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d)
or (ii) take any action which would subject it to general service of
process or taxation in any such jurisdiction if it is not then so
subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Securities promptly and, if requested by such
Holder or counsel, confirm such advice in writing promptly (i) when a
Shelf Registration Statement has become effective and when any
post-effective amendments and supplements thereto become effective,
(ii) of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Shelf Registration
Statement and Prospectus or for additional information after the Shelf
Registration Statement has become effective, (iii) of the issuance by
the SEC or any state securities authority of any stop order suspending
the effectiveness of a Shelf Registration Statement or the initiation
of any proceedings for that purpose, (iv) at the closing of any sale
of Registrable Securities if, between the effective date of a Shelf
Registration Statement and such closing, the representations and
warranties of the Issuers contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any,
relating to such offering cease to be true and correct in all material
respects, (v) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the happening
of any material event or the discovery of any material facts during
the period a Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related
Prospectus untrue or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein (in the case of the Prospectus in light of the circumstances
under which they were made) not misleading and (vii) of any
determination by the Issuers that a post-effective amendment to a
Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in
the Exchange Offer Registration Statement a "Plan of Distribution"
section covering the use of the Prospectus included in the Exchange
Offer Registration Statement by broker-dealers who have
<PAGE> 13
12
exchanged their Registrable Securities for Exchange Securities for the
resale of such Exchange Securities, (ii) furnish to each broker-dealer
who desires to participate in the Exchange Offer, without charge, as
many copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary prospectus, and any
amendment or supplement thereto, as such broker-dealer may reasonably
request, (iii) include in the Exchange Offer Registration Statement a
statement that any broker-dealer who holds Registrable Securities
acquired for its own account as a result of market-making activities
or other trading activities (a "Participating Broker-Dealer"), and who
receives Exchange Securities for Registrable Securities pursuant to
the Exchange Offer, may be a statutory underwriter and must deliver a
prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Securities, (iv) subject to the last
paragraph of this Section 3, hereby consent to the use of the
Prospectus forming part of the Exchange Offer Registration Statement
or any amendment or supplement thereto, by any broker-dealer in
connection with the sale or transfer of the Exchange Securities
covered by the Prospectus or any amendment or supplement thereto, and
(v) include in the transmittal letter or similar documentation to be
executed by an exchange offeree in order to participate in the
Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Securities. If the
undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Registrable
Securities, it represents that the Registrable Securities to
be exchanged for Exchange Securities were acquired by it as a
result of market-making activities or other trading activities
and acknowledges that it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Securities pursuant to the Exchange Offer;
however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Securities,
the broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the 1933 Act;
(B) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, use its best efforts to cause to
be delivered at the request of an entity representing the
Participating Broker-Dealers (which entity shall be one of the
Purchasers, unless it elects not to act as such representative) only
one, if any, "cold comfort" letter with respect to the Prospectus in
the form existing on the last date for which exchanges are accepted
<PAGE> 14
13
pursuant to the Exchange Offer and with respect to each subsequent
amendment or supplement, if any, effected during the period specified
in clause (C) below;
(C) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, use its best efforts to maintain
the effectiveness of the Exchange Offer Registration Statement for the
180-day period specified in clause (D) below; and
(D) not be required to amend or supplement the Prospectus
contained in the Exchange Offer Registration Statement as would
otherwise be contemplated by Section 3(b), or take any other action as
a result of this Section 3(f), for a period extending beyond 180 days
after the last date for which exchanges are accepted pursuant to the
Exchange Offer (as such period may be extended by the Issuers) and
Participating Broker-Dealers shall not be authorized by the Issuers
to, and shall not, deliver such Prospectus after such period in
connection with resales contemplated by this Section 3;
(g) (A) in the case of an Exchange Offer, furnish counsel
for the Purchasers and (B) in the case of a Shelf Registration,
furnish counsel for the Holders of Registrable Securities copies of
any request by the SEC or any state securities authority for
amendments or supplements to a Registration Statement and Prospectus
or for additional information;
(h) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement
as soon as practicable and provide immediate notice to each Holder of
the withdrawal of any such order;
(i) unless any Registrable Securities are in book entry
form only, in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold free from any restrictive legends; and cause
such Registrable Securities to be in such denominations (consistent
with the provisions of the Indenture) and registered in such names as
the selling Holders or the underwriters, if any, may reasonably
request at least one Business Day prior to the closing of any sale of
Registrable Securities;
(j) in the case of a Shelf Registration, upon the
occurrence of any event or the discovery of any facts, each as
contemplated by Sections 2(d)(i)(B) or 3(e)(ii)-(vi) hereof, use its
best efforts to prepare a post-effective amendment to a Registration
Statement or an amendment or supplement to the related Prospectus or
file any other required document so that, as thereafter delivered to
the purchasers of the Registrable Securities, such Prospectus will not
contain at the time of such delivery any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in
<PAGE> 15
14
light of the circumstances under which they were made, not misleading.
The Issuers agree to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus
as promptly as practicable upon receipt of such notice until the
Issuers have amended or supplemented the Prospectus to correct such
misstatement or omission, provided that the Issuers shall cause such
suspension not to last more than 30 days per occurrence or more than
60 days in aggregate in a calendar year. At such time as such public
disclosure is otherwise made or the Issuers determine that such
disclosure is not necessary, in each case to correct any misstatement
of a material fact or to include any omitted material fact, the
Issuers agree promptly to notify each Holder of such determination and
to furnish each Holder such numbers of copies of the Prospectus, as
amended or supplemented, as such Holder may reasonably request;
(k) obtain a CUSIP number for all Exchange Securities, or
Registrable Securities, as the case may be, not later than the
effective date of an Exchange Offer Registration Statement or Shelf
Registration Statement, as the case may be, and provide the Trustee
with printed certificates evidencing the Exchange Securities or the
Registrable Securities, as the case may be, held in book entry form,
in a form eligible for deposit with DTC;
(l) (i) cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "TIA"), in connection
with the registration of the Exchange Securities, or Registrable
Securities, as the case may be, (ii) cooperate with the Trustees and
the Holders to effect such changes to the Indenture as may be required
for the Indenture to be so qualified in accordance with the terms of
the TIA and (iii) execute, and use its best efforts to cause the
Trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into such
customary agreements (including underwriting agreements in customary
form) and take all other customary and appropriate actions (including
those reasonably requested by the Holders of a majority in principal
amount of Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration:
(i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters,
if any, in form, substance and scope as are customarily made
by the Issuers to underwriters in similar underwritten
offerings as may be reasonably requested by them;
<PAGE> 16
15
(ii) obtain an opinion of counsel to each Issuer
(who may be the general counsel of the Guarantor) and updates
thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing
underwriters, if any, or if there are no such managing
underwriters, to the Holders of a majority in principal amount
of the Registrable Securities being sold) addressed to each
selling Holder and the underwriters, if any, covering the
matters customarily covered in opinions requested in sales of
securities or underwritten offerings and such other matters as
may be reasonably requested by such Holders and underwriters;
(iii) obtain a "cold comfort" letter and updates
thereof from the Issuers' independent certified public
accountants addressed to the underwriters, if any, and will
use its best efforts to have such letter addressed to the
selling Holders of Registrable Securities, such letter to be
in customary form and covering such matters of the type
customarily covered in "cold comfort" letters in connection
with similar underwritten offerings as the Holders of a
majority in principal amount of the Registrable Securities
being sold shall request;
(iv) enter into a securities sales agreement with
the Holders and an agent of the Holders providing for, among
other things, the appointment of such agent for the selling
Holders for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into,
cause the same to set forth indemnification provisions and
procedures substantially equivalent to the indemnification
provisions and procedures set forth in Section 5 hereof with
respect to all parties to be indemnified pursuant to said
Section; and
(vi) deliver such other documents and certificates
as may be reasonably requested by Holders of a majority in
principal amount of Registrable Securities being sold, and as
are customarily delivered in similar offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto)
if appropriate in connection with any particular disposition of
Registrable Securities and (ii) each closing under any underwriting or
similar agreement as and to the extent required thereunder. In the
case of any underwritten offering, the Issuers shall provide written
notice to the Holders of all Registrable Securities of such
underwritten offering at least 30 days prior to the filing of a
prospectus supplement for such underwritten offering. Such notice
shall (x) offer each such Holder the right to participate in such
underwritten offering, (y) specify a date,
<PAGE> 17
16
which shall be no earlier than 10 days following the date of such
notice, by which such Holder must inform the Issuers of its intent to
participate in such underwritten offering and (z) include the
instructions such Holder must follow in order to participate in such
underwritten offering;
(n) in the case of a Shelf Registration, make available
for inspection by representatives of the Holders of the Registrable
Securities and any underwriters participating in any disposition
pursuant to a Shelf Registration Statement and any counsel or
accountant retained by such Holders or underwriters, all financial and
other records, pertinent corporate documents and properties of the
Issuers reasonably requested by it, and cause the respective officers,
directors, employees, and any other agents of each Issuer to make
reasonably available all relevant information reasonably requested by
any such representative, underwriter, counsel or accountant in
connection with a Registration Statement, in each case as is customary
for similar due diligence examinations; provided, however, that any
information that is designated in writing by the Issuers, in good
faith, as confidential at the time of delivery of such information
shall be kept confidential by such representatives, underwriters,
counsel or accountant, unless such disclosure is made in connection
with a court proceeding or required by law, or such information
becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality; and provided
further that the foregoing inspection and information gathering shall,
to the extent reasonably possible, be coordinated on behalf of the
Holders and the other parties entitled thereto by one counsel
designated by and on behalf of such Holders and other parties;
(o) (i) a reasonable time prior to the filing of any
Exchange Offer Registration Statement, any Prospectus forming a part
thereof, any amendment to an Exchange Offer Registration Statement or
amendment or supplement to a Prospectus, provide copies of such
document to the Purchasers, and use their best efforts to reflect in
any such document when filed such comments as any of the Purchasers or
their counsel may reasonably request; (ii) in the case of a Shelf
Registration, a reasonable time prior to filing any Shelf Registration
Statement, any Prospectus forming a part thereof, any amendment to
such Shelf Registration Statement or amendment or supplement to such
Prospectus, provide copies of such document to the Holders of
Registrable Securities, to the Purchasers, to counsel on behalf of the
Holders and to the underwriter or underwriters of an underwritten
offering of Registrable Securities, if any, and use its best efforts
to reflect such comments in any such document when filed as the
Holders of Registrable Securities, their counsel and any underwriter
may reasonably request; and (iii) cause the representatives of the
Issuers to be available for discussion of such document as shall be
reasonably requested by the Holders of Registrable Securities, the
Purchasers on behalf of such Holders or any underwriter and shall not
at any time make any filing of any such document of which such
Holders, the Purchasers on behalf of such Holders, their counsel
<PAGE> 18
17
or any underwriter shall not have previously been advised and
furnished a copy or to which such Holders, the Purchasers on behalf of
such Holders, their counsel or any underwriter shall reasonably
object;
(p) in the case of a Shelf Registration, use their best
efforts to cause the Registrable Securities to be rated with the
appropriate rating agencies at the time of effectiveness of such Shelf
Registration Statement, unless the Registrable Securities are already
so rated; and
(q) otherwise use their efforts to comply with all
applicable rules and regulations of the SEC and make generally
available to its security holders, as soon as reasonably practicable
after the effective date of a Registration Statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the
1933 Act and Rule 158 thereunder.
In the case of a Shelf Registration Statement, the Issuers may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Securities to furnish to the Issuers such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Securities as the Issuers may from time to time reasonably
request and the Issuers may exclude from such registration the Registrable
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Issuers of the happening of
any event or the discovery of any facts, each of the kind described in Sections
2(d)(i)(B) or 3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to such Shelf Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(j) hereof, and, if so directed by
the Issuers, such Holder will deliver to the Issuers (at the Issuers' expense)
all copies in its possession other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If the Issuers shall give any
such notice to suspend the disposition of Registrable Securities pursuant to a
Shelf Registration Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Sections 2(d)(i)(B) or
3(e)(ii)-(vi) hereof, the Issuers shall be deemed to have used their best
efforts to keep the Shelf Registration Statement effective during such period
of suspension provided that the Issuers shall use their best efforts to file
and have declared effective (if an amendment) as soon as practicable an
amendment or supplement to the Shelf Registration Statement and shall extend
the period during which the Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice to and including the
date when the Holders shall have received copies of
<PAGE> 19
18
the supplemented or amended Prospectus necessary to resume such dispositions.
4. Underwritten Offering. The Holders of Registrable
Securities covered by a Shelf Registration Statement who desire to do so may
sell such Registrable Securities in an underwritten offering. In any such
underwritten offering, the investment banker or bankers and manager or managers
that will administer the offering will be selected by, and the underwriting
arrangements with respect thereto will be approved by, the Holders of a
majority of the Registrable Securities to be included in such offering;
provided, however, that (i) such investment bankers and managers and
underwriting arrangements must be reasonably satisfactory to the Issuers and
(ii) the Issuers shall not be obligated to arrange for more than one
underwritten offering during the period such Shelf Registration Statement is
required to be effective pursuant to Section 2(b)(B) hereof. No Holder may
participate in any underwritten offering contemplated hereby unless such Holder
(a) agrees to sell such Holder's Registrable Securities in accordance with any
approved underwriting arrangements, (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such approved
underwriting arrangements and (c) at least 20% of the outstanding Registrable
Securities are included in such underwritten offering. The Holders
participating in any underwritten offering shall be responsible for any
expenses customarily borne by selling securityholders, including underwriting
discounts and commissions and fees and expenses of counsel to the selling
securityholders.
5. Indemnification and Contribution. (a) Each of the
Issuers agrees, jointly and severally, to indemnify and hold harmless each
Holder and each person, if any, who controls any Holder within the meaning of
either Section 15 of the 1933 Act or Section 20 of the 1934 Act, from and
against all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Holder or
any such controlling person in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Exchange Securities or Registrable
Securities were registered under the 1933 Act, including all documents
incorporated therein by reference, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in
any Prospectus (as amended or supplemented if the Issuers shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Holder furnished to the Issuers
in writing by any selling Holder expressly for use therein; provided, however,
that the foregoing indemnity agreement with respect to any preliminary
<PAGE> 20
19
Prospectus shall not inure to the benefit of any Person from whom the Person
asserting any such losses, claims, damages or liabilities purchased Registrable
Securities, or any person controlling such seller, if a copy of the final
Prospectus (as then amended or supplemented if the Issuers shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such seller to such purchaser with or prior to the written confirmation of the
sale of the Registrable Securities to such Person, and if the final Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities. In connection with any underwritten
offering permitted by Section 4, the Issuers will also, jointly and severally,
indemnify the underwriters participating in the distribution, their officers
and directors and each Person who controls such Persons (within the meaning of
the 1933 Act and the 1934 Act) to the same extent as provided above with
respect to the indemnification of the Holders, if requested in connection with
any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless each Issuer and the other selling Holders, and each
of their respective directors, officers who sign the Registration Statement and
each Person, if any, who controls any Issuer and any other selling Holder
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act to the same extent as the foregoing indemnity from the Issuers to the
Holders, but only with reference to information relating to such Holder
furnished to the Issuers in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b)
above, such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that such fees and expenses shall
be reimbursed as they are incurred. Such firm shall be designated in writing
by the Majority Holders in the case of parties indemnified pursuant to
paragraph (a) above and
<PAGE> 21
20
by the Issuers in the case of parties indemnified pursuant to paragraph (b)
above. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested in
writing an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 90 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party for such fees and expenses of counsel in
accordance with such request prior to the date of such settlement, unless such
fees and expenses are being disputed in good faith. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which such
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a)
or paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Issuers and the Holders shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Issuers or by the Holders and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 5(d) are several in proportion to the respective
aggregate principal amount of Registrable Securities of such Holder that were
registered pursuant to a Registration Statement.
(e) Each Issuer and each Holder agree that it would not
be just or equitable if contribution pursuant to this Section 5 were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to
<PAGE> 22
21
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Securities were sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any person controlling any Holder, or by or on behalf of the
Issuers, their respective officers or directors or any person controlling the
Issuers, (iii) acceptance of any of the Exchange Securities and (iv) any sale
of Registrable Securities pursuant to a Shelf Registration Statement.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so
long as the Guarantor is subject to the reporting requirements of Section 13 or
15 of the 1934 Act (and, if at any time any Note Issuer becomes subject to such
requirements (the "Reporting Note Issuer"), for so long as it is a Reporting
Note Issuer), the Guarantor (and any Reporting Note Issuer) covenants that it
will file the reports required to be filed by it under Section 13(a) or 15(d)
of the 1934 Act and the rules and regulations adopted by the SEC thereunder,
that if it ceases to be so required to file such reports, it will upon the
request of any Holder of Registrable Securities (i) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
1933 Act, (ii) deliver such information to a prospective purchaser as is
necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will
take such further action as any Holder of Registrable Securities may reasonably
request, and (iii) take such further action that is reasonable in the
circumstances, in each case, to the extent required from time to time to enable
such Holder to sell its Registrable Securities without registration under the
1933 Act within the limitation of the exemptions provided by (x) Rule 144 under
the 1933 Act, as such Rule may be amended from time to time, (y) Rule 144A
under the 1933 Act, as such Rule may be amended from time to time, or (z) any
similar rules or regulations hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Guarantor (and any Reporting Note
Issuer) will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) Other Registration Rights. The Issuers may grant
registration rights that would permit any Person the right to piggyback on any
Shelf Registration Statement, provided
<PAGE> 23
22
that if the managing underwriter, if any, of an offering pursuant to such Shelf
Registration Statement delivers an opinion of the selling Holders that the
total amount of securities which they and the holders of such piggyback rights
intend to include in any Shelf Registration Statement materially adversely
affects the success of such offering (including the price at which such
securities can be sold), then the amount, number or kind of securities to be
offered for the account of holders of such piggyback rights will be reduced to
the extent necessary to reduce the total amount of securities to be included in
such offering to the amount, number or kind recommended by such managing
underwriter; and provided further that such piggyback registration rights shall
in no event materially adversely affect the interests of any Holder.
(c) No Inconsistent Agreements. The Issuers have not
entered into nor will the Issuers on or after the date of this Agreement enter
into any agreement which is inconsistent with the rights granted to the Holders
of Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof.
(d) Amendments and Waivers. Except as otherwise
expressly permitted in the Indenture, the provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Issuers have obtained the written consent of
Holders of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure; provided, however, that no amendment, modification,
supplement or waiver or consent to any departure from the provisions of Section
5 hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by
such Holder to the Issuers by means of a notice given in accordance with the
provisions of this Section 6(e), which address initially is, with respect to
the Purchasers, the address set forth in the Purchase Agreement; and (ii) if to
the Issuers, initially at each Issuer's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(e).
All such notices and communications shall be deemed to have
been duly given; at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
(f) Successors and Assigns. This Agreement shall inure
to the benefit of and
<PAGE> 24
23
be binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders; provided that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Registrable Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this
Agreement and, if applicable, the Purchase Agreement, and such Person shall be
entitled to receive the benefits hereof.
(g) Third Party Beneficiaries. The Holders shall be
third party beneficiaries to the agreements made hereunder and to the
obligations of the Issuers hereunder and shall have the right to enforce such
agreements and obligations directly to the extent any such Holder deems such
enforcement necessary or advisable to protect its rights hereunder.
(h) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(k) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(l) Termination. This Agreement shall terminate and be
of no further force or effect when there shall not be any Registrable
Securities outstanding, except that the provisions of Sections 2(c), 2(e), 5,
6(g) and 6(j) hereof shall survive any such termination.
<PAGE> 25
24
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CALAIR L.L.C.
By: CALFINCO, Inc.,
Its Managing Member
By: /s/ JEFFREY J. MISNER
-------------------------------
Name: Jeffrey J. Misner
Title: Vice President -
Treasury Operations
CALAIR CAPITAL CORPORATION
By: /s/ JEFFREY J. MISNER
----------------------------------------
Name: Jeffrey J. Misner
Title: Vice President - Treasury
Operations
CONTINENTAL AIRLINES, INC.
By: /s/ GERALD LADERMAN
----------------------------------------
Name: Gerald Laderman
Title: Vice President - Corporate
Finance
<PAGE> 26
25
Confirmed and accepted as of
the date first above written:
CHASE SECURITIES INC.
By: /s/ LEAH S. SCHRAUDENBACH
----------------------------------------
Name: Leah S. Schraudenbach
Title: Vice President
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ H. ANDREW BROWNFIELD
----------------------------------------
Name: H. Andrew Brownfield
Title:
MORGAN STANLEY & CO. INCORPORATED
By: /s/ HELEN MEATES
----------------------------------------
Name: Helen Meates
Title: Vice President
<PAGE> 1
EXHIBITS 5.1, 8.1 AND 23.2
Houston, Texas
July 31, 1998
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Calair L.L.C.
c/o CALFINCO Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Calair Capital Corporation
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Ladies and Gentlemen:
We have acted as special counsel to Continental Airlines, Inc., a
Delaware corporation ("Continental"), Calair L.L.C., a Delaware limited
liability company and an indirect subsidiary of Continental ("Calair"), and
Calair Capital Corporation, a Delaware corporation and a direct, wholly owned
subsidiary of Calair ("Calair Capital" and together with Calair, the "Note
Issuers"), in connection with the proposed issuance by the Note Issuers of up
to $112,300,000 aggregate principal amount of their 8 1/8% Senior Notes due
2008 (the "Exchange Notes"), which will be fully and unconditionally guaranteed
on an unsecured, senior basis by Continental, in exchange for a like principal
amount of their outstanding 8 1/8% Senior Notes due 2008, which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental (the
"Old Notes"). The terms of the offer to exchange the Exchange Notes for the
Old Notes (the "Exchange Offer") are described in a Registration Statement on
Form S-4 to be filed by the Note Issuers and Continental with the Securities
and Exchange Commission (the "Registration Statement"), for the registration of
the Exchange Notes under the Securities Act of 1933, as amended (the "1933
Act"). The Old Notes have been, and the Exchange Notes will be, issued
pursuant to an indenture dated as of April 1, 1998 (the "Indenture"), among
Calair and Calair Capital, as joint and several obligors, Continental, as
guarantor, and Bank One, N.A., as trustee (the "Trustee").
In rendering this opinion, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity with original
documents of all documents submitted to us as certified or photostatic copies.
We have also assumed the truth, accuracy and completeness of all
representations, warranties and certifications made by the Note Issuers and
Continental.
<PAGE> 2
Continental Airlines, Inc.
Calair L.L.C.
Calair Capital Corporation
July 31, 1998
Page 2
Based upon the foregoing and subject to the qualifications hereinafter
set forth, we are of the opinion that the Exchange Notes have been duly
authorized for issuance and, when the Registration Statement has become
effective under the 1933 Act, and the Exchange Notes have been duly executed,
issued and authenticated in accordance with the Indenture and issued and sold
in exchange for the Old Notes as contemplated by the Registration Statement and
in accordance with the Exchange Offer, the Exchange Notes will constitute valid
and legally binding obligations of the Note Issuers and Continental, subject to
(i) bankruptcy, insolvency, reorganization, moratorium, liquidation,
rearrangement, fraudulent transfer, fraudulent conveyance and other similar
laws (including court decisions) now or hereafter in effect and affecting the
rights and remedies of creditors generally or providing for the relief of
debtors, (ii) the refusal of a particular court to grant equitable remedies,
including, without limitation, specific performance and injunctive relief, and
(iii) general principles of equity (regardless of whether such remedies are
sought in a proceeding in equity or at law).
We are further of the opinion that the statements contained in the
prospectus constituting a part of the Registration Statement under the caption
"TAX CONSIDERATIONS," as qualified therein, constitute an accurate description,
in general terms, of the indicated United States federal income tax
consequences to a holder of the purchase, ownership and disposition of the
Exchange Notes.
We are members of the Texas Bar. The opinions expressed herein are
limited exclusively to the federal laws of the United States of America, the
laws of the State of Delaware and the laws of the State of New York, and we are
expressing no opinion as to the effect of the laws of any other jurisdiction,
domestic or foreign.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statements made with respect to us under the
caption "Legal Matters" in the prospectus included as part of the Registration
Statement. In giving this consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of the Securities
Act and the rules and regulations thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 10.1
SALE AGREEMENT
between
Continental Airlines, Inc.
and
Calair L.L.C.
dated as of
April 17, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I: DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II: SALE OF SUBJECT SLOTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.01. SALE OF SUBJECT SLOTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.03. DELIVERIES AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF CAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.01. AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.02. NO CONFLICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.03. TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.04. ORGANIZATION AND EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.05. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.06. GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.07. FAIR VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.01. CONSEQUENCES OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.02. SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.03. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.04. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.05. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.06. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.07. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.08. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.09. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.11 INTENDED TAX TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
Exhibits:
A - List of Subject Slots
B - Form of Deed of Conveyance and Assignment of Slots
1.
-i-
<PAGE> 3
SALE AGREEMENT
This Sale Agreement (this "Agreement") is made and entered into on
this 17th day of April, 1998, by and between Continental Airlines, Inc., a
Delaware corporation ("CAL"), and Calair L.L.C., a Delaware limited liability
company ("Calair").
RECITALS
Pursuant to this Agreement, CAL desires to sell to Calair, and Calair
desires to purchase from CAL, each of the Subject Slots (as defined below),
upon and subject to the terms and conditions contained herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I: DEFINED TERMS
CALFINCO: CALFINCO, Inc., a Delaware corporation.
CLOSING: The consummation of the sale of the Subject Slots.
CLOSING DATE: April 17, 1998.
CREDITORS' RIGHTS: Bankruptcy, insolvency or other laws relating to
or affecting generally the enforcement of creditors' rights and general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
ENCUMBRANCE: Any mortgage, lien, security interest, pledge, charge,
encumbrance, claim, restriction or burden.
GOVERNMENTAL AUTHORITY(IES): Individually, any one of, and
collectively, any two or more of, the United States of America or any other
foreign country or jurisdiction, any state, commonwealth, territory or
possession thereof and any political subdivision of any of the foregoing,
including but not limited to courts, departments, commissions, boards, bureaus,
agencies or other instrumentalities.
LEGAL REQUIREMENTS: Any law, statute, ordinance, decree, requirement,
order, judgment, rule or regulation of, including the terms of any license or
permit issued by, any Governmental Authority.
PERSON: Any individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization or association or
other entity.
-1-
<PAGE> 4
SLOT. As defined in Section 93.213 of the Slot Regulations.
SLOT REGULATIONS. The Federal Aviation Regulations, Title 14 Code of
Federal Regulations, Part 93, Subpart S, as amended, or any successor
provisions or regulations.
SLOT LEASE: That certain Slot Lease Agreement, dated as of even date
herewith, between CAL and Calair, pursuant to which Calair will lease the
Subject Slots to CAL.
SUBJECT SLOT(S): Individually, any one of, and collectively, any two
or more of, the Slots listed on Exhibit A attached hereto.
ARTICLE II: SALE OF SUBJECT SLOTS
Section 2.01. SALE OF SUBJECT SLOTS. At the Closing, and on and
subject to the terms and conditions of this Agreement, Calair agrees to
purchase from CAL, and CAL agrees to sell to Calair, the Subject Slots, for the
consideration specified below in Section 2.03(a).
Section 2.02. THE CLOSING. The Closing shall take place at the
offices of Millbank, Tweed, Hadley & McCloy, Chase Manhattan Plaza, New York,
New York 10005, commencing at 9 a.m. local time on the Closing Date.
Section 2.03. DELIVERIES AT CLOSING. At the Closing, the following
shall occur:
(a) As full consideration for sale of the Subject Slots,
Calair shall pay to CAL at the Closing by Calair's delivery by wire transfer of
$151,140,000, in immediately available funds, to The Chase Manhattan Bank, 270
Park Avenue, New York, New York, 10017, ABA No. 021000021, Account No.
910-2-499291, Reference "Calair";
(b) CAL shall deliver to Calair a Deed of Conveyance and
Assignment of Slots, substantially in the form of Exhibit B attached hereto,
evidencing the transfer of the Subject Slots from CAL to Calair; and
(c) Opinions addressed, in form and substance
satisfactory, and from Persons acceptable, to Calair and the Members of Calair,
in their sole and absolute discretion.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF CAL
CAL hereby represents and warrants to Calair as follows:
Section 3.01. AUTHORITY. CAL has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by CAL and the consummation by CAL of
the transactions contemplated hereby have been duly and validly authorized by
CAL, and no other proceedings on the part of CAL are required in connection
with such authorization. This Agreement has been duly and validly executed and
delivered by CAL and, assuming the due
-2-
<PAGE> 5
authorization, execution and delivery by Calair, constitutes a legal, valid and
binding obligation of CAL, enforceable against CAL in accordance with its
terms, subject, as to enforceability, to Creditors' Rights.
Section 3.02. NO CONFLICT. The execution and delivery of this
Agreement by CAL does not, and the performance of this Agreement by CAL will
not:
(a) conflict with or violate any voting, trust or other
material agreement of CAL;
(b) conflict with or violate any Legal Requirements, or
any material order, judgment or decree applicable to CAL;
(c) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of any of the Subject Slots;
(d) result in the creation of an Encumbrance (other than
the Encumbrances created by the Security Agreement (Calair)) on any of the
Subject Slots pursuant to any note, indenture, agreement, lease, license,
permit or other instrument or obligation to which CAL is a party or by which
CAL or the Subject Slots are bound or affected;
(e) require the approval, consent or authorization of, or
require any filing with, any Governmental Authorities or other Persons, in each
case except (i) where such breach or default or failure to obtain such
approvals, consents or authorizations, or to make such filings, would not
prevent or delay the performance by CAL of its obligations under this
Agreement, and (ii) for such filings as shall have been made as of the Closing
Date;
(f) render CAL insolvent or leave CAL with insufficient
capital or assets to operate its business or satisfy its obligations as and
when they become due; or
(g) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under (i) that certain Credit Agreement, dated April 16, 1997, in the original
principal amount of $160,000,000 among CAL, the "Lenders" party thereto, and
The Chase Manhattan Bank, as Administrative Agent for "Lenders" party thereto,
as such agreement may be amended from time to time, or (ii) that certain Credit
Agreement, dated July 18, 1997, in the original principal amount of
$575,000,000 among CAL, the "Lenders" and "Issuing Bank" party thereto, and The
Chase Manhattan Bank, as Administrative Agent for "Lenders" and "Issuing Bank"
party thereto, as such agreement may be amended from time to time.
Section 3.03. TITLE. Except as described on Schedule 3.03, CAL has
good and valid title to the Subject Slots, free and clear of all Encumbrances;
Section 3.04. ORGANIZATION AND EXISTENCE. CAL (a) is a corporation
that has been duly incorporated and is validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to own and lease the properties it currently owns and leases and
to carry on its business as now being conducted and (b) except where the
failure to do so
-3-
<PAGE> 6
could not reasonably be expected to result in a material adverse change in the
financial condition of CAL, is duly licensed or qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in which the
character of the properties now owned or leased by it or the nature of the
business now conducted by it requires it to be so qualified.
Section 3.05. LITIGATION. There are no actions, suits, proceedings
or governmental investigations or inquiries pending, or to the knowledge of
CAL, threatened, against CAL or its subsidiaries or any of their respective
properties, assets, operations or businesses that, if adversely determined,
would delay or prevent the consummation of the transactions contemplated
hereby.
Section 3.06. GOVERNMENTAL APPROVALS. CAL has filed the letter
attached hereto as Exhibit C with the FAA, and all required governmental
approvals for the consummation of the transactions contemplated hereby,
including any approvals of the FAA, have been obtained.
Section 3.07. FAIR VALUE. The transfer of the Subject Slots is not
made with the intent to hinder, delay, or defraud any entity to which CAL is
indebted, and the Purchase Price is "reasonably equivalent value" (within the
meaning of 11 U.S.C. Section 548) for the Slots.
ARTICLE IV: MISCELLANEOUS
Section 4.01. CONSEQUENCES OF TERMINATION. No termination of this
Agreement shall relieve any party hereto of any liability for a breach of this
Agreement which occurs prior to such termination.
Section 4.02. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
were not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof in addition to
any other remedy at law or in equity.
Section 4.03. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the parties and supersedes all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof.
Section 4.04. AMENDMENTS. This Agreement may not be amended except
by an instrument in writing signed by all of the parties.
Section 4.05. SEVERABILITY. If any term or provision of this
Agreement is invalid, illegal or incapable or being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon determination that any term or provision
is invalid, illegal or incapable of being enforced, the parties hereby shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
-4-
<PAGE> 7
Section 4.06. NOTICES. All notices, directions and other
communications provided for hereunder shall be in writing and may be personally
delivered, mailed (by registered or certified mail, postage prepaid) or sent by
telecopy, telegraph or other direct written electronic means, to the applicable
party at the address indicated below:
If to Calair L.L.C.:
Calair L.L.C.
c/o Continental Airlines, Inc.
2929 Allen Parkway, Suite 1588
Houston, Texas 77019
Attention: Vice President - Treasury Operations
Telecopy No.: 713-834-2448
With a copy to Chase Equity Associates, L.P.
c/o Chase Capital Partners, Inc.
380 Madison Avenue, 12th Floor
New York, New York 10017-2591
Attn: Brian J. Richmand
Telecopy No.: 212-622-3101
and a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Brian S. Rosen, Esq.
Telecopy No.: 212-310-8007
If to Continental Airlines, Inc.:
Continental Airlines, Inc.
2929 Allen Parkway, Suite 1588
Houston, Texas 77019
Attention: Vice President - Corporate Finance
Telecopy No.: 713-834-2448
or as to any party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the
terms of this Section 4.06. All such notices, when personally delivered shall
be deemed to have been validly and effectively given on the date of such
delivery, when transmitted by telegraph, telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day on which it is transmitted, or, if mailed, shall be deemed to have been
validly and effectively given when deposited in the mail.
-5-
<PAGE> 8
Section 4.07. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
giving effect to the principles of conflict of laws thereof (other than Section
5-1401 of the New York General Obligations Law).
Section 4.08. DESCRIPTIVE HEADINGS. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
Section 4.09. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement. Upon execution of this Agreement,
counterpart signature pages may be delivered by facsimile transmission.
Section 4.10 CAL INTEREST IN SUBJECT SLOTS.
(a) Upon the consummation of the transactions
contemplated by this Agreement, CAL will have no interest in the Subject Slots
other than those interests arising pursuant to the Slot Lease and CAL's
ownership of the capital stock of Calfinco, a member of Calair; and
(b) Upon the consummation of the transactions
contemplated by this Agreement, in the event that a case is commenced under
Title 11 of the United States Code (the "Bankruptcy Code") by or against CAL,
the Subject Slots shall not be deemed to be property of the estate of CAL in
accordance with Section 541 of the Bankruptcy Code, and the parties hereto
agree that the benefits of Section 362 of the Bankruptcy Code shall only extend
to CAL's interests under the Slot Lease.
Section 4.11 INTENDED TAX TREATMENT. CAL and Calair intend that
the transactions consummated at the Closing be treated, for federal income tax
purposes, as a sale of the Subject Slots by CAL to Calair. Furthermore, CAL
and Calair hereby covenant and agree that each shall file federal tax returns
consistent with such intended treatment.
-6-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers, managers, or Managing Members thereunto duly
authorized, as of the date and year first above written.
CONTINENTAL AIRLINES, INC.
By: /s/ GERALD LADERMAN
--------------------------------------------
Gerald Laderman
Vice President - Corporate Finance
CALAIR L.L.C.
By: CALFINCO Inc.,
Managing Member
By: /s/ JEFFREY J. MISNER
------------------------------------
Jeffrey J. Misner
Vice President - Treasury Operations
-7-
<PAGE> 10
EXHIBIT A
LIST OF SUBJECT SLOTS
A. CHICAGO O'HARE
<TABLE>
<CAPTION>
TIME SLOT NO.
----- --------
<S> <C> <C>
2. 07:15 7240*
3. 07:15 8270
4. 08:15 7664
5. 08:45 7742
6. 09:45 7796
7. 10:15 7475
8. 10:15 8659
9. 11:15 7971*
10. 11:45 8506*
11. 11:45 7439*
12. 12:15 8426*
13. 13:15 7609*
14. 13:45 7178*
15. 13:45 7377
16. 14:15 7320*
17. 14:15 8071*
18. 14:45 8316*
19. 14:45 7682
20. 15:15 8640
21. 15:45 7970*
22. 16:15 8327
23. 16:15 7659
24. 16:45 7924*
25. 16:45 8290
26. 17:15 7591*
27. 17:45 7743
28. 18:15 8200*
29. 18:15 7977
30. 18:15 7635*
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-1
<PAGE> 11
B. WASHINGTON NATIONAL
<TABLE>
<CAPTION>
TIME SLOT NO.
----- --------
<S> <C> <C>
1. 07:00 1209*
2. 07:00 1270
3. 07:00 1568
4. 08:00 1610
5. 08:00 1498*
6. 09:00 1637
7. 09:00 1453
8. 09:00 1335*
9. 10:00 1026
10. 11:00 1120*
11. 11:00 1067*
12. 11:00 1020
13. 12:00 1572*
14. 12:00 1368
15. 13:00 1069*
16. 13:00 1656
17. 13:00 1068
18. 14:00 1545
19. 14:00 1615
20. 14:00 1520
21. 15:00 1600
22. 15:00 1054
23. 15:00 1164*
24. 16:00 1156
25. 16:00 1111*
26. 16:00 1527*
27. 17:00 1071*
28. 17:00 1280
29. 18:00 1324*
30. 19:00 1095*
31. 19:00 1129*
32. 19:00 1294*
33. 19:00 1550*
34. 19:00 1301
35. 20:00 1279
36. 20:00 1640*
37. 20:00 1288*
38. 20:00 1448*
39. 21:00 1647
40. 21:00 1558
41. 21:00 1239
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-2
<PAGE> 12
C. LAGUARDIA - DEPARTURE
<TABLE>
<CAPTION>
TIME SLOT NO.
----- --------
<S> <C> <C>
1. 07:00 3851*
2. 08:30 3595*
3. 08:30 3336
4. 09:30 3181*
5. 10:00 3198*
6. 11:00 3663*
7. 12:00 3833
8. 13:00 3331
9. 13:30 3808
10. 14:30 3379*
11. 15:30 3363*
12. 16:30 3805
13. 17:00 3090*
14. 17:00 3274*
15. 17:30 3412*
16. 18:30 3398*
17. 19:30 3572
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-3
<PAGE> 13
D. LAGUARDIA - ARRIVAL
<TABLE>
<CAPTION>
TIME SLOT NO.
---- --------
<S> <C> <C>
1. 08:30 3077*
2. 09:00 3087
3. 10:30 3827*
4. 12:30 3582
5. 13:30 3108*
6. 15:30 3618*
7. 16:00 3091*
8. 16:00 3810*
9. 17:00 3678*
10. 17:30 3288*
11. 18:00 3173*
12. 18:30 3800
13. 19:00 3620*
14. 19:30 3679*
15. 21:30 3053*
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-4
<PAGE> 14
EXHIBIT B
FORM OF DEED OF CONVEYANCE AND ASSIGNMENT OF SLOTS
THIS DEED OF CONVEYANCE, made this 17th day of April 1998 by
Continental Airlines, Inc., a Delaware corporation (hereinafter referred to as
"Seller"), to Calair L.L.C., a Delaware limited liability company (hereinafter
referred to as "Purchaser").
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration delivered to Seller by
Purchaser, the receipt and sufficiency of which are hereby acknowledged, Seller
has and hereby does assign, transfer, and convey unto Purchaser, its heirs,
legal representatives, successors, successors-in-title and assigns, all of
Seller's right, title and interest in and to the primary operating authority
granted by the Federal Aviation Administration pursuant to Title 14 of the Code
of Federal Regulations, Part 93, Subparts K & S, as amended from time to time,
or any recodification thereof in any regulation, to conduct certain Instrument
Flight Rule (as defined under the regulations promulgated under Federal
Aviation Act of 1958, as amended) take-offs or landings in the specified
periods, each of which is listed on Exhibit A attached hereto (collectively,
the "Slots").
TO HAVE AND TO HOLD the Slots, together with all and singular the
rights and appurtenances thereto in anywise belonging, unto Purchaser and its
successors and assigns, forever; and Seller does hereby bind itself and its
successors and assigns to warrant and forever defend all and singular the Slots
unto Purchaser, and its successors and assigns, against every person whosoever
lawfully claiming or to claim the same or any part thereof.
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR
IMPLIED, AS TO THE MERCHANTABILITY, QUALITY, CONDITION OR FITNESS FOR
PARTICULAR USES OF THE SLOTS. THE SLOTS ARE SOLD IN AN "AS IS, WHERE IS"
CONDITION, WITH ALL FAULTS.
B-1
<PAGE> 15
IN WITNESS WHEREOF, Seller has caused this instrument to be executed
by its duly authorized representative this the 17th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:
-----------------------------
Gerald Laderman
Vice President
ACCEPTED:
CALAIR L.L.C.
By: CALFINCO, INC.,
Managing Member
By:
-----------------------------
Jeffrey J. Misner
Vice President
B-2
<PAGE> 16
EXHIBIT C
[CONTINENTAL AIRLINES, INC. LETTERHEAD]
April 17, 1998
Lorelei Peter, Manager
Airspace and Air Traffic Law Branch
Office of the Chief Counsel
Federal Aviation Administration
800 Independence Avenue, SW
Washington, DC 20591
Dear Ms. Peter:
Please be advised that, pursuant to 14 C.F. R. Part 93.221(a),
Continental Airlines, Inc. has agreed to sell substantially all of its current
take-off and landing rights at Chicago O'Hare, Ronald Reagan Washington
National and LaGuardia airports, on this date, to Calair L.L.C., a Delaware
limited liability company and a subsidiary of Continental Airlines, Inc. The
slots involved in the transaction are attached hereto as Exhibit A. None of
those slots is used for international or essential air service operations.
Immediately upon the sale, Continental Airlines, Inc. will lease the slots back
from Calair L.L.C. for a ten-year period.
This letter will serve as written evidence of consent by Continental
Airlines, Inc. and Calair L.L.C. to the transfer of the slots listed on Exhibit
A.
Please confirm transfer of the above-referenced slots to me by
facsimile (telecopy no.: ____________).
Respectfully submitted,
CONTINENTAL AIRLINES, INC.
By:
---------------------------
James W. von Atzingen
Managing Attorney - Finance
Acknowledged and Agreed:
CALAIR L.L.C.
By: CALFINCO, Inc., its managing member
By
----------------------------------------
Vice President
2929 Allen Parkway, Suite 2010
Houston, Texas 77019, tel: 713/834-2950
C-1
<PAGE> 17
SCHEDULE 3.03
Title Exceptions
1. None
3.03-1
<PAGE> 1
EXHIBIT 10.2
SLOT LEASE AGREEMENT
between
Continental Airlines, Inc.
and
Calair L.L.C.
dated as of
April 17, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1 Definitions ......................................... 1
Section 2 Lease of Slots ...................................... 3
Section 3 Term and Rent ....................................... 3
Section 4 Representations, Warranties and Covenants ........... 4
Section 5 Encumbrances ........................................ 5
Section 6 Impositions ......................................... 5
Section 7 Use of Leased Slots ................................. 6
Section 8 Indemnification ..................................... 6
Section 9 Subleases ........................................... 7
Section 10 Events of Default ................................... 7
Section 11 Remedies ............................................ 7
Section 12 Notices ............................................. 8
Section 13 Right to Purchase Leased Slots or to Request that
Lessor Exchange Leased Slots......................... 9
Section 14 Amendments and Miscellaneous ........................11
</TABLE>
-i-
<PAGE> 3
SLOT LEASE AGREEMENT
This Slot Lease Agreement (this "LEASE") is made and entered into by
and between CALAIR L.L.C. ("Lessor"), a limited liability company organized and
existing under the laws of the State of Delaware, and CONTINENTAL AIRLINES, INC.
("LESSEE"), a corporation incorporated and existing under the laws of the State
of Delaware; to be effective the 17th day of April, 1998, (the "COMMENCEMENT
DATE").
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein:
AFFILIATE. With respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(ii) any executive officer, director or general partner of such Person or (iii)
any Person who is an executive officer, director, general partner, or trustee of
any Person described in clauses (i) and (ii) of this sentence. For the purpose
of this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or agency or
otherwise.
BUSINESS DAY. Any day other than a Saturday, Sunday, or other day on
which commercial banks in the City of New York, or in Columbus, Ohio, are
authorized by law to close.
CAL SALE AGREEMENT. That certain Sale Agreement, effective of even date
with this Lease, by and between Lessor and Lessee.
CEA. Chase Equity Associates, L.P.
CLAIMS. As defined in Section 8 hereof.
COMMENCEMENT DATE. As defined in the first paragraph of this Lease.
ENCUMBRANCE: Any mortgage, lien, security interest, pledge, charge,
encumbrance, claim, restriction or burden.
EVENT OF DEFAULT. As defined in Section 10 hereof.
FAA. The Federal Aviation Administration of the United States
Department of Transportation or any successor agency.
<PAGE> 4
GOVERNMENTAL AUTHORITY(IES): Individually, any one of, and
collectively, any two or more of, the United States of America or any other
foreign country or jurisdiction, any state, commonwealth, territory or
possession thereof and any political subdivision of any of the foregoing,
including but not limited to courts, departments, commissions, boards, bureaus,
agencies or other instrumentalities.
IMPOSITIONS. As defined in Section 6 hereof.
INDEMNIFIED PERSON. As defined in Section 8 hereof.
LAW. Any law, treaty, statute, rule, regulation, order, code, judgment,
decree, injunction, writ, requirement or decision of or agreement with or by any
government or governmental department, commission, board, court, authority or
agency having jurisdiction of the matter in question.
LIEN. Any mortgage, pledge, hypothecation, assignment, encumbrance,
lien (statutory or otherwise), priority, security interest or other security
device or arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any financing or similar
statement or notice filed under the Uniform Commercial Code (as in effect from
time to time in the relevant jurisdiction) or otherwise, or any other similar
recording or notice statute, and any lease having substantially the same effect
as any of the foregoing).
LLC AGREEMENT. That certain Amended and Restated Company Agreement of
Calair L.L.C., effective of even date with this Lease.
LEASED SLOT(S): Individually, any one of, and collectively, any two or
more of, the Slots listed on Exhibit A attached hereto, as the same may be
replaced by Substitute Slots or Swapped Slots, or both.
OPERATIVE DOCUMENTS. Collectively, the LLC Agreement, the CAL Sale
Agreement, this Lease, and the Redemption Option Agreement.
PERMITTED ENCUMBRANCES. (i) Bankers' rights of set-off for uncollected
items and routine fees and expenses arising in the ordinary course of business,
(ii) Liens created by or pursuant to, or expressly permitted under this Lease
and the Operative Documents, (iii) Liens for taxes and other governmental
charges and assessments (and other Liens imposed by Law) not yet delinquent or
being contested in good faith and by proper proceedings and as to which
appropriate reserves (in the good faith judgment of the relevant Person) are
being maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors, (iv) restrictions
on transfers of securities or voting under applicable Laws and (v) restrictions
on the transfer of assets of Lessor under any Operative Documents.
PERSON: Any individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization or association or
other entity.
PURCHASED SLOTS. As defined in Section 13(b) hereof.
-2-
<PAGE> 5
REDEMPTION OPTION AGREEMENT. That certain Redemption Option Agreement,
effective of even date with this Lease, between Lessor and Chase Equity
Associates, L.P.
RENT. shall mean $8,141,931, and shall be payable in arrears on the 1st
day of each April and October during the Term following the Commencement Date.
SLOT. As defined in Section 93.213 of the Slot Regulations.
SLOT REGULATIONS. The Federal Aviation Regulations, Title 14 Code of
Federal Regulations, Part 93, Subpart S, as amended, or any successor provisions
or regulations.
SLOT TRADE. A temporary "swap" of operating authority with respect to a
Slot in exchange for operating authority with respect to another Slot or a
temporary "slide" transaction with the FAA or equivalent Government Authority
with respect to a Slot, in each case in accordance with standard airline
industry practice.
SUBSTITUTE SLOTS. As defined in Section 13(c) hereof.
SWAPPED SLOTS. As defined in Section 13(b) hereof.
TERM. The term of this Lease, as specified in Section 3(a) hereof.
USE PROVISIONS. Section 93.227 of the Slot Regulations.
SECTION 2. LEASE OF SLOTS.
Subject to the terms and conditions of this Lease, Lessor hereby agrees
to lease to Lessee, and Lessee hereby agrees to lease from Lessor, the Leased
Slots for the Term.
SECTION 3. TERM AND RENT.
(a) The term of this Lease shall begin on the Commencement Date,
unless Lessee has not received written confirmation of the Lease from the FAA
pursuant to Section 93.221 of the Slot Regulations, in which case the term of
this Lease shall begin on the date such written confirmation is received by
Lessee, and shall continue until April 1, 2008, unless terminated earlier in
accordance with the provisions of Section 11(a) hereof.
(b) All payments of Rent hereunder shall be made by wire transfer of
immediately available funds not later than 12:30 p.m. (New York City time) on
the 1st day of each April and October following the Commencement Date, and on
the last Business Day of the Term, and shall be paid to Lessor at Account No.
323095852 at The Chase Manhattan Bank, ABA No. 021000021, 55 Water Street, New
York, New York, 10041, or at such other account as Lessor may direct by notice
in writing to Lessee. If any April 1 or October 1 of any year shall not be
Business Day, then the payment of Rent shall be made on the next succeeding
Business Day with the same force and effect as if made on the originally
specified payment date for Rent; provided, however, that, if such payment of
Rent is made on the next succeeding Business Day, no additional Rent shall
accrue for
-3-
<PAGE> 6
the period from and after such payment date to the next succeeding Business Day.
The first installment of Rent shall be prorated based on the actual number of
days since the Commencement Date, and the payment of Rent on the last day of the
Term shall be prorated based on the actual number of days since the immediately
preceding April 1st or October 1st, as applicable, in each case, divided by 182
or 183, as applicable.
(c) Other than a termination pursuant to Section 11(a) hereof, this
Lease shall not terminate, nor shall the respective obligations of Lessor or
Lessee be affected, by reason of any interference with the use of the Leased
Slots by any private person, corporation or Governmental Authority, or the
invalidity or unenforceability or lack of due authorization of this Lease or
lack of right, power of authority of Lessor to enter into this Lease. It is the
express intention of Lessor and Lessee that all Rent payable by Lessee hereunder
shall be, and continue to be, payable in all events unless the obligation to pay
the same shall be terminated pursuant to the express provisions of this Lease.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Lessee represents that Lessee is an air carrier certificated
under 49 U.S.C. ss. 44705, that is authorized to use the Leased Slots under the
Slot Regulations and Use Provisions.
(b) Lessee represents that Lessee has obtained all approvals
necessary to consummate this transaction.
(c) Upon request by Lessor, Lessee shall provide Lessor with a copy of
all use reports for the Leased Slots filed with the FAA by the Lessee pursuant
to the Use Provisions promptly after such reports are delivered to the FAA.
(d) EXCEPT AS SET FORTH IN SECTION 5(B), LESSOR SHALL NOT BE DEEMED TO
HAVE MADE AND LESSOR HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY
KIND, EITHER EXPRESS OR IMPLIED, AS TO THE LEASED SLOTS. LESSOR SHALL HAVE NO
LIABILITY TO LESSEE FOR ANY CLAIM, LOSS OR DAMAGE OF ANY KIND OR NATURE
WHATSOEVER (INCLUDING STRICT LIABILITY IN TORT) NOR SHALL THERE BE ANY ABATEMENT
OF RENTAL, ARISING DIRECTLY OR INDIRECTLY OUT OF OR IN CONNECTION WITH (I) THE
USE OF THE LEASED SLOTS, (II) ANY INTERRUPTION OR LOSS OF SERVICE OR USE OF THE
LEASED SLOTS, OR (III) ANY LOSS OF BUSINESS OR OTHER CONSEQUENTIAL LOSS OR
DAMAGE WHETHER OR NOT RESULTING FROM ANY OF THE FOREGOING. LESSEE WILL DEFEND,
INDEMNIFY AND HOLD LESSOR HARMLESS AGAINST ANY AND ALL CLAIMS, DEMANDS, COSTS,
EXPENSES, DAMAGES, LOSSES AND LIABILITIES (INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE
LEASED SLOTS.
SECTION 5. ENCUMBRANCES.
(a) Other than Permitted Encumbrances and those Encumbrances arising
pursuant to subleases and Slot Trades permitted by Section 9 hereof, (i) Lessee
will not directly or indirectly
-4-
<PAGE> 7
create, incur, assume any Encumbrances on its interest in the Leased Slots and
(ii) Lessee will not directly or indirectly create, incur, or assume any
Encumbrances on or with respect to the Leased Slots which challenge or in any
way restrict Lessor's ownership interest in the Leased Slots (and Lessee will
promptly, at its own expense, take such action as may be necessary duly to
discharge any such Encumbrance). Lessee shall not be responsible for any
Encumbrance created or incurred by Lessor with respect to the Leased Slots,
other than Encumbrances created at the request of Lessee.
(b) Other than Permitted Encumbrances, Lessor will not directly or
indirectly create, incur, assume or suffer to exist any Encumbrances on its
title to or interest in the Leased Slots (and Lessor will promptly, at its own
expense, take such action as may be necessary duly to discharge any such
Encumbrance).
SECTION 6. IMPOSITIONS.
This Lease is intended to be a completely net lease. In connection
therewith, Lessee agrees to pay and to indemnify Lessor for, and hold Lessor
harmless from and against, all expenses and costs of any kind or nature
whatsoever relating to the use, ownership, retention, maintenance, or sale of
the Leased Slots, including without limitation, any and all income, franchise,
sales, use, personal property, ad valorem, value added, leasing use, stamp or
other taxes, levies, imposts, duties, charges, or withholdings of any nature,
together with any penalties, fines or interest thereon ("IMPOSITIONS"), arising
out of the transactions contemplated by this Lease and imposed against Lessor,
Lessee, the Rent, or the Leased Slots by any federal, state, local or foreign
government or taxing authority upon or with respect to the Leased Slots or upon
the sale, purchase, ownership, delivery, leasing, possession, use, operation,
return or other disposition thereof, or upon the rentals, receipts or earnings
arising therefrom, or upon or with respect to this Lease unless, and only to the
extent that, any such Imposition is being contested by Lessee in good faith and
by appropriate proceedings and the nonpayment thereof or the contest thereof in
such proceedings does not, in the written opinion of counsel for Lessee,
delivered to and approved by Lessor, adversely affect the title, property or
rights of Lessor. Notwithstanding the preceding sentence, Lessee shall have no
liability with respect to (A) Impositions imposed upon or with respect to, based
on, or measured by, net income (or in lieu thereof, gross income or receipts),
capital, or net worth, (B) capital gains taxes, excess profits taxes, minimum
and alternative minimum taxes, personal holding company taxes, succession taxes,
estate taxes, doing business or franchise taxes, or similar taxes, (C) any
Impositions, other than those described in clauses (A) and (B), that are imposed
as a result of a sale, transfer of title, mortgaging, pledging, financing, or
other disposition by Lessor of any of the Slots, or any interest in the Rent or
part thereof or any interest in any Operative Document, other than (i) such
Impositions resulting from any such sale, transfer of title, mortgaging,
pledging, financing, or other dispositions requested by Lessee, and (ii) a
disposition of any Slots resulting from the exercise of remedies under the Lease
while an Event of Default has occurred and is continuing, (D) any Impositions
caused by any act of Lessor other than any act contemplated or permitted by the
Operative Documents, (E) any Impositions imposed by reason of the gross
negligence or willful misconduct of Lessor, (F) any Impositions imposed with
respect to periods prior to commencement of the Term or after the termination of
the Lease, and (G) withholding taxes in respect of any of the items described in
clauses (A) through (F) above. Lessee shall pay any and all costs and expenses
incurred in any such contest, including any attorneys' fees incurred by Lessor.
All amounts payable by Lessee under this Section shall be payable, to the extent
not theretofore paid, on written demand of Lessor. In case any
-5-
<PAGE> 8
report or return is required to be made with respect to any obligation of Lessee
under this Section or arising out of this Section, Lessee will either (after
notice to Lessor) make such report or return in such manner as will show the
ownership of the Leased Slots in Lessor and send a copy of such report or return
to Lessor or will notify Lessor of such requirement and make such report or
return in such manner as shall be satisfactory to Lessor. Lessor agrees to
cooperate fully with Lessee in the preparation of any such reports or returns.
SECTION 7. USE OF LEASED SLOTS.
(a) Lessee agrees that the Leased Slots will be used solely by Lessee
(other than in connection with subleases and Slot Trades permitted by Section 9
hereof) and in compliance with any and all Laws applicable to the use of the
Leased Slots. Throughout the term of this Lease, the use of the Leased Slots
shall be at the sole cost, risk and expense of Lessee.
(b) Lessee shall have no interest in the Leased Slots other than
those interests arising pursuant to this Lease and Lessee's ownership of the
capital stock of CALFINCO, Inc., a Delaware corporation and a member of Lessor.
Accordingly, Lessee agrees at its own cost and expense, to perform all acts
reasonably requested by Lessor which are directed toward providing notice to
third parties of Lessee's non-ownership interest in the Leased Slots, other than
Lessee's leasehold interest hereunder, including, but not limited to, the
execution of documents presented by Lessor which recite that Lessee does not
have an ownership interest in the Leased Slots, other than Lessee's leasehold
interest hereunder, and which are to be filed in the Office of the Secretary of
State for each state where the Leased Slots are located.
(c) In the event that a case is commenced under Title 11 of the United
States Code (the "Bankruptcy Code") by or against Lessee, the Leased Slots shall
not be deemed to be property of the estate of Lessee in accordance with Section
541 of the Bankruptcy Code, and the parties hereto agree that the benefits of
Section 362 of the Bankruptcy Code shall only extend to Lessee's interests under
the Slot Lease.
(d) So long as no Event of Default under Section 10 hereof shall have
occurred and be continuing, neither Lessor nor any Person claiming by, through,
or under Lessor shall interfere with Lessee's use of the Leased Slots or any of
Lessee's rights under this Lease.
SECTION 8. INDEMNIFICATION.
Lessee agrees to assume liability for, and does hereby agree to
indemnify, protect, save and keep harmless Lessor and its successors, assigns,
agents and servants (each such person being referred to as an "INDEMNIFIED
PERSON") from and against any and all liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving strict or
absolute liability), actions, suits, costs, expenses and disbursements
(including, without limitation, legal fees and expenses) of any kind and nature
whatsoever ("CLAIMS") which may be imposed on, incurred by, or asserted against
any Indemnified Person, whether or not any such Indemnified Person shall also be
indemnified as to any such Claim by any other person, in any way relating to or
arising out of this Lease or any document contemplated hereby, or the
performance or enforcement of any of the terms hereof or thereof, or in any way
relating to or arising out of the use of the Leased Slots or
-6-
<PAGE> 9
any accident in connection therewith; provided, however, that Lessee shall not
be required to indemnify any Indemnified Person for (i) any Claim in respect of
any Leased Slot arising from acts or events which occur after possession of such
Leased Slot has been returned to Lessor, (ii) any Claim resulting from acts
which would constitute the willful misconduct or gross negligence of any such
Indemnified Person, or (iii) any Claim resulting from any breach by Lessor of
its covenant in Section 7(c) hereof. The rights and indemnities of each
Indemnified Person hereunder are expressly made for the benefit of, and shall be
enforceable by, each Indemnified Person notwithstanding the fact that such
Indemnified Person is either no longer a party to this Lease, or was not a party
to this Lease at its outset.
SECTION 9. SUBLEASES AND SLOT TRADES.
So long as no Termination Event shall have occurred under the LLC
Agreement, Lessee shall have the right to sublet, and to engage in Slot Trades
with respect to, any of the Leased Slots, provided that such transaction is
entered into in accordance with standard airline industry practice, or to assign
any of its rights hereunder; provided, however, that (i) each Slot Trade shall
expire on or before the eleventh (11th) anniversary of the Closing Date and (ii)
no sublease shall extend beyond the Term without the consent of the Lessor and
the members of Lessor; and provided, further, that if such Slot Trade or
sublease extends beyond the Term, Lessor, or its assignee, shall have the sole
right (a) to use any Slot received in such Slot Trade, and (b) to receive any
proceeds from any such sublease that accrue (as determined in accordance with
generally accepted accounting principles), after the expiration or earlier
termination of the Term, including without limitation, any termination in
accordance with the provisions of Section 11 hereof. No sublease, other
relinquishment of the possession of any of the Leased Slots, or assignment by
Lessee of any of its rights hereunder shall in any way discharge or diminish any
of Lessee's obligations to Lessor hereunder.
SECTION 10. EVENTS OF DEFAULT.
Each of the following events shall constitute an Event of Default
hereunder:
(a) Lessee shall fail to make any payment of Rent within 10 days after
the date due; or
(b) Lessee shall make a general assignment for the benefit of
creditors or consent to the appointment of a trustee or receiver for itself or
for a substantial part of its property, or a trustee or a receiver shall be
appointed for Lessee, for any of the Leased Slots, or for substantially all of
Lessee's property without Lessee's consent and such appointment shall not be
dismissed within a period of 60 days; or bankruptcy, reorganization or
insolvency proceedings shall be instituted by or against Lessee and, if
instituted against Lessee, shall not be dismissed, stayed or withdrawn for a
period of 60 days; or
(c) Lessee shall fail to comply with any term, provision or covenant
of this Lease (other than the obligation to pay Rent), and such failure
continues for 30 days after written notice from Lessor or any member of Lessor
thereof to Lessee.
-7-
<PAGE> 10
SECTION 11. REMEDIES.
(a) Upon the occurrence of any Event of Default and so long as the
same shall be continuing, Lessor may, at its option, declare this Lease to be in
default by written notice to such effect given to Lessee, and at any time
thereafter, Lessor may exercise one or more of the following remedies, as Lessor
in its sole discretion shall lawfully elect:
(i) Terminate this Lease by giving Lessee written notice
thereof, in which event, Lessee shall pay to Lessor the sum of all Rent accrued
hereunder and unpaid through the date of termination, and an amount equal to the
total Rent that Lessee would have been required to pay for the remainder of the
Term discounted to present value at a per annum rate equal to the "Discount
Rate" as published on the date this Lease is terminated by The Wall Street
Journal, Southwest Edition, in its listing under the heading "Money Rate", minus
the then fair market value of the Leased Slots for such period, similarly
discounted; or
(ii) Terminate Lessee's right to use the Leased Slots without
terminating this Lease by giving written notice thereof to Lessee, in which
event Lessee shall pay to Lessor all Rent during the remainder of the Term,
diminished by any net sums thereafter received by Lessor through reletting the
Leased Slots during such period (which reletting may be for a period less than
or greater than the remainder of the Term). Lessor may, from time to time, bring
action against Lessee to collect amounts due by Lessee hereunder and the costs
and expenses associated with reletting the Leased Slots, without the necessity
of Lessor's waiting until the expiration of the Term. Unless Lessor delivers
written notice to Lessee expressly stating that it has elected to terminate this
Lease, all actions taken by Lessor to prohibit Lessee's use of the Leased Slots
shall be deemed to be taken under this Section 11(a)(ii). If Lessor elects to
proceed under this Section 11(a)(ii), it may at any time elect to terminate this
Lease under Section 11(a)(i).
(b) Lessee shall be liable for all reasonable costs, charges and
expenses, including the costs and expenses associated with reletting the Leased
Slots, and reasonable attorneys' fees and disbursements, incurred by Lessor by
reason of the occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto.
(c) No remedy referred to herein is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity. No express or implied waiver
by Lessor of any default or Event of Default hereunder shall in any way be, or
be construed to be, a waiver of any future or subsequent default or Event of
Default. The failure or delay of Lessor in exercising any rights granted it
hereunder upon any occurrence of any of the contingencies set forth herein shall
not constitute a waiver of any such right upon the continuation or recurrence of
any such contingencies or similar contingencies and any single or partial
exercise of any particular right by Lessor shall not exhaust the same or
constitute a waiver of any other right provided herein.
SECTION 12. NOTICES.
All notices, directions and other communications provided for hereunder
shall be in writing and may be personally delivered, mailed (by registered or
certified mail, postage prepaid) or sent by
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<PAGE> 11
telecopy, telegraph or other direct written electronic means, to the applicable
party at the address indicated below:
If to Lessor:
Calair L.L.C.
c/o Continental Airlines, Inc.
2929 Allen Parkway, Suite 1588
Houston, Texas 77019
Attention: Vice President - Treasury Operations
Telecopy No.: 713-834-2448
With a copy to Chase Equity Associates, L.P.
c/o Chase Capital Partners, Inc.
380 Madison Avenue, 12th Floor
New York, New York 10017-2591
Attn: Brian J. Richmand
Telecopy No.: 212-622-3101
and to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Brian S. Rosen, Esq.
Telecopy No.: 212-310-8007
If to Lessee:
Continental Airlines, Inc.
2929 Allen Parkway, Suite 1588
Houston, Texas 77019
Attention: Vice President - Corporate Finance
Telecopy No.: 713-834-2448
or as to any party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the terms
of this Section 12. All such notices, when personally delivered shall be deemed
to have been validly and effectively given on the date of such delivery, when
transmitted by telegraph, telecopy or other direct written electronic means
shall be deemed to have been validly and effectively given on the day on which
it is transmitted, or, if mailed, shall be deemed to have been validly and
effectively given when deposited in the mail.
-9-
<PAGE> 12
SECTION 13. RIGHT TO PURCHASE LEASED SLOTS OR TO REQUEST THAT LESSOR
EXCHANGE LEASED SLOTS.
(a) At any time, and from time to time, if Lessee reasonably
determines that any one or more of the Leased Slots are uneconomical to operate,
are obsolete, or are surplus to Lessee's business, Lessee shall be entitled
either (i) to cause Lessor to sell the Leased Slots to a Person that is not an
Affiliate of Lessor or Lessee, subject to Section 4.3(h) of the LLC Agreement,
or (ii) to request that Lessor enter into an exchange of such Leased Slots with
any entity other than Lessee or an Affiliate of Lessee; provided, however, that
Lessor and its members, jointly, shall have sole discretion as to whether to
consent to any sale of Leased Slots if the aggregate fair market value of all
Leased Slots sold (or proposed to be sold) pursuant to this Section 13 is
greater than or equal to $50,000,000.
(b) If Lessee causes any one or more of the Leased Slots to be sold
(the "PURCHASED SLOTS"),
(1) such sale shall be free and clear of any Encumbrance;
(2) the consideration to be paid for such Purchased Slots shall be
either (i) immediately available funds, or (ii) another Slot,
or Slots (the "SWAPPED SLOTS"), having an aggregate fair
market value at least equal to the fair market value, as set
forth in an appraisal prepared by an appraiser reasonably
acceptable to Lessor, dated within 30 days of the sale of the
Purchased Slots, or (iii) a combination of immediately
available funds and Swapped Slots;
(3) if the consideration for the sale is immediately available
funds, this Lease shall terminate as to such Purchased
Slot(s), in lieu of any stipulated loss, Lessee shall continue
to pay the full amount of the Rent hereunder, reduced only by
an amount equal to the interest earned by the Lessor on such
funds until the earlier of (i) the date such funds are used,
if ever, to redeem CEA's Member Interest under the Redemption
Option Agreement, and (ii) the expiration or earlier
termination of the Term, Lessor hereby agreeing to either
invest any such funds, net of any amounts distributed to the
members of Lessor to pay taxes due in respect of such sale, in
Cash Equivalents, as defined in the LLC Agreement, or to make
loans to members of Lessor, or Affiliates of such members,
pursuant to, and in accordance with the terms and conditions
contained in, Section 7.1 of the LLC Agreement; and if the
consideration for the purchase is Swapped Slots, the Swapped
Slots shall thereafter automatically be included in, and the
Purchased Slots shall thereafter automatically be excluded
from, the Leased Slots and the Rent due hereunder shall
continue unabated;
(4) Lessee shall provide Lessor and its members with ten (10)
days' prior written notice of such proposed sale, and, if
requested by Lessor or any of its Members, provide Lessor and
its Members with an appraisal reasonably satisfactory to
Lessor and its Members indicating the fair market value, at or
-10-
<PAGE> 13
not more than thirty (30) days prior to the time of the sale,
of the Purchased Slots and the Swapped Slots (if applicable);
and
(5) If the consideration paid for the Purchased Slots is Swapped
Slots, the sale shall be effected by a like-kind exchange
pursuant to Section 1031 of the Internal Revenue Code.
(c) If Lessee requests that Lessor enter into an exchange of Leased
Slots with any entity other than Lessee or an Affiliate of Lessee and Lessor
complies with such request, (i) the Slots received from the other airline
carrier in such exchange ("SUBSTITUTE SLOTS") shall have an aggregate fair
market value at least equal to the fair market value of the Slots transferred to
the other airline carrier in such exchange, as set forth in an appraisal
prepared by an appraiser reasonably acceptable to Lessor, dated within thirty
(30) days of the exchange, (ii) the exchange shall be effected by a like-kind
exchange pursuant to Section 1031 of the Internal Revenue Code, and (iii) the
Substitute Slots shall thereafter automatically be included in, and the Slots
transferred to the other airline carrier in such exchange shall thereafter
automatically be excluded from, the Leased Slots.
SECTION 14. AMENDMENTS AND MISCELLANEOUS.
(a) The terms of this Lease shall not be waived, altered, modified,
amended, supplemented or terminated in any manner whatsoever except by written
instrument signed by Lessor and Lessee, subject to the terms of the LLC
Agreement.
(b) This Lease shall be binding upon and inure to the benefit of
Lessor, and its successors and assigns, any security assignee of Lessor
accepting an assignment of the rights of Lessor under this Lease and the
successors and assigns of any such security assignee, and Lessee and its
successors and, to the extent permitted hereby, assigns. With respect to the
provisions of Sections 6 and 8 of this Lease, the successors and assigns, agents
and servants of Lessor, any security assignee of Lessor and any holder of
obligations of Lessor issued in connection with this Lease shall each be
indemnified thereunder and, with respect to clause (ii) of the proviso to
Section 8 of this Lease, the willful misconduct or gross negligence of any
Indemnified Person shall not affect the rights of any other Indemnified Person
under such Section.
(c) All agreements, representations and warranties contained in this
Lease or in any document or certificate delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Lease and
the expiration or other termination of this Lease.
(d) Any provision of this Lease which may be determined by competent
authority to be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, Lessee hereby waives any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
-11-
<PAGE> 14
(e) This Lease shall constitute an agreement of lease and nothing
herein shall be construed as conveying to Lessee any right, title or interest in
or to the Leased Slots, except as a lessee only.
(f) This Lease shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to the principles of
conflict of laws thereof (other than Section 5-1401 of the New York General
Obligations Law).
(g) Section headings are for convenience only and shall not be
construed as part of this Lease.
(h) Lessor and Lessee shall, prior to the commencement of the Term,
and thereafter as may be necessary, notify the FAA pursuant to Section 93.221 of
the Slot Regulations of the contemplated use of the Leased Slots by Lessee.
-12-
<PAGE> 15
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on or
as of the Commencement Date.
Lessor: CALAIR L.L.C.
By: CALFINCO Inc.
Managing Member
By: /s/ JEFFREY J. MISNER
-----------------------------------
Jeffrey J. Misner
Vice President - Treasury Operations
Lessee: CONTINENTAL AIRLINES, INC.
By: /s/ GERALD LADERMAN
------------------------------------------
Gerald Laderman
Vice President - Corporate Finance
<PAGE> 16
EXHIBIT A
LIST OF LEASED SLOTS
A. CHICAGO O'HARE
<TABLE>
<CAPTION>
TIME SLOT NO.
------ --------
<S> <C> <C>
1. 07:15 7240*
2. 07:15 8270
3. 08:15 7664
4. 08:45 7742
5. 09:45 7796
6. 10:15 7475
7. 10:15 8659
8. 11:15 7971*
9. 11:45 8506*
10. 11:45 7439*
11. 12:15 8426*
12. 13:15 7609*
13. 13:45 7178*
14. 13:45 7377
15. 14:15 7320*
16. 14:15 8071*
17. 14:45 8316*
18. 14:45 7682
19. 15:15 8640
20. 15:45 7970*
21. 16:15 8327
22. 16:15 7659
23. 16:45 7924
24. 16:45 8290
25. 17:15 7591*
26. 17:45 7743
27. 18:15 8200*
28. 18:15 7977
29. 18:15 7635*
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-1
<PAGE> 17
B. WASHINGTON NATIONAL
<TABLE>
<CAPTION>
TIME SLOT NO.
------ --------
<S> <C> <C>
1. 07:00 1209*
2. 07:00 1270
3. 07:00 1568
4. 08:00 1610
5. 08:00 1498*
6. 09:00 1637
7. 09:00 1453
8. 09:00 1335*
9. 10:00 1026
10. 11:00 1120*
11. 11:00 1067*
12. 11:00 1020
13. 12:00 1572*
14. 12:00 1368
15. 13:00 1069*
16. 13:00 1656
17. 13:00 1068
18. 14:00 1545
19. 14:00 1615
20. 14:00 1520
21. 15:00 1600
22. 15:00 1054
23. 15:00 1164*
24. 16:00 1156
25. 16:00 1111*
26. 16:00 1527*
27. 17:00 1071*
28. 17:00 1280
29. 18:00 1324*
30. 19:00 1095*
31. 19:00 1129*
32. 19:00 1294*
33. 19:00 1550*
34. 19:00 1301
35. 20:00 1279
36. 20:00 1640*
37. 20:00 1288*
38. 20:00 1448*
39. 21:00 1647
40. 21:00 1558
41. 21:00 1239
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-2
<PAGE> 18
C. LAGUARDIA - DEPARTURE
<TABLE>
<CAPTION>
TIME SLOT NO.
------ --------
<S> <C> <C>
1. 07:00 3851*
2. 08:30 3595*
3. 08:30 3336
4. 09:30 3181*
5. 10:00 3198*
6. 11:00 3663*
7. 12:00 3833
8. 13:00 3331
9. 13:30 3808
10. 14:30 3379*
11. 15:30 3363*
12. 16:30 3805
13. 17:00 3090*
14. 17:00 3274*
15. 17:30 3412*
16. 18:30 3398*
17. 19:30 3572
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-3
<PAGE> 19
D. LAGUARDIA - ARRIVAL
<TABLE>
<CAPTION>
TIME SLOT NO.
------ --------
<S> <C> <C>
1. 08:30 3077*
2. 09:00 3087
3. 10:30 3827*
4. 12:30 3582
5. 13:30 3108
6. 15:30 3618*
7. 16:00 3091*
8. 16:00 3810*
9. 17:00 3678*
10. 17:30 3288*
11. 18:00 3173*
12. 18:30 3800
13. 19:00 3620*
14. 19:30 3679*
15. 21:30 3053*
</TABLE>
* As of April 1998, licensed to a third-party commercial air carrier.
A-4
<PAGE> 1
EXHIBIT 10.3
================================================================================
REDEMPTION OPTION AGREEMENT
BETWEEN
CALAIR L.L.C.
AND
CHASE EQUITY ASSOCIATES, L.P.
dated as of
April 17, 1998
================================================================================
<PAGE> 2
REDEMPTION OPTION AGREEMENT
This Redemption Option Agreement (this "Agreement") is made and
entered into by and between CALAIR L.L.C. ("Calair"), a limited liability
company organized and existing under the laws of the State of Delaware and
CHASE EQUITY ASSOCIATES, L.P. ("CEA"), a California limited partnership.
RECITALS
Effective as of March 30, 1998, CALFINCO Inc. ("Calfinco") entered
into a limited liability company agreement (the "Original LLC Agreement")
forming Calair. Calair's certificate of formation was filed with the Secretary
of State of Delaware on March 31, 1998. Of even date herewith, CEA and
Calfinco are amending and restating the Original LLC Agreement (as amended and
restated, the "LLC Agreement"). Each capitalized term not otherwise defined in
this Agreement shall have the meaning ascribed to such term in the LLC
Agreement.
As an inducement to Calfinco's becoming a member in Calair, CEA agreed
to grant Calair certain rights to redeem CEA's Member Interest, as more
particularly set forth below.
NOW THEREFORE, in consideration of the foregoing premises, and paid
Ten and No/100 Dollars ($10.00) in hand paid, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, CEA
and Calair hereby agree as follows:
1. On the fifth anniversary of the Closing Date (the "Fifth
Anniversary"), or if the Fifth Anniversary is not a Business Day, on the first
(1st) Business Day thereafter, Calfinco, regardless of whether Calfinco is then
the Managing Member, shall have the right to cause Calair to redeem one-half
of CEA's Member Interest for $5,558,000, payable in immediately available
funds.
2. CEA shall have the right, at any time not more than two
hundred seventy (270) days prior to the Tenth Anniversary, to give Calair
notice (the "Redemption Notice") requesting that Calair elect whether to
exercise Calair's option to redeem all of CEA's remaining Member Interest.
Calfinco, regardless of whether Calfinco is then the Managing Member, shall
have the right to cause Calair to redeem all of CEA's remaining Member Interest
by notifying CEA of Calair's election to so redeem CEA's Member Interest within
ten (10) Business Days after receipt of the Redemption Notice. If Calair so
notifies CEA of Calair's election to redeem CEA's Member Interest, the
redemption shall occur on the Tenth Anniversary, or if the Tenth Anniversary is
not a Business Day, on the first (1st) Business Day thereafter. The purchase
price for such redemption shall be (i) $6,834,200, if Calair has previously
exercised its right pursuant to Section 1 hereof, or (ii) $13,668,400, if
Calair failed to exercise its right pursuant to Section 1 hereof. If Calair
notifies CEA that Calair elects not to redeem the remainder of CEA's Member
Interest, or if Calair fails to notify CEA of any election by Calair within
such ten (10) Business Day period following the Redemption Notice, Calair shall
be deemed to have waived its right to redeem CEA's remaining Member Interest.
<PAGE> 3
3. (a) Within five (5) Business Days after (i) CEA refuses
to consent to the taking of any action under Section 4.3 of the LLC Agreement
that Calfinco, as the Managing Member, requests CEA to consent to (provided
this clause (i) shall not apply to any request for consent that CEA refuses
prior to the second anniversary of the Closing Date), or (ii) Calfinco's
receipt of a "Trigger Event Notice" pursuant to Section 4.4(a) of the LLC
Agreement, Calfinco, regardless of whether Calfinco is then the Managing
Member, shall have the right to cause Calair to tender to CEA a notice (a
"Conditional Exercise Notice") of Calair's intent to redeem all of CEA's
remaining Member Interest.
(b) If Calair gives CEA a Conditional Exercise Notice,
Calair shall cause the fair market value of the Slots to be determined by an
appraisal (the "Appraisal") performed by an appraiser reasonably acceptable to
Calfinco and CEA within ten (10) Business Days after delivery of the
Conditional Exercise Notice. Unless Calair notifies CEA of Calair's rescission
of the Conditional Exercise Notice within ten (10) Business Days after delivery
of the Conditional Exercise Notice, Calair shall be obligated to redeem all of
CEA's remaining Member Interest for the purchase price described in Paragraph
3(c) within thirty (30) days after delivery of the Conditional Exercise Notice.
(c) The purchase price payable by Calair for CEA's
remaining Member Interest, if redeemed pursuant to this paragraph 3, shall be
equal to the sum of (i) CEA's Sharing Ratio prior to giving effect to such
redemption multiplied by all due and unpaid Net Rent (as defined below), if
any, together with interest thereon at the Net Rent Default Rate (as defined
below), plus (ii) (A) if such redemption occurs after the Fifth Anniversary,
CEA's Sharing Ratio prior to giving effect to such redemption, multiplied by
the Net Rent that would have been payable by CAL under the Slot Lease for the
remainder of the term of the Slot Lease, or (B) if such redemption occurs prior
to the Fifth Anniversary, (1) CEA's Sharing Ratio prior to giving effect to
such redemption (i.e. twenty-four percent (24%)), multiplied by the Net Rent
that would have been payable by CAL under the Slot Lease to, but excluding, the
Fifth Anniversary, plus (2) twelve percent (12%) multiplied by the Net Rent
that would have been payable by CAL under the Slot Lease from and including the
Fifth Anniversary through the Tenth Anniversary, with each rental stream
described in clauses (ii)(A), (ii)(B)(1), and (ii)(B)(2) being discounted to
present value using as the discount rate, seventy-five (75) basis points in
excess of the yield reported, as of 10:00 a.m. (New York City time) on the day
preceding the day of redemption, on the display designated as "Page 678" on the
Telerate Access Service (or such other display as may replace Page 678 on the
Telerate Access Service), for actively traded U.S. Treasury securities,
interpolated to correspond to the weighted average maturity of CEA's share of
the Net Rent payable to CEA during the remaining term of the Slot Lease
(calculated as stated above in clause (ii)(A) or (ii)(B)) (the "Discount
Rate"), plus (iii) the greater of (x) the purchase price that would be
associated with Calair's redemption of CEA's remaining Member Interest on the
first date or dates that the redemption of such Member Interest would be
possible pursuant to Sections 1 and 2 hereof, discounted to present value using
the Discount Rate, and (y) CEA's Sharing Ratio prior to giving effect to such
redemption, multiplied by the amount by which (1) the then fair market value of
the Slots, as set forth in the Appraisal, plus the then outstanding principal
balance of any loans made by Calair to a Member, or an Affiliate of a Member,
pursuant
-2-
<PAGE> 4
to, and in accordance with the terms and conditions contained in, Section 7.1
of the LLC Agreement, plus any cash then being retained by Calair, exceeds (2)
the principal balance of, together with any accrued interest on, the
Indebtedness of Calair as of the date of redemption.
(d) By way of example and not by way of limitation, the
amount described in clause (iii)(x) of paragraph 3(c) above would be calculated
as follows:
(i) If the redemption occurs on or prior to the
Fifth Anniversary, the amount would be the sum of (A)
$5,558,000, discounted from the Fifth Anniversary back to the
actual date of redemption at the Discount Rate, plus (B)
$6,834,200, discounted from the Tenth Anniversary back to the
actual date of redemption at the Discount Rate.
(ii) If the redemption occurs after the Fifth
Anniversary and Calair has previously exercised its redemption
option described in paragraph 1, the amount would be
$6,834,200, discounted from the Tenth Anniversary back to the
actual date of redemption at the Discount Rate.
(iii) If the redemption occurs after the Fifth
Anniversary and Calair has not exercised its redemption option
described in paragraph 1, the amount would be $13,668,400,
discounted from the Tenth Anniversary back to the actual date
of redemption at the Discount Rate.
(e) As used in paragraph 3(c) above, (i) "Net Rent", for
any period, means the amount by which the aggregate rent payable under the Slot
Lease exceeds the interest payable for such period in respect of the
Indebtedness evidenced by the Credit Documents, or any refinancing of such
Indebtedness pursuant to Section 4.3(r) of the LLC Agreement, and (ii) "Net
Rent Default Rate" shall mean 9% per semi-annual period, prorated for any
partial period based on the actual number of days since the immediately
preceding April 1st or October 1st, as applicable, in each case, divided by 182
or 183, as applicable.
4. Within thirty (30) days after Calfinco obtains knowledge that
CEA's Member Interest has been Transferred pursuant to the foreclosure of a
security interest granted by CEA on its Member Interest, Calfinco, regardless
of whether Calfinco is then the Managing Member, shall have the right to cause
Calair to redeem all of CEA's remaining Member Interest for a purchase price
equal to the price described in clause 5 below. Calair shall notify CEA of
Calair's election to exercise Calair's rights to redeem CEA's remaining Member
Interest, and Calair shall consummate such redemption, within such thirty (30)
day period after Calair obtains knowledge that CEA's Member Interest has been
so Transferred.
5. Within thirty (30) days after Calfinco's receipt of a
"Termination Notice" pursuant to Section 11.1(b) of the LLC Agreement as a
result of the occurrence of any event described in clause (ii) of the
definition of Termination Event, Calfinco, regardless of whether Calfinco is
then the Managing Member, shall have the right to cause Calair to redeem all of
CEA's remaining
-3-
<PAGE> 5
Member Interest for a purchase price equal to the amount described in clauses
3(c)(i), the applicable portion of clause 3(c)(ii), and clause 3(c)(iii)(x)
above, except that the phrase "one hundred fifty (150) basis points" shall be
substituted for the phrase "seventy-five (75) basis points" in the definition
of "Discount Rate." Calair shall notify CEA of Calair's election to exercise
Calair's right to redeem CEA's remaining Member Interest, and Calair shall
consummate such redemption, within such thirty (30) day period after receipt of
such Termination Notice.
6. At any time after Calfinco's receipt of a "Termination Notice"
pursuant to Section 11.1(b) of the LLC Agreement as a result of the occurrence
of an event described in clause (xi) of the definition of Termination Event and
prior to the Tenth Anniversary, Calfinco, regardless of whether Calfinco is
then the Managing Member, shall have the right to cause Calair to tender to CEA
a Conditional Exercise Notice and to proceed with the redemption of CEA's
Member Interest in accordance with Paragraph 3 above, except that the purchase
price payable to CEA for such redemption shall be reduced by the amount of any
Distributions made by the Company Liquidator to CEA from the proceeds of the
sale of Slots pursuant to Section 11.7(d) of the LLC Agreement.
Notwithstanding anything to the contrary contained in this Section 6, (a) the
tender of a Conditional Exercise Notice under this Section 6 shall not
prohibit, nor is it intended to prohibit, Calair from selling its assets in
accordance with Sections 11.1 and 11.7 of the LLC Agreement, and (b) no event,
including, without limitation, the commencement of a case under Title 11 of the
United States Code by or against Calfinco, Calair or CAL, other than
consummation of the redemption option contained herein, shall inhibit the sale
of assets in accordance with Sections 11.1 and 11.7 of the LLC Agreement.
7. (a) Within five (5) Business Days after Calfinco's
receipt of a "Termination Notice" pursuant to Section 11.1(b) of the LLC
Agreement as a result of the occurrence of any event other than as described in
clauses (ii) of the definition of Termination Event, Calfinco, regardless of
whether Calfinco is then the Managing Member, shall have the right to cause
Calair to tender to CEA a Conditional Exercise Notice and to proceed with the
redemption of CEA's Member Interest in accordance with Paragraph 3 above.
(b) If Calair does not tender a Conditional Exercise Notice to CEA
with such five (5) Business Day period, then CEA shall have the right to notify
Calfinco of CEA's intent to cause Calair to terminate, wind up, and liquidate
(the "Liquidation Notice"). Within five (5) Business Days after Calfinco's
receipt of a Liquidation Notice, Calfinco, regardless of whether Calfinco is
then the Managing Member, shall have the right to cause Calair to tender to CEA
a Conditional Exercise Notice and to proceed with the redemption of CEA's
Member Interest in accordance with Paragraph 3 above.
(c) If Calair does not tender a Conditional Exercise Notice to CEA
pursuant to this Paragraph 7, and consummate the redemption of CEA's Member
Interest in accordance with Paragraph 3 above, CEA shall have the right to
cause the termination, winding up, and liquidation of Calair in accordance with
Section 11.1 of the LLC Agreement.
-4-
<PAGE> 6
8. Within thirty (30) days after Calfinco's receipt of notice or
otherwise becoming aware that CEA's Member Interest has been Transferred
pursuant to a Transfer that was not a Permitted Transfer, Calfinco, regardless
of whether Calfinco is then the Managing Member, shall have the right to cause
Calair to redeem all of CEA's and/or the transferee's Member Interest for a
purchase price equal to (a) if such transferee is not a foreign or domestic air
carrier or an Affiliate of such an air carrier, the amount paid by the
transferee for such Member Interest, stated in terms of cash, or if payment was
made in part by a promissory note, in terms of cash and a promissory note in
like amount from Calair, or (b) if such transferee is a foreign or domestic air
carrier or an Affiliate of such an air carrier, the lesser of (i) the amount
described in clause 8(a), and (ii) the sum of the amounts described in clauses
3(c)(i) and 3(c)(iii)(y) above.
9. Notwithstanding anything contained in this Agreement or any
other Operative Document, the options and rights of Calair granted hereunder
shall expire on the first (1st) Business Day after the Tenth Anniversary, or if
the Tenth Anniversary is not a Business Day, on the second (2nd) Business Day
after the Tenth Anniversary.
10. Each party hereto agrees that the other party would be
irreparably damaged if any of the provisions of this Agreement were not
performed in accordance with their specific terms and that monetary damages
would not provide an adequate remedy in such an event. The parties hereto
agree that time is of the essence with respect to performance of the provisions
of this Agreement. Accordingly, the parties hereto agree that, in addition to
any other remedy to which the non-breaching party may be entitled, whether at
law or in equity, the non-breaching party shall be entitled to injunctive
relief to prevent breaches of the provisions of this Agreement and specifically
to enforce the terms and provisions of this Agreement and any action instituted
in any court of the United States or any state thereof having subject matter
jurisdiction.
11. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to the
principles of conflict of laws thereof (other than Section 5-1401 of the New
York General Obligations Law).
12. This Agreement may not be amended except by an instrument in
writing signed by all of the parties hereto.
13. All notices, directions and other communications provided for
hereunder shall be in writing and may be personally delivered, mailed (by
registered or certified mail, postage prepaid) or sent by telecopy, telegraph
or other direct written electronic means, to the applicable party at the
address indicated below:
-5-
<PAGE> 7
If to Calair L.L.C.:
Calair L.L.C.
c/o Continental Airlines, Inc.
2929 Allen Parkway, Suite 1588
Houston, Texas 77019
Attention: Vice President - Treasury Operations
Telecopy No.: 713-834-2448
If to CEA:
c/o Chase Capital Partners, Inc.
380 Madison Avenue, 12th Floor
New York, New York 10017-2591
Attn: Brian J. Richmand
Telecopy No.: 212-622-3101
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Brian S. Rosen, Esq.
Telecopy No.: 212-310-8007
or as to any party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the
terms of this paragraph 13. All such notices, when personally delivered shall
be deemed to have been validly and effectively given on the date of such
delivery, when transmitted by telegraph, telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day on which it is transmitted, or, if mailed, shall be deemed to have been
validly and effectively given when deposited in the mail.
14. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and
the same agreement. Upon execution of this Agreement, counterpart signature
pages may be delivered by facsimile transmission.
15. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their successor and assigns. Without
limiting the generality of the foregoing, if CEA Transfers its Member Interest
to another Person, Calair's redemption rights shall apply to the Member
Interest of such other Person.
-6-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers, managers, or members thereunto duly authorized, as
of the date and year first above written.
CHASE EQUITY ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS, its General Partner
By: /s/ BRIAN RICHMOND
------------------------------------
Name: Brian Richmond
Title: General Partner
CALAIR L.L.C.
By: CALFINCO Inc.,
Managing Member
By: /s/ JEFFREY J. MISNER
------------------------------------
Name: Jeffrey J. Misner
Title: Vice President - Treasury Operations
-7-
<PAGE> 1
EXHIBIT 12.1
CONTINENTAL AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS 4/28/93 1/1/93
ENDED ENDED THROUGH THROUGH
3/31/98 3/31/97 1997 1996 1995 1994 12/31/93 4/27/93
------- ------- ---- ---- ---- ---- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings (Loss) Before Income
Taxes,
Minority Interest and
Extraordinary Items $ 137 $ 124 $ 639 $ 428 $ 310 $ (651) $ (52) $ (977)
Plus:
Interest Expense (a) 40 42 166 165 213 241 165 52
Capitalized Interest (13) (6) (35) (5) (6) (17) (8) (2)
Amortization of Capitalized
Interest 1 1 3 3 2 1 0 0
Portion of Rent Expense
Representative of
Interest Expense (a) 110 94 400 359 360 337 216 117
-------- ------- ------ ------- ------- ------ --------- ---------
275 255 1,173 950 879 (89) 321 (810)
-------- ------- ------ ------- ------- ------ --------- ---------
Fixed Charges:
Interest Expense (a) 40 42 166 165 213 241 165 52
Portion of Rent Expense
Representative of Interest
Expense (a) 110 94 400 359 360 337 216 117
-------- ------- ------ ------- ------- ------ --------- ---------
Total Fixed Charges 150 136 566 524 573 578 381 169
-------- ------- ------ ------- ------- ------ --------- ---------
Coverage Adequacy (Deficiency) $ 125 $ 119 $ 607 $ 426 $ 306 $ (667) $ (60) $ (979)
======== ======= ====== ======= ======= ====== ========= =========
Coverage Ratio 1.83 1.88 2.07 1.81 1.53 n/a n/a n/a
======== ======= ====== ======= ======= ====== ========= =========
</TABLE>
Note: A vertical black line is shown in the table above to separate
Continental's post-reorganized consolidated financial data from its
predecessor since they have not been prepared on a consistent basis of
accounting.
(a) Includes Fair Market Value Adjustments resulting from the
Company's emergence from bankruptcy.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the (i) incorporation by reference of our reports (a) dated February 9,
1998, except for Note 13, as to which the date is March 18, 1998, related to
the consolidated financial statements of Continental Airlines, Inc., and (b)
dated March 18, 1998 related to the financial statement schedule of Continental
Airlines, Inc., both included in Continental Airlines, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1997 filed with the Securities and
Exchange Commission; and (ii) inclusion of our report dated March 31, 1998
related to the March 31, 1998 consolidated balance sheet of Calair L.L.C. in
the Registration Statement (Form S-4) and related Prospectus of Calair Capital
Corporation, Calair L.L.C. and Continental Airlines, Inc. for the registration
of $112,300,000 of 8 1/8% Senior Notes due 2008 of Calair Capital Corporation
and Calair L.L.C.
/s/ ERNST & YOUNG LLP
Houston, Texas
July 30, 1998
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W. Kellner,
Jeffery A. Smisek, Jennifer L. Vogel and Scott Peterson, and each or any of
them, his or her true and lawful attorneys-in-fact and agents (with full power
to each of them to act alone), with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities, to sign the Registration Statement on Form S-4, or other
appropriate Form, relating to the offer by Calair L.L.C. ("Calair"), a Delaware
limited liability company and an indirect subsidiary of Continental Airlines,
Inc. ("Continental"), a Delaware corporation, and Calair Capital Corporation, a
Delaware corporation and a wholly owned subsidiary of Calair, to exchange up to
$112,300,000 aggregate principal amount of their 8 1/8% Senior Notes due 2008,
which are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental for a like principal amount of their outstanding 8 1/8% Senior Notes
due 2008, which are fully and unconditionally guaranteed on an unsecured, senior
basis by Continental, and any and all amendments (including post-effective
amendments) or supplements to such Registration Statement, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Date: July 29, 1998 /s/ GORDON M. BETHUNE
--------------------------------------------------
Gordon M. Bethune
Chairman of the Board and Chief Executive Officer
Continental Airlines, Inc.
Date: July 29, 1998 /s/ MICHAEL P. BONDS
--------------------------------------------------
Michael P. Bonds
Vice President and Controller
Continental Airlines, Inc.
Date: July __, 1998
--------------------------------------------------
Thomas J. Barrack, Jr., Director
Continental Airlines, Inc.
Date: July __, 1998
--------------------------------------------------
Lloyd M. Bentsen, Jr., Director
Continental Airlines, Inc.
Date: July 28, 1998 /s/ DAVID BONDERMAN
--------------------------------------------------
David Bonderman, Director
Continental Airlines, Inc.
<PAGE> 2
Date: July 29, 1998 /s/ GREGORY D. BRENNEMAN
--------------------------------------------------
Gregory D. Brenneman, Director
Continental Airlines, Inc.
Date: July __, 1998
--------------------------------------------------
Patrick Foley, Director
Continental Airlines, Inc.
Date: July 29, 1998 /s/ DOUGLAS H. McCORKINDALE
--------------------------------------------------
Douglas H. McCorkindale, Director
Continental Airlines, Inc.
Date: July 29, 1998 /s/ GEORGE G. C. PARKER
--------------------------------------------------
George G. C. Parker, Director
Continental Airlines, Inc.
Date: July 29, 1998 /s/ RICHARD W. POGUE
--------------------------------------------------
Richard W. Pogue, Director
Continental Airlines, Inc.
Date: July __, 1998
--------------------------------------------------
William S. Price III, Director
Continental Airlines, Inc.
Date: July 29, 1998 /s/ DONALD L. STURM
--------------------------------------------------
Donald L. Sturm, Director
Continental Airlines, Inc.
Date: July 29, 1998 /s/ KAREN HASTIE WILLIAMS
--------------------------------------------------
Karen Hastie Williams, Director
Continental Airlines, Inc.
Date: July 29, 1998 /s/ CHARLES A. YAMARONE
--------------------------------------------------
Charles A. Yamarone, Director
Continental Airlines, Inc.
-2-
<PAGE> 3
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Jeffery A. Smisek,
Jennifer L. Vogel and Scott Peterson, and each or any of them, his or her true
and lawful attorneys-in-fact and agents (with full power to each of them to act
alone), with full power of substitution and resubstitution for him or her and in
his or her name, place and stead in any and all capacities, to sign the
Registration Statement on Form S-4, or other appropriate Form, relating to the
offer by Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental"), a Delaware
corporation, and Calair Capital Corporation, a Delaware corporation and a wholly
owned subsidiary of Calair, to exchange up to $112,300,000 aggregate principal
amount of their 8 1/8% Senior Notes due 2008, which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental for a
like principal amount of their outstanding 8 1/8% Senior Notes due 2008, which
are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental, and any and all amendments (including post-effective amendments) or
supplements to such Registration Statement, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done (with full power to each of them to act alone), as fully
and to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Date: July 29, 1998
/s/ LAWRENCE W. KELLNER
----------------------------------------------------
Lawrence W. Kellner
Executive Vice President and Chief Financial Officer
Continental Airlines, Inc.
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W. Kellner,
Jeffery A. Smisek, Jennifer L. Vogel and Scott Peterson, and each or any of
them, his or her true and lawful attorneys-in-fact and agents (with full power
to each of them to act alone), with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities, to sign the Registration Statement on Form S-4, or other
appropriate Form, relating to the offer by Calair L.L.C. ("Calair"), a Delaware
limited liability company and an indirect subsidiary of Continental Airlines,
Inc. ("Continental"), a Delaware corporation, and Calair Capital Corporation, a
Delaware corporation and a wholly owned subsidiary of Calair, to exchange up to
$112,300,000 aggregate principal amount of their 8 1/8% Senior Notes due 2008,
which are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental for a like principal amount of their outstanding 8 1/8% Senior Notes
due 2008, which are fully and unconditionally guaranteed on an unsecured, senior
basis by Continental, and any and all amendments (including post-effective
amendments) or supplements to such Registration Statement, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Date: July 29, 1998 /s/ GORDON M. BETHUNE
-------------------------------------------------
Gordon M. Bethune
Chairman of the Board and Chief Executive Officer
CALFINCO Inc.
Managing Member of Calair L.L.C.
Date: July 29, 1998 /s/ GREGORY D. BRENNEMAN
-------------------------------------------------
Gregory D. Brenneman
President, Chief Operating Officer and Director
CALFINCO Inc.
Managing Member of Calair L.L.C.
Date: July 29, 1998 /s/ MICHAEL P. BONDS
-------------------------------------------------
Michael P. Bonds
Vice President and Controller
CALFINCO Inc.
Managing Member of Calair L.L.C.
<PAGE> 2
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Jeffery A. Smisek,
Jennifer L. Vogel and Scott Peterson, and each or any of them, his or her true
and lawful attorneys-in-fact and agents (with full power to each of them to act
alone), with full power of substitution and resubstitution for him or her and in
his or her name, place and stead in any and all capacities, to sign the
Registration Statement on Form S-4, or other appropriate Form, relating to the
offer by Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental"), a Delaware
corporation, and Calair Capital Corporation, a Delaware corporation and a wholly
owned subsidiary of Calair, to exchange up to $112,300,000 aggregate principal
amount of their 8 1/8% Senior Notes due 2008, which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental for a
like principal amount of their outstanding 8 1/8% Senior Notes due 2008, which
are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental, and any and all amendments (including post-effective amendments) or
supplements to such Registration Statement, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done (with full power to each of them to act alone), as fully
and to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Date: July 29, 1998 /s/ LAWRENCE W. KELLNER
-------------------------------------------------
Lawrence W. Kellner
Executive Vice President and Chief Financial Officer
CALFINCO Inc.
Managing Member of Calair L.L.C.
<PAGE> 3
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W. Kellner,
Jennifer L. Vogel and Scott Peterson, and each or any of them, his or her true
and lawful attorneys-in-fact and agents (with full power to each of them to act
alone), with full power of substitution and resubstitution for him or her and in
his or her name, place and stead in any and all capacities, to sign the
Registration Statement on Form S-4, or other appropriate Form, relating to the
offer by Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental"), a Delaware
corporation, and Calair Capital Corporation, a Delaware corporation and a wholly
owned subsidiary of Calair, to exchange up to $112,300,000 aggregate principal
amount of their 8 1/8% Senior Notes due 2008, which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental for a
like principal amount of their outstanding 8 1/8% Senior Notes due 2008, which
are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental, and any and all amendments (including post-effective amendments) or
supplements to such Registration Statement, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done (with full power to each of them to act alone), as fully
and to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Date: July 29, 1998 /s/ JEFFERY A. SMISEK
-------------------------------------------------
Jeffery A. Smisek
Executive Vice President, General Counsel,
Secretary and Director
CALFINCO Inc.
Managing Member of Calair L.L.C.
<PAGE> 1
EXHIBIT 24.3
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W. Kellner,
Jeffery A. Smisek, Jennifer L. Vogel and Scott Peterson, and each or any of
them, his or her true and lawful attorneys-in-fact and agents (with full power
to each of them to act alone), with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities, to sign the Registration Statement on Form S-4, or other
appropriate Form, relating to the offer by Calair L.L.C. ("Calair"), a Delaware
limited liability company and an indirect subsidiary of Continental Airlines,
Inc. ("Continental"), a Delaware corporation, and Calair Capital Corporation, a
Delaware corporation and a wholly owned subsidiary of Calair, to exchange up to
$112,300,000 aggregate principal amount of their 8 1/8% Senior Notes due 2008,
which are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental for a like principal amount of their outstanding 8 1/8% Senior Notes
due 2008, which are fully and unconditionally guaranteed on an unsecured, senior
basis by Continental, and any and all amendments (including post-effective
amendments) or supplements to such Registration Statement, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Date: July 29, 1998 /s/ GORDON M. BETHUNE
-------------------------------------------------
Gordon M. Bethune
Chairman of the Board and Chief Executive Officer
Calair Capital Corporation
Date: July 29, 1998 /s/ GREGORY D. BRENNEMAN
-------------------------------------------------
Gregory D. Brenneman
President, Chief Operating Officer and Director
Calair Capital Corporation
Date: July 29, 1998 /s/ MICHAEL P. BONDS
-------------------------------------------------
Michael P. Bonds
Vice President and Controller
Calair Capital Corporation
<PAGE> 2
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Jeffery A. Smisek,
Jennifer L. Vogel and Scott Peterson, and each or any of them, his or her true
and lawful attorneys-in-fact and agents (with full power to each of them to act
alone), with full power of substitution and resubstitution for him or her and in
his or her name, place and stead in any and all capacities, to sign the
Registration Statement on Form S-4, or other appropriate Form, relating to the
offer by Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental"), a Delaware
corporation, and Calair Capital Corporation, a Delaware corporation and a wholly
owned subsidiary of Calair, to exchange up to $112,300,000 aggregate principal
amount of their 8 1/8% Senior Notes due 2008, which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental for a
like principal amount of their outstanding 8 1/8% Senior Notes due 2008, which
are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental, and any and all amendments (including post-effective amendments) or
supplements to such Registration Statement, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done (with full power to each of them to act alone), as fully
and to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Date: July 29, 1998 /s/ LAWRENCE W. KELLNER
----------------------------------------------------
Lawrence W. Kellner
Executive Vice President and Chief Financial Officer
Calair Capital Corporation
<PAGE> 3
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W. Kellner,
Jennifer L. Vogel and Scott Peterson, and each or any of them, his or her true
and lawful attorneys-in-fact and agents (with full power to each of them to act
alone), with full power of substitution and resubstitution for him or her and in
his or her name, place and stead in any and all capacities, to sign the
Registration Statement on Form S-4, or other appropriate Form, relating to the
offer by Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental"), a Delaware
corporation, and Calair Capital Corporation, a Delaware corporation and a wholly
owned subsidiary of Calair, to exchange up to $112,300,000 aggregate principal
amount of their 8 1/8% Senior Notes due 2008, which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental for a
like principal amount of their outstanding 8 1/8% Senior Notes due 2008, which
are fully and unconditionally guaranteed on an unsecured, senior basis by
Continental, and any and all amendments (including post-effective amendments) or
supplements to such Registration Statement, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done (with full power to each of them to act alone), as fully
and to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Date: July 29, 1998 /s/ JEFFERY A. SMISEK
-------------------------------------------------
Jeffery A. Smisek
Executive Vice President, General Counsel,
Secretary and Director
Calair Capital Corporation
<PAGE> 1
EXHIBIT 25.1
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE
ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6229
(Name, address and telephone number of agent for service)
CALAIR CAPITAL CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 76-0566170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CALAIR L.L.C.
(Exact name of obligor as specified in its charter)
Delaware 76-0556172
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
<PAGE> 2
c/o CALFINCO, Inc.
2929 Allen Parkway, Suite 2010 77019
Houston, Texas (Zip Code)
(Address of principal executive office)
8 1/8% Senior Notes due 2008
(Title of the Indenture securities)
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST
POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES,
ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS
EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and
Exchange Commission File No. 33-50709.
<PAGE> 3
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
March 31, 1998, published pursuant to the requirements of the Comptroller of
the Company, see attached.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on July 30, 1998.
Bank One, NA
By: /s/ David Knox
Authorized Signer
<PAGE> 4
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS,
NATIONAL ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County
of Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to- time by resolution of the shareholders at any annual or special
meeting thereof, provided, however, that the Board of Directors, by resolution
of a majority thereof, shall be authorized to increase the number of its
members by not more than two between regular meetings of the shareholders.
Each Director, during the full term of his directorship, shall own, as
qualifying shares, the minimum number of shares of either this Association or
of its parent bank holding company in accordance with the provisions of
applicable law. Unless otherwise provided by the laws of the United States,
any vacancy in the Board of Directors for any reason, including an increase in
the number thereof, may be filled by action of the Board of Directors.
<PAGE> 5
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year
specified therefor in the By-Laws, but if no election is held on that day, it
may be held on any subsequent business day according to the provisions of law;
and all elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be 2,073,750 shares of common stock of the par value of Ten Dollars ($10) each;
but said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such,
if any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time
fix.
This Association, at any time and from time-to-time, may authorize
and issue debt obligations, whether or not subordinated, without the approval
of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall
have the power to appoint one or more Vice Presidents and to appoint a
Secretary and such other officers and employees as may be required to transact
the business of this Association.
The Board of Directors shall have the power to define the duties
of the officers and employees of this Association; to fix the salaries to be
paid to them; to
-6-
<PAGE> 6
dismiss them; to require bonds from them and to fix the penalty thereof; to
regulate the manner in which any increase of the capital of this Association
shall be made; to manage and administer the business and affairs of this
Association; to make all By-Laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.
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TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses)
that may be incurred or paid by him in connection with any claim, action, suit
or proceeding, whether civil, criminal or administrative (all referred to
hereafter in this paragraphs as "Claims") or in connection with any appeal
relating thereto in which he may become involved as a party or otherwise or
with which he may be threatened by reason of his being or having been a
Director, officer or employee of the Association or such other corporation, or
by reason of any action taken or omitted by him in his capacity as such
Director, officer or employee, whether or not he continues to be such at the
time such liability or expenses are incurred, provided that nothing contained
in this paragraph shall be construed to permit indemnification of any such
person who is adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts, unless, at the time such indemnification is
sought, such indemnification in such instance is permissible under applicable
law and regulations, including published rulings of the Comptroller of the
Currency or other appropriate supervisory or regulatory authority, and provided
further that there shall be no indemnification of directors, officers, or
employees against expenses, penalties, or other payments incurred in an
administrative proceeding or action instituted by an appropriate regulatory
agency which proceeding or action results in a final order assessing civil
money penalties or requiring affirmative action by an individual or individuals
in the form of payments to the Association. Every person who may be
indemnified under the provisions of this paragraph and who has been wholly
successful on the merits with respect to any Claim shall be entitled to
indemnification as of right. Except as provided in the preceding sentence, any
indemnification under this paragraph shall be at the sole discretion of the
Board of Directors and shall be made only if the Board of Directors or the
Executive Committee acting by a quorum consisting of
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Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or
non-existence of a contract of insurance or indemnity under which the
Association would be wholly or partially reimbursed for such indemnification,
but the existence or non-existence of such insurance is not the sole
circumstance to be considered nor shall it be wholly determinative of whether
such indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of
Directors or the Executive Committee acting by a quorum consisting of Directors
who are not parties to such Claim shall find or if independent legal counsel
(who may be the regular counsel of the Association) selected by the Board of
Directors or Executive Committee whether or not a disinterested quorum exists
shall render their opinion that the Director, officer or employee acted in good
faith in what he reasonably believed to be the best interests of the
Association or such other corporation and further in the case of any criminal
action or proceeding, that the Director, officer or employee reasonably
believed his conduct to be lawful. Determination of any Claim by judgment
adverse to a Director, officer or employee by settlement with or without Court
approval or conviction upon a plea of guilty or of nolo contendere or its
equivalent shall not create a presumption that a Director, officer or employee
failed to meet the standards of conduct set forth in this paragraph. Expenses
incurred with respect to any Claim may be advanced by the Association prior to
the final disposition thereof upon receipt of an undertaking satisfactory to
the Association by or on behalf of the recipient to repay such amount unless it
is ultimately determined that he is entitled to indemnification under this
paragraph. The rights of indemnification provided in this paragraph shall be
in addition to any rights to which any Director, officer or employee may
otherwise be entitled by contract or as a matter of law.
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<PAGE> 9
Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
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Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to
the provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given
by or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as
shown upon the books of the Bank mailed not less than ten days prior to the
date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of Directors or by any three or
more shareholders owning, in the aggregate, not less than ten percent of the
stock of this Bank. The notice of any special meeting of the shareholders
called by the Board of Directors, stating the time, place and purpose of the
meeting, shall be given by or under the direction of the Secretary, or such
other officer as is designated by the Chief Executive Officer, by first-class
mail, postage prepaid, to all shareholders of
<PAGE> 11
record of the Bank at their respective addresses as shown upon the books of the
Bank, mailed not less than ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the
directors-elect of their election and to meet forthwith for the organization of
the new board.
The minutes of the meeting shall be signed by the presiding officer and
the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
as three shareholders to be judges of the election, who shall hold and conduct
the same, and who shall, after the election has been held, notify, in writing
over their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the
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meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall notify, in writing over their signatures, the secretary of
the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as many
persons as there are Directors to be elected, or to cumulate such shares as
provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in his name. Shareholders may vote by proxy duly authorized in
writing. All proxies used at the annual meeting shall be secured for that
meeting only, or any adjournment thereof, and shall be dated, and if not dated
by the shareholder, shall be dated as of the date of receipt thereof. No
officer or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to
time until a quorum is obtained. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
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ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION and
shall be employed either in the position of Chief Executive Officer or active
leadership within his or her business, professional or community interest which
shall be located within the geographic area in which the Bank operates, or as
an executive officer of the Bank. A director shall not be eligible for
nomination and re-election as a director of the Bank if such person's executive
or leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The
age of 70 is the mandatory retirement age as a director of the Bank. When a
person's eligibility as director of the Bank terminates, whether because of
change in share ownership, position, residency or age, within 30 days after
such termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event
shall such person be nominated or elected as a director. Provided, however,
following a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the
right to participate in board meetings but shall be without the power to vote
and shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.
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<PAGE> 14
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to his prior
death, resignation, or removal from office. Whenever any vacancy shall occur
among the directors, the remaining directors shall constitute the directors of
the Bank until such vacancy is filled by the remaining directors, and any
director so appointed shall hold office for the unexpired term of his or her
successor. Notwithstanding the foregoing, each director shall hold office and
serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
holders shall meet for organization of the new board at the time fixed by the
presiding officer of the annual meeting. If at the time fixed for such meeting
there is no quorum present, the Directors in attendance may adjourn from time
to time until a quorum is obtained. A majority of the number of Directors
elected by the shareholders shall constitute a quorum for the transaction of
business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held on the third Monday of each calendar month excluding
March and July, which meeting will be held at 4:00 p.m. When any regular
meeting of the Board falls on a holiday, the meeting shall be held on such
other day as the Board may previously designate or should the Board fail to so
designate, on such day as the Chairman of the Board of President may fix.
Whenever a quorum is not present, the directors in attendance shall adjourn the
meeting to a time not later than the date fixed by the Bylaws for the next
succeeding regular meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at the call of the Chairman of the Board or President, or at the
request of two or more Directors. Any special meeting may be held at such
place in Franklin County, Ohio, and at such time as may be fixed in the call.
Written or oral notice shall be given to each Director not later than the day
next preceding the day on which special meeting is to be held, which notice may
be waived in writing.
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<PAGE> 15
The presence of a Director at any meeting of the Board shall be deemed a waiver
of notice thereof by him. Whenever a quorum is not present the Directors in
attendance shall adjourn the special meeting from day to day until a quorum is
obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank
may be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by resolution
of the Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the
Bank's sole benefit and which are concurrent and duplicative with meetings
attended or board service for an affiliate of the Bank for which the Director
receives payment; and provided further, that payment hereunder shall not be
made in the case of any Director in the regular employment of the Bank or of
one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers
of the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
exist or may be amended hereafter. The Executive Committee shall consist of
not fewer than four board members, including the Chairman of the Board and
President of the
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<PAGE> 16
Bank, one of whom, as hereinafter required by these By-laws, shall be the Chief
Executive Officer. The other members of the Committee shall be appointed by
the Chairman of the Board or by the President, with the approval of the Board
and shall continue as members of the Executive Committee until their successors
are appointed, provided, however, that any member of the Executive Committee
may be removed by the Board upon a majority vote thereof at any regular or
special meeting of the Board. The Chairman or President shall fill any vacancy
in the Committee by the appointment of another Director, subject to the
approval of the Board of Directors. The regular meetings of the Executive
Committee shall be held on a regular basis as scheduled by the Board of
Directors. Special meetings of the Executive Committee shall be held at the
call of the Chairman or President or any two members thereof at such time or
times as may be designated. In the event of the absence of any member or
members of the Committee, the presiding member may appoint a member or members
of the Board to fill the place or places of such absent member or members to
serve during such absence. Not fewer than three members of the Committee must
be present at any meeting of the Executive Committee to constitute a quorum,
provided, however that with regard to any matters on which the Executive
Committee shall vote, a majority of the Committee members present at the
meeting at which a vote is to be taken shall not be officers of the Bank and,
provided further, that if, at any meeting at which the Chairman of the Board
and President are both present, Committee members who are not officers are not
in the majority, then the Chairman of the Board or President, which ever of
such officers is not also the Chief Executive Officer, shall not be eligible to
vote at such meeting and shall not be recognized for purposes of determining if
a quorum is present at such meeting. When neither the Chairman of the Board
nor President are present, the Committee shall appoint a presiding officer.
The Executive Committee shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE.
There shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of which
shall be, at least once in each calendar year, to review, develop and recommend
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<PAGE> 17
policies and programs related to the Bank's Community Reinvestment Act
Compliance and regulatory compliance with all existing statutes, rules and
regulations affecting the Bank under state and federal law. Such Committee
shall provide and promptly make a full report of such review of current Bank
policies with regard to Community Reinvestment Act and regulatory compliance in
writing to the Board, with recommendations, if any, which may be necessary to
correct any unsatisfactory conditions. Such Committee may, in its discretion,
in fulfilling its duties, utilize the Community Reinvestment Act officers of
the Bank, Banc One Ohio Corporation and Banc One Corporation and may engage
outside Community Reinvestment Act experts, as approved by the Board, to
review, develop and recommend policies and programs as herein required. The
Community Reinvestment Act and regulatory compliance policies and procedures
established and the recommendations made shall be consistent with, and shall
supplement, the Community Reinvestment Act and regulatory compliance programs,
policies and procedures of Banc One Corporation and Banc One Ohio Corporation.
The Community Reinvestment Act and Compliance Policy Committee shall consist of
not fewer than four board members, one of whom shall be the Chief Executive
Officer and a majority of whom are not officers of the Bank. Not fewer than
three members of the Committee, a majority of whom are not officers of the
Bank, must be present to constitute a quorum. The Chairman of the Board or
President of the Bank, whichever is not the Chief Executive Officer, shall be
an ex officio member of the Community Reinvestment Act and Compliance Policy
Committee. The Community Reinvestment Act and Compliance Policy Committee,
whose chairman shall be appointed by the Board, shall keep a record of its
proceedings and report its proceedings and the action taken by it to the Board
of Directors.
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known
as the Trust Management Committee and the Trust Examination Committee appointed
as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
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ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or
more Vice Chairmen, one or more Vice Presidents (which may include
one or more Executive Vice Presidents and/or Senior Vice
Presidents) and one or more Assistant Secretaries, all of whom
shall be elected by the Board. All other officers may be elected
by the Board or appointed in writing by the Chief Executive
Officer. The salaries of all officers elected by the Board shall
be fixed by the Board. The Board from time-to-time shall
designate the President or Chairman of the Board to serve as the
Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually at
the organizational meeting of the Board of Directors following the
Annual Meeting of Shareholders. Such officers as the Board shall
elect from their own number shall hold office from the date of
their election as officers until the organization meeting of the
Board of Directors following the next Annual Meeting of
Shareholders, provided, however, that such officers may be
relieved of their duties at any time by action of the Board in
which event all the powers incident to their office shall
immediately terminate.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as
otherwise limited by law or these By-laws, the Board assigns to
Chief Executive Officer and/or his
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designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff
and other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section, operation,
function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected by
the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer
of the Bank, perform management functions and have management
responsibilities. Any two or more offices may be held by the same
person except that no person shall hold the office of Chairman of
the Board and/or President and at the same time also hold the
office of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of
the Bank, to the extent that such officer is authorized in writing
by the Chief Executive Officer, may appoint persons other than
officers who are in the employment of the Bank to serve in
management positions and in connection therewith, the appointing
officer may assign such title, salary, responsibilities and
functions as are deemed appropriate by him, provided, however,
that nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as
provided in this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Bank shall have general and active management of the business of the Bank and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. Except as otherwise prescribed or limited by these By-Laws, the
Chief Executive Officer shall have full right, authority and power to control
all personnel, including elected and appointed officers, of the Bank, to employ
or direct the
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<PAGE> 20
employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define and
prescribe the duties and responsibility of all Officers of the Bank, subject to
such further limitations and directions as he may from time-to-time deem
proper. The Chief Executive Officer shall perform all duties incident to his
office and such other and further duties, as may, from time-to-time, be
required of him by the Board of Directors or the shareholders. The
specification of authority in these By-Laws wherever and to whomever granted
shall not be construed to limit in any manner the general powers of delegation
granted to the Chief Executive Officer in conducting the business of the Bank.
The Chief Executive Officer or, in his absence, the Chairman of the Board or
President of the Bank, as designated by the Chief Executive Officer, shall
preside at all meetings of shareholders and meetings of the Board. In the
absence of the Chief Executive Officer, such officer as is designated by the
Chief Executive Officer shall be vested with all the powers and perform all the
duties of the Chief Executive Officer as defined by these By-Laws. When
designating an officer to serve in his absence, the Chief Executive Officer
shall select an officer who is a member of the Board of Directors whenever such
officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attorneys;
to sign and give any notice required to be given; to demand payment and/or to
declare due for any default any debt or obligation due or payable to the Bank
upon demand or authorized to be declared due; to foreclose any mortgages, to
exercise any option, privilege or election to forfeit, terminate, extend or
renew any lease; to authorize and direct any proceedings for the collection of
any money or for the enforcement of any right or obligation; to adjust, settle
and compromise all claims of every kind and description in favor of or against
the Bank, and to give receipts, releases and discharges therefor; to borrow
money and in connection therewith to make, execute and deliver
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<PAGE> 21
notes, bonds or other evidences of indebtedness; to pledge or hypothecate any
securities or any stocks, bonds, notes or any property real or personal held or
owned by the Bank, or to rediscount any notes or other obligations held or
owned by the Bank, to employ or direct the employment of all personnel,
including elected and appointed officers, and the dismissal of them at
pleasure, and in furtherance of and in addition to the powers hereinabove set
forth to do all such acts and to take all such proceedings as in his judgment
are necessary and incidental to the operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer being a member of the Bank's management
staff who is also a person in charge of and responsible for any department
within the Bank and any other officer to the extent such officer is so
designated and authorized by the Chief Executive Officer, the Chairman of the
Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other
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<PAGE> 22
papers or documents as may be appropriate in the circumstances; to execute any
loan agreement, security agreement, commitment letters and financing statements
and other documents on behalf of the Bank as a lender; to execute purchase
orders, documents and agreements entered into by the Bank in the ordinary
course of business, relating to purchase, sale, exchange or lease of services,
tangible personal property, materials and equipment for the use of the Bank; to
execute powers of attorney to perform specific or general functions in the name
of or on behalf of the Bank; to execute promissory notes or other instruments
evidencing debt of the Bank; to execute instruments pledging or releasing
securities for public funds, documents submitting public fund bids on behalf of
the Bank and public fund contracts; to purchase and acquire any real or
personal property including loan portfolios and to execute and deliver such
agreements, contracts or other papers or documents as may be appropriate in the
circumstances; to execute any indemnity and fidelity bonds, proxies or other
papers or documents of like or different character necessary, desirable or
incidental to the conduct of its banking business; to execute and deliver
settlement agreements or other papers or documents as may be appropriate in
connection with a dismissal authorized by Section 3.01(c) of these By-laws; to
execute agreements, instruments, documents, contracts or other papers of like
or difference character necessary, desirable or incidental to the conduct of
its banking business; and to execute and deliver partial releases from and
discharges or assignments of mortgages, financing statements and assignments or
surrender of insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive
Officer, Chairman of the Board, President or any officer who is a member of the
Bank's management staff who is in charge of and responsible for any department
within the Bank are authorized for and on behalf of the Bank to sign and issue
checks, drafts, and certificates of deposit; to sign and endorse bills of
exchange, to sign and countersign foreign and domestic letters of credit, to
receive and receipt for payments of principal, interest, dividends, rents, fees
and payments of every kind and description paid to the Bank, to sign receipts
for property acquired by or entrusted to the Bank, to guarantee the genuineness
of signatures on assignments of stocks, bonds or other securities, to sign
certifications of
- 23 -
<PAGE> 23
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management
staff, may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
- 24 -
<PAGE> 24
ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall
consist of the Chairman of the Board who shall be Chairman of the Com- mittee,
the President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion,
appoint members of the Board to fill the place of such absent members to serve
during such absence. Three members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of the Chairman, or President or any
two members thereof.
The Trust Management Committee, under the general direction of the Board
of Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.
- 25 -
<PAGE> 25
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Commit-
tee known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of the
committee until their successors are appointed. Such members shall not be
active officers of the Bank. Two members of the Committee shall constitute a
quorum. Any member of the Committee may be removed by the Board by a majority
vote at any regular or special meeting of the Board. The Committee shall meet
at such times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law,
Regulations of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in writing
to the Board of Directors of the Bank, together with a recommendation as to
what action, if any, may be necessary to correct any unsatisfactory condition.
A report of the audits together with the action taken thereon shall be noted in
the Minutes of the Board of Directors and such report shall be a part of the
records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
and supervision of an officer of the Bank or of the trust affiliate of the Bank
designated by and subject to the advice and direction of the Chief Executive
Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provisions
of law and applicable regulations.
- 26 -
<PAGE> 26
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may
be carried in the name of the Bank in its fiduciary capacity, in the name of
Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify
the character or class of investments to be made and does not vest in the Bank
any discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated and
authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real
property or personal property and to purchase and acquire any real or personal
property and to execute and deliver such agreements, contracts, or other papers
and documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a power of attorney, or as agent and to execute
and deliver partial releases from any discharges or assignments or mortgages
and assignments or surrender of insurance policies, to execute and deliver
deeds, contracts, leases, assignments, bills of
- 27 -
<PAGE> 27
sale, transfers or such other papers or documents as may be appropriate in the
circumstances for property now or hereafter held by this Bank in any fiduciary
capacity or owned by any principal for whom this Bank may now or hereafter be
acting under a power of attorney or as agent; to execute and deliver settlement
agreements or other papers or documents as may be appropriate in connection
with a dismissal authorized by Section 3.01(c) of these By-laws; provided that
the signature of any such person shall be attested in each case by any officer
of the Trust Department or by any other person who is specifically authorized
by the Chief Executive Officer, the President or the officer in charge of the
Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the trust affiliate
of the Bank as are specifically designated and authorized by the Chief
Executive Officer, the President, or the officer in charge of the Trust
Department, or any other person or corporation as is specifically authorized by
the Chief Executive Officer, the President or the officer in charge of the
Trust Department, are hereby authorized on behalf of this Bank, to sign any and
all pleadings and papers in probate and other court proceedings, to execute any
indemnity and fidelity bonds, trust agreements, proxies or other papers or
documents of like or different character necessary, desirable or incidental to
the appointment of the Bank in any fiduciary capacity and the conduct of its
business in any fiduciary capacity; also to foreclose any mortgage, to execute
and deliver receipts for payments of principal, interest, dividends, rents,
fees and payments of every kind and description paid to the Bank; to sign
receipts for property acquired or entrusted to the Bank; also to sign stock or
bond certificates on behalf of this Bank in any fiduciary capacity and on
behalf of this Bank as transfer agent or registrar; to guarantee the
genuineness of signatures on assignments of stocks, bonds or other securities,
and to authenticate bonds, debentures, land or lease trust certificates or
other forms of security issued pursuant to any indenture under which this Bank
now or hereafter is acting as
Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the Trust
Department, may sign checks, drafts and orders for the payment of money
executed by the Trust Department in the course of its business.
- 28 -
<PAGE> 28
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
officer of the Trust Department, any officer of the trust affiliate of the Bank
and such other persons as may be specifically authorized by Resolution of the
Trust Management Committee or the Board of Directors, may vote shares of stock
of a corporation of record on the books of the issuing company in the name of
the Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law
applicable to such fiduciary account. In the case of shares of stock which are
held by a nominee of the Bank, such shares may be voted by such person(s)
authorized by such nominee.
- 29 -
<PAGE> 29
ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required
by law and deemed appropriate by the Board. The corporate seal may be
facsimile engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the
Chief Executive Officer, may authorize the issuance of a new certificate
therefor without the furnishing of indemnity. Stock Transfer Books, in which
all transfers of stock shall be recorded, shall be provided.
- 30 -
<PAGE> 30
The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a reasonable period prior to the day
designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such
dividends or to be treated as shareholders for such other purpose.
- 31 -
<PAGE> 31
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, NA f/k/a Bank One, Columbus, NA.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of
the Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding Officer and
attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
majority of the Directors.
- 32 -
<PAGE> 32
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for CALAIR
CAPITAL CORPORATION and CALAIR L.L.C. described in the attached Statement of
Eligibility and Qualification, does hereby consent that reports of examinations
by Federal, State, Territorial, or District Authorities may be furnished by
such authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, NA
Dated: July 30, 1998 By: /s/ DAVID KNOX
------------------------------
Authorized Signer
- 33 -
<PAGE> 33
EXHIBIT 7
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS
EXAMINATION COUNCIL Expires March 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Please refer to page i, [1]
Table of Contents, for
the required disclosure
of estimated burden.
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES - FFIEC 031
(980331)
REPORT AT THE CLOSE OF BUSINESS MARCH 31, 1998 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 This report form is to be filed by banks with branches and
(State member banks); 12 U.S.C. Section 1817 (State consolidated subsidiaries in U.S. territories and
nonmember banks); and 12 U.S.C. Section 161 (National possessions, Edge or Agreement subsidiaries, foreign
banks). branches, consolidated foreign subsidiaries, or
international Banking Facilities.
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be The Reports of Condition and Income are to be prepared in
signed by an authorized officer and the Report of accordance with Federal regulatory authority instructions.
Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and We, the undersigned directors (trustees), attest to the
three directors for State member and National banks. correctness of the Report of Condition (including the
I, C. William Willen, Vice-President supporting schedules) for this report date and declare that
---------------------------------------------------- it has been examined by us and to the best of our knowledge
Name and Title of Officer Authorized to Sign Report and belief has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory
of the named bank do hereby declare that the Reports of authority and is true and correct.
Condition and Income (including the supporting
schedules) for this report date have been prepared in
conformance with the instructions issued by the
appropriate Federal regulatory authority and are true /s/ Frederick L. Cullen
to the best of my knowledge and belief. -------------------------------------------------------------
Director (Trustee)
/s/ David P. Lauer
-------------------------------------------------------------
/s/ C. William Willen Director (Trustee)
-------------------------------------------------------
Signature of Officer Authorized to Sign Report
/s/ William M. Bennett
-------------------------------------------------------------
April 30, 1998 Director (Trustee)
-------------------------------------------------------
Date of Signature
- ------------------------------------------------------------------------------------------------------------------------------------
SUBMISSION OF REPORTS (b) in hard-copy (paper) form and arrange for another
party to convert the paper report to electronic form.
Each bank must prepare its Reports of That party (if other than EDS) must transmit the
Condition and Income either: bank's computer data file to EDS.
(a) in electronic form and then file the computer data To fulfill the signature and attestation requirement for the
file directly with the banking agencies' Reports of Condition and Income for this report date, attach
collection agent, Electronic Data Systems this signature page to the hard-copy record of the completed
Corporation (EDS), by modem or on computer report that the bank places in its files.
diskette; or
- ------------------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number | | | | | |
(RCRI 9050) CALL NO. 203 31 03-31-98
STBK: 39-1580 00088 STCERT: 39-66559
BANK ONE, NATIONAL ASSOCIATION
100 EAST BROAD STREET, OH1-0121
COLUMBUS, OH 43271
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C> <C>
Bank One, NA Call Date: 03/31/98 State #: FFIEC 031
100 East Broad Street, OH1-1066 Vendor ID: D Cert #: 06559 RC-1
Columbus, OH 43271 Transit #: 04400037
Transmitted to EDS as 0101467 on 04/30/98 at 09:05:47 CST [11]
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
SCHEDULE RC - BALANCE SHEET
C400<-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
RCFD
1. Cash and balances due from depository Institutions (from Schedule RC-A): ----
a. Noninterest-bearing balances and currency and coin(1) 0081 1,108,408 1.a
----------------------------
b. Interest-bearing balances (2) 0071 1,100 1.b
-----------------------------------------------------
2. Securities
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 153,124 2.a
------------------------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 2,285,146 2.b
----------------------
3. Federal funds sold and securities purchased under agreements to resell 1350 0 3
---------------
4. Loans and lease financing receivables:
RCFD
a. Loans and leases, net of unearned income (from Schedule ----
RC-C) 2122 18,887,996 4.a
--------------------------------------------------------
b. LESS: Allowance for loan and lease losses 3123 422,079 4.b
-----------
c. LESS: Allocated transfer risk reserve 3128 0 4.c
----------------------- RCFD
d. Loans and leases, net of unearned income, ----
allowance, and reserve (item 4.a minus 4.b and 4.c) 2125 18,465,91 4.d
--------------------------------
5. Trading assets (from Schedule RC-D) 3545 0 5.
--------------------------------------------------
6. Premises and fixed assets (including capitalized leases) 2145 194,830 6.
-----------------------------
7. Other real estate owned (from Schedule RC-M) 2150 9,427 7.
-----------------------------------------
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule 2130 39,238 8.
RC-M) 2155 3,827 9.
-------------------------------------------------------------------------------
9. Customers liability to this bank on acceptances outstanding
------------------------
10. Intangible assets (from Schedule RC-M) 2143 140,696 10.
-----------------------------------------------
11. Other assets (from Schedule RC-F) 2160 2,107,317 11.
----------------------------------------------------
12. Total assets (sum of items 1 through 11) 2170 24,509,03 12.
---------------------------------------------
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C> <C>
Bank One, NA Call Date: 03/31/98 State #: FFIEC 031
100 East Broad Street, OH1-1066 Vendor ID: D Cert #: 06559 RC-2
Columbus, OH 43271 Transit #: 04400037
Transmitted to EDS as 0101467 on 04/30/98 at 09:05:47 CST [12]
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of columns A and C from ----
Schedule RC-E, part I) RCON 2200 15,013,853 13.a
------------------------------------------- ----
(1) Noninterest-bearing (1) 6631 3,550,812 13.a.1
----------------------------------------
(2) Interest-bearing 6636 11,463,041 13.a.2
----------------------------------------------- RCFN
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ----
(from Schedule RC-E, part II) RCFN 2200 1,251,180 13.b
------------------------------------ ----
(1) Noninterest-bearing 6631 0 13.b1
--------------------------------------------
(2) Interest-bearing 6636 1,251,180 RCFD 13.b2
----------------------------------------------- ----
14. Federal funds purchased and securities sold under agreements to repurchase 2800 1,932,851 14
----------------
RCON
----
15. a. Demand notes issued to the U.S. Treasury 2840 48,512 15.a
-----------------------------------------------
RCFD
----
b. Trading liabilities (from Schedule RC-D) 3548 0 15.b
-----------------------------------------------
16. Other borrowed money (includes mortgage indebtedness an
obligations under capitalized leases):
a. With a remaining maturity of one year or less 2332 1,415,753 16.a
------------------------------------------
b. With a remaining maturity of more than one year through three years A547 470,997 16.b
--------------------
c. With a remaining maturity of more than three years A548 639,840 16.c
-------------------------------------
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 3,827 18
----------------------------------
19. Subordinated notes and debentures (2) 3200 729,193 19
-----------------------------------------------------
20. Other liabilities (from Schedule RC-G) 2930 1,038,774 20
----------------------------------------------------
21. Total liabilities (sum of items 13 through 20) 2948 22,544,580 21
--------------------------------------------
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 3838 0 23
---------------------------------------------
24. Common stock 3230 127,043 24
------------------------------------------------------------------------------
25. Surplus (exclude all surplus related to preferred stock) 3839 738,352 25
----------------------------------
26. a. Undivided profits and capital reserves 3632 1,082,183 26.a
-------------------------------------------------
b. Net unrealized holding gains (losses) on available-for-sale securities 8434 16,872 26.b
-----------------
27. Cumulative foreign currency translation adjustments 3284 0 27
---------------------------------------
28. Total equity capital (sum of items 23 through 27) 3210 1,964,450 28
-----------------------------------------
29. Total liabilities and equity capital (sum of items 21 and 28) 3300 24,509,030 29
-----------------------------
Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes the RCFD
most comprehensive level of auditing work performed for the bank by independent external ---- Number
auditors as of any date during 1997 6724 N/A M.1
-------------------------------------------------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE> 1
EXHIBIT 99.1
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR 8 1/8% SENIOR NOTES DUE 2008,
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
BANK ONE, N.A.
By Hand/Overnight Courier: Facsimile Transmission Number
Bank One, N.A. 614-244-5185
235 West Schrock Road or 614-244-5188
Westerville, OH 43271-0184
Attention: Corporate Trust Operations (For Eligible Institutions Only)
Lora Marsch Confirm by Telephone
(If by Mail, Registered 614-248-4856
Certified Mail Recommended)
----------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the
Prospectus dated _________, 1998 (the "Prospectus") of Calair L.L.C. ("Calair"),
a Delaware limited liability company and an indirect subsidiary of Continental
Airlines, Inc., Calair Capital Corporation ("Calair Capital" and, together with
Calair, the "Issuers"), a Delaware corporation and a wholly owned subsidiary of
Calair and Continental Airlines, Inc. ("Continental" or the "Company"), a
Delaware corporation, and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe the offer of the Company and the Issuers
(the "Exchange Offer") to exchange the Issuers' 8 1/8% Senior Notes due 2008
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for a like principal amount of the Issuers'
issued and outstanding 8 1/8% Senior Notes due 2008 (the "Old Notes").
Capitalized terms used but not defined herein have the respective meaning given
to them in the Prospectus.
The Company and the Issuers reserve the right, at any time or from time
to time, to extend the Exchange Offer at their discretion, in which event the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. The Company and the Issuers shall notify the holders of the Old Notes
of any extension by oral or written notice and will mail to the record holders
of Old Notes an announcement thereof, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
The term "business day" shall mean any day which is not a Saturday, Sunday or
day on which banks are authorized by law to close in the State of New York.
This Letter of Transmittal is to be used by a holder of Old Notes if
original Old Notes, if available, are to be forwarded herewith or if delivery of
Old Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer -- Procedures for Tendering" and "Book-Entry
Transfer." Holders of Old Notes whose Old Notes
<PAGE> 2
are not immediately available, or who are unable to deliver their Old Notes and
all other documents required by this Letter of Transmittal to the Exchange Agent
on or prior to the Expiration Date, or who are unable to complete the procedure
for book-entry transfer on a timely basis, must tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction
1. Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Issuers or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered
Holder(s) Exactly as Name(s)
Appear(s) on Old Notes
(Please Fill In, If Blank) Old Note(s) Tendered
- ------------------------------------------------------------------------------------------------------------------------
Aggregate Principal Principal
Registered Amount Represented by Amount
Number(s)* Note(s) Tendered**
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the entire aggregate
principal amount represented by such Old Notes. All tenders must be in integral multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution:__________________________________________________
Account Number:_________________________________________________________________
Transaction Code Number:________________________________________________________
-2-
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s) of Old Notes:___________________________________
Date of Execution of Notice of Guaranteed Delivery:_____________________________
Window Ticket Number (if available):____________________________________________
Name of Eligible Institution that Guaranteed Delivery:__________________________
Account Number (if delivered by book-entry transfer):___________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:___________________________________________________________________________
Address:________________________________________________________________________
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company and the Issuers for exchange the
principal amount of Old Notes indicated above. Subject to and effective upon the
acceptance for exchange of the principal amount of Old Notes tendered in
accordance with this Letter of Transmittal, the undersigned hereby exchanges,
assigns and transfers to the Issuers all right, title and interest in and to the
Old Notes tendered for exchange hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent, the agent and attorney-in-fact of
the undersigned (with full knowledge that the Exchange Agent also acts as the
agent of the Company and the Issuers in connection with the Exchange Offer) with
respect to the tendered Old Notes with full power of substitution to (i) deliver
such Old Notes, or transfer ownership of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility, to the Issuers and deliver all
accompanying evidences of transfer and authenticity, and (ii) present such Old
Notes for transfer on the books of the Issuers and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Issuers will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Issuers and the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made
in reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Shearman & Sterling, SEC No-Action
Letter (available July 2, 1993), that the Exchange Notes issued in exchange for
the Old Notes pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than a Participating
Broker-Dealer), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders are not
participating in, and have no arrangement with any person to participate in, the
distribution of such Exchange Notes. The undersigned specifically represent(s)
to the Company and the Issuers that (i) any Exchange Notes acquired in
-3-
<PAGE> 4
exchange for Old Notes tendered hereby are being acquired in the ordinary course
of business of the person receiving such Exchange Notes, whether or not the
undersigned, (ii) the undersigned is not participating in, and has no
arrangement with any person to participate in, the distribution of Exchange
Notes, and (iii) neither the undersigned nor any such other person is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company or
the Issuers or a broker-dealer tendering Old Notes acquired directly from the
Company and the Issuers.
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The undersigned acknowledges that if the
undersigned is participating in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) the undersigned cannot rely on the position
of the staff of the SEC in the Morgan Stanley Letter and similar SEC no-action
letters, and, in the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes, in which
case the registration statement must contain the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the SEC, and (ii) a broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Agreement (including certain indemnification
rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent, the Company or the Issuers to be
necessary or desirable to complete the exchange, assignment and transfer of the
Old Notes tendered hereby, including the transfer of such Old Notes on the
account books maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company and the Issuers shall
be deemed to have accepted for exchange validly tendered Old Notes when, as and
if the Company or the Issuers gives oral or written notice thereof to the
Exchange Agent. Any tendered Old Notes that are not accepted for exchange
pursuant to the Exchange Offer for any reason will be returned, without expense,
to the undersigned at the address shown below or at a different address as may
be indicated herein under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the acceptance of properly tendered
Old Notes by the Company and the Issuers pursuant to the procedures described
under the caption "The Exchange Offer -- Procedures for Tendering" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company and the Issuers upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the Exchange Notes issued in exchange for the Old Notes accepted
for exchange and return any Old Notes not tendered or not exchanged, in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the Exchange Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes that
the Company and the Issuers have no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Old Notes from
the name of the registered holder(s) thereof if the Company and the Issuers do
not accept for exchange any of the Old Notes so tendered for exchange.
-4-
<PAGE> 5
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned, or
(ii) if Old Notes tendered by book-entry transfer which are not exchanged are to
be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue Exchange Notes and/or Old Notes to:
Name:___________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(include Zip Code)
________________________________________________________________________________
(Tax Identification or Social Security Number)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
Book-Entry Transfer Facility Account Number:
(Complete Substitute Form W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered,
or Exchange Notes issued in exchange for Old Notes accepted for exchange, are to
be mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature.
Mail or deliver Exchange Notes and/or Old Notes to:
Name:___________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(include Zip Code)
________________________________________________________________________________
(Tax Identification or Social Security Number)
- --------------------------------------------------------------------------------
-5-
<PAGE> 6
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X_______________________________________________________________________________
X_______________________________________________________________________________
(Signature(s) of Registered Holders or Old Notes)
___________________________________________________________________, 1998
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company
and the Issuers, submit evidence satisfactory to the Company and the Issuers of
such person's authority so to act. See Instruction 5 regarding the completion of
this Letter of Transmittal, printed below.)
Name(s):________________________________________________________________________
(Please Type or Print)
Capacity:_______________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:_____________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name of Firm)
________________________________________________________________________________
(Address, Include Zip Code)
________________________________________________________________________________
(Area Code and Telephone Number)
Dated:__________________________________________________________________ , 1998
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Notes, this Letter
of Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Old Notes should be sent to the Company or the
Issuers.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot complete
the procedure for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedures: (1) such tender must be made by or
through a firm which is a member of a registered national securities exchange or
of the National Association of Securities Dealers Inc., a commercial bank or a
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution"); (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number(s) of such Old Notes and the
amount of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery, this Letter of Transmittal (or facsimile
hereof) together with the certificates for all physically tendered Old Notes, in
proper form for transfer (or a Book-Entry Confirmation) and any other documents
required hereby, must be deposited by the Eligible Institution with the Exchange
Agent; and (iii) the certificates for all physically tendered shares of Old
Notes, in proper form for transfer (or Book-Entry Confirmation, as the case may
be) and all other documents required hereby are received by the Exchange Agent
within three NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of
the Prospectus.
3. Tender by Holder. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, then Old Notes
for the principal amount of Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted for
exchange.
-7-
<PAGE> 8
5. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal (or
facsimile hereof) is signed by the record holder(s) of the Old Notes tendered
hereby, the signature must correspond with the name(s) as written on the face of
the Old Notes without alteration, enlargement or any change whatsoever. If this
Letter of Transmittal (or facsimile hereof) is signed by a participant in the
Book-Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any tendered Old Notes, nor provide
a separate bond power. In any other case, such holder must either properly
endorse the Old Notes tendered or transmit a properly completed separate bond
power with this Letter of Transmittal, with the signatures on the endorsement or
bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered holder or holders of any Old Notes listed, such
Old Notes must be endorsed or accompanied by appropriate bond powers, in each
case signed as the name of the registered holder or holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company or the Issuers, evidence satisfactory to the
Company and the Issuers of their authority to act must be submitted with this
Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal
(or facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered Old
Notes) and the Exchange Notes are to be issued directly to such registered
holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility,
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal (or facsimile hereof) must
be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. Transfer Taxes. The Company and the Issuers will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange
Offer. If, however, certificates representing Exchange Notes or Old Notes for
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide the Issuers
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual is his or her social security number.
If the Issuers is not provided with the
-8-
<PAGE> 9
correct TIN, the holder may be subject to a $50 penalty imposed by Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained). Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.
The Issuers reserve the right in its sole discretion to take whatever
steps are necessary to comply with the Issuers' obligations regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company and the Issuers in their sole
discretion, which determination will be final and binding. The Company and the
Issuers reserve the absolute right to reject any and all Old Notes not properly
tendered or any Old Notes which, if accepted, would, in the opinion of the
Company and the Issuers or their counsel, be unlawful. The Company and the
Issuers also reserve the absolute right to waive any conditions of the Exchange
Offer or irregularities or conditions of tender as to particular Old Notes. The
interpretation of the terms and conditions by the Company and the Issuers of the
Exchange Offer (which includes this Letter of Transmittal and the instructions
hereto) shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company and the Issuers shall determine. Neither the Company, the
Issuers, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes,
nor shall any of them incur any liability for failure to give such notification.
10. Waiver of Conditions. The Company and the Issuers reserve the
absolute right to waive, in whole or part, any of the conditions to the Exchange
Offer set forth in the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for
assistance or for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover page of this Letter of Transmittal. Holders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
-9-
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN Social Security Number
IN THE BOX AT RIGHT AND CERTIFY OR Employer Identification Number
FORM W-9 BY SIGNING AND DATING BELOW
------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 -- Certification -- Under penalties of PART 3 --
INTERNAL REVENUE SERVICE perjury, I certify that:
(1) The number shown on this form is my Awaiting TIN [ ]
correct Awaiting TIN 9 Taxpayer
Identification Number (or I am waiting
for a number to be issued to me) and
(2) I am not subject to backup
withholding Please complete the either Please complete the
because I have not been notified by the Certificate of Awaiting
Certificate of Awaiting Internal Revenue Taxpayer Identification
PAYER'S REQUEST FOR TAXPAYER Service ("IRS") that I am subject to Number below.
IDENTIFICATION NUMBER (TIN) Taxpayer Identification backup
withholding as a result of failure to
report Number below. all interest or
dividends, or the IRS has notified me
that I am no longer subject to backup
withholding.
------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE________________________________ DATE________________________, 1998
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payor within 60
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
__________________________________ ___________________, 1998
Signature Date
- --------------------------------------------------------------------------------
-10-
<PAGE> 11
- --------------------------------------------------------------------------------
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States
citizen or resident (or I am signing for a foreign corporation, partnership,
estate or trust).
__________________________________ ___________________, 1998
Signature Date
- --------------------------------------------------------------------------------
-11-
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
This form, or one substantially equivalent hereto, must be used by a
holder to accept the Exchange Offer of Calair L.L.C. ("Calair"), a Delaware
limited liability company and an indirect subsidiary of Continental Airlines,
Inc., Calair Capital Corporation ("Calair Capital" and, together with Calair,
the "Issuers"), a Delaware corporation and a wholly owned subsidiary of Calair
and Continental Airlines, Inc. ("Continental" or the "Company"), a Delaware
corporation, and to tender 8 1/8% Senior Notes due 2008, (the "Old Notes") to
the Exchange Agent pursuant to the guaranteed delivery procedures described in
"The Exchange Offer --Guaranteed Delivery Procedures" of the Prospectus of the
Company and the Issuers, dated __________, 1998 (the "Prospectus") and in
Instruction 2 to the related Letter of Transmittal. Any holder who wishes to
tender Old Notes pursuant to such guaranteed delivery procedures must ensure
that the Exchange Agent receives this Notice of Guaranteed Delivery prior to
the Expiration Date (as defined below) of the Exchange Offer. Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED
IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
BANK ONE, N.A.
<TABLE>
<S> <C>
By Hand/Overnight Courier: Facsimile Transmission Number
Bank One, N.A. 614-244-5185
235 West Schrock Road or 614-244-5188
Westerville, OH 43271-0184
Attention: Corporate Trust Operations (For Eligible Institutions Only)
Lora Marsch Confirm by Telephone
(If by Mail, Registered 614-248-4856
Certified Mail Recommended)
</TABLE>
-----------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE IN THE BOX PROVIDED ON
THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company and the Issuers, upon
the terms and subject to the conditions set forth in the Prospectus and the
related Letter of Transmittal, receipt of which is hereby acknowledged, the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus and in Instruction 2 of the
Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
Certificate Number(s) (if known) of Old Notes Aggregate Principal Amount Aggregate Principal Amount
or Account Number at the Book-Entry Facility Represented Tendered
--------------------------------------------- -------------------------- --------------------------
<S> <C> <C>
PLEASE SIGN AND COMPLETE
Names of Record Holders: Signatures:
----------------------------------------- ---------------------------------
Address:
--------------------------------------------------------- --------------------------------------------
Dated: , 1998
- ----------------------------------------------------------------- --------------------------------
Area Code and Telephone Numbers:
---------------------------------
- -----------------------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Old Notes or on a security
position listing as the owner of Old Notes, or by person(s) authorized to
become holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Capacity:
- -------------------------------------------------------------------------------
Address(es):
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17 Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the Prospectus under the caption "The Exchange Offer--Book-Entry Transfer" and
in the Letter of Transmittal) and any other required documents, all by 5:00
p.m., New York City time, within five business days following the Expiration
Date.
<TABLE>
<S> <C>
Name of Firm:
- ------------------------------------------ ----------------------------------------------
(AUTHORIZED SIGNATURE)
Address:
- ------------------------------------------
(INCLUDE ZIP CODE) Name:
-----------------------------------------
Area Code and Tel. Number: Title:
----------------------------------------
(PLEASE TYPE OR PRINT)
- ------------------------------------------
Date: , 1998
-----------------------------------
</TABLE>
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice
of Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Old Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in- fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and submit with the Letter of Transmittal
evidence satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
<PAGE> 1
EXHIBIT 99.3
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________, 1998. UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer by
Calair L.L.C. ("Calair"), a Delaware limited liability company and an indirect
subsidiary of Continental Airlines, Inc., Calair Capital Corporation ("Calair
Capital" and, together with Calair, the "Issuers"), a Delaware corporation and
a wholly owned subsidiary of Calair and Continental Airlines, Inc.
("Continental" or the "Company"), a Delaware corporation, to exchange the
Issuers' 8 1/8% Senior Notes due 2008 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of the Issuers' issued and outstanding 8 1/8% Senior
Notes due 2008, (the "Old Notes") upon the terms and subject to the conditions
set forth in the Prospectus, dated ________, 1998, and the related Letter of
Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ___________, 1998;
2. Letter of Transmittal (together with accompanying Substitute Form W-9
Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee; and
5. Letter which may be sent from your clients to you with such client's
instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire on the Expiration Date unless extended. The Exchange Offer
is not conditioned upon any minimum number of Old Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company and the Issuers that (i) the Exchange Notes acquired
in exchange for Old Notes pursuant to the Exchange Offer are being acquired in
the ordinary course of business of the person receiving such Exchange Notes,
whether or not the holder, (ii) the holder is not participating in, and has no
arrangement with any person to participate in, the distribution of Exchange
Notes within the meaning of the Securities Act, and (iii) neither the holder
nor any such other person is an "affiliate" (within the meaning of Rule 405
under the Securities Act) of the Company or the Issuers or a broker-dealer
tendering Old Notes acquired directly from the Company or the Issuers. If the
holder is a broker-dealer that will receive Exchange Notes for its own account
in exchange for Old Notes, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The enclosed Letter to Clients contains an authorization by the beneficial
owners of the Old Notes for you to make the foregoing representations.
The Company and the Issuers will not pay any fee or commission to any broker
or dealer or to any other persons (other than the Exchange Agent) in connection
with the solicitation of tenders of Old Notes pursuant to the Exchange Offer.
The Company and the Issuers will pay or cause to be paid any transfer taxes
payable on the transfer of Old Notes to them, except as otherwise provided in
Instruction 7 of the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
<PAGE> 1
EXHIBIT 99.4
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ___________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated _________, 1998, of Calair
L.L.C. ("Calair"), a Delaware limited liability company and an indirect
subsidiary of Continental Airlines, Inc., Calair Capital Corporation ("Calair
Capital" and, together with Calair, the "Issuers"), a Delaware corporation and a
wholly owned subsidiary of Calair and Continental Airlines, Inc. ("Continental"
or the "Company"), a Delaware corporation and a related Letter of Transmittal
(which together constitute the "Exchange Offer") relating to the offer by the
Company and the Issuers, to exchange the Issuers' 8 1/8% Senior Notes due 2008
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of the
Issuers' issued and outstanding 8 1/8% Senior Notes due 2008 (the "Old Notes"),
upon the terms and subject to the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the holder of record of Old Notes held by us for your own account.
A tender of such Old Notes can be made only by us as the record holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Old Notes held by
us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations and warranties contained in the Letter of
Transmittal.
Very truly yours,
<PAGE> 2
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN AMPLE
TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION
DATE.
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
_________, 1998 (the "Prospectus") of Calair L.L.C. ("Calair"), a Delaware
limited liability company and an indirect subsidiary of Continental Airlines,
Inc., Calair Capital Corporation ("Calair Capital" and, together with Calair,
the "Issuers"), a Delaware corporation and a wholly owned subsidiary of Calair
and Continental Airlines, Inc. ("Continental" or the "Company"), a Delaware
corporation, and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the offer of the Company and the
Issuers (the "Exchange Offer") to exchange the Issuers' 8 1/8% Senior Notes due
2008 (the "Exchange Notes"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), for all of the Issuers'
outstanding 8 1/8% Senior Notes due 2008, (the "Old Notes"). Capitalized terms
used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$____________________ of the 8 1/8% Senior Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] To TENDER the following Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED) (IF ANY):
$_______________________.
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i)
the Exchange Notes acquired in exchange for Old Notes pursuant to the Exchange
Offer are being acquired in the ordinary course of business of the person
receiving such Exchange Notes, whether or not the undersigned, (ii) the
undersigned is not participating in, and has no arrangement with any person to
participate in, the distribution within the meaning of the Securities Act and
(iii) neither the undersigned nor any such other person is an "affiliate"
(within the meaning of Rule 405 under the Securities Act) of the Company or the
Issuers or a broker-dealer tendering Old Notes acquired directly from the
Company or the Issuers. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
SIGN HERE
Name of beneficial owner(s):
---------------------------------------------------
Signature(s):
------------------------------------------------------------------
Name(s) (please print):
--------------------------------------------------------
Address:
-----------------------------------------------------------------------
Telephone Number:
--------------------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
--------------------------------------------------------------------------
