UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporations)
0-9781 74-2099724
(Commission File Number) (IRS Employer Identification No.)
2929 Allen Parkway, Houston, Texas 77019
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 713-834-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Class A Common Stock, New York Stock Exchange, Inc.
par value $.01 per share
Class B Common Stock, New York Stock Exchange, Inc.
par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant was $188.8 million as of March 31, 1995.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No
_______________
As of March 31, 1995, 6,301,056 shares of Class A Common Stock and
20,521,581 shares of Class B Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting
of Stockholders to be held on June 5, 1995: PART III
PART I
ITEM 1. BUSINESS.
Continental Airlines, Inc. (the "Company", the "Reorganized Company" or
"Continental") is a United States air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth largest
United States airline as measured by 1994 revenue passenger miles and,
together with its wholly owned subsidiary, Continental Express, Inc.
("Express"), and its 91.0%-owned subsidiary, Continental Micronesia, Inc.
("CMI"), serves more than 160 airports worldwide. Internationally,
Continental flies to 54 destinations and offers additional connecting
service through alliances with foreign carriers. Continental is one of the
leading airlines providing service to Mexico and Central America, serving
more destinations there than any other United States airline. Through CMI,
the Company provides extensive service in the western Pacific. The
Company's wholly owned subsidiary, System One Information Management, Inc.
("System One"), operates a travel agency computerized reservation system,
principally in the United States. See Item 1. "Business. System One".
As used in this Form 10-K, the terms "Continental" and "Company" refer to
Continental Airlines, Inc. (or, as required by the context, its
predecessor) and, unless the context indicates otherwise, its subsidiaries.
Chapter 11 Reorganization
The Company reorganized under Chapter 11 of the federal bankruptcy code
effective April 27, 1993 (the "Reorganization"), after having filed for
protection on December 3, 1990. Continental's filing for reorganization
was necessitated primarily by declines in revenue resulting from a
recessionary environment, extreme price competition and significantly
increased fuel prices resulting from the Persian Gulf War.
Pursuant to the Reorganization, Continental Airlines Holdings, Inc.
(together with its subsidiaries, "Holdings" or the "Predecessor Company"),
which had been the Company's parent, merged into the Company. The
previously outstanding publicly held equity interests in Holdings were
cancelled and new stock in the Company was issued. Also pursuant to the
Reorganization, a majority of the Company's equity was issued to Air
Partners, L.P. ("AP") and Air Canada ("AC"), in exchange for their
investments in the Company. Additional shares of common stock were issued
to the Company's retirement plan, and a fixed number of shares of common
stock was issued to or for the benefit of prepetition creditors. See Item
3. "Legal Proceedings. Plan of Reorganization".
During the Chapter 11 case, Continental (i) restructured substantial
amounts of secured aircraft debt and aircraft lease obligations,
significantly reducing its annual payments of principal, interest and rent,
(ii) retired 42 older jet aircraft and (iii) accelerated the scheduled
retirement during 1993, 1994 and 1995 of 52 additional older, Stage II
(noise level) aircraft. Also, the Company resolved (largely on a non-cash
basis) significant claims and contingencies affecting the Company. Such
claims and contingencies included the Company's liability to the Pension
Benefit Guaranty Corporation (the "PBGC") related to pension plans
previously maintained by Eastern Air Lines, Inc. ("Eastern") (the "PBGC
Settlement") and the Company's potential liability to Eastern (or its
creditors) as a result of certain transactions entered into with Eastern
prior to 1989. Certain parties have appealed the disposition of their
claims in the Reorganization. See Item 3. "Legal Proceedings". Pursuant
to the Reorganization, a substantial amount of unsecured prepetition
liabilities was converted to equity, and additional secured and priority
debt was restructured to extend payment dates and/or reduce the interest
charge.
Pursuant to the Reorganization, System One, which had been a subsidiary of
Holdings, was restructured as a wholly owned subsidiary of Continental, two
separate commuter airline subsidiaries were restructured as Express and
Continental's western Pacific operations were restructured by establishing
CMI.
Domestic Operations
Continental operates its domestic route system primarily through three hubs
in Newark, Houston and Cleveland. Continental's hub system allows the
Company to transport passengers between a large number of destinations with
substantially more frequent service than if each route were served
directly. The hub system also allows Continental to add service to a new
destination from a large number of cities using only one or a limited
number of aircraft.
Newark. As of March 31, 1995, Continental operated 55.8% (181 departures)
of the total daily jet departures and, together with Express, accounted for
57.0% (277 departures) of all daily (jet and turboprop) departures from
Newark. Considering the three major airports serving New York City
(Newark, LaGuardia and John F. Kennedy), Continental and Express accounted
for approximately 22.6% of all daily departures, while the next largest
carrier, USAir, Inc. ("USAir"), and its commuter affiliate accounted for
approximately 17.4% of all daily departures as of March 31, 1995.
Houston. As of March 31, 1995, Continental operated 77.9% (255 departures)
of the daily jet departures and, together with Express, accounted for 79.2%
(352 departures) of all daily departures from Houston's Intercontinental
Airport. Southwest Airlines Co. ("Southwest") also has a significant share
of the Houston market, primarily through Hobby Airport. Considering both
Intercontinental and Hobby Airports, as of March 31, 1995, Continental
operated 58.2% and Southwest operated 21.6% of the daily jet departures
from Houston.
Cleveland. As of March 31, 1995, Continental operated 54.8%
(105 departures) of all daily jet departures and, together with Express,
accounted for 60.3% (169 departures) of all daily departures from
Cleveland's Hopkins Airport ("Hopkins"). The next largest carrier, USAir,
and its commuter affiliate accounted for 9.3% of all daily departures from
Hopkins as of March 31, 1995.
Denver. During 1994, the Company significantly reduced operations in
Denver, resulting in the conversion of Denver from a hub to a spoke city.
In August 1993, prior to management's decision to reduce operations in
Denver, Continental operated 165 daily jet departures and 110 daily
turboprop departures from Denver. As of March 31, 1995, Continental
operated only 19 daily jet departures and had terminated all turboprop
operations at Denver. Turboprop service is provided to a number of smaller
regional cities by an unaffiliated third party, G.P. Express Airlines, Inc.
("GP Express"), under a code-share agreement. As a result of this
reduction of operations in Denver, aircraft were redeployed to other hubs
and to non-hub flying. See Item 3. "Legal Proceedings. Denver
International Airport" and Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
Greensboro. As of March 31, 1995, Continental operated 56.3%
(57 departures) of all daily jet departures and, together with Express and
GP Express, accounted for 60.8% (90 departures) of all daily departures
from Greensboro's Piedmont Triad International Airport ("Piedmont").
Turboprop service is provided to a number of smaller regional cities by GP
Express under a code-share agreement. The next largest carrier, USAir, and
its commuter affiliate accounted for 21.8% (34 departures) of all daily
departures from Piedmont as of March 31, 1995.
Continental Lite. In 1994, Continental rapidly expanded "Continental Lite"
(a network of short-haul, no-frills, low-fare flights initially referred to
as Peanuts Flights) from 173 daily flights and 19 aircraft serving
14 cities in November 1993 to 1,000 daily flights and 114 aircraft serving
43 cities in September 1994. The rapid growth of Continental Lite was
supplied by redeploying a substantial portion of Continental's capacity,
including aircraft made available by elimination of the Denver hub and by
deliveries of new aircraft under the Company's agreement with The Boeing
Company ("Boeing"). Continental Lite experienced operational problems in
connection with this rapid growth and was not profitable in 1994. At its
peak, approximately 35% of Continental Lite flying consisted of point-to-
point, linear service not integrated with the Company's hubs ("linear
flying"). Linear flying proved to be significantly unprofitable and was
responsible for an estimated 70% of all Continental Lite system losses in
1994. In 1995, the Company is substantially reducing its Continental Lite
operation. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
America West Airlines, Inc. ("America West"). As a limited partner in
AmWest Partners, L.P. ("AmWest"), Continental participated in the
acquisition by AmWest of a portion of the equity of reorganized America
West in connection with America West's emergence from bankruptcy, effective
August 25, 1994. In the transaction, Continental paid $18.8 million for
approximately 4.1% of the equity interest and 17.1% of the voting power of
the reorganized America West. Continental also entered into a series of
agreements with America West, including agreements related to code-sharing
and ground handling, which have created substantial benefits for both
airlines.
Each investor participating in the acquisition did so on individual terms;
Continental and certain other parties invested at the same per share price,
but at a higher price (approximately $9.36 per share as compared to
approximately $7.01 per share) than the price paid by Air Partners, II,
L.P., TPG Partners, L.P. and TPG Parallel I, L.P. (collectively, the "TPG
entities"), partnerships controlled by Mr. David Bonderman, Chairman of the
Board of Continental. However, as between Continental and the TPG
entities, Continental is entitled to receive a 10.0% per year return on its
investment before the TPG entities receive any return and to recoup its
invested capital before the TPG entities recoup their capital.
International Operations and Foreign Carrier Alliances
International Operations. Continental has extensive operations in the
western Pacific conducted by CMI, and has expanded its presence in Mexico
and Central and South America. As measured by available seat miles, as of
March 31, 1995, approximately 25.5% of Continental's operations (including
CMI) were dedicated to international traffic. As of March 31, 1995,
Continental operated seven departures a day to five cities in Europe, with
connecting service to additional cities through alliances with foreign
carriers.
Foreign Carrier Alliances. Over the last decade, major United States
airlines have developed and expanded alliances with foreign air carriers,
generally involving adjacent terminal operations, coordinated flights and
joint marketing. Continental currently has alliances with AC, Scandinavian
Airlines System ("SAS"), Transavia Airlines ("Transavia") and Alitalia
Airlines ("Alitalia") which management believes are important to
Continental's ability to compete as an international airline. In April
1994, Continental entered into a strategic alliance with Alitalia pursuant
to a memorandum of understanding, which provided for a code-share agreement
and a framework for jointly developing new and competitive services between
the United States and Italy. In addition, Continental and Alitalia entered
into a wet lease agreement in May 1994 providing for the sharing of
revenues and expenses associated with such new services. Implementation of
the new alliance began on July 1, 1994, with the commencement of new
service between Newark and Rome. The code-share agreement was given final
approval by both the United States and Italian governments in October 1994.
New service between Newark/Milan and Mexico City/Houston/Rome is planned to
begin in mid 1995.
Continental Micronesia, Inc.
Continental has historically had a strong presence in the western Pacific,
based in part on operations conducted since 1976 under the name
"Continental/Air Micronesia". CMI's operations include a hub operation
based on the neighboring islands of Guam and Saipan. The Guam/Saipan hub
provides scheduled service to seven Japanese cities (more Japanese
destinations than any other United States carrier), Hong Kong, South Korea,
Taiwan, Indonesia, the Philippines and ten islands in the western Pacific.
Effective April 15, 1995, CMI is adding service to Sydney, Australia. In
1995, CMI also plans to add service to Cebu, Philippines, subject to
certain regulatory matters.
Pursuant to the Reorganization, Continental restructured its western
Pacific operations by establishing CMI. Continental provides CMI with
pilots, aircraft and other essential services at a price intended to
approximate Continental's cost of providing the service. CMI is separately
certificated as an airline by the United States Department of
Transportation (the "DOT"), and holds an operating license issued by the
United States Federal Aviation Administration (the "FAA") and foreign route
authority issued by the DOT.
The 9.0% minority interest in CMI is owned by United Micronesia Development
Association, Inc. ("UMDA"), a private company. Under agreements entered
into in connection with the Reorganization, UMDA would have the right to
increase its ownership in CMI to just over 20% in the event any
participating employer in the Company's pension plans failed to make, or
Continental failed to adequately provide for, certain pension plan
payments. CMI also pays UMDA a fee of approximately one percent of CMI's
gross revenues, as defined, which will continue until January 1, 2012.
Prior to the establishment of CMI, Continental had conducted the western
Pacific operations itself under the name Continental/Air Micronesia and had
paid UMDA the one percent fee.
CMI's operations in the western Pacific have consistently provided greater
operating profit margins than Continental's overall operations. Any
significant and sustained decrease in traffic to and from Guam and Saipan
could materially adversely affect the Company. Because the majority of
CMI's traffic originates in Japan, its results of operations are
substantially affected by the Japanese economy and are impacted by changes
in the value of the yen as compared to the dollar. During 1993 and 1994,
the yen generally appreciated against the dollar, resulting in an increase
in CMI's profitability, revenues and, to a lesser extent, expenses.
Continental Express
Continental's jet service at each of its domestic hub cities and at
Greensboro is coordinated with Express, which operates under the name
"Continental Express". Express operates advanced new-generation turboprop
aircraft that average approximately five years of age and seat from 30 to
60 passengers. As of March 31, 1995, Express served 23 destinations from
Houston, 17 from Newark, 16 from Cleveland and 2 from Greensboro. In
general, Express flights are less than 200 miles in length and less than
90 minutes in duration. Management believes the turboprop operations
complement Continental's jet operations by allowing more frequent service
to small cities than could be provided economically with jets and by
carrying traffic that connects onto Continental's jets. In many cases,
Express (and Continental) compete for such connecting traffic with commuter
airlines owned by or affiliated with other major airlines operating out of
the same or other cities.
In May 1994, Express terminated substantially all of its unprofitable
Denver operations, which were taken over by GP Express, an unaffiliated
commuter airline operator. Express has implemented cost-reduction
programs, including substantial workforce reductions. In 1994, Continental
announced it was considering a possible private placement by Express of
less than 20% of the common stock of Express as well as a possible future
distribution by Continental to its stockholders of all or part of the stock
of Express held by Continental. Continental has currently postponed
pursuing these transactions.
Business Strategy
Continental has developed a new strategic program, the Go Forward Plan,
designed to strengthen the Company's domestic hub operations, increase
revenues and cash flows, improve profitability by shrinking excess
capacity, and enhance customer service. Since the Reorganization,
Continental has not been profitable. In late 1993 and throughout 1994, the
Company significantly reduced its presence in Denver, which had
historically been unprofitable for the Company, and redeployed aircraft and
other resources to the eastern United States in connection with the
expansion of Continental Lite. Demand for Continental Lite, particularly
in linear markets, proved insufficient to absorb the Company's excess
capacity, and Continental Lite was not profitable in 1994. Overcapacity
worsened in the latter half of 1994 as Continental's fleet expanded due to
deliveries of new jet aircraft.
During the fourth quarter of 1994, the Company determined that a new
strategic plan was needed to return the Company to profitability and
strengthen its balance sheet. The Go Forward Plan has four key strategic
components: Fly to Win, Fund the Future, Make Reliability a Reality and
Working Together.
Fly to Win. Continental intends to maximize efficiencies and revenues by:
- - - - Strengthening its domestic hub operations by adjusting frequencies and
improving schedules.
- - - - Pricing fares commensurate with market demand and elasticity.
- - - - Reducing Continental Lite flying by approximately one-third, primarily in
linear markets which, at Continental Lite's peak capacity in 1994,
represented approximately 35% of the Continental Lite system but
accounted for an estimated 70% of Continental Lite's 1994 losses.
- - - - Downgauging aircraft and reducing overall capacity by removing from
service 24 less-efficient widebody aircraft and accelerating the
retirement of 23 older Stage II narrowbody aircraft during 1995.
- - - - Modernizing its domestic fleet by placing in service 27 new, more
efficient aircraft in 1995.
- - - - Improving customer service by returning Continental's frequent flyer
program ("OnePass") to its 1993 terms.
- - - - Reducing staff (at all levels) by approximately 4,000 positions to match
the reduction in capacity and to eliminate non-value added activities.
Fund the Future. The Company is taking steps to improve liquidity and, in
the long term, de-leverage the balance sheet by:
- - - - Adjusting Continental's fleet plan by deferring certain aircraft
deliveries, canceling options on aircraft deliveries and removing 24
widebody aircraft and 30 narrowbody aircraft (23 of which are being
retired on an accelerated schedule) from service in 1995.
- - - - Negotiating amendments to certain debt and lease agreements to reduce
cash requirements in 1995 and 1996.
- - - - Evaluating the potential disposition of certain non-strategic assets.
See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations. Liquidity and Capital Commitments".
Make Reliability a Reality. Continental has placed renewed emphasis on
reliability and has named two executives to improve its on-time
performance, baggage handling and customer satisfaction. Employees will
have the opportunity to earn extra pay each month that the Company meets
certain on-time performance targets as measured by the DOT. In order to
enhance consumer perception of Continental's reliability, consistency and
quality, the Company is completing the refurbishment of its terminal spaces
and fleet interiors and exteriors during the first half of 1995. In
addition, the Company is installing new passenger in-flight
telecommunications and computer facilities on all jet aircraft and expects
that installation will be substantially completed by the end of 1995.
Working Together. Senior management has instituted a new open-door policy
with its employees designed to improve the working environment and
encourage all employees to work together as a team to improve operational
performance and customer service. In support of the new policy, senior
management has hosted hundreds of employees for informal get-togethers and
discussion sessions in the executive offices, and more of these sessions
are scheduled. In addition, the Company has hired new senior executives
with successful records at profitable companies in the areas of pricing,
scheduling, distribution, human resources, airport services, law and
finance.
Continental's alliance with America West is producing further efficiencies
for the two carriers. Task forces have been established to coordinate and
optimize benefits in the areas of code-sharing, frequent flyer programs,
maintenance procurement, station operations and information systems.
Employees
Labor costs are a significant variable that can substantially impact
airline results. For the year 1994, labor costs constituted approximately
27.0% of total operating expenses. While there can be no assurance that
Continental's generally good labor relations and high labor productivity
experienced in the past five years will continue, Continental's management
has established as a significant component of the Go Forward Plan the
preservation of good employee relations.
As of December 31, 1994, Continental had approximately 37,800 full-time
equivalent employees (including approximately 4,800 pilots, 6,400 flight
attendants, 4,900 mechanics, 100 dispatchers, 17,300 customer service
agents, reservations agents, ramp and other airport personnel and 4,300
management and clerical employees), approximately 29.8% of whom were
represented by unions.
The Company and the Independent Association of Continental Pilots ("IACP")
are negotiating an initial collective bargaining agreement for the pilots.
Negotiations have progressed to mediated collective bargaining with the
National Mediation Board ("NMB") - a normal and usual part of the airline
labor negotiation process. The Company is hopeful that a mutually
acceptable agreement can be reached without adverse employee work actions;
however, the ultimate outcome of the Company's negotiations with the IACP
is unknown at this time.
In 1992, Continental and its flight attendants entered into a collective
bargaining agreement with the International Association of Machinists and
Aerospace Workers ("IAM") that has been ratified by the Continental flight
attendants and becomes amendable in 1996. In 1993, the NMB ruled that the
Express flight attendants are also represented by the IAM. Negotiations
between Continental and the IAM have commenced, but the parties have not
yet reached an agreement. The Company is hopeful that the parties can
reach an agreement without adverse employee work actions; however, the
ultimate outcome is unknown at this time. CMI's flight attendants are also
represented by the IAM, but are covered under a separate four-year contract
that was signed in September 1992 and becomes amendable in September 1996.
Continental's dispatchers are represented by the Transport Workers Union
which also represents the dispatchers of Express. CMI's dispatchers are
not represented by a union.
CMI's mechanics and mechanic-related employees are represented by the
International Brotherhood of Teamsters ("IBT") under a collective
bargaining agreement signed in April 1994 which becomes amendable in March
1997. The IBT also represents CMI's agent classification employees located
on Guam whose collective bargaining agreement was also signed in April 1994
and becomes amendable in March 1997.
The other employees of Continental, Express and CMI are not represented by
unions and are not covered by collective bargaining agreements.
The Company has taken several cost containment actions affecting employees.
In 1992, Continental and its subsidiaries implemented across-the-board
salary and wage reductions for all employees, ranging from 5.0% of pay at
the lowest level of compensation to approximately 22.5% of base pay for
Continental's senior management. The reductions, which lowered payroll
expense by approximately 10.0%, were restored in equal increments in
December 1992, April 1993, April 1994 and July 1994. In January 1995,
Continental determined not to make any longevity pay increases and to
eliminate approximately 4,000 positions, including executive and management
positions, during 1995.
Fuel
Fuel costs constituted approximately 13.1% of total operating costs in
1994. Consequently, changes in fuel costs can significantly affect
Continental's operating results. Fuel prices continue to be susceptible to
political events. In the event of any fuel supply shortage, higher fuel
prices or curtailment of scheduled service could result. Continental
cannot predict near or long-term fuel prices. Continental enters into
petroleum purchase option contracts to hedge a portion of its future
purchases against significant increases in the market price of jet fuel.
In December 1994, approximately three months of jet fuel purchases were
hedged by these contracts. In August 1993, the United States increased
taxes on domestic fuel, including aviation fuel, by 4.3 cents per gallon.
Airlines are exempt from this tax increase until October 1, 1995. When
implemented (based on approximately one billion gallons of fuel consumed
domestically in 1994), the fuel tax will increase Continental's annual
costs by approximately $43.9 million. However, it is possible that the
fuel tax exemption will be extended beyond the October 1, 1995 deadline.
Competition and Marketing
The airline industry is highly competitive and susceptible to price
discounting. Continental must compete with carriers having substantially
greater resources, as well as smaller carriers with lower cost structures.
Overall industry profit margins have historically been low and in recent
years, have been substantially negative. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
As is the case with other carriers, most tickets for travel on Continental
are sold by travel agents. Travel agents generally receive commissions
measured by the price of tickets sold. Accordingly, airlines compete not
only with respect to the price of tickets sold but also with respect to the
amount of commissions paid. Airlines often pay additional commissions in
connection with special revenue programs. On February 10, 1995, Delta
Airlines, Inc. ("Delta") became the first major airline to place a $50 cap
on travel agency commissions for round-trip tickets priced over $500.
Other airlines, including Continental, imposed similar commission caps.
However, due to Continental's low fare structure, this change in its
commissions policy is not expected to significantly impact operating
results. See Item 3. "Legal Proceedings. Antitrust Proceedings".
Frequent Flyer Program
Each major airline has established a frequent flyer program designed to
encourage travel on that carrier. Continental sponsors OnePass, which
allows passengers to earn mileage credits by flying Continental and certain
other carriers, including AC, Transavia, Alitalia, America West and SAS
(collectively, the "OnePass Partners"), and by using the services of
hotels, car rental firms and credit card companies participating in the
OnePass program.
Continental accrues the incremental cost associated with the earned flight
awards based on expected redemptions. The incremental cost to transport a
passenger on a free trip includes the cost of incremental fuel, meals,
insurance and miscellaneous supplies and does not include any charge for
potential displacement of revenue passengers or costs for aircraft
ownership, maintenance, labor or overhead allocation.
Continental estimates that as of December 31, 1994 and 1993, the total
available awards under the OnePass program(based on accumulated mileage)
were 1.6 million and 2.5 million roundtrips, respectively, after
eliminating those accounts below the minimum level. Continental estimates
that as of December 31, 1994 and 1993, 1.1 million and 1.5 million,
respectively, of such awards could be expected to be redeemed, and,
accordingly, Continental has recorded a liability with respect to such
awards. The liability for expected redeemed flight awards decreased from
$63.6 million in 1993 to $42 million in 1994 primarily due to a change in
the Company's estimate of awards expected to be redeemed. The difference
between the awards expected to be redeemed and the total awards available
is an estimate, based on historical data, of breakage for those customers
who do not redeem all or part of their mileage for travel awards or use
their awards with another OnePass Partner.
The number of awards used on Continental was approximately 590,000 and
580,000 roundtrips for the years 1994 and 1993, respectively. Such awards
represented approximately 4.6% and 4.7% of Continental's total revenue
passenger miles for each year, respectively. Due to the structure of the
program and the low level of redemptions as a percentage of total travel,
Continental believes that displacement of revenue passengers by passengers
using flight awards has historically been minimal.
Industry Regulation and Airport Access
Continental, CMI and Express operate under certificates of public
convenience and necessity issued by the DOT. Such certificates may be
altered, amended, modified or suspended by the DOT after notice and hearing
if public convenience and necessity so require, or may be revoked for
intentional failure to comply with the terms and conditions of a
certificate. The airlines are also regulated by the FAA, primarily in the
areas of flight operations, maintenance, ground facilities and other
technical matters. Pursuant to these regulations, Continental has
established, and the FAA has approved, a maintenance program for each type
of aircraft operated by the Company that provides for the ongoing
maintenance of such aircraft, ranging from frequent routine inspections to
major overhauls. Recently adopted regulations require phase-out of certain
aircraft and aging aircraft modifications. Such types of regulations can
significantly increase costs and affect a carrier's ability to compete.
The DOT allows local airport authorities to implement procedures designed
to abate special noise problems, provided such procedures do not
unreasonably interfere with interstate or foreign commerce or the national
transportation system. Certain airports, including the major airports at
Boston, Washington, D.C., Chicago, Los Angeles, San Diego and San
Francisco, have established airport restrictions to limit noise, including
restrictions on aircraft types to be used and limits on the number of
hourly or daily operations or the time of such operations. In some
instances these restrictions have caused curtailments in services or
increases in operating costs and such restrictions could limit the ability
of Continental to expand its operations at the affected airports. Local
authorities at other airports are considering adopting similar noise
regulations.
In the last several years, the FAA has issued a number of maintenance
directives and other regulations relating to, among other things,
retirement of older aircraft, collision avoidance systems, airborne
windshear avoidance systems, noise abatement and increased inspections and
maintenance procedures to be conducted on older aircraft.
On March 24, 1995, the FAA issued new regulations relating to commuter
safety. The new regulations are not expected to have a significant impact
on the operations of Express.
Several airports have recently sought to increase substantially the rates
charged to airlines, and the ability of airlines to contest such increases
has been restricted by a recent decision of the United States Supreme
Court. In addition, legislation which became effective June 1, 1992 allows
public airports to impose passenger facility charges of up to $3 per
departing or connecting passenger at such airports. With certain
exceptions, these charges are passed on to the customers.
The FAA has designated John F. Kennedy, LaGuardia, O'Hare and Washington
National airports as "high density traffic airports" and has limited the
number of departure and arrival slots at those airports. Currently, slots
at the high density traffic airports may be voluntarily sold or transferred
between the carriers. The DOT has in the past reallocated slots to other
carriers and reserves the right to withdraw slots. Various amendments to
the slot system, proposed from time to time by the FAA, members of Congress
and others, could, if adopted, significantly affect operations at the high
density traffic airports or expand slot controls to other airports.
Certain of such proposals could restrict the number of flights, limit the
ownership transferability of slots, increase the risk of slot withdrawal,
or otherwise decrease the value of Continental's slots. Continental cannot
predict whether any of these proposals will be adopted.
The award of international routes to United States carriers is regulated by
agreements between the United States and foreign governments. The United
States has in the past generally followed the practice of encouraging
foreign governments to accept multiple carrier designation on foreign
routes, although certain countries have sought to limit the number of
carriers. Foreign route authorities may become less valuable to the extent
that the United States and other countries adopt "open skies" policies
liberalizing entry on international routes. Continental cannot predict
what laws and regulations will be adopted or their impact, but the impact
may be significant. Certain regulatory changes, if proposed and adopted,
could materially adversely affect Continental, could cause defaults under
the Company's secured note agreements with General Electric Capital
Corporation and affiliates (collectively "GE Capital") and could require
charges to the Company's financial statements.
Many aspects of Continental's operations are subject to increasingly
stringent federal, state and local laws protecting the environment. Future
regulatory developments could affect operations and increase operating
costs in the airline industry, including for Continental.
Additional laws and regulations have been proposed or are contemplated that
could significantly increase the cost of airline operations by, for
example, increasing fuel taxes, imposing additional requirements or
restrictions on operations or impairing access to capital markets.
Continental cannot predict what laws and regulations will be adopted or
their impact, but the impact could be significant.
System One
System One develops, markets and distributes travel-related information
management products and services ("IMS") to the worldwide travel-related
services industry and owns, markets and distributes a computerized
reservation system ("CRS") to travel agencies, travel suppliers,
corporations and other customers. System One has approximately a 15% share
of the travel agency business in the United States and has a substantial
market share in Latin America and in the Mid-Pacific/ Micronesia markets.
The travel information supplied by the System One CRS to its subscribers
includes flight availability, fares, hotel accommodations, car rentals,
currency exchange rates and tourist information. System One's IMS business
includes management and accounting systems for large travel agencies as
well as data consolidation and management products. Approximately 12.3% of
System One's 1994 revenues were realized in connection with Continental
bookings.
In 1991, System One signed a 10-year systems management agreement with
Electronic Data Systems ("EDS"). The agreement provides for EDS to manage
the data processing and telecommunications facilities and services used by
System One.
In February and March 1995, System One borrowed additional funds from EDS
on the same terms as the existing loan agreement with EDS. The proceeds
from these borrowings were used to repay a portion of the outstanding
amount due Continental from System One under an intercompany revolving
credit agreement.
Continental and System One are currently negotiating a series of
transactions whereby the existing systems management agreement between
System One and EDS would be terminated and a substantial portion of the
assets (including the travel agent subscriber base and IMS software) and
certain liabilities of System One would be transferred to a newly formed
limited liability company ("New S1") that would be owned equally by System
One (which will remain a wholly owned subsidiary of Continental), EDS and
AMADEUS, a European CRS. Substantially all of System One's remaining
assets (including the CRS software) and liabilities would be transferred to
AMADEUS. In addition to retaining a one-third interest in New S1, the
outstanding indebtedness of System One owed to each of EDS and Continental
would be repaid, and System One would receive cash and an equity interest
in AMADEUS. New S1 would market the AMADEUS CRS and would continue to
develop, market and distribute travel-related IMS. These transactions are
anticipated to close in the second quarter of 1995.
ITEM 2. PROPERTIES.
Flight Equipment
At December 31, 1994, Continental (including CMI) operated a fleet of 330
jet aircraft, as follows:
<TABLE>
<CAPTION>
Seats
Total in Standard Average Age
Type Aircraft Owned Leased Configuration (In Years)
<S> <C> <C> <C> <C> <C>
Four Engine
747-200* 3 - 3 392 21.7
747-100* 2 - 2 392 24.0
Three Engine
DC-10-10 6 - 6 287 21.7
DC-10-30 13 - 13 278 16.9
727-200* 65 1 64 149 17.5
Two Engine
A300 21 2 19 257 13.1
737-500 21 - 21 107 0.6
737-300 59 10 49 131 7.2
737-200* 18 9 9 115 25.0
737-100* 13 13 - 107 25.8
757-200 11 - 11 183 0.5
MD-80 67 10 57 141 9.5
DC-9-30* 31 3 28 110 22.4
330 48 282
</TABLE>
*Stage II (noise level) aircraft.
All of the aircraft and engines owned by Continental are subject to
mortgages.
Pursuant to the Company's Go Forward Plan, Continental will remove from
service 21 A300 aircraft, three 747 aircraft and 30 727 aircraft (23 of
which are being retired on an accelerated schedule) during 1995. See Item
7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations. Results of Operations. Nonrecurring Charges".
The FAA has adopted rules pursuant to the Airport Noise and Capacity Act of
1990 that require a scheduled phase out of Stage II aircraft during the
1990's. As a result of Continental's acquisition of a number of new
aircraft and the retirement of older Stage II aircraft in recent years,
approximately 60.0% of Continental's current jet fleet was composed of
Stage III aircraft at December 31, 1994. The Company plans to either
retire or install hush kits on the remainder of its Stage II jet fleet
prior to the year 2000 in order to comply with such rules.
Continental has firm commitments to take delivery of 22 new 737 and five
new 757 aircraft in 1995, one new 757 aircraft in 1996 and 43 new jet
aircraft during the years 1998 through 2002. The estimated aggregate cost
of these aircraft is approximately $3.4 billion.
As of December 31, 1994, Express operated a fleet of 76 aircraft, as
follows:
<TABLE>
<CAPTION>
Seats
Total in Standard Average Age
Type Aircraft Owned Leased Configuration (In Years)
<S> <C> <C> <C> <C> <C>
ATR-72 2 - 2 60 1.0
ATR-42 42 5 37 46 4.8
EMB 120 32 22 10 30 5.0
76 27 49
</TABLE>
In late 1994, the Company returned to the lessor five Beech aircraft, sold
10 Beech aircraft and grounded its fleet of five Dash 7 aircraft.
In December 1994, Express contracted with Beech Acceptance Corporation
("Beech") for the purchase of 25 Beech 1900-D aircraft at an estimated
aggregate cost of $104 million, excluding price escalations. Deliveries of
these aircraft are scheduled in 1995 and 1996.
See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations. Liquidity and Capital Commitments" for
information regarding capital commitments and financing relating to
aircraft.
Facilities
Continental's principal facilities are located in Newark, Houston,
Cleveland, Guam, Los Angeles, Denver and Honolulu. All such facilities, as
well as substantially all of Continental's other facilities, are leased on
a long-term, net rental basis, with the lessee responsible for maintenance,
taxes, insurance and other facility-related expenses and services. In
certain locations, Continental owns hangars and other facilities on land
leased on a long-term basis, which facilities will become the property of
the lessor on termination of the lease. At each of its hub cities and most
other locations, Continental's passenger and baggage handling space is
leased directly from the airport authority on varying terms dependent on
prevailing practice at each airport.
Denver's Stapleton Airport closed on February 28, 1995 in connection with
the opening of the new Denver International Airport ("DIA"). In 1992, the
Company agreed to lease (i) 20 gates at DIA for a period of five years from
the date DIA opened, (ii) four of such gates for an additional five years
and (iii) a substantial amount of operational space in connection with the
gates. On April 10, 1995, the Company reached an agreement with the City
and County of Denver (the "City") and certain other parties to amend its
lease of facilities at DIA which, among other things, reduces to 10 the
number of gates (and reduces associated operational space) to be leased by
Continental. See Item 3. "Legal Proceedings. Denver International
Airport" and Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations. Liquidity and Capital Commitments".
The Company is negotiating with America West and Frontier Airlines
("Frontier") to sublease up to five of its 10 gates and certain operational
space.
Continental recently finished construction of certain new cargo facilities
at Los Angeles International Airport ("LAX"). Such facilities were
financed with the proceeds from the issuance of $25.3 million of tax-exempt
revenue bonds in December 1994. Continental agreed to fund the principal
and interest payments related to such bonds through long-term lease
agreements. The Company is attempting to sublease the majority of these
facilities.
On November 7, 1994, the Company announced its decision to close its
western United States scheduled maintenance facilities in Los Angeles and
Denver, eliminating approximately 1,640 maintenance positions. Much of the
Company's scheduled maintenance needs are now performed by outside
suppliers who can support the Company's flight operations at locations more
convenient to its primary domestic routes in the eastern, central and
southern regions of the United States.
CMI operates a hub in Guam/Saipan, where the airport has undertaken a major
terminal expansion expected to be completed by 1997. This expansion, while
increasing the number of gates available to CMI, will also increase the
cost of CMI's operations in Guam.
Continental also maintains administrative offices, airport and terminal
facilities, training facilities and other facilities related to the airline
business in the cities it serves.
As of December 31, 1994, Continental remains contingently liable on
$202.1 million of long-term lease obligations of USAir related to the East
End Terminal at LaGuardia. In the event USAir defaults on such
obligations, Continental may be required to cure the default, at which
time it would have the right to reoccupy the terminal.
ITEM 3. LEGAL PROCEEDINGS.
Plan of Reorganization
The Company's Plan of Reorganization, which became effective on April 27,
1993, provides for the full payment of all allowed administrative and
priority claims. Pursuant to the Plan of Reorganization, holders of
allowed general unsecured claims are entitled to participate in a
distribution of 1,900,000 shares of Class A common stock, 5,042,368 shares
of Class B common stock and $6,523,952 of cash and have no further claim
against the Company. The Plan of Reorganization provided for this
distribution to be issued initially in trust to a distribution agent and
thereafter for distributions to be made from the trust from time to time as
disputed claims are resolved. The distribution agent must reserve from
each partial distribution of stock or cash to allow a complete pro rata
distribution to be made to each holder of a disputed claim in the event
such claim is eventually allowed, unless the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court") establishes a lower
reserve or estimates the claim at a lesser amount for purposes of
distribution. As of March 31, 1995, there remained 307,939 shares of
Class A common stock, 1,115,915 shares of Class B common stock, and
approximately $1 million of cash available for distribution. The stock and
cash set aside for distribution to prepetition unsecured creditors was
fixed in the Plan of Reorganization and will not change as claims are
allowed. However, as set forth below, a limited number of proceedings are
still pending in which prepetition creditors seek to impose additional
obligations on the Company.
Bankruptcy Appeals
Several parties appealed the Bankruptcy Court's April 16, 1993 order
confirming the Plan of Reorganization.
A group of bondholders appealed to have the United States District Court
for the District of Delaware (the "District Court") declare invalid the
Plan of Reorganization provisions relating to the allocation for payment of
unsecured creditors and the provisions releasing certain current and former
officers and directors of the Company and its former parent from the claims
of creditors. If the bondholders successfully imposed liability upon such
officers and directors, the Company could be required to indemnify such
individuals. The Company opposed the appeal on the merits and sought
dismissal of certain of the claims as moot due to the substantial
consummation of the Plan of Reorganization. On March 16, 1995, the
District Court dismissed the appeal in part on grounds of mootness and
denied it in part on the merits. The Company does not believe that the
foregoing matter will have a material adverse effect on the Company.
On December 3, 1990, Continental owned 77 aircraft and 81 spare engines (in
four collateral pools) securing debt evidenced by equipment trust
certificates. The trustees for the four collateral pools moved in the
Bankruptcy Court for "adequate protection" payments under Sections 361 and
363 of the federal bankruptcy code for the Company's retention and use of
the aircraft and engines after December 3, 1990, including postpetition
claims for the alleged decline in market value of the aircraft and engines
after December 3, 1990 and claims for deterioration in the condition of the
aircraft and engines in the same period. The Bankruptcy Court rejected the
adequate protection claims that alleged market value decline, and prior to
April 16, 1993, the Company settled all of the adequate protection claims
of the trustees from three of the four collateral pools. The Company also
settled all adequate protection claims of the trustees for the fourth
collateral pool, except for their claim of approximately $117 million for
alleged market value decline of their pool of 29 aircraft and 81 additional
engines. On April 16, 1993, the Bankruptcy Court rejected the market value
decline claims of the trustees for the fourth collateral pool in their
entirety and incorporated those findings into its order confirming the Plan
of Reorganization. The trustees for the fourth collateral pool appealed
from these orders, but failed to obtain a stay pending appeal. The Company
opposed these appeals on the merits and sought dismissal of the appeals on
the grounds they were made moot by the substantial consummation of the Plan
of Reorganization. The District Court dismissed the appeals as moot, and
the trustees appealed to the Third Circuit Court of Appeals seeking review
of the District Court's mootness determination and the Bankruptcy Court's
finding on the merits. Such appeal is still pending. The Company does not
believe that the foregoing matter will have a material adverse effect on
the Company.
On July 19, 1994, the Bankruptcy Court approved a comprehensive settlement
resolving certain claims filed by the Air Line Pilots Association ("ALPA")
and former pilots of Eastern. A group of separately represented Eastern
pilots (the "LPP Claimants") filed an appeal from an order disallowing the
integration of the Eastern pilots seniority list with Continental pilots
seniority list. Continental filed a motion to dismiss as moot the appeals
brought by the LPP Claimants, on the grounds that only ALPA had standing
with regard to this proceeding and ALPA had previously withdrawn a similar
appeal. The motion remains pending. Other Eastern-related claimants,
including a group of 130 Eastern pilots who seek jobs and damages from
Continental based on alleged prepetition promises of employment with
Continental, have filed notices of appeal from the confirmation order. The
Company is opposing these appeals on the merits and, in any event, if such
parties are successful on their claims, their recovery would be limited to
the fixed pools of Company common stock and cash provided for in the Plan
of Reorganization.
Antitrust Proceedings
In March 1994, the United States District Court for the Northern District
of Georgia approved the July 1992 settlement agreement between Continental
and class plaintiffs in the consolidated Domestic Air Transportation
Antitrust Litigation, in which Continental and other airlines were alleged
to have violated the federal antitrust laws by actions related to pricing.
Under the settlement approved by the court, Continental provided
approximately $11 million in transportation certificates to class members,
in full settlement and release of all claims. Pursuant to this agreement
and similar settlements involving other defendant airlines, transportation
certificates totaling $438 million were provided by Continental and other
airlines, which will be valid on any of the settling defendants and will
not be subject to interline reimbursement.
On December 21, 1992, the United States Department of Justice (the "DOJ")
commenced a civil action in the United States District Court for the
District of Columbia against Continental, seven other domestic airlines and
the Airline Tariff Publishing Company, alleging violations of Section 1 of
the Sherman Act by price fixing and maintenance of a "coordination
facilitation device". The suit sought injunctive relief only. All of the
airlines, including Continental, named in the suit have entered into a
consent decree with the DOJ that is intended to restrict, to some extent,
the airlines' pricing practices. This consent decree was approved by the
court on August 10, 1994.
Continental and other airlines were the subjects of a civil investigation
conducted during 1990-1992 by the Attorney General of the State of Florida
and, separately, of a multistate civil investigation that was begun in
December 1992 by the Attorneys General of several other states, including
Colorado, Connecticut, New York, Ohio, Pennsylvania, Utah and Washington.
The investigations sought to determine if the airlines had violated federal
or analogous state laws with respect to pricing or bidding concerning
government air travel. On October 11, 1994, Continental, together with
other airlines, entered into a Settlement Agreement with several states to
settle the claims by the 50 states of price fixing. The Settlement
Agreement requires the airlines to provide a 10% discount off published
domestic fares for eligible government travel during a period no greater
than 18 months. To implement the Settlement Agreement, on November 10,
1994, the State Attorneys General filed a class action complaint against
Continental and the other airlines in the United States District Court for
the District of Columbia, along with a motion for preliminary approval of
the Settlement Agreement. On December 8, 1994, the District Court issued a
preliminary order approving the Settlement Agreement. Final approval of
the Settlement Agreement is still pending. The Company does not believe
that the foregoing matter will have a material adverse effect on the
Company.
On February 9, 1995, Delta imposed dollar limits on the base commissions
it would pay to travel agents on domestic airline tickets. Shortly
thereafter, other airlines, including Continental, imposed similar dollar
limits on their respective commissions. In February and March of 1995,
Continental and six other major United States airlines were sued in a
number of putative class actions, including In re Airline Travel Agents
Antitrust Litigation in the United States District Court for the District
of Minnesota, in which various travel agents allege that Continental and
the other defendants combined and conspired in unreasonable restraint of
trade and commerce in violation of applicable antitrust laws. The
plaintiffs also allege that the defendant airlines unlawfully fixed,
lowered, maintained and stabilized the commissions paid to United States
travel agents. Plaintiffs seek injunctive relief, treble damages,
attorneys fees and related costs. Continental is in the process of
reviewing the specific allegations in light of the pertinent facts and
commencing the preparation of its defense. The Company does not believe
that the foregoing matter will have a material adverse effect on the
Company.
Denver International Airport
In 1992, the Company agreed to lease (i) 20 gates at DIA for a period of
five years from the date DIA opened, (ii) four of such gates for an
additional five years and (iii) a substantial amount of operational space
in connection with the gates and for the terms set forth in the agreement.
During 1994, the Company significantly reduced its Denver operations. The
City filed a complaint on February 22, 1995 against the Company in the
United States District Court for the District of Colorado seeking a
determination that the Company materially breached and repudiated the lease
and a March 1994 agreement to pay certain costs associated with the delays
in opening DIA. In addition, the City sought a judgment declaring the
City's rights and the Company's obligations and the award of an injunction
that the Company perform such obligations. The City also sought attorneys
fees and costs relating to its suit. The Company believes it has defenses
against the City, as well as claims against the City that justify
rescission of the lease or, if rescission is not awarded by the court, a
substantial reduction in the Company's obligations thereunder.
The Company, the City and certain other parties have entered into an
agreement ("Settlement") that was approved by the Denver City Council on
April 10, 1995. The Settlement provides for the release of certain claims
and the settlement of certain litigation filed by the City against the
Company and reduces (i) the full term of the lease to five years, subject
to certain rights of renewal granted to Continental, (ii) the number of
gates leased from 20 to 10, (iii) the amount of leased operational and
other space by approximately 70%. The reduced gates and operational space
exceed Continental's current needs at the airport, and the Company is
negotiating with America West and Frontier to sublease up to five of its
remaining gates and certain operational space. The Company will attempt to
sublease additional facilities and operational space as well. To the
extent Continental is able to sublease any of its gates and operational
space, its costs under the lease would be reduced.
The Settlement may still be challenged by certain parties, including by
other air carriers, and the Company cannot predict what the outcome of any
such challenge would be. Certain air carriers have taken the position that
an insufficient number of carriers have executed the Settlement. Failure
to implement the Settlement could reduce or eliminate the Company's
estimated savings at DIA.
Environmental Proceedings
The Company (including its predecessors) has been identified by the United
States Environmental Protection Agency ("EPA") as a potentially responsible
party at three Superfund sites. At each site, the Company's potential
responsibility is premised on allegations that the Company generated waste
disposed of at such site. The Company believes that, although applicable
case law is evolving and some cases may be interpreted to the contrary, any
claim of liability associated with these sites was discharged by
confirmation of the Company's Plan of Reorganization, principally because
the Company's exposure at each site is based on alleged prepetition offsite
disposal known as of the date of confirmation. Even if the claims were not
discharged, on the basis of currently available information, the Company
believes that its potential liability for a share of the cost to remedy
each site (to the extent the Company is found to have liability) is not
material; however, the Company has not been designated a "de minimis"
contributor at any of such sites by the EPA. The Company does not believe
that the foregoing matters will have a material adverse effect on the
Company. The Company may become involved in other environmental
proceedings, including the investigation and remediation of environmental
contamination at properties or waste disposal sites used or previously used
by the Company.
General
Various other claims and lawsuits against the Company are pending, which
are of the type reasonably foreseeable in view of the nature of the
Company's business. The Company cannot at this time reasonably estimate
the possible loss or range of loss that could be experienced if any of the
claims were successful. Typically, such claims and lawsuits are covered by
insurance. The Company does not believes that the foregoing matters will
have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Continental's Class A and Class B common stock began trading on the New
York Stock Exchange on a when-issued basis on July 14, 1993 and commenced
trading on a regular-way basis on September 2, 1993, following the initial
distribution of stock to the Company's prepetition creditors. On
December 14, 1993, the Company sold 8,086,579 shares of Class B common
stock in an underwritten public offering. Prior to that time, there had
been limited trading volume in the Company's common stock.
The following table gives the high and low sales prices for the stocks as
reported on the New York Stock Exchange for each quarterly period
subsequent to July 1993.
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
High Low High Low
<S> <C> <C> <C> <C>
1993 Third Quarter . . . . 30-1/8 17-7/8 30-1/2 17
Fourth Quarter . . . . 27-7/8 16 25-7/8 13
1994 First Quarter. . . . . 30-3/4 18-3/4 27-1/4 16-7/8
Second Quarter . . . . 21 13-1/2 19-3/4 11-1/4
Third Quarter. . . . . 22-1/4 14 21-1/2 13
Fourth Quarter . . . . 18-1/2 8-1/8 18-1/8 7-1/2
</TABLE>
The stock of Holdings that was cancelled in the Reorganization was publicly
traded prior to April 28, 1993. Information regarding the price range of
such pre-reorganization trading is not comparable with data provided for
the Class A common stock or the Class B common stock and is not included in
this Form 10-K.
As of March 31, 1995, there were approximately 5,100 and 5,900 holders of
record of Continental's Class A and Class B common stock, respectively.
The Company has not paid dividends on its common stock. The Company
anticipates that no dividends on its common stock will be declared in the
foreseeable future, and that earnings, if any, will be retained for the
development of the Company's business. The Company's loan agreements with
GE Capital prohibit the Company from paying dividends to common
stockholders until February 28, 1997, restrict the subsequent payment of
dividends to common stockholders to a percentage of eligible net income (as
defined) and require CMI to maintain certain minimum cash balances and net
worth levels, which effectively restrict the amount of cash available to
Continental from CMI.
The Company's certificate of incorporation provides that no shares of
capital stock may be voted by or at the direction of persons who are not
United States citizens unless such shares are registered on a separate
stock record. The Company's bylaws further provide that no shares will be
registered on such separate stock record if the amount so registered would
exceed United States foreign ownership restrictions. United States law
currently requires that no more than 25% of the voting stock of the Company
(or any other domestic airline) may be owned directly or indirectly by
persons who are not citizens of the United States. Because AC owns
approximately 23.9% of the voting power of the Company's common stock and
shares of common stock owned by AC have priority over shares held by other
foreign holders, the number of shares that may be voted by other foreign
holders is very limited.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain consolidated financial data of (i) the Reorganized Company
at December 31, 1994 and 1993 and for the year ended December 31, 1994 and the period April 28,
1993 through December 31, 1993 and (ii) the Predecessor Company, for the period January 1, 1993
through April 27, 1993 and as of and for the three years ended December 31, 1992 (in millions,
except per share data).
Because consolidated Continental (as reorganized) includes System One and other businesses that
had been consolidated with Holdings prior to April 28, 1993 (but not with pre-reorganization
Continental), the discussion herein generally refers to Holdings' consolidated financial
statements for periods prior to April 28, 1993. As a result of the adoption of fresh start
reporting in accordance with the American Institute of Certified Public Accountants' Statement of
Position 90-7 -"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7") upon consummation of the Plan of Reorganization on April 27, 1993, the consolidated
financial statements of the Predecessor Company and the Reorganized Company have not been
prepared on a consistent basis of accounting and are separated by a vertical black line.
<CAPTION>
Reorganized Company (1) Predecessor Company (1)(2)(3)
April 28, January 1,
Year Ended 1993 through 1993 through
December 31, December 31, April 27, Year Ended December 31,
1994 1993 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Operating revenues. . . . . . $5,669.9 $3,910.5 $1,857.2 $5,458.7 $5,450.8 $6,133.9
Operating income (loss) . . . (11.0) 95.4 (113.1) (105.9) (218.9) (426.6)
Loss before extraordinary
gain . . . . . . . . . . . . (613.3) (38.5) (978.6) (125.3) (305.7) (2,402.9)
Net income (loss) (4) . . . . (613.3) (38.5) 2,640.1 (125.3) (305.7) (2,343.9)
Primary and fully diluted
loss per common share:
Before extraordinary
gain . . . . . . . . . . . (23.76) (2.33) * (2.70) (6.74) (58.96)
Extraordinary gain. . . . . - - * - - 1.44
Net loss. . . . . . . . . . (23.76) (2.33) * (2.70) (6.74) (57.52)
(continued on next page)
</TABLE>
<TABLE>
<CAPTION>
Reorganized Company (1)(3) Predecessor Company (1)(3)
December 31, December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Total assets. . . . . . . . . . . .$4,601.2 $5,098.5 $3,252.5 $3,522.8 $3,468.7
Estimated liabilities subject
to Chapter 11 reorganization
proceedings. . . . . . . . . . . . - - 3,907.1 4,211.9 4,352.0
Long-term debt and capital
lease obligations. . . . . . . . . 1,202.5 1,775.3 228.0 81.2 -
Minority interest . . . . . . . . . 25.8 21.9 - - -
Redeemable preferred stock. . . . . 52.6 46.9 101.9 101.9 101.9
*Not meaningful.
(1) See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations. Results of Operations" for a discussion of significant transactions in 1994,
1993 and 1992. 1994 results include nonrecurring charges of approximately $446.8 million.
1990 results included net losses of $177.1 million attributable to Eastern and Eastern-
related adjustments aggregating approximately $1.4 billion. Also included in 1990 results
are adjustments aggregating approximately $440.7 million resulting from the Chapter 11
filing by the Predecessor Company and adjustments totaling approximately $270.7 million
recorded in connection with asset impairment. 1990 results include gains on the disposition
of property, equipment and other assets of $100.2 million.
(2) Includes Eastern for periods through April 19, 1990, for which periods and at which date
Eastern was a consolidated subsidiary of Holdings.
(3) Certain reclassifications have been made in prior years' financial statements to conform to
the 1994 presentation.
(4) No cash dividends were paid on common stock during the periods shown.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Continental is the successor to Continental Airlines Holdings, Inc. and
Continental Airlines, Inc. On December 3, 1990, Continental and Holdings
and all their wholly owned domestic subsidiaries filed voluntary petitions
to reorganize under Chapter 11 of the federal bankruptcy code. The
companies' consolidated Plan of Reorganization was confirmed on April 16,
1993 and became effective on April 27, 1993. On such date, Holdings merged
with and into Continental. System One, which had been a subsidiary of
Holdings, was reorganized as a subsidiary of Continental. Because
consolidated Continental (as reorganized) includes System One and other
businesses that had been consolidated with Holdings for periods through
April 27, 1993 (but not with pre-reorganization Continental), the
discussion herein generally refers to Holdings' consolidated financial
statements for periods through April 27, 1993.
On April 27, 1993, the Company adopted fresh start reporting in accordance
with SOP 90-7, which resulted in adjustment of the Company's common
stockholders' equity and the carrying values of assets and liabilities.
The fresh start reporting adjustments, primarily related to the adjustment
of the Company's assets and liabilities to fair market values, have also
affected the Company's statements of operations. The more significant
adjustments related to increased amortization expense relating to routes,
gates and slots and reorganization value in excess of amounts allocable to
identifiable assets; reduced aircraft rent expense; and increased interest
expense.
Adverse Industry Conditions and Competition
The Company has experienced significant losses in the last five fiscal
years. The Company's viability is dependent upon its ability to achieve
and sustain profitable results of operations and thereby obtain access to
external capital sources. During the fourth quarter of 1994, the Company
recorded a nonrecurring charge of approximately $446.8 million. See
"Results of Operations. Nonrecurring Charges".
The airline industry is highly competitive and susceptible to price
discounting, and Continental must compete with carriers having
substantially greater resources, as well as smaller carriers with lower
cost structures. Overall industry profit margins have historically been
low and in recent years, have been substantially negative. Profit levels
are highly sensitive to changes in fuel costs, changes in average yield
(fare levels) and changes in passenger demand. Passenger demand and yield
have been affected by, among other things, the general state of the economy
and fare actions taken by Continental or its competitors.
In addition, a number of new carriers have entered the industry, typically
with low cost structures. In some cases, the new entrants have initiated
or triggered further price discounting. Aircraft, skilled labor and gates
at most airports continue to be available to start-up carriers, and
additional entrepreneurs have indicated that they intend to enter the
airline business. Although management believes Continental may be better
able than several of its major competitors to compete with the fares
offered by start-up carriers because of Continental's lower cost structure,
the entry of new carriers on many of Continental's routes (as well as
increased competition from established carriers) could negatively impact
Continental's results of operations.
Airline Costs
Management believes that the Company's costs will be affected in 1995 by
(i) the full-year impact of the 1994 wage restorations, (ii) higher
aircraft rental expense as new aircraft are delivered, (iii) changes in the
costs of materials and services (in particular, the cost of fuel, which can
fluctuate significantly in response to global market conditions), (iv)
changes in governmental regulations and taxes affecting air transportation
and the costs charged for airport access, (v) changes in the Company's
fleet and related capacity and (vi) the Company's continuing efforts to
reduce costs throughout its operations.
Management believes that maintaining a cost advantage is crucial to the
Company's business strategy, and Continental is pursuing aggressive cost
reduction objectives in virtually all aspects of its operations.
Fuel costs constituted approximately 13.1% of Continental's operating costs
in 1994 and, although Continental has consistently sought to hedge its
short to intermediate term exposure against severe spikes in crude oil
prices, future price changes could materially affect Continental's results
of operations. See Item 1. "Business. Fuel".
In the last several years, the FAA has issued a number of maintenance
directives and other regulations relating to, among other things,
retirement of older aircraft, collision avoidance systems, airborne
windshear avoidance systems, noise abatement and increased inspections and
maintenance procedures to be conducted on older aircraft. These regulatory
actions have imposed, and may in the future impose further, material
unanticipated costs upon the Company and other airlines.
Other
The Company had, as of December 31, 1994, deferred tax assets aggregating
approximately $1.6 billion, including approximately $1.1 billion of net
operating loss carryforwards. The Company recorded a valuation allowance
of $844.2 million against such assets as of December 31, 1994. Realization
of a substantial portion of the Company's remaining net operating loss
carryforwards will require the completion during the next three years of
transactions resulting in recognition of built-in gains for federal income
tax purposes. Although the Company currently intends to consummate one or
more such transactions, in the event the Company were to determine in the
future that no such transactions will be completed, an adjustment to the
deferred tax liability of up to approximately $194 million would be charged
to income in the period such determination was made.
Many aspects of Continental's operations are also subject to increasingly
stringent federal, state and local laws protecting the environment.
Continental has been named as a potentially responsible party at three
cleanup sites which have been designated as Superfund Sites. At sites
where EPA has commenced remedial litigation, potential liability is joint
and several. Continental's alleged volumetric contributions at the sites
are minimal. The Company does not believe that the foregoing matters will
have a material adverse effect on the Company.
Certain Statistical Information
An analysis of statistical information for Continental's jet operations for
each of the three years in the period ended December 31, 1994 is as
follows:
<TABLE>
<CAPTION>
Net Increase/ Net Increase/
(Decrease) (Decrease)
1994 1994-1993 1993 1993-1992 1992
<S> <C> <C> <C> <C> <C>
Revenue passengers
(000). . . . . . . 42,202 9.3 % 38,628 0.7 % 38,358
Revenue passenger
miles (millions)
(a). . . . . . . . 41,588 (1.7)% 42,324 (1.7)% 43,072
Available seat miles
(millions) (b) . . 65,861 (1.7)% 67,011 (1.3)% 67,877
Passenger load
factor (c) . . . . 63.1% (0.1) pts. 63.2% (0.3) pts. 63.5%
Breakeven passenger
load factor (d). . 62.9% (0.4) pts. 63.3% (2.1) pts. 65.4%
Passenger revenue
per available
seat mile
(cents) (e). . . . 7.22 0.7 % 7.17 7.7 % 6.66
Operating cost per
available seat
mile (cents) (f) . 7.86 (0.5)% 7.90 4.5 % 7.56
Average yield per
revenue passenger
mile (cents) (g) . 11.44 0.8 % 11.35 8.2 % 10.49
Average fare
per revenue
passenger. . . . . $112.71 (9.3)% $124.32 5.5 % $117.84
Average length of
aircraft flight
(miles). . . . . . 727 (15.1)% 856 0.6 % 851
Average daily util-
ization of each
aircraft (h) . . . 9:57 2.2 % 9:44 1.7 % 9:34
</TABLE>
_______________
(a) The number of scheduled miles flown by revenue passengers.
(b) The number of seats available for passengers multiplied by the number
of scheduled miles those seats are flown.
(c) Revenue passenger miles divided by available seat miles.
(d) The percentage of seats that must be occupied by revenue passengers in
order for the airline to breakeven on an income before income taxes
basis, excluding nonrecurring charges, nonoperating items and other
special items. This statistic excludes Express operations.
(e) Passenger revenues divided by available seat miles.
(f) Operating expenses divided by available seat miles. Operating cost
for the year ended December 31, 1993 included approximately
$37 million of nonrecurring items related to the Reorganization.
(g) The average revenue received for each mile a revenue passenger is
carried.
(h) The average block hours flown per day in revenue service per aircraft.
Results of Operations
The following discussion provides an analysis of the Company's results of
operations and reasons for material changes therein for the three years
ended December 31, 1994. The Company's results of operations for the
periods subsequent to April 27, 1993 have not been prepared on a basis of
accounting consistent with its predecessor's results of operations for
periods prior to April 28, 1993 due to the implementation of fresh start
reporting upon the Company's emergence from bankruptcy. Financial
information for 1993 is derived by combining the results of operations of
the Company for the period April 28, 1993 through December 31, 1993 with
those of Holdings for the period January 1, 1993 through April 27, 1993.
Overview of 1994. Continental's 1994 loss before nonrecurring charges was
$166.5 million, or $6.61 per common share (primary and fully diluted). The
1994 net loss of $613.3 million, or $23.76 per common share (primary and
fully diluted), included nonrecurring charges of approximately
$446.8 million, or $17.15 per common share (primary and fully diluted).
See "Nonrecurring Charges" below. The nonrecurring charges and losses in
1994 were caused primarily by major operating changes implemented by
Continental during the year and by a late 1994 build-up of excess fleet and
related operating capacity that the Company was unable to deploy
profitably. Continental's Go Forward Plan, a new, multi-faceted strategy,
is designed to redirect and improve the Company's operations, shrink excess
capacity, improve liquidity and achieve profitability. See Item 1.
"Business. Business Strategy".
Reduction in Western United States Operations. During 1994, Continental
greatly reduced its operations in the western United States. The Company
eliminated its unprofitable Denver hub operation, cutting daily jet
departures from 165 in August 1993, to 86 in July 1994, 59 in September
1994 and 19 at March 31, 1995. Beginning in May 1994, Express also
terminated all Denver turboprop operations. In November 1994, Continental
announced its decision to close its western United States heavy maintenance
facilities in Los Angeles and Denver, eliminating approximately 1,640
maintenance positions.
Continental Lite. In 1994, Continental rapidly expanded Continental Lite
(a network of short-haul, no-frills, low-fare flights initially referred to
as Peanuts Flights), from 173 daily flights and 19 aircraft serving 14
cities in November 1993 to 1,000 daily flights and 114 aircraft serving 43
cities in September 1994. The rapid growth of Continental Lite was
supplied by redeploying a substantial portion of Continental's capacity,
including aircraft made available by elimination of the Denver hub and by
deliveries of new aircraft under the Company's agreement with Boeing.
Continental Lite experienced operational problems in connection with this
rapid growth and was not profitable in 1994. At its peak, approximately
35% of Continental Lite flying consisted of point-to-point, linear service
not integrated with the Company's hubs. Linear flying proved to be
significantly unprofitable and was responsible for an estimated 70% of all
Continental Lite system losses in 1994. As part of its Go Forward Plan,
the Company is substantially reducing Continental Lite operations by
redeploying aircraft out of Continental Lite to replace less efficient,
larger aircraft being retired from long-haul service, and implementing
other changes intended to improve profitability.
Express. Management has implemented strategies designed to improve the
performance of Express, which experienced losses in 1994. In addition to
terminating its significantly unprofitable Denver operations, Express
implemented cost-reduction programs, including substantial workforce
reductions, and has entered into an agreement to acquire 25 new,
operationally efficient, 19-seat turboprop aircraft from Beech Acceptance
Corporation. Fourth quarter results for Express were adversely affected by
an FAA Airworthiness Directive, which prohibited all airlines, including
Express, from flying ATR-42 and ATR-72 aircraft during atmospheric icing
conditions. The Airworthiness Directive was effective December 9, 1994
through January 13, 1995. The FAA may issue further Airworthiness
Directives with respect to the ATR aircraft and it is not possible to
predict the effect, if any, that future directives or other regulatory
actions may have on the use of such aircraft in certain weather conditions.
International. CMI achieved significant profit growth in 1994 and
continued to generate operating profit margins greater than those of the
rest of the Company. The increase in CMI's profits during 1994 reflected
improvement in the Japanese economy, continued appreciation of the Japanese
yen against the dollar (which increased CMI's dollar revenues and, to a
lesser extent, expenses), the severe typhoons and an earthquake at Guam
that adversely affected 1993 results, and continued growth in air traffic
demand in CMI's markets. Continental also expanded its presence in Europe
and South America in 1994 and is one of the leading airlines providing
service to Mexico and Central America, serving more destinations there than
any other United States airline.
Nonrecurring Charges. During the fourth quarter of 1994, the Company
recorded a nonrecurring charge of approximately $446.8 million associated
primarily with (i) the planned early retirement of certain aircraft and
(ii) closed or underutilized airport and maintenance facilities and other
assets.
Approximately $278 million of the nonrecurring charge was associated with
the planned early retirement during 1995 of 24 widebody jet aircraft (21
Airbus A300s and three Boeing 747s), 23 narrowbody Boeing 727 jet aircraft
and five Dash 7 turboprop aircraft, including a provision for the disposal
of the related inventory. All of these aircraft (except for two owned
Airbus A300 aircraft) have remaining lease obligations beyond the planned
retirement dates for such aircraft. The $278 million charge represents the
Company's best estimate of the expected loss based upon, among other
things, the anticipated resolution of negotiations with certain lessors as
well as anticipated sublease rental income of certain aircraft and engines.
To the extent the actual resolution of the negotiations, actual sublease
rental income or other events or amounts vary from the Company's estimates,
the actual charge could be different from the amount estimated.
Approximately $168.8 million of the nonrecurring charge was associated with
the closure of the LAX maintenance facility, underutilized airport
facilities and other assets (primarily associated with DIA). This portion
of the charge relates to the Company's contractual obligations under the
related lease agreements and the write-off of related leasehold
improvements, less an estimated amount for sublease rental income.
However, should actual sublease rental income be different from the
Company's estimates, the actual charge could be different from the amount
estimated.
Approximately $324.2 million of the nonrecurring charge represents an
actual cash outlay to be incurred over the remaining lease terms (of from
one to 15 years) and approximately $122.6 million represents a noncash
charge associated with a write-down of certain assets (principally
inventory and flight equipment) to expected net realizable value.
Continental expects to finance the cash outlays primarily with internally
generated funds.
Comparison of 1994 to 1993. The Company recorded a consolidated loss
before nonrecurring charges of $166.5 million for the year ended
December 31, 1994 as compared to a consolidated loss before extraordinary
gain of $1 billion for the year ended December 31, 1993. The Company's net
loss in 1994 included nonrecurring charges of approximately $446.8 million.
The Company's net income in 1993 included an extraordinary gain of
$3.6 billion primarily related to the discharge of prepetition debt
obligations in the Reorganization.
Passenger revenues of $5 billion in 1994 decreased 1.6%, $79.4 million,
from 1993 due primarily to a 1.7% decrease in Continental's jet revenue
passenger miles resulting from a 1.7% decrease in available seat miles.
Such decrease was partially offset by a 0.8% increase in jet yields.
Cargo, mail and other revenues decreased by 2.8%, $18.3 million, from 1993
to 1994 primarily as a result of Continental's termination of service to
Australia and New Zealand in October 1993 and poor weather in the eastern
United States in the first quarter of 1994.
Wages, salaries and related costs increased 2.0%, $30.2 million, from 1993
to 1994 due to higher wage rates, partially offset by a decrease in the
number of full-time equivalent employees. In July 1992, the Company
implemented an average 10.0% wage reduction, which reduction was restored
in equal increments in December 1992, April 1993 and April 1994, with the
final restoration occurring in July 1994. The number of full-time
equivalent employees decreased from approximately 39,700 as of December 31,
1993 to approximately 37,800 at December 31, 1994.
Rentals and landing fees increased 4.0%, $32 million, from 1993 to 1994.
Rent expense increased primarily as a result of the delivery of new Boeing
737 and 757 aircraft during 1994. Such increase was partially offset by
retirements of leased aircraft and the full year impact in 1994 of the
amortization of deferred credits recorded in connection with the Company's
adjustment of operating leases to fair market value as of April 27, 1993.
Aircraft fuel expense decreased 8.7%, $70.6 million, from 1993 to 1994
primarily due to a reduction in the average price per gallon. The average
price per gallon of fuel decreased 9.7%, from 59.26 cents in 1993 to
53.52 cents in 1994. The quantity of jet fuel used increased from
1.333 billion gallons in 1993 to 1.349 billion gallons used in 1994
principally due to an increase in the frequency of take-offs and landings
associated with Continental Lite operations.
Maintenance, materials and repairs costs decreased 9.5%, $51.8 million,
from 1993 to 1994 primarily due to increased operational efficiencies and
the retirement of older aircraft.
Commissions expense decreased 20.6%, $113.9 million, from 1993 to 1994
primarily due to a decrease in commissionable sales and a reduction in the
aggregate average commission rate.
Depreciation and amortization expense increased 7.9%, $18.9 million, from
1993 to 1994 due primarily to (i) an increase in aircraft operated under
capital leases during the fourth quarter of 1993, (ii) the amortization of
incremental capitalized costs associated with aircraft, and (iii) the
annualized impact of fresh start adjustments relating to aircraft, routes,
gates and slots and Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets.
Other operating expenses increased 3.8%, $50.7 million, from 1993 to 1994
primarily as a result of increases in reservations and sales expense,
advertising expense and other miscellaneous expenses, partially offset by a
decrease in passenger service expenses that consist primarily of catering
costs.
The Company's interest expense increased 10.6%, $23.1 million, from 1993 to
1994 due primarily to a net increase in debt on which the Company was
required to accrue interest. As a result of its Chapter 11 filing, through
April 1993, the Company was not obligated to pay, and accordingly ceased
accruing, contractual interest on its unsecured and undersecured
obligations.
Interest capitalized increased 71.3%, $7.1 million, from 1993 to 1994 due
primarily to an increase in 1994 in the average balance during the year of
purchase deposits for flight equipment.
Interest income increased 20.2%, $3.8 million, from 1993 to 1994 primarily
due to an increase in the average balance of cash and cash equivalents
coupled with an increase in the average interest rate. Interest income
earned on the Company's investments during the period prior to April 28,
1993 was netted against reorganization items in accordance with SOP 90-7.
The Company recorded gains of $10.5 million and $35.4 million in 1994 and
1993, respectively, relating primarily to Continental's disposition of
property, equipment and other assets. In 1994, a gain totaling
$8.5 million related to the sale of 10 Beech aircraft and five spare
engines was recorded. In 1993, the Company recorded a gain of
$34.9 million related to System One's sale to EDS of substantially all of
the assets of its Airline Services Division.
Reorganization items, net, in 1993 included professional fees of
$58.6 million, accruals for rejected aircraft agreements of $153.3 million
and other miscellaneous adjustments of $33.9 million. In addition, in the
second quarter of 1993, fresh start adjustments totaling $719.1 million
were recorded relating to the adjustment of assets and liabilities to fair
market value as well as other miscellaneous fresh start adjustments of
approximately $76.8 million. These fresh start adjustments were partially
offset by the write off of deferred gains on sale/leaseback transactions of
$218.6 million and interest income of $4.5 million.
The Company's other nonoperating income (expense) in 1994 included foreign
exchange losses of $5.2 million (primarily related to Japanese yen-
denominated transactions). Other nonoperating expense in 1993 included
foreign exchange losses (primarily related to Japanese yen, German mark and
British pound denominated transactions), charges totaling approximately
$13.1 million related to the Company's termination of services to Australia
and New Zealand and other expenses primarily related to the abandonment of
airport facilities.
In 1993, the Company recorded an extraordinary gain of $3.6 billion
resulting from the extinguishment of prepetition obligations, including the
write off of a deferred credit related to Eastern of $1.1 billion.
Comparison of 1993 to 1992. The Company recorded a consolidated loss
before extraordinary gains of $1 billion for the year ended December 31,
1993 as compared to a consolidated net loss of $125.3 million in 1992. The
Company's net income in 1993 included an extraordinary gain of
approximately $3.6 billion primarily related to the discharge of
prepetition debt obligations. The net loss in 1992 included gains
aggregating $185 million relating to sales of assets and Eastern-related
adjustments, principally the PBGC Settlement.
Passenger revenues of $5.1 billion in 1993 increased 5.9%, $286.2 million,
from 1992 due primarily to an 8.2% increase in Continental's jet yields,
partially offset by a 1.7% decrease in Continental's jet revenue passenger
miles resulting from a 1.3% decrease in available seat miles. Such
increase reflected $75 million of passenger revenues recorded in the third
quarter of 1993 as a result of the completion of the Company's periodic
evaluation of its air traffic liability account.
Cargo, mail and other revenues increased 3.6%, $22.8 million, from 1992 to
1993 primarily due to an increase in ground handling and similar services.
Wages, salaries and related costs increased 2.5%, $36.6 million, from 1992
to 1993. In July 1992, the Company implemented an average 10.0% wage
reduction which was partially offset by increases in worker's compensation
and medical benefits expenses. In December 1992, 25% of such wage
reduction was restored and in April 1993 another 25% was restored. The
number of full-time equivalent employees increased from approximately
35,600 as of December 31, 1992 to approximately 39,700 as of December 31,
1993.
Rentals and landing fees remained relatively constant in 1993 as compared
to 1992. Rent expense increased due to Continental's leaseback of
previously owned aircraft which were transferred to certain debt holders in
December 1992 and April 1993 in settlement of litigation. These increases
were offset by the amortization of deferred credits recorded in connection
with the Company's adjustment of operating leases to fair market value as
of April 27, 1993.
Aircraft fuel expense decreased 3.0%, $25.4 million, from 1992 to 1993.
The quantity of jet fuel used increased from 1.307 billion gallons in 1992
to 1.333 billion gallons in 1993 due to an increase in Continental's
operating levels, while the average price per gallon of fuel decreased
5.4%, from 62.48 cents per gallon in 1992 to 59.26 cents per gallon in
1993.
Maintenance, materials and repairs increased 7.8%, $39.6 million, from 1992
to 1993 primarily due to outsourcing certain maintenance to third parties.
For outsourcing contracts, 100% of the cost is included in maintenance,
materials and repairs, whereas, when Continental performs its own
maintenance work, a portion of such cost is classified as wages, salaries
and related costs, in accordance with industry practice.
Commissions expense increased 19.8%, $91.5 million, from 1992 to 1993
primarily due to an increase in passenger revenues.
Depreciation and amortization expense remained relatively constant in 1993
as compared to 1992. Depreciation decreased due to a reduction in the
number of owned aircraft as a result of settlements reached in December
1992 and April 1993 with certain aircraft debt holders (which resulted in
the transfer to the debt holders and subsequent leaseback of certain
aircraft). This decrease was substantially offset by the amortization of
intangibles (including Reorganization Value in Excess of Amounts Allocable
to Identifiable Assets) beginning April 28, 1993.
Other operating expenses increased 6.5%, $82.2 million, from 1992 to 1993
due primarily to increases in reservations and sales expense, advertising
expense and other miscellaneous expenses.
The Company's interest expense increased 42.0%, $64.3 million, from 1992 to
1993 due primarily to (i) interest accretion associated with the fair
market value adjustment for operating leases and debt and (ii) a net
increase in debt on which the Company was required to accrue interest.
Interest capitalized increased 69.5%, $4.1 million, from 1992 to 1993 due
primarily to an increase in 1993 in the average balance during the year of
purchase deposits for flight equipment.
Interest income increased 22.9%, $3.5 million, from 1992 to 1993 primarily
due to an increase in funds available for investment. Interest income
earned on the Company's investments during the period prior to April 27,
1993 was netted against reorganization items in accordance with SOP 90-7.
The Company recorded gains on disposition of property, equipment and other
assets of approximately $35.4 million in 1993 relating primarily to System
One's sale to EDS of substantially all of the assets of its Airline
Services Division. The Company recorded gains on disposition of property,
equipment and other assets of approximately $53.2 million in 1992 relating
primarily to Continental's sale to USAir of certain assets at LaGuardia.
In 1992, the Company recorded a $17.3 million gain when it was released
from its guaranty of interest payments on certain Eastern Equipment Trust
Certificates and a $114.5 million net gain in connection with the PBGC
Settlement.
Reorganization items, net, in 1993 included professional fees of
$58.6 million, accruals for rejected aircraft agreements of $153.3 million
and other miscellaneous adjustments of $33.9 million. In addition, in the
second quarter of 1993, fresh start adjustments totaling $719.1 million
were recorded relating to the adjustment of assets and liabilities to fair
market value as well as other miscellaneous fresh start adjustments of
approximately $76.8 million. These fresh start adjustments were partially
offset by the write off of deferred gains on sale/leaseback transactions of
$218.6 million and interest income of $4.5 million.
In 1992, the Company recorded reorganization items, net, totaling
$31.5 million, including $30 million in reorganization-related professional
fees, $6.7 million in net adjustments related to rejected leases and
$10.1 million of miscellaneous items, offset by $15.3 million of interest
income.
Continental's loss on settlement of litigation in 1992 included a
$41.6 million charge recorded in connection with a lawsuit brought by
American General Corporation and American General Life Insurance Company
and $8 million related to the settlement of certain antitrust litigation.
The Company's other nonoperating expense in 1993 included foreign exchange
losses (primarily related to Japanese yen, German mark and British pound
denominated transactions), charges totaling approximately $13.1 million
related to the Company's termination of services to Australia and New
Zealand and other expenses primarily related to the abandonment of airport
facilities. The Company's other nonoperating income in 1992 included
foreign exchange gains of $6.4 million, proceeds of approximately
$4.5 million from Trump Shuttle, Inc. (the "Shuttle") under a settlement
agreement related to the termination of the Shuttle's participation in the
OnePass program, insurance proceeds of $6.4 million and other miscellaneous
items.
In 1993, the Company recorded an extraordinary gain of approximately
$3.6 billion resulting from the extinguishment of prepetition obligations,
including the write off of a deferred credit related to Eastern of
approximately $1.1 billion.
Liquidity and Capital Commitments
As part of the Company's Go Forward Plan, in January 1995 the Company
commenced a series of initiatives designed to improve liquidity in 1995 and
1996. The major liquidity elements of this plan include (i) rescheduling
principal amortization under the Company's loan agreements with its primary
secured lenders (representing approximately $599.4 million of the Company's
outstanding long-term debt at December 31, 1994), (ii) restructuring the
Company's commitments to purchase new Boeing aircraft and related engines,
(iii) deferring or reducing cash requirements associated with certain
existing aircraft, (iv) reducing the Company's lease commitments at DIA and
(v) evaluating the potential disposition of non-core assets. As discussed
below, under agreements in principle and binding agreements reached through
April 12, 1995, the Company has improved its liquidity by an estimated
$231 million in 1995 and $221 million in 1996. This achieves roughly 75%
of the Go Forward Plan liquidity goal.
On March 31, 1995 the Company signed agreements with Boeing and certain
engine manufacturers to defer substantially all aircraft deliveries that
had been scheduled for 1996 and 1997. Five Boeing 767 aircraft that had
been scheduled for delivery to Continental in 1995 have been sold to a
third party. They have been replaced by five Boeing 767's which
Continental will take delivery of starting in 1998. Options to purchase
additional aircraft have been canceled. On March 30, 1995 Continental
amended its principal secured loan agreements with GE Capital and General
Electric Company (collectively, the "Lenders") to defer 1995 and 1996
principal payments and amended certain of its operating lease agreements
with one of the Lenders to defer 1995 rental obligations. Continental
agreed, among other things, to obtain concessions from certain aircraft
lessors. Continuing deferrals of these principal and operating lease
payments will be suspended if specified portions of such concessions are
not obtained by May 31 and June 30, 1995 or if other covenants are not
complied with. If the required concessions are obtained at a later date,
the deferrals will resume. As discussed immediately below, the Company has
reached agreements with some of these lessors and is in negotiations with
the remaining lessors. The Company anticipates that it will be successful
in timely obtaining the required concessions. These agreements with
Boeing, the engine manufacturers and the Lenders will improve the Company's
1995 and 1996 liquidity by approximately $167 million and $161 million,
respectively.
In connection with the Go Forward Plan, the Company is retiring from
service 24 less efficient widebody aircraft during 1995. In February 1995,
the Company began paying market rentals, which are significantly less than
contractual rentals on these aircraft, and began ceasing all rental
payments as the aircraft are removed from service. In addition, in
February 1995 Continental reduced its rental payments on an additional 11
widebody aircraft leased at significantly above-market rates. The Company
began negotiations in February 1995 with the relevant lessors of the 35
widebody aircraft to amend the lease repayment schedules or provide,
effective February 1, 1995, alternative compensation, which could include
debt securities convertible into equity, in lieu of current cash payments.
As of April 12, 1995, the Company had entered into agreements or agreements
in principle with lessors of 16 of these aircraft that will improve the
Company's liquidity by an estimated $44 million and $40 million in 1995 and
1996, respectively.
On April 10, 1995, the Denver City Council approved an agreement among the
City and County of Denver, the Company and certain signatory airlines
amending the Company's lease of facilities at DIA by reducing the Company's
lease term to five years, reducing to 10 the number of gates (and reducing
associated space) leased by the Company and making certain changes in the
rates and charges under the lease. The agreement also provides for the
release of certain claims and the settlement of certain litigation filed by
the City and County of Denver against the Company. See Item 3. "Legal
Proceedings. Denver International Airport". The agreement is expected to
result in annual reduction in costs to the Company of approximately
$20 million over the life of the lease.
Continental and System One are currently negotiating a series of
transactions whereby the existing systems management agreement between
System One and EDS would be terminated and a substantial portion of the
assets (including the travel agent subscriber base and IMS software) and
certain liabilities of System One would be transferred to a newly formed
limited liability company (New S1) that would be owned equally by System
One (which will remain a wholly owned subsidiary of Continental), EDS and
AMADEUS, a European CRS. Substantially all of System One's remaining
assets (including the CRS software) and liabilities would be transferred to
AMADEUS. In addition to retaining a one-third interest in New S1, System
One would receive cash proceeds and an equity interest in AMADEUS and the
outstanding indebtedness of System One owed to each of EDS and Continental
would be repaid. New S1 would market the AMADEUS CRS and would continue to
develop, market and distribute travel-related IMS. These transactions are
anticipated to close in the second quarter of 1995.
Continental's failure to make required payments to the Lenders, the City
and County of Denver and certain aircraft lessors as described above
constituted events of default under the respective agreements with such
parties. The agreements reached through April 12, 1995 with the Lenders,
the City and County of Denver and two aircraft lessors have cured defaults
under their respective agreements. As of April 12, 1995, defaults under
the remaining widebody aircraft leases were continuing due to the
nonpayment of rents, which could entitle the lessors to pursue contractual
remedies, including seeking to take possession of the leased aircraft. As
of April 12, 1995, the Company is in negotiations with these remaining
lessors and has received proposals from lessors representing a majority of
the Company's agreements currently in default. The Company believes it
will be able to successfully conclude the remaining negotiations and thus
avoid any material adverse effect on the Company. In addition, under
"cross default" provisions, the payment defaults create defaults under a
significant number of Continental's other lease and debt agreements, and
the Company's obligations under the agreements subject to such cross
defaults are also eligible to be accelerated. However, in the opinion of
the Company, it is unlikely that lessors or creditors will exercise
remedies under cross default provisions because (i) the Company is making
all required contractual payments under the applicable agreements, (ii) the
contractual payments on a substantial majority of aircraft leases are at
current market rates, (iii) taking possession of the aircraft would cause
the lessors or lenders to incur remarketing costs, and (iv) exercise of
remedies could expose lessors and lenders to "lender liability" litigation.
Additionally, the Company has made substantial progress in negotiations
with lenders and lessors to cure the payment defaults and expects to
complete all such negotiations by June 30, 1995, and as a result all events
of default, including cross defaults, should be eliminated. Consequently,
the Company does not expect the cross defaults to have a material adverse
effect on the Company.
As a result of the FAA Airworthiness Directive which forced the partial
grounding of the Company's ATR commuter fleet in late 1994 and early 1995,
the Company withheld January and February lease payments totaling
$7 million on those ATR aircraft leased by the manufacturer. The Company's
non-payment of rentals may have resulted in an event of default under the
related lease agreements with ATR. As of April 12, 1995, the Company was
engaged in discussions with ATR concerning compensation, if any, to be
received by the Company as a result of the grounding, and the Company had
received a proposal from ATR that, if accepted, would cure the payment
default. In addition because of a decrease in the value of certain
collateral, the Company may have been in default under the debt agreement
relating to the financing of the Company's LAX maintenance facility. At
March 31, 1995 the principal balance of the applicable obligation was
approximately $64 million and at April 12, 1995, the Company was in
negotiations with the creditor. As a result of the progress in the ATR and
LAX maintenance facility negotiations, the Company does not anticipate that
the foregoing matters will have a material adverse effect on the Company.
The Company has no current plans to take other actions in the future that
would constitute additional events of default.
As a result of the defaults and cross-defaults described above that were
continuing at April 12, 1995, approximately $489.9 million of the Company's
long-term debt and capital lease obligations were classified as debt and
capital leases in default within current liabilities as of December 31,
1994. While the Company does not believe it is probable that it will be
required to fund such defaulted obligations in the next twelve months,
generally accepted accounting principles require that such defaulted
obligations be classified as current liabilities at December 31, 1994. In
addition, certain operating leases with remaining aggregate rentals of
$1.4 billion as of December 31, 1994 were in default or cross default at
April 12, 1995. See Notes 5 and 6 of the Notes to the Consolidated
Financial Statements included in Item 8. Financial Statements and
Supplementary Data.
Continental has firm commitments to take delivery of 22 new 737 and five
new 757 aircraft in 1995, one new 757 aircraft in 1996 and 43 new jet
aircraft during the years 1998 through 2002. The estimated aggregate cost
of these aircraft is approximately $3.4 billion. In December 1994, Express
contracted with Beech for the purchase and financing of 25 Beech 1900-D
aircraft at an estimated aggregate cost of $104 million, excluding price
escalations. Deliveries of the Beech aircraft are scheduled in 1995 and
1996. As of December 31, 1994, Continental had made deposits on jet and
turboprop aircraft orders of approximately $166.1 million, of which
$29.6 million was refunded in January 1995 and $22.6 million was refunded
in April 1995 in connection with the rescheduling of aircraft deliveries.
The Company currently anticipates that the firm financing commitments
available to it with respect to its acquisition of new Boeing and Beech
aircraft will be sufficient to fund all deliveries scheduled during the
years 1995 and 1996.
Continental's capital expenditures during 1994 aggregated approximately
$131.1 million, which primarily related to aircraft modifications,
passenger terminal facility improvements, and ground, telecommunications
and computer equipment. Continental expects its 1995 capital expenditures,
exclusive of aircraft, to aggregate approximately $83 million primarily
relating to aircraft modifications, passenger terminal facility
improvements and office, maintenance, telecommunications and ground
equipment.
As of December 31, 1994, the Company had approximately $396.3 million in
cash and cash equivalents as compared to $721 million as of December 31,
1993. The $324.7 million decrease resulted from approximately
$246.6 million of net cash used by financing activities and $121.4 million
of net cash used by investing activities, offset by $43.3 million of net
cash provided by operating activities.
Continental does not have general lines of credit, and substantially all of
its assets, including the stock of its subsidiaries, are encumbered.
Approximately $118.7 million and $102.4 million of cash and cash
equivalents at December 31, 1994 and 1993, respectively, were held in
restricted arrangements relating primarily to workers' compensation claims
and in accordance with the terms of certain other agreements. In addition,
CMI is required by its loan agreement with GE Capital to maintain certain
minimum cash balances and net worth levels, which effectively restrict the
amount of cash available to Continental from CMI. As of December 31, 1994,
CMI had a minimum cash balance requirement of $23.7 million.
Continental currently believes that its cash on hand, together with cash
expected to be generated from operations, cash anticipated to be generated
from disposition of non-strategic assets and available aircraft financing,
will be sufficient to fund its operations, fleet commitments and expected
capital expenditures for fiscal 1995.
Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements
Page No.
Report of Independent Auditors F-2
Report of Independent Public Accountants F-3
Consolidated Statements of Operations for each of the
Three Years in the Period Ended December 31, 1994 F-5
Consolidated Balance Sheets as of December 31,
1994 and 1993 F-7
Consolidated Statements of Cash Flows for each of the
Three Years in the Period Ended December 31, 1994 F-9
Consolidated Statements of Redeemable and Nonredeemable
Preferred Stock and Common Stockholders' Equity
(Deficit) for each of the Three Years in the Period
Ended December 31, 1994 F-13
Notes to Consolidated Financial Statements F-15
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Continental Airlines, Inc.
We have audited the accompanying consolidated balance sheets of Continental
Airlines, Inc. (the "Company") as of December 31, 1994 and 1993, and the
related consolidated statements of operations, redeemable and non-
redeemable preferred stock and common stockholders' equity and cash flows
for the year ended December 31, 1994 and for the period April 28, 1993
through December 31, 1993. We have also audited the accompanying
consolidated statements of operations, redeemable and nonredeemable
preferred stock and common stockholders' equity and cash flows for the
period from January 1, 1993 through April 27, 1993 of Continental Airlines
Holdings, Inc. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, the
Company's consolidated Plan of Reorganization was confirmed by the
bankruptcy court on April 16, 1993 and became effective April 27, 1993. As
a result, Continental Airlines Holdings, Inc. (the "Predecessor Company")
merged with and into the Company (the "Reorganized Company") effective
April 27, 1993. The Company also adopted fresh start reporting effective
April 27, 1993 and, as a result, the consolidated financial information for
the period after April 27, 1993 is presented on a different basis of
accounting than for the period before April 28, 1993 and, therefore, is not
comparable.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of the Company as of December 31, 1994 and 1993, the consolidated
results of its operations and its cash flows for the year ended
December 31, 1994 and the period from April 28, 1993 to December 31, 1993
and the consolidated results of operations and cash flows of Continental
Airlines Holdings, Inc., for the period from January 1, 1993 through
April 27, 1993, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
April 12, 1995
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Continental Airlines Holdings, Inc.:
We have audited the accompanying consolidated statements of operations,
nonredeemable preferred stock and common stockholders' deficit and cash
flows of Continental Airlines Holdings, Inc. (a Delaware corporation) and
its subsidiaries, entities in Chapter 11 reorganization proceedings
(Holdings), for the year ended December 31, 1992. These financial
statements and the schedules referred to below are the responsibility of
Holdings' management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and
cash flows of Holdings for the year ended December 31, 1992, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared on a
going concern basis. Holdings has experienced significant operating losses
in 1990, 1991 and 1992. Furthermore, Holdings is subject to additional
uncertainties, including litigation and significant liquidity concerns,
which management expects will be substantially resolved upon emergence from
bankruptcy and the consummation of the investment by Air Partners, L.P. and
Air Canada. In January 1993, Holdings filed a revised second amended joint
plan of reorganization and related disclosure statement with the bankruptcy
court. If a plan of reorganization is not approved by the bankruptcy
court, there is substantial doubt about Holdings' ability to continue as a
going concern. In the event a plan of reorganization is approved by the
bankruptcy court, the reorganized company will adopt fresh start reporting;
however, in the long-term, the reorganized company's viability will be
dependent upon its ability to achieve successful future operations. The
accompanying consolidated 1992 financial statements do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might
be necessary should Holdings be unable to continue in existence nor do the
consolidated financial statements reflect the adjustments required by fresh
start reporting.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules for Holdings for 1992
listed in the index to financial statement schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. These schedules have
been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Houston, Texas
March 12, 1993
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
<CAPTION>
Reorganized Company Predecessor Company
Period from
Reorganization Period from
(April 28, January 1,
Year Ended 1993 through 1993 through Year Ended
December 31, December 31, April 27, December
31,
1994 1993) 1993 1992
<S> <C> <C> <C> <C>
Operating Revenues:
Passenger . . . . . . . .$5,036,057 $3,493,070 $1,622,406 $4,829,273
Cargo, mail and other . . 633,874 417,457 234,752 629,436
5,669,931 3,910,527 1,857,158 5,458,709
Operating Expenses:
Wages, salaries and
related costs. . . . . . 1,531,588 999,467 501,901 1,464,783
Rentals and landing fees. 825,469 519,443 273,977 797,495
Aircraft fuel . . . . . . 741,374 540,078 271,935 837,451
Maintenance, materials
and repairs. . . . . . . 495,333 363,175 183,930 507,508
Commissions . . . . . . . 438,883 377,537 175,283 461,305
Depreciation and
amortization . . . . . . 257,765 162,050 76,795 238,441
Other . . . . . . . . . . 1,390,490 853,328 486,475 1,257,576
5,680,902 3,815,078 1,970,296 5,564,559
Operating Income (Loss). . (10,971) 95,449 (113,138) (105,850)
Nonoperating Income
(Expense):
Interest expense. . . . . (240,575) (165,484) (52,023) (153,207)
Interest capitalized. . . 16,988 8,156 1,759 5,851
Interest income . . . . . 22,569 14,242 - -
Gain on disposition of
property, equipment
and other assets, net. . 10,471 4,100 31,250 53,230
Eastern-related
adjustments. . . . . . . - - - 131,797
Reorganization items,
net. . . . . . . . . . . - - (818,551) (31,549)
Loss on settlement
of litigation. . . . . . - - - (49,619)
Nonrecurring charges. . . (446,796) - - -
Other, net. . . . . . . . (2,798) (7,958) (25,742) 24,554
(640,141) (146,944) (863,307) (18,943)
Loss before Income Taxes,
Minority Interest and
Extraordinary Gain. . . . (651,112) (51,495) (976,445) (124,793)
Income Tax (Provision)
Benefit . . . . . . . . . 42,150 12,785 (2,140) (540)
(continued on next page)
</TABLE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
<CAPTION>
Reorganized Company Predecessor Company
Period from
Reorganization Period from
(April 28, January 1,
Year Ended 1993 through 1993 through Year Ended
December 31, December 31, April 27, December
31,
1994 1993) 1993 1992
<S> <C> <C> <C> <C>
Loss before Minority
Interest and
Extraordinary Gain . . .$ (608,962) $ (38,710) $ (978,585) $ (125,333)
Minority Interest. . . . . (4,380) 161 - -
Loss before
Extraordinary Gain. . . . (613,342) (38,549) (978,585) (125,333)
Extraordinary Gain . . . . - - 3,618,723 -
Net Income (Loss). . . . . (613,342) (38,549) 2,640,138 (125,333)
Preferred Dividend
Requirements and
Accretion to Liquidation
Value . . . . . . . . . . (5,690) (3,531) - -
Income (Loss) Applicable
to Common Shares. . . . .$ (619,032) $ (42,080) $2,640,138 $ (125,333)
Primary and Fully Diluted
Loss per Common Share . .$ (23.76) $ (2.33) $ N.M.* $ (2.70)
</TABLE>
*N.M. - Not meaningful - Historical per share data for the Predecessor
Company is not meaningful since the Company has been recapitalized
and has adopted fresh start reporting as of April 27, 1993.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except for share data)
<CAPTION>
December 31, December 31,
ASSETS 1994 1993
<S> <C> <C>
Current Assets:
Cash and cash equivalents, including
restricted cash and cash equivalents of
$118,732 and $102,439, respectively. . . . . $ 396,298 $ 721,038
Accounts receivable, net of allowance for
doubtful receivables of $37,809 and
$35,046, respectively. . . . . . . . . . . . 375,621 334,828
Spare parts and supplies, net of allowance
for obsolescence of $36,325 and $4,621,
respectively . . . . . . . . . . . . . . . . 141,781 161,856
Prepayments and other . . . . . . . . . . . . 76,260 79,404
Total current assets . . . . . . . . . . . . 989,960 1,297,126
Property and Equipment:
Owned property and equipment:
Flight equipment . . . . . . . . . . . . . . 1,004,337 951,881
Other. . . . . . . . . . . . . . . . . . . . 281,605 284,362
1,285,942 1,236,243
Less: Accumulated depreciation. . . . . . . 207,206 69,022
1,078,736 1,167,221
Purchase deposits for flight equipment. . . . 166,052 166,984
Capital leases:
Flight equipment . . . . . . . . . . . . . . 400,037 394,236
Other. . . . . . . . . . . . . . . . . . . . 17,045 2,142
417,082 396,378
Less: Accumulated amortization. . . . . . . 69,103 23,838
347,979 372,540
Total property and equipment. . . . . . . . 1,592,767 1,706,745
Other Assets:
Routes, gates and slots, net of accumulated
amortization of $96,642 and $39,241,
respectively . . . . . . . . . . . . . . . . 1,591,140 1,672,759
Reorganization value in excess of amounts
allocable to identifiable assets, net of
accumulated amortization of $31,197 and
$13,838, respectively. . . . . . . . . . . . 318,206 335,565
Other assets, net . . . . . . . . . . . . . . 109,109 86,301
Total other assets. . . . . . . . . . . . . 2,018,455 2,094,625
Total Assets. . . . . . . . . . . . . . . $4,601,182 $5,098,496
(continued on next page)
</TABLE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except for share data)
<CAPTION>
December 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
<S> <C> <C>
Current Liabilities:
Debt and capital lease obligations in default . $ 489,865 $ -
Current maturities of long-term debt. . . . . . 126,186 176,228
Current maturities of capital leases. . . . . . 25,788 40,556
Accounts payable. . . . . . . . . . . . . . . . 629,939 566,268
Air traffic liability . . . . . . . . . . . . . 584,108 590,994
Accrued payroll and pensions. . . . . . . . . . 178,648 167,859
Accrued other liabilities . . . . . . . . . . . 373,273 364,204
Total current liabilities. . . . . . . . . . . 2,407,807 1,906,109
Long-Term Debt . . . . . . . . . . . . . . . . . 1,038,165 1,369,885
Capital Leases . . . . . . . . . . . . . . . . . 164,349 405,387
Deferred Credits and Other Long-Term
Liabilities:
Deferred income taxes. . . . . . . . . . . . . 28,100 50,767
Deferred credit - operating leases . . . . . . 137,606 288,556
Accruals for aircraft retirements and
excess facilities . . . . . . . . . . . . . . 391,947 -
Other. . . . . . . . . . . . . . . . . . . . . 251,118 288,395
Total deferred credits and other
long-term liabilities. . . . . . . . . . . . 808,771 627,718
Commitments and Contingencies
Minority Interest. . . . . . . . . . . . . . . . 25,800 21,935
Redeemable Preferred Stock (aggregate
redemption value - $55,966 and $50,497,
respectively) . . . . . . . . . . . . . . . . . 52,606 46,916
Common Stockholders' Equity:
Class A common stock - $.01 par, 50,000,000
shares authorized; 6,301,056 shares and
6,013,216 shares issued and outstanding at
December 31, 1994 and 1993, respectively. . . 63 60
Class B common stock - $.01 par, 100,000,000
shares authorized; 20,403,512 shares and
19,509,352 shares issued and outstanding at
December 31, 1994 and 1993, respectively. . . 204 195
Additional paid-in capital . . . . . . . . . . 778,382 764,274
Accumulated deficit. . . . . . . . . . . . . . (651,891) (38,549)
Unearned portion of restricted stock issued
for future service. . . . . . . . . . . . . . (13,872) -
Additional minimum pension liability . . . . . (6,549) (5,434)
Unrealized loss on marketable equity
securities. . . . . . . . . . . . . . . . . . (2,218) -
Treasury stock - 30,000 shares in 1994 . . . . (435) -
Total common stockholders' equity . . . . . . 103,684 720,546
Total Liabilities and
Stockholders' Equity. . . . . . . . . . . $4,601,182 $5,098,496
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<CAPTION>
Reorganized Company Predecessor Company
Period from
Reorganization Period from
(April 28, January 1,
Year Ended 1993 through 1993 through Year Ended
December 31, December 31, April 27, December
31,
1994 1993) 1993 1992
<S> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net income (loss) . . . .$(613,342) $(38,549) $2,640,138 $(125,333)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization . . . . . 257,765 162,050 76,795 232,199
Nonrecurring charges. . 446,796 - - -
Provision for
doubtful receivables.. 24,913 11,640 7,643 23,214
Amortization of
deferred credits . . . (62,942) (43,196) (13,289) (42,573)
Amortization of re-
stricted stock
grants . . . . . . . . 5,502 - - -
Gain on disposition
of property,
equipment and other
assets, net. . . . . . (10,471) (4,100) (31,250) (53,230)
Extraordinary credit -
gain on discharge
of debt, net . . . . . - - (3,618,723) -
Loss on settlement
of litigation. . . . . - - - 49,619
Eastern-related
adjustments. . . . . . - - - (131,797)
Reorganization
items, net . . . . . . - - 779,460 (1,485)
Deferred income tax
benefit. . . . . . . . (42,150) (12,850) - -
Other, net. . . . . . . 34,231 9,694 16,195 25,156
</TABLE>
(continued on next page)
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<CAPTION>
Reorganized Company Predecessor Company
Period from
Reorganization Period from
(April 28, January 1,
Year Ended 1993 through 1993 through Year Ended
December 31, December 31, April 27, December
31,
1994 1993) 1993 1992
<S> <C> <C> <C> <C>
Changes in operating
assets and
liabilities:
(Increase) decrease
in accounts
receivable. . . . . .$(64,081) $ 112,556 $ (132,472) $ 139,544
(Increase) decrease
in spare parts and
supplies. . . . . . . (10,038) 2,854 365 (514)
(Increase) decrease
in prepayments and
other assets. . . . . (12,084) 14,010 34,503 7,336
Increase in accounts
payable . . . . . . . 88,635 15,121 74,929 48,571
Increase (decrease)
in air traffic
liability . . . . . . (6,886) (95,557) 109,587 90,680
Increase (decrease)
in accrued
liabilities,
deferred credits
and other . . . . . . 7,413 (68,858) 129,748 73,216
Net cash provided by
operating activities.. 43,261 64,815 73,629 334,603
Cash Flows from
Investing Activities:
Proceeds from
disposition of
property, equipment
and other assets . . . . 28,459 4,395 36,123 63,304
Capital expenditures. . .(131,050) (236,228) (67,425) (132,994)
Investment in
America West . . . . . . (18,771) - - -
Other, net. . . . . . . . - - - 1,013
Net cash used by
investing activities. .(121,362) (231,833) (31,302) (68,677)
</TABLE>
(continued on next page)
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<CAPTION>
Reorganized Company Predecessor Company
Period from
Reorganization Period from
(April 28, January 1,
Year Ended 1993 through 1993 through Year Ended
December 31, December 31, April 27, December
31,
1994 1993) 1993 1992
<S> <C> <C> <C> <C>
Cash Flows from
Financing Activities:
Proceeds from
issuance of long-term
debt . . . . . . . . . .$ 33,561 $ 89,820 $ 308,536 $ 22,598
Payments on long-term
debt and capital lease
obligations. . . . . . .(280,200) (120,964) (106,296) (231,046)
Proceeds from issuance
of preferred and
common stock, net. . . . - 153,060 122,004 -
Net cash provided
(used) by financing
activities. . . . . . .(246,639) 121,916 324,244 (208,448)
Net Increase (Decrease)
in Cash and Cash
Equivalents . . . . . . .(324,740) (45,102) 366,571 57,478
Cash and Cash Equivalents
Beginning of Period . . . 721,038 766,140 399,569 342,091
Cash and Cash Equivalents
End of Period . . . . . .$ 396,298 $ 721,038 $ 766,140 $ 399,569
Supplemental Cash Flow
Information:
Interest paid. . . . . .$ 202,319 $ 92,590 $ 30,926 $ 108,558
</TABLE>
(continued on next page)
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
<CAPTION>
Reorganized Company Predecessor Company
Period from
Reorganization Period from
(April 28, January 1,
Year Ended 1993 through 1993 through Year Ended
December 31, December 31, April 27, December
31,
1994 1993) 1993 1992
<S> <C> <C> <C> <C>
Financing and
Investing Activities
Not Affecting Cash:
Capital lease
obligations incurred. .$ 14,053 $ 1,259 $ - $ -
Reclassification of
accrued rent and
interest to long-
term debt . . . . . . .$ 28,177 $ 73,416 $ 113,496 $ 84,901
Capitalization of
operating leases
due to renegotiated
terms . . . . . . . . .$ - $ 136,510 $ - $ 27,065
Property and
equipment acquired
through the issuance
of debt . . . . . . . .$ 10,494 $ 1,679 $ - $ 59,868
Financed purchase
deposits for
flight equipment. . . .$ 21,519 $ 33,124 $ - $ -
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE AND NONREDEEMABLE
PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands of dollars)
Additional
<CAPTION>
Preferred Common Paid-In Accumulated
Stock Stock Capital Deficit Other
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991. . . . . . . . . . . . . . . . $102,246 $467 $1,094,775 $(4,823,720) $(12,024)
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . - - - (125,333) -
Conversion of 6-3/4% Nonredeemable Preferred to Common. . (38) 3 35 - -
Balance, December 31, 1992. . . . . . . . . . . . . . . . 102,208 470 1,094,810 (4,949,053) (12,024)
Net Income (1/1/93 - 4/27/93) . . . . . . . . . . . . . . - - - 2,640,138 -
Net Loss (4/28/93 - 12/31/93) . . . . . . . . . . . . . . - - - (38,549) -
Conversion of 6-3/4% Nonredeemable Preferred to Common. . (1) - 1 - -
Reorganization Items:
Fresh Start Adjustments. . . . . . . . . . . . . . . . . - - - 2,308,915 12,024
Cancellation of Stock. . . . . . . . . . . . . . . . . . (102,207) (470) (1,094,811) - -
Issuance of Stock in Connection with Emergence from
Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . 43,385 174 614,826 - -
Issuance of Stock in Connection with Public Offering. . . - 81 152,979 - -
Accumulated Unpaid Dividends:
8% Cumulative Redeemable Preferred . . . . . . . . . . . 932 - (932) - -
12% Cumulative Redeemable Preferred. . . . . . . . . . . 2,465 - (2,465) - -
Accretion to Redemption Value for 8% Preferred. . . . . . 134 - (134) - -
Additional Minimum Pension Liability. . . . . . . . . . . - - - - (5,434)
Balance, December 31, 1993. . . . . . . . . . . . . . . . 46,916 255 764,274 (38,549) (5,434)
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . - - - (613,342) -
Restricted Stock Grant to Employees . . . . . . . . . . . - 12 20,004 - (20,016)
Amortization of Restricted Stock Grants . . . . . . . . . - - - - 5,503
Accumulated Unpaid Dividends:
8% Cumulative Redeemable Preferred . . . . . . . . . . . 1,468 - (1,468) - -
12% Cumulative Redeemable Preferred. . . . . . . . . . . 4,000 - (4,000) - -
Accretion to Redemption Value for 8% Preferred. . . . . . 222 - (222) - -
Additional Minimum Pension Liability. . . . . . . . . . . - - - - (1,115)
Unrealized Loss on Marketable Equity Securities . . . . . - - - - (2,218)
Forfeiture of Restricted Class B Stock. . . . . . . . . . - - (206) - 206
Balance, December 31, 1994. . . . . . . . . . . . . . . . $ 52,606 $267 $ 778,382 $ (651,891) $(23,074)
</TABLE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE AND NONREDEEMABLE
PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY (DEFICIT)
NUMBER OF SHARES
<CAPTION>
Redeemable Nonredeemable Class A Class B
Preferred Preferred Common Common Other Common Treasury
Stock Stock Stock Stock Stock Stock
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991. . . . . . . . 30,139 53,080,830 - - 46,745,170 597,539
Conversion of 6-3/4% Nonredeemable
Preferred to Common. . . . . . . . . . . - 384,091 - - 256,042 -
Balance, December 31, 1992. . . . . . . . 30,139 53,464,921 - - 47,001,212 597,539
Conversion of 6-3/4% Nonredeemable
Preferred to Common. . . . . . . . . . . - (2,550) - - 1,700 -
Reorganization Items:
Cancellation of Stock. . . . . . . . . . (30,139) (53,462,371) - - (47,002,912) (597,539)
Issuance of Stock in Connection
with Emergence from Bankruptcy. . . . . 471,000 - 6,013,216 11,422,773 - -
Issuance of Stock in Connection
with Public Offering . . . . . . . . . . - - - 8,086,579 - -
Balance, December 31, 1993. . . . . . . . 471,000 - 6,013,216 19,509,352 - -
Conversion of Class B to Class A
by Air Canada. . . . . . . . . . . . . . - - 287,840 (287,840) - -
Restricted Stock Grant to Employees . . . - - - 1,182,000 - -
Forfeiture of Restricted Class B
Stock. . . . . . . . . . . . . . . . . . - - - - - 30,000
Balance, December 31, 1994. . . . . . . . 471,000 - 6,301,056 20,403,512 - 30,000
</TABLE>
CONTINENTAL AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continental Airlines, Inc. (the "Company", the "Reorganized Company" or
"Continental") is the successor to Continental Airlines Holdings, Inc.
(together with its subsidiaries "Holdings" or the "Predecessor Company")
and Continental Airlines, Inc. On December 3, 1990, Continental and
Holdings and all their wholly owned domestic subsidiaries filed voluntary
petitions to reorganize under Chapter 11 of the federal bankruptcy code.
The Companies' consolidated Plan of Reorganization was confirmed on
April 16, 1993 and became effective on April 27, 1993 (the
"Reorganization"). On such date, Holdings merged with and into
Continental. System One Information Management, Inc. ("System One"), which
had been a subsidiary of Holdings, was reorganized as a subsidiary of
Continental. Because consolidated Continental (as reorganized) includes
System One and other businesses that had been consolidated with Holdings
prior to April 27, 1993 (but not with pre-reorganization Continental), the
discussion herein includes references to Holdings' consolidated financial
statements for periods prior to April 27, 1993. On April 27, 1993,
Continental adopted fresh start reporting in accordance with the American
Institute of Certified Public Accountants' Statement of Position 90-7 -
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"), which resulted in adjustments to the Company's common
stockholders' equity and the carrying values of assets and liabilities.
Accordingly, the Company's post-reorganization balance sheet and statements
of operations have not been prepared on a consistent basis of accounting
with the pre-reorganization balance sheet and statements of operations.
For accounting purposes, the inception date for the Reorganized Company is
deemed to be April 28, 1993. A vertical black line is shown in the
consolidated financial statements to separate Continental from the
Predecessor Company since they have not been prepared on a consistent basis
of accounting.
NOTE 1 - LIQUIDITY
During the fourth quarter of 1994, the Company determined that a new
strategic plan, the Go Forward Plan, was needed to return the Company to
profitability and strengthen its balance sheet. As part of the Company's
Go Forward Plan, in January 1995, the Company commenced a series of
initiatives designed to improve liquidity in 1995 and 1996. The major
liquidity elements of this plan include (i) rescheduling principal
amortization under the Company's loan agreements with its primary secured
lenders (representing approximately $599.4 million of the Company's
outstanding long-term debt at December 31, 1994), (ii) restructuring the
Company's commitments to purchase new Boeing aircraft and related engines,
(iii) deferring or reducing cash requirements associated with certain
existing aircraft, (iv) reducing the Company's lease commitments at Denver
International Airport ("DIA") and (v) evaluating the potential disposition
of non-core assets. As discussed below, under agreements in principle and
binding agreements reached through April 12, 1995, the Company has improved
its liquidity by an estimated $231 million in 1995 and $221 million in
1996. This achieves roughly 75% of the Go Forward Plan liquidity goal.
On March 31, 1995 the Company signed agreements with The Boeing Company
("Boeing") and certain engine manufacturers to defer substantially all
aircraft deliveries that had been scheduled for 1996 and 1997. Five Boeing
767 aircraft that had been scheduled for delivery to Continental in 1995
have been sold to a third party. They have been replaced by five Boeing
767's which Continental will take delivery of starting in 1998. Options to
purchase additional aircraft have been canceled. On March 30, 1995
Continental amended its principal secured loan agreements with General
Electric Capital Corporation and affiliates (collectively, "GE Capital")
and General Electric Company (collectively, the "Lenders") to defer 1995
and 1996 principal payments and amended certain of its operating lease
agreements with one of the Lenders to defer 1995 rental obligations.
Continental agreed, among other things, to obtain concessions from certain
aircraft lessors. Continuing deferrals of these principal and operating
lease payments will be suspended if specified portions of such concessions
are not obtained by May 31 and June 30, 1995 or if other covenants are not
complied with. If the required concessions are obtained at a later date,
the deferrals will resume. As discussed immediately below, the Company has
reached agreements with some of these lessors and is in negotiations with
the remaining lessors. The Company anticipates that it will be successful
in timely obtaining the required concessions. These agreements with
Boeing, the engine manufacturers and the Lenders will improve the Company's
1995 and 1996 liquidity by approximately $167 million and $161 million,
respectively.
In connection with the Go Forward Plan, the Company is retiring from
service 24 less efficient widebody aircraft during 1995. In February 1995,
the Company began paying market rentals, which are significantly less than
contractual rentals on these aircraft, and began ceasing all rental
payments as the aircraft are removed from service. In addition, in
February 1995 Continental reduced its rental payments on an additional 11
widebody aircraft leased at significantly above-market rates. The Company
began negotiations in February 1995 with the relevant lessors of the 35
widebody aircraft to amend the lease repayment schedules or provide,
effective February 1, 1995, alternative compensation, which could include
debt securities convertible into equity, in lieu of current cash payments.
As of April 12, 1995, the Company had entered into agreements or agreements
in principle with lessors of 16 of these aircraft that will improve the
Company's liquidity by an estimated $44 million and $40 million in 1995 and
1996, respectively.
On April 10, 1995, the Denver City Council approved an agreement among the
City and County of Denver (the "City"), the Company and certain signatory
airlines amending the Company's lease of facilities at DIA by reducing the
Company's lease term to five years, reducing to 10 the number of gates (and
reducing associated space) leased by the Company and making certain changes
in the rates and charges under the lease. The agreement also provides for
the release of certain claims and the settlement of certain litigation
filed by the City against the Company. See Note 13. The agreement is
expected to result in annual reduction in costs to the Company of
approximately $20 million over the life of the lease.
Continental and System One are currently negotiating a series of
transactions whereby the existing systems management agreement between
System One and Electronic Data System ("EDS") would be terminated and a
substantial portion of the assets (including the travel agent subscriber
base and travel-related information management products and services
("IMS") software) and certain liabilities of System One would be
transferred to a newly formed limited liability company ("New S1") that
would be owned equally by System One (which will remain a wholly owned
subsidiary of Continental), EDS and AMADEUS, a European computerized
reservation system ("CRS"). Substantially all of System One's remaining
assets (including the CRS software) and liabilities would be transferred to
AMADEUS. In addition to retaining a one-third interest in New S1, System
One would receive cash proceeds and an equity interest in AMADEUS and the
outstanding indebtedness of System One owed to each of EDS and Continental
would be repaid. New S1 would market the AMADEUS CRS and would continue to
develop, market and distribute travel-related IMS. These transactions,
which are expected to result in a gain, are anticipated to close in the
second quarter of 1995.
Continental's failure to make required payments to the Lenders, the City
and County of Denver and certain aircraft lessors as described above
constituted events of default under the respective agreements with such
parties. The agreements reached through April 12, 1995 with the Lenders,
the City and County of Denver and two aircraft lessors have cured the
defaults under their respective agreements. As of April 12, 1995, defaults
under the remaining widebody aircraft leases were continuing due to the
nonpayment of rents, which could entitle the lessors to pursue contractual
remedies, including seeking to take possession of the leased aircraft. As
of April 12, 1995, the Company is in negotiations with these remaining
lessors and has received proposals from lessors representing a majority of
the Company's agreements currently in default. The Company believes it
will be able to successfully conclude the remaining negotiations and thus
avoid any material adverse effect on the Company. In addition, under
"cross default" provisions, the payment defaults create defaults under a
significant number of Continental's other lease and debt agreements, and
the Company's obligations under the agreements subject to such cross
defaults are also eligible to be accelerated. However, in the opinion of
the Company, it is unlikely that lessors or creditors will exercise
remedies under cross default provisions because (i) the Company is making
all required contractual payments under the applicable agreements, (ii) the
contractual payments on a substantial majority of aircraft leases are at
current market rates, (iii) taking possession of the aircraft would cause
the lessors or lenders to incur remarketing costs, and (iv) exercise of
remedies could expose lessors and lenders to "lender liability" litigation.
Additionally, the Company has made substantial progress in negotiations
with lenders and lessors to cure the payment defaults and expects to
complete all such negotiations by June 30, 1995, and as a result all events
of default, including cross defaults, should be eliminated. Consequently,
the Company does not expect the cross defaults to have a material adverse
effect on the Company.
As a result of the Federal Aviation Administration ("FAA") Airworthiness
Directive which forced the partial grounding of the Company's ATR commuter
fleet in late 1994 and early 1995, the Company withheld January and
February lease payments totaling $7 million on those ATR aircraft leased by
the manufacturer. The Company's non-payment of rentals may have resulted
in an event of default under the related lease agreements with ATR. As of
April 12, 1995, the Company was engaged in discussions with ATR concerning
compensation, if any, to be received by the Company as a result of the
grounding, and the Company had received a proposal from ATR that, if
accepted, would cure the payment default. In addition because of a
decrease in the value of certain collateral, the Company may have been in
default under the debt agreement relating to the financing of the Company's
Los Angeles International Airport ("LAX") maintenance facility. At
March 31, 1995 the principal balance of the applicable obligation was
approximately $64 million and at April 12, 1995, the Company was in
negotiations with the creditor. As a result of the progress in the ATR and
LAX maintenance facility negotiations, the Company does not anticipate that
the foregoing matters will have a material adverse effect on the Company.
The Company has no current plans to take other actions in the future that
would constitute additional events of default.
As a result of the defaults and cross-defaults described above that were
continuing at April 12, 1995, approximately $489.9 million of the Company's
long-term debt and capital lease obligations were classified as debt and
capital leases in default within current liabilities as of December 31,
1994. While the Company does not believe it is probable that it will be
required to fund such defaulted obligations in the next twelve months,
generally accepted accounting principles require that such defaulted
obligations be classified as current liabilities at December 31, 1994. In
addition, certain operating leases with remaining aggregate rentals of
$1.4 billion as of December 31, 1994 were in default or cross default at
April 12, 1995. See Notes 5 and 6.
NOTE 2 - PREDECESSOR COMPANY CHAPTER 11 REORGANIZATION
On April 16, 1993, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") confirmed the Plan of Reorganization of
Holdings and all its subsidiaries that had filed for Chapter 11
reorganization, including, among others, Continental, System One and
Chelsea Catering Corporation ("Chelsea") (collectively, the "Debtors").
The Reorganization became effective on April 27, 1993 (the "Effective
Date"). The Reorganization resolved several large contingent claims that
had burdened the Company. Such claims and contingencies included the
Company's liability to the Pension Benefit Guaranty Corporation (the
"PBGC") related to pension plans previously maintained by Eastern Air
Lines, Inc. ("Eastern") (the "PBGC Settlement") and the Company's potential
liability to Eastern (or its creditors) as a result of certain transactions
entered into with Eastern prior to 1989. Certain of Eastern's former
employees continue to assert claims against the Company, including demands
that former Eastern pilots be integrated into Continental's work force.
Pursuant to the Reorganization, pre-existing equity interests of the
Company were cancelled, the Company's obligations to other prepetition
creditors were restructured and general unsecured nonpriority prepetition
creditors became entitled, in full satisfaction of their claims, to share
in $6,523,952 of cash and fixed pools of Class A Common Stock ("Class A")
and Class B Common Stock ("Class B") of the Reorganized Company.
Pursuant to the Reorganization, on the Effective Date, all of the Debtors
other than Continental were merged with and into Continental. Continental
capitalized two wholly owned subsidiaries, Continental Express, Inc.
("Express") and System One, which continue the commuter airline and
computer reservations and related businesses, respectively, of certain of
the Debtors, by transferring certain assets and liabilities to such
subsidiaries. Also, on the Effective Date, Continental transferred the
assets of its Continental/Air Micronesia division to Continental
Micronesia, Inc. ("CMI"), an indirect subsidiary 91.0%-owned by Continental
which continues Continental's western Pacific operations.
As part of the Reorganization and an Investment Agreement dated
November 12, 1992, as amended, between Continental, Holdings, Air Partners,
L.P. ("AP") and Air Canada ("AC"), on the Effective Date (i) AP purchased
for an aggregate of $55 million (less certain fees) 2,740,000 shares of
Class A and 2,260,000 shares of Class B and warrants to purchase an
aggregate of 1,519,734 additional shares of Class A and
3,382,632 additional shares of Class B; (ii) AC purchased for an aggregate
of $55 million (less certain fees) 1,373,216 shares of Class A and
3,626,784 shares of Class B and warrants to purchase an aggregate of
1,367,880 additional shares of Class A and 4,849,755 additional shares of
Class B; (iii) enRoute Enterprises USA Inc., an indirect wholly owned
subsidiary of AC, purchased 300,000 shares of Continental's 12% Cumulative
Preferred Stock ("12% Preferred Stock") for $30 million; (iv) Continental
issued to itself, as Distribution Agent, 1,900,000 shares of its Class A
and 5,042,368 shares of its Class B for the benefit of general unsecured
creditors under the Plan of Reorganization; (v) Continental issued
493,621 shares of Class B to the Master Trust for the Continental Airlines,
Inc. Retirement Plan; and (vi) Continental issued to GE Capital, as
commitment consideration for its loan to CMI, 171,000 shares of its newly-
authorized 8% Cumulative Preferred Stock ("8% Preferred Stock"). As a
result of such issuances, as of April 27, 1993, AC had 28.7% of the equity
interest and 24.3% of the voting power and AP had 28.7% of the equity
interest and 41.5% of the voting power of Continental without giving effect
to the warrants.
Nonoperating reorganization items recorded by the Predecessor Company
consisted of the following (in millions):
<TABLE>
<CAPTION>
Period from
January 1, 1993
through
April 27, 1993 1992
<S> <C> <C>
Reorganization Costs:
Professional fees. . . . . . . . . . . . $ 58.6 $30.0
Interest income. . . . . . . . . . . . . (4.5) (15.3)
Rejected aircraft agreements . . . . . . 153.3 6.7
Other. . . . . . . . . . . . . . . . . . 33.9 10.1
Revaluation of Assets and Liabilities:
Fair market value adjustments. . . . . . 719.1 -
Write off of deferred gains on
sale/leaseback transactions . . . . . . (218.6) -
Other. . . . . . . . . . . . . . . . . . 76.8 -
$818.6 $31.5
</TABLE>
NOTE 3 - FRESH START REPORTING
In connection with its emergence from bankruptcy on April 27, 1993,
Continental adopted fresh start reporting in accordance with SOP 90-7. The
fresh start reporting common equity value of $615 million was determined by
the Company with the assistance of its financial advisors. The significant
factors used in the determination of this value were analyses of publicly
available information of other companies believed to be comparable to the
Company, industry, economic and overall market conditions and historical
and estimated performance of the airline industry; discussions with various
potential investors; and certain financial analyses, including discounted
future cash flows.
Under fresh start reporting, the reorganization value of the entity has
been allocated to the Reorganized Company's assets and liabilities on a
basis substantially consistent with the purchase method of accounting. The
portion of reorganization value not attributable to specific tangible or
identifiable intangible assets of the Reorganized Company has been
reflected as "Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets" in the accompanying consolidated balance sheet as of
December 31, 1993. The fresh start reporting adjustments, primarily
related to the adjustment of the Company's assets and liabilities to fair
market values, will have a significant effect on the Company's future
statements of operations. The more significant adjustments relate to
increased depreciation and amortization expense relating to aircraft,
routes, gates and slots and reorganization value in excess of amounts
allocable to identifiable assets; reduced aircraft rent expense; and
increased interest expense.
<TABLE>
The effects of the Plan of Reorganization and fresh start reporting on the Company's consolidated
balance sheet as of April 27, 1993 are as follows (in thousands):
<CAPTION>
Predecessor Issuance Reorganized
Company's Debt of Debt Fresh Start Company's
Balance Sheet Discharge and Stock Adjustments Balance Sheet
ASSETS April 27, 1993 (a) (b) (c) April 27, 1993
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents. . . . . $ 377,102 $ - $389,038 $ - $ 766,140
Accounts receivable, net . . . . . 459,024 - - - 459,024
Spare parts and supplies, net. . . 194,679 - - (23,440) 171,239
Prepayments and other. . . . . . . 94,271 - - (209) 94,062
Total current assets. . . . . . . 1,125,076 - 389,038 (23,649) 1,490,465
Property and Equipment, net . . . . 1,907,819 - - (467,553) 1,440,266
Other Assets:
Routes, gates and slots. . . . . . - - - 1,712,000 1,712,000
Reorganization value in excess of
amounts allocable to identifiable
assets. . . . . . . . . . . . . . - - - 349,403 349,403
Other assets . . . . . . . . . . . 73,414 - 15,995 (1,628) 87,781
Total other assets. . . . . . . . 73,414 - 15,995 2,059,775 2,149,184
Total Assets . . . . . . . . . . $3,106,309 $ - $405,033 $1,568,573 $5,079,915
</TABLE>
<TABLE>
<CAPTION>
Predecessor Issuance Reorganized
Company's Debt of Debt Fresh Start Company's
LIABILITIES AND Balance Sheet Discharge and Stock Adjustments Balance Sheet
STOCKHOLDERS' EQUITY (DEFICIT) April 27, 1993 (a) (b) (c) April 27, 1993
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Current maturities of
long-term debt. . . . . . . . . $ 104,705 $ 70,306 $(40,000) $ 185 $ 135,196
Current maturities of
capital leases. . . . . . . . . 590 29,851 - - 30,441
Accounts payable . . . . . . . . 564,421 20,898 - 9,806 595,125
Air traffic liability. . . . . . 686,551 - - - 686,551
Accrued payroll and pensions . . 164,945 16,170 - 11,007 192,122
Accrued other liabilities. . . . 264,988 75,216 (3,952) 129,107 465,359
Total current liabilities . . . 1,786,200 212,441 (43,952) 150,105 2,104,794
Estimated Liabilities Subject
to Chapter 11 Reorganization
Proceedings. . . . . . . . . . . 3,859,715 (3,859,715) - - -
Long-term Debt. . . . . . . . . . 268,119 806,647 310,000 (31,233) 1,353,533
Capital Leases. . . . . . . . . . 24,033 277,970 - (758) 301,245
Deferred Credits and Other
Long-Term Liabilities:
Deferred income taxes . . . . . - - - 100,000 100,000
Deferred credit related
to Eastern . . . . . . . . . . 1,056,496 (1,056,496) - - -
Deferred credit -
operating leases . . . . . . . - - - 329,546 329,546
Other . . . . . . . . . . . . . 254,340 430 - (44,458) 210,312
Total deferred credits and
other long-term
liabilities . . . . . . . . . 1,310,836 (1,056,066) - 385,088 639,858
Minority Interest . . . . . . . . - - - 22,100 22,100
</TABLE>
<TABLE>
<CAPTION>
Predecessor Issuance Reorganized
Company's Debt of Debt Fresh Start Company's
LIABILITIES AND Balance Sheet Discharge and Stock Adjustments Balance Sheet
STOCKHOLDERS' EQUITY (DEFICIT) April 27, 1993 (a) (b) (c) April 27, 1993
<S> <C> <C> <C> <C> <C>
Redeemable Preferred Stock. . . . $ 101,938 $ - $ 43,385 $ (101,938) $ 43,385
Nonredeemable Preferred Stock
and Common Stockholders'
Equity (Deficit):
Series C convertible
preferred stock. . . . . . . . 204 - - (204) -
6-3/4% cumulative convertible
junior preferred stock . . . . 65 - - (65) -
Class A common stock. . . . . . - - 60 - 60
Class B common stock. . . . . . - - 114 - 114
Common stock. . . . . . . . . . 470 - - (470) -
Additional paid-in capital. . . 1,094,811 - 109,900 (589,885) 614,826
Retained earnings (deficit) . . (5,328,058) 3,618,723 (14,474) 1,723,809 -
Common treasury stock . . . . . (12,024) - - 12,024 -
Total nonredeemable
preferred stock and
common stockholders'
equity (deficit) . . . . . . (4,244,532) 3,618,723 95,600 1,145,209 615,000
Total Liabilities and
Stockholders' Equity
(Deficit) . . . . . . . . . $3,106,309 $ - $405,033 $1,568,573 $5,079,915
(a) To record the discharge or reclassification of prepetition obligations (Estimated Liabilities
Subject to Chapter 11 Reorganization Proceedings) pursuant to the Reorganization.
Substantially all of these obligations are only entitled to receive such distributions of
cash and common stock as provided under the Reorganization. A portion of Estimated
Liabilities Subject to Chapter 11 Reorganization Proceedings was restructured and will
continue, as restructured, to be liabilities of the Reorganized Company.
(b) To record proceeds received from issuance of new debt and equity securities and the pay down
of the Company's revolving credit facility with The Chase Manhattan Bank, N.A. ("Chase").
(c) To record adjustments to reflect assets and liabilities at fair market value (including the
establishment of Reorganization Value in Excess of Amounts Allocable to Identifiable Assets),
the establishment of the Reorganized Company's equity value of $615 million through the
cancellation of the Predecessor Company's equity and establishment of the minority interest.
</TABLE>
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation -
The consolidated financial statements of the Reorganized Company
include the accounts of Continental and its wholly owned operating
subsidiaries, System One and Express, as well as CMI. The minority
interest holder of CMI has rights to acquire the minimum number of
additional shares of CMI necessary to cause Continental's equity
interest to decline below 80.0% if certain events relating to the
defined benefit plans of Continental occur. The consolidated
financial statements of the Predecessor Company include the accounts
of Holdings and its wholly owned operating subsidiaries, Continental,
System One and Chelsea.
The companies operate within the air transportation industry. All
significant intercompany transactions have been eliminated in
consolidation.
(b) Cash and Cash Equivalents -
Cash and cash equivalents consist of cash and short-term, highly
liquid investments which are readily convertible into cash and have
original maturities of three months or less. Approximately
$118.7 million and $102.4 million of cash and cash equivalents at
December 31, 1994 and December 31, 1993, respectively, were held in
restricted arrangements relating primarily to payments for workers'
compensation claims and in accordance with the terms of certain other
agreements.
(c) Spare Parts and Supplies -
Flight equipment expendable parts and supplies were recorded at fair
market values (which approximated average cost) as of April 27, 1993;
subsequent purchases are valued at average cost. An allowance for
obsolescence for flight equipment expendable parts and supplies is
accrued to allocate the costs of these assets, less an estimated
residual value, over the estimated useful lives of the related
aircraft and engines.
(d) Property and Equipment -
Property and equipment were recorded at fair market values as of
April 27, 1993; subsequent purchases are valued at cost and are
depreciated to estimated residual values over their estimated useful
lives using the straight-line method. Estimated useful lives for such
assets are 15 to 28 years from date of manufacture for all owned jet
and certain commuter aircraft; 9 to 21 years, depending on the lease
period, for aircraft acquired under long-term capital leases; and 2 to
25 years for other property and equipment, including airport facility
improvements. Effective April 27, 1993, Continental revised the
estimated useful lives of its Stage III aircraft from 28 years from
date of manufacture to 25 years.
(e) Intangible Assets -
Routes are amortized on a straight-line basis over 40 years, gates
over the stated term of the related lease and slots over 20 years.
Routes, gates and slots are comprised of the following (in millions):
<TABLE>
<CAPTION>
Balance at Accumulated Amortization
December 31, 1994 at December 31, 1994
<S> <C> <C>
Routes . . . . . . $ 967.2 $41.4
Gates. . . . . . . 470.5 40.5
Slots. . . . . . . 153.4 14.7
$1,591.1 $96.6
</TABLE>
Reorganization value in excess of amounts allocable to identifiable
assets is amortized on a straight-line basis over 20 years. The
carrying value of intangible assets is reviewed if the facts and
circumstances suggest that it may be impaired. If this review
indicates that the Company's intangible assets will not be
recoverable, as determined based on the undiscounted cash flows over
the remaining amortization period, the Company's carrying value of the
intangible assets is reduced by the estimated shortfall of cash flows.
(f) Air Traffic Liability -
Passenger revenues are recognized when transportation is provided
rather than when a ticket is sold. The amount of passenger ticket
sales not yet recognized as revenue is reflected in the accompanying
consolidated balance sheets as air traffic liability. The Company
performs periodic evaluations of this estimated liability, and any
adjustments resulting therefrom, which can be significant, are
included in results of operations for the periods in which the
evaluations are completed. In the third quarter of 1993, the Company
recorded an adjustment to increase passenger revenues by $75 million
as a result of completion of a periodic evaluation.
Continental sponsors a frequent flyer program ("OnePass") and records
an estimated liability for the incremental cost associated with
providing the related free transportation at the time a free travel
award is earned. The liability is adjusted periodically based on
awards earned and awards redeemed.
(g) Passenger Traffic Commissions -
Passenger traffic commissions are recognized as expense when the
transportation is provided and the related revenue is recognized. The
amount of passenger traffic commissions not yet recognized as expense
is included in prepayments and other in the accompanying consolidated
balance sheets.
(h) Deferred Income Taxes -
Deferred income taxes reflect the net tax effects of temporary
differences between the financial reporting carrying amounts of assets
and liabilities and the income tax amounts.
(i) Deferred Credit - Aircraft Operating Leases -
Aircraft operating leases were adjusted to fair market value at
April 27, 1993. The net present value of the difference between the
stated lease rates and the fair market rates has been recorded as a
deferred credit in the accompanying consolidated balance sheets. The
deferred credit is increased through charges to interest expense and
decreased on a straight-line basis as a reduction in rent expense over
the applicable lease periods, generally one to 15 years.
(j) Maintenance and Repair Costs -
Maintenance and repair costs for owned and leased flight equipment,
including the overhaul of aircraft components, are charged to
operating expense as incurred.
(k) Petroleum Option Contracts -
Gains on petroleum option contracts are recognized as a component of
fuel expense when the underlying fuel being hedged is used.
(l) Earnings (Loss) per Share -
Earnings (loss) per common share computations are based upon earnings
(loss) applicable to common shares and the average number of shares of
common stock and dilutive common stock equivalents (stock options,
warrants and restricted stock) outstanding. The number of shares used
in the computation for the year ended December 31, 1994 and the period
April 28, 1993 through December 31, 1993 was 26,056,897 and
18,022,918, respectively. Preferred stock dividend requirements
(including additional dividends on unpaid dividends) and accretion to
redemption value on preferred stock increased the net loss for this
computation by approximately $5.7 million and $3.5 million for the
year ended December 31, 1994 and for the period April 28, 1993 through
December 31, 1993, respectively. On the Effective Date, all of the
outstanding common and preferred stock of Holdings was cancelled.
Information regarding the earnings (loss) per share computation
relating to the pre-reorganization stock is not comparable with data
provided for Class A and Class B and is therefore not included.
(m) Reclassifications -
Certain reclassifications have been made in the prior year's financial
statements to conform to the current year presentation.
NOTE 5 - LONG-TERM DEBT
Continental's long-term debt was recorded at fair market value at April 27,
1993. The fair market value adjustment is amortized to interest expense
over the life of the debt. Long-term debt as of December 31 is summarized
as follows (in millions of dollars):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Secured
Notes payable to GE Capital and affiliates,
interest rates of 8.64% to 12.0% and floating
interest rates of LIBOR plus 4.0%, payable
through 2005 . . . . . . . . . . . . . . . . . . . $ 599.4 $ 603.1
Notes payable, interest rates of 5.84% to 18.38%
(imputed interest rates approximate stated
interest rates), payable through 2005. . . . . . . 274.6 276.7
Notes payable, interest rates of 6% to 12.25%
(imputed interest rates of 7.86% to 9.9%),
payable through 2008 . . . . . . . . . . . . . . . 278.2 332.5
Floating rate notes, interest rates of prime
plus 0.5% to 3.05% and LIBOR plus 0.75% to
3.75% and Eurodollar plus 0.75%, payable
through 2007 . . . . . . . . . . . . . . . . . . . 148.9 159.1
Other . . . . . . . . . . . . . . . . . . . . . . . 15.2 18.0
Unsecured
Notes payable, interest rates of 6.94% to 12%
(imputed interest rates 16.3% to 21.8%),
payable through 2005 . . . . . . . . . . . . . . . 112.4 181.6
Other . . . . . . . . . . . . . . . . . . . . . . . 9.5 1.6
1,438.2 1,572.6
Less: debt in default. . . . . . . . . . . . . . . 264.7 -
Less: current maturities . . . . . . . . . . . . . 126.2 176.2
Less: fair market value adjustment . . . . . . . . 9.1 26.5
Total . . . . . . . . . . . . . . . . . . . . . . . $1,038.2 $1,369.9
</TABLE>
Substantially all of Continental's property, equipment and spare parts and
supplies are subject to agreements securing indebtedness of Continental.
Continental has various loan and lease obligations with GE Capital which
were renegotiated in March 1995. In addition, the Company is in default
under various loan agreements. See Note 1.
Continental and CMI have various loan agreements containing significant
financial covenants including, among other things, minimum cash balance
requirements, consolidated net worth requirements, restrictions on the
payment of dividends, restrictions on new borrowings and mandatory
prepayments upon sale of certain assets. As of December 31, 1994, CMI had
a minimum cash balance requirement of $23.7 million, net assets of
$286.7 million and was restricted from paying dividends in excess of
approximately $48.7 million.
In December 1993, the Company obtained a $50 million secured revolving
credit facility, the proceeds from which must be used to finance certain
aircraft purchase deposits. During 1994, Continental drew down
approximately $21.5 million and repaid a total of $31.6 million of such
facility. The revolving credit agreement contains a financial covenant
relating to minimum cash balance requirements and is collateralized by
certain accounts receivable and the related aircraft agreements.
Maturities of long-term debt due over the next five years (including the
scheduled repayments of debt in default) are as follows (in millions):
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
1995. . . . . . . . . . . . . . . . . . . . . $175.3
1996. . . . . . . . . . . . . . . . . . . . . 156.3
1997. . . . . . . . . . . . . . . . . . . . . 188.1
1998. . . . . . . . . . . . . . . . . . . . . 168.3
1999. . . . . . . . . . . . . . . . . . . . . 176.9
</TABLE>
As of December 31, 1994 and 1993, the prime, LIBOR and Eurodollar rates
associated with Continental's indebtedness approximated 8.5% and 6.0%, 6.5%
and 3.4%, and 6.3% and 4.0%, respectively.
NOTE 6 - LEASES
Continental leases certain aircraft and other assets under long-term lease
arrangements. Other leased assets include real property, airport and
terminal facilities, sales offices, maintenance facilities, training
centers and general offices. Most leases also include renewal options and
some aircraft leases include purchase options.
At December 31, 1994, the scheduled future minimum lease payments under
capital leases and the scheduled future minimum lease rental payments
required under aircraft and engine operating leases that have initial or
remaining noncancellable lease terms in excess of one year are as follows
(in millions):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases*
<S> <C> <C>
Year ended December 31,
1995. . . . . . . . . . . . . . . . . . . . . . $ 93.5 $ 586.4
1996. . . . . . . . . . . . . . . . . . . . . . 94.9 551.1
1997. . . . . . . . . . . . . . . . . . . . . . 89.9 492.7
1998. . . . . . . . . . . . . . . . . . . . . . 83.0 434.2
1999. . . . . . . . . . . . . . . . . . . . . . 79.3 396.2
Later years . . . . . . . . . . . . . . . . . . 160.2 2,578.4
Total minimum lease payments. . . . . . . . . . . . 600.8 $5,039.0
Less: amount representing interest . . . . . . . . 185.5
Present value of capital leases . . . . . . . . . . 415.3
Less: capital lease obligations in default . . . . 225.1
Less: current maturities of capital leases . . . . 25.8
Long-term capital leases. . . . . . . . . . . . . . $164.4
</TABLE>
______________
* These amounts have not been reduced to reflect the Company's fresh start-
related revaluation of leases to fair market value as of April 27, 1993
(see Note 4(i)).
In March and April 1995, the Company successfully completed negotiations
with lessors of 11 narrowbody aircraft and 16 widebody aircraft which
resulted in the deferral of payments due in 1995 and 1996 to later years.
Such deferrals are not reflected in the tables above. Operating leases
with remaining lease payments of $1.4 billion as of December 31, 1994 are
in default as of April 12, 1995. Scheduled repayments have not been
adjusted in the above table. See Note 1.
Not included in the above operating lease table is approximately
$240 million in annual minimum lease payments relating to non-aircraft
leases, principally airport and terminal facilities and related equipment.
See Note 1 for a discussion of the Denver lease.
The Company's total rental expense for all operating leases, net of
sublease rentals, was $674.6 million, $666.2 million and $645.9 million in
1994, 1993 and 1992, respectively.
As of December 31, 1994, Continental remains contingently liable on
$202.1 million of long-term lease obligations of USAir, Inc. ("USAir")
related to the East End Terminal at LaGuardia. In the event USAir defaults
on such obligations, Continental may be required to cure the default, at
which time it would have the right to reoccupy the terminal.
NOTE 7 - FINANCIAL INSTRUMENTS
(a) Cash equivalents -
Cash equivalents consist primarily of commercial paper with maturities
of three months or less and approximate fair value due to the short
maturity of three months or less.
(b) Investment in Marketable Equity Securities -
Continental's investment in America West is classified as available-
for-sale and carried at aggregate market value of $16.6 million at
December 31, 1994. An unrealized loss of $2.2 million representing
the excess of cost over market value is reflected in stockholders'
equity.
(c) Petroleum Option Contracts -
The Company enters into petroleum option contracts to protect against
a sharp increase in jet fuel prices. These option contracts generally
cover the Company's forecasted jet fuel needs for the next three to
six months. At December 31, 1994, the Company had options outstanding
with an aggregate contract value of approximately $140 million. At
December 31, 1994, the fair value of the option contracts was
immaterial as the strike price under these contracts exceeded the
current spot rate. During the year ended December 31, 1994, option
hedging activities reduced fuel expense by approximately $2.2 million,
net of the premiums associated with these options.
The Company is exposed to credit loss in the event of nonperformance
by the counterparty on the petroleum option contracts, however, the
Company does not anticipate nonperformance by this counterparty. The
amount of such exposure is generally the unrealized gains, if any, on
such option contracts.
(d) Debt -
The fair value of the Company's debt with a carrying value of
$1.34 billion and $1.53 billion as of December 31, 1994 and
December 31, 1993, respectively, estimated based on the discounted
amount of future cash flows using the current incremental rate of
borrowing for a similar liability or quoted market prices,
approximates $1.29 billion and $1.56 billion, respectively. The fair
value of the remaining debt (with a carrying value of approximately
$84.4 million and $53.1 million, respectively, and primarily relating
to modification notes) was not practicable to estimate due to the
large number and small dollar amounts of these notes.
NOTE 8 - PREFERRED AND COMMON STOCK
On the Effective Date, all of the then outstanding equity securities of the
Predecessor Company were cancelled, including all outstanding common and
preferred stock of Continental and Holdings. Continental's Restated
Certificate of Incorporation authorizes the issuance of 10 million shares
of preferred stock, 50 million shares each of Class A, Class C Common Stock
("Class C") and Class D Common Stock ("Class D") and 100 million shares of
Class B.
Redeemable Preferred Stock
Pursuant to the Plan of Reorganization and the Investment Agreement, newly
authorized shares of redeemable preferred stock were issued. Redeemable
preferred stock consists of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
(millions)
<S> <C> <C>
12% Preferred Stock, 1,000,000 shares
authorized, 300,000 shares issued and
outstanding, redemption value -
$36,465,154 and $32,465,055,
respectively . . . . . . . . . . . . . . $36.5 $32.5
8% Preferred Stock, 171,000 shares
authorized, issued and outstanding,
redemption value - $19,500,450 and
$18,032,270, respectively. . . . . . . . 16.1 14.4
$52.6 $46.9
</TABLE>
Holders of 12% Preferred Stock and 8% Preferred Stock are entitled to
receive, when and if declared by the Board of Directors (the "Board") out
of legally available funds of the Company, cumulative dividends payable
quarterly in cash at an annual rate of $12 and $8 per share for 12%
Preferred Stock and 8% Preferred Stock, respectively. To the extent net
income, as defined, for any calendar quarter is less than the amount of
dividends due on all outstanding shares of 12% Preferred Stock for such
quarter, the Board may declare dividends payable in additional shares of
12% Preferred Stock in lieu of cash. At any time, the Company may redeem,
in whole or in part, on a pro rata basis among the stockholders, any
outstanding shares of 12% Preferred Stock or 8% Preferred Stock. All
outstanding shares of both series of preferred stock are mandatorily
redeemable on April 27, 2003 out of legally available funds. In each case,
the redemption price is $100 per share plus accrued unpaid dividends.
Neither series of preferred stock is convertible into shares of common
stock and neither series has voting rights, except under limited
circumstances. The 8% Preferred Stock ranks pari passu with the 12%
Preferred Stock as to payment of dividends and liquidation. As of December
31, 1994, the Company had approximately $8.9 million of dividends on its
preferred stock in arrears.
The Company recorded a $222,000 and $134,000 charge against additional
paid-in capital related to the accretion of the difference between
redemption value and fair market value at date of issuance for the 8%
Preferred Stock for the year ended December 31, 1994 and for the period
from April 28, 1993 through December 31, 1993, respectively.
Common Stock
Continental has two classes of common stock outstanding, Class A and
Class B. Holders of shares of Class A and Class B are entitled to receive
dividends when and if declared by the Board. Each share of Class A is
entitled to 10 votes per share and each share of Class B is entitled to one
vote per share. Pursuant to a stockholders' agreement, AC and AP have
agreed to vote their shares for the election of six directors nominated by
AC, six directors nominated by AP and six directors not affiliated with AP
or AC. AC has the right, subject to foreign ownership restrictions, to
convert shares of Class B into shares of Class A. Also, AC has the limited
right, in certain circumstances, to convert its Class A into Class C and AP
has the limited right, in certain circumstances, to convert its Class A
into Class D. No person may hold or own Class C or Class D stock,
respectively, other than AC and certain of its affiliates or AP and certain
of its affiliates. The Class C and Class D common stock, if issued, would
preserve the rights of each of AC and AP, respectively, to elect six
directors to the Company's Board in certain circumstances, including a sale
by the other party of its stock.
On December 14, 1993, the Company sold 8,086,579 shares of Class B common
stock in an underwritten public offering realizing net proceeds of
approximately $153.1 million. In January 1994, AC converted 287,840 shares
of Class B into an equal number shares of Class A to preserve its
percentage of total voting power. In July 1994, 1,000,000 shares of
restricted Class B were granted and issued to substantially all employees
at or below the manager or equivalent level and 182,000 shares of
restricted Class B were granted and issued to key officers. See Note 9.
As of December 31, 1994, AC had 18.7% of the equity interest and 23.9% of
the voting power and AP had 18.7% of the equity interest and 35.6% of the
voting power.
Warrants
The Company has outstanding 11,120,001 Class A Warrants and Class B
Warrants (collectively, the "Warrants") of which 4,902,366 Warrants are
held by AP and 6,217,635 Warrants are held by AC. Each Warrant entitles
the holder to purchase one share of Class A or Class B. The Warrants are
exercisable as follows: (i) 7,413,334 Warrants (1,964,534 Class A Warrants
and 5,448,800 Class B Warrants) have an initial exercise price of $15 per
share, and (ii) 3,706,667 Warrants (923,080 Class A Warrants and
2,783,587 Class B Warrants) have an initial exercise price of $30 per
share. The warrants expire on April 27, 1998.
NOTE 9 - STOCK PLANS AND AWARDS
On March 4, 1994, the Board of Directors adopted the Continental Airlines,
Inc. 1994 Employee Stock Purchase Plan (the "Stock Purchase Plan")
effective July 1, 1994 and the Continental Airlines, Inc. 1994 Incentive
Equity Plan (the "Incentive Plan"), which plans were approved by the
stockholders of the Company at the annual stockholders' meeting on June 30,
1994.
Under the Company's Stock Purchase Plan, all full and part-time employees
of the Company who are on the United States payroll may purchase shares of
Class B at 85% of the lower of fair market value on the first or last
business day of a calendar quarter. Subject to adjustment, a maximum of
4,000,000 shares of Class B are authorized for purchase under the Stock
Purchase Plan. In January 1995, 118,069 shares of Class B were issued in
connection with the Stock Purchase Plan.
Under the Incentive Plan, key officers and employees of the Company and its
subsidiaries may be selected by the Human Resources Committee of the Board
of Directors (the "Committee") to receive any or all of the following:
stock options, restricted stock, long-term incentive awards and annual
incentive awards subject to adjustment. The Incentive Plan also provides
for each outside director to receive on the day following the annual
stockholders meeting options to purchase 1,500 shares of Class B. Subject
to adjustment, the number of shares of Class B that may be issued under the
Incentive Plan will not in the aggregate exceed 2,300,000. The following
table summarizes stock option transactions pursuant to the Company's
Incentive Plan for the year ended December 31, 1994:
Granted*. . . . . . . . . . . . . . . . . . . . . . . . . 2,111,000
Exercised . . . . . . . . . . . . . . . . . . . . . . . . -
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . (265,000)
Outstanding at December 31, 1994. . . . . . . . . . . . . 1,846,000
Average option price per share:
Options exercised. . . . . . . . . . . . . . . . . . . . -
Options outstanding at end of year . . . . . . . . . . . $20.13
Options exercisable at end of year. . . . . . . . . . . . 123,875
* The option price for all stock options is equal to 100% of the fair
market value of Continental's common stock at the date of grant.
The stock options generally vest over a four-year period.
In addition, the Incentive Plan permits awards of restricted stock to
participants, subject to one or more restrictions, including a restriction
period and a purchase price, if any, to be paid by the participant, as
determined by the Committee. The number of shares of common stock that may
be granted or sold as restricted stock under the Incentive Plan may not in
the aggregate exceed 300,000 shares of Class B. As of December 31, 1994,
152,000 shares of restricted stock were outstanding with no cost to the
participants. These shares vest over a two-year period. During 1994,
30,000 shares were forfeited and returned to treasury stock. At
December 31, 1994, 302,000 shares of common stock were available for future
grants of stock options or restricted stock under the Incentive Plan.
Additionally, on March 4, 1994, the Board approved a one-time grant of
1,000,000 shares of restricted stock to substantially all employees at or
below the Manager level. These shares were issued at no cost to the
employee and vest over a four-year period. Unvested shares of restricted
stock are subject to certain transfer restrictions and forfeiture under
certain circumstances. The unearned portion of restricted stock issued for
future service, representing the fair market value of the stock on the date
of award, is being amortized to wages, salaries and related costs over the
vesting period.
The Board of Directors, on March 4, 1994, also approved a profit sharing
program under which 15% of the Company's pre-tax earnings (before unusual
or nonrecurring items) will be distributed each year to all employees on a
pro rata basis according to base salary.
NOTE 10 - EMPLOYEE BENEFIT PLANS
The Company has noncontributory defined benefit pension and defined
contribution (including 401(k) savings) plans. Substantially all domestic
employees of the Company are covered by one or more of these plans. The
benefits under the active defined benefit pension plan are based on years
of service and an employee's final average compensation. Total pension
expense for the defined benefit plans was $50.7 million, $52.1 million and
$36 million and total expense for the defined contribution plans was
$0.9 million, $0.3 million and $2.1 million for 1994, 1993 and 1992,
respectively.
Net periodic pension cost of the Company's defined benefit plans for 1994,
1993 and 1992 included the following components (in millions):
<TABLE>
<CAPTION>
Period from Period from
April 28, January 1,
1993 through 1993 through
December 31, April 27,
1994 1993 1993 1992
<S> <C> <C> <C> <C>
Service cost - benefits earned
during the year. . . . . . . . $39.3 $25.7 $13.9 $31.5
Interest cost on projected
benefit obligations. . . . . . 38.9 22.6 8.9 21.2
Return on plan assets . . . . . 14.0 (15.5) (10.1) (12.4)
Net amortization and deferral . (41.5) 1.0 5.6 (4.3)
Net periodic pension costs. . $50.7 $33.8 $18.3 $36.0
</TABLE>
In connection with the Reorganization, the Company recorded an additional
liability of approximately $146.1 million (not included in pension expense
above) related to the grant of past service credit under the Company's
retirement plan for domestic employees and the recognition of unamortized
losses and costs. The following table sets forth the defined benefit
plans' funded status amounts as of December 31, 1994 and 1993 (in
millions):
<TABLE>
<CAPTION>
1994 1993
Accumulated Assets Accumulated Assets
Benefits Exceed Benefits Exceed
Exceed Accumulated Exceed
Accumulated
Assets Benefits Assets Benefits
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested. . . . . . . . . . . $257.0 $ 66.0 $264.1 $71.6
Non-vested. . . . . . . . . 15.8 0.5 23.8 1.2
Accumulated benefit obliga-
tions. . . . . . . . . . . . 272.8 66.5 287.9 72.8
Effect of projected future
salary increases . . . . . . 99.4 - 121.3 -
Projected benefit obligation. 372.2 66.5 409.2 72.8
Plan assets at fair value . . 209.7 75.5 201.7 84.6
Projected benefit obligation
in excess of (less than)
plan assets. . . . . . . . . 162.5 (9.0) 207.5 (11.8)
Unrecognized net gain (loss). 39.9 (7.4) (20.1) (2.3)
Additional minimum liability. 6.5 - 5.4 -
Accrued (prepaid) pension
liability . . . . . . . . . $208.9 $(16.4) $192.8 $(14.1)
</TABLE>
In accordance with Statement of Financial Accounting Standards No. 87
"Employers' Accounting for Pensions", an additional minimum pension
liability for certain plans, representing the excess of accumulated
benefits over plan assets and accrued pension costs, was recognized at
December 31, 1994 and 1993. A corresponding amount was recognized as a
separate reduction to stockholders' equity.
Plan assets consist primarily of equity securities, long-term debt
securities and short-term investments. Pursuant to the Reorganization, the
PBGC Settlement and the Investment Agreement, on April 27, 1993,
Continental issued 493,621 shares of Class B to the Master Trust for the
Continental Airlines, Inc. Retirement Plan.
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 8.75%, 7.50% and
8.25% for 1994, 1993 and 1992, respectively. The expected long-term rate
of return on assets (which is used to calculate the Company's return on
pension assets for the current year) was 9.25%, 9.25% and 9.97% for 1994,
1993 and 1992, respectively. The weighted average rate of salary increases
was 4.3%, 5.3% and 6.3% for 1994, 1993 and 1992, respectively. The
unrecognized net gain (loss) are amortized on a straight-line basis over
the average remaining service period of employees expected to receive a
plan benefit.
Continental's policy is to fund the noncontributory defined benefit pension
plans in accordance with Internal Revenue Service ("IRS") requirements as
modified, to the extent applicable, by agreements with the IRS.
NOTE 11 - INCOME TAXES
Effective April 27, 1993, the Reorganized Company adopted the liability
method of accounting for income taxes required by SFAS No. 109 (which was
adopted January 1, 1993 by the Predecessor Company). Under the provisions
of SFAS 109, the Company elected not to restate prior years' consolidated
financial statements. The cumulative effect of initial adoption on prior
years' retained earnings was not material. Additionally, as of January 1,
1993, the effect of the adoption of SFAS 109 upon income before income
taxes was not material.
The reconciliation of income tax computed at the United States federal
statutory tax rates to income tax benefit for the year ended December 31,
1994 and the period April 28, 1993 through December 31, 1993 are as follows
(in millions):
<TABLE>
<CAPTION>
Amount Percent
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Income tax benefit at United States
statutory rates. . . . . . . . . . . . $(227.9) $(18.0) (35.0)% (35.0)%
State income tax benefit. . . . . . . . (19.6) (2.5) (3.0) (4.9)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets. . . . . . . . . . 6.1 4.8 0.9 9.4
Meals and entertainment disallowance. . 6.6 1.4 1.0 2.7
Impact of change in federal tax rates . - 1.5 - 2.9
Net operating loss not benefitted . . . 192.6 - 29.6 -
Income tax benefit, net . . . . . . . . $ (42.2) $(12.8) (6.5)% (24.9)%
</TABLE>
The significant component of the provision for income taxes for the year
ended December 31, 1994 and the period April 28, 1993 through December 31,
1993 was a deferred tax benefit of $42.2 million and $12.8 million,
respectively.
The provision for income taxes of the Predecessor Company for the period
from January 1 through April 27, 1993 and for the year ended December 31,
1992 was $2.1 million and $0.5 million, respectively. The provision for
income taxes of the Predecessor Company represents only state income taxes.
Due to losses generated, there is no provision for federal income taxes for
the period from January 1, 1993 through April 27, 1993 and for the year
ended December 31, 1992.
The provision for income taxes for the period from April 28, 1993 through
December 31, 1993 reflects an increase of $1.5 million which is related to
the increase in the corporate tax rate from 34.0% to 35.0% enacted by the
Revenue Reconciliation Act of 1993.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the related amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
as of December 31, 1994 and 1993 are as follows (in millions):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Spare parts and supplies, fixed assets and
intangibles . . . . . . . . . . . . . . . . . . $ 668.0 $ 745.3
Deferred gain . . . . . . . . . . . . . . . . . . 84.8 92.1
Other, net. . . . . . . . . . . . . . . . . . . . 8.6 21.3
Gross deferred tax liabilities. . . . . . . . . . 761.4 858.7
Capital and safe harbor lease activity. . . . . . (24.0) (40.5)
Accrued liabilities . . . . . . . . . . . . . . . (343.1) (287.4)
Revaluation of leases . . . . . . . . . . . . . . (80.1) (136.9)
Net operating loss carryforwards. . . . . . . . . (1,068.7) (919.5)
Investment tax credit carryforwards . . . . . . . (44.7) (54.5)
Gross deferred tax assets . . . . . . . . . . . . (1,560.6) (1,438.8)
Deferred tax assets valuation allowance . . . . . 844.2 667.3
Net deferred tax liability. . . . . . . . . . . . 45.0 87.2
Less current deferred tax liability . . . . . . . 16.9 36.4
Non-current deferred tax liability. . . . . . . . $ 28.1 $ 50.8
</TABLE>
At December 31, 1994, the Company has net operating loss carryforwards of
approximately $2.7 billion for income tax purposes that will expire from
1995 through 2009 and investment tax credit carryforwards of approximately
$44.7 million that will expire through 2001. As a result of the change in
ownership of the Company on April 27, 1993, the ultimate utilization of the
Company's net operating losses and investment tax credits could be limited.
For financial reporting purposes, a valuation allowance of $844.2 million
has been recognized to offset the deferred tax assets related to a portion
of those carryforwards. The Company has considered prudent and feasible
tax planning strategies in assessing the need for the valuation allowance.
The Company has assumed $194 million of benefit attributable to such tax
planning strategies. In the event the Company were to determine in the
future that any such tax planning strategies would not be implemented, an
adjustment to the deferred tax liability would be charged to income in the
period such determination was made. In the event the Company recognizes
additional tax benefits related to net operating loss carryforwards and
investment tax credit carryforwards attributable to the Predecessor
Company, those benefits would be applied to reduce Reorganization Value in
Excess of Amounts Allocable to Identifiable Assets and other intangibles to
zero, and thereafter as an addition to paid-in capital.
The deferred tax valuation allowance increased from $667.3 million at
December 31, 1993 to $844.2 million at December 31, 1994. This increase is
related to deferred tax assets associated with certain nonrecurring charges
and net operating losses that may not be realizable.
Approximately $545 million of the Company's net operating losses can only
be used to offset the separate parent company taxable income of Continental
Airlines, Inc. Approximately $17.8 million of the Company's investment
tax credits can only be used to offset the separate parent company tax
liability of Continental Airlines, Inc.
NOTE 12 - NONRECURRING CHARGES
During the fourth quarter of 1994, the Company recorded a nonrecurring
charge of approximately $446.8 million associated primarily with (i) the
planned early retirement of certain aircraft and (ii) closed or
underutilized airport and maintenance facilities and other assets.
Approximately $278 million of the nonrecurring charge was associated with
the planned early retirement during 1995 of 24 widebody jet aircraft
(21 Airbus A300s and three Boeing 747s), 23 narrowbody Boeing 727 jet
aircraft and five Dash 7 turboprop aircraft, including a provision for the
disposal of the related inventory. All of these aircraft (except for two
owned Airbus A300 aircraft) have remaining lease obligations beyond the
planned retirement dates for such aircraft. The $278 million charge
represents the Company's best estimate of the expected loss based upon,
among other things, the anticipated resolution of negotiations with certain
lessors as well as anticipated sublease rental income of certain aircraft
and engines. To the extent the actual resolution of the negotiations,
actual sublease rental income or other events or amounts vary from the
Company's estimates, the actual charge could be different from the amount
estimated.
Approximately $168.8 million of the nonrecurring charge was associated with
the closure of the LAX maintenance facility, underutilized airport
facilities and other assets (primarily associated with DIA). This portion
of the charge relates to the Company's contractual obligations under the
related lease agreements and the write-off of related leasehold
improvements, less an estimated amount for sublease rental income.
However, should actual sublease rental income be different from the
Company's estimates, the actual charge could be different from the amount
estimated.
Approximately $324.2 million of the nonrecurring charge represents an
actual cash outlay to be incurred over the remaining lease terms (of from
one to 15 years) and approximately $122.6 million represents a noncash
charge associated with a write-down of certain assets (principally
inventory and flight equipment) to expected net realizable value.
Continental expects to finance the cash outlays primarily with internally
generated funds.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Capital Commitments
On March 31, 1995, the Company signed agreements with Boeing and certain
engine manufacturers that would defer certain aircraft and engine
deliveries that previously were scheduled to occur in 1996 and 1997, to
cancel orders for certain option aircraft and to obtain refunds of deposits
corresponding to the revised delivery schedule.
Continental has firm commitments to take delivery of 22 new 737 and five
new 757 aircraft in 1995, one new 757 aircraft in 1996 and 43 new jet
aircraft during the years 1998 through 2002. The estimated aggregate cost
of these aircraft is approximately $3.4 billion. In December 1994, Express
contracted with Beech Acceptance Corporation ("Beech") for the purchase and
financing of 25 Beech 1900-D aircraft at an estimated aggregate cost of
$104 million, excluding price escalations. Deliveries of the Beech
aircraft are scheduled in 1995 and 1996. As of December 31, 1994,
Continental had made deposits on jet and turboprop aircraft orders of
approximately $166.1 million.
Continental expects its 1995 capital expenditures, exclusive of aircraft,
to aggregate approximately $83 million primarily relating to aircraft
modifications, passenger terminal facility improvements and office,
maintenance, telecommunications and ground equipment.
See Note 1 for a discussion of debt and operating lease obligations in
default. See Note 6 for a discussion of Continental's contingent liability
on long-term lease obligations.
Legal Proceedings
In 1992, the Company agreed to lease (i) 20 gates at DIA for a period of
five years from the date DIA opened, (ii) four of such gates for an
additional five years and (iii) a substantial amount of operational space
in connection with the gates and for the terms set forth in the agreement.
During 1994, the Company significantly reduced its Denver operations. The
City filed a complaint on February 22, 1995 against the Company in the
United States District Court for the District of Colorado seeking a
determination that the Company materially breached and repudiated the lease
and a March 1994 agreement to pay certain costs associated with the delays
in opening DIA. In addition, the City sought a judgment declaring the
City's rights and the Company's obligations and the award of an injunction
that the Company perform such obligations. The City also sought attorneys
fees and costs relating to its suit. The Company believes it has defenses
against the City, as well as claims against the City that justify
rescission of the lease or, if rescission is not awarded by the court, a
substantial reduction in the Company's obligations thereunder.
The Company, the City and certain other parties have entered into an
agreement ("Settlement") that was approved by the Denver City Council on
April 10, 1995. The Settlement provides for the release of certain claims
and the settlement of certain litigation filed by the City against the
Company and reduces (i) the full term of the lease to five years, subject
to certain rights of renewal granted to Continental, (ii) the number of
gates leased from 20 to 10, (iii) the amount of leased operational and
other space by approximately 70%. The reduced gates and operational space
exceed Continental's current needs at the airport, and the Company is
negotiating with America West Airlines, Inc. ("America West") and Frontier
Airlines to sublease up to five of its remaining gates and certain
operational space. The Company will attempt to sublease additional
facilities and operational space as well. To the extent Continental is
able to sublease any of its gates and operational space, its costs under
the lease would be reduced.
The Settlement may still be challenged by certain parties, including by
other air carriers, and the Company cannot predict what the outcome of any
such challenge would be. Certain air carriers have taken the position that
an insufficient number of carriers have executed the Settlement. Failure
to implement the Settlement could reduce or eliminate the Company's
estimated savings at DIA.
Certain parties continue to seek recovery for claims that were subject to
the Company's Plan of Reorganization. For the most part, if such parties
were successful on their claims, their recovery would be limited to the
fixed pools of Company common stock and cash provided for in the Plan of
Reorganization. Nevertheless, certain claims, if successful, could result
in additional obligations being imposed upon the Company, including the
possible indemnification of certain current and former officers and
directors of the Company or its former parent. In addition, the Company is
a party to certain lawsuits, and the subject of certain claims, which arose
after the Company's bankruptcy proceedings were commenced and in the
ordinary course of the Company's business. Although the amount sought in
certain of these claims and proceedings is substantial, the Company cannot
at this time reasonably estimate the possible loss or range of loss that
could be experienced if any of the claims were successful. However, the
Company believes that the resolution of these matters is unlikely to have a
material adverse effect on the Company.
NOTE 14 - RELATED PARTY TRANSACTIONS
The following is a summary of significant related party transactions which
have occurred during 1994 and the period April 28, 1993 through
December 31, 1993 other than those discussed elsewhere in the Notes to
Consolidated Financial Statements.
CMI and United Micronesia Development Association, Inc. ("UMDA"), the
minority stockholder of CMI, have a services agreement whereby UMDA is paid
a fee for certain services, which fee approximates 1.0% of CMI's revenues.
For the year ended December 31, 1994 and the period April 28, 1993 through
December 31, 1993, these fees totaled approximately $4.8 million and
$3.5 million, respectively. As of December 31, 1994 and 1993, the Company
had a payable to UMDA totaling approximately $7.2 million and $7.3 million,
respectively. The payable bears interest at 12.0% per annum and matures in
2011. Annual principal and interest payments on the payable aggregating
$1,000,000 per year are applied to reduce the 1.0% fee.
In connection with AC's investment in the Company, AC, AP and the Company
agreed to identify and pursue opportunities to achieve cost savings,
revenue enhancement or other synergies from areas of joint operation
between the Company and AC. The Company and AC have entered into a series
of synergies agreements, primarily in the areas of aircraft maintenance and
commercial and marketing alliances (including agreements regarding
coordination of connecting flights). The Company believes that the
synergies agreements allocate potential benefits to the Company and AC in a
manner that is equitable and commercially reasonable, and contain terms at
least as favorable to the Company as could be obtained from unrelated
parties. As a result of these agreements, Continental paid AC
$29.1 million and $9 million for the year ended December 31, 1994 and from
the period April 28, 1993 through December 31, 1993, respectively,
primarily relating to aircraft maintenance. Continental also reimbursed AC
and AP in 1993 for fees incurred in connection with their investment in
Continental of $6.9 million and $11.1 million, respectively.
GE Capital and General Electric Company, owner of 171,000 shares of the
Company's 8% Preferred Stock, provide certain services to Continental such
as repairing engines and the leasing of certain aircraft. Continental also
has loans payable to GE Capital. See Note 5.
Under the amended agreements with GE Capital, if Air Partners disposes of
any of its Class A shares, Continental must prepay deferred amounts
totaling approximately $146 million and, at Continental's election, either
(i) prepay loans totaling $150 million or (ii) pledge its Air Micronesia,
Inc. stock as collateral for all GE Capital obligations.
The Company and America West have entered into a series of agreements
during 1994 related to code-sharing and ground handling. The services
provided are considered normal to the daily operations of both airlines.
As a result of these agreements, Continental paid America West $0.5 million
in 1994.
NOTE 15 - FOREIGN OPERATIONS
Continental conducts operations to various foreign countries. Operating
revenues from foreign operations are as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Latin America $ 310 $ 278 $ 283
Atlantic 400 384 375
Pacific 678 630 712
$1,388 $1,292 $1,370
</TABLE>
<TABLE>
NOTE 16 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited summarized financial data by quarter for 1994 and 1993 is as follows (in millions, except
per share data):
<CAPTION>
Period Period
from from
April 1, April 28,
Three 1993 1993
Months through through
Ended April 27, June 30, Three Months Ended
March 31, 1993 1993 June 30 September 30 December 31
<S> <C> <C> <C> <C> <C> <C>
1994
Operating revenues . . . . $1,356.5 $ - $ - $1,390.5 $1,513.7 $1,409.2
Operating income (loss). . (55.2) - - (1.5) 82.8 (37.1)
Nonoperating income
(expense), net. . . . . . (58.4) - - (51.5) (50.0) (480.2)
Net income (loss). . . . . (71.6) - - (49.0) 30.6 (523.3)
Primary and fully diluted
earnings (loss) per
common share (a). . . . . (2.86) - - (1.97) 1.03 (19.66)
1993
Operating revenues . . . . 1,383.2 473.9 977.6 - 1,564.2 1,368.8
Operating income (loss). . (55.2) (58.0) (4.1) - 91.0 8.6
Nonoperating income
(expense), net. . . . . . (52.7) (810.6) (32.0) - (67.1) (47.8)
Extraordinary gain . . . . - 3,618.7 - - - -
Net income (loss). . . . . (109.5) 2,749.6 (24.4) - 12.4 (26.5)
Primary and fully diluted
earnings (loss) per
common share (b). . . . . N.M.* N.M.* (1.45) - 0.53 (1.47)
(a) The sum of the four quarterly earnings (loss) per share amounts in 1994 does not agree with
the loss per share as calculated for the full year due to the issuance of restricted stock
in 1994.
(b) The sum of the four quarterly earnings (loss) per share amounts in 1993 does not agree with
the loss per share as calculated for the full year due to the issuance of a large number of
shares of the Class B common stock in December 1993.
*N.M. - Not meaningful. Historical per share data for the Predecessor Company is not meaningful
since the Company was recapitalized and adopted fresh start reporting as of April 27, 1993.
</TABLE>
During the third quarter of 1994, the Company recorded a favorable
adjustment of $23.4 million as a result of the Company's estimate of awards
expected to be redeemed for travel on Continental under its frequent flyer
program.
During the fourth quarter of 1994, nonrecurring charges of approximately
$446.8 million were recorded for costs associated with grounding aircraft,
reducing operations at certain airport facilities and modifying certain
aircraft and facilities lease agreements.
During the first quarter of 1993, reorganization-related charges of
$11.6 million were partially offset by interest income of $3.1 million.
During the second quarter of 1993, the Company recorded a gain of
$34.9 million related to System One's sale to EDS of substantially all of
the assets of its Airline Services Division. In addition, reorganization-
related charges of $234.2 million were recorded. Fresh start adjustments
totaling $719.1 million were recorded relating to the adjustment of assets
and liabilities to fair market value as well as other miscellaneous fresh
start adjustments of approximately $76.8 million. These fresh start
adjustments were partially offset by the write-off of deferred gains on
sale/leaseback transactions of $218.6 million. The Company recorded an
extraordinary gain of approximately $3.6 billion resulting from the
extinguishment of prepetition obligations, including the write-off of a
deferred credit related to Eastern of approximately $1.1 billion.
During the third quarter of 1993, the Company recorded nonoperating charges
totaling approximately $13.1 million related to the Company's termination
of services to Australia and New Zealand and other expenses primarily
related to the abandonment of airport facilities. Also included in
passenger revenues is $75 million recorded as a result of completion of the
Company's periodic evaluation of its air traffic liability account.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
There were no changes in or disagreements on any matters of accounting
principles or financial statement disclosure between the Company and its
independent public accountants during the registrant's two most recent
fiscal years or any subsequent interim period.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of stockholders to be held on June 5,
1995.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of stockholders to be held on June 5,
1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of stockholders to be held on June 5,
1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of stockholders to be held on June 5,
1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following financial statements are included in Item 8. "Financial
Statements and Supplementary Data.":
Report of Independent Auditors
Report of Independent Public Accountants
Consolidated Statements of Operations for each of the Three Years in
the
Period Ended December 31, 1994
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Cash Flows for each of the Three Years in
the
Period Ended December 31, 1994
Consolidated Statements of Redeemable and Nonredeemable Preferred
Stock
and Common Stockholders' Equity (Deficit) for each of the Three
Years
in the Period Ended December 31, 1994
Notes to Consolidated Financial Statements
(b) Financial Statement Schedules:
Report of Independent Auditors
Schedule I - Condensed Financial Information of Registrant (Parent
Company Only)
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because they are inapplicable,
not required, or the information is included elsewhere in the
consolidated financial statements or notes thereto.
(c) Reports on Form 8-K.
None.
(d) See accompanying Index to Exhibits.
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Continental
Airlines, Inc. (the "Company") as of December 31, 1994 and 1993, and for
the year ended December 31, 1994 and the period from April 28, 1993 through
December 31, 1993, and the consolidated statements of operations,
redeemable and nonredeemable preferred stock and common stockholders'
equity and cash flows for the period from January 1, 1993 through April 27,
1993 for Continental Airlines Holdings, Inc., and have issued our report
thereon dated April 12, 1995 (included elsewhere in this Form 10-K). Our
audits also included the financial statement schedules for these related
periods listed in Item 14(b) of this Form 10-K. These schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Houston, Texas
April 12, 1995
<TABLE>
CONTINENTAL AIRLINES, INC.
(Parent Company Only)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF OPERATIONS (a)(b)
(In thousands of dollars)
<CAPTION>
April 28, 1993
Year ended through
December 31, 1994 December 31, 1993
<S> <C> <C>
Operating Revenues:
Passenger. . . . . . . . . . . . . . . $4,210,628 $2,954,485
Cargo, mail and other. . . . . . . . . 411,452 298,078
4,622,080 3,252,563
Operating Expenses:
Wages, salaries and related costs. . . 1,346,841 873,889
Rentals and landing fees . . . . . . . 746,640 465,671
Aircraft fuel. . . . . . . . . . . . . 641,772 469,338
Maintenance, materials and repairs . . 366,204 272,898
Commissions. . . . . . . . . . . . . . 352,705 301,201
Depreciation and amortization. . . . . 210,797 133,335
Other. . . . . . . . . . . . . . . . . 1,041,541 624,627
4,706,500 3,140,959
Operating Income (Loss) . . . . . . . . (84,420) 111,604
Nonoperating Income (Expense):
Interest expense . . . . . . . . . . . (193,487) (136,499)
Interest income. . . . . . . . . . . . 20,002 15,638
Interest income from subsidiaries. . . 12,235 4,991
Nonrecurring charges . . . . . . . . . (433,812) -
Other, net . . . . . . . . . . . . . . 8,315 (6,996)
(586,747) (122,866)
Loss before Equity in Net Losses of
Subsidiaries and Income Taxes. . . . . (671,167) (11,262)
Equity in Net Losses of
Subsidiaries . . . . . . . . . . . . . (14,801) (26,158)
Income Tax Expense. . . . . . . . . . . 72,626 (1,129)
Net Loss. . . . . . . . . . . . . . . . $ (613,342) $ (38,549)
</TABLE>
These Statements should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and Notes to Schedule I.
<TABLE>
CONTINENTAL AIRLINES, INC.
(Parent Company Only)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET (a)(b)
(In thousands of dollars, except for share data)
<CAPTION>
December 31, December
31,
ASSETS 1994 1993
<S> <C> <C>
Current Assets:
Cash and cash equivalents, including
restricted cash and cash equivalents of
$118,732 and $102,439, respectively . . . . . $ 325,728 $ 680,962
Accounts receivable, net . . . . . . . . . . . 281,734 309,455
Accounts receivable from subsidiaries, net . . 64,447 -
Notes receivable from subsidiaries . . . . . . 97,825 46,221
Spare parts and supplies, net. . . . . . . . . 119,796 136,522
Prepayments and other. . . . . . . . . . . . . 70,369 70,707
Total current assets. . . . . . . . . . . . . 959,899 1,243,867
Property and Equipment:
Owned property and equipment, net of
accumulated depreciation of $180,281 and
$62,297, respectively . . . . . . . . . . . . 1,017,317 1,111,110
Purchase deposits for flight equipment . . . . 166,052 166,984
Capital leases, net of accumulated
amortization of $58,169 and $19,291,
respectively . . . . . . . . . . . . . . . . 311,299 329,473
Total property and equipment . . . . . . . . 1,494,668 1,607,567
Other Assets:
Routes, gates and slots, net of accumulated
amortization of $73,041 and $29,730,
respectively. . . . . . . . . . . . . . . . . 1,051,141 1,118,670
Reorganization value in excess of amounts
allocable to identifiable assets, net of
accumulated amortization of $22,999 and
$10,585, respectively . . . . . . . . . . . . 210,659 223,073
Investment in subsidiaries . . . . . . . . . . 257,502 272,303
Notes receivable from subsidiaries . . . . . . - 56,875
Other assets, net. . . . . . . . . . . . . . . 66,467 43,935
Total other assets . . . . . . . . . . . . . 1,585,769 1,714,856
Total Assets . . . . . . . . . . . . . . . $4,040,336 $4,566,290
</TABLE>
These Statements should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and Notes to Schedule I.
<TABLE>
CONTINENTAL AIRLINES, INC.
(Parent Company Only)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET (a)(b)
(In thousands of dollars, except for share data)
<CAPTION>
December 31, December
31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
<S> <C> <C>
Current Liabilities:
Debt and capital lease obligations
in default. . . . . . . . . . . . . . . . . . $ 489,865 $ -
Current maturities of long-term debt (c) . . . 108,620 160,250
Current maturities of capital leases . . . . . 18,278 33,620
Accounts payable . . . . . . . . . . . . . . . 548,258 472,762
Accounts payable to subsidiaries, net. . . . . - 10,795
Air traffic liability. . . . . . . . . . . . . 551,810 590,994
Accrued other liabilities. . . . . . . . . . . 492,885 459,602
Total current liabilities . . . . . . . . . . 2,209,716 1,728,023
Long-Term Debt (c). . . . . . . . . . . . . . . 859,773 1,178,989
Capital Leases. . . . . . . . . . . . . . . . . 119,798 353,606
Deferred Credits and Other Long-Term
Liabilities. . . . . . . . . . . . . . . . . . 694,759 538,210
Commitments and Contingencies (d)
Redeemable Preferred Stock (aggregate
liquidation value - $55,966 and $50,497,
respectively) (e) . . . . . . . . . . . . . . 52,606 46,916
Common Stockholders' Equity:
Class A common stock - $.01 par, 50,000,000
shares authorized; 6,301,056 shares and
6,013,216 shares issued and outstanding
at December 31, 1994 and 1993,
respectively (e) . . . . . . . . . . . . . . 63 60
Class B common stock - $.01 par,
100,000,000 shares authorized;
20,403,512 shares and 19,509,352 shares
issued and outstanding at December 31,
1994 and 1993, respectively (e). . . . . . . 204 195
Additional paid-in capital. . . . . . . . . . 778,382 764,274
Accumulated deficit . . . . . . . . . . . . . (651,891) (38,549)
Unearned portion of restricted stock
issued for future services . . . . . . . . . (13,872) -
Additional minimum pension liability. . . . . (6,549) (5,434)
Unrealized loss on marketable equity
securities . . . . . . . . . . . . . . . . . (2,218) -
Treasury stock - 30,000 shares in 1994. . . . (435) -
Total common stockholders' equity. . . . . . 103,684 720,546
Total Liabilities and Stockholders' Equity $4,040,336 $4,566,290
</TABLE>
These Statements should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and Notes to Schedule I.
<TABLE>
CONTINENTAL AIRLINES, INC.
(Parent Company Only)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS (a)(b)
(In thousands of dollars)
<CAPTION>
April 28, 1993
Year ended through
December 31, 1994 December 31, 1993
<S> <C> <C>
Net cash provided (used) by
operating activities . . . . . . . . $(39,447) $ 62,612
Cash Flows from Investing
Activities:
Proceeds from disposition of
property, equipment and other
assets . . . . . . . . . . . . . . 27,643 94
Capital expenditures . . . . . . . . (99,826) (217,059)
Investment in America West . . . . . (18,771) -
Net cash used by investing
activities . . . . . . . . . . . . (90,954) (216,965)
Cash Flows from Financing
Activities:
Proceeds from issuance of
long-term debt, net. . . . . . . . 30,980 89,820
Payments on long-term debt and
capital lease obligations . . . . . (255,813) (108,578)
Net proceeds from issuance of
common stock. . . . . . . . . . . . - 153,060
Net cash provided (used) by
financing activities . . . . . . . (224,833) 134,302
Net Decrease in Cash and Cash
Equivalents. . . . . . . . . . . . . (355,234) (20,051)
Cash and Cash Equivalents -
Beginning of Period. . . . . . . . . 680,962 701,013
Cash and Cash Equivalents -
End of Period. . . . . . . . . . . . $325,728 $680,962
</TABLE>
These Statements should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and Notes to Schedule I.
NOTES TO SCHEDULE I
(a) See Notes 1 and 2 to Notes to Consolidated Financial Statements for a
discussion of Continental Airlines, Inc. (the "Company" or
"Continental") liquidity and predecessor company's emergence from
bankruptcy.
(b) The Condensed Financial Information of Registrant includes the
accounts of Continental and its wholly owned subsidiary, Rubicon
Indemnity, Ltd., a subsidiary formed for workers' compensation
reinsurance purposes. This subsidiary has been included in Schedule I
to properly reflect the parent company's workers' compensation
liability.
(c) Continental's long-term debt (parent company only) was recorded at
fair market value at April 27, 1993. The fair market value adjustment
is amortized to interest expense over the life of the debt. See
Note 5 to Notes to Consolidated Financial Statements. Long-term debt
as of December 31, 1994 and 1993 is summarized as follows (in
millions):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Secured
Notes payable to GE Capital, interest rates of
8.64% to 12.0% and floating interest rates of
LIBOR plus 4.0%, payable through 2005. . . . . . .$ 439.4 $ 443.1
Notes payable, interest rates of 5.84% to 18.38%
(imputed interest rates approximate stated
interest rates), payable through 2005. . . . . . . 240.9 234.9
Notes payable, interest rates of 6% to 12.25%
(imputed interest rates of 7.86% to 9.9%),
payable through 2008 . . . . . . . . . . . . . . . 278.2 332.5
Floating rate notes, interest rates of prime
plus 0.5% to 3.05%, LIBOR plus 0.75% to
3.75% and Eurodollar plus 0.75%, payable
through 2007. . . . . . . . . . . . . . . . . . . 148.9 159.1
Other . . . . . . . . . . . . . . . . . . . . . . . 15.0 15.7
Unsecured
Notes payable, interest rates of 6.94% to 12%
(imputed interest rates of 16.3% to 21.8%),
payable through 2005 . . . . . . . . . . . . . . . 112.3 179.9
Other . . . . . . . . . . . . . . . . . . . . . . . 7.6 0.6
1,242.3 1,365.8
Less: debt in default. . . . . . . . . . . . . . . 264.7 -
Less: current maturities . . . . . . . . . . . . . 108.6 160.3
Less: fair market value adjustment . . . . . . . . 9.2 26.5
Total . . . . . . . . . . . . . . . . . . . . . . .$ 859.8 $1,179.0
</TABLE>
Long-term debt maturities, excluding $9.2 million of non-cash fair
market value adjustments, due over the next five years are as follows
(in millions):
Year ending December 31,
1995. . . . . . . . . . . . . . . . . . . . . . . $157.8
1996. . . . . . . . . . . . . . . . . . . . . . . 144.2
1997. . . . . . . . . . . . . . . . . . . . . . . 167.2
1998. . . . . . . . . . . . . . . . . . . . . . . 142.4
1999. . . . . . . . . . . . . . . . . . . . . . . 154.3
The above maturities have not been adjusted to reflect the potential
acceleration of certain obligations due to defaults under the loan
agreements.
(d) See Note 13 of Notes to Consolidated Financial Statements.
(e) See Note 8 of Notes to Consolidated Financial Statements.
(f) See Note 6 of Notes to Consolidated Financial Statements for a
discussion of operating lease obligations in default.
(g) The Company has not paid dividends on its common stock.
On April 27, 1993, Continental adopted fresh start reporting in accordance
with Statement of Position 90-7 - "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code", which resulted in adjustments to
the Company's common stockholders' equity and the carrying values of assets
and liabilities. Accordingly, the Parent Company only post-reorganization
balance sheets and statements of operations have not been prepared on a
consistent basis of accounting with the Parent Company only pre-
reorganization balance sheet and statements of operations. See Note 3 of
Notes to Consolidated Financial Statements.
<TABLE>
CONTINENTAL AIRLINES HOLDINGS, INC.
(Parent Company Only)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF OPERATIONS (a)
(In thousands of dollars)
<CAPTION>
Predecessor Company
Period from
January 1,
1993 through Year ended
April 27, December 31,
1993 1992
<S> <C> <C>
Operating Revenues (lease revenue and
management fees from subsidiaries) (a) . . $ 32,598 $ 101,554
Operating Expenses:
Wages, salaries and related costs. . . . . 727 2,544
Rentals. . . . . . . . . . . . . . . . . . 15,317 48,225
Depreciation and amortization. . . . . . . 4,719 14,533
Other. . . . . . . . . . . . . . . . . . . 676 3,112
21,439 68,414
Operating Income. . . . . . . . . . . . . . 11,159 33,140
Nonoperating Income (Expense):
Interest expense . . . . . . . . . . . . . (5,023) (16,579)
Gain (loss) on disposition of property,
equipment and other assets, net . . . . . (5) 1
Eastern-related pension adjustments. . . . - 114,547
Eastern liquidation-related adjustments. . - 17,250
Reorganization items, net. . . . . . . . . (134,287) 5,201
Other, net . . . . . . . . . . . . . . . . 861 2,853
Total nonoperating income (expense),
net. . . . . . . . . . . . . . . . . . . (138,454) 123,273
Income (Loss) Before Equity in Net Loss
of Subsidiaries and Extraordinary Gain . . (127,295) 156,413
Equity in Net Losses of Subsidiaries. . . . 837,625 (281,746)
Income (Loss) Before Extraordinary Gain . . 710,330 (125,333)
Extraordinary Gain. . . . . . . . . . . . . 1,929,808 -
Net Income (Loss) . . . . . . . . . . . . . $2,640,138 $(125,333)
</TABLE>
These Statements should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and Notes to Schedule I.
<TABLE>
CONTINENTAL AIRLINES HOLDINGS, INC.
(Parent Company Only)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS (a)
(In thousands of dollars)
<CAPTION>
Predecessor Company
Period from
January 1,
1993 through Year ended
April 27, December 31,
1993 1992
<S> <C> <C>
Net cash provided by operating
activities . . . . . . . . . . . . . . . . $ 121 $ 2,439
Cash Flows from Investing Activities:
Proceeds from disposition of property
and equipment . . . . . . . . . . . . . . - -
Capital expenditures . . . . . . . . . . . (4) (5)
Cash received from affiliates. . . . . . . - 39
Other. . . . . . . . . . . . . . . . . . . - 974
Net cash provided by investing
activities . . . . . . . . . . . . . . . (4) 1,008
Cash Flows from Financing Activities:
Proceeds from issuance of long-term
debt, net . . . . . . . . . . . . . . . . - (188)
Payments on long-term debt and capital
lease obligations . . . . . . . . . . . . (442) (13,487)
Net cash used by financing activities . . . (442) (13,675)
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . (325) (10,228)
Cash and Cash Equivalents - Beginning of
Period . . . . . . . . . . . . . . . . . . 9,182 19,410
Cash and Cash Equivalents - End of Period . $8,857 $ 9,182
</TABLE>
These Statements should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and Notes to Schedule I.
(a) The Condensed Financial Information of Registrant includes the
accounts of Continental Airlines Holdings, Inc. ("Holdings") and
certain special purpose subsidiaries (together, "CTA"), primarily
formed to provide fuel purchasing services to Holdings' airline
subsidiaries and to finance aircraft leased to Continental.
(b) Prepetition long-term debt for CTA totaling approximately
$312.9 million at December 31, 1992 was included in Estimated
Liabilities Subject to Chapter 11 Reorganization Proceedings.
Pursuant to the Reorganization and the PBGC Settlement, the PBGC
receives the equity interest in all of CTA's debt-owned aircraft with
the debt totaling approximately $135.2 million. Therefore, scheduled
maturities for long-term debt of CTA are immaterial.
(c) CTA did not pay dividends on its common stock in 1992.
<TABLE>
CONTINENTAL AIRLINES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993, and 1992
(In thousands of dollars)
<CAPTION>
Allowance
for Doubtful Allowance for
Receivables Obsolescence
<S> <C> <C>
Balance, December 31, 1991 . . . $51,450 $65,643
Additions charged to expense . 23,214 12,978
Deductions from reserve. . . . (25,844) (341)
Other. . . . . . . . . . . . . (181) 1,770
Balance, December 31, 1992 . . . 48,639 80,050
Additions charged to expense . 19,283 9,890
Deductions from reserve. . . . (32,190) (1,946)
Other. . . . . . . . . . . . . (686) (83,373) (a)
Balance, December 31, 1993 . . . 35,046 4,621
Additions charged to expense . 24,913 32,294
Deductions from reserve. . . . (21,204) (739)
Other. . . . . . . . . . . . . (946) 149
Balance, December 31, 1994 . . . $37,809 $36,325
</TABLE>
(a) Primarily represents fresh start adjustments in accordance with
SOP 90-7.
INDEX TO EXHIBITS
OF
CONTINENTAL AIRLINES, INC.
2.1 Revised Third Amended Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code with Respect to Debtors'
Revised Second Amended Joint Plan of Reorganization Under Chapter
11 of the United States Bankruptcy Code, as filed with the
Bankruptcy Court on January 13, 1993 -- incorporated by reference
from Exhibit 2.1 to Continental's Annual Report on Form 10-K for
the year ended December 31, 1992 (File no. 0-09781) (the
"1992 10-K").
2.2 Modification of Debtors' Revised Second Amended Joint Plan of
Reorganization dated March 12, 1993 -- incorporated by reference
to Exhibit 2.2 to Continental's Current Report on Form 8-K, dated
April 16, 1993 (the "April 8-K").
2.3 Second Modification of Debtors' Revised Second Amended Joint Plan
of Reorganization, dated April 8, 1993 -- incorporated by
reference to Exhibit 2.3 to the April 8-K.
2.4 Third Modification of Debtors' Revised Second Amended Joint Plan
of Reorganization, dated April 15, 1993 -- incorporated by
reference to Exhibit 2.4 to the April 8-K.
2.5 Confirmation Order, dated April 16, 1993 -- incorporated by
reference to Exhibit 2.5 to the April 8-K.
3.1 Restated Certificate of Incorporation of Continental --
incorporated by reference to Exhibit 4.1 to the April 8-K.
3.2 By-laws of Continental -- incorporated by reference to
Exhibit 4.4 to the April 8-K.
4.1 Specimen Class B Common Stock Certificates of the Company --
incorporated by reference to Exhibit 4.1 to Continental's Form S-
1 Registration Statement (No. 33-68870) (the "1993 S-1").
4.2 Certificate of Designation of 12% Cumulative Preferred Stock --
incorporated by reference to Exhibit 4.2 to the April 8-K.
4.3 Certificate of Designation of 8% Cumulative Preferred Stock --
incorporated by reference to Exhibit 4.3 to Continental's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1993.
4.4 Certificate of Correction to Certificate of Designation of 8%
Cumulative Preferred Stock -- incorporated by reference to
Exhibit 4.4 to the 1993 S-1.
4.5 Subscription and Stockholders' Agreement - incorporated by
reference to Exhibit 4.5 to the April 8-K.
4.6 Registration Rights Agreement dated as of April 27, 1993, among
Continental, Air Partners and Air Canada -- incorporated by
reference to Exhibit 4.6 to the April 8-K.
4.7 Warrant Agreement dated as of April 27, 1993, between Continental
and Continental as warrant agent -- incorporated by reference to
Exhibit 4.7 to the April 8-K.
4.8 Loan Agreement dated as of April 27, 1993, among Continental
Micronesia, Air Micronesia, Inc. and GE Capital -- incorporated
by reference to Exhibit 4.8 to the April 8-K.
4.8(a) Waiver, Consent and Amendment to CMI Loan Agreement, dated as of
March 30, 1995, among CMI, Air Micronesia, Inc. and GE Capital --
filed herewith. (2)
4.9 Loan Agreements dated as of April 27, 1993, between ASATT Corp.
and Continental -- incorporated by reference to Exhibit 4.9 to
the April 8-K.
4.9(a) Waiver, Consent and Amendment to Series B-1 Loan Agreement, dated
as of March 30, 1995, between Continental and Global Project &
Structured Finance Corporation (successor by merger to ASATT
Corp.) -- filed herewith. (2)
4.9(b) Waiver, Consent and Amendment to Series B-2 Loan Agreement, dated
as of March 30, 1995, between Continental and Global Project &
Structured Finance Corporation (successor by merger to ASATT
Corp.) -- filed herewith. (2)
4.10 Loan Agreement dated as of April 27, 1993, between Continental
and General Electric Company, individually and as agent --
incorporated by reference to Exhibit 4.10 to the 1993 S-1.
4.10(a) Waiver, Consent and Amendment to Consolidation Loan Agreement,
dated as of March 30, 1995, between Continental and General
Electric Company, individually and as agent -- filed herewith.
(2)
4.11 Master Restructuring Agreement, dated as of March 30, 1995,
between Continental and GE Capital -- filed herewith. (2)
4.12 Agreement by Continental to furnish to the Commission, upon
request, copies of certain instruments defining the rights of
holders of long-term debt of the kind described in Item 601(b)(4)
of Regulation S-K -- incorporated by reference to Exhibit 4.11 to
the 1993 S-1.
10.1 Master Agreement among Continental, System One and EDS,
Continental Services Agreement between Continental and EDS, CRS
Services Agreement between System One and EDS, and ASD Services
and Acquisition Agreement between System One and EDS, each dated
as of May 1, 1991 -- incorporated by reference to Exhibit 10.1 to
Holdings' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1991. (1)
10.2 Litigation Settlement Agreement, dated as of August 31, 1992,
among the Pension Benefit Guaranty Corporation and, jointly and
severally, each of the debtors (as defined) -- incorporated by
reference to Exhibit 10.10 to the 1992 10-K.
10.3 Agreement of Lease dated as of January 11, 1985, between the Port
Authority of New York and New Jersey and People Express Airlines,
Inc., regarding Terminal C (the "Terminal C Lease") --
incorporated by reference to Exhibit 10.61 to the Annual Report
on Form 10-K of People Express Airlines, Inc. for the year ended
December 31, 1984.
10.4 Assignment of Lease with Assumption and Consent dated as of
August 15, 1987, among the Port Authority of New York and New
Jersey, People Express Airlines, Inc. and Continental --
incorporated by reference to Exhibit 10.2 to Continental's Annual
Report on Form 10-K for the year ended December 31, 1987 (the
"1987 10-K").
10.5 Supplemental Agreements Nos. 1 through 6 to the Terminal C
Lease -- incorporated by reference to Exhibit 10.3 to the
Continental 1987 10-K.
10.6 Supplemental Agreement No. 7 to the Terminal C Lease --
incorporated by reference to Exhibit 10.4 to Continental's Annual
Report on Form 10-K for the year ended December 31, 1988.
10.7 Supplemental Agreements No. 8 through 11 to the Terminal C
Lease -- incorporated by reference to Exhibit 10.10 to the
1993 S-1.
10.8(a)* Employment Agreement between the Company and Robert Ferguson --
incorporated by reference to Exhibit 10.11(a) to the 1993 S-1.
10.8(b)* Termination Agreement between the Company and Robert Ferguson --
filed herewith.
10.8(c)* Employment Agreement between the Company and Charles Goolsbee --
incorporated by reference to Exhibit 10.11(b) to the 1993 S-1.
10.8(d)* Memorandum of Agreement between the Company and Charles
Goolsbee -- filed herewith.
10.8(e)* Employment Agreement between the Company and Gordon Bethune --
filed herewith.
10.8(f)* Employment Agreement between the Company and Daniel Garton --
incorporated by reference to Exhibit 10.2 to Continental's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1994 (the "1994 Third Quarter 10-Q").
10.8(g)* Employment Agreement between the Company and John Luth --
incorporated by reference to Exhibit 10.3 to the 1994 Third
Quarter 10-Q.
10.8(h)* Letter Agreement between the Company and John Luth -- filed
herewith.
10.8(i)* Employment Agreement between the Company and Donald Valentine --
filed herewith.
10.9* Continental Airlines, Inc. 1994 Incentive Equity Plan --
incorporated by reference to Exhibit 4.3 to the Company's Form S-
8 Registration Statement (No. 33-81324).
10.10 Not used.
10.11 Purchase Agreement No. 1782, including exhibits and side letters
thereto, between the Company and Boeing, effective April 27,
1993, relating to the purchase of Boeing 737-524 aircraft --
incorporated by reference to Exhibit 10.1 to Continental's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993
(the "June 10-Q"). (1)
10.11(a) Supplemental Agreement No. 6 to Purchase Agreement No. 1782
between the Company and Boeing, dated March 31, 1995, relating to
the purchase of Boeing 737-524 aircraft -- filed herewith. (2)
10.12 Purchase Agreement No. 1783, including exhibits and side letters
thereto, between the Company and Boeing, effective April 27,
1993, relating to the purchase of Boeing 757-224 aircraft --
incorporated by reference to Exhibit 10.2 to the June 10-Q. (1)
10.12(a) Supplemental Agreement No. 4 to Purchase Agreement No. 1783
between the Company and Boeing, dated March 31, 1995, relating to
the purchase of Boeing 757-224 aircraft -- filed herewith. (2)
10.13 Purchase Agreement No. 1784, including exhibits and side letters
thereto, between the Company and Boeing, effective April 27,
1993, relating to the purchase of Boeing 767-324ER aircraft --
incorporated by reference to Exhibit 10.3 to the June 10-Q. (1)
10.13(a) Supplemental Agreement No. 3 to Purchase Agreement No. 1784
between the Company and Boeing, dated March 31, 1995, relating to
the purchase of Boeing 767-324ER aircraft -- filed herewith. (2)
10.14 Purchase Agreement No. 1785, including exhibits and side letters
thereto, between the Company and Boeing, effective April 27,
1993, relating to the purchase of Boeing 777-224 aircraft --
incorporated by reference to Exhibit 10.4 to the June 10-Q. (1)
10.14(a) Supplemental Agreement No. 3 to Purchase Agreement No. 1785
between the Company and Boeing, dated March 31, 1995, relating to
the purchase of Boeing 777-224 aircraft -- filed herewith. (2)
10.15 Lease Agreement dated as of May 1992 between the City and County
of Denver, Colorado and Continental regarding Denver
International Airport -- incorporated by reference to
Exhibit 10.17 to the 1993 S-1.
10.15(a) Supplemental Lease Agreement, including an exhibit thereto, dated
as of April 3, 1995 between the City and County of Denver,
Colorado and Continental and United Air Lines, Inc. regarding
Denver International Airport -- filed herewith.
10.16 Stock Subscription Warrant of Continental Micronesia granted to
United Micronesia Development Association, Inc. -- incorporated
by reference to Exhibit 10.18 to the 1993 S-1.
10.17 Lease Agreement, as amended and supplemented, between the Company
and the City of Houston, Texas regarding Terminal C of Houston
Intercontinental Airport -- incorporated by reference to
Exhibit 10.5 to Continental's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993 (the "September 10-Q").
10.18 Agreement and Lease dated as of May 1987, as supplemented,
between the City of Cleveland, Ohio and Continental regarding
Cleveland Hopkins International Airport -- incorporated by
reference to Exhibit 10.6 to the September 10-Q.
10.19 Third Revised Investment Agreement dated April 21, 1994 between
America West Airlines, Inc. and AmWest Partners, L.P. --
incorporated by reference to Exhibit 1 to the August 25, 1994
Schedule 13D.
22.1 List of Subsidiaries of Continental -- incorporated by reference
to Exhibit 22.1 to the 1993 S-1.
23.1 Consent of Ernst & Young LLP -- filed herewith.
23.2 Consent of Arthur Andersen LLP -- filed herewith.
25.1 Powers of attorney executed by certain directors and officers of
Continental -- filed herewith.
27.1 Financial Data Schedule -- filed herewith.
__________
*These exhibits relate to management contracts or compensatory plans or
arrangements.
(1) The Commission has granted confidential treatment for a portion of this
agreement.
(2) The Company has applied to the Commission for confidential treatment of
a portion of this exhibit.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CONTINENTAL AIRLINES, INC.
By /s/ DANIEL P. GARTON
Daniel P. Garton
Senior Vice President and
Chief Financial Officer
Date: April 12, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
in the capacities and on the dates indicated.
Signature Capacity Date
(i) Principal Executive Officer:
GORDON M. BETHUNE* President, April 12, 1995
Gordon M. Bethune Chief Executive Officer
and Director
(ii) Principal Financial Officer:
/s/ DANIEL P. GARTON Senior Vice President April 12, 1995
Daniel P. Garton and Chief Financial
Officer
(iii) Principal Accounting Officer:
/s/ MICHAEL P. BONDS Staff Vice President April 12, 1995
Michael P. Bonds and Controller
(iv) A Majority of the Directors:
THOMAS J. BARRACK, JR.* Director April 12, 1995
Thomas J. Barrack, Jr.
DAVID BONDERMAN* Director and April 12, 1995
David Bonderman Chairman of the Board
JOEL H. COWAN* Director April 12, 1995
Joel H. Cowan
PATRICK FOLEY* Director April 12, 1995
Patrick Foley
ROWLAND C. FRAZEE* Director April 12, 1995
Rowland C. Frazee
HOLLIS L. HARRIS* Director April 12, 1995
Hollis L. Harris
ROBERT L. LUMPKINS* Director April 12, 1995
Robert L. Lumpkins
DOUGLAS McCORKINDALE* Director April 12, 1995
Douglas McCorkindale
DAVID E. MITCHELL, O.C.* Director April 12, 1995
David E. Mitchell, O.C.
RICHARD W. POGUE* Director April 12, 1995
Richard W. Pogue
WILLIAM S. PRICE* Director April 12, 1995
William Price
DONALD L. STURM* Director April 12, 1995
Donald L. Sturm
CLAUDE I. TAYLOR, O.C.* Director April 12, 1995
Claude I. Taylor, O.C.
KAREN HASTIE WILLIAMS* Director April 12, 1995
Karen Hastie Williams
CHARLES A. YAMARONE* Director April 12, 1995
Charles A. Yamarone
*By /s/ Daniel P. Garton
Daniel P. Garton
Attorney-in-Fact
April 12, 1995
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 4.8(a)
WAIVER, CONSENT AND AMENDMENT TO
CMI LOAN AGREEMENT
WAIVER, CONSENT AND AMENDMENT TO CMI LOAN AGREEMENT,
dated as of March 30, 1995 (this "Amendment"), among CONTINENTAL
MICRONESIA, INC., a Delaware corporation ("Borrower"), AIR
MICRONESIA, INC., a Delaware corporation ("Guarantor"), the
financial institutions party to the Loan Agreement referred to
below ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("GE Capital"), as agent for said Lenders
under the Loan Agreement (in such capacity, "Agent").
W I T N E S S E T H :
WHEREAS, Borrower, Guarantor, Lenders and Agent are
parties to that certain Loan Agreement, dated as of April 27,
1993 (such Agreement, as it may be hereafter amended,
supplemented or otherwise modified from time to time, being
hereinafter referred to as the "Loan Agreement", and capitalized
terms defined therein and not otherwise defined herein being used
herein as therein defined; and
WHEREAS, Continental Airlines, Inc. ("Continental"),
Continental Express, Inc., GE Capital, General Electric Company,
and Global Project & Structured Finance Corporation, are parties
to that certain Master Restructuring Agreement, dated as of March
30, 1995 (the "Restructuring Agreement"), pursuant to which
certain obligations of Borrower and Continental are being
restructured; and
WHEREAS, Borrower has advised Lenders and Agent that
Borrower wishes to amend certain provisions of the Loan Agreement
in connection with the transactions contemplated by the
Restructuring Agreement, and Borrower has requested that Lenders
agree to various amendments to, and waivers of, certain
provisions of the Loan Agreement in connection therewith; and
WHEREAS, Lenders have agreed so to amend and waive, as
the case may be, certain provisions of the Loan Agreement upon
the terms and subject to the conditions provided herein;
NOW, THEREFORE, in consideration of the premises,
covenants and agreements contained herein, the parties hereto
hereby agree as follows:
SECTION 1. Waiver and Consent. The obligation of
Borrower to make any principal payment of the Loan due and
payable as set forth in Section 2.1(c) of the Loan Agreement on
any Interest Payment Date during the period from January 1, 1995
through December 31, 1996 (a "Deferred Principal Payment Date")
is hereby waived and each such principal payment otherwise due
and payable on such Deferred Principal Payment Date shall instead
be repaid in accordance with Section 2.1(c) of the Loan
Agreement, as amended by this Amendment.
SECTION 2. Amendments to Loan Agreement. The Loan
Agreement is hereby amended as follows:
(a) Section 1 is hereby amended as follows:
(i) by deleting the definition of the term
"Disposition" in its entirety and substituting the following
new definition in lieu therefor:
"'Disposition' shall mean any sale,
transfer, assignment, conveyance or other
disposition.";
(ii) by deleting the definition of the term
"Disposition Notice" in its entirety;
(iii) by inserting in the definition of the term
"Eligible Assignee" before the first reference therein to
"any Person" the reference to "GE Capital, Societe Nationale
d'Etude et de Construction de Moteurs D'Aviation, MTU
Motoren-und Turbinen-Union Munchen, GmbH, any of their
respective Subsidiaries or Affiliates, or";
(iv) by deleting in the definition of the term
"Lender" the reference therein to "by Section 8.1(a)(i) or
8.1(a)(ii)" and substituting the reference to "hereunder" in
lieu therefor; and
(v) by inserting the following new definitions in
proper alphabetical order:
"'CMI Deferred Amount' shall mean the
aggregate amount of all principal payments
deferred in accordance with the terms of Section 1
of the Waiver, Consent and Amendment."
"'CMI Deferred Date' shall mean
December 31, 1996."
"'CMI LIBOR Rate' shall mean the average
of the four rates, reported from time to time by
Telerate News Service (or such other number of
rates as such service may from time to time
report), at which foreign branches of major United
States banks offer United States dollar deposits
to other banks for a 90-day period in the London
interbank market at approximately 11:00 a.m.,
London time, on the second full Eurodollar
Business Day next preceding each Interest Payment
Date set forth on Schedule 2.1 attached hereto
during which any CMI Deferred Amount is to be
outstanding (unless such Interest Payment Date is
not a Business Day, in which event such interest
rates shall be determined two Eurodollar Business
Days prior to the Business Day next succeeding
such Interest Payment Date). If such interest
rates shall cease to be available from Telerate
News Service, the CMI LIBOR Rate shall be
determined from such financial reporting service
or other information as shall be mutually
acceptable to Agent and Borrower. Such CMI LIBOR
Rate, as determined above, will remain in effect
with respect to any outstanding CMI Deferred
Amount to but not including the next Interest
Payment Date, after which the CMI LIBOR Rate
determined in accordance with the prior two
sentences shall be in effect."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Deferred Principal Payment Date' shall have
the meaning set forth in Section 1 of the Waiver,
Consent and Amendment."
"'Eurodollar Business Day' shall mean a
Business Day on which banks in the city of London are
generally open for interbank or foreign exchange
transactions."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
"'Waiver, Consent and Amendment' shall
mean that certain Waiver, Consent and Amendment,
dated as of March 30, 1995, among Borrower,
Guarantor, Lenders and GE Capital, as Agent."
(b) Section 2.1 is hereby amended by deleting
subsection (c) thereof in its entirety and substituting the
following new subsection (c) in lieu therefor:
"(c) The principal amount of each Loan
(other than the CMI Deferred Amount) shall be due
and payable in quarterly installments in the
amounts and on the Interest Payment Dates set
forth in Schedule 2.1 attached hereto. The CMI
Deferred Amount outstanding on the CMI Deferred
Date shall be due and payable in the amounts and
on the dates set forth on Schedule 2.1 attached
hereto.
(c) Section 2.2 is hereby amended as follows:
(i) by deleting in subsection (b) thereof the
first parenthetical contained therein;
(ii) by deleting subsection (f) thereof in its
entirety; and
(iii) by renumbering subsection (g) thereof to be
new subsection (f).
(d) Section 2.2 is hereby amended by deleting clause
(iii) of subsection (d) thereof in its entirety and substituting
the following new clause (iii) in lieu therefor:
"(iii) applied first, ratably to the scheduled
payments of the outstanding amounts set forth in
the column titled Deferred Principal Balance on
Schedule 2.1 hereto, and then, to the scheduled
payments of the outstanding amounts set forth in
the column titled Principal Balance on Schedule
2.1 hereto in the inverse order of maturity.
Notwithstanding anything to the contrary contained
herein, the CMI Deferred Amount may be prepaid in
whole or in part without any prepayment penalty."
(e) Section 2.5 is hereby amended as follows:
(i) by deleting the words "on the average outstanding
principal balance of the Notes outstanding" in the second
sentence of subsection (a) thereof immediately prior to
clause (i) therein and substituting the following words "on
each day during such Payment Period on the amount set forth
in the column titled Principal Balance on Schedule 2.1
hereof (as reduced by any prepayments made during such
Payment Period) opposite the Interest Payment Date that is
the first day of such Payment Period"; and
(ii) by inserting the following new proviso before the
parenthetical at the end of the second sentence of
subsection (a) thereof:
"provided, however, that interest shall accrue on each
day during such Payment Period on the amount set forth
in the column titled Deferred Principal Balance on
Schedule 2.1 hereof (as reduced by any prepayments made
during such Payment Period) opposite the Interest
Payment Date that is the first day of such Payment
Period at a rate per annum equal to 4% above the CMI
LIBOR Rate in effect during such Payment Period".
(f) [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
(g) Section 5.1 is hereby amended as follows:
(i) by deleting subsection (a) thereof in its
entirety and substituting the following new subsection (a)
in lieu therefor:
"(a) Upon the earlier to occur of the
date of distribution, in final form, to Borrower's
management or within 45 days after the end of each
fiscal month, (i) a copy of the unaudited
consolidated statement of income of Borrower and
its Subsidiaries for that portion of the Fiscal
Year ending as of the end of such month and, if
prepared in the ordinary course, a copy in final
form of the consolidated balance sheet as of the
close of such month and statement of cash flow of
Borrower and its Subsidiaries for that portion of
the Fiscal Year ending as of the end of such
month, (ii) a copy of the unaudited consolidated
statement of income of Borrower and its
Subsidiaries for such month, in each case,
prepared in the form customarily produced by
Borrower for internal corporate, financial or
accounting purposes, and (iii) a comparison of
actual cash forecasts, budgets and other
information required to be delivered to Lender in
accordance with Sections 5.1(a) and 5.1(g) with
the amounts projected for such fiscal month.";
(ii) by deleting subsection (g) thereof in its
entirety and substituting the following new subsection (g)
in lieu therefor:
"(g) Promptly upon preparation in final form
and in any event at the beginning of each Fiscal Year:
(i) projected consolidated cash flow
statements including summary details of cash
disbursements, including Capital Expenditures, for
such Fiscal Year, and projected consolidated
income statements of Borrower and its
Subsidiaries, on a monthly basis;
(ii) if prepared in the ordinary course,
projected consolidated balance sheets of Borrower
and its Subsidiaries for such Fiscal Year, on a
quarterly basis, together with appropriate
supporting details as requested by Lender;
(iii) any other budgets or formal financial
projections prepared regarding Borrower and
distributed to Borrower's Stockholders; and
(iv) projected budgets for the next 12
months regarding Borrower and its Subsidiaries,
together with statistical information, on a
monthly basis.";
(iii) by inserting at the end of subsection (l)
thereof before the period at the end thereof the reference
to "and shall also provide Agent, upon its reasonable
request, with reasonable opportunities to discuss all of the
foregoing information provided to Agent and each Lender
pursuant to this Section 5 with appropriate members of
management of AMI, Borrower or any of their respective
Subsidiaries, as appropriate".
(h) [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
(i) Section 8.1 is hereby amended by deleting it in
its entirety and substituting the reference to "[RESERVED]" in
lieu therefor.
(j) Section 8.2 is hereby amended as follows:
(i) by deleting in subsection (a) thereof the
first parenthetical therein;
(ii) by deleting in subsection (a) thereof the two
references therein to "the Tranche A Loan" and substituting
the reference to "any Loan" in lieu therefor;
(iii) by deleting in subsection (b) thereof the
first parenthetical therein; and
(iv) by deleting in subsection (b) thereof the
reference therein to "the Tranche A Loan" and substituting
the reference to "any Loan" in lieu therefor.
(k) Section 8.3 is hereby amended by deleting in the
first sentence of subsection (d) thereof the reference therein to
"Tranche A Loan to an Eligible Assignee" and substituting the
reference to "Tranche A Loan or Tranche B Loan, as the case may
be, to a Lender or an Eligible Assignee" in lieu therefor.
(l) Section 8.4 is hereby amended as follows:
(i) by deleting the first sentence of
subsection (a) thereof in its entirety and substituting
the following new sentence in lieu therefor:
"Each Lender may sell, transfer, assign or
negotiate all or a portion of the Loans owing to
it and the Notes held by it and a commensurate
portion of its rights and obligations hereunder
and under the other Loan Documents; provided,
however, that (i) each such assignment shall be of
a constant, and not a varying percentage of all of
the assigning Lender's rights and obligations
under this Agreement, (ii) each assignee hereunder
shall also be a Lender or an Eligible Assignee,
(iii) each such sale, transfer or assignment shall
be in an aggregate principal amount of not less
than $5,000,000 and (iv) no such assignment may
result in the Notes being beneficially owned by
more than fifteen (15) Persons in the aggregate.";
(ii) by deleting in the second sentence of
subsection (a) thereof the reference therein to "Tranche A";
and
(iii) by deleting in the first sentence of
subsection (d) thereof the reference therein to "Tranche A".
(m) Section 9.1 is hereby amended by inserting the
following new subsection (s) at the end thereof:
"(s) So long as GE Capital or any of its
Affiliates shall hold any Note or be owed any
Obligation under this Agreement or any of the other
Loan Documents, Borrower shall fail to make any payment
when due, taking into account applicable cure periods,
if any (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) on any
Indebtedness owed by Borrower to GE Capital or any of
its Affiliates; or any such Indebtedness shall be
declared to be due and payable or required to be
prepaid in full (other than by a regularly scheduled
required prepayment) prior to the stated maturity
thereof."
(n) Schedule 2.1 to the Loan Agreement is deleted and
Schedule 2.1 hereto is substituted therefor.
SECTION 3. Effective Date. This Amendment shall
become effective upon the Restructuring Date (as such term is
defined the Restructuring Agreement).
SECTION 4. [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
SECTION 5. Miscellaneous. (a) Upon the effectiveness
of this Amendment, on and after the date hereof, each reference
in the Loan Agreement and the other Loan Documents to "this
Agreement," "hereunder," "hereof," "herein," or words of like
import, shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement and all of the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
Without limiting the generality of the foregoing, Borrower hereby
confirms that all of its obligations under the Collateral
Documents shall continue and shall remain in full force and
effect.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of Lenders or Agent
under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
(d) This Amendment may be executed in any number of
separate counterparts, each of which shall, collectively and
separately, constitute one agreement.
(e) The section titles contained in this Amendment are
and shall be without substantive meaning or content of any kind
whatsoever and are not part of the agreement among the parties
hereto.
(f) Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of
construction, validity and performance, this Amendment shall be
governed by, and construed and enforced in accordance with, the
laws of the State of New York, without regard to the principles
thereof regarding conflicts of law, and any applicable laws of
the United States. Agent, each Lender and Borrower agree to
submit to personal jurisdiction and, to the extent permitted by
applicable law, to waive any objection as to venue in the County
of New York, State of New York. To the extent permitted by
applicable law, service of process on Borrower, Agent or any
Lender in any action arising out of or relating to this Amendment
shall be effective if mailed to such party at the address listed
Section 11.11 of the Loan Agreement. Nothing herein shall
preclude Agent, Lender or Borrower from bringing suit or taking
other legal action in any other jurisdiction.
(g) To the extent permitted by applicable law, the
parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
CONTINENTAL MICRONESIA, INC.
By: /s/ JOANNE ROEMER
Name: Joanne Roemer
Title:Vice President & CFO
AIR MICRONESIA, INC.
By: /s/ JOHN LUTH
Name: John E. Luth
Title: Attorney-in-Fact
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and
Lender
By: ERIC M. DULL
Name: Eric M. Dull
Title: Attorney-in-Fact
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 4.9(a)
WAIVER, CONSENT AND AMENDMENT TO
SERIES B-1 LOAN AGREEMENT
WAIVER, CONSENT AND AMENDMENT TO SERIES B-1 LOAN
AGREEMENT, dated as of March 30, 1995 (this "Amendment"), between
CONTINENTAL AIRLINES, INC., a Delaware corporation ("Borrower")
and GLOBAL PROJECT & STRUCTURED FINANCE CORPORATION (successor by
merger to ASATT Corp.) ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower and Lender are parties to that
certain Loan Agreement, dated as of April 27, 1993 (such
Agreement, as it may be hereafter amended, supplemented or
otherwise modified from time to time, being hereinafter referred
to as the "Loan Agreement", and capitalized terms defined therein
and not otherwise defined herein being used herein as therein
defined); and
WHEREAS, Borrower, together with Continental Express,
Inc., GE Capital, General Electric Company, and Lender, are
parties to that certain Master Restructuring Agreement, dated as
of March 30, 1995 (the "Restructuring Agreement"), pursuant to
which certain obligations of Borrower are being restructured; and
WHEREAS, Borrower has advised Lender that Borrower
wishes to amend certain provisions of the Loan Agreement in
connection with the transactions contemplated by the
Restructuring Agreement, and Borrower has requested that Lender
agree to various amendments to, and waivers of, certain
provisions of the Loan Agreement in connection therewith; and
WHEREAS, Lender has agreed so to amend and waive, as
the case may be, certain provisions of the Loan Agreement upon
the terms and subject to the conditions provided herein;
NOW, THEREFORE, in consideration of the premises,
covenants and agreements contained herein, the parties hereto
hereby agree as follows:
SECTION 1. Waiver and Consent. The obligation of
Borrower to make any principal payment of the Loan due and
payable as set forth in Section 2.1(c) of the Loan Agreement on
any Interest Payment Date during the period from January 1, 1995
through December 31, 1996 (a "Deferred Principal Payment Date")
is hereby waived and each such principal payment otherwise due
and payable on such Deferred Principal Payment Date shall instead
be repaid in accordance with Section 2.1(c) of the Loan
Agreement, as amended by this Amendment [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
SECTION 2. Amendments to Loan Agreement. The Loan
Agreement is hereby amended as follows:
(a) Section 1 is hereby amended as follows:
(i) by inserting in the definition of the
term "Net Sales Proceeds" after each reference therein
to "Asset Sale" the reference to "Equity Issuance, Debt
Issuance or Stock Sale, as the case may be,"; and
(ii) by inserting the following new
definitions in proper alphabetical order:
"'B-1 Deferred Amount' shall mean the
aggregate amount of all principal payments
deferred in accordance with the terms of Section 1
of the Waiver, Consent and Amendment. "
"'B-1 Deferred Date' shall mean
December 31, 1996."
"'B-1 LIBOR Rate' shall mean the average
of the four rates, reported from time to time by
Telerate News Service (or such other number of
rates as such service may from time to time
report), at which foreign branches of major United
States banks offer United States dollar deposits
to other banks for a 90-day period in the London
interbank market at approximately 11:00 a.m.,
London time, on the second full Eurodollar
Business Day next preceding each Interest Payment
Date set forth on Schedule 2.1 attached hereto
during which any B-1 Deferred Amount is to be
outstanding (unless such Interest Payment Date is
not a Business Day, in which event such interest
rates shall be determined two Eurodollar Business
Days prior to the Business Day next succeeding
such Interest Payment Date). If such interest
rates shall cease to be available from Telerate
News Service, the B-1 LIBOR Rate shall be
determined from such financial reporting service
or other information as shall be mutually
acceptable to Lender and Borrower. Such B-1 LIBOR
Rate, as determined above, will remain in effect
with respect to any outstanding B-1 Deferred
Amount to but not including the next Interest
Payment Date, after which the B-1 LIBOR Rate
determined in accordance with the prior two
sentences shall be in effect."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Deferred Principal Payment Date' shall have
the meaning set forth in Section 1 of the Waiver,
Consent and Amendment."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Eurodollar Business Day' shall mean a
Business Day on which banks in the city of London
are generally open for interbank or foreign
exchange transactions."
"'Restructuring Agreement' shall mean
that certain Master Restructuring Agreement, dated
as of March 30, 1995, among Borrower, Continental
Express, Inc., GE Capital, General Electric
Company, and Lender."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Waiver, Consent and Amendment' shall
mean that certain Waiver, Consent and Amendment,
dated as of March 30, 1995, between Borrower and
Lender."
(b) Section 2.1 is hereby amended by deleting
subsection (c) thereof in its entirety and substituting the
following new subsection (c) in lieu therefor:
"(c) The principal amount of the Loan
(other than the B-1 Deferred Amount) shall be due
and payable in quarterly installments in the
amounts and on the Interest Payment Dates set
forth in Schedule 2.1 attached hereto. The B-1
Deferred Amount outstanding on the B-1 Deferred
Date shall be due and payable in the amounts and
on the dates set forth on Schedule 2.1 attached
hereto [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
(c) Section 2.2 is hereby amended by deleting
subsection (e) thereof in its entirety and substituting the
following new subsection (e) in lieu therefor:
"(e) Each prepayment made pursuant to
subsection (a) hereof shall be applied first,
ratably to the scheduled payments of the
outstanding amounts set forth in the column titled
Deferred Principal Payment on Schedule 2.1 hereto,
and then, to the scheduled payments of the
outstanding amounts set forth in the column titled
Principal Payment on Schedule 2.1 hereto in the
inverse order of maturity. Notwithstanding
anything to the contrary contained herein, the B-1
Deferred Amount may be prepaid in whole or in part
without any prepayment penalty."
(d) Section 2.3 is hereby amended as follows:
(i) by deleting subsection (d) thereof in
its entirety and substituting the following new
subsection (d) in lieu therefor:
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
(ii) by inserting the following new
subsections (e), (f) and (g) at the end thereof:
"(e) Each prepayment made pursuant to
subsections (a), (d) and (g) hereof shall be
applied first, ratably to the scheduled payments
of the B-1 Deferred Amount, and then, to the
scheduled payments due under Section 2.1 hereof
(excluding the B-1 Deferred Amount) in the inverse
order of maturity.
(f) [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
(g) [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
(e) Section 2.6 is hereby amended as follows:
(i) by deleting the words "on the average
principal balance of the Note outstanding during such
Payment Period" in the second sentence of subsection (a)
thereof and substituting the following words "on each day
during such Payment Period on the amount set forth in the
column titled Principal Balance on Schedule 2.1 hereof (as
reduced by any prepayments made during such Payment Period)
opposite the Interest Payment Date that is the first day of
such Payment Period"; and
(ii) by inserting the following new proviso before
the end of the second sentence of subsection (a) thereof:
"provided, however, that interest shall accrue on
each day during such Payment Period on the amount
set forth in the column titled Deferred Principal
Balance on Schedule 2.1 hereof (as reduced by any
prepayments made during such Payment Period)
opposite the Interest Payment Date that is the
first day of such Payment Period at a rate per
annum equal to [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] above the B-1 LIBOR Rate in effect
during such Payment Period".
(f) Section 5.1 is hereby amended as follows:
(i) by deleting subsection (a) thereof in its
entirety and substituting the following new subsection (a)
in lieu therefor:
"(a) Upon the earlier to occur of the
date of distribution, in final form, to Borrower's
management or within 45 days after the end of each
fiscal month, (i) a copy of the unaudited
consolidated statement of income of Borrower and
its Subsidiaries for that portion of the Fiscal
Year ending as of the end of such month and, if
prepared in the ordinary course, a copy in final
form of the consolidated balance sheet as of the
close of such month and statement of cash flow of
Borrower and its Subsidiaries for that portion of
the Fiscal Year ending as of the end of such
month, (ii) a copy of the unaudited consolidated
statement of income of Borrower and its
Subsidiaries for such month, in each case,
prepared in the form customarily produced by
Borrower for internal corporate, financial or
accounting purposes, and (iii) a comparison of
cash forecasts, budgets and other information
required to be delivered to Lender in accordance
with Sections 5.1(a) and 5.1(f) with the actual
results for such fiscal month.";
(ii) by deleting subsection (f) thereof in its
entirety and substituting the following new subsection (f)
in lieu therefor:
"(f) Promptly upon preparation in final form
and in any event by the first Business Day of each
Fiscal Year:
(i) projected consolidated cash flow
statements including summary details of cash
disbursements, including Capital Expenditures, for
such Fiscal Year, and projected consolidated
income statements of Borrower and its
Subsidiaries, on a monthly basis;
(ii) if prepared in the ordinary course,
projected consolidated balance sheets of Borrower
and its Subsidiaries for such Fiscal Year, on a
quarterly basis, together with appropriate
supporting details as requested by Lender;
(iii) any other budgets or formal financial
projections prepared regarding Borrower and
distributed to Borrower's Stockholders; and
(iv) projected budgets for the next 12
months regarding Borrower and its Subsidiaries,
together with statistical information, on a
monthly basis.";
(iii) by renumbering subsection (j) to be new
subsection (k);
(iv) by inserting the following new subsection (j)
in the proper alphabetical order:
"(j) As soon as practicable but in any
event on the first Business Day of each fiscal
week of each fiscal month, cash forecasts,
including schedules reflecting cash balances,
actual and projected, and sources and uses of cash
for such fiscal week, for the preceding fiscal
week and for each of the two succeeding fiscal
weeks."; and
(v) by inserting at the end of new subsection (k)
thereof before the period at the end thereof the reference
to "and shall also provide Lender, upon its reasonable
request, with reasonable opportunities to discuss all of the
foregoing information provided to Lender pursuant to this
Section 5 with appropriate members of management of Borrower
or any of its Subsidiaries, as appropriate".
(g) Section 9.1 is hereby amended by inserting the
following new subsection (p) at the end thereof:
"(p) So long as GE Capital or any of its
Affiliates shall hold any Note or be owed any
Obligation under this Agreement or any of the other
Loan Documents, Borrower shall fail to make any payment
when due, taking also into account applicable cure
periods, if any (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise)
on any Indebtedness owed by Borrower to GE Capital or
any of its Affiliates; or any such Indebtedness shall
be declared to be due and payable or required to be
prepaid in full (other than by a regularly scheduled
required prepayment) prior to the stated maturity
thereof."
(h) Schedule 2.1 to the Loan Agreement is deleted and
Schedule 2.1 hereto is substituted therefor.
SECTION 3. Effective Date. This Amendment shall
become effective upon the Restructuring Date (as such term is
defined in the Restructuring Agreement).
SECTION 4. Miscellaneous. (a) Upon the effectiveness
of this Amendment, on and after the date hereof, each reference
in the Loan Agreement and the other Loan Documents to "this
Agreement," "hereunder," "hereof," "herein," or words of like
import, shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement and all of the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
Without limiting the generality of the foregoing, Borrower hereby
confirms that all of its obligations under the Collateral
Documents shall continue and shall remain in full force and
effect.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of Lender or Agent
under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
(d) This Amendment may be executed in any number of
separate counterparts, each of which shall, collectively and
separately, constitute one agreement.
(e) The Section Titles contained in this Amendment are
and shall be without substantive meaning or content of any kind
whatsoever and are not part of the agreement among the parties
hereto.
(f) Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of
construction, validity and performance, this Amendment shall be
governed by, and construed and enforced in accordance with, the
laws of the State of New York, without regard to the principles
thereof regarding conflicts of law, and any applicable laws of
the United States. Agent, each Lender and Borrower agree to
submit to personal jurisdiction and, to the extent permitted by
applicable law, to waive any objection as to venue in the County
of New York, State of New York. To the extent permitted by
applicable law, service of process on Borrower, Agent or any
Lender in any action arising out of or relating to this Amendment
shall be effective if mailed to such party at the address listed
Section 11.11 of the Loan Agreement. Nothing herein shall
preclude Agent, Lender or Borrower from bringing suit or taking
other legal action in any other jurisdiction.
(g) To the extent permitted by applicable law, the
parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
CONTINENTAL AIRLINES, INC.
By: /s/ JOHN LUTH
Name: John E. Luth
Title: Senior Vice
President and Chief
Information Officer
GLOBAL PROJECT & STRUCTURED
FINANCE CORPORATION
By: /s/ ERIC M. DULL
Name: Eric M. Dull
Title: Vice President
Schedule 2.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 4.9(b)
WAIVER, CONSENT AND AMENDMENT TO
SERIES B-2 LOAN AGREEMENT
WAIVER, CONSENT AND AMENDMENT TO SERIES B-2 LOAN
AGREEMENT, dated as of March 30, 1995 (this "Amendment"), between
CONTINENTAL AIRLINES, INC., a Delaware corporation ("Borrower")
and GLOBAL PROJECT & STRUCTURED FINANCE CORPORATION (successor by
merger to ASATT Corp.) ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower and Lender are parties to that cer-
tain Loan Agreement, dated as of April 27, 1993 (such Agreement,
as it may be hereafter amended, supplemented or otherwise modi-
fied from time to time, being hereinafter referred to as the
"Loan Agreement", and capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined;
and
WHEREAS, Borrower, together with Continental Express,
Inc., GE Capital, General Electric Company, and Lender, are
parties to that certain Master Restructuring Agreement, dated as
of March 30, 1995 (the "Restructuring Agreement"), pursuant to
which certain obligations of Borrower are being restructured; and
WHEREAS, Borrower has advised Lender that Borrower
wishes to amend certain provisions of the Loan Agreement in
connection with the transactions contemplated by the
Restructuring Agreement, and Borrower has requested that Lender
agree to various amendments to, and waivers of, certain provi-
sions of the Loan Agreement in connection therewith; and
WHEREAS, Lender has agreed so to amend and waive, as
the case may be, certain provisions of the Loan Agreement upon
the terms and subject to the conditions provided herein;
NOW, THEREFORE, in consideration of the premises,
covenants and agreements contained herein, the parties hereto
hereby agree as follows:
SECTION 1. Waiver and Consent. The obligation of
Borrower to make any principal payment of the Loan due and
payable as set forth in Section 2.1(c) of the Loan Agreement on
any Interest Payment Date during the period from January 1, 1995
through December 31, 1996 (a "Deferred Principal Payment Date")
is hereby waived and each such principal payment otherwise due
and payable on such Deferred Principal Payment Date shall instead
be repaid in accordance with Section 2.1(c) of the Loan
Agreement, as amended by this Amendment [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
SECTION 2. Amendments to Loan Agreement. The Loan
Agreement is hereby amended as follows:
(a) Section 1 is hereby amended as follows:
(i) by inserting in the definition of the
term "Net Sales Proceeds" after each reference therein
to "Asset Sale" the reference to "Equity Issuance, Debt
Issuance or Stock Sale, as the case may be,"; and
(ii) by inserting the following new defini-
tions in proper alphabetical order:
"'B-2 Deferred Amount' shall mean the
aggregate amount of all principal payments
deferred in accordance with the terms of Section 1
of the Waiver, Consent and Amendment. "
"'B-2 Deferred Date' shall mean
December 31, 1996."
"'B-2 LIBOR Rate' shall mean the average
of the four rates, reported from time to time by
Telerate News Service (or such other number of
rates as such service may from time to time
report), at which foreign branches of major United
States banks offer United States dollar deposits
to other banks for a 90-day period in the London
interbank market at approximately 11:00 a.m.,
London time, on the second full Eurodollar
Business Day next preceding each Interest Payment
Date set forth on Schedule 2.1 attached hereto
during which any B-2 Deferred Amount is to be
outstanding (unless such Interest Payment Date is
not a Business Day, in which event such interest
rates shall be determined two Eurodollar Business
Days prior to the Business Day next succeeding
such Interest Payment Date). If such interest
rates shall cease to be available from Telerate
News Service, the B-2 LIBOR Rate shall be
determined from such financial reporting service
or other information as shall be mutually accept-
able to Lender and Borrower. Such B-2 LIBOR Rate,
as determined above, will remain in effect with
respect to any outstanding B-2 Deferred Amount to
but not including the next Interest Payment Date,
after which the B-2 LIBOR Rate determined in
accordance with the prior two sentences shall be
in effect."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Deferred Principal Payment Date' shall have
the meaning set forth in Section 1 of the Waiver,
Consent and Amendment."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Eurodollar Business Day' shall mean a
Business Day on which banks in the city of London
are generally open for interbank or foreign
exchange transactions."
"'Restructuring Agreement' shall mean
that certain Master Restructuring Agreement, dated
as of March 30, 1995, among Borrower, Continental
Express, Inc., GE Capital, General Electric
Company, and Lender."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
-TREATMENT]
"'Waiver, Consent and Amendment' shall
mean that certain Waiver, Consent and Amendment,
dated as of March 30, 1995, between Borrower and
Lender."
(b) Section 2.1 is hereby amended by deleting
subsection (c) thereof in its entirety and substituting the
following new subsection (c) in lieu therefor:
"(c) The principal amount of the Loan
(other than the B-2 Deferred Amount) shall be due
and payable in quarterly installments in the
amounts and on the Interest Payment Dates set
forth in Schedule 2.1 attached hereto. The B-2
Deferred Amount outstanding on the B-2 Deferred
Date shall be due and payable in the amounts and
on the dates set forth on Schedule 2.1 attached
hereto [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
(c) Section 2.2 is hereby amended by deleting subsec-
tion (e) thereof in its entirety and substituting the following
new subsection (e) in lieu therefor:
"(e) Each prepayment made pursuant to
subsection (a) hereof shall be applied first,
ratably to the scheduled payments of the
outstanding amounts set forth in the column titled
Deferred Principal Payment on Schedule 2.1 hereto
and then, to the scheduled payments of the
outstanding amounts set forth in the column titled
Principal Payment on Schedule 2.1 hereto in the
inverse order of maturity. Notwithstanding
anything to the contrary contained herein, the B-2
Deferred Amount may be prepaid in whole or in part
without any prepayment penalty."
(d) Section 2.3 is hereby amended as follows:
(i) by deleting subsection (d) thereof in
its entirety and substituting the following new subsec-
tion (d) in lieu therefor:
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
(ii) by inserting the following new subsec-
tions (e), (f) and (g) at the end thereof:
"(e) Each prepayment made pursuant to
subsections (a), (d) and (g) hereof shall be
applied first, ratably to the scheduled payments
of the B-2 Deferred Amount and then, to the sched-
uled payments due under Section 2.1 hereof
(excluding the B-2 Deferred Amount) in the inverse
order of maturity.
(f) [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
(g) [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
(e) Section 2.6 is hereby amended as follows:
(i) by deleting the words "on the average
principal balance of the Note outstanding during such
Payment Period" in the second sentence of subsection (a)
thereof and substituting the following words "on each day
during such Payment Period on the amount set forth in the
column titled Principal Balance on Schedule 2.1 hereof (as
reduced by any prepayments made during such Payment Period)
opposite the Interest Payment Date that is the first day of
such Payment Period"; and
(ii) by inserting the following new proviso before
the end of the second sentence of subsection (a) thereof:
"provided, however, that interest shall accrue on
each day during such Payment Period on the amount
set forth in the column titled Deferred Principal
Balance on Schedule 2.1 hereof (as reduced by any
prepayments made during such Payment Period)
opposite the Interest Payment Date that is the
first day of such Payment Period at a rate per
annum equal to [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] above the B-2 LIBOR Rate in effect
during such Payment Period".
(f) Section 5.1 is hereby amended as follows:
(i) by deleting subsection (a) thereof in its
entirety and substituting the following new subsection (a)
in lieu therefor:
"(a) Upon the earlier to occur of the
date of distribution, in final form, to Borrower's
management or within 45 days after the end of each
fiscal month, (i) a copy of the unaudited consoli-
dated statement of income of Borrower and its
Subsidiaries for that portion of the Fiscal Year
ending as of the end of such month and, if pre-
pared in the ordinary course, a copy in final form
of the consolidated balance sheet as of the close
of such month and statement of cash flow of
Borrower and its Subsidiaries for that portion of
the Fiscal Year ending as of the end of such
month, (ii) a copy of the unaudited consolidated
statement of income of Borrower and its
Subsidiaries for such month, in each case, pre-
pared in the form customarily produced by Borrower
for internal corporate, financial or accounting
purposes and (iii) a comparison of cash forecasts,
budgets and other information required to be
delivered to Lender in accordance with Sections
5.1(a) and 5.1(f) with the actual results for such
fiscal month.";
(ii) by deleting subsection (f) thereof in its
entirety and substituting the following new subsection (f)
in lieu therefor:
"(f) Promptly upon preparation in final form
and in any event by the first Business Day of each
Fiscal Year:
(i) projected consolidated cash flow
statements including summary details of cash
disbursements, including Capital Expenditures, for
such Fiscal Year, and projected consolidated
income statements of Borrower and its
Subsidiaries, on a monthly basis;
(ii) if prepared in the ordinary course,
projected consolidated balance sheets of Borrower
and its Subsidiaries for such Fiscal Year, on a
quarterly basis, together with appropriate
supporting details as requested by Lender;
(iii) any other budgets or formal financial
projections prepared regarding Borrower and
distributed to Borrower's Stockholders; and
(iv) projected budgets for the next 12
months regarding Borrower and its Subsidiaries,
together with statistical information, on a
monthly basis.";
(iii) by renumbering subsection (j) to be new
subsection (k);
(iv) by inserting the following new subsection (j)
in the proper alphabetical order:
"(j) As soon as practicable but in any
event on the first Business Day of each fiscal
week of each fiscal month, cash forecasts, includ-
ing schedules reflecting cash balances, actual and
projected, and sources and uses of cash for such
fiscal week, for the preceding fiscal week and for
each of the two succeeding fiscal weeks."; and
(v) by inserting at the end of new subsection (k)
thereof before the period at the end thereof the reference
to "and shall also provide Lender, upon its reasonable
request, with reasonable opportunities to discuss all of the
foregoing information provided to Lender pursuant to this
Section 5 with appropriate members of management of Borrower
or any of its Subsidiaries, as appropriate".
(g) Section 9.1 is hereby amended by inserting the
following new subsection (p) at the end thereof:
"(p) So long as GE Capital or any of its
Affiliates shall hold any Note or be owed any
Obligation under this Agreement or any of the
other Loan Documents, Borrower shall fail to make
any payment when due, taking into account
applicable cure periods, if any (whether by
scheduled maturity, required prepayment,
acceleration, demand or otherwise) on any
Indebtedness owed by Borrower to GE Capital or any
of its Affiliates; or any such Indebtedness shall
be declared to be due and payable or required to
be prepaid in full (other than by a regularly
scheduled required prepayment) prior to the stated
maturity thereof."
(h) Schedule 2.1 to the Loan Agreement is deleted and
Schedule 2.1 hereto is substituted therefor.
SECTION 3. Effective Date. This Amendment shall
become effective upon the Restructuring Date (as such term is
defined in the Restructuring Agreement).
SECTION 4. Miscellaneous. (a) Upon the effectiveness
of this Amendment, on and after the date hereof, each reference
in the Loan Agreement and the other Loan Documents to "this
Agreement," "hereunder," "hereof," "herein," or words of like
import, shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement and all of the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
Without limiting the generality of the foregoing, Borrower hereby
confirms that all of its obligations under the Collateral
Documents shall continue and shall remain in full force and
effect.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of Lender or Agent
under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
(d) This Amendment may be executed in any number of
separate counterparts, each of which shall, collectively and
separately, constitute one agreement.
(e) The Section Titles contained in this Amendment are
and shall be without substantive meaning or content of any kind
whatsoever and are not part of the agreement among the parties
hereto.
(f) Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of
construction, validity and performance, this Amendment shall be
governed by, and construed and enforced in accordance with, the
laws of the State of New York, without regard to the principles
thereof regarding conflicts of law, and any applicable laws of
the United States. Agent, each Lender and Borrower agree to
submit to personal jurisdiction and, to the extent permitted by
applicable law, to waive any objection as to venue in the County
of New York, State of New York. To the extent permitted by
applicable law, service of process on Borrower, Agent or any
Lender in any action arising out of or relating to this Amendment
shall be effective if mailed to such party at the address listed
Section 11.11 of the Loan Agreement. Nothing herein shall
preclude Agent, Lender or Borrower from bringing suit or taking
other legal action in any other jurisdiction.
(g) To the extent permitted by applicable law, the
parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
CONTINENTAL AIRLINES, INC.
By: /s/ JOHN E. LUTH
Name: John E. Luth
Title: Senior Vice
President and Chief
Information Officer
GLOBAL PROJECT & STRUCTURED
FINANCE CORPORATION
By: /s/ ERIC M. DULL
Name: Eric M. Dull
Title: Vice President
Schedule 2.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 4.10(a)
WAIVER, CONSENT AND AMENDMENT TO
CONSOLIDATION LOAN AGREEMENT
WAIVER, CONSENT AND AMENDMENT TO CONSOLIDATION LOAN
AGREEMENT, dated as of March 30, 1995 (this "Amendment"), between
CONTINENTAL AIRLINES, INC., a Delaware corporation ("Borrower"),
and GENERAL ELECTRIC COMPANY, a New York corporation (in its
individual capacity, "GE") on its own behalf and as agent for the
Holders (as defined in the Loan Agreement referred to below) (in
such capacity, "Agent").
W I T N E S S E T H :
WHEREAS, Borrower, GE and Agent are parties to that
certain Loan Agreement, dated as of April 27, 1993 (such Loan
Agreement, as modified by that certain Waiver, dated as of April
27, 1994 (the "1994 Waiver") and as further amended, supplemented
or otherwise modified hereby and from time to time hereafter,
being hereinafter referred to as the "Loan Agreement", and
capitalized terms defined therein and not otherwise defined
herein being used herein as therein defined); and
WHEREAS, Borrower, together with Continental
Micronesia, Inc., Continental Express, Inc., General Electric
Capital Corporation, GE, and Global Project & Structured Finance
Corporation, are parties to that certain Master Restructuring
Agreement, dated as of March 30, 1995 (the "Restructuring
Agreement"), pursuant to which certain obligations of Borrower
are being restructured; and
WHEREAS, Borrower has advised Agent that Borrower
wishes to amend certain provisions of the Loan Agreement in
connection with the transactions contemplated by the
Restructuring Agreement, and Borrower has requested that Agent
agree to various amendments to, and waivers of, certain provi-
sions of the Loan Agreement in connection therewith; and
WHEREAS, Agent has agreed so to amend and waive, as the
case may be, certain provisions of the Loan Agreement upon the
terms and subject to the conditions provided herein;
NOW, THEREFORE, in consideration of the premises,
covenants and agreements contained herein, the parties hereto
hereby agree as follows:
SECTION 1. Waiver and Consent. The obligation of the
Borrower to make the principal prepayment of $10 million on March
31, 1995 (the "Waiver Prepayment Date") required by the 1994
Waiver and any scheduled principal payment of the Consolidation
Loan due and payable as set forth in Section 2.1(e) of the Loan
Agreement on any Payment Date during the period from January 1,
1995 through December 31, 1996 (together with the Waiver
Prepayment Date, each a "Deferred Principal Payment Date") is
hereby waived and each such principal payment otherwise due and
payable on a Deferred Principal Payment Date shall instead be
repaid in accordance with Section 2.1(e) of the Loan Agreement,
as amended by this Amendment [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
SECTION 2. Amendments to Loan Agreement. The Loan
Agreement is hereby amended as follows:
(a) Section 1 is hereby amended as follows:
(i) by inserting in the definition of "Appraisal"
after the word "Collateral" the reference to "or the
Liquidation Value, at the time of such appraisal, of any
Secondary Collateral";
(ii) by deleting the proviso to the definition of
"Collateral Ratio" and inserting the following:
"provided, however, that for purposes of calculation of
the Collateral Ratio, only Collateral on which the
Consolidation Collateral Agent has a perfected first-
priority lien and Secondary Collateral on which the B-1
Collateral Agent or the B-2 Collateral Agent, as the
case may be, has a perfected first-priority lien shall
be included; and, provided, further, that as long as
the B-2 Collateral Agent has a perfected first-priority
lien on all general intangibles (as defined in the New
York Code) of Borrower, the B-2 Collateral Agent shall
be deemed to have a perfected first-priority lien on
all Routes of Borrower.";
(iii) by deleting the definition of "Maturity Date"
and inserting therefor the following:
"'Maturity Date' shall mean the eighth anniversary
of the Closing Date or, with respect to the
Consolidation Deferred Amount, January 1, 2005, or
in any case any earlier date on which the Loans
(including the Consolidation Deferred Amount) are
accelerated by Agent pursuant to the terms of
Section 9.2 hereof."
(iv) by deleting the definition of "Payment Date"
and inserting therefor the following:
"'Payment Date' shall mean each August 1,
November 1, February 1, and May 1, or if any such
day is not a Business Day, the next succeeding
Business Day."
(v) by inserting in the definition of the
term "Net Sales Proceeds" after each reference therein
to "Asset Sale" the reference to ", Equity Issuance,
Debt Issuance or Stock Sale, as the case may be,"; and
(vi) by inserting the following new definitions in
proper alphabetical order:
"'Assignment and Acceptance' shall mean
an assignment and acceptance agreement entered
into by a Holder and an Eligible Assignee, and
accepted by Agent, in substantially the form
attached hereto as Exhibit S."
"'Consolidation Deferred Amount' shall
mean the aggregate amount of all principal pay-
ments deferred in accordance with the terms of
Section 1 of the Waiver, Consent and Amendment.
For the avoidance of doubt, any Consolidation
Deferred Amount shall be a Loan hereunder for all
purposes, including without limitation, Section
2.6 hereof."
"'Consolidation Deferred Date' shall
mean December 31, 1996."
"'Consolidation LIBOR Rate' shall mean
the average of the four rates, reported from time
to time by Telerate News Service (or such other
number of rates as such service may from time to
time report), at which foreign branches of major
United States banks offer United States dollar
deposits to other banks for a 90-day period in the
London interbank market at approximately 11:00
a.m., London time, on the second full Eurodollar
Business Day next preceding each Payment Date set
forth on Schedule 2.1 attached hereto during which
any Consolidation Deferred Amount is to be
outstanding (unless such Payment Date is not a
Business Day, in which event such interest rates
shall be determined two Eurodollar Business Days
prior to the Business Day next succeeding such
Payment Date). If such interest rates shall cease
to be available from Telerate News Service, the
Consolidation LIBOR Rate shall be determined from
such financial reporting service or other informa-
tion as shall be mutually acceptable to Agent and
Borrower. Such Consolidation LIBOR Rate, as
determined above, will remain in effect with
respect to any outstanding Consolidation Deferred
Amount to but not including the next Payment Date,
after which the Consolidation LIBOR Rate
determined in accordance with the prior two
sentences shall be in effect."
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"'Deferred Principal Payment Date' shall
have the meaning assigned to it in Section 1 of
the Waiver, Consent and Amendment."
"'Eligible Assignee' shall mean GE
Capital, SNECMA, MTU, any of their respective
Subsidiaries or Affiliates, or any Person (other
than a competitor of Borrower, AMI or CMI or an
Affiliate of a competitor of Borrower, AMI or CMI)
that is a (i) commercial bank organized under the
laws of the U.S., or any state thereof;
(ii) commercial bank organized under the laws of
any other country which is a member of the
Organization of Economic Cooperation and
Development (the "OECD"), or a political sub-
division of any such country, provided that such
bank is acting through a branch or agency located
in the country in which it is organized or another
country which is also a member of the OECD;
(iii) central bank of any country which is a
member of the OECD; (iv) commercial finance com-
pany or finance subsidiary of a corporation, in
each case organized under the laws of the U.S. or
any state thereof, provided that such finance com-
pany or subsidiary is organized under, and acting
through an office located in, a country which is a
member of the OECD; (v) insurance company organ-
ized under the laws of the U.S. or any state
thereof; (vi) investment company organized under
the laws of a country which is a member of the
OECD and registered under the Investment Company
Act of 1940, as amended; or (vii) "accredited
investor" as defined in Regulation D promulgated
under the Securities Act of 1933, as amended,
which is organized under the laws of or a citizen
of a country which is a member of the OECD."
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Eurodollar Business Day' shall mean a
Business Day on which banks in the city of London
are generally open for interbank or foreign
exchange transactions."
"'Letter Agreement No. 7' shall mean Letter
Agreement No. 7 dated as of March 30, 1995 between
Borrower and GE relating to that certain General Terms
Agreement No. 6-8057 dated as of December 8, 1989, as
amended and restated as of November 1, 1994, between
Borrower and GE.
"'Liquidation Value' shall mean as of any
date on which the Collateral and Secondary Collateral
are to be valued, the price at which a seller could
reasonably be expected to make an orderly disposition
of all of such Collateral and Secondary Collateral in
one or more cash sales within 90 days of such date
taking into account the then condition of the
applicable property, the total amount of property to be
disposed of and prevailing market conditions. For the
purposes hereof, the Liquidation Value per share of
Stock (herein referred to as a "security") at any date
shall be (1) if such Stock is not registered under the
Exchange Act, the value of the security determined by
an Independent Appraiser in an Appraisal, or (2) if the
Stock is registered under the Securities Exchange Act
of 1934 as amended (the "Exchange Act"), the average of
the daily Market Prices (as defined below) of such
security for each Business Day during the period
commencing 10 Business Days before such date and ending
on the date one day prior to such date. The Market
Price for each such Business Day shall be: (A) in the
case of a security listed or admitted to trading on any
securities exchange, the closing price, regular way, on
such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such
day, (B) in the case of a security not then listed or
admitted to trading on any securities exchange, the
last reported sale price on such day, or if no sale
takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a
reputable quotation source designated by Borrower, (C)
in the case of a security not then listed or admitted
to trading on any securities exchange and as to which
no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low
asked prices on such day, as reported by the reputable
quotation service, or The Wall Street Journal, Eastern
Edition or if such newspaper is no longer published
then in a newspaper of general circulation in the
Borough of Manhattan, City and State of New York,
customarily published on each business day, as
designated by Agent or if there shall be no bid and
asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most
recent day (not more than 10 Business Days prior to the
date in question) for which prices have been so
reported, and (D) if there are no bid and asked prices
reported during the 10 Business Days prior to the date
in question, the Liquidation Value of the security
shall be determined as if the security was not
registered under the Exchange Act."
"'Market Value of AMI Stock' shall mean, as
of the end of each Fiscal Year of AMI, an amount equal
to (i) (A) 7 times the EBIT (as defined below) for such
Fiscal Year times (B) the percentage of all Stock of
AMI held by Borrower on which a perfected, first-
priority Lien exists securing the Deferred Amounts,
less (ii) the outstanding principal amount of the CMI
Loan as at the end of such Fiscal Year. EBIT for any
period shall mean the consolidated operating earnings
(loss) of AMI for such Fiscal Year."
"'Restructuring Agreement' shall mean
that certain Master Restructuring Agreement, dated
as of March 30, 1995, among Borrower, Continental
Express, Inc., GE Capital, General Electric
Company, and Global Project & Structured Finance
Corporation."
"'Secondary Obligations' shall mean the
aggregate outstanding principal amount of the B Loans,
the Modification Financing, Rent Deferrals, the
Unearned Allowances (as defined in Letter Agreement No.
7) and the Deferred Amount (as defined in the
Restructuring Agreement); provided, however, that
Deferred Amounts shall be excluded to the extent that
the Market Value of AMI Stock is at least 1.5 times the
aggregate outstanding principal amount of the Deferred
Amounts (other than the Consolidation Deferred Amounts)
so excluded as of such date.
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
"'Waiver, Consent and Amendment' shall
mean that certain Waiver, Consent and Amendment,
dated as of March 30, 1995, among Borrower, GE and
Agent."
(b) Section 2.1 is hereby amended as follows:
(i) by deleting subsection (b) and substituting
therefor the following:
(b) Interest shall accrue on the outstanding
principal amount of the Consolidation Loan set
forth in the column titled Principal Balance at a
rate per annum equal to the applicable Base Rate.
Interest shall accrue on the outstanding principal
amount of the Consolidation Loan set forth in the
column titled Deferred Principal Balance at a rate
per annum equal to [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] above the Consolidation
LIBOR Rate in effect during the period from and
including each Payment Date (including for this
purpose the Waiver Prepayment Date with respect to
the $10 million prepayment otherwise due thereon)
to but not including the next Payment Date.
Interest on the Consolidation Loan shall be
payable quarterly in arrears on each Payment Date.
All computations of interest shall be made on the
basis of a 360 day year consisting of twelve 30
day months."; and
(ii) by deleting the first two sentences of
paragraph (e) and substituting therefor the following:
The outstanding principal amount of
the Consolidation Loan shall be due
and payable in quarterly
installments in the amounts, and on
the Payment Dates, set forth on
Schedule 2.1 hereto [CONFIDENTIAL
MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
(c) Section 2.3 is hereby amended by deleting
paragraph (a) in its entirety and substituting therefor the
following:
(a) Subject to the further provisions of
this Section 2.3, Borrower may elect to prepay
(and shall prepay in the event the terms of
Section 3.4 of the Mortgage, 8.4 of the
Consolidation Security Agreement or 7.9 hereof or
any other provision of the Loan Documents other
than Section 2.4 hereof so require) the Loans at
any time in whole or from time to time in part,
upon at least three Business Days' prior notice by
delivery to Agent of an irrevocable notice
informing Agent of Borrower's election (or
obligation) and specifying the date of such
prepayment (each, a "Prepayment Date"). Each
partial optional prepayment of the Loans shall be
in an aggregate principal amount of at least
$1,000,000, and shall be applied, at Borrower's
option, to any Loans then outstanding. Any
prepayment of the Consolidation Loan shall be
applied first, ratably to the scheduled payments
set forth under the column titled Deferred
Principal Payment on Schedule 2.1 hereto and after
payment in full of the Consolidation Deferred
Amount to the scheduled payments set forth under
the column titled Principal Payment in the inverse
order of maturity."
(d) Section 2.4 is hereby amended by:
(i) in paragraph (a) thereof, deleting the words
after "the Collateral Ratio" in the seventh line
thereof through the end of such sentence; and
(ii) by inserting the following new subsections
(c), (d) and (e) at the end thereof:
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
(d) [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
(e) [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
(e) Section 2.6 is hereby amended by deleting the
words "Base Rate" in subsection (b) thereof and substituting
therefor the words "interest rate".:
(f) Section 5.1 is hereby amended as follows:
(i) by deleting subsection (a) thereof in its
entirety and substituting the following new subsection (a)
in lieu thereof:
(a) Upon the earlier to occur of the
date of distribution, in final form, to Borrower's
management or within 45 days after the end of each
fiscal month, (i) a copy of the unaudited con-
solidated statement of income of Borrower and its
Subsidiaries for that portion of the Fiscal Year
ending as of the end of such month and, if pre-
pared in the ordinary course, a copy in final form
of the consolidated balance sheet as of the close
of such month and statement of cash flow of
Borrower and its Subsidiaries for that portion of
the Fiscal Year ending as of the end of such
month, (ii) a copy of the unaudited consolidated
statement of income of Borrower and its
Subsidiaries for such month, in each case, pre-
pared in the form customarily produced by Borrower
for internal corporate, financial or accounting
purposes, and (iii) a comparison of cash
forecasts, budgets and other information required
to be delivered to Agent in accordance with
Sections 5.1(a) and 5.1(f) hereof with the actual
results for such fiscal month.;
(ii) by deleting subsection (f) thereof in its
entirety and substituting the following new subsection (f)
in lieu thereof:
(f) Promptly upon preparation in final
form and in any event by the first Business Day of
each Fiscal Year:
(i) projected consolidated cash flow
statements including summary details of cash
disbursements, including Capital Expenditures, for
such Fiscal Year, and projected consolidated
income statements of Borrower and its
Subsidiaries, on a monthly basis;
(ii) if prepared in the ordinary course,
projected consolidated balance sheets of Borrower
and its Subsidiaries for such Fiscal Year, on a
quarterly basis, together with appropriate
supporting details as requested by Agent;
(iii) any other budgets or formal financial
projections prepared regarding Borrower and
distributed to Borrower's Stockholders; and
(iv) projected budgets for the next 12
months regarding Borrower and its Subsidiaries,
together with statistical information on a monthly
basis.;
(iii) by renumbering subsection (l) to be new
subsection (m);
(iv) by inserting the following new subsection (l)
in the proper alphabetical order:
(l) As soon as practicable but in any
event on the first Business Day of each fiscal
week of each fiscal month, cash forecasts, includ-
ing schedules reflecting cash balances, actual and
projected, and sources and uses of cash for such
fiscal week, for the preceding fiscal week and for
each of the two succeeding fiscal weeks."; and
(v) by inserting at the end of new subsection (m)
thereof before the period at the end thereof the reference
to "and shall also provide Agent, upon its reasonable
request, with reasonable opportunities to discuss all of the
foregoing information provided to Agent pursuant to this
Section 5 with appropriate members of management of Borrower
or any of its Subsidiaries, as appropriate".
(g) Sections 6.15(b) and (c) are deleted in their
entirety and the following substituted therefor:
(b) From the Collateral Reset Date until the
Termination Date, Borrower covenants and agrees that it
will maintain, own and possess Collateral (on which
Consolidation Collateral Agent shall have a perfected
first-priority Lien) or Secondary Collateral (on which
the B-1 Collateral Agent or the B-2 Collateral Agent
shall have a perfected first-priority Lien) with a Fair
Market Value or Liquidation Value, as the case may be,
such that the ratio of (i) the aggregate of (A) the
Fair Market Value of Collateral plus (B)(I) the
Liquidation Value of Secondary Collateral minus (II)
the unpaid principal amount of the Secondary
Obligations to (ii) the unpaid principal amount of the
Loans shall be at all times equal to or greater than
1.5:1.
(c) Borrower will provide to Agent an Appraisal
of the Fair Market Value of the then-existing
Collateral and the Liquidation Value of the then-
existing Secondary Collateral prepared, at Borrower's
expense, by an Independent Appraiser not later than
thirty days before each and any of the following
events: (i) the Collateral Reset Date; (ii) each
anniversary of the Collateral Reset Date; and (iii)
payment in full of obligations owing in respect of the
B Loans.
(h) Section 6.17(a) is amended by:
(i) deleting the words from and including "Without
limiting in any manner" through and including "any
other Loan Document,";
(ii) inserting the following new sentence at the
beginning thereof: "Notwithstanding any provision of
any other Loan Document, no Collateral or Secondary
Collateral shall be released from the Lien thereon
granted to the B-1 Collateral Agent, B-2 Collateral
Agent or the Consolidation Collateral Agent under the
Loan Documents, except in compliance with this Section
6.17.";
(iii) [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
(iv) deleting subparagraph (i) thereof and
substituting therefor the following: "after giving
effect to the proposed release of Collateral by the
Consolidation Collateral Agent, Borrower will be in
compliance with the provisions of this Section
6.17(a);" and
(v) deleting the words "Fair Market" in
subparagraph (ii) thereof and substituting therefor the
word "Liquidation".
(i) Section 9.1 is hereby amended by inserting the
following new subsection (q) at the end thereof:
"(q) So long as GE Capital or any of
its Affiliates shall hold any Note or be owed
any Obligation under this Agreement or any of
the other Loan Documents, Borrower shall fail
to make any payment when due, taking into
account applicable cure periods, if any
(whether by scheduled maturity, required
prepayment, acceleration, demand or
otherwise) on any Indebtedness owed by
Borrower to GE Capital or any of its
Affiliates; or any such Indebtedness shall be
declared to be due and payable or required to
be prepaid in full (other than by a regularly
scheduled required prepayment) prior to the
stated maturity thereof."
(j) Section 10.11 is hereby amended by deleting in
subsection (a) thereof the reference therein to Sidley & Austin
in its entirety and deleting in subparagraph (b) thereof the
reference to Hughes, Hubbard & Reed in its entirety.
(k) Section 10.23 is hereby amended by deleting it in
its entirety and substituting the following new Section 10.23 in
lieu thereof:
"10.23 (a) Each Holder may sell, transfer,
assign or negotiate all or a portion of any Loan
owing to it and any Note held by it and a commen-
surate portion of its rights and obligations here-
under and under the other Loan Documents; pro-
vided, however, that (i) each such assignment
shall be of a constant, and not a varying percen-
tage of all of the assigning Holder's rights and
obligations under this Agreement, (ii) each
assignee hereunder shall also be a Holder or an
Eligible Assignee, (iii) each such sale, transfer
or assignment shall be in an aggregate principal
amount of not less than $5,000,000 and (iv) no
such assignment may result in the Notes being
beneficially owned by more than 15 Persons in the
aggregate. As part of any sales or assignments
(other than participations), the parties to each
sale or assignment shall execute and deliver to
Agent, for its acceptance and recording, an
Assignment and Acceptance, together with the Note
subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after
the effective date specified in the applicable
Assignment and Acceptance, (1) the assignee
thereunder shall be deemed a party hereto and, to
the extent that rights and obligations under the
Loan Documents have been assigned to it pursuant
to such Assignment and Acceptance, have the rights
and obligations of a Holder hereunder and there-
under, as the case may be, and (2) the assignor
thereunder shall, to the extent that rights and
obligations under this Agreement have been
assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released
from its obligations under the Loan Documents
(and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an
assigning Holder's rights and obligations under
the Loan Documents, such Holder shall cease to
have any rights hereunder or under the other Loan
Documents).
(b) By executing and delivering an
Assignment and Acceptance in accordance with
Section 10.23(a), the assigning Holder and the
assignee thereunder confirm to and agree with each
other and the other parties hereto as follows:
(i) other than as provided in such Assignment and
Acceptance, such assigning Holder makes no repre-
sentation or warranty and assumes no responsibil-
ity with respect to any statements, warranties or
representations made in or in connection with any
Loan Document or the execution, legality, valid-
ity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument
or document furnished pursuant hereto or thereto;
(ii) such assigning Holder makes no representation
or warranty and assumes no responsibility with
respect to the financial condition of any Loan
Party or the performance or observance by any Loan
Party of any of its obligations under any Loan
Document or of any other instrument or document
furnished pursuant hereto or thereto; (iii) such
assignee confirms that it has received a copy of
each Loan Document, together with copies of the
financial statements referred to in Section 4.5 of
this Agreement and such other documents and infor-
mation as it has deemed appropriate to make its
own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee
will, independently and without reliance upon such
assigning Holder or any other Holder or Agent and
based on such documents and information as it
shall deem appropriate at the time, continue to
make its own credit decision in taking or not
taking action under this Agreement or any Loan
Document; (v) such assignee confirms that it is an
Eligible Assignee or a Holder; (vi) such assignee
appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers
under the Loan Documents as are delegated to Agent
by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance
with their terms all of the obligations which by
the terms of the Loan Documents are required to be
performed by it as a Holder.
(c) Upon its receipt of an Assignment and
Acceptance executed by an assigning Holder and an
Eligible Assignee or a Holder, together with the
Note subject to such assignment, Agent shall, if
such Assignment and Acceptance has been completed,
(i) accept such Assignment and Acceptance,
(ii) record the information contained therein in
the Register and (iii) give prompt notice thereof
to Borrower. Within ten Business Days after its
receipt of such notice, Borrower, at its own
expense, shall execute and deliver to Agent, in
exchange for such surrendered Note, a new Note
made payable to such Eligible Assignee or its
registered assigns in an amount equal to the
interest in the Loan assumed by it pursuant to
such Assignment and Acceptance and, if the assign-
ing Holder has retained an interest in the Loan, a
new Note made payable to the assigning Holder or
its registered assigns in an amount equal to the
interest in the Loan retained by it hereunder.
Such new Note shall be dated the effective date of
such Assignment and Acceptance and shall otherwise
be in substantially the form of Exhibit O hereto.
(d) Each Holder may sell participations to
one or more banks or other entities in or to all
or a portion of its rights and obligations under
the Loan Documents (including, without limitation,
all or a portion of any Loan owing to it and any
Note held by it). The terms of such participation
shall not, in any event, require the participant's
consent to (i) any amendments, waivers or other
modifications of any provision of any Loan
Documents, or (ii) the consent to any departure by
any Loan Party therefrom, or to the exercising or
refraining from exercising any powers or rights
which such Holder may have under or in respect of
the Loan Documents (including, without limitation,
the right to enforce the obligations of the Loan
Parties), except if any such amendment, waiver or
other modification or consent would (i) reduce the
amount, or postpone any date fixed for, any amount
(whether of principal or interest) payable to such
participant under the Loan Documents, to which
such participant would otherwise be entitled under
such participation or (ii) result in the release
of all or substantially all of the Collateral
other than in accordance with the Collateral
Documents. In the event of the sale of any par-
ticipation by any Holder, (i) each Loan Party's
obligations under the Loan Documents shall remain
unchanged, and no Loan Party shall incur any
expense as a result thereof, (ii) such Holder's
obligations under the Loan Documents shall remain
unchanged, (iii) such Holder shall remain solely
responsible to the other parties hereto for the
performance of such obligations, (iv) such Holder
shall remain the holder of such Notes and
Obligations for all purposes of this Agreement,
and (v) Borrower, Agent and the other Holders
shall continue to deal solely and directly with
such Holder in connection with such Holder's
rights and obligations under this Agreement.
(e) Subject to the provisions of Section
10.15 hereof, any Holder may, in connection with
any assignment or participation or proposed
assignment or participation pursuant to this
Section 10.23, disclose to the assignee or
participant or proposed assignee or participant
any information relating to any Loan Party,
furnished to such Holder by or on behalf of such
Loan Party."
(l) Section 10.24 is hereby amended by inserting the
following new sentences at the end thereof:
"The entries in the Registry shall be conclusive and
binding for all purposes, absent manifest error, and
the Loan Parties, Agent and Holders may treat each
Person whose name is recorded in the Registry as a
Holder for all purposes of this Agreement. The
Registry shall be available for inspection by Borrower,
Agent or any Holder at any reasonable time and from
time to time upon reasonable prior notice."
SECTION 3. Amendments to Exhibits and Schedules to
Loan Agreement. (a) Exhibit A hereto is added as new Exhibit S
to the Loan Agreement.
(b) Schedule 2.1 to the Loan Agreement is hereby
deleted in its entirety and Schedule 2.1 hereto is added as a new
Schedule 2.1 in lieu thereof.
SECTION 4. Limited Waiver. Agent hereby waives
Borrower's compliance with the provisions of Sections 6.15(b) and
(c) of the Loan Agreement for the period from the date hereof
through June 30, 1995.
SECTION 5. Effective Date. This Amendment shall
become effective upon the Restructuring Date (as such term is
defined in the Restructuring Agreement).
SECTION 6. Miscellaneous. (a) Upon the effectiveness
of this Amendment, on and after the date hereof, each reference
in the Loan Agreement and the other Loan Documents to "this
Agreement," "hereunder," "hereof," "herein," or words of like
import, shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement and all of the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
Without limiting the generality of the foregoing, Borrower hereby
confirms that all of its obligations under the Collateral
Documents shall continue and shall remain in full force and
effect.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of Holders or Agent
under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
(d) This Amendment may be executed in any number of
separate counterparts, each of which shall, collectively and
separately, constitute one agreement.
(e) The Section titles contained in this Amendment are
and shall be without substantive meaning or content of any kind
whatsoever and are not part of the agreement among the parties
hereto.
(f) Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of
construction, validity and performance, this Amendment shall be
governed by, and construed and enforced in accordance with, the
laws of the State of New York, without regard to the principles
thereof regarding conflicts of law, and any applicable laws of
the United States. Agent and Borrower agree to submit to per-
sonal jurisdiction, to the extent permitted by law, and to waive
any objection as to venue in the County of New York, State of New
York. To the extent permitted by law, service of process on
Borrower or Agent in any action arising out of or relating to
this Amendment shall be effective if mailed to such party at the
address listed Section 10.11 of the Loan Agreement. Nothing
herein shall preclude Agent or Borrower from bringing suit or
taking other legal action in any other jurisdiction.
(g) To the extent permitted by law, the parties hereto
waive all right to trial by jury in any action or proceeding to
enforce or defend any rights under this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
CONTINENTAL AIRLINES, INC.
By: /s/ JOHN LUTH
Name: John E. Luth
Title: Senior Vice
President and Chief
Information Officer
GENERAL ELECTRIC COMPANY,
Individually and as Agent
By: /s/ MARK D. POWERS
Name: Mark D. Powers
Title: Director, Customer Sales
Financing
Schedule 2.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 4.11
MASTER RESTRUCTURING AGREEMENT
MASTER RESTRUCTURING AGREEMENT, dated as of
March 30, 1995, among CONTINENTAL AIRLINES, INC., a Delaware
corporation ("Continental"), CONTINENTAL EXPRESS, INC., a
Delaware corporation ("Express"), GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GE Capital"), GENERAL
ELECTRIC COMPANY, a New York corporation ("GE"), and GLOBAL
PROJECT & STRUCTURED FINANCE CORPORATION (formerly
Transportation and Industrial Funding Corporation), a
Delaware corporation ("GPSF").
AGREEMENT
In consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. Other Defined Terms. Unless
defined in Section 1.02 below, all capitalized terms used in
this Agreement shall have the meanings set forth in the B-1
Loan Agreement.
Section 1.02. Defined Terms. Capitalized terms
used in this Agreement shall have the following respective
meanings when used herein:
"Agreement" shall mean this Agreement, including
all amendments, modifications and supplements hereto and any
appendices, exhibits or schedules to any of the foregoing
and shall refer to this Agreement as the same may be in
effect at the time such reference becomes operative.
"Air Canada Consent" shall mean the consent, in
form and substance satisfactory to the GE Parties, given by
Air Canada in respect of the Restructuring Documents.
"Air Partners" shall mean Air Partners, L.P., a
Texas limited partnership.
"Aircraft Lease" shall mean each of the lease
agreements listed on Schedule 1 to this Agreement.
"Aircraft Mortgage Supplement" shall mean a
Supplement, in the form of Exhibit A to the Aircraft
Mortgage.
"AMI" shall mean Air Micronesia, Inc., a Delaware
corporation.
"AMI Companies" shall mean, collectively, AMI,
CMI, and their respective Subsidiaries.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"Aviation Act" shall mean the Federal Aviation Act
of 1958, as amended from time to time, or any similar
legislation of the U.S. enacted in substitution or
replacement thereof.
"A-300" shall mean the A300B4-203 aircraft
(manufacturer's serial number 262) currently leased by
Continental from GE Capital.
"A-300 Obligations" shall mean, at any time, the
obligations (other than the Aircraft Lease relating thereto
in existence on the date hereof) then owing by Continental
to GE Capital under all agreements and other evidences of
Indebtedness with respect to the A-300, as such obligations
may be amended from time to time.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"B-1 Collateral Document Amendment" shall mean the
amendment, in substantially the form of Exhibit A hereto, to
the B-1 Collateral Agency Agreement.
"B-1 Deferred Amount" shall have the meaning
specified in the B-1 Loan Amendment.
"B-1 Loan Agreement" shall mean the Loan
Agreement, dated as of April 27, 1993, between Continental
and GPSF, relating to the B-1 Loan.
"B-1 Loan Amendment" shall mean the waiver,
consent and amendment, in substantially the form of Exhibit
B hereto, amending the B-1 Loan Agreement.
"B-2 Collateral Document Amendment" shall mean the
amendment, in substantially the form of Exhibit C hereto, to
the B-2 Collateral Agency Agreement.
"B-2 Deferred Amount" shall have the meaning
specified in the B-2 Loan Amendment.
"B-2 Loan Agreement" shall mean the Loan
Agreement, dated as of April 27, 1993, between Continental
and GPSF, relating to the B-2 Loan.
"B-2 Loan Amendment" shall mean the waiver,
consent and amendment, in substantially the form of Exhibit
D hereto, amending the B-2 Loan Agreement.
"B-737 Lease" shall mean the documents evidencing
the single investor lease financing of the B-737-524
aircraft (manufacturer's serial number 27332) that closed on
October 27, 1994.
"CMI" shall mean Continental Micronesia, Inc., a
Delaware corporation.
"CMI Deferred Amount" shall have the meaning set
forth in the CMI Loan Amendment.
"CMI Loan Agreement" shall mean that certain Loan
Agreement, dated as of April 27, 1993 among AMI, CMI and the
lenders who are parties thereto.
"CMI Loan Amendment" shall mean the waiver,
consent and amendment, in substantially the form of Exhibit
F hereto, amending the CMI Loan Agreement.
"Collateral Document Amendments" shall mean each
of the B-1 Collateral Document Amendment, the B-2 Collateral
Document Amendments, the Express Collateral Document
Amendments, the Continental AMI Pledge Amendment and the
Consolidation Loan Collateral Document Amendments.
"Consolidation Collateral Agency Agreement
Amendment" shall mean the amendment, in substantially the
form of Exhibit G hereto, amending the Consolidation
Collateral Agency Agreement, as defined in the Consolidation
Loan Agreement.
"Consolidation Deferred Amount" shall have the
meaning set forth in the Consolidation Loan Amendment.
"Consolidation Loan" shall mean, collectively, the
loans made to Continental by GE pursuant to the terms of the
Consolidation Loan Agreement.
"Consolidation Loan Agreement" shall mean that
certain Loan Agreement, dated as of April 27, 1993, between
Continental and GE.
"Consolidation Loan Amendment" shall mean the
waiver, consent and amendment, in substantially the form of
Exhibit H hereto, amending the Consolidation Loan Agreement.
"Consolidation Loan Collateral Document
Amendments" shall mean the Consolidation Mortgage and
Security Agreement Amendment, the Consolidation Security
Agreement Amendment and the Consolidation Collateral Agency
Agreement Amendment.
"Consolidation Mortgage and Security Agreement
Amendment" shall mean the amendment, in substantially the
form of Exhibit I hereto, amending the Mortgage, as defined
in the Consolidation Loan Agreement.
"Consolidation Security Agreement Amendment" shall
mean the amendment, in substantially the form of Exhibit J
hereto, amending the Consolidation Security Agreement, as
defined in the Consolidation Loan Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"Continental AMI Pledge Agreement" shall mean the
Continental Stock Pledge Agreement, as defined in the CMI
Loan Agreement.
"Continental AMI Pledge Amendment" shall mean the
amendment, in substantially the form of Exhibit K hereto,
amending the Continental AMI Pledge Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"Continental Party" shall mean each of
Continental, CMI and Express, and "Continental Parties"
shall mean all of them.
"Continental Express Pledge Agreement" shall mean
the Borrower Pledge Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"Deferred Amount" shall mean the B-1 Deferred
Amount, the B-2 Deferred Amount, the CMI Deferred Amount,
the Consolidation Deferred Amount, the Modification Notes
Deferred Amount, the Lease Deferral Deferred Amount, the
Rent Deferral Deferred Amount and the A-300 Obligations.
"Disclosure Letter" shall mean the letter, of even
date herewith, from Continental to the GE Parties.
"Dormant Routes" shall have the meaning set forth
in Section 10.12.
"Draft 10-K" shall have the meaning set forth in
Section 10.05(a).
"Election" shall have the meaning set forth in
Section 3.03.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"Express B-1 Guaranty Amendment" shall mean the
amendment, in substantially the form of Exhibit L hereto, to
the Express B-1 Guaranty.
"Express B-2 Guaranty Amendment" shall mean the
amendment, in substantially the form of Exhibit M hereto, to
the Express B-2 Guaranty.
"Express Collateral Agency Agreement Amendment"
shall mean the amendment, in substantially the form of
Exhibit N hereto, to the Express Collateral Agency
Agreement.
"Express Collateral Agent" shall mean GPSF as
collateral agent under the Express Collateral Agency
Agreement and its successors and assigns as collateral agent
thereunder.
"Express Collateral Document Amendments" shall
mean the Express B-1 Guaranty Amendment, the Express B-2
Guaranty Amendment and the Express Collateral Agency
Agreement Amendment.
"Financing Agreement" shall mean the Agreement,
dated as of April 6, 1993, between GE and Continental.
"GE Party" shall mean GE Capital, GE, GPSF,
Polaris Holding Company and Wilmington Trust Company (not in
its individual capacity but solely as owner trustee and
lessor under certain of the Aircraft Leases), and "GE
Parties" shall mean all of them.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
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A REQUEST FOR CONFIDENTIAL TREATMENT]
"Interest Rate Agreement" shall have the meaning
set forth in Section 8.01.
"Lease Amendments" shall mean the amendments, in
substantially the form of Exhibits O-1, O-2, O-3 and O-4
hereto, to each of the Aircraft Leases.
"Lease Deferral Deferred Amount" shall mean the
aggregate principal amount evidenced by each Lease Deferral
Note.
"Lease Deferral Notes" shall mean the promissory
notes, in substantially the form of Exhibits P-1, P-2 and P-
3 hereto, evidencing Continental's obligations with respect
to the deferrals of rent under the Lease Amendments.
"Letter Agreement No. 7" shall have the meaning
set forth in the Consolidation Loan Amendment.
"LIBOR Rate" shall mean the average of the four
rates, reported two Business Days before the date on which
GE Capital and Continental enter into each Interest Rate
Agreement by Telerate News Service (or such other number of
rates as such service may from time to time report), at
which foreign branches of major United States banks offer
United States dollar deposits to other banks for a 90-day
period in the London interbank market.
"Modification Note Amendments" shall mean each of
the amendments, in substantially the form of Exhibit Q-1 and
Q-2 hereto, to the notes issued to any GE Party evidencing
the Modification Financing.
"Modification Notes Deferred Amounts" shall mean
each of the Modification Note Deferred Amounts as specified
in the Modification Note Amendments.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
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A REQUEST FOR CONFIDENTIAL TREATMENT]
"Rent Deferral Deferred Amount" shall mean each of
the Rent Deferral Deferred Amounts as specified in the Rent
Deferral Note Amendments.
"Redelivery Notice" shall have the meaning set
forth in Section 2.03.
"Rent Deferral Note Amendments" means the
amendments, in substantially the form of Exhibit S hereto,
to the Rent Deferrals.
"Restructuring Collateral Valuation Report" shall
mean the valuation report, dated March 14, 1995, as updated
on March 30, 1995 prepared by Morten Beyer and Associates.
"Restructuring Date" shall mean the date when all
of the conditions set forth in Article IX hereof shall have
been satisfied.
"Restructuring Documents" shall mean this
Agreement, the CMI Loan Amendment, the B-1 Loan Amendment,
the B-2 Loan Amendment, the Consolidation Loan Amendment,
the Lease Amendments, the A-300 Obligations, the
Modification Note Amendments, the Rent Deferral Note
Amendments, the Lease Deferral Notes, the B-1 Collateral
Document Amendment, the B-2 Collateral Document Amendment,
the Pledge Supplement to the Continental Express Pledge
Agreement, the Continental AMI Pledge Amendment, the
Aircraft Mortgage Amendment, the Consolidation Collateral
Agency Agreement Amendment, the Consolidation Mortgage and
Security Agreement Amendment, the Consolidation Security
Agreement Amendment, the Reimbursement Agreement, Letter
Agreement No. 7, the Express Collateral Agency Agreement
Amendment, the Express B-1 Guaranty Amendment, and the
Express B-2 Guaranty Amendment.
"Restructuring Expenses" shall mean all fees,
costs and expenses incurred by any GE Party to the extent
required to be paid by any Continental Party pursuant to the
terms of Section 11.02.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
"Subject Lease" shall have the meaning set forth
in Section 2.01.
"Subsequent Agreement" shall have the meaning set
forth in Section 3.03.
ARTICLE II
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ARTICLE III
A-300 RETURN
Section 3.01. Compliance with Lease. Continental
agrees to redeliver to GE Capital the A-300 no later than
June 30, 1995. Until the A-300 has been redelivered by
Continental, Continental shall comply with all terms and
conditions of the lease, as amended, relating to the A-300.
Section 3.02. Return Condition. Continental may
redeliver the A-300 in a condition that does not meet the
return conditions contained in the lease relating thereto;
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
ARTICLE IV
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
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ARTICLE V
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ARTICLE VI
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
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ARTICLE VII
ADDITIONAL COVENANTS
Section 7.01. Continental Covenants. Continental
agrees that notwithstanding the provisions of the B-1 Loan
Agreement or the B-2 Loan Agreement, for so long as the GE
Parties hold 66 2/3% in principal amount of the Notes issued
under either the B-1 Loan Agreement or the B-2 Loan
Agreement (as defined in such agreements) or a majority in
principal amount of the Notes issued under the Consolidation
Loan Agreement (as defined in such agreement), as the case
may be, it shall be obligated to comply with the covenants
contained on Schedule 7.01, and the failure by Continental
to comply with any of such covenants shall, subject to the
grace periods and notice provisions contained in Section
9.1(c) of the B-1 Loan Agreement, B-2 Loan Agreement or
Consolidation Loan Agreement, respectively, constitute an
Event of Default under the B-1 Loan Agreement, the B-2 Loan
Agreement or the Consolidation Loan Agreement, respectively.
Each of the GE Parties agrees that compliance with the
covenants set forth on Schedule 7.01 may be enforced or
waived solely by it, and it shall not enter into any
agreement or make any commitment to any other Person with
respect to the enforcement or waiver of such covenants.
Section 7.02. GE Capital Covenants. (a) GE
Capital agrees, in connection with any agreements
Continental may enter into in connection with the redelivery
of aircraft to lessors, to consent to the grant of a Lien on
B-1 Collateral or B-2 Collateral reasonably acceptable to GE
Capital, subordinate to the Lien of the B-1 Collateral Agent
on the B-1 Collateral or the B-2 Collateral Agent on the B-2
Collateral, in form and substance and pursuant to
documentation reasonably satisfactory to GE Capital (which
agreement shall include provisions prohibiting such lessors
from foreclosing upon, or otherwise exercising rights with
respect to, such Collateral), to secure Continental's
obligations to such lessors under such agreements.
(b) GE Capital agrees to consent to an amendment
to the certificate of incorporation of Continental, in form
and substance reasonably satisfactory to it, which amendment
would provide for the amendment to the terms of the Air
Canada Preferred Stock and the GE Capital Preferred Stock to
provide that dividends payable on such preferred stock
during the period from March 1, 1995 to February 28, 1997
shall be paid only in additional shares of such preferred
stock.
ARTICLE VIII
INTEREST RATE PROTECTION
Section 8.01. Interest Rate Protection. So long
as any Deferred Amounts (other than the A-300 Obligations)
remain outstanding, Continental may request that GE Capital
provide it with interest rate cap agreements or other
substantially similar agreements or arrangements
satisfactory to GE Capital (each an "Interest Rate
Agreement") which would provide Continental with a maximum
LIBOR Rate not to exceed 8% on any or all of the Deferred
Amounts (other than the A-300 Obligations) for the remaining
term of such obligations so long as the aggregate cost of
such Interest Rate Agreements does not exceed $5 million.
Section 8.02. Procedure. Any request by
Continental pursuant to Section 8.01 shall indicate the
notional amount of the Interest Rate Agreement to be
provided (which notional amount shall not exceed the maximum
principal amount of the Deferred Amount for which the
Interest Rate Agreement is being requested), the term of
such interest rate protection and the type of Interest Rate
Agreement being requested. GE Capital will, within five
Business Days of having received such request, notify
Continental of the cost of such Interest Rate Agreement. If
Continental accepts such offer, then, so long as no Event of
Default (as defined in each of the CMI Loan Agreement, the
B-1 Loan Agreement, the B-2 Loan Agreement or the
Consolidation Loan Agreement) shall have occurred and be
continuing, GE Capital shall promptly provide Continental
with a draft Interest Rate Agreement and an amendment to the
underlying documentation increasing the principal amount of
such Deferred Amount by the cost of such Interest Rate
Agreement. GE Capital shall have no obligation to execute
any Interest Rate Agreement unless and until Continental
shall have executed an amendment evidencing the additional
obligation.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.01. Conditions Precedent. The
obligation of the GE Parties to effect any of the
transactions described herein or in the Restructuring
Documents shall be subject to each GE Party having received
a copy of each of the following items which, unless
otherwise indicated, shall be dated the Restructuring Date:
(a) The Modification Note Amendments, the
Rent Deferral Note Amendments and the Lease Deferral
Notes, duly executed by Continental.
(b) The B-1 Loan Amendment, the B-2 Loan
Amendment, the Consolidation Loan Amendment and the
Lease Amendments, duly executed by Continental.
(c) The CMI Loan Amendment, duly executed by
CMI.
(d) The B-1 Collateral Document Amendment,
the B-2 Collateral Document Amendment, the Pledge
Supplement to the Continental Express Pledge Agreement,
the Continental AMI Pledge Amendment, the Aircraft
Mortgage Supplement and the Consolidation Collateral
Agency Agreement Amendment, the Consolidation Mortgage
and Security Agreement Amendment, and the Consolidation
Security Agreement Amendment, duly executed by
Continental; and the Express Collateral Agency
Agreement Amendment, the Express B-1 Guaranty Amendment
and the Express B-2 Guaranty Amendment, duly executed
by Express; together with:
(i) executed copies of proper Financing
Statements (Form UCC-1), to be duly filed under
the Uniform Commercial Code of each jurisdiction
as may be necessary or, in the reasonable opinion
of any GE Party, desirable to perfect the security
interests created by the Collateral Document
Amendments;
(ii) evidence of the completion of all
recordings and filings of the Collateral Document
Amendments as may be necessary or, in the
reasonable opinion of the GE Parties, desirable to
perfect, or continue the perfection of, the Liens
created thereby;
(iii) certificates representing the Pledged
Shares referred to in the Pledge Supplement to the
Continental Express Pledge Agreement and undated
stock powers for such certificates executed in
blank; and
(iv) evidence that all other actions
necessary or, in the reasonable opinion of any GE
Party, desirable to perfect and protect the
security interests created by the Collateral
Document Amendments have been taken.
(e) Letter Agreement No. 7, duly executed by
Continental.
(f) An amendment, in form and substance
satisfactory to GE, amending that certain General Terms
Agreement Number 6, dated November 4, 1994, duly
executed by Continental.
(g) The Reimbursement Agreement, duly
executed by Continental.
(h) The Restructuring Collateral Valuation
Report.
(i) The Air Canada Consent, duly executed by
Air Canada.
(j) A Certificate (the statements in which
shall be true) of a Responsible Officer of Continental,
reasonably satisfactory in form and substance to the GE
Parties, stating that (i) all of the representations
and warranties of Continental contained herein or in
any of the Restructuring Documents are correct on and
as of the Restructuring Date as though made on and as
of such date (except to the extent any such
representation or warranty expressly relates to an
earlier date), (ii) no event has occurred and is
continuing, or would result from the transactions
contemplated by this Agreement or the Restructuring
Documents, which constitutes or would constitute a
Default or an Event of Default (as defined in the B-1
Loan Agreement, the B-2 Loan Agreement, the CMI Loan
Agreement or the Consolidation Loan Agreement), after
giving effect to transactions contemplated by the
Restructuring Documents, except for the payment
defaults set forth in the Disclosure Letter and any
other default under any of the "cross default"
provisions of each such agreement, and (iii) the
conditions set forth in Section 9.02 have been
satisfied.
(k) [CONFIDENTIAL MATERIAL OMITTED AND FILED
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(l) [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
(m) Evidence, in form and substance
satisfactory to the GE Parties, that Continental shall
have withdrawn any objection made in the Bankruptcy
Court to the payment of the fees and expenses incurred
by any GE Party in connection with Continental's
Chapter 11 proceeding in the Bankruptcy Court.
(n) Favorable opinions of counsel to the
Continental Parties in substantially the forms of
Exhibits T-1 and T-2 hereto, it being understood that
to the extent that such opinions of counsel to the
Continental Parties shall rely upon any other opinion
of counsel, each such other opinion shall be in form
and substance reasonably satisfactory to each GE Party
and shall provide that such GE Party and its successors
and assigns may rely thereon.
(o) Resolutions of the board of directors of
each Continental Party, in form and substance
reasonably satisfactory to each GE Party, each
certified by the Secretary or Assistant Secretary of
such Continental Party, as of the Restructuring Date,
to be duly adopted and in full force and effect on such
date, authorizing (i) the execution, delivery and
performance by such Continental Party of each of the
Restructuring Documents to which such Continental Party
is a party, and (ii) officers to execute and deliver
this Agreement and the other Restructuring Documents to
which such Continental Party is a party.
(p) Governmental certificates or other
evidence, dated the most recent practicable date prior
to the Restructuring Date, with telegram updates where
available, showing that each Continental Party is
organized and in good standing in the jurisdiction of
its organization and is qualified as a foreign
corporation and in good standing in all jurisdictions
identified on Schedule 10.03.
(q) A copy of each Continental Party's
organizational charter and all amendments thereto, in
form and substance reasonably satisfactory to each GE
Party, in each instance, certified as of a recent date
by the Secretary of State of the jurisdiction of its
organization, and a copy of each Continental Party's
by-laws, in form and substance reasonably satisfactory
to each GE Party, in each instance, certified by the
Secretary or Assistant Secretary of such Continental
Party as true and correct as of the Restructuring Date.
(r) Certificates of the Secretary or an
Assistant Secretary of each Continental Party, dated
the Restructuring Date, as to the incumbency and
signatures of the officers of such Continental Party
executing this Agreement, any of the other
Restructuring Documents and any other certificate or
other document to be delivered pursuant hereto or
thereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary.
(s) Such additional information and
materials, including, without limitation, copies of any
debt agreements, security agreements and other material
contracts as any GE Party may reasonably request.
Section 9.02. Additional Conditions to
Restructuring. In addition to the conditions precedent set
forth in Section 9.01 hereof, no GE Party shall be obligated
to perform any of its obligations in any Restructuring
Document or hereunder unless and until the following
conditions precedent have been satisfied (or each GE Party
shall have waived such requirement) in a manner reasonably
satisfactory to such GE Party:
(a) All (i) Regulatory Approvals and
(ii) third-party consents referred to in Section 10.04
(vii) necessary to permit each Continental Party to
consummate the transactions contemplated hereby and by
the Restructuring Documents shall have been obtained.
(b) All Restructuring Expenses then due and
payable and all other costs and expenses incurred by
any GE Party in connection with the matters
contemplated by this Agreement shall have been paid
prior to, or will be paid on, the Restructuring Date.
(c) After giving effect to the transactions
contemplated hereby, all unpaid amounts with respect to
the B-1 Loan Agreement, the B-2 Loan Agreement, the CMI
Loan Agreement, the Consolidation Loan Agreement and
the Aircraft Leases shall have been paid prior to, or
will be paid on, the Restructuring Date.
(d) Each GE Party shall be satisfied that it
shall have received a lien on all Collateral required
to be granted to it pursuant to the Loan Documents or
any Restructuring Document.
(e) Continental shall have entered into a
restructuring agreement, in form and substance
satisfactory to each GE Party, pursuant to which it
will have rescheduled its obligations with Boeing to
purchase aircraft in 1996 and 1997.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
To induce the GE Parties to enter into this
Agreement and the other Restructuring Documents, Continental
makes the following representations and warranties to such
GE Parties, each and all of which shall be true and correct
as of the date of execution and delivery of this Agreement,
and shall survive the execution and delivery of this
Agreement:
Section 10.01. Corporate Existence; Compliance
with Law. Continental and each of its Subsidiaries (other
than the Excluded Subsidiaries) (i) is a corporation duly
organized, validly existing and in good standing under the
laws of the state of its incorporation; (ii) is duly
qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where its ownership or
lease of property or the conduct of its business requires
such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not
have a Material Adverse Effect); (iii) has the requisite
corporate power and authority to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the
property it operates under lease, and to conduct its
business as now conducted and as proposed to be conducted
immediately after the Restructuring Date; (iv) has, or by
the Restructuring Date will have, all licenses, permits,
consents or approvals from or by, and has made all filings
with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for
such ownership, operation and current conduct except where
the failure to so obtain or comply would not have a Material
Adverse Effect; (v) is in compliance with its certificate or
articles of incorporation and by-laws; and (vi) is in
compliance with all applicable provisions of law where the
failure to comply would have a Material Adverse Effect.
Section 10.02. Executive Offices. The current
location of Continental's and each of its Subsidiaries'
(other than the Excluded Subsidiaries) executive offices and
principal places of business are set forth on Schedule 10.02
hereto.
Section 10.03. Subsidiaries. There are no
Subsidiaries of Continental other than as set forth on
Schedule 10.03 hereto. Schedule 10.03 sets forth such
Subsidiaries (other than the Excluded Subsidiaries),
together with their respective jurisdictions of
organization, and the authorized and outstanding Stock of
each such Subsidiary, by class and number and percentage of
each class legally owned by Continental or any of its
Subsidiaries (other than the Excluded Subsidiaries) or any
other Person. There are no options, warrants, rights to
purchase or similar rights covering, or agreements to issue
or sell, Stock of any Subsidiary (other than the Excluded
Subsidiaries), nor agreements restricting the voting or
disposition of such Stock, except for the CMI Loan Documents
(as defined in the CMI Loan Agreement) and as set forth on
Schedule 10.03.
Section 10.04. Corporate Power; Authorization;
Enforceable Obligations. The execution, delivery and
performance by Continental and its Subsidiaries (other than
the Excluded Subsidiaries) of the Restructuring Documents to
be delivered by Continental and such Subsidiaries, to the
extent they are parties thereto, hereunder and thereunder,
and the creation of all Liens in favor of any GE Party
provided for herein and therein: (i) are within
Continental's and such Subsidiaries' corporate power;
(ii) have been, or by the Restructuring Date will be, duly
authorized by all necessary corporate action; (iii) are not
in contravention of any provision of Continental's, or such
Subsidiaries' respective certificates or articles of
incorporation or by-laws; (iv) will not violate any law or
regulation or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or
result in the breach or termination of, constitute a default
under or accelerate any performance required by, any
material indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Continental or any of
such Subsidiaries is a party or by which Continental or any
of such Subsidiaries or any of their property is bound;
(vi) will not result in the creation or imposition of any
Lien upon any of the property of Continental or any of such
Subsidiaries other than those created pursuant to the Loan
Documents or the Restructuring Documents; and (vii) do not
require the consent or approval of any governmental body,
agency, authority or any other Person except consents and
approvals to be obtained on or prior to the Restructuring
Date and except where the failure to obtain such consents or
approvals will not have a Material Adverse Effect. All
Regulatory Approvals and all other consents and approvals
necessary to permit Continental and its Subsidiaries (other
than the Excluded Subsidiaries) to conduct their business
operations have been or will be duly obtained on or prior to
the Restructuring Date. At or prior to the Restructuring
Date, each of the Restructuring Documents contemplated to be
executed prior to or on the Restructuring Date shall have
been duly executed and delivered for the benefit of or on
behalf of Continental or its Subsidiaries (other than the
Excluded Subsidiaries), as the case may be, and each shall
then constitute a legal, valid and binding obligation of
Continental or its Subsidiaries, to the extent they are
parties thereto, enforceable against them in accordance with
its terms except as enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the
rights of creditors generally or by the application of
general principles of equity.
Section 10.05. Financial Statements. (a) The
draft consolidated balance sheet of Continental and its
Subsidiaries for the year ended December 31, 1994 (including
notes thereto) set forth in the draft Form 10-K for
Continental for fiscal year 1994 (the "Draft 10-K"), which
is substantially similar to the Form 10-K to be filed by
Continental with the Securities and Exchange Commission, a
copy of which has been furnished to each GE Party prior to
the date of this Agreement, presents fairly the consolidated
financial position of Continental and its consolidated
Subsidiaries at December 31, 1994.
(b) The audited consolidated balance sheet of
Continental as at December 31, 1993 and the related
consolidated statements of income, retained earnings and
cash flow for the year then ended, with the opinion thereon
of Ernst & Young, LLP, and the consolidated balance sheet of
Continental as at September 30, 1994 and the related
consolidated statements of income, retained earnings and
cash flow for the nine months then ended, copies of which
have been furnished to the GE Parties prior to the date of
this Agreement, have been, except as noted therein, prepared
in conformity with GAAP consistently applied throughout the
periods involved and present fairly the consolidated
financial position of Continental as at the dates thereof,
and the results of operations and cash flow for the periods
then ended, subject to year end adjustments.
Section 10.06. [Reserved].
Section 10.07. Ownership of Property; Liens.
(a) As of the date of this Agreement, except as disclosed in
Schedule 10.07(a), neither Continental nor any of its
Subsidiaries (excluding the AMI Companies and the Excluded
Subsidiaries) own fee simple title to any Real Estate. All
real and personal property owned by Continental or its
Subsidiaries (excluding the AMI Companies and the Excluded
Subsidiaries) is described in Schedule 10.07(a) hereto.
None of the properties and assets of Continental or its
Subsidiaries (excluding the AMI Companies and the Excluded
Subsidiaries) including, without limitation, the Leases, are
subject to any Liens, except Permitted Encumbrances.
(b) All Material Leases of Continental or its
Subsidiaries (excluding the AMI Companies and the Excluded
Subsidiaries) as of the date of this Agreement are set forth
on Schedule 10.07(b), together with information regarding
the commencement date, termination date and renewal options,
if any. Except as set forth in the Disclosure Letter,
neither Continental nor the applicable Subsidiary nor, to
the knowledge of Continental, any other party to any such
Material Lease, is in default of its obligations thereunder
or has delivered or received any notice of default under any
such Material Lease, nor has any event occurred which, with
the giving of notice, the passage of time or both, would
constitute a default under any such Material Lease, except,
in each case, for any default which would not have a
Material Adverse Effect.
Section 10.08. No Default. Except as set forth
in the Disclosure Letter, neither Continental nor any of its
Subsidiaries (other than the Excluded Subsidiaries) is in
default, nor, to Continental's knowledge, is any third party
in default, under or with respect to any contract,
agreement, lease or other instrument to which Continental or
any such Subsidiary is a party, except for any default which
(either individually or collectively with other defaults
arising out of the same event or events) would not have a
Material Adverse Effect. No Default or Event of Default (as
defined in the B-1 Loan Agreement, the B-2 Loan Agreement,
the CMI Loan Agreement or the Consolidation Loan Agreement),
other than any default under any of the "cross default"
provisions of each such agreement, has occurred and is
continuing, after giving effect to the transactions
contemplated by the Restructuring Documents.
Section 10.09. Investment Company Act. Neither
Continental nor any of its Subsidiaries (other than the
Excluded Subsidiaries) is (a) an "investment company"
required to register under the Investment Company Act of
1940, as amended, or (b) an "affiliated person" of, or
"promoter" or "principal underwriter" for, such an
"investment company," as such terms are defined in the
Investment Company Act of 1940, as amended. The
consummation of the transactions contemplated by this
Agreement and the other Restructuring Documents will not
violate any provision of such Act or any rule, regulation or
order issued by the Securities and Exchange Commission
thereunder.
Section 10.10. No Litigation. Except as set
forth in the Draft 10-K, no action, claim or proceeding is
now pending or, to the knowledge of Continental, threatened
against Continental or any of its Subsidiaries, at law, in
equity or otherwise, before any court, board, commission,
agency or instrumentality of any foreign government or any
federal, state or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of
arbitrators, which is reasonably likely to have a Material
Adverse Effect. None of the matters set forth in the Draft
10-K questions the validity of any of the Restructuring
Documents or any action taken or to be taken pursuant
thereto.
Section 10.11. Collateral Valuation Report. The
Restructuring Collateral Valuation Report does not omit any
material (after taking into account any Permitted
Encumbrances thereon) item of property (other than Excluded
Property) to be owned by Continental or any of its
Subsidiaries (other than the AMI Companies or the Excluded
Subsidiaries) immediately after the Restructuring Date and
the Route valuation information contained therein accurately
reflects the conclusions and assumptions contained in the
Morten Beyer and Associates appraisals referred to therein.
Section 10.12. Operations. (a) Set forth on
Schedule 10.12(a) are true, correct and complete lists, as
of the date of this Agreement, of (i) all Slots (within the
meaning set forth in clauses (i) and (ii) of the definition
thereof) and Routes held or used by Continental or any of
its Subsidiaries (excluding the AMI Companies, System One
and the Excluded Subsidiaries) and indicating those Routes
not being used or operated by Continental or any of its
Subsidiaries (excluding the AMI Companies and the Excluded
Subsidiaries) as of the date of this Agreement and not
intended to be used or operated hereafter (such Routes being
referred to as "Dormant Routes"); and (ii) all Gates leased
by Continental or any of its Subsidiaries (excluding the AMI
Companies and the Excluded Subsidiaries) in or outside the
U.S. Continental and its Subsidiaries (other than the
Excluded Subsidiaries) hold the Slots (within the meaning
set forth in clauses (i) and (ii) of the definition thereof)
held by them pursuant to Title 14 or equivalent foreign
regulations, subject only to the regulations of the FAA, an
equivalent foreign Governmental Authority and Permitted
Encumbrances, and each of them has, at all times after
obtaining such Slot, complied in all material respects with
all of the terms, conditions and regulations set forth in
Title 14 or any equivalent foreign regulation, including,
without limitation, the usage requirements set forth in
Section 93.227 of Title 14 or any equivalent foreign
regulation (except where noncompliance shall have been
waived by the FAA or an equivalent foreign Governmental
Authority), and there exists no material violation of such
terms, conditions and regulations that gives the FAA or any
equivalent foreign Governmental Authority the right to
terminate, cancel, withdraw or modify any such Slots.
(b) Each of Continental, CMI and Express is a
"citizen of the United States" as defined in Section 101(16)
of the Aviation Act. Each of Express, CMI and Continental
is a duly certificated "air carrier" within the meaning of
the Aviation Act authorized to transport passengers,
property and mail in interstate, overseas and foreign air
transportation and is certificated under Sections 401 and
604(b) of the Aviation Act. All such certificates or
exemptions from the requirement to possess certificates or
their foreign equivalents are in force and duly issued to
Continental, CMI or Express, as the case may be, by the DOT,
the FAA or its predecessor agency or the applicable
equivalent foreign Governmental Authority, and all material
licenses, permits, authorizations, certificates of
compliance, certificates of public convenience and necessity
and other certificates (including, without limitation, air
carrier operating certificates and operations specifications
issued by the FAA or any applicable equivalent foreign
Governmental Authority pursuant to Part 121 of the
Regulations of the FAA or equivalent foreign regulation),
which are required by the DOT and the FAA or any equivalent
foreign Governmental Authority and which are adequate for
the conduct of the business of Continental, CMI and Express
as now conducted and as proposed to be conducted immediately
after the Restructuring Date, are in full force and effect.
There are no license fees due and payable on Continental's,
CMI's or Express' DOT or FAA licenses or their applicable
foreign equivalents. Continental, CMI and Express are in
compliance with all material requirements of the licenses,
permits, authorizations and certificates issued to each of
them by the DOT and the FAA or any applicable equivalent
foreign Governmental Authority and none of the FAA, DOT or
any applicable equivalent foreign agency is taking any
action or, to the knowledge of Continental, considering the
taking of any action to revoke, suspend, modify or amend
such licenses, permits, authorizations or certificates which
is reasonably likely to have a Material Adverse Effect.
(c) Schedule 10.12(c) sets forth a true and
complete list of (i) all airframes and aircraft engines,
including serial numbers, which, to the best of
Continental's knowledge, will be operated by Continental or
its Subsidiaries (excluding the Excluded Subsidiaries)
immediately after the Restructuring Date and indicates
whether such airframes and aircraft engines will be owned or
leased and (ii) a complete list of all locations at which
Spare Parts owned and used by Continental or its
Subsidiaries (other than the Excluded Subsidiaries) in their
business are kept.
Section 10.13. Existing Indebtedness. Neither
Continental nor any of its Subsidiaries (excluding the AMI
Companies, the Excluded Subsidiaries and excluding
intercompany Indebtedness) will be obligated with respect to
any Indebtedness on the Restructuring Date other than (i)
the Indebtedness described in the Draft 10-K (ii)
modification financing incurred in connection with the
modification of the aircraft owned or leased by Continental
and such Subsidiaries, (iii) deferred rental or interest
obligations incurred in connection with aircraft owned or
leased by Continental and such Subsidiaries, (iv)
Indebtedness incurred pursuant to the Restructuring
Documents and (v) Indebtedness incurred in the ordinary
course of business since December 31, 1994.
Section 10.14. Excluded Subsidiaries. Each of
the Excluded Subsidiaries is an inactive corporation and
none of the Excluded Subsidiaries is engaged in the conduct
of business. None of the Excluded Subsidiaries owns any
material assets or is obligated with respect to any
Indebtedness or liabilities other than immaterial
liabilities or liabilities that are joint and several with
Continental.
Section 10.15. Fees. Neither Continental nor any
of its Subsidiaries have paid any fees or other compensation
to Air Partners, or any entity controlled by, or under
common control with, Air Partners (other than director
compensation), in connection with the transactions
contemplated by this Agreement or the Restructuring Plan.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Complete Agreement; Modification
of Agreement. (a) The Restructuring Documents constitute
the complete agreement between the parties with respect to
the subject matter hereof. The Restructuring Documents
supersede any and all discussions, negotiations,
understandings or agreements, written or oral, express or
implied, with respect thereto, which are merged herein and
superseded hereby. No Continental Party may sell, assign or
transfer any of the Restructuring Documents or any portion
thereof, including, without limitation, such Continental
Party's rights, title, interests, remedies, powers and
duties hereunder or thereunder. No GE Party may sell,
assign or transfer any of its rights or obligations under
any of the Restructuring Documents, except to any of its
Affiliates, without the consent of Continental, which
consent will not be unreasonably withheld.
(b) No amendment or waiver of any provision of
this Agreement or any other Restructuring Document, nor
consent to any departure by any Continental Party therefrom,
shall in any event be effective unless the same shall be in
writing and signed by the GE Parties party thereto (and the
Continental Party party thereto, with respect to any
amendment), and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
Section 11.02. Fees and Expenses. (a) The
Continental Parties shall pay all reasonable out-of-pocket
expenses of the GE Parties and/or Relevant Collateral Agent
(including the reasonable fees and expenses of all of their
respective counsel retained in connection with the
Restructuring Documents and the transactions contemplated
thereby) arising after December 14, 1994, in connection with
the negotiation, preparation, execution and recordation of
the Restructuring Documents.
(b) The Continental Parties shall also pay all
reasonable out-of-pocket expenses incurred after the
Restructuring Date:
(i) of any GE Party in connection with any
request of any Continental Party for any waivers,
amendments, modifications or consents relating to
the Restructuring Documents or any other matters
undertaken by any GE Party and/or Relevant
Collateral Agent, in each instance, at the request
of any Continental Party;
(ii) of any GE Party and/or Relevant
Collateral Agent in connection with any of the
following acts which are undertaken by such GE
Party and/or Relevant Collateral Agent in
connection with the evaluation and enforcement of
their remedies in connection with an Event of
Default under any Loan Document: (A) any attempt
to verify, protect, collect, sell, liquidate or
otherwise dispose of the Collateral; (B) the
commencing, defending or intervening in any
litigation or in filing a petition, complaint,
answer, counterclaim, motion or other pleading in
any legal proceeding relating to the exercise by
any GE Party and/or Relevant Collateral Agent of
rights or remedies under the Restructuring
Documents; or (C) in taking any other action in or
with respect to any suit or proceeding (bankruptcy
or otherwise) relating to the exercise by any GE
Party and/or Relevant Collateral Agent of rights
under the Restructuring Documents; and
(iii) of any GE Party and/or Relevant
Collateral Agent after the occurrence and during
the continuation of an Event of Default under any
Loan Document, in enforcing any Obligations or in
foreclosing against or realizing upon the
Collateral (or any portion thereof), in attempting
to enforce or enforcing a Lien on any of the
Collateral or exercising or enforcing any other
right or remedy available by reason of such Event
of Default against any Continental Party, any of
its Subsidiaries or any other Person that may be
obligated to any GE Party and/or Relevant
Collateral Agent by virtue of any of the
Restructuring Documents.
The Restructuring Expenses shall be due and
payable ten (10) days after written demand by any GE Party
and/or Relevant Collateral Agent upon any Continental Party
and shall constitute additional Obligations secured under
this Agreement and the other Restructuring Documents.
Section 11.03. No Waiver by any GE Party. Any GE
Party's failure, at any time or times, to require strict
performance by any Continental Party of any provision of
this Agreement and any of the other Loan Documents shall not
waive, affect or diminish any right of such GE Party
thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by any GE Party of an
Event of Default by any Continental Party under the Loan
Documents shall not suspend, waive or affect any other Event
of Default by any Continental Party under this Agreement and
any of the other Loan Documents, whether the same is prior
or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements,
warranties, covenants and representations of any Continental
Party contained in this Agreement or any of the other Loan
Documents and no Event of Default by any Continental Party
under this Agreement and no defaults by any Continental
Party under any of the other Loan Documents shall be deemed
to have been suspended or waived by any GE Party, unless
such suspension or waiver is by an instrument in writing,
signed by an officer of such GE Party and directed to such
Continental Party specifying such suspension or waiver.
Section 11.04. Remedies. Any GE Party's rights
and remedies under this Agreement shall be cumulative and
nonexclusive of any other rights and remedies which any GE
Party may have under any other agreement, including, without
limitation, the Restructuring Documents, by operation of law
or otherwise. Recourse to any collateral granted to any GE
Party shall not be required.
Section 11.05. Waiver of Jury Trial. To the
extent permitted by applicable law, the parties hereto waive
all right to trial by jury in any action or proceeding to
enforce or defend any rights under the Restructuring
Documents.
Section 11.06. Severability. Wherever possible,
each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable
law; but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of
this Agreement.
Section 11.07. Parties. This Agreement and the
other Restructuring Documents shall be binding upon, and
inure to the benefit of, the successors of any Continental
Party or any GE Party and the permitted assigns, transferees
and endorsees of any GE Party or any Collateral Agent.
Section 11.08. Conflict of Terms. Except as
otherwise provided in this Agreement or any of the other
Restructuring Documents by specific reference to the
applicable provisions of this Agreement, if any provision
contained in this Agreement is in conflict with, or
inconsistent with, any provision in any of the other
Restructuring Documents or Loan Documents (as defined in the
CMI Loan Agreement, the B-1 Loan Agreement, the B-2 Loan
Agreement or the Consolidation Loan Agreement), the
provision contained in this Agreement shall govern and
control.
Section 11.09. Consents. Upon satisfaction of
the conditions contained in Article IX hereof, each GE Party
hereby consents to all waivers, amendments and modifications
contained in each of the Restructuring Documents to the
extent required in the underlying documents.
Section 11.10. Governing Law. Except as
otherwise expressly provided in any of the Restructuring
Documents, in all respects, including all matters of
construction, validity and performance, this Agreement and
the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the
State of New York, and any applicable laws of the U.S. Each
GE Party, Relevant Collateral Agent and each Continental
Party agrees to submit to personal jurisdiction and, to the
extent permitted by applicable law, to waive any objection
as to venue in the County of New York, State of New York.
To the extent permitted by applicable law, service of
process on any GE Party, Continental Party or Collateral
Agent in any action arising out of or relating to any of the
Restructuring Documents shall be effective if mailed to such
party at the address listed in Section 11.11 hereof.
Nothing herein shall preclude any GE Party or Continental
Party from bringing suit or taking other legal action in any
other jurisdiction.
Section 11.11. Notices. Except as otherwise
provided herein, whenever it is provided herein that any
notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon
any of the parties by another, or whenever any of the
parties desires to give or serve upon another any
communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be
delivered either in person, with receipt acknowledged, or by
telecopy and confirmed by telecopy answerback or sent by a
nationally recognized overnight air delivery service,
postage prepaid, addressed as follows:
(a) If to any GE Party other than GE at:
GE Capital Aviation Services, Inc.
263 Tresser Boulevard
7th Floor
Stamford, Connecticut 06927-4900
Attention: Manager-Operations
Commercial Aviation
Telecopy Number: 203/357-4585
With copies, in each case, to:
GE Capital Aviation Services, Inc.
263 Tresser Boulevard
7th Floor
Stamford, Connecticut 06927-4900
Attention: General Counsel
Telecopy Number: 203/357-6264
(b) If to GE at:
General Electric Company
Aircraft Engines
One Neumann Way
Mail Drop F-17
Cincinnati, Ohio 45215
Attention: Manager, Legal Operations
Telecopy Number: 513/243-8068
(c) If to any Continental Party:
Continental Airlines, Inc.
2929 Allen Parkway, Suite 1466
Houston, Texas 77019
Attention: General Counsel
Telecopy Number: 713/834-5161
With copies to:
Continental Airlines, Inc.
2929 Allen Parkway, Suite 1580
Houston, Texas 77019
Attention: Vice President-Treasurer
Telecopy Number: 713/834-2448
or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required
hereunder may be waived in writing by the party entitled to
receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication
hereunder shall be deemed to have been duly given or served
on the date on which delivered personally or by a nationally
recognized overnight air delivery service, with receipt
acknowledged or telecopied and confirmed by telecopy
answerback. To the extent permitted by applicable law,
failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other
communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration
or other communication.
Section 11.12. Survival. The representations and
warranties of Continental in this Agreement shall survive
the execution, delivery and acceptance hereof by the parties
hereto and the closing of the transactions described herein
or related hereto.
Section 11.13. Section Titles. The Section
titles and Table of Contents contained in this Agreement are
and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between
the parties hereto.
Section 11.14. Counterparts. This Agreement may
be executed in any number of separate counterparts, each of
which shall, collectively and separately, constitute one
agreement.
Section 11.15. Confidentiality. (a) Each GE
Party agrees (on behalf of itself and each of its
affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep
confidential, in accordance with its customary procedures
for handling confidential information of this nature and in
accordance with safe and sound business practices, any non-
public information supplied to it by any Continental Party
pursuant to this Agreement or any other Restructuring
Document or received by any GE Party as a result of any
inspection conducted by it; provided that nothing herein
shall limit the disclosure of any such information (i) to
the extent required by statute, rule, regulation or judicial
process, (ii) to counsel for any GE Party, (iii) to bank
examiners, auditors, accountants or appraisers, (iv) to a
Subsidiary or Affiliate of any GE Party, (v) to any assignee
(or prospective assignee) permitted by the terms of this
Agreement so long as such assignee (or prospective assignee)
agrees (in a written instrument furnished to and for the
benefit of the Continental Parties) to the provisions of
this Section 11.15, or (vi) to any other Person in the
course of the enforcement of any GE Party's rights or
remedies hereunder or under any other Restructuring
Document; provided, further, that in no event shall any GE
Party be obligated or required to return any materials
furnished to it by any Continental Party or any of their
respective Subsidiaries.
(b) Continental and the GE Parties shall, subject
to their respective legal obligations (including
requirements of stock exchanges and other similar regulatory
bodies), agree upon the text of any press release relating
to this Agreement or the transactions contemplated hereby
before issuing any such press release or otherwise making
public statements with respect to the transactions
contemplated hereby and in making any related filings with
any federal or state governmental or regulatory agency or
with any national securities exchange with respect thereto.
Section 11.16. Officers' Certificates. It is not
intended that any certificate of any officer of any
Continental Party delivered to any GE Party pursuant to the
provisions of this Agreement or any other Restructuring
Document shall give rise to any personal liability on the
part of such officer as a result of the delivery of any such
certificate. Any such certificate shall be deemed to be
limited to the best of such officer's knowledge regarding
the statements contained therein.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been
executed on behalf of each of the parties as of the date
first written above.
CONTINENTAL AIRLINES, INC.
By: /s/ JOHN LUTH
John E. Luth
Senior Vice President and
Chief Information Officer
CONTINENTAL EXPRESS, INC.
By: /s/ JOHN LUTH
John E. Luth
Attorney-in-Fact
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ ERIC M. DULL
Eric M. Dull
Attorney-in-Fact
GENERAL ELECTRIC COMPANY
By: /s/ MARK D. POWERS
Name: Mark D. Powers
Title: Director, Customer
Sales Financing
<PAGE>
GLOBAL PROJECT & STRUCTURED
FINANCE CORPORATION
By: /s/ ERIC M. DULL
Eric M. Dull
Vice President<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . 1
Section 1.01. Other Defined Terms.. . . . . . . . . 1
Section 1.02. Defined Terms.. . . . . . . . . . . . 1
ARTICLE II
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
ARTICLE III
A-300 RETURN. . . . . . . . . . . 12
Section 3.01. Compliance with Lease.. . . . . . . . 12
Section 3.02. Return Condition. . . . . . . . . . . 12
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
ARTICLE IV
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
ARTICLE V
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
ARTICLE VI
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
ARTICLE VII
ADDITIONAL COVENANTS. . . . . . . . . 15
Section 7.01. Continental Covenants . . . . . . . . 15
Section 7.02. GE Capital Covenants. . . . . . . . . 15
ARTICLE VIII
INTEREST RATE PROTECTION. . . . . . . . 16
Section 8.01. Interest Rate Protection. . . . . . . 16
Section 8.02. Procedure . . . . . . . . . . . . . . 16
ARTICLE IX
CONDITIONS PRECEDENT. . . . . . . . . 17
Section 9.01. Conditions Precedent. . . . . . . . . 17
Section 9.02. Additional Conditions to
Restructuring . . . . . . . . . . . . 21
ARTICLE X
REPRESENTATIONS AND WARRANTIES . . . . . . 21
Section 10.01. Corporate Existence; Compliance
with Law.. . . . . . . . . . . . . . 22
Section 10.02. Executive Offices. . . . . . . . . . 22
Section 10.03. Subsidiaries.. . . . . . . . . . . . 22
Section 10.04. Corporate Power; Authorization;
Enforceable Obligations. . . . . . . 23
Section 10.05. Financial Statements . . . . . . . . 24
Section 10.06. [Reserved] . . . . . . . . . . . . . 24
Section 10.07. Ownership of Property; Liens . . . . 24
Section 10.08. No Default . . . . . . . . . . . . . 25
Section 10.09. Investment Company Act . . . . . . . 25
Section 10.10. No Litigation. . . . . . . . . . . . 26
Section 10.11. Collateral Valuation Report. . . . . 26
Section 10.12. Operations . . . . . . . . . . . . . 26
Section 10.13. Existing Indebtedness. . . . . . . . 28
Section 10.14. Excluded Subsidiaries. . . . . . . . 28
Section 10.15. Fees.. . . . . . . . . . . . . . . . 28
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . 29
Section 11.01. Complete Agreement; Modification
of Agreement . . . . . . . . . . . . 29
Section 11.02. Fees and Expenses. . . . . . . . . . 29
Section 11.03. No Waiver by any GE Party. . . . . . 31
Section 11.04. Remedies . . . . . . . . . . . . . . 31
Section 11.05. Waiver of Jury Trial . . . . . . . . 31
Section 11.06. Severability . . . . . . . . . . . . 31
Section 11.07. Parties. . . . . . . . . . . . . . . 32
Section 11.08. Conflict of Terms. . . . . . . . . . 32
Section 11.09. Consents.. . . . . . . . . . . . . . 32
Section 11.10. Governing Law. . . . . . . . . . . . 32
Section 11.11. Notices. . . . . . . . . . . . . . . 33
Section 11.12. Survival . . . . . . . . . . . . . . 34
Section 11.13. Section Titles . . . . . . . . . . . 34
Section 11.14. Counterparts . . . . . . . . . . . . 34
Section 11.15. Confidentiality. . . . . . . . . . . 35
Section 11.16. Officers' Certificates . . . . . . . 35
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
<PAGE>
SCHEDULE 2.01
AIRCRAFT SUBJECT TO REDELIVERY
Manufacturer's Serial Numbers
737's MD-80's
23369 49102*
23370 49114*
23371 49116*
23372 49117*
23455 49118*
23456 49229
23457 49246
<PAGE>
SCHEDULE 2.05
Aircraft Information
Information to be reported, as requested, shall
include, but not be limited to, the following:
1. Total aircraft time and cycles, and certified maximum
aircraft weight.
2. Total aircraft time and cycles at last "C" check and
"D" check (specifying the number of such check), and
the number of hours and cycles until the next check is
to be performed.
3. Part and serial number for each time controlled and
life limited part installed on the aircraft indicating
total time/cycles and time remaining, including landing
gear.
4. Part and serial number of APU with total hours/cycles
since new, total hours/cycles at last overhaul and date
of next scheduled or required overhaul.
5. For each installed engine, including for each original
engine to the extent such engine is not the original
engine installed on the aircraft: (i) total time/cycles
since new; (ii) time since last shop visit or overhaul;
(iii) time remaining until next scheduled "off-wing"
maintenance; (iv) "disc sheet" showing part numbers and
serial numbers of all time controlled and time limited
parts in each engine showing time/cycles used and
time/cycles remaining; and (v) service bulletin
listing.
6. AD method of compliance record for the aircraft,
engines and equipment showing date and method of
compliance.
7. Reports of all accidents and incidents involving the
aircraft.
8. List of all modifications to the aircraft/list of ste's
done by Continental during the lease.
9. List of major repairs performed on the aircraft
10. LOPA showing the aircraft interior or fleet where
common.
11. Pilot log book reports for the 30 days preceding such
request.
12. Engine performance monitoring conducted during the 30
days preceding such request.
13. Service bulletin listing for the aircraft.<PAGE>
SCHEDULE 3
RESTRUCTURING PLAN DOCUMENTS
1. 1995 Business Plan
2. 1995 Revenue Plan
3. 1995 Fleet Plan
4. 1995 Domestic Capacity Plan
5. 1995 Budget - Operating Expense Plan
6. 1995 Budget - Capacity Reduction
7. 1995 Budget - Capacity Reduction (Division Targets)
8. 1995 Budget - Consolidated Statement of Operations
(Plan Versus Prior Year)
9. 1995 Capital Expenditure Plan
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
<PAGE>
SCHEDULE 7.01
Continental shall comply with the covenants or
other provisions set forth in Sections [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT], 8.1 and 8.2 of this Schedule 7.01
in lieu of complying with the comparable covenant or other
provision in the B-1 Loan Agreement and B-2 Loan Agreement,
as the case may be and shall not be required to comply with
Section 6.3 of each of the B-1 Loan Agreement or the B-2
Loan Agreement, as the case may be. Continental and its
Subsidiaries, as the case may be, shall also comply with the
additional covenants set forth in Sections 7.15 through 7.23
of this Schedule 7.01.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
Section 7.15. Cancellation of Indebtedness Owed
to It. Continental shall not cancel, or permit any of its
Subsidiaries to cancel, any claim or Indebtedness owed to it
except for adequate consideration and in the ordinary course
of business.
Section 7.16. No New Subsidiaries. Continental
shall not, and shall not permit any of its Subsidiaries to,
incorporate or otherwise organize any Subsidiary which was
not in existence on the Closing Date unless all the
outstanding Stock of such Subsidiary is owned by Continental
and pledged to the B-2 Collateral Agent and such Subsidiary
shall be and become a Guarantor and shall execute and
deliver a Guaranty and a Security Agreement in favor of the
B-2 Collateral Agent and in form and substance reasonably
acceptable to the GE Parties.
Section 7.17. Modification of Charter and By-
Laws. Continental shall not amend, and shall not permit any
of its Subsidiaries to amend, its certificate of
incorporation or by-laws other than amendments which in the
aggregate have no Material Adverse Effect.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
<PAGE>
Section 8.1. Disposition of Scheduled Assets.
[Intentionally Omitted]
Section 8.2 [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Exhibit 10.8(b)
AGREEMENT
This Agreement is entered into on the 21st day of November, 1994,
between Continental Airlines, Inc., a Delaware corporation (the "Company"),
and Robert R. Ferguson III (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive and the Company mutually desire to terminate
the Executive's employment with the Company; and
WHEREAS, the Company wishes to retain the Executive as a consultant as
described below;
NOW, THEREFORE, in consideration of the premises, the agreements
herein contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and the
Executive agree as follows:
1. This Agreement embodies the full and final settlement of all
obligations of the Company to the Executive and the arrangements set forth
herein fully close out all relationships between the Executive and the
Company and its subsidiaries.
2. The Executive hereby resigns from the Board of Directors of the
Company and any committees thereof effective as of the date hereof. The
Executive and the Company acknowledge that, from and after October 27,
1994, (a) he has not been an active status employee of the Company, (b) he
has not held the positions of Vice Chairman and Chief Executive Officer of
the Company and (c) he has not been a director or officer of, has not been
employed by and has not held any other position with subsidiaries of the
Company. From October 27 to November 30, 1994, the Executive shall
continue to receive salary as though he remained on the payroll of the
Company in paid leave status at his existing rate of base salary.
3. Contemporaneous with the execution of this Agreement, the Company
will pay the Executive a lump sum equal to $418,209. On January 3, 1995,
the Company will pay the Executive a lump sum equal to $2,394,222. Each of
the payments to be made under this Section 3 shall be made by wire
transfer, immediately available funds, to that account and bank previously
used for the direct deposit of his periodic pay.
4. The Executive will be entitled to any benefits or rights he earned
under the terms of the Company's employee pension plans, employee benefit
plans or other compensation arrangements by which the Executive was covered
during his employment, in accordance with the terms of those plans or
arrangements applicable to the Executive's voluntary termination of
employment other than by reason of retirement. Following October 27, 1994,
the Executive shall accrue no further benefits under said plans and
arrangements, except as specifically provided herein. The Executive shall
remain entitled to reimbursement for expenses incurred during the period
prior to October 27, 1994, under the Company's standard expense
reimbursement policy and procedures.
5. The Executive agrees, from time to time, to provide consulting
services to the Company and its subsidiaries for a period of up to one year
after the date hereof at such times and for such periods as the Company and
the Executive shall reasonably agree. The Company will pay the Executive
$100,000, in four equal installments of $25,000 payable on January 3, 1995,
February 1, 1995, March 1, 1995 and April 3, 1995, for such consulting
services. Each of the payments to be made under this Section 5 shall be
made by wire transfer, immediately available funds, to that account and
bank previously used for the direct deposit of his periodic pay.
6. Provided all annual pass cards in the possession of the Executive
have been surrendered to the Company, the Executive and his eligible family
members shall be entitled to pass privileges for a 42 month period from the
date hereof of the same type and priority received prior to the termination
of employment (i.e., PS1B for company business or S100 for personal
travel), subject to any changes in policy generally applicable to directors
of the Company still in the service thereof. Passes shall be issued upon
individual requests directly to the Continental Airlines pass bureau.
Thereafter, the Executive and his eligible family members shall receive
lifetime passes (equivalent to S200 passes) and his children shall continue
to receive such passes so long as they are eligible under the Company's
pass policy, pursuant to the resolution adopted by the Company's Board of
Directors on April 21, 1993.
7. For a period of 42 months from the date hereof, the Executive
shall continue in the Company's group insurance programs (including,
without limitation, long-term disability insurance and group medical
insurance) or be provided substantially comparable benefits, provided he
has not accepted other employment that provides comparable benefits. The
Executive's entitlement to benefit continuation pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 shall commence at
the end of such period.
8. The Executive shall be under no obligation to mitigate damage to
the Company and no future earnings (except with respect to benefit coverage
as described in Section 7 above) by the Executive from any source shall be
payable to the Company or be subject to offset pursuant to this Agreement.
9. The Company shall indemnify the Executive against all losses,
including legal fees and expenses, arising from claims against the
Executive in connection with the Executive's good-faith execution of his
employment with the Company (which employment shall, for purposes of this
Section 9, be understood by the Company and the Executive to have ceased on
October 26, 1994, except with respect to his capacity as a director, which
ceased on the date hereof), to the fullest extent permitted by the General
Corporation Law of the State of Delaware, and, without limiting the
generality of the foregoing, will be obligated on its commitment to
indemnify the Executive as set forth in the Executive's previous employment
agreement with the Company that was affirmed by order of the Delaware
Bankruptcy Court dated August 21, 1991.
10. All payments and benefits due to the Executive hereunder shall be
subject to the Executive's compliance with the following provisions for a
period ending one year after the date hereof:
(a) The Executive shall, upon reasonable notice, furnish such
information and proper assistance to the Company and its subsidiaries as
may reasonably be required in connection with any litigation in which it or
any of its subsidiaries is, or may become, a party.
(b) The Executive will not discuss with any other employee of the
Company or its subsidiaries the formation or operations of any business
intended to compete with the Company or its subsidiaries, or the possible
future employment of such other employee by any business.
(c) Any public statement made by the Executive concerning the Company
or its subsidiaries, officers, directors or employees shall be submitted
for approval in writing from the Company's public relations and legal
departments.
If the Executive fails to comply with the above obligations, the
Company may cease extending benefits to the Executive and may recover by
appropriate action instituted in any court of competent jurisdiction (i)
any net after-tax payments theretofore paid to the Executive hereunder, and
(ii) any tax benefit actually realized by the Executive as a result of the
recovery of any such payments with respect to the taxable year of the
Executive during which the Executive repays to the Company the payments
described in clause (i) of this sentence (it being understood and agreed
that the Company will not be entitled to recover any tax benefit actually
realized by the Executive in any later taxable year of the Executive,
including, but not limited to, any such tax benefit resulting from any
payment under this clause (ii)). For purposes of clause (ii) of the
preceding sentence, a tax benefit is "actually realized by the Executive"
"with respect to the taxable year of the Executive" when it results, with
respect to such taxable year, in a refund of tax to the Executive for such
taxable year or a reduction in the amount of tax for such taxable year
which the Executive would have had to pay if such repayment had not been
made.
11. The Executive hereby releases, remises, acquits and discharges
the Company, Air Partners, L.P. and Air Canada and each of their respective
subsidiaries, divisions, officers, directors, agents, employees,
consultants, independent contractors, attorneys, advisers, successors and
assigns, jointly and severally, from any and all claims, known or unknown,
which the Executive, his heirs, successors or assigns have or may have
against any of such parties and any and all liability (including any claims
under the April 16, 1993 employment agreement or any prior such agreements,
except with regard to the obligation set forth in Section 9 of this
Agreement) that any of such parties may have to him whether denominated
claims, demands, causes of action, obligations, damages or liabilities
arising from any and all bases, however denominated, including but not
limited to claims of discrimination under the U.S. Age Discrimination in
Employment Act, Title VII of the United States Civil Rights Act of 1964, 42
U.S.C. Paragraph 1981, V.T.C.A., Labor Code Paragraph 21.051(1) or any
other Texas law, or any other U.S. federal, state or local law or any other
law, rule or regulation or workers' compensation or disability claims under
any such laws. Notwithstanding any other provision of this Agreement, this
release is not intended to interfere with the Executive's right to file a
charge with the U.S. Equal Employment Opportunity Commission in connection
with any claim the Executive believes he may have against the Company, Air
Partners, L.P., Air Canada or any of their subsidiaries. However, by
signing this Agreement, the Executive agrees to waive the right to recover
in any proceeding he may bring before the U.S. Equal Employment Opportunity
Commission or in any proceeding brought by the U.S. Equal Employment
Opportunity Commission on his behalf. This release relates to claims
arising from and during the Executive's relationship with the Company, Air
Partners, L.P., Air Canada, their subsidiaries and predecessor companies,
or as a result of the termination of such relationship. This release is
for any relief, no matter how denominated, including but not limited to
wages, back pay, front pay, compensatory damages or punitive damages. The
Executive further agrees that the Executive will not file or permit to be
filed on his behalf any such claim. This release shall not apply to (a)
the obligations set forth in this Agreement or (b) any other claims that
may arise after the date on which he signs this Agreement. The Executive
expressly acknowledges that the benefits being offered to him in this
Agreement constitute consideration for the foregoing release that is in
addition to anything of value to which he is already entitled from the
Company, Air Partners, L.P., Air Canada and their subsidiaries.
The Company, Air Partners, L.P. and Air Canada hereby release, remise,
acquit and discharge the Executive and his heirs, successors, assigns,
agents, attorneys and advisers, jointly and severally, from any and all
claims, known or unknown, which they, their subsidiaries, successors or
assigns have or may have against him and any and all liability (including
any claims under the April 16, 1993 employment agreement or any prior such
agreements) which the Executive may have to the Company, Air Partners,
L.P., Air Canada or their subsidiaries whether denominated claims, demands,
causes of action, obligations, damages or liabilities arising from any and
all bases, however denominated. This release relates to claims arising
from and during the Executive's relationship with the Company, Air
Partners, L.P., Air Canada, their subsidiaries and predecessor companies,
or as a result of the termination of such relationship. This release is
for any relief, no matter how denominated, including but not limited to
compensatory damages or punitive damages. The Company, Air Partners, L.P.
and Air Canada further agree that they will not file or permit to be filed
on behalf of the Company, Air Partners, L.P. or Air Canada or any of their
subsidiaries, successors or assigns any such claim. This release shall not
apply to (a) the obligations set forth in this Agreement or (b) any other
claims that may arise after the date on which the Executive signs this
Agreement. The Company, Air Partners, L.P. and Air Canada expressly
acknowledge that they and their subsidiaries are receiving consideration
for the foregoing release that is in addition to anything of value to which
they are already entitled from the Executive.
Nothing in this Section 11 shall have any effect on the Executive's
ability to receive any properly payable benefit under any existing or
expired director and officer insurance policy maintained by the Company.
The Company shall maintain with respect to the Executive the same coverage
under any director and officer insurance policies relating to the period
during which the Executive was a director and/or officer as is maintained
for others who were directors and officers during such period or continue
to be directors and officers (but only with respect to actions during such
period).
12. This Agreement does not constitute an admission of liability of
any kind by the Company or any of its subsidiaries. This Agreement is
personal to the Executive and, without the prior written consent of the
Board of Directors of the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. The terms
of this Agreement shall be binding and inure to the benefit of the Company,
Air Partners, L.P., Air Canada and their respective subsidiaries,
successors and assigns. This Agreement constitutes the entire
understanding between the Executive and the Company, Air Partners, L.P.,
Air Canada and their respective subsidiaries with respect to the subject
matter hereof, and supersedes all prior understandings, written or oral.
Without limitation on the foregoing, this Agreement shall supersede the
April 16, 1993 employment agreement between the Executive and the Company
and any prior such agreements, except as set forth in Section 9 of this
Agreement. The terms of this Agreement may be changed, modified or
discharged only by an instrument in writing signed by the parties hereto.
This Agreement shall be construed, enforced and interpreted in accordance
with applicable Federal law and the laws of the State of Texas without
reference to its principles of conflicts of law. If either party brings an
action or proceeding to enforce such party's rights under this Agreement,
the prevailing party in such action or proceeding shall be entitled to
receive from the other party an amount equal to the prevailing party's
reasonable attorneys' fees and expenses incurred as a result of such action
or proceeding. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be original.
13. (a) All payments hereunder shall be subject to, and reduced by,
applicable withholding taxes, which the Company shall timely remit to the
appropriate tax authorities.
(b) Because the Executive believes there is some uncertainty as to
the proper characterization for federal tax purposes of payments made by
the Company to, or for the benefit of, the Executive, the Executive has
determined that he wishes to file his federal income tax returns and make
payment of taxes on the basis that a portion of the payments due him under
Section 3 of this Agreement in the aggregate amount of $2,441,618 (which
amount excludes a "base amount," as defined in Section 280G of the Code, of
$370,813) is subject to Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), although a statement will be included in such
returns that states the Executive reserves the right to prosecute a refund
claim with respect thereto on the grounds that such payments are not
subject to Section 4999 of the Code and that the Executive is obligated to
refund amounts to the Company in the event that such refund claim is
successful. The Executive and the Company acknowledge that as a result of
this determination (i) $126,170 of the $418,209 amount due the Executive on
the date of execution of this Agreement under Section 3 of this Agreement,
and (i) $723,092 of the $2,394,222 amount due the Executive on January 3,
1995, under Section 3 of this Agreement, relate to excise, medicare, and
income tax indemnities and gross-ups that the Executive is entitled to if
such payments are subject to Section 4999 of the Code. The Executive,
therefore, requests that the Company withhold, and the Company agrees to
withhold, income, medicare, and excise taxes from such amounts as set forth
on Appendix B and determined utilizing the methodology set forth on
Appendix A, notwithstanding the Company's view that none of such payments
are subject to Section 4999 of the Code. On or before the date the
Executive files his federal income tax return for 1994, the Company and the
Executive shall recompute the amounts due under Section 3 of this Agreement
based upon the information in such federal income tax return to be filed
and utilizing the methodology set forth in Appendix A hereto. The
Executive anticipates that his taxable income for 1994 (excluding any
amount due the Executive under Section 3 of this Agreement) will not vary
by more than $150,000 from the $590,587 taxable income figure used in
Appendix A. Within 10 days after the Company and the Executive agree on
such recomputation, the Company or the Executive, as the case may be, shall
make a payment to the other to reflect the results of such recomputation.
In the event any federal tax rate used in the computations reflected on the
first two pages of Appendix A is different from the corresponding rate in
effect with respect to the Executive's 1995 taxable year solely as a result
of changes in applicable tax law, the Company and the Executive shall
recompute the amounts due on January 3, 1995, under Section 3 of this
Agreement so that neither party receives a benefit nor suffers a detriment
solely as a result of such tax rate difference. Any such recomputation
shall be made within 10 days after enactment of the law causing such
difference. Within 10 days after the Company and the Executive agree on
such recomputation, the Company or the Executive, as the case may be, shall
make a payment to the other to reflect the results of such recomputation.
(c) As a result of the uncertainty in the application of Section 4999
of the Code, it is possible that the Internal Revenue Service may claim (a
"Claim") that the Executive's tax liability is increased by the reason of
the imposition of the excise tax under Section 4999 of the Code on a
payment or payments made by the Company to or for the benefit of the
Executive with respect to which the Company has not made sufficient
indemnity and gross-up payments. The Executive shall promptly notify the
Company in writing of any Claim and will not pay such Claim prior to the
expiration of the thirty-day period following the date on which the
Executive gave such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such Claim is due). If
the Company notifies the Executive in writing prior to the expiration of
such period that it desires to contest such Claim, the Company shall,
subject to the provisions of this Section 13, have the right to control all
proceedings relating to such Claim, including requesting the Executive to
pay the amounts claimed and pursue a refund claim with respect to such
amounts (a "Defensive Refund Claim"). In addition, the Company may prepare
and prosecute a refund claim (an "Offensive Refund Claim") with respect to
any payments hereunder treated as subject to Section 4999 of the Code (and
related taxes thereon).
(d) The Executive shall appoint the Company (or counsel appointed by
the Company) as attorney-in-fact to prosecute any Claim, Defensive Refund
Claim or Offensive Refund Claim (a "Controversy") on his behalf for the
Company's benefit with respect thereto. The Company shall bear and pay
directly all costs and expenses (including the costs and expenses of
counsel and experts retained by the Company and any additional interest and
penalties) incurred in connection with any Controversy and shall indemnify
and hold the Executive harmless, on a fully grossed-up after tax basis, for
any tax, including interest and penalties with respect thereto, imposed as
a result of such payment of costs and expenses. If the Company requests
the Executive to pay an amount claimed and pursue a Defensive Refund Claim,
the Company shall advance the amount of such payment to the Executive, on
an interest-free basis, and shall indemnify and hold the Executive
harmless, on a fully grossed-up after tax basis, from any tax, including
interest and penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to such advance.
With respect to any Claim, the Company shall indemnify and hold the
Executive harmless, on a fully grossed-up after tax basis, from all
liabilities for taxes (including any interest and penalties imposed with
respect to such taxes), including any tax under Section 4999 of the Code,
resulting from such Claim. If, after the receipt by the Executive of any
amount advanced by the Company under this Section 13(d), a final
determination is made that the Executive is not entitled to a refund of the
amount claimed to which such advance relates, then such advance shall be
forgiven, to the extent that the Executive was not entitled to a refund of
the amount claimed, and such forgiven amount shall not be required to be
repaid and shall offset, to the extent thereof, the amount of indemnities
and gross-ups required to be paid by the Company hereunder.
(e) In the Company's prosecution of any Controversy, (i) any
extension of the statute of limitations relating to assessment, payment or
collection of taxes for the taxable year of the Executive with respect to
which the contested amount of the Controversy relates shall be limited
solely to such contested amount, and (ii) the Company's control of any
contest or proceeding shall be limited to issues with respect to the
Controversy and the Executive shall be entitled to settle or contest, in
his sole and absolute discretion, any other issue. The Company shall
promptly keep the Executive informed of all developments and events
relating to any such Controversy (including, without limitation, providing
to the Executive copies of all written materials pertaining to any such
Controversy), and the Executive or his authorized representatives shall be
entitled, at the Executive's expense, to participate in all conferences,
meetings and proceedings relating to any such Controversy. The Executive
agrees to provide (or cause to be provided) to the Company any information
reasonably requested by the Company that is within his possession or
control and relates to such Controversy and otherwise to cooperate with the
Company and its representatives in good faith in order to contest
effectively such Controversy.
(f) Any refund (including interest thereon) actually received by or
credited to the Executive as a result of a Controversy shall be returned to
the Company by the Executive within 10 days of such receipt or 10 days of
receipt of notice of such crediting, as the case may be. In addition, the
Executive shall pay to the Company an amount equal to any tax benefit
actually realized by the Executive with respect to the taxable year during
which the Executive actually returns to the Company such refund or a prior
taxable year as a result of such return (it being understood and agreed
that the Company will not be entitled to recover any tax benefit actually
realized by the Executive with respect to any later taxable year of the
Executive, including, but not limited to, any such tax benefit resulting
from any payment pursuant to this sentence). A tax benefit is "actually
realized by the Executive with respect to the taxable year" "or a prior
taxable year" when it results, with respect to such taxable year, in a
refund of tax to the Executive or a reduction in the amount of tax which
the Executive would have had to pay if such repayment had not been made in
such taxable year. Any tax benefit required to be paid by the Executive to
the Company under this Section 13(f) shall be paid within 10 days after the
date on which such tax benefit is actually realized by the Executive.
14. The failure of either party at any time to enforce any of the
provisions of this Agreement or to require performance by the other party
of any provision hereof shall not be construed to be a waiver of such
provisions or to affect the validity of this Agreement, or any part hereof,
or of the right of either party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
15. Written notices required or furnished under this Agreement shall
be sent to the following addresses:
to the Company: Continental Airlines, Inc.
2929 Allen Parkway
Suite 2020
Houston, Texas 77019
Attention: Corporate Secretary
to the Executive: Information to be treated confidentially
by Continental Airlines, Inc.
Notices shall be effective on the first business day following receipt
thereof. Notices sent by mail shall be deemed received on the date of
delivery shown on the return receipt.
16. Except as is otherwise specifically provided in this Agreement,
the Executive will return to the Company and its subsidiaries, as promptly
as possible, any personal property of the Company and its subsidiaries such
as keys and company credit cards. The Executive shall not charge any
additional amounts on any company credit card, and represents that he has
not made any such charges since October 26, 1994.
17. The payments hereunder will not constitute compensation for any
purpose under any retirement plan or scheme maintained by the Company or
any of its subsidiaries.
18. The Company will pay the reasonable fees and expenses of (a)
counsel incurred on his behalf in connection with the review and
negotiation of this Agreement in an amount not to exceed $85,000 and (b)
tax counsel, accountants and other appropriate professionals in connection
with the preparation of the Executive's 1994 and 1995 tax returns in an
amount not to exceed $10,000 for each return.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed
this Agreement, in each case on the date first above written.
CONTINENTAL AIRLINES, INC.
By: /s/ David Bonderman
David Bonderman
Title: Chairman
EXECUTIVE
/s/ Robert R. Ferguson III
Robert R. Ferguson III
APPENDIX A
FERGUSON CALCULATIONS
W-2 through 11/30/94 $ 556,791
Accrued Vacation 25,000
Other Income 15,000
$ 596,791
Severance Amount $1,845,225
Total (Gross) Income $2,442,016
Total (Gross) Income Not
Including Severance $ 596,791
Total Itemized Deduction - 6,204
Taxable Income Not Including
Severance $ 590,587
Income Tax (married/joint) $ 210,177
Average Rate of Taxation on
Income before Severance 35.21785%
Total (Gross) Income $2,442,016
x .3521785
Income Tax (married/joint) $ 860,026
Medicare Tax Rate 1.45%
Total (Gross) Income
(subject to Medicare Tax) $2,442,651
Medicare Tax $ 35,418
Income Tax $ 860,026
Total Tax $ 895,444
Total (Gross) Income $2,442,016
Total Tax - 895,444
After Tax Income $1,546,572
1. Bracket Creep Gross-Up Calculation
X - (75,305 + .396(X - 250,000 - 3,720 1/)) - (.0145(X + 635 2/)) =
1,546,572
X - 75,305 - .396X + 99,000 + 1,473 - .0145X - 9 = 1,546,572
.5895X + 25,159 = 1,546,572
.5895X = 1,521,413
X = $2,580,853
-2,442,016
138,837 = Bracket Creep Gross-Up
2. Excise Tax Gross-Up Calculation
X - (75,305 + .396(X - 250,000 - 3,720)) - (.0145(X + 635)) -
(.2(X - 370,813 - 596,791)) = 1,546,572
X - 75,305 - .396X + 99,000 + 1,473 - .0145X - 9 - .2X + 74,163 +
119,358 = 1,546,572
.3895X + 218,680 = 1,546,572
.3895X = 1,327,892
X = $3,409,222
-2,442,016
- 138,837
$ 828,369 = Excise Tax Gross-Up
$3,409,222
- 596,791
$2,812,431
- 370,813
$2,441,618
x 20%
$ 488,324 = Excise Tax
________________________
1/ Total itemized deduction taken on Total (Gross) Income including
severance.
2/ Excess of income subject to Medicare tax over income subject to federal
income tax.
3. Base Amount Allocations
Total Separation Payments $2,812,431
1994 Separation Payment - 418,209
1995 Separation Payment $2,394,222
Present Value of 1994
Separation Payment $ 389,984 3/
Present Value of 1995
Separation Payment $2,216,225 4/
PV of Total 2,606,209
Present Value of 1994
Separation Payment $ 389,984
PV of Total divided by 2,606,209
.1496365
Base Amount x 370,813
1994 Base Amount 55,487
Base Amount $ 370,813
1994 Base Amount - 55,487
1995 Base Amount 315,326
4. $1 Million Cap and 1994 Excise Tax Calculation
Severance Payment $1,845,225
Bracket Creep Gross-Up 138,837
Excise Tax Gross-Up 828,369
Total Separation Payment $2,812,431
W-2 through 11/30/94 $ 556,791
Accrued Vacation 25,000
1994 W-2 Compensation before
Separation Payment $ 581,791
Maximum 1994 W-2 Compensation $1,000,000
1994 W-2 Compensation before
Separation Payment - 581,791
1994 (Gross) Separation Payment $ 418,209
1994 Base Amount 55,487
1994 "Excess Parachute Payment" $ 362,722
Excise Tax Withholding Rate x 20%
Excise Tax Withholding Amt. $ 72,544
________________
3/ Present value on April 16, 1993, of $418,209 on November 16, 1994,
using a 4.46% discount rate.
4/ Present value on April 16, 1993, of $2,394,222 paid on January 16,
1995, using a discount rate of 4.46%.
Income Tax Gross-Up on
Excise Tax 5/ $ 120,106
Excise Tax Withholding Amt. - 72,544
Income Tax Withholding
on Excise Tax Indemnity $ 47,562
1994 (Gross) Separation Payment $ 418,209
Medicare Tax Withholding Rate x 1.45%
Medicare Withholding $ 6,064
1994 (Gross) Separation Payment $ 418,209
Excise Tax Withholding Amount - 72,544
Income Tax Withholding on
on Excise Tax Indemnity - 47,562
Separation Payment after Income
and Excise Withholding $ 298,103
Regular Withholding Rate x 28%
Regular Withholding $ 83,469
Excise Tax Withholding Amt. $ 72,544
Income Tax Withholding on
Excise Tax Indemnity $ 47,562
Medicare Withholding $ 6,064
Regular Withholding $ 83,469
Total 1994 Withholding $ 209,639
1994 (Gross) Separation Payment $ 418,209
Total 1994 Withholding - 209,639
Net 1994 Separation Payment $ 208,570
5. 1995 Excise Tax Calculation
Severance Payment $1,845,225
Bracket Creep Gross-Up 138,837
Excise Tax Gross-Up 828,369
Total Separation Payment $2,812,431
1994 (Gross) Separation Payment - 418,209
1995 (Gross) Separation Payment $2,394,222
1995 Base Amount 315,326
1995 "Excess Parachute Payment" $2,078,896
Excise Tax Withholding Rate x 20%
Excise Tax Withholding Amt. $ 415,779
Income Tax Gross-Up on
Excise Tax 6/ $ 688,376
Excise Tax Withholding Amt. - 415,779
Income Tax Withholding on
Excise Tax Indemnity $ 272,597
_____________________
5/ $72,544 divided by (1 - .396).
6/ $415,779 divided by (1 - .396).
1995 (Gross) Separation Payment $2,394,222
Medicare Tax Withholding Rate x 1.45%
Medicare Withholding $ 34,716
1995 (Gross) Separation Payment $2,394,222
Excise Tax Withholding Amount - 415,779
Income Tax Withholding on
Excise Tax Indemnity - 272,597
Separation Payment after Income
and Excise Withholding $1,705,846
Regular Withholding Rate x 28%
Regular Withholding $ 477,637
Excise Tax Withholding Amt. $ 415,779
Income Tax Withholding
on Excise Tax Indemnity - 272,597
Medicare Withholding - 34,716
Regular Withholding - 477,637
Total 1995 Withholding $1,200,729
1995 (Gross) Separation Payment $2,394,222
Total 1995 Withholding -1,200,729
Net 1995 Separation Payment $1,193,493
APPENDIX B
FERGUSON CALCULATIONS
1. 1994 PAYMENTS DUE IN DUE COURSE, BUT NO LATER THAN NOVEMBER 30, 1994
a. Salary from November 16, 1994 through November 30, 1994:
Gross Amount $25,500
Less: Federal Income Tax Withholding (9,046)
Medicare Tax Withholding ( 370)
Net Amount $16,084
b. Accrued Vacation
Gross Amount $25,000
Less: Federal Income Tax Withholding (@28%) (7,000)
Medicare Tax Withholding ( 363)
Net Amount $17,637
2. 1994 PAYMENTS DUE UPON EXECUTION OF THIS AGREEMENT
Lump Sum Payment Under Section 3 of this Agreement:
Gross Amount $ 418,209
Less: Federal Income Tax Withholding ( 131,031)
Medicare Tax Withholding ( 6,064)
Section 4999 Excise Tax Withholding
[20% ($418,209-$55,487 Base Amount] ( 72,544)
Net Amount $ 208,570
3. 1995 PAYMENT DUE ON JANUARY 3, 1995 UNDER SECTION 3 OF THIS AGREEMENT
Gross Amount $2,394,222
Less: Federal Income Tax Withholding ( 750,234)
Medicare Tax Withholding ( 34,716)
Section 4999 Excise Tax Withholding
[20%($2,394,222-$315,326 Base Amount)] ( 415,779)
Net Amount $1,193,493
Exhibit 10.8(d)
Memorandum of Agreement
Charles T. Goolsbee ("Goolsbee") and Continental Airlines, Inc.
("Continental") in full and final settlement of all rights and obligations
of the parties under the Employment Agreement between them dated as of
April 16, 1993, agree as follows:
1. The Employment Agreement dated as of April 16, 1993 is of no
further force and effect and is, in all respects, terminated.
2. Goolsbee shall remain in the employ of Continental until March
15, 1995.
3. The balance of the loans presently owed to Continental by
Goolsbee in the principal amount of $364,000, and all interest
thereon, is hereby forgiven.
4. Continental shall pay Goolsbee the sum of $150,000 on or before
March 31, 1995.
5. If, as and when Goolsbee sells his house, Continental agrees to
pay, at the Closing thereof, a brokerage commission of up to six
percent (6%) of the sale price to Goolsbee for payment to the
selling broker, plus the sum of $30,000 to Goolsbee.
6. Goolsbee shall act as a consultant to Continental for a period of
one year, at the rate of $15,000 per month, from March 15, 1995
to March 14, 1996, on the following terms:
(a) Goolsbee shall work 12 (twelve) full business days per month
on the business of Continental in matters relating to
potential business alliances for Continental and in legal
matters of Continental, all as directed by Gordon Bethune or
his designee;
(b) Goolsbee shall report to Gordon Bethune or his designee;
(c) Continental shall indemnify Goolsbee against all losses,
including legal fees and expenses, arising from claims
against Goolsbee in connection with Goolsbee's good-faith
execution of his consultancy hereunder. Continental shall,
to the fullest extent permitted by law, indemnify Goolsbee
for all acts or omissions committed by Goolsbee while he was
employed as a Continental employee;
(d) Goolsbee shall assist Continental in connection with any
litigation in which it, or its affiliates, is or may become
a party;
(e) Goolsbee will not accept employment from any person, firm or
corporation which, in any way, competes with Continental;
(f) Goolsbee will not solicit, directly or indirectly, any
employee of Continental to leave the employ of Continental.
7. Goolsbee shall, to the extent feasible under Continental's
various programs, continue to be included in the group insurance
programs, including long-term disability and group term life
insurance at the normal rate (one-half current annual salary,
i.e. at $162,500), provided he has not accepted other employment
that provides comparable benefits, for the period of the
consultancy in para. 6 hereinabove and for a period of one and
one-half years thereafter, and shall, indefinitely, be entitled
to the same pass privileges on Continental as he enjoyed during
his period of employment with Continental. During Goolsbee's
twelve-month consultancy period, he will also have the same pass
privileges on other airlines that he enjoyed during his period of
employment with Continental. Goolsbee shall be eligible for
COBRA benefits, at his own expense, commencing with the cessation
of his health benefits under this para. 7.
8. Goolsbee and Continental both confirm to each other that there
are no oral representations or inducements, of any kind or
nature, made by either to the other to induce the other to enter
into this Memorandum of Agreement, and none shall be claimed at
any time.
9. In the event of any dispute arising hereunder, Goolsbee and
Continental agree to arbitrate the dispute before the American
Arbitration Association in New York City.
10. This Memorandum of Agreement constitutes the entire agreement
between Goolsbee and Continental, and may not be changed, amended
or modified except by a writing signed by Goolsbee and by
Continental.
February 23, 1995
/s/ Charles Goolsbee
Charles Goolsbee
Continental Airlines, Inc.
by: /s/ Gordon Bethune
Gordon Bethune
President and Chief Executive Officer
Exhibit 10.8(e)
SECOND AMENDED AND RESTATED EMPLOYMENT COMPENSATION AGREEMENT
This Agreement dated as of January 10, 1995 between Continental
Airlines, Inc. (the "Company"), a Delaware corporation, and Gordon M.
Bethune (the "Executive"),
W I T N E S S E T H:
WHEREAS the Company and the Executive (each referred to herein
individually as a "Party" and collectively as the "Parties") have entered
into an Employment Agreement dated as of February 14, 1994 (the "Employment
Agreement") a letter agreement dated February 14, 1994 (the February Letter
Agreement") a letter agreement dated July 7, 1994 (the "Letter Agreement")
an amendment to the Employment Agreement styled First Amendment to
Employment Agreement dated as of July 12, 1994 (the "First Amendment") and
a Amended and Restated Employment Compensation Agreement dated January 10,
1995 (the "First Amended and Restated Agreement"), and
WHEREAS to implement the agreement of the parties with respect to the
supplemental executive retirement plan set forth in Section 18 below, the
Company and the executive desire to further amend the Employment Agreement
and to restate the Employment Agreement as amended to date,
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Parties hereto agree that the Employment
Agreement hereby be amended and restated in its entirety as follows:
1. Employment - The Company agrees to employ the Executive, and the
Executive agrees to remain in the employ of the Company under the terms and
conditions herein provided.
2. Position - During his employment hereunder, the Executive agrees
to serve the Company and the Company shall employ the Executive in such
capacity or capacities as may be specified from time to time by the Board
of Directors of the Company, subject to the provisions of Section 5(a)(ii)
hereof and that such Executive shall not be required to work at a location
other than one within the contiguous 48 states of the United States of
America.
3. Term - The Executive's employment shall be one at will, to-wit:
either the Executive or the Company shall have the right to terminate it at
any time, with or without cause, and without any liability or obligation of
either Party to the other except as may be expressly specified in this
Agreement.
4. Compensation - The Company will pay the Executive a base salary
at an initial annual rate of $550,000, payable in substantially equal semi-
monthly installments. During his employment with the Company, the
Executive's salary shall be reviewed periodically in accordance with
Company policy and such review may result in an increase in said salary
which such amount shall be substituted for the specified amount set forth
in this Section.
5. Termination of Employment -
(a) A "Termination of Employment" shall be defined as any one of
the following: (i) the termination of the Executive's employment by the
Company for any reason other than (A) willful misconduct or gross neglect
of duty by the Executive, (B) retirement under the ordinary retirement
program of the Company, (C) disability of the Executive resulting in
compensated absence from his duties to the Company on a full-time basis for
over 180 days or (D) death of the Executive; (ii) the termination of the
Executive's employment by the Executive after providing the Company with
ten business days' prior written notice that the Executive is terminating
employment because of (A) a material reduction in the responsibilities or
title of the Executive or of the corporate amenities to which he was
entitled immediately prior thereto or (B) a reduction of the Executive's
cash compensation by more than 10% below the highest annual salary from
time to time in effect for the Executive; provided, however, that no
Termination of Employment shall occur pursuant to the preceding clause (ii)
if the circumstances described in the preceding clauses (ii)(A) and (ii)(B)
are corrected prior to the expiration of ten business days from the date
the Executive provided notice to the Company of his intent to terminate
employment; and (iii) the Termination of the Executive's employment by the
Executive following a Change in Control. For purposes hereof, a Change in
Control shall be deemed to have occurred if (a) any corporation, person or
other entity completes a tender or exchange offer for shares of the
Company's common stock pursuant to which purchases are made of more than
50% of the Company's common stock, (b) the Company merges with or
consolidates into another corporation pursuant to a transaction in which
the holders of the Company's common stock immediately prior to such merger
or consolidation own less than 50% of the common stock of the Company into
which the Company is merged or consolidated immediately after such merger
or consolidation or the Company sells or otherwise disposes of all or
substantially all of its assets, (c) any person other than Air Canada or
Air Partners owns, directly or indirectly, securities entitling such person
to, or such person does in fact, elect a majority of the Company Board of
Directors, or (d) either Air Canada or Air Partners ceases to own, directly
or indirectly, securities entitling such person to elect one-sixth of the
Board of Directors of the Company, provided that this clause (d) shall not
apply in the case of a sale by Air Canada of all or any portion of its
shares to another foreign air carrier.
(b) Upon a Termination of Employment, or upon the expiration of
long term disability insurance benefits (prior to the Executive's regular
retirement date) while the Executive remains disabled, the Company will pay
the Executive (subject to provisions of Section 9 hereof) as severance pay
or liquidated damages, or both, a lump sum amount equal to 300% of his then
current Annual Compensation from the Company. For purposes hereof, "Annual
Compensation" shall mean the annualized rate of pay as set forth in
Section 4 hereof plus a Deemed Annual Bonus. The "Deemed Annual Bonus"
shall be equal to 25% of the annualized pay rate set forth in Section 4
hereof.
(c) Executive shall be under no obligation to mitigate his
damage resulting from a Termination of Employment and no future earnings by
Executive from any source shall be payable to the Company or shall reduce
the sums due from the Company pursuant to this Agreement.
(d) For a period of three years following a Termination of
Employment, the Executive shall continue in the Company's group insurance
programs, including long-term disability insurance (or be provided
substantially comparable benefits), provided he has not accepted other
employment that provides comparable benefits. The Executive's entitlement
to benefit continuation pursuant to the Consolidated Omnibus Budget
Reconciliation Act shall commence at the end of such period.
(e) For three years following a Termination of Employment, and
provided all annual pass cards in the possession of the Executive have been
surrendered to the Company, the Executive and his eligible family members
shall be entitled to pass privileges on Continental Airlines of the same
type and priority as the Executive received prior to the Termination of
Employment, subject to any changes in policy generally applicable to
officers of Continental Airlines still in the employ thereof. In addition,
upon termination of Executive's employment for any reason, Executive and
eligible family members shall be entitled to a lifetime pass at senior
officer retiree grade. Passes shall be issued upon individual requests
directly to the Continental Airlines pass bureau.
6. Indemnification - The Company shall indemnify the Executive
against all losses, including legal fees and expenses, arising from claims
against the Executive in connection with the Executive's good-faith
execution of his employment hereunder, to the fullest extent permitted by
the General Corporation Law of the State of Delaware.
7. Tax Indemnity - The Company shall indemnify Executive on a fully
grossed-up after-tax basis against any tax liability (including, without
limitation, excise taxes incurred pursuant to IRC Paragraph 4999) resulting
from the payment of severance or the provision of other benefits following
a Termination of Employment pursuant to this Agreement (excluding benefits
provided for under Section 18), to the extent that Executive's tax payments
are at a higher percentage of total income than they would have been absent
such payment of severance or provision of benefits. To the extent not
otherwise provided for in this Agreement, the Company shall also indemnify
Executive with respect to any medicare payroll taxes (plus any income taxes
imposed on such indemnity payments) as incurred by Executive in connection
with the deferral of compensation under the supplemental executive
retirement plan set forth in Section 18.
8. Life Insurance - The Company shall maintain life insurance for
the Executive in the amount of the severance payable to Executive pursuant
to Section 5 hereof. In the absence of such life insurance, the Company
shall pay Executive's beneficiary or beneficiaries an amount equal to such
severance in the event of the death of Executive while employed by the
Company. The Company shall hold Executive harmless from any tax liability
accruing to Executive as a result of the purchase of such insurance, and
likewise shall hold Executive's estate, heirs and assigns harmless from any
tax liability accruing because of the failure to maintain such insurance.
9. Post-Termination Obligations - All payments and benefits due to
the Executive hereunder shall be subject to the Executive's compliance with
the following provisions during the applicability of this Agreement and for
one full year after the expiration or termination hereof;
(a) The Executive shall, upon reasonable notice, furnish such
information and proper assistance to the Company and its affiliates as may
reasonably be required in connection with any litigation in which it or any
of its affiliates is, or may become, a party.
(b) The Executive will not discuss with any other employee of
the Company or its affiliates the formation or operations of any business
intended to compete with the Company or its affiliates, or the possible
future employment of such other employee by any business.
(c) Any public statements made by the Executive concerning the
Company or its affiliates, officers, directors or employees shall be
submitted for approval in writing from the Company's public relations and
legal departments.
If the Executive fails to comply with the above obligations, the
Company may cease extending benefits to the Executive and may recover by
appropriate action instituted in any court of competent jurisdiction any
severance payments theretofore paid to the Executive.
10. Consolidation, Merger, Sale of Assets - This Agreement shall be
binding upon and inure to the benefit of the Executive and the Company and
its successors and assigns, including without limitation any corporation
with or into which the Company may be consolidated or merged or to which
the Company sells or transfers all or substantially all of its assets.
11. Notices - Written notices required or furnished under this
Agreement shall be sent to the following addresses:
to the Company: Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: Corporate Secretary
to the Executive: Gordon M. Bethune
Information to be treated
confidentially by
Continental Airlines, Inc.
Notices shall be effective on the first business day following receipt
thereof. Notices sent by mail shall be deemed received on the date of
delivery shown on the return receipt.
12. Amendments - This Agreement may not amended or changed, orally or
in writing, except by the written agreement of the Parties.
13. Governing Law - This Agreement and any dispute arising under or
relating to any provision of this Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
14. Confidentiality - Except as provided by law, all information
provided by either Party to the other hereunder, including the terms and
conditions of the Agreement, shall be treated by the Party receiving such
information as confidential, and shall not be disclosed by such Party to
any party without the prior written consent of the Party from which the
information was obtained. This obligation of confidentiality shall survive
termination of this Agreement.
15. Severability - If any one or more of the provisions contained in
this Agreement are held to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
16. Previous Agreements - This Agreement constitutes the entire
understanding and agreement of the Parties with respect to the subject
matter hereof and replaces and supersedes any and all previous employment
agreements, either written or verbal, between the Parties including without
limitation the February Letter Agreement, the Letter Agreement, the
Employment Agreement, the First Amendment and the First Amended and
Restated Agreement.
17. Captions - All Section titles or captions contained in this
Agreement are for convenience only and shall not be deemed as part of this
Agreement.
18. Supplemental Executive Retirement Plan -
(a) The Company agrees to pay Executive the deferred
compensation benefits set forth in this Section 18 as a supplemental
executive retirement plan (the "Plan"). The base retirement benefit under
the Plan (the "Base Benefit") shall be in the form of an annual straight
life annuity in an amount equal to the product of (i) 1.6% times (ii) the
number of Executive's credited years of service (as defined below) under
the Plan times (iii) the Executive's final average compensation (as defined
below). For purposes hereof, Executive's credited years of service under
the Plan shall be equal to the number of Executive's years of benefit
service with the Company, calculated as set forth in the Continental
Airlines Retirement Plan beginning at January 1, 1995; provided, however
that if a Termination of Employment occurs and Executive is paid severance
pay under Section 5(b) of this Agreement, Executive shall be further
credited with three (3) additional years of service under the Plan. For
purposes hereof, Executive's final average compensation shall be equal to
the greater of (i) $550,000 or (ii) the average of the five highest annual
cash compensation amounts paid to Executive by the Company during the
consecutive ten calendar years immediately preceding his termination of
employment at retirement or otherwise. For purposes hereof, cash
compensation shall include base salary plus cash bonuses other than the
bonus set forth in Section 19 below and any other bonus paid on or prior to
March 31, 1995. All benefits under the Plan shall be payable in equal
monthly installments beginning on the first day of the month following the
Retirement Date. For purposes hereof, "Retirement Date: is defined as
later of the (i) date on which Executive attains (or in the event of his
earlier death), would have attained) age 65 or (ii) the date of his
retirement from employment with the Company. If Executive is single on the
Retirement Date, benefits under the Plan will be paid to Executive during
his lifetime in the form of the Base Benefit. If Executive is married on
the Retirement Date, benefits under the Plan will be paid in the form of a
joint and survivor annuity that is actuarially equivalent (as defined
below) to the Base Benefit, with Executive's surviving spouse being
entitled during her lifetime after his death to a benefit (the "Survivor's
Benefit") equal to 50% of the benefit payable to Executive during their
joint lifetimes. In the event of Executive's death prior to the Retirement
Date, his surviving spouse, if he is married on the date of his death, will
receive beginning on the Retirement Date an amount equal to the Survivor's
Benefit calculated as if the Executive had retired with a joint and
survivor annuity on the day before his date of death. The amount of any
benefits payable to Executive and/or his spouse under the Continental
Airlines Retirement Plan shall be offset against benefits due under the
Plan. If Executive's employment with the Company terminates for any reason
prior to February 14, 1999, the Company shall provide further benefits
under the Plan to ensure that Executive is treated for all purposes as if
he were fully vested under the Continental Airlines Retirement Plan.
(b) The Executive understands that he must rely upon the general
credit of the Company for payment of benefits under the Plan. The Company
has not and will not in the future set aside assets for security or enter
into any other arrangement which will cause the obligation created to be
other than a general corporate obligation of the Company or will cause
Executive to be more than a general creditor of the Company.
(c) For purposes of the Plan, the terms "actuarial equivalent", or
"actuarially equivalent" when used with respect to a specified benefit
shall mean the amount of benefit of a different type or payable at a
different age that can be provided at the same cost as such specified
benefit, as computed by the Actuary. The actuarial assumptions used to
determine equivalencies between different forms of annuities under the Plan
shall be the 1984 Unisex Pensioners Mortality 50% male, 50% female
calculation (with males set back one year and females set back five years),
with interest at an annual rate of 7%. The term "Actuary" shall mean the
individual actuary or actuarial firm selected by the Company to service its
pension plans generally or if no such individual or firm has been selected,
an individual actuary or actuarial firm appointed by the Company and
reasonably satisfactory to Executive and/or his spouse.
19. Bonus Payments. On July 12, 1994, the Company paid to Executive
a cash bonus in the amount of $1,500,000. Executive and the Company agree
that: (i) if Executive voluntarily terminates his employment with the
Company prior to January 12, 1995, Executive will refund to the Company the
entire amount of the bonus ($1,500,000); (ii) if Executive voluntarily
terminates his employment with the Company on or after January 12, 1995 but
prior to January 12, 1996, Executive will refund to the Company one-half of
the bonus ($750,000); and (iii) the bonus will be fully earned if Executive
does not voluntarily terminate his employment with the Company on or before
January 12, 1996.
20. Stock Options - Pursuant to the Company's 1994 Incentive Equity
Plan (the "Incentive Plan") the Company has awarded and granted to
Executive options to purchase 125,000 shares of Class B Common stock at an
exercise price of $14.125, and options to purchase 125,000 shares of Class
B Common Stock at an exercise price of $11.00 (together, the "1994 Stock
Options") with 25% of the shares covered by such stock options vesting
annually on a cumulative basis commencing January 2, 1995. The Company
further agreed to award and grant to Executive, pursuant to the Incentive
Plan, options (the "1995 Stock Options") to purchase 25,000 shares of Class
B Common Stock effective January 2, 1995, at an exercise price equal to the
market price (as defined in the Incentive Plan, of shares of such stock on
January 2, 1995, with 25% of the shares covered by the 1995 Stock Option
vesting annually on a cumulative basis commencing January 2, 1995. In the
event of a termination of Executive's employment by the Company for any
reason other than cause, the Company shall cause any unvested options under
the 1994 and 1995 Stock Options to vest immediately. The 1994 Stock
Options and the 1995 Stock Options are evidenced, by certain Amended and
Restated Stock Option Grants with respect thereto, and the Company and the
Executive acknowledge and agree that any and all other agreements with
respect to Executive's stock option grants have been superseded and
replaced thereby.
21. Restricted Stock Award - Pursuant to the Incentive Plan,
Executive has been awarded restricted stock grants for a total of 75,000
shares of the Company's Class B Common Stock with 50% of such restricted
stock vesting on March 1, 1995 and 50% vesting on March 1, 1996. In the
event of a termination of Executive's employment by the Company for any
reason other than cause, the Company shall cause any unvested stock under
such grants to vest immediately. Such grant of restricted stock is
evidenced by that certain restricted Stock Grant Agreement, executed by the
Company September 21, 1994, and Company and Executive acknowledge and agree
that any and all other agreements with respect to Executive's restricted
stock grants have been superseded and replaced thereby.
22. Automobile - The Company has leased an automobile for Executive's
use pursuant to a lease agreement dated July 11, 1994 with Chase Auto
Leasing Corp. The Company agrees to take such action as may be necessary
to permit Executive, at his option, to take title to the automobile at the
completion of the lease term by paying the residual payment then owing
under the lease.
The parties hereto have executed this Agreement as of the date and
year first above written.
CONTINENTAL AIRLINES, INC. (the
"Company")
By /s/ Joni K. Ffrench
/s/ Gordon M. Bethune
GORDON M. BETHUNE ("Executive")
Exhibit 10.8(h)
March 30, 1995
Mr. John E. Luth
Dear Mr. Luth:
This letter agreement (the "Agreement") sets forth all of the
understandings and agreements between you and Continental Airlines, Inc.
("Continental") and its affiliates relating to (1) the termination of your
employment with Continental, (2) the resignation from your position as
Senior Vice-President and Chief Information Officer of Continental and (3)
your retention as a consultant to Continental. You and Continental hereby
agree that the effective date of the termination of your employment with
Continental will be March 31, 1995 (the "Termination Date") but that you
shall retain your title and position as Senior Vice-President and Chief
Information Officer of Continental until May 31, 1995. It is intended that
the arrangements set forth herein will fully close out all relationships
between you and Continental. You understand and agree that there are no
other commitments, express or implied, by Continental or any of its
affiliates, except those set forth in this Agreement and that this
Agreement supersedes any and all previous agreements, either written or
verbal, between you and Continental, including, without limitation, the
April 16, 1993 employment agreement.
Upon the Termination Date, you shall be entitled to any benefits or
rights you have earned under the terms of any employee benefit plans by
which you were covered during your employment in accordance with the terms
of those plans applicable to your termination of employment. On and after
the Termination Date, you shall accrue no further benefits under said
plans, except as specifically provided herein.
In addition, Continental is offering you the benefits set forth in
this Agreement in recognition of your termination of employment.
Continental intends that the benefits being offered hereby will fully close
out the relationship between Continental and its affiliates and you, and
any possible claims arising from or through that relationship.
Consequently, Continental is making the benefits described in this
Agreement available to you only on the conditions that you sign and return
this Agreement, by which you elect to conclude the relationship on this
mutually satisfactory basis.
You understand that you will be receiving the benefits discussed in
this Agreement as consideration for signing and returning the Agreement, by
which you agree to terminate your relationship with Continental and to
abide by the other obligations described herein. You also understand and
agree by signing this Agreement that there are no other commitments,
express or implied, by Continental or any of its affiliates other than
those set forth in this Agreement.
I. Benefits
The benefits being offered to you are as follows:
1. Continental will pay you a lump sum amount equal to $741,404 upon
this Agreement becoming effective, enforceable and irrevocable in
accordance with its terms on the Effective Date (as defined in Section V,
paragraph 14 hereof).
2. For a period of two and one-half years following the Termination
Date, you will continue in Continental's group insurance programs
(including long-term disability insurance and group term life insurance at
the normal rate - one-half current annual salary) or be provided
substantially comparable benefits, unless you accept other employment that
provides such comparable benefits. Your entitlement to benefit
continuation pursuant to the Consolidated Omnibus Budget Reconciliation Act
of 1985 shall commence at the end of such period.
3. For two and one-half years after the Termination Date, and subject
to your surrender of all annual pass cards in your possession to
Continental (in accordance with Section V, paragraph 12 hereof), you and
your eligible family members shall be entitled to pass privileges on
Continental Airlines of the same type and priority as you received prior to
the Termination Date, subject to any changes in policy generally applicable
to officers of Continental Airlines still in the employ thereof. Passes
shall be issued upon individual requests directly to the Continental
Airlines pass bureau.
4. Continental shall indemnify you against all losses, including
legal fees and expenses, arising from claims against you in connection with
your good-faith execution of your employment with Continental, to the
fullest extent permitted by the General Corporation Law of the State of
Delaware.
5. If you are liable for any excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 with respect to any benefits received by
you pursuant to this Agreement, Continental agrees to indemnify you for the
amount of such excise tax (and any penalties associated therewith) and for
the income, excise and employment taxes imposed on you with respect to any
payment pursuant to this paragraph 5. If any claim for tax is asserted by
any taxing authority against you that, if successful, would result in
indemnification by Continental under this paragraph 5, you agree to
promptly notify Continental in writing of such fact. You agree not to
settle, compromise, abandon or pay any such claim without Continental's
prior written consent. You agree that Continental will have the right to
control all aspects of dealings with the Internal Revenue Service and any
litigation related to such claim. If any such claim is made by any taxing
authority, Continental agrees to prosecute any contest or settlement of
such claim diligently.
6. Continental agrees to provide you with the outplacement services
of Reedie & Co., Inc., on terms and conditions Continental usually provides
to departing senior executives, for a period of up to six months from
either the Termination Date or the date of the termination of your
consulting arrangement with Continental, as you may elect.
II. Consulting Period from Termination Date Through August 1, 1995
During the consulting period from the Termination Date through August
1, 1995:
1. You will render consulting services to Continental. You will
devote yourself substantially to the full-time performance of the duties
requested of you by the executive officer to whom you reported immediately
prior to the Termination Date.
2. You shall be paid semi-monthly in arrears at a per annum rate of
$350,000 through May 31, 1995. From June 1, 1995, through July 31, 1995,
you shall be paid semi-monthly in arrears at a per annum rate of $175,000.
3. You shall not be eligible for any bonus under any Continental
bonus program currently in effect. You also waive the right to receive any
future compensation which may be awarded to other executives of Continental
on or after the Termination Date under any existing or new arrangements of
Continental.
4. Continental will pay to you $247,135 on the date that the final
documents memorializing the GE and Boeing deals are executed, but in any
event not later than May 31, 1995.
5. If the final documents memorializing the GE and Boeing deals are
executed on or before August 1, 1995, you have the option to terminate your
consulting arrangement with Continental upon the date of such execution (or
any date thereafter prior to August 1, 1995), upon which termination you
would cease to earn the amount which would otherwise be payable to you
under Section II, paragraph 2 above.
6. Continental may terminate your employment and pay you no further
amounts (other than amounts already accrued) under Section II, paragraph 2
above at any time as a result of your death, disability (resulting in your
failure to perform your duties to Continental on a substantially full-time
basis for over 60 days within any 120-day period) or your willful
misconduct or gross neglect of duty.
III. Restrictive Covenants
All payments and benefits due to you hereunder shall be subject to
your compliance with the following provisions during the period of your
consulting arrangement with Continental and for a period ending one year
after the termination of your consulting arrangement:
1. You shall, upon reasonable notice, furnish such information and
proper assistance to Continental and its affiliates as may reasonably be
required in connection with any litigation in which it or any of its
affiliates is, or may become, a party.
2. You will not discuss with any other employee of Continental or its
affiliates the formation or operations of any business intended to compete
with Continental or its affiliates, or the possible future employment of
such other employee by any business.
3. Any public statements made by you concerning Continental or its
affiliates, officers, directors or employees shall be submitted for
approval in writing from Continental's public relations and legal
departments.
If you fail to comply with the above obligations, Continental may
cease extending benefits to you and may recover by appropriate action
instituted in any court of competent jurisdiction any severance payments
made hereunder theretofore paid to you.
IV. General Release and Waiver
1. YOU AGREE TO RELEASE, REMISE, ACQUIT AND DISCHARGE CONTINENTAL AND
ITS AFFILIATES AND ITS AND THEIR RESPECTIVE DIVISIONS, OFFICERS, DIRECTORS,
CONTROLLING PERSONS, AGENTS, EMPLOYEES, CONSULTANTS, INDEPENDENT
CONTRACTORS, ATTORNEYS, ADVISERS, SUCCESSORS AND ASSIGNS, JOINTLY AND
SEVERALLY, FROM ANY AND ALL CLAIMS, KNOWN OR UNKNOWN, WHICH YOU, YOUR
HEIRS, SUCCESSORS, OR ASSIGNS HAVE OR MAY HAVE AGAINST ANY OF SUCH PARTIES
AND ANY AND ALL LIABILITY (INCLUDING ANY CLAIMS UNDER THE APRIL 16, 1993
EMPLOYMENT AGREEMENT) THAT ANY OF SUCH PARTIES MAY HAVE TO YOU WHETHER
DENOMINATED CLAIMS, DEMANDS, CAUSES OF ACTION, OBLIGATIONS, DAMAGES OR
LIABILITIES ARISING FROM ANY AND ALL BASES, HOWEVER DENOMINATED, INCLUDING
BUT NOT LIMITED TO CLAIMS OF DISCRIMINATION UNDER THE U.S. AGE
DISCRIMINATION IN EMPLOYMENT ACT, TITLE VII OF THE UNITED STATES CIVIL
RIGHTS ACT OF 1964, 42 U.S.C. PARAGRAPH 1981, V.T.C.A., LABOR CODE
PARAGRAPH 21.051(1) OR ANY OTHER TEXAS LAW, OR ANY OTHER U.S. FEDERAL,
STATE, OR LOCAL LAW OR ANY OTHER LAW, RULE, OR REGULATION OR WORKERS'
COMPENSATION OR DISABILITY CLAIMS UNDER ANY SUCH LAWS. NOTWITHSTANDING ANY
OTHER PROVISION OF THIS AGREEMENT, THIS RELEASE IS NOT INTENDED TO
INTERFERE WITH YOUR RIGHT TO FILE A CHARGE WITH THE U.S. EQUAL EMPLOYMENT
OPPORTUNITY COMMISSION IN CONNECTION WITH ANY CLAIM YOU BELIEVE YOU MAY
HAVE AGAINST CONTINENTAL OR ANY OF ITS AFFILIATES. HOWEVER, BY SIGNING AND
RETURNING THIS AGREEMENT, YOU AGREE TO WAIVE THE RIGHT TO RECOVER IN ANY
PROCEEDING YOU MAY BRING BEFORE THE U.S. EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION OR IN ANY PROCEEDING BROUGHT BY THE U.S. EQUAL EMPLOYMENT
OPPORTUNITY COMMISSION ON YOUR BEHALF. THIS RELEASE RELATES TO CLAIMS
ARISING FROM AND DURING YOU RELATIONSHIP WITH CONTINENTAL AND ITS
AFFILIATES, OR AS A RESULT OF THE TERMINATION OF SUCH RELATIONSHIP. THIS
RELEASE IS FOR ANY RELIEF, NO MATTER HOW DENOMINATED, INCLUDING BUT NOT
LIMITED TO WAGES, BACK PAY, FRONT PAY, COMPENSATORY DAMAGES OR PUNITIVE
DAMAGES. YOU FURTHER AGREE THAT YOU WILL NOT FILE OR PERMIT TO BE FILED ON
YOUR BEHALF ANY SUCH CLAIM. THIS RELEASE SHALL NOT APPLY TO THE
OBLIGATIONS SET FORTH IN THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE
INDEMNIFICATION FOUND IN SECTION I, PARAGRAPH 4) OR ANY OTHER CLAIMS THAT
MAY ARISE AFTER THE DATE ON WHICH YOU SIGN THIS AGREEMENT.
2. YOU EXPRESSLY ACKNOWLEDGE THAT THE BENEFITS BEING OFFERED TO YOU
HEREBY CONSTITUTE VALUABLE CONSIDERATION FOR THE FOREGOING GENERAL RELEASE
AND WAIVER.
V. General Provisions
1. No Admission. This Agreement does not constitute an admission of
liability of any kind by Continental or any of its affiliates.
2. Assigns. (a) This Agreement is personal to you and, without the
prior written consent of the Board of Directors of Continental, shall not
be assignable by you otherwise than by will or the laws of descent and
distribution.
(b) The terms of this Agreement shall be binding and inure to the
benefit of Continental and its affiliates and their respective successors
and assigns.
3. Entire Agreement. This Agreement constitutes the entire
understanding between you and Continental and its affiliates with respect
to the subject matter hereof, and supersedes all prior understandings,
written or oral. The terms of this Agreement may be changed, modified or
discharged only by an instrument in writing signed by the parties hereto.
4. Governing Law. This Agreement shall be construed, enforced and
interpreted in accordance with applicable Federal law and the laws of the
State of Texas without reference to its principles of conflicts of law.
The parties hereto agree that in the event either party brings an action or
proceeding to enforce such party's rights under this Agreement, the
prevailing party in such action or proceeding shall be entitled to receive
from the other party an amount equal to the prevailing party's reasonable
attorney's fees and expenses incurred as a result of such action or
proceeding.
5. Taxes. All payments hereunder shall be subject to, and reduced
by, any applicable withholding taxes. Continental believes that you are
not subject to any excise tax under Section 4999 of the Internal Revenue
Code of 1986 with respect to any amounts payable hereunder. If any claim
for tax is asserted by any taxing authority against you that, if
successful, would result in indemnification by Continental under Section I,
paragraph 5, Continental agrees to prosecute any contest or settlement of
such claim diligently. You agree not to file any returns or reports, or
otherwise take any positions, with applicable taxing authorities that are
inconsistent with that belief. The obligations of Continental pursuant to
this Agreement are conditioned on your compliance with the preceding
sentence.
6. Execution. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be original.
7. Right to Contract. You represent and warrant to Continental and
its affiliates that you have no obligation to any other person or entity
that would affect or conflict with any of your obligations hereunder, and
that the complete performance of your obligations hereunder will not
violate any contract by which you are bound.
8. Enforceability. The failure of either party at any time to
enforce any of the provisions of this Agreement or to require performance
by the other party of any provision hereof shall not be construed to be a
waiver of such provisions or to affect the validity of this Agreement, or
of any part hereof, or of the right of either party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
9. Confidentiality. You shall treat this Agreement as confidential
and will not disclose its existence or contents except as may be required
by applicable law.
10. Notices. Written notices required or furnished under this
Agreement shall be sent to the following addresses:
to Continental: Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: Corporate Secretary
to you: Mr. John E. Luth
Information to be treated confidentially
by Continental Airlines, Inc.
Notices shall be effective on the first business day following receipt
thereof. Notices sent by mail shall be deemed received on the date of
delivery shown on the return receipt.
11. Severability. If any provision of this Agreement is determined
to be so broad as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable. The unenforceability or invalidity
or any provision of this Agreement, or any part thereof, shall not render
any other provision of this Agreement invalid or unenforceable.
12. Return of Property. Except as is otherwise specifically provided
in this Agreement, upon your Termination Date (or, if necessary, upon the
termination of your consulting arrangement with Continental), you will
return to Continental and its affiliates, immediately, any personal
property of Continental and its affiliates such as keys, company credit
cards and any annual pass cards. You shall not charge any additional
amounts on any company credit card.
13. Payments. The payments made to you hereunder will not constitute
compensation for any purpose under any retirement, profit-sharing, pension,
stock bonus or similar plan or arrangement maintained by Continental or any
of its affiliates.
14. Knowing and Voluntary Waiver; Right to Consider and Revoke. (a)
You understand that you may consider whether to agree to the terms
contained herein for a period of twenty-one days after the date hereof.
Accordingly, you may sign and return this Agreement by April 20, 1995 to
acknowledge your understanding of and agreement with the foregoing. Prior
to your signing this Agreement, you are advised to consult with an
attorney.
(b) This Agreement will become effective, enforceable and irrevocable
seven days after the date on which you sign it (the "Effective Date").
During the seven-day period prior to the Effective Date, you may revoke
your agreement to accept the terms hereof by indicating in writing to
Continental your intention to revoke. Of course, if you exercise your
right to revoke hereunder, you will forfeit your right to receive of the
benefits offered to you under this Agreement.
Very truly yours,
CONTINENTAL AIRLINES, INC.
Date: March 31, 1995 By: /s/ Gordon M. Bethune
Gordon M. Bethune
President and
Chief Executive Officer
Acknowledged and Accepted:
/s/ John E. Luth Date: March 30, 1995
John E. Luth
Exhibit 10.8(i)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of May 24, 1993 is entered into by
and between CONTINENTAL AIRLINES, INC. (the "Company"), a Delaware
corporation, and DONALD G. VALENTINE, (the "Executive"). The Company and
the Executive are referred to herein individually as a "Party" and
collectively as the "Parties".
The Company wishes to assure itself of the continued services of the
Executive, and the Executive is willing to continue employment with the
Company on a full-time basis, and upon the other terms and conditions
hereinafter provided.
In consideration of the mutual covenants contained herein, the Parties
agree as follows:
1. Employment - The Company agrees to employ the Executive, and the
Executive agrees to remain in the employ of the Company under the terms and
conditions herein provided.
2. Position - During his employment hereunder, the Executive agrees
to serve the Company and the Company shall employ the Executive in such
capacity or capacities as may be specified from time to time by the Board
of Directors of the Company, subject to the provisions of Section 5(a)(ii)
hereof and that such Executive shall not be required to work at a location
other than one within the contiguous 48 states of the United States of
America.
3. Term - The Executive's employment shall be one at will, to-wit:
either the Executive or the Company shall have the right to terminate it at
any time, with or without cause, and without any liability or obligation of
either Party to the other except as may be expressly specified in this
Agreement.
4. Compensation - The Company will pay the Executive a base salary
at an initial annual rate of $325,000, payable in substantially equal semi-
monthly installments. During his employment with the Company, the
Executive's salary shall be reviewed periodically in accordance with
Company policy and such review may result in an increase in said salary
which such amount shall be substituted for the specified amount set forth
in this Section.
5. Termination of Employment -
(a) A "Termination of Employment" shall be defined as any one of
the following: (i) the termination of the Executive's employment by the
Company for any reason other than (A) willful misconduct or gross neglect
of duty by the Executive, (B) retirement under the ordinary retirement
program of the Company, (C) disability of the Executive resulting in
compensated absence from his duties to the Company on a full-time basis for
over 180 days or (D) death of the Executive: (ii) the termination of the
Executive's employment by the Executive after providing the Company with
ten business days' prior written notice that the executive is terminating
employment because of (A) a material reduction in the responsibilities or
title of the Executive or the corporate amenities to which he was entitled
immediately prior thereto or (B) a reduction of the Executive's cash
compensation by more than 10% below the highest annual salary from time to
time in effect for the Executive; provided, however, that no Termination of
Employment shall occur pursuant to the preceding clause (ii) if the
circumstances described in the preceding clauses (ii)(A) and (ii)(B) are
corrected prior to the expiration of ten business days from the date the
Executive provided notice to the Company of his intent to terminate
employment.
(b) Upon a Termination of Employment, or upon the expiration of
long term disability insurance benefits (prior to the Executive's regular
retirement date) while Executive remains disabled, the Company will pay the
Executive, (subject to the provisions of Section 9 hereof) as severance
pay or liquidated damages, or both, a lump sum amount equal to (i) 200% of
his then current Annual Compensation from the Company; plus, (ii) that
amount due to such Executive under his previous Employment Agreement due to
1992 pay reduction in excess of ten percent of Executive's stated
compensation under such previous Employment Agreement; plus, (iii) that
cumulated amount of pay reductions permitted by Section 5(f) hereof in
excess of 10% of the Executive's annual base salary set forth in Section 4
of this Agreement, from the date of this Agreement until the date of
Termination of Employment. "Annual Compensation" shall mean: Annualized
rate of pay as set forth in Section 4 hereof plus a Deemed Annual Bonus.
"Deemed Annual Bonus" shall be 25% of the amount set forth in Section 4
hereof.
(c) Executive shall be under no obligation to mitigate damage to
the Company hereunder and no future earnings by Executive from any source
shall be payable to the Company or be subject to offset pursuant to this
Agreement.
(d) For a period of two and one-half years following Termination
of Employment, the Executive shall continue in the Company's group
insurance programs, including long-term disability insurance (or be
provided substantially comparable benefits), provided he has not accepted
other employment that provides comparable benefits. The Executive's
entitlement to benefit continuation pursuant to the Consolidated Omnibus
Budget Reconciliation Act shall commence at the end of such period.
(e) For two and one-half years following Termination of
Employment, and provided all annual pass cards in the possession of the
Executive have been surrendered to the Company, the Executive and his
eligible family members shall be entitled to pass privileges on Continental
Airlines of the same type and priority as the Executive received prior to
the Termination of Employment, subject to any changes in policy generally
applicable to officers of Continental Airlines still in the employ thereof.
Passes shall be issued upon individual requests directly to the Continental
Airlines pass bureau.
(f) The Company shall be entitled to continue pay reductions in
effect on the date of this Agreement for so long as, and to the extent
that, such pay reductions are in effect for the Company's work force in
general. Such continuation of previous pay reductions shall not constitute
a violation of Section 5(a)(ii)(B) hereof.
6. Indemnification - The Company shall indemnify the Executive
against all losses, including legal fees and expenses, arising from claims
against the Executive in connection with the Executive's good-faith
execution of his employment hereunder, to the fullest extent permitted by
the Corporation Code of the State of Delaware.
7. Tax Indemnity - The Company shall indemnify Executive on a fully
grossed-up after-tax basis against any tax liability (including, without
limitation, excise taxes incurred pursuant to IRC Paragraph 4999) resulting
from the payment of severance or the provision of other benefits following
Termination of Employment pursuant to this Agreement, to the extent that
Executive's tax payments are at a higher percentage of total income than
they would have been absent such payment of severance or provision of
benefits.
8. Life Insurance - The Company shall maintain life insurance for
the Executive in the amount of the severance payable to Executive pursuant
to Section 5 hereof. In the absence of such life insurance, the Company
shall pay Executive's beneficiary or beneficiaries an amount equal to such
severance in the event of the death of Executive while employed by the
Company. The Company shall hold the Executive harmless from any tax
liability accruing to Executive as a result of the purchase of such
insurance, and likewise shall hold Executive's estate, heirs and assigns
harmless from any tax liability accruing because of the failure to maintain
such insurance.
9. Post-Termination Obligations - All payments and benefits due to
the Executive hereunder shall be subject to the Executive's compliance with
the following provisions during the applicability of this Agreement and for
one full year after the expiration or termination hereof:
(a) The Executive shall, upon reasonable notice, furnish such
information and proper assistance to the Company and its affiliates as may
reasonably be required in connection with any litigation in which it or any
of its affiliates is, or may become, a party.
(b) The Executive will not discuss with any other employee of
the Company or its affiliates the formation or operations of any business
intended to compete with the Company or its affiliates, or the possible
future employment of such other employee by any business.
(c) Any public statements made by the Executive concerning the
Company or its affiliates, officers, directors or employees shall be
submitted for approval in writing from the Company's public relations and
legal departments.
If the Executive fails to comply with the above obligations, the
Company may cease extending benefits to the Executive and may recover by
appropriate action instituted in any court of competent jurisdiction any
severance payments theretofore paid to the Executive.
10. Consolidation, Merger, Sale of Assets - This Agreement shall be
binding upon and inure to the benefit of the Executive and the Company and
its successors and assigns, including without limitation any corporation
with or into which the Company may be consolidated or merged or to which
the Company sells or transfers all or substantially all of its assets.
11. Notices - Written notices required or furnished under this
Agreement shall be sent to the following addresses:
to the Company: Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: Corporate Secretary
to the Executive: Information to be treated
confidentially by
Continental Airlines, Inc.
Notices shall be effective on the first business day following receipt
thereof. Notices sent by mail shall be deemed received on the date of
delivery shown on the return receipt.
12. Amendments - This Agreement may not be amended or changed, orally
or in writing except by the written agreement of the Parties.
13. Governing Law - This Agreement and any dispute arising under or
relating to any provision of this Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
14. Confidentiality - Except as provided by law, all information
provided by either Party to the other hereunder, including the terms and
conditions of the Agreement, shall be treated by the Party receiving such
information as confidential, and shall not be disclosed by such Party to
any party without the prior written consent of the Party from which the
information was obtained. This obligation of confidentiality shall survive
termination of this Agreement.
15. Severability - If any one or more of the provisions contained in
this Agreement are held to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
16. Previous Agreements - This Agreement, once it becomes effective
and enforceable, will replace and supersede any and all previous employment
agreements, either written or verbal, between the Parties. The Company
will, however, remain obligated to make the payment specified in Section
5(b)(ii) hereof in the event of a Termination of Employment, and will
remain obligated on its commitment to indemnify the Executive pursuant to
Executive's previous employment agreement with the Company affirmed by
order of the Delaware Bankruptcy Court dated August 21, 1991.
17. Captions - All Section titles or captions in this Agreement are
for convenience only and shall not be deemed as part of this Agreement.
The parties hereto have executed this Agreement as of the dated and
year first above written.
CONTINENTAL AIRLINES, INC.
(The Company)
By /s/ Robert R. Ferguson III
/s/ Donald G. Valentine
DONALD G. VALENTINE ("Executive")
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 10.11(a)
Supplemental Agreement No. 6
to
Purchase Agreement No. 1782
between
The Boeing Company
and
Continental Airlines Inc.
Relating to Boeing Model 737-524 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of
March 31 , 1995 by and between THE BOEING COMPANY, a Dela-
ware corporation with its principal office in Seattle, Wash-
ington, (Boeing) and Continental Airlines Inc., a Delaware
corporation with its principal office in Houston, Texas (-
Buyer);
WHEREAS, the parties hereto entered into Purchase
Agreement No. 1782 dated March 18, 1993, as amended and
supplemented, relating to Boeing Model 737-524 aircraft (the
Agreement); and
WHEREAS, Boeing has offered, at Buyer's request, to
reschedule delivery of Aircraft (Rescheduled Aircraft),
currently scheduled to deliver to Buyer starting in 1996, to
1998 and later subject to certain terms and conditions; and
WHEREAS, Buyer has accepted Boeing's offer, and
agreed to incorporate the terms and conditions of the ac-
cepted proposal in the Agreement; and
WHEREAS, Boeing and Buyer have agreed to amend the
Agreement to incorporate certain other changes;
NOW THEREFORE, in consideration of the mutual cove-
nants herein contained, the parties agree to amend the Agre-
ement as follows:
1. Table of Contents and Articles:
1.1 Remove and replace, in its entirety, the
Table of Contents with a new Table of Contents (attached
hereto) to reflect amendment of the Agreement.
1.2 Remove and replace, in its entirety, Article
2, Delivery, Title and Risk of Loss, with new Article 2
(attached hereto) to incorporate the delivery schedule for
the Rescheduled Aircraft.
1.3 Remove and replace, in its entirety, Article
3, Price of Aircraft, with new Article 3 (attached hereto)
to incorporate revised Advance Payment Base Prices for the
Rescheduled Aircraft.
1.4 Remove and replace, in its entirety, Article
7, Changes to the Detail Specification, with new Article 7
(attached hereto). Article 7.2, Program Changes, has been
deleted and replaced with new Article 7.2, Change Orders.
1.5 Remove and replace, in its entirety, the Sche-
dule for Delivery of Model 737-524 Aircraft following Arti-
cle 15, with a revised schedule (attached hereto) to incor-
porate the Rescheduled Aircraft and update information re-
lating to previously delivered Aircraft.
2. Exhibit D:
2.1 Remove and replace Pages D-1 through D-4 of
Exhibit D, Price Adjustment Due to Economic Fluctuations
Airframe Price Adjustment (1992 Base Price), with new Pages
D-1 through D-4 (attached hereto) to incorporate a revised
schedule for the Rescheduled Aircraft.
3. Letter Agreements:
3.1 Delete, in its entirety, Letter Agreement
1782-3, Option Aircraft, relating to the Option Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
The Agreement will be deemed to be supplemented to the ex-
tent herein provided and as so supplemented will continue in
full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above
written.
THE BOEING COMPANY CONTINENTAL AIRLINES INC.
By: /s/ RICHARD G. PLANK By: /s/ JOHN LUTH
Its: Attorney-In-Fact Its:Senior Vice President
TABLE OF CONTENTS
ARTICLES Page Rev By
ARTICLE 1. Subject Matter of Sale............ 1-1 SA#2
ARTICLE 2. Delivery, Title and Risk of Loss.. 2-1 SA#6
ARTICLE 3. Price of Aircraft................. 3-1 SA#6
ARTICLE 4. Taxes............................. 4-1
ARTICLE 5. Payment........................... 5-1 SA#1
ARTICLE 6. Excusable Delay................... 6-1
ARTICLE 7. Changes to the Detail Specification 7-1 SA#6
ARTICLE 8. Federal Aviation Requirements and
Certificates ..................... 8-1
ARTICLE 9. Representatives, Inspection,
Flights and Test Data............. 9-1
ARTICLE 10. Assignment, Resale or Lease....... 10-1
ARTICLE 11. Termination for Certain Events.... 11-1
ARTICLE 12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance..................... 12-1
ARTICLE 13. Buyer Furnished Equipment and
Spare Parts....................... 13-1 SA#2
ARTICLE 14. Contractual Notices and Requests.. 14-1
ARTICLE 15. Miscellaneous..................... 15-1
Schedule for Delivery of Model 737-524 Aircraft SA#6
EXHIBITS
EXHIBIT A Aircraft Configuration............ A-1 SA#2
Block A and B Aircraft
EXHIBIT A1 Aircraft Configuration............ A1-1 SA#4
Block C Aircraft
EXHIBIT B Product Assurance Document........ B-1 SA#2
EXHIBIT C Customer Support Document ........ C-1 SA#2
EHIBIT DPrice Adjustments Due to Economic SA#6
Fluctuations - Airframe and Engines D-1
EXHIBIT E Buyer Furnished Equipment
Provisions Document..................E-1 SA#2
EXHIBIT F Defined Terms Document ..............F-1 SA#2
LETTER AGREEMENTS
1782-1 Spare Parts Support SA#2
1782-2 Seller Purchased Equipment SA#2
1782-3 Option Aircraft SA#6
CANCELLED IN ITS ENTIRETY
1782-4 Waiver of Aircraft Demonstration SA#2
Flights
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPA-
RATELY WITH THE SECURITIES AND EXCHANGE COM-
MISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
Supplemental Agreements Dated as of
Supplemental Agreement No. 1 April 29, 1993
Supplemental Agreement No. 2 November 4, 1993
Supplemental Agreement No. 3 December 23, 1993
Supplemental Agreement No. 4 April 1, 1994
Supplemental Agreement No. 5 July 1, 1994
Supplemental Agreement No. 6 March 31, 1995
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by
Boeing, and Buyer will accept delivery of the Aircraft, in accordance
with the following schedule:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.2 Notice of Target Delivery Date. Boeing will give Buyer
notice of the Target Delivery Date of the Aircraft approximately 30
days prior to the scheduled month of delivery.
2.3 Notice of Delivery Date. Boeing will give Buyer at least
7 days' notice of the delivery date of the Aircraft. If an Aircraft
delivery is delayed beyond such delivery date due to the responsibility
of Buyer, Buyer will reimburse Boeing for all costs incurred by Boeing
as a result of such delay, including amounts for storage, insurance,
Taxes, preservation or protection of the Aircraft and interest on pay-
ments due.
2.4 Place of Delivery. The Aircraft will be delivered at a
facility selected by Boeing in the State of Washington, unless mutually
agreed otherwise.
2.5 Title and Risk of Loss. Title to and risk of loss of an
Aircraft will pass from Boeing to Buyer upon delivery of such Aircraft,
but not prior thereto.
2.6 Documents of Title. Upon delivery of and payment for
each Aircraft, Boeing shall deliver to Buyer a bill of sale duly con-
veying to Buyer good title to such Aircraft free and clear of all
liens, claims, charges and encumbrances of every kind whatsoever, and
such other appropriate documents of title as Buyer may reasonably re-
quest.
2.7 Aircraft Delivery Schedule. The Schedule for Delivery of
Model 737-524 Aircraft, following Article 15, is a delivery schedule,
sorted by month and year of delivery, for the Aircraft.
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features listed in Exhib-
it A which have been selected by Buyer.
3.1.2 Base Airframe Price is the Aircraft Basic Price
excluding the price of Special Features and Engines.
3.1.3 Engine Price is the price established by the En-
gine manufacturer for the Engines installed on the Aircraft including
all accessories, equipment and parts set forth in Exhibit D.
3.1.4 Aircraft Basic Price is comprised of the Base
Airframe Price, the Engine Price and the price of the Special Features.
3.1.5 Economic Price Adjustment is the adjustment to the
Aircraft Basic Price (Base Airframe, Engine and Special Features) as
calculated pursuant to Exhibit D.
3.1.6 Aircraft Price is the total amount Buyer is to pay
for the Aircraft at the time of delivery.
3.1.7 Price First Published is the first price published
by Boeing for the same model of aircraft to be delivered in the same
general time period as the affected Aircraft and is used to establish
the Base Airframe Price when the Base Airframe Price was not establis-
hed at the time of execution of this Agreement.
3.2 Aircraft Basic Price.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATE-
LY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.3 Aircraft Price.
3.3.1 Block A Aircraft. The Aircraft Price of the Block
A Aircraft will be established at the time of delivery of such Aircraft
to Buyer and will be the sum of:
3.3.1.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATE-
LY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
plus
3.3.1.2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATE-
LY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
plus
3.3.1.3 other price adjustments made pursu-
ant to this Agreement or other written agreements executed by Boeing
and Buyer.
3.3.2 Block B Aircraft. The Aircraft Price of the Block
B Aircraft will be established at the time of delivery of such Aircraft
to Buyer and will be the sum of:
3.3.2.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATE-
LY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.3.2.2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATE-
LY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
plus
3.3.2.3 other price adjustments made pursu-
ant to this Agreement or other written agreements executed by Boeing
and Buyer.
3.3.3 Block C Aircraft. The Aircraft Price of the Block
C Aircraft will be established at the time of delivery of such Aircraft
to Buyer and will be the sum of:
3.3.3.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] plus
3.3.3.2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] plus
3.3.2.3 other price adjustments made pursu-
ant to this Agreement or other written agreements executed by Boeing
and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATE-
LY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.4.2 Adjustment of Advance Payment Base Prices - Long-Lead
Aircraft. For Aircraft scheduled for delivery 36 months or more after
the date of this Agreement, the Advance Payment Base Prices appearing
in Article 3.4.1 will be used to determine the amount of the first
advance payment to be made by Buyer on the Aircraft. No later than 25
months before the scheduled month of delivery of the first Aircraft
scheduled for delivery in a calendar year (First Aircraft), Boeing will
increase or decrease the Advance Payment Base Price of the First Air-
craft and all Aircraft scheduled for delivery after the First Aircraft
as required to reflect the effects of [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSU-
ANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Boeing will provide the
adjusted Advance Payment Base Prices for each affected Aircraft to
Buyer, and the advance payment schedule will be considered amended to
substitute such adjusted Advance Payment Base Prices.
ARTICLE 7.
Changes to the Detail Specification.
7.1 Development Changes. Boeing may, at its own expense and
without Buyer's consent, incorporate Development Changes in the Detail
Specification and the Aircraft prior to delivery to Buyer. Development
Changes are defined as changes to the basic specification for Model -
737-500 aircraft that neither affect the Aircraft Purchase Price nor
adversely affect Aircraft delivery, guaranteed weight, guaranteed per-
formance or compliance with the interchangeability or replaceability
requirements set forth in the Detail Specification. Development Chang-
es are changes deemed necessary to correct defects, prevent delay or
ensure compliance with this Agreement. If Boeing makes changes pursu-
ant to this paragraph, Boeing will promptly notify Buyer of such chang-
es.
7.2 Change Orders. The Detail Specification and associated
provisions of this Agreement may be amended by Change Order or other
written agreement, which will state the particular changes to be made
and any effect on design, performance, weight, balance, time of deliv-
ery, Aircraft Basic Price and Advance Payment Base Price.
Continental Airlines, Inc.
Delivery Schedule for Model 737-524 Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
PRICE ADJUSTMENT DUE TO
ECONOMIC FLUCTUATIONS
AIRFRAME PRICE ADJUSTMENT
(1992 Base Price)
(Relating to Block A, B and C Aircraft)
1. Formula.
The Airframe Price Adjustment will be determined at the
time of Aircraft delivery in accordance with the following
formula:
Pa = (P)(L + M - 1)
Where:
Pa = Airframe Price Adjustment.
L = .65 x ECI
116.2
M = .35 x ICI
115.9
P = Aircraft Basic Price (as set forth in Arti-
cle 3.2 of this Agreement) less the base price
of Engines (as defined in this Exhibit D) in the
amount of:
Block A and B Aircraft [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
Block C Aircraft [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
ECI = A value using the "Employment Cost
Index for workers in aerospace manufacturing"
(aircraft manufacturing, standard industrial
classification code 3721, compensation, base
month and year June 1989 = 100), as released by
the Bureau of Labor Statistics, U.S. Department
of Labor on a quarterly basis for the months of
March, June, September and December, calculated
as follows: A three-month arithmetic average
value (expressed as a decimal and rounded to the
nearest tenth) will be determined using the
months set forth in the table below for the
applicable Aircraft, with the released Employ-
ment Cost Index value described above for the
month of March also being used for the months of
January and February; the value for June also
used for April and May; the value for September
also used for July and August; and the value for
December also used for October and November.
ICI = The three-month arithmetic average of
the released monthly values for the Industrial
Commodities Index as set forth in the "Producer
Prices and Price Index" (Base Year 1982 = 100)
as released by the Bureau of Labor Statistics,
U.S. Department of Labor values (expressed as a
decimal and rounded to the nearest tenth) for
the months set forth in the table below for the
applicable Aircraft.
In determining the value of L, the ratio of ECI di-
vided by 116.2 will be expressed as a decimal rounded to the
nearest ten-thousandth and then multiplied by .65 with the
resulting value also expressed as a decimal and rounded to
the nearest ten-thousandth.
In determining the value of M, the ratio of ICI di-
vided by 115.9 will be expressed as a decimal rounded to the
nearest ten-thousandth and then multiplied by .35 with the
resulting value also expressed as a decimal and rounded to
the nearest ten-thousandth.
[CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
The following definitions of B and D will apply:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATE-
LY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
2. If at the time of delivery of an Aircraft Boeing is
unable to determine the Airframe Price Adjustment because
the applicable values to be used to determine the ECI and
ICI have not been released by the Bureau of Labor Statis-
tics, then:
2.1 The Airframe Price Adjustment, to be used at
the time of delivery of each of the Aircraft, will be deter-
mined by utilizing the escalation provisions set forth
above. The values released by the Bureau of Labor Statis-
tics and available to Boeing 30 days prior to scheduled
month of Aircraft delivery will be used to determine the ECI
and ICI values for the applicable months (including those
noted as preliminary by the Bureau of Labor Statistics) to
calculate the Airframe Price Adjustment. If no values have
been released for an applicable month, the provisions set
forth in Paragraph 2.2 below will apply. If prior to deliv-
ery of an Aircraft the U.S. Department of Labor changes the
base year for determination of the ECI or ICI values as
defined above, such rebased values will be incorporated in
the Airframe Price Adjustment calculation. The payment by
Buyer to Boeing of the amount of the Purchase Price for such
Aircraft, as determined at the time of Aircraft delivery,
will be deemed to be the payment for such Aircraft required
at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S.
Department of Labor substantially revises the methodology
used for the determination of the values to be used to de-
termine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released
values), or for any reason has not released values needed to
determine the applicable Aircraft Airframe Price Adjustment,
the parties will, prior to delivery of any such Aircraft,
select a substitute for such values from data published by
the Bureau of Labor Statistics or other similar data report-
ed by non-governmental United States organizations, such
substitute to lead in application to the same adjustment
result, insofar as possible, as would have been achieved by
continuing the use of the original values as they may have
fluctuated during the applicable time period. Appropriate
revision of the formula will be made as required to reflect
any substitute values. However, if within 24 months from
delivery of the Aircraft the Bureau of Labor Statistics
should resume releasing values for the months needed to
determine the Airframe Price Adjustment, such values will be
used to determine any increase or decrease in the Airframe
Price Adjustment for the Aircraft from that determined at
the time of delivery of such Aircraft.
2.3 In the event escalation provisions are made
non-enforceable or otherwise rendered null and void by any
agency of the United States Government, the parties agree,
to the extent they may lawfully do so, to equitably adjust
the Purchase Price of any affected Aircraft to reflect an
allowance for increases or decreases in labor compensation
and material costs occurring since February, 1992, which is
consistent with the applicable provisions of paragraph 1 of
this Exhibit D.
2.4 If required, Boeing will submit either a sup-
plemental invoice or refund the amounts due Buyer as appro-
priate to reflect any increase or decrease in the Airframe
Price Adjustment for the Aircraft from that determined at
the time of delivery of such Aircraft. Any payments due
Boeing or Buyer will be made with reasonable promptness.
3. For the calculations herein, the values released by
the Bureau of Labor Statistics and available to Boeing 30
days prior to scheduled month of Aircraft delivery will be
used to determine the ECI and ICI values for the applicable
months (including those noted as preliminary by the Bureau
of Labor Statistics) to calculate the Airframe Price Adjust-
ment.
Note: Any rounding of a number, as required under
this Exhibit D with respect to escalation of
the airframe price, will be accomplished as
follows: if the first digit of the portion to
be dropped from the number to be rounded is
five or greater, the preceding digit will be
raised to the next higher number.
6-1162-WLJ-366R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-366R1 to
Purchase Agreement No. 1782 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPA-
RATELY WITH THE SECURITIES AND EXCHANGE COMMIS-
SION PURSUANT TO A REQUEST FOR CONFIDENTIAL TRE-
ATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1782
dated March 18, 1993 as amended and supplemented (the
Agreement) between THE BOEING COMPANY (Boeing) and CONTI-
NENTAL AIRLINES, INC., (Buyer) relating to Model
737-524 aircraft (the Aircraft). Letter Agreement 6-1162-
WLJ-366 is hereby cancelled and superceded.
All terms used herein and in the Agreement, and not de-
fined herein, will have the same meaning as in the Agree-
ment.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by signa-
ture below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-374R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-374R1 to
Purchase Agreement No. 1782 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EX-
CHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No.
1782 dated March 18, 1993, as amended and supplemented
(the Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC., (Buyer) relating to Model
737-524 aircraft (the Aircraft). Letter Agreement 6-
1162-WLJ-374 is hereby cancelled and superceded.
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
1. Boeing and Buyer each understand that certain
commercial and financial information contained in the
documents listed below (Confidential Documents) is
considered by the other party to be confidential.
2. Boeing and Buyer agree that each party will
treat the Confidential Documents and the information
contained therein as confidential and will not, without
the other party's prior written consent, disclose such
Confidential Documents or any information contained
therein to any other person or entity except as may be
required by (i) applicable law or governmental regula-
tions; or (ii) for financing the Aircraft in accordance
with the provisions of Article 10 of the Agreement.
3. In connection with Buyer's disclosure or filing
of Confidential Documents, or the information contained
therein pursuant to any such applicable law or govern-
mental regulation, Buyer will request and use its best
reasonable efforts to obtain confidential treatment of
such Confidential Documents and the information con-
tained therein. Boeing agrees to cooperate with Buyer
in making and supporting its request for confidential
treatment.
Schedule of Confidential Documents
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO as of this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-377R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-377R1 to
Purchase Agreement No. 1782 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPA-
RATELY WITH THE SECURITIES AND EXCHANGE COMMIS-
SION PURSUANT TO A REQUEST FOR CONFIDENTIAL TRE-
ATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1782
dated March 18, 1993, as amended and supplemented, (the
Agreement) between THE BOEING COMPANY (Boeing) and CONTI-
NENTAL AIRLINES, INC., (Buyer) relating to Model 737-524
aircraft (the Aircraft). Letter Agreement 6-1162-WLJ-377
is hereby cancelled and superceded.
All terms used herein and in the Agreement, and not de-
fined herein, will have the same meaning as in the Agree-
ment.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by sig-
nature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-383R1
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-383R1 to
Purchase Agreement No. 1782 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSU-
ANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1782
dated March 18, 1993, as amended and supplemented, (the Agr-
eement) between THE BOEING COMPANY (Boeing) and CONTINENTAL
AIRLINES, INC., (Buyer) relating to Model 737-524 aircraft
(the Aircraft). Letter Agreement 6-1162-WLJ-383 is hereby
cancelled and superceded.
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A RE-
QUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by signature
below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-RGP-946
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 6-1162-RGP-946 to
Purchase Agreements No. 1782, 1783, 1784 and
1785 - [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COM-
MISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
Gentlemen:
Reference is made to the following Purchase Agreements,
each dated March 18, 1993, as amended and supplemented
(the Purchase Agreements) between THE BOEING COMPANY (Boe-
ing) and CONTINENTAL AIRLINES, INC. (Buyer): Purchase
Agreement 1782 relating to model 737-524 Aircraft; Pur-
chase Agreement 1783 relating to model 757-224 Aircraft;
Purchase 1784 relating to model 767-324ER Aircraft; and
Purchase Agreement 1785 relating to model 777-224 Air-
craft. The Aircraft rescheduled for delivery to Buyer in
1998 and later are sometimes hereinafter referred to as
the Rescheduled Aircraft.
This letter, when accepted by Buyer, will become part of
the Purchase Agreements and will evidence our further
agreement with respect to the matters set forth below.
All terms used herein and in the Purchase Agreement, and
not defined herein, shall have the same meaning as in the
Purchase Agreements.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by signa-
ture below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
Attachment A to 6-1162-RGP-946
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 10.12(a)
Supplemental Agreement No. 4
to
Purchase Agreement No. 1783
between
The Boeing Company
and
Continental Airlines Inc.
Relating to Boeing Model 757-224 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of
March ___, 1995 by and between THE BOEING COMPANY, a
Delaware corporation with its principal office in Seattle,
Washington, (Boeing) and Continental Airlines Inc., a
Delaware corporation with its principal office in Houston,
Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase
Agreement No. 1783 dated March 18, 1993, as amended and
supplemented, relating to Boeing Model 757-224 aircraft (the
Agreement); and
WHEREAS, Boeing has offered, at Buyer's request, to
reschedule delivery of Aircraft (Rescheduled Aircraft),
currently scheduled to deliver to Buyer starting in
February, 1996, to 1998 and later, and delete the Option
Aircraft from the Agreement, subject to certain terms and
conditions; and
WHEREAS, Buyer has accepted Boeing's offer, and
agreed to incorporate the terms and conditions of the
accepted proposal in the Agreement; and
WHEREAS, Boeing and Buyer have agreed to amend the
Agreement to incorporate certain other changes;
NOW THEREFORE, in consideration of the mutual
covenants herein contained, the parties agree to amend the
Agreement as follows:
1. Table of Contents and Articles:
1.1 Remove and replace, in its entirety, the
Table of Contents with a new Table of Contents (attached
hereto) to reflect amendment of the Agreement.
1.2 Remove and replace, in its entirety, Article
2, Delivery, Title and Risk of Loss, with new Article 2
(attached hereto) to incorporate the delivery schedule for
the Rescheduled Aircraft and add new Article 2.7, Aircraft
Delivery Schedule, to incorporate Schedule for Delivery of
Model 757-224 Aircraft.
1.3 Remove and replace, in its entirety, Article
3, Price of Aircraft, with new Article 3 (attached hereto)
to incorporate revised Advance Payment Base Prices for the
Rescheduled Aircraft.
1.4 Remove and replace, in its entirety, Article
7, Changes to the Detail Specification, with new Article 7
(attached hereto). Article 7.2, Program Changes, has been
deleted and replaced with new Article 7.2, Change Orders.
1.5 Add a Schedule for Delivery of Model 757-224
Aircraft following Article 15, (attached hereto) to
incorporate the Rescheduled Aircraft and add information
relating to previously delivered Aircraft.
2. Exhibit D:
2.1 Remove and replace Pages D-1 through D-4 of
Exhibit D, Price Adjustment Due to Economic Fluctuations
Airframe Price Adjustment (1992 Base Price), with new Pages
D-1 through D-4 (attached hereto) to incorporate a revised
schedule for the Rescheduled Aircraft.
3. Letter Agreements:
3.1 Delete, in its entirety, Letter Agreement
1783-3, Option Aircraft, in response to Buyer's request to
terminate its options to purchase additional Model 757-224
Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
The Agreement will be deemed to be supplemented to the
extent herein provided and as so supplemented will continue
in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above
written.
THE BOEING COMPANY Continental Airlines Inc.
By: /s/ RICHARD G. PLANK By: /s/ JOHN LUTH
Its: Attorney-In-Fact Its:Senior Vice President
TABLE OF CONTENTS
ARTICLES Page Rev. By
ARTICLE 1. Subject Matter of Sale.............. 1-1 SA#2
ARTICLE 2. Delivery, Title and Risk of Loss.... 2-1 SA#4
ARTICLE 3. Price of Aircraft................... 3-1 SA#4
ARTICLE 4. Taxes............................... 4-1
ARTICLE 5. Payment............................. 5-1
ARTICLE 6. Excusable Delay..................... 6-1
ARTICLE 7. Changes to the Detail Specification. 7-1 SA#4
ARTICLE 8. Federal Aviation Requirements and
Certificates ....................... 8-1
ARTICLE 9. Representatives, Inspection,
Flights and Test Data............... 9-1
ARTICLE 10. Assignment, Resale or Lease......... 10-1
ARTICLE 11. Termination for Certain Events...... 11-1
ARTICLE 12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance....................... 12-1
ARTICLE 13. Buyer Furnished Equipment and
Spare Parts......................... 13-1 SA#2
ARTICLE 14. Contractual Notices and Requests.... 14-1
ARTICLE 15. Miscellaneous....................... 15-1
Schedule for Delivery of Model 757-224 Aircraft
EXHIBITS
EXHIBIT A Aircraft Configuration ............. A-1 SA#2
EXHIBIT B Product Assurance Document ......... B-1 SA#2
EXHIBIT C Customer Support Document .......... C-1 SA#2
EXHIBIT D Price Adjustments Due to Economic SA#4
Fluctuations - Airframe and Engines D-1
TABLE OF CONTENTS (Continued)
EXHIBIT E Buyer Furnished Equipment Provisions
Document ........................... E-1 SA#4
EXHIBIT F Defined Terms Document ........... F-1 SA#2
LETTER AGREEMENTS
1783-1 Spare Parts Support SA#2
1783-2 Seller Purchased Equipment SA#2
1783-4 Waiver of Aircraft Demonstration SA#2
Flights
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 April 29, 1993
Supplemental Agreement No. 2 November 4, 1993
Supplemental Agreement No. 3 July 15, 1994
Supplemental Agreement No. 4 March 31, 1995
ARTICLE 2. Delivery, Title and Risk of Loss.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
2.2 Notice of Target Delivery Date. Boeing will
give Buyer notice of the Target Delivery Date of the
Aircraft approximately 30 days prior to the scheduled month
of delivery.
2.3 Notice of Delivery Date. Boeing will give
Buyer at least 7 days' notice of the delivery date of the
Aircraft. If an Aircraft delivery is delayed beyond such
delivery date due to the responsibility of Buyer, Buyer will
reimburse Boeing for all costs incurred by Boeing as a
result of such delay, including amounts for storage,
insurance, Taxes, preservation or protection of the Aircraft
and interest on payments due.
2.4 Place of Delivery. The Aircraft will be
delivered at a facility selected by Boeing in the State of
Washington, unless mutually agreed otherwise.
2.5 Title and Risk of Loss. Title to and risk of
loss of an Aircraft will pass from Boeing to Buyer upon
delivery of such Aircraft, but not prior thereto.
2.6 Documents of Title. Upon delivery of and
payment for each Aircraft, Boeing shall deliver to Buyer a
bill of sale duly conveying to Buyer good title to such
Aircraft free and clear of all liens, claims, charges and
encumbrances of every kind whatsoever, and such other
appropriate documents of title as Buyer may reasonably
request.
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features
listed in Exhibit A which have been selected by Buyer.
3.1.2 Base Airframe Price is the Aircraft
Basic Price excluding the price of Special Features and
Engines.
3.1.3 Engine Price is the price established
by the Engine manufacturer for the Engines installed on the
Aircraft including all accessories, equipment and parts set
forth in Exhibit D.
3.1.4 Aircraft Basic Price is comprised of
the Base Airframe Price, the Engine Price and the price of
the Special Features.
3.1.5 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airframe,
Engine and Special Features) as calculated pursuant to
Exhibit D.
3.1.6 Aircraft Price is the total amount
Buyer is to pay for the Aircraft at the time of delivery.
3.1.7 Price First Published is the first
price published by Boeing for the same model of aircraft to
be delivered in the same general time period as the affected
Aircraft and is used to establish the Base Airframe Price
when the Base Airframe Price was not established at the time
of execution of this Agreement.
3.2 Aircraft Basic Price.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.3 Aircraft Price.
3.3.1 Block A Aircraft. The Aircraft Price
of the Block A Aircraft will be established at the time of
delivery of such Aircraft to Buyer and will be the sum of:
3.3.1.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
plus
3.3.1.2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
plus
3.3.1.3 other price adjustments
made pursuant to this Agreement or other written agreements
executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.4.2 Adjustment of Advance Payment Base Prices -
Long-Lead Aircraft. For Aircraft scheduled for delivery 36
months or more after the date of this Agreement, the Advance
Payment Base Prices appearing in Article 3.4.1 will be used
to determine the amount of the first advance payment to be
made by Buyer on the Aircraft. No later than 25 months
before the scheduled month of delivery of the first Aircraft
scheduled for delivery in a calendar year (First Aircraft),
Boeing will increase or decrease the Advance Payment Base
Price of the First Aircraft and all Aircraft scheduled for
delivery after the First Aircraft as required to reflect the
effects of [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Boeing
will provide the adjusted Advance Payment Base Prices for
each affected Aircraft to Buyer, and the advance payment
schedule will be considered amended to substitute such
adjusted Advance Payment Base Prices.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
ARTICLE 7. Changes to the Detail Specification.
7.1 Development Changes. Boeing may, at its own
expense and without Buyer's consent, incorporate Development
Changes in the Detail Specification and the Aircraft prior
to delivery to Buyer. Development Changes are defined as
changes to the basic specification for Model 757-200
aircraft that neither affect the Aircraft Purchase Price nor
adversely affect Aircraft delivery, guaranteed weight,
guaranteed performance or compliance with the
interchangeability or replaceability requirements set forth
in the Detail Specification. Development Changes are
changes deemed necessary to correct defects, prevent delay
or ensure compliance with this Agreement. If Boeing makes
changes pursuant to this paragraph, Boeing will promptly
notify Buyer of such changes.
7.2 Change Orders. The Detail Specification and
associated provisions of this Agreement may be amended by
Change Order or other written agreement, which will state
the particular changes to be made and any effect on design,
performance, weight, balance, time of delivery, Aircraft
Basic Price and Advance Payment Base Price.
Continental Airlines, Inc.
Delivery Schedule for Model 757-224 Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
PRICE ADJUSTMENT DUE TO
ECONOMIC FLUCTUATIONS
AIRFRAME PRICE ADJUSTMENT
(1992 Base Price)
(Relating to Block A Aircraft)
1. Formula.
The Airframe Price Adjustment will be determined at the
time of Aircraft delivery in accordance with the following
formula:
Pa = (P)(L + M - 1)
Where:
Pa = Airframe Price Adjustment.
L = .65 x ECI
116.2
M = .35 x ICI
115.9
P = Aircraft Basic Price (as set forth in
Article 3.2 of this Agreement) less the base
price of Engines (as defined in this Exhibit D)
in the amount of [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].
ECI = A value using the "Employment Cost Index for
workers in aerospace manufacturing" (aircraft
manufacturing, standard industrial
classification code 3721, compensation, base
month and year June 1989 = 100), as released by
the Bureau of Labor Statistics, U.S. Department
of Labor on a quarterly basis for the months of
March, June, September and December, calculated
as follows: A three-month arithmetic average
value (expressed as a decimal and rounded to the
nearest tenth) will be determined using the
months set forth in the table below for the
applicable Aircraft, with the released
Employment Cost Index value described above for
the month of March also being used for the
months of January and February; the value for
June also used for April and May; the value for
September also used for July and August; and the
value for December also used for October and
November.
ICI = The three-month arithmetic average of the
released monthly values for the Industrial
Commodities Index as set forth in the "Producer
Prices and Price Index" (Base Year 1982 = 100)
as released by the Bureau of Labor Statistics,
U.S. Department of Labor values (expressed as a
decimal and rounded to the nearest tenth) for
the months set forth in the table below for the
applicable Aircraft.
In determining the value of L, the ratio of ECI
divided by 116.2 will be expressed as a decimal rounded to
the nearest ten-thousandth and then multiplied by .65 with
the resulting value also expressed as a decimal and rounded
to the nearest ten-thousandth.
In determining the value of M, the ratio of ICI
divided by 115.9 will be expressed as a decimal rounded to
the nearest ten-thousandth and then multiplied by .35 with
the resulting value also expressed as a decimal and rounded
to the nearest ten-thousandth.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
The following definitions of B and D will apply:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
2. If at the time of delivery of an Aircraft Boeing is
unable to determine the Airframe Price Adjustment because
the applicable values to be used to determine the ECI and
ICI have not been released by the Bureau of Labor
Statistics, then:
2.1 The Airframe Price Adjustment, to be used at
the time of delivery of each of the Aircraft, will be
determined by utilizing the escalation provisions set forth
above. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to
scheduled month of Aircraft delivery will be used to
determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor
Statistics) to calculate the Airframe Price Adjustment. If
no values have been released for an applicable month, the
provisions set forth in Paragraph 2.2 below will apply. If
prior to delivery of an Aircraft the U.S. Department of
Labor changes the base year for determination of the ECI or
ICI values as defined above, such rebased values will be
incorporated in the Airframe Price Adjustment calculation.
The payment by Buyer to Boeing of the amount of the Purchase
Price for such Aircraft, as determined at the time of
Aircraft delivery, will be deemed to be the payment for such
Aircraft required at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S.
Department of Labor substantially revises the methodology
used for the determination of the values to be used to
determine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released
values), or for any reason has not released values needed to
determine the applicable Aircraft Airframe Price Adjustment,
the parties will, prior to delivery of any such Aircraft,
select a substitute for such values from data published by
the Bureau of Labor Statistics or other similar data
reported by non-governmental United States organizations,
such substitute to lead in application to the same
adjustment result, insofar as possible, as would have been
achieved by continuing the use of the original values as
they may have fluctuated during the applicable time period.
Appropriate revision of the formula will be made as required
to reflect any substitute values. However, if within 24
months from delivery of the Aircraft the Bureau of Labor
Statistics should resume releasing values for the months
needed to determine the Airframe Price Adjustment, such
values will be used to determine any increase or decrease in
the Airframe Price Adjustment for the Aircraft from that
determined at the time of delivery of such Aircraft.
2.3 In the event escalation provisions are made
non-enforceable or otherwise rendered null and void by any
agency of the United States Government, the parties agree,
to the extent they may lawfully do so, to equitably adjust
the Purchase Price of any affected Aircraft to reflect an
allowance for increases or decreases in labor compensation
and material costs occurring since February, 1992, which is
consistent with the applicable provisions of paragraph 1 of
this Exhibit D.
2.4 If required, Boeing will submit either a
supplemental invoice or refund the amounts due Buyer as
appropriate to reflect any increase or decrease in the
Airframe Price Adjustment for the Aircraft from that
determined at the time of delivery of such Aircraft. Any
payments due Boeing or Buyer will be made with reasonable
promptness.
3. For the calculations herein, the values released by
the Bureau of Labor Statistics and available to Boeing 30
days prior to scheduled month of Aircraft delivery will be
used to determine the ECI and ICI values for the applicable
months (including those noted as preliminary by the Bureau
of Labor Statistics) to calculate the Airframe Price
Adjustment.
Note: Any rounding of a number, as required under this
Exhibit D with respect to escalation of the airframe
price, will be accomplished as follows: if the first
digit of the portion to be dropped from the number to
be rounded is five or greater, the preceding digit
will be raised to the next higher number.
6-1162-WLJ-367R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-367R1 to
Purchase Agreement No. 1783 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1783
dated March 18, 1993 as amended and supplemented (the
Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC. (Buyer) relating to Model
757-224 aircraft (the Aircraft). Letter Agreement
6-1162-WLJ-367 is hereby cancelled and superceded.
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
1. Boeing and Buyer each understand that certain
commercial and financial information contained in the
documents listed below (Confidential Documents) is
considered by the other party to be confidential.
2. Boeing and Buyer agree that each party will
treat the Confidential Documents and the information
contained therein as confidential and will not, without
the other party's prior written consent, disclose such
Confidential Documents or any information contained
therein to any other person or entity except as may be
required by (i) applicable law or governmental
regulations; or (ii) for financing the Aircraft in
accordance with the provisions of Article 10 of the
Agreement.
3. In connection with any such disclosure or filing
of the Confidential Documents, or the information
contained therein pursuant to any such applicable law or
governmental regulation, Buyer will request and use its
best reasonable efforts to obtain confidential treatment
of such Confidential Documents and the information
contained therein. Boeing agrees to cooperate with Buyer
in making and supporting its request for confidential
treatment.
Schedule of Confidential Documents
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-375R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-375R1 to
Purchase Agreement No. 1783 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1783
dated March 18, 1993 (the Agreement) between THE BOEING
COMPANY (Boeing) and CONTINENTAL AIRLINES, INC. (Buyer)
relating to twenty-five (25) firm and twenty-five (25)
option Model 757-224 aircraft (the Aircraft). Letter
Agreement 6-1162-WLJ-375 is hereby cancelled and
superceded.
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-391R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-391R1 to
Purchase Agreement No. 1783 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1783
dated March 18, 1993 as amended and supplemented (the
Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC. (Buyer) relating to Model 757-
224 aircraft (the Aircraft). Letter Agreement
6-1162-WLJ-391 is hereby cancelled and superceded.
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-RGP-946
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 6-1162-RGP-946 to
Purchase Agreements No. 1782, 1783, 1784 and
1785 - [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
Reference is made to the following Purchase Agreements,
each dated March 18, 1993, as amended and supplemented
(the Purchase Agreements) between THE BOEING COMPANY
(Boeing) and CONTINENTAL AIRLINES, INC. (Buyer): Purchase
Agreement 1782 relating to model 737-524 Aircraft;
Purchase Agreement 1783 relating to model 757-224
Aircraft; Purchase 1784 relating to model 767-324ER
Aircraft; and Purchase Agreement 1785 relating to model
777-224 Aircraft. The Aircraft rescheduled for delivery
to Buyer in 1998 and later are sometimes hereinafter
referred to as the Rescheduled Aircraft.
This letter, when accepted by Buyer, will become part of
the Purchase Agreements and will evidence our further
agreement with respect to the matters set forth below.
All terms used herein and in the Purchase Agreement, and
not defined herein, shall have the same meaning as in the
Purchase Agreements.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
Attachment A to 6-1162-RGP-946
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 10.13(a)
Supplemental Agreement No. 3
to
Purchase Agreement No. 1784
between
The Boeing Company
and
Continental Airlines Inc.
Relating to Boeing Model 767-324ER Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of
March 31 , 1995 by and between THE BOEING COMPANY, a
Delaware corporation with its principal office in Seattle,
Washington, (Boeing) and Continental Airlines Inc., a
Delaware corporation with its principal office in Houston,
Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase
Agreement No. 1784 dated March 18, 1993, as amended and
supplemented, relating to Boeing Model 767-324ER aircraft
(the Agreement); and
WHEREAS, Boeing has offered, at Buyer's request, to
reschedule delivery of twelve (12) Aircraft (Rescheduled
Aircraft), currently scheduled to deliver to Buyer starting
in 1995, to 1998 and later, and delete the Option Aircraft
from the Agreement, subject to certain terms and conditions;
and
WHEREAS, Buyer has accepted Boeing's offer, and
agreed to incorporate the terms and conditions of the
accepted proposal in the Agreement; and
WHEREAS, Boeing and Buyer have agreed to amend the
Agreement to incorporate certain other changes;
NOW THEREFORE, in consideration of the mutual
covenants herein contained, the parties agree to amend the
Agreement as follows:
1. Table of Contents and Articles:
1.1 Remove and replace, in its entirety, the
Table of Contents with a new Table of Contents (attached
hereto) to reflect amendment of the Agreement.
1.2 Remove and replace, in its entirety, Article
2, Delivery, Title and Risk of Loss, with new Article 2
(attached hereto) to incorporate the delivery schedule for
the Rescheduled Aircraft and add new Article 2.7, Aircraft
Delivery Schedule, to incorporate Schedule for Delivery of
Model 767-324ER Aircraft.
1.3 Remove and replace, in its entirety, Article
3, Price of Aircraft, with new Article 3 (attached hereto)
to incorporate revised Advance Payment Base Prices for the
Rescheduled Aircraft.
1.4 Remove and replace, in its entirety, Article
7, Changes to the Detail Specification, with new Article 7
(attached hereto). Article 7.2, Program Changes, has been
deleted and replaced with new Article 7.2, Change Orders.
1.5 Add a Schedule for Delivery of Model 767-324ER
Aircraft following Article 15, (attached hereto) to
incorporate the Rescheduled Aircraft and add information
relating to previously delivered Aircraft.
2. Exhibit D:
2.1 Remove and replace Pages D-1 through D-4 of
Exhibit D, Price Adjustment Due to Economic Fluctuations
Airframe Price Adjustment (1992 Base Price), with new Pages
D-1 through D-4 (attached hereto) to incorporate a revised
schedule for the Rescheduled Aircraft.
3. Letter Agreements:
3.1 Delete, in its entirety, Letter Agreement
1784-3, Option Aircraft, in response to Buyer's request to
terminate its options to purchase additional Model 767-324ER
Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
The Agreement will be deemed to be supplemented to the
extent herein provided and as so supplemented will continue
in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above
written.
THE BOEING COMPANY CONTINENTAL AIRLINES INC.
By: /s/ RICHARD G. PLANK By: /s/ JOHN LUTH
Its: Attorney-In-Fact Its:Senior Vice President
TABLE OF CONTENTS
ARTICLES Page
Rev. By
ARTICLE 1. Subject Matter of Sale.............. 1-1
SA#2
ARTICLE 2. Delivery, Title and Risk of Loss.... 2-1
SA#3
ARTICLE 3. Price of Aircraft................... 3-1
SA#2
ARTICLE 4. Taxes............................... 4-1
ARTICLE 5. Payment............................. 5-1
ARTICLE 6. Excusable Delay..................... 6-1
ARTICLE 7. Changes to the Detail Specification. 7-1
SA#3
ARTICLE 8. Federal Aviation Requirements and
Certificates ....................... 8-1
ARTICLE 9. Representatives, Inspection,
Flights and Test Data............... 9-1
ARTICLE 10. Assignment, Resale or Lease......... 10-1
ARTICLE 11. Termination for Certain Events...... 11-1
ARTICLE 12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance....................... 12-1
ARTICLE 13. Buyer Furnished Equipment and
Spare Parts......................... 13-1 SA#2
ARTICLE 14. Contractual Notices and Requests.... 14-1
ARTICLE 15. Miscellaneous....................... 15-1
Schedule for Delivery of Model 767-324ER Aircraft
SA#3
EXHIBITS
EXHIBIT A Aircraft Configuration ............. A-1
SA#2
EXHIBIT B Product Assurance Document ......... B-1
SA#2
EXHIBIT C Customer Support Document .......... C-1
SA#2
EXHIBIT D Price Adjustments Due to Economic
SA#3
Fluctuations - Airframe and Engines D-1
EXHIBIT E Buyer Furnished Equipment Provisions
Document ........................... E-1 SA#2
EXHIBIT F Defined Terms Document ............. F-1
SA#2
LETTER AGREEMENTS
1784-1 Spare Parts Support
SA#2
1784-2 Seller Purchased Equipment
SA#2
1784-3 Option Aircraft (CANCELLED)
SA#3
1784-4 Waiver of Aircraft Demonstration Flights
SA#2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 April 29, 1993
Supplemental Agreement No. 2 November 4, 1993
Supplemental Agreement No. 3 March 31, 1995
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be
delivered to Buyer by Boeing, and Buyer will accept delivery
of the Aircraft, in accordance with the following schedule:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
2.2 Notice of Target Delivery Date. Boeing will
give Buyer notice of the Target Delivery Date of the
Aircraft approximately 30 days prior to the scheduled month
of delivery.
2.3 Notice of Delivery Date. Boeing will give
Buyer at least 7 days' notice of the delivery date of the
Aircraft. If an Aircraft delivery is delayed beyond such
delivery date due to the responsibility of Buyer, Buyer will
reimburse Boeing for all costs incurred by Boeing as a
result of such delay, including amounts for storage,
insurance, Taxes, preservation or protection of the Aircraft
and interest on payments due.
2.4 Place of Delivery. The Aircraft will be
delivered at a facility selected by Boeing in the State of
Washington, unless mutually agreed otherwise.
2.5 Title and Risk of Loss. Title to and risk of
loss of an Aircraft will pass from Boeing to Buyer upon
delivery of such Aircraft, but not prior thereto.
2.6 Documents of Title. Upon delivery of and
payment for each Aircraft, Boeing shall deliver to Buyer a
bill of sale duly conveying to Buyer good title to such
Aircraft free and clear of all liens, claims, charges and
encumbrances of every kind whatsoever, and such other
appropriate documents of title as Buyer may reasonably
request.
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features
listed in Exhibit A which have been selected by Buyer.
3.1.2 Base Airframe Price is the Aircraft
Basic Price excluding the price of Special Features and
Engines.
3.1.3 Engine Price is the price established
by the Engine manufacturer for the Engines installed on the
Aircraft including all accessories, equipment and parts set
forth in Exhibit D.
3.1.4 Aircraft Basic Price is comprised of
the Base Airframe Price, the Engine Price and the price of
the Special Features.
3.1.5 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airframe,
Engine and Special Features) as calculated pursuant to
Exhibit D.
3.1.6 Aircraft Price is the total amount
Buyer is to pay for the Aircraft at the time of delivery.
3.1.7 Price First Published is the first
price published by Boeing for the same model of aircraft to
be delivered in the same general time period as the affected
Aircraft and is used to establish the Base Airframe Price
when the Base Airframe Price was not established at the time
of execution of this Agreement.
3.2 Aircraft Basic Price.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.3 Aircraft Price.
3.3.1 Block A Aircraft. The Aircraft Price
of the Block A Aircraft will be established at the time of
delivery of such Aircraft to Buyer and will be the sum of:
3.3.1.1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] plus
3.3.1.2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] plus
3.3.1.3 other price adjustments
made pursuant to this Agreement or other written agreements
executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For
advance payment purposes, the following estimated delivery
prices of the Aircraft have been established, using
currently available forecasts of the escalation factors used
by Boeing as of the date of signing this Agreement. The
Advance Payment Base Price of each Aircraft is set forth
below:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.4.2 Adjustment of Advance Payment Base Prices -
Long-Lead Aircraft. For Aircraft scheduled for delivery 36
months or more after the date of this Agreement, the Advance
Payment Base Prices appearing in Article 3.4.1 will be used
to determine the amount of the first advance payment to be
made by Buyer on the Aircraft. No later than 25 months
before the scheduled month of delivery of the first Aircraft
scheduled for delivery in a calendar year (First Aircraft),
Boeing will increase or decrease the Advance Payment Base
Price of the First Aircraft and all Aircraft scheduled for
delivery after the First Aircraft as required to reflect the
effects of [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Boeing
will provide the adjusted Advance Payment Base Prices for
each affected Aircraft to Buyer, and the advance payment
schedule will be considered amended to substitute such
adjusted Advance Payment Base Prices.
ARTICLE 7. Changes to the Detail Specification.
7.1 Development Changes. Boeing may, at its own
expense and without Buyer's consent, incorporate Development
Changes in the Detail Specification and the Aircraft prior
to delivery to Buyer. Development Changes are defined as
changes to the basic specification for Model 767-300ER
aircraft that neither affect the Aircraft Purchase Price nor
adversely affect Aircraft delivery, guaranteed weight,
guaranteed performance or compliance with the
interchangeability or replaceability requirements set forth
in the Detail Specification. Development Changes are
changes deemed necessary to correct defects, prevent delay,
or insure compliance with this Agreement. If Boeing makes
changes pursuant to this paragraph, Boeing will promptly
notify Buyer of such changes.
7.2 Change Orders. The Detail Specification and
associated provisions of this Agreement may be amended by
Change Order or other written agreement, which will state
the particular changes to be made and any effect on design,
performance, weight, balance, time of delivery, Aircraft
Basic Price and Advance Payment Base Price.
Continental Airlines, Inc.
Delivery Schedule for Model 767-324ER Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
PRICE ADJUSTMENT DUE TO
ECONOMIC FLUCTUATIONS
AIRFRAME PRICE ADJUSTMENT
(1992 Base Price)
(Relating to Block A Aircraft)
1. Formula.
The Airframe Price Adjustment will be determined at
the time of Aircraft delivery in accordance with the
following formula:
Pa = (P)(L + M - 1)
Where:
Pa = Airframe Price Adjustment.
L = .65 x ECI
116.2
M = .35 x ICI
115.9
P = Aircraft Basic Price (as set forth in
Article 3.2 of this Agreement) less the base
price of Engines (as defined in this Exhibit D)
in the amount of [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].
ECI = A value using the "Employment Cost Index for
workers in aerospace manufacturing" (aircraft
manufacturing, standard industrial
classification code 3721, compensation, base
month and year June 1989 = 100), as released by
the Bureau of Labor Statistics, U.S. Department
of Labor on a quarterly basis for the months of
March, June, September and December, calculated
as follows: A three-month arithmetic average
value (expressed as a decimal and rounded to the
nearest tenth) will be determined using the
months set forth in the table below for the
applicable Aircraft, with the released
Employment Cost Index value described above for
the month of March also being used for the
months of January and February; the value for
June also used for April and May; the value for
September also used for July and August; and the
value for December also used for October and
November.
ICI = The three-month arithmetic average of the
released monthly values for the Industrial
Commodities Index as set forth in the "Producer
Prices and Price Index" (Base Year 1982 = 100)
as released by the Bureau of Labor Statistics,
U.S. Department of Labor values (expressed as a
decimal and rounded to the nearest tenth) for
the months set forth in the table below for the
applicable Aircraft.
In determining the value of L, the ratio of ECI
divided by 116.2 will be expressed as a decimal rounded to
the nearest ten-thousandth and then multiplied by .65 with
the resulting value also expressed as a decimal and rounded
to the nearest ten-thousandth.
In determining the value of M, the ratio of ICI
divided by 115.9 will be expressed as a decimal rounded to
the nearest ten-thousandth and then multiplied by .35 with
the resulting value also expressed as a decimal and rounded
to the nearest ten-thousandth.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
The following definitions of B and D will apply:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
2. If at the time of delivery of an Aircraft Boeing is
unable to determine the Airframe Price Adjustment because
the applicable values to be used to determine the ECI and
ICI have not been released by the Bureau of Labor
Statistics, then:
2.1 The Airframe Price Adjustment, to be used at
the time of delivery of each of the Aircraft, will be
determined by utilizing the escalation provisions set forth
above. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to
scheduled month of Aircraft delivery will be used to
determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor
Statistics) to calculate the Airframe Price Adjustment. If
no values have been released for an applicable month, the
provisions set forth in Paragraph 2.2 below will apply. If
prior to delivery of an Aircraft the U.S. Department of
Labor changes the base year for determination of the ECI or
ICI values as defined above, such rebased values will be
incorporated in the Airframe Price Adjustment calculation.
The payment by Buyer to Boeing of the amount of the Purchase
Price for such Aircraft, as determined at the time of
Aircraft delivery, will be deemed to be the payment for such
Aircraft required at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S.
Department of Labor substantially revises the methodology
used for the determination of the values to be used to
determine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released
values), or for any reason has not released values needed to
determine the applicable Aircraft Airframe Price Adjustment,
the parties will, prior to delivery of any such Aircraft,
select a substitute for such values from data published by
the Bureau of Labor Statistics or other similar data
reported by non-governmental United States organizations,
such substitute to lead in application to the same
adjustment result, insofar as possible, as would have been
achieved by continuing the use of the original values as
they may have fluctuated during the applicable time period.
Appropriate revision of the formula will be made as required
to reflect any substitute values. However, if within 24
months from delivery of the Aircraft the Bureau of Labor
Statistics should resume releasing values for the months
needed to determine the Airframe Price Adjustment, such
values will be used to determine any increase or decrease in
the Airframe Price Adjustment for the Aircraft from that
determined at the time of delivery of such Aircraft.
2.3 In the event escalation provisions are made
non-enforceable or otherwise rendered null and void by any
agency of the United States Government, the parties agree,
to the extent they may lawfully do so, to equitably adjust
the Purchase Price of any affected Aircraft to reflect an
allowance for increases or decreases in labor compensation
and material costs occurring since February, 1992, which is
consistent with the applicable provisions of paragraph 1 of
this Exhibit D.
2.4 If required, Boeing will submit either a
supplemental invoice or refund the amounts due Buyer as
appropriate to reflect any increase or decrease in the
Airframe Price Adjustment for the Aircraft from that
determined at the time of delivery of such Aircraft. Any
payments due Boeing or Buyer will be made with reasonable
promptness.
3. For the calculations herein, the values released by
the Bureau of Labor Statistics and available to Boeing 30
days prior to scheduled month of Aircraft delivery will be
used to determine the ECI and ICI values for the applicable
months (including those noted as preliminary by the Bureau
of Labor Statistics) to calculate the Airframe Price
Adjustment.
Note: Any rounding of a number, as required under this
Exhibit D with respect to escalation of the airframe
price, will be accomplished as follows: if the first
digit of the portion to be dropped from the number to
be rounded is five or greater, the preceding digit
will be raised to the next higher number.
6-1162-WLJ-361R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-361R1 to
Purchase Agreement No. 1784 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No.
1784 dated March 18, 1993, as amended and supplemented
(the Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC., relating to Model 767-324ER
aircraft (the Aircraft).
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
1. Boeing and Buyer each understand that certain
commercial and financial information contained in the
documents listed below (Confidential Documents) is
considered by the other party to be confidential.
2. Boeing and Buyer agree that each party will
treat the Confidential Documents and the information
contained therein as confidential and will not, without
the other party's prior written consent, disclose such
Confidential Documents or any information contained
therein to any other person or entity except as may be
required by (i) applicable law or governmental
regulations; or (ii) for financing the Aircraft in
accordance with the provisions of Article 10 of the
Agreement.
3. In connection with Buyer's disclosure or filing
of Confidential Documents, or the information contained
therein pursuant to any such applicable law or
governmental regulation, Buyer will request and use its
best reasonable efforts to obtain confidential
treatment of such Confidential Documents and the
information contained therein. Boeing agrees to
cooperate with Buyer in making and supporting its
request for confidential treatment.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO as of
this date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-363R1
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-363R1 to
Purchase Agreement No. 1784 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1784
dated March 18, 1993, as amended and supplemented (the
Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC.relating to Model 767-324ER
aircraft (the Aircraft).
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-364R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-364 to
Purchase Agreement No. 1784 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1784
dated as of even date herewith (the Agreement) between
THE BOEING COMPANY (Boeing) and CONTINENTAL AIRLINES,
INC-. (Buyer) relating to Model 767-324ER aircraft (the
Aircraft).
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-RGP-946
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 6-1162-RGP-946 to
Purchase Agreements No. 1782, 1783, 1784 and
1785 - [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Gentlemen:
Reference is made to the following Purchase Agreements,
each dated March 18, 1993, as amended and supplemented
(the Purchase Agreements) between THE BOEING COMPANY
(Boeing) and CONTINENTAL AIRLINES, INC. (Buyer): Purchase
Agreement 1782 relating to model 737-524 Aircraft;
Purchase Agreement 1783 relating to model 757-224
Aircraft; Purchase 1784 relating to model 767-324ER
Aircraft; and Purchase Agreement 1785 relating to model
777-224 Aircraft. The Aircraft rescheduled for delivery
to Buyer in 1998 and later are sometimes hereinafter
referred to as the Rescheduled Aircraft.
This letter, when accepted by Buyer, will become part of
the Purchase Agreements and will evidence our further
agreement with respect to the matters set forth below.
All terms used herein and in the Purchase Agreement, and
not defined herein, shall have the same meaning as in the
Purchase Agreements.
At Buyer's request, and in consideration of Boeing's
agreement to amend the Purchase Agreements, Boeing and
Buyer hereby agree as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
Attachment A to 6-1162-RGP-946
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
EXPURGATED CONFIDENTIAL
TREATMENT
REQUESTED BY
CONTINENTAL
AIRLINES, INC.
Exhibit 10.14(a)
Supplemental Agreement No. 3
to
Purchase Agreement No. 1785
between
The Boeing Company
and
Continental Airlines Inc.
Relating to Boeing Model 777-224 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of
March 31 , 1995 by and between THE BOEING COMPANY, a
Delaware corporation with its principal office in Seattle,
Washington, (Boeing) and Continental Airlines Inc., a
Delaware corporation with its principal office in Houston,
Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase
Agreement No. 1783 dated March 18, 1993, as amended and
supplemented, relating to Boeing Model 777-224 aircraft (the
Agreement); and
WHEREAS, Boeing has offered, at Buyer's request, to
reschedule delivery of Aircraft (Rescheduled Aircraft),
currently scheduled to deliver to Buyer starting in 1997, to
1999 and later, and delete the Option Aircraft from the
Agreement, subject to certain terms and conditions; and
WHEREAS, Buyer has accepted Boeing's offer, and
agreed to incorporate the terms and conditions of the
accepted proposal in the Agreement; and
WHEREAS, Boeing and Buyer have agreed to amend the
Agreement to incorporate certain other changes;
NOW THEREFORE, in consideration of the mutual
covenants herein contained, the parties agree to amend the
Agreement as follows:
1. Table of Contents and Articles:
1.1 Remove and replace, in its entirety, the
Table of Contents with a new Table of Contents (attached
hereto) to reflect amendment of the Agreement.
1.2 Remove and replace, in its entirety, Article
2, Delivery, Title and Risk of Loss, with new Article 2
(attached hereto) to incorporate the delivery schedule for
the Rescheduled Aircraft and add new Article 2.7, Aircraft
Delivery Schedule, to incorporate Schedule for Delivery of
Model 777-224 Aircraft.
1.3 Remove and replace, in its entirety, Article
3, Price of Aircraft, with new Article 3 (attached hereto)
to incorporate revised Advance Payment Base Prices for the
Rescheduled Aircraft.
1.4 Remove and replace, in its entirety, Article
7, Changes to the Detail Specification, with new Article 7
(attached hereto). Article 7.2, Program Changes, has been
deleted and replaced with new Article 7.2, Change Orders.
1.5 Add a Schedule for Delivery of Model 777-224
Aircraft following Article 15, (attached hereto) to
incorporate the Rescheduled Aircraft and add information
relating to previously delivered Aircraft.
2. Exhibit D:
2.1 Remove and replace Pages D-1 through D-4 of
Exhibit D, Price Adjustment Due to Economic Fluctuations
Airframe Price Adjustment (1992 Base Price), with new Pages
D-1 through D-4 (attached hereto) to incorporate a revised
schedule for the Rescheduled Aircraft.
3. Letter Agreements:
3.1 Delete, in its entirety, Letter Agreement
1785-3, Option Aircraft, in response to Buyer's request to
terminate its options to purchase additional Model 777-224
Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
The Agreement will be deemed to be supplemented to the
extent herein provided and as so supplemented will continue
in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above
written.
THE BOEING COMPANY Continental Airlines Inc.
By: /s/ RICHARD G. PLANK By: /s/ JOHN LUTH
Its: Attorney-In-Fact Its:Senior Vice President
ARTICLES Page Rev. By
ARTICLE 1. Subject Matter of Sale.............. 1-1 SA#2
ARTICLE 2. Delivery, Title and Risk of Loss.... 2-1 SA#3
ARTICLE 3. Price of Aircraft................... 3-1 SA#3
ARTICLE 4. Taxes............................... 4-1
ARTICLE 5. Payment............................. 5-1
ARTICLE 6. Excusable Delay..................... 6-1
ARTICLE 7. Changes to the Detail Specification. 7-1 SA#3
ARTICLE 8. Federal Aviation Requirements and
Certificates ....................... 8-1
ARTICLE 9. Representatives, Inspection,
Flights and Test Data............... 9-1
ARTICLE 10. Assignment, Resale or Lease......... 10-1
ARTICLE 11. Termination for Certain Events...... 11-1
ARTICLE 12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance....................... 12-1
ARTICLE 13. Buyer Furnished Equipment and
Spare Parts......................... 13-1 SA#2
ARTICLE 14. Contractual Notices and Requests.... 14-1
ARTICLE 15. Miscellaneous....................... 15-1
EXHIBITS
EXHIBIT A Aircraft Configuration ............. A-1 SA#2
EXHIBIT B Product Assurance Document ......... B-1 SA#2
EXHIBIT C Customer Support Document .......... C-1 SA#2
EXHIBIT D Price Adjustments Due to Economic SA#3
Fluctuations - Airframe and Engines D-1
EXHIBIT E Buyer Furnished Equipment Provisions
Document ........................... E-1 SA#3
EXHIBIT F Defined Terms Document ............. F-1 SA#2
LETTER AGREEMENTS
1785-1 Spare Parts Support SA#2
1785-2 Seller Purchased Equipment SA#2
1785-4 Waiver of Aircraft Demonstration Flights SA#2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 April 29, 1993
Supplemental Agreement No. 2 November 4, 1993
Supplemental Agreement No. 3 March 31, 1995
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be
delivered to Buyer by Boeing, and Buyer will accept delivery
of the Aircraft, in accordance with the following schedule:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
2.2 Notice of Target Delivery Date. Boeing will
give Buyer notice of the Target Delivery Date of the
Aircraft approximately 30 days prior to the scheduled month
of delivery.
2.3 Notice of Delivery Date. Boeing will give
Buyer at least 7 days' notice of the delivery date of the
Aircraft. If an Aircraft delivery is delayed beyond such
delivery date due to the responsibility of Buyer, Buyer will
reimburse Boeing for all costs incurred by Boeing as a
result of such delay, including amounts for storage,
insurance, Taxes, preservation or protection of the Aircraft
and interest on payments due.
2.4 Place of Delivery. The Aircraft will be
delivered at a facility selected by Boeing in the State of
Washington, unless mutually agreed otherwise.
2.5 Title and Risk of Loss. Title to and risk of
loss of an Aircraft will pass from Boeing to Buyer upon
delivery of such Aircraft, but not prior thereto.
2.6 Documents of Title. Upon delivery of and
payment for each Aircraft, Boeing shall deliver to Buyer a
bill of sale duly conveying to Buyer good title to such
Aircraft free and clear of all liens, claims, charges and
encumbrances of every kind whatsoever, and such other
appropriate documents of title as Buyer may reasonably
request.
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features
listed in Exhibit A which have been selected by Buyer.
3.1.2 Base Airframe Price is the Aircraft
Basic Price excluding the price of Special Features and
Engines.
3.1.3 Engine Price is the price established
by the Engine manufacturer for the Engines installed on the
Aircraft including all accessories, equipment and parts set
forth in Exhibit D.
3.1.4 Aircraft Basic Price is comprised of
the Base Airframe Price, the Engine Price and the price of
the Special Features.
3.1.5 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airframe,
Engine and Special Features) as calculated pursuant to
Exhibit D.
3.1.6 Aircraft Price is the total amount
Buyer is to pay for the Aircraft at the time of delivery.
3.1.7 Price First Published is the first
price published by Boeing for the same model of aircraft to
be delivered in the same general time period as the affected
Aircraft and is used to establish the Base Airframe Price
when the Base Airframe Price was not established at the time
of execution of this Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.3 Aircraft Price.
3.3.1 Block A Aircraft. The Aircraft Price
of the Block A Aircraft will be established at the time of
delivery of such Aircraft to Buyer and will be the sum of:
3.3.1.1 [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] plus
3.3.1.2 [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] plus
3.3.1.3 other price adjustments
made pursuant to this Agreement or other written agreements
executed by Boeing and Buyer.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
3.4.2 Adjustment of Advance Payment Base Prices -
Long-Lead Aircraft. For Aircraft scheduled for delivery 36
months or more after the date of this Agreement, the Advance
Payment Base Prices appearing in Article 3.4.1 will be used
to determine the amount of the first advance payment to be
made by Buyer on the Aircraft. No later than 25 months
before the scheduled month of delivery of the first Aircraft
scheduled for delivery in a calendar year (First Aircraft),
Boeing will increase or decrease the Advance Payment Base
Price of the First Aircraft and all Aircraft scheduled for
delivery after the First Aircraft as required to reflect the
effects of (i) any adjustments in the Aircraft Price
pursuant to this Agreement and (ii) the then-current
forecasted escalation factors used by Boeing. Boeing will
provide the adjusted Advance Payment Base Prices for each
affected Aircraft to Buyer, and the advance payment schedule
will be considered amended to substitute such adjusted
Advance Payment Base Prices.
ARTICLE 7. Changes to the Detail Specification.
7.1 Development Changes. Boeing may, at its own
expense and without Buyer's consent, incorporate Development
Changes in the Detail Specification and the Aircraft prior
to delivery to Buyer. Development Changes are defined as
changes to the basic specification for Model 777-200
aircraft that neither affect the Aircraft Purchase Price nor
adversely affect Aircraft delivery, guaranteed weight,
guaranteed performance or compliance with the
interchangeability or replaceability requirements set forth
in the Detail Specification. Development Changes are
changes deemed necessary to correct defects, prevent delay,
or insure compliance with this Agreement. If Boeing makes
changes pursuant to this paragraph, Boeing will promptly
notify Buyer of such changes.
7.2 Change Orders. The Detail Specification and
associated provisions of this Agreement may be amended by
Change Order or other written agreement, which will state
the particular changes to be made and any effect on design,
performance, weight, balance, time of delivery, Aircraft
Basic Price and Advance Payment Base Price.
Continental Airlines, Inc.
Delivery Schedule for Model 777-224 Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
PRICE ADJUSTMENT DUE TO
ECONOMIC FLUCTUATIONS
AIRFRAME PRICE ADJUSTMENT
(1992 Base Price)
(Relating to Block A Aircraft)
1. Formula.
The Airframe Price Adjustment will be determined at
the time of Aircraft delivery in accordance with the
following formula:
Pa = (P)(L + M - 1)
Where:
Pa = Airframe Price Adjustment.
L = .65 x ECI
116.2
M = .35 x ICI
115.9
P = Aircraft Basic Price (as set forth in
Article 3.2 of this Agreement) less the base
price of Engines (as defined in this Exhibit D)
in the amount of [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].
ECI = A value using the "Employment Cost Index for
workers in aerospace manufacturing" (aircraft
manufacturing, standard industrial
classification code 3721, compensation, base
month and year June 1989 = 100), as released by
the Bureau of Labor Statistics, U.S. Department
of Labor on a quarterly basis for the months of
March, June, September and December, calculated
as follows: A three-month arithmetic average
value (expressed as a decimal and rounded to the
nearest tenth) will be determined using the
months set forth in the table below for the
applicable Aircraft, with the released
Employment Cost Index value described above for
the month of March also being used for the
months of January and February; the value for
June also used for April and May; the value for
September also used for July and August; and the
value for December also used for October and
November.
ICI = The three-month arithmetic average of the
released monthly values for the Industrial
Commodities Index as set forth in the "Producer
Prices and Price Index" (Base Year 1982 = 100)
as released by the Bureau of Labor Statistics,
U.S. Department of Labor values (expressed as a
decimal and rounded to the nearest tenth) for
the months set forth in the table below for the
applicable Aircraft.
In determining the value of L, the ratio of ECI
divided by 116.2 will be expressed as a decimal rounded to
the nearest ten-thousandth and then multiplied by .65 with
the resulting value also expressed as a decimal and rounded
to the nearest ten-thousandth.
In determining the value of M, the ratio of ICI
divided by 115.9 will be expressed as a decimal rounded to
the nearest ten-thousandth and then multiplied by .35 with
the resulting value also expressed as a decimal and rounded
to the nearest ten-thousandth.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
The following definitions of B and D will apply:
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
2. If at the time of delivery of an Aircraft Boeing is
unable to determine the Airframe Price Adjustment because
the applicable values to be used to determine the ECI and
ICI have not been released by the Bureau of Labor
Statistics, then:
2.1 The Airframe Price Adjustment, to be used at
the time of delivery of each of the Aircraft, will be
determined by utilizing the escalation provisions set forth
above. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to
scheduled Aircraft delivery will be used to determine the
ECI and ICI values for the applicable months (including
those noted as preliminary by the Bureau of Labor
Statistics) to calculate the Airframe Price Adjustment. If
no values have been released for an applicable month, the
provisions set forth in Paragraph 2.2 below will apply. If
prior to delivery of an Aircraft the U.S. Department of
Labor changes the base year for determination of the ECI or
ICI values as defined above, such rebased values will be
incorporated in the Airframe Price Adjustment calculation.
The payment by Buyer to Boeing of the amount of the Purchase
Price for such Aircraft, as determined at the time of
Aircraft delivery, will be deemed to be the payment for such
Aircraft required at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S.
Department of Labor substantially revises the methodology
used for the determination of the values to be used to
determine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released
values), or for any reason has not released values needed to
determine the applicable Aircraft Airframe Price Adjustment,
the parties will, prior to delivery of any such Aircraft,
select a substitute for such values from data published by
the Bureau of Labor Statistics or other similar data
reported by non-governmental United States organizations,
such substitute to lead in application to the same
adjustment result, insofar as possible, as would have been
achieved by continuing the use of the original values as
they may have fluctuated during the applicable time period.
Appropriate revision of the formula will be made as required
to reflect any substitute values. However, if within 24
months from delivery of the Aircraft the Bureau of Labor
Statistics should resume releasing values for the months
needed to determine the Airframe Price Adjustment, such
values will be used to determine any increase or decrease in
the Airframe Price Adjustment for the Aircraft from that
determined at the time of delivery of such Aircraft.
2.3 In the event escalation provisions are made
non-enforceable or otherwise rendered null and void by any
agency of the United States Government, the parties agree,
to the extent they may lawfully do so, to equitably adjust
the Purchase Price of any affected Aircraft to reflect an
allowance for increases or decreases in labor compensation
and material costs occurring since February, 1992, which is
consistent with the applicable provisions of paragraph 1 of
this Exhibit D.
3. For the calculations herein, the values released by
the Bureau of Labor Statistics and available to Boeing 30
days prior to scheduled Aircraft delivery will be used to
determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor
Statistics) to calculate the Airframe Price Adjustment.
Note: Any rounding of a number, as required under this
Exhibit D with respect to escalation of the airframe
price, will be accomplished as follows: if the first
digit of the portion to be dropped from the number to
be rounded is five or greater, the preceding digit
will be raised to the next higher number.
6-1162-WLJ-353R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-353R1 to
Purchase Agreement No. 1785 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No.
1785 dated March 18, 1993 as amended and supplemented
(the Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC. (Buyer) relating to Model
777-224 aircraft (the Aircraft). Letter Agreement
6-1162-WLJ-353 is cancelled and superceded.
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
1. Boeing and Buyer each understand that certain
commercial and financial information contained in the
documents listed below (Confidential Documents) is
considered by the other party to be confidential.
2. Boeing and Buyer agree that each party will
treat the Confidential Documents and the information
contained therein as confidential and will not, without
the other party's prior written consent, disclose such
Confidential Documents or any information contained
therein to any other person or entity except as may be
required by (i) applicable law or governmental
regulations; or (ii) for financing the Aircraft in
accordance with the provisions of Article 10 of the
Agreement.
3. In connection with Buyer's disclosure or
filing of Confidential Documents, or the information
contained therein pursuant to any such applicable law
or governmental regulation, Buyer will request and use
its best reasonable efforts to obtain confidential
treatment of such Confidential Documents and the
information contained therein. Boeing agrees to
cooperate with Buyer in making and supporting its
request for confidential treatment.
Schedule of Confidential Documents
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO as of this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-355R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-355R1 to
Purchase Agreement No. 1785 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1785
dated March 18, 1993 as amended and supplemented (the
Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC. (Buyer) relating to five (5)
Model 777-224 aircraft (the Aircraft). Letter Agreement
6-1162-WLJ-355 is hereby cancelled and superceded.
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-WLJ-357R1
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-WLJ-357R1 to
Purchase Agreement No. 1785 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1785
dated March 18, 1993 as amended and supplemented (the
Agreement) between THE BOEING COMPANY (Boeing) and
CONTINENTAL AIRLINES, INC. (Buyer) relating to Model
777-224 aircraft (the Aircraft). Letter Agreement
6-1162-WLJ-357 is hereby cancelled and superceded.
All terms used herein and in the Agreement, and not
defined herein, will have the same meaning as in the
Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding
of the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
6-1162-RGP-946
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 6-1162-RGP-946 to
Purchase Agreements No. 1782, 1783, 1784 and
1785 - [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Gentlemen:
Reference is made to the following Purchase Agreements,
each dated March 18, 1993, as amended and supplemented
(the Purchase Agreements) between THE BOEING COMPANY
(Boeing) and CONTINENTAL AIRLINES, INC. (Buyer): Purchase
Agreement 1782 relating to model 737-524 Aircraft;
Purchase Agreement 1783 relating to model 757-224
Aircraft; Purchase 1784 relating to model 767-324ER
Aircraft; and Purchase Agreement 1785 relating to model
777-224 Aircraft. The Aircraft rescheduled for delivery
to Buyer in 1998 and later are sometimes hereinafter
referred to as the Rescheduled Aircraft.
This letter, when accepted by Buyer, will become part of
the Purchase Agreements and will evidence our further
agreement with respect to the matters set forth below.
All terms used herein and in the Purchase Agreement, and
not defined herein, shall have the same meaning as in the
Purchase Agreements.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
If the foregoing accurately reflects your understanding of
the matters treated herein, please so indicate by
signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ RICHARD G. PLANK
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 31 , 1995
CONTINENTAL AIRLINES, INC.
By /s/ JOHN LUTH
Its Senior Vice President
Attachment A to 6-1162-RGP-946
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
Exhibit 10.15(a)
AGREEMENT
The City and County of Denver ("CCD") and
Continental Airlines, Inc. ("Continental"), and United Air
Lines, Inc. ("United"), as signatory airlines ("Carriers")
pursuant to their respective Denver International Airport
("DIA") Airport Use and Facilities Lease Agreements with
CCD (sometimes hereafter the "Lease" or "Leases" as usage
requires) hereby agree as follows:
1. Continental Gate Lease Commitments: Continental
commits to leasing gates on Concourse A at DIA, on a
preferential use basis, pursuant to the further terms and
conditions hereof, in the number and location, as follows:
CARRIER NUMBER LOCATION LEASE TERM
Continental 10 A32, A34, A36, A38, A40, 5 years
A42, A44, A45, A47, A49
The locations and numbers specified above are intended to
be in lieu of the locations and numbers specified in
Continental's Lease, and such Lease will be revised to
reflect the appropriate deletions and additions, including
without limitation all associated operations and other
space; provided, however, that Continental will lease
terminal and concourse space totaling approximately
113,488 square feet (including club room, mail facility,
and all other space). All such concourse space shall be
located on Concourse A. The parties recognize and
acknowledge that a portion of the space included in
Continental's 113,488 square feet has not been
specifically identified as of the date of this Agreement
and that CCD will cooperate with Continental to designate
such particular space as best meets its needs and
objectives, provided that the final designation of space
shall be approved by CCD in the exercise of its reasonable
discretion. CCD and the Carriers expressly waive any
argument that the lack of specificity as to the identity
of the particular square feet leased renders any portion
of this Agreement unenforceable. Continental will have
the option to renew or not, in its sole discretion, and
without any liquidated damages payment, its lease for five
years at a reduced level of occupancy commensurate with
three gates and associated space on Concourse A,
consistent with any minimum space requirements for a three
gate lease that may be imposed generally upon airlines by
CCD at such time.
2. Rates and Charges: The methodology for calculating
airline rates and charges is hereby modified to reflect
the provisions of this Agreement and such modifications
are reflected on attached Exhibit A, which shall become
Revised Exhibit F to the leases of all signatory airlines;
provided, however, that in the event of any inconsistency
or ambiguity between this Agreement and Exhibit A hereto,
this Agreement shall control. Rates and charges shall
remain subject to the audit rights of all Carriers set
forth in paragraph 6 below. The Carriers agree that for a
period of five years CCD may (but is not required to)
include up to 215,000 square feet of unleased operational
and office space as "undeveloped space"; provided,
however, that as additional square footage is leased after
DBO, CCD agrees that it shall reduce such amount of
undeveloped space accordingly.
3. Increased Amortization: Except and only to the
extent, if any, that the rights of the owners of its
airport revenue bonds (including without limitation rights
arising from the rate maintenance covenant) are not
thereby materially impaired, CCD will cause, by January 1,
1997 (or as soon thereafter as possible consistent with
CCD's aforesaid obligations to owners of its airport
revenue bonds), amortization of Capital Fund contributions
to the planning, development, and construction of the new
airport project, which CCD represents to be approximately
$264 million as of the date hereof, over a thirty-year
term, which costs are currently to be amortized by CCD
over a fifteen-year term. In addition, to the extent that
United is reimbursed by CCD pursuant to the September 1,
1994 agreement between United and CCD, as amended on
October 14, 1994, for (1) payments to BAE Automated
Systems, Inc. for the costs of the modifications to the
automated baggage system, for amounts not to exceed $35
million, and (2) if CCD reimburses United for costs for
the modification of the automated baggage system paid to
parties other than BAE Automated Systems, Inc., for
amounts not to exceed $10 million, such amounts shall be
repaid to CCD by United over a thirty-year amortization
period effective as of the date of any such
reimbursements.
4. Right of First Refusal/Pedestrian Bridge: United
hereby releases any claim of right of first refusal, which
it has pursuant to its agreement with CCD, as to all gates
and other space on Concourse A, except gates A32, A34,
A36, A38, A40, A42, A44, A45, A47, and A49 and other space
related to such gates, as to which gates and space
United's right of first refusal shall continue, and fur-
ther, United releases any claims to any restrictions on
any aspect of the use, appearance or function of the
pedestrian bridge to Concourse A.
5. Certain Baggage System Issues:
a. Rates and Charges for Baggage Systems.
CCD and Carriers hereby agree that for
purposes of rates and charges at DIA there
are three separate and distinct baggage
systems known as the Concourse A Automated
Baggage System ("AABS"), the Concourse B, or
United Automated Baggage System ("UABS"),
and the Rapistan-Demag Backup Baggage System
(the "BBS"). Therefore, all rates and
charges for equipment and certain space
associated with the DIA baggage systems, as
defined and set forth herein, shall be
allocated on the basis of these three
separate systems as follows:
i. All baggage system equipment
(hardware) located on Concourse A ("A
Sortation Equipment") shall be part
of the AABS and shall be charged
exclusively to airlines operating
from Concourse A on the basis of
their respective passenger
enplanements. All space associated
with such A Sortation Equipment shall
be allocated to airlines operating
from Concourse A on the basis of such
airlines' rented square feet on such
concourse as a percentage of total
rentable square feet on such
concourse.
ii. All baggage system equipment
(hardware) located on Concourse B ("B
Sortation Equipment") shall be part
of the UABS and shall be charged
exclusively to airlines operating
from Concourse B. All space
associated with such B Sortation
Equipment shall be allocated to
airlines operating from Concourse B
on the basis of such airlines' rented
square feet on such concourse as a
percentage of total rentable square
feet on such concourse.
iii. All baggage system equipment
(hardware) located on Concourse C ("C
Sortation Equipment") as of DBO, but
not the space associated therewith
nor any subsequent C Sortation
Equipment or trackage, shall be a
part of and charged to the UABS and
shall be charged exclusively to
airlines operating from Concourse B;
provided, however, that if the C
Sortation Equipment is utilized by an
airline or airlines operating on
Concourse C, then said C Sortation
Equipment shall no longer be charged
to the airline or airlines operating
on Concourse B.
iv. All baggage system equipment
(hardware) for the AABS and the UABS
located in the landside terminal and
the tunnel, and space associated with
said hardware located in the landside
terminal, baggage system maintenance
areas, and all control room equipment
and certain space in the landside
terminal and tunnel for the AABS and
UABS (collectively the "Spine
Equipment and Space") shall be
allocated on the basis of 65% to the
UABS, and thus to airlines serving
Concourse B, and 35% to the AABS, and
thus to airlines serving Concourse A,
and shall be further allocated among
such airlines on the respective
Concourses on the basis of their
origination and destination passenger
traffic; provided, however, that
Continental, for itself, its
successors, and assigns, hereby
agrees that in the event it no longer
operates at DIA but remains an
operating airline during the 5 years
following DBO, it, or its successors
or assigns, shall be responsible to
pay, during such initial five-year
term, a share of the 35% of the Spine
Equipment and Space based on its
actual 1995 DIA origination and
destination passenger traffic, but
not less than 800,000 origination and
destination passengers. In the event
that Continental ceases operation
without a successor or assign, then
the 35% share of the Spine Equipment
and Space shall be paid as follows:
For each six-month period after the
commencement of the assessment of
charges for the AABS pursuant to
subparagraph a.vii hereof, the
Concourse A airlines shall
collectively pay 100% of their 35%
share of the Spine Equipment and
Space, unless the total origination
and destination traffic on
Concourse A is below 1.0 million
passengers. In that event, the A
Concourse airlines shall be charged
for the AABS share of the Spine
Equipment and Space costs, using the
1.0 million passenger level as the
"denominator" of origination and
destination traffic on Concourse A
for such six-month period and using
the airlines' actual origination and
destination traffic as the numerator,
with the resulting quotient
multiplied by the 35% charge for the
Spine Equipment and Space for that
six-month period. The balance of the
35% share of the Spine Equipment and
Space not charged to any airline
under this methodology shall, subject
to all prior requirements of CCD's
bond ordinances applicable to the
airport or airport system, be paid by
net revenues of DIA. If for any
reason DIA net revenues are
insufficient or otherwise cannot be
used to pay such costs, then each
Concourse A signatory airline shall
have the right to move to Concourse C
to the extent available space exists,
and be subject to rates and charges
as if such airline were on
Concourse C whether or not such
airline is actually able to obtain
space on such Concourse.
v. The parties recognize and acknowledge
that the 65/35 allocation of Spine
Equipment and Space costs is
desirable for the first 5 years after
DBO, but may not be desirable over a
longer term. Accordingly, at least 8
months prior to the end of the first
five years after DBO, any airline or
group of airlines representing at
least 40% of combined Concourses A
and B origin and destination traffic
may, with respect to the second
five-year period and thereafter,
cause CCD to charge the Spine
Equipment and Space to airlines
operating on Concourses A and B based
on such airlines' respective shares
of the combined A and B origination
and destination traffic. If this
right, as set forth herein, is
exercised, CCD shall change the
allocation as set forth in
subparagraph a.iv above to reflect
the provisions of this paragraph,
thus creating a common A/B system for
purposes of allocating Spine
Equipment and Space costs. If no
such right is exercised, then the
Spine Equipment and Space costs shall
continue thereafter to be allocated
as set forth in subparagraph a.iv of
this paragraph 5.
vi. If, at any time after DBO, a baggage
system, automated or otherwise, other
than the BBS, is constructed for
Concourse C, the costs of such system
shall not be charged, in whole or
part or in any way to airlines
operating from Concourses A or B and
such costs shall be allocated to a
separate cost center, to be charged
exclusively to Concourse C airlines
based on their respective origination
and destination traffic and, in
addition, an equitable share of any
common equipment and space shall be
allocated to such airlines to the
extent such common equipment and
space is utilized by a Concourse C
system.
vii. The Concourse A airlines' AABS rates
and charges for the A Sortation
Equipment, associated space, and for
the 35% of the Spine Equipment and
Space as set forth in subparagraphs
a.i and a.iv of this paragraph 5,
shall begin to be charged to such
airlines at the earlier of
(1) certification by CCD that the
AABS meets the performance standards
established in Contract F-300B as
modified by amendments and change
orders thereto through Change Order
14 or (2) November 15, 1995. Between
DBO and the assessment of rates and
charges for the AABS, as provided for
herein, said rates and charges shall,
subject to all prior requirements of
CCD's bond ordinances applicable to
the airport or airport system, be
paid from net DIA airport revenues.
viii. Any expenditures required to make the
AABS operational shall be paid by CCD
as part of its obligations under
Contract F-300B and the amendments
and change orders thereto. Any
additional expenditures, unless paid
for by CCD's share of net revenues,
for the AABS cannot be made without
the approval of signatory airlines
and their sublessees serving
Concourse A carrying at least 51% of
the origination and destination
traffic on such concourse. In no
event shall any expenditures for the
AABS, over and above that which is
currently approved in Contract F-
300B, including the amendments and
change orders thereto through Change
Order 14, be charged directly or
indirectly or in any way to United,
except to the extent United is
operating from Concourse A.
ix. The Concourse A airlines' obligation
to pay for the AABS as set forth in
subparagraph a.vii of this
paragraph 5, shall not constitute an
obligation of the Concourse A
airlines to use the AABS unless the
AABS meets the performance and
reliability criteria established in
F300-B, as amended, and change orders
thereto through the date hereof and
(1) the total actual annual
origination and destination traffic
on Concourse A exceeds 4.5 million
passengers, or (2) the airlines
carrying at least 51% of the
origination and destination traffic
on Concourse A (excluding United if
United operates from Concourse A)
elect to request the use of such
system.
b. Operations and Maintenance Costs.
Continental hereby agrees for itself and its
sublessees and CCD agrees that any other
airline operating from Concourse A, either
as a signatory or nonsignatory airline,
shall pay a pro rata share of the costs of
an operations and maintenance agreement for
the AABS, UABS, and the BBS on the following
terms and conditions:
i. For so long as the airlines operating
on Concourse A are not required to
use, or do not elect to use, the
AABS, such airlines shall not,
pursuant to this Agreement, be
responsible for, and shall not be
obligated to pay for, any portion of
the costs of the "O&M Agreement," as
defined in subparagraph b.ii below.
If the Concourse A airlines commence
the actual use of the AABS pursuant
to subparagraph a.ix above, then and
only then the following subparagraphs
shall apply.
ii. The operations and maintenance
agreement shall be the agreement
dated January 25, 1995 between United
and BAE Automated Systems, Inc.,
entitled Denver International Airport
Agreement for Operations, Maintenance
and Management Services, or any
substantially similar successor
agreement if the BAE contract is
terminated pursuant to its provisions
("O&M Agreement"), which O&M
Agreement shall be expanded to
include the AABS and that part of the
BBS serving Concourse A.
iii. The "O&M Agreement" shall not be
applicable to the C Concourse portion
of the BBS, and the Concourse C
carriers shall be separately
responsible for the O&M costs for
that part of the BBS which serves
Concourse C. If the AABS is not in
use by airlines on Concourse A, the
Concourse A airlines shall be
separately responsible for the O&M
costs for that part of the BBS
serving Concourse A.
iv. The parties acknowledge that the O&M
Agreement is a five-year agreement.
The Concourse A and B airlines agree
to pay for the cost of the O&M
Agreement, except those costs related
to the BBS, as follows:
<TABLE>
<CAPTION>
A Carriers' B Carriers'
O&M Contract Segment Share Share
<S> <C> <C>
Management 35% 65%
Terminal/spine/control room 35% 65%
Concourse A 100% 0%
Concourse B 0% 100%
</TABLE>
v. The O&M Agreement costs for any
portion of the BBS shall be allocated
pursuant to the formula for
allocation of the equipment costs for
the BBS.
vi. In the event that an automated system
is built, after DBO, for Concourse C
and if Concourse C airlines also join
in some portion of the O&M Agreement,
then the allocable shares of each
segment of the O&M Agreement shall be
adjusted on an equitable basis to
reflect the addition of such
airlines.
vii. The annual costs of the O&M Agreement
shall be established by United
pursuant to the provisions of the O&M
Agreement, provided however that the
annual budget for the segment of the
contract solely attributable to
Concourse A shall be determined by
the Concourse A airlines in the
manner provided in the O&M Agreement,
with a vote required to bind the
Concourse A airlines of a majority of
the signatory airlines and their
sublessees serving Concourse A,
cumulatively carrying at least 51% of
such airlines' Concourse A
origination and destination
passengers for the immediately
preceding calendar year (except 1994
calendar year Stapleton International
Airport passenger figures for such
Concourse A airlines shall be used
from DBO of DIA through the end of
1995).
viii. The airlines serving Concourse A
shall have the right to dispute the
allocation of budgeted costs among or
between contract segments of the O&M
Agreement, with a vote required to
bind the Concourse A airlines of a
majority of the signatory airlines
and their sublessees serving
Concourse A, cumulatively carrying at
least 51% of such airlines'
Concourse A origination and
destination passengers for the
immediately preceding calendar year
(except 1994 calendar year Stapleton
International Airport passenger
figures for such Concourse A airlines
shall be used from DBO of DIA through
the end of 1995).
c. Miscellaneous Baggage System Provisions.
i. The cost allocations provided for in
this paragraph 5 shall not result in
joint or joint and several liability
for any airline.
ii. CCD agrees that, except for
international arrivals, no airlines
will be allowed to locate on
Concourse A or to use Concourse A on
a charter basis or other limited
basis unless such airlines agree to
pay a fair and equitable share of the
AABS costs, Spine Equipment and
Space, and, if applicable pursuant to
subparagraph b above, their allocable
share of the O&M Agreement,
substantially on the basis set forth
above or on other fair and equitable
terms and conditions, with
appropriate adjustments for signatory
or nonsignatory status. CCD will
credit the AABS cost center to the
extent of such collected rates and
charges from charter or other limited
basis operations.
6. Audit Rights: Notwithstanding paragraph 2 above,
the Carriers will retain the right to audit any and all of
the amounts and the allocation of costs and cost centers
pursuant to the agreed upon rates and charges methodology,
and to dispute (i) such allocations to the extent
inconsistent with such methodology, and (ii) the amounts
of any charges to them. The Carriers also retain the
right to request annual audits.
CCD will follow such procedures and keep and maintain such
books, records and accounts as are necessary or required
under the provisions of the pertinent agreement or CCD's
bond ordinances applicable to the airport or airport
system. Such books, records and accounts will contain all
items affecting the computation of airline rentals, rates,
fees and charges, recorded in accordance with reasonable
accounting principles or procedures. All Carriers will
have the right, at any reasonable time and at their own
expense, until the expiration of three (3) years after the
termination of their respective use and lease agreements,
to examine and make copies of CCD's books, records and
accounts pertinent to such agreements.
Each Carrier agrees that the Auditor of CCD or any of the
Auditor's duly authorized representatives, until the
expiration of three (3) years after the termination of
each respective Carrier's Lease, shall have the right, at
any reasonable time and at its expense, to have access to
and the right to examine any books, documents, papers and
records of the Carrier pertinent to such agreement.
Nothing herein shall be construed to allow a change to the
baggage system cost allocation methodology in subparagraph
5.a.iv above.
7. Capitalization of Delay Costs: Subject to CCD's
obligations to the owners of its airport revenue bonds,
and consistent with CCD's obligations to United for
repayment of Delay Costs for the period March 10, 1994
through May 15, 1994, pursuant to Section 3.03 of the
agreement between CCD and United dated September 1, 1994,
as amended on October 14, 1994, CCD will use its best
efforts to capitalize delay costs incurred between
March 10, 1994 and May 15, 1994 and, if successful, will
then return to the airlines all amounts paid to date to
defray such costs. Subject to CCD's obligations to the
owners of its airport revenue bonds, CCD will include such
capitalized delay costs in the rate base for all carriers,
based on a capitalization period of not less than the term
of any bonds issued to finance such costs or 20 years,
whichever is greater. Notwithstanding the foregoing,
should CCD not return to United said Delay Costs amounts,
nothing herein shall waive United's rights under Section
3.03 of the aforesaid agreement, as amended.
8. Sublease Rights: As a special incentive for
Continental agreeing to commit to take more gates, as of
DBO, than the number of gates it requires as of DBO, and
in compromise of the disputes between the parties, CCD
will amend its policy on subleasing rights, which amended
policy will remain in effect no less than five years from
DBO, to conform to the following:
a. CCD will approve a request by
Continental to sublease any of its gates to
any other airline so long as (i) all other
available gates at DIA are leased to an
airline (other than the City's two
international Concourse A gates), or
(ii) Continental and the subleasing airline
are parties to a legitimate code-sharing
agreement;
b. In addition to the rights in "a" above,
CCD will approve a subleasing request by
Continental as to the seven gates and
associated space that are contemplated to be
subleased to Frontier and America West, if
any of such subleased gates and associated
space thereafter becomes vacant, so long as
the "replacement" subleasing airline is
either (i) a new entrant to DIA (not serving
DIA prior to such replacement sublease) or
(ii) an airline already serving DIA on
Concourse A who wishes to take one or more
additional gates on Concourse A, and no
other gates on such Concourse are available
to be leased by CCD to such airline at such
time.
c. CCD will approve a request by
Continental to sublease or enter into a use
agreement with respect to its club space or
mail sort facility on reasonable terms and
conditions related to the facilities.
d. No sublease for any space will release
an airline from its obligations under its
Lease, and such airline will remain
primarily liable unless CCD elects to
require an assignment of such airline's
Lease.
9. Releases: CCD and Continental, and their
subsidiaries, affiliates, representatives, agents,
officers, directors, employees, successors and assigns,
hereby mutually release and discharge each other from and
against any and all claims, demands, causes of action,
damages, losses or liabilities arising from or relating
to:
a. Any acts or omissions prior to the date
of execution of this Agreement, arising from
or relating to the Airport Use and
Facilities Lease Agreement, the Amendatory
Agreement, the Agreement on a New Airport,
as amended, or the March 16, 1994 Agreement
between CCD and Continental, including but
not limited to any failure by Continental to
occupy, or pay rates and charges on, any
gates or space in the terminal complex or
Concourse A at DIA prior to the date of
execution of this Agreement; and
b. any claim by Continental that CCD was
required to open DIA prior to February 28,
1995; and
c. any claim by Continental that CCD was
required to provide an "Integrated Automated
Baggage Handling System;" and
d. any claim by Continental that CCD failed
to coordinate or consult with Continental in
the planning, design, development and
construction of DIA, that CCD failed to
expedite completion, minimize costs and stay
within its budget, and that CCD failed to
perform as a reasonably prudent airport
operator in the planning, design,
development, and construction of DIA; and
e. any claim by CCD against Continental for
rates and charges at DIA in excess of those
required by or pursuant to this Agreement,
or by agreements not modified, amended or
superseded by this Agreement, it being
expressly agreed that CCD shall withdraw
invoices for rates and charges at DIA
previously submitted to Continental for the
months of March and April 1995, and CCD
shall reissue to Continental invoices for
March and April 1995 as if this Agreement
had then been in full force and effect as of
DBO
This provision shall not be construed to release any
claims arising from any breach of this Agreement or any
claims not specifically released herein. The foregoing
releases shall not affect or release in any way the
parties' rights under paragraph 6 of this Agreement, the
exercise of such rights, or the consequences of the
exercise of such rights. CCD shall, upon payment of
amounts due from Continental pursuant to subparagraph 9.e
of this Agreement and other amounts due, owing and
outstanding as of May 1, 1995 regarding three special
facility leases for facilities at Stapleton and four
support facilities at DIA, cause to be dismissed, without
prejudice except to the extent of the claims released, the
claims filed against Continental in the matter City and
County of Denver, Colorado v. Continental Airlines, Inc.,
Civ. 95-S-419 (D. Colo. filed February 22, 1995).
10. Binding Terms: This Agreement is binding on the
parties hereto and Continental shall be entitled to rely
hereon in order to occupy and to give up for occupancy
premises in the locations and numbers specified in
paragraph 2 above, together with associated operations
space.
11. Bond Ordinance: This agreement and any agreement
contemplated hereby will be in all respects subject and
subordinate to any and all City bond ordinances applicable
to the airport and airport system and to any other bond
ordinances which hereafter may amend, supplement or
replace such ordinances; except to the extent that any
ordinances that amend, supplement, or replace such
ordinances impair the rights of the Carriers under this
Agreement. The parties acknowledge and agree that all
property subject to any agreement which was financed by
the net proceeds of tax-exempt bonds is owned by CCD, and
the Carriers which are a party thereto agree not to take
any action that would impair, or omit to take any action
required to confirm, the treatment of such property as
owned by CCD for purposes of Section 142(b) of the
Internal Revenue Code of 1986, as amended. In particular,
the Carriers agree to make an irrevocable election
(binding on themselves and all successors in interest) not
to claim depreciation or an investment credit with respect
to any property subject to any agreement which was
financed by the net proceeds of tax-exempt bonds and will
execute such forms and take such other action as CCD may
reasonably request in order to implement such election.
12. Revenue Credit Split: The annual "revenue credit"
for DIA, if any, to be divided between the Capital
Improvement Account and the Airline Revenue Credit
Account, shall be divided as follows:
<TABLE>
<CAPTION>
Capital Airline
Improvement Revenue
Years from DBO Account Share Credit Share
<S> <C> <C>
0-5 20% 80%
6-11 25% 75%
12- 50% 50%
</TABLE>
13. CCD Use of Available Office Space: CCD agrees that
for so long as the currently available office or other
unleased space at DIA is available for office space at
DIA, it will not cause to be built any additional office
space over and above existing space, at DIA for the
purpose of use by CCD employees or agents at DIA.
14. Sixth Runway: CCD will proceed with the completion
of Runway 16R - 34L and related taxiways in two phases.
In the first phase, CCD will complete the rough grading in
FY95-96 utilizing the existing AIP #09 Grant for $10
million and the $6 million required as matching funds,
which funds shall come from the proceeds of 30-year bond
sales or the Capital Fund. In the second phase, CCD will
complete the remainder of the final grading, paving,
lighting and related work to provide a complete
operational unit, only if: (i) its operational
effectiveness, utilizing computer simulation SIMMOD
(current version), is proven to result in annual
operational cost savings that equal or exceed the annual
debt service and operating and maintenance expenses of
this phase of the sixth runway project; or (ii) signatory
airlines that account for at least 51% of total landed
aircraft weight during the previous fiscal year approves;
or (iii) the FAA funds 75% of the entire cost of the
remainder of the sixth runway project.
15. Execution by Counterparts: This agreement may be
signed in two or more counterparts, each of which shall be
deemed an original.
16. Conflicts With and Amendments of Existing Leases
and Other Agreements: In the event of any inconsistency
between the Carriers' Leases, or any other agreements
between Carriers and CCD and the terms hereof, this
Agreement shall control, supersede, and amend any such
inconsistent or contrary provisions, but all provisions in
such leases or agreements not inconsistent with the terms
and provisions hereof shall remain in full force and
effect.
17. Condition; Final Approval: This Agreement is
conditioned on CCD obtaining the written consent of a
numerical majority of the signatory airlines and a
majority of the signatory airlines in terms of rentals,
rates, fees and charges paid in the preceding fiscal year,
pursuant to the General Provisions Section set forth in
the Rate-Making Procedures and Reestablishment Part of the
Airport Use and Facilities Lease Agreements of such
signatory airlines. In addition, this agreement is
expressly subject to, and shall not be or become effective
or binding on CCD until executed by CCD and an executed
copy has been delivered to at least one of the Carriers.
18. Effective Date: For purposes of rates and charges
assessed to airlines at DIA, this Agreement shall be
deemed to be effective as of May 1, 1995; provided,
however, that as part of the compromise of the litigation
pending between Continental and CCD, Continental's rates
and charges for March and April, 1995, shall be calculated
as if this Agreement were effective as of DBO.
19. DBO: "DBO" as used herein is February 28, 1995.
ATTEST: CITY AND COUNTY OF DENVER
______________________________ By_________________________
ARIE P. TAYLOR, Clerk and Mayor Wellington E. Webb
Recorder, Ex-Officio Clerk of
the City and County of Denver Dated:_____________________
Dated:_______________________
RECOMMENDED AND APPROVED:
APPROVED AS TO FORM: By_________________________
Manager of Public Works
DANIEL E. MUSE, Attorney for
the City and County of Denver Dated:_____________________
By____________________________ By_________________________
Assistant City Attorney Manager of Aviation
Dated:________________________ Dated:_____________________
REGISTERED AND
COUNTERSIGNED:
By__________________________
Auditor
Dated:______________________
ATTEST:
___________________________
Secretary
CONTINENTAL AIRLINES, INC. UNITED AIR LINES, INC.
By /s/ Gordon M. Bethune By /s/ Stuart I. Oran
Gordon M. Bethune Stuart I. Oran
Title: Chief Executive Officer Title Executive Vice
President - Corporate
Affairs and General
Counsel
Dated: April 3, 1995 Dated: April 3, 1995
MUTUAL RELEASE
Continental Airlines, Inc. ("Continental") and United
Air Lines, Inc. ("United") hereby grant releases to each
other covering all claims of any nature arising out of or
resulting from any or all of the following: (i)
modifications of the "Integrated Automated Baggage Handling
System" (as defined in Contract F-300B) pursuant to the
agreement dated September 1, 1994 between the City and
County of Denver, Colorado ("CCD") and United, as amended
October 14, 1994; and (ii) the failure of Continental to
occupy, or pay rates and charges on, any gates or facilities
in the terminal complex or Concourse A at DIA except to the
extent of Continental's obligations under the Agreement
between and among Continental, United, and CCD, executed by
Continental and United of even date herewith; provided,
however, that in the event such Agreement does not become
effective by April 17, 1995, this mutual release shall
become null and void in its entirety unless further extended
by mutual written agreement of Continental and United.
CONTINENTAL AIRLINES, INC. UNITED AIR LINES, INC.
By: /s/ Gordon M. Bethune By: /s/ Stuart I. Oran
Gordon M. Bethune STUART I. ORAN
Title: Chief Executive Officer Title: Executive Vice
President
Corporate Affairs
and General Counsel
Dated: April 3, 1995 Dated: April 3, 1995
EXHIBIT A TO AGREEMENT AMONG
CITY AND COUNTY OF DENVER,
UNITED AIR LINES, INC., AND
CONTINENTAL AIRLINES, INC.
(Revised Exhibit F to Leases)
DENVER INTERNATIONAL AIRPORT
AIRLINE RATE-MAKING METHODOLOGY
General Rate-Making Concepts
The City will use a "compensatory" methodology to establish Terminal
Complex rental rates. The Airlines will pay the fully allocated cost of
the space that they lease in the Landside Terminal building and airside
concourses.
Landing fees will be established according to a "cost center residual cost"
methodology, under which the airlines will pay the costs of the Airfield,
after first deducting airfield revenues from other sources (primarily
general aviation landing fees and fuel flowage fees).
Rate-Making Procedures at the Airport
At the Airport, the City intends to use cost accounting concepts and rate-
making procedures as described in the following sections.
Cost Center. Direct (revenue-producing) cost centers to be
established for the New Airport are to include the following:
Terminal Complex -- All levels of space, including the
pedestrian bridge to Concourse A, the clerestory in Concourse
B, public escalators, elevators and moving walkways in the
Landside Terminal and airside Concourses A, B, and C.
Airline Tenant Finishes and Equipment - Airline space finishes
and equipment, ticketing facilities, loading bridges,
communications equipment, baggage and flight information
display systems, apron level commuter facilities and baggage
sortation systems which shall include related equipment and
space within Concourses A and B (and additional concourses as
such sortation systems are operational), and approved
modifications to the automated baggage systems. Sub-cost
centers will be established for the Landside Terminal, the
international facilities, each airside concourse and each
airline as applicable.
Joint Use Facilities - All space and related equipment in the
Landside Terminal and Concourses allocated to Tug Circulation
and common use facilities, (including, but not limited to, pre-
conditioned air facilities, triturators, etc.). The apron
level on Concourse C shall be included in the Concourse C tug
circulation space (excluding the space occupied by the baggage
carrousels on the Concourse C Apron).
Baggage Claim -- All bag claim space and equipment in the
Landside Terminal including carrousels, and input conveyors and
related inbound baggage handling space in the Landside
Terminal.
Spine Equipment and Space -- The inbound and outbound automated
DCV baggage systems (AABS and UABS), including their equipment
and related space (excluding the Tunnel space allocated to the
AGTS and Tunnel cost center) in the Landside Terminal and in
the Tunnel from the Landside Terminal to the Concourses,
separately serving Concourse A (the "AABS") and separately
serving Concourse B (the"UABS"), including the costs of the
maintenance space, control room equipment and related control
room space, (excluding the costs of baggage sortation system
equipment and space in the concourses and the costs of approved
modifications to the automated systems which are included in
the baggage sortation for each concourse).
Backup Baggage System -- The outbound conveyor baggage system
and equipment, including all costs of baggage equipment, and
structural/construction modifications/costs to accommodate the
Backup Baggage System and related operations, tug circulation
and odd size lift space in the Landside Terminal, related
maintenance space and the space in the parking structure used
for the Backup Baggage System.
AGTS and Tunnels -- The Automatic Guideway Transit System
("AGTS"), including vehicles and equipment, the AGTS tunnels
and the baggage and tug tunnels between the Landside Terminal
and the airside concourses and tunnel modifications to
accommodate increased tug and cart operations.
International Facilities -- International gates on Concourse A
and related holdrooms, sterile circulation space, ramp areas,
operations space and the FIS area in the Landside Terminal, and
the international portion of the Connector to Concourse A.
Concourse Ramp Area -- The aircraft parking aprons and pushback
zones located adjacent to the airside concourses.
Airfield Area -- The runway and taxiway system, undeveloped
acreage and 50% of the costs incurred to develop the North
Cargo Site prior to DBO.
Public Parking Area - All space allocated for public parking in
the parking structure and all other public parking lots
(excluding the cost of the parking structure space exclusively
dedicated to the Backup Baggage System which will be allocated
to the Backup Baggage System cost center).
Employee Parking Area -- The employee parking lot(s).
Fueling System - The fuel storage and distribution system,
including hydrant fueling pits at the aircraft parking aprons.
Commercial Vehicle Facilities -- The surface parking area and building
to be used for staging commercial vehicles and the dedicated
commercial roadway serving the Terminal Complex. Commercial vehicles
include hotel/motel courtesy vans, taxis and limousines.
Rental Car Facilities -- Areas and roadways provided for Rental Car
operations not in the Terminal Complex.
Cargo Area -- The joint use air cargo facilities (including apron,
building and truck parking areas) and other areas provided for air
cargo carriers and freight forwarders.
Airline Maintenance and Support Area -- Areas provided for airline
maintenance facilities, cargo facilities and inflight kitchens.
Airport Mail Facility -- Areas provided for the Airport mail facility
to be constructed by the U.S. Postal Service.
Additional Concourses -- Costs related to all levels of space and
associated apron areas of any airside concourses in addition to
Concourses A, B and C shall be allocated to new cost centers to be
established.
Indirect (nonrevenue-producing) cost centers are to include:
Access, Terminal, and Service Roadways -- Pena Boulevard, other
secondary access roads, the terminal area roadways, the terminal
curbsides, the perimeter circulation roadway, and other secondary
internal roadways.
Airport Maintenance -- Airport maintenance facilities and indirect
(unallocated) maintenance expenses.
Airport Administration -- Airport administrative facilities and
administrative expenses.
Aircraft Rescue and Fire Fighting -- The rapid response stations,
structural fire station(s) and ARFF operating expenses.
Certain Cost Center Allocations
The net requirement of the Terminal Complex will be recovered through
rental rates. Net Terminal Complex requirements will be divided by total
rentable space in the Terminal Complex to determine the average rental rate
per square foot of rentable space. Airlines will be charged this average
rate for space that they lease. Undeveloped space in the Terminal Complex
shall not be considered rentable space in computing the average rental
rate. Space costs associated with the FIS area, international facilities,
and AGTS and tunnel areas, baggage claim and baggage systems shall be
assigned at the average Terminal Complex rental rate to the appropriate
costs centers.
The net costs of the Ramp Area including pushback zones will be recovered
through separate ramp fees assessed on a per-lineal-foot basis measured two
hundred and fifty (250) feet from the exterior walls of each concourse.
Commuter aircraft ramp fees will be calculated based on 50% of the sum of
the per-lineal-foot measurement of the commuter facility ramp area.
The net costs of the Airfield Area will be recovered through landing fees
assessed on the basis of the total landed weight of all aircraft using the
Airport.
International fees on arriving international flights will be assessed on a
per deplaning international passenger basis to recover costs allocable to
the International Facilities cost center.
Fueling system charges will be distributed 10% equally and 90% on a
gallonage basis among airlines to recover all of the costs associated with
the fueling system.
Charges for the AGTS, the AGTS tunnels, and the baggage and tug tunnels
between the landside terminal and the airside concourses will be assessed
among airlines on the basis of their respective originating and destination
passengers at the Airport for the preceding three-month period.
Baggage Claim space will be costed at the average rental rate in the
Terminal Complex. This amount will be added to the Baggage Claim cost
center costs. Charges for the Baggage Claim cost center will be allocated
among airlines on the basis of their respective deplaned destination
passengers for the preceding three-month period.
Landside Terminal space allocated to the Backup Baggage System will be
costed at the average rental rate of the Terminal Complex. This space
shall be allocated based on Airline rented square footage in the Landside
Terminal and charged to the Airline Tenants. Space in the Public Parking
Area will be costed at the average cost per square foot of the Parking
Structure, and, when applicable, will be added to the Backup Baggage System
cost center. Charges for the Backup Baggage System cost center, including
equipment, structural/construction costs and related space as described
above, will be allocated to a sub-cost center for each of the five modules
presently developed in the Terminal and Parking Structure (additional
modules will be added when developed). The costs of each module shall be
charged to the airline(s) leasing or using those facilities. In the event
the Backup Baggage System equipment and/or space is jointly used by two or
more airlines, such costs will be allocated among such airlines on the
basis of their proportional number of carrousels in the module exclusively
used by each airline to the total number of carrousels in their module.
Furthermore, if a carousel is jointly used by two or more airlines, the
costs allocated to such carousel will be further allocated to each carrier
using the carousel based on their proportional share of originating
passengers.
The cost of the Parking Structure will be allocated to each module based on
the square footage of that module used for the Backup Baggage System.
However, the airlines will not be charged for such costs until the average
number of cars in the Parking Structure exceeds 12,000 for 22 consecutive
days.
Joint Use Facilities shall be costed at the average Terminal Complex rate.
The cost of the Joint Use Facilities in each concourse shall be separately
allocated based on Airline rentable square footage within the respective
concourse and charged to the respective tenants/users of the facilities in
each concourse based on their proportional share of rented square footage
to the total rentable square footage.
For purposes of allocating costs to airlines based on rentable square
footage, airline rentable square footage shall include the 215,000 square
feet of unleased space that has been redefined for certain purposes as
undeveloped space.
The space associated with the Spine Equipment and Space in the Terminal
Complex will be costed at the average rental rate of the Terminal Complex.
This amount will be added to the equipment costs of the Spine Equipment and
Space and allocated 65% to the UABS serving Concourse B and 35% to the AABS
serving Concourse A and assessed among the airlines on each respective
concourse on the basis of their respective originating and destination
passengers for the preceding three-month period. The parties recognize and
acknowledge that the 65/35 allocation of Spine Equipment and Space is
desirable for the initial 5-year term, but may not be desirable over a
longer term. Accordingly, at least 8 months prior to the end of the first
five years after DBO, any airline or group of airlines representing at
least 40% of combined Concourses A and B originating and destination
traffic may, with respect to the second five-year period and thereafter,
cause the City to charge the Spine Equipment and Space to airlines
operating on Concourse A and B based on such airlines' respective shares of
the combined A and B originating and destination traffic.
The Concourse A airlines' rates and charges for the baggage sortation
equipment and space on Concourse A and for the 35% of the Spine Equipment
and Space shall begin to be charged to such airlines at the earlier of (1)
certification by the City that the AABS meets the performance standards
established in Contract F-300B as modified by amendments and change orders
thereto through Change Order 14 or (2) November 15, 1995. Between DBO and
the assessment of rates and charges for the baggage sortation equipment and
space and the Concourse A proportional share of the Spine Equipment and
Space, as provided for herein, said rates and charges shall, subject to all
prior requirements of the City's Bond Ordinances applicable to the Airport
or Airport System, be paid from net DIA airport revenues.
Continental, for itself, its successors, and assigns, agrees that in the
event it no longer operates at DIA but remains an operating airline during
the 5 years following DBO, it, or its successors or assigns, shall be
responsible to pay, during such initial five-year term, a share of the 35%
of the Spine Equipment and Space based on its actual 1995 DIA originating
and destination passenger traffic, but not less than 800,000 originating
and destination passengers. In the event that Continental ceases operation
without a successor or assign, then the 35% share of the Spine Equipment
and Space shall be paid as follows: For each six-month period after the
commencement of the assessment of charges for the AABS, the Concourse A
airlines shall collectively pay 100% of their 35% share of the Spine
Equipment and Space, unless the total originating and destination traffic
on Concourse A during such period is below 1.0 million passengers. In that
event, the Concourse A airlines shall be charged for the AABS share of the
Spine Equipment and Space, using the 1.0 million passenger level as the
"denominator" of originating and destination traffic on Concourse A for
such six-month period and using the airlines' actual originating and
destination traffic as the numerator, with the resulting quotient
multiplied by the 35% charge for the Spine Equipment and Space for that
six-month period. The balance of the 35% share of the Spine Equipment and
Space not charged to any airline under this methodology shall, subject to
all prior requirements of the City's Bond Ordinances applicable to the
Airport or the Airport System, be paid by net revenues of DIA. If for any
reason DIA net revenues are insufficient or otherwise cannot be used to pay
such costs, then each Concourse A signatory airline shall have the right to
move to Concourse C to the extent available space exists, and be subject to
rates and charges as if such airline were on Concourse C whether or not
such airline is actually able to obtain space on such Concourse.
The City shall credit the AABS cost center to the extent of collected
rates, fees and charges assessed charter and other limited basis operations
on Concourse A.
Airline Tenant Finish and Equipment costs, excluding the costs of the
baggage sortation equipment and approved modifications to the automated DCV
baggage system to provide for the automated system on Concourses A and B,
shall be allocated to the applicable sub-costs centers and then divided by
total airline rentable space in that cost center to determine the average
tenant finish rate per square foot. The cost of the baggage sortation
space shall be included in the costs of the Tenant Finish and Equipment and
allocated based on airline rentable space.
The costs of the Concourse A baggage sortation system equipment and
approved modifications shall be allocated exclusively to the airlines
operating on Concourse A on the basis of their respective passenger
enplanements. The costs of the Concourse B baggage sortation system
equipment and approved modifications shall be allocated exclusively to the
airlines operating on Concourse B on the basis of their respective
passenger enplanements. The costs of the Concourse C baggage sortation
system equipment as of DBO shall be allocated to the Concourse B sortation
system equipment until such equipment is otherwise utilized or leased by
other airlines.
In the event an automated baggage system is constructed for Concourse C or
for any additional airside concourse, the costs related to such baggage
system(s), equipment and space shall be allocated to Concourse C, or the
new concourse as applicable, and charged exclusively to the airlines
operating on such concourse.
Costs associated with undeveloped acreage will be allocated to the Airfield
Area until the land is developed. Costs and revenues associated with
developed acreage will be allocated to the applicable cost center.
Not more than forty percent (40%) of the costs (debt service and operating
and maintenance expenses) associated with the Access and Terminal Roadways
shall be allocated to the Terminal Complex.
Costs associated with the Service Roadways shall be allocated back to the
direct cost centers based primarily on which cost centers benefit from such
Service Roadways.
Not more than eighty percent (80%) of the costs associated with Aircraft
Rescue and Fire Fighting shall be allocated to the Airfield Area cost
center.
Costs associated with the Airport Administration cost center will be
allocated based on a 50/50 revenue/direct expense formula: fifty percent
(50%) on the percentage distribution of operating revenue by cost center
and the remaining fifty percent (50%) allocated on the percentage
distribution of direct Operation and Maintenance Expenses by cost center.
Undeveloped space shall include: (i) space in which no buildout has
occurred, (ii) the space in the basement of Concourse C until such space
is leased or utilized, (iii) no more than 215,000 square feet of unleased
operational and office space (including the prorata costs of Tenant Finish
and Equipment and Joint Use Facilities) until such space is exclusively
leased and (iv) the space in level 3 of the Landside Terminal interior to
the tug circulation rights-of-way not otherwise leased or used.
Airport Costs
Airport "costs" (also referred to as "requirements") include without
limitation:
(1) Operation and Maintenance Expenses.
(2) Debt service on Bonds issued for the Airport and any other
amounts required under the General Bond Ordinance except debt
service on PFC-enhanced bonds for which PFC revenues are
available.
(3) Debt service on Bonds used for Airport land acquisition.
(4) Amortization of 50% of the City's New Airport expenditures
incurred prior to January 1, 1990, from Capital Fund and
Operating Fund moneys used for (a) pre-1990 planning and
administrative costs, (b)Airport land acquisition, (c) New
Airport Project costs, and (d) debt service on Bonds used for
Airport land acquisition.
(5) Amortization of all investments made for the New Airport Project
costs from other than Bonds or grants after January 1, 1990 and
prior to DBO.
(6) Amortization of the City's investment in the Airport Coverage
Account to be accumulated during the pre-DBO period.
(7) For the purposes of items (4), (5), and (6) above, amortization
charges are to be calculated over 15 years at the weighted
average effective interest cost on all Airport fixed-rate Bonds
prior to January 1, 1997. Except and only to the extent, if any,
that the rights of the owners of its airport revenue bonds
(including, without limitation, the rights arising from the rate
maintenance covenant) are not thereby materially impaired, the
City will cause, by January 1, 1997 (or as soon thereafter as
possible consistent with the City's aforesaid obligations to
owners of its airport revenue bonds), amortization of the net
unamortized balance of City's investments in items (4), (5) and
(6) above on a straight-line basis for the balance of the period
through March 1, 2025.
(8) Amortization of reimbursements made to United Airlines related to
costs for modifications to the United Airlines automated DCV
baggage system, not to exceed $45 million, from other than bonds
shall be calculated on a straight line basis over 30 years,
effective as of the date of any such reimbursement, at the
weighted average effective interest rate of all Airport fixed-
rate bonds prior to January 1, 1997.
(9) Amortization of the City's investments from the Capital Fund,
subsequent to DBO, shall be amortized at the average rate of the
Airport fixed-rate bonds over 15 years and charged to the
Airlines.
PFC Revenues
PFC Revenues will not be treated as airport revenues for the purpose of
establishing airline rates, fees and charges. For rate-making purposes,
PFC revenues shall be allocated to the extent available, to at least fifty
percent (50%) of the capital costs and/or debt service associated with the
following eligible projects in the following order of priority: (1)
facilities for the Federal Inspection Services, (2) the portion of Airport
Boulevard from an interchange with the Proposed E-470 to the terminal and
terminal area roads, (3) the Automated Guideway Transit System ("AGTS"),
including vehicles and equipment and (4) the AGTS tunnels. That portion of
the capital costs or debt service paid for by PFC revenues will not be
included in the calculation of the airline rate base.
Airport "Credits"
Debt service will be charged to the airline rate base at the Airport in
lieu of amortization of such Airport costs as are bond-financed. Interest
income on the Bond Reserve Fund (provided that the minimum Bond Reserve
Requirement has been funded) and on the Interest and Principal Accounts of
the Bond Fund that are Gross Revenues shall be credited to the cost centers
of the Airport in the same proportion as the debt service allocation.
The City shall establish accounts within the Capital Fund as illustrated in
Figure 2. Net Revenues of the Airport System, as defined in the General
Bond Ordinance, flowing to the Capital Fund each year are to be used to
replenish reserve funds or accounts as required in the General Bond
Ordinance and the Coverage Account and to fund the Equipment and Capital
Outlay Account for equipment and capital outlays included in the operating
budget. Remaining Net Revenues are to be allocated as follows: (a) 80%
for the first five years following DBO, 75% for the next six years, and 50%
thereafter, up to a maximum of $40 million to flow into the Airline Revenue
Credit Account to be applied as a credit against Signatory Airline rates
and charges in the following fiscal year and (b) the balance to flow into
the Capital Improvement Account.
Prior to DBO, City shall create an Airport Coverage Account and fund that
account up to an amount equal to twenty-five percent (25%) of Debt Service
Requirements on Bonds issued to finance the Airport (other than Special
Facilities Bonds and other Bonds to finance support facilities such as
cargo, maintenance and food preparation facilities). The Airport Coverage
Account shall be considered as Other Available Funds (as defined in the
General Bond Ordinance) for the purpose of meeting the Rate Maintenance
Covenant. Airline rentals, rates, fees and charges will not be used for
such funding unless the intended sources are insufficient to fully fund the
Airport Coverage Account prior to DBO.
Miscellaneous
The City intends to redeem, defease or otherwise provide for the
outstanding Series 1984 and 1985 Bonds that relate to Stapleton. The "land
acquisition" portion of the 1985 Bonds, portions of the 1984 Bonds and the
interim improvements portion of the 1985 Bonds used for the New Airport
Project will be refinanced if it is determined to result in financial
savings to the City.
All defined terms used herein shall be consistent with the defined terms in
the General Bond Ordinance.
Gross Revenues of the Airport System shall include, after January 1, 1994,
the proceeds of the City's 1989 $0.02 per-gallon fuel tax increase.
Any payments received within six (6) months after DBO from tenants of
Stapleton for activities prior to DBO of the Airport shall be treated as if
received prior to DBO for purposes of allocation of the Capital Fund.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in: (i) the Registration
Statement (Form S-3 No. 33-79688) of Continental Airlines, Inc. and in the
related Prospectus, and (ii) the Registration Statements (Form S-8 No. 33-
81324) pertaining to the Continental Airlines, Inc. 1994 Incentive Equity
Plan, (Form S-8 No. 33-81326) pertaining to the Continental Airlines, Inc.
1994 Restricted Stock Grant, and (Form S-8 No. 33-81328) pertaining to the
Continental Airlines, Inc. 1994 Employee Stock Purchase Plan, of our report
dated April 12, 1995, with respect to the consolidated financial statements
and schedules of Continental Airlines, Inc. included in this Form 10-K for
the year ended December 31, 1994.
ERNST & YOUNG LLP
Houston, Texas
April 12, 1995
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated March 12, 1993 included in this Form 10-K,
into the previously filed: (i) Registration Statement (Form S-3 No. 33-
79688) of Continental Airlines, Inc. and in the related Prospectus, and
(ii) the Registration Statements (Form S-8 No. 33-81324) pertaining to the
Continental Airlines, Inc. 1994 Incentive Equity Plan, (Form S-8 No. 33-
81326) pertaining to the Continental Airlines, Inc. 1994 Restricted Stock
Grant, and (Form S-8 No. 33-81328) pertaining to the Continental Airlines,
Inc. 1994 Employee Stock Purchase Plan.
ARTHUR ANDERSEN LLP
Houston, Texas
April 12, 1995
Exhibit 25.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/28/95 By: /s/ Thomas J. Barrack, Jr.
Thomas J. Barrack, Jr.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/16/95 By: /s/ Gordon M. Bethune
Gordon M. Bethune
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/17/95 By: /s/ David Bonderman
David Bonderman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/20/95 By: /s/ Joel H. Cowan
Joel H. Cowan
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/17/95 By: /s/ Patrick Foley
Patrick Foley
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/20/95 By: /s/ Rowland C. Frazee
Rowland C. Frazee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/16/95 By: /s/ Hollis L. Harris
Hollis L. Harris
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/16/95 By: /s/ Robert L. Lumpkins
Robert L. Lumpkins
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/18/95 By: /s/ Douglas H. McCorkindale
Douglas H. McCorkindale
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/17/95 By: /s/ David E. Mitchell
David E. Mitchell
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/16/95 By: /s/ Richard W. Pogue
Richard W. Pogue
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/17/95 By: /s/ William S. Price
William S. Price
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/17/95 By: /s/ Donald L. Sturm
Donald L. Sturm
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/20/95 By: /s/ Claude I. Taylor
Claude I. Taylor
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/16/95 By: /s/ Karen Hastie Williams
Karen Hastie Williams
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director
and/or officer of Continental Airlines, Inc. (the "Company"), does hereby
constitute and appoint Daniel P. Garton and Joni K. Ffrench or either of
them, their true and lawful attorney or attorneys, to execute in their
name, place and stead in such capacity or capacities (whether on behalf of
the Company, or otherwise), the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, to be filed by the Company under the
Securities and Exchange Act of 1934, and generally to perform all things
necessary to be done in the premises as fully and effectually in all
respects as they could do if personally present.
IN WITNESS WHEREOF, the undersigned has signed their name hereto on
the date set forth opposite their name.
Date: 3/22/95 By: /s/ Charles A. Yamarone
Charles A. Yamarone
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. AMOUNTS SHOWN IN THOUSAND
OF DOLLARS, EXCEPT FOR SHARE DATA.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-END] DEC-31-1994
[CASH] 396,298
[SECURITIES] 0
[RECEIVABLES] 375,621
[ALLOWANCES] 0
[INVENTORY] 141,781
[CURRENT-ASSETS] 989,960
[PP&E] 1,592,767
[DEPRECIATION] 0
[TOTAL-ASSETS] 4,601,182
[CURRENT-LIABILITIES] 2,407,807
[BONDS] 0
[COMMON] 267
[PREFERRED-MANDATORY] 52,606
[PREFERRED] 0
[OTHER-SE] 103,417
[TOTAL-LIABILITY-AND-EQUITY] 4,601,182
[SALES] 0
[TOTAL-REVENUES] 5,669,931
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 5,680,902
[LOSS-PROVISION] (10,971)
[INTEREST-EXPENSE] (240,575)
[INCOME-PRETAX] (651,112)
[INCOME-TAX] 42,150
[INCOME-CONTINUING] (613,342)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (613,342)
[EPS-PRIMARY] (23.76)
[EPS-DILUTED] (23.76)
</TABLE>
