Registration No. ____________
Filed with the Securities and Exchange Commission on September 14, 2000
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
CONTINENTAL AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-2099724
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
1600 SMITH STREET, DEPT. HQSEO
HOUSTON, TEXAS 77002
(713) 324-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------
JEFFERY A. SMISEK, ESQ. COPIES OF CORRESPONDENCE TO:
EXECUTIVE VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY JOHN K. HOYNS, ESQ.
CONTINENTAL AIRLINES, INC. HUGHES HUBBARD & REED LLP
1600 SMITH STREET, DEPT. HQSEO ONE BATTERY PARK PLAZA
HOUSTON, TEXAS 77002 NEW YORK, NEW YORK 10004-1482
(713) 324-2950
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. | |
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. | |
Pursuant to Rule 429 of the Rules and Regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended, the form of
prospectus included in this registration statement also relates to an
aggregate remaining amount of $756,683,000 of pass through certificates
covered by such form of prospectus previously registered under the
registrant's registration statement on Form S-3 (File No. 333-91765).
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE (2)
(1)
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Pass through certificates $1,700,000,000 (3) $1,700,000,000 $249,036 (4)
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(1) Estimated solely for purposes of determining the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(o), the registration fee has been calculated on the
basis of the maximum aggregate offering price of the securities listed.
(3) Omitted pursuant to Rule 457(o).
(4) A filing fee of $199,764 was previously paid in connection with the pass
through certificates included herein remaining from the registrant's
registration statement on Form S-3 (File No. 333-91765).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
WILL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT WILL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION - DATED SEPTEMBER 14, 2000
PROSPECTUS
$1,700,000,000
CONTINENTAL AIRLINES, INC.
PASS THROUGH CERTIFICATES
--------------------------
This prospectus relates to pass through certificates to be issued by
one or more trusts that we will form, as creator of each pass through trust,
with a national or state bank or trust company, as trustee. The trustee will
hold all property owned by a trust for the benefit of holders of pass through
certificates issued by that trust. Each pass through certificate issued by a
trust will represent a beneficial interest in all property held by that trust.
We will describe the specific terms of any offering of pass through
certificates in a prospectus supplement to this prospectus. You should read
this prospectus and the applicable prospectus supplement carefully before you
invest.
This prospectus may not be used to consummate sales of pass through
certificates unless accompanied by a prospectus supplement.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------------
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
The date of this prospectus is ____________, 2000.
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TABLE OF CONTENTS
PAGE PAGE
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Where You Can Find More Defeasance of the Indentures
Information.....................1 and the Equipment Notes in
Certain Circumstances..........25
Assumption of Obligations by
Forward-Looking Statements........1 Continental....................25
Liquidity Facility.............25
Intercreditor Issues...........25
Incorporation of Certain
Documents by Reference..........2 U.S. Income Tax Matters..........26
General........................26
Summary...........................3 Tax Status of the Pass Through
The Offering....................3 Trusts.........................26
Certificates....................3 Taxation of Certificateholders
Pass Through Trusts.............4 Generally......................26
Equipment Notes.................4 Effect of Subordination of
Certificateholders
The Company.......................6 of Subordinated Trusts.........27
Original Issue Discount........27
Use of Proceeds...................6 Sale or Other Disposition of
the Certificates...............27
Ratio of Earnings to Fixed Foreign Certificateholders.....28
Charges...........................7 Backup Withholding.............28
Description of the Certificates...7 ERISA Considerations.............28
General.........................7
Book-Entry Registration........11 Plan of Distribution.............28
Payments and Distributions.....13
Pool Factors...................14 Legal Opinions...................30
Reports to Certificateholders..15
Voting of Equipment Notes......15 Experts..........................30
Events of Default and Certain
Rights Upon an Event of
Default........................16
Merger, Consolidation and
Transfer of Assets.............18
Modifications of the Basic
Agreement......................18
Modification of Indenture and
Related Agreements.............19
Cross-Subordination Issues.....19
Termination of the Pass Through
Trusts.........................20
Delayed Purchase of Equipment
Notes..........................20
Liquidity Facility.............20
The Pass Through Trustee.......20
Description of the Equipment
Notes............................21
General........................21
Principal and Interest
Payments.......................21
Redemption.....................22
Security.......................22
Ranking of Equipment Notes.....24
Payments and Limitation of
Liability......................24
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC under the Securities Exchange Act of 1934.
You may read and copy this information at the following locations of the SEC:
Judiciary Plaza Seven World Trade Center Citicorp Center
450 Fifth Street, N.W. 13th Floor 500 West Madison Street,
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
You may also obtain copies of this information by mail from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at (800) SEC-0330.
The SEC also maintains an internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, who
file reports electronically with the SEC. The address of that site is
HTTP://WWW.SEC.GOV.
You may also inspect reports, proxy statements and other information
about us at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed with the SEC a registration statement on Form S-3, which
registers the securities that we may offer under this prospectus. The
registration statement, including the attached exhibits and schedules,
contains additional relevant information about us and the securities
offered. The rules and regulations of the SEC allow us to omit certain
information included in the registration statement from this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement delivered with this
prospectus and the documents we incorporate by reference may contain
statements that constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include any statements that
predict, forecast, indicate or imply future results, performance or
achievements, and may contain the words "believe," "anticipate," "expect,"
"estimate," "project," "will be," "will continue," "will result," or words or
phrases of similar meaning.
Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results may vary
materially from anticipated results for a number of reasons, including those
stated in our SEC reports incorporated in this prospectus by reference or as
stated in a prospectus supplement to this prospectus under the caption "Risk
Factors".
All forward-looking statements attributable to us are expressly
qualified in their entirety by the cautionary statements above.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be part of this
prospectus, except for any information that is superseded by subsequent
incorporated documents or by information that is included directly in this
prospectus or any prospectus supplement.
This prospectus includes by reference the documents listed below that
we previously have filed with the SEC and that are not delivered with this
document. They contain important information about our company and its
financial condition.
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FILING DATE FILED
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Annual Report on Form 10-K for the year ended December February 11, 2000
31, 1999
Quarterly Report on Form 10-Q for the quarter ended March April 20, 2000
31, 2000
Quarterly Report on Form 10-Q for the quarter ended June July 18, 2000
30, 2000
Amendment to Quarterly Report on Form 10-Q for the July 25, 2000
quarter ended June 30, 2000
Current Report on Form 8-K January 18, 2000
Current Report on Form 8-K February 8, 2000
Current Report on Form 8-K March 30, 2000
Current Report on Form 8-K March 31, 2000
Current Report on Form 8-K June 13, 2000
</TABLE>
Our SEC file number is 0-9781.
We incorporate by reference additional documents that we may file with
the SEC between the date of this prospectus and the termination of the
offering of securities under this prospectus. These documents include our
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, as well as our proxy statements.
You may obtain any of these incorporated documents from us without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference in such document. You may obtain
documents incorporated by reference in this prospectus by requesting them
from us in writing or by telephone at the following address:
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
Attention: Secretary
(713) 324-2950.
<PAGE>
SUMMARY
THE OFFERING
This prospectus describes the pass through certificates that we may
offer from time to time after the date of this prospectus. The proceeds of
these offerings will be used to provide funds for the financing or
refinancing of our aircraft. For convenience, throughout this prospectus,
the words we, us, ours or similar words refer to Continental Airlines, Inc.
This prospectus describes the general terms of the pass through
certificates. The actual terms of any offering of pass through certificates
will be described in a supplement to this prospectus. To the extent that any
provision in any prospectus supplement is inconsistent with any provision in
this prospectus, the provision of the prospectus supplement will control.
CERTIFICATES
Pass through certificates are securities that evidence an ownership
interest in a pass through trust. The holders of the certificates issued by
a pass through trust will be the beneficiaries of that trust. For
convenience, we may refer to pass through certificates as "certificates" and
refer to the holder of a pass through certificate as a "certificateholder."
The beneficial interest in a pass through trust represented by a
certificate will be a percentage interest in the property of that trust equal
to the original face amount of such certificate divided by the original face
amount of all of the certificates issued by that trust. Each certificate
will represent a beneficial interest only in the property of the pass through
trust that issued the certificate. Multiple series of certificates may be
issued. If more than one series of certificates is issued, each series of
certificates will be issued by a separate pass through trust.
The property that will be held by each pass through trust will include
equipment notes secured by aircraft that we own or lease. Payments of
principal and interest on the equipment notes owned by a pass through trust
will be passed through to holders of certificates issued by that trust in
accordance with the terms of the pass through trust agreement pursuant to
which the trust was formed.
If certificates of any series are entitled to the benefits of a
liquidity facility or other form of credit enhancement, the prospectus
supplement relating to that series will describe the terms of the liquidity
facility or other form of credit enhancement. A liquidity facility is a
revolving credit agreement, letter of credit, bank guarantee, insurance
policy or other instrument or agreement under which another person agrees to
make certain payments in respect of the certificates if there is a shortfall
in amounts otherwise available for distribution. While a liquidity facility
is designed to increase the likelihood of the timely payment of certain
amounts due under certificates, it is not a guarantee of timely or ultimate
payment.
The rights of a pass through trustee to receive monies payable under
equipment notes held for that pass through trustee may be subject to the
effect of subordination provisions contained in an intercreditor agreement
described in the prospectus supplement for a series of certificates. An
intercreditor agreement will set forth the terms and conditions upon which
payments made under the equipment notes and payments made under any liquidity
facility will be received, shared and distributed among the several pass
through trustees and the liquidity provider.
We may offer and sell up to $1,700,000,000 of aggregate initial
offering price of certificates pursuant to this prospectus and related
prospectus supplements in one or more offerings of certificates. The initial
offering price may be denominated in U.S. dollars or foreign currencies based
on the applicable exchange rate at the time of sale.
<PAGE>
PASS THROUGH TRUSTS
We will form a separate pass through trust to issue each series of
certificates. Each pass through trust will be formed by us, as creator of
each pass through trust, and a national or state bank or trust company, as
trustee. Unless otherwise stated in a prospectus supplement, Wilmington
Trust Company will be the trustee of each pass through trust. For
convenience, we may refer to the pass through trustee as the trustee.
Each pass through trust will be governed by a trust instrument that
creates the trust and sets forth the powers of the trustee and the rights of
the beneficiaries. The beneficiaries of a pass through trust will be the
holders of certificates issued by that trust. The trust instrument for each
pass through trust will consist of a basic pass through trust agreement
between us and the pass through trustee, which we refer to as the "Basic
Agreement", and a supplement to that basic agreement, which we refer to as a
"pass through trust supplement."
When a pass through trust supplement is signed and delivered, the pass
through trustee, on behalf of the related pass through trust, will enter into
one or more purchase or refunding agreements, referred to as "note purchase
agreements," under which it will agree to purchase one or more promissory
notes secured by aircraft described in the applicable prospectus supplement.
These secured promissory notes are referred to as "equipment notes."
Under the applicable note purchase agreement, the pass through trustee,
on behalf of the related pass through trust, will purchase one or more
equipment notes. The equipment notes that are the property of a pass through
trust will have:
o identical interest rates, in each case equal to the rate applicable
to the certificates issued by such pass through trust; and
o identical priority of payment relative to each of the other
equipment notes held for such pass through trust.
If any portion of the proceeds of an offering of a series of
certificates is not used to purchase equipment notes on the date the
certificates are originally issued, those proceeds will be held for the
benefit of the certificateholders. If any of the proceeds are not later used
to purchase equipment notes by the date specified in the applicable
prospectus supplement, the proceeds will be returned to the
certificateholders.
EQUIPMENT NOTES
The equipment notes owned by a pass through trust may consist of any
combination of:
o Equipment notes issued by an owner trustee and secured by an
aircraft owned by that trustee and leased to us. We refer to these
equipment notes as "leased aircraft notes."
o Equipment notes issued by us and secured by an aircraft owned by us.
We refer to these equipment notes as "owned aircraft notes."
LEASED AIRCRAFT NOTES. Except as specified in a prospectus supplement,
leased aircraft notes will be issued by a bank, trust company, financial
institution or other entity solely in its capacity as owner trustee in a
leveraged lease transaction. In a leveraged lease transaction, one or more
persons will form an owner trust to acquire an aircraft and then that owner
trust will lease the aircraft to us. The investors that are the
beneficiaries of the owner trusts are typically referred to as owner
participants. Each owner participant will contribute a portion of the
purchase price of the aircraft to the owner trust, and the remainder of the
purchase price of the aircraft will be financed, or "leveraged", through the
issuance of leased aircraft notes. Leased aircraft notes may also be issued
to refinance an aircraft previously financed in a leveraged lease transaction
or otherwise.
<PAGE>
The leased aircraft notes will be issued pursuant to a separate
indenture between the owner trustee and a bank, trust company, financial
institution or other entity, as loan trustee. The indenture entered into in
connection with the issuance of leased aircraft notes will be referred to as
a "leased aircraft indenture." The loan trustee under a leased aircraft
indenture will act as a trustee for the holders of the leased aircraft notes
issued under that leased aircraft indenture.
In a leveraged lease transaction, we will pay or advance rent and other
amounts to the owner trustee in its capacity as lessor under the lease. The
owner trustee will use the rent payments and certain other amounts received
by it to make payments of principal and interest on the leased aircraft
notes. The owner trustee also will assign its rights to receive basic rent
and certain other payments to a loan trustee as security for the owner
trustee's obligations to pay principal of, premium, if any, and interest on
the leased aircraft notes.
Payments or advances required to be made under a lease and related
agreements will at all times be sufficient to make scheduled payments of
principal of, and interest on, the leased aircraft notes issued to finance
the aircraft subject to that lease. However, we will not have any direct
obligation to pay principal of, or interest on, the leased aircraft notes.
No owner participant or owner trustee will be personally liable for any
amount payable under a leased aircraft indenture or the leased aircraft notes
issued under that indenture.
OWNED AIRCRAFT NOTES. We may finance or refinance aircraft that we own
through the issuance of owned aircraft notes. Owned aircraft notes relating
to an owned aircraft will be issued under a separate indenture relating to
that owned aircraft. Each separate indenture relating to owned aircraft
notes will be between us and a bank, trust company, financial institution or
other entity, as loan trustee. The indenture entered into in connection with
the issuance of owned aircraft notes will be referred to as an "owned
aircraft indenture." Because we often refer to owned aircraft indentures and
leased aircraft indentures together, we sometimes refer to them collectively
as the "indentures". The loan trustee under an owned aircraft indenture will
act as a trustee for the holders of the owned aircraft notes issued under
that owned aircraft indenture.
Unlike the leased aircraft notes, we will have a direct obligation to
pay the principal of, and interest on, the owned aircraft notes.
<PAGE>
THE COMPANY
We are a major United States air carrier engaged in the business of
transporting passengers, cargo and mail. We are the fifth largest U.S.
airline, as measured by revenue passenger miles in the first six months of
2000, and, together with our wholly owned subsidiaries, Continental Express,
Inc. and Continental Micronesia, Inc., serve 230 airports worldwide. As of
June 30, 2000, we flew to 136 domestic and 94 international destinations and
offered additional connecting service through alliances with domestic and
foreign air carriers. We directly serve 16 European cities and Tel Aviv and
are one of the leading airlines providing service to Mexico and Central
America, serving more destinations there than any other U.S. airline.
Continental Micronesia provides extensive service in the western Pacific,
including service to more Japanese cities than any other U.S. carrier.
We operate our route system primarily through domestic hubs at Newark
International Airport, George Bush Intercontinental Airport in Houston,
Hopkins International Airport in Cleveland, and a Pacific hub on the island
of Guam. We are the primary carrier at each of these hubs, accounting for
55%, 77%, 49% and 71% of average daily jet departures, respectively, as of
June 30, 2000 (in each case excluding regional jets). Each of our domestic
hubs is located in a large business and population center, contributing to a
high volume of "origin and destination" traffic. The Guam hub is
strategically located to provide service from Japanese and other Asian cities
to popular resort destinations in the western Pacific.
We are a Delaware corporation, with executive offices located at 1600
Smith Street, Houston, Texas 77002. Our telephone number is (713) 324-2950.
USE OF PROCEEDS
Except as set forth in a prospectus supplement for a specific offering
of certificates, the certificates will be issued in order to provide funds
for:
o the financing or refinancing of the debt portion and, in certain
cases, the refinancing of some of the equity portion of one or more
separate leveraged lease transactions entered into by us, as lessee,
with respect to the leased aircraft as described in the applicable
prospectus supplement; and
o the financing or refinancing of debt to be issued, or the purchase
of debt previously issued, by us in respect of the owned aircraft as
described in the applicable prospectus supplement.
Except as set forth in a prospectus supplement for a specific offering
of certificates, the proceeds from the sale of the certificates will be used
by the pass through trustee on behalf of the applicable pass through trust or
pass through trusts to purchase either:
o leased aircraft notes issued by one or more owner trustees to
finance or refinance, as specified in the applicable prospectus
supplement, the related leased aircraft; or
o owned aircraft notes issued by us to finance or refinance, as
specified in the applicable prospectus supplement, the related owned
aircraft.
If any portion of the proceeds of an offering of a series of certificates is
not used to purchase equipment notes on the date the certificates are issued,
those proceeds will be held for the benefit of the certificateholders. If
any of the proceeds are not later used to purchase equipment notes by the
date specified in the applicable prospectus supplement, the proceeds will be
returned to the certificateholders. See "Description of Certificates--Delayed
Purchase of Equipment Notes".
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of our "earnings" to our "fixed charges" for each of the
years 1995 through 1999 and for the six months ended June 30, 2000 were:
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- --------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- --------------
1.53 1.81 2.07 1.94 1.80 1.50
The ratios of earnings to fixed charges are based on continuing
operations. For purposes of the ratios, "earnings" means the sum of:
o our pre-tax income; and
o our fixed charges, net of interest capitalized.
"Fixed charges" represent:
o the interest we pay on borrowed funds;
o the amount we amortize for debt discount, premium and issuance
expense and interest previously capitalized; and
o that portion of rentals considered to be representative of the
interest factor.
DESCRIPTION OF THE CERTIFICATES
The following description is a summary of the terms of the certificates
that we expect will be common to all series of certificates. We will
describe the financial terms and other specific terms of any series of
certificates in a prospectus supplement. To the extent that any provision in
any prospectus supplement is inconsistent with any provision in this
prospectus, the provision of the prospectus supplement will control.
Because the following description is a summary, it does not describe
every aspect of the certificates, and it is subject to and qualified in its
entirety by reference to all the provisions of the pass through trust
agreement and the applicable supplements to the pass through trust
agreement. For convenience, we will refer to the pass through trust
agreement between the pass through trustee and us as the "Basic Agreement,"
and to the Basic Agreement as supplemented by a supplement as a "pass through
trust agreement." The form of Basic Agreement has been filed as an exhibit
to the registration statement of which this prospectus is a part. The
supplement to the Basic Agreement relating to each series of certificates and
the forms of the other agreements described in this prospectus and the
applicable prospectus supplement will be filed as exhibits to a
post-effective amendment to the registration statement of which this
prospectus is a part, a Current Report on Form 8-K, a Quarterly Report on
Form 10-Q or an Annual Report on Form 10-K, as applicable, filed by us with
the SEC.
GENERAL
Except as amended by a supplement to the Basic Agreement, the terms of
the Basic Agreement generally will apply to all of the pass through trusts
that we form to issue certificates. We will create a separate pass through
trust for each series of certificates by entering into a separate supplement
to the Basic Agreement. Each supplement to the Basic Agreement will contain
the additional terms governing the specific pass through trust to which it
relates and, to the extent inconsistent with the Basic Agreement, will
supersede the Basic Agreement.
<PAGE>
Certificates for a pass through trust will be issued pursuant to the
pass through trust agreement applicable to such pass through trust. Unless
otherwise stated in the applicable prospectus supplement, each pass through
certificate will be issued in a minimum denomination of $1,000 or a multiple
of $1,000, except that one certificate of each series may be issued in a
different denomination.
Each certificate will represent a fractional undivided interest in the
property of the pass through trust that issued the certificate. All payments
and distributions made with respect to a certificate will be made only from
the property owned by the pass through trust that issued the certificate.
The certificates do not represent an interest in or obligation of
Continental, the pass through trustee, any of the owner trustees or loan
trustees, in their individual capacities, or any owner participant. Each
certificateholder by its acceptance of a certificate agrees to look solely to
the income and proceeds from the property of the applicable pass through
trust as provided in the pass through trust agreement.
The property of each pass through trust for which a series of
certificates will be issued will include:
o the equipment notes held for the pass through trust;
o all monies at any time paid under the equipment notes held for the
pass through trust;
o the rights of such pass through trust to acquire equipment notes;
o funds from time to time deposited with the pass through trustee in
accounts relating to that pass through trust; and
o if so specified in the relevant prospectus supplement, rights under
intercreditor agreements relating to cross-subordination
arrangements and monies receivable under a liquidity facility.
The rights of a pass through trustee to receive monies payable under
equipment notes held for that pass through trustee may be subject to the
effect of subordination provisions contained in an intercreditor agreement
described in the prospectus supplement for a series of certificates. An
intercreditor agreement refers to an agreement among the pass through
trustees and, if applicable, a liquidity provider under a liquidity facility,
as creditors of the issuers of the equipment notes owned by the pass through
trustees. An intercreditor agreement will set forth the terms and conditions
upon which payments made under the equipment notes and payments made under
any liquidity facility will be received, shared and distributed among the
several pass through trustees and the liquidity provider. In addition, the
intercreditor agreement will set forth agreements among the pass through
trustees and the liquidity provider relating to the exercise of remedies
under the equipment notes and the indentures.
Cross-subordination refers to an agreement under which payments on a
junior class of equipment notes issued under an indenture are distributed to
a pass through trustee that holds a senior class of equipment notes issued
under a different indenture on which all required payments were not made.
The effect of this distribution mechanism is that holders of certificates of
a pass through trust that owns a junior class of equipment notes will not
receive payments made on that junior class of equipment notes until certain
distributions are made on the certificates of the pass through trust that
owns a senior class of equipment notes.
Equipment notes owned by a pass through trust may be leased aircraft
notes, owned aircraft notes or a combination of leased aircraft notes and
owned aircraft notes.
Leased aircraft notes will be issued in connection with the leveraged
lease of an aircraft to us. Except as set forth in the applicable prospectus
supplement, each leased aircraft will be leased to us under a lease between
us, as lessee, and an owner trustee, as lessor. Each owner trustee will
issue leased aircraft notes on a non-recourse basis under a separate leased
aircraft indenture between it and the applicable loan trustee. The owner
trustee will use the proceeds of the sale of the leased aircraft notes to
finance or refinance a portion of the purchase price paid or to be paid by
the owner trustee for the applicable leased aircraft. The owner trustee will
obtain the remainder of the funding for the leased aircraft from an equity
contribution from the owner participant that is the beneficiary of the owner
trust and, to the extent set forth in the applicable prospectus supplement,
<PAGE>
additional debt secured by the applicable leased aircraft or other sources.
A leased aircraft also may be subject to other financing arrangements.
Generally, neither the owner trustee nor the owner participant will be
personally liable for any principal or interest payable under any leased
aircraft indenture or any leased aircraft notes. In some cases, an owner
participant may be required to make payments to an owner trustee that are to
be used by the owner trustee to pay principal of, and interest on, the
equipment notes. If an owner participant is required to make payments to be
used by an owner trustee to pay principal of, and interest on, the equipment
notes and the owner participant fails to make the payment, we will be
required to provide the owner trustee with funds sufficient to make the
payment. We will be obligated to make payments or advances under a lease and
the related documents sufficient to pay when due all scheduled principal and
interest payments on the leased aircraft notes issued to finance the aircraft
subject to that lease.
We will issue owned aircraft notes under separate owned aircraft
indentures. Owned aircraft notes will be issued in connection with the
financing or refinancing of an aircraft that we own. Owned aircraft notes
will be obligations that have recourse to us and the related aircraft. Any
owned aircraft may secure additional debt or be subject to other financing
arrangements.
An indenture may provide for the issuance of multiple classes of
equipment notes. If an indenture provides for multiple classes of equipment
notes, it may also provide for differing priority of payments among the
different classes. Equipment notes issued under an indenture may be held in
more than one pass through trust, and one pass through trust may hold
equipment notes issued under more than one indenture. Unless otherwise
provided in a prospectus supplement, only equipment notes having the same
priority of payment may be held for the same pass through trust.
Except as set forth in the prospectus supplement for any series of
certificates, interest payments on the equipment notes held for a pass
through trust will be passed through to the registered holders of
certificates of that pass through trust at the annual rate shown on the cover
page of the prospectus supplement for the certificates issued by that pass
through trust. The certificateholders' right to receive payments made in
respect of the equipment notes is subject to the effect of any
cross-subordination provisions described in the prospectus supplement for a
series of certificates.
We refer you to the prospectus supplement that accompanies this
prospectus for a description of the specific series of certificates being
offered by this prospectus and the applicable prospectus supplement,
including:
o the specific designation, title and amount of the certificates;
o amounts payable on and distribution dates for the certificates;
o the currency or currencies, including currency units, in which the
certificates may be denominated;
o the specific form of the certificates, including whether or not the
certificates are to be issued in accordance with a book-entry
system;
o a description of the equipment notes to be purchased by the pass
through trust issuing that series of certificates, including:
o the period or periods within which, the price or prices at
which, and the terms and conditions upon which the equipment
notes may or must be redeemed or defeased in whole or in part,
by us or an owner trustee;
o the payment priority of the equipment notes in relation to any
other equipment notes issued with respect to the related
aircraft; and
<PAGE>
o any intercreditor or other rights or limitations between or
among the holders of equipment notes of different priorities
issued with respect to the same aircraft;
o a description of the aircraft to be financed with the proceeds of
the issuance of the equipment notes;
o a description of the note purchase agreement setting forth the terms
and conditions upon which that pass through trust will purchase
equipment notes;
o a description of the indentures under which the equipment notes to
be purchased for that pass through trust will be issued;
o a description of the events of default, the remedies exercisable
upon the occurrence of events of default and any limitations on the
exercise of those remedies under the indentures pursuant to which
the equipment notes to be purchased for that pass through trust will
be issued;
o if the certificates relate to leased aircraft, a description of the
leases to be entered into by the owner trustees and us;
o if the certificates relate to leased aircraft, a description of the
provisions of the leased aircraft indentures governing:
o the rights of the related owner trustee and/or owner
participant to cure our failure to pay rent under the leases;
and
o any limitations on the exercise of remedies with respect to
the leased aircraft notes;
o if the certificates relate to leased aircraft, a description of the
participation agreements that will set forth the terms and
conditions upon which the owner participant, the owner trustee, the
pass through trustees, the loan trustee and we agree to enter into a
leveraged lease transaction;
o if the certificates relate to an owned aircraft, a description of
the participation agreements that will set forth the terms and
conditions upon which the applicable pass through trustees, the loan
trustee and we agree to enter into a financing transaction for the
owned aircraft;
o a description of the limitations, if any, on amendments to leases,
indentures, pass through trust agreements, participation agreements
and other material agreements entered into in connection with the
issuance of equipment notes;
o a description of any cross-default provisions in the indentures;
o a description of any cross-collateralization provisions in the
indentures;
o a description of any agreement among the holders of equipment notes
and any liquidity provider governing the receipt and distribution of
monies with respect to the equipment notes and the enforcement of
remedies under the indentures, including a description of any
applicable intercreditor and cross-subordination arrangements;
o a description of any liquidity facility or other credit enhancement
relating to the certificates;
o if the certificates relate to aircraft that have not yet been
delivered or financed, a description of any deposit or escrow
agreement or other arrangement providing for the deposit and
investment of funds pending the purchase of equipment notes and the
financing of an owned aircraft or leased aircraft; and
o any other special terms pertaining to the certificates.
<PAGE>
The concept of cross-default mentioned above refers to a situation
where a default under one indenture or lease results in a default under other
indentures or leases. We currently do not expect any indentures or leases to
contain cross-default provisions. The concept of cross-collateralization
mentioned above refers to the situation where collateral that secures
obligations incurred under one indenture also serves as collateral for
obligations under one or more other indentures. We currently do not expect
any indentures to be cross-collateralized.
BOOK-ENTRY REGISTRATION
GENERAL
If specified in the applicable prospectus supplement, the certificates
will be subject to the procedures and provisions described below.
Upon issuance, each series of certificates will be represented by one
or more fully registered global certificates. Each global certificate will
be deposited with, or on behalf of, The Depository Trust Company, referred to
as DTC, and registered in the name of Cede & Co., the nominee of DTC. No
purchaser of a certificate will be entitled to receive a physical certificate
representing an interest in the global certificates, except as set forth
below under "--Physical Certificates". For convenience, we refer to such
purchasers as "certificate owners". Unless and until physical certificates
are issued under the limited circumstances described below, all references in
this prospectus and any prospectus supplement to actions by
certificateholders will refer to actions taken by DTC upon instructions from
DTC participants, and all references to distributions, notices, reports and
statements to certificateholders will refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the certificates, or to DTC participants for
distribution to certificateholders in accordance with DTC procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
"clearing agency" registered pursuant to Section 17A of the Securities
Exchange Act of 1934.
Under the New York Uniform Commercial Code, a "clearing corporation" is
defined as:
o a person that is registered as a "clearing agency" under the federal
securities laws;
o a federal reserve bank; or
o any other person that provides clearance or settlement services with
respect to financial assets that would require it to register as a
clearing agency under the federal securities laws but for an
exclusion or exemption from the registration requirement, if its
activities as a clearing corporation, including promulgation of
rules, are subject to regulation by a federal or state governmental
authority.
A "clearing agency" is an organization established for the execution of
trades by transferring funds, assigning deliveries and guaranteeing the
performance of the obligations of parties to trades.
DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions between
DTC participants through electronic book-entry changes in the accounts of DTC
participants. The ability to execute transactions through book-entry changes
in accounts eliminates the need for transfer of physical certificates. DTC
is owned by a number of DTC participants and by the New York Stock Exchange,
the American Stock Exchange, and the National Association of Securities
Dealers. DTC participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations.
Banks, brokers, dealers, trust companies and other entities that clear
through or maintain a custodial relationship with a DTC participant, either
directly or indirectly, are indirect participants in the DTC system.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers of the
<PAGE>
certificates among DTC participants on whose behalf it acts with respect to
the certificates and to receive and transmit distributions of principal,
premium, if any, and interest with respect to the certificates. DTC
participants and indirect DTC participants with which certificate owners have
accounts similarly are required to make book-entry transfers and receive and
transmit the payments on behalf of their respective customers. Certificate
owners that are not DTC participants or indirect DTC participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
the certificates may do so only through DTC participants and indirect DTC
participants. In addition, certificate owners will receive all distributions
of principal, premium, if any, and interest from the pass through trustee
through DTC participants or indirect DTC participants, as the case may be.
Under a book-entry format, certificate owners may experience some delay
in their receipt of payments, because payments with respect to the
certificates will be forwarded by the pass through trustee to Cede, as
nominee for DTC. DTC will forward payments in same-day funds to each DTC
participant who is credited with ownership of the certificates in an amount
proportionate to the principal amount of that DTC participant's holdings of
beneficial interests in the certificates, as shown on the records of DTC or
its nominee. Each such DTC participant will forward payments to its indirect
DTC participants in accordance with standing instructions and customary
industry practices. DTC participants and indirect DTC participants will be
responsible for forwarding distributions to certificate owners for whom they
act. Accordingly, although certificate owners will not possess physical
certificates, DTC's rules provide a mechanism by which certificate owners
will receive payments on the certificates and will be able to transfer their
interests.
Unless and until physical certificates are issued under the limited
circumstances described below, the only physical certificateholder will be
Cede, as nominee of DTC. Certificate owners will not be recognized by the
pass through trustee as registered owners of certificates under the pass
through trust agreement. Certificate owners will be permitted to exercise
their rights under the pass through trust agreement only indirectly through
DTC. DTC will take any action permitted to be taken by a certificateholder
under the pass through trust agreement only at the direction of one or more
DTC participants to whose accounts with DTC the certificates are credited.
In the event any action requires approval by certificateholders of a certain
percentage of the beneficial interests in a pass through trust, DTC will take
action only at the direction of and on behalf of DTC participants whose
holdings include undivided interests that satisfy the required percentage.
DTC may take conflicting actions with respect to other undivided interests to
the extent that the actions are taken on behalf of DTC participants whose
holdings include those undivided interests. DTC will convey notices and
other communications to DTC participants, and DTC participants will convey
notices and other communications to indirect DTC participants in accordance
with arrangements among them. Arrangements among DTC and its direct and
indirect participants are subject to any statutory or regulatory requirements
as may be in effect from time to time. DTC's rules applicable to itself and
DTC participants are on file with the SEC.
A certificate owner's ability to pledge the certificates to persons or
entities that do not participate in the DTC system, or otherwise to act with
respect to the certificates, may be limited due to the lack of a physical
certificate to evidence ownership of the certificates, and because DTC can
only act on behalf of DTC participants, who in turn act on behalf of indirect
DTC participants.
Neither we nor the pass through trustee will have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the certificates held by Cede, as nominee for DTC, for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests or for the performance by DTC, any DTC participant or any
indirect DTC participant of their respective obligations under the rules and
procedures governing their obligations.
The applicable prospectus supplement will specify any additional
book-entry registration procedures applicable to certificates denominated in
a currency other than U.S. dollars.
SAME-DAY SETTLEMENT AND PAYMENT
As long as the certificates are registered in the name of DTC or its
nominee, we will make all payments to the loan trustee under any lease or any
<PAGE>
owned aircraft indenture in immediately available funds. The pass through
trustee will pass through to DTC in immediately available funds all payments
received from us, including the final distribution of principal with respect
to the certificates of any pass through trust.
Any certificates registered in the name of DTC or its nominee will
trade in DTC's Same-Day Funds Settlement System until maturity. DTC will
require secondary market trading activity in the certificates to settle in
immediately available funds. We cannot give any assurance as to the effect,
if any, of settlement in same-day funds on trading activity in the
certificates.
PHYSICAL CERTIFICATES
Physical certificates will be issued in paper form to
certificateholders or their nominees, rather than to DTC or its nominee, only
if:
o we advise the pass through trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as
depository with respect to the certificates and we are unable to
locate a qualified successor;
o we elect to terminate the book-entry system through DTC; or
o after the occurrence of certain events of default or other events
specified in the related prospectus supplement, certificateholders
owning at least a majority in interest in a pass through trust
advise the applicable pass through trustee, us and DTC through DTC
participants that the continuation of a book-entry system through
DTC or a successor to DTC is no longer in the certificate owners'
best interest.
Upon the occurrence of any of the events described in the three
subparagraphs above, the applicable pass through trustee will notify all
certificate owners through DTC participants of the availability of physical
certificates. Upon surrender by DTC of the global certificates and receipt
of instructions for re-registration, the pass through trustee will reissue
the certificates as physical certificates to certificate owners.
After physical certificates are issued, the pass through trustee or a
paying agent will make distributions of principal, premium, if any, and
interest with respect to certificates directly to holders in whose names the
physical certificates were registered at the close of business on the
applicable record date. Except for the final payment to be made with respect
to a certificate, the pass through trustee or a paying agent will make
distributions by check mailed to the addresses of the registered holders as
they appear on the register maintained by the pass through trustee. The pass
through trustee or a paying agent will make the final payment with respect to
any pass through certificate only upon presentation and surrender of the
applicable pass through certificate at the office or agency specified in the
notice of final distribution to certificateholders.
Physical certificates will be freely transferable and exchangeable at
the office of the pass through trustee upon compliance with the requirements
set forth in the pass through trust agreement. Neither the pass through
trustee nor any transfer or exchange agent will impose a service charge for
any registration of transfer or exchange. However, the pass through trustee
or transfer or exchange agent will require payment of a sum sufficient to
cover any tax or other governmental charge attributable to a transfer or
exchange.
PAYMENTS AND DISTRIBUTIONS
Subject to the effect of any cross-subordination provisions set forth
in the prospectus supplement for a series of certificates:
o Payments of principal, premium, if any, and interest with respect to
the equipment notes held for each pass through trust will be
distributed by the pass through trustee, upon receipt, to
certificateholders of that trust on the dates and in the currency
specified in the applicable prospectus supplement, except in certain
cases when some or all of the equipment notes are in default as
described in the applicable prospectus supplement. Payments of
principal of, and interest on, the unpaid principal amount of the
equipment notes held in each pass through trust will be scheduled to
<PAGE>
be received by the pass through trustee on the dates specified in
the applicable prospectus supplement.
o Each certificateholder of a pass through trust will be entitled to
receive a pro rata share of any distribution in respect of scheduled
payments of principal and interest made on the equipment notes held
for such pass through trust.
If we elect or are required to redeem equipment notes relating to one
or more aircraft prior to their scheduled maturity date, payments of
principal, premium (if any) and interest received by the pass through trustee
as a result of the early redemption will be distributed on a special
distribution date determined as described in the applicable prospectus
supplement. Payments received by the pass through trustee following a
default under the equipment notes held for a pass through trust will also be
distributed on a special distribution date determined in the same way.
However, if following such a default the pass through trustee receives any
scheduled payments on equipment notes on a regular distribution date or
within five days thereafter, the pass through trustee will distribute those
payments on the date they are received. In addition, if following a default
under equipment notes the pass through trustee receives payments on the
equipment notes on a regular distribution date by making a drawing under any
liquidity facility, as described in the applicable prospectus supplement,
those payments will be distributed to certificateholders on the regular
distribution date. The pass through trustee will mail notice to the
certificateholders of record of the applicable pass through trust stating the
anticipated special distribution date.
POOL FACTORS
Unless otherwise described in the applicable prospectus supplement, the
"pool balance" for each pass through trust or for the certificates issued by
any pass through trust indicates, as of any date, the portion of the original
aggregate face amount of the certificates issued by that pass through trust
that has not been distributed to certificateholders (excluding any payments
of interest or premium). The pool balance for each pass through trust as of
any distribution date will be computed after giving effect to any
distribution to certificateholders to be made on that date.
Unless otherwise described in the applicable prospectus supplement, the
"pool factor" for a pass through trust as of any distribution date for that
trust is the quotient (rounded to the seventh decimal place) computed by
dividing (a) the pool balance by (b) the aggregate original face amount of
the certificates issued by that pass through trust. The pool factor for a
pass through trust as of any distribution date will be computed after giving
effect to the payment of principal, if any, on the equipment notes held for
that pass through trust and distribution to certificateholders of the payment
of principal to be made on that date. Each pass through trust will have a
separate pool factor.
The pool factor for a pass through trust initially will be 1.0000000.
The pool factor for a pass through trust will decline as described in this
prospectus and the related prospectus supplement to reflect reductions in the
pool balance of that pass through trust. As of any distribution date for a
pass through trust, a certificate will represent a share of the pool balance
of that pass through trust equal to the product obtained by multiplying the
original face amount of the certificate by the pool factor for the pass
through trust that issued such certificate. The pool factor and pool balance
of each past through trust will be mailed to the certificateholders of the
pass through trust on each distribution date.
The pool factor for each pass through trust will decline in proportion
to the scheduled repayments of principal on the equipment notes held by that
pass through trust, unless there is an early redemption or purchase of
equipment notes held by a pass through trust or if a default occurs in the
repayment of equipment notes held by a pass through trust. In the event of a
redemption, purchase or default, the pool factor and the pool balance of each
pass through trust affected by the redemption, purchase or default will be
recomputed, and a notice will be mailed to the certificateholders of the pass
through trust.
<PAGE>
REPORTS TO CERTIFICATEHOLDERS
The pass through trustee will include with each distribution of a
payment to certificateholders a statement setting forth the following
information:
o the amount of the distribution allocable to principal and the amount
allocable to premium, if any;
o the amount of the distribution allocable to interest; and
o the pool balance and the pool factor for the pass through trust
after giving effect to the distribution.
As long as the certificates are registered in the name of DTC or its
nominee, on the record date prior to each distribution date, the pass
through trustee will request from DTC a securities position listing setting
forth the names of all DTC participants reflected on DTC's books as holding
interests in the certificates on that record date. On each distribution
date, the applicable pass through trustee will mail to each DTC participant
holding certificates the statement described above and will make available
additional copies as requested by the DTC participants for forwarding to
certificate owners.
After the end of each calendar year, each pass through trustee will
prepare a report for each person that was a holder of one or more of its pass
through certificates at any time during the preceding calendar year. This
report will contain the sum of the amount of distributions allocable to
principal, premium and interest with respect to that pass through trust for
the preceding calendar year or, if the person was a holder of a pass through
certificate during only a portion of the preceding calendar year, for the
applicable portion of the preceding calendar year. In addition, each pass
through trustee will prepare for each person that was a holder of one or more
of its pass through certificates at any time during the preceding calendar
year any other information that are readily available to the pass through
trustee and which a certificateholder reasonably requests as necessary for
the purpose of preparing its federal income tax returns. The reports and
other items described in this section will be prepared on the basis of
information supplied to the pass through trustee by DTC participants and will
be delivered by the pass through trustee to DTC participants to be available
for forwarding by DTC participants to certificate owners in the manner
described above.
If the certificates of a pass through trust are issued in the form of
physical certificates, the pass through trustee of that pass through trust
will prepare and deliver the information described above to each record
holder of a pass through certificate issued by that pass through trust as the
name and period of ownership of the holder appears on the records of the
registrar of the certificates.
VOTING OF EQUIPMENT NOTES
A pass through trustee has the right to vote and give consents and
waivers with respect to the equipment notes held by that pass through trust.
However, the pass through trustee's right to vote and give consents or
waivers may be restricted or may be exercisable by another person in
accordance with the terms of an intercreditor agreement, as described in the
applicable prospectus supplement. The pass through trust agreement will set
forth:
o the circumstances in which a pass through trustee may direct any
action or cast any vote with respect to the equipment notes held for
its pass through trust at its own discretion;
o the circumstances in which a pass through trustee will seek
instructions from its certificateholders; and
o if applicable, the percentage of certificateholders required to
direct the pass through trustee to take action.
If the holders of certificates are entitled to the benefits of a
liquidity facility, and the liquidity facility is used to make any payments
to certificateholders, the provider of the liquidity facility may be entitled
to exercise rights to vote or give consents and waivers with respect to the
equipment notes held for the pass through trust that issued the certificates,
as described in the applicable prospectus supplement.
<PAGE>
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The prospectus supplement will specify the events of default that can
occur under the pass through trust agreement and under the indentures
relating to the equipment notes held for the related pass through trust. In
the case of a leased aircraft indenture, an indenture default will include
events of default under the related lease. In the case of any equipment
notes that are supported by a liquidity facility, a default may include
events of default under that liquidity facility.
Unless otherwise provided in a prospectus supplement, all of the
equipment notes issued under the same indenture will relate to a specific
aircraft and there will be no cross-collateralization or cross-default
provisions in the indentures. As a result, events resulting in a default
under any particular indenture will not necessarily result in an a default
under any other indenture. If a default occurs in fewer than all of the
indentures, payments of principal and interest on the equipment notes issued
under the indentures with respect to which a default has not occurred will
continue to be made as originally scheduled.
As described below under "--Cross-Subordination Issues", a prospectus
supplement may describe the terms of any cross-subordination provisions among
certificateholders of separate pass through trusts. If cross-subordination
is provided, payments made pursuant to an indenture under which a default has
not occurred may be distributed first to the holders of the certificates
issued under the pass through trust which holds the most senior equipment
notes issued under all of the indentures.
The ability of the applicable owner trustee or owner participant under
a leased aircraft indenture to cure a default under the indenture, including
a default that results from the occurrence of a default under the related
lease, will be described in the prospectus supplement. Unless otherwise
provided in a prospectus supplement, with respect to any pass through
certificates or equipment notes entitled to the benefits of a liquidity
facility, a drawing under the liquidity facility for the purpose of making a
payment of interest as a result of our failure to have made a corresponding
payment will not cure a default related to our failure.
The prospectus supplement related to a series of pass through
certificates will describe the circumstances under which the pass through
trustee of the related pass through trust may vote some or all of the
equipment notes held in the pass through trust. The prospectus supplement
also will set forth the percentage of certificateholders of the pass through
trust entitled to direct the pass through trustee to take any action with
respect to the equipment notes. If the equipment notes outstanding under an
indenture are held by more than one pass through trust, then the ability of
the certificateholders issued with respect to any one pass through trust to
cause the loan trustee with respect to any equipment notes held in the pass
through trust to accelerate the equipment notes under the applicable
indenture or to direct the exercise of remedies by the loan trustee under the
applicable indenture will depend, in part, upon the proportion of the
aggregate principal amount of the equipment notes outstanding under that
indenture and held in that pass through trust to the aggregate principal
amount of all equipment notes outstanding under that indenture.
In addition, if cross-subordination provisions are applicable to any
series of certificates, then the ability of the certificateholders of any one
pass through trust holding equipment notes issued under an indenture to cause
the loan trustee with respect to any equipment notes held in that pass
through trust to accelerate the equipment notes under that indenture or to
direct the exercise of remedies by the loan trustee under that indenture will
depend, in part, upon the class of equipment notes held in the pass through
trust. If the equipment notes outstanding under an indenture are held by
more than one pass through trust, then each pass through trust will hold
equipment notes with different terms from the equipment notes held in the
other pass through trusts and therefore the certificateholders of each pass
through trust may have divergent or conflicting interests from those of the
certificateholders of the other pass through trusts holding equipment notes
issued under the same indenture. In addition, so long as the same
institution acts as pass through trustee of each pass through trust, in the
absence of instructions from the certificateholders of any pass through
trust, the pass through trustee for the pass through trust could for the same
reason be faced with a potential conflict of interest upon a default under an
indenture. In that event, the pass through trustee has indicated that it
would resign as pass through trustee of one or all the pass through trusts,
and a successor trustee would be appointed in accordance with the terms of
the Basic Agreement.
<PAGE>
The prospectus supplement for a series of certificates will specify
whether and under what circumstances the pass through trustee may sell for
cash to any person all or part of the equipment notes held in the related
pass through trust. Any proceeds received by the pass through trustee upon a
sale will be deposited in an account established by the pass through trustee
for the benefit of the certificateholders of the pass through trust for the
deposit of the special payments and will be distributed to the
certificateholders of the pass through trust on a special distribution date.
The market for equipment notes in default may be very limited, and we
cannot assure you that they could be sold for a reasonable price.
Furthermore, so long as the same institution acts as pass through trustee of
multiple pass through trusts, it may be faced with a conflict in deciding
from which pass through trust to sell equipment notes to available buyers.
If the pass through trustee sells any equipment notes with respect to which a
default under an indenture exists for less than their outstanding principal
amount, the certificateholders of that pass through trust will receive a
smaller amount of principal distributions than anticipated and will not have
any claim for the shortfall against us, any owner trustee, owner participant
or the pass through trustee. Furthermore, neither the pass through trustee
nor the certificateholders of that pass through trust could take any action
with respect to any remaining equipment notes held in that pass through trust
so long as no default under an indenture exists.
Any amount, other than scheduled payments received on a regular
distribution date, distributed to the pass through trustee of any pass
through trust by the loan trustee under any indenture on account of the
equipment notes held in that pass through trust following a default under
such indenture will be deposited in the special payments account for that
pass through trust and will be distributed to the certificateholders of that
pass through trust on a special distribution date. In addition, if a
prospectus supplement provides that the applicable owner trustee may, under
circumstances specified in the prospectus supplement, redeem or purchase the
outstanding equipment notes issued under the applicable indenture, the price
paid by the owner trustee to the pass through trustee of any pass through
trust for the equipment notes issued under that indenture and held in that
pass through trust will be deposited in the special payments account for the
pass through trust and will be distributed to the certificateholders of the
pass through trust on a special distribution date.
Any funds representing payments received with respect to any equipment
notes in default held in a pass through trust, or the proceeds from the sale
by the pass through trustee of any of those equipment notes, held by the pass
through trustee in the special payments account for that pass through trust
will, to the extent practicable, be invested and reinvested by the pass
through trustee in permitted investments pending the distribution of the
funds on a special distribution date. Permitted investments will be
specified in the related prospectus supplement.
The Basic Agreement provides that the pass through trustee of each pass
through trust will give to the certificateholders of that pass through trust
notice of all uncured or unwaived defaults known to it with respect to that
pass through trust. The Basic Agreement requires the pass through trustee to
provide the notice of default within 90 days after the occurrence of the
default. However, except in the case of default in the payment of principal,
premium, if any, or interest on any of the equipment notes held for a pass
through trust, the pass through trustee will be protected in withholding a
notice of default if it in good faith determines that withholding the notice
is in the interest of the certificateholders of such pass through trust. The
term "default" as used in this paragraph means only the occurrence of a
default under an indenture with respect to equipment notes held in a pass
through trust as described above, except that in determining whether any
default under an indenture has occurred, any related grace period or notice
will be disregarded.
The Basic Agreement requires the pass through trustee to act with a
specified standard of care while a default is continuing under an indenture.
In addition, the Basic Agreement contains a provision entitling the pass
through trustee to require reasonable security or indemnification by the
certificateholders of the pass through trust before proceeding to exercise
any right or power under the Basic Agreement at the request of those
certificateholders.
The prospectus supplement for a series of certificates will specify the
percentage of certificateholders entitled to waive, or to instruct the pass
through trustee to waive, any past default with respect to the related pass
through trust and its consequences. The prospectus supplement for a series
of certificates also will specify the percentage of certificateholders
<PAGE>
entitled to waive, or to instruct the pass through trustee or the loan
trustee to waive, any past default under an indenture.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
We will be prohibited from consolidating with or merging into any other
corporation or transferring substantially all of our assets as an entirety to
any other corporation unless the surviving, successor or transferee
corporation:
o is validly existing under the laws of the United States or any of
its states;
o is a citizen of the United States, as defined in Title 49 of the
U.S. Code relating to aviation, referred to as the "Transportation
Code," holding an air carrier operating certificate issued pursuant
to Chapter 447 of Title 49, U.S. Code, if, and so long as, that
status is a condition of entitlement to the benefits of Section 1110
of the U.S. Bankruptcy Code relating to the rights of creditors of
an airline in the event of the airline's bankruptcy; and
o expressly assumes all of our obligations contained in the Basic
Agreement and any pass through trust supplement, the note purchase
agreements, any indentures, any participation agreements and, with
respect to aircraft leased by us, the applicable leases.
In addition, we will be required to deliver a certificate and an
opinion or opinions of counsel indicating that the transaction, in effect,
complies with these conditions.
MODIFICATIONS OF THE BASIC AGREEMENT
The Basic Agreement contains provisions permitting us and the pass
through trustee of each pass through trust to enter into a supplemental trust
agreement, without the consent of the holders of any of the certificates
issued by such pass through trust, in order to do the following, among other
things:
o to provide for the formation of such pass through trust and the
issuance of a series of certificates and to set forth the terms of
the certificates;
o to evidence the succession of another corporation to us and the
assumption by that corporation of our obligations under the Basic
Agreement and the pass through trust agreements;
o to add to our covenants for the benefit of holders of such
certificates, or to surrender any right or power in the Basic
Agreement conferred upon us;
o to cure any ambiguity or correct or supplement any defective or
inconsistent provision of the Basic Agreement or any pass through
trust agreement, so long as those changes will not materially
adversely affect the interests of the holders of such certificates,
or to cure any ambiguity or correct any mistake or, to give effect
to or provide for replacement liquidity facilities, if applicable,
to such certificates;
o to comply with any requirement of the SEC, any applicable law, rules
or regulations of any exchange or quotation system on which any
certificates may be listed or of any regulatory body;
o to modify, eliminate or add to the provisions of the Basic Agreement
to the extent necessary to continue the qualification of the pass
through trust agreement under the Trust Indenture Act of 1939, and
to add to the Basic Agreement other provisions as may be expressly
permitted by the Trust Indenture Act;
o to provide for a successor pass through trustee or to add to or
change any provision of the Basic Agreement as necessary to
facilitate the administration of the pass through trusts created
under the pass through trust agreement by more than one pass through
trustee; and
<PAGE>
o to make any other amendments or modifications to the Basic Agreement
so long as those amendments or modifications apply only to
certificates of a series issued after the date of the amendment or
modification.
No pass through trust supplement may be made that will adversely affect
the status of any pass through trust as a grantor trust for U.S. federal
income tax purposes.
The Basic Agreement also contains provisions permitting us and the pass
through trustee of each pass through trust, with the consent of a majority in
interest of the certificateholders of the pass through trust, to execute
supplemental trust agreements adding any provisions to or changing or
eliminating any of the provisions of the Basic Agreement, to the extent
relating to that pass through trust, and the applicable pass through trust
supplement, or modifying the rights of the certificateholders, except that no
supplement may, without the consent of each affected certificateholder:
o reduce in any manner the amount of, or delay the timing of, any
receipt by the pass through trustee of payments on the equipment
notes held in the pass through trust or distributions in respect of
any pass through certificate issued by the pass through trust;
o change the date or place of any payment in respect of any pass
through certificate, or make distributions payable in currency other
than that provided for in the certificates, or impair the right of
any certificateholder to institute suit for the enforcement of any
payment when due;
o permit the disposition of any equipment note held in the pass
through trust, except as provided in the pass through trust
agreement, or otherwise deprive any certificateholder of the benefit
of the ownership of the applicable equipment note;
o reduce the percentage of the aggregate fractional undivided
interests of the pass through trust that is required in order for
any supplement or waiver to be approved;
o modify any of the provisions relating to the rights of the
certificateholders in respect of the waiver of events of default or
receipt of payment;
o alter the priority of distributions described in any applicable
intercreditor agreement, in a manner materially adverse to the
interests of the certificateholders of such pass through trust; or
o adversely affect the status of any pass through trust as a grantor
trust for U.S. federal income tax purposes.
MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
The prospectus supplement will specify the pass through trustee's
obligations if a pass through trustee, as the holder of any equipment notes
held for a pass through trust, receives a request for its consent to any
amendment, modification or waiver under the indenture under which the
equipment notes were issued, under the lease relating to the aircraft leased
by us that was financed with the proceeds of the equipment notes or under any
liquidity facility.
CROSS-SUBORDINATION ISSUES
The equipment notes issued under an indenture may be held in more than
one pass through trust, and one pass through trust may hold equipment notes
issued under more than one indenture. Unless otherwise provided in a
prospectus supplement, only equipment notes having the same priority for
distributions under the applicable indenture may be held in the same pass
through trust. In that event, payments made on account of a subordinate
class of certificates issued under a prospectus supplement may be
subordinated, under circumstances described in the prospectus supplement, to
the prior payment of all amounts owing to certificateholders of a pass
through trust which holds senior equipment notes issued under the applicable
indentures. The prospectus supplement related to an issuance of certificates
will describe the "cross-subordination" provisions and any related terms,
<PAGE>
including the percentage of certificateholders under any pass through trust
which are permitted to:
o grant waivers of defaults under any applicable indenture;
o consent to the amendment or modification of any applicable
indenture; or
o direct the exercise of remedial actions under any applicable
indenture.
TERMINATION OF THE PASS THROUGH TRUSTS
Our obligations and those of the pass through trustee with respect to a
pass through trust will terminate upon the distribution to certificateholders
of the pass through trust of all amounts required to be distributed to them
pursuant to the applicable pass through trust agreement and the disposition
of all property held in the pass through trust. In no event will any pass
through trust continue beyond 110 years following the date of the execution
of the applicable pass through trust supplement, or any other final
expiration date as may be specified in the pass through trust supplement.
The pass through trustee will send to each certificateholder of record of the
pass through trust notice of the termination of the pass through trust, the
amount of the proposed final payment and the proposed date for the
distribution of the final payment for the pass through trust. The final
distribution to any certificateholder of the pass through trust will be made
only upon surrender of that certificateholder's certificates at the office or
agency of the pass through trustee specified in the notice of termination.
DELAYED PURCHASE OF EQUIPMENT NOTES
On the issuance date of any certificates, if all of the proceeds from
the sale of the certificates are not used to purchase the equipment notes
contemplated to be held in the related pass through trust, the equipment
notes may be purchased by the pass through trustee at any time on or prior to
the date specified in the applicable prospectus supplement. In that event,
the proceeds from the sale of the certificates not used to purchase equipment
notes will be held under an arrangement described in the applicable
prospectus supplement pending the purchase of equipment notes. The
arrangements with respect to the payment of interest on funds so held will be
described in the applicable prospectus supplement. If any proceeds are not
used to purchase equipment notes by the date specified in the applicable
prospectus supplement, the proceeds will be returned to the
certificateholders.
LIQUIDITY FACILITY
The related prospectus supplement may provide that one or more payments
of interest on the certificates of one or more series will be supported by a
liquidity facility issued by an institution identified in the related
prospectus supplement. The provider of the liquidity facility may have a
claim on money and property belonging to a pass through trust that is senior
to the certificateholders' as specified in the related prospectus supplement.
THE PASS THROUGH TRUSTEE
Unless otherwise provided in the prospectus supplement for any series
of certificates, the pass through trustee for each series of certificates
will be Wilmington Trust Company. With certain exceptions, the pass through
trustee makes no representations as to the validity or sufficiency of the
Basic Agreement, the pass through trust supplements, the certificates, the
equipment notes, the indentures, the leases or other related documents. The
pass through trustee will not be liable with respect to any series of
certificates for any action taken or omitted to be taken by it in good faith
in accordance with the direction of the holders of a majority in principal
amount of outstanding certificates of that series issued under the Basic
Agreement. Subject to those provisions, the pass through trustee will be
under no obligation to exercise any of its rights or powers under the Basic
Agreement at the request of any holders of certificates issued under that
agreement unless they will have offered to the pass through trustee indemnity
satisfactory to it. The Basic Agreement provides that the pass through
trustee in its individual or any other capacity may acquire and hold
certificates and, subject to certain conditions, may otherwise deal with us
and, with respect to the leased aircraft, with any owner trustee with the
same rights it would have if it were not the pass through trustee.
<PAGE>
The pass through trustee may resign with respect to any or all of the
pass through trusts at any time, in which event we will be obligated to
appoint a successor trustee. If the pass through trustee ceases to be
eligible to continue as pass through trustee with respect to a pass through
trust or becomes incapable of acting as pass through trustee or becomes
insolvent, we may remove the pass through trustee, or any certificateholder
of the pass through trust for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent
jurisdiction for the removal of the pass through trustee and the appointment
of a successor trustee. Any resignation or removal of the pass through
trustee with respect to a pass through trust and appointment of a successor
trustee for the pass through trust does not become effective until acceptance
of the appointment by the successor trustee. Pursuant to the resignation and
successor trustee provisions, it is possible that a different trustee could
be appointed to act as the successor trustee with respect to each pass
through trust. All references in this prospectus to the pass through trustee
should be read to take into account the possibility that the pass through
trusts could have different successor trustees in the event of a resignation
or removal.
The Basic Agreement provides that we will pay the pass through
trustee's fees and expenses and indemnify the pass through trustee against
certain liabilities.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries, and we refer you
to the entire prospectus and detailed information appearing in the applicable
prospectus supplement. Where no distinction is made between the leased
aircraft notes and the owned aircraft notes or between their respective
indentures, those statements refer to any equipment notes and any indenture.
To the extent that any provision in any prospectus supplement is
inconsistent with any provision in this summary, the provision of the
prospectus supplement will control.
GENERAL
The equipment notes will be issued under indentures. Equipment notes
secured by an aircraft that is leased to us will be issued under an indenture
between an owner trustee and a loan trustee. Equipment notes secured by an
aircraft that is owned by us will be issued under an indenture between a loan
trustee and us.
The leased aircraft notes will be non-recourse obligations of the
applicable owner trustee. All of the leased aircraft notes issued under the
same indenture will relate to and will be secured by one or more specific
aircraft leased to us. Unless otherwise specified in the applicable
prospectus supplement, leased aircraft notes will not be secured by any other
aircraft.
We will be the issuer of owned aircraft notes. The owned aircraft
notes will be our direct recourse obligations. All of the owned aircraft
notes issued under the same indenture will relate to, and will be secured by,
one or more specific aircraft that we own. Unless otherwise specified in the
applicable prospectus supplement, the owned aircraft notes will not be
secured by any other aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the pass through trustee on the equipment notes
held in a pass through trust will be passed through to the certificateholders
of that pass through trust on the dates and at the annual rate set forth in
the applicable prospectus supplement until the final distribution for that
pass through trust. Principal payments received by the pass through trustee
on the equipment notes held in a pass through trust will be passed through to
the certificateholders of that pass through trust in scheduled amounts on the
dates set forth in the applicable prospectus supplement until the final
distribution date for that pass through trust.
If any date scheduled for any payment of principal, premium, if any, or
interest with respect to the equipment notes is not a business day, the
payment will be made on the next succeeding business day without any
additional interest.
<PAGE>
REDEMPTION
The applicable prospectus supplement will describe the circumstances,
whether voluntary or involuntary, under which the equipment notes may be
redeemed or purchased prior to their stated maturity date, in whole or in
part. The prospectus supplement will also describe the premium, if any,
applicable upon redemptions or purchases and other terms applying to the
redemptions or purchases of the equipment notes.
SECURITY
The leased aircraft notes will be secured by:
o an assignment by the related owner trustee to the related loan
trustee of the owner trustee's rights, except for certain rights
described below, under the lease or leases with respect to the
related aircraft, including the right to receive payments of rent
under those leases; and
o a mortgage granted to the loan trustee on the aircraft, subject to
our rights under the lease or leases.
Under the terms of each lease, our obligations in respect of each
leased aircraft will be those of a lessee under a "net lease". Accordingly,
we will be obligated, among other things and at our expense, to cause each
leased aircraft to be duly registered, to pay all costs of operating the
aircraft and to maintain, service, repair and overhaul the aircraft or cause
it to be maintained, serviced, repaired and overhauled. With respect to the
leased aircraft, the assignment by the related owner trustee to the related
loan trustee of its rights under the related lease will exclude, among other
things:
o rights of the owner trustee and the related owner participant
relating to indemnification by us for certain matters;
o insurance proceeds payable to the owner trustee in its individual
capacity and to the owner participant under liability insurance
maintained by us pursuant to the lease or by the owner trustee or
the owner participant;
o insurance proceeds payable to the owner trustee in its individual
capacity or to the owner participant under certain casualty
insurance maintained by the owner trustee or the owner participant
pursuant to the lease; and
o any rights of the owner participant or the owner trustee to enforce
payment of the foregoing amounts and their respective rights to the
proceeds of the foregoing.
The owned aircraft notes will be secured by a mortgage granted to the
related loan trustee of all of our right, title and interest in and to the
owned aircraft. Under the terms of each owned aircraft indenture, we will be
obligated, among other things and at our expense, to cause each owned
aircraft to be duly registered, to pay all costs of operating the aircraft
and to maintain, service, repair and overhaul the aircraft or cause it to be
maintained, serviced, repaired and overhauled.
We will be required, except under certain circumstances, to keep each
aircraft registered under the Transportation Code, and to record the
indenture and the lease, if applicable, among other documents, with respect
to each aircraft under the Transportation Code. Recordation of the
indenture, the lease, if applicable, and other documents with respect to each
aircraft will give the related loan trustee a perfected security interest in
the related aircraft whenever it is located in the United States or any of
its territories and possessions. The Convention on the International
Recognition of Rights in Aircraft, referred to as the "Convention," provides
that this security interest will also be recognized, with certain limited
exceptions, in those jurisdictions that have ratified or adhere to the
Convention.
<PAGE>
We will have the right, subject to certain conditions, at our own
expense to register each aircraft in countries other than the United States.
Each aircraft may also be operated by us or under lease, sublease or
interchange arrangements in countries that are not parties to the
Convention. The extent to which the related loan trustee's security interest
would be recognized in an aircraft located in a country that is not a party
to the Convention, and the extent to which the security interest would be
recognized in a jurisdiction adhering to the Convention if the aircraft is
registered in a jurisdiction not a party to the Convention, is uncertain.
Moreover, in the case of a default under an indenture, the ability of the
related loan trustee to realize upon its security interest in an aircraft
could be adversely affected as a legal or practical matter if the aircraft
were registered or located outside the United States.
Unless otherwise specified in the applicable prospectus supplement, the
equipment notes will not be cross-collateralized. Consequently, the
equipment notes issued in respect of any one aircraft will not be secured by
any other aircraft. Unless and until a default under an indenture with
respect to a leased aircraft has occurred and is continuing, the related loan
trustee may exercise only limited rights of the related owner trustee under
the related lease.
The loan trustee will invest and reinvest funds, if any, held by it
from time to time under an indenture. The loan trustee will, at our
direction, invest and reinvest funds in certain investments described in the
applicable indenture. We will not be entitled to direct the loan trustee to
invest and reinvest funds with respect to a leased aircraft in the case of a
default under the applicable lease or, with respect to an owned aircraft, in
the case of a default under the applicable indenture. We will pay the net
amount of any loss resulting from these investments.
In the case of Chapter 11 bankruptcy proceedings involving a holder of
"equipment" (defined as described below), Section 1110 of the U.S. Bankruptcy
Code provides special rights to lessors, conditional vendors and holders of
security interests with respect to such equipment. Under Section 1110, the
right of such financing parties to take possession of such equipment in
compliance with the provisions of a lease, conditional sale contract or
security agreement is not affected by any provision of the U.S. Bankruptcy
Code or any power of the bankruptcy court. Ordinarily, such right would be
limited by the "automatic stay" under the Bankruptcy Code. Such right to
take possession may not be exercised for 60 days following the date of
commencement of the reorganization proceedings. Thereafter, such right to
take possession may be exercised during such proceedings unless, within the
60-day period or any longer period consented to by the relevant parties, the
debtor agrees to perform its obligations that become due on or after that
date and cures all defaults on a timely basis. Defaults resulting solely
from the financial condition, bankruptcy, insolvency or reorganization of the
debtor need not be cured.
"Equipment" is defined in Section 1110 of the U.S. Bankruptcy Code, in
part, as an aircraft, aircraft engine, propeller, appliance, or spare part
(as defined in Section 40102 of Title 49 of the U.S. Code) that is subject to
a security interest granted by, leased to, or conditionally sold to a debtor
that, at the time such transaction is entered into, holds an air carrier
operating certificate issued pursuant to chapter 447 of title 49 of the U.S.
Code for aircraft capable of carrying 10 or more individuals or 6,000 pounds
of more of cargo (subject to certain limitations in the case of equipment
first placed in service on or prior to October 22, 1994).
In connection with any issuance of certificates under this prospectus
and the applicable prospectus supplement, it will be a condition to the pass
through trustee's obligation to purchase equipment notes with respect to each
aircraft that our outside counsel provide its opinion (which may assume that
we hold, at the time of the lease or mortgage, as the case may be, an air
carrier operating certificate issued pursuant to chapter 447 of title 49 of
the U.S. Code for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo) to the Pass Through Trustee that:
o if the aircraft is a leased aircraft, the owner trustee, as lessor
under the lease for the aircraft, and the loan trustee, as assignee
of the owner trustee's rights under the lease pursuant to the
applicable indenture, will be entitled to the benefits of Section
1110 of the U.S. Bankruptcy Code with respect to the airframe and
engines comprising the aircraft; or
o if the aircraft is an owned aircraft, the loan trustee will be
entitled to the benefits of Section 1110 with respect to the
airframe and engines comprising the owned aircraft.
<PAGE>
The opinion will not address the possible replacement of an aircraft
after an "Event of Loss", as defined in the applicable indenture, in the
future.
RANKING OF EQUIPMENT NOTES
Some of the equipment notes related to one or more aircraft, as
described in the related prospectus supplement, may be subordinated and
junior in right of payment to other equipment notes related to the same
aircraft. The terms of the subordination, if any, will be described in the
related prospectus supplement.
PAYMENTS AND LIMITATION OF LIABILITY
We will lease each leased aircraft from an owner trustee for a term
commencing on the delivery date of the aircraft to the owner trustee and
expiring on a date no earlier than the latest maturity date of the related
leased aircraft notes, unless previously terminated as permitted by the terms
of the related lease. We will make basic rent and other payments under each
lease to an owner trustee, as lessor. The owner trustee will assign these
payments under the applicable indenture to the related loan trustee to
provide the funds necessary to pay principal of, premium, if any, and
interest due from the owner trustee on the leased aircraft notes issued under
the indenture. Each lease will provide that under no circumstances will our
rent payments be less than the scheduled payments on the related leased
aircraft notes. The balance of any basic rent payment under each lease,
after payment of amounts due on the leased aircraft notes issued under the
indenture corresponding to the lease, will be paid over to the applicable
owner trustee. Our obligation to pay rent and to cause other payments to be
made under each lease will be our direct obligation.
Except in circumstances in which we purchase a leased aircraft and
assume the related leased aircraft notes, the leased aircraft notes will not
be our direct obligation. None of the owner trustees, the owner participants
or the loan trustees will be personally liable to any holder of leased
aircraft notes for amounts payable under the leased aircraft notes. Except
as provided in the indentures relating to the leased aircraft notes, no owner
trustee or loan trustee will be liable for or incur any liability under the
indentures. Except in the circumstances described above, all amounts payable
under any leased aircraft notes, other than payments made in connection with
an optional redemption or purchase by the related owner trustee or the
related owner participant, will be made only from:
o the assets subject to the lien of the applicable indenture with
respect to the aircraft or the income and proceeds received by the
related loan trustee from that aircraft, including rent payable by
us under the related lease; or
o if so provided in the related prospectus supplement, the applicable
liquidity facility.
With respect to the leased aircraft notes, except as otherwise provided
in the applicable indenture, no owner trustee will be personally liable for
any amount payable or for any statements, representations, warranties,
agreements or obligations under any indenture or under any leased aircraft
notes. None of the owner participants will have any duty or responsibility
under the leased aircraft indentures or under the leased aircraft notes to
the related loan trustee or to any holder of any leased aircraft note.
Our obligations under each owned aircraft indenture and under the owned
aircraft notes will be our direct obligations.
DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable prospectus supplement, an
indenture may provide that the obligations of the related loan trustee, the
related owner trustee or us, as the case may be, under that indenture will be
deemed to have been discharged and paid in full on the 91st day after the
date that money or certain United States government securities, in an
aggregate amount sufficient to pay when due (including as a consequence of
redemption in respect of which notice is given on or prior to the date of the
deposit) principal, premium, if any, and interest on all equipment notes
issued under that indenture, are irrevocably deposited with the related loan
trustee. The discharge may occur only if, among other things, there has been
published by the IRS a ruling to the effect that holders of the equipment
notes will not recognize income, gain or loss for federal income tax purposes
as a result of the deposit, defeasance and discharge and will be subject to
<PAGE>
federal income tax on the same amount and in the same manner and at the same
time as would have been the case if the deposit, defeasance and discharge had
not occurred.
Upon defeasance of the equipment notes, or upon payment in full of the
principal of, premium, if any, and interest on all equipment notes issued
under any indenture on the applicable maturity date, or upon deposit with the
applicable loan trustee of sufficient money no earlier than one year prior to
the date of maturity, the holders of the equipment notes will have no
beneficial interest in or other rights with respect to the related aircraft
or other assets subject to the lien of the indenture and the lien will
terminate.
ASSUMPTION OF OBLIGATIONS BY CONTINENTAL
Unless otherwise specified in the applicable prospectus supplement,
upon our purchase of any leased aircraft prior to the end of the applicable
term, we may assume on a full recourse basis all of the obligations of the
owner trustee, other than its obligations in its individual capacity, under
the indenture and the leased aircraft notes relating to that lease. If we
assume leased aircraft notes, provisions relating to maintenance, possession
and use of the related aircraft, liens and insurance will be incorporated
into the indenture. If we assume leased aircraft notes in connection with
our purchase of a leased aircraft, leased aircraft notes issued under the
indenture will not be redeemed and will continue to be secured by the
aircraft.
LIQUIDITY FACILITY
The related prospectus supplement may provide that one or more payments
of interest on the related equipment notes of one or more series will be
supported by a liquidity facility issued by an institution identified in the
related prospectus supplement. Unless otherwise provided in the related
prospectus supplement, the provider of the liquidity facility will have a
claim upon the assets securing the equipment notes senior to the claim of the
pass through trustee, as owner of the equipment notes.
INTERCREDITOR ISSUES
Equipment notes may be issued in different classes, which means that
the equipment notes may have different payment priorities even though they
are issued by the same borrower and relate to the same aircraft. If multiple
classes of equipment notes are issued, the related prospectus supplement will
describe the priority of distributions among the equipment notes, any
liquidity facilities, the ability of any class to exercise and/or enforce any
or all remedies with respect to the related aircraft, and, if the equipment
notes are leased aircraft notes, the related lease, and certain other
intercreditor terms and provisions.
<PAGE>
U.S. INCOME TAX MATTERS
GENERAL
Unless otherwise indicated in the applicable prospectus supplement, the
following summary describes all material generally applicable U.S. federal
income tax consequences to certificateholders of the purchase, ownership and
disposition of the certificates offered by this prospectus, and in the
opinion of Hughes Hubbard & Reed LLP, our special tax counsel, is accurate in
all material respects with respect to the matters discussed in this
prospectus. Except as otherwise specified, the summary is addressed to
beneficial owners of certificates that are citizens or residents of the
United States, corporations, partnerships or other entities created or
organized in or under the laws of the United States or any state therein, or
estates or trusts the income of which is subject to U.S. federal income
taxation regardless of its source, and that will hold the certificates as
capital assets.
This summary does not address the tax treatment of
U.S. certificateholders that may be subject to special tax rules, such as
banks, insurance companies, dealers in securities or commodities, tax-exempt
entities, holders that will hold certificates as part of a straddle or
holders that have a "functional currency" other than the U.S. dollar, nor,
except as specifically indicated, does it address the tax treatment of
U.S. certificateholders that do not acquire certificates at the public
offering price as part of the initial offering. The summary is not a
comprehensive description of all of the tax considerations that may be
relevant to a decision to purchase certificates. This summary does not
describe any tax consequences arising under the laws of any state, locality
or taxing jurisdiction other than the United States.
The summary is based upon the tax laws and practice of the United
States as in effect on the date of this prospectus, as well as judicial and
administrative interpretations, in final or proposed form, available on or
before that date. Changes to the existing laws could apply retroactively and
could alter the tax consequences discussed below. We have not sought any
ruling from the IRS with respect to the federal income tax consequences,
discussed below, and we cannot assure you that the IRS will not take contrary
positions. The pass through trusts are not indemnified for any federal
income taxes that may be imposed upon them, and the imposition of any such
taxes on a pass through trust could result in a reduction in the amounts
available for distribution to the certificateholders of that pass through
trust. Prospective investors should consult their own tax advisors with
respect to the federal, state, local and foreign tax consequences to them of
the purchase, ownership and disposition of the certificates.
TAX STATUS OF THE PASS THROUGH TRUSTS
In the opinion of our special tax counsel, each pass through trust will
be classified as a grantor trust for U.S. federal income tax purposes.
TAXATION OF CERTIFICATEHOLDERS GENERALLY
A U.S. certificateholder will be treated as owning its pro rata
undivided interest in each of the equipment notes and any other property held
by the related pass through trust. Accordingly, each
U.S. certificateholder's share of interest paid on the equipment notes will
be taxable as ordinary income, as it is paid or accrued, in accordance with
such U.S. certificateholder's method of accounting, and a U.S.
certificateholder's share of any premium paid on redemption of an equipment
note will be treated as capital gain. If a pass through trust is supported
by a liquidity facility, any amounts received by the pass through trust under
the liquidity facility with respect to unpaid interest will be treated for
U.S. federal income tax purposes as having the same characteristics as the
payments they replace. If we assume an owner trust's obligations under
leased aircraft notes, the assumption would be treated for federal income tax
purposes as a taxable exchange of the leased aircraft notes, resulting in
recognition of gain or loss by the U.S. certificateholder.
Each U.S. certificateholder will be entitled to deduct, consistent with
its method of accounting, its pro rata share of fees and expenses paid or
incurred by the corresponding pass through trust as provided in Section 162
<PAGE>
or 212 of the Internal Revenue Code of 1986, as amended, referred to herein
as the "Code". Certain fees and expenses, including fees paid to the pass
through trustee and the provider of the liquidity facility, if applicable,
will be paid by parties other than the certificateholders. These fees and
expenses could be treated as constructively received by the pass through
trust, in which event a U.S. certificateholder will be required to include in
income and will be entitled to deduct its pro rata share of the fees and
expenses. If a U.S. certificateholder is an individual, estate or trust, the
deduction for the certificateholder's share of fees or expenses will be
allowed only to the extent that all of the certificateholder's miscellaneous
itemized deductions, including the certificateholder's share of fees and
expenses, exceed 2% of the certificateholder's adjusted gross income. In
addition, in the case of U.S. certificateholders who are individuals, certain
otherwise allowable itemized deductions will be subject generally to
additional limitations on itemized deductions under applicable provisions of
the Code.
EFFECT OF SUBORDINATION OF CERTIFICATEHOLDERS OF SUBORDINATED TRUSTS
If any pass through trust is subordinated in right of payment to any
other pass through trust and the subordinated trust receives less than the
full amount of the interest, principal or premium paid with respect to the
equipment notes held by it because of the subordination of such pass through
trust, the certificateholders of the subordinated trust would probably be
treated for federal income tax purposes as if they had:
o received as distributions their full share of interest, principal,
or premium;
o paid over to the preferred class of certificateholders an amount
equal to their share of the amount of the shortfall; and
o retained the right to reimbursement of the amount of the shortfall
to the extent of future amounts payable to the certificateholders of
the subordinated trust on account of the shortfall.
Under this analysis:
o subordinated certificateholders incurring a shortfall would be
required to include as current income any interest or other income
of the subordinated trust that was a component of the shortfall,
even though that amount was in fact paid to a preferred class of
certificateholders;
o a loss would only be allowed to subordinated certificateholders when
their right to receive reimbursement of the shortfall becomes
worthless; that is, when it becomes clear that funds will not be
available from any source to reimburse the shortfall; and
o reimbursement of the shortfall before a claim of worthlessness would
not be taxable income to certificateholders because the amount
reimbursed would have been previously included in income.
These results should not significantly affect the inclusion of income for
certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to certificateholders on the cash method of accounting
by, in effect, placing them on the accrual method.
ORIGINAL ISSUE DISCOUNT
The equipment notes may be issued with original issue discount,
referred to as OID. The prospectus supplement will state whether any
equipment notes to be held by the related pass through trust will be issued
with OID. Generally, a holder of a debt instrument issued with OID that is
not negligible must include the OID in income for federal income tax purposes
as it accrues, in advance of the receipt of the cash attributable to such
income, under a method that takes into account the compounding of interest.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a certificate, a
U.S. certificateholder generally will recognize capital gain or loss equal to
<PAGE>
the difference between the amount realized on the disposition, other than any
amount attributable to accrued interest which will be taxable as ordinary
income, and the U.S. certificateholder's adjusted tax basis in the related
equipment notes and any other property held by the corresponding pass through
trust. Any gain or loss will be long-term capital gain or loss to the extent
attributable to property held by the pass through trust for more than one
year. In the case of individuals, estates, and trusts, the maximum rate of
tax on net long-term capital gains generally is 20%.
FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest (including any OID) on the equipment notes to, or on
behalf of, any beneficial owner of a certificate that is not a U.S. person
will not be subject to U.S. federal withholding tax provided that:
o the non-U.S. certificateholder does not actually or constructively
own 10% or more of the total combined voting power of all classes of
stock of an owner participant or us;
o the non-U.S. certificateholder is not a bank receiving interest
pursuant to a loan agreement entered into in the ordinary course of
its trade or business, or a controlled foreign corporation for U.S.
tax purposes that is related to an owner participant or us; and
o certain certification requirements (including identification of the
beneficial owner of the certificate) are complied with.
Any capital gain realized upon the sale, exchange, retirement or other
disposition of a certificate or upon receipt of premium paid on an equipment
note by a non-U.S. certificateholder will not be subject to U.S. federal
income or withholding taxes if (i) such gain is not effectively connected
with a U.S. trade or business of the non-U.S. certificateholder and (ii) in
the case of an individual, such non-U.S. certificateholder is not present in
the United States for 183 days or more in the taxable year of the sale,
exchange, retirement or other disposition or receipt.
BACKUP WITHHOLDING
Payments made on the certificates will not be subject to a backup
withholding tax of 31% unless, in general, the certificateholder fails to
comply with certain reporting procedures or otherwise fails to establish an
exemption from such tax under applicable provisions of the Code.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable prospectus supplement, the
certificates may, subject to certain legal restrictions, be purchased and
held by an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended, referred to as "ERISA,"
or an individual retirement account or an employee benefit plan subject to
section 4975 of the Code. A fiduciary of an employee benefit plan must
determine that the purchase and holding of a certificate is consistent with
its fiduciary duties under ERISA and does not result in a non-exempt
prohibited transaction as defined in section 406 of ERISA or section 4975 of
the Code. Employee benefit plans which are governmental plans, as defined in
section 3(32) of ERISA, and certain church plans, as defined in section 3(33)
of ERISA, are not subject to Title I of ERISA or section 4975 of the Code.
The certificates may, subject to certain legal restrictions, be purchased and
held by such plans.
PLAN OF DISTRIBUTION
Certificates may be sold to one or more underwriters for public
offering and resale by them. Certificates may also be sold to investors or
other persons directly or through one or more dealers or agents. Any
underwriter, dealer or agent involved in the offer and sale of the
certificates will be named in an applicable prospectus supplement.
The certificates may be sold:
<PAGE>
o at a fixed price or prices, which may be changed;
o at market prices prevailing at the time of sale;
o at prices related to prevailing market prices; or
o at negotiated prices.
Dealer trading may take place in certain of the certificates, including
certificates not listed on any securities exchange. We do not intend to
apply for listing of the certificates on a national securities exchange.
From time to time, we also may authorize underwriters acting as our agents to
offer and sell the certificates upon the terms and conditions as will be set
forth in any prospectus supplement.
In connection with the sale of certificates, underwriters may be deemed
to have received compensation from us in the form of underwriting discounts
or commissions and may also receive commissions from purchasers of
certificates for whom they may act as agent. Underwriters may sell
certificates to or through dealers, and those dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions, which may be changed from time to time, from
the purchasers for whom they may act as agent.
If a dealer is used directly by us in the sale of certificates in
respect of which this prospectus is delivered, we will sell the certificates
to the dealer, as principal. The dealer may then resell the certificates to
the public at varying prices to be determined by the dealer at the time of
resale. The dealer will be named in, and the terms of the sale, will be set
forth in the applicable prospectus supplement.
Certificates may be offered and sold through agents designated by us
from time to time. The agent involved in the offer or sale of the
certificates will be named in, and any commissions payable by us to the agent
will be set forth in, the applicable prospectus supplement. Unless otherwise
indicated in the applicable prospectus supplement, the agent will be acting
on a best efforts basis for the period of its appointment.
We may solicit directly offers to purchase certificates, and
certificates may be sold directly to institutional investors or others who
may be deemed to be underwriters within the meaning of the Securities Act
with respect to any resale. The terms of these sales will be described in
the applicable prospectus supplement. Except as set forth in the applicable
prospectus supplement, no director, officer or employee of ours will solicit
or receive a commission in connection with direct sales by us of the
certificates, although those persons may respond to inquiries by potential
purchasers and perform ministerial and clerical work in connection with our
direct sales.
Any underwriting compensation that we pay to underwriters, dealers or
agents in connection with the offering of certificates, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable prospectus supplement.
Underwriters, dealers and agents participating in the distribution of
the certificates may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
certificates may be deemed to be underwriting discounts and commissions under
the Securities Act. Underwriters, dealers and agents may be entitled under
agreements with us to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act, and to
reimbursement by us for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us and our subsidiaries in the ordinary course of
business.
If so indicated in an applicable prospectus supplement and subject to
existing market conditions, we will authorize dealers acting as our agents to
solicit offers by certain institutions to purchase certificates from us at
the public offering price set forth in the applicable prospectus supplement
pursuant to delayed delivery contracts. These contracts will provide for
payment and delivery on the date or dates stated in the applicable prospectus
supplement. Each contract will be for an amount not less than, and the
aggregate principal amount of certificates sold pursuant to these contracts
<PAGE>
will not be less nor more than, the respective amounts stated in the
applicable prospectus supplement. Institutions with whom these contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to our
approval. These contracts will not be subject to any conditions, except for
the condition that the purchase by an institution of the certificates not be
prohibited at the time of delivery under the laws of any jurisdiction in the
United States to which the institution is subject. A commission set forth in
the applicable prospectus supplement will be granted to underwriters and
agents soliciting purchases of certificates pursuant to contracts accepted by
us. Agents and underwriters will have no responsibility in respect of the
delivery or performance of these contracts.
If an underwriter or underwriters is used in the sale of any
certificates, the applicable prospectus supplement will state the intention,
if any, of the underwriters at the date of the prospectus supplement to make
a market in the certificates. We cannot assure you that there will be a
market for the certificates.
The place and time of delivery for the certificates in respect of which
this prospectus is delivered will be set forth in the applicable prospectus
supplement.
LEGAL OPINIONS
Unless otherwise indicated in the applicable prospectus supplement, our
counsel, Hughes Hubbard & Reed LLP, New York, New York, will render an
opinion with respect to the validity of the certificates being offered by
such prospectus supplement. Unless otherwise indicated in the applicable
prospectus supplement, Hughes Hubbard & Reed LLP will rely on the opinion of
counsel for the pass through trustee as to certain matters relating to the
authorization, execution and delivery of the certificates by, and the valid
and binding effect on, the pass through trustee.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K
for the year ended December 31, 1999, as set forth in their reports, which
are incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements and schedule are, and
audited consolidated financial statements to be included in subsequently
filed documents will be, incorporated by reference in reliance on Ernst &
Young LLP's reports pertaining to such financial statements, to the extent
covered by consents filed with the SEC, given on their authority as experts
in auditing and accounting.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering, other than
underwriting discounts and commissions, are:
Securities and Exchange Commission registration filing fee.... $ 249,036
Printing and engraving expenses............................... 300,000<F1>
Trustee fees and expenses..................................... 25,000<F1>
Accounting fees and expenses.................................. 100,000<F1>
Rating agency fees............................................ 85,000<F1>
Legal fees and expenses....................................... 550,000<F1>
Miscellaneous................................................. 90,964<F1>
---------
Total............................................. $1,400,000<F1>
===========
-----------------
[FN]
<F1>
Estimates.
</FN>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Continental Airlines, Inc.'s Certificate of Incorporation and By-Laws
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 actions, 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
<PAGE>
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 indemnify 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.
(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
<PAGE>
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 By-Laws also limit the personal
liability of directors to the Company and its stockholders for monetary
damages resulting from certain breaches of the directors' fiduciary duties.
The Certificate of Incorporation of the Company provides as follows:
"No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach
of the Director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the GCL, or (iv) for any transaction from which
the Director derived any improper personal benefit. If the GCL is
amended . . . to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the GCL, as so amended."
The Company maintains directors' and officers' liability insurance.
ITEM 16. EXHIBITS
Reference is made to the Exhibit Index which immediately precedes the
exhibits filed with this registration statement, which is incorporated herein
by reference.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
<PAGE>
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Houston, State of Texas, on
September 14, 2000.
CONTINENTAL AIRLINES, INC.
By: /S/ JEFFERY A. SMISEK
-----------------------------
Jeffery A. Smisek
Executive Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated, on September 14, 2000.
SIGNATURE TITLE
GORDON M. BETHUNE* Chairman of the Board, Chief Executive
--------------------------- Officer (Principal Executive Officer)
Gordon M. Bethune and Director
LAWRENCE W. KELLNER* Executive Vice President and Chief
--------------------------- Financial Officer
Lawrence W. Kellner (Principal Financial Officer)
CHRIS T. KENNY* Staff Vice President and Controller
--------------------------- (Principal Accounting Officer)
Chris T. Kenny
THOMAS J. BARRACK, JR.* Director
---------------------------
Thomas J. Barrack, Jr.
DAVID BONDERMAN* Director
---------------------------
David Bonderman
GREGORY D. BRENNEMAN* President, Chief Operating Officer and
--------------------------- Director
Gregory D. Brenneman
KIRBYJON H. CALDWELL* Director
---------------------------
Kirbyjon H. Caldwell
PATRICK FOLEY* Director
---------------------------
Patrick Foley
DOUGLAS H. MCCORKINDALE* Director
---------------------------
Douglas H. McCorkindale
GEORGE G. C. PARKER* Director
---------------------------
George G. C. Parker
<PAGE>
RICHARD W. POGUE* Director
---------------------------
Richard W. Pogue
WILLIAM S. PRICE III* Director
---------------------------
William S. Price III
DONALD L. STURM* Director
---------------------------
Donald L. Sturm
KAREN HASTIE WILLIAMS* Director
---------------------------
Karen Hastie Williams
CHARLES A. YAMARONE* Director
---------------------------
Charles A. Yamarone
*By: /S/ JEFFERY A. SMISEK
-----------------------------
Jeffery A. Smisek
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
4.1 Form of Pass Through Trust Agreement--filed as Exhibit
4.1 to the Company's registration statement on Form
S-3 (No. 333-31285) (the "July 1997 S-3") and
incorporated herein by reference<F2>
5.1 Opinion of Hughes Hubbard & Reed LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Hughes Hubbard & Reed LLP (included in its
opinion filed as exhibit 5.1)
24.1 Powers of Attorney
25.1 Statement of Eligibility of Wilmington Trust Company
on Form T-1 with respect to the Pass Through Trust
Agreement
--------------------
<F2>
The Pass Through Trust Agreement was previously qualified under the Trust
Indenture Act of 1939 in connection with the July 1997 S-3.
