<PAGE> 1
Filed Pursuant to
Ruling 424(b)(5) File No. 333-29255
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 23, 1997)
$200,000,000
[CONTINENTAL AIRLINES LOGO]
8% SENIOR NOTES DUE 2005
----------------------
Interest payable on June 15 and December 15
----------------------
WE MAY, AT ANY TIME, REDEEM THE SENIOR NOTES IN WHOLE
OR IN PART AT THE REDEMPTION PRICE DESCRIBED IN THIS PROSPECTUS SUPPLEMENT.
----------------------
INVESTING IN THE SENIOR NOTES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-3 OF THIS PROSPECTUS SUPPLEMENT.
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PRICE 100% AND ACCRUED INTEREST, IF ANY
----------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS CONTINENTAL
------------ ------------- ------------
<S> <C> <C> <C>
Per Senior Note........................... 100.000% 2.000% 98.000%
Total..................................... $200,000,000 $4,000,000 $196,000,000
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this Prospectus
Supplement or the accompanying Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the senior notes to
purchasers on December 14, 1998.
----------------------
MORGAN STANLEY DEAN WITTER CREDIT SUISSE FIRST BOSTON
December 8, 1998
<PAGE> 2
These offering materials consist of two documents: (a) this Prospectus
Supplement, which describes the terms of the senior notes (the "Notes") that we
are currently offering, and (b) the accompanying Prospectus, which provides
general information about our debt securities, some of which may not apply to
the Notes that we are currently offering. The information in this Prospectus
Supplement supercedes any inconsistent information included in the accompanying
Prospectus.
In various places in this Prospectus Supplement and the accompanying
Prospectus, we refer you to other sections of such documents for additional
information by indicating the caption heading of such other sections. The page
on which each principal caption included in this Prospectus Supplement and the
accompanying Prospectus can be found is listed in the Table of Contents below.
All such cross references in this Prospectus Supplement are to captions
contained in this Prospectus Supplement and not in the accompanying Prospectus,
unless otherwise stated.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Risk Factors................................................ S-3
Use of Proceeds............................................. S-8
Ratio of Earnings to Fixed Charges.......................... S-8
Continental................................................. S-8
Description of the Notes.................................... S-11
Tax Considerations.......................................... S-14
Underwriters................................................ S-16
Legal Opinions.............................................. S-16
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
The Company................................................. 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 12
Legal Opinions.............................................. 14
Experts..................................................... 14
</TABLE>
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. We have
not authorized anyone to provide you with information concerning this offering
other than the information contained in this Prospectus Supplement and the
accompanying Prospectus. We are offering to sell the Notes and seeking offers to
buy the Notes only in jurisdictions where offers and sales are permitted. The
information contained in this Prospectus Supplement and the accompanying
Prospectus is accurate only as of the date of this Prospectus Supplement,
regardless of the time of delivery of this Prospectus Supplement and the
accompanying Prospectus or any sale of the Notes. In this Prospectus Supplement
and the accompanying Prospectus, "we," "us," and "our" refer to Continental
Airlines, Inc. ("Continental").
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<PAGE> 3
RISK FACTORS
You should carefully review the information included elsewhere and
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus and should particularly consider the following matters.
This Prospectus Supplement and the accompanying Prospectus include
"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 Supplement and the accompanying
Prospectus, including, without limitation, statements regarding our future
financial position, as well as certain of those relating to transactions
regarding or with Northwest Airlines, Inc. ("Northwest") are forward-looking
statements. Although we believe that the expectations reflected in such
Forward-Looking Statements are reasonable, we cannot give any assurance that
such expectations will be correct. Important factors that could cause actual
results to differ materially from such expectations are disclosed below and
elsewhere in this Prospectus Supplement and the accompanying Prospectus.
RISK FACTORS RELATING TO CONTINENTAL
Leverage and Liquidity. We have a higher proportion of debt compared to
our equity capital than some of our principal competitors. In addition, our cash
resources are less than some of our principal competitors. A majority of our
property and equipment is subject to liens securing indebtedness. Accordingly,
we may be less able than some of our competitors to withstand a prolonged
recession in the airline industry or respond as flexibly to changing economic
and competitive conditions.
As of September 30, 1998, we had:
- $2.4 billion (including current maturities) of long-term debt and
capital lease obligations.
- $1.3 billion of Continental-obligated mandatorily redeemable
preferred securities of subsidiary trust and common stockholders'
equity.
- $1.2 billion in cash and cash equivalents (excluding restricted cash
and cash equivalents of $13 million) and $44 million of short-term
investments.
- $225 million available to be drawn under general lines of credit.
We have substantial commitments for capital expenditures, including for the
acquisition of new aircraft. As of December 1, 1998, we have agreed to acquire a
total of 123 Boeing jet aircraft through 2005. We also have options for an
additional 114 aircraft (exercisable subject to certain conditions). The
estimated aggregate cost of our firm commitments for Boeing aircraft is
approximately $5.9 billion. We currently plan to finance our new Boeing aircraft
with a combination of enhanced pass through trust certificates, lease equity and
other third party financing, subject to availability and market conditions. As
of December 1, 1998, approximately $804 million in financing had been arranged
for such future Boeing deliveries. In addition, we have commitments or letters
of intent for backstop financing for approximately one-third of the anticipated
remaining acquisition cost of such Boeing deliveries.
As of December 1, 1998, Continental Express, Inc., our subsidiary that
operates turboprop and regional jet aircraft ("Continental Express"), had firm
commitments for 40 Embraer ERJ-145 ("ERJ-145") 50-seat regional jets and a
memorandum of understanding to purchase 25 ERJ-135 ("ERJ-135") 37-seat regional
jets, with options for an additional 125 ERJ-145 and 50 ERJ-135 aircraft
exercisable through 2008. Neither Continental Express nor Continental will have
any obligation to take any such firm aircraft that are not financed by a third
party and leased to Continental. Continental Express took delivery of 15 of the
ERJ-145 firm aircraft in the first three quarters of 1998 and will take delivery
of the remaining 65 firm aircraft through the third quarter of 2001. We expect
to account for all of these aircraft as operating leases. In addition,
Continental Express recently announced the accelerated retirement of certain
turboprop aircraft.
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We expect to finance certain of our capital commitments through operating
leases, which will increase our operating expenses. For 1997, we incurred
approximately $626 million of rent expenses under operating leases relating to
aircraft, compared to $568 million for 1996, and approximately $236 million
relating to facilities and other rentals, compared to $210 million in 1996. We
expect that our operating lease expenses for 1998 will exceed 1997 amounts.
Additional financing will be needed to satisfy our capital commitments. We
cannot predict whether sufficient financing will be available for capital
expenditures not covered by firm financing commitments.
On August 11, 1998, we announced that Continental Micronesia, Inc., our
subsidiary based in Guam ("CMI"), plans to accelerate the retirement of its four
Boeing 747 aircraft by April 1999 and its remaining thirteen Boeing 727 aircraft
by December 2000. The Boeing 747s will be replaced by DC-10-30 aircraft and the
Boeing 727 aircraft will be replaced with a reduced number of Boeing 737
aircraft. In addition, Continental Express will accelerate the retirement of
certain turboprop aircraft by December 2000, including its fleet of 32 EMB-120
turboprop aircraft, as regional jets are acquired to replace turboprops. As a
result of its decision to accelerate the retirement of these aircraft, we
recorded a fleet disposition/impairment loss of $122 million ($77 million after
tax) in the third quarter of 1998.
Continental's History of Operating Losses. We recorded net income of
approximately $317 million in the first nine months of 1998, $385 million in
1997, $319 million in 1996 and $224 million in 1995. However, we experienced
significant operating losses in the previous eight years. Historically, the
financial results of the U.S. airline industry have been cyclical. We cannot
predict whether current industry conditions will continue.
Aircraft Fuel. Fuel costs constitute a significant portion of our
operating expenses. Fuel costs were approximately 10.2% of operating expenses
for the nine months ended September 30, 1998 and 13.6% for the year ended
December 31, 1997. Fuel prices and supplies are influenced significantly by
international political and economic circumstances. If a fuel supply shortage
were to arise from a disruption of oil imports or otherwise, higher fuel prices
or curtailment of scheduled airline service could result. Significant changes in
fuel costs would materially affect our operating results.
Labor Matters. In September 1997, we announced our intention to bring all
our employees to industry standard wages (the average of the top ten air
carriers as ranked by the Department of Transportation, excluding Continental)
within 36 months. We expect to phase in these wage increases over the 36-month
period as revenue, interest rates and rental rates reach industry standards. We
estimate that the increased wages will aggregate approximately $500 million over
such 36-month period.
The current status of our and our subsidiaries' principal labor union
agreements is as follows:
- Continental's Pilots. In June 1998, a five-year collective bargaining
agreement, retroactive to October 1997, was ratified by our pilots.
The agreement becomes amendable in October 2002. We began accruing for
the increased costs of the new agreement in the fourth quarter of
1997. We estimate that the increased costs under the agreement will be
approximately $113 million for 1998.
- Continental Express's Pilots. In June 1998, the pilots at Continental
Express rejected a new five-year agreement. In November 1998,
Continental and the pilots of Continental Express reached a new
tentative agreement which will be submitted for a ratification vote.
While we cannot predict the outcome of the ratification vote, we
believe the outcome will not have a material financial impact on us.
- Flight Attendants. The flight attendants at Continental, Continental
Express and CMI are covered by collective bargaining agreements that
become amendable on December 31, 1999, November 1, 1999, and June 30,
2000, respectively. In November 1998, Continental and the union
representing Continental's flight attendants reached a tentative
agreement which, if ratified by the flight attendants, would extend
the term of their contract until December 2001.
- Dispatchers. Our dispatchers ratified a new five-year collective
bargaining agreement in June 1998. The agreement becomes amendable in
October 2003.
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<PAGE> 5
- Mechanics. Negotiations for an initial collective bargaining
agreement covering our mechanics and related employees began in the
fall of 1997. In November 1998, after a proposed four-year collective
bargaining agreement was rejected by the union membership, Continental
and the International Brotherhood of Teamsters, representing our
mechanics, reached a new tentative three-year agreement that will be
submitted to members for a ratification vote. While we cannot predict
the outcome of the vote, we believe that the outcome will not have a
material financial impact on us. CMI's mechanics are covered by a
collective bargaining agreement, which becomes amendable March 31,
2001.
Risks Regarding Continental/Northwest Alliance. In November 1998,
Continental and Northwest began implementing the Northwest alliance, a long-term
global alliance involving extensive code-sharing, frequent flyer reciprocity and
other cooperative activities ("Northwest Alliance"). In a related transaction,
on November 20, 1998, a Northwest affiliate acquired securities representing
approximately 14.5% of Continental's equity from Continental's principal
shareholder and certain other parties. These acquired securities, together with
additional Continental equity securities for which the Northwest affiliate holds
a limited voting proxy, represent approximately 51% of the fully diluted voting
power of Continental.
Our ability to implement the Northwest Alliance successfully and to achieve
anticipated benefits are subject to certain risks and uncertainties, including:
- Disapproval or delay by regulatory authorities or adverse regulatory
developments.
- Competitive pressures, including developments with respect to
alliances among other air carriers.
- Customer reaction to the alliance, including reaction to differences
in product and benefits provided by Continental and Northwest.
- Economic conditions in the principal markets served by Continental and
Northwest.
- Increased costs or other implementation difficulties, including those
caused by employees.
- Our ability to modify certain contracts that restrict certain aspects
of the alliance.
- The outcome of lawsuits commenced by shareholders of Continental
challenging the Northwest Alliance, the transfer of Continental
securities to a Northwest affiliate and certain related matters.
On October 23, 1998, the Department of Justice filed a lawsuit against
Northwest and us challenging Northwest's acquisition of an interest in
Continental. The Department of Justice did not seek to preliminary enjoin the
transaction before it closed on November 20, 1998, nor is the Department of
Justice challenging the Northwest Alliance at this time, although it is
continuing to investigate certain specific aspects of the alliance. We are in
the process of implementing our alliance with Northwest. While it is not
possible to predict the ultimate outcome of this litigation, Continental does
not believe that this litigation will have a material adverse effect on us.
Year 2000. Computerized systems are essential to our operations. Many
computer programs in use around the world use only two digits to identify the
applicable year and do not take account of the change in century that will occur
in the year 2000. If this problem is not corrected, computer applications could
fail or create mistakes. As a result, we have implemented a Year 2000 project to
ensure that our computer systems will function properly in the year 2000 and
thereafter. Our Year 2000 project should be completed in early 1999, and we
believe that the Year 2000 issue will not pose significant operational problems
for our computer systems.
We have also contacted our significant suppliers and vendors with whom our
systems interface or upon whom our business depends. We are working with these
parties to minimize the extent to which our business will be vulnerable to their
failure to remediate their Year 2000 issues. Our business is also dependent upon
certain governmental agencies, such as the United States Federal Aviation
Administration, that provide essential services to the aviation industry. We
cannot predict whether the systems of such third parties on which our business
relies (including those of the Federal Aviation Administration) will be modified
on a timely basis.
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Our business, financial condition and results of operations could be
materially adversely affected if our systems or those operated by other parties
on which our business depends fail to operate properly beyond 1999.
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
Competition and Industry Conditions. The airline industry is highly
competitive and susceptible to price discounting. Carriers have used discount
fares to stimulate traffic during periods of slack demand, to generate cash flow
and to increase market share. Some of our competitors have substantially greater
financial resources or lower cost structures than we do.
Airline profit levels are highly sensitive to changes in fuel costs, fare
levels and passenger demand. Passenger demand and fare levels have in the past
been influenced by, among other things, the general state of the economy (both
in international regions and domestically), international events, airline
capacity and pricing actions taken by carriers. For example, the operating
results of CMI have declined during 1996, 1997 and the nine months ended
September 30, 1998 as a result of the continued weakness of the yen against the
dollar, a weak Japanese economy and increased fuel costs in 1996 and 1997.
Domestically, from 1990 to 1993, the weak U.S. economy, turbulent international
events and extensive price discounting by carriers contributed to unprecedented
losses for U.S. airlines. In the last several years, the U.S. economy has
improved and excessive price discounting has abated. We cannot predict the
extent to which these industry conditions will continue.
In recent years, the major U.S. airlines have sought to form marketing
alliances with other U.S. and foreign air carriers. Such alliances generally
provide for "code-sharing", frequent flyer reciprocity, coordinated scheduling
of flights of each alliance member to permit convenient connections and other
joint marketing activities. Such arrangements permit an airline to market
flights operated by other alliance members as its own. This increases the
destinations, connections and frequencies offered by the airline, which provide
an opportunity to increase traffic on such airline's segment of flights
connecting with alliance partners. The Northwest Alliance is an example of such
an arrangement, and Continental has existing alliances with numerous other air
carriers. Other major U.S. airlines have alliances or planned alliances more
extensive than our alliances. We cannot predict the extent to which we will
benefit from our alliances or be disadvantaged by competing alliances.
Regulatory Matters. Airlines are subject to extensive regulatory and legal
compliance requirements. These requirements impose substantial costs on
airlines. In the last several years, the Federal Aviation Administration has
issued a number of directives and other regulations relating to the maintenance
and operation of aircraft that have required significant expenditures. Such
Federal Aviation Administration requirements cover, 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. We expect to continue incurring expenses in complying with the Federal
Aviation Administration's regulations.
Additional laws, regulations, taxes and airport rates and charges have been
proposed from time to time that could significantly increase the cost of airline
operations or reduce revenues. Congress and the Department of Transportation
have also proposed the regulations of airlines' competitive responses and other
activities. Restrictions on the ownership and transfer of airline routes and
takeoff and landing slots have also been proposed. The ability of U.S. carriers
to operate international routes is subject to change because the applicable
arrangements between the United States and foreign governments may be amended
from time to time, or because appropriate slots or facilities are not made
available. We cannot provide assurances that laws or regulations enacted in the
future will not adversely affect us.
RISK FACTORS RELATING TO THE NOTES AND THE OFFERING
Absence of Certain Covenants. The terms of the Notes do not limit our or
any of our subsidiaries' ability to incur additional indebtedness, to mortgage
or pledge any of our assets or their assets, to sell assets or to pay dividends
or make other distributions in respect of, 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 us to repurchase their
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Notes in the event of a change of control or a decline in the credit rating of
our debt securities resulting from a takeover, recapitalization or similar
restructuring or any other reason.
Absence of Public Market; Restrictions on Transfer. The Notes are new
securities for which there presently is no market. Although the Underwriters
have advised us that they currently intend to make a market in the 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 Underwriters. If an active
public market does not develop, the market price and liquidity of the Notes may
be adversely affected. If a trading market develops for the Notes, the future
trading prices thereof will depend on many factors including, among other
things, our results of operations, prevailing interest rates, the market for
securities with similar terms and the market for securities of other companies
in similar businesses. We do not intend to apply for a listing of the Notes on
any securities exchange or for their quotation through any automated dealer
quotation system.
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USE OF PROCEEDS
The net proceeds from the Offering (after expenses estimated at $150,000)
will be used by Continental for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES (a)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------
1995 1996 1997 1997 1998
---- ------ ------ ----- -----
<S> <C> <C> <C> <C>
1.53.. 1.81 2.07 2.20 2.06
</TABLE>
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(a) For purpose 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 of 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.
CONTINENTAL
Continental is a major U.S. air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth largest U.S.
airline (as measured by revenue passenger miles in the first ten months of 1998)
and, together with its wholly-owned subsidiaries, Continental Express and CMI,
serves 204 airports worldwide. As of November 1, 1998, Continental flew to 124
domestic and 80 international destinations and offered additional connecting
service through alliances with domestic and foreign carriers. Continental
directly serves 13 European cities and is one of the leading airlines providing
service to Mexico and Central America, serving more destinations there than any
other U.S. airline. Through its Guam hub, CMI provides extensive service in the
western Pacific, including service to more Japanese cities than any other U.S.
carrier.
Domestic Operations. Continental operates its domestic route system
primarily through its hubs at Newark International Airport, George Bush
Intercontinental Airport in Houston and Hopkins International Airport in
Cleveland. Continental's hub system allows it to transport passengers between a
large number of destinations with substantially more frequent service than if
each route were served directly. The hub system also allows Continental to add
service to a new destination from a large number of cities using only one or a
limited number of aircraft. As of November 1, 1998, Continental operated 80% of
the average daily jet departures from Houston's George Bush Intercontinental
Airport (excluding regional jets), 58% of the average daily jet departures from
Newark International Airport (excluding regional jets), and 53% of the average
daily jet departures from Cleveland Hopkins International Airport (excluding
regional jets). Each of Continental's domestic hubs is located in a large
business and population center, contributing to a high volume of "origin and
destination" traffic.
Continental Express. Continental's jet service at each of its domestic hub
cities is coordinated with Continental Express, which operates new-generation
turboprop aircraft and regional jets under the name "Continental Express." The
turboprop aircraft average approximately seven years of age and seat 64 or fewer
passengers while the regional jets average less than one year of age and seat 50
passengers. In addition, Continental Express recently announced the accelerated
retirement of certain turboprop aircraft and an order to purchase 25 ERJ-135,
37-seat regional jets.
As of November 1, 1998, Continental Express served 29 destinations from
Newark International Airport (14 by regional jet), 31 destinations from George
Bush Intercontinental Airport (11 by regional jet) and 40 destinations from
Cleveland (12 by regional jet). In addition, commuter feed traffic is currently
provided by
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other code-sharing partners. Continental believes that Continental Express's
turboprop and regional jet operations complement Continental's jet operations by
allowing more frequent service to small cities than could be provided
economically with conventional jet aircraft and by carrying traffic that
connects into Continental's jets. In many cases, Continental Express (and
Continental) compete for such connecting traffic with commuter airlines owned by
or affiliated with other major airlines operating out of the same or other
cites. Continental believes that Continental Express's new regional jets provide
greater comfort and enjoy better customer acceptance than its turboprop
aircraft. The regional jets also allow Continental Express to serve certain
routes that cannot be served by turboprop aircraft.
Domestic Carrier Alliances. Continental has entered into and continues to
develop alliances with domestic carriers:
- In January 1998, Continental announced it had entered into a long-term
global alliance with Northwest. The Northwest Alliance is expected to
include the placing by each carrier of its code on substantially all
of the flights of the other, and reciprocal frequent flyer programs
and executive lounge access. Significant other joint marketing
activities will be undertaken, while preserving the separate
identities of the carriers.
- Continental has entered into a series of agreements with America West
Airlines, Inc. ("America West"), including agreements related to
code-sharing and ground handling, which have created substantial
benefits for both airlines. These code-sharing agreements cover 61
city-pairs and allow Continental to link additional destinations to
its route network and derive additional traffic from America West's
distribution strength in cities where Continental has less sales
presence. The sharing of facilities and employees by Continental and
America West in their respective key markets has resulted in
significant cost savings.
- Continental has entered into a code-sharing arrangement with
Gulfstream International Airlines, Inc. ("Gulfstream") which commenced
in April 1997. Gulfstream serves as a connection for Continental
passengers throughout Florida as well as five markets in the Bahamas.
- Continental has entered into a code-sharing arrangement with Colgan
Air, Inc. which commenced in July 1997 on flights connecting in four
cities in the eastern United States and offers connections for
Continental passengers to 9 cities in the Northeastern and
mid-Atlantic regions of the United States.
- Continental and CMI entered into a cooperative marketing agreement
with Hawaiian Airlines that began October 1, 1997 on flights
connecting in Honolulu.
International Operations. Continental serves destinations throughout
Europe, Mexico, Central and South America and the Caribbean and has extensive
operations in the western Pacific conducted by CMI. As measured by available
seat miles for the first ten months of 1998, approximately 29.7% of
Continental's jet operations were dedicated to international traffic. As of
November 1, 1998, Continental offered 105 weekly departures to 13 European
cities and marketed service to 34 other cities through code-sharing agreements.
Continental is one of the leading airlines providing service to Mexico and
Central America, serving more destinations there than any other U.S. airline.
Continental's hub at Newark International Airport is a significant
international gateway. From Newark, Continental serves 13 European cities, four
Canadian cities, three Mexican cities, two Central American cities, six South
American cities and six Caribbean destinations, and markets numerous other
destinations through code-sharing arrangements with foreign carriers. In
addition, Continental commenced non-stop service to Tokyo in November 1998, and
has announced plans to begin non-stop service to Zurich and Brussels in 1999.
Continental's Houston hub is the focus of Continental's operations in
Mexico and Central America. Continental currently flies non-stop from Houston to
14 cities in Mexico, every country in Central America, five cities in South
America, one Caribbean destination, three cities in Canada and two cities in
Europe. In
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addition, Continental announced plans to commence non-stop service from Houston
to Tokyo in January 1999.
Continental also flies to Toronto from its hub in Cleveland and has
announced service to London, subject to government approvals.
Foreign Carrier Alliances. Over the last decade, major U.S. airlines have
developed and expanded alliances with foreign air carriers, generally involving
adjacent terminal operations, coordinated flights, code-sharing and other joint
marketing activities. Continental is the sole major U.S. carrier to operate a
hub in the New York City area. Consequently, Continental believes it is uniquely
situated to attract alliance partners from Europe, the Far East and South
America and intends to aggressively pursue such alliances. Continental believes
that the Northwest Alliance will enhance its ability to attract foreign alliance
partners.
Continental believes that developing a network of international alliance
partners will better leverage Continental's hub assets by attracting high-yield
flow traffic and by strengthening Continental's position in large, local
(non-connecting) markets and will result in improved returns to Continental.
Additionally, Continental can enlarge its scope of service more rapidly and
enter additional markets with lower capital and start-up costs through the
formation of alliances with partners as compared with entering markets
independently.
Continental has a goal of developing alliance relationships that, together
with Continental's own flying, will permit expanded service through Houston and
Newark to major destinations in South America, Europe and Asia. Route
authorities necessary for Continental's own service to certain of these
destinations are not currently available to Continental.
Continental has implemented international code-sharing agreements with
Alitalia, Transavia Airlines, CSA Czech Airlines, British Midland, China
Airlines, EVA Airways Corporation, an airline based in Taiwan (which commenced
March 30, 1998), Virgin Atlantic Airways ("Virgin") (which commenced February 2,
1998), Viacao Aerea Sao Paulo ("VASP") (which commended July 1, 1998) and Air
France (which commenced June 19, 1998), and is in the process of implementing a
code-share agreement and other joint marketing and service agreements with
Compania Panamena de Aviacion, S.A. (COPA), 49% of the common equity of which is
owned by Continental. Upon receipt of government approval, Continental will
commence code-sharing arrangements with Aeroservicios Carabobo S.A. (Aserca), a
Venezuelan carrier, and Air Aruba. In addition, the Northwest Alliance
contemplates formation of a joint venture with KLM Royal Dutch Airlines, a Dutch
carrier. Continental has entered into joint marketing agreements with Air China
and Aerolineas Centrales de Columbia (ACES), for which government approval has
not yet been sought.
Certain of Continental's code-sharing agreements involve block-space
arrangements (pursuant to which the carriers agree to share capacity and bear
economic risk for blocks of seats on certain routes). Alitalia has agreed to
purchase blocks of seats on Continental flights between Newark and Rome and
Milan. VASP has agreed to purchase blocks of seats on Continental flights
between Newark and Rio de Janeiro and Sao Paulo. Continental and Air France
purchase blocks of seats on each other's flights between Houston and Newark and
Paris. Continental and Virgin exchange blocks of seats on each other's flights
between Newark and London. Continental's agreement with Virgin also includes the
purchase by Continental of blocks of seats on eight other routes flown by Virgin
between the United Kingdom and the United States.
Many of the Continental's international alliance agreements provide that a
party may terminate the agreement upon a change of control of the other party.
As a result of the sale by Continental's principal shareholder of most of its
Continental equity securities to an affiliate of Northwest, certain of
Continental's international alliance partners will have the right to terminate
their alliance relationship with Continental. Based on discussions with such
partners, Continental believes that none of its partners will exercise such
right.
Continental anticipates entering into other code-sharing, joint marketing
and block-space agreements, which may include Continental undertaking the
financial commitment to purchase seats from other carriers.
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CMI. CMI is a United States-certificated international air carrier engaged
in the business of transporting passengers, cargo and mail in the western
Pacific. From its hub operations based on the island of Guam, CMI provides
service to nine cities in Japan, more than any other U.S. carrier, as well as
other Pacific Rim destinations, including Taiwan, the Philippines, Hong Kong,
Australia, New Caledonia and Indonesia. Service to these Japanese cities and
certain other Pacific Rim destinations is subject to a variety of regulatory
restrictions, limiting the ability of other carriers to service these markets.
CMI is the principal air carrier in the Micronesian Islands, where it
pioneered scheduled air service in 1968. CMI's route system is linked to the
United States market through Honolulu, which CMI serves non-stop from both Tokyo
and Guam. CMI and Continental also maintain a code-sharing agreement and
coordinate schedules on certain flights from the west coast of the United States
to Honolulu, and from Honolulu to Guam and Tokyo, to facilitate travel from the
United States into CMI's route system. CMI has announced the accelerated
retirement of certain of its aircraft.
Continental is a Delaware corporation. Its executive offices are located at
1600 Smith Street, Houston, Texas 77002, and its telephone is (713) 324-5000.
DESCRIPTION OF THE NOTES
The Notes offered hereby will be issued under an indenture dated as of July
15, 1997 (the "Indenture"), among Continental and Bank One, N.A., as trustee
(the "Trustee"), a copy of which is available from the Trustee upon request. 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. Capitalized terms not otherwise defined below or elsewhere in
this Prospectus Supplement or the accompanying Prospectus have the meanings
given to them in the Indenture.
GENERAL
The Notes will mature on December 15, 2005, will be limited to $200 million
aggregate principal amount and will be unsecured senior obligations of
Continental. Each Note will bear interest at the rate set forth on the cover
page hereof from December 14, 1998 or from the most recent interest payment date
to which interest has been paid or duly provided for, payable on June 15, 1999,
and semiannually thereafter on December 15 and June 15 in each year (until the
principal thereof is paid or duly provided for) to the Person in whose name the
Note (or any predecessor Note) is registered at the close of business on the
December 1 or June 1 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 transferable, at the office or agency of the Trustee;
provided, however, that, at the option of Continental, 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 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 redemption of Notes, but Continental 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.
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
OPTIONAL REDEMPTION
The Notes will be redeemable as a whole or in part, at the option of
Continental at any time, at a redemption price equal to the greater of (i) 100%
of the principal amount or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon, each discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the
S-11
<PAGE> 12
Treasury Rate plus 50 basis points, plus, in either case, accrued and unpaid
interest on the principal amount being redeemed to such redemption date.
"Business Day" means any calendar day that is not a Saturday, Sunday or
legal holiday in New York, New York and on which commercial banks are open for
business in New York, New York.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term ("Remaining Life") of the series of Notes to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of a
comparable maturity to the remaining term of such Notes.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee.
"Comparable Treasury Price" means (1) the average of five Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest Reference Treasury Dealer Quotations, or (2) if the Independent
Investment Banker obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Reference Treasury Dealer" means (1) Morgan Stanley & Co. Incorporated and
Credit Suisse First Boston Corporation and their respective successors,
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer and (2) any
other Primary Treasury Dealer selected by the Independent Investment Banker
after consultation with the Company.
"Reference Treasury Dealer Quotations" means with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Independent Investment Banker, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Independent Investment Banker at 5:00 p.m., New York
City time, on the third Business Day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date, (1) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the Remaining Life, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined and
the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (2) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate shall be calculated on the third
Business Day preceding the redemption date.
Holders of Notes to be redeemed will receive notice thereof of first-class
mail at least 30 and not more than 60 days prior to the date fixed for
redemption. If fewer than all of the Notes are to be redeemed, the Trustee will
select not more than 60 days prior to the redemption date, the particular Notes
or portions thereof for redemption from the outstanding Notes not previously
called by such method as the Trustee deems fair and appropriate.
S-12
<PAGE> 13
CONSOLIDATION, MERGER AND SALE OF ASSETS
Continental will not 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 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 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) Continental will be the
continuing corporation or (b) the Person (if other than Continental) formed by
such consolidation or into which Continental is merged or the Person or group of
affiliated Persons that acquire by sale, assignment, conveyance, transfer, lease
or disposition of all or substantially all the properties and assets of
Continental and its Subsidiaries on a consolidated basis (the "Surviving
Entity") (1) will be 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, Continental's obligation for the due and punctual
payment of the principal of, premium, if any, and interest on all the Notes and
the performance and observance of every covenant of the Indenture on the part of
Continental 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.
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, 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.
Upon any consolidation or merger, or any sale, conveyance, transfer or
other disposition of all or substantially all of the property and assets of
Continental in accordance with the above provisions, 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, Continental with the same effect as if such
successor Person had been named as the issuer of the Notes and all obligations
of Continental shall terminate.
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.
S-13
<PAGE> 14
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). This
summary applies only to those persons who acquire the Notes for cash in this
Offering for the stated principal amount 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
tax laws.
For purposes of this discussion, a "U.S. Holder" means a beneficial owner
of the Note that is or which is a citizen or resident (as determined for United
States federal income tax purposes) of the United States; a corporation,
partnership or other entities created or organized in the United States or under
the laws of the United States or of any state; an estate the income of which is
includible in gross income for United States 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 persons 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.
U.S. HOLDERS
PAYMENTS OF INTEREST
A U.S. 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 U.S. Holder's method of tax accounting.
SALE, EXCHANGE OR RETIREMENT OF NOTES
A U.S. Holder's tax basis in a Note generally will equal the purchase price
paid therefor, reduced by any principal payments on the Note. Upon the sale,
exchange or retirement (including redemption) of a Note, a U.S. 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.
Under current law, net capital gains of individuals generally are subject
to a maximum federal tax rate of 20% for capital assets held more than one year.
The deductibility of capital losses is subject to limitations.
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 U.S. Holder (a
"Foreign Person").
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 and such Foreign Person so certifies to Continental or its
paying agent of such fact on a Form 4224, Form W-8ECI or substitute form, 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
S-14
<PAGE> 15
above, and in the case of a Foreign Person that is a foreign corporation, may
also be subject to the federal branch profits tax at a rate of 30% (or a lower
applicable treaty rate).
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, (ii) the Foreign Person is not a controlled foreign
corporation related, directly or indirectly, to Continental through stock
ownership, (iii) the Foreign Person is not a bank whose receipt of interest on a
Note is described in Section 881(c)(3)(A) of the Code, and (iv) Continental, 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, Form W-8IMY (or substitute form) 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 owner, together with a
copy of the beneficial owner's Owner's Statement. Treasury regulations generally
effective for payments made on or after January 1, 2000, add certain alternative
certification procedures. It is possible that Continental and other withholding
agents may request new certification forms from holders in order to qualify for
continued exemption from withholding under the Treasury regulations when they
become effective. A Foreign Person who does not qualify for the "portfolio
interest" exception and whose receipt of interest is not effectively connected
with a U.S. trade or business as described above 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, such as Form 1001, Form
W-8BEN or substitute form) 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, such as Form
1001, Form W-8BEN or substitute form). 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 Continental 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 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.
S-15
<PAGE> 16
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), each of the
Underwriters named below has severally agreed to purchase, and Continental has
agreed to sell to them, severally, the aggregate principal amount of the Notes
set forth opposite the name of such Underwriters.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF NOTES
---- ----------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $160,000,000
Credit Suisse First Boston Corporation...................... 40,000,000
------------
Total.................................................. $200,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
Notes offered hereby if any are taken.
The Underwriters initially propose to offer a part of the Notes directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
.250% of the principal amount of such Notes. Either Underwriter may allow, and
such dealers may reallow, a concession not in excess of .125% of the principal
amount of the Notes to certain other dealers. After the initial offering of the
Notes, the offering price and other selling terms may from time to time be
varied by the Underwriters.
Continental does not intend to apply for listing of the Notes on a national
securities exchange. The Underwriters presently intend to make a market in the
Notes in the secondary trading market. However, the Underwriters are not
obligated to make a market in the Notes, and any such market making may be
discontinued at any time at the sole discretion of Underwriters. No assurance
can be given as to the liquidity of, or the trading markets for, the Notes.
Continental has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In order to facilitate the offering of the Notes, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriters may over-allot in connection with the
offering, creating a short position in the Notes for their own account. In
addition, to cover over-allotments or to stabilize the price of the Notes, the
Underwriters may bid for, and purchase, Notes in the open market. Finally, the
Underwriters may reclaim selling concessions allowed to a dealer for
distributing the Notes in the offering, if the Underwriters repurchase
previously distributed Notes in transactions to cover short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Notes above independent market levels. The
Underwriters are not required to engage in these activities and may end any of
these activities at any time.
It is expected that delivery of the Notes will be made against payment
therefor on or about December 14, 1998, which is the fourth business day
following the date hereof (such settlement cycle being herein referred to as
"T+4"). Purchasers of Notes should note that the ability to settle secondary
market trades of the Notes effected on the date of pricing and the next
succeeding business day may be affected by the T+4 settlement.
The Underwriters or their affiliates engage in (or in the future may engage
in) transactions with, and provide services for Continental or its affiliates in
the ordinary course of business.
LEGAL OPINIONS
Certain matters related to the validity of the Notes are being passed upon
for Continental by Vinson & Elkins L.L.P., Houston, Texas, and for the
Underwriters by Shearman & Sterling, New York, New York.
S-16
<PAGE> 17
REGISTRATION NO. 333-29255
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4512 74-2099724
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
2929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
(713) 834-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
<TABLE>
<S> <C>
JEFFERY A. SMISEK, ESQ. Copies of correspondence to:
EXECUTIVE VICE PRESIDENT, JOHN K. HOYNS, ESQ.
GENERAL COUNSEL AND SECRETARY HUGHES HUBBARD & REED LLP
CONTINENTAL AIRLINES, INC. ONE BATTERY PARK PLAZA
2929 ALLEN PARKWAY, SUITE 2010 NEW YORK, NEW YORK 10004-1482
HOUSTON, TEXAS 77019
(713) 834-2950
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 18
PROSPECTUS
$400,000,000
CONTINENTAL AIRLINES, INC.
DEBT SECURITIES
---------------------
Continental Airlines, Inc. ("Continental", or the "Company") may from time
to time offer, together or separately, its debt securities, consisting of
debentures, notes and/or other evidences of indebtedness representing unsecured
obligations of Continental (the "Debt Securities"), in amounts, at prices and on
terms to be determined at the time of offering. The Debt Securities offered
pursuant to this Prospectus may be issued as unsecured and unsubordinated Debt
Securities ("Senior Debt Securities") or as unsecured and subordinated Debt
Securities ("Subordinated Debt Securities"), in one or more series and will be
limited to $400,000,000 aggregate public offering price and exercise price (or
its equivalent, based on the applicable exchange rate at the time of sale, in
one or more foreign currencies or currency units).
The specific terms of the particular Debt Securities in respect of which
this Prospectus is being delivered (the "Offered Securities") will be set forth
in a supplement to this Prospectus (the "Prospectus Supplement") which will be
delivered together with this Prospectus including, where applicable, the
specific designation (including whether the Offered Securities are Senior Debt
Securities or Subordinated Debt Securities), aggregate principal amount,
ranking, authorized denomination, maturity, premium, if any, the rate (which may
be fixed or variable), time and method of calculating payments of interest, if
any, the place or places where principal of, premium, if any, and interest, if
any, on such Debt Securities will be payable, the currency in which principal
of, premium, if any, and interest, if any, on such Debt Securities will be
payable, any terms of redemption at the option of Continental or the holder, any
sinking fund provisions, the initial public offering price and other special
terms, together with any other terms in connection with the offering and sale of
the Offered Securities, and the net proceeds to Continental from such offering.
The Debt Securities may be denominated in United States dollars or, at the
option of Continental if so specified in the applicable Prospectus Supplement,
in one or more foreign currencies or currency units. The Debt Securities may be
issued in registered form or bearer form, or both. If so specified in the
applicable Prospectus Supplement, Debt Securities of a series may be issued in
whole or in part in the form of one or more temporary or permanent global
securities.
The Senior Debt Securities will rank on a parity with all unsecured and
unsubordinated indebtedness of Continental, and the Subordinated Debt Securities
will be subordinated in right of payment to all Senior Indebtedness (as
hereinafter defined). See "Description of Debt Securities -- Subordination of
Subordinated Debt Securities."
---------------------
Continental may sell the Debt Securities to or through underwriters,
through dealers or agents or directly to purchasers. See "Plan of Distribution."
The Prospectus Supplement will set forth the names of any underwriters, dealers
or agents, if any, involved in the sale of the Offered Securities in respect of
which this Prospectus is being delivered, the proposed amounts, if any, to be
purchased by underwriters and the compensation, if any, of such underwriters or
agents.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is July 23, 1997.
<PAGE> 19
AVAILABLE INFORMATION
Continental has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all
amendments, exhibits and schedules, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Debt Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and to
which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved.
Continental is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Commission. Such
reports and other information, as well as the Registration Statement may be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, Room 1024, and at the regional
offices of the Commission located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such materials may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Such material may be accessed electronically by means
of the Commission's Internet web site (http://www.sec.gov), which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. In addition, reports,
proxy statements and other information concerning Continental may be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
Continental is the successor to Continental Airlines Holdings, Inc.
("Holdings"), which merged with and into Continental on April 27, 1993. Holdings
had also been subject to the informational requirements of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-9781) are
hereby incorporated by reference in this Prospectus: (i) Continental's Annual
Report on Form 10-K for the year ended December 31, 1996, filed on February 24,
1997, (ii) Continental's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997, filed on April 28, 1997 and (iii) Continental's Current
Reports on Form 8-K filed January 6, March 21, April 18, May 28, June 10 and
June 25, 1997.
All reports and any definitive proxy or information statements filed by
Continental pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Debt Securities offered 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, or
contained in this Prospectus, shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein or contained in the Prospectus Supplement with
respect to the Offered Securities 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.
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THE COMPANY
Continental Airlines, Inc. is a major United States air carrier engaged in
the business of transporting passengers, cargo and mail. Continental is the
fifth largest United States airline (as measured by revenue passenger miles in
the first five months of 1997) and, together with its wholly owned subsidiary,
Continental Express, Inc. ("Express"), and its 91%-owned subsidiary, Continental
Micronesia, Inc. ("CMI"), each a Delaware corporation, serves 195 airports
worldwide as of June 12, 1997.
The Company operates its route system primarily through domestic hubs at
Newark, George Bush Intercontinental in Houston, Cleveland, and a Pacific hub on
the island of Guam. Each of Continental's three domestic hubs is located in a
large business and population center, contributing to a high volume of "origin
and destination" traffic. The Guam hub is strategically located to provide
service from Japanese and other Asian cities to popular resort destinations in
the western Pacific. Continental is the primary carrier at each of these hubs,
accounting for 54%, 79%, 54% and 68% of average daily jet departures,
respectively, as of June 12, 1997.
The Company is a Delaware corporation. Its executive offices are located at
2929 Allen Parkway, Suite 2010, Houston, Texas 77019, and its telephone number
is (713) 834-2950.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds to Continental from the sale of the Debt Securities offered hereby will
be used for general corporate purposes, which may include the repayment of
outstanding indebtedness and financing of capital expenditures. The Company may
also engage in additional public or private financings of a character and amount
to be determined.
RATIO OF EARNINGS TO FIXED CHARGES
The following information for the year ended December 31, 1992 and for the
period January 1, 1993 through April 27, 1993 relates to Continental's
predecessor, Holdings. Information for the period April 28, 1993 through
December 31, 1993, for the years ended December 31, 1994, 1995 and 1996 and for
the three months ended March 31, 1996 and 1997 relates to Continental. The
information as to Continental has not been prepared on a consistent basis of
accounting with the information as to Holdings due to Continental's adoption,
effective April 27, 1993, of fresh start reporting in accordance with the
American Institute of Certified Public Accountants' Statement of Position
90-7 -- "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7").
For the year ended December 31, 1992, for the periods January 1, 1993
through April 27, 1993 and April 28, 1993 through December 31, 1993 and for the
year ended December 31, 1994, earnings were not sufficient to cover fixed
charges. Additional earnings of $131 million, $979 million, $60 million and $667
million, respectively, would have been required to achieve ratios of earnings to
fixed charges of 1.0. The ratio of earnings to fixed charges for the years ended
December 31, 1995 and December 31, 1996 was 1.53 and 1.81, respectively. The
ratio of earnings to fixed charges for the three months ended March 31, 1996 and
March 31, 1997 was 1.70 and 1.88, respectively. For purposes of calculating this
ratio, earnings consist of earnings before taxes, minority interest and
extraordinary items plus interest expense (net of capitalized interest), the
portion of rental expense representative of interest expense and amortization of
previously capitalized interest. Fixed charges consist of interest expense and
the portion of rental expense representative of interest expense.
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DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture, between
Continental, as issuer, and Bank One, N.A., as Trustee (the "Senior Indenture").
The Subordinated Debt Securities are to be issued under an Indenture, between
Continental, as issuer, and Bank One, N.A., as Trustee (the "Subordinated
Indenture"). The Senior Indenture and the Subordinated Indenture are referred to
herein individually as an "Indenture" and collectively as the "Indentures." The
Trustee under each Indenture is referred to herein as the "Trustee." A copy of
the form of each Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part.
The statements herein relating to the Debt Securities and the Indentures
are summaries, and reference is made to the detailed provisions of the
Indentures, including the definitions therein of certain terms capitalized in
this Prospectus. Where no distinction is made between the Senior Debt Securities
and the Subordinated Debt Securities or between the Senior Indenture and the
Subordinated Indenture, such summaries refer to any Debt Securities and either
Indenture. Whenever particular defined terms of the Indentures are referred to
herein or in a Prospectus Supplement, such defined terms are incorporated herein
or therein by reference. The definitive Indentures, the supplemental indenture
or resolutions of the Board of Directors establishing any class or series of
Debt Securities and the forms of the related Purchase Agreement and certificates
representing such Debt Securities, as applicable, will be filed as exhibits to a
post-effective amendment to the Registration Statement of which this Prospectus
is a part, a Current Report on Form 8-K, a Quarterly Report on Form 10-Q or an
Annual Report on Form 10-K, as applicable, filed by Continental with the
Commission.
The anticipated market for the Debt Securities and the specific use of
proceeds of an offering of such securities will be set forth in the applicable
Prospectus Supplement.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provide that Debt Securities may be
issued from time to time in one or more series. The Senior Debt Securities will
be unsecured and unsubordinated obligations of Continental and will rank on a
parity with all other unsecured and unsubordinated indebtedness of Continental.
The Subordinated Debt Securities will be unsecured obligations of Continental
and, as set forth below under "Subordination of Subordinated Debt Securities,"
will be subordinated in right of payment to all Senior Indebtedness of
Continental.
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for a description of the specific series of Debt Securities being
offered thereby, including: (1) the specific designation of such Debt
Securities, including whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities; (2) any limit upon the aggregate principal amount
of such Debt Securities; (3) the date or dates on which the principal of such
Debt Securities will mature or the method of determining such date or dates; (4)
the rate or rates (which may be fixed or variable) at which such Debt Securities
will bear interest, if any, or the method of calculating such rate or rates; (5)
the date or dates from which interest, if any, will accrue or the method by
which such date or dates will be determined; (6) the date or dates on which
interest, if any, will be payable and the record date or dates therefor; (7) the
place or places where principal of, premium, if any, and interest, if any, on
such Debt Securities will be payable; (8) the period or periods within which,
the price or prices at which, the currency or currency units in which, and the
terms and conditions upon which, such Debt Securities may be redeemed, in whole
or in part, at the option of Continental; (9) the obligation, if any, of
Continental to redeem or repurchase such Debt Securities pursuant to any sinking
fund or analogous provisions, upon the happening of specified events, or at the
option of a holder thereof and the period or periods within which, the price or
prices at which and the other terms and conditions upon which, such Debt
Securities shall be redeemed or repurchased, in whole or in part, pursuant to
such obligation; (10) the denominations in which such Debt Securities are
authorized to be issued; (11) the currency or currency units for which Debt
Securities may be purchased or in which Debt Securities may be denominated
and/or the currency or currency units in which principal of, premium, if any,
and/or interest, if any, on such Debt Securities will be payable or redeemable
and whether Continental may elect to make, or the holders of any
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<PAGE> 22
such Debt Securities may elect to receive, payments in respect of such Debt
Securities in a currency or currency units other than that in which such Debt
Securities are stated to be payable or redeemable; (12) if other than the
principal amount thereof, the portion of the principal amount of such Debt
Securities which will be payable upon declaration of the acceleration of the
maturity thereof or the method by which such portion shall be determined; (13)
the person to whom any interest on any such Debt Security shall be payable if
other than the person in whose name such Debt Security is registered on the
applicable record date; (14) any addition to, or modification or deletion of,
any Event of Default or any covenant of Continental specified in the Indenture
with respect to such Debt Securities; (15) the application, if any, of such
means of defeasance or covenant defeasance as may be specified for such Debt
Securities and coupons appertaining thereto; (16) whether such Debt Securities
are to be issued in whole or in part in the form of one or more temporary or
definitive global securities and, if so, the identity of the depositary for such
global security or securities; (17) any index used to determine the amount of
payments of principal of (and premium, if any) and interest, if any, on such
Debt Securities; (18) any provisions relating to the exchange of such Debt
Securities; and (19) any other special terms pertaining to such Debt Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will not be listed on any securities exchange.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully registered form without coupons. Where Debt
Securities of any series are issued in bearer form ("Bearer Debt Securities"),
the special restrictions and considerations, including special offering
restrictions and special federal income tax considerations, applicable to any
such Debt Securities and to payment on and transfer and exchange of such Debt
Securities will be described in the applicable Prospectus Supplement. Bearer
Debt Securities and any coupons appertaining thereto will be transferable by
delivery.
Debt Securities may be sold at a discount below their stated principal
amount, bearing no interest or interest at a rate which at the time of issuance
is below market rates. Certain federal income tax consequences and special
considerations applicable to any such Debt Securities will be described in the
applicable Prospectus Supplement.
If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units or if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium, if any, or interest, if any, on any Debt Securities is payable in one
or more foreign currencies or currency units, the restrictions, elections,
certain federal income tax considerations, specific terms and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
In addition to such subordination as may apply to the Subordinated Debt
Securities described below under "Subordination of Subordinated Debt
Securities", the Debt Securities will be structurally subordinated to all
indebtedness and other liabilities (including trade payables and lease
obligations) of the Company's subsidiaries, as any right of the Company to
receive any assets of its subsidiaries upon their liquidation or reorganization
(and the consequent right of the Holders of the Debt Securities to participate
in those assets) will be effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent that
the Company itself is recognized as a creditor of such subsidiary, in which case
the claims of the Company would still be subordinate to any security interest in
the assets of such subsidiary and any indebtedness of such subsidiary senior to
that held by the Company.
DENOMINATIONS, PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Debt Securities in registered form ("Registered Debt Securities") will be
issuable in denominations of $1,000 and integral multiples of $1,000, and Bearer
Debt Securities will be issuable in the denomination of $5,000 or, in each case,
in such other denominations and currencies as may be specified in the terms of
the Debt Securities of such series. Unless otherwise provided in the applicable
Prospectus Supplement, payments in respect of the Debt Securities will be made,
subject to any applicable laws and regulations, in the designated currency at
the office or agency of Continental maintained for that purpose as Continental
may designate from time to time, except that, at the option of Continental,
interest payments, if any, on Debt Securities in registered form may be made (i)
by checks mailed to the holders of Debt Securities entitled thereto at their
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registered addresses or (ii) by wire transfer to an account maintained by the
Person entitled thereto as specified in the Register. Unless otherwise indicated
in an applicable Prospectus Supplement, payment of any installment of interest
on Debt Securities in registered form will be made to the Person in whose name
such Debt Security is registered at the close of business on the applicable
record date for such interest.
Payment in respect of Debt Securities in bearer form will be payable in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as Continental may appoint from time to time. The Paying
Agents outside the United States, if any, initially appointed by Continental for
a series of Debt Securities will be named in the applicable Prospectus
Supplement. Continental may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents, except that, if Debt Securities of
a series are issuable as Registered Debt Securities, Continental will be
required to maintain at least one Paying Agent in each Place of Payment for such
series and, if Debt Securities of a series are issuable as Bearer Debt
Securities, Continental will be required to maintain a Paying Agent in a Place
of Payment outside the United States where Debt Securities of such series and
any coupons appertaining thereto may be presented and surrendered for payment.
The Trustee and Continental may act as Paying Agents. Continental will have the
right to require a holder of any Debt Security, in connection with the payment
of the principal of, premium, if any, and interest, if any, on such Debt
Security, to certify information to Continental or, in the absence of such
certification, Continental will be entitled to rely on any legal presumption to
enable Continental to determine its duties and liabilities, if any, to deduct or
withhold taxes, assessments or governmental charges from such payment.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of Continental maintained for such purpose as designated by Continental from
time to time. Debt Securities may be transferred or exchanged without service
charge, other than any tax or other governmental charge imposed in connection
therewith.
In the event of any redemption of Debt Securities, Continental shall not be
required to (i) issue, register the transfer of or exchange Debt Securities of
any series during a period beginning at the opening of business 15 days before
any selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Debt Securities, the day of mailing of the relevant notice of
redemption and (B) if Debt Securities of the series are issuable as Bearer Debt
Securities, the day of the first publication of the relevant notice of
redemption; (ii) register the transfer of or exchange any Registered Debt
Securities, or portion thereof, called for redemption, except the unredeemed
portion of any Registered Debt Security being redeemed in part; or (iii)
exchange any Bearer Debt Security called for redemption, except to exchange such
Bearer Security for a Registered Debt Security of that series and like tenor
which is immediately surrendered for redemption.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, the
following provisions will apply to the Subordinated Debt Securities.
The payment of the principal of, premium, if any, and interest, if any, on,
and the redemption or repurchase of, the Subordinated Debt Securities and
coupons will be subordinated and junior in right of payment, to the extent set
forth in the Subordinated Indenture, to the prior payment in full of all Senior
Indebtedness of Continental. The Subordinated Debt Securities will rank pari
passu with all existing and future subordinated indebtedness of Continental,
except that the Subordinated Debt Securities will rank senior to any future
subordinated indebtedness or other subordinated obligations of Continental which
by its terms states that it will rank junior to the Subordinated Debt
Securities. Notwithstanding the foregoing, payment from the money or the
proceeds of U.S. Government Obligations held in any defeasance trust described
under "Defeasance" below is not subordinate to any Senior Indebtedness or
subject to the restrictions described herein.
Senior Indebtedness of Continental means (i) the principal, premium, if
any, interest, if any, and other amounts in respect of (A) indebtedness of
Continental for money borrowed and (B) indebtedness evidenced
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by securities, debentures, bonds or other similar instruments issued by
Continental, (ii) all capital lease obligations of Continental, (iii) all
obligations of Continental issued or assumed as the deferred purchase price of
property, all conditional sale obligations of Continental and all obligations of
Continental under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
Continental for the reimbursement on any letter of credit, bankers acceptance,
security purchase facility or similar credit transaction, (v) all obligations of
the type referred to in clauses (i) through (iv) above of other persons for the
payment of which Continental is responsible or liable as obligor, guarantor or
otherwise, and (vi) all obligations of the type referred to in clauses (i)
through (v) above of other persons secured by any lien on any property or asset
of Continental (whether or not such obligation is assumed by Continental),
except for (1) any such indebtedness or other obligation that is by its terms
subordinated to or pari passu with the Subordinated Debt Securities, (2) any
indebtedness between or among Continental and its affiliates, including all
other debt securities and guarantees in respect of those debt securities,
initially issued to any trust, or a trustee of such trust, partnership or other
entity affiliated with Continental that, directly or indirectly, is a financing
vehicle of Continental (a "financing entity") in connection with the issuance by
such financing entity of preferred securities or other securities that rank pari
passu with, or junior to, the Subordinated Debt Securities and (3) Continental's
guarantee of certain payments under the 8 1/2% Convertible Trust Originated
Preferred Securities issued by Continental Airlines Finance Trust and
Continental's 8 1/2% Convertible Subordinated Deferrable Interest Debentures due
2020. Such Senior Indebtedness shall continue to be Senior Indebtedness and be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness. The
payment of the principal of, premium, if any, and interest, if any, on the
Securities and coupons shall rank senior in right of payment to Continental's
guarantee of certain payments under the 8 1/2% Convertible Trust Originated
Preferred Securities issued by Continental Airlines Finance Trust and
Continental's 8 1/2% Convertible Subordinated Deferrable Interest Debentures due
2020.
No payment on account of principal of, premium, if any, or interest, if
any, on, or redemption or repurchase of, the Subordinated Debt Securities or any
coupon or any deposit pursuant to the provisions described under "Defeasance"
below may be made by the Company if there is a default in the payment of
principal, premium, if any, sinking funds or interest, if any, (including a
default under any repurchase or redemption obligation) or other amounts with
respect to any Senior Indebtedness or if any other event of default with respect
to any Senior Indebtedness, permitting the holders thereof to accelerate the
maturity thereof, shall have occurred and shall not have been cured or waived or
shall not have ceased to exist after written notice to the Company and the
Trustee by any holder of Senior Indebtedness. Upon any acceleration of the
principal due on the Subordinated Debt Securities or payment or distribution of
assets of the Company to creditors upon any dissolution, winding up, liquidation
or reorganization, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings, all principal of, premium, if
any, sinking funds and interest, if any, or other amounts due on all Senior
Indebtedness must be paid in full before the Holders of the Subordinated Debt
Securities are entitled to receive any payment. By reason of such subordination,
in the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Holders of the Subordinated
Debt Securities, and such subordination may result in a reduction or elimination
of payments to the Holders of the Subordinated Debt Securities.
The Subordinated Indenture does not limit the Company's ability to incur
Senior Indebtedness or any other indebtedness.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depositary (the "Depositary") or with a
nominee for the Depositary identified in the applicable Prospectus Supplement.
In such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive certificated
form, a Registered Global Security may not be
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registered for transfer or exchange except as a whole by the Depositary for such
Registered Global Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary for such series or
a nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement. Continental
expects that the following provisions will apply to depositary arrangements.
Upon the issuance of any Registered Global Security, and the deposit of
such Registered Global Security with or on behalf of the Depositary for such
Registered Global Security, the Depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Debt
Securities represented by such Registered Global Security to the accounts of
institutions ("participants") that have accounts with the Depositary or its
nominee. The accounts to be credited will be designated by the underwriters or
agents engaging in the distribution of such Debt Securities or by Continental,
if such Debt Securities are offered and sold directly by Continental. Ownership
of beneficial interests in a Registered Global Security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests by participants in such Registered Global Security will
be shown on, and the transfer of that ownership interest will be effected only
through, records maintained by the Depositary for such Registered Global
Security or by its nominee. Ownership of beneficial interests in such Registered
Global Security by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such
Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the Indentures. Unless otherwise specified in the applicable
Prospectus Supplement and except as specified below, owners of beneficial
interests in such Registered Global Security will not be entitled to have Debt
Securities of the series represented by such Registered Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certificated form and will not be
considered the holders thereof for any purposes under the Indentures.
Accordingly, each person owning a beneficial interest in such Registered Global
Security must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under the
Indentures. The Depositary may grant proxies and otherwise authorize
participants to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action which a holder is entitled to give or
take under the Indentures. Continental understands that, under existing industry
practices, if Continental requests any action of holders, or an owner of a
beneficial interest in such Registered Global Security desires to give any
notice or take any action a holder is entitled to give or take under the
Indentures, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Unless otherwise specified in the applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
Debt Securities represented by a Registered Global Security registered in the
name of a Depositary or its nominee will be made to such Depositary or its
nominee, as the case may be, as the registered owner of such Registered Global
Security.
Continental expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal
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amount of such Registered Global Security as shown on the records of such
Depositary. Continental also expects that payments by participants to owners of
beneficial interests in such Registered Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with the securities held for the accounts of customers
registered in "street names," and will be the responsibility of such
participants. None of Continental, the Trustee or any agent of Continental shall
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of a Registered
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by Continental within ninety days, Continental will
issue such Debt Securities in definitive certificated form in exchange for such
Registered Global Security. In addition, Continental may at any time and in its
sole discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive certificated form in exchange
for all of the Registered Global Securities representing such Debt Securities.
Further, if Continental so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Registered Global Security
representing Debt Securities of such series may, on terms acceptable to
Continental and the Depositary for such Registered Global Security, receive Debt
Securities of such series in definitive form registered in the name of such
beneficial owner or its designee.
CONSOLIDATION, MERGER OR SALE BY CONTINENTAL
Each Indenture provides that Continental shall not merge into or
consolidate with any other corporation or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its assets to any Person,
unless (i) the successor, resulting or acquiring Person is a corporation
organized and existing under the laws of the United States of America or a State
thereof or the District of Columbia and such corporation expressly assumes by
supplemental indenture all the obligations of Continental under the Debt
Securities and any coupons appertaining thereto and the obligations of
Continental under the Indenture, (ii) immediately after giving effect to such
merger or consolidation, or such sale, conveyance, transfer, lease or other
disposition, no Default or Event of Default shall have occurred and be
continuing and (iii) certain other conditions are met. In the event a successor,
resulting or acquiring corporation assumes the obligations of Continental, such
successor, resulting or acquiring corporation shall succeed to and be
substituted for Continental under the Indentures and under the Debt Securities
and any coupons appertaining thereto and all obligations of Continental shall
terminate. In the event of any such permitted consolidation, merger, sale,
conveyance, disposition or other change of control transaction (including a
highly leveraged transaction), the holders of the Debt Securities will not have
the right to require redemption thereof or similar rights unless otherwise
provided in the applicable Prospectus Supplement.
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Events of Default with respect to Debt Securities of any series issued
thereunder are defined in the Indentures as being: default for thirty days in
payment of any interest on any Debt Securities of that series or any coupon
appertaining thereto or any additional amount payable with respect to Debt
Securities of such series as specified in the terms of the Debt Securities of
such series when due (whether or not, in the case of Subordinated Debt
Securities, such payment is prohibited by the subordination provisions
applicable thereto); default in payment of the principal of or premium, if any,
on any Debt Securities of that series when due; failure to deposit any sinking
fund payment when and as due by the terms of the Debt Securities of that series;
default for sixty days after notice to Continental by the Trustee for such
series, or by the holders of 25% in aggregate principal amount of the Debt
Securities of such series then outstanding, in the performance of any other
agreement applicable to the Debt Securities of that series contained in the
Indenture; and certain events of bankruptcy, insolvency or reorganization of
Continental. Any other Events of Default applicable to a specified series of
Debt Securities will be described in the applicable Prospectus Supplement. An
Event of
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Default with respect to a particular series of Debt Securities will not
necessarily be an Event of Default with respect to any other series of Debt
Securities.
The Indentures provide that, if an Event of Default occurs with respect to
the Debt Securities of any series issued thereunder and is continuing, the
Trustee for such series or the holders of 25% in aggregate principal amount of
all of the outstanding Debt Securities of that series, by written notice to
Continental (and to the Trustee for such series, if notice is given by such
holders of Debt Securities), may declare the principal (or, if the Debt
Securities of that series are original issue discount Debt Securities or indexed
Debt Securities, such portion of the principal amount specified in the terms of
such series) of all the Debt Securities of that series to be due and payable.
The Indentures provide that the Trustee for any series of Debt Securities
shall, within 90 days after the occurrence of a Default known to it with respect
to Debt Securities of that series, give to the holders of the Debt Securities of
that series notice of all such uncured Defaults; provided, that such notice
shall not be given until 60 days after the occurrence of a Default with respect
to Debt Securities of that series involving a failure to perform a covenant
other than the obligation to pay principal, premium, if any, or interest, if
any, or make a mandatory sinking fund payment; and provided further, that,
except in the case of default in payment on the Debt Securities of that series,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers (as defined therein) in good faith determines that
withholding such notice is in the interest of the holders of the Debt Securities
of that series. "Default" means any event which is, or, after notice or passage
of time or both, would be, an Event of Default.
The Indentures provide that the Trustee will be under no obligation to
exercise any of its rights or powers thereunder at the request or direction of
any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or indemnity. Subject to such provisions for indemnification
of the Trustee, the Indentures provide that the holders of not less than a
majority in aggregate principal amount of the outstanding Debt Securities of
each series affected (with each such series voting as a class) may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee for such series, or exercising any trust or power conferred on such
Trustee.
The Indentures include a covenant that Continental will file annually with
the Trustee a certificate as to Continental's compliance with all conditions and
covenants of the applicable Indenture.
The holders of not less than a majority in aggregate principal amount of
the outstanding Debt Securities of any series by notice to the Trustee for such
series may waive, on behalf of the holders of all Debt Securities of such
series, any past Default or Event of Default with respect to that series and its
consequences, and may rescind and annul a declaration of acceleration with
respect to that series and its consequences (unless a judgment or decree based
on such acceleration has been obtained and entered), except a Default or Event
of Default in the payment of the principal of, premium, if any, or interest, if
any, on any Debt Security (and any acceleration resulting therefrom) and certain
other defaults.
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting Continental and the Trustee to
enter into one or more supplemental indentures without the consent of the
holders of any of the Debt Securities in order (i) to evidence the succession of
another corporation to Continental and the assumption of the covenants of
Continental by a successor; (ii) to add to the covenants of Continental or
surrender any right or power of Continental; (iii) to add additional Events of
Default with respect to any series; (iv) to add or change any provisions to such
extent as necessary to permit or facilitate the issuance of Debt Securities in
bearer form or in global form provided that such action does not adversely
affect the interests of any holder of Debt Securities of any series issued under
such Indenture in any material respect; (v) under certain circumstances to add
to, change or eliminate any provision affecting Debt Securities not yet issued;
(vi) to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities; (viii) to evidence and provide for successor Trustees; (ix) if
allowed without penalty under applicable laws and regulations, to permit payment
in respect of Debt Securities in bearer form in the United States; (x) to
correct or supplement any inconsistent provisions or to make any other
provisions with respect to matters or questions arising under the Indentures,
provided that
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such action does not adversely affect the interests of any holder of Debt
Securities of any series issued under such Indenture in any material respect;
(xi) to supplement any of the provisions of the Indenture to permit or
facilitate the defeasance and discharge of Debt Securities of any series,
provided that such action does not adversely affect the interests of any holder
of Debt Securities of any series issued under such Indenture in any material
respect; or (xii) to cure any ambiguity or correct any mistake.
The Indentures also contain provisions permitting Continental and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the outstanding Debt Securities of each series affected by such
supplemental indenture, to execute supplemental indentures adding any provisions
to or changing or eliminating any of the provisions of the Indentures or any
other supplemental indenture or modifying the rights of the holders of Debt
Securities of such series, except that no such supplemental indenture may,
without the consent of the holder of each Debt Security so affected, (i) change
the time for payment of principal or interest, if any, on any Debt Security;
(ii) reduce the principal of, or interest, if any, on any Debt Security; (iii)
reduce the amount of premium, if any, payable upon the redemption of any Debt
Security; (iv) reduce the amount of principal payable upon acceleration of the
maturity of an Original Issue Discount Debt Security; (v) change the coin or
currency in which any Debt Security or any premium or interest thereon is
payable; (vi) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security; (vii) reduce the percentage in
principal amount of the outstanding Debt Securities of any series the consent of
whose holders is required for modification or amendment of the Indentures or for
waiver of compliance with certain provisions of the Indentures or for waiver of
certain defaults; (viii) change the obligation of Continental to maintain an
office or agency in the places and for the purposes specified in the Indentures;
or (ix) modify any of the foregoing provisions.
DEFEASANCE
If indicated in the applicable Prospectus Supplement, Continental may elect
either (i) to defease and be discharged from any and all obligations with
respect to the Debt Securities of or within any series (except as described
below) ("defeasance") or (ii) to be released from its obligations with respect
to certain covenants applicable to the Debt Securities of or within any series
("covenant defeasance"), upon the deposit with the Trustee for such series (or
other qualifying trustee), in trust for such purpose, of money and/or Government
Obligations which through the payment of principal and interest in accordance
with their terms will provide money in the amount sufficient to pay the
principal of, premium, if any, and interest, if any, on such Debt Securities to
Maturity or redemption, as the case may be, and any mandatory sinking fund
payments thereon. Upon the occurrence of a defeasance, Continental will be
deemed to have paid and discharged the entire indebtedness represented by such
Debt Securities and any coupons appertaining thereto and to have satisfied all
of its other obligations under such Debt Securities and any coupons appertaining
thereto (except for (i) the rights of holders of such Debt Securities to
receive, solely from the trust funds deposited to defease such Debt Securities,
payments in respect of the principal of, premium, if any, and interest, if any,
on such Debt Securities or any coupons appertaining thereto when such payments
are due and (ii) certain other obligations as provided in the Indentures). Upon
the occurrence of a covenant defeasance, Continental will be released only from
its obligations to comply with certain covenants contained in the Indenture
relating to such Debt Securities, will continue to be obligated in all other
respects under such Debt Securities and will continue to be contingently liable
with respect to the payment of principal, interest, if any, and premium, if any,
with respect to such Debt Securities.
Unless otherwise specified in the applicable Prospectus Supplement and
except as described below, the conditions to both defeasance and covenant
defeasance are as follows: (i) such defeasance or covenant defeasance must not
result in a breach or violation of, or constitute a Default or Event of Default
under, the applicable Indenture or any other material agreement or instrument to
which Continental is a party or by which it is bound; (ii) certain bankruptcy
related Defaults or Events of Default with respect to Continental must not have
occurred and be continuing during the period commencing on the date of the
deposit of the trust funds to defease such Debt Securities and ending on the
91st day after such date; (iii) Continental must deliver to the Trustee an
Officer's Certificate and an Opinion of Counsel to the effect that the holders
of such Debt Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such
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<PAGE> 29
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts and in the same manner and at all the same times as would have
been the case if such defeasance or covenant defeasance had not occurred (such
Opinion of Counsel, in the case of defeasance, must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable federal income
tax law occurring after the date of the Indentures); and (iv) any additional
conditions to such defeasance or covenant defeasance which may be imposed on
Continental pursuant to the applicable Indenture. The Indentures require that a
nationally recognized firm of independent public accountants deliver to the
Trustee a written certification as to the sufficiency of the trust funds
deposited for the defeasance or covenant defeasance of such Debt Securities. The
Indentures do not provide the holders of such Debt Securities with recourse
against such firm. If indicated in the applicable Prospectus Supplement, in
addition to obligations of the United States or an agency or instrumentality
thereof, Government Obligations may include obligations of the government or any
agency or instrumentality of the government issuing the currency in which Debt
Securities of such series are payable. In the event that Government Obligations
deposited with the Trustee for the defeasance of such Debt Securities decrease
in value or default subsequent to their being deposited, Continental will have
no further obligation, and the holders of such Debt Securities will have no
additional recourse against Continental, as a result of such decrease in value
or default. As described above, in the event of a covenant defeasance,
Continental remains contingently liable with respect to the payment of
principal, interest, if any, and premium, if any, with respect to the Debt
Securities.
Continental may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If Continental exercises its defeasance option, payment of such Debt Securities
may not be accelerated because of a Default or an Event of Default. If
Continental exercises its covenant defeasance option, payment of such Debt
Securities may not be accelerated by reason of a Default or an Event of Default
with respect to the covenants to which such covenant defeasance is applicable.
However, if such acceleration were to occur, the realizable value at the
acceleration date of the money and Government Obligations in the defeasance
trust could be less than the principal and interest, if any, then due on such
Debt Securities, in that the required deposit in the defeasance trust is based
upon scheduled cash flow rather than market value, which will vary depending
upon interest rates and other factors.
The applicable Prospectus Supplement may further describe the provisions,
if any, applicable to defeasance or covenant defeasance with respect to Debt
Securities of a particular series.
THE TRUSTEE
Bank One, N.A., is the Trustee under the Indentures. Bank One, N.A. acts as
Trustee under one other indenture for Continental, and may from time to time act
as Trustee under other indentures. Bank One, N.A. also may establish banking or
other commercial relationships with Continental in the ordinary course of
business. If more than one series of Debt Securities is outstanding under an
Indenture, the holders of a majority in aggregate principal amount of each such
series at any time outstanding may remove the Trustee with respect to such
series (but not as to any other series) by so notifying the Trustee and may
appoint a successor Trustee with respect to such series. Continental may remove
the Trustee with respect to the Securities of any series at any time by giving
written notice thereof to the Trustee if there is at the time of such removal no
Default with respect to the Securities of such series. Each reference in this
Prospectus to the Trustee under an Indenture refers, in the case of each series
of Debt Securities outstanding under such Indenture, to the Trustee for such
series.
PLAN OF DISTRIBUTION
Continental may sell Debt Securities in or outside of the United States to
one or more underwriters for public offering and sale by them or may sell Debt
Securities to investors or other persons directly or through one or more dealers
or agents. Any such underwriter, dealer or agent involved in the offer and sale
of the Offered Securities will be named in an applicable Prospectus Supplement.
The Offered Securities may be sold at a fixed price or prices, which may be
changed, or from time to time at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at
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<PAGE> 30
negotiated prices. Dealer trading may take place in certain of the Offered
Securities, including Offered Securities not listed on any securities exchange.
Continental also may, from time to time, authorize underwriters acting as
Continental's agents to offer and sell the Offered Securities upon the terms and
conditions as shall be set forth in any Prospectus Supplement. In connection
with the sale of Offered Securities, underwriters may be deemed to have received
compensation from Continental in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions (which may be changed from time to time) from the purchasers for
whom they may act as agent.
If a dealer is used directly by Continental in the sale of Offered
Securities in respect of which this Prospectus is delivered, such Offered
Securities will be sold to the dealer, as principal. The dealer may then resell
such Offered Securities to the public at varying prices to be determined by such
dealer at the time of resale. Any such dealer and the terms of any such sale
will be set forth in the Prospectus Supplement relating thereto.
Offered Securities may be offered and sold through agents designated by
Continental from time to time. Any such agent involved in the offer or sale of
the Offered Securities in respect of which this Prospectus is delivered will be
named in, and any commissions payable by Continental to such agent will be set
forth in, the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
Offers to purchase Offered Securities may be solicited directly by
Continental and sales thereof may be made by Continental directly to
institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto. Except as set forth in the applicable Prospectus Supplement, no
director, officer or employee of Continental will solicit or receive a
commission in connection with direct sales by Continental of the Offered
Securities, although such persons may respond to inquiries by potential
purchasers and perform ministerial and clerical work in connection with any such
direct sales.
Any underwriting compensation paid by Continental to underwriters, dealers
or agents in connection with the offering of Offered Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements with
Continental, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by Continental for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, Continental and its subsidiaries in the ordinary course of
business.
If so indicated in an applicable Prospectus Supplement and subject to
existing market conditions, Continental will authorize dealers acting as
Continental's agents to solicit offers by certain institutions to purchase
Offered Securities from Continental at the public offering price set forth in
such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date or dates stated in such
Prospectus Supplement. Each Contract will be for an amount not less than, and
the aggregate principal amount of Offered Securities sold pursuant to Contracts
shall not be less nor more than, the respective amounts stated in such
Prospectus Supplement. Institutions with whom Contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of Continental.
Contracts will not be subject to any conditions except the purchase by an
institution of the Offered Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject. A commission
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indicated in the applicable Prospectus Supplement will be granted to
underwriters and agents soliciting purchases of Offered Securities pursuant to
Contracts accepted by Continental. Agents and underwriters will have no
responsibility in respect of the delivery or performance of Contracts.
The Offered Securities may or may not be listed on a national securities
exchange or a foreign securities exchange. If an underwriter or underwriters are
utilized in the sale of any Offered Securities, the applicable Prospectus
Supplement will contain a statement as to the intention, if any, of such
underwriters at the date of such Prospectus Supplement to make a market in the
Offered Securities. No assurances can be given that there will be a market for
the Offered Securities.
The place and time of delivery for the Offered Securities in respect of
which this Prospectus is delivered will be set forth in the applicable
Prospectus Supplement.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Debt Securities offered hereby will be passed upon for
Continental by Hughes Hubbard & Reed LLP, New York, New York.
EXPERTS
The consolidated financial statements (including financial statement
schedules) of Continental Airlines, Inc. appearing in Continental Airlines,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1996 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon included therein and incorporated herein by reference. Such
consolidated financial statements are, and audited consolidated financial
statements to be included in subsequently filed documents will be, incorporated
herein by reference in reliance upon reports of Ernst & Young LLP pertaining to
such consolidated financial statements (to the extent covered by consents filed
with the Commission) given upon the authority of such firm as experts in
accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering, other than
underwriting discounts and commissions, are:
<TABLE>
<S> <C>
Securities and Exchange Commission registration filing
fee....................................................... $121,213
Printing and engraving expenses............................. 20,000*
Trustee fees and expenses................................... 15,000*
Accounting fees and expenses................................ 15,000*
Rating Agency fees.......................................... 30,000*
Legal fees and expenses..................................... 50,000*
Miscellaneous............................................... 23,787*
--------
Total............................................. 275,000*
========
</TABLE>
- ---------------
* Estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify each of its directors and officers to the full extent
permitted by the laws of the State of Delaware and may indemnify certain other
persons as authorized by the Delaware General Corporation Law (the "GCL").
Section 145 of the GCL provides as follows:
"(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
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but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made (1) by a majority
vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in
a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
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(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)".
The Certificate of Incorporation and Bylaws of the Company also limit the
personal liability of directors to the Company and its stockholders for monetary
damages resulting from certain breaches of the directors' fiduciary duties. The
Certificate of Incorporation of the Company provides as follows:
"No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of
the Director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
GCL, or (iv) for any transaction from which the Director derived any
improper personal benefit. If the GCL is amended . . . to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the GCL, as so
amended".
The Company maintains directors' and officers' liability insurance.
ITEM 16. EXHIBITS.
Reference is made to the Exhibit Index which immediately precedes the
exhibits filed with this Registration Statement, which is incorporated herein by
reference.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed pursuant to Section 13
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<PAGE> 35
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether or not
such indemnification 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Houston, State of Texas, on July 18, 1997.
CONTINENTAL AIRLINES, INC.
By: /s/ JEFFERY A. SMISEK
----------------------------------
Jeffery A. Smisek
Executive Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated, on July 18, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer) and
Gordon M. Bethune Director
* Executive Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial Officer)
Lawrence W. Kellner
* Vice President and Controller (Principal
- ----------------------------------------------------- Accounting Officer)
Michael P. Bonds
* Director
- -----------------------------------------------------
Thomas J. Barrack, Jr.
* President, Chief Operating Officer and
- ----------------------------------------------------- Director
Gregory D. Brenneman
* Director
- -----------------------------------------------------
Lloyd M. Bentsen, Jr.
* Director
- -----------------------------------------------------
David Bonderman
* Director
- -----------------------------------------------------
Patrick Foley
* Director
- -----------------------------------------------------
Douglas H. McCorkindale
* Director
- -----------------------------------------------------
George G. C. Parker
</TABLE>
II-5
<PAGE> 37
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Director
- -----------------------------------------------------
Richard W. Pogue
* Director
- -----------------------------------------------------
William S. Price III
* Director
- -----------------------------------------------------
Donald L. Sturm
* Director
- -----------------------------------------------------
Karen Hastie Williams
* Director
- -----------------------------------------------------
Charles A. Yamarone
*By: /s/ SCOTT R. PETERSON
------------------------------------------------
Scott R. Peterson, Attorney-in-fact
</TABLE>
II-6
<PAGE> 38
LOGO
