<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 1, 1998
REGISTRATION NO. 333-60409
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CALAIR CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6749 76-0566170
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
2929 ALLEN PARKWAY, SUITE 2010
HOUSTON, TEXAS 77019
(713) 834-2950
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
CALAIR L.L.C.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6749 76-0566172
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
C/O CALFINCO INC.
2929 ALLEN PARKWAY, SUITE 2010
HOUSTON, TEXAS 77019
(713) 834-2950
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
CONTINENTAL AIRLINES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4512 74-2099724
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
JEFFERY A. SMISEK, ESQ.
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
CONTINENTAL AIRLINES, INC.
2929 ALLEN PARKWAY, SUITE 2010
HOUSTON, TEXAS 77019
(713) 834-2950
(Name, address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
Copy to:
SCOTT N. WULFE
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-2750
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SENIOR NOTE(1) PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 1/8% Senior Notes due 2008......... $112,300,000 100% $112,300,000 $33,129(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantee of 8 1/8% Senior Notes due
2008(3)............................ $112,300,000 N/A N/A N/A(4)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Previously paid.
(3) Continental Airlines, Inc. has irrevocably and unconditionally guaranteed on
a unsecured senior basis the 8 1/8% Senior Notes Due 2008 of Calair L.L.C.
and Calair Capital Corporation.
(4) Pursuant to Rule 457(n), no separate fee is required to be paid in respect
of guarantee of the 8 1/8% Senior Notes Due 2008, which is being registered
concurrently.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 1, 1998
PROSPECTUS
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
OFFER TO EXCHANGE
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ALL OUTSTANDING 8 1/8% SENIOR NOTES DUE 2008
PAYMENT FULLY AND UNCONDITIONALLY GUARANTEED ON AN UNSECURED, SENIOR BASIS BY
CONTINENTAL AIRLINES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON OCTOBER 6, 1998, UNLESS EXTENDED
---------------------
Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental" or the
"Company"), a Delaware corporation, and Calair Capital Corporation ("Calair
Capital" and, together with Calair, the "Issuers"), a Delaware corporation and a
wholly owned subsidiary of Calair, hereby offer, upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal," and together with this Prospectus, the
"Exchange Offer"), to exchange up to $112,300,000 aggregate principal amount of
their 8 1/8% Senior Notes due 2008 (the "Exchange Notes"), which are fully and
unconditionally guaranteed on an unsecured, senior basis by Continental and
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for a like principal amount of their
outstanding 8 1/8% Senior Notes due 2008, which are fully and unconditionally
guaranteed on an unsecured, senior basis by Continental (the "Old Notes"). The
form and terms of the Exchange Notes are identical in all material respects to
the form and terms of the Old Notes, except that the Exchange Notes do not
contain terms with respect to transfer restrictions (other than transfer
restrictions relating to certain Employee Retirement Income Security Act of
1974, as amended ("ERISA"), matters) or interest rate increases. The Exchange
Notes will evidence the same debt as the Old Notes and will be issued under and
be entitled to the benefits of the same Indenture (as defined herein). The
Exchange Notes and the Old Notes are collectively referred to herein as the
"Notes."
The Notes are unsecured, senior obligations of the Issuers ranking pari
passu in right of payment with all other existing and future unsecured and
unsubordinated obligations of the Issuers. The Old Notes have been, and the
Exchange Notes will be upon original issue, fully and unconditionally guaranteed
on an unsecured, senior basis by Continental (the "Parent Guarantee"). The
Parent Guarantee is an unsecured, senior obligation of Continental ranking pari
passu in right of payment with all other existing and future unsecured and
unsubordinated obligations of Continental, and senior in right of payment to all
existing and future obligations of Continental expressly subordinated in right
of payment to the Parent Guarantee. The Notes and the Parent Guarantee are
effectively subordinated in right of payment to any secured senior obligations
of the Issuers and Continental, respectively, with respect to the assets of the
Issuers and Continental, respectively, securing such obligations. The Notes and
the Parent Guarantee are also effectively subordinated to all existing
(Cover continued on next page)
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED AND BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is September 1, 1998
<PAGE> 3
and future liabilities of the subsidiaries of the Issuers and Continental,
respectively. As of June 30, 1998, Continental had approximately $2.3 billion
(including current maturities) of long-term debt and capital lease obligations
on a consolidated basis of which approximately $1.3 billion was secured
long-term debt and capital lease obligations of Continental and $496 million was
long-term debt and capital lease obligations of Continental's subsidiaries, and
the Issuers had no indebtedness outstanding other than the Notes. The terms of
the Notes and the Parent Guarantee do not limit the Issuers' or Continental's or
any of their respective subsidiaries' ability to incur additional indebtedness
or to mortgage or pledge any of their respective assets or to pay dividends or
make other distributions on, or redeem or repurchase, capital stock. See
"Capitalization" and "Description of the Notes -- Ranking."
The Old Notes were sold by the Issuers on April 17, 1998 to the Initial
Purchasers (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchasers only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and to non-U.S. persons pursuant to offers and sales that occurred outside
the United States within the meaning of Regulation S under the Securities Act,
each of whom agreed to comply with certain transfer restrictions and other
conditions. Accordingly, the Old Notes may not be offered, resold or otherwise
transferred unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy the
obligations of the Issuers and the Company under the Registration Rights
Agreement (as defined herein) entered into with the Initial Purchasers in
connection with the offering of the Old Notes (the "Old Notes Offering").
The Exchange Notes will accrue interest at the applicable per annum rate
set forth on the cover page of this Prospectus, from the last date on which
interest was paid on the Old Notes surrendered in exchange therefor or, if no
interest has been paid, from the date of issuance of the Old Notes, April 17,
1998. Interest on the Exchange Notes is payable on April 1 and October 1 of each
year to holders of record on the March 15 and September 15 immediately preceding
such interest payment date. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes.
The Issuers and the Company will accept for exchange any and all Old Notes
that are validly tendered on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be October 6, 1998, unless the
Exchange Offer is extended. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date (as defined herein), unless previously accepted for exchange.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange and is not subject to any other conditions,
other than that the Exchange Offer, or the making of any exchange by a holder,
does not violate applicable law or any applicable interpretation of the staff of
the SEC (as defined below). However, the Exchange Offer is subject to the terms
and provisions of the Registration Rights Agreement. Old Notes may be tendered
only in denominations of $1,000 principal amount and integral multiples thereof.
The Issuers and the Company have agreed to pay the expenses of the Exchange
Offer. See "The Exchange Offer."
Based on interpretations of the Securities Act by the staff of the
Securities and Exchange Commission (the "Commission" or "SEC"), as set forth in
no-action letters issued to third parties, including Exxon Capital Holdings
Corporation, SEC No-Action Letter (available April 13, 1989), Morgan Stanley &
Co. Incorporated, SEC No-Action Letter (available June 5, 1991) and Shearman &
Sterling, SEC No-Action Letter (available July 2, 1993) (collectively, the
"Exchange Offer No-Action Letters"), the Issuers and the Company believe that
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold or otherwise transferred by holders thereof (other than a
Participating Broker-Dealer (as defined below), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to engage in, a
distribution of such Exchange Notes and have no arrangement with any person to
participate in a distribution of such Exchange Notes. By tendering the Old Notes
in exchange for Exchange Notes, each holder will represent to the Issuers and
the Company that: (i) it is not an affiliate of the Issuers or the Company (as
defined in Rule 405 under the Securities Act) or a broker-dealer tendering Old
Notes acquired directly from the Issuers or the Company for its own account;
2
<PAGE> 4
(ii) any Exchange Notes to be received by it will be acquired in the ordinary
course of its business; and (iii) it is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such
Exchange Notes and has no arrangement or understanding to participate in a
distribution of the Exchange Notes. If a holder of Old Notes is an affiliate of
the Issuers or the Company or is a broker-dealer who purchased Old Notes
directly from the Issuers for its own account or is engaged in or intends to
engage in a distribution of the Exchange Notes or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder may not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that holds
Old Notes acquired for its own account as a result of market-making activities
or other trading activities (a "Participating Broker-Dealer") and that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. Pursuant to the Registration Rights Agreement, the Issuers and the
Company have agreed that until the close of business 180 days after the
Expiration Date they will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Neither the Issuers nor the Company will receive any proceeds from the
Exchange Offer. No underwriter is being utilized in connection with the Exchange
Offer.
To the extent Old Notes are tendered and accepted in the Exchange Offer,
the aggregate principal amount of Old Notes outstanding will decrease with a
resulting decrease in the liquidity in the market for the Old Notes. Upon
consummation of the Exchange Offer, holders of the Old Notes who were eligible
to participate in the Exchange Offer but who did not tender their Old Notes will
not be entitled to certain rights under the Registration Rights Agreement and
such Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity in the market for the Old Notes could be adversely
affected.
The Exchange Notes generally will be freely transferable (subject to the
restrictions discussed elsewhere herein) but will be a new issue of securities
for which there is not initially a market. Accordingly, no assurance is given as
to the development or liquidity of or the trading market for the Exchange Notes.
Chase Securities Inc., Credit Suisse First Boston and Morgan Stanley Dean Witter
(the "Initial Purchasers") have advised the Issuers and Continental that they
currently intend to make a market, if permitted by applicable laws and
regulations, in the Exchange Notes; however, the Initial Purchasers are not
obligated to do so, and any such market making may be discontinued at any time
without notice. The Issuers do not intend to apply for a listing of the Exchange
Notes on any securities exchange or for their quotation through any automated
dealer quotation system.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS OR THE
COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY
JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE
IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
CONTINENTAL AIRLINES, INC., 2929 ALLEN PARKWAY, SUITE 2010, HOUSTON, TEXAS
77019, ATTENTION: SECRETARY, TELEPHONE (713) 834-2950. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY SEPTEMBER 29, 1998.
3
<PAGE> 5
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS
OF HISTORICAL FACTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE FUTURE FINANCIAL
POSITION OF THE ISSUERS OR CONTINENTAL, AS WELL AS CERTAIN OF THOSE RELATING TO
TRANSACTIONS REGARDING OR WITH NORTHWEST AIRLINES, INC. ("NORTHWEST") ARE
FORWARD-LOOKING STATEMENTS. ALTHOUGH EACH OF THE ISSUERS AND CONTINENTAL
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, NEITHER THE ISSUERS NOR CONTINENTAL CAN GIVE ANY ASSURANCE THAT SUCH
EXPECTATIONS WILL BE CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM SUCH EXPECTATIONS ARE DISCLOSED UNDER "RISK FACTORS"
AND ELSEWHERE IN THIS PROSPECTUS.
4
<PAGE> 6
AVAILABLE INFORMATION
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Issuers and the Company with the
Commission under the Securities Act. This Prospectus omits certain of the
information set forth in the Registration Statement. Reference is hereby made to
the Registration Statement and to the exhibits relating thereto for further
information with respect to the Issuers and the Company and the securities
offered hereby. Statements contained herein concerning the provisions of
contracts or other documents are not necessarily complete, and each such
statement is qualified in its entirety by reference to the copy of the
applicable contract or other document filed with the Commission. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the public reference facilities
of the Commission described below.
As a result of the Exchange Offer, Calair will become subject to the
periodic reporting and other informational requirements of the Exchange Act.
Calair's obligation to provide such reports and other information will be
automatically suspended as to any fiscal year, other than 1998, if at the
beginning of such year, the Notes are held of record by fewer than three hundred
persons. Information with respect to Calair Capital will be provided, to the
extent required by the Commission, in the required filings made by Calair and
Continental. Continental is subject to the informational requirements of the
Exchange Act and in accordance therewith files periodic reports and other
information with the Commission. Such reports and other information concerning
Calair and Continental may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and at Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such material may also be accessed electronically by
means of the Commission's Internet web site (http://www.sec.gov) which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. In addition, reports,
proxy statements and other information concerning Continental may be inspected
and copied at the offices of the New York Stock Exchange, Inc. ("NYSE"), 20
Broad Street, New York, New York 10005.
While any Old Notes remain outstanding and are "restricted securities"
within the meaning of Rule 144(a)(3), each Issuer will make available, upon the
request of any holder of an Old Note or a prospective purchaser thereof
designated by such holder, such information as is specified in paragraph (d)(4)
of Rule 144A, to such holder or prospective purchaser, in order to permit
compliance by such holder with Rule 144A in connection with the resale of such
Note by such holder unless, at the time of such request, the applicable Issuer
is subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act. Any such request should be directed to the Issuers c/o CALFINCO Inc., 2929
Allen Parkway, Suite 2010, Houston, Texas 77019, Attention: Secretary, telephone
(713) 834-2950.
The Indenture provides that Continental will file on a timely basis with
the Commission, to the extent such filings are accepted by the Commission and
whether or not Continental has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that
Continental would be required to file if it were subject to Section 13 or 15 of
the Exchange Act. Continental will also be required (a) to file with the Trustee
copies of such reports and documents within 15 days after the date on which
Continental files such reports and documents with the Commission or the date on
which Continental would be required to file such reports and documents if
Continental were so required and (b) if filing such reports and documents with
the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at Calair's cost copies of such reports and documents to
any holder of Notes promptly upon written request. The Issuers will not be
required to file, provide or furnish with or to any Person any report or
information except as required by Section 13 or 15 of the Exchange Act and as
described above.
5
<PAGE> 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Continental with the Commission (File No.
0-9781) are hereby incorporated by reference in this Prospectus: (i)
Continental's Annual Report on Form 10-K for the year ended December 31, 1997,
filed on March 20, 1998, (ii) Continental's Current Reports on Form 8-K dated
January 25, February 20, March 3, April 21, and July 30, 1998, and (iii)
Continental's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998 and June 30, 1998.
All reports and any definitive proxy or information statements filed by
Continental pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
Exchange Offer hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Continental will provide without charge to any person to whom a copy of
this Prospectus has been delivered, upon written or oral request, a copy of any
or all of the foregoing documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Continental
Airlines, Inc., 2929 Allen Parkway, Suite 2010, Houston, Texas 77019, Attention:
Secretary, telephone (713) 834-2950. In order to ensure timely delivery of the
documents, any request should be made by September 29, 1998.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS, THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS OR THE COMPANY SINCE THE
DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL,
NOR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
6
<PAGE> 8
PROSPECTUS SUMMARY
The following summary information does not purport to be complete and is
qualified in its entirety by reference to, and should be read in conjunction
with, the more detailed information and financial statements, and the related
notes thereto, included elsewhere or incorporated by reference in this
Prospectus. As used in this Prospectus, the terms "Continental" and "Company"
refer to Continental Airlines, Inc. and its subsidiaries, unless the context
indicates otherwise.
THE ISSUERS
Calair, a Delaware limited liability company, was formed on March 31, 1998,
for the purpose of acquiring certain takeoff and landing rights (collectively,
the "Slots") at Chicago O'Hare Airport ("Chicago O'Hare"), Ronald Reagan
Washington National Airport ("Washington National") and LaGuardia Airport
("LaGuardia") from Continental, pursuant to the Transaction (as defined herein).
Upon the closing of the Transaction, the members in Calair consisted of CALFINCO
Inc. ("Calfinco"), a wholly owned subsidiary of Continental, and Chase Equity
Associates, L.P. ("CEA"), an affiliate of Chase Securities Inc., one of the
Initial Purchasers. Upon the closing of the Transaction, Calfinco and CEA owned
member interests in Calair of 76% and 24%, respectively. Pursuant to the
Transaction, Calair acquired the Slots from Continental on April 17, 1998 and
Continental leased the Slots back from Calair for a 10-year period. Calair
Capital, a Delaware corporation and a wholly owned subsidiary of Calair, was
formed specifically to effect the Old Notes Offering. The Notes are joint and
several obligations of Calair and Calair Capital, although Calair received all
the net proceeds of the Old Notes Offering, and are fully and unconditionally
guaranteed by Continental. Calair Capital is a shell company with no operations.
Consequently, financial statements of Calair Capital are not included in this
Prospectus because they are not meaningful. The consolidated financial
statements of Calair reflect the operations of the Issuers.
The principal executive offices of Calair are located at 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, and the telephone number is (713)
834-2950. The principal executive offices of Calair Capital are also located at
2929 Allen Parkway, Suite 2010, Houston, Texas 77019, and the telephone number
is (713) 834-2950.
CONTINENTAL
Continental is a major United States air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth largest United
States airline (as measured by revenue passenger miles for the first seven
months of 1998) and, together with its wholly owned subsidiaries, Continental
Express, Inc. ("Express") and Continental Micronesia, Inc. ("CMI"), each a
Delaware corporation, serves 206 airports worldwide as of August 1, 1998.
Recent Developments
On August 11, 1998, the Company announced that CMI plans to accelerate the
retirement of its four Boeing 747 aircraft in April 1999 and its remaining
thirteen Boeing 727 aircraft by December 2000. The 747s will be replaced by
DC-10-30s and the 727s will be replaced with a reduced number of Boeing 737s. In
addition, Express will accelerate the retirement of certain turboprop aircraft
by December 2000, including its fleet of 32 EMB-120 aircraft, as regional jets
are brought in to replace turboprops. CMI's fleet retirement decisions will
result in a nonrecurring charge of $65 million ($41 million after tax) and
Express' fleet retirement decisions will result in a nonrecurring charge of $57
million ($36 million after tax). The combined charge will be $122 million ($77
million after tax) and was recorded in the third quarter of 1998.
The principal executive offices of Continental are located at 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, and the telephone number is (713)
834-2950.
7
<PAGE> 9
THE TRANSACTION
Continental sold the Slots to Calair for $151.1 million pursuant to the
terms of a Sale Agreement (as defined herein) between Continental and Calair.
The acquisition of the Slots was funded with a combination of debt and equity,
which included $31.7 million in capital contributions from Calfinco, $10.0
million in capital contributions from CEA and the net proceeds of the Old Notes
Offering. Continental and Calair executed a Slot Lease Agreement (as defined
herein) pursuant to which Continental agreed to lease the Slots back from Calair
for a 10-year period. Pursuant to the terms of a Redemption Option Agreement (as
defined herein) between Calair and CEA, Calair has the right to redeem 50% of
CEA's member interest (i.e., 12% of Calair) on April 17, 2003, the fifth
anniversary of the closing date of the acquisition, and has the right to redeem
all of CEA's member interest (either 12% of Calair if Calair has previously
exercised its fifth anniversary redemption option, or 24% otherwise) upon the
occurrence of certain events described in the Redemption Option Agreement and
the Company Agreement (as defined herein) and on April 17, 2008, the tenth
anniversary of the closing date of the acquisition of the Slots. The acquisition
and lease of the Slots and the execution of the Transaction Documents (as
defined herein) are collectively referred to herein as the "Transaction."
THE EXCHANGE OFFER
Exchange and Registration
Rights Agreement......... Pursuant to an Exchange and Registration Rights
Agreement among the Issuers, Continental and the
Initial Purchasers (the "Registration Rights
Agreement"), each of the Issuers and Continental
have agreed for the benefit of the holders of the
Notes, at no cost to such holders, either (i) to
effect the Exchange Offer to exchange the Old Notes
for the Exchange Notes issued by the Issuers, which
have terms identical in all material respect to the
Old Notes (except that the Exchange Notes do not
contain terms with respect to transfer restrictions
(other than transfer restrictions relating to
certain ERISA matters) or interest rate increases
as described below and the Exchange Notes are
initially available only in book-entry form) or
(ii) (a) if any changes in law or applicable
interpretations thereof by the staff of the
Commission do not permit the Issuers to effect the
Exchange Offer, (b) if for any other reason the
registration statement filed in connection with an
Exchange Offer (the "Exchange Offer Registration
Statement") is not declared effective within 180
days after the closing date of the Old Notes
Offering (the "Closing Date") or if the Exchange
Offer is not consummated within 210 days after the
Closing Date, (c) at the request of a holder (other
than an Initial Purchaser) not eligible to
participate in the Exchange Offer or (d) at the
request of an Initial Purchaser under certain other
circumstances described in the Registration Rights
Agreement, to register the Notes for resale under
the Securities Act through a shelf registration
statement (the "Shelf Registration Statement"). In
the event that neither an Exchange Offer
Registration Statement nor a Shelf Registration
Statement has been declared effective by the
Commission (each, a "Registration Event") on or
prior to the 210th day after the Closing Date, the
interest rate per annum payable in respect of the
Notes shall be increased by 0.50%, from and
including such 210th day to but excluding the
earlier of (i) the date on which a Registration
Event occurs and (ii) the date on which all of the
Notes otherwise become transferable by holders of
the Notes (other than affiliates or former
affiliates of the Issuers or Continental) without
further registration under the Securities Act. If
the Shelf Registration Statement (if filed) ceases
8
<PAGE> 10
to be effective at any time during the period
specified by the Registration Rights Agreement for
more than 60 days, whether or not consecutive,
during any 12-month period, the interest rate per
annum payable in respect of the Notes shall be
increased by 0.50% from the 61st day of the
applicable 12-month period such Shelf Registration
Statement ceases to be effective until such time as
the Shelf Registration Statement again becomes
effective (or, if earlier, the end of such period
specified by the Registration Rights Agreement).
The Registration Statement of which this Prospectus
is a part constitutes the Exchange Offer
Registration Statement. See "The Exchange
Offer -- Terms of the Exchange Offer."
The Exchange Offer......... Exchange Notes are being offered in exchange for an
equal principal amount of Old Notes. As of the date
hereof, $112,300,000 aggregate principal amount of
Old Notes is outstanding. Old Notes may be tendered
only in integral multiples of $1,000.
Resale of Exchange Notes... Based on interpretations of the Securities Act by
the staff of the Commission, as set forth in
no-action letters issued to third parties,
including the Exchange Offer No-Action Letters, the
Issuers and the Company believe that the Exchange
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred
by holders thereof (other than a Participating
Broker-Dealer), without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, and do not intend to engage in, a distribution
of such Exchange Notes and have no arrangement with
any person to participate in a distribution of such
Exchange Notes. By tendering the Old Notes in
exchange for Exchange Notes, each holder will
represent to the Issuers and the Company that: (i)
it is not an affiliate of the Issuers or the
Company (as defined under Rule 405 of the
Securities Act) or a broker-dealer tendering Old
Notes acquired directly from the Issuers or the
Company for its own account; (ii) any Exchange
Notes to be received by it were acquired in the
ordinary course of its business; and (iii) it is
not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities
Act) of such Exchange Notes and has no arrangement
or understanding to participate in a distribution
of the Exchange Notes. If a holder of Old Notes is
an affiliate of the Issuers or the Company or is a
broker-dealer who purchased Old Notes directly from
the Issuers for its own account or is engaged in or
intends to engage in a distribution of the Exchange
Notes or has any arrangement or understanding with
respect to the distribution of the Exchange Notes
to be acquired pursuant to the Exchange Offer, such
holder may not rely on the applicable
interpretations of the staff of the Commission and
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any secondary resale transaction.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of
such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may
9
<PAGE> 11
be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes received
in exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading
activities. The Issuers and the Company have agreed
that, starting on the Expiration Date and ending on
the close of business 180 days after the Expiration
Date, they will make this Prospectus available to
any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of
Distribution." To comply with the securities laws
of certain jurisdictions, it may be necessary to
qualify for sale or register the Exchange Notes
prior to offering or selling such Exchange Notes.
The Issuers and the Company have agreed, pursuant
to the Registration Rights Agreement and subject to
certain specified limitations therein, to register
or qualify the Exchange Notes for offer or sale
under the securities or "blue sky" laws of such
jurisdictions as may be necessary to permit the
holders of Exchange Notes to trade Exchange Notes
without any restrictions or limitations under the
securities laws of the several states of the United
States.
Consequences of Failure to
Exchange Old Notes....... Upon consummation of the Exchange Offer, subject to
certain exceptions, holders of Old Notes who do not
exchange their Old Notes for Exchange Notes in the
Exchange Offer will no longer be entitled to
registration rights and will not be able to offer
or sell their Old Notes, unless such Old Notes are
subsequently registered under the Securities Act
(which, subject to certain limited exceptions, the
Issuers and the Company will have no obligation to
do), except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and
applicable state securities laws. See "Risk
Factors -- Risk Factors Relating to the Issuers,
the Exchange Notes and the Exchange Offer --
Consequences of Failure to Exchange" and "The
Exchange Offer -- Terms of the Exchange Offer."
Expiration Date............ 5:00 p.m., New York City time, on October 6, 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Interest on the Exchange
Notes...................... The Exchange Notes will accrue interest at the
applicable per annum rate set forth on the cover
page of this Prospectus, from the last date on
which interest was paid on the Old Notes
surrendered in exchange therefor or, if no interest
has been paid, from the date of issuance of the Old
Notes, April 17, 1998. Interest on the Exchange
Notes is payable on April 1 and October 1 of each
year to holders of record on the March 15 and
September 15 immediately preceding such interest
payment date.
Conditions to the Exchange
Offer...................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer
is subject to certain customary conditions, which
may be waived by the Issuers and the Company. See
"The Exchange Offer -- Certain Conditions to the
Exchange Offer." Except for the requirements of
applicable federal and state securities laws, there
are no federal or state regulatory requirements to
be complied with or obtained by the Issuers and the
Company in connection with the Exchange Offer.
10
<PAGE> 12
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes to be exchanged and any other
required documentation to the Exchange Agent (as
defined herein) at the address set forth herein or
effect a tender of Old Notes pursuant to the
procedures for book-entry transfer as provided for
herein. See "The Exchange Offer -- Procedures for
Tendering" and "-- Book Entry Transfer."
Guaranteed Delivery
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes and
a properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date. To
withdraw a tender of Old Notes, a written notice
(telegram, telex, facsimile transmission or letter)
of withdrawal must be received by the Exchange
Agent at its address set forth herein under "The
Exchange Offer -- Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes and
Delivery of Exchange
Notes.................... Subject to certain conditions, any and all Old
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date will be accepted for exchange.
The Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer -- Terms
of the Exchange Offer."
Tax Considerations......... The exchange of Exchange Notes for Old Notes should
not be a sale or exchange or otherwise a taxable
event for federal income tax purposes. See "Tax
Considerations."
Exchange Agent............. Bank One, N.A. is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange
Offer.
Fees and Expenses.......... All expenses incident to the consummation of the
Exchange Offer and compliance with the Registration
Rights Agreement will be borne by the Issuers and
the Company. See "The Exchange Offer -- Fees and
Expenses."
Use of Proceeds............ There will be no proceeds payable to the Issuers or
Continental from the issuance of the Exchange Notes
pursuant to the Exchange Offer. The net proceeds
from the Old Notes Offering (approximately $110
million), together with capital contributions from
Calfinco and CEA, were used by Calair to purchase
the Slots from Continental in connection with the
Transaction. Continental used the proceeds from the
sale of the Slots for general corporate purposes.
See "The Private Placement and Use of Proceeds."
11
<PAGE> 13
SUMMARY OF TERMS OF EXCHANGE NOTES
The Exchange Offer relates to the exchange of up to $112,300,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
Exchange Notes. The Exchange Notes will be entitled to the benefits of the same
Indenture that governs the Old Notes and will govern the Exchange Notes. The
form and terms of the Exchange Notes are the same in all material respects as
the form and terms of the Old Notes, except that the Exchange Notes do not
contain terms with respect to transfer restrictions (other than transfer
restrictions relating to certain ERISA matters) or interest rate increases. See
"Description of the Notes."
Issuers.................... Calair L.L.C. and Calair Capital Corporation.
Securities Offered......... $112,300,000 principal amount of 8 1/8% Senior
Notes due 2008.
Maturity Date.............. April 1, 2008.
Interest Payment Dates..... April 1 and October 1.
Sinking Fund............... None.
Mandatory Redemption....... None.
Optional Redemption........ The Notes are redeemable at the option of the
Issuers, in whole or in part, at any time and from
time to time, on not less than 20 nor more than 60
days' prior notice, at a redemption price equal to
the sum of (i) the principal amount thereof on the
redemption date, (ii) accrued and unpaid interest
thereon, if any, to the redemption date (subject to
the right of holders of record on relevant record
dates to receive interest due on an interest
payment date), plus (iii) a Make-Whole Premium, if
any. See "Description of the Notes -- Redemption."
Parent Guarantee........... Continental has fully and unconditionally
guaranteed, pursuant to the Indenture, the due and
punctual payment of the principal of, premium, if
any, and interest on, the Notes when the same shall
become due, whether by acceleration or otherwise.
See "Description of the Notes -- Parent Guarantee."
Ranking.................... The Notes are unsecured, senior obligations of the
Issuers ranking pari passu in right of payment with
all other existing and future unsecured and
unsubordinated obligations of the Issuers. The
Parent Guarantee is an unsecured, senior obligation
of Continental ranking pari passu in right of
payment with all other existing and future
unsecured and unsubordinated obligations of
Continental, and senior in right of payment to all
existing and future obligations of Continental
expressly subordinated in right of payment to the
Parent Guarantee. The Notes and the Parent
Guarantee are effectively subordinated in right of
payment to any secured senior obligations of the
Issuers and Continental, respectively, with respect
to the assets of the Issuers and Continental,
respectively, securing such obligations. The Notes
and the Parent Guarantee are effectively
subordinated to all existing and future liabilities
of the subsidiaries of the Issuers and Continental,
respectively. As of June 30, 1998, Continental had
approximately $2.3 billion (including current
maturities) of long-term debt and capital lease
obligations on a consolidated basis of which
approximately $1.3 billion was secured long-term
debt and capital lease obligations of Continental
and $496 million was long-term debt and capital
lease obligations of Continental's subsidiaries,
and the Issuers had no indebtedness outstanding
other than the Notes. See "Description of the
Notes -- Ranking."
12
<PAGE> 14
Absence of a Public
Market..................... The Exchange Notes generally will be freely
transferable (subject to the restrictions discussed
elsewhere herein) but will be a new issue of
securities for which there is not initially a
market. Accordingly, no assurance is given as to
the development or liquidity of or the trading
market for the Exchange Notes. The Initial
Purchasers have advised the Issuers and Continental
that they currently intend to make a market, if
permitted by applicable laws and regulations, in
the Exchange Notes; however, the Initial Purchasers
are not obligated to do so, and any such market
making may be discontinued at any time without
notice. The Issuers do not intend to apply for a
listing of the Exchange Notes, on any securities
exchange or for their quotation through any
automated dealer quotation system.
RISK FACTORS
For a discussion of risk factors that prospective holders of the Exchange
Notes should consider carefully before tendering their Old Notes in the Exchange
Offer, see "Risk Factors" beginning on page 17.
13
<PAGE> 15
SUMMARY FINANCIAL AND OPERATING DATA OF CONTINENTAL
The following tables summarize certain consolidated financial data and
certain operating data with respect to Continental. The following selected
consolidated financial data for the three and six months ended June 30, 1998 and
1997 are derived from the unaudited consolidated financial statements of
Continental incorporated by reference in this Prospectus. The following selected
consolidated financial data for the years ended December 31, 1997, 1996 and 1995
are derived from the audited consolidated financial statements of Continental
incorporated by reference in this Prospectus. Continental's selected
consolidated financial data should be read in conjunction with, and are
qualified in their entirety by reference to, such consolidated financial
statements, including the notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ----------------- ----------------------------
1998(1) 1997(1) 1998(1) 1997(1) 1997(1) 1996(1) 1995(1)
------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Financial Data -- Operations:
Operating Revenue....................... $2,036 $1,786 $3,890 $3,484 $7,213 $6,360 $5,825
Operating Expenses...................... 1,756 1,555 3,460 3,107 6,497 5,835(2) 5,440(3)
------ ------ ------ ------ ------ ------ ------
Operating Income........................ 280 231 430 377 716 525 385
Nonoperating Expense, net............... (5) (23) (18) (45) (76) (97) (75)(4)
------ ------ ------ ------ ------ ------ ------
Income before Income Taxes, Minority
Interest and Extraordinary Charges.... 275 208 412 332 640 428 310
Net Income.............................. $ 163 $ 128 $ 244 $ 202 $ 385 $ 319 $ 224
====== ====== ====== ====== ====== ====== ======
Earnings per Common Share............... $ 2.68 $ 2.22 $ 4.08 $ 3.50 $ 6.65 $ 5.75 $ 4.07
====== ====== ====== ====== ====== ====== ======
Earnings per Common Share Assuming
Dilution.............................. $ 2.06 $ 1.63 $ 3.12 $ 2.58 $ 4.99 $ 4.17 $ 3.37
====== ====== ====== ====== ====== ====== ======
Ratio of Earnings to Fixed Charges(5)... 2.66 2.48 2.26 2.18 2.07 1.81 1.53
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30, YEAR ENDED DECEMBER 31,
--------------- --------------- ---------------------------
1998 1997 1998 1997 1997 1996 1995
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data (Jet Operations Only)(6):
Revenue passenger miles (millions)(7).............. 13,675 11,922 25,747 22,813 47,906 41,914 40,023
Available seat miles (millions)(8)................. 18,574 16,486 36,097 32,318 67,576 61,515 61,006
Passenger load factor(9)........................... 73.6% 72.3% 71.3% 70.6% 70.9% 68.1% 65.6%
Breakeven passenger load factor(10)................ 59.0% 57.7% 59.8% 58.3% 60.0% 60.7%(13) 60.8%
Passenger revenue per available seat mile
(cents)(11)...................................... 9.39 9.31 9.25 9.30 9.19 8.93 8.20
Operating cost per available seat mile
(cents)(12)...................................... 8.85 8.90 8.99 9.08 9.07 8.77(13) 8.36
Average yield per revenue passenger mile
(cents)(14)...................................... 12.75 12.87 12.98 13.17 12.96 13.10 12.51
Average length of aircraft flight (miles).......... 1,038 944 1,026 935 967 896 836
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------
1998 1997 1996
----------- ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Financial Data -- Balance Sheet:
Assets:
Cash and Cash Equivalents, including restricted cash and
cash equivalents of
$14, $15 and $76, respectively(15)...................... $1,067 $1,025 $1,061
Short-term Investments.................................... 117 -- --
Other Current Assets...................................... 873 703 573
Total Property and Equipment, Net......................... 2,834 2,225 1,596
Routes, Gates and Slots, Net.............................. 1,396 1,425 1,473
Other Assets, Net......................................... 368 452 503
------ ------ ------
Total Assets........................................ $6,655 $5,830 $5,206
====== ====== ======
Liabilities and Stockholders' Equity:
Current Liabilities....................................... $2,500 $2,285 $2,104
Long-Term Debt and Capital Leases......................... 2,089 1,568 1,624
Deferred Credits and Other Long-Term Liabilities.......... 741 819 594
Minority Interest(16)..................................... -- -- 15
Continental-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely
Convertible Subordinated Debentures(17)................. 242 242 242
Redeemable Preferred Stock(18)............................ -- -- 46
Common Stockholders' Equity............................... 1,083 916 581
------ ------ ------
Total Liabilities and Stockholders' Equity.......... $6,655 $5,830 $5,206
====== ====== ======
</TABLE>
(See footnotes on the following page.)
14
<PAGE> 16
- ---------------
(1) No cash dividends were paid on common stock during the periods shown.
(2) Includes a $128 million fleet disposition charge recorded in 1996
associated primarily with the Company's decision to accelerate the
replacement of its DC-9-30, DC-10-10, 727-200, 737-100, and 737-200
aircraft. In connection with its decision to accelerate the replacement of
such aircraft, the Company wrote down its Stage 2 aircraft inventory, that
is not expected to be consumed through operations, to its estimated fair
value and recorded a provision for costs associated with the return of
leased aircraft at the end of their respective lease terms.
(3) Includes a $20 million cash payment in 1995 by the Company in connection
with a 24-month collective bargaining agreement entered into by the Company
and the Independent Association of Continental Pilots.
(4) Includes a pre-tax gain of $108 million ($30 million after tax) on the
series of transactions by which the Company and its subsidiary, Continental
CRS Interests, Inc., transferred certain assets and liabilities relating to
the computerized reservation business of such subsidiary to a newly-formed
limited liability company and the remaining assets and liabilities were
sold.
(5) For purposes of calculating this ratio, earnings consist of earnings before
taxes, minority interest and extraordinary loss plus interest expense (net
of capitalized interest), the portion of rental expense representative of
interest expense and amortization on previously capitalized interest. Fixed
charges consist of interest expense and the portion of rental expense
representative of interest expense. For the periods January 1, 1993 through
April 27, 1993 and April 28, 1993 through December 31, 1993 and for the
year ended December 31, 1994, earnings were not sufficient to cover fixed
charges. Additional earnings of $979 million, $60 million and $667 million,
respectively, would have been required to achieve ratios of earnings to
fixed charges of 1.0.
(6) Includes operating data for CMI, but does not include operating data for
Express' regional jet operations or turboprop operations.
(7) The number of scheduled miles flown by revenue passengers.
(8) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(9) Revenue passenger miles divided by available seat miles.
(10) The percentage of seats that must be occupied by revenue passengers in
order for the airline to break even on an income before income taxes basis,
excluding nonrecurring charges, nonoperating items and other special items.
(11) Passenger revenue divided by available seat miles.
(12) Operating expenses divided by available seat miles.
(13) Excludes a $128 million fleet disposition charge. See Note (2) for
description of the fleet disposition charge.
(14) The average revenue received for each mile a revenue passenger is carried.
(15) Restricted cash and cash equivalents agreements relate primarily to
workers' compensation claims and the terms of certain other agreements.
(16) In July 1997, the Company purchased the minority interest holder's 9%
interest in Air Micronesia, Inc., the parent of CMI.
(17) The sole assets of such Trust are convertible subordinated debentures, with
an aggregate principal amount of $249 million, which bear interest at the
rate of 8 1/2% per annum and mature on December 1, 2020. Upon repayment,
the Continental-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
(18) Continental redeemed for cash all of the outstanding shares of its Series A
12% Cumulative Preferred Stock in 1997.
15
<PAGE> 17
SUMMARY FINANCIAL AND OPERATING DATA OF CALAIR
The following tables summarize certain consolidated financial data with
respect to Calair. The following selected financial data for the three months
ended June 30, 1998 is derived from the unaudited consolidated financial
statements of Calair included elsewhere herein. The March 31, 1998 balance sheet
information is derived from the audited Calair consolidated balance sheet
included elsewhere herein. Calair was formed on March 31, 1998. See "The
Issuers" and "The Transaction" for a description of Calair's operations since
that date. Calair is a limited liability corporation which is not subject to
federal income taxes. Calair is economically dependent upon Continental for its
operations and cash flow.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30,
1998
--------------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT RATIOS)
<S> <C>
Financial Data -- Operations:
Rental Income from Continental Airlines, Inc.............. $ 3,337
Amortization Expense...................................... (1,260)(A)
-------
Operating Income.......................................... 2,077
Interest Expense.......................................... (2,298)
-------
Net Loss.................................................. $ (221)
Ratio of Earnings to Fixed Charges........................ (B)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1998
------------ ----------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Financial Data -- Balance Sheet:
Assets:
Cash...................................................... $ 1 $1
Receivable from Continental Airlines, Inc................. 3,827
Slots, Net................................................ 149,881(A)
Deferred Financing Costs, Net............................. 966
-------- --
Total Assets...................................... $154,675 $1
======== ==
Liabilities and Members' Equity:
Interest Payable.......................................... $ 2,252 $
Other Accrued Liabilities................................. 490
Long-Term Debt............................................ 110,487
Members' Equity........................................... 41,446 1
-------- --
Total Liabilities and Members' Equity............. $154,675 $1
======== ==
</TABLE>
- ---------------
(A) Slots are being amortized over 20 years.
(B) For purposes of calculating this ratio, earnings consist of earnings plus
interest expense. Fixed charges consist of interest expense. For the three
months ended June 30, 1998, earnings were not sufficient to cover fixed
charges. Additional earnings of $221,000 would have been required to achieve
a ratio of earnings to fixed charges of 1.0.
16
<PAGE> 18
RISK FACTORS
Prospective holders of the Exchange Notes should consider carefully the
following factors as well as the other information and data included in this
Prospectus before tendering their Old Notes in the Exchange Offer.
RISK FACTORS RELATING TO CONTINENTAL
Leverage and Liquidity
Continental is more leveraged and has significantly less liquidity than
certain of its competitors, several of whom have substantial available lines of
credit and/or significant unencumbered assets. Accordingly, Continental may be
less able than certain of its competitors to withstand a prolonged recession in
the airline industry and may not have as much flexibility to respond to changing
economic conditions or to exploit new business opportunities.
As of June 30, 1998, Continental had approximately $2.3 billion (including
current maturities) of long-term debt and capital lease obligations and had
approximately $1.3 billion of Continental-obligated mandatorily redeemable
preferred securities of subsidiary trust and common stockholders' equity.
Subsequent to their issuance in April 1998, the Old Notes have been reflected as
indebtedness on Continental's consolidated balance sheet due to Continental's
76% ownership interest in Calair. Common stockholders' equity reflects the
adjustment of Continental's balance sheet and the recording of assets and
liabilities at fair market value as of April 27, 1993 in accordance with the
American Institute of Certified Public Accountants' Statement of Position 90-7--
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7"). As of June 30, 1998, Continental had approximately $1.1 billion in
cash and cash equivalents (excluding restricted cash and cash equivalents of $14
million) and $117 million in short-term investments. Continental has significant
encumbered assets.
For 1997, Continental incurred cash expenditures under operating leases
relating to aircraft of approximately $626 million, compared to $568 million for
1996, and $236 million relating to facilities and other rentals, compared to
$210 million in 1996. Continental expects that its operating lease expenses for
1998 will increase over 1997 amounts. In addition, Continental has capital
requirements relating to compliance with regulations that are discussed below.
See "-- Risk Factors Relating to the Airline Industry -- Regulatory Matters."
As of July 17, 1998, Continental had firm commitments with The Boeing
Company ("Boeing") to take delivery of a total of 132 jet aircraft during the
years 1998 through 2005 with options for an additional 61 aircraft (exercisable
subject to certain conditions). These new aircraft will replace older, less
efficient Stage 2 aircraft and allow for growth of operations. The estimated
aggregate cost of the Company's firm commitments for the Boeing aircraft is
approximately $5.9 billion. As of July 17, 1998, Continental had completed or
had third-party commitments for a total of approximately $982 million in
financing for its future Boeing deliveries, and had commitments or letters of
intent from various sources for backstop financing for approximately one-third
of the anticipated remaining acquisition cost of such Boeing deliveries. The
Company currently plans on financing the new Boeing aircraft with a combination
of enhanced equipment trust certificates, lease equity and other third-party
financing, subject to availability and market conditions. However, further
financing will be needed to satisfy the Company's capital commitments for other
aircraft and aircraft-related expenditures such as engines, spare parts,
simulators and related items. There can be no assurance that sufficient
financing will be available for all aircraft and other capital expenditures not
covered by firm financing commitments. Deliveries of new Boeing aircraft are
expected to increase aircraft rental, depreciation and interest costs while
generating cost savings in the areas of maintenance, fuel and pilot training.
As of July 17, 1998, Express had firm commitments for 22 Embraer ERJ-145
("ERJ-145") 50-seat regional jets and a letter of intent to purchase 25 ERJ-135
37-seat regional jets, with options for an additional 150 ERJ-145 and 50 ERJ-135
aircraft exercisable through 2008. Neither Express nor Continental will have any
obligation to take any such aircraft that are not financed by a third party and
leased to the Company. The Company expects to account for all of these aircraft
as operating leases.
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On August 11, 1998, the Company announced that CMI plans to accelerate the
retirement of its four Boeing 747 aircraft in April 1999 and its remaining
thirteen Boeing 727 aircraft by December 2000. The 747s will be replaced by
DC-10-30s and the 727s will be replaced with a reduced number of Boeing 737s. In
addition, Express will accelerate the retirement of certain turboprop aircraft
by December 2000, including its fleet of 32 EMB-120 aircraft, as regional jets
are brought in to replace turboprops. CMI's fleet retirement decisions will
result in a nonrecurring charge of $65 million ($41 million after tax) and
Express' fleet retirement decisions will result in a nonrecurring charge of $57
million ($36 million after tax). The combined charge will be $122 million ($77
million after tax) and was recorded in the third quarter of 1998.
Continental's History of Operating Losses
Although Continental recorded net income of $244 million in the first half
of 1998, $385 million in 1997, $319 million in 1996 and $224 million in 1995, it
had experienced significant operating losses in the previous eight years. In the
long term, Continental's viability depends on its ability to sustain profitable
results of operations.
Aircraft Fuel
Since fuel costs constitute a significant portion of Continental's
operating costs (approximately 10.8% for the six months ended June 30, 1998 and
13.6% for the year ended December 31, 1997), significant changes in fuel costs
would materially affect Continental's operating results. Fuel prices continue to
be susceptible to international events, and Continental cannot predict near or
longer-term fuel prices. Historically, the Company has entered into petroleum
call options to provide some short-term protection against a sharp increase in
jet fuel prices. In light of declining fuel prices and the high cost of call
options with strike prices at spreads above current prices which have typically
been purchased by the Company, the Company's petroleum call option contracts
currently provide protection only against significantly higher fuel prices with
respect to approximately three months of the Company's fuel needs, in the event
of a fuel supply shortage resulting from a disruption of oil imports or
otherwise.
Labor Matters
In June 1998, a five-year collective bargaining agreement, retroactive to
October 1997, was ratified by Continental's pilots, who are represented by the
Independent Association of Continental Pilots ("IACP"). The agreement becomes
amendable in October 2002. The Company began accruing for the increased costs of
the new agreement in the fourth quarter of 1997. The Company estimates that the
increased costs will be approximately $113 million for 1998. Also in June 1998,
the pilots at Express, who are also represented by the IACP, rejected a new
five-year agreement which had been submitted to them for ratification. The
parties will resume bargaining with the assistance of the National Mediation
Board in the third quarter of 1998. While it is not possible to predict the
outcome of those negotiations, the Company does not believe they will have a
material financial impact on the Company. The Company's dispatchers, represented
by the Transport Workers' Union, ratified a new five-year collective bargaining
agreement in June 1998. The agreement becomes amendable in October 2003.
Collective bargaining negotiations, which began in the fall of 1997, are ongoing
with the International Brotherhood of Teamsters for an initial collective
bargaining agreement covering Continental's mechanics and related employees.
While it is not possible to predict the outcome of those negotiations, the
Company does not believe they will have a material financial impact on the
Company.
In September 1997, Continental announced that it intends to bring all
employees to industry standard wages (the average of the top ten U.S. air
carriers as ranked by the DOT, excluding Continental) within 36 months. The
announcement further stated that wage increases will be phased in over the
36-month period as revenue, interest rates and rental rates reach industry
standards. Continental estimates that the increased wages will aggregate
approximately $500 million over the 36-month period.
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Certain Tax Matters
At December 31, 1997, Continental had estimated net operating loss
carryforwards ("NOLs") of $1.7 billion for federal income tax purposes that will
expire through 2009 and federal investment tax credit carryforwards of $45
million that will expire through 2001. As a result of the change in ownership of
Continental on April 27, 1993, the ultimate utilization of Continental's NOLs
and investment tax credits will be limited. Reflecting this possible limitation,
Continental has recorded a valuation allowance of $617 million at December 31,
1997.
Continental had, as of December 31, 1997, deferred tax assets aggregating
$1.1 billion, including $631 million of NOLs. Realization of a substantial
portion of the Company's remaining NOLs required the completion by April 27,
1998 of transactions resulting in recognition of built-in gains for federal
income tax purposes. The Company consummated several such transactions resulting
in the elimination of reorganization value in excess of amounts allocable to
identifiable assets. To the extent the Company were to determine in the future
that additional NOLs of the Company's predecessor could be recognized in the
Company's consolidated financial statements, such benefit would reduce routes,
gates and slots.
As a result of NOLs, the Company will not pay United States federal income
taxes (other than alternative minimum tax) until it has recorded approximately
an additional $515 million of taxable income following December 31, 1997.
Section 382 of the Internal Revenue Code ("Section 382") imposes limitations on
a corporation's ability to utilize NOLs if it experiences an "ownership change."
In general terms, an ownership change may result from transactions increasing
the ownership of certain stockholders in the stock of a corporation by more than
50 percentage points over a three-year period. Based on information currently
available, the Company does not believe that the Air Partners Transaction (as
defined herein) will result in an ownership change for purposes of Section 382.
Continental Micronesia
Because the majority of CMI's traffic originates in Japan, its results of
operations are substantially affected by the Japanese economy and changes in the
value of the yen as compared to the dollar. Appreciation of the yen against the
dollar during 1994 and 1995 increased CMI's profitability, while the decline of
the yen against the dollar, that began in 1996 and has continued through the
first six months of 1998, has reduced CMI's profitability. As a result of
increased fuel costs in 1996 and 1997 and the continued weakness of the yen
against the dollar and a weak Japanese economy, CMI's operating earnings have
declined significantly since 1995 and are not expected to improve materially
absent a significant improvement in the Japanese economy and the yen exchange
rate.
To reduce the potential negative impact on CMI's dollar earnings, CMI, from
time to time, purchases average rate options as a hedge against a portion of its
expected net yen cash flow position. Such options historically have not had a
material effect on Continental's results of operations or financial condition.
Any significant and sustained decrease in traffic or yields (including due to
the value of the yen) to and from Japan could materially adversely affect
Continental's consolidated profitability.
Principal Stockholder
As of June 30, 1998, Air Partners, L.P. ("Air Partners") held approximately
14% of the common equity interest and 51% of the general voting power of the
Company, having exercised its remaining warrants in April 1998. Various
provisions in the Company's Certificate of Incorporation and Bylaws currently
provide Air Partners with the right to elect one-third of the directors in
certain circumstances; these provisions could have the effect of delaying,
deferring or preventing a change in the control of the Company. On January 26,
1998, the Company announced that Air Partners had entered into an agreement to
dispose of its interest in the Company to an affiliate of Northwest.
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Risks Regarding Continental/Northwest Alliance
On January 26, 1998, the Company and Northwest announced a long-term global
alliance (the "Northwest Alliance") involving schedule coordination, frequent
flyer reciprocity, executive lounge access, airport facility coordination,
code-sharing, the formation of a joint venture among the two carriers and KLM
Royal Dutch Airlines ("KLM") with respect to their respective trans-Atlantic
services, cooperation regarding other alliance partners of the two carriers and
regional alliance development, certain coordinated sales programs, preferred
reservations displays and other activities.
Successful implementation of the alliance and the achievement and timing of
the anticipated synergies by the Company are subject to certain risks and
uncertainties, some of which are beyond the control of the Company, including
(a) competitive pressures, including developments with respect to existing and
potential future competitive alliances; (b) customer perception of and
acceptance of the alliance, including product differences and benefits provided;
(c) whether the Northwest pilots approve those aspects of the alliance requiring
their approval, and the timing thereof; (d) potential adverse developments with
respect to regional economic performance; (e) costs or difficulties in
implementing the alliance being greater than expected, including those caused by
the Company's or Northwest's workgroups; (f) contractual impediments to the
implementation by the Company of certain aspects of the alliance; and (g)
non-approval or delay by regulatory authorities or possible adverse regulatory
decisions or changes. There can be no assurance that the alliance will be fully
and timely implemented or continued, or that the anticipated synergies will not
be delayed or will be achieved. Recently, United Airlines and Delta Air Lines,
and American Airlines and US Airways, respectively, announced plans to form
alliances, subject in certain cases to approval of such companies' respective
pilots' unions. If either or both planned alliances are implemented, the
anticipated benefit from the Company's alliance with Northwest would be somewhat
diminished. The Company cannot currently estimate the impact of any such
alliances on its business or on the anticipated benefits from the Northwest
Alliance.
At August 31, 1998, the alliance between Continental and Northwest
continues to be reviewed by the Department of Justice and the Department of
Transportation, and the parties have provided additional information to both
reviewing agencies. Continental cannot predict the timing or outcome of these
governmental processes.
Corporate Governance Agreement
The Company announced on January 26, 1998 that Air Partners, the holder of
approximately 14% of the Company's equity and approximately 51% of its voting
power (after giving effect to the exercise of warrants), had entered into an
agreement to dispose of its interest in the Company to an affiliate of Northwest
(the "Air Partners Transaction"). In connection with the Air Partners
Transaction, the Company has entered into a corporate governance agreement with
certain affiliates of Northwest, designed to assure the independence of the
Company's board of directors and management during the six-year period of the
governance agreement. During the term of the governance agreement, the
securities of the Company beneficially owned by Northwest and its affiliates
will be deposited into a voting trust and generally voted as recommended by the
Company's board of directors (a majority of whom must be independent directors
as defined in the agreement) or in the same proportion as the votes cast by
other holders of the Company's voting securities. However, pursuant to the
governance agreement, those shares may be voted as directed by the Northwest
affiliate in connection with certain matters, including with respect to mergers
and certain other change in control matters and the issuance of capital stock
representing in excess of 20% of the voting power of the Company prior to
issuance requiring a stockholder vote. In addition, in connection with the
election of directors, those shares shall be voted for the election of the
independent directors; provided that with respect to elections of directors in
respect of which any person other than the Company is soliciting proxies, the
shares may be voted, at the election of Northwest's affiliate, either as
recommended by the Company's board of directors or in the same proportion as the
votes cast by other holders of the Company's voting securities. As a result of
the provisions of the corporate governance agreement, the ability of the Company
to engage in a change in control transaction other than with Northwest or an
affiliate thereof, or to issue significant amounts of capital stock under
certain circumstances, is limited.
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Shareholder Litigation
Following the announcement of the Northwest Alliance, the Air Partners
Transaction and the related corporate governance agreement between the Company
and certain affiliates of Northwest (collectively, the "Northwest Transaction"),
to the Company's knowledge as of August 31, 1998, six separate lawsuits were
filed against the Company and its Directors and certain other parties (the
"Shareholder Litigation"). The complaints in the Shareholder Litigation, which
were filed in the Court of Chancery of the State of Delaware in and for New
Castle County and seek class certification, and which have been consolidated
under the caption In re Continental Airlines, Inc. Shareholder Litigation,
generally allege that the Company's Directors improperly accepted the Northwest
Transaction in violation of their fiduciary duties owed to the public
shareholders of the Company. They further allege that Delta Air Lines, Inc.
submitted a proposal to purchase the Company which, in the plaintiffs' opinion,
was superior to the Northwest Transaction. The Shareholder Litigation seeks,
inter alia, to enjoin the Northwest Transaction and the award of unspecified
damages to the plaintiffs.
While there can be no assurance that the Shareholder Litigation will not
result in a delay in the implementation of any aspect of the Northwest
Transaction, or the enjoining of the Northwest Transaction, the Company believes
the Shareholder Litigation to be without merit and intends to defend it
vigorously.
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
Industry Conditions and Competition
The airline industry is highly competitive and susceptible to price
discounting. Continental has in the past both responded to discounting actions
taken by other carriers and initiated significant discounting actions itself.
Continental's competitors include carriers with substantially greater financial
resources (and in certain cases, lower cost structures), as well as smaller
carriers with lower cost structures. Airline profit levels are highly sensitive
to, and during recent years have been severely impacted by, changes in fuel
costs, fare levels (or "average yield") and passenger demand. Passenger demand
and yields have been affected by, among other things, the general state of the
economy, international events and actions taken by carriers with respect to
fares. From 1990 to 1993, these factors contributed to the domestic airline
industry's incurring unprecedented losses. Although fare levels have increased
subsequently, significant industry-wide discounts could be reimplemented at any
time, and the introduction of broadly available, deeply discounted fares by a
major United States airline would likely result in lower yields for the entire
industry and could have a material adverse effect on the Company's operating
results.
The airline industry has consolidated in past years as a result of mergers
and liquidations and may further consolidate in the future. Among other effects,
such consolidation has allowed certain of Continental's major competitors to
expand (in particular) their international operations and increase their market
strength. Furthermore, the emergence in recent years of several new carriers,
typically with low cost structures, has further increased the competitive
pressures on the major United States airlines. In many cases, the new entrants
have initiated or triggered price discounting. Aircraft, skilled labor and gates
at most airports continue to be readily available to start-up carriers.
Competition with new carriers or other low cost competitors on Continental's
routes could negatively impact Continental's operating results.
Regulatory Matters
In the last several years, the United States Federal Aviation
Administration (the "FAA") has issued a number of maintenance directives and
other regulations relating to, among other things, retirement of older aircraft,
security measures, collision avoidance systems, airborne windshear avoidance
systems, noise abatement, commuter aircraft safety and increased inspections and
maintenance procedures to be conducted on older aircraft. Continental expects to
continue incurring expenses for the purpose of complying with the FAA's noise,
aging aircraft and other regulations. In addition, several airports have
recently sought to increase substantially the rates charged to airlines, and the
ability of airlines to contest such increases has been restricted by federal
legislation, the Department of Transportation ("DOT") regulations and judicial
decisions.
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Management believes that Continental benefitted significantly from the
expiration of the aviation trust fund tax (the "ticket tax") on December 31,
1995. The ticket tax was reinstated on August 27, 1996, expired again on
December 31, 1996 and was reinstated again on March 7, 1997. In July 1997,
Congress passed tax legislation reimposing and significantly modifying the
ticket tax. The legislation includes the imposition of new excise tax and
segment fee tax formulas to be phased in over a multi-year period, an increase
in the international departure tax and the imposition of a new arrivals tax, and
the extension of the ticket tax to cover items such as the sale of frequent
flyer miles. Management believes that the ticket tax has a negative impact on
the Company, although neither the amount of such negative impact directly
resulting from the reimposition of the ticket tax, nor the benefit previously
realized by its expiration, can be precisely determined.
Additional laws and regulations have been proposed from time to time that
could significantly increase the cost of airline operations by imposing
additional requirements or restrictions on operations. Laws and regulations have
also been considered that would prohibit or restrict the ownership and/or
transfer of airline routes or takeoff and landing slots. Also, the availability
of international routes to United States carriers is regulated by treaties and
related agreements between the United States and foreign governments that are
amendable. Continental cannot predict what laws, regulations and amendments may
be adopted or their impact, and there can be no assurance that laws, regulations
and amendments currently proposed or enacted in the future will not adversely
affect Continental.
Seasonal Nature of Airline Business
Due to the greater demand for air travel during the summer months, revenue
in the airline industry in the third quarter of the year is generally
significantly greater than revenue in the first quarter of the year and
moderately greater than revenue in the second and fourth quarters of the year
for the majority of air carriers. Continental's results of operations generally
reflect this seasonality, but have also been impacted by numerous other factors
that are not necessarily seasonal, including the extent and nature of
competition from other airlines, fare wars, excise and similar taxes, changing
levels of operations, fuel prices, foreign currency exchange rates and general
economic conditions.
Year 2000 and Euro
The Company uses a significant number of computer software programs and
embedded operating systems that are essential to its operations. As a result,
the Company implemented a Year 2000 project in early 1997 to ensure that the
Company's computer systems will function properly in the year 2000 and
thereafter. The Company anticipates completing its Year 2000 project in early
1999 and believes that, with modifications to its existing software and systems
and/or conversions to new software, the Year 2000 issue will not pose
significant operational problems for its computer systems.
The Company has also initiated communications with its significant
suppliers and vendors with which its systems interface and exchange data or upon
which its business depends. The Company is coordinating efforts with these
parties to minimize the extent to which its business will be vulnerable to their
failure to remediate their own Year 2000 issues. The Company's business is also
dependent upon certain governmental organizations or entities such as the
Federal Aviation Administration ("FAA") that provide essential aviation industry
infrastructure. There can be no assurance that the systems of such third parties
on which the Company's business relies (including those of the FAA) will be
modified on a timely basis. The Company's Year 2000 project involves the review
of a number of internal and third-party components. Each component is subjected
to the project's five phases, which consist of inventory of systems, evaluation
and analysis, modification implementation, user testing and integration
compliance. The components are currently in various stages of completion;
however, the Company's entire Year 2000 project is anticipated to be completed
by early 1999. This should allow the Company sufficient time for any additional
analysis, modification and testing which may be required. The Company's
business, financial condition or results of operations could be materially
adversely affected by the failure of its systems or those operated by other
parties to operate properly beyond 1999. Although the Company currently has
day-to-day operational contingency plans, management is in the process of
updating these plans for possible Year 2000-specific operational requirements.
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The total cost (excluding internal payroll costs) of the Company's Year
2000 project is currently expected to approximate $12 million to $15 million and
will be funded through cash from operations. As of June 30, 1998, the Company
had incurred and expensed approximately $7 million relating to its Year 2000
project. The cost of the Company's Year 2000 project is limited by the
substantial outsourcing of its systems and the significant implementation of new
systems following its emergence from bankruptcy in 1993. The costs of the
Company's Year 2000 project and the date on which the Company believes it will
be completed are based on management's best estimates and include assumptions
regarding third-party modification plans. However, in particular due to the
potential impact of third-party modification plans, there can be no assurance
that these estimates will be achieved and actual results could differ materially
from those anticipated.
Effective January 1, 1999, eleven of the fifteen countries comprising the
European Union will begin a transition to a single monetary unit, the "euro",
which is scheduled to be completed by July 1, 2002. The Company has developed a
plan designed to allow Continental to operate effectively in the euro.
Management does not anticipate that the implementation of this single currency
plan will have a material effect on the Company's operations or financial
condition.
RISK FACTORS RELATING TO THE ISSUERS, THE EXCHANGE NOTES AND THE EXCHANGE OFFER
No Operating History; Limited Purpose; Limited Income
At the time of the Old Notes Offering, the Issuers were newly formed
special purpose entities with no prior operating history. The Company Agreement
limits the business of Calair to leasing and/or selling the Slots, managing,
protecting and conserving the Slots and other Calair property, performing and
complying with the Transaction Documents, owning the stock of Calair Capital and
activities related or incidental thereto or otherwise permitted under the
Company Agreement. Calair Capital was formed by Calair specifically to effect
the Old Notes Offering, acting as agent for Calair, and does not have any
material assets or conduct operations of its own. The sole sources of revenue
for Calair are rental payments received by Calair from Continental under the
Slot Lease Agreement and proceeds from the sale of any of the Slots that may be
sold in the future. See "The Transaction." Consequently, Calair's ability to
make payments of interest on the Notes in the amounts and on the dates
contemplated herein depends upon the receipt by Calair of payments under the
Slot Lease Agreement. Regular rental payments under the Slot Lease Agreement
will not be sufficient to enable Calair to repay the principal of the Notes upon
maturity. At maturity of the Notes, it is anticipated that Calfinco will make a
voluntary capital contribution to Calair to fund repayment of the principal of
the Notes. However, Calfinco is under no obligation under the Company Agreement
to do so. If Calfinco does not make such a capital contribution in an amount
equal to the principal balance of the Notes prior to maturity and Calair is not
otherwise able to pay the Notes, Continental will be obligated to make payment
under the Parent Guarantee with respect to the Notes. Therefore, purchasers of
the Notes should rely on Continental's payments under the Slot Lease Agreement
and the Parent Guarantee for payments of interest, principal and other amounts
due under the Notes.
Absence of Certain Covenants
The terms of the Notes and the Parent Guarantee do not limit the Issuers'
or Continental's or any of their respective subsidiaries' ability to incur
additional indebtedness, to mortgage or pledge any of their respective assets,
to sell assets or to pay dividends or make other distributions on, or redeem or
repurchase, capital stock. In addition, the Notes do not contain provisions that
would give holders of the Notes the right to require the Issuers to repurchase
their Notes in the event of a change of control of the Issuers or Continental or
a decline in the credit rating of Calair's, Calair Capital's or Continental's
debt securities resulting from a takeover, recapitalization or similar
restructuring or any other reason.
Absence of Public Market
The Exchange Notes are new securities for which there presently is no
market. Although the Initial Purchasers have advised the Issuers and Continental
that they currently intend to make a market, if permitted by applicable laws and
regulations, in the Exchange Notes, they are not obligated to do so and any such
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market making may be discontinued at any time without notice in the sole
discretion of the Initial Purchasers. In addition, such market making activity
may be limited during the pendency of the Exchange Offer or the effectiveness of
any shelf registration statement in lieu thereof. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. The Issuers do not intend to apply for a listing of the Exchange Notes on
any securities exchange or for their quotation through any automated dealer
quotation system.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfers and exchanges of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuers and the Company do not currently
anticipate that they will register the Old Notes under the Securities Act
subsequent to the Exchange Offer. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected. See "Transfer Restrictions
on Old Notes."
THE ISSUERS
Calair, a Delaware limited liability company, was formed on March 31, 1998,
for the purpose of acquiring the Slots from Continental, pursuant to the
Transaction. Upon the closing of the Transaction, the members in Calair
consisted of Calfinco, a wholly owned subsidiary of Continental, and CEA, an
affiliate of Chase Securities Inc., one of the Initial Purchasers. Upon the
closing of the Transaction, Calfinco and CEA owned member interests in Calair of
76% and 24%, respectively. Pursuant to the Transaction, Calair acquired the
Slots from Continental on April 17, 1998 and Continental leased the Slots back
from Calair for a 10-year period. Calair Capital, a Delaware corporation and a
wholly owned subsidiary of Calair, was formed specifically to effect the Old
Notes Offering acting as agent for Calair and does not have any material assets
or conduct operations of its own. Accordingly, holders of the Notes should look
to Calair, rather than Calair Capital, as the principal obligor on the Notes.
The Notes are joint and several obligations of Calair and Calair Capital,
although Calair received all the net proceeds of the Old Notes Offering, and are
fully and unconditionally guaranteed by Continental. See "The Transaction."
Calair Capital is a shell company with no operations. Consequently, financial
statements of Calair Capital are not included in this Prospectus because they
are not meaningful. The consolidated financial statements of Calair reflect the
operations of the Issuers.
CONTINENTAL
Continental is a major United States air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth largest United
States airline (as measured by revenue passenger miles for the first seven
months of 1998) and, together with its wholly owned subsidiaries, Express and
CMI, each a Delaware corporation, serves 206 airports worldwide as of August 1,
1998.
RECENT DEVELOPMENTS
On August 11, 1998, the Company announced that CMI plans to accelerate the
retirement of its four Boeing 747 aircraft in April 1999 and its remaining
thirteen Boeing 727 aircraft by December 2000. The 747s will be replaced by
DC-10-30s and the 727s will be replaced with a reduced number of Boeing 737s. In
addition, Express will accelerate the retirement of certain turboprop aircraft
by December 2000, including its fleet of 32 EMB-120 aircraft, as regional jets
are brought in to replace turboprops. CMI's fleet retirement decisions will
result in a nonrecurring charge of $65 million ($41 million after tax) and
Express' fleet
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retirement decisions will result in a nonrecurring charge of $57 million ($36
million after tax). The combined charge was $122 million ($77 million after tax)
and was recorded in the third quarter of 1998.
THE TRANSACTION
Pursuant to the Transaction, Continental sold the Slots to Calair for
$151.1 million pursuant to the terms of a Sale Agreement between Continental and
Calair. The Transaction was funded with a combination of debt and equity, which
included $31.7 million in capital contributions from Calfinco, $10.0 million in
capital contributions from CEA and the net proceeds of the Old Notes Offering.
Continental and Calair executed a Slot Lease Agreement pursuant to which
Continental leased the Slots back from Calair for a 10-year period. Pursuant to
the terms of a Redemption Option Agreement between Calair and CEA, Calair has
the right to redeem 50% of CEA's member interest (i.e., 12% of Calair) on April
17, 2003, the fifth anniversary of the closing date of the Transaction, and has
the right to redeem all of CEA's member interest (either 12% of Calair if Calair
has previously exercised its fifth anniversary redemption option, or 24%
otherwise) upon the occurrence of certain events described in the Redemption
Option Agreement and the Company Agreement and on April 17, 2008, the tenth
anniversary of the closing date of the Transaction.
Set forth below is a summary of certain provisions of each of the Company
Agreement, the Sale Agreement, the Slot Lease Agreement and the Redemption
Option Agreement, which are collectively referred to herein as the "Transaction
Documents." The summary herein of certain provisions of each of the Transaction
Documents does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of each such agreement. The
Issuers will provide a copy of each such agreement to holders of Exchange Notes
upon request.
THE COMPANY AGREEMENT
Pursuant to an amended and restated limited liability company agreement
entered into between Calfinco and CEA (the "Company Agreement"), Calfinco is the
initial managing member of Calair and owns a 76% member interest, and CEA owns a
24% member interest. Calair is managed by the managing member, who has full
power and authority to manage the business and affairs of Calair as set forth in
the Company Agreement and performs all acts necessary and desirable to the
objects and purposes of Calair. The exercise of the foregoing duties are subject
only to (i) the rights of CEA to approve certain extraordinary decisions
specified in the Company Agreement ("Extraordinary Decisions") and (ii) the
rights of any liquidator of Calair in the event of a dissolution, winding up or
liquidation of Calair, which liquidator under certain circumstances may not be
Calfinco. Such Extraordinary Decisions include, among other things and subject
to certain exceptions, Calair's ability to incur indebtedness (other than the
Notes and payables associated with Calair expenses), to engage in certain
extraordinary transactions with respect to the Slots, to cause or permit the
incurrence of liens against Calair's assets, to cause Calair's dissolution, to
cause Calair to merge or consolidate with another entity, to enter into
transactions with affiliates, or to institute voluntary bankruptcy proceedings
in respect of Calair. However, if CEA does not approve any of the foregoing
actions that Calfinco desires to take, except in certain circumstances, at
Calfinco's direction, Calair has the right to redeem all of CEA's member
interest, as provided in the Redemption Option Agreement. See "-- The Redemption
Option Agreement" below. Except as provided in the Company Agreement, CEA shall
have no right, power or authority to take part in the management or control of
Calair.
CEA agreed not to transfer its member interest to any other air carrier or
any affiliate thereof. CEA also agreed not to transfer its member interest to
any other entity, except to affiliates of CEA, without granting Calfinco a right
of first refusal with respect to such transfer. Upon the willful mismanagement
of Calair by Calfinco or upon the occurrence of certain events such as the
default by Continental under the Slot Lease Agreement, the default by Calair or
Continental under the Indenture (as defined herein) or related documents and the
exercise of any remedy thereunder, including acceleration of the Notes, by the
Trustee (as defined herein), a default or misrepresentation by Calair under the
Transaction Documents, the Indenture or related documents, the bankruptcy of
Continental or Calfinco, or certain other events, CEA has the right after notice
to Calfinco, and provided Calair does not exercise its right to redeem all of
CEA's member interest within
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<PAGE> 27
specified periods after such notice (see "-- The Redemption Option Agreement"
below) to remove Calfinco as the managing member and to be substituted as the
managing member of Calair.
Calfinco has the right (but is not obligated) to make additional capital
contributions to Calair to enable Calair to exercise Calair's redemption rights
under the Redemption Option Agreement. Calair's cash available for distribution
net of amounts necessary to pay interest on the Notes, certain amounts to be
held in respect of redemptions of CEA's member interest, and expenses, will
generally be distributed, and its taxable income, loss and other tax items will
generally be allocated, in accordance with the members' ownership percentages.
Calair may loan cash, otherwise available for distribution to the members of
Calair, to Continental without CEA's consent under certain circumstances. If
Calair has not redeemed all of CEA's member interest on or before April 17,
2008, the tenth anniversary of the closing date of the Transaction, CEA has the
right to require the liquidation of Calair.
THE SALE AGREEMENT
Under the Sale Agreement entered into between Calair and Continental (the
"Sale Agreement"), Continental sold to Calair substantially all of Continental's
current takeoff and landing rights at Chicago O'Hare (29 slots), Washington
National (41 slots) and LaGuardia (32 slots) for $151.1 million. Takeoff and
landing rights of the type sold to Calair are defined in the Federal Aviation
Regulations, Title 14, Code of Federal Regulations, Part 93, Subpart S. See
"-- Information and Industry Regulation Relating to the Slots." Continental
transferred the Slots by a Deed of Conveyance and warranted title to the Slots
but will otherwise transfer the Slots on an "as is, where is' basis.
THE SLOT LEASE AGREEMENT
Under the Slot Lease Agreement entered into between Calair and Continental
(the "Slot Lease Agreement"), Continental leased the Slots from Calair for a
term of 10 years at a rate equal to approximately $16.3 million per annum,
payable in arrears on April 1 and October 1 of each year of such term, subject
to adjustment as described below. Continental agreed to keep the Slots free of
encumbrances, other than encumbrances arising pursuant to subleases, licenses
and Slot trades permitted by the Slot Lease Agreement.
The leased Slots are used by Continental and by other entities to which
Continental may sublease or license one or more leased Slots or with which
Continental may engage in a temporary exchange of Slots, in each case consistent
with industry practice. Use of the leased Slots is at the sole cost, risk and
expense of Continental. Continental agreed to indemnify Calair against certain
claims and taxes relating to the use of the Slots. If (i) Continental fails to
pay rent within 10 days after written notice thereof, (ii) Continental makes a
general assignment for the benefit of creditors or consents to the appointment
of a trustee or receiver for itself or for a substantial part of its property,
or a trustee or receiver is appointed for Continental or for any of the leased
Slots, or for substantially all of Continental's property without Continental's
consent and such appointment is not dismissed within 60 days or bankruptcy,
reorganization or insolvency proceedings are instituted by or against
Continental, and if instituted against Continental, are not dismissed, stayed or
withdrawn for 60 days, or (iii) Continental fails to comply with any covenant of
the Slot Lease Agreement (other than to pay rent), and such failure continues
for 30 days after notice thereof, Calair has the right to terminate the Slot
Lease Agreement. Upon such termination, Calair has the right to recover all rent
accrued to date, together with the discounted present value of the remaining
rent to be paid under the Slot Lease Agreement, or alternatively, to recover the
remainder of the rent to be paid over the remaining term of the Slot Lease
Agreement as it becomes due, less any net amount received from reletting the
Slots.
Under certain circumstances, Continental has the right to cause Calair to
sell Slots to persons who are not affiliates of Calair or Continental or to
request that Calair exchange Slots with persons who are not affiliates of
Continental. If any of the Slots are sold, the consideration payable for such
purchase shall be a combination of immediately available funds and Slots (in a
tax-free exchange pursuant to Section 1031 of the Internal Revenue Code) having
a value equal to the fair market value of the purchased Slots, as determined by
an appraisal prepared by an appraiser acceptable to both members of Calair
within 30 days prior to the purchase.
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<PAGE> 28
Swapped Slots and substitute Slots are included as Slots subject to the Slot
Lease Agreement immediately upon the swap or exchange.
THE REDEMPTION OPTION AGREEMENT
Under the Redemption Option Agreement entered into between Calair and CEA
(the "Redemption Option Agreement"), CEA granted Calair the right to redeem all
or, in the case of clause (i) below, a portion of the member interest of CEA
(and its successors and assigns) under the following circumstances:
(i) 50% of CEA's member interest (i.e., 12% of Calair) on April 17,
2003, the fifth anniversary of the closing date of the Transaction;
(ii) all of CEA's remaining member interest (i.e., 12% of Calair if
Calair has exercised its option described in clause (i) above or 24%
otherwise) on April 17, 2008, the tenth anniversary of the closing date of
the Transaction;
(iii) all of CEA's member interest, within certain time periods after
(a) CEA refuses to approve an Extraordinary Decision proposed by Calfinco
under the Company Agreement; provided such redemption right shall not be
exercisable until after the second anniversary of the closing of the
Transaction, (b) Calfinco has received notice that, as a result of the
occurrence of one of the events entitling CEA to do so under the Company
Agreement, CEA has elected to remove Calfinco as managing member, (c)
Calfinco has received notice that CEA has, pursuant to the Company
Agreement, elected to terminate and liquidate the Company, (d) foreclosure
of any security interest granted by CEA on its member interest, or (e)
Calair becomes aware that CEA has transferred CEA's member interest in a
manner not permitted by the Company Agreement. If Calair has not redeemed
all of CEA's member interest on or before the tenth anniversary of the
closing date of the transaction, CEA will have the right to require the
liquidation of Calair.
The purchase price for any of the foregoing redemption options depends upon
the date of exercise, the appraised fair market value of the Slots, and the
particular circumstances giving rise to the redemption option. However, in all
events it is anticipated that if Calair exercises such option, all the available
cash of Calair will not be sufficient to pay the redemption purchase price.
Accordingly, Calair will be dependent upon the voluntary capital contributions
of Calfinco to fund any shortfall. Calfinco is not obligated to make any such
voluntary capital contributions to Calair.
INFORMATION AND INDUSTRY REGULATION RELATING TO THE SLOTS
In an attempt to alleviate airport congestion, the FAA promulgated special
air traffic rules in 1968 that applied to five high density airports, John F.
Kennedy International Airport ("JFK"), LaGuardia, Newark International, Chicago
O'Hare and Washington National. The high density rule was designed to limit the
number of Instrument Flight Rule ("IFR") operations (i.e., takeoffs and
landings) permitted per hour and to require that each operation be supported by
a specific authorization called a "slot." A slot is generally defined as a
single arrival or departure. It takes two slots to effect a transit or
turnaround flight at any airport. Under the regulatory regime promulgated in
1968, slots for operations at a high density airport were allocated by a
committee of air carriers operating at the airport. Although the "high density
rule" was initially established as a temporary measure for the years 1968
through 1972, the FAA retained it indefinitely at Chicago O'Hare, JFK, LaGuardia
and Washington National in order to continue to alleviate congestion.
In December 1985, the FAA adopted a buy-sell rule, permitting holders of
certain slots to transfer them for any consideration. The buy-sell regulations,
which remain in effect (as amended from time to time) provide that, except for
international and essential air service slots, permanent slots may be purchased,
sold, traded, or leased, in any number, at any high density airport, subject to
confirmation by the FAA.
Pursuant to the 1985 regulations, the FAA in 1986 distributed slots to
carriers in a lottery. Carriers awarded slots in the lottery were thereafter
free to buy, sell, trade or lease these slots, subject to FAA confirmation.
However, the FAA has the right to reduce the number of slots, cancel slots for
operational
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<PAGE> 29
reasons and reallocate slots. The FAA also has the right to withdraw a slot if
the slot is not used at least 80% of the time during any two-month period. The
Department of Transportation from time to time exempts airlines from the slot
regulations at airports other than Washington National to provide essential air
service between slot-controlled airports and small communities, to provide
foreign air transportation, and, under exceptional circumstances, for new
entrants to institute service.
At Washington National, federal law limits the number of hourly operations
and prohibits non-stop flights exceeding 1,250 miles with certain exceptions
such as Houston and Dallas/Ft. Worth. This limit on distance is known as a
"perimeter rule" and was originally put in place to divert traffic demand to the
less congested Dulles Airport. The perimeter rule effectively limits utilization
of Washington National slots to their fullest potential since inherently
lucrative long haul non-stop services are effectively barred from the airport.
LaGuardia, like Washington National, is limited to domestic services and also
has a 1,500 mile perimeter rule with the exception of services to Denver.
Runways at LaGuardia are restricted in length (only 7,000 feet) and by weight so
four engine wide-body services are prohibited. O'Hare is one of the world's
busiest airports and number one in the United States in terms of both aircraft
operations and passengers enplaned. Unlike Washington National and LaGuardia,
O'Hare is also a major international hub so there is demand for slots from both
domestic and foreign carriers.
Various amendments to the slot system and the perimeter rules, proposed
from time to time by the FAA, members of Congress and others, could, if adopted,
significantly affect operations at the high density traffic airports,
significantly change the value of the slots, expand slot controls to other
airports or eliminate slots entirely. If adopted, certain of such proposals
could restrict the number of flights, limit transfer of the ownership of slots,
increase the risk of slot withdrawals or eliminate slots entirely, which could
in turn result in charges to Continental's financial statements. Continental
cannot predict whether any of these proposals will be adopted or the impact that
the adoption of any such proposal would have on the value of the Slots or the
business or operations of Calair.
MANAGEMENT OF THE ISSUERS
Calair is managed by Calfinco, its managing member, pursuant to the Company
Agreement. Calair has no directors, officers or employees. The following table
sets forth certain information concerning the executive officers and directors
of Calfinco. All such executive officers are directors of Calair Capital and
hold the same positions in Calair Capital as they hold in Calfinco.
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gordon M. Bethune......................... 57 Chairman of the Board and Chief Executive Officer
Gregory D. Brenneman...................... 36 President, Chief Operating Officer and Director
Lawrence W. Kellner....................... 39 Executive Vice President, Chief Financial Officer
and Director
Jeffery A. Smisek......................... 44 Executive Vice President, General Counsel,
Secretary and Director
</TABLE>
Gordon M. Bethune has served as Chairman of the Board and Chief Executive
Officer of Calfinco since December 1995 and as Chairman of the Board and Chief
Executive Officer of Continental since September 1996 and as Director of
Continental since August 1994. From November 1994 to September 1996, Mr. Bethune
served as President and Chief Executive Officer and from February 1994 to
November 1994 as President and Chief Operating Officer of Continental.
Commencing in 1988, he served in various positions with The Boeing Company,
including Vice President and General Manager of the Commercial Airplane Group
Renton Division, Vice President and General Manager of the Customer Services
Division and Vice President of Airline Logistics Support.
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<PAGE> 30
Gregory D. Brenneman has served as President and Chief Operating Officer
and Director of Calfinco since December 1995 and as President and Chief
Operating Officer of Continental since September 1996 and as Director of
Continental since June 1995. From May 1995 to September 1996, he served as Chief
Operating Officer and from February to April 1995 as a consultant to
Continental. Prior to that time, he served in various positions, including Vice
President, with Bain & Company, Inc., a consulting firm, for more than five
years. Mr. Brenneman is also a Director of Browning-Ferris Industries, Inc.
Lawrence W. Kellner has served as Executive Vice President and Chief
Financial Officer of Calfinco since November 1996 and as Senior Vice President
and Chief Financial Officer of Calfinco from December 1995 to November 1996. He
has also served as Executive Vice President and Chief Financial Officer of
Continental since November 1996. From June 1995 to November 1996, he served as
Senior Vice President and Chief Financial Officer of Continental. From November
1992 to May 1995, Mr. Kellner served as Executive Vice President and Chief
Financial Officer of American Savings Bank, F.A. Mr. Kellner is also a Director
of Belden & Blake Corporation.
Jeffery A. Smisek has served as Executive Vice President, General Counsel
and Secretary of Calfinco since November 1996 and as Senior Vice President,
General Counsel and Secretary of Calfinco from December 1995 to November 1996.
He has also served as Executive Vice President, General Counsel and Secretary of
Continental since November 1996. Mr. Smisek served as Senior Vice President and
Secretary of Continental from April 1995 to November 1996 and as General Counsel
of Continental since March 1995. Prior to that time, Mr. Smisek was a Partner
with the law firm of Vinson & Elkins L.L.P. for more than five years. Mr. Smisek
is also a Director of Tuboscope Inc.
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Issuers on April 17, 1998 to the Initial
Purchasers in a transaction not registered under the Securities Act in reliance
upon Section 4(2) of the Securities Act. The Old Notes were thereupon offered
and sold by the Initial Purchasers only to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) and pursuant to offers and sales
that occurred outside the United States within the meaning of Regulation S under
the Securities Act. The net proceeds from the Old Notes Offering (approximately
$110 million), together with capital contributions from Calfinco and CEA, were
used by Calair to purchase the Slots from Continental in connection with the
Transaction. Continental used the proceeds from the sale of the Slots for
general corporate purposes.
Neither the Issuers nor the Company will receive any proceeds from the
Exchange Offer.
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<PAGE> 31
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration Statement and
a copy of which is available as set forth under the heading "Available
Information."
TERMS OF THE EXCHANGE OFFER
The Issuers and Continental entered into the Registration Rights Agreement
with the Initial Purchasers pursuant to which each of the Issuers and
Continental agreed, for the benefit of and at no cost to the holders of the
Notes, to the extent not prohibited by any applicable law or interpretation of
the staff of the Commission, (i) to use its best efforts to file with the
Commission within 120 days after the Closing Date the Exchange Offer
Registration Statement with respect to the offer to exchange the Notes for the
Exchange Notes, which will have terms identical in all material respects to the
Notes entitled to make such exchange (except that the Exchange Notes will not
contain terms with respect to transfer restrictions (other than transfer
restrictions relating to certain ERISA matters) or interest rate increases as
described herein and the Exchange Notes will be available only in book-entry
form), (ii) to use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective by the Commission within 180 days after the
Closing Date, (iii) to use its best efforts to cause such Exchange Offer
Registration Statement to remain effective until the closing of the Exchange
Offer and (iv) to consummate the Exchange Offer within 210 days after the
Closing Date. Promptly after the Exchange Offer Registration Statement has been
declared effective, the Issuers and Continental will offer the Exchange Notes in
exchange for surrender of the Notes. The Issuers and Continental will keep the
Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Notes. For each Note duly tendered pursuant to the Exchange Offer
and not validly withdrawn by the holder thereof, the holder of such Note will
receive an Exchange Note having a face amount equal to that of the tendered
Note.
Based on interpretations of the Securities Act by the staff of the
Commission, as set forth in no-action letters issued to third parties, including
the Exchange Offer No-Action Letters, the Issuers and the Company believe that
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold or otherwise transferred by holders thereof (other than a
Participating Broker-Dealer), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not engaged in, and do not intend to engage in, a distribution
of such Exchange Notes and have no arrangement with any person to participate in
a distribution of such Exchange Notes. By tendering the Old Notes in exchange
for Exchange Notes, each holder will represent to the Issuers and the Company
that: (i) it is not an affiliate of the Issuers or the Company (as defined under
Rule 405 of the Securities Act) or a broker-dealer tendering Old Notes acquired
directly from the Issuers or the Company for its own account; (ii) any Exchange
Notes to be received by it were acquired in the ordinary course of its business;
and (iii) it is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Notes and has no
arrangement or understanding to participate in a distribution of the Exchange
Notes. If a holder of Old Notes is an affiliate of the Issuers or the Company or
is a broker-dealer who purchased Old Notes directly from the Issuers for its own
account or is engaged in or intends to engage in a distribution of the Exchange
Notes or has any arrangement or understanding with respect to the distribution
of the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder
may not rely on the applicable interpretations of the staff of the Commission
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any secondary resale transaction. Each
Participating Broker-Dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Old Notes
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<PAGE> 32
where such Old Notes were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities. The Issuers and
the Company have agreed that, starting on the Expiration Date and ending on the
close of business 180 days after the Expiration Date, they will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution." To comply with the securities
laws of certain jurisdictions, it may be necessary to qualify for sale or
register the Exchange Notes prior to offering or selling such Exchange Notes.
The Issuers and the Company have agreed, pursuant to the Registration Rights
Agreement and subject to certain specified limitations therein, to use their
best efforts to register or qualify the Exchange Notes for offer or sale under
the securities or "blue sky" laws of such jurisdictions as may be necessary to
permit the holders of Exchange Notes to trade Exchange Notes without any
restrictions or limitations under the securities laws of the several states of
the United States.
If (i) any changes in law or applicable interpretations thereof by the
staff of the Commission do not permit the Issuers to effect the Exchange Offer,
(ii) if for any other reason the Exchange Offer Registration Statement is not
declared effective within 180 days after the Closing Date under certain
circumstances or the Exchange Offer is not consummated within 210 days after the
Closing Date, (iii) at the request of a holder (other than an Initial Purchaser)
not eligible to participate in the Exchange Offer or (iv) at the request of an
Initial Purchaser under certain other circumstances described in the
Registration Rights Agreement, each of the Issuers and Continental will, in lieu
of effecting the registration of the Exchange Notes pursuant to the Exchange
Offer Registration Statement and at no cost to the holders of Notes, (a) as
promptly as practicable, file with the Commission the Shelf Registration
Statement covering resales of the Notes, (b) use its best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
by the 180th day after the Closing Date (or promptly in the event of a request
by any holder or Initial Purchaser pursuant to clause (iii) or (iv) above,
respectively) and (c) use its best efforts to keep effective the Shelf
Registration Statement for a period of two years after its effective date (or
for such shorter period as shall end when all of the Notes covered by the Shelf
Registration Statement have been sold pursuant thereto or may be freely sold
pursuant to Rule 144 under the Securities Act). The Issuers and Continental
will, in the event of the filing of a Shelf Registration Statement, provide to
each holder of the Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement for such Notes has become effective and take certain other actions as
are required to permit unrestricted resales of such Notes. A holder of Notes who
sells such Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver the prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of such Notes will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement.
In the event that no Registration Event has occurred on or prior to the
210th day after the Closing Date, the interest rate per annum payable in respect
of the Notes shall be increased by 0.50% from and including such 210th day to
but excluding the earlier of (i) the date on which a Registration Event occurs
and (ii) the date on which all of the Notes otherwise become transferable by
holders of the Notes (other than affiliates or former affiliates of the Issuers
or Continental) without further registration under the Securities Act. In the
event that the Shelf Registration Statement (if filed) ceases to be effective at
any time during the period specified by the Registration Rights Agreement for
more than 60 days, whether or not consecutive, during any 12-month period, the
interest rate per annum payable in respect of the Notes shall be increased 0.50%
from the 61st day of the applicable 12-month period such Shelf Registration
Statement ceases to be effective until such time as the Shelf Registration
Statement again becomes effective (or, if earlier, the end of such period
specified by the Registration Rights Agreement).
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<PAGE> 33
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean October 6, 1998, unless the Issuers
and the Company, in their sole discretion, extend the Exchange Offer, in which
case the term "Expiration Date" shall mean the latest date to which the Exchange
Offer is extended. Notwithstanding any extension of the Exchange Offer, if the
Exchange Offer is not consummated by November 13, 1998, the interest rate borne
by the Notes is subject to increase. See "-- Terms of the Exchange Offer."
In order to extend the Expiration Date, the Issuers and the Company will
notify the Exchange Agent of any extension by oral or written notice and will
notify the holders of the Old Notes by means of a press release or other public
announcement prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Such announcement may state that
Issuers and the Company are extending the Exchange Offer for a specified period
of time.
The Issuers and the Company reserve the right (i) to delay acceptance of
any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer
and not permit acceptance of Old Notes not previously accepted if any of the
conditions set forth herein under "-- Certain Conditions to the Exchange Offer"
shall have occurred and shall not have been waived by the Company, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, or (ii) to amend the terms of the Exchange Offer in any manner deemed by
it to be advantageous to the holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the Exchange Agent. If the
Exchange Offer is amended in a manner determined by the Issuers and the Company
to constitute a material change, the Issuers and the Company will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of the Old Notes of such amendment.
Without limiting the manner in which the Issuers and the Company may choose
to make public announcement of any delay, extension, amendment or termination of
the Exchange Offer, the Issuers and the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to an appropriate news agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will accrue interest at the applicable per annum rate
set forth on the cover page of this Prospectus, from the last date on which
interest was paid on the Old Notes surrendered in exchange therefor or, if no
interest has been paid, from the date of issuance of the Old Notes, April 17,
1998. Interest on the Exchange Notes is payable on April 1 and October 1 of each
year to holders of record on the March 15 and September 15 immediately preceding
such interest payment date. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date or must comply with the guaranteed delivery
procedures described below. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(iii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANS-
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<PAGE> 34
MITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUERS OR THE COMPANY. Delivery of
all documents must be made to the Exchange Agent at its address set forth below.
Holders may also request their respective brokers, dealers, commercial banks,
trust companies or nominees to effect such tender for such holders.
The tender by a holder of Old Notes will constitute an agreement among such
holder, the Issuers and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Issuers or any other person
who has obtained a properly completed bond power from the registered holder.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such owner's
name or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder or holders of any Old Notes listed therein, such Old Notes
must be endorsed or accompanied by bond powers and a proxy which authorizes such
person to tender the Old Notes on behalf of the registered holder or holders, in
each case signed as the name of the registered holder or holders appears on the
Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuers and
the Company, evidence satisfactory to the Issuers and the Company of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Issuers and the Company in their sole discretion, which determination
will be final and binding. The Issuers and the Company reserve the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
which, if accepted, would, in the opinion of the Issuers and the Company or
their counsel, be unlawful. The Issuers and the Company also reserve the
absolute right to waive any conditions of the Exchange Offer or irregularities
or conditions of tender as to particular Old Notes. The Issuers' and the
Company's interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Issuers and the Company shall determine. Neither the Issuers, the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost to such holder
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by the Exchange Agent to the tendering holders of Old Notes, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Issuers and the Company reserve the right in their sole
discretion, subject to the provisions of the Indenture, to (i) purchase or make
offers for any Old Notes that remain outstanding subsequent to the Expiration
Date or, as set forth under "-- Certain Conditions to the Exchange Offer," to
terminate the Exchange Offer in accordance with the terms of the Registration
Rights Agreement and (ii) to the extent permitted by applicable law, purchase
Old Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Notes properly tendered will be accepted, promptly after the Expiration
Date, and the Exchange Notes will be issued promptly after acceptance of the Old
Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes of
the Exchange Offer, Old Notes shall be deemed to have been accepted as validly
tendered for exchange when, as and if the Issuers and the Company have given
oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or nonexchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case (other than as set forth in the next paragraph), be transmitted to and
received by the Exchange Agent at one of the addresses set forth below under
"-- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in place for sending a signed, hard copy of the Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
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GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes,
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedures for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Company (by facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes, the registration number(s) of
such Old Notes and the amount of Old Notes tendered, stating that the tender is
being made thereby and guaranteeing that within three NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery, the Letter of
Transmittal (or facsimile thereof) together with the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution with the Exchange
Agent and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the business day prior to the Expiration Date.
For a withdrawal to be effective, a written notice (telegram, telex,
facsimile transmission or letter) of withdrawal must be received by the Exchange
Agent prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date at one of the addresses set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), (where certificates for Old
Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder, and a statement
that such holder is withdrawing its election to have such Old Notes exchanged.
If certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuers and the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the holder thereof without cost to such
holder (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with such Book-Entry Transfer Facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering" and "-- Book-Entry Transfer" above at any time on or prior to the
Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer shall not be subject to any conditions, other than that
the Exchange Offer, or the making of any exchange by a holder, does not violate
applicable law or any applicable interpretation of the SEC. Each holder of Old
Notes (other than Participating Broker-Dealers) who wishes to exchange such Old
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Notes for Exchange Notes in the Exchange Offer shall represent that (i) it is
not an affiliate of the Issuers or the Company (as defined under Rule 405 of the
Securities Act) or a broker-dealer tendering Old Notes acquired directly from
the Issuers or the Company for its own account, (ii) any Exchange Notes to be
received by it were acquired in the ordinary course of its business and (iii) it
is not engaged in, and does not intend to engage in, a distribution of such
Exchange Notes and has no arrangement with any Person to participate in a
distribution of the Exchange Notes.
Notwithstanding any other term of the Exchange Offer, Old Notes will not be
required to be accepted for exchange, nor will Exchange Notes be issued in
exchange for any Old Notes, and the Issuers and the Company may terminate or
amend the Exchange Offer as provided herein before the acceptance of such Old
Notes, if because of any change in law, or applicable interpretations thereof by
the Commission, the Issuers and the Company determine that it is not permitted
to effect the Exchange Offer. The Issuers and the Company have no obligation to,
and will not knowingly, permit acceptance of tenders of Old Notes from
affiliates of the Issuers or the Company (within the meaning of Rule 405 under
the Securities Act) or from any other holder or holders who are not eligible to
participate in the Exchange Offer under applicable law or interpretations
thereof by the Commission, or if the Exchange Notes to be received by such
holder or holders of Old Notes in the Exchange Offer, upon receipt, will not be
tradable by such holder without restriction under the Securities Act and the
Exchange Act and without material restrictions under the "blue sky" or
securities laws of substantially all of the states of the United States.
EXCHANGE AGENT
Bank One, N.A., the Trustee under the Indenture, has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance and
inquiries for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail, Hand or Overnight Courier Facsimile Transmission Number
Bank One, N.A. 614-244-5185
235 West Schrock Road or 614-244-5188
Westerville, OH 43271-0184
Attention: Corporate Trust Operations (For Eligible Institutions Only)
Lora Marsch Confirm by Telephone
(If by Mail, Registered or 800-346-5153
Certified Mail Recommended)
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuers and the Company. The principal solicitation for tenders
pursuant to the Exchange Offer is being made by mail; however, additional
solicitations may be made by telegraph, telephone, telecopy or in person by
officers of the Issuers and the Company and regular employees of the Company.
The Issuers and the Company will not make any payments to brokers, dealers
or other persons soliciting acceptances of the Exchange Offer. The Issuers and
the Company, however, will pay the Exchange Agent reasonable and customary fees
for its services and will reimburse the Exchange Agent for its reasonable out-
of-pocket expenses in connection therewith. The Issuers and the Company may also
pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of the
Prospectus and related documents to the beneficial owners of the Old Notes, and
in handling or forwarding tenders for exchange.
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The expenses to be incurred in connection with the Exchange Offer will be
paid by the Issuers and the Company, including fees and expenses of the Exchange
Agent and Trustee and accounting, legal, printing and related fees and expenses.
The Issuers and the Company will pay all transfer taxes, if any, applicable
to the exchange of Old Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or Old Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Notes tendered, or if tendered Old Notes are registered in the name
of any person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF EXCHANGE
NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. See "Transfer Restrictions on Old
Notes." In general, the Old Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Issuers and the Company do not currently anticipate that they will
register the Old Notes under the Securities Act subsequent to the Exchange
Offer. Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer
No-Action Letters, the Issuers and the Company believe that the Exchange Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than a broker-dealer who
acquires such Exchange Notes directly from the Issuers and the Company for
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or any holder that is an "affiliate" of the
Issuers or the Company as defined in Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders are not engaged in, and do not
intend to engage in, a distribution of such Exchange Notes and have no
arrangement with any person to participate in a distribution of such Exchange
Notes. By tendering the Old Notes in exchange for Exchange Notes, each holder,
other than a broker-dealer, will represent to the Issuers and the Company that:
(i) it is not an affiliate of the Issuers or the Company (as defined under Rule
405 of the Securities Act) or a broker-dealer tendering Old Notes acquired
directly from the Issuers or the Company for its own account; (ii) any Exchange
Notes to be received by it will be acquired in the ordinary course of its
business; and (iii) it is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such Exchange Notes
and has no arrangement or understanding to participate in a distribution of the
Exchange Notes. If a holder of Old Notes is engaged in or intends to engage in a
distribution of the Exchange Notes or has any arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, such holder may not rely on the applicable interpretations of
the staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction. Each Participating Broker-Dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such
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Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Issuers and the Company have agreed that, starting on
the Expiration Date and ending on the close of business 180 days after the
Expiration Date, they will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution." To comply with the securities laws of certain jurisdictions, it
may be necessary to qualify for sale or register the Exchange Notes prior to
offering or selling such Exchange Notes. The Issuers and the Company have
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to use their best efforts to register or qualify
the Exchange Notes for offer or sale under the securities or "blue sky" laws of
such jurisdictions as may be necessary to permit the holders of Exchange Notes
to trade Exchange Notes without any restrictions or limitations under the
securities laws of the several states of the United States.
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued and the Old Notes were issued under an
indenture dated as of April 1, 1998 (the "Indenture"), among Calair and Calair
Capital, as joint and several obligors, Continental, as guarantor, and Bank One,
N.A., as trustee (the "Trustee"), a copy of which has been filed as an exhibit
to the Registration Statement and a copy of which is available as set forth
under the heading "Available Information." The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Indenture,
including the definitions of certain terms contained therein. For definitions of
certain capitalized terms used in the following summary, see "-- Certain
Definitions." Capitalized terms not otherwise defined below or elsewhere in this
Prospectus have the meanings given to them in the Indenture. References to the
Notes include the Old Notes and the Exchange Notes unless the context otherwise
requires.
GENERAL
The Notes mature on April 1, 2008, are limited to $112.3 million aggregate
principal amount and are unsecured, senior obligations of the Issuers. Each
Exchange Note will bear interest at the rate set forth on the cover page hereof
from its date of issue or from the most recent interest payment date to which
interest has been paid or duly provided for and semiannually thereafter on April
1 and October 1 in each year until the principal thereof is paid or duly
provided for to the Person in whose name the Exchange Note (or any predecessor
Note) is registered at the close of business on the March 15 or September 15
next preceding such interest payment date. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Issuers in The City of New York maintained for such purposes (which
initially will be the Corporate Trust Office of the Trustee c/o First Chicago
Trust Company of New York, 14 Wall Street, 8th Floor, Suite 4607, New York, New
York 10005); provided, however, that, at the option of the Issuers, interest may
be paid by check mailed to the address of the Person entitled thereto as such
address shall appear on the security register. The Exchange Notes will be issued
only in registered form without coupons and only in denominations of $1,000 and
any integral multiple thereof. No service charge will be made for any
registration of transfer or exchange or redemption of Notes, but the Issuers may
require payment in certain circumstances of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
THE PARENT GUARANTEE
Pursuant to the Indenture, Continental has unconditionally guaranteed the
due and punctual payment of the principal of, premium, if any, and interest on
the Notes when the same shall become due, whether by
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<PAGE> 40
acceleration or otherwise. The Parent Guarantee is enforceable without any need
first to enforce the Notes against either of the Issuers.
RANKING
The Notes are unsecured, senior obligations of the Issuers ranking pari
passu in right of payment with all other existing and future unsecured and
unsubordinated obligations of the Issuers. The Parent Guarantee is an unsecured,
senior obligation of Continental ranking pari passu in right of payment with all
other existing and future unsecured and unsubordinated obligations of
Continental, and senior in right of payment to all existing and future
obligations of Continental expressly subordinated in right of payment to the
Parent Guarantee. The Notes and the Parent Guarantee are effectively
subordinated in right of payment to any secured senior obligations of the
Issuers and Continental, respectively, with respect to the assets of the Issuers
and Continental, respectively, securing such obligations. The Notes and the
Parent Guarantee are also effectively subordinated to all existing and future
liabilities of the subsidiaries of the Issuers and Continental, respectively. As
of June 30, 1998, Continental had approximately $2.3 billion (including current
maturities) of long-term debt and capital lease obligations on a consolidated
basis of which approximately $1.3 billion was secured long-term debt and capital
lease obligations of Continental and $496 million was long-term debt and capital
lease obligations of Continental's subsidiaries, and the Issuers had no
indebtedness outstanding other than the Notes.
The Indenture contains no limitations on the ability of the Issuers or
Continental or any of their respective Subsidiaries to incur additional
indebtedness in the future or to mortgage or pledge any of their respective
assets or to pay dividends or make other distributions on, or redeem or
repurchase, capital stock.
SINKING FUND
The Notes are not entitled to the benefit of any sinking fund.
REDEMPTION
The Notes are redeemable at the option of the Issuers, in whole or in part,
at any time and from time to time, on not less than 20 nor more than 60 days'
prior notice, at a redemption price equal to the sum of (i) the principal amount
thereof on the redemption date, (ii) accrued and unpaid interest thereon, if
any, to the redemption date (subject to the right of holders of record on
relevant record dates to receive interest due on an interest payment date), plus
(iii) a Make-Whole Premium, if any.
"Make-Whole Premium" is defined, with respect to a Note, as the excess, if
any, of (A) the present value of the required interest and principal payments
due on such Note on or after the redemption date, computed using a discount rate
equal to the Treasury Rate plus 25 basis points, over (B) the sum of the then
outstanding principal amount of such Note plus the accrued and unpaid interest
thereon, if any, paid on the redemption date.
"Treasury Rate" is defined as the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days prior
to the redemption date (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining Average Life of the Notes; provided, however, that if the Average
Life of the Notes is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Average Life of the Notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected not more than 60 days prior to the redemption date by
the Trustee pro rata, by lot, or by such other method as the
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<PAGE> 41
Trustee will deem fair and appropriate; provided, however, that no such partial
redemption will reduce the principal amount of a Note not redeemed to less than
$1,000. Notice of redemption will be mailed, first-class postage prepaid, at
least 20 but not more than 60 days before the redemption date to each holder of
Notes to be redeemed at its registered address. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption and accepted for payment.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Reports
Continental will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not Continental has a
class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that Continental would be required to file
if it were subject to Section 13 or 15 of the Exchange Act. Continental is also
required (a) to file with the Trustee copies of such reports and documents
within 15 days after the date on which Continental files such reports and
documents with the Commission or the date on which Continental would be required
to file such reports and documents if Continental were so required, and (b) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at Calair's cost
copies of such reports and documents to any holder of Notes promptly upon
written request. The Issuers are not required to file, provide or furnish with
or to any Person any report or information except as required by Section 13 or
15 of the Exchange Act and as described under "Available Information."
Consolidation, Merger and Sale of Assets
None of Calair, Calair Capital or Continental will, in a single transaction
or through a series of transactions, consolidate with or merge with or into any
other Person, or permit any Person to consolidate with or merge into Calair,
Calair Capital or Continental, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets to
any other Person or Persons if such transaction or series of transactions, in
the aggregate, would result in the sale, assignment, conveyance, transfer, lease
or other disposition of all or substantially all of the properties and assets of
Calair and its Subsidiaries, Calair Capital and its Subsidiaries or Continental
and its Subsidiaries on a consolidated basis to any other Person or group of
affiliated Persons, unless at the time and immediately after giving effect
thereto (i) either (a) Calair, Calair Capital or Continental will be the
continuing corporation (or, in the case of Calair, the continuing limited
liability company or the continuing corporation) or (b) the Person (if other
than Calair, Calair Capital or Continental) formed by such consolidation or into
which Calair, Calair Capital or Continental is merged or the Person or group of
affiliated Persons that acquire by sale, assignment, conveyance, transfer, lease
or disposition all or substantially all the properties and assets of Calair and
its Subsidiaries, Calair Capital and its Subsidiaries or Continental and its
Subsidiaries on a consolidated basis (the "Surviving Entity") (1) will be a
corporation (or, in the case of the successor to Calair, a limited liability
company or a corporation) duly organized and validly existing under the laws of
the United States of America, any state thereof or the District of Columbia and
(2) will expressly assume, by a supplemental indenture in form satisfactory to
the Trustee, Calair's or Calair Capital's obligation for the due and punctual
payment of the principal of, premium, if any, and interest on all the Notes (or
Continental's obligations under the Parent Guarantee, as the case may be) and
the performance and observance of every covenant of the Indenture on the part of
Calair, Calair Capital or Continental, as the case may be, to be performed or
observed; and (ii) immediately before and immediately after giving effect to
such transaction or series of transactions, no Event of Default will have
occurred and be continuing. Notwithstanding anything to the contrary contained
in this paragraph, Calair Capital shall not merge into, or consolidate with, any
entity if, as a result thereof, no Issuer would be a corporation.
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, Calair, Calair Capital,
Continental or the Surviving Entity shall deliver to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Opinion of Counsel stating
that such consolidation, merger, sale, assignment, conveyance, transfer, lease
or other disposition, and if a supplemental indenture is
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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.
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, the holders of the Notes do
not have the right to require the redemption thereof or any similar rights.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of any installment of interest on any Note
when it becomes due and payable and continuance of such default for a
period of 30 days;
(ii) default in the payment of the principal of or premium, if any, on
any Note at its Maturity (upon acceleration, optional redemption, required
purchase or otherwise);
(iii) default in the performance, or breach, of the "Consolidation,
Merger and Sale of Assets" covenant;
(iv) default in the performance, or breach, of any covenant of the
Issuers or Continental contained in the Indenture (other than a default in
the performance, or breach, of a covenant which is specifically dealt with
in clauses (i), (ii) or (iii) above) and continuance of such default or
breach for a period of 60 days after written notice shall have been given
to the Issuers or Continental by the Trustee or to the Issuers, Continental
and the Trustee by the holders of at least 25% in aggregate principal
amount of the Notes then outstanding;
(v) the Parent Guarantee shall for any reason cease to be, or shall be
asserted in writing by Continental or either Issuer not to be, enforceable
in accordance with its terms and the terms of the Indenture; and
(vi) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to either Issuer or Continental.
If an Event of Default (other than as specified in clause (vi) above) shall
occur and be continuing, the Trustee or the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Issuers and Continental (and to the Trustee if such notice is given by the
holders), may, and the Trustee upon the written request of such holders shall,
declare the principal of, premium, if any, and accrued interest on the Notes to
be immediately due and payable, and upon any such declaration of acceleration
all such amounts payable in respect of the Notes shall be immediately due and
payable. If an Event of Default specified in clause (vi) above occurs and is
continuing, then the principal of, premium, if any, and accrued interest on the
Notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
At any time after such a declaration of acceleration, but before a judgment
or decree for payment of the money due has been obtained by the Trustee, the
holders of at least a majority in aggregate principal amount of the outstanding
Notes, by written notice to the Issuers, Continental and the Trustee, may
rescind such declaration and its consequences if (a) the Issuers or Continental
have paid or deposited with the Trustee a sum sufficient to pay (i) all overdue
interest on all Notes, (ii) all unpaid principal of and premium, if any, on any
outstanding Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (iii) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate prescribed therefor by the Notes, and (iv) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; (b) all Events of Default, other than the non-payment of amounts of
principal of, premium, if any, or interest on the Notes that has become due
solely by such declaration of acceleration, have been cured or waived; and (c)
the rescission would not conflict with any
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judgment or decree of a court of competent jurisdiction. No such rescission
shall affect any subsequent default or impair any right consequent thereon.
The holders of at least a majority in aggregate principal amount of the
outstanding Notes, by notice to the Trustee, may waive all past Defaults and
Events of Default and their consequences under the Indenture (except a default
in the payment of the principal of, premium, if any, or interest on any Note, or
in respect of a covenant or provision under the Indenture which cannot be
modified or amended without the consent of the holder of each outstanding Note
affected thereby) if (i) all existing Events of Default, other than the
nonpayment of principal of, premium, if any, and interest on the Notes that have
become due solely by such declaration of acceleration, have been cured or waived
and (ii) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 30 days after it occurs unless such Default
or Event of Default has been cured. Except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Notes, the
Trustee may withhold the notice to the holders of such Notes if the board of
directors, the executive committee or a trust committee of its directors and/or
officers in good faith determines that withholding the notice is in the interest
of the holders of the Notes.
The Issuers and Continental are required to furnish to the Trustee annual
statements as to the performance by the Issuers and Continental of their
obligations under the Indenture and as to any default in such performance. The
Issuers and Continental are also required to notify the Trustee within five
Business Days of actual knowledge by a Responsible Officer of the Issuers of an
Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Issuers may, at their option and at any time, elect to have their
obligations under the Notes discharged with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Issuers will be deemed to have
paid and discharged the entire indebtedness represented by the outstanding Notes
and to have satisfied all of their other obligations under such Notes and the
Indenture insofar as such Notes are concerned except for (i) the rights of
holders of outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (ii) the
Issuers' obligations to issue temporary Notes, register the transfer or exchange
of any Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an
office or agency for payments in respect of the Notes and segregate and hold
such payments in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee and (iv) the defeasance provisions of the Indenture. In addition,
the Issuers may, at their option and at any time, elect to have their
obligations released with respect to certain covenants set forth in the
Indenture, and any omission to comply with such obligations will not constitute
a Default or an Event of Default with respect to the Notes ("covenant
defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Issuers must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient (as indicated in an opinion of a
nationally recognized firm of independent public accountants in the case of
deposit of U.S. Government Obligations or a combination of cash and U.S.
Government Obligations) to pay and discharge the principal of, premium, if any,
and interest on the outstanding Notes on the Stated Maturity (or redemption
date, if applicable) of such principal, premium, if any, or installment of
interest; (ii) no Default or Event of Default with respect to the Notes will
have occurred and be continuing on the date of such deposit or, insofar as an
event of bankruptcy under clause (vi) of "Events of Default" above is concerned,
at any time during the period ending on the 91st day after the date of such
deposit; (iii) such defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under, the Indenture or any
other material agreement or instrument to which any Issuer or Continental is a
party or by which any of them is bound; (iv) in the case of defeasance, the
Issuers and Continental shall have delivered to the Trustee an Opinion of
Counsel stating that the Issuers and Continental have received from, or there
has been published
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by, the Internal Revenue Service a ruling, or since April 1, 1998, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred; (v) in the case of
covenant defeasance, the Issuers and Continental shall have delivered to the
Trustee an Opinion of Counsel to the effect that the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such covenant defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred; and (vi) the Issuers
shall have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for relating to
either the defeasance or the covenant defeasance, as the case may be, have been
complied with.
SATISFACTION AND DISCHARGE
Except as otherwise provided in the Indenture, the Issuers and Continental
may terminate their obligations under the Notes and the Indenture if: (i) all
Notes previously authenticated and delivered (other than destroyed, lost or
stolen Notes that have been replaced or Notes that are paid pursuant to the
Indenture or Notes for whose payment money or securities have theretofore been
held in trust and thereafter repaid to the Issuers, as provided in the
Indenture) have been delivered to the Trustee for cancellation and the Issuers
and Continental have paid all sums payable by them hereunder; or (ii)(A) the
Notes mature within one year or all of them are to be called for redemption
within one year under arrangements satisfactory to the Trustee for giving the
notice of redemption, (B) the Issuers irrevocably deposit in trust with the
Trustee during such one-year period, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds
solely for the benefit of the holders for that purpose, cash or U.S. Government
Obligations sufficient (in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee in the case of deposit of U.S. Government Obligations
or a combination of cash and U.S. Government Obligations), without consideration
of any reinvestment of any interest thereon, to pay principal, premium, if any,
and interest on the Notes to maturity or redemption, as the case may be, and to
pay all other sums payable by it hereunder, (C) no Default or Event of Default
with respect to the Notes shall have occurred and be continuing on the date of
such deposit, and (D) the Issuers and Continental have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, in each case stating that
all conditions precedent provided for herein relating to the satisfaction and
discharge of the Indenture have been complied with.
With respect to the foregoing clause (i), the Issuers' and Continental's
obligations under the Indenture relating to compensation of the Trustee and
indemnity shall survive. With respect to the foregoing clause (ii), the Issuers'
and Continental's obligations under the Indenture relating to registration,
transfer and exchange of the Notes, defaulted interest, payment on the Notes,
maintenance of office or agency, compensation of the Trustee and indemnity,
replacement of the Trustee, application of trust money, repayment and
reinstatement shall survive until the Notes are no longer outstanding.
Thereafter, only the Issuers' and Continental's obligations under the Indenture
relating to compensation of the Trustee and indemnity, repayment and
reinstatement shall survive. After any such irrevocable deposit, the Trustee
upon request shall acknowledge in writing the discharge of the Issuers' and
Continental's obligations under the Notes and the Indenture except for those
surviving obligations specified above.
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by a supplemental
indenture entered into by the Issuers, Continental and the Trustee with the
consent of the holders of a majority in aggregate outstanding principal amount
of the Notes then outstanding; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Note
affected thereby: (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount of, or
premium, if any, or interest thereon or change the place or currency of payment
of principal of, or
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premium, if any, or the interest on any Note, or impair the right to institute
suit for the enforcement of any payment on or after the Stated Maturity (or, in
the case of redemption, on or after the redemption date) of any Note; (ii)
reduce the percentage in principal amount of outstanding Notes, the consent of
whose holders is required for any supplemental indenture, for any waiver of
compliance with certain provisions of the Indenture or for waiver of certain
Defaults and their consequences provided for in the Indenture; (iii) waive a
default in the payment of principal of, premium, if any, or interest on the
Notes, (iv) modify the Parent Guarantee or the related section in the Indenture
in any manner adverse to the interests of the holders of the Notes; (v) modify
any of the provisions relating to supplemental indentures requiring the consent
of holders or relating to the waiver of past defaults or relating to the waiver
of certain covenants, except to increase the percentage of outstanding Notes
required to take such actions or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Note affected thereby; or (vi) except as otherwise permitted under
the covenant described above under "-- Certain Covenants -- Consolidation,
Merger and Sale of Assets" consent to the assignment or transfer by any Issuer
or Continental of any of its rights or obligations under the Indenture.
Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Issuers, Continental and the Trustee may modify or amend the
Indenture: (a) to evidence the succession of another Person to any of the
Issuers or Continental or any other obligor or guarantor on the Notes, and the
assumption by any such successor of the covenants of the Issuers or Continental
or such obligor or guarantor in the Indenture and in the Notes in accordance
with the covenant described above under "-- Certain Covenants -- Consolidation,
Merger and Sale of Assets"; (b) to add to the covenants of the Issuers or
Continental or any other obligor or guarantor upon the Notes for the benefit of
the holders of the Notes or to surrender any right or power conferred upon the
Issuers or Continental or any other obligor or guarantor upon the Notes, as
applicable, under the Indenture or the Notes; (c) to cure any ambiguity, or to
correct or supplement any provision in the Indenture or the Notes which may be
defective or inconsistent with any other provision in the Indenture or the Notes
or make any other provisions with respect to matters or questions arising under
the Indenture or the Notes; provided that, in each case, such provisions shall
not adversely affect the interests of the holders of the Notes; (d) to comply
with the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; (e) to add a
guarantor of the Notes under the Indenture (in addition to Continental); (f) to
evidence and provide the acceptance of the appointment of a successor Trustee
under the Indenture; or (g) to mortgage, pledge, hypothecate or grant a security
interest in favor of the Trustee for the benefit of the holders of the Notes as
additional security for the payment and performance of the obligations of the
Issuers and Continental under the Indenture, in any property or assets.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain covenants and provisions of the
Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent Person
would exercise under the circumstances in the conduct of such Person's own
affairs.
The Indenture and, upon consummation of the Exchange Offer, the provisions
of the Trust Indenture Act, incorporated by reference therein contain
limitations on the rights of the Trustee thereunder, should it become a creditor
of the Issuers or Continental, to obtain payment of claims in certain cases or
to realize on certain property received by it in respect of any such claims, as
security or otherwise. The Trustee is permitted to engage in other transactions;
provided, however, that if it acquires any conflicting interest (as defined in
the Trust Indenture Act) it must eliminate such conflict or resign.
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GOVERNING LAW
The Indenture and the Old Notes are, and the Exchange Notes will be,
governed by, and construed in accordance with, the laws of the State of New
York. Upon consummation of the Exchange Offer, the Indenture will be subject to
the provisions of the Trust Indenture Act that are required to be part of the
Indenture and will, to the extent applicable, be governed by such provisions.
CERTAIN DEFINITIONS
"Average Life" means, as of the date of determination with respect to any
indebtedness, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from the date of determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such Person's capital stock, and any rights (other than
debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of the Indenture.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"GAAP" means generally accepted accounting principles in the United States,
as applied from time to time by any Person in the preparation of its
consolidated financial statements.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note becomes due and payable as therein or herein provided, whether at
the Stated Maturity with respect to such principal or by declaration of
acceleration, call for redemption or purchase or otherwise.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other indebtedness, means the
date specified in the instrument governing such indebtedness as the fixed date
on which the principal of such indebtedness, or any installment of interest
thereon, is due and payable.
"Subsidiary" means, with respect to any other Person, any Person a majority
of the equity ownership or Voting Stock of which is at the time owned, directly
or indirectly, by such Person or by one or more other Subsidiaries or by such
Person and one or more other Subsidiaries.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
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TAX CONSIDERATIONS
The following is a summary of certain federal income tax consequences under
the Internal Revenue Code of 1986, as amended (the "Code"), of the ownership and
disposition of the Notes. The summary is based upon the laws, regulations,
rulings and judicial decisions in effect on the date of this Prospectus, all of
which are subject to change at any time (possibly on a retroactive basis).
Unless otherwise specifically noted, this summary applies only to those persons
who acquired the Old Notes for cash in the Old Notes Offering and who hold the
Notes as capital assets. This summary does not discuss all aspects of federal
income taxation that may be relevant to investors in light of their particular
investment circumstances, nor does it address the consequences to certain types
of holders subject to special treatment under the federal income tax laws (for
example, tax-exempt organizations, dealers in securities, financial
institutions, life insurance companies or persons holding Notes as part of a
hedging or "conversion" transaction or a straddle). This summary also does not
discuss the consequences to a holder under state, local or foreign tax laws,
which may differ from the corresponding federal income tax laws. Holders of
Notes are advised to consult their own tax advisors regarding the particular tax
considerations pertaining to them with respect to ownership and disposition of
the Notes, including the effects of applicable federal, state, local, foreign
and other tax laws to which they may be subject, as well as possible changes in
the tax laws.
Except as the context otherwise requires, references in the summary to the
Notes apply to Old Notes and Exchange Notes received therefor (see "-- The
Exchange Offer").
PAYMENTS OF INTEREST
A holder of a Note generally will be required to report as ordinary income
for federal income tax purposes interest received or accrued on the Note in
accordance with the holder's method of tax accounting.
SALE, EXCHANGE OR RETIREMENT OF NOTES
A holder's tax basis in a Note generally will equal the purchase price paid
therefor, increased by market discount previously included in income by such
holder and reduced by any amortized premium and any principal payments on the
Note. Upon the sale, exchange or retirement (including redemption) of Note, a
holder of a Note generally will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange or retirement of the Note
(other than in respect of accrued and unpaid interest on the Note) and the
adjusted tax basis in the Note. Such gain or loss generally will be capital gain
or loss, except to the extent of any accrued market discount. Such gain or loss
will be long term capital gain or loss if the property has been held for more
than one year.
THE EXCHANGE OFFER
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not constitute a taxable exchange for federal income tax purposes because
the Exchange Notes will not be considered to differ materially in kind or extent
from the Old Notes. Rather, the Exchange Notes will be treated as a continuation
of the Old Notes in the hands of the holder, with the results that (i) a holder
will not recognize taxable gain or loss as a result of exchanging Notes for
Exchange Notes pursuant to the Exchange Offer, (ii) the holding period of the
Exchange Notes will include the holding period of the Old Notes exchanged
therefor and (iii) the adjusted tax basis of the Exchange Notes immediately
after the exchange will be the same as the adjusted tax basis immediately prior
to the exchange of the Old Notes exchanged therefor.
FOREIGN HOLDERS
The following is a general discussion of certain United States federal
income tax consequences of the ownership and sale or other disposition of the
Notes by a holder that, for federal income tax purposes, is not a "United States
person" (a "Foreign Person"). For purposes of this discussion, a "United States
person" means a citizen or resident (as determined for United States federal
income tax purposes) of the United States; a corporation, partnership or other
entity created or organized in the United States or under the laws of the United
States or of any political subdivision thereof; an estate the income of which is
includible in gross
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income for U.S. federal income tax purposes, regardless of its source; or a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust. Resident alien individuals will be subject to United States federal
income tax with respect to the Notes as if they were United States citizens.
If the income or gain on the Notes is "effectively connected with the
conduct of a trade or business within the United States" by the Foreign Person
holding the Note, such income or gain will be subject to tax essentially in the
same manner as if the Notes were held by a United States person, as discussed
above, and in the case of a Foreign Person that is a foreign corporation, may
also be subject to the federal branch profits tax.
If the income on the Notes is not "effectively connected," then under the
"portfolio interest" exception to the general rules for the withholding of tax
on interest paid to a Foreign Person, a Foreign Person will not be subject to
United States tax (or to withholding) on interest on a Note; provided that (i)
the Foreign Person does not actually or constructively own 10% or more of a
capital or profits interest in Continental within the meaning of Section
871(h)(3) of the Code, and (ii) the Company, its paying agent or the person who
would otherwise be required to withhold tax received either (a) a statement (an
"Owner's Statement") on the Internal Revenue Service's Form W-8, signed under
penalties of perjury by the beneficial owner of the Note, in which the owner
certifies that the owner is not a United States person and which provides the
owner's name and address, or (b) a statement signed under penalties of perjury
by a financial institution holding the Note on behalf of the beneficial owners,
together with a copy of each beneficial owner's Owner's Statement. Recently
finalized regulations, which generally will become effective on January 1, 2000,
add certain alternative certification procedures. A Foreign Person who does not
qualify for the "portfolio interest" exception would be subject to United States
withholding tax at a flat rate of 30% (or a lower applicable treaty rate upon
delivery of requisite certificate of eligibility) on interest payments on the
Notes.
If the gain on the Notes is not "effectively connected" with the conduct of
a United States trade or business, then gain recognized by a Foreign Person upon
the redemption, sale or exchange of a Note (including any gain representing
accrued market discount) will not be subject to United States tax unless the
Foreign Person is an individual present in the United States for 183 days or
more during the taxable year in which the Note is redeemed, sold or exchanged,
and certain other requirements are met, in which case the Foreign Person will be
subject to United States tax at a flat rate of 30% (unless exempt by applicable
treaty upon delivery of requisite certification of eligibility). Foreign Persons
who are individuals may also be subject to tax pursuant to provisions of United
States federal income tax law applicable to certain United States expatriates.
BACKUP WITHHOLDING
In general, a 31% backup withholding tax will apply to payments received
with respect to Notes if the holder (i) fails to provide a taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is
notified by the Internal Revenue Service that he or she failed to report
properly payments of interest and dividends and the Internal Revenue Service has
notified the Issuers that he or she is subject to backup withholding, or (iv)
fails, under certain circumstances, to provide a signed statement, certified
under penalties of perjury, that the TIN provided is correct and that he or she
is not subject to backup withholding. The amount of any backup withholding
deducted from a payment to a holder is allowable as a credit against the
holder's federal income tax liability, provided that certain required
information is furnished to the Internal Revenue Service. Certain holders
(including, among others, corporations and foreign individuals who comply 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.
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TRANSFER RESTRICTIONS ON OLD NOTES
Each purchaser of Old Notes from the Initial Purchasers, by its acceptance
thereof, was deemed to have acknowledged, represented to and agreed with the
Issuers, Continental and the Initial Purchasers as follows:
1. It understands and acknowledges that the Notes have not been registered
under the Securities Act or any other applicable securities law and that the
Notes are being offered for resale in transactions not requiring registration
under the Securities Act or any other securities laws, including sales pursuant
to Rule 144A, and, unless so registered, may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act or any other applicable securities laws, pursuant to an exemption
therefrom or in a transaction not subject thereto and in each case in compliance
with the conditions for transfer set forth in paragraph (4) below.
2. It is not an "affiliate" (as defined in Rule 144 under the Securities
Act) of the Issuers or Continental or acting on behalf of the Issuers or
Continental, and it is either (i) a "qualified institutional buyer" as defined
in Rule 144A (a "QIB") and is aware that any sale of the Notes to it will be
made in reliance on Rule 144A and such acquisition will be for its own account
or for the account of another QIB or (ii) not a "U.S. person" as defined in
Regulation S or purchasing for the account or benefit of a U.S. person (other
than a distributor) and is purchasing Notes in an offshore transaction in
accordance with Regulation S.
3. It acknowledges that none of the Issuers, Continental, the Initial
Purchasers nor any person representing the Issuers, Continental or the Initial
Purchasers has made any representation to it with respect to the Issuers or
Continental or the Old Notes Offering, other than the information contained in
the Offering Memorandum relating to the Old Notes, which has been delivered to
it and upon which it is relying in making its investment decision with respect
to the Notes. It has had access to such financial and other information
concerning the Issuers and Continental and the Notes as it has deemed necessary
in connection with its decision to purchase the Notes, including an opportunity
to ask questions of and request information from the Issuers and Continental and
the Initial Purchasers.
4. It is purchasing the Notes for its own account, or for one or more
investor accounts for which it is acting as a fiduciary or agent, in each case
not with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act, subject to any requirement of law
that the disposition of its property or the property of such investor account or
accounts be at all times within its or their control and subject to its or their
ability to resell such Notes pursuant to Rule 144A or any other available
exemption from registration under the Securities Act. It agrees on its own
behalf and on behalf of any investor account for which it is purchasing the
Notes, and each subsequent holder of the Notes by its acceptance thereof will
agree, to offer, sell or otherwise transfer such Notes prior to the date which
is two years after the later of the date of original issue of such Notes and the
last date that the Issuers or any affiliate of the Issuers was the owner of such
Notes (or any predecessor thereto) (the "Resale Restriction Termination Date")
only (i) to the Issuers, (ii) pursuant to a registration statement that has been
declared effective under the Securities Act, (iii) for so long as the Notes are
eligible for resale pursuant to Rule 144A, to a person it reasonably believes is
a QIB that purchases for its own account or for the account of a QIB to whom
notice is given that the transfer is being made in reliance on Rule 144A, (iv)
pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S, (v) to an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is an
institutional investor (an "Institutional Accredited Investor") purchasing for
its own account or for the account of such an Institutional Accredited Investor,
in each case in a minimum principal amount of the Notes of $250,000, or (vi)
pursuant to any other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any requirement of
law that the disposition of its property or the property of such investor
account or accounts be at all times within its or their control. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to be
made pursuant to clause (v) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee substantially in
the form of Annex A of the Offering Memorandum relating to the Old Notes to the
Issuers and the Trustee, which shall provide, among other things, that the
transferee is an Institutional Accredited Investor that is acquiring such Notes
not for distribution in violation of the Securities
48
<PAGE> 50
Act. Each purchaser acknowledges that the Issuers and the Trustee reserve the
right prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Notes pursuant to clauses (iv), (v) or (vi) above to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Issuers and the Trustee. Each purchaser
acknowledges that each Note will contain a legend substantially to the following
effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE
CASE OF ANY OF THE FOREGOING CLAUSES (A) THROUGH (F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUERS AND THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
5. If it is an insurance company, the funds to be used to purchase the
Notes by it constitute (x) assets of an insurance company general account
maintained by it and the acquisition and holding of each such Note by such
account satisfies the requirements of United States Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 95-60 or (y) assets of an
insurance company pooled separate account satisfying the conditions of PTCE
90-1. If it is not an insurance company, no part of the funds to be used to
purchase the Notes to be purchased by it constitute assets of any trust or other
entity which contains, or is deemed to contain, the assets of any employee
benefit plan such that the use of such assets constitutes a non-exempt
49
<PAGE> 51
prohibited transaction under ERISA or the Code. As used in this paragraph, the
term "employee benefit plan" shall have the meaning assigned to such term in
Section 3 of ERISA.
6. It acknowledges that the Issuers, Continental, the Initial Purchasers
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that, if any of the
acknowledgments, representations or agreements deemed to have been made by it by
its purchase of Notes is no longer accurate, it shall promptly notify the
Issuers, Continental and the Initial Purchasers. If it is acquiring any Notes as
a fiduciary or agent for one or more investor accounts, it represents that it
has sole investment discretion with respect to each such account and that it has
full power to make the foregoing acknowledgments, representations and agreements
on behalf of each such account.
50
<PAGE> 52
BOOK-ENTRY; DELIVERY AND FORM
THE GLOBAL NOTE
The Exchange Notes will be issued in the form of one or more global notes
in registered form, without interest coupons (collectively, the "Global Note").
The Global Note will be deposited with, or on behalf of, The Depository Trust
Company ("DTC") and registered in the name of Cede & Co., as nominee of DTC, or
will remain in the custody of the Trustee pursuant to the FAST Balance
Certificate Agreement between DTC and the Trustee.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTE
DTC has advised the Issuers that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking organization"
within the meaning of the New York Banking Law, (iii) a member of the Federal
Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (v) a "clearing agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the), banks and
trust companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. Investors who are not Participants may
beneficially own securities held by or on behalf of DTC only through
Participants or Indirect Participants.
The Issuers expect that pursuant to procedures established by DTC (i) upon
deposit of the Global Note, DTC or its nominee will credit the accounts of
Participants with payments in amounts proportionate to their respective
beneficial interests in the Global Note as shown on the records of DTC or such
nominee and (ii) ownership of beneficial interests in the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the interests of Participants) and
the records of Participants and the Indirect Participants (with respect to the
interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the Trustee thereunder.
Accordingly, each holder owning a beneficial interest in a Global Note must rely
on the procedures of DTC and, if such holder is not a Participant or an Indirect
Participant, on the procedures of the Participant through which such holder owns
its interest, to exercise any rights of a holder of Notes under the Indenture or
such Global Note. The Issuers understand that under existing industry practice,
in the event that the Issuers request any action of holders of Notes, or a
holder that is an owner of a beneficial interest in a Global Note desires to
take any action that DTC, as the holder of such Global Note, is entitled to
take, DTC would authorize the Participants to take such action and the
Participants would authorize holders
51
<PAGE> 53
owning through such Participants to take such action or would otherwise act upon
the instruction of such holders. Neither the Issuers nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of Notes by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to such Notes.
Payments with respect to the principal of, and premium, if any, and
interest on, any Notes represented by a Global Note registered in the name of
DTC or its nominee on the applicable record date will be payable by the Trustee
to or at the direction of DTC or its nominee in its capacity as the registered
holder of the Global Note representing such Notes under the Indenture. Under the
terms of the Indenture, the Issuers and the Trustee may treat the persons in
whose names the Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving payment thereon and for any and all other
purposes whatsoever. Accordingly, neither the Issuers nor the Trustee has or
will have any responsibility or liability for the payment of such amounts to
owners of beneficial interests in a Global Note (including principal, premium,
if any, and interest). Payments by the Participants and the Indirect
Participants to the owners of beneficial interests in a Global Note will be
governed by standing instructions and customary industry practice and will be
the responsibility of the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds.
CERTIFICATED NOTES
If (i) the Issuers notify the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
Notes in definitive form under the Indenture or (iii) upon the occurrence of
certain other events as provided in the Indenture, then, upon surrender by DTC
of the Global Note, Certificated Notes will be issued to each person that DTC
identifies as the beneficial owner of the Notes represented by the Global Note.
Upon any such issuance, the Trustee is required to register such Certificated
Notes in the name of such person or persons (or the nominee of any thereof) and
cause the same to be delivered thereto.
Neither the Issuers nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Issuers and the
Company have agreed that, starting on the Expiration Date and ending on the
close of business 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). In addition, until such date, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Issuers and the Company will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
52
<PAGE> 54
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuers and the
Company will promptly send additional copies of this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Issuers and the Company have agreed in the Registration Rights Agreement to pay
all expenses incident to the Exchange Offer other than commissions or
concessions of any brokers or dealers and to indemnify the holders of the Old
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Exchange Notes in
connection with the Exchange Offer are being passed upon for Calair, Calair
Capital and Continental by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements (including the financial statement
schedule) of Continental Airlines, Inc. appearing in Continental Airlines,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1997,
incorporated by reference in this Prospectus and the Registration Statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The consolidated balance sheet of Calair L.L.C. as of March 31, 1998
appearing in this Prospectus and the Registration Statement has been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
53
<PAGE> 55
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Calair L.L.C. Consolidated Balance Sheet -- June 30, 1998
(unaudited)............................................... F-2
Calair L.L.C. Consolidated Statement of Operations for the
three months ended June 30, 1998 (unaudited).............. F-3
Calair L.L.C. Consolidated Statement of Cash Flows for the
three months ended June 30, 1998 (unaudited).............. F-4
Notes to Consolidated Financial Statements (unaudited)...... F-5
Report of Independent Auditors.............................. F-7
Calair L.L.C. Consolidated Balance Sheet -- March 31,
1998...................................................... F-8
Notes to Consolidated Balance Sheet -- March 31, 1998....... F-9
</TABLE>
F-1
<PAGE> 56
CALAIR L.L.C.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Assets:
Cash...................................................... $ 1
Receivable from Continental Airlines, Inc. ............... 3,827
Slots, net................................................ 149,881
Deferred financing costs, net............................. 966
--------
Total Assets........................................... $154,675
========
Liabilities and Members' Equity:
Interest payable.......................................... $ 2,252
Other accrued liabilities................................. 490
Long-term debt............................................ 110,487
Members' equity........................................... 41,446
--------
Total Liabilities and Members' Equity.................. $154,675
========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
F-2
<PAGE> 57
CALAIR L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Rental income from Continental Airlines, Inc. .............. $ 3,337
Amortization expense........................................ (1,260)
-------
Operating income............................................ 2,077
Interest expense............................................ (2,298)
-------
Net loss.................................................... $ (221)
=======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
F-3
<PAGE> 58
CALAIR L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net loss.................................................. $ (221)
Adjustments to Reconcile Net Income (Loss) to
Cash Used in Operating Activities:
Amortization........................................... 1,260
Increase in receivable from Continental Airlines,
Inc. ................................................. (3,827)
Increase in deferred financing costs................... (982)
Increase in interest payable........................... 2,252
Increase in other accrued liabilities.................. 490
Other.................................................. 47
---------
Net cash used in operating activities................ (981)
---------
Cash Flows from Investing Activities:
Purchase of slots from Continental Airlines, Inc. ........ (151,141)
---------
Cash used by Investing Activities...................... (151,141)
---------
Cash Flows from Financing Activities:
Net proceeds from issuance of long-term debt.............. 110,456
Capital contributions..................................... 41,666
---------
Cash provided by financing activities.................. 152,122
---------
Net Change in Cash.......................................... --
Cash -- Beginning of Period................................. 1
---------
Cash -- End of Period....................................... $ 1
=========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-4
<PAGE> 59
CALAIR L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- ORGANIZATION
Calair L.L.C. ("Calair"), a Delaware limited liability company, and its
wholly owned subsidiary, Calair Capital Corporation ("Calair Capital"), were
formed in March 1998 for the purpose of acquiring certain take-off and landing
rights at Chicago O'Hare Airport, Ronald Reagan International Airport in
Washington, D.C. and New York LaGuardia Airport (collectively, the "Slots") from
Continental Airlines, Inc. ("Continental").
In April 1998, Calair acquired the Slots from Continental for $151.1
million. The acquisition of the Slots was funded with a combination of debt and
equity, which included (i) $31.7 million in capital contributions from CALFINCO
Inc. ("Calfinco"), a wholly owned subsidiary of Continental, (representing a 76%
equity interest in Calair), (ii) $10.0 million in capital contributions from
Chase Equity Associates, L.P. ("CEA") (representing a 24% equity interest in
Calair) and (iii) net proceeds of $110.5 million from an offering of Senior
Notes due 2008 (the "Senior Notes").
Pursuant to the terms of a Redemption Option Agreement between Calair and
CEA, Calair has the right to redeem 50% of CEA's member interest (i.e., 12% of
Calair) on April 17, 2003, the fifth anniversary of the closing date of the
acquisition of the Slots, and has the right to redeem all of CEA's member
interest (either 12% of Calair if Calair has previously exercised its fifth
anniversary redemption option, or 24% otherwise) upon the occurrence of certain
events described in the Redemption Option Agreement and the Company Agreement
and on April 7, 2008, the tenth anniversary of the closing date of the
acquisition of the Slots. If Calair has not redeemed all of CEA's member
interest on or before the tenth anniversary of the closing date of the
acquisition of the Slots, CEA will have the right to require the liquidation of
Calair.
Calair is economically dependent upon its parent, Continental, for its
operations and cash flow.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Calair include the accounts of
Calair and its wholly owned subsidiary, Calair Capital. All intercompany
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
SLOTS
Slots are amortized on a straight-line basis over 20 years. Calair had
accumulated amortization related to slots of $1.3 million as of June 30, 1998.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized on a straight-line basis over the
term of the Senior Notes (10 years).
INCOME TAXES
Calair is a limited liability corporation which is not subject to federal
income taxes.
F-5
<PAGE> 60
NOTE 3 -- SENIOR NOTES
Calair and Calair Capital have outstanding $112.3 million in 8 1/8% Senior
Notes due 2008. These notes mature April 1, 2008 and pay interest semiannually
on April 1 and October 1. Continental has fully and unconditionally guaranteed
the Senior Notes. As of June 30, 1998 the unamortized discount relating to these
notes totalled $1.8 million.
By October 1998, the Senior Notes are expected to be exchanged for new
publicly registered notes with terms identical in all material respects to the
form and terms of the Senior Notes.
NOTE 4 -- TRANSACTIONS WITH CONTINENTAL
Under the terms of a Slot Lease Agreement between Calair and Continental,
Continental pays Calair $8.1 million semiannually on April 1 and October 1 for
the right to use the Slots. The term of the Slot Lease Agreement extends through
April 2008.
F-6
<PAGE> 61
REPORT OF INDEPENDENT AUDITORS
The Member
Calair L.L.C.
We have audited the accompanying consolidated balance sheet of Calair
L.L.C. (a Delaware limited liability company) as of March 31, 1998. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of Calair
L.L.C. at March 31, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
March 31, 1998
F-7
<PAGE> 62
CALAIR L.L.C.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
ASSETS
<TABLE>
<S> <C>
Cash........................................................ $1,000
------
Total Assets...................................... $1,000
======
MEMBER'S EQUITY
Member's Equity............................................. $1,000
------
Total Member's Equity............................. $1,000
======
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-8
<PAGE> 63
CALAIR L.L.C.
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1 -- ORGANIZATION
Calair L.L.C. ("Calair"), a Delaware limited liability company, and its
wholly owned subsidiary, Calair Capital Corporation ("Calair Capital"), were
formed in March 1998 for the purpose of acquiring certain take-off and landing
rights at Chicago O'Hare Airport, Ronald Reagan Washington National Airport in
Washington, D.C. and LaGuardia Airport (collectively, the "Slots") from
Continental Airlines, Inc. ("Continental"). Calair has not commenced operations.
Under a proposed transaction, Continental will sell the Slots to Calair for
$151.1 million. The transaction will be funded with a combination of debt and
equity, which will include (i) $31.7 million in capital contributions from
CALFINCO Inc. ("Calfinco"), a wholly owned subsidiary of Continental
(representing a 76% equity interest in Calair), (ii) $10.0 million in capital
contributions from Chase Equity Associates, L.P. ("CEA") (representing a 24%
equity interest in Calair) and (iii) net proceeds of approximately $113 million
from an offering of Senior Notes due 2008 (the "Senior Notes"). The Senior Notes
will be fully and unconditionally guaranteed by Continental. At closing,
Continental will lease the Slots back from Calair for a 10-year period pursuant
to the terms of a Slot Lease Agreement between Calair and Continental.
Pursuant to the terms of a Redemption Option Agreement between Calair and
CEA, Calair will have the right to redeem 50% of CEA's member interest (i.e. 12%
of Calair) at the fifth anniversary of the closing date of the transaction and
will have the right to redeem all of CEA's member interest (either 12% of Calair
if Calair has previously exercised its fifth anniversary redemption option, or
24% otherwise) upon the occurrence of certain events described in the Redemption
Option Agreement and the Company Agreement and at the tenth anniversary of the
closing date of the transaction. If Calair has not redeemed all of CEA's member
interest on or before the tenth anniversary of the closing date of the
transaction, CEA will have the right to require the liquidation of Calair.
NOTE 2 -- PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet of Calair includes the accounts of Calair
and its wholly owned subsidiary, Calair Capital. All intercompany transactions
have been eliminated in consolidation.
NOTE 3 -- CAPITAL TRANSACTION
Calfinco, the sole member, acquired its equity in Calair for $1,000 in
cash.
F-9
<PAGE> 64
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS OR CONTINENTAL SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................... 5
Incorporation of Certain
Documents by Reference.................... 6
Prospectus Summary.......................... 7
Risk Factors................................ 17
The Issuers................................. 24
Continental................................. 24
The Transaction............................. 25
Management of the Issuers................... 28
The Private Placement and
Use of Proceeds........................... 29
The Exchange Offer.......................... 30
Description of the Notes.................... 38
Tax Considerations.......................... 46
Transfer Restrictions on Old Notes.......... 48
Book Entry; Delivery and Form............... 51
Plan of Distribution........................ 52
Legal Matters............................... 53
Experts..................................... 53
Index to Calair Financial Statements........ F-1
</TABLE>
================================================================================
================================================================================
PROSPECTUS
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
OFFER TO EXCHANGE
8 1/8% SENIOR NOTES DUE 2008, WHICH
HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING 8 1/8%
SENIOR NOTES DUE 2008
FULLY AND UNCONDITIONALLY GUARANTEED BY
CONTINENTAL AIRLINES, INC.
Dated September 1, 1998
================================================================================
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Continental Airlines, Inc.
Continental Airlines, Inc.'s Certificate of Incorporation and Bylaws
provide that Continental Airlines, Inc. will indemnify each of its directors and
officers to the full extent permitted by the laws of the State of Delaware and
may indemnify certain other persons as authorized by the Delaware General
Corporation Law (the "GCL"). Section 145 of the GCL provides as follows:
"(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
II-1
<PAGE> 66
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative, or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For purposes of this section, references to 'the corporation' shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to 'other enterprises' shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner 'not
opposed to the best interests of the corporation' as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
The Certificate of Incorporation and Bylaws also limit the personal
liability of directors to Continental Airlines, Inc. and its stockholders for
monetary damages resulting from certain breaches of the directors' fiduciary
duties. The Bylaws of Continental Airlines, Inc. provide as follows:
"No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or
II-2
<PAGE> 67
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL, or (iv) for any transaction from which the Director
derived any improper personal benefit. If the GCL is amended to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of Directors of the Corporation shall be
eliminated or limited to the full extent permitted by the GCL, as so amended."
Continental Airlines, Inc. maintains directors' and officers' liability
insurance.
Calair L.L.C.
Calair L.L.C.'s Amended and Restated Company Agreement provides as follows:
Subject to limitations set forth in such Agreement, "(a) the Company
hereby agrees, to the fullest extent permitted by Law, to indemnify, hold
harmless and pay, and (b) the Company Liquidator, or any receiver or
trustee of the Company (each of the foregoing Persons being an
'Indemnitor') (in the case of the Company Liquidator, receiver or trustee,
to the extent of Company Property) shall indemnify, hold harmless and pay,
all Expenses ('Indemnified Amounts') of any Member, and the direct and
indirect members, partners, shareholders and other equity holders of any
Member, and the successors and permitted assignees of each such Person
(whether pursuant to an assignment for security or otherwise) and creditors
of and surety providers with respect to, any of the foregoing, and their
respective successors and assigns (whether pursuant to an assignment for
security or otherwise) and each of the respective directors, officers,
employees, administrators and agents of any of the foregoing (each an
'Indemnified Person'), which may be incurred or realized by or asserted
against such Indemnified Person, relating to, growing out of or resulting
from:
(i) Company Obligations. Any failure by the Company to perform or
observe each of its covenants and obligations under this Agreement or
any other Operative Document to which it is a party (collectively, the
'Covered Documents'), including Indemnified Amounts resulting from or
arising out of or in connection with enforcement of the Covered
Documents (or determining whether or how to enforce any Covered
Documents, whether through negotiations, legal proceedings or
otherwise), or responding to any subpoena or other legal process or
informal investigative demand in connection herewith or therewith; or
(ii) Representations and Warranties. Any inaccuracy in, or any
breach of, any written certification, representation or warranty made by
or on behalf of the Company in any Covered Document or in any written
report or certification required hereunder or under any other Covered
Document, in each case (A) if but only if such certification,
representation or warranty is made as of a specific date, as of the date
as of which the facts stated therein were certified, represented or
warranted and (B) in all other cases, as of any date or during any
period to which such certification, representation or warranty may be
applicable; or
(iii) Investigations; Litigation; Proceedings. Any investigation,
litigation or proceeding, whether or not such Indemnified Person is a
party thereto, that (A) relates to, grows out of or results from any
action or omission, or alleged action or omission, by or on behalf of or
attributable to the Company and (B) would not have resulted in
Indemnified Amounts incurred or realized by or asserted against such
Indemnified Person but for the Covered Documents or the transactions
thereunder or contemplated thereby."
Calair L.L.C.'s Amended and Restated Company Agreement also provides as
follows:
"The Company may maintain insurance, at its expense, to protect itself
and any Member, or agent of the Company or another limited liability
company, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Company would have the
power to indemnify such person against such expense, liability or loss
under the [Delaware Limited Liability Company] Act."
II-3
<PAGE> 68
Calair Capital Corporation.
The Bylaws of Calair Capital Corporation provide as follows:
"Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a 'proceeding'), by
reason of the fact that he or she or a person of whom he or she is the
legal representative, is or was or has agreed to become a director or
officer of the Corporation or is or was serving or has agreed to serve at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while serving or
having agreed to serve as a director or officer, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to serve in the capacity which
initially entitled such person to indemnity hereunder and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by
the board of directors of the Corporation. The right to indemnification
conferred in this Article VI shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however,
that, if the Delaware General Corporation Law requires, the payment of such
expenses incurred by a current, former or proposed director or officer in
his or her capacity as a director or officer or proposed director or
officer (and not in any other capacity in which service was or is or has
been agreed to be rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
indemnified person, to repay all amounts so advanced if it shall ultimately
be determined that such indemnified person is not entitled to be
indemnified under this Section or otherwise."
For a discussion of Section 145 of the Delaware General Corporation Law,
see "Indemnification of Directors and Officers -- Continental Airlines," above.
Calair Capital Corporation's Certificate of Incorporation limits the
liability of directors to Calair Capital Corporation and its stockholders for
monetary damages resulting from breaches of the directors' fiduciary duties,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following instruments and documents are included as Exhibits to this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<C> <S>
*3.1 -- Certificate of Formation of Calair L.L.C., dated March
30, 1998.
*3.2 -- Amended and Restated Company Agreement of Calair L.L.C.,
dated as of April 17, 1998.
*3.3 -- Certificate of Incorporation of Calair Capital
Corporation, dated March 30, 1998.
</TABLE>
II-4
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<C> <S>
*3.4 -- Bylaws of Calair Capital Corporation, dated March 31,
1998.
*4.1 -- Form of 8 1/8% Senior Notes due 2008 (included as Exhibit
B to Exhibit 4.2 below).
*4.2 -- Senior Notes Indenture, dated as of April 1, 1998, among
Calair L.L.C. and Calair Capital Corporation, as Issuers,
Continental, as Guarantor, and Bank One, N.A., as
Trustee.
*4.3 -- Exchange and Registration Rights Agreement, dated as of
April 17, 1988, among Calair L.L.C. and Calair Capital
Corporation, as Note Issuers, and Continental Airlines,
Inc., as Guarantor, and Chase Securities Inc., Credit
Suisse First Boston Corporation and Morgan Stanley & Co.
Incorporated, as Purchasers.
*5.1 -- Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008.
*8.1 -- Tax Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008 (contained in Exhibit 5.1 above).
*10.1 -- Sale Agreement between Continental Airlines, Inc. and
Calair L.L.C. dated as of April 17, 1998.
*10.2 -- Slot Lease Agreement between Continental Airlines, Inc.
and Calair L.L.C. dated as of April 17, 1998.
*10.3 -- Redemption Option Agreement between Calair L.L.C. and
Chase Equity Associates, L.P. dated as of April 17, 1998.
12.1 -- Statement regarding the computation of earnings to fixed
charges of Continental Airlines, Inc.
12.2 -- Statement regarding the computation of earnings to fixed
charges of Calair L.L.C.
23.1 -- Consent of Ernst & Young LLP.
*23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 above).
*24.1 -- Powers of attorney executed by certain directors and
officers of Continental.
*24.2 -- Powers of attorney executed by certain directors and
officers of CALFINCO Inc., as managing member of Calair
L.L.C.
*24.3 -- Powers of attorney executed by certain directors and
officers of Calair Capital Corporation.
*25.1 -- Statement of Eligibility and Qualification on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Registered Holders and Depository Trust
Company Participants.
99.4 -- Form of Letter to Clients.
</TABLE>
- ---------------
* Previously filed.
ITEM 22. UNDERTAKINGS
The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described
II-5
<PAGE> 70
under Item 20 above, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it 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 September 1, 1998.
CONTINENTAL AIRLINES, INC.
By: /s/ LAWRENCE W. KELLNER
----------------------------------
Lawrence W. Kellner
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and September 1, 1998
- ----------------------------------------------------- Chief Executive Officer
Gordon M. Bethune (Principal Executive
Officer) and Director
/s/ LAWRENCE W. KELLNER Executive Vice President and September 1, 1998
- ----------------------------------------------------- Chief Financial Officer
Lawrence W. Kellner (Principal Financial
Officer)
* Vice President and Controller September 1, 1998
- ----------------------------------------------------- (Principal Accounting
Michael P. Bonds Officer)
* Director September 1, 1998
- -----------------------------------------------------
Thomas J. Barrack, Jr.
* Director September 1, 1998
- -----------------------------------------------------
Lloyd M. Bentsen, Jr.
* Director September 1, 1998
- -----------------------------------------------------
David Bonderman
* Director September 1, 1998
- -----------------------------------------------------
Gregory D. Brenneman
Director
- -----------------------------------------------------
Patrick Foley
* Director September 1, 1998
- -----------------------------------------------------
Douglas H. McCorkindale
</TABLE>
II-7
<PAGE> 72
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director September 1, 1998
- -----------------------------------------------------
George G.C. Parker
* Director September 1, 1998
- -----------------------------------------------------
Richard W. Pogue
Director
- -----------------------------------------------------
William S. Price III
* Director September 1, 1998
- -----------------------------------------------------
Donald L. Sturm
* Director September 1, 1998
- -----------------------------------------------------
Karen Hastie Williams
* Director September 1, 1998
- -----------------------------------------------------
Charles A. Yamarone
*By /s/ LAWRENCE W. KELLNER
-------------------------------------------------
Lawrence W. Kellner
Attorney-in-fact
September 1, 1998
</TABLE>
II-8
<PAGE> 73
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it 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 September 1, 1998.
CALAIR CAPITAL CORPORATION
By: /s/ LAWRENCE W. KELLNER
----------------------------------
Lawrence W. Kellner
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and September 1, 1998
- ----------------------------------------------------- Chief Executive Officer
Gordon M. Bethune (Principal Executive
Officer) and Director
* Director September 1, 1998
- -----------------------------------------------------
Gregory D. Brenneman
/s/ LAWRENCE W. KELLNER Executive Vice President and September 1, 1998
- ----------------------------------------------------- Chief Financial Officer
Lawrence W. Kellner (Principal Financial
Officer) and Director
* Director September 1, 1998
- -----------------------------------------------------
Jeffery A. Smisek
* Vice President and Controller September 1, 1998
- ----------------------------------------------------- (Principal Accounting
Michael P. Bonds Officer)
</TABLE>
*By /s/ LAWRENCE W. KELLNER
--------------------------------
Lawrence W. Kellner
Attorney-in-fact
September 1, 1998
II-9
<PAGE> 74
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on September 1, 1998.
CALAIR L.L.C.
By: CALFINCO Inc.
Managing Member
By:/s/ LAWRENCE W. KELLNER
--------------------------------
Lawrence W. Kellner
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and September 1, 1998
- ----------------------------------------------------- Chief Executive Officer
Gordon M. Bethune (Principal Executive
Officer) and Director of
CALFINCO Inc., Managing
Member
* Director of CALFINCO Inc., September 1, 1998
- ----------------------------------------------------- Managing Member
Gregory D. Brenneman
/s/ LAWRENCE W. KELLNER Executive Vice President and September 1, 1998
- ----------------------------------------------------- Chief Financial Officer
Lawrence W. Kellner (Principal Financial
Officer) and Director of
CALFINCO Inc., Managing
Member
* Director of CALFINCO Inc., September 1, 1998
- ----------------------------------------------------- Managing Member
Jeffery A. Smisek
* Vice President and Controller September 1, 1998
- ----------------------------------------------------- (Principal Accounting
Michael P. Bonds Officer) of CALFINCO Inc.,
Managing Member
</TABLE>
*By /s/ LAWRENCE W. KELLNER
--------------------------------
Lawrence W. Kellner
Attorney-in-fact
September 1, 1998
II-10
<PAGE> 75
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*3.1 -- Certificate of Formation of Calair L.L.C., dated March
30, 1998.
*3.2 -- Amended and Restated Company Agreement of Calair L.L.C.,
dated as of April 17, 1998.
*3.3 -- Certificate of Incorporation of Calair Capital
Corporation, dated March 30, 1998.
*3.4 -- Bylaws of Calair Capital Corporation, dated March 31,
1998.
*4.1 -- Form of 8 1/8% Senior Notes due 2008 (included as Exhibit
B to Exhibit 4.2 below).
*4.2 -- Senior Notes Indenture, dated as of April 1, 1998, among
Calair L.L.C. and Calair Capital Corporation, as Issuers,
Continental, as Guarantor, and Bank One, N.A., as
Trustee.
*4.3 -- Exchange and Registration Rights Agreement, dated as of
April 17, 1988, among Calair L.L.C. and Calair Capital
Corporation, as Note Issuers, and Continental Airlines,
Inc., as Guarantor, and Chase Securities Inc., Credit
Suisse First Boston Corporation and Morgan Stanley & Co.
Incorporated, as Purchasers.
*5.1 -- Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008.
*8.1 -- Tax Opinion of Vinson & Elkins L.L.P., counsel for
Continental Airlines, Inc., Calair L.L.C. and Calair
Capital Corporation relating to the 8 1/8% Senior Notes
due 2008 (contained in Exhibit 5.1 above).
*10.1 -- Sale Agreement between Continental Airlines, Inc. and
Calair L.L.C. dated as of April 17, 1998.
*10.2 -- Slot Lease Agreement between Continental Airlines, Inc.
and Calair L.L.C., dated as of April 17, 1998.
*10.3 -- Redemption Option Agreement between Calair L.L.C. and
Chase Equity Associates, L.P. dated as of April 17, 1998.
12.1 -- Statement regarding the computation of earnings to fixed
charges of Continental Airlines, Inc.
12.2 -- Statement regarding the computation of earnings to fixed
charges of Calair L.L.C.
23.1 -- Consent of Ernst & Young LLP.
*23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 above).
*24.1 -- Powers of attorney executed by certain directors and
officers of Continental.
*24.2 -- Powers of attorney executed by certain directors and
officers of CALFINCO Inc., as managing member of Calair
L.L.C.
*24.3 -- Powers of attorney executed by certain directors and
officers of Calair Capital Corporation.
*25.1 -- Statement of Eligibility and Qualification on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Registered Holders and Depository Trust
Company Participants.
99.4 -- Form of Letter to Clients.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 12.1
CONTINENTAL AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
6/30/98 6/30/97 6/30/98 6/30/97 1997 1996 1995 1994
------- ------- ------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings (Loss) Before Income
Taxes,
Minority Interest and
Extraordinary Items $ 275 $ 208 $ 412 $ 332 $ 639 $ 428 $ 310 $ (651)
Plus:
Interest Expense (a) 44 42 84 84 166 165 213 241
Capitalized Interest (15) (8) (28) (14) (35) (5) (6) (17)
Amortization of Capitalized
Interest 1 1 2 2 3 3 2 1
Portion of Rent Expense
Representative of
Interest Expense (a) 113 94 223 188 400 359 360 337
------- ------- -------- ------- ------ ------- ------- ------
418 337 693 592 1,173 950 879 (89)
------- ------- -------- ------- ------ ------- ------- ------
Fixed Charges:
Interest Expense (a) 44 42 84 84 166 165 213 241
Portion of Rent Expense
Representative of Interest
Expense (a) 113 94 223 188 400 359 360 337
------- ------- -------- ------- ------ ------- ------- ------
Total Fixed Charges 157 136 307 272 566 524 573 578
------- ------- -------- ------- ------ ------- ------- ------
Coverage Adequacy (Deficiency) $ 261 $ 201 $ 386 $ 320 $ 607 $ 426 $ 306 $ (667)
======= ======= ======== ======= ====== ======= ======= ======
Coverage Ratio 2.66 2.48 2.26 2.18 2.07 1.81 1.53 n/a
======= ======= ======== ======= ====== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
4/28/93 1/1/93
THROUGH THROUGH
12/31/93 4/27/93
-------- -------
<S> <C> <C>
Earnings:
Earnings (Loss) Before Income
Taxes,
Minority Interest and
Extraordinary Items $ (52) $ (977)
Plus:
Interest Expense (a) 165 52
Capitalized Interest (8) (2)
Amortization of Capitalized
Interest 0 0
Portion of Rent Expense
Representative of
Interest Expense (a) 216 117
--------- ---------
321 (810)
--------- ---------
Fixed Charges:
Interest Expense (a) 165 52
Portion of Rent Expense
Representative of Interest
Expense (a) 216 117
--------- ---------
Total Fixed Charges 381 169
--------- ---------
Coverage Adequacy (Deficiency) $ (60) $ (979)
========= =========
Coverage Ratio n/a n/a
========= =========
</TABLE>
Note: A vertical black line is shown in the table above to separate
Continental's post-reorganized consolidated financial data from its
predecessor since they have not been prepared on a consistent basis of
accounting.
(a) Includes Fair Market Value Adjustments resulting from the
Company's emergence from bankruptcy.
<PAGE> 1
EXHIBIT 12.2
CALAIR L.L.C.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
6/30/98
-------
<S> <C>
Earnings:
Net loss
Taxes, $ (221)
Plus:
Interest Expense 2,298
--------
2,077
--------
Fixed Charges:
Interest Expense 2,298
--------
Total Fixed Charges 2,298
--------
Coverage Deficiency $ (221)
========
Coverage Ratio N/A
========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
(i) incorporation by reference of our reports (a) dated February 9, 1998,
except for Note 13, as to which the date is March 18, 1998, with respect to
the consolidated financial statements of Continental Airlines, Inc., and
(b) dated March 18, 1998 with respect to the financial statement schedule
of Continental Airlines, Inc., both included in Continental Airlines,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1997 filed
with the Securities and Exchange Commission; and
(ii) inclusion of our report dated March 31, 1998 with respect to the March 31,
1998 consolidated balance sheet of Calair L.L.C.
in the Registration Statement Amendment No. 1 to Form S-4 (No. 333-60409) and
related Prospectus of Calair Capital Corporation, Calair L.L.C. and Continental
Airlines, Inc. for the registration of $112,300,000 of 8 1/8% Senior Notes due
2008 of Calair Capital Corporation and Calair L.L.C.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Houston, Texas
August 26, 1998
<PAGE> 1
EXHIBIT 99.1
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR 8 1/8% SENIOR NOTES DUE 2008,
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON OCTOBER 6, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
BANK ONE, N.A.
<TABLE>
<S> <C>
By Hand/Overnight Courier: Facsimile Transmission Number
Bank One, N.A. 614-244-5185
235 West Schrock Road or 614-244-5188
Westerville, OH 43271-0184 (For Eligible Institutions Only)
Attention: Corporate Trust Operations Confirm by Telephone
Lora Marsch 800-346-5153
(If by Mail, Registered
Certified Mail Recommended)
</TABLE>
---------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated September 1, 1998 (the "Prospectus") of Calair L.L.C. ("Calair"), a
Delaware limited liability company and an indirect subsidiary of Continental
Airlines, Inc. ("Continental" or the "Company"), a Delaware corporation, Calair
Capital Corporation ("Calair Capital" and, together with Calair, the "Issuers"),
a Delaware corporation and a wholly owned subsidiary of Calair, and Continental
and this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the offer of the Issuers and the Company (the "Exchange Offer") to
exchange the Issuers' 8 1/8% Senior Notes due 2008 (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for a like principal amount of the Issuers' issued and outstanding
8 1/8% Senior Notes due 2008 (the "Old Notes"). Capitalized terms used but not
defined herein have the respective meanings given to them in the Prospectus.
The Issuers and the Company, in their sole discretion, reserve the right,
at any time or from time to time, to extend the Exchange Offer, in which case
the term "Expiration Date" shall mean the latest date to which the Exchange
Offer is extended. The Issuers and the Company will notify the Exchange Agent of
any
<PAGE> 2
extension by oral or written notice and will notify the holders of the Old Notes
by means of a press release or other public announcement prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. The term "business day" shall mean any day which is not a
Saturday, Sunday or day on which banks are authorized by law to close in the
State of New York.
This Letter of Transmittal is to be used by a holder of Old Notes if
original Old Notes, if available, are to be forwarded herewith or if delivery of
Old Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer -- Procedures for Tendering" and "Book-Entry
Transfer." Holders of Old Notes whose Old Notes are not immediately available,
or who are unable to deliver their Old Notes and all other documents required by
this Letter of Transmittal to the Exchange Agent on or prior to the Expiration
Date, or who are unable to complete the procedure for book-entry transfer on a
timely basis, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 1. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Issuers or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal amounts
on a separate signed schedule and affix the list to this Letter of Transmittal.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S),
EXACTLY AS NAME(S) APPEAR(S) ON OLD NOTES
(PLEASE FILL IN, IF BLANK) OLD NOTES(S) TENDERED
- ------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL PRINCIPAL
REGISTERED AMOUNT REPRESENTED AMOUNT
NUMBER(S)* BY NOTE(S) TENDERED**
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by such Old Notes. All tenders must be in integral multiples of
$1,000.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s) of Old Notes:
- ------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- ------------------------------------------------------
Window Ticket Number (if available):
- ---------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
- ----------------------------------------------------
Account Number (if delivered by book-entry transfer):
- ----------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuers and the Company for exchange the principal amount
of Old Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Old Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Issuers and the Company all right, title and interest in and to the Old
Notes tendered for exchange hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the agent and attorney-in-fact of
the undersigned (with full knowledge that the Exchange Agent also acts as the
agent of the Issuers and the Company in connection with the Exchange Offer) with
respect to the tendered Old Notes with full power of substitution to (i) deliver
such Old Notes, or transfer ownership of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility, to the Issuers and the Company
and deliver all accompanying evidences of transfer and authenticity, and (ii)
present such Old Notes for transfer on the books of the Issuers and receive all
benefits and otherwise exercise all rights of beneficial ownership of such Old
Notes, all in
3
<PAGE> 4
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Issuers and the Company will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Issuers and the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance on interpretations of the Securities Act by the staff of the Securities
and Exchange Commission (the "SEC"), as set forth in no-action letters issued to
third parties, including Exxon Capital Holdings Corporation, SEC No-Action
Letter (available April 13, 1989), Morgan Stanley & Co. Incorporated, SEC
No-Action Letter (available June 5, 1991) and Shearman & Sterling, SEC No-Action
Letter (available July 2, 1993) (collectively, the "Exchange Offer No-Action
Letters"), that the Exchange Notes issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof (other
than a Participating Broker-Dealer), without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not engaged in, and do not intend to engage in, a distribution
of such Exchange Notes and have no arrangement with any person to participate in
a distribution of such Exchange Notes. The undersigned specifically represent(s)
to the Issuers and the Company that (i) any Exchange Notes acquired in exchange
for Old Notes tendered hereby are being acquired in the ordinary course of
business of the person receiving such Exchange Notes, whether or not the
undersigned, (ii) the undersigned is not engaged in, does not intend to engage
in, and has no arrangement with any person to participate in, a distribution
(within the meaning of the Securities Act) of Exchange Notes, and (iii) neither
the undersigned nor any such other person is an "affiliate" (as defined in Rule
405 under the Securities Act) of the Issuers or the Company or a broker-dealer
tendering Old Notes acquired directly from the Issuers or the Company.
If the undersigned is an affiliate of the Issuers or the Company or is a
broker-dealer who purchased Old Notes directly from the Issuers for its own
account or is engaged in or intends to engage in a distribution of the Exchange
Notes or has any arrangement or understanding with respect to the distribution
of the Exchange Notes to be acquired pursuant to the Exchange Offer, the
undersigned may not rely on the applicable interpretations of the staff of the
SEC and must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any secondary resale transaction. Each
Participating Broker-Dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired by
such Participating Broker-Dealer as a result of market-making activities or
other trading activities. The Issuers and the Company have agreed that, starting
on the Expiration Date and ending on the close of business 180 days after the
Expiration Date, they will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent, the Company or the Issuers to be
necessary or desirable to complete the exchange, assignment and transfer of the
Old Notes tendered hereby, including the transfer of such Old Notes on the
account books maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company and the Issuers shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and if
the Company or the Issuers gives oral or written notice thereof to the Exchange
Agent. Any tendered Old Notes that are not accepted for exchange pursuant to the
Exchange Offer for any reason will be returned, without expense, to the
undersigned at the address shown
4
<PAGE> 5
below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the acceptance of properly tendered Old
Notes by the Issuers and the Company pursuant to the procedures described under
the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuers and the Company upon the terms and subject to the
conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the Exchange Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes that
the Issuers and the Company have no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Old Notes from
the name of the registered holder(s) thereof if the Issuers and the Company do
not accept for exchange any of the Old Notes so tendered for exchange.
5
<PAGE> 6
================================================================================
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if (i) Old Notes in a principal amount not tendered, or
Exchange Notes issued in exchange for Old Notes accepted for exchange, are to be
issued in the name of someone other than the undersigned, or (ii) Old Notes
tendered by book-entry transfer which are not exchanged are to be returned by
credit to an account maintained at the Book-Entry Transfer Facility other than
the account indicated above.
Issue Exchange Notes and/or Old Notes to:
Name:
-------------------------------------------------------------------------
(Please Type or Print)
- -------------------------------------------------------------------------------
Address: ----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(include Zip Code)
- -------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
- -------------------------------------------------------------------------------
Book-Entry Transfer Facility Account Number:
- -------------------------------------------------------------------------------
(Complete Substitute Form W-9)
===============================================================================
===============================================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or
Exchange Notes issued in exchange for Old Notes accepted for exchange, are to be
mailed or delivered to someone other than the undersigned, or to the undersigned
at an address other than that shown below the undersigned's signature.
Mail or deliver Exchange Notes and/or Old Notes to:
Name:
--------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
================================================================================
6
<PAGE> 7
================================================================================
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF REGISTERED HOLDERS OR OLD NOTES)
- ------------------------------------------------------------------------- , 1998
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Issuers
and the Company, submit evidence satisfactory to the Issuers and the Company of
such person's authority so to act. See Instruction 5 regarding the completion of
this Letter of Transmittal, printed below.)
Name(s):
-----------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity:
----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
------------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 5)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER)
Dated:
------------------------------------------------------------------ , 1998
================================================================================
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent (except as
indicated in "The Exchange Offer -- Book-Entry Transfer" section of the
Prospectus) at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of the tendered Old Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and sole risk of the holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent
before the Expiration Date. No Letter of Transmittal or Old Notes should be sent
to the Issuers or the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot complete
the procedure for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth herein and in
the Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through a firm which is a member of a registered national securities exchange or
of the National Association of Securities Dealers Inc., a commercial bank or a
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (each an "Eligible Institution"); (ii) prior to the Expiration
Date, the Exchange Agent must have received from the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of the
Old Notes, the registration number(s) of such Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that, within three NYSE trading days after the date of execution of the Notice
of Guaranteed Delivery, this Letter of Transmittal (or facsimile hereof)
together with the certificates for all physically tendered Old Notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, and any
other documents required hereby, will be deposited by the Eligible Institution
with the Exchange Agent; and (iii) the certificates for all physically tendered
shares of Old Notes, in proper form for transfer, or Book-Entry Confirmation, as
the case may be, and all other documents required hereby are received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on his behalf. If such beneficial
owner wishes to tender on his own behalf, such beneficial owner must, prior to
completing and executing this Letter of Transmittal and delivering his Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
8
<PAGE> 9
4. Partial Tenders. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering holder should fill in the principal amount tendered
in the third column of the box entitled "Description of Old Notes Tendered"
above. The entire principal amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, then Old Notes for the
principal amount of Old Notes not tendered and Exchange Notes issued in exchange
for any Old Notes accepted will be sent to the holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Old Notes are accepted for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal (or facsimile hereof) is
signed by the record holder(s) of the Old Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the Old Notes without
alteration, enlargement or any change whatsoever. If this Letter of Transmittal
(or facsimile hereof) is signed by a participant in the Book-Entry Transfer
Facility, the signature must correspond with the name as it appears on the
security position listing as the holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any tendered Old Notes, nor provide
a separate bond power.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed herein, such
Old Notes must be endorsed or accompanied by appropriate bond powers and a proxy
which authorizes such person to tender the Old Notes on behalf of the registered
holder or holders, in each case signed as the name of the registered holder or
holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuers or the Company, evidence satisfactory to the
Issuers and the Company of their authority to act must be submitted with this
Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on a Letter of Transmittal or notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution unless (i) this Letter of
Transmittal (or facsimile hereof) is signed by the registered holder(s) of the
Old Notes tendered herein (or by a participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of the
tendered Old Notes) and the Exchange Notes are to be issued directly to such
registered holder(s) (or, if signed by a participant in the Book-Entry Transfer
Facility, deposited to such participant's account at such Book-Entry Transfer
Facility) and neither the box entitled "Special Issuance Instructions" nor the
box entitled "Special Delivery Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution.
6. Special Issuance and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which Exchange Notes or substitute Old
Notes for principal amounts not tendered or not accepted for exchange are to be
issued or sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. Transfer Taxes. The Issuers and the Company will pay all transfer taxes,
if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer.
If, however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes
9
<PAGE> 10
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a holder
of any Old Notes which are accepted for exchange must provide the Issuers (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual is his or her social security number. If
the Issuers is not provided with the correct TIN, the holder may be subject to a
$50 penalty imposed by Internal Revenue Service. If withholding results in an
over-payment of taxes, a refund may be obtained. Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.
The Issuers reserve the right in its sole discretion to take whatever steps
are necessary to comply with the Issuers' obligations regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be determined by the Issuers and the Company in their sole discretion,
which determination will be final and binding. The Issuers and the Company
reserve the absolute right to reject any and all Old Notes not properly tendered
or any Old Notes which, if accepted, would, in the opinion of the Issuers and
the Company or their counsel, be unlawful. The Issuers and the Company also
reserve the absolute right to waive any conditions of the Exchange Offer or
irregularities or conditions of tender as to particular Old Notes. The
interpretation of the terms and conditions by the Issuers and the Company of the
Exchange Offer (which includes this Letter of Transmittal and the instructions
hereto) shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Issuers and the Company shall determine. Neither the Issuers, the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes,
nor shall any of them incur any liability for failure to give such notification.
10. Waiver of Conditions. The Issuers and the Company reserve the absolute
right to waive, in whole or part, any of the conditions to the Exchange Offer
set forth in the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address or
telephone number set forth on the cover page of this Letter of Transmittal.
Holders may also
10
<PAGE> 11
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
11
<PAGE> 12
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
BOX AT RIGHT AND CERTIFY BY SIGNING AND OR
FORM W-9 DATING BELOW Employer Identification Number
Department of the Treasury
Internal Revenue Service
--------------------------------------------------------------------------------
PAYER'S REQUEST FOR PART 2 -- Certification -- Under penal- PART 3 --
TAXPAYER IDENTIFICATION ties of perjury, I certify that:
NUMBER (TIN) Awaiting TIN [ ]
(1) The number shown on this form is my Please complete the
correct Taxpayer Identification Certificate of Awaiting
Number (or I am waiting for a number Taxpayer Identification
to be issued to me) and Number below.
(2) I am not subject to backup with-
holding either because I have not
been notified by the Internal Reve-
nue Service ("IRS") that I am subject
to backup withholding as a result of
failure to report all interest or
dividends, or the IRS has notified me
that I am no longer subject to backup
withholding.
--------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
Signature ------------------------------- Date-----------------------, 1998
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payor within 60
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
<TABLE>
<S> <C>
- ----------------------------------------------------------- --------------------------------, 1998
Signature Date
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States citizen
or resident (or I am signing for a foreign corporation, partnership, estate or
trust).
<TABLE>
<S> <C>
- ----------------------------------------------------------- --------------------------------, 1998
Signature Date
</TABLE>
- -------------------------------------------------------------------------------
12
<PAGE> 1
EXHIBIT 99.2
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER
6, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
BANK ONE, N.A.
<TABLE>
<S> <C>
By Hand/Overnight Courier: Facsimile Transmission Number
Bank One, N.A. 614-244-5185
235 West Schrock Road or 614-244-5188
Westerville, OH 43271-0184 (For Eligible Institutions Only)
Attention: Corporate Trust Operations Confirm by Telephone
Lora Marsch 800-346-5153
(If by Mail, Registered
Certified Mail Recommended)
</TABLE>
---------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE IN THE BOX PROVIDED ON
THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
This form, or one substantially equivalent hereto, must be used by a holder
to accept the Exchange Offer of Calair L.L.C. ("Calair"), a Delaware limited
liability company and an indirect subsidiary of Continental Airlines, Inc.
("Continental" or the "Company"), a Delaware corporation, Calair Capital
Corporation ("Calair Capital" and, together with Calair, the "Issuers"), a
Delaware corporation and a wholly owned subsidiary of Calair, and Continental
and to tender 8 1/8% Senior Notes due 2008 (the "Old Notes") to the Exchange
Agent pursuant to the guaranteed delivery procedures described in "The Exchange
Offer -- Guaranteed Delivery Procedures" of the Prospectus of the Issuers and
the Company, dated September 1, 1998 (the "Prospectus") and in Instruction 2 to
the related Letter of Transmittal. Any holder who wishes to tender Old Notes
pursuant to such guaranteed delivery procedures must ensure that the Exchange
Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers and the Company, upon the
terms and subject to the conditions set forth in the Prospectus and the related
Letter of Transmittal, receipt of which is hereby acknowledged, the principal
amount of Old Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 2 of the Letter of
Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD NOTES AGGREGATE PRINCIPAL AMOUNT AGGREGATE PRINCIPAL AMOUNT
OR ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY REPRESENTED TENDERED
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Names of Record Holders: Signatures:
---------------------------- -----------------------------------------
Address: -------------------------------------------- -----------------------------------------------------
- ----------------------------------------------------- Dated: ---------------------------------------, 1998
Area Code and Telephone Numbers:
--------------------
- -----------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17 Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the certificates for all physically tendered
Old Notes tendered hereby, in proper form for transfer, or confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility described in the Prospectus under the caption "The
Exchange Offer -- Book-Entry Transfer" and in the Letter of Transmittal, as the
case may be, and any other required documents, all by 5:00 p.m., New York City
time, within three NYSE trading days after the date of execution of this Notice
of Guaranteed Delivery.
<TABLE>
<S> <C>
Name of Firm: -----------------------------------------------------
(Authorized Signature)
- -----------------------------------------------------
Address: Name:
-------------------------------------------- -----------------------------------------------
(Include Zip Code) Title:
----------------------------------------------
(Please Type or Print)
Area Code and Tel. Number:
- -----------------------------------------------------
Date:
---------------------------------------- , 1998
</TABLE>
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
3
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery (or facsimile hereof)
and any other documents required by this Notice of Guaranteed Delivery must be
received by the Exchange Agent at its address set forth herein prior to the
Expiration Date. The method of delivery of this Notice of Guaranteed Delivery
and any other required documents to the Exchange Agent is at the election and
sole risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedures, see the Prospectus and Instruction 2 of
the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery (or facsimile hereof) is signed by the registered holder(s)
of the Old Notes referred to herein, the signature must correspond with the
name(s) written on the face of the Old Notes without alteration, enlargement, or
any change whatsoever. If this Notice of Guaranteed Delivery (or facsimile
hereof) is signed by a participant of the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the Old Notes, the
signature must correspond with the name shown on the security position listing
as the owner of the Old Notes.
If this Notice of Guaranteed Delivery (or facsimile hereof) is signed by a
person other than the registered holder(s) of any Old Notes listed or a
participant of the Book-Entry Transfer Facility, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers, signed as the name of
the registered holder(s) appears on the Old Notes or signed as the name of the
participant shown on the Book-Entry Transfer Facility's security position
listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in- fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address or telephone number set forth on the cover
page of this Notice of Guaranteed Delivery. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
4
<PAGE> 1
EXHIBIT 99.3
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON OCTOBER 6, 1998. UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by Calair L.L.C. ("Calair"), a Delaware limited liability company and an
indirect subsidiary of Continental Airlines, Inc. ("Continental" or the
"Company"), a Delaware corporation, Calair Capital Corporation ("Calair Capital"
and, together with Calair, the "Issuers"), a Delaware corporation and a wholly
owned subsidiary of Calair, and Continental to exchange the Issuers' 8 1/8%
Senior Notes due 2008 (the "Exchange Notes"), which have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount of the Issuers' issued and outstanding 8 1/8% Senior Notes due
2008 (the "Old Notes") upon the terms and subject to the conditions set forth in
the Prospectus, dated September 1, 1998, and the related Letter of Transmittal
(which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated September 1, 1998;
2. Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee; and
5. Letter which may be sent from your clients to you with such
client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire on the Expiration Date unless extended. The Exchange Offer is
not conditioned upon any minimum number of Old Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Issuers and the Company that (i) any Exchange Notes acquired in
exchange for Old Notes pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the person receiving such Exchange Notes, whether
or
<PAGE> 2
not the holder, (ii) the holder is not engaged in, does not intend to engage in,
and has no arrangement with any person to participate in, a distribution (within
the meaning of the Securities Act) of Exchange Notes and (iii) neither the
holder nor any such other person is an "affiliate" (within the meaning of Rule
405 under the Securities Act) of the Company or the Issuers or a broker-dealer
tendering Old Notes acquired directly from the Company or the Issuers. If the
holder is a broker-dealer that will receive Exchange Notes for its own account
in exchange for Old Notes, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The enclosed Letter to Clients contains an authorization by the beneficial
owners of the Old Notes for you to make the foregoing representations.
The Issuers and the Company will not pay any fee or commission to any
broker or dealer or to any other persons (other than the Exchange Agent) in
connection with the solicitation of tenders of Old Notes pursuant to the
Exchange Offer. The Issuers and the Company will pay or cause to be paid any
transfer taxes payable on the transfer of Old Notes to them, except as otherwise
provided in Instruction 7 of the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
2
<PAGE> 1
EXHIBIT 99.4
CALAIR L.L.C.
CALAIR CAPITAL CORPORATION
CONTINENTAL AIRLINES, INC.
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8 1/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON OCTOBER 6, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated September 1, 1998, of Calair
L.L.C. ("Calair"), a Delaware limited liability company and an indirect
subsidiary of Continental Airlines, Inc. ("Continental" or the "Company"), a
Delaware corporation, Calair Capital Corporation ("Calair Capital" and, together
with Calair, the "Issuers"), a Delaware corporation and a wholly owned
subsidiary of Calair, and Continental and a related Letter of Transmittal (which
together constitute the "Exchange Offer") relating to the offer by the Issuers
and the Company, to exchange the Issuers' 8 1/8% Senior Notes due 2008 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), for a like principal amount of the Issuers'
issued and outstanding 8 1/8% Senior Notes due 2008 (the "Old Notes"), upon the
terms and subject to the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
We are the holder of record of Old Notes held by us for your own account. A
tender of such Old Notes can be made only by us as the record holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Old Notes held by us
for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your behalf
make the representations and warranties contained in the Letter of Transmittal.
Very truly yours,
<PAGE> 2
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN AMPLE
TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION
DATE.
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
September 1, 1998 (the "Prospectus") of Calair L.L.C. ("Calair"), a Delaware
limited liability company and an indirect subsidiary of Continental Airlines,
Inc. ("Continental" or the "Company"), Calair Capital Corporation ("Calair
Capital" and, together with Calair, the "Issuers"), a Delaware corporation and a
wholly owned subsidiary of Calair, and Continental, a Delaware corporation, and
the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the offer of the Company and the Issuers (the "Exchange
Offer") to exchange the Issuers' 8 1/8% Senior Notes due 2008 (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for all of the Issuers' outstanding 8 1/8% Senior Notes
due 2008, (the "Old Notes"). Capitalized terms used but not defined herein have
the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$ of the 8 1/8% Senior Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] To TENDER the following Old Notes held by you for the account
of the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED)
(IF ANY): $ .
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
Exchange Notes acquired in exchange for Old Notes pursuant to the Exchange Offer
are being acquired in the ordinary course of business of the person receiving
such Exchange Notes, whether or not the undersigned, (ii) the undersigned is not
engaged in, does not intend to engage in, and has no arrangement with any person
to participate in, a distribution (within the meaning of the Securities Act) of
Exchange Notes and (iii) neither the undersigned nor any such other person is an
"affiliate" (within the meaning of Rule 405 under the Securities Act) of the
Issuers or the Company or a broker-dealer tendering Old Notes acquired directly
from the Issuers or the Company. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
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<PAGE> 3
SIGN HERE
Name of beneficial owner(s):
- --------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
Name(s) (please print):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Telephone Number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
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