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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
0-9781
(Commission File Number)
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2929 Allen Parkway, Suite 2010, Houston, Texas 77019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 713-834-2950
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 the 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 and non-voting common
equity stock held by non-affiliates of the registrant was $3.2
billion as of March 11, 1998.
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 11, 1998, 8,379,464 shares of Class A Common Stock and
50,951,663 shares of Class B Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting
of Stockholders to be held on May 21, 1998: PART III
<PAGE>
PART I
ITEM 1. BUSINESS.
Continental Airlines, Inc. (the "Company" or "Continental") is a
major United States air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth
largest United States airline (as measured by 1997 revenue
passenger miles) and, together with its wholly owned subsidiaries,
Continental Express, Inc. ("Express") and Continental Micronesia,
Inc. ("CMI"), each a Delaware corporation, serves 191 airports
worldwide. As of March 1, 1998, Continental flies to 125 domestic
and 66 international destinations and offers additional connecting
service through alliances with domestic and foreign carriers.
Continental directly serves 10 European cities and is one of the
leading airlines providing service to Mexico and Central America,
serving more destinations there than any other United States
airline. Continental currently flies to seven cities in South
America. Through its Guam hub, CMI provides extensive service in
the western Pacific, including service to more Japanese cities than
any other United States carrier.
As used in this Form 10-K, the terms "Continental" and "Company"
refer to Continental Airlines, Inc. and its subsidiaries, unless
the context indicates otherwise. This Form 10-K may contain
forward-looking statements. In connection therewith, please see
the cautionary statements contained in Item 1. "Business - Risk
Factors Relating to the Company" and "Business - Risk Factors
Relating to the Airline Industry" which identify important factors
that could cause actual results to differ materially from those in
the forward-looking statements.
Continental/Northwest Alliance and Related Agreements
On January 26, 1998, the Company announced that, in connection with
an agreement by Air Partners, L.P. ("Air Partners") to dispose of
its interest in the Company to an affiliate of Northwest Airlines,
Inc. ("Northwest"), the Company had entered into a long-term global
alliance with Northwest ("Northwest Alliance") involving schedule
coordination, frequent flyer reciprocity, executive lounge access,
airport facility coordination, code-sharing, the formation of a
joint venture among the two carriers and KLM Royal Dutch Airlines
("KLM") with respect to their trans-Atlantic services, cooperation
regarding other alliance partners of the two carriers and regional
alliance development, certain coordinated sales programs, preferred
reservations displays and other activities.
The Northwest Alliance is expected to be phased in over a multi-
year period. A significant portion of the alliance activities will
commence promptly. Code-sharing will commence, subject to
governmental approvals, with the Company initially placing its
designator code on all of Northwest's international flights (other
than its trans-Atlantic flights) and those Northwest domestic
flights which create international connecting itineraries to and
from Latin America. Thereafter, subject to governmental approval
and approval by Northwest's pilots under their collective
bargaining agreement, (i) Northwest and the Company anticipate
entering into a joint venture among themselves and KLM with respect
to their respective trans-Atlantic flights, (ii) Northwest
anticipates placing its designator code on substantially all of the
Company's other international flights, and (iii) Northwest and the
Company each anticipate placing their respective designator codes
on substantially all of the other carrier's domestic flights.
The Company estimates that the alliance, when fully phased in over
a three-year period, will generate in excess of $500 million in
additional annual pre-tax operating income for the carriers, and
anticipates that approximately 45% of such pre-tax operating income
will accrue to the Company. The Company believes that a
significant portion of the alliance synergies allocable to the
Company can be achieved even without the activities which are
subject to approval of Northwest's pilots.
The Company also announced on January 26, 1998 that Air Partners,
the holder of approximately 14% of the Company's equity and
approximately 51% of its voting power (after giving effect to the
exercise of warrants), had entered into an agreement to dispose of
its interest in the Company to an affiliate of Northwest (the "Air
Partners Transaction"). The Air Partners Transaction is subject
to, among other matters, governmental approval and expiration of
applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. The agreement also extends to an
affiliate of Air Partners a right of first offer to purchase
certain shares of Class A common stock of the Company to be
acquired by Northwest or its affiliates if such entities intend to
dispose of those securities prior to the fifth anniversary of the
closing of the Air Partners Transaction.
In connection with the Air Partners Transaction, the Company
entered into a corporate governance agreement with certain
affiliates of Northwest (the "Northwest Parties") designed to
assure the independence of the Company's board and management
during the six-year term of the governance agreement. Under the
corporate governance agreement, as amended, the Northwest Parties
have agreed not to beneficially own voting securities of the
Company in excess of 50.1% of the fully diluted voting power of the
Company's voting securities, subject to certain exceptions
involving third-party acquisitions or tender offers for 15% or more
of the voting power of the Company's voting securities and a
limited exception permitting a one-time ownership of approximately
50.4% of the fully diluted voting power. The Northwest Parties
have agreed to deposit all voting securities of the Company
beneficially owned by them in a voting trust with an independent
voting trustee requiring that such securities be voted (i) on all
matters other than the election of directors, either as recommended
by the Company's board of directors (a majority of whom must be
independent directors as defined in the agreement) or in the same
proportion as the votes cast by other holders of voting securities,
and (ii) in the election of directors, for the election of
independent directors nominated by the board of directors;
provided, that in the event of a merger or similar business
combination or a recapitalization, liquidation or similar
transaction, a sale of all or substantially all of the Company's
assets, or an issuance of voting securities which would represent
more than 20% of the voting power of the Company prior to issuance,
or any amendment of the Company's charter or by-laws that would
materially and adversely affect Northwest, the shares may be voted
as directed by the Northwest Party owning such shares, and if a
third party is soliciting proxies in connection with an election of
directors, the shares may be voted at the option of such Northwest
Party either as recommended by the Company's board of directors or
in the same proportion as the votes cast by the other holders of
voting securities.
The Northwest Parties have also agreed to certain restrictions on
the transfer of voting securities owned by them, have agreed not to
seek to affect or influence the Company's board of directors or the
control of the management of the Company or the business,
operations, affairs, financial matters or policies of the Company
or to take certain other actions, and have agreed to take all
actions as are necessary to cause independent directors to at all
times constitute at least a majority of the Company's board of
directors. The Company has agreed to cause one designee of a
Northwest Party reasonably acceptable to the board of directors to
be appointed to the Company's board, and has agreed to grant
preemptive rights to a Northwest Party with respect to certain
issuances of Class A common stock and Class B common stock. The
Northwest Parties have agreed that certain specified actions,
together with any material transactions between the Company and
Northwest or its affiliates, including any modifications or waivers
of the corporate governance agreement and the alliance agreement,
may not be taken without the prior approval of a majority of the
board of directors, including the affirmative vote of a majority of
the independent directors. The governance agreement also provides
for the Company to adopt a shareholder rights plan with reasonably
customary terms and conditions, with an acquiring person threshold
of 15% and with appropriate exceptions for the Northwest Parties
for actions permitted by and taken in compliance with the corporate
governance agreement.
The corporate governance agreement provides that, if after three
years Northwest's pilots have not consented to those portions of
the alliance agreement requiring their consent and the Company, at
its election, then chooses to terminate the alliance agreement, the
Northwest Parties can elect either to dispose of their shares in
the Company or negotiate with a committee of independent directors
of the Company regarding a merger. If a merger agreement cannot be
reached within six months of the establishment of the committee,
certain appraisal procedures are specified. If upon completion of
the appraisal procedures, Northwest is unwilling to enter into a
merger agreement at the value for the shares not held by the
Northwest Parties determined by such appraisal procedures, then the
Northwest Parties must sell their voting securities, and if the
Company and the committee are unwilling to approve a merger
agreement at such value, then the corporate governance agreement
(except for certain provisions requiring continuing independent
directors and approval by a majority of such independent directors
of material transactions between the Company and the Northwest
Parties) will expire.
The corporate governance agreement will otherwise expire after the
sixth anniversary of the date of closing of the Air Partners
Transaction, or if earlier, upon the date that the Northwest
Parties cease to beneficially own voting securities representing at
least 10% of the fully diluted voting power of the Company's voting
securities. Upon a termination of the above described terms of the
governance agreement, the Northwest Parties must nonetheless take
such actions as are necessary to cause the Company's board of
directors to at all times include at least five directors who are
independent of and otherwise unaffiliated with Northwest or the
Company and their respective affiliates, and any material
transaction between the Company and Northwest or its affiliates, or
relating to the governance agreement or the alliance agreement, may
not be taken without prior approval thereof by a majority vote of
the independent directors.
The alliance agreement provides that if after four years the
Company has not entered into a code-share with KLM or is not
legally able (but for aeropolitical restrictions) to enter into a
new trans-Atlantic joint venture with KLM and Northwest and place
its airline code on certain Northwest flights, Northwest can elect
to (i) cause good faith negotiations among the Company, KLM and
Northwest as to the impact, if any, on the contribution to the
joint venture resulting from the absence of the code-share, and the
Company will reimburse the joint venture for the amount of any loss
until it enters into a code-share with KLM, or (ii) terminate
(subject to cure rights of the Company) after one year's notice any
or all of such alliance agreement and any or all of the agreements
contemplated thereunder.
Business Strategy
In 1995, Continental implemented a plan, labeled the "Go Forward
Plan", which was a "back to basics" approach focusing on improving
profitability and financial condition, delivering a consistent,
reliable, quality product to customers and improving employee
morale and working conditions. The Company's 1998 strategic plan,
as discussed below, retains the four basic components of the Go
Forward Plan: Fly to Win, Fund the Future, Make Reliability a
Reality and Working Together, with initiatives intended to build
upon Continental's operational and strategic strengths.
Fly to Win
The Company's 1998 Fly to Win initiatives center around three
principal themes: Grow Hub Operations, Improve Business/Leisure
Mix and Strengthen its Alliance Network.
<PAGE>
Grow Hub Operations. Continental will continue to add select
flights and refine its flight schedules to maximize the potential
of its hubs. In addition, Continental plans to focus on expanding
international traffic through service to new destinations and
additional code-sharing and other marketing alliances with certain
foreign carriers.
Management believes that by adding domestic and international
flights to the Company's hubs, attracting more international
passengers through alliances with foreign carriers and further
refining the efficiency of the Company's hub operations,
Continental will continue to capture additional flow traffic
through its hubs and attract a larger share of higher-yielding
business travelers.
Improve Business/Leisure Mix. The Company's passenger load factors
increased from 68.1% in 1996 to 70.9% in 1997, facilitating
management of the business/leisure traveler mix on its aircraft.
Since business travelers typically pay a higher fare (on a revenue-
per-seat-mile basis) for the convenience of being able to make and
change last minute travel plans, increases in business traffic
contribute disproportionately to incremental profitability.
Unrestricted business fares accounted for approximately 43.8% of
the Company's domestic passenger revenue in 1997 compared to 42.8%
in 1996 (excluding CMI and Express). Many of the Company's product
and schedule improvements have been made to appeal to business
travelers. The Company has invested in state-of-the-art revenue
management and pricing systems to enhance its ability to manage its
fare mix.
Strengthen its Alliance Network. Management believes that
strengthening the Company's network of alliance partners will allow
it to compete with larger global airline alliances, better leverage
the Company's hub assets and result in improved returns to the
Company. Focusing on strategic global alliances allows the Company
to benefit from the strengths of its alliance partners in their
local markets while reducing the Company's reliance on any
individual alliance partner.
The Company seeks alliance relationships that, together with the
Company's own flying, will permit expanded service through Newark
to major destinations in South America, Europe and Asia, and
expanded service through Houston to South America and Europe as
well as service to Japan. Route authorities that would be required
for the Company's own service to certain of these destinations are
not currently available to the Company. See "Continental/Northwest
Alliance and Related Agreements" above and "Foreign Carrier
Alliances" below for a discussion of new alliances recently entered
into with other carriers.
<PAGE>
Fund the Future
Having achieved its 1995 goals of building the Company's overall
liquidity and improving its financial condition, management shifted
its financial focus in 1996 and 1997 to target the Company's
interest and lease expenses. Through refinancing and other
initiatives, Continental has achieved substantial reductions in
interest and lease expenses attributable to financing arrangements
that were entered into when the Company was in a less favorable
financial position.
In 1997 and early 1998, the Company completed a number of
transactions intended to strengthen its long-term financial
position and enhance earnings:
- - In March 1997, Continental completed an offering of $707 million
of pass-through certificates to be used to finance (through
either leveraged leases or secured debt financings) the debt
portion of the acquisition cost of up to 30 new aircraft from The
Boeing Company ("Boeing") scheduled to be delivered through April
1998.
- - In April 1997, Continental entered into a $160 million secured
revolving credit facility to be used for the purpose of making
certain predelivery payments to Boeing for new Boeing aircraft to
be delivered through December 1999.
- - In April 1997, Continental redeemed for cash all of the 460,247
outstanding shares of its Series A 12% Cumulative Preferred Stock
held by an affiliate of Air Canada for $100 per share plus
accrued dividends thereon. The redemption price, including
accrued dividends, totaled $48 million.
- - In June 1997, Continental purchased from Air Partners for $94
million in cash warrants to purchase 3,842,542 shares of Class B
common stock of the Company.
- - In June 1997, Continental completed an offering of $155 million
of pass-through certificates which were used to finance the
acquisition of 10 aircraft previously leased by the Company.
- - In July 1997, Continental entered into a $575 million credit
facility, including $350 million of term loans, $275 million of
which was loaned by Continental to its wholly owned subsidiary
Air Micronesia, Inc. ("AMI"), reloaned by AMI to its wholly owned
subsidiary, CMI, and used by CMI to repay its existing secured
term loan. The facility also includes a $225 million revolving
credit facility.
- - In July 1997, the Company (i) purchased (a) the right of United
Micronesia Development Association, Inc. ("UMDA") to receive
future payments under a services agreement between UMDA and CMI
and (b) UMDA's 9% interest in AMI, (ii) terminated the Company's
obligations to UMDA under a settlement agreement entered into in
1987, and (iii) terminated substantially all of the other
contractual arrangements between the Company, AMI and CMI, on the
one hand, and UMDA on the other hand, for an aggregate
consideration of $73 million.
- - In September 1997, Continental completed an offering of $89
million of pass-through certificates which were used to finance
the debt portion of the acquisition cost of nine Embraer ERJ-145
("ERJ-145") regional jets.
- - In October 1997, the Company completed an offering of $752
million of pass-through certificates to be used to finance
(through either leveraged leases or secured debt financings) the
debt portion of the acquisition cost of up to 24 new Boeing
aircraft scheduled to be delivered from April 1998 through
November 1998.
- - In February 1998, the Company completed an offering of $773
million of pass-through certificates to be used to finance
(through either leveraged leases or secured debt financings) the
debt portion of the acquisition cost of up to 24 aircraft
scheduled to be delivered from February 1998 through December
1998.
- - In addition, during 1997 and the first quarter of 1998,
Continental completed several offerings totaling approximately
$291 million aggregate principal amount of tax-exempt special
facilities revenue bonds to finance or refinance certain airport
facility projects. These bonds are payable solely from rentals
paid by Continental under long-term lease agreements with the
respective governing bodies.
The focus in 1998 is to maintain stable cash balances while
continuing to pay down debt, secure financing for aircraft
deliveries in 1998 and 1999 and, under appropriate circumstances,
buy back stock. The Company expects to continue, through
refinancings and other initiatives, to eliminate excess interest
and lease expenses.
Make Reliability a Reality
Customer service continues to be the focus in 1998. Management
believes Continental's on-time performance record is crucial to its
other operational objectives and, together with its baggage
handling, customer satisfaction and involuntary denied boarding
initiatives, is an important tool to attract higher-margin business
travelers.
Continental's goal for 1998 is to be ranked monthly by the
Department of Transportation ("DOT") among the top three major air
carriers (excluding those airlines who do not report
electronically) in on-time performance, baggage handling, customer
satisfaction and involuntary denied boarding. For 1997,
Continental ranked fifth in on-time performance, second in baggage
handling, fourth in fewest customer complaints and first in fewest
involuntary denied boardings. In 1997, bonuses of $65 were paid to
substantially all employees for each month that Continental ranked
second or third or achieved 80% or above (for arrivals within 14
minutes) in on-time performance, and bonuses of $100 were paid for
each month that Continental ranked first among the top 10 U.S. air
carriers in on-time performance. For 1997, a total of $21 million
of on-time bonuses was paid. This successful on-time performance
bonus program continues in 1998.
In addition to programs intended to improve Continental's standings
in DOT performance data, the Company has acted in a number of
additional areas to enhance its attractiveness to business
travelers and the travel agent community. Specifically,
Continental implemented various initiatives designed to offer
travelers cleaner and more attractive aircraft interiors,
consistent interior and exterior decor, first class seating on all
jet aircraft, better meals and greater benefits under its award-
winning frequent flyer program. In 1996 and 1997, Continental
continued to make product improvements, such as refurbished
Presidents Clubs with specialty bars, and on-board specialty
coffees and microbrewery beer, among others. In 1997, the Company
switched to a new inflight telephone service provider that offers
reliable air-to-ground telephone service on board its jet aircraft.
The Company expects to complete the installation of inflight
telephones on all its Stage 3 aircraft in 1998. The Company has
also continued to refine its award-winning BusinessFirst service.
In January 1998, Continental launched its TransContinental service
whereby passengers traveling coast-to-coast from Newark
International Airport ("Newark International") will experience new
enhancements on their flights, including new check-in options at
nine New York locations, flexible meal options and door-to-door
pick-up service. The focus in 1998 also includes the integration
of Boeing 777 and 737-700/800 aircraft into the fleet and the
enhancement of the entertainment equipment on board the fleet.
Working Together
Management believes that Continental's employees are its greatest
asset, as well as the cornerstones of improved reliability and
customer service. Management has introduced a variety of programs
to increase employee participation and foster a sense of shared
community. These initiatives include significant efforts to
communicate openly and honestly with all employees through daily
news bulletins, weekly voicemail updates from the Company's Chief
Executive Officer, monthly and quarterly Continental publications,
videotapes mailed to employees, and a Go Forward Plan bulletin
board in over 600 locations system-wide. In addition, regularly
scheduled visits to airports throughout the route system are made
by the senior executives of the Company (each of whom is assigned
an airport for this purpose). Monthly meetings open to all
employees, as well as other periodic on-site visits by management,
are designed to encourage employee participation, knowledge and
cooperation. Continental's goal for 1998 is to be ranked among the
top three major air carriers in employee measures such as turnover,
lost time, productivity and on-the-job injury claims.
In September 1997, Continental announced that it intends to bring
all employees to industry standard wages over a three-year period.
See "Employees" below.
Domestic Operations
Continental operates its domestic route system primarily through
its hubs at Newark International, George Bush Intercontinental
Airport ("Bush Intercontinental") in Houston and Hopkins
International Airport ("Hopkins International") in Cleveland. In
addition, as part of its alliance with Northwest, Continental's
system will connect with Northwest's hubs in Minneapolis, Detroit
and Memphis. See "Continental/Northwest Alliance and Related
Agreements" above. The Company's hub system allows it to transport
passengers between a large number of destinations with
substantially more frequent service than if each route were served
directly. The hub system also allows Continental to add service to
a new destination from a large number of cities using only one or
a limited number of aircraft. Each of Continental's domestic hubs
is located in a large business and population center, contributing
to a high volume of "origin and destination" traffic.
Newark. As of March 1, 1998, Continental operated 58% (244
departures) of the average daily jet departures (excluding regional
jets) and, together with Express, 59% (354 departures) of all
average daily departures (jet, regional jet and turboprop) from
Newark International. Considering the three major airports serving
New York City (Newark International, LaGuardia and John F.
Kennedy), Continental and Express accounted for 24% of all daily
departures, while the next largest carrier, US Airways, Inc. ("US
Airways"), and its commuter affiliate accounted for 15% of all
daily departures.
Houston. As of March 1, 1998, Continental operated 80%
(333 departures) of the average daily jet departures (excluding
regional jets) and, together with Express, 84% (479 departures) of
all average daily departures from Bush Intercontinental. Southwest
Airlines Co. ("Southwest") also has a significant share of the
Houston market through Hobby Airport. Considering both Bush
Intercontinental and Hobby Airport, Continental operated 58% and
Southwest operated 26% of the daily jet departures (excluding
regional jets) from Houston.
Cleveland. As of March 1, 1998, Continental operated 55% (98
departures) of the average daily jet departures (excluding regional
jets) and, together with Express, 67% (247 departures) of all
average daily departures from Hopkins International. The next
largest carrier, Southwest, accounted for 6% of all daily
departures.
<PAGE>
Continental Express. Continental's jet service at each of its
domestic hub cities is coordinated with Express, which operates
new-generation turboprop aircraft and regional jets under the name
"Continental Express". The turboprop aircraft average
approximately five years of age and seat 64 passengers or less
while the regional jets average less than one year of age and seat
50 passengers.
In September 1996, Express placed a firm order for 25 ERJ-145
regional jets, with options for an additional 175 aircraft
exercisable through 2008. In June 1997, Express exercised its
option to order 25 of such option aircraft and expects to confirm
its order for an additional 25 of its remaining 150 option aircraft
by August 1998. Express took delivery of 18 of the aircraft
through December 31, 1997 and will take delivery of the remaining
32 aircraft through the third quarter of 1999. The Company expects
to account for all of these aircraft as operating leases. Express
began service with its regional jets in Cleveland in April 1997.
See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations. Liquidity and Capital
Commitments".
As of March 1, 1998, Express served 19 destinations from Newark
International (eight by regional jet), 21 destinations from Bush
Intercontinental (two by regional jet) and 36 destinations from
Hopkins International (seven by regional jet). In addition,
commuter feed traffic is currently provided by other code-sharing
partners. See "Domestic Carrier Alliances" below.
Management believes Express's turboprop and regional jet operations
complement Continental's jet operations by allowing more frequent
service to small cities than could be provided economically with
conventional jet aircraft and by carrying traffic that connects
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. Express's new ERJ-145 regional jets provide
greater comfort and enjoy better customer acceptance than turboprop
aircraft. These regional jets also allow Express to serve certain
routes that cannot be served by turboprop aircraft.
Domestic Carrier Alliances. Pursuant to the Company's Fly to Win
initiative under the Go Forward Plan, Continental has entered into
and continues to develop alliances with domestic carriers:
- - On January 26, 1998, the Company announced that it had entered
into a long-term global alliance with Northwest. See
"Continental/Northwest Alliance and Related Agreements" above.
- - Continental has entered into a series of agreements with America
West, Inc. ("America West"), including agreements related to
code-sharing and ground handling, which have created substantial
benefits for both airlines. These code-sharing agreements cover
73 city-pairs and allow Continental to link additional
destinations to its route network. The sharing of facilities and
employees by Continental and America West in their respective key
markets has resulted in significant cost savings.
- - Currently, SkyWest Airlines, Inc., a commuter operator, provides
Continental access to five additional markets in California
through Los Angeles.
- - Continental has entered into a code-sharing agreement with
Gulfstream International Airlines, Inc. ("Gulfstream") which
commenced in April 1997. Gulfstream serves as a connection for
Continental passengers throughout Florida as well as five markets
in the Bahamas.
- - Continental has a code-sharing arrangement with Colgan Air, Inc.
which commenced in July 1997 on flights connecting in four cities
in the eastern United States and offers connections for
Continental passengers to ten cities in the northeastern and mid-
Atlantic regions of the United States.
- - Continental and CMI entered into a cooperative marketing
agreement with Hawaiian Airlines that began October 1, 1997 on
flights connecting in Honolulu.
International Operations
International Operations. Continental serves destinations
throughout Europe, Mexico, the Caribbean and Central and South
America and has extensive operations in the western Pacific
conducted by CMI. Continental's revenue from international
operations has increased each of the last three years and, as
measured by 1997 available seat miles, approximately 31.4% of
Continental's jet operations were dedicated to international
traffic. See Note 15 of Notes to Consolidated Financial
Statements. As of March 1, 1998, the Company offered 112 weekly
departures to 10 European cities and marketed service to six other
cities through code-sharing agreements. Continental is one of the
leading airlines providing service to Mexico and Central America,
serving more destinations there than any other United States
airline. The Company was recently awarded route authority to fly
to Tokyo from both its Newark and Houston hubs receiving a total of
14 frequencies for the two cities. Initially, the Company will use
seven frequencies at its Newark hub with daily non-stop service
scheduled to begin in November 1998. The Company will begin daily
non-stop service to Tokyo from Houston in December 1998.
The Company's Newark hub is a significant international gateway.
From Newark, the Company serves 10 European and two Canadian cities
and markets service to Amsterdam, Prague and certain other
destinations in Canada, the United Kingdom and Europe through code-
sharing arrangements with foreign carriers. Continental recently
announced new non-stop service, subject to government approval,
between Newark and Dublin and Shannon, Ireland (effective June
1998), and Newark and Glasgow, Scotland (effective July 1998). The
Company also has code-sharing agreements and joint marketing
arrangements with other foreign carriers which management believes
are important to Continental's ability to compete effectively as an
international airline. See "Foreign Carrier Alliances" discussed
below.
The Company also has non-stop service to two Mexican cities, six
Caribbean destinations and four South American cities from Newark.
Continental recently received authority from the DOT to begin
service between Newark and Santiago, Chile. The service is
scheduled to begin on May 30, 1998.
The Company's Houston hub is the focus of its operations in Mexico
and Central America. Continental currently flies from Houston to
11 cities in Mexico, every country in Central America and five
cities in South America, including new service to Caracas,
Venezuela which commenced in December 1997. Continental recently
announced four new international routes out of Houston to three
cities in Mexico (Tampico, Veracruz and Merida) and Calgary,
Canada, all of which are scheduled to begin in the second quarter
of 1998. Continental also flies non-stop from Houston to Toronto,
Vancouver, London and Paris.
Continental Micronesia. CMI is a United States-certificated
international air carrier engaged in the business of transporting
passengers, cargo and mail in the western Pacific. From its hub
operations based on the island of Guam, CMI provides service to six
cities in Japan, more than any other United States carrier, as well
as other Pacific rim destinations, including Taiwan, the
Philippines, Hong Kong and Indonesia. Service to these Japanese
cities and certain other Pacific Rim destinations is subject to a
variety of regulatory restrictions, limiting the ability of other
carriers to service these markets.
CMI is the principal air carrier in the Micronesian Islands, where
it pioneered scheduled air service in 1968. CMI's route system is
linked to the United States market through Honolulu, which CMI
serves non-stop from both Tokyo and Guam. CMI and Continental also
maintain a code-sharing agreement and coordinate schedules on
certain flights from the west coast of the United States to
Honolulu, and from Honolulu to Guam and Tokyo, to facilitate travel
from the United States into CMI's route system.
In July 1997, the Company entered into certain agreements with
UMDA. For a discussion of these agreements, see "Business Strategy
- - Fund the Future" above.
<PAGE>
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, code-sharing and other joint marketing
activities. Continental is the sole major United States carrier to
operate a hub in the New York City area. Consequently, management
believes the Company is uniquely situated to attract alliance
partners from Europe, the Far East and South America and intends to
aggressively pursue such alliances. The Company believes that its
recently announced global alliance with Northwest will enhance its
ability to attract foreign alliance partners.
Management believes that developing a network of international
alliance partners will better leverage the Company's hub assets by
attracting high-yield flow traffic and result in improved returns
to the Company. Additionally, Continental can enlarge its scope of
service more rapidly and enter additional markets with lower
capital and start-up costs through formation of alliances with
partners as compared with entering markets independently of other
carriers.
Management has a goal of developing alliance relationships that,
together with the Company's own flying, will permit expanded
service through Newark and Houston to major destinations in South
America, Europe and Asia. Route authorities necessary for the
Company's own service to certain of these destinations are not
currently available to the Company.
Continental has implemented international code-sharing agreements
with Alitalia, Air Canada, Transavia Airlines ("Transavia"), CSA
Czech Airlines, Business Air, China Airlines, EVA Airways
Corporation, an airline based in Taiwan (scheduled to commence
March 30, 1998) and Virgin Atlantic Airways ("Virgin"), which
commenced February 2, 1998.
Alitalia and Continental code-share between points in the United
States and Italy, with Alitalia placing its code on Continental
flights between Newark and Rome and Milan and between Newark and
seven U.S. cities and Mexico City. Continental's agreement with
Alitalia involves a block-space arrangement pursuant to which
carriers agree to share capacity and bear economic risk for blocks
of seats on certain routes.
Continental's agreement with Virgin is a code-share arrangement
containing block-space commitments involving the carriers' Newark-
London routes and eight other routes flown by Virgin between the
United Kingdom and the United States.
<PAGE>
Continental and Air Canada (and its subsidiaries) continue to code-
share on six cross-border routes under agreements that expire in
April 1998, where Continental places its code on 18 Air Canada
flights per day and Air Canada places its code on six Continental
flights per day. Continental and Air Canada provide ground
handling and other services for each other at certain locations in
the United States and Canada. Continental does not anticipate
renewing its agreements with Air Canada.
In addition, the Company has also entered into joint marketing
agreements with other airlines, all of which are currently subject
to government approval. Some of these agreements will involve
block-space provisions which management believes are important to
Continental's ability to compete as an international airline. In
October 1996, Continental announced a block-space agreement with
Air France which contemplates a future code-share arrangement on
certain flights between Newark and Charles de Gaulle Airport
("CDG") and Houston and CDG. In August 1997, Continental announced
a code-share agreement with Aerolineas Centrales de Colombia
("ACES").
In connection with the Continental/Northwest alliance, subject to
government approvals, code-sharing will commence with the Company
and Northwest. See "Continental/Northwest Alliance and Related
Agreements" above. Many of the Company's international alliance
agreements provide that a party may terminate the agreement upon a
change of control of the other party. If the Air Partners
Transaction is consummated, certain of the Company's international
alliance partners will have the right to terminate their alliance
relationship with the Company. Based on discussions with such
partners, the Company believes that none of its partners will
exercise such right.
The Company anticipates entering into other code-sharing, joint
marketing and block-space agreements in 1998, which may include the
Company undertaking the financial commitment to purchase seats from
other carriers.
Employees
As of December 31, 1997, the Company had approximately 39,300 full-
time equivalent employees, including approximately 17,100 customer
service agents, reservations agents, ramp and other airport
personnel, 7,000 flight attendants, 6,300 management and clerical
employees, 5,500 pilots, 3,300 mechanics and 100 dispatchers.
Labor costs are a significant component of the Company's expenses
and can substantially impact airline results. In 1997, labor costs
(including employee incentives) constituted 27.9% of the Company's
total operating expenses. While there can be no assurance that the
Company's generally good labor relations and high labor
productivity will continue, management has established as a
significant component of its business strategy the preservation of
good relations with the Company's employees, approximately one-
third of whom are represented by unions. In September 1997, the
Company announced that it intends to bring all employees to
industry standard wages (the average of the top ten air carriers as
ranked by the DOT excluding Continental) within 36 months. Such
wage increases will be phased in over the 36-month period as
revenue, interest rates and rental rates reach industry standards.
The Company estimates that the increased wages will aggregate
approximately $500 million over the 36-month period.
In April 1997, collective bargaining negotiations began with the
Independent Association of Continental Pilots ("IACP") to amend
both the Continental pilots' contract (which became amendable in
July 1997) and the Express pilots' contract (which became amendable
in October 1997). In February 1998, a five-year collective
bargaining agreement with the Continental Airlines pilots was
announced by the Company and the IACP. In March 1998, Express also
announced a five-year collective bargaining agreement with its
pilots. These agreements are subject to approval by the IACP board
of directors and ratification by the Continental and Express
pilots.
The Company's mechanics and related employees recently voted to be
represented by the International Brotherhood of Teamsters (the
"Teamsters"). The Company does not believe that the Teamsters'
union representation will be material to the Company.
In addition, the Company's and Express's flight attendants and
dispatchers are represented by unions, as are CMI's flight
attendants, mechanics and related employees and its agent
classification employees. The other employees of Continental,
Express and CMI are not represented by unions and are not covered
by collective bargaining agreements.
Competition and Marketing
The airline industry is highly competitive and susceptible to price
discounting. The Company competes with other air carriers that
have substantially greater resources (and in certain cases, lower
cost structures) as well as smaller air carriers with low cost
structures. Overall industry profit margins have historically been
low. However, during 1995 through 1997, industry profit margins
improved substantially. See Item 1. "Business. Risk Factors
Relating to the Airline Industry" and Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
As 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.
In 1997, Continental Airlines continued to expand its electronic
ticketing ("E-Ticket") product throughout the United States.
Continental recorded over $1.3 billion in E-Ticket sales in 1997
representing 35% of domestic customers traveling with an E-Ticket
in 1997. Further expansion in 1998 will bring select international
stations online, expand the number of E-Ticket machines in major
airports, and enhance the ability to interline with other carriers
on a bilateral basis. The Company expects these features to
contribute to an increase in E-Ticket usage and a further reduction
in distribution costs.
Frequent Flyer Program
Each major airline has established a frequent flyer program
designed to encourage repeat travel on such carrier. Continental
sponsors a frequent flyer program ("OnePass"), which allows
passengers to earn mileage credits by flying Continental and
certain other carriers, such as America West, Transavia, Alitalia
and Air Canada. The Company also sells mileage credits to hotels,
car rental agencies, credit card companies and others 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. 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. The
number of awards used on Continental represented less than 7% of
Continental's total revenue passenger miles in each of the years
1997 and 1996.
Industry Regulation and Airport Access
Continental and its subsidiaries operate under certificates of
public convenience and necessity issued by the DOT. Such
certificates may be altered, amended, modified or suspended by the
DOT 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 Federal Aviation
Administration ("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. Certain regulations require phase-
out of certain aircraft and modifications to aging aircraft. Such
regulations can significantly increase costs and affect a carrier's
ability to compete.
<PAGE>
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, Orange County 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.
Several airports have recently sought to increase substantially the
rates charged to airlines, and the ability of airlines to contest
such increases has been restricted by federal legislation, DOT
regulations and judicial decisions. In addition, public airports
generally impose passenger facility charges of up to $3 per
departing or connecting passenger. With certain exceptions, these
charges are passed on to the customers.
The FAA has designated John F. Kennedy, LaGuardia, O'Hare and Wash-
ington 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 transfer of the ownership of
slots, increase the risk of slot withdrawals or require charges to
the Company's financial statements. Continental cannot predict
whether any of these proposals will be adopted.
The availability of international routes to United States carriers
is regulated by treaties and related 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.
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.
Risk Factors Relating to the Company
Leverage and Liquidity. Continental is more leveraged and has
significantly less liquidity than certain of its competitors,
several of whom have substantial available lines of credit and/or
significant unencumbered assets. Accordingly, Continental may be
less able than certain of its competitors to withstand a prolonged
recession in the airline industry and may not have as much
flexibility to respond to changing economic conditions or to
exploit new business opportunities.
As of December 31, 1997, Continental had approximately $1.9 billion
(including current maturities) of long-term debt and capital lease
obligations and had approximately $1.2 billion of Continental-
obligated mandatorily redeemable preferred securities of subsidiary
trust and common stockholders' equity. Common stockholders' equity
reflects the adjustment of Continental's balance sheet and the
recording of assets and liabilities at fair market value as of
April 27, 1993 in accordance with the American Institute of
Certified Public Accountants' Statement of Position 90-7 -
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code". As of December 31, 1997, Continental had $1.0
billion in cash and cash equivalents (excluding restricted cash and
cash equivalents of $15 million). Continental has general lines of
credit and significant encumbered assets.
For 1997, Continental incurred cash expenditures under operating
leases relating to aircraft of approximately $626 million, compared
to $568 million for 1996, and $236 million relating to facilities
and other rentals, compared to $210 million in 1996. Continental
expects that its operating lease expenses for 1998 will increase
over 1997 amounts. In addition, Continental has capital
requirements relating to compliance with regulations that are
discussed below. See "Risk Factors Relating to the Airline
Industry - Regulatory Matters".
In March 1998, Continental announced the conversion of 15 Boeing
737 option aircraft to 15 Boeing 737-900 firm aircraft and the
addition of 25 option aircraft.
As of March 18, 1998, Continental had firm commitments with Boeing
to take delivery of a total of 154 jet aircraft (including the
Boeing 737-900 aircraft discussed above) during the years 1998
through 2005 with options for additional aircraft (exercisable
subject to certain conditions). These aircraft will replace older,
less efficient Stage 2 aircraft and allow for growth of operations.
The estimated aggregate cost of the Company's firm commitments for
the Boeing aircraft is approximately $6.7 billion. As of March 18,
1998, Continental had completed or had third party commitments for
a total of approximately $1.6 billion in financing for its future
Boeing deliveries, and had commitments or letters of intent from
various sources for backstop financing for approximately one-third
of the anticipated remaining acquisition cost of such Boeing
deliveries. The Company currently plans on financing the new
Boeing aircraft with a combination of enhanced equipment trust
certificates, lease equity and other third party financing, subject
to availability and market conditions. However, further financing
will be needed to satisfy the Company's capital commitments for
other aircraft and aircraft-related expenditures such as engines,
spare parts, simulators and related items. There can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments. Deliveries of new Boeing aircraft are
expected to increase aircraft rental, depreciation and interest
costs while generating cost savings in the areas of maintenance,
fuel and pilot training.
Continental's History of Operating Losses. Although Continental
recorded net income of $385 million in 1997, $319 million in 1996
and $224 million in 1995, it had experienced significant operating
losses in the previous eight years. In the long term,
Continental's viability depends on its ability to sustain
profitable results of operations.
Aircraft Fuel. Since fuel costs constitute a significant portion
of Continental's operating costs (approximately 13.6% and 13.3% for
the years ended December 31, 1997 and 1996, respectively),
significant changes in fuel costs would materially affect
Continental's operating results. Fuel prices continue to be
susceptible to international events, and Continental cannot predict
near or longer-term fuel prices. Continental enters into petroleum
option contracts to provide some short-term protection (generally
three to six months) against a sharp increase in jet fuel prices.
In the event of a fuel supply shortage resulting from a disruption
of oil imports or otherwise, higher fuel prices or curtailment of
scheduled service could result.
Labor Matters. In April 1997, collective bargaining agreement
negotiations began with the IACP to amend both the Continental
Airlines pilots' contract (which became amendable in July 1997) and
Express pilots' contract (which became amendable in October 1997).
In February 1998, a five-year collective bargaining agreement with
the Continental Airlines pilots was announced by the Company and
the IACP. In March 1998, Express also announced a five-year
collective bargaining agreement with its pilots. These agreements
are subject to approval by the IACP board of directors and
ratification by the Continental and Express pilots. The Company
began accruing for the increased costs of a tentative agreement
reached in November 1997 in the fourth quarter of 1997. The
Company estimates that such accrual will be approximately $113
million for 1998. Continental's mechanics and related employees
recently voted to be represented by the Teamsters. Continental
does not believe that the Teamsters' union representation will be
material to Continental. In September 1997, Continental announced
that it intends to bring all employees to industry standard wages
(the average of the top ten air carriers as ranked by the DOT,
excluding Continental) within 36 months. The announcement further
stated that wage increases would be phased in over the 36-month
period as revenue, interest rates and rental rates reach industry
standards. Continental estimates that the increased wages will
aggregate approximately $500 million over the 36-month period.
Certain Tax Matters. At December 31, 1997, Continental had
estimated net operating loss carryforwards ("NOLs") of $1.7 billion
for federal income tax purposes that will expire through 2009 and
federal investment tax credit carryforwards of $45 million that
will expire through 2001. As a result of the change in ownership
of Continental on April 27, 1993, the ultimate utilization of
Continental's NOLs and investment tax credits could be limited.
Reflecting this possible limitation, Continental has recorded a
valuation allowance of $617 million at December 31, 1997.
Continental had, as of December 31, 1997, deferred tax assets
aggregating $1.1 billion, including $631 million of NOLs.
Realization of a substantial portion of the Company's remaining
NOLs will require the completion by April 27, 1998 of transactions
resulting in recognition of built-in gains for federal income tax
purposes. The Company has consummated several such transactions
resulting in a $62 million reduction in reorganization value in
excess of amounts allocable to identifiable assets. The Company
may consummate one or more additional built-in gain transactions by
April 27, 1998.
As a result of NOLs, Continental will not pay United States federal
income taxes (other than alternative minimum tax) until it has
recorded approximately an additional $515 million of taxable income
following December 31, 1997. Section 382 of the Internal Revenue
Code ("Section 382") imposes limitations on a corporation's ability
to utilize NOLs if it experiences an "ownership change." In
general terms, an ownership change may result from transactions
increasing the ownership of certain stockholders in the stock of a
corporation by more than 50 percentage points over a three-year
period. In the event that an ownership change should occur,
utilization of Continental's NOLs would be subject to an annual
limitation under Section 382 determined by multiplying the value of
Continental's stock at the time of the ownership change by the
applicable long-term tax-exempt rate (which was 5.23% for February
1998). Any unused annual limitation may be carried over to later
years, and the amount of the limitation may under certain
circumstances be increased by the built-in gains in assets held by
Continental at the time of the change that are recognized in the
five-year period after the change. Under current conditions, if an
ownership change were to occur, Continental's annual NOL
utilization would be limited to approximately $147 million per year
other than through the recognition of future built-in gain
transactions.
Based on information currently available, the Company does not
believe that the Air Partners Transaction will result in an
ownership change for purposes of Section 382.
<PAGE>
Continental Micronesia. Because the majority of CMI's traffic
originates in Japan, its results of operations are substantially
affected by the Japanese economy and changes in the value of the
yen as compared to the dollar. Appreciation of the yen against the
dollar during 1994 and 1995 increased CMI's profitability, while a
decline of the yen against the dollar in 1996 and 1997 has reduced
CMI's profitability. As a result of the continued weakness of the
yen against the dollar, a weak Japanese economy and increased fuel
costs, CMI's operating earnings have declined during 1996 and 1997,
and are not expected to improve materially absent a significant
improvement in these factors.
To reduce the potential negative impact on CMI's dollar earnings,
CMI, from time to time, purchases average rate options as a hedge
against a portion of its expected net yen cash flow position. Such
options historically have not had a material effect on
Continental's results of operations or financial condition. Any
significant and sustained decrease in traffic or yields (including
due to the value of the yen) to and from Japan could materially
adversely affect Continental's consolidated profitability.
Principal Stockholder. As of December 31, 1997, Air Partners held
approximately 9% of the common equity interest and 39% of the
general voting power of the Company. If all the remaining warrants
held by Air Partners had been exercised on December 31, 1997,
approximately 14% of the common equity interest and 51% of the
general voting power of the Company would have been held by Air
Partners. Various provisions in the Company's Certificate of
Incorporation and Bylaws currently provide Air Partners with the
right to elect one-third of the directors in certain circumstances;
these provisions could have the effect of delaying, deferring or
preventing a change in the control of the Company. On January 26,
1998, the Company announced that Air Partners had entered into an
agreement to dispose of its interest in the Company to an affiliate
of Northwest. See Item 1. "Business - Continental/Northwest
Alliance and Related Agreements".
Risks Regarding Continental/Northwest Alliance. On January 26,
1998, the Company and Northwest announced a long-term global
alliance involving schedule coordination, frequent flyer
reciprocity, executive lounge access, airport facility
coordination, code-sharing, the formation of a joint venture among
the two carriers and KLM with respect to their respective trans-
Atlantic services, cooperation regarding other alliance partners of
the two carriers and regional alliance development, certain
coordinated sales programs, preferred reservations displays and
other activities. See Item 1. "Business - Continental/Northwest
Alliance and Related Agreements".
Successful implementation of the alliance and the achievement and
timing of the anticipated synergies by the Company are subject to
certain risks and uncertainties, some of which are beyond the
control of the Company, including (a) competitive pressures,
including developments with respect to existing and potential
future competitive alliances; (b) customer perception of and
acceptance of the alliance, including product differences and
benefits provided; (c) whether the Northwest pilots approve those
aspects of the alliance requiring their approval, and the timing
thereof; (d) potential adverse developments with respect to
regional economic performance; (e) costs or difficulties in
implementing the alliance being greater than expected, including
those caused by the Company's or Northwest's workgroups; (f)
contractual impediments to the implementation by the Company of
certain aspects of the alliance; and (g) non-approval or delay by
regulatory authorities or possible adverse regulatory decisions or
changes. There can be no assurance that the alliance will be fully
and timely implemented or continued, or that the anticipated
synergies will not be delayed or will be achieved.
Corporate Governance Agreement. The Company announced on January
26, 1998 that Air Partners, the holder of approximately 14% of the
Company's equity and approximately 51% of its voting power (after
giving effect to the exercise of warrants), had entered into an
agreement to dispose of its interest in the Company to an affiliate
of Northwest. See Item 1. "Business - Continental/Northwest
Alliance and Related Agreements". In connection with the Air
Partners Transaction, the Company has entered into a corporate
governance agreement with certain affiliates of Northwest, designed
to assure the independence of the Company's board of directors and
management during the six-year period of the governance agreement.
During the term of the governance agreement, the securities of the
Company beneficially owned by Northwest and its affiliates will be
deposited into a voting trust and generally voted as recommended by
the Company's board of directors (a majority of whom must be
independent directors as defined in the agreement) or in the same
proportion as the votes cast by other holders of the Company's
voting securities. However, pursuant to the governance agreement,
those shares may be voted as directed by the Northwest affiliate in
connection with certain matters, including with respect to mergers
and certain other change in control matters and the issuance of
capital stock representing in excess of 20% of the voting power of
the Company prior to issuance requiring a stockholder vote. In
addition, in connection with the election of directors, those
shares shall be voted for the election of the independent
directors; provided that with respect to elections of directors in
respect of which any person other than the Company is soliciting
proxies, the shares may be voted, at the election of Northwest's
affiliate, either as recommended by the Company's board of
directors or in the same proportion as the votes cast by other
holders of the Company's voting securities. As a result of the
provisions of the corporate governance agreement, the ability of
the Company to engage in a change in control transaction other than
with Northwest or an affiliate thereof, or to issue significant
amounts of capital stock under certain circumstances, is limited.
Shareholder Litigation. Following the announcement of the
Northwest Alliance, the Air Partners Transaction and the related
corporate governance agreement between the Company and certain
affiliates of Northwest (collectively, the "Northwest Trans-
action"), to the Company's knowledge as of March 1, 1998, six
separate lawsuits were filed against the Company and its Directors
and certain other parties (the "Shareholder Litigation"). The
complaints in the Shareholder Litigation, which were filed in the
Court of Chancery of the State of Delaware in and for New Castle
County and seek class certification, and which have been
consolidated under the caption In re Continental Airlines, Inc.
Shareholder Litigation, generally allege that the Company's
Directors improperly accepted the Northwest Transaction in
violation of their fiduciary duties owed to the public shareholders
of the Company. They further allege that Delta Air Lines, Inc.
submitted a proposal to purchase the Company which, in the
plaintiffs' opinion, was superior to the Northwest Transaction.
The Shareholder Litigation seeks, inter alia, to enjoin the
Northwest Transaction and the award of unspecified damages to the
plaintiffs.
While there can be no assurance that the Shareholder Litigation
will not result in a delay in the implementation of any aspect of
the Northwest Transaction, or the enjoining of the Northwest
Transaction, the Company believes the Shareholder Litigation to be
without merit and intends to defend it vigorously.
Risks Factors Relating to the Airline Industry
Industry Conditions and Competition. The airline industry is
highly competitive and susceptible to price discounting.
Continental has in the past both responded to discounting actions
taken by other carriers and initiated significant discounting
actions itself. Continental's competitors include carriers with
substantially greater financial resources (and in certain cases,
lower cost structures), as well as smaller carriers with lower cost
structures. Airline profit levels are highly sensitive to, and
during recent years have been severely impacted by, changes in fuel
costs, fare levels (or "average yield") and passenger demand.
Passenger demands and yields have been affected by, among other
things, the general state of the economy, international events and
actions taken by carriers with respect to fares. From 1990 to
1993, these factors contributed to the domestic airline industry's
incurring unprecedented losses. Although fare levels have
increased subsequently, fuel costs have also increased
significantly. In addition, significant industry-wide discounts
could be reimplemented at any time, and the introduction of broadly
available, deeply discounted fares by a major United States airline
would likely result in lower yields for the entire industry and
could have a material adverse effect on Continental's operating
results.
The airline industry has consolidated in past years as a result of
mergers and liquidations and may further consolidate in the future.
Among other effects, such consolidation has allowed certain of
Continental's major competitors to expand (in particular) their
international operations and increase their market strength.
Furthermore, the emergence in recent years of several new carriers,
typically with low cost structures, has further increased the
competitive pressures on the major United States airlines. In many
cases, the new entrants have initiated or triggered price
discounting. Aircraft, skilled labor and gates at most airports
continue to be readily available to start-up carriers. Competition
with new carriers or other low cost competitors on Continental's
routes could negatively impact Continental's operating results.
Regulatory Matters. In the last several years, the FAA has issued
a number of maintenance directives and other regulations relating
to, among other things, retirement of older aircraft, security
measures, collision avoidance systems, airborne windshear avoidance
systems, noise abatement, commuter aircraft safety and increased
inspections and maintenance procedures to be conducted on older
aircraft. Continental expects to continue incurring expenses for
the purpose of complying with the FAA's noise, aging aircraft and
other regulations. In addition, several airports have recently
sought to increase substantially the rates charged to airlines, and
the ability of airlines to contest such increases has been
restricted by federal legislation, DOT regulations and judicial
decisions.
Management believes that Continental benefitted significantly from
the expiration of the aviation trust fund tax (the "ticket tax") on
December 31, 1995. The ticket tax was reinstated on August 27,
1996, expired again on December 31, 1996 and was reinstated again
on March 7, 1997. In July 1997, Congress passed tax legislation
reimposing and significantly modifying the ticket tax. The
legislation includes the imposition of new excise tax and segment
fee tax formulas to be phased in over a multi-year period, an
increase in the international departure tax and the imposition of
a new arrivals tax, and the extension of the ticket tax to cover
items such as the sale of frequent flyer miles. Management
believes that the ticket tax has a negative impact on Continental,
although neither the amount of such negative impact directly
resulting from the reimposition of the ticket tax, nor the benefit
previously realized by its expiration, can be precisely determined.
Additional laws and regulations have been proposed from time to
time that could significantly increase the cost of airline
operations by imposing additional requirements or restrictions on
operations. Laws and regulations have also been considered that
would prohibit or restrict the ownership and/or transfer of airline
routes or takeoff and landing slots. Also, the availability of
international routes to United States carriers is regulated by
treaties and related agreements between the United States and
foreign governments that are amendable. Continental cannot predict
what laws, regulations and amendments may be adopted or their
impact, and there can be no assurance that laws, regulations and
amendments currently proposed or enacted in the future will not
adversely affect Continental.
Seasonal Nature of Airline Business. Due to the greater demand for
air travel during the summer months, revenue in the airline
industry in the third quarter of the year is generally
significantly greater than revenue in the first quarter of the year
and moderately greater than revenue in the second and fourth
quarters of the year for the majority of air carriers.
Continental's results of operations generally reflect this
seasonality, but have also been impacted by numerous other factors
that are not necessarily seasonal, including the extent and nature
of competition from other airlines, fare wars, excise and similar
taxes, changing levels of operations, fuel prices, foreign currency
exchange rates and general economic conditions.
Other
While the Company has implemented a Year 2000 project to ensure
that its computer systems will function properly in the year 2000
and thereafter (see Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations"), the Company's
business is dependent upon certain governmental organizations or
entities, such as the FAA, that provide essential aviation industry
infrastructure. There can be no assurance that the systems of such
third parties (including those of the FAA) will be modified to
function properly in the year 2000 on a timely basis. The
Company's business, financial condition or results of operations
could be materially adversely affected by the failure of systems
operated by other parties to operate properly beyond 1999. To the
extent possible, the Company will be developing and executing
contingency plans designed to allow continued operation in the
event of failure of third parties' systems.
<PAGE>
ITEM 2. PROPERTIES.
Flight Equipment
As shown in the following table, Continental's (including CMI's)
jet aircraft fleet (excluding regional jets) consisted of 337 jets
and was comprised of 11 different types and series of aircraft at
December 31, 1997.
<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* 4 - 4 426 25.0
Three Engine
DC-10-10 6 - 6 287 25.2
DC-10-30 28 6 22 242 21.7
727-200* 43 4 39 149 21.1
Two Engine
757-200 23 - 23 183 2.4
737-500 50 1 49 104 2.4
737-300 65 14 51 128 10.4
737-200* 16 16 - 100 28.5
737-100* 5 5 - 95 29.5
MD-80 69 15 54 141 13.0
DC-9-30* 28 3 25 103 25.7
337 64 273 14.4
</TABLE>
*Stage 2 (noise level) aircraft which are scheduled to be replaced
prior to the year 2000.
The table above excludes six all-cargo 727 CMI aircraft.
A majority of the aircraft and engines owned by Continental are
subject to mortgages.
The FAA has adopted rules pursuant to the Airport Noise and
Capacity Act of 1990 that require a scheduled phase out of Stage 2
aircraft during the 1990's. As a result of Continental's
acquisition of a number of new aircraft and the retirement of older
Stage 2 aircraft in recent years, 71.5% of Continental's current
jet fleet was composed of Stage 3 aircraft at December 31, 1997.
The Company plans to retire the remainder of its Stage 2 jet fleet
(excluding those aircraft operated by CMI) prior to the year 2000
in order to comply with such rules. Scheduled deliveries of the
Company's new Boeing aircraft on order are expected to reduce the
average age of the Company's jet fleet from 14.4 years to 9.8 years
by the end of 1999.
During 1997, Continental took delivery of a total of 20 new Boeing
aircraft which consisted of 14 737-500 aircraft and six 757-200
aircraft. In addition, Continental also purchased three DC-10-30
aircraft and leased seven DC-10-30 aircraft. The Company
anticipates taking delivery of 64 new Boeing aircraft in 1998.
As of December 31, 1997, Express operated a fleet of 116 aircraft,
as follows:
<TABLE>
<CAPTION>
Seats
Total in Standard Average Age
Type Aircraft Owned Leased Configuration (In Years)
<S> <C> <C> <C> <C> <C>
Turboprop
ATR-72 3 3 - 64 3.4
ATR-42-320 30 3 27 46 7.9
ATR-42-500 8 - 8 48 1.3
EMB-120 32 22 10 30 8.4
Beech 1900-D 25 25 - 19 1.9
Regional jets
ERJ-145* 18 - 18 50 0.5
116 53 63 5.0
</TABLE>
*One regional jet was damaged beyond economic repair in February
1998.
Not included in the table above is one ATR-42 aircraft owned by the
Company and currently leased to a third party.
During 1997, Express took delivery of 16 ERJ-145 aircraft. Express
anticipates taking delivery of 18 new ERJ-145 aircraft in 1998.
See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Commitments" for a discussion of the Company's order for new firm
commitment aircraft and related financing arrangements.
Facilities
The Company's principal facilities are located at Newark
International, Bush Intercontinental, Hopkins International and
A.B. Won Pat International Airport in Guam. All these facilities,
as well as substantially all of Continental's other facilities, are
leased on a long-term, net-rental basis, and Continental is
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 three domestic 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.
In July 1996, the Company announced plans to expand its gates and
related facilities into Terminal B at Bush Intercontinental, as
well as planned improvements at Terminal C and the construction of
a new automated people mover system linking Terminal B and Terminal
C. In April 1997, the City of Houston completed the offering of
$190 million aggregate principal amount of tax-exempt special
facilities revenue bonds (the "IAH Bonds"). In connection
therewith, the Company has entered into long-term leases (or
amendments to existing leases) with the City of Houston providing
for the Company to make rental payments sufficient to service the
related tax-exempt bonds, which have a term no longer than 30
years.
The Company is building a wide-body aircraft maintenance hangar in
Honolulu, Hawaii at an estimated cost of $25 million. Construction
of the hangar, anticipated to be completed by the second quarter of
1998, is being financed by tax-exempt special facilities revenue
bonds issued by the State of Hawaii. In connection therewith, the
Company has entered into long-term leases providing for the Company
to make rental payments sufficient to service the related tax-
exempt bonds.
In December 1997, Continental substantially completed construction
of a new hangar and improvements to a cargo facility at Newark
International. Continental expects to complete the financing of
these projects in April 1998 with approximately $25 million of tax-
exempt bonds. Continental is also planning a facility expansion at
Newark which would require, among other matters, agreements to be
reached with the applicable airport authority.
Continental has announced plans to expand its facilities at Hopkins
International, which expansion is expected to be completed in the
third quarter of 1999. The expansion, which will include a new jet
concourse for the regional jet service offered by Express, as well
as other facility improvements, is expected to cost approximately
$156 million and will be funded principally by the issuance of a
combination of tax-exempt special facilities revenue bonds (issued
in March 1998) and general airport revenue bonds (issued in
December 1997) by the City of Cleveland. In connection therewith,
Continental has entered into a long-term lease with the City of
Cleveland under which rental payments will be sufficient to service
the related bonds.
The Company has lease agreements with the City and County of Denver
covering ten gates and several support facilities at Denver
International Airport. The gates and facilities exceed
Continental's needs at the airport and the Company has subleased a
portion of the space.
<PAGE>
The Company has cargo facilities at Los Angeles International
Airport. In July 1996, the Company subleased such facilities to
another carrier. If such carrier fails to comply with its
obligations under the sublease, the Company would be required to
perform those obligations.
CMI operates a hub on the island of Guam. In September 1996, the
Guam International Airport Authority completed the first phase of
a $240 million airport terminal expansion and renovation project.
This provided new arrival facilities, inbound baggage carousels and
customs halls and increased the number of gates available to CMI
from six to 12. Upon completion of the second (and final) phase of
the project in August 1998, five new additional gates will be
added, including ticket counters and a new pier-sort outbound
baggage system. The completed project is expected to triple the
size of the terminal complex and increase the cost of CMI's
operations in Guam by approximately $15 million a year.
Continental also maintains administrative offices, airport and
terminal facilities, training facilities and other facilities
related to the airline business in the cities it serves.
Continental remains contingently liable until December 1, 2015, on
$202 million of long-term lease obligations of US Airways related
to the East End Terminal at LaGuardia Airport in New York. If US
Airways defaulted on these obligations, Continental could be
required to cure the default, at which time it would have the
right to reoccupy the terminal.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
Plan of Reorganization
The Company's Plan of Reorganization, which became effective on
April 27, 1993, upon emergence from bankruptcy (the "Plan of
Reorganization"), 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 3,800,000 shares of
the Company's Class A common stock, 10,084,736 shares of the
Company's Class B common stock, and $6,523,952 of cash and have no
further claim against the Company. The Plan of Reorganization
provides 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 December 31, 1997, there remained
581,355 shares of Class A common stock, 1,520,827 shares of Class B
common stock, and approximately $972,000 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,
a limited number of proceedings were brought by prepetition
creditors seeking to impose additional obligations on the Company.
Environmental Proceedings
Under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (commonly known
as "Superfund") and similar state environment cleanup laws,
generators of waste disposed of at designated sites may, under
certain circumstances, be subject to joint and several liability
for investigation and remediation costs. The Company (including
its predecessors) has been identified as a potentially responsible
party at four federal and two state sites that are undergoing or
have undergone investigation or remediation. The Company believes
that, although applicable case law is evolving and some cases may
be interpreted to the contrary, some or all of any liability claims
associated with these sites were discharged by confirmation of the
Company's Plan of Reorganization, principally because the Company's
exposure is based on alleged offsite disposal known as of the date
of confirmation. Even if any such claims were not discharged, on
the basis of currently available information, the Company believes
that its potential liability for its allocable share of the cost to
remedy each site (to the extent the Company is found to have
liability) is not, in the aggregate, material; however, the Company
has not been designated a "de minimis" contributor at any of such
sites.
The Company is also involved in other environmental matters,
including the investigation and/or remediation of environmental
conditions at properties used or previously used by the Company.
Although the Company is not currently subject to any environmental
cleanup orders imposed by regulatory authorities, it is undertaking
voluntary investigation or remediation at certain properties in
consultation with such authorities. The full nature and extent of
any contamination at these properties and the parties responsible
for such contamination have not been determined, but based on
currently available information the Company does not believe that
any environmental liability associated with such properties will
have a material adverse effect on the Company.
Shareholder Litigation
Following the announcement of the Northwest Alliance, the Air
Partners Transaction and the related corporate governance agreement
between the Company and certain affiliates of Northwest
(collectively, the "Northwest Transaction"), to the Company's
knowledge as of March 1, 1998, six separate lawsuits were filed
against the Company and its Directors and certain other parties
(the "Shareholder Litigation"). The complaints in the Shareholder
Litigation, which were filed in the Court of Chancery of the State
of Delaware in and for New Castle County and seek class
certification, and which have been consolidated under the caption
In re Continental Airlines, Inc. Shareholder Litigation, generally
allege that the Company's Directors improperly accepted the
Northwest Transaction in violation of their fiduciary duties owed
to the public shareholders of the Company. They further allege
that Delta Air Lines, Inc. submitted a proposal to purchase the
Company which, in the plaintiffs' opinion, was superior to the
Northwest Transaction. The Shareholder Litigation seeks, inter
alia, to enjoin the Northwest Transaction and the award of
unspecified damages to the plaintiffs.
While there can be no assurance that the Shareholder Litigation
will not result in a delay in the implementation of any aspect of
the Northwest Transaction, or the enjoining of the Northwest
Transaction, the Company believes the Shareholder Litigation to be
without merit and intends to defend it vigorously.
General
Various other claims and lawsuits against the Company are pending
that are of the type generally consistent with 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 in whole or in part by insurance. The Company does not
believe 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.<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Continental's common stock trades on the New York Stock Exchange.
The table below shows the high and low sales prices for the
Company's Class A common stock and Class B common stock as reported
on the New York Stock Exchange during 1996 and 1997.
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
High Low High Low
<S> <C> <C> <C> <C>
1996 First Quarter . . . 27 19-1/8 28-3/16 19-7/16
Second Quarter. . . 31-1/16 25-7/8 31-7/16 26-9/16
Third Quarter . . . 31 21 31-1/8 21-1/8
Fourth Quarter. . . 30-5/8 22 30-3/4 22-5/8
1997 First Quarter . . . 33-3/4 27 33-5/8 27
Second Quarter. . . 36-3/4 30-1/8 35-7/8 29-1/2
Third Quarter . . . 41-7/16 34 41-3/8 34
Fourth Quarter. . . 50-1/2 38-1/2 50-3/16 38-5/8
</TABLE>
As of March 11, 1998, there were approximately 3,133 and 17,956
holders of record of Continental's Class A common stock and Class B
common stock, respectively.
The Company has paid no cash dividends on its common stock.
Because management believes it is important to continue
strengthening the Company's balance sheet and liquidity, the
Company has no current intention of paying cash dividends on its
common stock, but may consider repurchase of its common stock under
certain market conditions. Certain of the Company's credit
agreements and indentures restrict the ability of the Company and
certain of its subsidiaries to pay cash dividends by imposing
minimum unrestricted cash requirements on the Company, limiting the
amount of such dividends when aggregated with certain other
payments or distributions and requiring that the Company comply
with other covenants specified in such instruments.
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.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The table on the following page sets forth certain consolidated
financial data of (i) the Company at December 31, 1997, 1996, 1995,
1994 and 1993 and for the years ended December 31, 1997, 1996, 1995
and 1994 and the period April 28, 1993 through December 31, 1993
and (ii) the Predecessor Company (see "1993 Reorganization" below),
for the period January 1, 1993 through April 27, 1993 (in millions,
except per share data).
1993 Reorganization
As used on the following page, the term "Reorganized Company"
refers to Continental Airlines, Inc. and its subsidiaries. The
Company reorganized under Chapter 11 of the federal bankruptcy code
in April 1993, after having filed for protection in December 1990.
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 with and
into the Reorganized Company.
As a result of the adoption of fresh start reporting in accordance
with SOP 90-7, upon consummation of the Company's Plan of
Reorganization (see Item 3. "Legal Proceedings - Plan of
Reorganization"), 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. The Reorganized Company includes
Continental CRS Interests, Inc. (formerly System One Information
Management, Inc. prior to April 27, 1995) and other businesses that
had been consolidated with Holdings prior to April 28, 1993 (but
not with pre-reorganized Continental).
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA (Continued)
<CAPTION>
Predecessor
Reorganized Company (1)(2)(3) Company (2)
April 28, January 1,
1993 through 1993 through
Year Ended December 31, December 31, April 27,
1997 1996 1995 1994 1993 1993
<S> <C> <C> <C> <C> <C> <C>
Operating revenue. . . . $7,213 $6,360 $5,825 $5,670 $3,910 $1,857
Operating income (loss). 716 525 385 (11) 95 (114)
Income (loss) before
extraordinary gain
(loss) . . . . . . . . 389 325 224 (613) (39) (979)
Net income (loss). . . . 385 319 224 (613) (39) 2,640
Earnings (loss) per
common share:
Income (loss)
before extra-
ordinary loss. . . 6.72 5.87 4.07 (11.88) (1.17) *
Net income (loss). . 6.65 5.75 4.07 (11.88) (1.17) *
Earnings (loss) per
common share
assuming dilution:
Income (loss)
before extra-
ordinary loss. . . 5.03 4.25 3.37 (11.88) (1.17) *
Net income (loss). . 4.99 4.17 3.37 (11.88) (1.17) *
*Not meaningful.
</TABLE>
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA (Continued)
<CAPTION>
Reorganized Company (1)
December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total assets . . . . . . . . . . . $5,830 $5,206 $4,821 $4,601 $5,099
Debt and capital lease obligations
in default (4) . . . . . . . . . - - - 490 -
Long-term debt and capital lease
obligations. . . . . . . . . . . 1,568 1,624 1,658 1,202 1,775
Minority interest (5). . . . . . . - 15 27 26 22
Continental-Obligated Mandatorily
Redeemable Preferred Securities
of Subsidiary Trust holding
solely Convertible Subordinated
Debentures (6) . . . . . . . . . 242 242 242 - -
Redeemable preferred stock (7) . . - 46 41 53 47
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(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
1997, 1996 and 1995. 1996 results include a $128 million fleet disposition charge
associated with the Company's decision to accelerate the replacement of certain aircraft
between August 1997 and December 1999. The fleet disposition charge relates primarily
to (i) the writedown of Stage 2 aircraft inventory to its estimated fair value and (ii)
a provision for costs associated with the return of leased aircraft at the end of their
respective lease terms. 1995 results include a $108 million gain ($30 million after
taxes) from the System One transactions. 1994 results include a provision of $447
million associated with the planned early retirement of certain aircraft and closed or
underutilized airport and maintenance facilities and other assets.
(2) No cash dividends were paid on common stock during the periods shown.
(3) The earnings per share amounts prior to 1997 have been restated as required to comply
with Statement of Financial Accounting Standards No. 128 - "Earnings Per Share" ("SFAS
128"). For further discussion of earnings per share and the impact of SFAS 128, see the
notes to the consolidated financial statements beginning on page F-14.
(4) The Company's failure to make certain required payments in 1994 to certain lenders and
aircraft lessors constituted events of default under the respective agreements with such
parties. These events of default were cured in 1995.
(5) Continental purchased UMDA's 9% interest in AMI in 1997. See Item 1. "Business -
Business Strategy - Fund the Future".
(6) The sole assets of the Continental-Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust ("Trust") are Convertible Subordinated Debentures, with an aggregate
principal amount of $250 million, which bear interest at the rate of 8-1/2% per annum
and mature on December 1, 2020. Upon repayment, the Trust will be mandatorily redeemed.
(7) Continental redeemed for cash all of the outstanding shares of its Series A 12%
Cumulative Preferred Stock in 1997. See Item 1. "Business - Business Strategy - Fund
the Future".
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion may contain forward-looking statements.
In connection therewith, please see the cautionary statements
contained in Item 1. "Business - Risk Factors Relating to the
Company" and "Business - Risk Factors Relating to the Airline
Industry" which identify important factors that could cause actual
results to differ materially from those in the forward-looking
statements. Hereinafter, the terms "Continental" and the "Company"
refer to Continental Airlines, Inc. and its subsidiaries, unless
the context indicates otherwise.
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, 1997.
Comparison of 1997 to 1996. The Company recorded consolidated net
income of $385 million and $319 million for the years ended
December 31, 1997 and 1996, respectively, including a $128 million
fleet disposition charge ($77 million after taxes) in 1996 and
after-tax extraordinary losses relating to the early extinguishment
of debt of $4 million and $6 million in 1997 and 1996,
respectively. Management believes that the Company benefitted in
the first three quarters of 1996 and in the first quarter of 1997
from the expiration of the aviation trust fund tax (the "ticket
tax") on December 31, 1995 and December 31, 1996, respectively.
The ticket tax was reinstated on August 27, 1996 and again on March
7, 1997. Management believes that the ticket tax has a negative
impact on the Company, although neither the amount of such negative
impact directly resulting from the reimposition of the ticket tax,
nor the benefit realized by its expiration, can be precisely
determined. Additionally, the Company benefitted in the first six
months of 1996 from the recognition of previously unbenefitted
post-reorganization net operating loss carryforwards ("NOLs").
Passenger revenue increased 13.4%, $789 million, during 1997
compared to 1996. The increase was due to a 14.3% increase in
revenue passenger miles on capacity growth of 9.9% offset by a 1.1%
decrease in yield.
Cargo revenue increased 13.6%, $21 million, during 1997 compared to
1996 due to an increase in cargo capacity, primarily in
international markets.
Mail and other revenue increased 12.8%, $43 million, from 1996 to
1997 primarily as a result of an increase in mail volumes
(principally in international markets) and an increase in other
revenue related to frequent flyer mileage credits sold to
participating partners in the Company's frequent flyer program
("OnePass").
<PAGE>
Wages, salaries and related costs increased 16.3%, $236 million,
during 1997 as compared to 1996 due in part to an 9.6% increase in
the average number of full-time equivalent employees from
approximately 34,300 for the year ended December 31, 1996 to 37,600
for the year ended December 31, 1997. Wages and salaries also
increased in 1997 due to a $29 million accrual for the impact of
the tentative collective bargaining agreement with the pilots.
Employee incentives increased 29.9%, $29 million, from 1996 to 1997
as a result of an increase in employee profit sharing of $37
million offset by a decrease in on-time bonuses of $8 million.
Aircraft fuel expense increased 14.3%, $111 million, from 1996 to
1997 primarily due to a 10.5% increase in the quantity of jet fuel
used from 1.228 billion gallons during 1996 to 1.357 billion
gallons during 1997, resulting from increased flying. In addition,
the average price per gallon, net of fuel hedging gains of $65
million in 1996, increased 3.3% from 60.9 cents in 1996 to
62.9 cents in 1997.
Commissions expense increased 11.2%, $57 million, in 1997 compared
to 1996, primarily due to increased passenger revenue.
Aircraft rentals increased 8.3%, $42 million, from 1996 to 1997,
primarily as a result of the delivery of new aircraft throughout
1997, net of retirements.
Maintenance, materials and repairs increased 16.5%, $76 million,
during 1997 as compared to 1996, principally due to the volume and
timing of engine overhauls, increase in component costs and routine
maintenance as part of the Company's ongoing maintenance program.
Aircraft maintenance expense was reduced by $16 million in 1997 due
to the reversal of reserves that are no longer required as a result
of the acquisition of 10 aircraft previously leased by the Company.
Other rentals and landing fees increased 12.9%, $45 million, during
1997 compared to 1996 due to higher facilities rentals and landing
fees resulting from increased operations.
During the third quarter of 1996, the Company recorded a fleet
disposition charge of $128 million ($77 million after taxes),
related primarily to (i) the writedown of Stage 2 aircraft
inventory to its estimated fair value; and (ii) a provision for
costs associated with the return of leased aircraft at the end of
their respective lease terms.
Other operating expense increased 14.9%, $194 million, in 1997 as
compared to 1996, primarily as a result of increases in passenger
services, advertising and publicity, reservations and sales expense
and other miscellaneous expense.
Interest capitalized increased $30 million in 1997 compared to 1996
as a result of higher average purchase deposits for flight
equipment resulting from the pending acquisition of new aircraft.
Interest income increased 30.2%, $13 million, in 1997 compared to
the prior year principally due to an increase in the average
invested balance of cash and cash equivalents.
Other nonoperating income (expense) for the year ended December 31,
1996 included an $18 million gain related to the sale of America
West Airlines, Inc. ("America West") common stock and warrants.
The income tax provision for the year ended December 31, 1997 and
1996 of $237 million and $86 million, respectively, consists of
federal, state and foreign income taxes. During the second quarter
of 1996, the Company had fully utilized previously unbenefitted
post-reorganization NOLs, and began accruing income tax expense.
Comparison of 1996 to 1995. The Company recorded consolidated net
income of $319 million and $224 million for the years ended
December 31, 1996 and 1995, respectively, including a $128 million
fleet disposition charge ($77 million after taxes) and a $6 million
after-tax extraordinary loss relating to the early extinguishment
of debt in 1996. Continental's financial and operating performance
improved significantly in 1996 compared to 1995, reflecting, among
other things, continued implementation of the Company's strategic
program to enhance the fundamentals of its operations, rationalize
capacity, improve customer service and employee relations and
strengthen its balance sheet and liquidity. Management believes
that the Company benefitted significantly from the expiration of
the ticket tax on December 31, 1995, although the amount of any
such benefit directly resulting from the expiration of the ticket
tax cannot precisely be determined. The ticket tax was reinstated
on August 27, 1996, and expired again on December 31, 1996.
Implementation of the Company's route realignment and capacity
rationalization initiatives increased capacity by 0.8% in 1996 as
compared to 1995. This increase in capacity, combined with a 4.7%
increase in traffic, produced a 2.5 percentage point increase in
load factor to 68.1%. This higher load factor, combined with a
4.7% increase in the average yield per revenue passenger mile,
contributed to a 10.7% increase in passenger revenue to $5.9
billion in 1996.
Mail and other revenue decreased 11.4%, $43 million, from 1995 to
1996 primarily as a result of a series of transactions entered into
with a former subsidiary, System One Information Management, Inc.
("System One") (which were effective April 27, 1995). See Note 11
of Notes to Consolidated Financial Statements. Partially
offsetting such decrease was an increase in other revenue resulting
from a wet lease agreement with Alitalia, an agreement with DHL
International to operate a sorting and distribution hub in Manila
and an increase in revenue related to frequent flyer mileage
credits sold to participating partners in the Company's OnePass
program.
Wages, salaries and related costs increased 5.1%, $71 million,
during 1996 as compared to 1995 due in part to an increase in the
average number of full-time equivalent employees from approximately
33,700 for the year ended December 31, 1995 to approximately 34,300
for the year ended December 31, 1996. The increase is also
attributable to pay increases effective July 1, 1996 for
Continental's jet pilots and substantially all of its non-unionized
employees and an increase in base wages and per diem payments for
flight attendants resulting from the Company's collective
bargaining agreement with the International Association of
Machinists and Aerospace Workers ("IAM") representing Continental's
flight attendants.
Employee incentives increased $46 million from 1995 to 1996
primarily due to an increase in employee profit sharing of $37
million and an increase in on-time bonuses of $9 million.
Aircraft fuel expense increased 13.7%, $93 million, from 1995 to
1996. The average price per gallon, net of fuel hedging gains of
$65 million in 1996, increased 10.7% from 55.0 cents in 1995 to
60.9 cents in 1996. In addition, there was a 2.1% increase in the
quantity of jet fuel used from 1.203 billion gallons during 1995 to
1.228 billion gallons during 1996, principally reflecting increased
capacity.
Commissions expense increased 4.3%, $21 million, in 1996 compared
to 1995, primarily due to a 10.7% increase in passenger revenue,
partially offset by a decrease in the percentage of commissionable
revenue.
Aircraft rentals increased 2.4%, $12 million, from 1995 to 1996,
primarily as a result of the delivery of new aircraft throughout
1996. Such increase was partially offset by retirements of certain
leased aircraft and refinancings of certain leased aircraft.
Maintenance, materials and repairs increased 7.5%, $32 million,
during 1996 as compared to 1995, principally due to the volume and
timing of engine overhauls as part of the Company's ongoing
maintenance program.
During the third quarter of 1996, the Company made the decision to
accelerate the replacement of 30 DC-9-30 aircraft, six DC-10-10
aircraft, 31 727-200 aircraft, 13 737-100 aircraft and 17 737-200
aircraft between August 1997 and December 1999. As a result of its
decision to accelerate the replacement of these aircraft, the
Company recorded a fleet disposition charge of $128 million ($77
million after taxes). The fleet disposition charge relates
primarily to (i) the writedown of Stage 2 aircraft inventory, which
is not expected to be consumed through operations, to its estimated
fair value; and (ii) a provision for costs associated with the
return of leased aircraft at the end of their respective lease
terms.
Interest expense decreased 22.5%, $48 million, from 1995 to 1996,
primarily due to principal reductions of long-term debt and capital
lease obligations as a result of the Company's refinancing
initiatives.
Interest income increased 38.7%, $12 million, in 1996 compared to
1995, principally due to an increase in the average invested
balance of cash and cash equivalents.
The Company's other nonoperating income (expense) for the year
ended December 31, 1996 includes a $13 million gain related to the
sale of approximately 1.4 million shares of America West common
stock, a $5 million gain related to the sale of the America West
warrants and foreign currency gains and losses (primarily related
to the Japanese yen and the British pound).
Nonoperating income (expense) for the year ended December 31, 1995
primarily consisted of a pre-tax gain of $108 million from the
System One transactions. Additionally in 1995, the bankruptcy
court approved a settlement resolving certain claims filed by the
Company for the return of certain aircraft purchase deposits. As
a result of the settlement, the Company recorded a $12 million gain
in 1995, included in other nonoperating income (expense). These
gains were partially offset by an additional provision of $14
million for underutilized airport facilities and other assets
(primarily associated with Denver International Airport) and a
$5 million pretax charge which represented a waiver fee to a major
creditor of the Company.
The income tax provision for the year ended December 31, 1996 of
$86 million consists of federal, state and foreign income taxes.
During 1996, the Company utilized previously unbenefitted NOLs,
created subsequent to the Company's 1993 emergence from bankruptcy,
and began accruing income tax expense in the second quarter. A
provision for federal income taxes was recorded for the year ended
December 31, 1995 related to the System One transactions. No
additional provision was recorded in 1995 due to the previously
incurred NOLs for which a tax benefit had not previously been
recorded.
<PAGE>
Certain Statistical Information
An analysis of statistical information for Continental's jet
operations, excluding regional jets operated by Continental
Express, for each of the three years in the period ended
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Net Increase/ Net Increase/
(Decrease) (Decrease)
1997 1997-1996 1996 1996-1995 1995
<S> <C> <C> <C> <C> <C>
Revenue pas-
senger miles
(millions) (1). . 47,906 14.3 % 41,914 4.7 % 40,023
Available seat
miles
(millions) (2). . 67,576 9.9 % 61,515 0.8 % 61,006
Passenger load
factor (3). . . . 70.9% 2.8 pts. 68.1% 2.5 pts. 65.6%
Breakeven pas-
senger load
factor (4), (11). 60.0% (0.7)pts. 60.7% (0.1)pts. 60.8%
Passenger revenue
per available
seat mile
(cents) (5) . . . 9.19 2.9 % 8.93 8.9 % 8.20
Total revenue per
available seat
miles (cents)
(6) . . . . . . . 10.09 3.0 % 9.80 8.6 % 9.02
Operating cost
per available
seat mile
(cents) (7),
(11). . . . . . . 9.07 3.4 % 8.77 4.9 % 8.36
Average yield
per revenue
passenger
mile (cents) (8). 12.96 (1.1)% 13.10 4.7 % 12.51
Average fare per
revenue
passenger . . . .$150.63 5.1 % $143.27 7.6 % $133.21
Revenue passengers
(thousands) . . . 41,210 7.5 % 38,332 2.0 % 37,575
Average length of
aircraft flight
(miles) . . . . . 967 7.9 % 896 7.2 % 836
Average daily
utilization of
each aircraft
(hours) (9) . . . 10:13 2.3 % 9:59 4.7 % 9:32
Actual aircraft
in fleet at end
of period (10). . 337 6.3 % 317 2.6 % 309
</TABLE>
<PAGE>
_______________
Continental has entered into block space arrangements with certain
other carriers whereby one or both of the carriers is obligated to
purchase capacity on the other carrier. One such arrangement began
in June 1997 pursuant to which the other carrier is sharing
Continental's costs of operating certain flights by committing to
purchase capacity on such flights. The tables above exclude 738
million available seat miles in 1997, as well as the related
revenue passenger miles and enplanements, which were purchased and
marketed by the other carrier.
(1) The number of scheduled miles flown by revenue passengers.
(2) The number of seats available for passengers multiplied by
the number of scheduled miles those seats are flown.
(3) Revenue passenger miles divided by available seat miles.
(4) The percentage of seats that must be occupied by revenue
passengers in order for the airline to break even on an
income before income taxes basis, excluding nonrecurring
charges, nonoperating items and other special items.
(5) Passenger revenue divided by available seat miles.
(6) Total revenue divided by available seat miles.
(7) Operating expenses divided by available seat miles.
(8) The average revenue received for each mile a revenue
passenger is carried.
(9) The average number of hours per day that an aircraft flown in
revenue service is operated (from gate departure to gate
arrival).
(10) Excludes six and four all-cargo 727 CMI aircraft in 1997 and
1996, respectively.
(11) 1996 excludes fleet disposition charge totaling $128 million.
Liquidity and Capital Resources
During 1997 and early 1998, the Company completed a number of
transactions intended to strengthen its long-term financial
position and enhance earnings:
- - In March 1997, Continental completed an offering of $707 million
of pass-through certificates to be used to finance (through
either leveraged leases or secured debt financings) the debt
portion of the acquisition cost of up to 30 new aircraft from The
Boeing Company ("Boeing") scheduled to be delivered to
Continental through April 1998.
- - In April 1997, Continental entered into a $160 million secured
revolving credit facility to be used for the purpose of making
certain predelivery payments to Boeing for new Boeing aircraft to
be delivered through December 1999.
- - In April 1997, Continental redeemed for cash all of the 460,247
outstanding shares of its Series A 12% Cumulative Preferred Stock
held by an affiliate of Air Canada for $100 per share plus
accrued dividends thereon. The redemption price, including
accrued dividends, totaled $48 million.
- - In June 1997, Continental purchased from Air Partners, L.P. ("Air
Partners") for $94 million in cash warrants to purchase 3,842,542
shares of Class B common stock of the Company.
- - In June 1997, Continental completed an offering of $155 million
of pass-through certificates which were used to finance the
acquisition of 10 aircraft previously leased by the Company.
- - In July 1997, Continental entered into a $575 million credit
facility, including $350 million of term loans, $275 million of
which was loaned by Continental to its wholly owned subsidiary
Air Micronesia, Inc. ("AMI"), reloaned by AMI to its wholly owned
subsidiary, Continental Micronesia, Inc. ("CMI") and used by CMI
to repay its existing secured term loan. The facility also
includes a $225 million revolving credit facility.
- - In July 1997, the Company (i) purchased (a) the right of United
Micronesia Development Association's ("UMDA") to receive future
payments under a services agreement between UMDA and CMI and (b)
UMDA's 9% interest in AMI, (ii) terminated the Company's
obligations to UMDA under a settlement agreement entered into in
1987, and (iii) terminated substantially all of the other
contractual arrangements between the Company, AMI and CMI, on the
one hand, and UMDA on the other hand, for an aggregate
consideration of $73 million.
- - In September 1997, Continental completed an offering of $89
million of pass-through certificates which were used to finance
the debt portion of the acquisition cost of nine Embraer ERJ-145
("ERJ-145") regional jets.
- - In October 1997, the Company completed an offering of $752
million of pass-through certificates to be used to finance
(through either leveraged leases or secured debt financings) the
debt portion of the acquisition cost of up to 24 new Boeing
aircraft scheduled to be delivered from April 1998 through
November 1998.
- - In February 1998, the Company completed an offering of $773
million of pass-through certificates to be used to finance
(through either leveraged leases or secured debt financings) the
debt portion of the acquisition cost of up to 24 aircraft
scheduled to be delivered from February 1998 through December
1998.
- - In addition, during 1997 and the first quarter of 1998,
Continental completed several offerings totaling approximately
$291 million aggregate principal amount of tax-exempt special
facilities revenue bonds to finance or refinance certain airport
facility projects. These bonds are payable solely from rentals
paid by Continental under long-term lease agreements with the
respective governing bodies.
The cash proceeds from the pass-through certificate transactions
are deposited with a depositary bank for the benefit of the
certificate holders and enable the Company to finance (through
either leveraged leases or secured debt financings) the debt
portion of the acquisition cost of new aircraft. As of March 18,
1998 approximately $1.6 billion of the proceeds remain on deposit.
If any funds remain as deposits at the end of the specified
delivery periods, such funds will be distributed back to the
certificate holders.
As of December 31, 1997, Continental had approximately $1.9 billion
(including current maturities) of long-term debt and capital lease
obligations, and had approximately $1.2 billion of Continental-
obligated mandatorily redeemable preferred securities of subsidiary
trust and common stockholders' equity, a ratio of 1.6 to 1. As of
December 31, 1996, the ratio of long-term debt and capital lease
obligations (including current maturities) to minority interest,
Continental-obligated mandatorily redeemable preferred securities
of subsidiary trust, redeemable preferred stock and common
stockholders' equity was 2.1 to 1.
As of December 31, 1997 the Company had $1.0 billion in cash and
cash equivalents (excluding restricted cash), compared to $985
million as of December 31, 1996. Net cash provided by operating
activities increased $129 million during the year ended December
31, 1997 compared to the same period in the prior year principally
due to an improvement in operating income. Net cash used by
investing activities for the year ended December 31, 1997 compared
to the same period in the prior year increased $406 million,
primarily as a result of higher capital and fleet-related
expenditures in 1997 and lower purchase deposits refunded in
connection with aircraft delivered in 1996. Net cash used by
financing activities increased $80 million primarily due to (i) a
decrease in payments on long-term debt and capital lease
obligations, (ii) a decrease in proceeds received from the issuance
of long-term debt and (iii) an increase in warrants purchased in
1997.
Continental has general lines of credit and significant encumbered
assets.
Deferred Tax Assets. The Company had, as of December 31, 1997,
deferred tax assets aggregating $1.1 billion, including
$631 million of NOLs. The Company recorded a valuation allowance
of $617 million against such assets as of December 31, 1997.
Realization of a substantial portion of the Company's remaining
NOLs will require the completion by April 27, 1998 of transactions
resulting in recognition of built-in gains for federal income tax
purposes. In the fourth quarter of 1997, the Company determined
that it would be able to recognize an additional $155 million of
NOLs attributable to the Company's pre-bankruptcy predecessor.
This benefit, $62 million, was used to reduce reorganization value
in excess of amounts allocable to identifiable assets. To the
extent the Company were to determine in the future that additional
NOLs of the Company's pre-bankruptcy predecessor could be
recognized in the consolidated financial statements, such benefit
would also reduce reorganization value in excess of amounts
allocable to identifiable assets. If such reorganization value is
exhausted, such benefit would decrease other intangibles. The
Company may consummate one or more additional built-in gain
transactions by April 28, 1998.
As a result of NOLs, the Company will not pay United States federal
income taxes (other than alternative minimum tax) until it has
recorded approximately an additional $515 million of taxable income
following December 31, 1997. Section 382 of the Internal Revenue
Code ("Section 382") imposes limitations on a corporation's ability
to utilize NOLs if it experiences an "ownership change". In
general terms, an ownership change may result from transactions
increasing the ownership of certain stockholders in the stock of a
corporation by more than 50 percentage points over a three-year
period. In the event that an ownership change should occur,
utilization of Continental's NOLs would be subject to an annual
limitation under Section 382 determined by multiplying the value of
the Company's stock at the time of the ownership change by the
applicable long-term tax exempt rate (which was 5.23% for February
1998). Any unused annual limitation may be carried over to later
years, and the amount of the limitation may under certain
circumstances be increased by the built-in gains in assets held by
the Company at the time of the change that are recognized in the
five-year period after the change. Under current conditions, if an
ownership change were to occur, Continental's annual NOL
utilization would be limited to approximately $147 million per year
other than through the recognition of future built-in gain
transactions.
Based on information currently available, the Company does not
believe that the Air Partners agreement to dispose of its interest
in the Company to an affiliate of Northwest Airlines, Inc. will
result in an ownership change for purposes of Section 382. See
Item 7. "Management's Discussion and Analyses - Liquidity and
Capital Resources - Other".
Purchase Commitments. In March 1998, Continental announced the
conversion of 15 Boeing 737 option aircraft to 15 Boeing 737-900
firm aircraft and the addition of 25 option aircraft. As of March
18, 1998, Continental had firm commitments with Boeing to take
delivery of a total of 154 jet aircraft (including the Boeing 737-
900 aircraft described above) during the years 1998 through 2005
with options for an additional 61 aircraft (exercisable subject to
certain conditions). These aircraft will replace older, less
efficient Stage 2 aircraft and allow for growth of operations. The
estimated aggregate cost of the Company's firm commitments for the
Boeing aircraft is approximately $6.7 billion. As of March 18,
1998, Continental had completed or had third party commitments for
a total of approximately $1.6 billion in financing for its future
Boeing deliveries, and had commitments or letters of intent from
various sources for backstop financing for approximately one-third
of the anticipated remaining acquisition cost of such Boeing
deliveries. The Company currently plans on financing the new
Boeing aircraft with a combination of enhanced equipment trust
certificates, lease equity and other third party financing, subject
to availability and market conditions. However, further financing
will be needed to satisfy the Company's capital commitments for
other aircraft and aircraft-related expenditures such as engines,
spare parts, simulators and related items. There can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments. Deliveries of new Boeing aircraft are
expected to increase aircraft rental, depreciation and interest
costs while generating cost savings in the areas of maintenance,
fuel and pilot training.
In September 1996, Continental Express, Inc. ("Express") placed an
order for 25 firm ERJ-145 regional jets, with options for an
additional 175 aircraft exercisable through 2008. In June 1997,
Express exercised its option to order 25 of such option aircraft
and expects to confirm its order for an additional 25 of its
remaining 150 option aircraft by August 1998. Neither Express nor
Continental will have any obligation to take such aircraft that are
not financed by a third party and leased to the Company. Express
took delivery of 18 of the aircraft through December 31, 1997 and
will take delivery of the remaining 32 aircraft through the third
quarter of 1999. The Company expects to account for all of these
aircraft as operating leases.
Continental expects its cash outlays for 1998 capital expenditures,
exclusive of fleet plan requirements, to aggregate $211 million,
primarily relating to mainframe, software application and
automation infrastructure projects, aircraft modifications and
mandatory maintenance projects, passenger terminal facility
improvements and office, maintenance, telecommunications and ground
equipment. Continental's capital expenditures during 1997
aggregated $118 million, exclusive of fleet plan requirements.
The Company expects to fund its future capital commitments through
internally generated funds together with general Company financings
and aircraft financing transactions. However, there can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments.
Year 2000. The Company uses a significant number of computer
software programs and embedded operating systems that are essential
to its operations. As a result, the Company implemented a Year
2000 project in early 1997 to ensure that the Company's computer
systems will function properly in the year 2000 and thereafter.
The Company anticipates completing its Year 2000 project in early
1999 and believes that, with modifications to its existing software
and systems and/or conversions to new software, the Year 2000 Issue
will not pose significant operational problems for its computer
systems.
The Company has also initiated communications with its significant
suppliers and vendors with which its systems interface and exchange
data or upon which its business depends. The Company is
coordinating efforts with these parties to minimize the extent to
which its business will be vulnerable to their failure to remediate
their own Year 2000 issues. The Company's business is also
dependent upon certain governmental organizations or entities such
as the Federal Aviation Administration ("FAA") that provide
essential aviation industry infrastructure. There can be no
assurance that the systems of such third parties on which the
Company's business relies (including those of the FAA) will be
modified on a timely basis. The Company's business, financial
condition or results of operations could be materially adversely
affected by the failure of its systems or those operated by other
parties to operate properly beyond 1999. To the extent possible,
the Company will be developing and executing contingency plans
designed to allow continued operation in the event of failure of
the Company's or third parties' systems.
The total cost (excluding internal payroll costs) of the Company's
Year 2000 project is currently estimated at $12 million and will be
funded through cash from operations. The cost of the Company's
Year 2000 project is limited by the substantial outsourcing of its
systems and the significant implementation of new systems following
its emergence from bankruptcy in 1993. The costs of the Company's
Year 2000 project and the date on which the Company believes it
will be completed are based on management's best estimates and
include assumptions regarding third-party modification plans.
However, in particular due to the potential impact of third-party
modification plans, there can be no assurance that these estimates
will be achieved and actual results could differ materially from
those anticipated.
Bond Financings. In April 1997, the City of Houston completed the
offering of $190 million aggregate principal amount of tax-exempt
special facilities revenue bonds (the "IAH Bonds") payable solely
from rentals paid by Continental under long-term lease agreements
with the City of Houston. The IAH Bonds are unconditionally
guaranteed by Continental. The proceeds from the IAH Bonds are
being used to finance the acquisition, construction and
installation of certain terminal and other airport facilities
located at Continental's hub at George Bush Intercontinental
Airport, including a new automated people mover system linking
Terminals B and C and 20 aircraft gates in Terminal B into which
Continental intends to expand its operations. The expansion
project is expected to be completed by the summer of 1999.
In December 1997, Continental substantially completed construction
of a new hangar and improvements to a cargo facility at
Continental's hub at Newark International Airport. Continental
expects to complete the financing of these projects in April 1998
with $25 million of tax-exempt bonds. Continental is also planning
a facility expansion at Newark which would require, among other
matters, agreements to be reached with the applicable airport
authority.
The Company is building a wide-body aircraft maintenance hangar in
Honolulu, Hawaii at an estimated cost of $25 million. Construction
of the hangar, anticipated to be completed by the second quarter of
1998, is being financed by tax-exempt special facilities revenue
bonds issued by the State of Hawaii. In connection therewith, the
Company has entered into long-term leases providing for the Company
to make rental payments sufficient to service the related tax-
exempt bonds.
Continental has announced plans to expand its facilities at its
Hopkins International Airport hub in Cleveland, which expansion is
expected to be completed in the third quarter of 1999. The
expansion, which will include a new jet concourse for the regional
jet service offered by Express, as well as other facility
improvements, is expected to cost approximately $156 million and
will be funded principally by the issuance of a combination of tax-
exempt special facilities revenue bonds (expected to be issued in
March 1998) and general airport revenue bonds (issued in December
1997) by the City of Cleveland. In connection therewith,
Continental has entered into a long-term lease with the City of
Cleveland under which rental payments will be sufficient to service
the related bonds.
Employees. In April 1997, collective bargaining agreement
negotiations began with the Independent Association of Continental
Pilots ("the IACP") to amend both the Continental Airlines pilots'
contract (which became amendable in July 1997) and Express pilots'
contract (which became amendable in October 1997). In February
1998, a five-year collective bargaining agreement with the
Continental Airlines pilots was announced by the Company and the
IACP. In March 1998, Express also announced a five-year collective
bargaining agreement with its pilots. These agreements are subject
to approval by the IACP board of directors and ratification by the
Continental and Express pilots. The Company began accruing for the
increased costs of a tentative agreement reached in November 1997
in the fourth quarter of 1997. The Company estimates that such
accrual will be approximately $113 million for 1998. The Company's
mechanics and related employees recently voted to be represented by
the International Brotherhood of Teamsters (the "Teamsters"). The
Company does not believe that the Teamsters' union representation
will be material to the Company. In September 1997, Continental
announced that it intends to bring all employees to industry
standard wages (the average of the top ten air carriers as ranked
by the Department of Transportation excluding Continental) within
36 months. The announcement further stated that wage increases
will be phased in over the 36-month period as revenue, interest
rates and rental rates reached industry standards. Continental
estimates that the increased wages will aggregate approximately
$500 million over the 36-month period.
Other. As a result of the continued weakness of the yen against
the dollar, a weak Japanese economy and increased fuel costs, CMI's
operating earnings have declined during 1996 and 1997, and are not
expected to improve materially absent a significant improvement in
these factors.
In addition, the Company has entered into petroleum option
contracts to provide some short-term protection against a sharp
increase in jet fuel prices, and CMI has entered into average rate
option contracts to hedge a portion of its Japanese yen-denominated
ticket sales against a significant depreciation in the value of the
yen versus the United States dollar.
On January 26, 1998, the Company announced that, in connection with
an agreement by Air Partners, L.P. to dispose of its interest in
the Company to an affiliate of Northwest Airlines, Inc.
("Northwest"), the Company had entered into a long-term global
alliance with Northwest.
The Company estimates that the alliance with Northwest, when fully
phased in over a three-year period, will generate in excess of $500
million in additional annual pre-tax operating income for the
carriers, and anticipates that approximately 45% of such pre-tax
operating income will accrue to the Company.
In February 1998, Continental began a block space arrangement
whereby it is committed to purchase capacity on another carrier at
a cost of approximately $147 million per year. This arrangement is
for 10 years. Pursuant to other block space arrangements, other
carriers are committed to purchase capacity on Continental.
On March 3, 1998, the Company announced that its Board of Directors
had authorized the expenditure of up to $100 million to repurchase
the Company's common stock or convertible securities. No time
limit was placed on the duration of the repurchase program.
Subject to applicable securities laws, such purchases will be at
times and in amounts as the Company deems appropriate. As of March
17, 1998, 200,000 shares had been repurchased.
Management believes that the Company's costs are likely to be
affected in the future by (i) higher aircraft rental expense as new
aircraft are delivered, (ii) higher wages, salaries and related
costs as the Company compensates its employees comparable to
industry average, (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, including
new security requirements, (v) changes in the Company's fleet and
related capacity and (vi) the Company's continuing efforts to
reduce costs throughout its operations, including reduced
maintenance costs for new aircraft, reduced distribution expense
from using Continental's electronic ticket product ("E-Ticket") and
the Internet for bookings, and reduced interest expense.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market Risk Sensitive Instruments and Positions
The Company is subject to certain market risks, including commodity
price risk (i.e., aircraft fuel prices), interest rate risk,
foreign currency risk and price changes related to investments in
equity securities. Following is a discussion of the adverse
effects of potential changes in these market risks. The
sensitivity analyses presented do not consider the effects that
such adverse changes may have on overall economic activity nor do
they consider additional actions management may take to mitigate
the Company's exposure to such changes. Actual results may differ.
See the notes to the consolidated financial statements for a
description of the Company's accounting policies and other
information related to these financial instruments.
Aircraft Fuel. The Company's results of operations are
significantly impacted by changes in the price of aircraft fuel.
During 1997, aircraft fuel accounted for 14% of the Company's
operating expenses. Based on the Company's 1998 projected fuel
consumption, a one cent change in the average annual price per
gallon of aircraft fuel would impact the Company's annual aircraft
fuel expense by approximately $15 million. In order to provide
short-term protection (generally three to six months) against sharp
increases in aircraft fuel prices, the Company has entered into
petroleum call options. As of December 31, 1997, the Company had
hedged approximately 24% of its projected 1998 fuel requirements,
including 100% related to the first quarter.
Foreign Currency. The Company is exposed to the effect of exchange
rate fluctuations on the U.S. dollar value of foreign currency
denominated operating revenue and expenses. The Company's largest
exposure comes from the Japanese yen. The result of a uniform 10%
strengthening in the value of the U.S. dollar from December 31,
1997 levels relative to the yen is estimated to result in a
decrease in operating income of approximately $25 million for 1998.
However, the Company has mitigated the effect of certain of these
potential foreign currency losses by purchasing foreign currency
average rate option contracts that effectively enable it to sell
Japanese yen expected to be received from yen-denominated ticket
sales over the next nine to twelve months at specified dollar
amounts. As of December 31, 1997, the Company had purchased
average rate options to hedge approximately 100% of its projected
1998 net yen-denominated cash flows.
Interest Rates. The Company's results of operations are affected
by fluctuations in interest rates (e.g., interest expense on debt
and interest income earned on short-term investments).
The Company had approximately $714 million of variable-rate debt as
of December 31, 1997. If average interest rates increased by 0.5%
during 1998 as compared to 1997, the Company's projected 1998
interest expense would increase by approximately $3 million. The
Company has mitigated its exposure on certain variable-rate debt by
entering into an interest rate cap (notional amount of $142 million
as of December 31, 1997) which expires in July 2001. The interest
rate cap limits the amount of potential increase in the Eurodollar
or Prime rate component of the floating rate to a maximum of 9%
over the term of the contract.
As of December 31, 1997, the fair value of $793 million (carrying
value) of the Company's fixed-rate debt was estimated to be $803
million, based upon discounted future cash flows using current
incremental borrowing rates for similar types of instruments or
market prices. Market risk, estimated as the potential increase in
fair value resulting from a hypothetical 0.5% decrease in interest
rates, was approximately $18 million as of December 31, 1997. The
fair value of the remaining fixed-rate debt (with a carrying value
of $162 million and primarily relating to aircraft modification
notes and various loans with immaterial balances) was not
practicable to estimate due to the large number and small dollar
amounts of these notes.
If 1998 average short-term interest rates decreased by 0.5% over
1997 average rates, the Company's projected interest income from
short-term investments would decrease by approximately $4 million
during 1998.
Preferred Securities of Trust. As of December 31, 1997, the fair
value of Continental's 8-1/2% Convertible Trust Originated
Preferred Securities was estimated to be $514 million using market
prices, which exceeded the carrying value of these securities by
$272 million. Market risk is estimated as the potential increase
in fair value resulting from a hypothetical 10% increase in market
prices and was estimated to be $51 million as of December 31, 1997.
Investments in Equity Securities. Continental's investment in
America West Holdings Corporation at December 31, 1997, which was
recorded as its fair value of $9 million and includes unrealized
gains of $4 million, has exposure to price risk. This risk is
estimated as the potential loss in fair value resulting from a
hypothetical 10% adverse change in prices quoted by stock exchanges
and amounts to $1 million.
The Company also has an investment in AMADEUS which is also subject
to price risk. However, since a readily determinable market value
does not exist for AMADEUS (it is privately held), the Company is
unable to quantify the amount of price risk sensitivity inherent in
this investment.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page No.
<S> <C>
Report of Independent Auditors F-2
Consolidated Statements of Operations for each of the
Three Years in the Period Ended December 31, 1997 F-3
Consolidated Balance Sheets as of December 31, 1997
and 1996 F-5
Consolidated Statements of Cash Flows for each of the
Three Years in the Period Ended December 31, 1997 F-7
Consolidated Statements of Redeemable Preferred Stock
and Common Stockholders' Equity for each of the
Three Years in the Period Ended December 31, 1997 F-9
Notes to Consolidated Financial Statements F-13
</TABLE>
<PAGE>
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, 1997
and 1996, and the related consolidated statements of operations,
redeemable preferred stock and common stockholders' equity and cash
flows for each of the three years in the period ended December 31,
1997. 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.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of the Company at December 31, 1997 and 1996,
the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
February 9, 1998
except for Note 13, as
to which the date is
March 18, 1998
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Operating Revenue:
Passenger. . . . . . . . . . . . . . . . $6,660 $5,871 $5,302
Cargo. . . . . . . . . . . . . . . . . . 175 154 145
Mail and other . . . . . . . . . . . . . 378 335 378
7,213 6,360 5,825
Operating Expenses:
Wages, salaries and related costs. . . . 1,688 1,452 1,381
Employee incentives. . . . . . . . . . . 126 97 51
Aircraft fuel. . . . . . . . . . . . . . 885 774 681
Commissions. . . . . . . . . . . . . . . 567 510 489
Aircraft rentals . . . . . . . . . . . . 551 509 497
Maintenance, materials and repairs . . . 537 461 429
Other rentals and landing fees . . . . . 395 350 356
Depreciation and amortization. . . . . . 254 254 253
Fleet disposition charge . . . . . . . . - 128 -
Other. . . . . . . . . . . . . . . . . . 1,494 1,300 1,303
6,497 5,835 5,440
Operating Income 716 525 385
Nonoperating Income (Expense):
Interest expense . . . . . . . . . . . . (166) (165) (213)
Interest capitalized . . . . . . . . . . 35 5 6
Interest income. . . . . . . . . . . . . 56 43 31
Gain on System One transactions. . . . . - - 108
Other, net . . . . . . . . . . . . . . . (1) 20 (7)
(76) (97) (75)
Income before Income Taxes, Minority
Interest and Extraordinary Loss. . . . . 640 428 310
Income Tax Provision. . . . . . . . . . . (237) (86) (78)
</TABLE>
(continued on next page)
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Income before Minority Interest
and Extraordinary Loss . . . . . . . . . $ 403 $ 342 $ 232
Minority Interest . . . . . . . . . . . . - (3) (6)
Distributions on Preferred Securities
of Trust, net of applicable income taxes
of $8, $8 and $0, respectively . . . . . (14) (14) (2)
Income before Extraordinary Loss. . . . . 389 325 224
Extraordinary Loss, net of applicable
income taxes of $2 and $4, respectively. (4) (6) -
Net Income. . . . . . . . . . . . . . . . 385 319 224
Preferred Dividend Requirements and
Accretion to Liquidation Value . . . . . (2) (5) (9)
Income Applicable to Common Shares. . . . $ 383 $ 314 $ 215
Earnings per Common Share:
Income before Extraordinary Loss. . . . $ 6.72 $ 5.87 $ 4.07
Extraordinary Loss. . . . . . . . . . . (0.07) (0.12) -
Net Income. . . . . . . . . . . . . . . $ 6.65 $ 5.75 $ 4.07
Earnings per Common Share Assuming
Dilution:
Income before Extraordinary Loss. . . . $ 5.03 $ 4.25 $ 3.37
Extraordinary Loss. . . . . . . . . . . (0.04) (0.08) -
Net Income. . . . . . . . . . . . . . . $ 4.99 $ 4.17 $ 3.37
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
<CAPTION>
December 31, December 31,
ASSETS 1997 1996
<S> <C> <C>
Current Assets:
Cash and cash equivalents, including
restricted cash and cash equivalents
of $15 and $76, respectively. . . . . . $1,025 $1,061
Accounts receivable, net of allowance
for doubtful receivables of $23 and
$27, respectively . . . . . . . . . . . 361 377
Spare parts and supplies, net of
allowance for obsolescence of $51 and
$47, respectively . . . . . . . . . . . 128 111
Deferred income taxes. . . . . . . . . . 111 -
Prepayments and other assets . . . . . . 103 85
Total current assets . . . . . . . . . 1,728 1,634
Property and Equipment:
Owned property and equipment:
Flight equipment. . . . . . . . . . . . 1,636 1,199
Other . . . . . . . . . . . . . . . . . 456 338
2,092 1,537
Less: Accumulated depreciation . . . . 473 370
1,619 1,167
Purchase deposits for flight equipment . 437 154
Capital leases:
Flight equipment. . . . . . . . . . . . 274 396
Other . . . . . . . . . . . . . . . . . 40 31
314 427
Less: Accumulated amortization . . . . 145 152
169 275
Total property and equipment . . . . . 2,225 1,596
Other Assets:
Routes, gates and slots, net of
accumulated amortization
of $270 and $212, respectively. . . . . 1,425 1,473
Reorganization value in excess of
amounts allocable to identifiable
assets, net of accumulated amortization
of $71 and $60, respectively. . . . . . 164 237
Investments. . . . . . . . . . . . . . . 104 134
Other assets, net. . . . . . . . . . . . 184 132
Total other assets . . . . . . . . . . 1,877 1,976
Total Assets . . . . . . . . . . . . $5,830 $5,206
</TABLE>
(continued on next page)
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
<CAPTION>
December 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt . . $ 243 $ 201
Current maturities of capital leases . . 40 60
Accounts payable . . . . . . . . . . . . 781 705
Air traffic liability. . . . . . . . . . 746 661
Accrued payroll and pensions . . . . . . 158 149
Accrued other liabilities. . . . . . . . 317 328
Total current liabilities . . . . . . . 2,285 2,104
Long-Term Debt. . . . . . . . . . . . . . 1,426 1,368
Capital Leases. . . . . . . . . . . . . . 142 256
Deferred Credits and Other Long-Term
Liabilities:
Deferred income taxes. . . . . . . . . . 435 75
Accruals for aircraft retirements and
excess facilities . . . . . . . . . . . 123 188
Other. . . . . . . . . . . . . . . . . . 261 331
Total deferred credits and other
long-term liabilities. . . . . . . . . 819 594
Commitments and Contingencies
Minority Interest . . . . . . . . . . . . - 15
Continental-Obligated Mandatorily
Redeemable Preferred Securities
of Subsidiary Trust Holding Solely
Convertible Subordinated
Debentures (1) . . . . . . . . . . . . . 242 242
Redeemable Preferred Stock. . . . . . . . - 46
Common Stockholders' Equity:
Class A common stock - $.01 par,
50,000,000 shares authorized;
8,379,464 and 9,280,000 shares issued
and outstanding, respectively . . . . . - -
Class B common stock - $.01 par,
200,000,000 shares authorized;
50,512,010 and 47,943,343 shares
issued and outstanding, respectively. . 1 -
Additional paid-in capital . . . . . . . 639 693
Retained earnings (accumulated deficit). 276 (109)
Other. . . . . . . . . . . . . . . . . . - (3)
Total common stockholders' equity . . . 916 581
Total Liabilities and Stockholders'
Equity . . . . . . . . . . . . . . . $5,830 $5,206
</TABLE>
(1) The sole assets of the Trust are convertible subordinated debentures
with an aggregate principal amount of $249 million, which bear
interest at the rate of 8-1/2% per annum and mature on December 1,
2020. Upon repayment, the Continental-Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trust will be
mandatorily redeemed.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Cash Flows From Operating
Activities:
Net income . . . . . . . . . . . . . . . $ 385 $ 319 $224
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization. . . . . 254 254 253
Provision for aircraft and
facilities. . . . . . . . . . . . . . - 128 14
Deferred income taxes. . . . . . . . . 212 72 71
Gain on sale of America West stock
and warrants. . . . . . . . . . . . . - (18) -
Gain on System One transactions. . . . - - (108)
Other, net . . . . . . . . . . . . . . 34 11 27
Changes in operating assets and
liabilities:
Increase in accounts receivable. . . (1) (42) (21)
Increase in spare parts and
supplies. . . . . . . . . . . . . . (38) (43) (8)
Increase in accounts payable . . . . 71 103 48
Increase (decrease) in air traffic
liability . . . . . . . . . . . . . 85 82 (5)
Other. . . . . . . . . . . . . . . . (42) (35) (176)
Net cash provided by operating
activities. . . . . . . . . . . . . . . 960 831 319
Cash Flows from Investing Activities:
Capital expenditures, net of returned
purchase deposits in 1996 and 1995. . . (417) (198) (67)
Purchase deposits paid in connection
with future aircraft deliveries . . . . (409) (116) (15)
Deposits refunded in connection with
aircraft transactions . . . . . . . . . 141 20 97
Other. . . . . . . . . . . . . . . . . . 28 43 60
Net cash provided (used) by
investing activities . . . . . . . . . (657) (251) 75
Cash Flows From Financing Activities:
Net proceeds from issuance of
long-term debt. . . . . . . . . . . . . 517 797 9
Payments on long-term debt and
capital lease obligations . . . . . . . (676) (975) (318)
Net proceeds from issuance of
preferred securities of trust . . . . . - - 242
Purchase of warrants . . . . . . . . . . (94) (50) (14)
Other. . . . . . . . . . . . . . . . . . (25) 30 13
Net cash used by financing activities . (278) (198) (68)
</TABLE>
(continued on next page)
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Net Increase in Cash and
Cash Equivalents . . . . . . . . . . . . $ 25 $ 382 $326
Cash and Cash Equivalents
Beginning of Period (1). . . . . . . . . 985 603 277
Cash and Cash Equivalents
End of Period (1). . . . . . . . . . . . $1,010 $ 985 $603
Supplemental Cash Flows Information:
Interest paid. . . . . . . . . . . . . . $ 156 $ 161 $179
Income taxes paid, net . . . . . . . . . $ 12 $ 4 $ 11
Financing and Investing Activities
Not Affecting Cash:
Capital lease obligations incurred. . . $ 22 $ 32 $ 10
Property and equipment acquired
through the issuance of debt . . . . . $ 207 $ 119 $ 92
Reduction of capital lease
obligations in connection with
refinanced aircraft. . . . . . . . . . $ 97 $ - $ -
Investment in AMADEUS acquired in con-
nection with System One transactions . $ - $ - $120
Issuance of convertible secured
debentures in connection with the
aircraft settlements . . . . . . . . . $ - $ - $158
</TABLE>
(1) Excludes restricted cash of $15 million, $76 million, $144 million
and $119 million at December 31, 1997, 1996, 1995 and 1994,
respectively.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
STOCK AND COMMON STOCKHOLDERS' EQUITY
(In millions)
<CAPTION>
Retained
Redeemable Additional Earnings
Preferred Paid-In (Accumulated
Stock Capital Deficit) Other
<S> <C> <C> <C> <C>
Balance, December 31, 1994 . . . . . . . . $ 53 $ 778 $ (652) $(23)
Net Income . . . . . . . . . . . . . . . . - - 224 -
Purchase of Warrants . . . . . . . . . . . - (51) - -
Accumulated Dividends:
8% Cumulative Redeemable Preferred
Stock. . . . . . . . . . . . . . . . . . 2 (2) - -
12% Cumulative Redeemable Preferred
Stock. . . . . . . . . . . . . . . . . . 2 (2) - -
Series A 12% Cumulative Preferred Stock . 2 (2) - -
Issuance of Note in Exchange for
Series A 8% Cumulative Preferred Stock. . (18) (3) - -
Additional Minimum Pension Liability . . . - - - (1)
Unrealized Gain on Marketable Equity
Securities. . . . . . . . . . . . . . . . - - - 20
Other. . . . . . . . . . . . . . . . . . . - 15 - 4
Balance, December 31, 1995 . . . . . . . . 41 733 (428) -
Net Income . . . . . . . . . . . . . . . . - - 319 -
Purchase of Warrants . . . . . . . . . . . - (50) - -
Accumulated Dividends:
Series A 12% Cumulative Preferred Stock . 5 (5) - -
Additional Minimum Pension Liability . . . - - - 6
Unrealized Gain on Marketable Equity
Securities, net . . . . . . . . . . . . . - - - 4
Sale of America West Stock and Warrants. . - - - (18)
Other. . . . . . . . . . . . . . . . . . . - 15 - 5
Balance, December 31, 1996 . . . . . . . . 46 693 (109) (3)
(continued on next page)
</TABLE>
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
STOCK AND COMMON STOCKHOLDERS' EQUITY
(In millions)
<CAPTION>
Retained
Redeemable Additional Earnings
Preferred Paid-In (Accumulated
Stock Capital Deficit) Other
<S> <C> <C> <C> <C>
Net Income . . . . . . . . . . . . . . . . $ - $ - $ 385 $ -
Purchase of Warrants . . . . . . . . . . . - (94) - -
Accumulated Dividends on Series A 12%
Cumulative Preferred Stock. . . . . . . . 2 (2) - -
Redemption of Series A 12% Cumulative
Preferred Stock . . . . . . . . . . . . . (48) - - -
Additional Minimum Pension Liability . . . - - - (4)
Other. . . . . . . . . . . . . . . . . . . - 42 - 7
Balance, December 31, 1997 . . . . . . . . $ - $ 639 $ 276 $ -
</TABLE>
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
STOCK AND COMMON STOCKHOLDERS' EQUITY
NUMBER OF SHARES
<CAPTION>
Redeemable Class A Class B
Preferred Common Common Treasury
Stock Stock Stock Stock
<S> <C> <C> <C> <C>
Balance, December 31, 1994 . . . . . . . 471,000 12,602,112 40,747,024 60,000
Cancellation of 8% and 12% Cumulative
Redeemable Preferred Stock. . . . . . . (471,000) - - -
Issuance of Series A 8% and 12%
Cumulative Preferred Stock. . . . . . . 589,142 - - -
Issuance of Note in Exchange for
Series A 8% Cumulative Preferred
Stock . . . . . . . . . . . . . . . . . (202,784) - - -
Forfeiture of Restricted Class B
Common Stock. . . . . . . . . . . . . . - - (55,000) 55,000
Reissuance of Treasury Stock . . . . . . - - 115,000 (115,000)
Preferred Stock In-kind Dividend . . . . 11,590 - - -
Issuance of Common Stock pursuant to
Stock Plans and Awards. . . . . . . . . - - 863,978 -
Other. . . . . . . . . . . . . . . . . . - - 1,185,546 -
Balance, December 31, 1995 . . . . . . . 397,948 12,602,112 42,856,548 -
Conversion of Class A to Class B
Common Stock by Air Canada. . . . . . . - (3,322,112) 3,322,112 -
Forfeiture of Restricted Class B
Common Stock. . . . . . . . . . . . . . - - (60,000) 60,000
Purchase of Common Stock . . . . . . . . - - (133,826) 133,826
Reissuance of Treasury Stock . . . . . . - - 193,826 (193,826)
Preferred Stock In-kind Dividend . . . . 49,134 - - -
Issuance of Common Stock pursuant to
Stock Plans and Awards. . . . . . . . . - - 1,764,683 -
Balance, December 31, 1996 . . . . . . . 447,082 9,280,000 47,943,343 -
(continued on next page)
</TABLE>
<PAGE>
<TABLE>
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
STOCK AND COMMON STOCKHOLDERS' EQUITY
NUMBER OF SHARES
<CAPTION>
Redeemable Class A Class B
Preferred Common Common Treasury
Stock Stock Stock Stock
<S> <C> <C> <C> <C>
Conversion of Class A to Class B
Common Stock. . . . . . . . . . . . . . - (900,536) 900,536 -
Purchase of Common Stock . . . . . . . . - - (154,882) 154,882
Reissuance of Treasury Stock pursuant
to Stock Plans. . . . . . . . . . . . . - - 154,882 (154,882)
Issuance of Preferred Stock Dividends
on Series A 12% Cumulative Preferred
Stock . . . . . . . . . . . . . . . . . 13,165 - - -
Redemption of Series A 12% Cumulative
Preferred Stock . . . . . . . . . . . . (460,247) - - -
Issuance of Common Stock pursuant to
Stock Plans . . . . . . . . . . . . . . - - 1,646,419 -
Conversion of Trust Originated
Preferred Securities into
Common Stock. . . . . . . . . . . . . . - - 21,712 -
Balance, December 31, 1997 . . . . . . . - 8,379,464 50,512,010 -
</TABLE>
<PAGE>
CONTINENTAL AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continental Airlines, Inc. (the "Company" or "Continental") is a
major United States air carrier engaged in the business of
transporting passengers, cargo and mail. Continental is the fifth
largest United States airline (as measured by 1997 revenue
passenger miles) and, together with its wholly owned subsidiaries,
Continental Express, Inc. ("Express"), and Continental Micronesia,
Inc. ("CMI"), each a Delaware corporation, serves 191 airports
worldwide. Continental flies to 125 domestic and 66 international
destinations and offers additional connecting service through
alliances with domestic and foreign carriers. Continental directly
serves 10 European cities and is one of the leading airlines
providing service to Mexico and Central America, serving more
destinations there than any other United States airline.
Continental currently flies to seven cities in South America.
Through its Guam hub, CMI provides extensive service in the western
Pacific, including service to more Japanese cities than any other
United States carrier.
As used in these Notes to Consolidated Financial Statements, the
terms "Continental" and "Company" refer to Continental Airlines,
Inc. and, unless the context indicates otherwise, its subsidiaries.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation -
The consolidated financial statements of the Company include
the accounts of Continental and its operating subsidiaries,
Express, CMI, and prior to April 27, 1995, System One
Information Management, Inc. ("System One"). See Note 11.
All significant intercompany transactions have been eliminated
in consolidation.
(b) Use of Estimates -
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
(c) 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 a maturity of three months or less when
purchased. Approximately $15 million and $76 million of cash
and cash equivalents at December 31, 1997 and 1996,
respectively, were held in restricted arrangements relating
primarily to payments for workers' compensation claims and in
accordance with the terms of certain other agreements.
(d) Spare Parts and Supplies -
Flight equipment expendable parts and supplies 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.
(e) Property and Equipment -
Property and equipment were recorded at fair market values as
of April 27, 1993; subsequent purchases were recorded at cost
and are depreciated to estimated residual values (10% of cost)
over their estimated useful lives using the straight-line
method. Estimated useful lives for such assets are 25 years
and 18 years from the date of manufacture for all owned jet
and turboprop aircraft, respectively; up to 25 years,
depending on the lease period, for aircraft acquired under
long-term capital leases; and two to 25 years for other
property and equipment, including airport facility
improvements.
(f) Intangible Assets -
Routes, Gates and Slots
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, 1997 at December 31, 1997
<S> <C> <C>
Routes. . . . $ 892 $115
Gates . . . . 407 115
Slots . . . . 126 40
$1,425 $270
</TABLE>
<PAGE>
Reorganization Value In Excess of Amounts Allocable to
Identifiable Assets
Reorganization value in excess of amounts allocable to
identifiable assets, arising from Continental's emergence from
bankruptcy reorganization in 1993, is amortized on a straight-
line basis over 20 years. The carrying value of this
intangible asset is reviewed if the facts and circumstances
suggest it may be impaired. If this review indicates that
this intangible asset will not be recoverable, as determined
based on the undiscounted cash flows over the remaining
amortization periods, the carrying value is reduced by the
estimated shortfall of cash flows.
(g) Air Traffic Liability -
Passenger revenue is 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.
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, awards redeemed
and changes in the OnePass program.
The Company also sells mileage credits to participating
partners in the OnePass program, such as hotels, car rental
agencies and credit card companies. The resulting revenue,
net of the estimated incremental cost of the credits sold, is
recorded as other operating revenue in the accompanying
Consolidated Statements of Operations during the period in
which the credits are sold.
(h) 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
assets in the accompanying Consolidated Balance Sheets.
<PAGE>
(i) Deferred Income Taxes -
Deferred income taxes are provided under the liability method
and reflect the net tax effects of temporary differences
between the tax basis of assets and liabilities and their
reported amounts in the financial statements.
(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) Advertising Costs -
The Company expenses the costs of advertising as incurred.
Advertising expense was $98 million, $76 million and $94
million for the years ended December 31, 1997, 1996 and 1995,
respectively.
(l) Stock Plans and Awards -
Continental has elected to follow Accounting Principles Board
Opinion No. 25 - "Accounting for Stock Issued to Employees"
("APB 25") in accounting for its employee stock options and
its stock purchase plans because the alternative fair value
accounting provided for under Statement of Financial
Accounting Standards No. 123 - "Accounting for Stock-Based
Compensation" ("SFAS 123") requires use of option valuation
models that were not developed for use in valuing employee
stock options or purchase rights. Under APB 25, since the
exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant,
no compensation expense is recognized. Furthermore, under APB
25, since the stock purchase plans are considered
noncompensatory plans, no compensation expense is recognized.
(m) Recently Issued Accounting Standards -
In June 1997, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards No.
130 - "Reporting Comprehensive Income" ("SFAS 130") and
Statement of Financial Accounting Standards No. 131 -
"Disclosure About Segments of an Enterprise and Related
Information" ("SFAS 131"). Both SFAS 130 and SFAS 131 are
effective for Continental beginning in the first quarter of
1998.
SFAS 130 establishes standards for the reporting and display
of comprehensive income and its components in a full set of
financial statements. Comprehensive income is defined as the
change in equity during a period from transactions and other
events and circumstances from non-owner sources. Upon
adopting the new standard, Continental will report and display
comprehensive income which includes net income plus non-owner
changes in equity such as the minimum pension liability and
unrealized gains or losses on investments in marketable equity
securities.
SFAS 131 changes the way segment information is presented from
an industry segment approach to a management approach. Under
the management approach, segments are determined based on the
operations regularly reviewed by the chief operating decision
maker to make decisions about resources to be allocated to the
segment and assess its performance. The Company believes that
it will report only one segment and certain additional
geographic disclosures.
In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 132 -
"Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS 132") that revises the
disclosure requirements of Statement of Financial Accounting
Standards No. 87 - "Employers' Accounting for Pensions") and
Statement of Financial Accounting Standards No. 106 -
"Employers' Accounting for Postretirement Benefits Other than
Pensions". The Company will adopt SFAS 132 in 1998. SFAS 132
is not expected to have an impact on the Company's results of
operations or financial position.
(n) Block Space Arrangements -
Continental has entered into block space arrangements with
certain other carriers whereby one or both of the carriers is
obligated to purchase capacity on the other carrier. To the
extent the other carrier is financially committed to purchase
such capacity on Continental's flights, such payments to
Continental by the other carrier are recorded as a reduction
in the respective operating expenses in the accompanying
Consolidated Statements of Operations. During 1997,
Continental recorded a reduction of approximately $43 million
of such operating expenses. To the extent that Continental is
financially committed to purchase capacity on other carriers,
such payments to other carriers are recorded as a reduction in
other revenue. No such payments were made in 1997. See Note
13.
(o) Reclassifications -
Certain reclassifications have been made in the prior years'
financial statements to conform to the current year
presentation.
<PAGE>
NOTE 2 - EARNINGS PER SHARE
In the fourth quarter of 1997, the Company adopted the FASB's
Statement of Financial Accounting Standards No. 128 - "Earnings per
Share" ("SFAS 128") which specifies the computation, presentation
and disclosure requirements for earnings per common share ("EPS").
SFAS 128 replaces the presentation of primary and fully diluted EPS
pursuant to Accounting Principles Board Opinion No. 15 - "Earnings
per Share" with the presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
obligations to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then
shared in the earnings of the entity. All prior-period EPS data
have been retroactively restated and reflect the application of
SFAS 128.
<PAGE>
The following table sets forth the computation of basic and diluted
earnings per share (in millions, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Numerator:
Income before extraordinary loss. . $389 $325 $224
Extraordinary loss, net of
applicable income taxes. . . . . . (4) (6) -
Net income. . . . . . . . . . . . . 385 319 224
Preferred stock dividends . . . . . (2) (5) (9)
Numerator for basic earnings per
share - income available to
common stockholders. . . . . . . . 383 314 215
Effect of dilutive securities:
Series A convertible debentures. . - 1 4
Preferred Securities of Trust. . . 14 15 2
6-3/4% convertible subordinated
notes . . . . . . . . . . . . . . 11 8 -
25 24 6
Other . . . . . . . . . . . . . . . (4) (3) (1)
Numerator for diluted earnings
per share - income available to
common stockholders after
assumed conversions . . . . . . . $404 $335 $220
Denominator:
Denominator for basic earnings per
share - weighted-average shares. . 57.6 54.6 52.8
Effect of dilutive securities:
Employee stock options . . . . . . 1.6 2.2 1.3
Warrants . . . . . . . . . . . . . 3.5 5.9 3.6
Restricted Class B common stock. . 0.4 0.8 0.7
Preferred Securities of Trust. . . 10.3 10.3 0.9
6-3/4% convertible subordinated
notes . . . . . . . . . . . . . . 7.6 5.8 -
Series A convertible debentures. . - 0.7 5.9
Dilutive potential common shares. . 23.4 25.7 12.4
Denominator for diluted earnings
per share - adjusted weighted-
average and assumed conversions . 81.0 80.3 65.2
</TABLE>
<PAGE>
Warrants to purchase 11,120,002 weighted average shares of the
Company's Class B common stock, par value $.01 per share ("Class B
common stock") were not included in the computation of diluted
earnings per share in 1995 because the warrants' exercise price was
greater than the average market price of the common shares and,
therefore, the effect would have been antidilutive.
NOTE 3 - LONG-TERM DEBT
Long-term debt as of December 31 is summarized as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Secured
Notes payable, interest rates of 5.84% to
9.97%, payable through 2019 . . . . . . . . $ 325 $ 218
Credit facility, floating interest rate of
LIBOR or Eurodollar plus 1.125%,
payable through 2002. . . . . . . . . . . . 275 -
Floating rate notes, interest rates of
Prime plus .5% to .75%, LIBOR plus
.75% to 3.75% or Eurodollar plus .75%
to 1.0%, payable through 2006 . . . . . . . 204 187
Revolving credit facility, floating interest
rates of LIBOR or Eurodollar plus 1.125%,
payable through 1999. . . . . . . . . . . . 160 -
Notes payable, interest rates of 7.13% to
7.15% payable through 1999 and floating
rates thereafter of LIBOR plus 2%,
payable through 2011. . . . . . . . . . . . 91 97
Floating rate note, interest rate of
LIBOR or Eurodollar plus 1.375%,
payable through 2004. . . . . . . . . . . . 75 -
Notes payable, interest rates of 10.0% to
14.00%, payable through 2005. . . . . . . . 54 178
Floating rate notes, interest rates of
Eurodollar plus 1.75% to 2.0% or Prime
plus 0.75% to 1.0% payable through 2003 . . - 320
Other. . . . . . . . . . . . . . . . . . . . 2 4
<PAGE>
Unsecured
Senior notes payable, interest rate of
9.5%, payable through 2001. . . . . . . . . $ 250 $ 250
Convertible subordinated notes, interest
rate of 6.75%, payable through 2006 . . . . 230 230
Notes payable, interest rates of 8.38% to
12%, payable through 2001 . . . . . . . . . 2 78
Other. . . . . . . . . . . . . . . . . . . . 1 7
1,669 1,569
Less: current maturities. . . . . . . . . . 243 201
Total. . . . . . . . . . . . . . . . . . . . $1,426 $1,368
</TABLE>
As of December 31, 1997 and 1996, the Prime, LIBOR and Eurodollar
rates associated with Continental's indebtedness approximated 8.5%
and 8.3%, 5.8% and 5.6%, 5.8% and 5.6%, respectively.
A majority of Continental's property and equipment is subject to
agreements securing indebtedness of Continental.
In July 1997, Continental entered into a $575 million credit
facility (the "Credit Facility"), including a $275 million term
loan, the proceeds of which were loaned to CMI to repay its
existing $320 million secured term loan. In connection with this
prepayment, Continental recorded a $4 million after tax
extraordinary loss relating to early extinguishment of debt. The
Credit Facility also includes a $225 million revolving credit
facility with a commitment fee of 0.25% per annum on the unused
portion, and a $75 million term loan commitment with a current
floating interest rate of Libor plus 1.375%. At December 31, 1997,
no borrowings were outstanding under the $225 million revolving
credit facility.
The Credit Facility is secured by substantially all of CMI's assets
(other than aircraft subject to other financing arrangements) but
does not contain any financial covenants relating to CMI other than
covenants restricting CMI's incurrence of certain indebtedness and
pledge or sale of assets. In addition, the Credit Facility
contains certain financial covenants applicable to Continental and
prohibits Continental from granting a security interest on certain
of its international route authorities and domestic slots.
In April 1997, Continental entered into a $160 million floating
rate secured revolving credit facility (the "Facility"). The
revolving loans made under the Facility are used to make certain
predelivery payments to The Boeing Company ("Boeing") for new
Boeing aircraft to be delivered through December 1999. As of
December 31, 1997, the Facility had been fully drawn.
At December 31, 1997, under the most restrictive provisions of the
Company's debt and credit facility agreements, the Company had a
minimum cash balance requirement of $600 million, a minimum net
worth requirement of $613 million and was restricted from paying
cash dividends in excess of $350 million.
In March 1996, the Company issued $230 million of 6-3/4%
Convertible Subordinated Notes (the "Notes"). The Notes are
convertible into shares of Class B common stock prior to their
maturity date, April 15, 2006, at a conversion price of $30.20 per
share. The Notes are redeemable at the option of the Company on or
after April 15, 1999, at specified redemption prices.
Maturities of long-term debt due over the next five years are as
follows (in millions):
Year ending December 31,
1998. . . . . . . . . . . . . . . . . . $243
1999. . . . . . . . . . . . . . . . . . 159
2000. . . . . . . . . . . . . . . . . . 152
2001. . . . . . . . . . . . . . . . . . 394
2002. . . . . . . . . . . . . . . . . . 170
NOTE 4 - 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, 1997, 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 ending December 31,
1998. . . . . . . . . . . . . . . . . . $ 55 $ 658
1999. . . . . . . . . . . . . . . . . . 52 593
2000. . . . . . . . . . . . . . . . . . 41 582
2001. . . . . . . . . . . . . . . . . . 41 564
2002. . . . . . . . . . . . . . . . . . 15 482
Later years . . . . . . . . . . . . . . 26 3,007
Total minimum lease payments . . . . . . . . 230 $5,886
Less: amount representing interest. . . . . 48
Present value of capital leases. . . . . . . 182
Less: current maturities of capital
leases. . . . . . . . . . . . . . . . . . . 40
Long-term capital leases . . . . . . . . . . $142
</TABLE>
Not included in the above operating lease table is $236 million in
annual minimum lease payments relating to non-aircraft leases,
principally airport and terminal facilities and related equipment.
Continental is the guarantor of $325 million aggregate principal
amount of tax-exempt special facilities revenue bonds. These
bonds, issued by various airport municipalities, are payable solely
from rentals paid by Continental under long-term agreements with
the respective governing bodies.
The Company's total rental expense for all operating leases, net of
sublease rentals, was $787 million, $719 million and $720 million
in 1997, 1996 and 1995, respectively.
During 1997, the Company acquired 10 aircraft previously leased by
it. Aircraft maintenance expense in the second quarter of 1997 was
reduced by approximately $16 million due to the reversal of
reserves that are no longer required as a result of the
transaction.
NOTE 5 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
As part of the Company's risk management program, Continental uses
or used a variety of financial instruments, including petroleum
call options, foreign currency average rate options, and interest
rate swap and interest rate cap agreements. The Company does not
hold or issue derivative financial instruments for trading
purposes.
Notional Amounts and Credit Exposure of Derivatives
The notional amounts of derivative financial instruments summarized
below do not represent amounts exchanged between parties and,
therefore, are not a measure of the Company's exposure resulting
from its use of derivatives. The amounts exchanged are calculated
based upon the notional amounts as well as other terms of the
instruments, which relate to interest rates, exchange rates and
other indices.
The Company is exposed to credit losses in the event of non-
performance by counterparties to these financial instruments, but
it does not expect any of the counterparties to fail to meet its
obligations. To manage credit risks, the Company selects
counterparties based on credit ratings, limits its exposure to a
single counterparty under defined guidelines, and monitors the
market position with each counterparty.
Fuel Price Risk Management
The Company has entered into petroleum call option contracts to
provide some short-term protection against a sharp increase in jet
fuel prices. The petroleum call option contracts generally cover
the Company's forecasted jet fuel needs for three to six months.
Gains, if any, on these option contracts are recognized as a
component of fuel expense when the underlying fuel being hedged is
used (deferral method). At December 31, 1997, the Company had
petroleum call option contracts outstanding with an aggregate
notional amount of $200 million. The fair value of the Company's
call option contracts at December 31, 1997, representing the amount
the Company would receive if the option contracts were closed, was
immaterial. During the year ended December 31, 1996, the Company
recognized gains of approximately $65 million under this risk
reduction strategy.
Foreign Currency Exchange Risk Management
CMI purchases foreign currency average rate option contracts that
effectively enable it to sell Japanese yen expected to be received
from yen-denominated ticket sales over the next nine to twelve
months at specified dollar amounts. The option contracts have only
nominal intrinsic value at the time of purchase. These contracts
are designated and effective as hedges of probable monthly yen-
denominated sales transactions, which otherwise would expose the
Company to foreign currency risk. Gains, if any, on these average
rate option contracts are deferred and recognized as a component of
passenger revenue when the related sale is recognized (deferral
method). At December 31, 1997, CMI had average rate option
contracts outstanding with a notional value of $266 million; the
related fair value, representing the amount CMI would receive to
terminate the agreements, was immaterial. During the year ended
December 31, 1997, the Company recognized gains of approximately
$10 million under these option contracts.
Interest Rate Risk Management
The Company entered into an interest rate cap agreement to reduce
the impact of potential increases in interest rates on a floating
rate bank financing. The interest rate cap agreement has a
notional value of $142 million and is effective through July 31,
2001. The interest rate cap limits the amount of potential
increase in the Eurodollar or Prime rate component of the floating
rate to a maximum of 9% over the term of the contract. The fair
value is immaterial. Payments to be received as a result of the
cap agreement are accrued as a reduction in interest expense
(accrual method).
Fair Value of Other Financial Instruments
(a) Cash equivalents -
Cash equivalents consist primarily of commercial paper with
original maturities of three months or less and approximate
fair value due to their short maturity.
(b) Investment in Equity Securities -
Continental's investment in America West Holdings Corporation
("America West") is classified as available-for-sale and
carried at an aggregate market value of $9 million and
$8 million at December 31, 1997 and 1996, respectively.
Included in stockholders' equity at December 31, 1997 and 1996
is a net unrealized gain of $4 million.
Since a readily determinable market value does not exist for
the Company's investment in AMADEUS (see Note 11), the
investment is carried at cost.
(c) Debt -
The fair value of the Company's debt with a carrying value of
$1.49 billion and $1.36 billion as of December 31, 1997 and
1996, respectively, estimated based on the discounted amount
of future cash flows using the current incremental rate of
borrowing for a similar liability or market prices,
approximates $1.47 billion and $1.37 billion, respectively.
The fair value of the remaining debt (with a carrying value of
$179 million and $209 million, respectively, and primarily
relating to aircraft modification notes and various loans with
immaterial balances) was not practicable to estimate due to
the large number and small dollar amounts of these notes.
(d) Preferred Securities of Trust -
As of December 31, 1997, the fair value of Continental's 8-
1/2% Convertible Trust Originated Preferred Securities
("TOPrS") (with a carrying value of $242 million), estimated
based on market prices, approximates $514 million. The
carrying value of the TOPrS was $242 million and the fair
value approximated $332 million as of December 31, 1996. See
Note 6.
NOTE 6 - PREFERRED SECURITIES OF TRUST
Continental Airlines Finance Trust, a Delaware statutory business
trust (the "Trust") with respect to which the Company owns all of
the common trust securities, had 4,986,500 and 4,997,000 8-1/2%
TOPrS outstanding at December 31, 1997 and 1996, respectively. The
TOPrS have a liquidation value of $50 per preferred security and
are convertible at any time at the option of the holder into shares
of Class B common stock at a conversion rate of 2.068 shares of
Class B common stock for each preferred security (equivalent to
$24.18 per share of Class B common stock), subject to adjustment in
certain circumstances. Distributions on the preferred securities
are payable by the Trust at the annual rate of 8-1/2% of the
liquidation value of $50 per preferred security and are included in
Distributions on Preferred Securities of Trust in the accompanying
Consolidated Statements of Operations. The proceeds of the private
placement, which totaled $242 million (net of $8 million of
underwriting commissions and expense) are included in Continental-
Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trust Holding Solely Convertible Subordinated Debentures in the
accompanying Consolidated Balance Sheets.
The sole assets of the trust are 8-1/2% Convertible Subordinated
Deferrable Interest Debentures ("Convertible Subordinated
Debentures") with an aggregate principal amount of $249 million
issued by the Company and which mature on December 1, 2020. The
Convertible Subordinated Debentures are redeemable by Continental,
in whole or in part, on or after December 1, 1998 at designated
redemption prices. If Continental redeems the Convertible
Subordinated Debentures, the Trust must redeem the TOPrS on a pro
rata basis having an aggregate liquidation value equal to the
aggregate principal amount of the Convertible Subordinated
Debentures redeemed. Otherwise, the TOPrS will be redeemed upon
maturity of the Convertible Subordinated Debentures, unless
previously converted.
Taking into consideration the Company's obligations under (i) the
Preferred Securities Guarantee relating to the TOPrS, (ii) the
Indenture relating to the Convertible Subordinated Debentures to
pay all debts and obligations and all costs and expenses of the
Trust (other than U.S. withholding taxes) and (iii) the Indenture,
the Declaration relating to the TOPrS and the Convertible
Subordinated Debentures, Continental has fully and unconditionally
guaranteed payment of (i) the distributions on the TOPrS, (ii) the
amount payable upon redemption of the TOPrS, and (iii) the
liquidation amount of the TOPrS.
The Convertible Subordinated Debentures and related income
statement effects are eliminated in the Company's consolidated
financial statements.
NOTE 7 - REDEEMABLE PREFERRED, PREFERRED AND COMMON STOCK
Redeemable Preferred and Preferred Stock
During the years ended December 31, 1997 and 1996, the Company's
board of directors declared and issued 13,165 and 49,134 additional
shares, respectively, of Series A 12% Cumulative Preferred Stock
("Series A 12% Preferred") in lieu of cash dividends. In April
1997, Continental redeemed for cash all of the 460,247 shares of
its Series A 12% Preferred then outstanding for $100 per share plus
accrued dividends thereon. The redemption price, including accrued
dividends, totaled $48 million.
Redeemable preferred stock consisted of 1,000,000 authorized shares
of Series A 12% Preferred with 447,082 shares issued and
outstanding at December 31, 1996.
Continental has 10 million shares of authorized preferred stock,
none of which were outstanding as of December 31, 1997 or 1996.
<PAGE>
Common Stock
Continental has two classes of common stock issued and outstanding,
Class A common stock, par value $.01 per share ("Class A common
stock") and Class B common stock. Holders of shares of Class A
common stock and Class B common stock are entitled to receive
dividends when and if declared by the Company's board of directors.
Each share of Class A common stock is entitled to 10 votes per
share and each share of Class B common stock is entitled to one
vote per share. In addition, Continental has authorized 50 million
shares of Class D common stock, par value $.01 per share, none of
which were outstanding.
The Company's Certificate of Incorporation permits shares of the
Company's Class A common stock to be converted into an equal number
of shares of Class B common stock. During 1997 and 1996, 900,536
and 3,322,112 shares of the Company's Class A common stock,
respectively, were so converted.
Warrants
As of December 31, 1997, the Company had outstanding 3,039,468
Class A Warrants and 308,343 Class B Warrants (collectively, the
"Warrants"). As of such date, all of the Class A Warrants were
held by Air Partners, L.P. ("Air Partners"), and all of the Class
B Warrants were held by a limited partner of Air Partners. The
Warrants entitle the holder to purchase one share of Class A common
stock or Class B common stock as follows: (i) 2,298,134 Class A
Warrants and 186,134 Class B Warrants have an exercise price of
$7.50 per share, and (ii) 741,334 Class A Warrants and 122,209
Class B Warrants have an exercise price of $15 per share. The
Warrants expire on April 27, 1998.
On June 2, 1997, the Company purchased for $94 million from Air
Partners warrants to purchase 3,842,542 shares of Class B common
stock (representing a portion of the total warrants held by Air
Partners). The purchase price represented the intrinsic value of
the warrants (the difference between the closing market price of
the Class B common stock on May 28, 1997 ($34.25) and the
applicable exercise price).
On November 21, 1996, Air Partners exercised its right to sell to
the Company, and the Company subsequently purchased, for $50
million, Warrants to purchase 2,614,379 shares of Class B common
stock (representing a portion of the total Warrants held by Air
Partners) pursuant to an agreement entered into earlier in 1996
with the Company.
On September 29, 1995, Continental purchased 2,735,760 Class A
Warrants and 9,699,510 Class B Warrants for an aggregate purchase
price of $56 million (including a waiver fee of $5 million paid to
a major creditor of the Company).
NOTE 8 - STOCK PLANS AND AWARDS
Stock Options
On May 16, 1997, the stockholders of the Company approved the
Continental Airlines, Inc. 1997 Stock Incentive Plan, as amended
(the "97 Incentive Plan") under which the Company may grant options
to purchase shares of Class B common stock to non-employee
directors of the Company and employees of the Company or its
subsidiaries. Subject to adjustment as provided in the 97
Incentive Plan, the aggregate number of shares of Class B common
stock that may be issued under the 97 Incentive Plan may not exceed
2,000,000 shares, which may be originally issued or treasury shares
or a combination thereof. The maximum number of shares of Class B
common stock that may be subject to options granted to any one
individual during any calendar year may not exceed 200,000 shares
(subject to adjustment as provided in the 97 Incentive Plan). The
total shares remaining available for grant under the 97 Incentive
Plan at December 31, 1997 was 604,000. Stock options granted under
the 97 Incentive Plan generally vest over a period of three years
and have a term of five years.
Under the Continental Airlines, Inc. 1994 Incentive Equity Plan, as
amended (the "94 Incentive Plan"), key officers and employees of
the Company and its subsidiaries received stock options and/or
restricted stock. The 94 Incentive Plan also provided for each
outside director to receive on the day following the annual
stockholders' meeting options to purchase 5,000 shares of Class B
common stock. The maximum number of shares of Class B common stock
that may be issued under the 94 Incentive Plan will not in the
aggregate exceed 9,000,000. The total remaining shares available
for grant under the 94 Incentive Plan at December 31, 1997 was
141,671. In 1995, the 94 Incentive Plan was amended to provide for
the exchange and repricing of substantially all the outstanding
stock options for new options bearing a shorter exercise term and
generally exercisable at a price lower than that of the cancelled
options, subject to certain conditions. The exercise price for the
repriced options equaled the market value per share on the date of
grant ($8.00). As a result of the repricing, stock options
generally vest over a period of three years and have a term of five
years.
Under the terms of the 97 and 94 Incentive Plans, a change of
control would result in all outstanding options under these plans
becoming exercisable in full and restrictions on restricted shares
being terminated (see Note 17).
The table on the following page summarizes stock option
transactions pursuant to the Company's 94 and 97 Incentive Plans
(share data in thousands):
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
Beginning of
Year. . . . . . 5,809 $17.37 4,769 $ 8.41 3,443 $10.19
Granted* . . . . 1,968 $29.34 3,307 $25.07 4,322 $ 8.43
Exercised . . . (1,582) $11.72 (1,747) $ 8.23 (361) $ 9.25
Cancelled. . . . (195) $22.49 (520) $14.83 (2,635) $10.58
Outstanding at
End of Year . . 6,000 $22.62 5,809 $17.37 4,769 $ 8.41
Options
exercisable
at end of
year. . . . . . 1,235 - 656 - 1,079 -
*The option price for all stock options is equal to 100% of the fair market value at the date
of grant.
Options granted during 1995 include the grant of repriced options; options cancelled during
1995 include the cancellation of the higher priced options.
</TABLE>
<PAGE>
The following tables summarize the range of exercise prices and the
weighted average remaining contractual life of the options
outstanding and the range of exercise prices for the options
exercisable at December 31, 1997 (share data in thousands):
<TABLE>
<CAPTION>
Options Outstanding
Weighted
Average
Remaining
Range of Contractual Weighted Average
Exercise Prices Outstanding Life Exercise Price
<S> <C> <C> <C>
$3.88-$8.00 1,178 3.10 $7.54
$8.19-$22.38 389 3.91 $16.59
$22.56-$23.00 1,328 3.12 $22.99
$23.25-$27.88 467 3.82 $25.63
$27.94-$48.88 2,638 4.08 $29.53
$3.88-$48.88 6,000 3.64 $22.62
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
Range of Weighted Average
Exercise Prices Exercisable Exercise Price
<S> <C> <C>
$3.88-$8.00 287 $ 7.63
$8.19-$22.38 186 $16.55
$22.56-$23.00 359 $22.99
$23.25-$27.88 77 $25.05
$27.94-$48.88 326 $30.53
$3.88-$48.88 1,235 $20.57
</TABLE>
Restricted Stock
The 97 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. In connection with the plan, 100,000 shares have been
authorized for issuance as restricted stock (subject to adjustment
as provided in the 97 Incentive Plan). As of December 31, 1997, no
awards of restricted stock had been made.
The 94 Incentive Plan also permitted 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. In connection with the plan, 600,000 shares were
authorized for issuance as restricted stock. As of December 31,
1997, 35,000 shares were available for grant as restricted stock.
<PAGE>
Additionally, on March 4, 1994, the Board approved a one-time grant
of 2,014,000 shares of restricted stock to substantially all
employees at or below the manager level. These shares were issued
at no cost to the employees and vest in 25 percent increments on
each of January 2, 1995, 1996, 1997 and 1998.
Employee Stock Purchase Plans
On May 16, 1997, the stockholders of the Company approved the
Continental Airlines, Inc. 1997 Employee Stock Purchase Plan (the
"97 Stock Purchase Plan"). Under the 97 Stock Purchase Plan, all
employees of the Company, including CMI and Express, may purchase
shares of Class B common stock of the Company at 85% of the lower
of the fair market value on the first day of the option period or
the last day of the option period. Subject to adjustment, a
maximum of 1,750,000 shares of Class B common stock are authorized
for issuance under the 97 Stock Purchase Plan. During 1997,
148,186 shares of Class B common stock were issued at prices
ranging from $23.38 to $29.33.
Under the Continental Airlines, Inc. 1994 Employee Stock Purchase
Plan, as amended (the "94 Stock Purchase Plan"), which terminated
on December 31, 1996, substantially all employees of the Company
could purchase shares of Class B common stock at 85% of the lower
of the fair market value on the first or last business day of a
calendar quarter. Subject to adjustment, a maximum of
8,000,000 shares of Class B common stock were authorized for
purchase under the 94 Stock Purchase Plan. During 1997, 70,706
shares were issued at a price of $19.55 per share that related to
contributions made in the fourth quarter of 1996. During 1996 and
1995, 191,809 and 518,428 shares, respectively, of Class B common
stock were issued at prices ranging from $15.81 to $23.96 in 1996
and $4.31 to $10.63 in 1995 in connection with the 94 Stock
Purchase Plan.
Pro Forma SFAS 123 Results
Pro forma information regarding net income and earnings per share
has been determined as if the Company had accounted for its
employee stock options and purchase rights under the fair value
method of SFAS 123. The fair value for these options was estimated
at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions for 1997, 1996 and
1995, respectively: risk-free interest rates of 6.1%, 5.8% and
6.2%; dividend yields of 0%; volatility factors of the expected
market price of the Company's common stock of 34% for 1997 and 39%
for 1996 and 1995; and a weighted-average expected life of the
option of 2.5 years, 2.6 years and 2.3 years. The weighted average
fair value of the stock options granted in 1997, 1996 and 1995 was
$7.87, $7.55 and $2.35, respectively. The fair value of the
purchase rights under the Stock Purchase Plans was also estimated
using the Black-Scholes model with the following weighted-average
assumptions for 1997, 1996 and 1995, respectively: risk free
interest rates of 5.2%, 5.2% and 5.8%; dividend yields of 0%;
expected volatility of 34% for 1997 and 39% for 1996 and 1995; and
an expected life of .33 years for 1997 and 0.25 years for 1996 and
1995. The weighted-average fair value of those purchase rights
granted in 1997, 1996 and 1995 was $7.38, $5.75 and $1.89,
respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferrable. In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the
Company's employee stock options and purchase rights have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options and
purchase rights.
Assuming that the Company had accounted for its employee stock
options and purchase rights using the fair value method and
amortized the resulting amount to expense over the options' vesting
period net income would have been reduced by $11 million, $9
million and $5 million for the years ended December 31, 1997, 1996
and 1995, respectively. Basic EPS would have been reduced by 18
cents, 17 cents and 10 cents for the years ended December 31, 1997,
1996 and 1995, respectively, and diluted EPS would have been
reduced by 14 cents, 11 cents and 6 cents for the same periods,
respectively. The pro forma effect on net income is not
representative of the pro forma effects on net income in future
years because it did not take into consideration pro forma
compensation expense related to grants made prior to 1995.
NOTE 9 - 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. For the years ended December 31, 1997, 1996 and
1995, total pension expense for the defined benefit plans was $41
million, $45 million and $40 million, respectively. Total expense
for the defined contribution plans was $6 million, $7 million and
$6 million, for 1997, 1996 and 1995, respectively.
<PAGE>
Net periodic pension cost of the Company's defined benefit plans
for 1997, 1996 and 1995 included the following components (in
millions):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost - benefits earned
during the year . . . . . . . . $38 $38 $30
Interest cost on projected
benefit obligations . . . . . . 51 45 40
Loss (return) on plan assets . . (83) (63) (79)
Net amortization and deferral. . 35 25 49
Net periodic pension costs . . . $41 $45 $40
</TABLE>
The following table sets forth the defined benefit plans' funded
status amounts as of December 31, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
1997 1996
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 . . . . . $603 $ 83 $308 $ 91
Non-vested . . . 17 1 96 3
Accumulated
benefit
obligations . . . 620 84 404 94
Effect of
projected future
salary increases. 141 - 107 -
Projected benefit
obligation. . . . 761 84 511 94
Plan assets at
fair value. . . . 529 103 393 115
Projected benefit
obligation in
excess of (less
than) plan
assets. . . . . . 232 (19) 118 (21)
Unrecognized prior
service costs . . (9) - (9) -
Unrecognized net
gain (loss).. . . (96) 3 42 7
Additional mini-
mum liability . . 9 - 2 -
Accrued (pre-
paid) pension
liability . . . . $136 $(16) $153 $(14)
</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, 1997 and 1996. A
corresponding amount was recognized as a separate reduction to
stockholders' equity.
Plan assets consist primarily of equity securities (including
50,000 and 100,000 shares of Class B common stock) as of December
31, 1997 and 1996, respectively, long-term debt securities and
short-term investments.
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was
7.25%, 7.75% and 7.25% for 1997, 1996 and 1995, 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% for each of 1997, 1996 and 1995. The weighted
average rate of salary increases was 4.9% for each of 1997, 1996
and 1995. In 1997, Continental changed from the 1984 Unisex
Pensioners Mortality Table to the 1983 Group Annuity Mortality
Table which affects the comparability of benefit obligations. The
unrecognized net gain (loss) is 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.
The Company also has a profit sharing program under which an award
pool consisting of 15.0% of the Company's annual pre-tax earnings,
subject to certain adjustments, is distributed each year to
substantially all employees (other than employees whose collective
bargaining agreement provides otherwise or who otherwise receive
profit sharing payments as required by local law) on a pro rata
basis according to base salary. The profit sharing expense
included in the accompanying Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995 was $105
million, $68 million and $31 million, respectively.
<PAGE>
NOTE 10 - INCOME TAXES
The reconciliations of income tax computed at the United States
federal statutory tax rates to income tax provision for the years
ended December 31, 1997, 1996 and 1995 are as follows (in
millions):
<TABLE>
<CAPTION>
Amount Percent
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Income tax pro-
vision at
United States
statutory rates . . $224 $150 $109 35.0 % 35.0 % 35.0 %
State income tax
provision . . . . . 9 6 5 1.4 1.4 1.6
Reorganization value
in excess of
amounts allocable
to identifiable
assets. . . . . . . 4 5 20 0.6 1.2 6.5
Meals and
entertainment
disallowance. . . . 9 7 6 1.4 1.6 1.9
Net operating loss
not benefitted. . . (15) (88) (67) (2.3) (20.5) (21.6)
Other. . . . . . . . 6 6 5 1.0 1.4 1.6
Income tax
provision, net. . . $237 $ 86 $ 78 37.1 % 20.1 % 25.0 %
</TABLE>
The significant component of the provision for income taxes for the
year ended December 31, 1997, 1996 and 1995 was a deferred tax
provision of $220 million, $80 million and $71 million,
respectively. The provision for income taxes for the period ended
December 31, 1997, 1996 and 1995 also reflects a current tax
provision in the amount of $17 million, $6 million and $7 million,
respectively, as the Company is in an alternative minimum tax
position for federal income tax purposes and pays current state
income tax.
<PAGE>
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, 1997 and
1996 are as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Spare parts and supplies, fixed assets
and intangibles . . . . . . . . . . . . . $ 639 $ 635
Deferred gain. . . . . . . . . . . . . . . 63 62
Capital and safe harbor lease activity . . 49 34
Other, net . . . . . . . . . . . . . . . . 39 34
Gross deferred tax liabilities . . . . . . 790 765
Accrued liabilities. . . . . . . . . . . . (370) (370)
Revaluation of leases. . . . . . . . . . . (16) (34)
Net operating loss carryforwards . . . . . (631) (804)
Investment tax credit carryforwards. . . . (45) (45)
Minimum tax credit carryforward. . . . . . (21) (10)
Gross deferred tax assets. . . . . . . . . (1,083) (1,263)
Deferred tax assets valuation allowance. . 617 694
Net deferred tax liability . . . . . . . . 324 196
Less: current deferred tax (asset)
liability . . . . . . . . . . . . . . . . (111) 121
Non-current deferred tax liability . . . . $ 435 $ 75
</TABLE>
At December 31, 1997, the Company has estimated net operating loss
carryforwards ("NOLs") of $1.7 billion for federal income tax
purposes that will expire through 2009 and federal investment tax
credit carryforwards of $45 million that will expire through 2001.
As a result of the change in ownership of the Company on April 27,
1993, the ultimate utilization of the Company's net operating
losses and investment tax credits could be limited. Reflecting
this possible limitation, the Company has recorded a valuation
allowance of $617 million at December 31, 1997.
In the fourth quarter of 1997, the Company determined that it would
be able to recognize an additional $155 million of NOLs
attributable to the Company's pre-bankruptcy predecessor. This
benefit, $62 million, was used to reduce reorganization value in
excess of amounts allocable to identifiable assets. To the extent
the Company were to determine in the future that additional NOLs of
the Company's pre-bankruptcy predecessor could be recognized in the
accompanying consolidated financial statements, such benefit would
also reduce reorganization value in excess of amounts allocable to
identifiable assets. If such reorganization value is exhausted,
such benefit would reduce other intangibles.
The deferred tax valuation allowance decreased from $694 million at
December 31, 1996 to $617 million at December 31, 1997. This
decrease is related to the realization of deferred tax assets
associated with net operating losses that had not previously been
benefitted.
Approximately $359 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 $13 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 11 - NONOPERATING INCOME (EXPENSE)
In February 1996, Continental sold approximately 1.4 million of the
1.8 million shares it owned in America West, realizing net proceeds
of $25 million and recognizing a gain of $13 million. In May 1996,
the Company sold all of its 802,860 America West warrants,
realizing net proceeds of $7 million and recognizing a gain of $5
million. The gains are included in Other, net in the accompanying
Consolidated Statements of Operations.
Continental and its former System One subsidiary entered into a
series of transactions on April 27, 1995 whereby a substantial
portion of System One's assets (including the travel agent
subscriber base and travel-related information management products
and services software), as well as certain liabilities of System
One, were transferred to a newly formed limited liability company,
System One Information Management, L.L.C. ("LLC"). LLC is owned
equally by Continental CRS Interests, Inc. ("Continental CRS")
(formerly System One, which remains a wholly owned subsidiary of
Continental), Electronic Data Systems Corporation ("EDS") and
AMADEUS, a European computerized reservation system ("CRS").
Substantially all of System One's remaining assets (including the
CRS software) and liabilities were transferred to AMADEUS. In
addition to the one-third interest in LLC, Continental CRS received
cash proceeds of $40 million and an equity interest in AMADEUS
valued at $120 million, and outstanding indebtedness of $42 million
of System One owed to EDS was extinguished. In connection with
these transactions, the Company recorded a pretax gain of $108
million, which amount was included in Nonoperating Income (Expense)
in the accompanying Consolidated Statements of Operations for the
year ended December 31, 1995. The related tax provision totaled
$78 million (which differs from the federal statutory rate due to
certain nondeductible expenses), for a net gain of $30 million.
System One's revenue, included in Cargo, mail and other revenue,
and related net earnings were not material to the consolidated
financial statements of Continental.
<PAGE>
NOTE 12 - ACCRUALS FOR AIRCRAFT RETIREMENTS AND EXCESS FACILITIES
During 1996, the Company made the decision to accelerate the
replacement of certain aircraft between August 1997 and December
1999. As a result of its decision to accelerate the replacement of
these aircraft, the Company recorded a fleet disposition charge of
$128 million. The fleet disposition charge related primarily to
(i) the writedown of Stage 2 aircraft inventory, which is not
expected to be consumed through operations, to its estimated fair
value; and (ii) a provision for costs associated with the return of
leased aircraft at the end of their respective lease terms. The
majority of the aircraft are being accounted for as operating
leases and therefore the Company will continue to recognize rent
and amortization expenses on these aircraft until they are removed
from service.
During 1994, the Company recorded a $447 million provision
associated with (i) the planned early retirement of certain
aircraft ($278 million) and (ii) closed or underutilized airport
and maintenance facilities and other assets ($169 million).
The following represents the activity within these accruals during
the three years ended December 31, 1997 (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Total accruals at beginning of year. . $205 $220 $443
Net cash payments:
Aircraft related. . . . . . . . . . . (25) (52) (59)
Underutilized facilities and other. . (13) (17) (20)
Decrease in accrual for grounded
aircraft. . . . . . . . . . . . . . . (16) - -
Fleet disposition charge for cost of
return of leased aircraft . . . . . . - 54 -
Issuance of the Convertible Secured
Debentures. . . . . . . . . . . . . . - - (158)
Increase in accrual for underutilized
facilities. . . . . . . . . . . . . . - - 14
Total accruals at end of year. . . . . 151 205 220
Portion included in accrued other
liabilities . . . . . . . . . . . . . (28) (17) (45)
Accrual for aircraft retirements and
excess facilities . . . . . . . . . . $123 $188 $175
</TABLE>
The remaining accruals relate primarily to anticipated cash outlays
associated with (i) underutilized airport facilities (primarily
associated with Denver International Airport), (ii) the return of
leased aircraft and (iii) the remaining liability associated with
the grounded aircraft. The Company has assumed certain sublease
rental income for these closed and underutilized facilities and
grounded aircraft in determining the accrual at December 31, 1997.
However, should actual sublease rental income be different from the
Company's estimates, the actual charge could be different from the
amount estimated. The remaining accrual represents cash outlays to
be incurred over the remaining lease terms (from one to 13 years).
NOTE 13 - COMMITMENTS AND CONTINGENCIES
In March 1998, Continental announced the conversion of 15 Boeing
737 option aircraft to 15 Boeing 737-900 firm aircraft and the
addition of 25 option aircraft.
As of March 18, 1998, Continental had firm commitments with Boeing
to take delivery of a total of 154 jet aircraft (including the
Boeing 737-900 aircraft described above) during the years 1998
through 2005 with options for an additional 61 aircraft
(exercisable subject to certain conditions). These aircraft will
replace older, less efficient Stage 2 aircraft and allow for the
growth of operations. The estimated aggregate cost of the
Company's firm commitments for the Boeing aircraft is approximately
$6.7 billion. As of March 18, 1998, Continental had completed or
had third party commitments for a total of approximately $1.6
billion in financing for its future Boeing deliveries, and had
commitments or letters of intent from various sources for backstop
financing for approximately one-third of the anticipated remaining
acquisition cost of such Boeing deliveries. The Company currently
plans on financing the new Boeing aircraft with a combination of
enhanced equipment trust certificates, lease equity and other third
party financing subject to availability and market conditions.
However, further financing will be needed to satisfy the Company's
capital commitments for other aircraft and aircraft-related
expenditures such as engines, spare parts, simulators and related
items. There can be no assurance that sufficient financing will be
available for all aircraft and other capital expenditures not
covered by firm financing commitments. Deliveries of new Boeing
aircraft are expected to increase aircraft rental, depreciation and
interest costs while generating cost savings in the areas of
maintenance, fuel and pilot training.
In September 1996, Express placed a firm order for 25 Embraer ERJ-
145 regional jets, with options for an additional 175 aircraft
exercisable through 2008. In June 1997, Express exercised its
option to order 25 of such option aircraft and expects to confirm
its order for an additional 25 of its remaining option aircraft by
August 1998. Neither Express nor Continental will have any
obligation to take such aircraft that are not financed by a third
party and leased to Continental. Express took delivery of 18 of
the aircraft through December 31, 1997 and will take delivery of
the remaining 32 aircraft through the third quarter of 1999.
Continental expects to account for all of these aircraft as
operating leases.
Continental expects its cash outlays for 1998 capital expenditures,
exclusive of fleet plan requirements, to aggregate $211 million
primarily relating to mainframe, software application and
automation infrastructure projects, aircraft modifications and
mandatory maintenance projects, passenger terminal facility
improvements and office, maintenance, telecommunications and ground
equipment.
<PAGE>
Continental remains contingently liable until December 1, 2015, on
$202 million of long-term lease obligations of US Airways, Inc.
("US Airways") related to the East End Terminal at LaGuardia
Airport in New York. If US Airways defaulted on these obligations,
Continental could be required to cure the default, at which time it
would have the right to reoccupy the terminal.
In April 1997, collective bargaining agreement negotiations began
with the Independent Association of Continental Pilots ("IACP") to
amend both the Continental pilots' contract (which became amendable
in July 1997) and Express pilots' contract (which became amendable
in October 1997). In February 1998, a five-year collective
bargaining agreement with the Continental Airlines pilots was
announced by the Company and the IACP. In March 1998, Express also
announced a five-year collective bargaining agreement with its
pilots. These agreements are subject to approval by the IACP board
of directors and ratification by the Continental and Express
pilots. In September 1997, Continental announced that it intends
to bring all employees to industry standard wages (the average of
the top ten air carriers as ranked by the DOT excluding
Continental) within 36 months. The announcement further stated
that wage increases will be phased in over the 36-month period as
revenue, interest rates and rental rates reached industry
standards.
In February 1998, Continental began a block space arrangement
whereby Continental is committed to purchase capacity on another
carrier at a cost of approximately $147 million per year. This
arrangement is for 10 years.
Legal Proceedings
The Company and/or certain of its subsidiaries are defendants in
various lawsuits, including suits relating to certain environmental
claims, the Company's consolidated Plan of Reorganization under
Chapter 11 of the federal bankruptcy code which became effective on
April 27, 1993, the Company's long-term global alliance agreement
with Northwest Airlines, Inc. ("Northwest") entered into in
connection with Air Partners' disposition of its interest in
Continental to an affiliate of Northwest (see Note 16) and
proceedings arising in the normal course of business. While the
outcome of these lawsuits and proceedings cannot be predicted with
certainty and could have a material adverse effect on the Company's
financial position, results of operations and cash flows, it is the
opinion of management, after consulting with counsel, that the
ultimate disposition of such suits will not have a material adverse
effect on the Company's financial position, results of operations
or cash flows.
<PAGE>
NOTE 14 - RELATED PARTY TRANSACTIONS
The following is a summary of significant related party
transactions that occurred during 1997, 1996 and 1995, other than
those discussed elsewhere in the Notes to Consolidated Financial
Statements.
In connection with certain synergies agreements, Continental paid
Air Canada $30 million, $16 million and $38 million for the years
ended December 31, 1997, 1996 and 1995, respectively, and Air
Canada paid Continental $16 million, $17 million and $16 million in
1997, 1996 and 1995, respectively, primarily relating to aircraft
maintenance.
The Company and America West, in which David Bonderman holds a
significant interest, entered into a series of agreements during
1994 related to code-sharing and ground handling that have created
substantial benefits for both airlines. Mr. Bonderman is a
director of the Company and holds a significant interest in the
Company. The services provided are considered normal to the daily
operations of both airlines. As a result of these agreements,
Continental paid America West $16 million, $15 million and $11
million in 1997, 1996 and 1995, respectively, and America West paid
Continental $23 million, $22 million and $14 million in 1997, 1996
and 1995, respectively.
On July 27, 1995 and August 10, 1995, Air Partners purchased from
the Company an aggregate of 308,226 and 657,320 shares of Class B
common stock, respectively, at purchase prices of $7.93 per share
(with respect to a total of 710,660 shares) and $6.70 per share
(with respect to a total of 254,886 shares). Of the total, 316,640
shares were purchased pursuant to the exercise of antidilution
rights granted to Air Partners under the Certificate of
Incorporation and the remaining 648,906 shares were purchased
pursuant to the exercise of antidilution rights granted to Air
Canada under the Certificate of Incorporation (which rights were
purchased by Air Partners immediately prior to their exercise on
August 10, 1995).
In May 1996, Air Canada converted all of its 3,322,112 shares of
Class A common stock into Class B common stock (pursuant to certain
rights granted to it under the Company's Certificate of
Incorporation) and sold, on the open market, 4,400,000 shares of
the Company's common stock pursuant to the Secondary Offering.
On November 21, 1996, Air Partners exercised its right to sell to
the Company, and the Company subsequently purchased, for $50
million, Warrants to purchase 2,614,379 shares of Class B common
stock (representing a portion of the total warrants held by Air
Partners) pursuant to an agreement entered into earlier in 1996
with the Company.
<PAGE>
In April 1997, Continental redeemed for cash all of the 460,247
outstanding shares of its Series A 12% Preferred held by an
affiliate of Air Canada for $100 per share plus accrued dividends
thereon. The redemption price, including accrued dividends,
totaled $48 million.
On June 2, 1997, the Company purchased for $94 million from Air
Partners warrants to purchase 3,842,542 shares of Class B common
stock (representing a portion of the total warrants held by Air
Partners). The purchase price represented the intrinsic value of
the warrants (the difference between the closing market price of
the Class B common stock on May 28, 1997 ($34.25) and the
applicable exercise price).
In July 1997, the Company purchased the rights of United Micronesia
Development Association, Inc. ("UMDA") to receive future payments
under a services agreement between UMDA and CMI (pursuant to which
CMI was to pay UMDA approximately 1% of the gross revenues of CMI,
as defined, through January 1, 2012, which payment by CMI to UMDA
totaled $1 million, $6 million and $6 million in 1997, 1996 and
1995, respectively) and UMDA's 9% interest in AMI, terminated the
Company's obligations to UMDA under a settlement agreement entered
into in 1987, and terminated substantially all of the other
contractual arrangements between the Company, AMI and CMI, on the
one hand, and UMDA on the other hand, for an aggregate
consideration of $73 million.
In connection with the Company's $320 million secured term loan
financing, entered into in 1996, CMI paid UMDA a dividend of
approximately $13 million in 1996.
<PAGE>
NOTE 15 - FOREIGN OPERATIONS
Continental conducts operations in various foreign countries.
Operating revenue from foreign operations are as follows (in
millions):
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Pacific $ 648 $ 699 $ 742
Atlantic 778 494 390
Latin America 532 372 311
$1,958 $1,565 $1,443
</TABLE>
NOTE 16 - SUBSEQUENT EVENTS
The Company announced on January 26, 1998 that Air Partners, the
holder of 5,263,188 shares of Continental's Class A common stock
and warrants to purchase 3,039,468 shares of Class A common stock,
which represent, assuming exercise of the warrants, approximately
14% of the Company's common stock equity and approximately 51% of
its outstanding voting power, had entered into an agreement to
dispose of its interest in the Company to an affiliate of Northwest
(the "Air Partners Transaction"). The Air Partners Transaction is
subject to, among other matters, governmental approval and
expiration of applicable waiting periods under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976. The agreement also
extends to an affiliate of Air Partners a right of first offer to
purchase certain shares of Class A common stock to be acquired by
Northwest or its affiliates if such entities intend to dispose of
those securities prior to the fifth anniversary of the closing of
the Air Partners Transaction. Upon completion of the Air Partners
Transaction, a change of control will result under the 97 and 94
Incentive Plans and all outstanding options and restricted stock
under these plans will become fully vested. The Company also
announced on January 26, 1998, that in connection with the Air
Partners Transaction, the Company had entered into a long-term
global alliance with Northwest.
<PAGE>
NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
Unaudited summarized financial data by quarter for 1997 and 1996 is as follows (in millions,
except per share data):
<CAPTION>
Three Months Ended
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1997
Operating revenue . . . . . . . . . . . . . $1,698 $1,786 $1,890 $1,839
Operating income. . . . . . . . . . . . . . 146 231 207 132
Nonoperating income (expense), net. . . . . (22) (23) (21) (10)
Net income. . . . . . . . . . . . . . . . . 74 128 110 73
Earnings per common share:
Income before extraordinary loss (a). . . $ 1.28 $ 2.22 $ 1.97 $ 1.26
Extraordinary loss, net of tax. . . . . . - - (0.07) -
Net income (a). . . . . . . . . . . . . . $ 1.28 $ 2.22 $ 1.90 $ 1.26
Earnings per common share assuming
dilution:
Income before extraordinary loss (a). . . $ 0.96 $ 1.63 $ 1.48 $ 0.97
Extraordinary loss, net of tax. . . . . . - - (0.04) -
Net income (a). . . . . . . . . . . . . . $ 0.96 $ 1.63 $ 1.44 $ 0.97
(continued on next page)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1996
Operating revenue . . . . . . . . . . . . . $1,489 $1,639 $1,671 $1,561
Operating income. . . . . . . . . . . . . . 120 229 77 99
Nonoperating income (expense), net. . . . . (25) (23) (30) (19)
Net income. . . . . . . . . . . . . . . . . 88 167 17 47
Earnings per common share:
Income before extraordinary loss (a). . . $ 1.60 $ 3.05 $ 0.42 $ 0.82
Extraordinary loss, net of tax. . . . . . - - (0.12) -
Net income (a). . . . . . . . . . . . . . $ 1.60 $ 3.05 $ 0.30 $ 0.82
Earnings per common share assuming
dilution:
Income before extraordinary loss (a). . . $ 1.19 $ 2.09 $ 0.34 $ 0.62
Extraordinary loss, net of tax. . . . . . - - (0.08) -
Net income (a). . . . . . . . . . . . . . $ 1.19 $ 2.09 $ 0.26 $ 0.62
(a) The sum of the four quarterly earnings per share amounts does not agree with the
earnings per share as calculated for the full year due to the fact that the full year
calculation uses a weighted average number of shares based on the sum of the four
quarterly weighted average shares divided by four quarters.<PAGE>
During the third quarter of 1997, in connection with the prepayment
of certain indebtedness, Continental recorded a $4 million after
tax extraordinary loss relating to early extinguishment of debt.
</TABLE>
During the first quarter of 1996, the Company recorded a pretax
gain of $12.5 million related to the sale of approximately 1.4
million shares of America West common stock.
During the second quarter of 1996, the Company recorded a $5
million gain related to the sale of the America West warrants.
During the third quarter of 1996, the Company recorded a fleet
disposition charge of $128 million ($77 million after-tax) related
to the Company's decision to accelerate the replacement of certain
aircraft. In addition, in connection with the prepayment of
certain indebtedness, Continental recorded a $6 million after tax
extraordinary loss relating to early extinguishment of debt.
<PAGE>
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 auditors during the registrant's
two most recent fiscal years or any subsequent interim period.
<PAGE>
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 May 21, 1998.
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 May 21, 1998.
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 May 21, 1998.
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 May 21, 1998.
<PAGE>
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
Consolidated Statements of Operations for each of the Three
Years in the Period Ended December 31, 1997
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Cash Flows for each of the Three
Years in the Period Ended December 31, 1997
Consolidated Statements of Redeemable Preferred Stock and
Common Stockholders' Equity for each of the Three Years
in the Period Ended December 31, 1997
Notes to Consolidated Financial Statements
(b) Financial Statement Schedules:
Report of Independent Auditors
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.
(i) Report on Form 8-K dated September 25, 1997, with
respect to Item 7. Financial Statements and Exhibits
related to the offering of Continental Airlines, Inc.'s
Pass Through Certificates, Series 1997-3.
(ii) Report on Form 8-K dated October 6, 1997, with respect
to Item 7. Financial Statements and Exhibits related
to the Form of Pass Through Trust Agreement and
Statement of Eligibility of Wilmington Trust Company on
Form T-1.
(iii) Report on Form 8-K dated October 23, 1997, with respect
to Item 7. Financial Statements and Exhibits related
to the offering of Continental Airlines, Inc.'s Pass
Through Certificates, Series 1997-4.
(d) See accompanying Index to Exhibits.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of
Continental Airlines, Inc. as of December 31, 1997 and 1996, and
for each of the three years in the period ended December 31, 1997,
and have issued our report thereon dated February 9, 1998, except
for Note 13, as to which the date is March 18, 1998 (included
elsewhere in this Form 10-K). Our audits also included the
financial statement schedule for these related periods listed in
Item 14(b) of this Form 10-K. This schedule is the responsibility
of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Houston, Texas
March 18, 1998
<PAGE>
CONTINENTAL AIRLINES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1997, 1996, and 1995
(In millions)
<TABLE>
<CAPTION>
Allowance
for Doubtful Allowance for
Receivables Obsolescence
<S> <C> <C>
Balance, December 31, 1994 . . . $38 $36
Additions charged to expense . 24 12
Deductions from reserve. . . . (15) (12)
Other. . . . . . . . . . . . . (3) -
Balance, December 31, 1995 . . . 44 36
Additions charged to expense . 16 18
Deductions from reserve. . . . (31) (8)
Other. . . . . . . . . . . . . (2) 1
Balance, December 31, 1996 . . . 27 47
Additions charged to expense . 12 12
Deductions from reserve. . . . (21) (4)
Other. . . . . . . . . . . . . 5 (4)
Balance, December 31, 1997 . . . $23 $51
</TABLE>
<PAGE>
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/ LAWRENCE W. KELLNER
Lawrence W. Kellner
Executive Vice President and
Chief Financial Officer
(On behalf of Registrant)
Date: March 19, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in the
capacities indicated on March 19, 1998.
Signature Capacity
/s/ GORDON M. BETHUNE Chairman and Chief Executive Officer
Gordon M. Bethune (Principal Executive Officer)
/s/ LAWRENCE W. KELLNER Executive Vice President and
Lawrence W. Kellner Chief Financial Officer
(Principal Financial Officer)
/s/ MICHAEL P. BONDS Vice President and Controller
Michael P. Bonds (Principal Accounting Officer)
THOMAS J. BARRACK, JR.* Director
Thomas J. Barrack, Jr.
LLOYD M. BENTSEN, JR.* Director
Lloyd M. Bentsen, Jr.
DAVID BONDERMAN* Director
David Bonderman
/s/GREGORY D. BRENNEMAN Director
Gregory D. Brenneman
PATRICK FOLEY* Director
Patrick Foley
DOUGLAS McCORKINDALE* Director
Douglas McCorkindale
<PAGE>
GEORGE G.C. PARKER* Director
George G.C. Parker
RICHARD W. POGUE* Director
Richard W. Pogue
WILLIAM S. PRICE III* Director
William Price III
DONALD L. STURM* Director
Donald L. Sturm
KAREN HASTIE WILLIAMS* Director
Karen Hastie Williams
CHARLES A. YAMARONE* Director
Charles A. Yamarone
*By /s/ LAWRENCE W. KELLNER
Lawrence W. Kellner
Attorney-in-Fact
March 19, 1998<PAGE>
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. 0-9781).
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 Amended and Restated Certificate of Incorporation of
Continental -- incorporated by reference to
Exhibit 4.1(a) to Continental's Form S-8 registration
statement (No. 333-06993) (the "1996 S-8").
3.2 By-laws of Continental, as amended to date --
incorporated by reference to Exhibit 3.1 to Continental's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 (the "1996 Third Quarter 10-Q").
4.1 Specimen Class A Common Stock Certificate of the Company
-- incorporated by reference to Exhibit 4.1 to
Continental's Annual Report on Form 10-K for the year
ended December 31, 1995 (File no. 0-9781) (the "1995 10-
K").
4.2 Specimen Class B Common Stock Certificate 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").
<PAGE>
4.3 Subscription and Stockholders' Agreement -- incorporated
by reference to Exhibit 4.5 to the April 8-K.
4.3(a) Amendment to Stockholders' Agreement dated April 19, 1996
among the Company, Air Partners and Air Canada --
incorporated by reference to Exhibit 10.1 to
Continental's Form S-3 Registration Statement (No. 333-
02701) (the "1996 S-3").
4.4 Amended and Restated Registration Rights Agreement dated
April 19, 1996 among the Company, Air Partners and Air
Canada -- incorporated by reference to Exhibit 10.2 to
the 1996 S-3.
4.5 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.
4.6 Continental hereby agrees 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)(iii)(A) of Regulation S-K.
10.1 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 (File No.
0-9781) of People Express Airlines, Inc. for the year
ended December 31, 1984.
10.1(a) Supplemental Agreements Nos. 1 through 6 to the Terminal
C Lease -- incorporated by reference to Exhibit 10.3 to
Continental's Annual Report on Form 10-K (File No. 1-
8475) for the year ended December 31, 1987 ("the 1987 10-
K").
10.1(b) 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 (File No. 1-
8475) for the year ended December 31, 1988.
10.1(c) Supplemental Agreements No. 8 through 11 to the Terminal
C Lease -- incorporated by reference to Exhibit 10.10 to
the 1993 S-1.
10.1(d) Supplemental Agreements No. 12 through 15 to the Terminal
C Lease -- incorporated by reference to Exhibit 10.2(d)
to the 1995 10-K.
10.1(e) Supplemental Agreement No. 16 to the Terminal C Lease.
(3)
<PAGE>
10.2 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 the 1987 10-K.
10.3* Amended and restated employment agreement between the
Company and Gordon M. Bethune -- incorporated by
reference to Exhibit 10.4 to the 1995 10-K.
10.3(a)* Amendment to employment agreement, dated as of April 19,
1996, between the Company and Gordon M. Bethune --
incorporated by reference to Exhibit 10.1 to
Continental's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 (the "1996 Second Quarter 10-
Q").
10.3(b)* Amendment to employment agreement, dated as of September
30, 1996, between the Company and Gordon M. Bethune --
incorporated by reference to Exhibit 10.1 to the 1996
Third Quarter 10-Q.
10.4* Amended and restated employment agreement between the
Company and Gregory D. Brenneman -- incorporated by ref-
erence to Exhibit 10.5 to the 1995 10-K.
10.4(a)* Amendment to employment agreement, dated as of April 19,
1996, between the Company and Gregory D. Brenneman --
incorporated by reference to Exhibit 10.2 to the 1996
Second Quarter 10-Q.
10.4(b)* Amendment to employment agreement, dated as of September
30, 1996, between the Company and Gregory D. Brenneman --
incorporated by reference to Exhibit 10.2 to the 1996
Third Quarter 10-Q.
10.5* Amended and restated employment agreement between the
Company and Lawrence W. Kellner -- incorporated by ref-
erence to Exhibit 10.3 to the 1996 Second Quarter 10-Q.
10.6* Amended and restated employment agreement between the
Company and C.D. McLean -- incorporated by reference to
Exhibit 10.8 to the 1995 10-K.
10.7* Form of amendment to employment agreements, dated as of
April 19, 1996, between the Company and, respectively,
Lawrence W. Kellner and C.D. McLean -- incorporated by
reference to Exhibit 10.4 to the 1996 Second Quarter 10-
Q.
<PAGE>
10.7(a)* Form of amendment to employment agreements, dated as of
September 30, 1996, between the Company and,
respectively, Lawrence W. Kellner and C.D. McLean --
incorporated by reference to Exhibit 10.3 to the 1996
Third Quarter 10-Q.
10.8* Amended and restated employment agreement, as amended,
between the Company and Jeffery A. Smisek -- incorporated
by reference to Exhibit 10.2 to the Continental Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997
(the "1997 First Quarter 10-Q").
10.9* Executive Bonus Program -- incorporated by reference to
Appendix B to the Company's proxy statement relating its
annual meeting of stockholders held on June 26, 1996.
10.10* Continental Airlines, Inc. 1994 Incentive Equity Plan
("1994 Equity Plan") -- incorporated by reference to
Exhibit 4.3 to the Company's Form S-8 Registration
Statement (No. 33-81324).
10.10(a)* First Amendment to 1994 Equity Plan -- incorporated by
reference to Exhibit 10.1 to Continental's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1995.
10.10(b)* Second Amendment to 1994 Equity Plan -- incorporated by
reference to Exhibit 4.3(c) to the 1996 S-8.
10.10(c)* Third Amendment to 1994 Equity Plan -- incorporated by
reference to Exhibit 10.4 to the 1996 Third Quarter 10-Q.
10.10(d)* Fourth Amendment to 1994 Equity Plan. (3)
10.10(e)* Form of Employee Stock Option Grant pursuant to the 1994
Equity Plan. (3)
10.10(f)* Form of Outside Director Stock Option Grant pursuant to
the 1994 Equity Plan. (3)
10.10(g)* Form of Restricted Stock Grant pursuant to the 1994
Equity Plan. (3)
10.11* Continental Airlines, Inc. 1997 Stock Incentive Plan
("1997 Incentive Plan") -- incorporated by reference to
Exhibit 4.3 to Continental's Form S-8 Registration
Statement (No. 333-23165).
10.11(a)* First Amendment to 1997 Incentive Plan. (3)
10.11(b)* Form of Employee Stock Option Grant pursuant to the 1997
Incentive Plan. (3)
<PAGE>
10.11(c)*Form of Outside Director Stock Option Grant pursuant to
the 1997 Incentive Plan. (3)
10.12* Form of Letter Agreement relating to certain flight
benefits between the Company and each of its nonemployee
directors -- incorporated by reference to Exhibit 10.19
of the 1995 10-K.
10.13 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 aircraft ("Purchase Agreement No. 1783") --
incorporated by reference to Exhibit 10.2 to
Continental's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993. (1)
10.13(a) Supplemental Agreement No. 4 to Purchase Agreement No.
1783, dated March 31, 1995 -- incorporated by reference
to Exhibit 10.12(a) to Continental's Annual Report on
Form 10-K for the year ended December 31, 1994 (File no.
0-9781). (1)
10.13(b) Supplemental Agreement No. 6 to Purchase Agreement No.
1783, dated June 13, 1996 -- incorporated by reference to
Exhibit 10.6 to the 1996 Second Quarter 10-Q. (1)
10.13(c) Supplemental Agreement No. 7 to Purchase Agreement No.
1783, dated July 23, 1996 -- incorporated by reference to
Exhibit 10.6(a) to the 1996 Second Quarter 10-Q. (1)
10.13(d) Supplemental Agreement No. 8 to Purchase Agreement No.
1783, dated October 27, 1996 -- incorporated by reference
to Exhibit 10.11(d) to Continental's Annual Report on
Form 10-K for the year ended December 31, 1996 (the "1996
10-K"). (1)
10.13(e) Letter Agreement No. 6-1162-GOC-044 to Purchase Agreement
No. 1783, dated March 21, 1997 -- incorporated by
reference to Exhibit 10.4 to the 1997 First Quarter 10-Q.
(2)
10.13(f) Supplemental Agreement No. 9 to Purchase Agreement No.
1783, dated August 13, 1997 -- incorporated by reference
to Exhibit 10.1 to Continental's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997. (2)
10.13(g) Supplemental Agreement No. 10, including side letters, to
Purchase Agreement No. 1783, dated October 10, 1997.
(2)(3)
<PAGE>
10.14 Purchase Agreement No. 1951, including exhibits and side
letters thereto, between the Company and Boeing, dated
July 23, 1996, relating to the purchase of Boeing 737
aircraft ("Purchase Agreement No. 1951") -- incorporated
by reference to Exhibit 10.8 to the 1996 Second Quarter
10-Q. (1)
10.14(a) Supplemental Agreement No. 1 to Purchase Agreement No.
1951, dated October 10, 1996 -- incorporated by reference
to Exhibit 10.14(a) to the 1996 10-K. (1)
10.14(b) Supplemental Agreement No. 2 to Purchase Agreement No.
1951, dated March 5, 1997 -- incorporated by reference to
Exhibit 10.3 to the 1997 First Quarter 10-Q. (2)
10.14(c) Supplemental Agreement No. 3, including exhibit and side
letter, to Purchase Agreement No. 1951, dated July 17,
1997. (2)(3)
10.14(d) Supplemental Agreement No. 4, including exhibits and side
letters, to Purchase Agreement No. 1951, dated October
10, 1997. (2)(3)
10.15 Aircraft General Terms Agreement between the Company and
Boeing, dated October 10, 1997. (2)(3)
10.15(a) Letter Agreement No. 6-1162-GOC-136 between the Company
and Boeing, dated October 10, 1997, relating to certain
long-term aircraft purchase commitments of the Company.
(2)(3)
10.16 Purchase Agreement No. 2060, including exhibits and side
letters, between the Company and Boeing, dated October
10, 1997, relating to the purchase of Boeing 767 aircraft
("Purchase Agreement No. 2060"). (2)(3)
10.16(a) Supplement Agreement No. 1 to Purchase Agreement No.
2060. (2)(3)
10.17 Purchase Agreement No. 2061, including exhibits and side
letters, between the Company and Boeing, dated October
10, 1997, relating to the purchase of Boeing 777 aircraft
("Purchase Agreement No. 2061"). (2)(3)
10.17(a) Supplemental Agreement No. 1 to Purchase Agreement No.
2061. (2)(3)
10.18 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.
<PAGE>
10.18(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 --
incorporated by reference to Exhibit 10.15(a) to
Continental's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 0-9781).
10.19 Lease Agreement, as amended and supplemented, between the
Company and the City of Houston, Texas regarding Terminal
C of George Bush 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 "1993 Third Quarter 10-Q").
10.20 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 1993 Third Quarter 10-Q.
10.21 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
Continental's Schedule 13D relating to America West
Airlines, Inc. filed on August 25, 1994.
10.22 Governance Agreement, dated January 25, 1998, among
Continental, Newbridge Parent Corporation and Northwest
Airlines Corporation (the "Governance Agreement") --
incorporated by reference to Exhibit 99.1 to
Continental's Current Report on Form 8-K, dated January
25, 1998.
10.22(a) First Amendment to the Governance Agreement, dated March
2, 1998. (3)
10.23 Letter Agreement No. 11 between the Company and General
Electric Company, dated December 22, 1997, relating to
certain long-term engine purchase commitments of the
Company. (2)(3)
21.1 List of Subsidiaries of Continental. (3)
23.1 Consent of Ernst & Young LLP. (3)
<PAGE>
24.1 Powers of attorney executed by certain directors and
officers of Continental. (3)
27.1 Financial Data Schedule. (3)
__________
*These exhibits relate to management contracts or compensatory
plans or arrangements.
(1) The Commission has granted confidential treatment for a
portion of this exhibit.
(2) The Company has applied to the Commission for confidential
treatment of a portion of this exhibit.
(3) Filed herewith.
EXHIBIT 10.1(e)
THIS SUPPLEMENTAL AGREEMENT SHALL NOT BE
BINDING
UPON THE PORT AUTHORITY UNTIL DULY EXECUTED BY
AN EXECUTIVE OFFICER THEREOF AND DELIVERED TO
THE LESSEE BY AN AUTHORIZED REPRESENTATIVE
OF THE PORT AUTHORITY
Port Authority Lease No. ANA-170 Supplement No. 16
Port Authority Facility -Newark International Airport
SUPPLEMENTAL AGREEMENT
THIS AGREEMENT, made as of October 23, 1995, by and between
THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (hereinafter
referred to as "the Port Authority") and CONTINENTAL AIRLINES,
INC. (hereinafter referred to as "the Lessee"),
WITNESSETH, That:
WHEREAS, the Port Authority and People Express Airlines,
Inc. as of January 11, 1985 entered into an agreement of lease
covering certain premises, rights and privileges at and in
respect to Newark International (hereinafter called the
"Airport") as therein set forth (said agreement of lease as
heretofore supplemented and amended is hereinafter called the
"Lease");and
WHEREAS, the Lease was thereafter assigned by said People
Express Airlines, Inc. to the Lessee pursuant to an Assignment of
Lease with Assumption and Consent Agreement entered into among
the Port Authority, the Lessee and said People Express Airlines,
Inc. and dated August 15, 1987; and
WHEREAS, a certain Stipulation between the parties hereto
was submitted for approval of the United States Bankruptcy Court
for the District of Delaware ("the Bankruptcy Court") covering
the Lessee's assumption of the Lease as part of the confirmation
of its reorganization plan in its Chapter 11 bankruptcy
proceedings and as debtor and debtor in possession pursuant to
the applicable provisions of the United States Bankruptcy Code as
set forth in and subject to the terms and conditions of said
Stipulation (said Stipulation being hereinafter referred to as
the "Stipulation"); and
WHEREAS, the Stipulation and the Lessee's assumption of the
Lease was approved by the Bankruptcy Court by an Order thereof
dated the 1st day of October, 1993; and
WHEREAS, the Port Authority and the Lessee desire to amend
the Lease in certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants and mutual
agreements herein contained, the Port Authority and the Lessee
hereby agree to amend the Lease, effective as of October 23,
1995, as follows:
1. (a) "By-pass Corridor Construction Work" shall mean
the construction work which shall be performed by the Lessee and
which shall consist generally of the construction of a pedestrian
corridor which will by-pass around the entrance/exit of the
monorail station at the premises under the Lease (Area M) and
which shall comply with all requirements for security clearance
and screening of individuals and their baggage in accessing the
secured areas of the premises under the Lease, together with all
other necessary, required or appropriate work related thereto;
all of said work to be more fully set forth in the plans and
specifications which are or shall be a part of the Construction
Application as hereinafter defined in subparagraph (b) (2) below.
(b) (1) The Lessee shall perform and complete, at its
sole cost and expense, the design and construction of the By-pass
Corridor Construction Work.
(2) The Lessee shall execute and submit for the Port
Authority's approval a Construction Application in the form
prescribed by the Port Authority covering the By-pass Corridor
Construction Work. The Lessee shall comply with all the terms and
provisions of the approved Construction Application (herein
referred to as the "Construction Application"). In the event of
any inconsistency between the terms of the Construction
Application and the terms of the Lease, as hereby amended, the
terms of the Lease, as hereby amended, shall prevail and control.
All By-pass Corridor Construction Work to be performed hereunder
shall be done in accordance with and subject to the Lease, as
hereby amended, the Construction Application and the final plans
and specifications as and when the same may have been approved by
the Port Authority, and subject to any conditions which may be
set forth therein or which may be imposed by the General Manager
of the Airport. All locations where the By-pass Corridor
Construction Work is to be performed shall be as specified in the
Construction Application. Notwithstanding any approval of the
Construction Application and notwithstanding any reference
therein to property lines or to space occupied by the Lessee it
is hereby understood and agreed that the areas upon which the
Lessee shall perform the By-pass Corridor Construction Work shall
only be on the premises under the Lease.
(c) All By-pass Corridor Construction Work shall be
done by the Lessee in accordance with the following further terms
and conditions:
(1) The Lessee hereby assumes the risk of loss
or damage to all or any part of the By-pass Corridor Construction
Work prior to the completion thereof and the risk of loss or
damage to all property of the Port Authority, the Lessee or
others arising out of or in connection with the performance of
the By-pass Corridor Construction Work. In the event of such loss
or damage, the Lessee shall forthwith repair, replace and make
good the Bypass Corridor Construction Work and any and all
property of the Port Authority, the Lessee or others, without
cost or expense to the Port Authority or others. The Lessee shall
itself and shall also require its contractors to indemnify and
hold harmless the Port Authority, its Commissioners, officers,
agents, representatives and employees from and against all claims
and demands, just or unjust, of third persons arising or alleged
to arise out of the performance of the By-pass Corridor
Construction Work and for all expenses incurred by it and by them
in the defense, settlement or satisfaction thereof, including
without limitation thereto, claims and demands for death, for
personal injury or for property damage, direct or consequential,
whether they arise from the acts or omissions of the Lessee, of
any contractors of the Lessee, of the Port Authority, or of third
persons, or from acts of God or of the public enemy, or
otherwise, including claims by the City of Newark against the
Port Authority pursuant to the provisions of the Basic Lease
whereby the Port Authority has agreed to indemnify the City
against claims, excepting only claims and demands which result
solely from affirmative willful acts done by the Port Authority,
its Commissioners, officers, agents, representatives and
employees with respect to the By-pass Corridor Construction Work.
If so directed, the Lessee shall at its own expense
defend any suit based upon any such claim or demand (even if such
suit, claim or demand is groundless, false or fraudulent), and in
handling such it shall not, without obtaining express advance
written permission from the General Counsel of the Port
Authority, raise any defense involving in any way the
jurisdiction of the tribunal, the immunity of the Port Authority,
its Commissioners, officers, agents, representatives or
employees, the governmental nature of the Port Authority, or the
provisions of any statutes respecting suits against the Port
Authority.
(2) Prior to engaging or retaining an architect
or architects for the By-pass Corridor Construction Work, the
name or names of said architect or architects shall be submitted
to the Port Authority for its approval. The Port Authority shall
have the right to disapprove any architect who may be
unacceptable to it. All By-pass Corridor Construction Work shall
be done in accordance with plans and specifications to be
submitted to and approved by the Port Authority prior to the
commencement of the By-pass Corridor Construction Work, and until
such approval has been obtained the Lessee shall continue to
resubmit plans and specifications as required. Upon approval of
such plans and specifications by the Port Authority, the Lessee
shall proceed diligently at its sole cost and expense to perform
the By-pass Corridor Construction Work. The Lessee shall complete
the By-pass Corridor Construction Work no later than December 31,
1996.
(3) Prior to entering a contract for any part
of the By-pass Corridor Construction Work, the Lessee shall
submit to the Port Authority for its approval the name(s) of the
contractor or contractors to whom the Lessee proposes to award
said contracts. The Port Authority shall have the right to
disapprove any contractor who may be unacceptable to it. The Port
Authority shall have the further right to disapprove any proposed
contract. The Lessee shall submit said contracts to the Port
Authority and shall include in all such contracts such provisions
and conditions as may be required by the Port Authority. Without
limiting the foregoing, all of the Lessee's contracts shall
provide as follows: "If (i) the Contractor fails to perform any
of his obligations under the Contract, including his obligation
to the Lessee to pay any claims lawfully made against him by any
materialman, subcontractor or workman or other third person which
arises out of or in connection with the performance of the
Contract or (ii) any claim (just or unjust) which arises out of
or in connection with the Contract is made against the Lessee or
(iii) any subcontractor under the Contract fails to pay any
claims, lawfully made against him by any materialman,
subcontractor, workman or other third persons which arises out of
or in connection with the Contract or if in the Lessee's opinion
any of the aforesaid contingencies is likely to arise, then the
Lessee shall have the right, in its discretion, to withhold out
of any payment (final or otherwise and even though such payments
have already been certified as due) such sums as the Lessee may
deem ample to protect it against delay or loss or to assume the
payment of just claims of third persons, and to apply such sums
in such manner as the Lessee may deem proper to secure such
protection or satisfy such claims. All sums so applied shall be
deducted from the Contractor's compensation. Omission by the
Lessee to withhold out of any payment, final or otherwise, a sum
for any of the above contingencies, even though such contingency
has occurred at the time of such payment, shall not be deemed to
indicate that the Lessee does not intend to exercise its right
with respect to such contingency. Neither the above provisions
for rights of the Lessee to withhold and apply monies nor any
exercise, or attempted exercise of, or omission to exercise such
rights by the Lessee shall create any obligation of any kind to
such materialmen, subcontractors, workmen or other third persons.
Until actual payment is made to the Contractor, his right to any
amount to be paid under the Contract (even though such amount has
already been certified as due) shall be subordinate to the rights
of the Lessee under this provision. The Lessee shall file with
the Port Authority a copy of its contracts with its contractors
prior to the start of the By-pass Corridor Construction Work.
(4) The Lessee shall furnish or require its
architect to furnish a full time resident engineer during the
period of its performance of the By-pass Corridor Construction
Work. The Lessee shall require certification by a licensed
engineer of all pile driving data and of all controlled concrete
work and such other certifications as may be requested by the
Port Authority from time to time.
(5) The Lessee agrees to be solely responsible
for any plans and specifications used by it and for any loss or
damage resulting from the use thereof, notwithstanding the same
have been approved by the Port Authority and notwithstanding the
incorporation therein of Port Authority recommendations or
requirements. Notwithstanding the requirement for approval by the
Port Authority of the contracts to be entered into by the Lessee
or the incorporation therein of Port Authority requirements or
recommendations, and notwithstanding any rights the Port
Authority may have reserved to itself hereunder, the Port
Authority shall have no liabilities or obligations of any kind to
any contractors engaged by the Lessee or for any other matter in
connection therewith and the Lessee hereby releases and
discharges the Port Authority, its Commissioners, officers,
representatives and employees of and from any and all liability,
claims for damages or losses of any kind, whether legal or
equitable, or from any action or cause of action arising or
alleged to arise out of the performance of any work pursuant to
the contracts between the Lessee and its contractors. Any
warranties contained in any contract entered into by the Lessee
for the performance of the Bypass Corridor Construction Work
hereunder shall be for the benefit of the Port Authority as well
as the Lessee, and the contract shall so provide.
(6) The Port Authority shall have the right,
through its duly designated representatives, to inspect the By-
pass Corridor Construction Work and the plans and specifications
thereof, at any and all times during the progress thereof and
from time to time, in its discretion, to take samples and perform
testing on any part of the By-pass Corridor Construction Work.
(7) The Lessee agrees that it shall deliver to
the Port Authority two (2) sets of "as built" microfilm drawings
of the By-pass Corridor Construction Work mounted on aperture
cards, all of which shall conform to the specifications of the
Port Authority (the receipt of a copy of said Specifications
prior to the execution of this Lease being hereby acknowledged by
the Lessee), and the Lessee shall during the term of this Lease
keep said drawings current showing thereon any changes or
modifications which may be made. (No changes or modifications
shall be made without prior Port Authority consent).
(8) The Lessee shall, if requested by the Port
Authority, take all reasonable measures to prevent erosion of the
soil and the blowing of sand during the performance of the By-
pass Corridor Construction Work, including but not limited to the
fencing of the area upon which the By-pass Corridor Construction
Work is to be performed or portions thereof and the covering of
open areas with asphaltic emulsion or similar materials as the
Port Authority may direct.
(9) Title to any soil, dirt, sand or other matter
(hereinafter in this Paragraph 9 collectively called "the
matter") excavated by Lessee during the course of the By-pass
Corridor Construction Work shall vest in the Port Authority and
the matter shall be delivered by Lessee at its expense to any
location on or off the Airport as may be designated by the Port
Authority. The entire proceeds, if any, of the sale or other
disposition of the matter shall belong to the Port Authority.
Notwithstanding the foregoing the Port Authority may elect by
prior written notice to Lessee to waive title to all or portions
of the matter in which event Lessee at its expense shall dispose
of the same without further instruction from the Port Authority.
(10) The Lessee shall pay the cost of the By-
pass Corridor Construction Work and the Lessee shall pay or cause
to be paid all claims lawfully made against it by its
contractors, subcontractors, materialmen and workmen, arising out
of or in connection with or because of the performance of the By-
pass Corridor Construction Work, and shall cause its contractors
and subcontractors to pay all such claims lawfully made against
them. Nothing herein contained shall be deemed to constitute
consent to the creation of any lien or claim against any part of
the Airport.
(11) The Lessee in its own name as insured and
including the Port Authority as an additional insured shall
procure and maintain Comprehensive General Liability insurance,
including but not limited to premises-operations, products
liability, completed operations, explosion, collapse, and
underground property damages, personal injury and independent
contractors, with a broad form property damage endorsement, and
with a contractual liability endorsement covering the obligations
assumed by the Lessee pursuant to subparagraphs (1) and (5) of
this Paragraph l(c), and Comprehensive Automobile Liability
insurance covering owned, nonowned and hired vehicles and
including automatic coverage for newly acquired vehicles. The
said Comprehensive General Liability insurance policy shall have
a limit of not less than $10,000,000 combined single limit per
occurrence for bodily injury and property damage liability, and
said Comprehensive Automobile Liability policy shall have a limit
of not less than $5,000,000 combined single limit per occurrence
for bodily injury and property damage liability. The Lessee may
provide such insurance by requiring each contractor engaged by it
for the By-pass Corridor Construction Work to procure and
maintain such insurance including such contractual liability
endorsement. Said insurance, whether provided by the Lessee or by
a contractor engaged by the Lessee for the By-pass Corridor
Construction Work shall not contain any care, custody or control
exclusions, and shall not contain any exclusion for bodily injury
to or sickness, disease or death of any employee of the Lessee or
of any of its contractors which would conflict with or in any way
impair coverage under the contractual liability endorsement. The
said policy or policies of insurance shall also provide or
contain an endorsement providing that the protections afforded
the Lessee thereunder with respect to any claim or action against
the Lessee by a third person shall pertain and apply with like
effect with respect to any claim or action against the Lessee by
the Port Authority, and shall also provide or contain an
endorsement providing that the protections afforded the Port
Authority thereunder with respect to any claim or action against
the Port Authority by the Lessee or its contractors shall be the
same as the protections afforded the Lessee thereunder with
respect to any claim or action against the Lessee by a third
person as if the Port Authority were the named insured
thereunder; but such provision or endorsement shall not limit,
vary or affect the protections afforded the Port Authority
thereunder as an additional insured.
The Lessee shall also procure and maintain
in effect or cause to be procured and maintained in effect
Worker's Compensation Insurance and Employer's Liability
Insurance, in accordance with and as required by law.
The insurance required hereunder and under
subparagraph (14) below shall be maintained in effect during the
performance of the By-pass Corridor Construction Work. With
respect to the insurance required hereunder and under
subparagraph (14) below, a certified copy of each of the policies
or a certificate or certificates evidencing the existence
thereof, or binders, shall be delivered to the Port Authority at
least fifteen (15) days prior to the commencement of any By-pass
Corridor Construction Work. In the event any binder is delivered,
it shall be replaced within thirty (30) days by a certified copy
of the policy or a certificate. Each such copy or certificate
shall bear the endorsement of or be accompanied by evidence of
payment of the premium thereof and, also, contain a valid
provision or endorsement that the policy may not be canceled,
terminated, changed or modified without giving fifteen (15) days'
written advance notice thereof to the Port Authority. Each such
copy and each such certificate with respect to the insurance
required under this Paragraph 1 shall contain an additional
endorsement providing that the insurance carrier shall not,
without obtaining express advance permission from the General
Counsel of the Port Authority, raise any defense involving in any
way the jurisdiction of the tribunal over the person of the Port
Authority, the immunity of the Port Authority, its Commissioners,
officers, agents or employees, the governmental nature of the
Port Authority or the provisions of any statutes respecting suits
against the Port Authority. The aforesaid policies of insurance
shall be written by a company or companies approved by the Port
Authority, the Port Authority agreeing not to withhold its
approval unreasonably. If at any time any of the insurance
policies shall be or become unsatisfactory to the Port Authority
as to form or substance or if any of the carriers issuing such
policies shall be or become unsatisfactory to the Port Authority,
the Lessee shall promptly obtain a new and satisfactory policy in
replacement, the Port Authority agreeing not to act unreasonably
hereunder.
(12) The Lessee shall be under no obligation to
reimburse the Port Authority for expenses incurred by the Port
Authority in connection with its normal review and approval of
the plans and specifications covering the By-pass Corridor
Construction Work submitted by the Lessee pursuant to this
Agreement.
(13) The Lessee shall prior to the commencement
of construction of the By-pass Corridor Construction Work and at
all times during construction of the By-pass Corridor
Construction Work submit to the Port Authority all engineering
studies with respect to construction and samples of construction
materials as may be required at any time and from time to time by
the Port Authority.
(14) The Lessee shall procure and maintain
Builder's Risk (All Risk) Completed Value Insurance covering the
By-pass Corridor Construction Work during the performance thereof
including material delivered to the ground area(s) in or on which
the Bypass Corridor Construction Work is to be performed but not
attached to the realty. Such insurance shall be in compliance
with and subject to the applicable provisions set forth herein
and shall name the Port Authority, the City of Newark, and the
Lessee and its contractors and subcontractors as additional
assureds and such policy shall provide that the loss shall be
adjusted with and payable to the Lessee. Such proceeds shall be
used by Lessee for the repair, replacement or rebuilding of the
By-pass Corridor Construction Work and any excess shall be paid
over to the Port Authority. The insurance required hereunder
shall be in compliance with and subject to the applicable
provisions of sub-paragraph 11 above.
(15) The By-pass Corridor Construction Work
which shall be performed strictly in accordance with the Lease,
as hereby amended. The Lessee shall remove, re-do, replace or
construct at its own cost and expense any and all portions of the
By-pass Corridor Construction Work not done in accordance with
the approved Construction Application, or the Lease or any
further requirements of the Port Authority. The Lessee agrees
that the By-pass Corridor Construction Work, including
workmanship and material, shall be of first-class quality.
(16) Nothing contained herein shall grant or be
deemed to grant to any contractor, architect, supplier,
subcontractor or any other person engaged by the Lessee or any of
its contractors in the performance of any part of the By-pass
Corridor Construction Work any right of action or claim against
the Port Authority, its Commissioners, officers, agents,
representatives and employees with respect to any work any of
them may do in connection with the By-pass Corridor Construction
Work. Nothing contained herein shall create or be deemed to
create any relationship between the Port Authority and any such
contractor, architect, supplier, subcontractor or any other
person engaged by the Lessee or any of its contractors in the
performance of any part of the By-pass Corridor Construction Work
and the Port Authority shall not be responsible to any of the
foregoing for any payments due or alleged to be due thereto for
any work performed or materials purchased in connection with the
By-pass Corridor Construction Work.
(17) Nothing contained herein or in the
Construction Application shall constitute a determination or
indication by the Port Authority that Lessee has complied with
the applicable governmental laws, ordinances, enactments,
resolutions, rules and regulations, including but not limited to
those of the City of Newark which may pertain to the By-pass
Corridor Construction Work.
(18) The Lessee shall not commence performance
of the By-pass Corridor Construction Work unless and until it has
met with the General Manager of the Airport and has given him at
least forty-eight (48) hours advance notice of its intention to
commence the By-pass Corridor Construction Work.
(19) In its performance of the By-pass Corridor
Construction Work, the Lessee shall at all times take all
necessary precautions, including without limitation compliance
with requirements of the Federal Aviation Administration and of
the Port Authority, to ensure the safety of its operations, to
protect all persons and property at the Airport and to ensure
that the Lessee shall not disrupt or interfere with normal
airport operations; and in connection with the foregoing the
Lessee shall construct and install as part of the By-pass
Corridor Construction Work such fences, equipment devices,
barricades and lighting and other facilities as may be necessary,
required or appropriate.
(20) (i) Without limiting any of the terms and
conditions hereof, the Lessee understands and agrees that it
shall put into effect prior to the commencement of any By-pass
Corridor Construction Work an affirmative action program and
Minority Business Enterprise ("MBE") program and Women-owned
Business Enterprise ("WBE") program in accordance with the
provisions of Schedule E, attached hereto and hereby made a part
hereof. The provisions of said Schedule E shall be applicable to
the Lessee's contractor or contractors and subcontractors at any
tier of construction as well as to the Lessee and the Lessee
shall include the provisions of said Schedule E within all of its
construction contracts so as to make said provisions and
undertakings the direct obligation of the construction contractor
or contractors and subcontractors at any tier of construction.
The Lessee shall and shall require its said contractor,
contractors and subcontractors to furnish to the Port Authority
such data, including but not limited to compliance reports
relating to the operation and implementation of the affirmative
action, MBE and WBE programs called for hereunder as the Port
Authority may request at any time and from time to time regarding
the affirmative action, MBE and WBE programs of the Lessee and
its contractor, contractors, and subcontractors at any tier of
construction, and the Lessee shall and shall also require that
its contractor, contractors and subcontractors at any tier of
construction make and put into effect such modifications and
additions thereto as may be directed by the Port Authority
pursuant to the provisions hereof and said Schedule E to
effectuate the goals of affirmative action and MBE and WBE
programs.
As used herein and in Schedule E the term
"construction work" or "construction" shall mean the By-pass
Corridor Construction Work approved by the Port Authority to be
performed by Lessee under the terms hereof; the term
"construction contracts" shall mean and refer to the contracts
covering or to cover the By-pass Corridor Construction Work and
the term "premises" shall mean the portions of the premises under
the Lease upon which the said By-pass Corridor Construction Work
is to be performed.
(ii) In addition to and without limiting any of
the terms and provisions hereof, the Lessee shall provide in its
contracts and all subcontracts covering the By-pass Corridor
Construction Work, or any portion thereof, that:
(aa) The contractor shall not discriminate
against employees or applicants for employment because of race,
creed, color, national origin, sex, age, disability or marital
status, and shall undertake or continue existing programs of
affirmative action to ensure that minority group persons are
afforded equal employment opportunity without discrimination.
Such programs shall include, but not be limited to, recruitment,
employment, job assignment, promotion, upgrading, demotion,
transfer, layoff, termination, rates of pay or other forms of
compensation, and selections for training or retraining,
including apprenticeships and on-the-job training;
(bb) At the request of either the Port Authority
or the Lessee, the contractor shall request such employment
agency, labor union, or authorized representative of workers with
which it has a collective bargaining or other agreement or
understanding and which is involved in the performance of the
contract with the Lessee to furnish a written statement that such
employment agency, labor union or representative shall not
discriminate because of race, creed, color, national origin, sex,
age, disability or marital status and that such union or
representative will cooperate in the implementation of the
contractor's obligations hereunder;
(cc) The contractor will state, in all solici-
tations or advertisements for employees placed by or on behalf of
the contractor in the performance of the contract, that all
qualified applicants will be afforded equal employment
opportunity without discrimination because of race, creed, color,
national origin, sex, age, disability or marital status;
(dd) The contractor will include the provisions
of subparagraphs (act) through (cc) of this paragraph in every
subcontract or purchase order in such a manner that such
provisions will be binding upon each subcontractor or vendor as
to its work in connection with the contract;
(ee) "Contractor" as used herein shall include
each contractor and subcontractor at any tier of construction.
(21) The Lessee shall give the Port Authority
fifteen (15) days' notice prior to the commencement of
construction of the By-Pass Corridor Construction Work. The Port
Authority will assign to the By-Pass Corridor Construction Work a
full time field engineer or engineers. The Lessee shall pay to
the Port Authority for the services of said engineer or engineers
the sum of Four Hundred Forty Dollars and No Cents ($440.00) for
each day or part thereof that the engineer or engineers are so
assigned. Nothing contained herein shall affect any of the
provisions of subparagraph (f) hereof or the rights of the Port
Authority hereunder. This agreement for the services of said
field engineer may be revoked at any time by either party on
thirty (30) days' written notice to the other.
(d) The By-pass Corridor Construction Work shall be
constructed in such a manner that there will be at all times a
minimum of air pollution, water pollution or any other type of
pollution and a minimum of noise emanating from, arising out of
or resulting from the operation, use or maintenance of any
portion thereof by the Lessee and from the operations of the
Lessee under the Lease. Accordingly, and in addition to all other
obligations imposed on the Lessee under the Lease, as hereby
amended, and without diminishing, limiting, modifying or
affecting any of the same, the Lessee shall be obligated to
construct as part of the Bypass Corridor Construction Work
hereunder such structures, fences, equipment, devices and other
facilities as may be necessary or appropriate to accomplish the
foregoing and each of the foregoing shall be and become a part of
the By-pass Corridor Construction Work it affects and all of the
foregoing shall be covered under the plans and specifications of
Lessee submitted hereunder and shall be part of the By-pass
Corridor Construction Work hereunder.
(e) Title to the By-pass Corridor Construction Work
which is located within the territorial limits of the City of
Newark shall pass to the City of Newark as the same or any part
thereof is erected upon or under or affixed to the land or to any
existing structures and said By-pass Corridor Construction Work
(including without limitation the By-pass Corridor) shall be and
become part of the premises under the Lease. Title to such part,
if any, of the By-pass Corridor Construction Work which is
located within the territorial limits of the City of Elizabeth
shall vest in the Port Authority as the same or any part of
thereof is erected upon or under or affixed to the land or to any
existing structures and said By-pass Corridor Construction Work
(including without limitation the By-pass Corridor) shall be and
become part of the premises under the Lease.
(f) (l) When the By-pass Corridor Construction Work
is substantially completed and ready for use, the Lessee shall
advise the Port Authority to such effect and shall deliver to the
Port Authority a certificate signed by an authorized officer of
the Lessee and also signed by the Lessee's licensed architect or
engineer certifying that the By-pass Corridor Construction Work
has been constructed strictly in accordance with the Construction
Application and the approved plans and specifications and the
provisions of the Lease, as hereby amended, and in compliance
with all applicable laws, ordinances and governmental rules,
regulations and orders. Thereafter, the By-pass Corridor
Construction Work will be inspected by the Port Authority and if
the same has been completed as certified by the Lessee and the
Lessee's licensed architect or engineer, as aforesaid, a
certificate to such effect shall be delivered to the Lessee,
subject to the condition that all risks thereafter with respect
to the construction and installation of the same and any
liability therefor for negligence or other reason shall be borne
by the Lessee. It is understood and agreed, however, that the
Lessee shall not use or permit the use of the Bypass Corridor
Construction Work or any portion thereof unless and until such
certificate is received from the Port Authority and the Lessee
shall not use or permit the use of the By-pass Corridor
Construction Work even if such certificate is received if the
Port Authority states in such certificate that the same cannot be
used until other work is completed by the Lessee.
(2) The term "Completion Date" for the purposes
of this Agreement shall mean the date appearing on the aforesaid
certificate issued by the Port Authority pursuant to subparagraph
(1) above after the substantial completion of the By-pass
Corridor Construction Work.
2. (a)-(1) As used herein: the term the "Cost of the By-
pass Corridor Construction Work" shall mean the sum of the
following actually paid by the Lessee (including all amounts paid
directly by the Port Authority to the Lessee's contractors as may
be elected by the Port Authority under subparagraph (c) (2) (ii)
below) to the extent that the inclusion of the same is permitted
by generally accepted accounting principles consistently applied:
(i) amounts actually paid or incurred by the
Lessee to its independent contractor(s) for work actually
performed and labor and materials actually furnished in
connection with the By-pass Corridor Construction Work; and
(ii) amounts actually paid and costs incurred by
the Lessee in connection with the By-pass Corridor Construction
Work for engineering, architectural, professional and consulting
services and supervision of construction for the By-pass Corridor
Construction Work; provided, however, that payments under this
item (ii) shall not exceed fifteen percent (15%) of the amounts
paid under item (i) above.
(2) Each reimbursement payment made by the Port
Authority to the Lessee for the Cost of the By-pass Corridor
Construction Work pursuant to subparagraph (c) of this Paragraph
2 and each direct payment paid directly by the Port Authority to
the Lessee's contractors for the Cost of the By-pass Corridor
Construction Work, as may be elected by the Port Authority
pursuant to subparagraph (c)(2)(ii) below, is referred to herein
as a "Construction Payment".
(b) It is specifically understood and agreed that
notwithstanding anything to the contrary herein, all costs and
expenses of the By-pass Corridor Construction Work shall be borne
solely by the Lessee without payment or reimbursement by the Port
Authority except to the extent provided for herein with respect
to, and properly included in a Construction Payment, and subject
to the limitation set forth in subparagraph (d) below.
(c) (1) The Port Authority shall make Construction
Payments for the Cost of the By-pass Corridor Construction Work,
as follows: On the twentieth day of the calendar month following
the full execution of this Supplemental Agreement by the Port
Authority and the Lessee and on the twentieth day of each
calendar month thereafter up to and including the calendar month
in which the last certificate described hereunder is delivered to
the Port Authority by the Lessee, the Lessee shall deliver to the
Port Authority a certificate which shall be signed by a
responsible fiscal officer of the Lessee, sworn to before a
notary public and which shall set forth a representation by the
Lessee that it will apply the Construction Payment only to the
Cost of the By-pass Corridor Construction Work and for no other
purpose whatsoever. Each such certificate shall certify the sum
of (i) the amounts of actual payments made by the Lessee and the
amounts due and payable from the Lessee to its contractors
(itemized by name and amount) for work actually performed and
labor and materials actually furnished for the By-pass Corridor
Construction Work; and (ii) the amounts of actual payments made
by the Lessee and the amounts due and payable from the Lessee in
connection with the By-pass Corridor Construction Work for
engineering, architectural, professional and consulting services
and supervision of construction (it being understood that, with
respect to the Cost of the By-pass Corridor Construction Work,
that payments under this item (ii) shall not exceed fifteen
percent (15%) of the amounts paid under item (i) above and shall
only apply to payments not included in a prior certificate). Any
Construction Payment by the Port Authority which may exceed the
limitation set forth in (ii) above shall be promptly refunded to
the Port Authority upon demand. Each such certificate for the By-
pass Corridor Construction Work shall also set forth all due and
payable amounts included by the Lessee in previous certificates
against which a Construction Payment has been made by the Port
Authority and which have been paid by the Lessee since the
submission of each such previous certificate and shall have
attached thereto or included thereon such verification as shall
be required by the Port Authority that such amounts have been
paid. Notwithstanding the foregoing, no Construction Payment
shall be made by the Port Authority until all due and payable
amounts included on all previously submitted certificates have
been paid by the Lessee and the payment thereof verified to the
satisfaction of the Port Authority (unless such amounts are being
withheld by the Lessee in accordance with the provision of sub-
paragraph (c)(3) below, and the amount of such withheld amount
shall have been deducted from the amount of a Construction
Payment). Each such certificate shall also set forth, in
reasonable detail, the amounts paid or due and payable to
specified independent contractors and the amounts paid or due and
payable to other specified persons and third parties which have
not previously been reported in certificates delivered to the
Port Authority. Each such certificate shall also (x) have
attached thereto reproduction copies or duplicate originals of
the invoices of the contractor(s) of the Lessee and for such
invoices an acknowledgment by the contractor(s) of the receipt by
them of such amounts and payments; (y) certify that the amounts,
payments and expenses therein set forth constitute portions of
the Cost of the By-pass Corridor Construction Work; and (z)
contain the Lessee's certification that the work for which a
Construction Payment is requested has been accomplished, and that
the amounts requested have been paid or are due and payable. Each
such certificate shall also set forth the total cumulative
payments made by the Lessee as aforesaid from the commencement of
the By-pass Corridor Construction Work to the date of the
certificate, and each such certificate shall also contain a
certification by the Lessee that each portion of the By-pass
Corridor Construction Work covered by said certificate has been
performed strictly in accordance with the terms of the Lease, as
hereby amended.
(2) (i) Within thirty (30) days after delivery of a duly
submitted certificate by the Lessee, the Port Authority shall
make a Construction Payment to the Lessee or, as provided in item
(ii) below, directly to the Lessee's contractors for the Cost of
the By-pass Corridor Construction Work during the period covered
by such certificate, as certified in such certificate (but only
to the extent that such amounts or any portion thereof have not
theretofore been included in a prior certificate). It is
understood that at the election of the Port Authority no
Construction Payment will be made if the Port Authority's
inspection, review or audit does not substantiate the contents of
any of said certificates and until such matters have been
resolved to the satisfaction of the Port Authority, but the Port
Authority shall have no obligation to conduct any such inspection
or audit at such time. The certificate shall also contain such
further information and documentation with respect to the Cost of
the Bypass Corridor Construction Work as the Port Authority from
time to time may require. It is hereby expressly understood and
agreed that nothing herein shall be or be deemed to be for the
benefit of any contractor of the Lessee.
(ii) After the delivery of each of the duly submitted
certificates by the Lessee to the Port Authority containing all
of the certifications and verifications in accordance with the
foregoing provisions of this subparagraph (c), the Port Authority
shall also have the right to elect, in its sole discretion, from
time to time to make any or all of the Construction Payments, or
portions thereof, called for under this subparagraph (c) directly
to any of the Lessee's independent contractors, as applicable; it
being expressly understood and agreed, without limiting any other
provision of this Paragraph 2, that each of the Lessee's
certificates to be delivered hereunder shall contain an
appropriate breakdown of costs separately listed for each of the
Lessee's independent contractors. In the event the Port Authority
elects to make any such direct Construction Payment or Payments
to the Lessee's independent contractor(s) each such Construction
Payment shall be deemed to have been made to the Lessee and to
the extent of such payment by the Port Authority, the Port
Authority shall be released of such obligation to the Lessee. The
Port Authority shall send the Lessee at the time of making such
direct payment a notice thereof setting forth the name of the
contractor to whom such payment was made and the amount of such
payment.
(3) The Lessee shall set forth in its final
certificate submitted pursuant to this subparagraph (c) its final
statement of the Cost of the By-pass Corridor Construction Work
and shall mark such statement "Final". The Lessee shall submit
said final certificate to the Port Authority no later than (i)
March 31, 1997, or (ii) a date which is sixty days following the
Completion Date, whichever is earlier; the date of said final
certificate being herein called the "Final Date". After
submitting said final certificate, Lessee shall submit no further
certificate hereunder with respect to the Cost of the By-pass
Corridor Construction Work.
(d) The entire obligation of the Port Authority under
this Supplemental Agreement to reimburse the Lessee for the Cost
of the By-pass Corridor Construction Work (including Construction
Payments made to the Lessee and Construction Payments made
directly to the Lessee's contractors) shall be limited in amount
to a total of One Million Dollars and No Cents ($1,000,000.00) to
be paid pursuant to certificates of the Lessee submitted in
accordance with subparagraph (c) above no later than the Final
Date.
(e) The Port Authority shall have the right by its
agents, employees and representatives to audit and inspect during
regular business hours after the submission of the final
certificate called for in subparagraph (c) hereof, the books and
records and other data of the Lessee relating to the Cost of the
By-pass Corridor Construction Work as aforesaid; it being
specifically understood that the Port Authority shall not be
bound by any prior audit, review or inspection conducted by it.
The Lessee agrees to keep such books, records and other data
within the Port of New York District, but the Lessee shall not be
required to maintain any such books, records and other data for
more than five (5) years after it has delivered the final
certificate called for under subparagraph (c) above.
3. As hereby amended, all the terms, provisions, covenants
and conditions of the Lease shall continue in full force and
effect.
4. The Lessee represents and warrants that no broker has
been concerned in the negotiation of this Agreement and that
there is no broker who is or may be entitled to be paid a
commission in connection therewith. The Lessee shall indemnify
and save harmless the Port Authority of and from all claims for
commission or brokerage made by any and all persons, firms or
corporations whatsoever for services in connection with the
negotiation or execution of this Agreement.
5. Neither the Commissioners of the Port Authority nor any
of them nor any officer, agent or employee thereof, shall be
charged personally by the Lessee with any liability, or held
liable to the Lessee under any term or provision of this
Agreement, or because of its execution or attempted execution, or
because of any breach, or attempted or alleged breach thereof.
6. This Agreement together with the Lease to which it is
supplementary constitutes the entire agreement between the Port
Authority and the Lessee on the subject matter, and may not be
changed, modified, discharged or extended except by an instrument
in writing duly executed on behalf of both the Port Authority and
the Lessee. The Lessee agrees that no representations or
warranties shall be binding upon the Port Authority unless
expressed in writing in the Lease or in this Agreement.
IN WITNESS WHEREOF, the Port Authority and the Lessee have
executed these presents as of the date first written above.
ATTEST THE PORT AUTHORITY OF NEW YORK
AND NEW JERSEY
__________________________ By: _______________________________
Secretary
(Title): __________________________
ATTEST: CONTINENTAL AIRLINES, INC.
___________________________ By: _______________________________
Secretary
(Title): __________________________
<PAGE>
SCHEDULE E
AFFIRMATIVE ACTION-EQUAL OPPORTUNITY - MINORITY
BUSINESS ENTERPRISES - WOMEN-OWNED BUSINESS
ENTERPRISES REQUIREMENTS
PART I. Affirmative Action Guidelines - Equal Employment
Opportunity
I. As a matter of policy, the Port Authority hereby
requires the Lessee and the Lessee shall require the Contractor,
s hereinafter defined, to comply with the provisions set forth in
this Schedule E and Paragraph 1 (c)(20) of this Agreement. The
provisions set forth in this Part I are similar to the conditions
for bidding on federal government contracts adopted by the Office
of Federal Contract Compliance effective May 8, 1978.
The Lessee, as well as each bidder, contractor and
subcontractor of the Lessee and each subcontractor of a
contractor at any tier of construction (herein collectively
referred to as the "Contractor"), must fully comply with the
following conditions set forth herein as to each construction
trade to be used on the construction work or any portion thereof
(said conditions being herein called the "Bid Conditions"). The
Lessee hereby commits itself to the goals for minority and female
utilization set forth below and all other requirements, terms and
conditions of the Bid Conditions. The Lessee shall likewise
require the Contractor to commit itself to said goals for
minority and female utilization set forth below and all other
requirements, terms and conditions of the Bid Conditions by
submitting a properly signed bid.
II. The Lessee and the Contractor shall each appoint an
executive of their respective companies to assume responsibility
for the implementation of the requirements, terms and conditions
of the following Bid Conditions:
(a) The goals for minority and female participation,
expressed in percentage terms for the Contractor's aggregate work
force in each trade on all construction work, are as follows:
(1) Minority participation:
Minority, except laborers 30%
Minority, laborers 40%
(2) Female participation:
Female, except laborers 6.9%
Female, laborers 6.9%
These goals are applicable to all the Contractor's
construction work performed in and for the premises.
The Contractor's specific affirmative action obligations
required herein of minority and female employment and training
must be substantially uniform throughout the length of the
contract, and in each trade, and the Contractor shall make good
faith efforts to employ minorities and women evenly on each of
its projects. The transfer of minority or female employees or
trainees from contractor to contractor or from project to project
for the sole purpose of meeting the Contractor's goals shall be a
violation of the contract. Compliance with the goals will be
measured against the total work hours performed.
(b) The Contractor shall provide written notification to
the Lessee and the Lessee shall provide written notification to
the Manager of the Office of Business and Job Opportunity of the
Port Authority within ten (10) working days of awarding any
construction subcontract in excess of Ten Thousand Dollars and No
Cents ($10,000.00) at any tier for construction work. The
notification shall list the name, address and telephone number of
the sub-contractor; the employer identification number; the
estimated starting and completion dates of the subcontract; and
the geographical area in which the subcontract is to be
performed.
(c) As used in these specifications:
(1) "Employer identification number" means the
Federal Social Security number used on the Employer's Quarterly
Federal Tax Return, U.S. Treasury Department Form 941.
(2) "Minority" includes:
(i) Black (all persons having origins in any of
the Black African racial groups not of Hispanic origin);
(ii) Hispanic (all persons of Mexican, Puerto
Rican, Dominican, Cuban, Central or South American culture or
origin, regardless of race);
(iii) Asian and Pacific Islander (all persons
having origins in any of the original peoples of the Far East,
Southeast Asia, the Indian Subcontinent or the Pacific Islands);
and
(iv) American Indian or Alaskan Native (all
persons having origins in any of the original peoples of North
America and maintaining identifiable tribal affiliations through
membership and participation or community identification).
(d) Whenever the Contractor, or any subcontractor at any
tier, subcontracts a portion of the construction work involving
any construction trade, it shall physically include in each
subcontract in excess of Ten Thousand Dollars and No Cents
($10,000.00) those provisions which include the applicable goals
for minority and female participation.
(e) The Contractor shall implement the specific
affirmative action standards provided in subparagraphs (1)
through (16) of paragraph (II)(h) of Part I hereof. The goals set
forth above are expressed as percentages of the total hours of
employment and training of minority and female utilization the
Contractor should reasonably be able to achieve in each
construction trade in which it has employees in the premises. The
Contractor is expected to make substantially uniform progress
toward its goals in each craft during the period specified.
(f) Neither the provisions of any collective bargaining
agreement, nor the failure by a union with whom the Contractor
has a collective bargaining agreement to refer either minorities
or women shall excuse the Contractor's obligations hereunder.
(g) In order for the nonworking training hours of
apprentices and trainees to be counted in meeting the goals, such
apprentices and trainees must be employed by the Contractor
during the training period, and the Contractor must have made a
commitment to employ the apprentices and trainees at the
completion of their training subject to the availability of
employment opportunities. Trainees must be trained pursuant to
training programs approved by the Department of Labor.
(h) The Contractor shall take specific affirmative actions
to ensure equal employment opportunity ("EEO").
The evaluation of the Contractor's compliance with these
provisions shall be based upon its good faith efforts to achieve
maximum results from its actions. The Contractor shall document
these efforts fully, and shall implement affirmative action steps
at least as extensive as the following:
(1) Ensure and maintain a working environment free of
harassment, intimidation and coercion at all sites, and in all
facilities at which the Contractor's employees are assigned to
work. The Contractor, where possible, will assign two (2) or more
women to each phase of the construction project. The Contractor
shall specifically ensure that all foremen, superintendents and
other supervisory personnel at the premises are aware of and
carry out the Contractor's obligation to maintain such a working
environment, with specific attention to minority or female
individuals working at the premises.
(2) Establish and maintain a current list of minority and
female recruitment sources, provide written notification to
minority and female recruitment sources and to community
organizations when the Contractor or its unions have employment
opportunities available and maintain a record of the
organizations' responses.
(3) Maintain a current file of the names, addresses and
telephone numbers of each minority and female off-the-street
applicant and minority or female referral from a union, a
recruitment source or community organization and of what action
was taken with respect to each such individual. If such
individual was sent to the union hiring hall for referral and was
not referred back to the Contractor by the union or, if referred,
was not employed by the Contractor, this shall be documented in
the file with the reason therefor, along with whatever additional
actions the Contractor may have taken.
(4) Provide immediate written notification to the Lessee
when the union(s) with which the Contractor has a collective
bargaining agreement have not referred to the Contractor a
minority person or woman sent by the Contractor, or when the
Contractor has other information that the union referral process
has impeded the Contractor's efforts to meet its obligations.
(5) Develop on-the-job training opportunities and/or
participate in training programs for the area which expressly
include minorities and women, including upgrading programs and
apprenticeship and training programs relevant to the Contractor's
employment needs, especially those programs funded or approved by
the Department of Labor. The Contractor shall provide notice of
these programs to the sources compiled pursuant to subparagraph
(2) of paragraph II (h) of Part I hereof.
(6) Disseminate the Contractor's EEO policy by providing
notice of the policy to unions and training programs and
requesting their cooperation in assisting the Contractor in
meeting its EEO obligations; by including said policy in any
policy manual and collective bargaining agreement; by publicizing
said policy in the Contractor's newspaper, annual report, etc.;
by specific review of the policy with all management personnel
and with all minority and female employees at least once a year;
and by posting the Contractor's EEO policy on bulletin boards
accessible to all employees at each location where construction
work is performed.
(7) Review, at least every six (6) months, the Contractors
EEO policy and affirmative action obligations hereunder with all
employees having any responsibility for hiring, assignment,
layoff, termination or other employment decisions including
specific review of these items with onpremises supervisory
personnel such as Superintendents, General Foremen, etc., prior
to the initiation of construction work at the premises. A written
record shall be made and maintained identifying the time and
place of these meetings, persons attending, subject matter
discussed and disposition of the subject matter.
(8) Disseminate the Contractor's EEO policy externally by
including it in any advertising in the news media, specifically
including minority and female news media, and providing written
notification to and discussing the Contractor's EEO policy with
other Contractors and Subcontractors with whom the Contractor
does or anticipates doing business.
(9) Direct its recruitment efforts, both oral and written,
to minority, female and community organizations, to schools with
minority and female students and to minority and female
recruitment and training organizations and to State-certified
minority referral agencies serving the Contractor's recruitment
area and employment needs. Not later than one (1) month prior to
the date for the acceptance of applications for apprenticeship or
other training by any recruitment source, the Contractor shall
send written notification to organizations such as the above,
describing the openings, screening procedures and tests to be
used in the selection process.
(10) Encourage present minority and female employees to
recruit other minority persons and women and, where reasonable,
provide after school, summer and vacation employment to minority
and female youth both on the premises and in other areas of a
Contractor's work force.
(11) Tests and other selection requirements shall comply
with 41 CFR Part 60-3.
(12) Conduct, at least every six (6) months, an inventory
and evaluation at least of all minority and female personnel for
promotional opportunities and encourage these employees to seek
or prepare for such opportunities through appropriate training,
etc.
(13) Ensure that seniority practices, job classifications,
work assignments and other personnel practices do not have a
discriminatory effect by continually monitoring all personnel and
employment related activities to ensure that the EEO policy and
the Contractor's obligations hereunder are being carried out.
(14) Ensure that all facilities and company activities are
nonsegregated except that separate or single user toilet and
necessary changing facilities shall be provided to assure privacy
between the sexes.
(15) Document and maintain a record of all solicitations of
offers for subcontracts from minority and female construction
contractors and suppliers, including circulation of solicitations
to minority and female contractor associations and other business
associations.
(16) Conduct a review, at least every six (6) months, of
all supervisors' adherence to and performance under the
Contractor's EEO policies and affirmative action obligations.
(i) Contractors are encouraged to participate in voluntary
associations which assist in fulfilling one or more of their
affirmative action obligations (subparagraphs (1)-(16) of
paragraph (II)(h) of Part I above). The efforts of a contractor
association, joint contractor-union, contractor-community or
other similar group of which the Contractor is a member and
participant, may be asserted as fulfilling any one or more of its
obligations under paragraph (II)(h) of Part I hereof provided
that the Contractor: actively participates in the group, makes
good faith efforts to assure that the group has a positive impact
on the employment of minorities and women in the industry,
ensures that the concrete benefits of the program are reflected
in the Contractor's minority and female work force participation,
makes good faith efforts to meet its individual goals and
timetables, and can provide access to documentation which
demonstrates the effectiveness of actions taken on behalf of the
Contractor. The obligation to comply, however, is the
Contractor's and failure of such a group to fulfill an obligation
shall not be a defense for the Contractor's non-compliance.
(j) A single goal for minorities and a separate single
goal for women have been established. The Contractor, however, is
required to provide equal employment opportunity and to take
affirmative action for all minority groups, both male and female,
and all women, both minority and non-minority. Consequently, the
Contractor may be in violation hereof if a particular group is
employed in a substantially disparate manner (for example, even
though the Contractor has achieved its goals for women generally,
the Contractor may be in violation hereof if a specific minority
group of women is underutilized).
(k) The Contractor shall not use the goals and timetables
or affirmative action standards to discriminate against any
person because of race, color, religion, sex or national origin.
(l) The Contractor shall not enter into any subcontract
with any person or firm debarred from Government contracts
pursuant to Executive Order 11246.
(m) The Contractor shall carry out such sanctions and
penalties for violation of this clause including suspension,
termination and cancellation of existing subcontracts as may be
imposed or ordered by the Lessee. Any Contractor who fails to
carry out such sanctions and penalties shall be in violation
hereof.
(n) The Contractor, in fulfilling its obligations
hereunder, shall implement specific affirmative action steps, at
least as extensive as those standards prescribed in paragraph
(II)(h) of Part I hereof, as to achieve maximum results from its
efforts to ensure equal employment opportunity. If the Contractor
fails to comply with the requirements of these provisions, the
Lessee shall proceed accordingly.
(o) The Contractor shall designate a responsible official
to monitor all employment related activity to ensure that the
company EEO policy is being carried out, to submit reports
relating to the provisions hereof as may be required and to keep
records. Records shall at the least include for each employee the
name, address, telephone numbers, construction trade, union
affiliation if any, employee identification number when assigned,
social security- number, race, sex, status (e.g., mechanical
apprentice, trained, helper or laborer), dates of changes in
status, hours worked per week in the indicated trade, rate of pay
and location at which the work was performed. Records shall be
maintained in an easily understandable and retrievable form;
however, to the degree that existing records satisfy this
requirement, contractors shall not be required to maintain
separate records.
(p) Nothing herein provided shall be construed as a
limitation upon the application of any laws which establish
different standards of compliance or upon the application of
requirements for the hiring of local or other area residents
(e.g., those under the Public Works Employment Act of 1977 and
the Community Development Block Grant Program).
(q) Without limiting any other obligation, term or
provision under the Lease, the Contractor shall cooperate with
all federal, state and local agencies established for the purpose
of implementing affirmative action compliance programs and shall
comply with all procedures and guidelines established or which
may be established by the Port Authority.
PART III. MINORITY BUSINESS ENTERPRISES/WOMEN-OWNED BUSINESS
ENTERPRISES
As a matter of policy, the Port Authority requires the
Lessee and the Lessee shall itself and shall require the general
contractor or other construction supervisor and each of the
Lessee's contractors to use every good faith effort to provide
for meaningful participation by Minority Business Enterprises and
Women-owned Business Enterprises in the construction work
pursuant to the provisions of this Schedule E. For purposes
hereof, Minority Business Enterprise ("MBE") shall mean any
business enterprise at least fifty-one percent (51%) of which is
owned by, or in the case of a publicly owned business, at least
fifty-one percent (51%) of the stock of which is owned by
citizens or permanent resident aliens who are minorities and such
ownership is real, substantial and continuing. For the purposes
hereof, Women-owned Business Enterprise ("WBE") shall mean any
business enterprise at least fifty-one percent (51%) of which is
owned by, or in the case of a publicly owned business, at least
fifty-one percent (51%) of the stock of which is owned by women
and such ownership is real, substantial and continuing. A
minority shall be as defined in paragraph II(c) of Part I of this
Schedule E. "Meaningful participation" shall mean that at least
seventeen percent (17%) of the total dollar value of the
construction contracts (including subcontracts) covering the
construction work are for the participation of MBEs and WBEs, of
which at least twelve percent (12%) are for the participation of
MBEs and five percent (5%) for WBE's. Good faith efforts to
include meaningful participation by MBEs and WBEs shall include
at least the following:
(a) Dividing the work to be subcontracted into smaller
portions where feasible.
(b) Actively and affirmatively soliciting bids for
subcontracts from MBEs and WBEs, including circulation of
solicitations to minority and female contractor associations. The
Contractor shall maintain records detailing the efforts made to
provide for meaningful MBE and WBE participation in the work,
including the names and addresses of all MBEs and WBEs contacted
and, if any such ABE or WBE is not selected as a joint venturer
or subcontractor, the reason for such decision.
(c) Making plans and specifications for prospective
construction work available to MBEs and WBEs in sufficient time
for review.
(d) Utilizing the list of eligible MBEs and WBEs
maintained by the Port Authority or seeking minorities and women
from other sources for the purpose of soliciting bids for
subcontractors.
(e) Encouraging the formation of joint ventures,
partnerships or other similar arrangements among subcontractors,
where appropriate, to insure that the Lessee and Contractor will
meet their obligations hereunder.
(f) Insuring that provision is made to provide progress
payments to MBEs and WBEs on a timely basis.
(g) Not requiring bonds from and/or providing bonds and
insurance for MBEs and WBEs, where appropriate.
_______________________________
For the Port Authority
Initialed:
_______________________________
For the Lessee
Exhibit 10.10(d)
FOURTH AMENDMENT TO
CONTINENTAL AIRLINES, INC.
1994 INCENTIVE EQUITY PLAN
RESOLVED, that pursuant to paragraph 15 of the Company's 1994
Incentive Equity Plan, as amended, such Plan be and hereby is
amended such that the penultimate paragraph of paragraph 11 of such
Plan shall read in its entirety as follows:
"Upon the occurrence of a Change in Control, with respect to
each Participant, (AA) all Stock Options granted to such
Participant and outstanding at such time shall immediately
vest and become exercisable in full (but subject, however, in
the case of ISOs, to the aggregate fair market value,
determined as of the date the ISOs are granted, of the stock
with respect to which ISOs are exercisable for the first time
by such Participant during any calendar year not exceeding
$100,000) and, except as required by law, all restrictions on
the transfer of shares acquired pursuant to such Stock Options
shall terminate and (BB) all restrictions applicable to such
Participant's Restricted Stock shall be deemed to have been
satisfied and such Restricted Stock shall vest in full."
Exhibit 10.10(e)
EMPLOYEE STOCK OPTION GRANT
PURSUANT TO THE TERMS OF THE
CONTINENTAL AIRLINES, INC.
1994 INCENTIVE EQUITY PLAN
Grant of Stock Option. Continental Airlines, Inc., a Delaware
corporation ("Company"), hereby grants to
("Optionee") the right, privilege and option as herein
set forth (the "Stock Option") to purchase up to _______
(__________) shares (the "Shares") of Class B common stock, $.01
par value per share, of Company ("Common Stock"), in accordance
with the terms of this document. The Shares, when issued to
Optionee upon the exercise of the Stock Option, shall be fully paid
and nonassessable. The Stock Option is granted pursuant to and to
implement in part the Continental Airlines, Inc. 1994 Incentive
Equity Plan (as amended and in effect from time to time, the
"Plan") and is subject to the provisions of the Plan, which is
hereby incorporated herein and is made a part hereof, as well as
the provisions of this document. By acceptance of the Stock
Option, Optionee agrees to be bound by all of the terms,
provisions, conditions and limitations of the Plan and this Stock
Option. All capitalized terms have the meanings set forth in the
Plan unless otherwise specifically provided. All references to
specified paragraphs pertain to paragraphs of this Stock Option
unless otherwise provided. The Stock Option is not intended to
qualify as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Option Term. Subject to earlier termination as
provided herein, the Stock Option shall terminate on _________. The
period during which the Stock Option is in effect is referred to as
the "Option Period".
3. Option Exercise Price. The exercise price (the "Option
Price") of the Shares subject to the Stock Option shall be $__.__
per Share (which is the Market Value per Share on the date hereof).
4. Vesting. Subject to the following provisions of this
Paragraph 4, the total number of Shares subject to this Stock
Option shall vest in _________________ percent (_______%)
increments on each of _________, _________ and _________ The
vested Shares that may be acquired under the Stock Option may be
purchased at any time after they become vested, in whole or in
part, during the Option Period. In addition, the total number of
Shares subject to this Stock Option shall become exercisable upon
the occurrence of one of the events as described in Paragraph 6(c)
or 6(d).
5. Method of Exercise. To exercise the Stock Option,
Optionee shall deliver written notice to Company (to the attention
of the Secretary of the Company) stating the number of Shares with
respect to which the Stock Option is being exercised together with
payment for such Shares. Payment shall be made (i) in cash or by
check acceptable to Company, (ii) provided that Optionee can do so
without incurring liability under Section 16(b) of the Securities
Exchange Act of 1934, as amended, in nonforfeitable, unrestricted
shares of Company's Common Stock owned by Optionee at the time of
exercise of the Stock Option having an aggregate Market Value at
the date of exercise equal to the aggregate Option Price per Share
so paid for or (iii) by a combination of (i) and (ii). In
addition, at the request of Optionee, and to the extent permitted
by applicable law and subject to Paragraph 15, the Stock Option may
be exercised pursuant to a "cashless exercise" arrangement with any
brokerage firm approved by the Administrator or its delegate under
which arrangement such brokerage firm, on behalf of Optionee, shall
pay to Company the exercise price of the Options being exercised,
and Company, pursuant to an irrevocable notice from Optionee, shall
promptly after receipt of the exercise price deliver the shares
being purchased to such firm.
6. Termination of Employment. Voluntary or involuntary
termination of employment, retirement, death or Disability of
Optionee, or occurrence of a Change in Control, shall affect
Optionee's rights under the Stock Option as follows:
(a) Involuntary Termination for Gross Misconduct.
The Stock Option shall terminate immediately and shall not be
exercisable if Optionee's employment (defined below) is
terminated involuntarily for gross misconduct (defined below).
(b) Other Involuntary Termination or Voluntary
Termination. If Optionee's employment is terminated
involuntarily other than for gross misconduct or if Optionee
voluntarily terminates employment, then immediately (i) the
Stock Option shall terminate as to Shares subject thereto to
the extent not yet then vested pursuant to Paragraph 4, (ii)
the Stock Option shall terminate as to all remaining Shares
subject thereto to the extent not exercised pursuant to
Paragraph 5 within 30 days after such termination of
employment and (iii) all restrictions (other than those
described in Paragraph 10) on transfer of Shares acquired
pursuant to the Stock Option shall terminate.
(c) Change in Control. If a Change in Control shall
occur, then immediately (i) the Stock Option shall become
exercisable in full, whether or not otherwise exercisable, and
(ii) all restrictions (other than those described in Paragraph
10) on transfer of Shares acquired pursuant to the Stock
Option shall terminate.
(d) Retirement, Death or Disability. If Optionee's
employment is terminated by retirement, death or Disability,
then immediately (i) the Stock Option shall become exercisable
in full, whether or not otherwise exercisable, for a term of
one year thereafter by Optionee or, in the case of death, by
the person or persons to whom Optionee's rights under the
Stock Option shall pass by will or by the applicable laws of
descent and distribution, or in the case of Disability, by
Optionee's personal representative, and (ii) all restrictions
(other than those described in Paragraph 10) on transfer of
Shares acquired pursuant to the Stock Option shall terminate.
However, in no event may any Stock Option be exercised by
anyone after the earlier of (y) the expiration of the Option
Period or (z) one year after Optionee's death, retirement,
Disability, or involuntary termination (described above).
(e) Definitions. For purposes of the Stock Option,
"employment" means employment by Company or a Subsidiary. In
this regard, neither the transfer of a Participant from
employment by Company to employment by a Subsidiary nor the
transfer of a Participant from employment by a Subsidiary to
employment by Company shall be deemed to be a termination of
employment of the Participant. Moreover, the employment of a
Participant shall not be deemed to have been terminated
because of absence from active employment on account of
temporary illness or during authorized vacation or during
temporary leaves of absence from active employment granted by
Company or a Subsidiary for reasons of professional
advancement, education, health, or government service, or
during military leave for any period if the Participant
returns to active employment within 90 days after the
termination of military leave, or during any period required
to be treated as a leave of absence by virtue of any valid law
or agreement. "Gross misconduct" means such misconduct,
dishonesty, wilful and repeated disobedience or other action
or inaction as might reasonably be expected to injure Company
or any of its Subsidiaries or its or their business interests
or reputation. The Administrator's determination in good
faith regarding whether a termination of employment or gross
misconduct has occurred shall be conclusive and determinative.
7. Reorganization of Company and Subsidiaries. The
existence of the Stock Option shall not affect in any way the right
or power of Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other
changes in Company's capital structure or its business, or any
merger or consolidation of Company or any issue of bonds,
debentures, preferred or prior preference stock ahead of or
affecting the Shares or the rights thereof, or the dissolution or
liquidation of Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
8. Adjustment of Shares. In the event of stock
dividends, spin-offs of assets or other extraordinary dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of rights
or warrants and similar transactions or events involving Company,
appropriate adjustments shall be made to the terms and provisions
of this Stock Option, in the same manner as is provided for
adjustments to the terms and provisions of the warrants issued by
Company to Air Canada and to Air Partners, L.P. under the Warrant
Agreement dated as of April 27, 1993.
9. No Rights in Shares. Optionee shall have no rights as
a stockholder in respect of Shares until such Optionee becomes the
holder of record of such Shares.
10. Certain Restrictions. By exercising the Stock Option,
Optionee agrees that if at the time of such exercise the sale of
Shares issued hereunder is not covered by an effective registration
statement filed under the Securities Act of 1933 ("Act"), Optionee
will acquire the Shares for Optionee's own account and without a
view to resale or distribution in violation of the Act or any other
securities law, and upon any such acquisition Optionee will enter
into such written representations, warranties and agreements as
Company may reasonably request in order to comply with the Act or
any other securities law or with this document. Optionee agrees
that Company shall not be obligated to take any affirmative action
in order to cause the issuance or transfer of Shares hereunder to
comply with any law, rule or regulation that applies to the Shares
subject to the Stock Option.
11. Shares Reserved. Company shall at all times during the
Option Period reserve and keep available such number of Shares as
will be sufficient to satisfy the requirements of this Stock
Option.
12. Nontransferability of Option. The Stock Option granted
pursuant to this document is not transferable other than by will,
the laws of descent and distribution or by qualified domestic
relations order. The Stock Option will be exercisable during
Optionee's lifetime only by Optionee or by Optionee's guardian or
legal representative. No right or benefit hereunder shall in any
manner be liable for or subject to any debts, contracts,
liabilities, or torts of Optionee.
13. Amendment and Termination. No amendment or termination
of the Stock Option shall be made by the Board or the Administrator
at any time without the written consent of Optionee. No amendment
or termination of the Plan will adversely affect the rights,
privileges and option of Optionee under the Stock Option without
the written consent of Optionee.
14. No Guarantee of Employment. The Stock Option shall not
confer upon Optionee any right with respect to continuance of
employment or other service with Company or any Subsidiary, nor
shall it interfere in any way with any right Company or any
Subsidiary would otherwise have to terminate such Optionee's
employment or other service at any time.
15. Withholding of Taxes. Company shall have the right to
(i) make deductions from the number of Shares otherwise deliverable
upon exercise of the Stock Option in an amount sufficient to
satisfy withholding of any federal, state or local taxes required
by law, or (ii) take such other action as may be necessary or
appropriate to satisfy any such tax withholding obligations.
16. No Guarantee of Tax Consequences. Neither Company nor
any Subsidiary nor the Administrator makes any commitment or
guarantee that any federal or state tax treatment will apply or be
available to any person eligible for benefits under the Stock
Option.
17. Severability. In the event that any provision of the
Stock Option shall be held illegal, invalid, or unenforceable for
any reason, such provision shall be fully severable, but shall not
affect the remaining provisions of the Stock Option, and the Stock
Option shall be construed and enforced as if the illegal, invalid,
or unenforceable provision had never been included herein.
18. Governing Law. The Stock Option shall be construed in
accordance with the laws of the State of Texas to the extent
federal law does not supersede and preempt Texas law.
Executed as of the ____ day of ____, 199_.
"COMPANY"
CONTINENTAL AIRLINES, INC.
By Order of the Administrator
By:______________________________
Printed Name:____________________
Title:___________________________
Accepted as of the ____ day of ____, 199_.
"OPTIONEE"
_________________________________
Printed Name:____________________
Exhibit 10.10(f)
OUTSIDE DIRECTOR STOCK OPTION GRANT
PURSUANT TO THE TERMS OF THE
CONTINENTAL AIRLINES, INC.
1994 INCENTIVE EQUITY PLAN
1. Grant of Option. Continental Airlines, Inc., a
Delaware corporation ("Company"), hereby grants to
_______________ ("Optionee") the right, privilege and option as
herein set forth (the "Outside Director Stock Option") to
purchase _________ shares (the "Shares") of Class B common stock,
$.01 par value per share, of Company ("Common Stock"), in
accordance with the terms of this document. The Shares, when
issued to Optionee upon the exercise of the Outside Director
Stock Option, shall be fully paid and nonassessable. The Outside
Director Stock Option is granted pursuant to and to implement in
part the Continental Airlines, Inc. 1994 Incentive Equity Plan
(as amended from time to time, the "Plan") and is subject to the
provisions of the Plan, which is hereby incorporated herein and
made a part hereof, as well as the provisions of this document.
By acceptance of the Outside Director Stock Option, Optionee
agrees to be bound by all of the terms, provisions, conditions
and limitations of the Plan as implemented by the Outside
Director Stock Option. All capitalized terms have the meanings
set forth in the Plan unless otherwise specifically provided.
All references to specified paragraphs pertain to paragraphs of
this Outside Director Stock Option unless otherwise specifically
provided. The Outside Director Stock Option is not intended to
qualify as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Option Term. Subject to earlier termination as
provided herein or in the Plan, the Outside Director Stock Option
shall terminate on the date that is the tenth anniversary of the
Date of Grant of the Outside Director Stock Option, which tenth
anniversary shall be ___________. The period during which the
Outside Director Stock Option is in effect is referred to as the
"Option Period".
3. Option Exercise Price. The exercise price (the
"Option Price") of the Shares subject to the Outside Director
Stock Option shall be $__.__ per Share (the closing sales price
of the Common Stock on _________, the Date of Grant).
4. Date Exercisable. This Outside Director Stock Option
shall become exercisable on the date immediately following the
Date of Grant.
5. Method of Exercise. To exercise the Outside Director
Stock Option, Optionee shall deliver written notice to Company
stating the number of Shares with respect to which the Outside
Director Stock Option is being exercised together with payment
for such Shares. Payment shall be made in cash or by check
acceptable to Company.
6. Termination of Board Service. The Outside Director
Stock Option shall terminate on, and may not be exercised after
the earlier of (i) the date that is one year after termination of
Optionee's service on the Board for any reason and (ii) the
expiration of the Option Period.
7. Reorganization of Company and Subsidiaries. The
existence of the Outside Director Stock Option shall not affect
in any way the right or power of Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in Company's capital structure
or its business, or any merger or consolidation of Company or any
issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Shares or the rights thereof, or the
dissolution or liquidation of Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
8. Adjustment of Shares. In the event of stock
dividends, spin-offs of assets or other extraordinary dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of
rights or warrants and similar transactions or events involving
Company, appropriate adjustments shall be made to the terms and
provisions of this Outside Director Stock Option, in the same
manner as is provided for adjustments to the terms and provisions
of the warrants issued by Company to Air Canada and to Air
Partners, L.P. under the Warrant Agreement dated as of April 27,
1993.
9. No Rights in Shares. Optionee shall have no rights as
a stockholder in respect of Shares until such Optionee becomes
the holder of record of such Shares.
10. Certain Restrictions. By exercising the Outside
Director Stock Option, Optionee agrees that if at the time of
such exercise the sale of Shares issued hereunder is not covered
by an effective registration statement filed under the Securities
Act of 1933 ("Act"), Optionee will acquire the Shares for
Optionee's own account and without a view to resale or
distribution in violation of the Act or any other securities law,
and upon any such acquisition Optionee will enter into such
written representations, warranties and agreements as Company may
reasonably request in order to comply with the Act or any other
securities law or with this document. Optionee agrees that
Company shall not be obligated to take any affirmative action in
order to cause the issuance or transfer of Shares hereunder to
comply with any law, rule or regulation that applies to the
Shares subject to the Outside Director Stock Option.
11. Shares Reserved. Company shall at all times during
the Option Period reserve and keep available such number of
Shares as will be sufficient to satisfy the requirements of this
Outside Director Stock Option.
12. Nontransferability of Option. The Outside Director
Stock Option granted pursuant to this document is not
transferable other than by will, the laws of descent and
distribution or by qualified domestic relations order. The
Outside Director Stock Option will be exercisable during
Optionee's lifetime only by Optionee or by Optionee's guardian or
legal representative. No right or benefit hereunder shall in any
manner be liable for or subject to any debts, contracts,
liabilities, or torts of Optionee.
13. Amendment and Termination. No amendment or
termination of the Outside Director Stock Option shall be made by
the Board or the Committee at any time without the written
consent of Optionee. No amendment or termination of the Plan
will adversely affect the rights, privileges and options of
Optionee under the Outside Director Stock Option without the
written consent of Optionee.
14. No Guarantee of Board Service. The Outside Director
Stock Option shall not confer upon Optionee any right with
respect to continuance of service on the Board, nor shall it
interfere in any way with any right to terminate such Optionee's
Board service.
15. Withholding of Taxes. Company shall have the right to
(i) make deductions from the number of Shares otherwise
deliverable upon exercise of the Outside Director Stock Option in
an amount sufficient to satisfy withholding of any federal, state
or local taxes required by law, or (ii) take such other action as
may be necessary or appropriate to satisfy any such tax
withholding obligations.
16. No Guarantee of Tax Consequences. Neither Company nor
any Subsidiary nor the Committee makes any commitment or
guarantee that any federal or state tax treatment will apply or
be available to any person eligible for benefits under the
Outside Director Stock Option.
17. Severability. In the event that any provision of the
Outside Director Stock Option shall be held illegal, invalid, or
unenforceable for any reason, such provision shall be fully
severable, but shall not affect the remaining provisions of the
Outside Director Stock Option and the Outside Director Stock
Option shall be construed and enforced as if the illegal,
invalid, or unenforceable provision had never been included
herein.
18. Governing Law. The Outside Director Stock Option
shall be construed in accordance with the laws of the State of
Texas to the extent federal law does not supersede and preempt
Texas law.
Executed this ____ day of ____, 199_.
"COMPANY"
CONTINENTAL AIRLINES, INC.
By:______________________________
Name:
Title:
Accepted as of the ____ day of ____, 199_.
"OPTIONEE"
_______________________________
Name:
Exhibit 10.10(g)
RESTRICTED STOCK GRANT
PURSUANT TO THE TERMS OF THE
CONTINENTAL AIRLINES, INC.
1994 INCENTIVE EQUITY PLAN
1. Grant of Restricted Shares. Continental Airlines,
Inc., a Delaware corporation ("Company"), hereby grants to
___________ ("Participant") all rights, title and interest in the
record and beneficial ownership of _________________ (__________)
shares (the "Restricted Shares") of Class B common stock, $.01
par value per share, of Company ("Common Stock") subject to the
conditions described in Paragraphs 4 and 5 as well as the other
provisions of this grant of Restricted Stock (the "Restricted
Stock Grant"). The Restricted Shares are granted pursuant to and
to implement in part the Continental Airlines, Inc. 1994
Incentive Equity Plan (as amended and in effect from time to
time, the "Plan") and are subject to the provisions of the Plan,
which is hereby incorporated herein and is made a part hereof, as
well as the provisions of this document. By acceptance of the
Restricted Stock Grant, Participant agrees to be bound by all of
the terms, provisions, conditions and limitations of the Plan and
this Restricted Stock Grant. All capitalized terms have the
meanings set forth in the Plan unless otherwise specifically
provided. All references to specified paragraphs pertain to
paragraphs of this Restricted Stock Grant unless otherwise
specifically provided.
2. Custody of Restricted Shares. Upon satisfaction of the
vesting conditions set forth in Paragraph 4 or the occurrence of
any of the events contemplated by Paragraph 5(b) or 5(c), Company
shall issue and deliver to Participant a certificate or
certificates for such number of Restricted Shares as are required
to be issued and delivered under the Restricted Stock Grant.
Prior to the satisfaction of such vesting conditions or the
occurrence of such events, the Restricted Shares are not
transferable and shall be held in trust or in escrow pursuant to
an agreement satisfactory to the Administrator until such time as
the restrictions on their transfer have expired. No right or
benefit hereunder shall in any manner be liable for or subject to
any debts, contracts, liabilities, or torts of Participant.
3. Risk of Forfeiture. Subject to Paragraphs 5(b) and
5(c), should Participant's employment (defined below) with
Company and any Subsidiaries terminate prior to any of the
vesting dates set forth in Paragraph 4, Participant shall forfeit
the right to receive the Restricted Shares that would otherwise
have vested on such dates.
4. Vesting Dates. Subject to Paragraph 5, the Restricted
Shares subject to this Restricted Stock Grant shall vest in
_________________ percent (_______%) increments on each of
_________, _________ and _________.
5. Termination of Employment. Voluntary or involuntary
termination of employment, retirement, death or Disability of
Participant, or occurrence of a Change in Control, shall affect
Participant's rights under this Restricted Stock Grant as
follows:
(a) Voluntary or Involuntary Termination. If, other
than as specified below, Participant voluntarily terminates
employment (defined below) or if Participant's employment is
terminated involuntarily, then Participant shall forfeit the
right to receive all Restricted Shares that have not
theretofore vested pursuant to Paragraph 4.
(b) Change in Control. If a Change in Control shall
occur, then immediately all nonvested Restricted Shares
shall fully vest, all restrictions (other than those
described in Paragraph 9) applicable to such Restricted
Shares shall terminate and Company shall release from escrow
or trust and shall issue and deliver to Participant a
certificate or certificates for all Restricted Shares.
(c) Retirement, Death or Disability. If Participant's
employment is terminated by retirement, death or Disability,
then immediately all nonvested Restricted Shares shall be
deemed fully vested, all restrictions (other than described
in Paragraph 9) applicable to Restricted Shares shall
terminate and Company shall release from escrow or trust and
shall issue and deliver to Participant a certificate or
certificates for all Restricted Shares.
(d) Definition of Employment. For purposes of the
Restricted Stock Grant, "employment" means employment by
Company or a Subsidiary. In this regard, neither the
transfer of a Participant from employment by Company to
employment by a Subsidiary nor the transfer of a Participant
from employment by a Subsidiary to employment by Company
shall be deemed to be a termination of employment of
Participant. Moreover, the employment of a Participant
shall not be deemed to have been terminated because of
absence from active employment on account of temporary
illness or during authorized vacation or during temporary
leaves of absence from active employment granted by Company
or a Subsidiary for reasons of professional advancement,
education, health, or government service, or during military
leave for any period if Participant returns to active
employment within 90 days after the termination of military
leave, or during any period required to be treated as a
leave of absence by virtue of any valid law or agreement.
The Administrator's determination in good faith regarding
whether a termination of employment of any type has occurred
shall be conclusive and determinative.
6. Ownership Rights.Subject to the restrictions set forth
herein and subject to Paragraph 8, Participant is entitled to all
voting and ownership rights applicable to the Restricted Shares,
including the right to receive any cash dividends that may be
paid on Restricted Shares, whether or not vested.
7. Reorganization of Company and Subsidiaries. The
existence of the Restricted Stock Grant shall not affect in any
way the right or power of Company or its stockholders to make or
authorize any or all adjustments, recapitalizations,
reorganizations or other changes in Company's capital structure
or its business, or any merger or consolidation of Company or any
issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Restricted Shares or the rights
thereof, or the dissolution or liquidation of Company, or any
sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar
character or otherwise.
8. Recapitalization Events. In the event of stock
dividends, spin-offs of assets or other extraordinary dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of
rights or warrants and similar transactions or events involving
Company ("Recapitalization Events"), then for all purposes
references herein to Common Stock or to Restricted Shares shall
mean and include all securities or other property (other than
cash) that holders of Common Stock of Company are entitled to
receive in respect of Common Stock by reason of each successive
Recapitalization Event, which securities or other property (other
than cash) shall be treated in the same manner and shall be
subject to the same restrictions as the underlying Restricted
Shares.
9. Certain Restrictions. By accepting the Restricted
Stock Grant, Participant agrees that if at the time of delivery
of certificates for Restricted Shares issued hereunder any sale
of such Shares of Common Stock is not covered by an effective
registration statement filed under the Securities Act of 1933
(the "Act"), Participant will acquire the Restricted Shares for
Participant's own account and without a view to resale or
distribution in violation of the Act or any other securities law,
and upon any such acquisition Participant will enter into such
written representations, warranties and agreements as Company may
reasonably request in order to comply with the Act or any other
securities law or with this document.
10. Amendment and Termination. No amendment or termination
of the Restricted Stock Grant shall be made by the Board or the
Administrator at any time without the written consent of
Participant. No amendment or termination of the Plan will
adversely affect the right, title and interest of Participant
under the Restricted Stock Grant or to Restricted Shares granted
thereunder without the written consent of Participant.
11. No Guarantee of Employment. The Restricted Stock Grant
shall not confer upon Participant any right with respect to
continuance of employment or other service with Company or any
Subsidiary, nor shall it interfere in any way with any right
Company or any Subsidiary would otherwise have to terminate such
Participant's employment or other service at any time.
12. Withholding of Taxes. Company shall have the right to
(i) make deductions from the number of Restricted Shares
otherwise deliverable upon satisfaction of the conditions
precedent under the Restricted Stock Grant (and other amounts
payable under the Restricted Stock Grant) in an amount sufficient
to satisfy withholding of any federal, state or local taxes
required by law, or (ii) take such other action as may be
necessary or appropriate to satisfy any such tax withholding
obligations.
13. No Guarantee of Tax Consequences. Neither Company nor
any Subsidiary nor the Administrator makes any commitment or
guarantee that any federal or state tax treatment will apply or
be available to any person eligible for benefits under the
Restricted Stock Grant.
14. Severability. In the event that any provision of the
Restricted Stock Grant shall be held illegal, invalid, or
unenforceable for any reason, such provision shall be fully
severable, but shall not affect the remaining provisions of the
Restricted Stock Grant and the Restricted Stock Grant shall be
construed and enforced as if the illegal, invalid, or
unenforceable provision had never been included herein.
15. Governing Law. The Restricted Stock Grant shall be
construed in accordance with the laws of the State of Texas to
the extent federal law does not supersede and preempt Texas law.
Executed as of the _____ day of _____, 199_.
"COMPANY"
CONTINENTAL AIRLINES, INC.
By Order of the Administrator
By:__________________________
Printed Name:
Title:
Accepted as of the _____ day of _____, 199_.
"PARTICIPANT"
_____________________________
Printed Name:
Exhibit 10.11(a)
FIRST AMENDMENT TO
CONTINENTAL AIRLINES, INC.
1997 STOCK INCENTIVE PLAN
RESOLVED, that pursuant to Section X of the Company's 1997 Stock
Incentive Plan, such Plan be and hereby is amended such that the
penultimate paragraph of Section IX(c) of such Plan shall read in
its entirety as follows:
"Upon the occurrence of a Change in Control, with respect to
each recipient of an Award hereunder, (AA) all Options
granted to such recipient and outstanding at such time shall
immediately vest and become exercisable in full (but
subject, however, in the case of Incentive Stock Options, to
the aggregate fair market value, determined as of the date
the Incentive Stock Options are granted, of the stock with
respect to which Incentive Stock Options are exercisable for
the first time by such recipient during any calendar year
not exceeding $100,000) and, except as required by law, all
restrictions on the transfer of shares acquired pursuant to
such Options shall terminate and (BB) all restrictions
applicable to such recipient's Restricted Stock shall be
deemed to have been satisfied and such Restricted Stock
shall vest in full."
Exhibit 10.11(b)
STOCK OPTION AGREEMENT
(PURSUANT TO THE TERMS OF THE
CONTINENTAL AIRLINES, INC.
1997 STOCK INCENTIVE PLAN)
This STOCK OPTION AGREEMENT (this "Option Agreement") is
between Continental Airlines, Inc., a Delaware corporation
("Company"), and __________ ("Optionee"), and is dated as of the
date set forth immediately above the signatures below.
1. Grant of Option. The Company hereby grants to
Optionee the right, privilege and option as herein set forth (the
"Option") to purchase up to ___________ (_____) shares (the
"Shares") of Class B common stock, $.01 par value per share, of
Company ("Common Stock"), in accordance with the terms of this
Option Agreement. The Shares, when issued to Optionee upon the
exercise of the Option, shall be fully paid and nonassessable.
The Option is granted pursuant to and to implement in part the
Continental Airlines, Inc. 1997 Stock Incentive Plan (as amended
and in effect from time to time, the "Plan") and is subject to
the provisions of the Plan, which is hereby incorporated herein
and is made a part hereof, as well as the provisions of this
Option Agreement. Optionee agrees to be bound by all of the
terms, provisions, conditions and limitations of the Plan and
this Option Agreement. All capitalized terms have the meanings
set forth in the Plan unless otherwise specifically provided.
All references to specified paragraphs pertain to paragraphs of
this Option Agreement unless otherwise provided. The Option is
not intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code")
2. Option Term. Subject to earlier termination as
provided herein, the Option shall terminate on ____________. The
period during which the Option is in effect is referred to as the
"Option Period".
3. Option Exercise Price. The exercise price (the
"Option Price") of the Shares subject to the Option shall be
$__.__ per Share (which is the Market Value per Share on the date
hereof).
4. Vesting. Subject to the following provisions of this
Paragraph 4, the total number of Shares subject to this Option
shall vest in __________________________ percent (______%)
increments on each of _____________, _____________ and ________
____. The vested Shares that may be acquired under the Option
may be purchased at any time after they become vested, in whole
or in part, during the Option Period. In addition, the total
number of Shares subject to this Option shall become exercisable
upon the occurrence of one of the events as described in
Paragraph 6(c) or 6(d).
5. Method of Exercise. To exercise the Option, Optionee
shall deliver an irrevocable written notice to Company (to the
attention of the Secretary of the Company) stating the number of
Shares with respect to which the Option is being exercised
together with payment for such Shares. Payment shall be made (i)
in cash or by check acceptable to Company, (ii) in
nonforfeitable, unrestricted shares of Company's Common Stock
owned by Optionee at the time of exercise of the Option having an
aggregate market value (measured by the Market Value per Share)
at the date of exercise equal to the aggregate exercise price of
the Option being exercised or (iii) by a combination of (i) and
(ii). In addition, at the request of Optionee, and to the extent
permitted by applicable law and subject to Paragraph 15, the
Option may be exercised pursuant to a "cashless exercise"
arrangement with any brokerage firm approved by the Administrator
or its delegate under which arrangement such brokerage firm, on
behalf of Optionee, shall pay to Company the exercise price of
the Options being exercised, and Company, pursuant to an
irrevocable notice from Optionee, shall promptly after receipt of
the exercise price deliver the shares being purchased to such
firm.
6. Termination of Employment. Voluntary or involuntary
termination of employment, retirement, death or Disability of
Optionee, or occurrence of a Change in Control, shall affect
Optionee's rights under the Option as follows:
(a) Involuntary Termination for Gross Misconduct.
The Option shall terminate immediately and shall not be
exercisable if Optionee's employment (defined below) is
terminated involuntarily for gross misconduct (defined below).
(b) Other Involuntary Termination or Voluntary
Termination. If Optionee's employment is terminated
involuntarily other than for gross misconduct or if Optionee
voluntarily terminates employment, then immediately (i) the
Option shall terminate as to Shares subject thereto to the
extent not yet then vested pursuant to Paragraph 4 or not
then exercisable pursuant to Paragraph 6(c) below, (ii) the
Option shall terminate as to all remaining Shares subject
thereto to the extent not exercised pursuant to Paragraph 5
within 30 days after such termination of employment (or, as
to Shares for which the Option may then be exercised
pursuant to Paragraph 6(c) below, to the extent not
exercised within the 30 day period described therein) and
(iii) all restrictions (other than those described in
Paragraph 10) on transfer of Shares acquired pursuant to the
Option shall terminate.
(c) Change in Control. If a Change in Control shall
occur, then immediately (i) the Option shall become
exercisable in full, whether or not otherwise exercisable,
and (ii) all restrictions (other than those described in
Paragraph 10) on transfer of Shares acquired pursuant to the
Option shall terminate.
(d) Retirement, Death or Disability. If Optionee's
employment is terminated by retirement, death or Disability,
then immediately (i) the Option shall become exercisable in
full, whether or not otherwise exercisable, for a term of
one year thereafter by Optionee or, in the case of death, by
the person or persons to whom Optionee's rights under the
Option shall pass by will or by the applicable laws of
descent and distribution, or in the case of Disability, by
Optionee's personal representative, and (ii) all
restrictions (other than those described in Paragraph 10) on
transfer of Shares acquired pursuant to the Option shall
terminate. However, in no event may any Option be exercised
by anyone after the earlier of (y) the expiration of the
Option Period or (z) one year after Optionee's death,
retirement or Disability (described above).
Definitions. For purposes of the Option,
"employment" means employment by Company or a subsidiary (as
the term "subsidiary" is defined in the Plan). In this
regard, neither the transfer of a Participant from
employment by Company to employment by a subsidiary nor the
transfer of a Participant from employment by a subsidiary to
employment by Company shall be deemed to be a termination of
employment of the Participant. Moreover, the employment of
a Participant shall not be deemed to have been terminated
because of absence from active employment on account of
temporary illness or during authorized vacation or during
temporary leaves of absence from active employment granted
by Company or a subsidiary for reasons of professional
advancement, education, health, or government service, or
during military leave for any period if the Participant
returns to active employment within 90 days after the
termination of military leave, or during any period required
to be treated as a leave of absence by virtue of any valid
law or agreement. "Gross misconduct" means such misconduct,
dishonesty, wilful and repeated disobedience or other
action or inaction as might reasonably be expected to injure
Company or any of its subsidiaries or its or their business
interests or reputation. The Administrator's determination
in good faith regarding whether a termination of employment,
gross misconduct or Disability has occurred shall be
conclusive and determinative.
7. Reorganization of Company and Subsidiaries. The
existence of the Option shall not affect in any way the right or
power of Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other
changes in Company's capital structure or its business, or any
merger or consolidation of Company or any issue of bonds,
debentures, preferred or prior preference stock ahead of or
affecting the Shares or the rights thereof, or the dissolution or
liquidation of Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
8. Adjustment of Shares. In the event of stock
dividends, spin-offs of assets or other extraordinary dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of
rights or warrants and similar transactions or events involving
Company, appropriate adjustments shall be made to the terms and
provisions of this Option, in the same manner as is provided for
adjustments to the terms and provisions of the warrants issued by
Company to Air Canada and to Air Partners, L.P. under the Warrant
Agreement dated as of April 27, 1993.
9. No Rights in Shares. Optionee shall have no rights as
a stockholder in respect of Shares until such Optionee becomes
the holder of record of such Shares.
10. Certain Restrictions. By exercising the Option,
Optionee agrees that if at the time of such exercise the sale of
Shares issued hereunder is not covered by an effective
registration statement filed under the Securities Act of 1933
("Act"), Optionee will acquire the Shares for Optionee's own
account and without a view to resale or distribution in violation
of the Act or any other securities law, and upon any such
acquisition Optionee will enter into such written
representations, warranties and agreements as Company may
reasonably request in order to comply with the Act or any other
securities law or with this Option Agreement. Optionee agrees
that Company shall not be obligated to take any affirmative
action in order to cause the issuance or transfer of Shares
hereunder to comply with any law, rule or regulation that applies
to the Shares subject to the Option.
11. Shares Reserved. Company shall at all times during
the Option Period reserve and keep available such number of
Shares as will be sufficient to satisfy the requirements of this
Option.
12. Nontransferability of Option. The Option granted
pursuant to this Option Agreement is not transferable other than
by will, the laws of descent and distribution or by qualified
domestic relations order. The Option will be exercisable during
Optionee's lifetime only by Optionee or by Optionee's guardian or
legal representative. No right or benefit hereunder shall in any
manner be liable for or subject to any debts, contracts,
liabilities, or torts of Optionee.
13. Amendment and Termination. No amendment or
termination of the Option shall be made by the Board or the
Administrator at any time without the written consent of
Optionee. No amendment or termination of the Plan will adversely
affect the rights, privileges and option of Optionee under the
Option without the written consent of Optionee.
14. No Guarantee of Employment. The Option shall not
confer upon Optionee any right with respect to continuance of
employment or other service with Company or any subsidiary, nor
shall it interfere in any way with any right Company or any
subsidiary would otherwise have to terminate such Optionee's
employment or other service at any time.
15. Withholding of Taxes. Company shall have the right to
(i) make deductions from the number of Shares otherwise
deliverable upon exercise of the Option in an amount sufficient
to satisfy withholding of any federal, state or local taxes
required by law, or (ii) take such other action as may be
necessary or appropriate to satisfy any such tax withholding
obligations.
16. No Guarantee of Tax Consequences. Neither Company nor
any subsidiary nor the Administrator makes any commitment or
guarantee that any federal or state tax treatment will apply or
be available to any person eligible for benefits under the
Option.
17. Severability. In the event that any provision of the
Option shall be held illegal, invalid, or unenforceable for any
reason, such provision shall be fully severable, but shall not
affect the remaining provisions of the Option, and the Option
shall be construed and enforced as if the illegal, invalid, or
unenforceable provision had never been included herein.
18. Governing Law. The Option shall be construed in
accordance with the laws of the State of Delaware to the extent
federal law does not supersede and preempt Delaware law.
IN WITNESS WHEREOF, the parties have entered into this
Option Agreement as of the _________ of _______, 1997.
"COMPANY"
CONTINENTAL AIRLINES, INC.
By Order of the Administrator
By:_____________________________
Name:
Title:
"OPTIONEE"
________________________________
Name:
Exhibit 10.11(c)
OUTSIDE DIRECTOR STOCK OPTION AGREEMENT
(PURSUANT TO THE TERMS OF THE
CONTINENTAL AIRLINES, INC.
1997 STOCK INCENTIVE PLAN)
This STOCK OPTION AGREEMENT (this "Option Agreement") is between
Continental Airlines, Inc., a Delaware corporation ("Company"),
and _______________ ("Optionee"), and is dated as of the date set
forth immediately above the signatures below.
1. Grant of Option. The Company hereby grants to
Optionee the right, privilege and option as herein set forth (the
"Option") to purchase up to _____________ (_____) shares (the
"Shares") of Class B common stock, $.01 par value per share, of
Company ("Common Stock"), in accordance with the terms of this
Option Agreement. The Shares, when issued to Optionee upon the
exercise of the Option, shall be fully paid and nonassessable.
The Option is granted pursuant to and to implement in part the
Continental Airlines, Inc. 1997 Stock Incentive Plan (as amended
and in effect from time to time, the "Plan") and is subject to
the provisions of the Plan, which is hereby incorporated herein
and is made a part hereof, as well as the provisions of this
Option Agreement. Optionee agrees to be bound by all of the
terms, provisions, conditions and limitations of the Plan and
this Option Agreement. All capitalized terms have the meanings
set forth in the Plan unless otherwise specifically provided.
All references to specified paragraphs pertain to paragraphs of
this Option Agreement unless otherwise provided. The Option is
not intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. Option Term. Subject to earlier termination as
provided herein, the Option shall terminate on ______________.
The period during which the Option is in effect is referred to as
the "Option Period".
3. Option Exercise Price. The exercise price (the "Option
Price") of the Shares subject to the Option shall be $_______ per
Share (which is the Market Value per Share on the date hereof).
4. Vesting. The total number of Shares subject to this
Option shall vest immediately upon the grant hereof.
5. Method of Exercise. To exercise the Option, Optionee
shall deliver an irrevocable written notice to Company (to the
attention of the Secretary of the Company) stating the number of
Shares with respect to which the Option is being exercised
together with payment for such Shares. Payment shall be made (i)
in cash or by check acceptable to Company, (ii) in
nonforfeitable, unrestricted shares of Company's Common Stock
owned by Optionee at the time of exercise of the Option having an
aggregate market value (measured by the Market Value per Share)
at the date of exercise equal to the aggregate exercise price of
the Option being exercised or (iii) by a combination of (i) and
(ii). In addition, at the request of Optionee, and to the extent
permitted by applicable law and subject to Paragraph 15, the
Option may be exercised pursuant to a "cashless exercise"
arrangement with any brokerage firm approved by the Administrator
or its delegate under which arrangement such brokerage firm, on
behalf of Optionee, shall pay to Company the exercise price of
the Options being exercised, and Company, pursuant to an
irrevocable notice from Optionee, shall promptly after receipt of
the exercise price deliver the shares being purchased to such
firm.
6. Termination of Board Service. The Option shall
terminate on, and may not be exercised after the earlier of (i)
the date that is one year after termination of Optionee's service
on the Board for any reason and (ii) the expiration of the Option
Period.
7. Reorganization of Company and Subsidiaries. The
existence of the Option shall not affect in any way the right or
power of Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other
changes in Company's capital structure or its business, or any
merger or consolidation of Company or any issue of bonds,
debentures, preferred or prior preference stock ahead of or
affecting the Shares or the rights thereof, or the dissolution or
liquidation of Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
8. Adjustment of Shares. In the event of stock
dividends, spin-offs of assets or other extraordinary dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of
rights or warrants and similar transactions or events involving
Company, appropriate adjustments shall be made to the terms and
provisions of this Option, in the same manner as is provided for
adjustments to the terms and provisions of the warrants issued by
Company to Air Canada and to Air Partners, L.P. under the Warrant
Agreement dated as of April 27, 1993.
9. No Rights in Shares. Optionee shall have no rights as
a stockholder in respect of Shares until such Optionee becomes
the holder of record of such Shares.
10. Certain Restrictions. By exercising the Option,
Optionee agrees that if at the time of such exercise the sale of
Shares issued hereunder is not covered by an effective
registration statement filed under the Securities Act of 1933
("Act"), Optionee will acquire the Shares for Optionee's own
account and without a view to resale or distribution in violation
of the Act or any other securities law, and upon any such
acquisition Optionee will enter into such written
representations, warranties and agreements as Company may
reasonably request in order to comply with the Act or any other
securities law or with this Option Agreement. Optionee agrees
that Company shall not be obligated to take any affirmative
action in order to cause the issuance or transfer of Shares
hereunder to comply with any law, rule or regulation that applies
to the Shares subject to the Option.
11. Shares Reserved. Company shall at all times during the
Option Period reserve and keep available such number of Shares as
will be sufficient to satisfy the requirements of this Option.
12. Nontransferability of Option. The Option granted
pursuant to this Option Agreement is not transferable other than
by will, the laws of descent and distribution or by qualified
domestic relations order. The Option will be exercisable during
Optionee's lifetime only by Optionee or by Optionee's guardian or
legal representative. No right or benefit hereunder shall in any
manner be liable for or subject to any debts, contracts,
liabilities, or torts of Optionee.
13. Amendment and Termination. No amendment or termination
of the Option shall be made by the Board or the Administrator at
any time without the written consent of Optionee. No amendment
or termination of the Plan will adversely affect the rights,
privileges and option of Optionee under the Option without the
written consent of Optionee.
14. No Guarantee of Board Service. The Option shall not
confer upon Optionee any right with respect to continuance of
service on the Board, nor shall it interfere in any way with any
right to terminate Optionee's Board service at any time.
15. Withholding of Taxes. Company shall have the right to
(i) make deductions from the number of Shares otherwise
deliverable upon exercise of the Option in an amount sufficient
to satisfy withholding of any federal, state or local taxes
required by law, or (ii) take such other action as may be
necessary or appropriate to satisfy any such tax withholding
obligations.
16. No Guarantee of Tax Consequences. Neither Company nor
any subsidiary nor the Administrator makes any commitment or
guarantee that any federal or state tax treatment will apply or
be available to any person eligible for benefits under the
Option.
17. Severability. In the event that any provision of the
Option shall be held illegal, invalid, or unenforceable for any
reason, such provision shall be fully severable, but shall not
affect the remaining provisions of the Option, and the Option
shall be construed and enforced as if the illegal, invalid, or
unenforceable provision had never been included herein.
18. Governing Law. The Option shall be construed in
accordance with the laws of the State of Delaware to the extent
federal law does not supersede and preempt Delaware law.
IN WITNESS WHEREOF, the parties have entered into this
Option Agreement as of the ___ day of ______, 199_.
"COMPANY"
CONTINENTAL AIRLINES, INC.
By Order of the Administrator
By:__________________________
Name:
Title:
"OPTIONEE"
_____________________________
Name:
Exhibit 10.13(g)
Supplemental Agreement No. 10
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
October 10,1997 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 as of March 18, 1993, as amended and supplemented,
relating to Boeing Model 757-224 aircraft (the Agreement); and
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Whereas, Buyer and Boeing have mutually agreed to amend the
Agreement to incorporate the effects of these and certain other
changes;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
<PAGE>
1. Table of Contents and Articles:
Remove and replace, in its entirety, the Table of Contents
with a new Table of Contents (attached hereto) to reflect amendment
of the Agreement as of the date of this Supplemental Agreement No.
10.
2. Letter Agreements:
2.1 Remove and replace, in its entirety, Letter Agreement
1783-9, "Escalation Sharing" with Letter Agreement 1783-9R1,
"Escalation Sharing", to clarify the language which describes how
the escalation sharing will be calculated.
2.2 Remove and replace, in its entirety, Letter Agreement 6-
1162-MMF-289, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] with Letter Agreement 6-1162-MMF-289R1,
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] incorporate a change to the method used to
calculate Buyer's lease payment.
2.3 Remove and replace, in its entirety, Letter Agreement 6-
1162-WLJ-375R5, "Special Matters" with new Letter Agreement No. 6-
1162-GOC-132, "Special Matters" to incorporate the effect of a
revised business offer.
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/ Gunar O. Clem__________ By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLES Page Revised
By
<S> <C> <C> <C>
ARTICLE 1. Subject Matter of Sale.............. 1-1 SA#9
ARTICLE 2. Delivery, Title and Risk of Loss.... 2-1 SA#9
ARTICLE 3. Price of Aircraft................... 3-1 SA#9
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 SA#9
EXHIBITS
EXHIBIT A Aircraft Configuration ............. A-1 SA#8
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
Fluctuations - Airframe and Engines D-1 SA#8
<PAGE>
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]
1783-6 Configuration Matters SA#2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1783-8 Spare Parts Provisioning SA#2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1783-10R2 Option Aircraft SA#9
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-WLJ-367R5 Disclosure of Confidential Info SA#9
6-1162-WLJ-369 Additional Considerations SA#2
6-1162-WLJ-372 Conditions Relating to SA#2
Purchase Agreement
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-WLJ-391R1 Special Purchase Agreement Provisions SA#4
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
TABLE OF CONTENTS (Continued)
6-1162-WLJ-405 Certain Additional Contractual SA#2
Matters
[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 November 19, 1993
Supplemental Agreement No. 4 March 31, 1995
Supplemental Agreement No. 5 November 30, 1995
Supplemental Agreement No. 6 June 13, 1996
Supplemental Agreement No. 7 July 23, 1996
Supplemental Agreement No. 8 October 27, 1996
Supplemental Agreement No. 9 August 13, 1997
Supplemental Agreement No.10 October , 1997
</TABLE>
<PAGE>
October 10,1997
1783-9R1
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 1783-9R1 to
Purchase Agreement No. 1783 -
Escalation Sharing
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1783 dated as
of March 18, 1993, as previously amended and supplemented (the
Agreement), between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Buyer) relating to Model 757-224 aircraft (the
Aircraft). This Letter Agreement supersedes and replaces in its
entirety Letter Agreement 1783-9.
All terms used herein and in the Agreement, and not defined herein,
will have the same meaning as in the Agreement.
1. Commitment.
Boeing agrees to share one-half of the escalation up to a
maximum of 3 percent per year in each of the years 1997 and 1998,
as more fully described in paragraph 2 below, for any of Buyer's
Aircraft which are scheduled to deliver after December 31, 1996.
For the purpose of this Letter Agreement such aircraft are referred
to as "Eligible Aircraft."
All escalation calculations under this Letter Agreement will be
made in accordance with Exhibit D to the Agreement entitled "Price
Adjustment Due to Economic Fluctuations - Airframe Price
Adjustment" (hereinafter referred to as "Exhibit D"), [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT].
2. Escalation Credit Memo.
2.1 Calculation - Eligible Aircraft Delivering in 1997.
At the time of delivery of each Eligible Aircraft
delivering in 1997, Boeing will issue to Buyer a credit memorandum
(the 1997 Credit Memorandum) which shall be applied to the Purchase
Price of such Aircraft. The 1997 Credit Memorandum shall be
calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.2 Calculation - Eligible Aircraft Delivering in 1998.
At the time of delivery of each Eligible Aircraft
delivering in 1998, Boeing will issue to Buyer a credit memorandum
(the 1998 Credit Memorandum) which shall be applied to the Purchase
Price of such Aircraft. The 1998 Credit Memorandum shall be
calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.3 Eligible Aircraft Delivering after 1998.
For Eligible Aircraft delivering after the calendar
year 1998, the amount of the credit memorandum will be the amount
calculated pursuant to paragraph 2.2 above through December 1998.
This credit memorandum amount will be escalated from December 1998
to the month of delivery.
3. Advance Payment Base Price.
It is agreed that the Advance Payment Base Prices for the
Eligible Aircraft set forth in Article 3 of the Agreement includes
an estimate for the escalation sharing credit memorandum pursuant
to this Letter Agreement.
4. Escalating Credits (STE).
It is agreed that the credit memoranda specified in Letter
Agreement No. 6-1162-GOC-132, which escalate in accordance with
Exhibit D, will be calculated using the same factors used to
develop the adjusted airframe escalation pursuant to this Letter
Agreement.
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/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
6-1162-MMF-289R1
October 10, 1997
Continental Airlines, Inc.
Suite 1923
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 6-1162-MMF-289R1 to
Purchase Agreement No. 1783 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1783 (the
Agreement) between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Buyer) relating to Model 757 aircraft (the
Aircraft). This Letter Agreement supersedes and replaces in its
entirety Letter Agreement 6-1162-MMF-289 dated June 13, 1996.
All terms not defined herein 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]
5. Confidential Treatment.
Boeing and Buyer agree that certain commercial and financial
information contained in this Letter Agreement is confidential and
subject to the confidentiality provisions of Letter Agreement 6-
1162-WLJ-367R2, Disclosure of Confidential Information.
If this Letter Agreement correctly states your understanding of the
matters treated herein, please so indicate by signature below.
Very truly yours,
THE BOEING COMPANY
By: /s/ Gunar O. Clem
Its: Attorney-In-Fact
AGREED and ACCEPTED this 10th day of October, 1997.
CONTINENTAL AIRLINES, INC.
By: /s/ Brian Davis
Its: Vice President
Date: ____________________
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
<PAGE>
October 10, 1997
6-1162-GOC-132
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-GOC-132 to Purchase
Agreement No. 1783 - Special Matters
Ladies and Gentlemen:
This Letter Agreement amends and supplements Purchase Agreement No.
1783 dated as of March 18, 1993 (the Purchase Agreement) between
The Boeing Company (Boeing) and Continental Airlines, Inc. (Buyer)
relating to Model 757-224 aircraft (the Aircraft). This Letter
Agreement supersedes and replaces in its entirety Letter Agreement
6-1162-WLJ-375R5, dated August 13, 1997.
All terms used herein and in the Purchase Agreement, and not
defined herein, will have the same meaning as in the Purchase
Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
7. Maintenance Specialist Support
Boeing shall provide, on a mutually agreeable schedule, one
(1) maintenance specialist (Specialist) for a period of
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] to advise and instruct Continental
Micronesia personnel in the maintenance of 757 Aircraft. The
Specialist shall be qualified to provide advice and instruction on
757 electrical and avionics systems. The scope of duties of the
Specialist shall exclude flying on Buyer's Aircraft in any
technical capacity, performing maintenance work, and signing-off
maintenance log books or aircraft maintenance releases. The
Specialist shall be assigned to Guam to support the introduction of
the Model 757 into the Continental Micronesia fleet. The Specialist
shall be assigned to a normal work shift, but not exceed eight (8)
hours in any 24 hour period and five (5) days in any seven (7) day
period. Buyer shall reimburse Boeing for all airfares incurred in
the assignment or reassignment of the Specialist.
Buyer shall pay, or reimburse Boeing for all taxes, fees, duties,
licenses, permits and other similar requirements or expenses
incurred by Boeing or the Specialist, resulting from providing such
technical support in Guam.
The services to be provided hereunder are of the type contemplated
in paragraph 4, Part B of the Customer Support Document and such
provisions shall be applicable to Boeing's undertaking set forth
herein.
8. Confidential Treatment.
Boeing and Buyer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Notwithstanding the provisions of Letter Agreement 6-1162-WLJ-
367R4, Boeing and Buyer agree that each party will treat this
Letter Agreement and the information contained herein as
confidential and will not, without the other party's prior written
consent, disclose this Letter Agreement or any information
contained herein to any other person or entity except as may be
required by applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Exhibit 10.14(c)
Supplemental Agreement No. 3
to
Purchase Agreement No. 1951
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of July 17,
1997, 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. 1951 dated July 23, 1996, as amended and supplemented,
relating to Boeing Model 737-500, 737-600, 737-700 and 737-800
aircraft (the Agreement);
WHEREAS, Buyer has elected to install CFM56-3-B1 engines
rated at 20,000 pounds thrust on the Model 737-500 aircraft and
Boeing has revised the prices for the Special Features installed
on the Model 737-500; and
WHEREAS, Boeing and Buyer have agreed to amend the Agreement
to incorporate the effect of these and 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:
Remove and replace, in its entirety, the "Table of
Contents", with the Table of Contents attached hereto, to reflect
the changes made by this Supplemental Agreement No. 3.
2. Articles:
Remove and replace, in its entirety, "Article 3. Price of
Aircraft", with "3. Price of Aircraft" attached hereto, to
incorporate into the Agreement the price for the 20,000 pound
thrust CFM56-3-B1 engines and the revised Special Features prices
for the Model 737-524.
3. Table 1:
Remove and replace, in its entirety, the first page of
"Table 1. Aircraft Deliveries and Description" that relates to
Model 737-524 aircraft, with the revised first page to "Table 1.
Aircraft Deliveries and Description" attached hereto, to reflect
the change in price that results from the change in engine thrust
and the revision of the Special Features prices and to
incorporate the latest escalation estimates into the calculation
of the Advance Payment Base Prices.
4. Exhibits:
Remove and replace, in its entirety, Exhibit A-4, entitled
"Aircraft Configuration", with Exhibit A-4 attached hereto, to
incorporate the 20,000 pound thrust CFM56-3-B1 engine and the
revised Special Features prices into the Purchase Agreement.
5. Letter Agreements:
Remove and replace, in its entirety, Letter Agreement 6-
1162-MMF-378, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] with Letter Agreement 6-1162-MMF-
378R1, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] the effect of installing 20,000 pound
thrust CFM56-3-B1 engines on the aircraft.
The Agreement will be deemed to be supplemented to the extent
herein provided as of the date hereof and as so supplemented will
continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: /s/ Gunar O. Clem By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page SA
Number Number
<S> <C> <C> <C>
ARTICLES
1. Subject Matter of Sale. . . . . . . . . . 1-1 SA 1
2. Delivery, Title and Risk of Loss. . . . . 2-1
3. Price of Aircraft . . . . . . . . . . . . 3-1 SA 3
4. Taxes . . . . . . . . . . . . . . . . . . 4-1
5. Payment . . . . . . . . . . . . . . . . . 5-1
6. Excusable Delay . . . . . . . . . . . . . 6-1
7. Changes to the Detail Specification . . . 7-1 SA 1
8. Federal Aviation Requirements and
Certificates and Export License . . . . . 8-1 SA 1
9. Representatives, Inspection,
Flights and Test Data . . . . . . . . . . 9-1
10. Assignment, Resale or Lease . . . . . . . 10-1
11. Termination for Certain Events. . . . . . 11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance . . . . . . . . . . . . . . 12-1
13. Buyer Furnished Equipment and
Spare Parts . . . . . . . . . . . . . . . 13-1
14. Contractual Notices and Requests. . . . . 14-1
15. Miscellaneous . . . . . . . . . . . . . . 15-1
<PAGE>
TABLE OF CONTENTS
SA
Number
TABLES
1. Aircraft Deliveries and
Descriptions - 737-500. . . . . . . . . . T-1 SA 3
Aircraft Deliveries and
Descriptions - 737-700. . . . . . . . . . T-2 SA 2
Aircraft Deliveries and
Descriptions - 737-800. . . . . . . . . . T-3 SA 4
Aircraft Deliveries and
Descriptions - 737-600. . . . . . . . . . T-4 SA 4
EXHIBITS
A-1 Aircraft Configuration - Model 737-724. . SA 2
A-2 Aircraft Configuration - Model 737-824. . SA 2
A-3 Aircraft Configuration - Model 737-624. . SA 1
A-4 Aircraft Configuration - Model 737-524. . SA 3
B Product Assurance Document. . . . . . . . SA 1
C Customer Support Document - Code Two -
Major Model Differences . . . . . . . . . SA 1
C1 Customer Support Document - Code Three -
Minor Model Differences . . . . . . . . . SA 1
D Aircraft Price Adjustments - New
Generation Aircraft . . . . . . . . . . . SA 1
D1 Airframe and Engine Price Adjustments - Current
Generation Aircraft . . . . . . . . . . . SA 1
E Buyer Furnished Equipment
Provisions Document . . . . . . . . . . . SA 1
F Defined Terms Document
<PAGE>
TABLE OF CONTENTS
SA
Number
LETTER AGREEMENTS
1951-1 Not Used . . . . . . . . . . . .
1951-2R2 Seller Purchased Equipment . . . SA 2
1951-3R1 Option Aircraft-Model 737-824
Aircraft . . . . . . . . . . . . SA 1
1951-4R1 Waiver of Aircraft Demonstration SA 1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1951-6 Configuration Matters. . . . . .
1951-7R1 Spares Initial Provisioning. . . SA 1
1951-8R1 Escalation Sharing - New Generation
Aircraft . . . . . . . . . . . . SA 1
1951-9 Option Aircraft-Model 737-624 Aircraft SA 1
1951-10 Configuration matters [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] - Model 737-624
Aircraft . . . . . . . . . . . . SA 1
1951-11 Escalation Sharing-Current Generation
Aircraft . . . . . . . . . . . . SA 1
<PAGE>
TABLE OF CONTENTS
SA
Number
RESTRICTED LETTER AGREEMENTS
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-MMF-308R2 Disclosure of Confidential . SA 4
Information
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-MMF-310R2 Certain Contractual Matters. SA 4
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-MMF-312R1 Special Purchase Agreement
Provisions. . . . . . . . . SA 1
6-1162-MMF-319 Special Provisions Relating to
the Rescheduled Aircraft. .
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
SUPPLEMENTAL AGREEMENTS DATED AS OF:
Supplemental Agreement No. 1 October 10,1996
Supplemental Agreement No. 2 March 5, 1997
Supplemental Agreement No. 3 July 17, 1997
Supplemental
</TABLE>
<PAGE>
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Current Generation Aircraft.
3.1.1.1 Special Features are the features
listed in Exhibit A-4 which Buyer has selected for incorporation
in Current Generation Aircraft.
3.1.1.2 Base Airframe Price is the Aircraft
Basic Price excluding the price of Special Features and Engines.
3.1.1.3 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-1.
3.1.1.4 Aircraft Basic Price is comprised of
the Base Airframe Price, the Engine Price and the price of the
Special Features.
3.1.1.5 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airframe, Engine and
Special Features) as calculated pursuant to Exhibit D-1.
3.1.1.6 Base Airplane Price is the Aircraft
Basic Price excluding the price of Special Features, but
including Engines.
3.1.2 New Generation Aircraft
3.1.2.1 Special Features are the features
listed in Exhibits A-1, A-2 and A-3, which Buyer has selected for
incorporation in New Generation Aircraft.
3.1.2.2 Base Airplane Price is the Aircraft
Basic Price excluding the price of Special Features, but
including Engines.
3.1.2.3 Aircraft Basic Price is comprised of
the Base Airplane Price and the price of the Special Features.
3.1.2.4 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airplane and Special
Features) as calculated pursuant to Exhibit D.
3.2 Aircraft Basic Price.
3.2.1 Current Generation Aircraft:
3.2.1.1 Model 737-524 Aircraft.
The Aircraft Basic Price of each 737-
524 Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airframe Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
Engine Price SEPARATELY WITH THE
SECURITIES AND EXCHANGE
Aircraft Basic Price COMMISSION PURSUANT TO
A REQUEST FOR
CONFIDENTIAL TREATMENT]
3.2.2 New Generation Aircraft.
3.2.2.1 Model 737-624 Aircraft.
The Aircraft Basic Price of each 737-
624 Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airframe Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
SEPARATELY WITH THE
Aircraft Basic Price SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO
A REQUEST FOR
CONFIDENTIAL TREATMENT]
3.2.2.2 Model 737-724 Aircraft.
The Aircraft Basic Price of each 737-
724 Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airframe Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
SEPARATELY WITH THE
Aircraft Basic Price SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO
A REQUEST FOR
CONFIDENTIAL TREATMENT]
3.2.2.3 Model 737-824 Aircraft.
The Aircraft Basic Price of each 737-
824 Aircraft, expressed in July 1995 dollars, is set forth below:
Base Airframe Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED
SEPARATELY WITH THE
Aircraft Basic Price SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO
A REQUEST FOR
CONFIDENTIAL TREATMENT]
3.3 Aircraft Price. The total amount that Buyer is to pay
for the Aircraft at the time of delivery (Aircraft Price) will be
established at the time of delivery of such Aircraft to Buyer and
will be the sum of:
3.3.1 the Aircraft Basic Price, set forth in Table 1;
plus
3.3.2 the Economic Price Adjustments for the Aircraft
Basic Price, as calculated pursuant to the formulas set forth in
Exhibits D or D-1, as applicable; plus
3.3.3 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 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 in Table 1.
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 each affected Aircraft, Boeing
will increase or decrease the Advance Payment Base Price of such
Aircraft as required to reflect the effects of (i) any
adjustments in the Aircraft Basic 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.
<PAGE>
AIRCRAFT CONFIGURATION
Dated July 17, 1997
relating to
BOEING MODEL 737-524 AIRCRAFT
Exhibit A-4
The detail Specification is Boeing Detail Specification D6-
38606-11, Revision F dated March 1, 1996. Such Detail
Specification will be comprised of Boeing Configuration
Specification D6-38606 Revision J dated October 17, 1994 as
amended to incorporate the applicable specification language to
reflect the effect of the changes set forth in the Change
Requests listed in the Attachment to this Exhibit A-4, including
the effects of such changes on Manufacturer's Empty Weight (MEW)
and Operating Empty Weight (OEW). Such Change Requests are set
forth in Boeing Document D6-77072. As soon as practicable,
Boeing will furnish to Buyer copies of the Detail Specification,
which copies will reflect the effect of such changes. The
Aircraft Basic Price will reflect and include all effects of such
changes of price upon configuration, except such Aircraft Basic
Price will not include the price effects of Change Requests
changing Buyer Furnished Equipment to Seller Purchased Equipment.
<PAGE>
0253CG3001 [CONFIDENTIAL
CHANGE BUYER FURNISHED EQUIPMENT (BFE) TO MATERIAL
SELLER PURCHASED EQUIPMENT (SPE) OMITTED AND
FILED
1110MP3262 SEPARATELY
EXTERIOR DECORATIVE FINISH DESOTO H.S. IN WITH THE
LIEU OF CROWN METRO SECURITIES
AND EXCHANGE
1110MP3278 COMMISSION
EXTERIOR MARKINGS - LOGO REVISION PURSUANT TO A
REQUEST FOR
1110MP3398 CONFIDENTIAL
EXTERIOR DECORATIVE FINISH - REVISION TREATMENT]
1120MP3040
SPE CATERING STRIPE - WHITE DEFLECTOR TAPE
- EXTERIOR MARKING REVISION
2210CG3022
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
GLIDE SLOPE CAPTURE INHIBIT BEFORE
LOCALIZER CAPTURE
2210CG3120
DIGITAL FLIGHT CONTROL SYSTEM (DFCS) -
PADDLE AUTOPILOT ENGAGE MODE CONTROL PANEL
2311MP3241
HF - COMPLETE PROVISIONS
2312CG3038
THIRD VHF COMMUNICATIONS - INSTALLATION -
BFE COLLINS
2312CG3093
DUAL VHF COMMUNICATIONS - INSTALLATION -
BFE ROCKWELL INTERNATIONAL CORP
2312MP3491
TRIPLE VHF COMMUNICATIONS - INSTALLATION -
BFE ROCKWELL INTERNATIONAL CORP - VHF-900
DATA RADIOS IN LIEU OF VHF-700 RADIOS
2322CH3064
AIRCRAFT COMMUNICATIONS ADDRESSING AND
REPORTING SYSTEM (ACARS) - ARINC 724 -
TELEDYNE - FULL CERTIFICATION
2322CH3180
ACARS PRINTER - REPLACEMENT - BFE MILTOPE
P/N 700750-111 IN LIEU OF BFE TP-4185
2322CH3181
ACARS MANAGEMENT UNIT (MU) - ADDITIONAL
PARAMETERS
2322MP3189
AIRCRAFT COMMUNICATION ADDRESSING AND
REPORTING (ACARS) - BFE DATA LOADABLE ARINC
724 - TELEDYNE-FULL CERT W/ 3RD VHF
FULL-FORMAT
2322MP3190
PROVIDE PARTIAL PROVISIONS FOR 724 ACARS IN
LIEU OF COMPLETE INSTALLATION OF BFE UNITS
2322MP3201
ACARS - BFE MILTOPE PRINTER - INSTALLATION
2322MP3310
VOICE CAPABILITY VIA ACARS
2322MP3322
ACARS SOFTWARE REVISION - 820A IN LIEU OF - 820
2331MP3151
PASSENGER ADDRESS - PART NUMBER CHANGE FOR
COLOR, SPE
2334MP3209
AUDIO ENTERTAINMENT - PARTIAL PROVISIONS
2350CH3023
FLIGHT COMPARTMENT AUDIO MUTING REVISION -
ONE SIDE MUTING
2350CH3119
DIGITAL AUDIO CONTROL SYSTEM - HEADSET
AURAL ALERTS - DELETION
2350CH3120
INTERPHONE - BFE MICROPHONES, BOOM
MIC/HEADSETS, AND HEADPHONES - REVISION
2370MP3146
SOLID STATE VOICE RECORDER SYSTEM - SPE
LORAL FAIRCHILD
2410CG3009
CONSTANT SPEED DRIVE (CSD) AND GENERATOR -
INSTALLATION - SUNDSTRAND
2500CH3396
FLIGHT COMPARTMENT DOOR - USE OF
CONTINENTAL UNIQUE KEY
2510MP3061
INTERCHANGE OXYGEN AND AUDIO CONTROL PANELS
- FLIGHT DECK
2511CG3025
SECOND OBSERVER'S STATION
2520CH3483
INTERIOR COLORS/MATERIAL - REVISION
2520CH3484
INTERIOR ARRANGEMENT - 10 FIRST CLASS, 94
TOURIST CLASS
2520MP3511
DRAPERY P/N CHANGE (SFE)
2520MP3512
PASSENGER COMPARTMENT - FOOTWELL LINING FOR
SPE CLOSET AND SPE WINDSCREEN - REVISION
2524CH3314
PASSENGER COMPARTMENT - WINDSCREEN/STOWAGE
UNIT INSTALLATION - BFE WITH SIX INCH
FOOTWELL AND PROVISIONS FOR WHEELCHAIR
STOWAGE
2524CH3315
PASSENGER COMPARTMENT - BFE 22 INCH DEEP
CLOSET, UNDERBIN AND SEAT TRACK MOUNTED,
WITH 6 INCH FOOTWELL, AFT OF GALLEY G2 -
2524MP3367
CLASS DIVIDER - DELETION OF SEAT TRACK
MOUNTED JOGGLED CLASS DIVIDER
2524MP3417
CLASS DIVIDER - SPE DRIESSEN - INSTALLATION
2525MP3120
INTERIOR ARRANGEMENT REVISION
2525MP3194
SPE KOITO PASSENGER SEATS IN LIEU OF SPE BE
AEROSPACE PASSENGER SEATS - INSTALLATION
2527MP3098
CHANGE IN CARPET/ENTRY MAT
2527MP3100
CARPET REVISION - BFE IN LIEU OF SFE
2528MP3174
LITERATURE POCKETS - SPE MCGEE PLASTICS IN
LIEU OF BOEING STANDARD - REVISION
2529MP3139
SFE ATTENDANT SEAT COVER MATERIAL AND COLOR
- REVISION
2530MP3456
INSTALLATION OF ASSIST HANDLES, GALLEYS G1
AND G2
2530MP3457
G1 GALLEY OVEN DELETION (SPE)
2530MP3458
GALLEY CHANGES (SPE), 1/2 SIZE CART
PROVISIONS
2530MP3461
GALLEYS - INSTALLATION OF SPE DRIESSEN
STANDARD CARRIERS IN LIEU OF SPE B.F.E,
INC. STANDARD CARRIERS
2530MP3463
GALLEYS - WATER FILTERS - INSTALLATION
2550CG3102
FWD AND AFT CARGO COMPARTMENT LINING AND
FLOOR PANEL REVISION - INSTALL HEAVIER GAGE
MATERIAL
2560CH3230
EMERGENCY EQUIPMENT - OVERWATER - HOOVER
LIFE VESTS AND EMERGENCY TRANSMITTER
2560MP3242
EMERGENCY EQUIPMENT - OVERWATER - DELETION
OF PROVISIONS
2560MP3243
EMERGENCY EQUIPMENT - OVERWATER - DELETION
2564CH3010
PROTECTIVE BREATHING EQUIPMENT ADDITION IN
FLIGHT DECK - BUYER FURNISHED
2564CH3011
BUYER FURNISHED MEDICAL KIT (NORTH HEALTH
PART NUMBER 01-70-65) INSTALLED IN FLIGHT
DECK
2564MP3067
MEDICAL KIT CONTAINER (SPE) - REVISION
2750MP3019
TRAILING EDGE FLAP TRANSMISSION BALLSCREWS
& REPLACEMENT - THOMSON SAGINAW IN LIEU OF
BEAVER
2811CG3001
FUEL TANK WATER SCAVENGING SYSTEM -
INSTALLATION - 737-300 AND 737-500
2840CH3022
FUEL FLOW INDICATOR - REPLACEMENT - SFE
SMITHS S347T001-14 IN LIEU OF S347T001-13
2910MP3074
ENGINE DRIVEN HYDRAULIC PUMPS - ABEX
QUICK ATTACHMENT
3131CH3230
DIGITAL FLIGHT DATA RECORDER - ARINC 717 -
SUNDSTRAND GXUS
3131CH3313
ACCELEROMETER - INSTALLATION - BFE MAGNETEC
P/N 3001-01-111
3131CG3330
DIGITAL FLIGHT DATA ACQUISITION UNIT
(DFDAU) - INSTALLATION - BFE TELEDYNE WITH
ACMS AND INTERNAL DISK DRIVE P/N
2233000-3-A
3240CG3086
NOSE LANDING GEAR WHEELS - ALLIEDSIGNAL INC
IN LIEU OF BF GOODRICH CO
3241CG3005
MAIN LANDING GEAR WHEELS AND BRAKES -
ALLIEDSIGNAL INC
3244CH3002
PARKING BRAKE WARNING LIGHT UNDER THE
FORWARD FACE OF THE NOSE GEAR STEERING
COVER - INSTALLATION
3245MP3025
SFE GOODYEAR TIRES IN LIEU OF SFE TIRES
MANUFACTURED BY THE BOEING STANDARD SUPPLIER
3310CH3015
KEEP OUT OF FLIGHT COMPARTMENT WARNING
LIGHT INSTALLATION
3320CH3026
INTERIOR LIGHTING - REVISION - COOL-WHITE
FLOURESCENT LAMPS IN LIEU OF WARM WHITE LAMPS
3343CH3006
WING TIP FAIRING REVISION - ADDITION OF
INCANDESCENT LAMP ACCESS PANEL
3343CH3012
INSTALL A SECOND INCANDESCENT POSITION
LIGHT ON EACH WING TIP - RETAIN EXISTING
STROBE AND LOGO LIGHTS
3351MP3013
DELETE LSI EMERGENCY FLOOR PROXIMITY
LIGHTING SYSTEM
3351MP3018
EMERGENCY FLOOR PROX LIGHTS SEAT MOUNTED
CLASS CONFIGURATION
3412CG3009
AIR DATA COMPUTER (ADC) - INSTALLATION -
HONEYWELL INC IN LIEU OF SMITHS INDUSTRIES
3412CH3027
STATIC SOURCE ERROR CORRECTION (SSEC) -
DEACTIVATION
3419CH3019
AMBER WINDSHEAR INCREASING PERFORMANCE
CAUTION MESSAGE ACTIVATION ON EADI
3419MP3026
AMBER WINDSHEAR INCREASING PERFORMANCE
CAUTION MESSAGE ON EADI - DELETION
3421MP3037
INERTIAL REFERENCE UNIT (IRU) - ACTIVATION
OF THE 1995 UPDATED MAGVAR TABLE
3422CG3005
ATTITUDE COMPARATOR ON EADI
3422CG3007
FILLED INTEGRATED CUE - FLIGHT DIRECTOR
COMMAND
3422CG3015
FMA DISPLAY LOCATION - TOP
3422CG3016
RANGE ARCS SUPPRESSED
3422CG3018
MAP/PLAN MODE ORIENTATION - 'HEADING UP'
3422CG3019
NAV MODE ORIENTATION - 'HEADING UP'
3422CG3020
CENTER MAP MODE - FULL COMPASS ROSE
3422CG3021
SINGLE CHANNEL AUTOPILOT ANNUNCIATION
3422CG3022
AIRSPEED TAPE ON EADI
3422CG3040
AIRSPEED TREND ON SPEED TAPE
3422CG3054
EADI AND EHSI DISPLAY UNIT COLOR - BROWN
3422CG3084
EFIS PIN SELECTABLE FEATURE - ADF
POINTER(S) DISPLAY ON EFIS MAP MODE
3422MP3132
DELETE EFIS OPTIONAL FEATURE - MAP/PLAN
DISPLAY ORIENTATION - "HEADING UP"
3422CG3149
RADIO ALTITUDE DISPLAY ON EADI - ADD RISING
RUNWAY PLUS RADIO ALTITUDE DIAL
3422MP3231
EFIS OPTIONAL FEATURE - FLIGHT DIRECTOR
COMMAND DISPLAY - SPLIT AXIS IN LIEU OF
INTEGRATED CUE
3422MP3249
EFIS OPTIONAL FEATURE - NAV DISPLAY
ORIENTATION - BASIC "TRACK UP" IN LIEU OF
"HEADING UP"
3431CG3020
DUAL VHF NAVIGATION - INSTALLATION - BFE
ROCKWELL INTERNATIONAL CORP
3432CH3015
MARKER BEACON SENSITIVITY AUTOMATIC SWITCHING
3432CG3017
MARKER BEACON - INSTALLATION - BFE ROCKWELL
INTERNATIONAL CORP
3433CG3036
LOW RANGE RADIO ALTIMETER (LRRA) - INSTALLATION
- BFE ROCKWELL INTERNATIONAL CORP
3443CG3083
WEATHER RADAR - INSTALLATION - BFE ROCKWELL
INTERNATIONAL CORP WITH TURBULENCE MODE
3443MP3099
WEATHER RADAR SYSTEM - ARINC 708A SINGLE
WEATHER RADAR SYSTEM WITH PREDICTIVE
WINDSHEAR - PARTIAL PROVISIONS
3443MP3101
WEATHER RADAR - INSTALLATION OF BENDIX
SYSTEM WITH P/N 066-05008-0201
3443MP3128
WEATHER RADAR - INSTALLATION OF BENDIX -0416
TRANSCEIVER AND -0414 CONTROL PANEL IN LIEU OF
-0201 TRANSCEIVER AND -0418 CONTROL PANEL
3443MP3150
WEATHER RADAR - INSTALL SPE TRANSCEIVER P/N
066-50008-0202 IN LIEU OF EXISTING P/N
066-50008-0201
3445CG3092
TCAS II - INSTALLATION - BFE ALLIEDSIGNAL INC
3445CH3112
TCAS II COMPUTER UNIT - BFE BENDIX
066-50000-0102 IN LIEU OF BFE BENDIX
066-50000-0504
3445MP3137
TCAS COMPUTER BFE CHANGE FROM P/N
066-50000-0102 TO P/N 066-50000-0108
3446CH3018
GPWS FLAPS WARNING INHIBIT ONLY IN LIEU OF
SEPARATE SWITCHES FOR FLAPS INHIBIT AND
LANDING GEAR INHIBIT
3446CH3050
GPWS VOICE CALLOUT REVISION - "HALF" VOLUME
IN LIEU OF "FULL" VOLUME
3446CH3056
GPWS RADIO ALTITUDE VOICE CALLOUTS - (100,
50, 30, 20, 10, BANK ANGLE)
3453CH3234
MODE S TRANSPONDER COAXIAL RELAY - INSTALL
SPE DOW-KEY IN LEIU OF SFE
3455CG3003
DISTANCE MEASURING EQUIPMENT (DME) -
INSTALLATION - BFE ROCKWELL INTERNATIONAL
CORP WITH AGILITY MODE
3457CG3021
DUAL AUTOMATIC DIRECTION FINDER (ADF) -
INSTALLATION - BFE
3457MP3073
ADF - INSTALLATION OF SINGLE SYSTEM WITH
DUAL CONTROL PANEL
3458CG3004
INSTALL PARTIAL PROVISIONS FOR GLOBAL
POSITION SYSTEM
3461CG3004
BUYER FURNISHED NAVIGATION DATA BASE
3461CG3007
FMC POSITION UPDATE AND RUNWAY OFFSET UPON
TO/GA ACTIVATION (IN METERS)
3461CG3009
FMC FLIGHT NUMBER ENTRY
3461CG3199
FMC - REVISION - INSTALLATION OF A SECOND 4
MCU, UPDATE 7 FMC INTO EXISTING PARTIAL PROVISIONS
3461MP3365
FMC POSITION UPDATE AND RUNWAY OFFSET UPON
TO/GA ACTIVATION - FEET IN LIEU OF METERS
3461MP3381
FMC REVISION - DELETION OF A SECOND 4 MCU,
UPDATE 7 FMC
3461MP3453
FLIGHT MANAGEMENT SYSTEM - PROVISIONS FOR
SECOND FMC - REVISION
3510CG3027
CREW OXYGEN - 114 CU. FT. IN LIEU OF 76 CU.
FT. CYLINDER
3910CH3052
RELOCATION OF THE EFIS AND VHF NAVIGATION
CONTROL PANELS
3910CH3057
EXTERNAL POSITION LIGHT SWITCH INSTALLATION
- FLIGHT DECK SWITCH CONVENTION
3910MP3110
PANEL ARRANGEMENT - ACARS PRINTER AND IDU
RELOCATION
3920CG3048
AUXILIARY E/E EQUIPMENT (E5) RACK
INSTALLATION - 737-500
3920CG3104
AUXILIARY E/E EQUIPMENT (E5) RACK
DELETION - 737-500
3920MP3106
GROUNDING WRIST STRAP ADDITION - E/E
COMPARTMENT
5121CG3059
CARGO COMPARTMENT CORROSION PROTECTION AND
DRAINAGE
5121CG3067
ADDITIONAL CORROSION PROTECTION FOR
INTEGRAL FUEL TANKS - EXTREME ENVIRONMENT
5250MP3002
FLIGHT COMPARTMENT DOOR SEAL - ADDITION
5352MP3005
RADOME REVISION - INSTALL SPE NORTON QUARTZ
RADOME IN LIEU OF STANDARD SFE RADOME VIA
SUPPLIER STC
7200CH3216
ENGINES - INSTALLATION OF CFM56-3-B1
ENGINES OPERATED AT 20,000 POUNDS
7740CH3007
ENGINE INDICATING SYSTEM - DELETION (THIS
CR BACKS OUT PRR 33004-64)
7900MP3022
LUBRICATING OIL - MOBIL JET 254 IN LIEU OF
MOBIL JET II
7930MP3001
PROVIDE DUAL ELEMENT OIL TEMPERATURE
TRANSMITTER, MAIN ENGINES
__________
TOTAL AMOUNT FOR SPECIAL FEATURES
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
6-1162-MMF-378R1
July 17, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-MMF-378R1 to Purchase
Agreement No. 1951 - [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996 (the Agreement) between THE BOEING COMPANY (Boeing)
and CONTINENTAL AIRLINES, INC. (Buyer) relating to Model 737-524
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 6-1162-MMF-378 dated
October 10, 1996.
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]
2. Confidential Treatment. Buyer understands that certain
commercial and financial information contained in this Letter
Agreement including any attachments hereto is considered by
Boeing as confidential. Buyer agrees that it will treat this
Letter Agreement and the information contained herein as
confidential and will not, without the prior written consent of
Boeing, disclose this Letter Agreement or any information
contained herein to any other person or entity except as provided
in Letter Agreement 6-1162-MMF-308R1.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: July 17, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment
Exhibit 10.14(d)
Supplemental Agreement No. 4
to
Purchase Agreement No. 1951
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 737 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of October 10,
1997, 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. 1951 dated July 23, 1996, as amended and supplemented, relating
to Boeing Model 737-500, 737-600, 737-700 and 737-800 aircraft (the
Purchase Agreement); and
WHEREAS, Buyer has requested and Boeing has agreed to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
WHEREAS, Boeing and Buyer have mutually agreed to amend the
Purchase Agreement to incorporate the effect of these and certain
other changes;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Purchase Agreement as
follows:
1. Table of Contents:
Remove and replace, in its entirety, the "Table of Contents",
with the Table of Contents attached hereto, to reflect the changes
made by this Supplemental Agreement No. 4.
2. Table 1:
Remove and replace, in their entirety, pages T-2, T-3 and T-4
of "Table 1, Aircraft Deliveries and Descriptions" that relate to
Models 737-700, 737-800 and 737-600 aircraft, respectively, with
the revised pages T-2, T-3 and T-4 attached hereto, to reflect the
mutually agreed upon revised delivery schedules and aircraft model
types.
3. Letter Agreements:
3.1 Remove and replace, in its entirety, Letter Agreement
1951-8R1, "Escalation Sharing - New Generation Aircraft" with
Letter Agreement 1951-8R2, "Escalation Sharing - New Generation
Aircraft", to clarify the language describing escalation sharing
for 1998 New Generation Aircraft.
3.2 Remove and replace, in its entirety, Letter Agreement
1951-11, "Escalation Sharing - Current Generation Aircraft" with
Letter Agreement 1951-11R1, "Escalation Sharing - Current
Generation Aircraft", to clarify the language describing escalation
sharing for 1998 Current Generation Aircraft.
3.3 Remove and replace, in its entirety, Letter Agreement 6-
1162-MMF-308R1, "Disclosure of Confidential Information" with
Letter Agreement 6-1162-MMF-308R2, "Disclosure of Confidential
Information", to revise the schedule of confidential documents,
revise the conditions for disclosure of confidential documents, and
to incorporate language limiting the requirement to revise this
Letter Agreement in the future.
3.4 Remove and replace, in its entirety, Letter Agreement 6-
1162-MMF-310R1, "Certain Contractual Matters" with Letter Agreement
6-1162-GOC-131, "Special Matters", to incorporate the effect of a
revised business offer.
3.5 Remove and replace, in its entirety, Letter Agreement 6-
1162-MMF-311R1, [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] with Letter Agreement 6-1162-MMF-311R2,
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] to incorporate a change to the method used
to calculate Buyer's lease payment.
The Purchase Agreement will be deemed to be supplemented to the
extent herein provided as of the date hereof and as so supplemented
will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: /s/ Gunar O. Clem By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page SA
Number Number
<S> <C> <C> <C>
ARTICLES
1. Subject Matter of Sale . . . . . . . . . . 1-1 SA 1
2. Delivery, Title and Risk of Loss . . . . . 2-1
3. Price of Aircraft. . . . . . . . . . . . . 3-1 SA 3
4. Taxes. . . . . . . . . . . . . . . . . . . 4-1
5. Payment. . . . . . . . . . . . . . . . . . 5-1
6. Excusable Delay. . . . . . . . . . . . . . 6-1
7. Changes to the Detail Specification. . . . 7-1 SA 1
8. Federal Aviation Requirements and
Certificates and Export License. . . . . . 8-1 SA 1
9. Representatives, Inspection,
Flights and Test Data. . . . . . . . . . . 9-1
10. Assignment, Resale or Lease. . . . . . . . 10-1
11. Termination for Certain Events . . . . . . 11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance. . . . . . . . . . . . . . . 12-1
13. Buyer Furnished Equipment and
Spare Parts. . . . . . . . . . . . . . . . 13-1
14. Contractual Notices and Requests . . . . . 14-1
15. Miscellaneous. . . . . . . . . . . . . . . 15-1
<PAGE>
TABLE OF CONTENTS
Page SA
Number Number
TABLES
1. Aircraft Deliveries and
Descriptions - 737-500 . . . . . . . . . . T-1 SA 3
Aircraft Deliveries and
Descriptions - 737-700 . . . . . . . . . . T-2 SA 4
Aircraft Deliveries and
Descriptions - 737-800 . . . . . . . . . . T-3 SA 4
Aircraft Deliveries and
Descriptions - 737-600 . . . . . . . . . . T-4 SA 4
EXHIBITS
A-1 Aircraft Configuration - Model 737-724 . . SA 2
A-2 Aircraft Configuration - Model 737-824 . . SA 2
A-3 Aircraft Configuration - Model 737-624 . . SA 1
A-4 Aircraft Configuration - Model 737-524 . . SA 3
B Product Assurance Document . . . . . . . . SA 1
C Customer Support Document - Code Two -
Major Model Differences. . . . . . . . . . SA 1
C1 Customer Support Document - Code Three -
Minor Model Differences. . . . . . . . . . SA 1
D Aircraft Price Adjustments - New
Generation Aircraft . . . . . . . . . . . SA 1
D1 Airframe and Engine Price Adjustments -
Current Generation Aircraft. . . . . . . . SA 1
E Buyer Furnished Equipment Provisions
Document . . . . . . . . . . . . . . . . . SA 1
F Defined Terms Document . . . . . . . . . .
<PAGE>
TABLE OF CONTENTS
SA
Number
LETTER AGREEMENTS
1951-1 Not Used . . . . . . . . . . . . . . . . . .
1951-2R2 Seller Purchased Equipment . . . . . . . . . SA 2
1951-3R1 Option Aircraft-Model 737-824 Aircraft . . . SA 1
1951-4R1 Waiver of Aircraft Demonstration . . . . . . SA 1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1951-6 Configuration Matters. . . . . . . . . . . .
1951-7R1 Spares Initial Provisioning. . . . . . . . . SA 1
1951-8R2 Escalation Sharing - New Generation
Aircraft . . . . . . . . . . . . . . . . . . SA 4
1951-9 Option Aircraft-Model 737-624 Aircraft . . . SA 1
1951-10 Configuration matters [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] - Model 737-624 Aircraft. . . . . SA 1
1951-11R1 Escalation Sharing-Current Generation
Aircraft . . . . . . . . . . . . . . . . . . SA 4
<PAGE>
TABLE OF CONTENTS
SA
Number
RESTRICTED LETTER AGREEMENTS
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-MMF-308R2 Disclosure of Confidential . . . . SA 4
Information
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-MMF-312R1 Special Purchase Agreement
Provisions . . . . . . . . . . . SA 1
6-1162-MMF-319 Special Provisions Relating to
the Rescheduled Aircraft . . . .
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-GOC-131 Special Matters. . . . . . . . . . SA 4
<PAGE>
TABLE OF CONTENTS
SUPPLEMENTAL AGREEMENTS DATED AS OF:
Supplemental Agreement No. 1 . . . . . . . . . . October 10,1996
Supplemental Agreement No. 2 . . . . . . . . . . March 5, 1997
Supplemental Agreement No. 3 . . . . . . . . . . July 17, 1997
Supplemental Agreement No. 4 . . . . . . . . . . October 1997
</TABLE>
<PAGE>
October 10, 1997
1951-8R2
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 1951-8R2 to
Purchase Agreement No. 1951 -
Escalation Sharing - New Generation Aircraft
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated July
23, 1996(the Agreement), between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Buyer) relating to Model 737-624/-724/-
824 aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-8R1 dated October
10, 1996.
All terms used herein and in the Agreement, and not defined herein,
will have the same meaning as in the Agreement.
1. Commitment.
Boeing agrees to share one-half of the escalation up to a
maximum of 3 percent per year in each of the years 1997 and 1998,
as more fully described in paragraph 2 below, for any of Buyer's
Aircraft which are scheduled to deliver after December 31, 1996.
For the purpose of this Letter Agreement such aircraft are referred
to as "Eligible Aircraft."
All escalation calculations under this Letter Agreement will be
made in accordance with Exhibit D to the Agreement entitled "Price
Adjustment Due to Economic Fluctuations - Airframe Price
Adjustment" (hereinafter referred to as "Exhibit D"), using actual
escalation indices published for the applicable period.
<PAGE>
2. Escalation Credit Memo.
2.1 Calculation - Eligible Aircraft Delivering in 1997.
At the time of delivery of each Eligible Aircraft
delivering in 1997, Boeing will issue to Buyer a credit memorandum
(the 1997 Credit Memorandum) which shall be applied to the Purchase
Price of such Aircraft. The 1997 Credit Memorandum shall be
calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.2 Calculation - Eligible Aircraft Delivering in 1998.
At the time of delivery of each Eligible Aircraft
delivering in 1998, Boeing will issue to Buyer a credit memorandum
(the 1998 Credit Memorandum) which shall be applied to the Purchase
Price of such Aircraft. The 1998 Credit Memorandum shall be
calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.3 Eligible Aircraft Delivering after 1998.
For Eligible Aircraft delivering after the calendar
year 1998, the amount of the credit memorandum will be the amount
calculated pursuant to paragraph 2.2 above through December 1998.
This credit memorandum amount will be escalated from December 1998
to the month of delivery pursuant to Exhibit D to the Agreement.
3. Advance Payment Base Price.
It is agreed that the Advance Payment Base Prices for the
Eligible Aircraft set forth in Article 3 of the Agreement includes
an estimate for the escalation sharing credit memorandum pursuant
to this Letter Agreement.
4. Escalating Credits (STE).
It is agreed that the credit memoranda specified in Letter
Agreement No. 6-1162-GOC-131, which escalate in accordance with
Exhibit D, will be calculated using the same factors used to
develop the adjusted airframe escalation pursuant to this Letter
Agreement.
5. [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/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
1951-11R1
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 1951-11R1 to
Purchase Agreement No. 1951 -
Escalation Sharing - Current Generation Aircraft
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated July
23, 1996(the Agreement), between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Buyer) relating to Model 737-524
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-11 dated October 10,
1996.
All terms used herein and in the Agreement, and not defined herein,
will have the same meaning as in the Agreement.
1. Commitment.
Boeing agrees to share one-half of the escalation up to a
maximum of 3 percent per year in each of the years 1997 and 1998,
as more fully described in paragraph 2 below, for any of Buyer's
aircraft which are scheduled to deliver after December 31, 1996.
For the purpose of this Letter Agreement such aircraft are referred
to as "Eligible Aircraft."
All escalation calculations under this Letter Agreement will be
made in accordance with Exhibit D1 to the Agreement entitled "Price
Adjustment Due to Economic Fluctuations - Airframe Price
Adjustment" (hereinafter referred to as "Exhibit D1"), using actual
escalation indices published for the applicable period.
<PAGE>
2. Escalation Credit Memo.
2.1 Calculation - Eligible Aircraft Delivering in 1997.
At the time of delivery of each Eligible Aircraft
delivering in 1997, Boeing will issue to Buyer a credit memorandum
(the 1997 Credit Memorandum) which shall be applied to the Purchase
Price of such Aircraft. The 1997 Credit Memorandum shall be
calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.2 Calculation - Eligible Aircraft Delivering in 1998.
At the time of delivery of each Eligible Aircraft
delivering in 1998, Boeing will issue to Buyer a credit memorandum
(the 1998 Credit Memorandum) which shall be applied to the Purchase
Price of such Aircraft. The 1998 Credit Memorandum shall be
calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.3 Eligible Aircraft Delivering after 1998.
For Eligible Aircraft delivering after the calendar
year 1998, the amount of the credit memorandum will be the amount
calculated pursuant to paragraph 2.2 above through December 1998.
This credit memorandum amount will be escalated pursuant to Exhibit
D1 to the Agreement from December 1998 to the month of delivery.
3. Advance Payment Base Price.
It is agreed that the Advance Payment Base Prices for the
Eligible Aircraft set forth in Article 3.4 of the Agreement include
an estimate for the escalation sharing credit memorandum pursuant
to this Letter Agreement.
4. Escalating Credits (STE).
It is agreed that the credit memoranda specified in Letter
Agreement No.6-1162-GOC-131 which escalate in accordance with
Exhibit D1, will be calculated using the same factors used to
develop the adjusted airframe escalation pursuant to this Letter
Agreement.
5. [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/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
6-1162-MMF-308R2
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-MMF-308R2 to
Purchase Agreement No. 1951 -
Disclosure of Confidential Information
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated July
23, 1996(the Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Buyer) relating to Model 737 aircraft
(the Aircraft). This Letter Agreement supersedes and replaces in
its entirety Letter Agreement 6-1162-MMF-308R1 dated October 10,
1996.
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 and
any documents that amend, supplement or supersede such documents
(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 or Boeing, as applicable, will request and use its best
reasonable efforts to obtain confidential treatment of such
Confidential Documents and the information contained therein.
Boeing and Buyer agree to cooperate with each other in making and
supporting any such request for confidential treatment.
Schedule of Confidential Documents
1. Letter Agreement No. 6-1162-MMF-295.
2. Letter Agreement No. 6-1162-MMF-296.
3. Letter Agreement No. 6-1162-MMF-309R1.
4. Letter Agreement No. 6-1162-MMF-311R1.
5. Letter Agreement No. 6-1162-MMF-312R1.
6. Letter Agreement No. 6-1162-MMF-319.
7. Letter Agreement No. 6-1162-MMF-378R1
8. Letter Agreement No. 6-1162-MMF-379R1.
9. Letter Agreement No. 6-1162-GOC-015
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/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davus
Its Vice President
<PAGE>
6-1162-MMF-311R2
October 10, 1997
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 6-1162-MMF-311R2 to
Purchase Agreement No. 1951 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1751 dated July
23, 1996(the Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Buyer) relating to Model 737 aircraft
(the Aircraft). This Letter Agreement supersedes and replaces in
its entirety Letter Agreement 6-1162-MMF-311R1 dated October 10,
1996.
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]
5. Confidential Treatment.
Boeing and Buyer agree that certain commercial and financial
information contained in this Letter Agreement is confidential and
subject to the confidentiality provisions of Letter Agreement 6-
1162-MMF-308R2, Disclosure of Confidential Information.
If this Letter Agreement correctly states your understanding of the
matters treated herein, please so indicate by signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
<PAGE>
October 10, 1997
6-1162-GOC-131
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-GOC-131 to
Purchase Agreement No. 1951 - Special Matters
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated as
of July 23, 1996 (the Agreement) between The Boeing Company
(Boeing) and Continental Airlines, Inc. (Buyer) relating to Model
737 aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirely Letter Agreement 6-1162-MMF-310R1, dated
October 10, 1996.
All terms used herein and in the Agreement, and not defined herein,
will have the same meaning as in the Agreement.
1. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Advance Payment Schedule.
2.1 Firm Aircraft. Notwithstanding the Advance Payment
Schedule contained in Article 5 of the Agreement, Buyer may pay
advance payments, according to the following schedule, for Aircraft
on firm order as of the date of signing Supplemental Agreement No.
4 to the Agreement.
<PAGE>
Due Date of Payment Amount Due per Aircraft
(Percentage times
Advance Payment Base Price)
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.2 Option Aircraft. Notwithstanding the Advance Payment
Schedule contained in Article 5 of the Agreement, Buyer may pay
advance payments according to the following schedule for all Option
Aircraft.
Due Date of Payment Amount Due per Aircraft
(Percentage times
Advance Payment Base Price)
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
3. Payment of Interest on Deferred Advance Payments.
3.1 Interest Rate for Firm Aircraft. Buyer agrees to pay
interest on all amounts which are deferred pursuant to Paragraph
2.1 of this Letter Agreement at a fluctuating rate per annum equal
to the three month London Interbank Offered Rate (LIBOR), as
published in The Wall Street Journal for the first business day of
each calendar quarter (usually published on the second business day
of such calendar quarter), plus 1.40%. Such interest shall accrue
from and including the date on which such payments would have been
due but for the execution of this Letter Agreement to but excluding
the date on which such amounts are paid in full. Interest shall be
due and payable on the first business day of each calendar quarter
and on the delivery date of any Aircraft that had a deferred
advance payment schedule. (Note: the interest rate as determined
above will be used for the entire calendar quarter; e.g., the
interest rate determined based on the LIBOR interest rate for July
1, 1991, will be used for all interest calculations in July, August
and September.)
3.2 Interest Rate for Option Aircraft. Buyer agrees to
pay interest on all amounts which are deferred pursuant to
Paragraph 2.2 of this Letter Agreement at [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
3.3 Delivery Delay Impact on Interest Calculations. If
the delivery of any Aircraft is delayed due to either an excusable
or a non-excusable delay, then interest on the deferred advance
payments in respect of such Aircraft will not accrue during the
time period from the last working day of the scheduled delivery
month to the day of delivery of the Aircraft. Payment of any
interest that has accrued prior to the start of the delay but
remains unpaid will be paid on the normal quarterly interest
payment schedule set forth in Paragraph 3.1 of this Letter
Agreement or on the delivery date of the Aircraft, whichever comes
first.
3.4 Boeing Invoice. Boeing shall submit to Buyer, not
less than fifteen (15) days prior to the end of each quarter, an
invoice for interest accrued during each such quarter. Buyer's
payment is due and payable to Boeing on the first business day of
the following month. Boeing's invoice will show interest accrued
during the quarter for each Aircraft for which advance payments
have been deferred. The invoice will also include interest accrued
on deferred advance payments with respect to other aircraft in
other purchase agreements between Buyer and Boeing.
4. Option Aircraft.
4.1 Option Deposits. Notwithstanding the amount
specified in paragraph 3 of Letter Agreements 1951-3R1 and 1951-9,
Boeing and Buyer agree that the Option Deposit shall be
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] per aircraft for either a Model 737-624,
737-724, or 737-824 Option Aircraft.
4.2 Option Aircraft Base Price Adjustment.
Notwithstanding the provisions of Paragraph 2.1.1 of the Attachment
to Letter Agreements 1951-3R1 and 1951-9, Boeing agrees that the
Base Airplane Price contained in Article 3 of the Agreement shall
apply to the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] Aircraft incorporated by Supplemental
Agreement No. 1 dated October 10, 1996.
5. Model Substitution.
5.1 Model 737-724/-824 Aircraft. Buyer may elect to
substitute Model 737-824 for Model 737-724 or Model 737-724 for
Model 737-824 Aircraft for any Aircraft or Option Aircraft
delivering in 1999 or later. Buyer's model substitution notice to
Boeing must be in writing to Boeing no later than the first day of
the tenth month prior to delivery of each Aircraft.
5.2 Model 737-624 Aircraft. Buyer may elect to
substitute either Model 737-724 or 737-824 Aircraft for Model 737-
624 Option Aircraft delivering in 2000 or later. Buyer's written
model substitution notice must be received by Boeing no later than
the first day of the tenth month prior to delivery of each
Aircraft.
5.3 Model 737-524 Aircraft. Buyer may elect to
substitute Model 737-324 for Model 737-524 Aircraft. Buyer's
substitution notice must be in writing and received by Boeing no
later than the first day of the tenth month prior to delivery of
each Aircraft if Customer and Boeing have previously agreed on a
configuration for the Model 737-324. If configuration for the
Model 737-324 has not been established, than the notice period
shall be the time required to configure the Model 737-324 plus 10
months.
6. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
7. Confidential Treatment.
Boeing and Buyer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Notwithstanding the provisions of Letter Agreement 6-1162-MMF-
308R2, Boeing and Buyer agree that each party will treat this
Letter Agreement and the information contained herein as
confidential and will not, without the other party's prior written
consent, disclose this Letter Agreement or any information
contained herein to any other person or entity except as may be
required by applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Exhibit 10.15
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-CAL
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLES NUMBER
<S> <C> <C>
1. Subject Matter of Sale 1
2. Price, Taxes and Payment 1
3. Regulatory Requirements and Certificates 3
4. Detail Specification; Changes 4
5. Representatives, Inspection, Flight Tests,
Test Data and Performance Guarantee Compliance
4
6. Delivery 5
7. Excusable Delay 5
8. Risk Allocation/Insurance 6
9. Assignment, Resale or Lease 7
10. Termination for Certain Events 9
11. Notices 9
12. Miscellaneous 10
EXHIBITS
A Buyer Furnished Equipment Provisions Document
B Customer Support Document
C Product Assurance Document
D Escalation Adjustment
APPENDICES
I Listing of Insurance Requirements
II Post-Delivery Sale Notice
III Post-Delivery Lease Notice
IV Owner Appointment of Agent - Warranties
V Contractor Confidentiality Agreement
LETTER AGREEMENTS
6-1162-GOC-117 Special Aircraft General Terms Agreement
Provisions
</TABLE>
<PAGE>
AIRCRAFT GENERAL TERMS AGREEMENT AGTA-CAL
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to
BOEING AIRCRAFT
This Aircraft General Terms Agreement AGTA-CAL
(AGTA) between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Customer) will apply to all Boeing aircraft
contracted for purchase from Boeing by Customer after the date
shown below except this AGTA will not apply to Boeing aircraft
purchased, whether by amendment or otherwise, under contracts
between Boeing and Customer that were executed prior to the date
shown below.
Article 1. Subject Matter of Sale.
1.1 Aircraft. Boeing will manufacture and sell
to Customer and Customer will purchase from Boeing aircraft under
purchase agreements which incorporate the terms and conditions of
this AGTA.
1.2 Buyer Furnished Equipment. Exhibit A, Buyer
Furnished Equipment Provisions Document to this AGTA, contains the
obligations of Customer and Boeing with respect to equipment
purchased and provided by Customer, which Boeing will receive,
inspect, store and install in an aircraft before delivery to
Customer. This equipment is defined in Exhibit A as Buyer Furnished
Equipment (BFE).
1.3 Customer Support. Exhibit B, Customer
Support Document to this AGTA, contains the obligations of Boeing
relating to Materials (as defined in Part 3 thereof), training,
services and other things in support of aircraft.
1.4 Product Assurance. Exhibit C, Product
Assurance Document to this AGTA, contains the obligations of Boeing
and the suppliers of equipment installed in each aircraft at
delivery relating to warranties, patent indemnities, software
copyright indemnities and service life policies.
Article 2. Price, Taxes and Payment.
2.1 Price.
2.1.1 Airframe Price is defined as the price
of the airframe for a specific model of aircraft described in a
purchase agreement. (For Models 737-600, 737-700 and 737-800, the
Airframe Price includes Engine Price.)
2.1.2 Optional Features Prices are defined
as the prices for optional features selected by Customer for a
specific model of aircraft described in a purchase agreement.
2.1.3 Engine Price is defined as the price
set by the engine manufacturer for a specific engine to be
installed on the model of aircraft described in a purchase
agreement (not applicable to Models 737-600, 737-700 and 737-800).
2.1.4 Aircraft Basic Price is defined as the
sum of the Airframe Price, Optional Features Prices and the Engine
Price, if applicable.
2.1.5 Escalation Adjustment is defined as
the price adjustment to the Airframe Price and the Optional
Features Prices (and the Engine Price for Models 737-600, 737-700
and 737-800) resulting from the calculation using the economic
price formula contained in Exhibit D, Escalation Adjustment to the
AGTA. The price adjustment to the Engine Price for all other
models of aircraft will be calculated using the economic price
formula in the Engine Escalation Adjustment to the applicable
purchase agreement.
2.1.6 Advance Payment Base Price is defined
as the estimated price of an aircraft as of the date of signing a
purchase agreement for the scheduled month of delivery of such
aircraft using commercial forecasts of the Escalation Adjustment.
2.1.7 Aircraft Price is defined as the total
amount Customer is to pay for an aircraft at the time of delivery,
which is the sum of the Aircraft Basic Price, the Escalation
Adjustment and other price adjustments made pursuant to the
purchase agreement.
2.2 Taxes.
2.2.1 Taxes are defined as all taxes, fees,
charges or duties and any interest, penalties, fines or other
additions to tax, including, but not limited to sales, use, value
added, gross receipts, stamp, excise, transfer and similar taxes,
imposed by any domestic or foreign taxing authority arising out of
or in connection with the performance of the applicable purchase
agreement or the sale, delivery, transfer or storage of any
aircraft, BFE, or other things furnished under the applicable
purchase agreement. Except for U.S. federal income taxes and
Washington State business and occupation taxes imposed on Boeing or
Boeing's assignee, Customer will be responsible for and pay all
Taxes. Customer is responsible for filing all tax returns, reports
and declarations and payment of any taxes related to or imposed on
BFE.
2.2.2 Reimbursement of Boeing. Customer
will promptly reimburse Boeing on demand, net of additional taxes
thereon, for any Taxes that are imposed on and paid by Boeing or
for which Boeing is responsible for collecting and for which
Customer is responsible as set forth above.
2.3 Payment.
2.3.1 Advance Payment Schedule. Customer
will make advance payments to Boeing for each aircraft in the
amounts and on the dates indicated in the schedule set forth in the
applicable purchase agreement.
2.3.2 Payment at Delivery. Customer will
pay any unpaid balance of the Aircraft Price at the time of
delivery of each aircraft.
2.3.3 Form of Payment. Customer will make
all payments to Boeing by unconditional deposit of United States
Dollars in a bank account in the United States designated by
Boeing.
2.3.4 Monetary and Government Regulations.
Customer is responsible for complying with all monetary control
regulations and for obtaining necessary governmental authorizations
related to payments.
Article 3. Regulatory Requirements and Certificates.
3.1 Certificates. Boeing will manufacture each
aircraft to conform to the appropriate Type Certificate issued by
the United States Federal Aviation Administration (FAA) for the
specific model of aircraft and will obtain from the FAA and furnish
to Customer at delivery of each aircraft either a Standard
Airworthiness Certificate or an Export Certificate of Airworthiness
issued pursuant to Part 21 of the Federal Aviation Regulations, as
appropriate.
3.2 FAA or Applicable Regulatory Authority
Manufacturer Changes.
3.2.1 A Manufacturer Change is defined as
any change to an aircraft, data relating to an aircraft, or testing
of an aircraft required by the FAA or any other United States
governmental agency having jurisdiction, to obtain a Standard
Airworthiness Certificate or by the country of import and/or
registration to obtain an Export Certificate of Airworthiness.
3.2.2 A Manufacturer Change will be
incorporated at no charge to Customer unless:
(i) the FAA issues the requirement
after the date of the applicable purchase agreement in which case
Customer shall pay for any Manufacturer Change which is
incorporated into any aircraft which delivers more than 18 months
after the date of the purchase agreement or 18 months after the
date of the Type Certificate, whichever is later; or
(ii) the requirement is solely
necessary to comply with a requirement of the country of import
and/or registration, other than the United States.
3.2.3 Customer will pay Boeing's charge for
validation of an aircraft required by any governmental agency of
the country of import and/or registration, other than the United
States.
3.3 FAA Operator Changes.
3.3.1 An Operator Change is defined as a
change in equipment that is required by Federal Aviation
Regulations which (i) is generally applicable to transport category
aircraft to be used in United States certified air carriage and
(ii) the required compliance date is on or before the scheduled
delivery month of the aircraft.
3.3.2 Boeing will deliver each aircraft
with Operator Changes incorporated or, at Boeing's option, with
suitable provisions for the incorporation of such equipment and
Customer will pay Boeing's applicable charges.
3.4 Export License. If an export license is
required by United States law or regulation for any aircraft or any
other things delivered under the purchase agreement, it is
Customer's obligation to obtain such license. If requested, Boeing
will assist Customer in applying for any such export license.
Customer will furnish any required supporting documents.
Article 4. Detail Specification; Changes.
4.1 Configuration Changes. The Detail
Specification is defined as the Boeing document that describes the
configuration of each aircraft purchased by Customer. The Detail
Specification for each aircraft may be amended by (i) Boeing to
reflect the incorporation of Manufacturer Changes and Operator
Changes or (ii) the agreement of the parties. In either case the
amendment will describe the particular changes to be made and any
effect on design, performance, weight, balance, scheduled delivery
month, Aircraft Basic Price, Aircraft Price and Advance Payment
Base Price.
4.2 Development Changes. Development
Changes are defined as changes to aircraft that do not affect the
Aircraft Price or scheduled delivery month, and do not adversely
affect guaranteed weight, guaranteed performance or compliance with
the interchangeability or replaceability requirements set forth in
the applicable Detail Specification. Boeing may, at its option,
incorporate Development Changes into the Detail Specification and
into an aircraft prior to delivery to Customer.
4.3 Notices. Boeing will promptly notify
Customer of any amendments to the Detail Specification.
Article 5. Representatives, Inspection, Demonstration Flights,
Test Data and Performance Guarantee Compliance.
5.1 Office Space. Twelve months before delivery
of the first aircraft purchased, and continuing until the delivery
of the last aircraft on firm order, Boeing will furnish, free of
charge, suitable office space and equipment for the accommodation
of up to three representatives of Customer in or conveniently
located near the assembly plant.
5.2 Inspection. Customer's representatives may
inspect each aircraft at any reasonable time provided such
inspection does not interfere with Boeing's performance.
5.3 Demonstration Flights. Prior to delivery,
Boeing will fly each aircraft not less than 1 1/2 hours and up to
4 hours to demonstrate to Customer the function of the aircraft and
its equipment using Boeing's production flight test procedures.
Customer may designate up to five representatives to participate as
observers.
5.4 Test Data; Performance Guarantee Compliance.
Performance Guarantees are defined as the written guarantees in a
purchase agreement regarding the operational performance of an
aircraft. Boeing will furnish to Customer flight test data
obtained on an aircraft of the same model to evidence compliance
with the Performance Guarantees. Performance Guarantees will be
met if reasonable engineering interpretations and calculations
based on the flight test data establish that the particular
aircraft being delivered under the applicable purchase agreement
would, if actually flown, comply with the guarantees.
5.5 Special Aircraft Test Requirements. Boeing
may use an aircraft for flight and ground tests prior to delivery,
without reduction in the Aircraft Price, if the tests are
considered necessary by Boeing (i) to obtain or maintain the Type
Certificate or Certificate of Airworthiness for the aircraft; or
(ii) to evaluate potential improvements that may be offered for
production or retrofit incorporation.
Article 6. Delivery.
6.1 Notices of Delivery Dates. Boeing will (i)
notify Customer of the approximate delivery date of each aircraft
at least 30 days before the scheduled month of delivery and (ii)
notify Customer of the scheduled delivery date at least 14 days
before such date.
6.2 Place of Delivery. Each aircraft will be
delivered at a facility selected by Boeing in the State of
Washington.
6.3 Bill of Sale. At delivery of an aircraft,
Boeing will provide Customer a bill of sale conveying good title,
free of encumbrances.
6.4 Delay. If Customer delays acceptance
of an aircraft beyond the scheduled delivery date, Customer will
reimburse Boeing for all costs incurred by Boeing as a result of
the delay.
Article 7. Excusable Delay.
7.1 General. Boeing will not be liable for any
delay in the scheduled delivery month of an aircraft or other
performance under a purchase agreement caused by: (i) acts of God;
(ii) war or armed hostilities; (iii) government acts or priorities;
(iv) fires, floods, or earthquakes; (v) strikes or labor troubles
causing cessation, slowdown, or interruption of work; or (vi) any
other cause to the extent such cause is beyond Boeing's control and
not occasioned by Boeing's fault or negligence. A delay resulting
from any such cause is defined as an Excusable Delay.
7.2 Notice. Boeing will give written notice to
Customer (i) of a delay as soon as Boeing concludes that an
aircraft will be delayed beyond the scheduled delivery month due to
an Excusable Delay; and (ii) of a revised delivery month based on
Boeing's appraisal of the facts.
7.2.1 If after Boeing gives Customer a
written notice specifying a revised delivery month Boeing concludes
that an aircraft will be further delayed beyond such revised
delivery month, Boeing shall provide Customer with a revised
written notice specifying a new revised delivery month.
7.2.2 If an Excusable Delay occurs after
Boeing has provided Customer with the scheduled delivery date,
Boeing will give prompt verbal and written notice to Customer of
the delay and of the revised delivery date based on Boeing's
appraisal of the facts.
7.3 Anticipated Delay in Delivery of Twelve
Months or Less. If the revised delivery month is 12 months or less
after the scheduled delivery month, Customer will accept such
aircraft when tendered for delivery, subject to the following:
7.3.1 The calculation of the Escalation
Adjustment will be based on the scheduled delivery month.
7.3.2 The advance payment schedule will be
adjusted to reflect the revised delivery month.
7.3.3 All other provisions of the applicable
purchase agreement, including the BFE on dock dates for the delayed
aircraft, are unaffected by an Excusable Delay.
7.4 Anticipated Delay in Delivery of More Than
Twelve Months. If the revised delivery month is more than 12
months after the scheduled delivery month, or more than 12 months
after a revised delivery month in the case of the occurrence of a
second event of Excusable Delay, either party may terminate the
applicable purchase agreement with respect to such aircraft within
30 days of the notice. If either party does not terminate the
applicable purchase agreement with respect to such aircraft, all
terms and conditions of the applicable purchase agreement will
remain in effect.
7.5 Aircraft Damaged Beyond Repair. If an
aircraft is destroyed or damaged beyond repair for any reason
before delivery, Boeing will give written notice to Customer
specifying the earliest month possible, consistent with Boeing's
other contractual commitments and production capabilities, in which
Boeing can deliver a replacement. Customer will have 30 days from
receipt of such notice to elect to have Boeing manufacture a
replacement aircraft under the same terms and conditions of
purchase, except that the calculation of the Escalation Adjustment
will be based upon the scheduled delivery month in effect
immediately prior to the date of such notice, or, failing such
election, the applicable purchase agreement will terminate with
respect to such aircraft. Boeing will not be obligated to
manufacture a replacement aircraft if reactivation of the
production line for the specific model of aircraft would be
required.
7.6 Termination. Termination under this Article
will discharge all obligations and liabilities of Boeing and
Customer with respect to any aircraft and all related undelivered
Materials, as defined in Exhibit B, Customer Support Document,
training, services and other things terminated under the applicable
purchase agreement, except that Boeing will return to Customer,
without interest, an amount equal to all advance payments paid by
Customer for the aircraft. If Customer terminates the applicable
purchase agreement as to any aircraft pursuant to this Article 7,
Boeing may elect, by written notice to Customer within 30 days of
such termination, to purchase from Customer any BFE related to the
aircraft at the invoice prices paid, or contracted to be paid, by
Customer.
7.7 Exclusive Rights. The termination rights in
this Article are in substitution for all other rights of
termination or any claim arising by operation of law due to delays
in performance covered by this Article.
Article 8. Risk Allocation/Insurance.
8.1 Title and Risk with Boeing.
8.1.1 Boeing's Indemnification of Customer.
Until transfer of title to an aircraft to Customer, Boeing will
indemnify and hold harmless Customer and Customer's observers from
and against all claims and liabilities, including all expenses and
attorneys' fees incident thereto or incident to establishing the
right to indemnification, for injury to or death of any person(s),
including employees of Boeing but not employees of Customer, or for
loss of or damage to any property, including an aircraft, arising
out of or in any way related to the operation of an aircraft during
all demonstration and test flights conducted under the provisions
of the applicable purchase agreement, whether or not arising in
tort or occasioned by the negligence of Customer or any of
Customer's observers.
8.1.2 Definition of Customer. For the
purpose of this Article, "Customer" is defined as Continental
Airlines, Inc., its divisions, subsidiaries, affiliates, the
assignees of each, and their respective directors, officers,
employees and agents.
8.2 Insurance.
8.2.1 Insurance Requirements. Customer will
purchase and maintain insurance acceptable to Boeing and will
provide a certificate of such insurance that names Boeing as an
additional insured for any and all claims and liabilities for
injury to or death of any person or persons, including employees of
Customer but not employees of Boeing, or for loss of or damage to
any property, including any aircraft, arising out of or in any way
relating to Materials, training, services or other things provided
under Exhibit B of the AGTA, which will be incorporated by
reference into the applicable purchase agreement, whether or not
arising in tort or occasioned by the negligence of Boeing, except
with respect to legal liability to persons or parties other than
Customer or Customer's assignees arising out of an accident caused
solely by a product defect in an aircraft. Customer will provide
such certificate of insurance at least thirty (30) days prior to
the scheduled delivery of the first aircraft under a purchase
agreement. The insurance certificate will reference each aircraft
delivered to Customer pursuant to each applicable purchase
agreement. Annual renewal certificates will be submitted to Boeing
before the expiration of the policy periods. Appendix I states the
terms, limits, provisions and coverages required by this Article
8.2.1. The failure of Boeing to demand compliance with this 8.2.1
in any year will not in any way relieve Customer of its obligations
hereunder nor constitutes a waiver by Boeing of these obligations.
8.2.2 Noncompliance with Insurance
Requirements. If Customer fails to comply with any of the
insurance requirements of Article 8.2.1 or if any of the insurers
fails to pay a claim covered by the insurance or otherwise fails to
meet any of insurer's obligations required by Appendix I, Customer
will provide the same protection to Boeing as that required by
Article 8.2.1 above.
8.2.3 Definition of Boeing. For purposes of
this article, "Boeing" is defined as The Boeing Company, its
divisions, subsidiaries, affiliates, assignees of each and their
respective directors, officers, employees and agents.
Article 9. Assignment, Resale or Lease.
9.1 Assignment. The applicable purchase
agreement is for the benefit of the parties and their respective
successors and assigns. No rights or duties of either party may be
assigned or delegated, or contracted to be assigned or delegated,
without the prior written consent of the other party, except:
9.1.1 Either party may assign its interest
to a corporation that (i) results from any merger or reorganization
of such party or (ii) acquires substantially all the assets of such
party;
9.1.2 Boeing may assign its rights to
receive money; and
9.1.3 Boeing may assign any of its rights
and duties to any wholly-owned subsidiary of Boeing, provided that
Boeing will remain fully responsible to Buyer for all obligations
that Boeing assigns to a wholly-owned subsidiary and Buyer may
continue to deal exclusively with Boeing.
9.1.4 Boeing may assign any of its rights
and duties with respect to Part 1, Articles 1, 2, 4 and 5 of
Exhibit B, Customer Support Document to the AGTA, to the extent it
relates to maintenance and flight training, to FlightSafety Boeing
Training International L.L.C, provided that Boeing will remain
fully responsible to Buyer for all obligations that Boeing assigns
to FlightSafety Boeing Training International L.L.C. and Buyer may
continue to deal exclusively with Boeing.
9.2 Transfer by Customer at Delivery. Boeing
will take any requested action reasonably required for the purpose
of causing an aircraft, at time of delivery, to be subject to an
equipment trust, conditional sale, lien or other arrangement for
Customer to finance the aircraft. However, no such action will
require Boeing to divest itself of title to or possession of the
aircraft until delivery of and payment for the aircraft.
9.3 Transfer of Unexpired Rights. If, following
delivery of an aircraft, Customer sells or leases the aircraft
(including any sale and lease back for financing purposes), all of
Customer's rights with respect to the aircraft under the applicable
purchase agreement will inure to the benefit of the purchaser or
lessee of such aircraft, effective upon Boeing's receipt of the
written agreement of the purchaser or lessee, in a form reasonably
satisfactory to Boeing, to comply with all applicable terms and
conditions of the applicable purchase agreement. Sample forms of
agreements acceptable to Boeing are attached as Appendices II and
III.
9.4 Notice of Sale or Lease After Delivery.
Customer will give notice to Boeing as soon as practicable of the
sale or lease of an aircraft including in the notice the name of
the entity with title and/or possession of such aircraft.
9.5 Exculpatory Clause in Post-Delivery Sale or
Lease. If, following the delivery of an aircraft, Customer sells
or leases such aircraft and obtains from the transferee any form of
exculpatory clause protecting Customer from liability for loss of
or damage to the aircraft, and/or related incidental or
consequential damages, including without limitation loss of use,
revenue or profit, Customer shall obtain for Boeing from the
purchaser or lessee the same protection.
9.6 Appointment of Agent - Warranty Claims. If,
following delivery of an aircraft, Customer appoints an agent to
act directly with Boeing for the administration of claims relating
to the warranties under the applicable purchase agreement, Boeing
will deal with the agent for that purpose, effective upon Boeing's
receipt of the agent's written agreement, in a form satisfactory to
Boeing, to comply with all applicable terms and conditions of the
applicable purchase agreement. A sample form of agreement
acceptable to Boeing is attached as Appendix V.
9.7 No Increase in Boeing Liability. No action
taken by Customer or Boeing relating to the resale or lease of an
aircraft or the assignment of Customer's rights under the
applicable purchase agreement will subject Boeing to any liability
beyond that in the applicable purchase agreement or modify in any
way Boeing's obligations under the applicable purchase agreement.
Article 10. Termination for Certain Events.
10.1 Termination. If either party
(i) ceases doing business as a going
concern, suspends all or substantially all
its business operations, or makes an
assignment for the benefit of creditors, or
generally does not pay its debts as they
become due, or admits in writing its
inability to pay its debts; or
(ii) petitions for or acquiesces in the
appointment of any receiver, trustee or
similar officer to liquidate or conserve its
business or any substantial part of its
assets; commences any legal proceeding such
as bankruptcy, reorganization, readjustment
of debt, dissolution or liquidation
available for the relief of financially
distressed debtors; or becomes the object of
any such proceeding, unless the proceeding
is dismissed or stayed within a reasonable
period, not to exceed 60 days,
the other party may terminate any purchase agreement with respect
to any undelivered aircraft, Materials, training, services and
other things by giving written notice of termination.
10.2 Repayment of Advance Payments. If Customer
terminates the applicable purchase agreement under this Article,
Boeing will repay to Customer, without interest, an amount equal to
any advance payments received by Boeing from Customer with respect
to undelivered aircraft.
Article 11. Notices.
All notices required by this AGTA or by any
applicable purchase agreement will be in English, will be effective
on the date of receipt and will be transmitted by any customary
means of written communication addressed as follows:
Customer: Continental Airlines, Inc.
2929 Allen Parkway
Suite 2010
Houston, TX 77019
Attention: V.P. Fleet Management
Boeing: Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
U.S.A.
Attention: Vice President - Contracts
Mail Stop 75-38
Article 12. Miscellaneous.
12.1 Government Approval. Boeing and Customer
will assist each other in obtaining any governmental consents or
approvals required to effect certification and sale of aircraft
under the applicable purchase agreement.
12.2 Headings. Article and paragraph headings
used in this AGTA and in any purchase agreement are for convenient
reference only and are not intended to affect the interpretation of
this AGTA or any purchase agreement.
12.3 GOVERNING LAW. THIS AGTA AND ANY PURCHASE
AGREEMENT WILL BE INTERPRETED UNDER AND GOVERNED BY THE LAW OF THE
STATE OF WASHINGTON, U.S.A., EXCEPT THAT WASHINGTON'S CHOICE OF LAW
RULES SHALL NOT BE INVOKED FOR THE PURPOSE OF APPLYING THE LAW OF
ANOTHER JURISDICTION.
12.4 Waiver/Severability. Failure by either party
to enforce any provision of this AGTA or any purchase agreement
will not be construed as a waiver. If any provision of this AGTA
or any provision of any purchase agreement are held unlawful or
otherwise ineffective by a court of competent jurisdiction, the
remainder of the AGTA or the applicable purchase agreement will
remain in effect.
12.5 Survival of Obligations. The Articles and
Exhibits of this AGTA including but not limited to those relating
to insurance, DISCLAIMER AND RELEASE and the EXCLUSION OF
CONSEQUENTIAL AND OTHER DAMAGES will survive termination or
cancellation of any purchase agreement or part thereof.
DATED AS OF October 10, 1997
CONTINENTAL AIRLINES, INC. THE BOEING COMPANY
By /s/ Brian Davis By /s/ Gunar O. Clem
Its Vice President Its Attorney in Fact
<PAGE>
EXHIBIT A
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-CAL
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
<PAGE>
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
The parties acknowledge Boeing intends to implement
a new Buyer Furnished Equipment Process for Buyer Furnished
Equipment in 1998. New documentation reflecting the new process
will be offered to Customers as soon as practicable. It is the
intention of the parties to replace this Exhibit with a mutually
agreeable new process when such a new process becomes available.
<PAGE>
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
1. General.
Certain equipment to be installed in the Aircraft is
furnished to Boeing by Customer at Customer's expense. This
equipment is designated "Buyer Furnished Equipment" (BFE) and is
listed in the Detail Specification. Boeing will provide to
Customer a BFE Requirements On-Dock/Inventory Document (BFE
Document) or an electronically transmitted BFE Report which may be
periodically revised, setting forth the items, quantities, on-dock
dates and shipping instructions relating to the in sequence
installation of BFE as described in the applicable Supplemental
Exhibit to this Exhibit A in a purchase agreement at the time of
aircraft purchase.
2. Supplier Selection.
Customer will:
2.1 Select and notify Boeing of the suppliers of BFE
items by those dates appearing in Supplemental Exhibit BFE1to the
applicable purchase agreement at the time of aircraft purchase.
2.2 Meet with Boeing and such selected BFE suppliers
promptly after such selection to:
2.2.1 complete BFE configuration design
requirements for such BFE; and
2.2.2 confirm technical data submittal dates for
BFE certification.
3. Customer's Obligations.
Customer will:
3.1 comply with and cause the supplier to comply with
the provisions of the BFE Document or BFE Report;
3.1.1 deliver technical data (in English) to
Boeing as required to support installation and FAA certification in
accordance with the schedule provided by Boeing or as mutually
agreed upon during the BFE meeting referred to above;
3.1.2 deliver BFE including production and/or
flight training spares to Boeing in accordance with the quantities
and schedule provided therein; and
3.1.3 deliver appropriate quality assurance
documentation to Boeing as required with each BFE part (D6-56586,
"BFE Product Acceptance Requirements");
3.2 authorize Boeing to discuss all details of the BFE
directly with the BFE suppliers;
3.3 authorize Boeing to conduct or delegate to the
supplier quality source inspection and supplier hardware acceptance
of BFE at the supplier location;
3.3.1 require supplier's contractual compliance
to Boeing defined source inspection and supplier delegation
programs, including availability of adequate facilities for Boeing
resident personnel; and
3.3.2 assure that Boeing identified supplier's
quality systems be approved to Boeing document D1-9000;
3.4 use reasonable commercial efforts to obtain from the
supplier's thereof, a non-exclusive, perpetual, royalty-free,
irrevocable license for Boeing to copy BFE Aircraft Software to
enable Boeing to load the software copies in (i) the aircraft's
mass storage device (MSD), (ii) media (e.g., diskettes, CD-ROMs,
etc.), (iii) the BFE hardware and/or (iv) an intermediate device or
other media to facilitate copying of the BFE Aircraft Software into
the aircraft's MSD, BFE hardware and/or media, including media as
Boeing may deliver to Customer with the aircraft;
3.5 grant Boeing a license, extending the same rights
set forth in paragraph 3.4 above, to copy: (i) BFE Aircraft
Software and data Customer has modified and/or (ii)) other software
and data Customer has added to the BFE Aircraft Software;
3.6 provide necessary field service representation at
Boeing's facilities to support Boeing on all issues related to the
installation and certification of BFE;
3.7 deal directly with all BFE suppliers to obtain
overhaul data, provisioning data, related product support
documentation and any warranty provisions applicable to the BFE;
3.8 work closely with Boeing and the BFE suppliers to
resolve any difficulties, including defective equipment, that
arise;
3.9 be responsible for modifying, adjusting and/or
calibrating BFE as required for FAA approval and for all related
expenses;
3.10 warrant that the BFE will meet the requirements of
the Detail Specification; and
3.11 be responsible for providing equipment which is FAA
certifiable at time of Aircraft delivery, or for obtaining waivers
from the applicable regulatory agency for non-FAA certifiable
equipment.
4. Boeing's Obligations.
Other than as set forth below, Boeing will provide for the
installation of and install the BFE and obtain certification of the
Aircraft with the BFE installed.
5. Nonperformance by Customer.
If Customer's nonperformance of obligations in this Exhibit
or in the BFE Document causes a delay in the delivery of the
Aircraft or causes Boeing to perform out-of-sequence or additional
work, Customer will reimburse Boeing for all resulting expenses and
be deemed to have agreed to any such delay in Aircraft delivery.
In addition Boeing will have the right to:
5.1 provide and install specified equipment or suitable
alternate equipment and increase the price of the Aircraft
accordingly; and/or
5.2 deliver the Aircraft to Customer without the BFE
installed.
6. Return of Equipment.
BFE not installed in the Aircraft will be returned to
Customer in accordance with Customer's instructions and at
Customer's expense.
7. Title and Risk of Loss.
Title to and risk of loss of BFE will at all times remain
with Customer or other owner. Boeing will have only such liability
for BFE as a bailee for mutual benefit would have, but will not be
liable for loss of use.
8. Indemnification of Boeing.
Customer hereby indemnifies and holds harmless Boeing from
and against all claims and liabilities, including costs and
expenses (including attorneys' fees) incident thereto or incident
to successfully establishing the right to indemnification, for
injury to or death of any person or persons, including employees of
Customer but not employees of Boeing, or for loss of or damage to
any property, including any Aircraft, arising out of or in any way
connected with any nonconformance or defect in any BFE and whether
or not arising in tort or occasioned by the negligence of Boeing.
This indemnity will not apply with respect to any nonconformance or
defect caused solely by Boeing's installation of the BFE.
9. Patent Indemnity.
Customer hereby indemnifies and holds harmless Boeing from
and against all claims, suits, actions, liabilities, damages and
costs arising out of any actual or alleged infringement of any
patent or other intellectual property rights by BFE or arising out
of the installation, sale or use of BFE by Boeing.
10. Definitions.
For the purposes of the above indemnities, the term
"Boeing" includes The Boeing Company, its divisions, subsidiaries
and affiliates, the assignees of each, and their directors,
officers, employees and agents.
<PAGE>
EXHIBIT B
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-CAL
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
CUSTOMER SUPPORT DOCUMENT
This document contains:
Part 1: Maintenance and Flight Training Programs;
Operations Engineering Support
Part 2: Field Services and Engineering Support
Services
Part 3: Technical Information and Materials
Part 4: Alleviation or Cessation of Performance
Part 5: Protection of Proprietary Information and
Proprietary Materials
<PAGE>
CUSTOMER SUPPORT DOCUMENT
PART 1:BOEING MAINTENANCE AND FLIGHT TRAINING
PROGRAMS; OPERATIONS ENGINEERING SUPPORT
1. Boeing Training Programs.
1.1 Boeing will provide maintenance training and flight
training programs to support the introduction of a specific model
of aircraft into service. The training programs will consist of
general and specialized courses and will be described in a
Supplemental Exhibit to the applicable purchase agreement.
1.2 Boeing will conduct all training in the Seattle area
unless otherwise agreed.
1.3 All training will be presented in the English
language. If translation is required, Customer will provide
interpreters.
1.4 Customer will be responsible for all living expenses
of Customer's personnel. Boeing will transport Customer's
personnel between their local lodging and Boeing's training
facility.
2. Training Planning Conferences.
Customer and Boeing will conduct planning conferences
approximately 12 months before the scheduled delivery month of the
first aircraft of a model to define and schedule the maintenance
and flight training programs.
3. Operations Engineering Support.
3.1 As long as an aircraft purchased by Customer from
Boeing is operated by Customer in scheduled revenue service, Boeing
will provide operations engineering support. Such support will
include:
3.1.1 assistance with the analysis and
preparation of performance data to be used in establishing
operating practices and policies for Customer's operation of
aircraft;
3.1.2 assistance with interpretation of the
minimum equipment list, the definition of the configuration
deviation list and the analysis of individual aircraft performance;
3.1.3 assistance with solving operational
problems associated with delivery and route-proving flights;
3.1.4 information regarding significant service
items relating to aircraft performance or flight operations; and
3.1.5 if requested by Customer, Boeing will provide
operations engineering support during an aircraft ferry flight.
4. Training at a Facility Other Than Boeing's.
If requested by Customer, Boeing will conduct the classroom
portions of the maintenance and flight training (except for the
Performance Engineer training courses) at a mutually acceptable
alternate training site, subject to the following conditions:
4.1 Customer will provide acceptable classroom space,
simulators (as necessary for flight training) and training
equipment required to present the courses;
4.2 Customer will pay Boeing's then-current per diem
charge for each Boeing instructor for each day, or fraction
thereof, that the instructor is away from the Seattle area,
including travel time;
4.3 Customer will reimburse Boeing for the actual costs
of round-trip transportation for Boeing's instructors and the
shipping costs of training Materials between the Seattle area and
the alternate training site;
4.4 Customer will be responsible for all taxes, fees,
duties, licenses, permits and similar expenses incurred by Boeing
and its employees as a result of Boeing's providing training at the
alternate site or incurred as a result of Boeing providing revenue
service training; and
4.5 Those portions of training that require the use of
training devices not available at the alternate site will be
conducted at Boeing's facility or at some other alternate site.
5. General Terms and Conditions.
5.1 Boeing flight instructor personnel will not be
required to work more than 5 days per week, or more than 8 hours in
any one 24-hour period, of which not more than 5 hours per 8-hour
workday will be spent in actual flying. These foregoing
restrictions will not apply to ferry assistance or revenue service
training services, which will be governed by FAA rules and
regulations.
5.2 Normal Line Maintenance is defined as line
maintenance that Boeing might reasonably be expected to furnish for
flight crew training at Boeing's facility, and will include ground
support and aircraft storage in the open, but will not include
provision of spare parts. Boeing will provide Normal Line
Maintenance services for any aircraft while the aircraft is used
for flight crew training at Boeing's facility. Customer will
provide such services if flight crew training is conducted
elsewhere. Regardless of the location of such training, Customer
will be responsible for providing all maintenance items (other than
those included in Normal Line Maintenance) required during the
training, including, but not limited to, fuel, oil, landing fees
and spare parts.
5.3 If the training is based at Boeing's facility, and
the aircraft is damaged during such training, Boeing will make all
necessary repairs to the aircraft as promptly as possible.
Customer will pay Boeing's reasonable charge, including the price
of parts and materials, for making the repairs. If Boeing's
estimated labor charge for the repair exceeds $25,000, Boeing and
Customer will enter into an agreement for additional services
before beginning the repair work.
5.4 If the flight training is based at Boeing's
facility, several airports in the states of Washington, Montana and
Oregon, as well as the services of the fixed base operator at Grant
County Airport at Moses Lake, Washington, may be used. Unless
otherwise agreed in the flight training planning conference, it
will be Customer's responsibility to make arrangements for the use
of such airports.
5.5 If Boeing agrees to make arrangements on behalf of
Customer for the use of airports for flight training, Boeing will
pay on Customer's behalf any landing fees charged by any airport
used in conjunction with the flight training. At least 30 days
before flight training, Customer will provide Boeing an open
purchase order against which Boeing will invoice Customer for any
landing fees Boeing paid on Customer's behalf. The invoice will be
submitted to Customer approximately 60 days after flight training
is completed, when all landing fee charges have been received and
verified. Customer will pay to Boeing within 30 days of the date
of the invoice.
5.6 If requested by Boeing, in order to provide the
flight training or ferry flight assistance, Customer will make
available to Boeing an aircraft after delivery to familiarize
Boeing instructor or ferry flight crew personnel with such
aircraft. If flight of the aircraft is required for any Boeing
instructor or ferry flight crew member to maintain an FAA license
for flight proficiency or landing currency, Boeing will be
responsible for the costs of fuel, oil, landing fees and spare
parts attributable to that portion of the flight.
5.7 If any part of the training described in paragraph
1.1 of this Exhibit is not used by Customer within 12 months after
the delivery of the last aircraft under the relevant purchase
agreement, Boeing will not be obligated to provide such training.
<PAGE>
CUSTOMER SUPPORT DOCUMENT
PART 2: FIELD AND ENGINEERING SUPPORT SERVICES
1. Field Service Representation.
Boeing will furnish field service representation to advise
Customer with respect to the maintenance and operation of an
aircraft (Field Service Representatives).
1.1 Field Service Representatives will be available at
a facility designated by Customer beginning before the scheduled
delivery month of the first aircraft and ending 12 months after
delivery of the last aircraft covered by a specific purchase
agreement.
1.2 Customer will provide, at no charge to Boeing,
suitable furnished office space and office equipment at the
location where Boeing is providing Field Service Representatives.
As required, Customer will assist each Field Service Representative
with visas, work permits, customs, mail handling, identification
passes and formal introduction to local airport authorities.
1.3 Boeing Field Service Representatives are assigned to
various airports around the world. Whenever Customer's aircraft
are operating through any such airport, the services of Boeing's
Field Service Representatives are available to Customer.
2. Engineering Support Services.
Boeing will, if requested by Customer, provide technical
advisory assistance for any aircraft and Boeing Product (as defined
in Part I of Exhibit C). Technical advisory assistance, provided
from the Seattle area or at a base designated by Customer as
appropriate, will include:
2.1 Operational Problem Support. If Customer
experiences operational problems with an aircraft, Boeing will
analyze the information provided by Customer to determine the
probable nature and cause of the problem and to suggest possible
solutions.
2.2 Schedule Reliability Support. If Customer is not
satisfied with the schedule reliability of a specific model of
aircraft, Boeing will analyze information provided by Customer to
determine the nature and cause of the problem and to suggest
possible solutions.
2.3 Maintenance Cost Reduction Support. If Customer is
concerned that actual maintenance costs of a specific model of
aircraft are excessive, Boeing will analyze information provided by
Customer to determine the nature and cause of the problem and to
suggest possible solutions.
2.4 Aircraft Structural Repair Support. If Customer is
designing structural repairs and desires Boeing's support, Boeing
will analyze and comment on Customer's engineering releases
relating to structural repairs not covered by Boeing's Structural
Repair Manual.
2.5 Aircraft Modification Support. If Customer is
designing aircraft modifications and requests Boeing's support,
Boeing will analyze and comment on Customer's engineering proposals
for changes in, or replacement of, systems, parts, accessories or
equipment manufactured to Boeing's detailed design. Boeing will
not analyze or comment on any major structural change unless
Customer's request for such analysis and comment includes complete
detailed drawings, substantiating information (including any
information required by applicable government agencies), all stress
or other appropriate analyses, and a specific statement from
Customer of the substance of the review and the response requested.
2.6 Facilities, Ground Equipment and Maintenance
Planning Support. Boeing will, at Customer's request, evaluate
Customer's technical facilities, tools and equipment for servicing
and maintaining aircraft, to recommend changes where necessary and
to assist in the formulation of an overall maintenance plan.
2.7 Post-Delivery Service Support. Boeing will, at
Customer's request, perform work on an aircraft after delivery but
prior to the initial departure flight or upon the return of the
aircraft to Boeing's facility prior to completion of that flight.
In that event the following provisions will apply.
2.7.1 Boeing may rely upon the commitment
authority of the Customer's personnel requesting the work.
2.7.2 As title and risk of loss has passed to
Customer, the insurance provisions of Article 8.2 of the AGTA
apply.
2.7.3 The provisions of the Boeing Warranty in
Part 2 of Exhibit C of this AGTA apply.
2.7.4 Customer will pay Boeing for requested work
not covered by the Boeing Warranty, if any.
2.7.5 The DISCLAIMER AND RELEASE and EXCLUSION OF
CONSEQUENTIAL AND OTHER DAMAGES provisions in Article 12 of Part 2
of Exhibit C of this AGTA apply.
2.8 Additional Services. Boeing may, at Customer's
request, provide additional services for an aircraft after
delivery, which may include retrofit kit changes (kits and/or
information), training, maintenance and repair of aircraft. Such
additional services will be subject to a mutually acceptable price,
schedule and scope of work. The DISCLAIMER AND RELEASE and the
EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions in Article
12 of Part 2 of Exhibit C of this AGTA and the insurance provisions
in Article 8.2 of this AGTA will apply to any such work. Title to
and risk of loss of any such aircraft will always remain with
Customer.
<PAGE>
CUSTOMER SUPPORT DOCUMENT
PART 3: TECHNICAL INFORMATION AND MATERIALS
1. General.
Materials are defined as any and all items that are created
by Boeing or a third party, which are provided pursuant to this
AGTA, directly or indirectly from Boeing and serve primarily to
contain, convey or embody information. Materials may include
either tangible embodiments (for example, documents or drawings),
or intangible embodiments (for example, software and other
electronic forms) of information but excludes Aircraft Software.
Aircraft Software is defined as software that is installed on and
used in the operation of the aircraft.
Boeing will furnish to Customer certain Materials to
support the maintenance and operation of the aircraft at no
additional charge to Customer, except as otherwise provided herein.
Such Materials will, if applicable, be prepared generally in
accordance with Air Transport Association of America (ATA)
Specification No. 100, entitled "Specification for Manufacturers'
Technical Data". Materials will be in English and in the units of
measure used by Boeing to manufacture an aircraft.
Digitally-produced Materials will, if applicable, be
prepared generally in accordance with ATA Specification No. 2100,
dated January 1994, "Digital Data Standards for Aircraft Support."
2. Materials Planning Conferences.
Customer and Boeing will conduct planning conferences
approximately 12 months before the scheduled delivery month of the
first aircraft of a model in order to mutually determine the proper
format and quantity of Materials to be furnished to Customer in
support of the aircraft.
When available, Customer may select Boeing standard digital
format as the delivery medium or, alternatively, Customer may
select a reasonable quantity of printed and 16mm microfilm formats.
When Boeing standard digital format is selected, Customer may also
select up to 5 copies of printed or microfilm format copies, with
the exception of the Illustrated Parts Catalog, which will be
provided in one selected format only.
3. Information and Materials - Incremental Increase.
Until one year after the month of delivery of the last
aircraft covered by a specific purchase agreement, Customer may
annually request in writing a reasonable increase in the quantity
of Materials with the exception of microfilm master copies, digital
formats, and others for which a specified number of copies are
provided. Boeing will provide the additional quantity at no
additional charge beginning with the next normal revision cycle.
Customer may request a decrease in revision quantities at any time.
4. Advance Representative Copies.
All advance representative copies of Materials will be
selected by Boeing from available sources. Such advance copies
will be for advance planning purposes only.
5. Customized Materials.
All customized Materials will reflect the configuration of
each aircraft as delivered.
6. Revisions.
6.1 Revision Service. Boeing will provide revisions
free of charge to certain Materials to be identified in the
planning conference conducted for a specific model of aircraft,
reflecting changes developed by Boeing, as long as Customer
operates an aircraft of that model.
6.2 Revisions Based on Boeing Service Bulletin
Incorporation. If Boeing receives written notice that Customer
intends to incorporate, or has incorporated, any Boeing service
bulletin in an aircraft, Boeing will at no charge issue revisions
to Materials with revision service reflecting the effects of such
incorporation into such aircraft.
7. Computer Software Documentation for Boeing Manufactured
Airborne Components and Equipment.
Boeing will provide to Customer a Computer Software Index
containing a listing of (i) all programmed airborne avionics
components and equipment manufactured by Boeing or a Boeing
subsidiary, designed and developed in accordance with Radio
Technical Commission for Aeronautics Document No. RTCA/DO-178 dated
January 1982, No. RTCA/DO-178A dated March 1985, or later as
available, and installed by Boeing in aircraft covered by the
applicable purchase agreement and (ii) specific software documents
(Software Documentation) available to Customer from Boeing for the
listed components and equipment.
Two copies of the Computer Software Index will be furnished
to Customer at no charge, with the first aircraft of a model.
Revisions to the Computer Software Index applicable to such model
of aircraft will be issued to Customer at no charge, as revisions
are developed by Boeing for so long as Customer operates the
aircraft.
Software Documentation will be provided to Customer upon
written request. The charge to Customer for Software Documentation
will be Boeing's price to reproduce the Software Documentation
requested. Software Documentation will be prepared generally in
accordance with ATA Specification No. 102 revised April 20, 1983,
"Specification for Computer Software Manual" but Software
Documentation will not include, and Boeing will not be obligated to
provide, any code (including, but not limited to, original source
code, assembled source code, or object code) on computer sensible
media.
8. Supplier Technical Data.
8.1 For supplier-manufactured programmed airborne
avionics components and equipment classified as Seller Furnished
Equipment (SFE) or Seller Purchased Equipment (SPE) which contain
computer software designed and developed in accordance with Radio
Technical Commission for Aeronautics Document No. RTCA/DO-178 dated
January 1982, No. RTCA/DO-178A dated March 1985, or later as
available, Boeing will request that each supplier of the components
and equipment make software documentation available to Customer in
a manner similar to that described in Article 7 above.
8.2 The provisions of this Article will not be
applicable to items of BFE.
8.3 Boeing will furnish to Customer a document
identifying the terms and conditions of the product support
agreements between Boeing and its suppliers requiring the suppliers
to fulfill Customer's requirements for information and services in
support of the specific model of aircraft.
9. Buyer Furnished Equipment Data.
Boeing will incorporate BFE information into the customized
Materials providing Customer makes the information available to
Boeing at least nine months prior to the scheduled delivery month
of Customer's first aircraft of a specific model. Customer agrees
to furnish the information in Boeing standard digital format if
Materials are to be delivered in Boeing standard digital format.
10. Materials Shipping Charges.
Boeing will pay the reasonable transportation costs of the
Materials. Customer is responsible for any customs clearance
charges, duties, and taxes.
11. Customer's Shipping Address.
The Materials furnished to Customer hereunder are to be
sent to a single address to be specified. Customer will promptly
notify Boeing of any change to the address.
<PAGE>
CUSTOMER SUPPORT DOCUMENT
PART 4: ALLEVIATION OR CESSATION OF PERFORMANCE
Boeing will not be required to provide any Materials, services,
training or other things at a facility designated by Customer if
any of the following conditions exist:
1. a labor stoppage or dispute in progress involving
Customer;
2. wars or warlike operations, riots or insurrections
in the country where the facility is located;
3. any condition at the facility which, in the opinion
of Boeing, is detrimental to the general health, welfare or safety
of its personnel or their families;
4. the United States Government refuses permission to
Boeing personnel or their families to enter into the country where
the facility is located, or recommends that Boeing personnel or
their families leave the country; or
5. the United States Government refuses permission to
Boeing to deliver Materials, services, training or other things to
the country where the facility is located.
After the location of Boeing personnel at the facility, Boeing
further reserves the right, upon the occurrence of any of such
events, to immediately and without prior notice to Customer
relocate its personnel and their families.
<PAGE>
CUSTOMER SUPPORT DOCUMENT
PART 5: PROTECTION OF PROPRIETARY INFORMATION
AND PROPRIETARY MATERIALS
1. General.
Title to all Materials containing, conveying or embodying
confidential, proprietary or trade secret information (Proprietary
Information) belonging to Boeing or a third party (Proprietary
Materials), will at all times remain with Boeing or such third
party. Customer will treat all Proprietary Materials and all
Proprietary Information in confidence and use and disclose the same
only as specifically authorized in this AGTA or the CSGTA, and
except to the extent required by law.
2. License Grant.
Boeing grants to Customer a worldwide, non-exclusive,
non-transferable license to use and disclose Proprietary Materials
in accordance with the terms and conditions of this AGTA. Customer
is authorized to make copies of Materials (except for Materials
bearing the copyright legend of a third party), and all copies of
Proprietary Materials will belong to Boeing and be treated as
Proprietary Materials under this AGTA. Customer will preserve all
proprietary legends, and all copyright notices on all Materials and
insure the inclusion of those legends and notices on all copies.
3. Use of Proprietary Materials and Proprietary Information.
Customer is authorized to use Proprietary Materials and
Proprietary Information for the purpose of: (a) operation,
maintenance, repair, or modification of Customer's aircraft for
which the Proprietary Materials and Proprietary Information have
been specified by Boeing and (b) development and manufacture of
training devices for use by Customer.
4. Providing of Proprietary Materials to Contractors.
Customer is authorized to provide Proprietary Materials to
Customer's contractors for the sole purpose of maintenance, repair,
or modification of Customer's aircraft for which the Proprietary
Materials have been specified by Boeing. In addition, Customer may
provide Proprietary Materials to Customer's contractors for the
sole purpose of developing and manufacturing training devices for
Customer's use. Before providing Proprietary Materials to its
contractor, Customer will first obtain a written agreement from the
contractor by which the contractor agrees (a) to use the
Proprietary Materials only on behalf of Customer, (b) to be bound
by all of the restrictions and limitations of this Part 5, and (c)
that Boeing is a third party beneficiary under the written
agreement. Customer agrees to provide copies of all such written
agreements to Boeing upon request. A sample agreement acceptable
to Boeing is attached as Appendix VII.
5. Providing of Proprietary Materials and Proprietary
Information to Regulatory Agencies.
When and to the extent required by a government regulatory
agency having jurisdiction over Customer or an aircraft, Customer
is authorized to provide Proprietary Materials and to disclose
Proprietary Information to the agency for use in connection with
Customer's operation, maintenance, repair, or modification of such
aircraft. Customer agrees to take all reasonable steps to prevent
the agency from making any distribution, disclosure, or additional
use of the Proprietary Materials and Proprietary Information
provided or disclosed. Customer further agrees to notify Boeing
immediately upon learning of any (a) distribution, disclosure, or
additional use by the agency, (b) request to the agency for
distribution, disclosure, or additional use, or (c) intention on
the part of the agency to distribute, disclose, or make additional
use of Proprietary Materials or Proprietary Information.
<PAGE>
EXHIBIT C
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-CAL
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
PRODUCT ASSURANCE DOCUMENT
This document contains:
Part 1: Exhibit C Definitions
Part 2: Boeing Warranty
Part 3: Boeing Service Life Policy
Part 4: Supplier Warranty Commitment
Part 5: Boeing Interface Commitment
Part 6: Boeing Indemnities against Patent and
Copyright Infringement
<PAGE>
PRODUCT ASSURANCE DOCUMENT
PART 1: EXHIBIT C DEFINITIONS
Authorized Agent - Agent appointed by Customer to perform
corrections and to administer warranties (see Appendix VI to the
AGTA for a form acceptable to Boeing).
Average Direct Hourly Labor Rate - the average hourly rate
(excluding all fringe benefits, premium-time allowances, social
charges, business taxes and the like) paid by Customer to its
Direct Labor employees.
Boeing Product - any system, accessory, equipment, part or
Aircraft Software that is manufactured by Boeing or manufactured to
Boeing's detailed design with Boeing's authorization.
Correct - to repair, modify, provide modification kits or
replace with a new product.
Correction - a repair, a modification, a modification kit
or replacement with a new product.
Corrected Boeing Product - a Boeing Product which is free
of defect as a result of a Correction.
Direct Labor - Labor spent by Customer's direct labor
employees to remove, disassemble, modify, repair, inspect and bench
test a defective Boeing Product, and to reassemble, reinstall a
Corrected Boeing Product and perform final inspection.
Direct Materials - Items such as parts, gaskets, grease,
sealant and adhesives, installed or consumed in performing a
Correction, excluding allowances for administration, overhead,
taxes, customs duties and the like.
Source Control Drawing (SCD) - a Boeing document defining
specifications for certain Supplier Products.
Supplier - the manufacturer of a Supplier Product.
Supplier Product - any system, accessory, equipment, part
or Aircraft Software that is not manufactured to Boeing's detailed
design. This includes but is not limited to parts manufactured to
a SCD, all standards, and other parts obtained from non-Boeing
sources.
<PAGE>
PRODUCT ASSURANCE DOCUMENT
PART 2: BOEING WARRANTY
1. Warranty Applicability.
This warranty applies to all Boeing Products and other
items as specified. Additional warranties applicable to Supplier
Products are in Part 4. Additional warranties applicable to
engines will be provided by Supplemental Exhibits to individual
purchase agreements.
2. Warranty.
2.1 Coverage. Boeing warrants that at the time of
aircraft delivery:
(i) the aircraft, including all Boeing Products,
engines, and Supplier Products will conform
to the Detail Specification except for
portions stated to be estimates,
approximations or design objectives;
(ii) all Boeing Products in the aircraft will be
free from defects in material and
workmanship, including process of
manufacture;
(iii) all Boeing Products in the aircraft will be
free from defects in design, including
selection of materials and the process of
manufacture, in view of the state of the art
at the time of design, and
(iv) the workmanship utilized to install Supplier
Products, engines and BFE will be free from
defects.
2.2 Exceptions. The following conditions do not
constitute a defect under this warranty:
(i) conditions resulting from normal wear and
tear;
(ii) conditions resulting from acts or omissions
of Customer; and
(iii) conditions resulting from failure to
properly service and maintain the aircraft.
3. Warranty Periods.
3.1 Warranty. The warranty period begins on the date of
aircraft delivery and ends: (i) after 48 months for Boeing aircraft
models 777-200, -300 or 737-600, -700, -800, or new aircraft models
designed and manufactured with similar, new technology; or, (ii)
after 36 months for any other Boeing aircraft model.
3.2 Warranty on Corrected Boeing Products. The warranty
period applicable to a Corrected Boeing Product, including the
workmanship to Correct and install, resulting from a defect in
material or workmanship is the remainder of the warranty period for
the defective Boeing Product it replaced. The warranty period for
a Corrected Boeing Product resulting from a defect in design is (i)
18 months or the remainder of the initial warranty period,
whichever is longer; or (ii) 6 months following the initial
installation of the Corrected Boeing Product provided that such
time period shall not be greater than 6 months past the initial
warranty period, whichever is longer. The 18 month period begins
on the date of delivery of the Corrected Boeing Product or date of
delivery of the kit or kits furnished to correct the Boeing
Product.
3.3 Survival of Warranties. All warranty periods are
stated above. The Performance Guarantees will not survive delivery
of the aircraft.
4. Remedies.
4.1 Defect Correction. At Customer's option, Boeing
will either Correct or reimburse Customer to Correct defects in
Boeing Products discovered during the warranty period.
4.2 Warranty Labor Rate. If Customer or its Authorized
Agent Corrects a defective Boeing Product, reimbursement to
Customer for Direct Labor hours will be provided at Customer's
established Warranty Labor Rate. Customer's established Warranty
Labor Rate will be the greater of the standard labor rate or 150%
of Customer's Average Direct Hourly Rate. The standard labor rate
paid by Boeing to its customers is established and published
annually. Prior to or concurrently with submittal of Customer's
first claim for Direct Labor reimbursement, Customer will notify
Boeing of Customer's then-current Average Direct Hourly Labor rate,
and thereafter notify Boeing of any material change in such rate.
Boeing will require information from Customer to substantiate such
rates.
4.3 Warranty Inspections. In addition to the remedies
to Correct defects in Boeing Products, Boeing will reimburse
Customer for cost of Direct Labor to perform inspections of the
aircraft to determine whether or not a covered defect exists in a
Boeing Product, provided:
4.3.1 the inspections are recommended by a service
bulletin or service letter issued by Boeing during the warranty
period; and
4.3.2 such reimbursement will not apply to any
inspections performed after a Correction is available to Customer.
4.4 Credit Memorandum Reimbursement. Boeing will make
all reimbursements by credit memoranda which may be applied toward
the purchase of Boeing goods and services.
4.5 Maximum Reimbursement. Unless previously agreed,
the maximum reimbursement for Direct Labor and Direct Materials
used to Correct a defective Boeing Product will not exceed 65% of
Boeing's then-current sales price for a new replacement Boeing
Product or such other percentage as may be mutually established in
an AOG situation.
5. Discovery and Notice.
5.1 For a claim to be valid:
(i) the defect must be discovered during the
warranty period; and
(ii) Boeing Product Assurance Contracts must
receive written notice of the discovery no
later than 90 days after expiration of the
warranty period. The notice must include
sufficient information to substantiate the
claim.
5.2 Receipt of Customer's or its Authorized Agent's
notice of the discovery of a defect secures Customer's rights to
remedies under this Exhibit C, even though a Correction is
performed after the expiration of the warranty period.
5.3 Once Customer has given valid notice of the
discovery of a defect, a claim should be submitted as soon as
practicable after performance of the Correction.
5.4 Boeing may release service bulletins or service
letters advising Customer of the availability of certain warranty
remedies. When such advice is provided, Customer will be deemed to
have fulfilled the requirements for discovery of the defect and
submittal of notice under this Exhibit C as of the date specified
in the service bulletin or service letter.
6. Filing a Claim.
6.1 Authority to File. Claims may be filed by Customer
or its Authorized Agent. Appointment of an Authorized Agent will
only be effective upon Boeing's receipt of the Authorized Agent's
express written agreement, in a form satisfactory to Boeing, to be
bound by and to comply with all applicable terms and conditions of
this Aircraft General Terms Agreement.
6.2 Claim Information.
6.2.1 Claimant is responsible for providing
sufficient information to substantiate Customer's rights to
remedies under this Exhibit C. Boeing may reject a claim for lack
of sufficient information. At a minimum, such information must
include:
(i) identity of claimant;
(ii) serial or block number of the aircraft on
which the defective Boeing Product was
delivered;
(iii) part number and nomenclature of defective
Boeing Product;
(iv) purchase order number and date of delivery
of the defective spare part
(v) description and substantiation of the
defect;
(vi) date the defect was discovered; and,
(vii) date the Correction was completed.
6.2.2 Additional information may be required based on the
nature of the defect and the remedies requested.
6.3 Boeing Claim Processing.
6.3.1 Any claim for a Boeing Product returned by
Customer or its Authorized Agent to Boeing for Correction must
accompany the Boeing Product. Any claim not associated with the
return of a Boeing Product must be signed and submitted in writing
directly by Customer or its Authorized Agent to Boeing Product
Assurance Contracts.
6.3.2 Boeing will promptly review the claim and
will give notification of claim approval or rejection. If the
claim is rejected, Boeing will provide a written explanation and
reasonable substantiation of such rejection.
7. Limited Warranty for Certain Materials.
7.1 Boeing warrants that, at the time of delivery, all
Materials created by Boeing will be free from errors and defects in
media.
7.2 Warranty Periods and Claims. The warranty period
with respect to an error or a defect in any Materials created by
Boeing begins at delivery of the Materials in which the error or
defect is discovered and ends 48 months after delivery of the
Materials.
The claimed error or defect must become apparent to
Customer within the applicable warranty period, and Boeing Product
Assurance Contracts must receive written notice of such error or
defect at the earliest practicable time after the error or defect
is discovered by Customer, but in no event, later than 90 days
after expiration of the applicable warranty period.
7.3 Remedy. Customer's remedy for an error or a defect
in media is replacement of the erroneous or defective Materials
created by Boeing with Materials free from such error or defect.
8. Corrections Performed by Customer or Its Authorized Agent.
8.1 Facilities Requirements. Customer or its Authorized
Agent may, at its option, Correct defective Boeing Products at its
facilities, or may subcontract Corrections to a third party
contractor certified by Customer's Civil Aviation Authority or the
Federal Aviation Authority.
8.2 Technical Requirements. All Corrections done by
Customer, its Authorized Agent or a third party contractor must be
performed in accordance with Boeing's applicable service manuals,
bulletins or other written instructions, using parts and materials
furnished or approved by Boeing.
8.3 Reimbursement.
8.3.1 Boeing will reimburse for reasonable costs of
Direct Materials and Direct Labor (excluding time expended for
overhaul) at Customer's Warranty Labor Rate to Correct a defective
Boeing Product. Claims for reimbursement must contain sufficient
information to substantiate Direct Labor hours expended and Direct
Materials consumed. Customer or its Authorized Agent may be
required to produce invoices for materials.
8.3.2 Reimbursement for Direct Labor hours to
perform Corrections stated in a service bulletin will be based on
the labor estimates in the service bulletin. Boeing will review
the rembursement amount if Customer's actual Direct Labor hours
exceed the service bulletin estimates by 25%.
8.3.3 Boeing will reimburse Customer's freight
charges associated with a Correction of a defect on a Boeing
Product performed by its Authorized Agent or a third party
contractor.
8.4 Disposition of Defective Boeing Products Beyond
Economical Repair.
8.4.1 A defective Boeing Product with a value of
U.S. $2000 or less may be scrapped without notification to Boeing.
If such Product has a value greater than U.S. $2000, Customer must
obtain confirmation of unrepairability by Boeing's on-site Customer
Services Representative prior to scrapping. Confirmation may be in
the form of the Representative's signature on Customer's claim or
through direct communication between the Representative and Boeing
Product Assurance Contracts.
8.4.2 A defective Boeing Product with a value
greater than $2000 found to be beyond economical repair will be
retained for a period of 60 days from the date Boeing receives
Customer's claim unless previously approved to be scrapped as
provided in paragraph 8.4.1. Customer may scrape such defective
Boeing Product after 60 days. Boeing may request return of such
defective Boeing Product during the 60 day period for inspection
and confirmation of a defect.
9. Corrections Performed by Boeing.
9.1 Freight Charges. Customer or its Authorized Agent
will pay shipping charges to return a Boeing Product to Boeing.
Boeing will reimburse Customer or its Authorized Agent for the
charge for any item determined to be defective under this AGTA.
Boeing will pay shipping charges to return the Corrected Boeing
Product.
9.2 Customer Instructions. The documentation shipped
with the returned defective Boeing Product may include specific
technical instructions for work to be performed on the Boeing
Product. The absence of such instructions will evidence Customer's
authorization for Boeing to perform all necessary Corrections and
work required to return the Boeing Product to a serviceable
condition.
9.3 Correction Time Objectives.
9.3.1 Boeing's objective for making Corrections is
10 working days for avionics and electronic Boeing Products, 30
working days for Corrections of other Boeing Products performed at
Boeing's facilities, and 40 working days for Corrections of other
Boeing Products performed at a Boeing subcontractor's facilities.
The objectives are measured from the date Boeing receives the
defective Boeing Product and a valid claim to the date Boeing ships
the Correction.
9.3.2 If Customer has a critical parts shortage
because Boeing has exceeded a Correction time objective and
Customer has procured spare Boeing Products for the defective
Boeing Product in quantities shown in Boeing's Recommended Spare
Parts List (RSPL) as agreed to by Customer, then Boeing will either
expedite the Correction or provide a similar Boeing Product on a no
charge loan or lease basis until a Corrected Boeing Product is
returned.
9.4 Title Transfer and Risk of Loss.
9.4.1 Title to and risk of loss of any Boeing
Product returned to Boeing will at all times remain with Customer
or any other title holder of such Boeing Product. While Boeing has
possession of the returned Boeing Product, Boeing will have only
such liabilities as a bailee for mutual benefit would have, but
will not be liable for loss of use.
9.4.2 If a Correction requires shipment of a new
Boeing Product, then at the time Boeing ships the new Boeing
Product, title to and risk of loss for the returned Boeing Product
will pass to Boeing, and title to and risk of loss for the new
Boeing Product will pass to Customer.
10. Returning an Aircraft.
10.1 Conditions. An aircraft may be returned to Boeing's
facilities for Correction only if:
(i) Boeing and Customer agree a defect exists;
(ii) Customer lacks access to adequate
facilities, equipment or qualified personnel
to perform the Correction; and
(iii) it is not practical, in Boeing's estimation,
to dispatch Boeing personnel to perform the
Correction at a remote site.
10.2 Correction Costs. Boeing will perform the
Correction at no charge to Customer. Subject to the conditions of
Article 10.1, Boeing will reimburse Customer for the costs of fuel,
oil and landing fees incurred in ferrying the aircraft to Boeing
and back to Customer's facilities. Customer will minimize the
length of both flights.
10.3 Separate Agreement. Boeing and Customer will enter
into a separate agreement covering return of the aircraft and
performance of the Correction. Authorization by Customer for
Boeing to perform additional work that is not part of the
Correction must be received within 24 hours of Boeing's request.
If such authorization is not received within 24 hours, Customer
will be invoiced for work performed by Boeing that is not part of
the Correction at Boeing's standard rates.
11. Insurance.
The provisions of Article 8.2 "Insurance", of this AGTA,
will apply to any work performed by Boeing in accordance with
Customer's specific technical instructions, to the extent any legal
liability of Boeing is based upon the content of such instructions.
12. Disclaimer and Release; Exclusion of Liabilities.
12.1 DISCLAIMER AND RELEASE. THE WARRANTIES, OBLIGATIONS
AND LIABILITIES OF BOEING AND THE REMEDIES OF CUSTOMER IN THIS
EXHIBIT C ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND CUSTOMER
HEREBY WAIVES, RELEASES AND RENOUNCES, ALL OTHER WARRANTIES,
OBLIGATIONS AND LIABILITIES OF BOEING AND ALL OTHER RIGHTS, CLAIMS
AND REMEDIES OF CUSTOMER AGAINST BOEING, EXPRESS OR IMPLIED,
ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMANCE OR
DEFECT IN ANY AIRCRAFT, MATERIALS, TRAINING, SERVICES OR OTHER
THING PROVIDED UNDER THIS AGTA AND THE APPLICABLE PURCHASE
AGREEMENT, INCLUDING, BUT NOT LIMITED TO:
(A) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS;
(B) ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF
TRADE;
(C) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY IN TORT, WHETHER OR NOT ARISING FROM
THE NEGLIGENCE OF BOEING; AND
(D) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY FOR LOSS OF OR DAMAGE TO ANY
AIRCRAFT.
12.2 EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES.
BOEING WILL HAVE NO OBLIGATION OR LIABILITY, WHETHER ARISING IN
CONTRACT (INCLUDING WARRANTY), TORT, WHETHER OR NOT ARISING FROM
THE NEGLIGENCE OF BOEING, OR OTHERWISE, FOR LOSS OF USE, REVENUE OR
PROFIT, OR FOR ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH
RESPECT TO ANY NONCONFORMANCE OR DEFECT IN ANY AIRCRAFT, MATERIALS,
TRAINING, SERVICES OR OTHER THING PROVIDED UNDER THIS AGTA AND THE
APPLICABLE PURCHASE AGREEMENT.
12.3 Definitions. For the purpose of this Article,
"BOEING" or "Boeing" is defined as The Boeing Company, its
divisions, subsidiaries, affiliates, the assignees of each, and
their respective directors, officers, employees and agents.
<PAGE>
PRODUCT ASSURANCE DOCUMENT
PART 3: BOEING SERVICE LIFE POLICY
1. Definitions.
SLP Component - any of the primary structural elements
(excluding industry standard parts) of the landing gear, wing,
fuselage, vertical or horizontal stabilizer listed in the
applicable purchase agreement for a specific model of aircraft
that is installed in the aircraft at time of delivery or is
purchased from Boeing by Customer as a spare part. The detailed
SLP Component listing will be in Supplemental Exhibit SLP1 to each
Purchase Agreement.
2. Service Life Policy.
2.1 SLP Commitment. If a failure or defect is
discovered in a SLP Component within the time periods specified in
Article 2.2 below, Boeing will, at a price calculated pursuant to
Article 3 below, Correct the SLP Component.
2.2 SLP Policy Periods.
2.2.1 The policy period for SLP Components
initially installed on an aircraft is 12 years after the date of
delivery of the aircraft.
2.2.2 The policy period for SLP Components
purchased from Boeing by Customer as spare parts is 12 years from
delivery of such SLP Component, or 12 years from delivery of a
replacement SLP Component, or 12 years from the date of delivery of
the last aircraft produced by Boeing of a specific model, whichever
first expires.
3. Price.
The price that Customer will pay for the Correction of a
defective or failed SLP Component will be calculated pursuant to
the following formula:
P = CT
144
where:
P = price to Customer
C = SLP Component sales price at time of
Correction
T = total age in months of the defective or
failed SLP Component from the date of
delivery to Customer to the date of
discovery of such condition.
4. Conditions.
Boeing's obligations under this Policy are conditioned upon
the following:
4.1 Customer must notify Boeing in writing of the defect
or failure within three months after it becomes apparent.
4.2 Customer must provide reasonable evidence that the
claimed defect or failure is covered by this Policy and if
requested by Boeing, that such defect or failure was not the result
of (i) a defect or failure in a component not covered by this
Policy, (ii) an extrinsic force, (iii) an act or omission of
Customer, or (iv) operation or maintenance contrary to applicable
governmental regulations or Boeing's instructions.
4.3 If return of a defective or failed SLP Component is
practicable and requested by Boeing, Customer will return such SLP
Component to Boeing at Boeing's expense.
4.4 Customer's rights and remedies under this Policy are
limited to the receipt of a Correction at prices calculated
pursuant to Article 3 above.
5. Disclaimer and Release; Exclusion of Liabilities.
This Part 3 and the rights and remedies of Customer and the
obligations of Boeing are subject to the DISCLAIMER AND RELEASE and
EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions of Article
12 of Part 2 of this Exhibit C.
<PAGE>
PRODUCT ASSURANCE DOCUMENT
PART 4: SUPPLIER WARRANTY COMMITMENT
1. Supplier Warranties and Supplier Patent and Copyright
Indemnities.
Boeing will use diligent efforts to obtain adequate
warranties and indemnities against patent and copyright
infringement enforceable by Customer from Suppliers of Supplier
Products (except for engines) installed on the aircraft at the time
of delivery that were selected and purchased by Boeing, but not
manufactured to Boeing's detailed design. Boeing will furnish
copies of the warranties and patent and copyright indemnities to
Customer in Boeing Document D6-56115, Product Support and Product
Assurance Supplier Defined Equipment Information, prior to the
scheduled delivery month of the first aircraft under the initial
purchase agreement to the AGTA.
2. Boeing Assistance in Administration of Supplier Warranties.
Customer will be responsible for submitting warranty claims
directly to Suppliers; however, if Customer experiences problems
enforcing any Supplier warranty obtained by Boeing for Customer,
Boeing will conduct an investigation of the problem and assist
Customer in the resolution of those claims.
3. Boeing Support in Event of Supplier Default.
3.1 If the Supplier defaults in the performance of a
material obligation under its warranty, and Customer provides
evidence to Boeing that a default has occurred, then Boeing will
furnish the equivalent warranty terms as provided by this AGTA.
3.2 At Boeing's request, Customer will assign to Boeing,
and Boeing will be subrogated to, Customer's rights against the
Supplier provided by the Supplier warranty.
<PAGE>
PRODUCT ASSURANCE DOCUMENT
PART 5: BOEING INTERFACE COMMITMENT
1. Interface Problems.
An Interface Problem is defined as a technical problem in
the operation of an aircraft or its systems experienced by
Customer, the cause of which is not readily identifiable by
Customer but which Customer believes to be attributable to the
design characteristics of the aircraft or its systems. In the
event Customer experiences an Interface Problem, Boeing will,
without additional charge to Customer, promptly conduct an
investigation and analysis to determine the cause or causes of the
Interface Problem. Boeing will promptly advise Customer at the
conclusion of its investigation of Boeing's opinion as to the
causes of the Interface Problem and Boeing's recommendation as to
corrective action.
2. Boeing Responsibility.
If Boeing determines that the Interface Problem is
primarily attributable to the design of any Boeing Product, Boeing
will Correct the design to the extent of any then-existing
obligations of Boeing under the provisions of the applicable Boeing
Warranty or Boeing Service Life Policy.
3. Supplier Responsibility.
If Boeing determines that the Interface Problem is
primarily attributable to the design of a Supplier Product, Boeing
will assist Customer in processing a warranty claim against the
Supplier.
4. Joint Responsibility.
If Boeing determines that the Interface Problem is
partially attributable to the design of a Boeing Product and
partially to the design of a Supplier Product, Boeing will seek a
solution to the Interface Problem through the cooperative efforts
of Boeing and the Supplier and will promptly advise Customer of the
resulting corrective actions and recommendations.
5. General.
Customer will, if requested by Boeing, assign to Boeing any
of Customer's rights against any Supplier as Boeing may require to
fulfill its obligations hereunder.
6. Disclaimer and Release; Exclusion of Liabilities.
This Part 5 and the rights and remedies of Customer and the
obligations of Boeing herein are subject to the DISCLAIMER AND
RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions
of Article 12 of Part 2 of this Exhibit C.
PRODUCT ASSURANCE DOCUMENT
PART 6: BOEING INDEMNITIES AGAINST PATENT
AND COPYRIGHT INFRINGEMENT
1. Indemnity Against Patent Infringement.
Boeing will defend, indemnify and hold harmless Customer
with respect to all claims, suits, costs and liabilities arising
out of any actual or alleged patent infringement through Customer's
use, lease or resale of any aircraft or any Boeing Product
installed on an aircraft at delivery.
2. Indemnity Against Copyright Infringement.
Boeing will defend, indemnify and hold harmless Customer
with respect to all claims, suits, costs and liabilities arising
out of any actual or alleged copyright infringement through
Customer's use, lease or resale of any Boeing created Materials and
Aircraft Software installed on an aircraft at delivery.
3. Exceptions, Limitations and Conditions.
3.1 Boeing's obligation to indemnify Customer for patent
infringement will extend only to infringements in countries which,
at the time of the infringement, were party to and fully bound by
either (a) Article 27 of the Chicago Convention on International
Civil Aviation of December 7, 1944, or (b) the International
Convention for the Protection of Industrial Property (Paris
Convention).
3.2 Boeing's obligation to indemnify Customer for
copyright infringement is limited to infringements in countries
which, at the time of the infringement, are members of The Berne
Union and recognize computer software as a "work" under The Berne
Convention.
3.3 The indemnities provided under this Part 6 will not
apply to any (i) BFE, (ii) engines, (iii) Supplier Product (iv)
Boeing Product used other than for its intended purpose, or (v)
Aircraft Software not created by Boeing.
3.4 Customer must deliver written notice to Boeing (i)
within 10 days after Customer first receives notice of any suit or
other formal action against Customer and (ii) within 20 days after
Customer first receives any other written allegation or written
claim of infringement covered by this Part 6.
3.5 At any time, Boeing will have the right at its
option and expense to: (i) negotiate with any party claiming
infringement, (ii) assume or control the defense of any
infringement allegation, claim, suit or formal action, (iii)
intervene in any infringement suit or formal action , and/or (iv)
attempt to resolve any claim of infringement by replacing an
allegedly infringing Boeing Product, Materials or Aircraft Software
with a noninfringing equivalent.
3.6 Customer will promptly furnish to Boeing all
information, records and assistance within Customer's possession or
control which Boeing considers relevant or material to any alleged
infringement covered by this Part 6.
3.7 Except as required by a final judgment entered
against Customer by a court of competent jurisdiction from which no
appeals can be or have been filed, Customer will obtain Boeing's
written approval prior to paying, committing to pay, assuming any
obligation or making any material concession relative to any
infringement covered by these indemnities.
3.8 BOEING WILL HAVE NO OBLIGATION OR LIABILITY UNDER
THIS PART 6 FOR LOSS OF USE, REVENUE OR PROFIT, OR FOR ANY OTHER
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF CUSTOMER. THE OBLIGATIONS
OF BOEING AND REMEDIES OF CUSTOMER IN THIS PART 6 ARE EXCLUSIVE AND
IN SUBSTITUTION FOR, AND CUSTOMER HEREBY WAIVES, RELEASES AND
RENOUNCES ALL OTHER INDEMNITIES, OBLIGATIONS AND LIABILITIES OF
BOEING AND ALL OTHER RIGHTS, CLAIMS AND REMEDIES OF CUSTOMER
AGAINST BOEING, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE,
WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT, COPYRIGHT OR OTHER
INTELLECTUAL PROPERTY INFRINGEMENT OR THE LIKE BY ANY AIRCRAFT,
AIRCRAFT SOFTWARE, MATERIALS, TRAINING, SERVICES OR OTHER THING
PROVIDED UNDER THIS AGTA AND THE APPLICABLE PURCHASE AGREEMENT.
3.9 For the purposes of this Part 6, "BOEING or Boeing"
is defined as The Boeing Company, its divisions, subsidiaries,
affiliates, the assignees of each and their respective directors,
officers, employees and agents.
3.10 For the purposes of this Part 6, "Customer" is
defined as Continental Airlines, Inc, its divisions, subsidiaries,
affiliates, the assignees of each and their respective directors,
officers, employees and agents.
<PAGE>
EXHIBIT D
to
AIRCRAFT GENERAL TERMS AGREEMENT
AGTA-CAL
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
ESCALATION ADJUSTMENT
AIRFRAME AND OPTIONAL FEATURES
(For Model 737-600, 737-700 and 737-800, Airframe
Price Includes the Engine Price)
<PAGE>
EXHIBIT D
ESCALATION ADJUSTMENT
1. Formula.
Airframe and Optional Features price adjustments (Airframe
Price Adjustment); are used to allow prices to be stated in current
year dollars at the signing of the applicable purchase agreement
and to adjust the amount to be paid by Customer at delivery for the
effects of economic fluctuation. 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. (For Model 737-600,
737-700 and 737-800, the Airframe Price includes
the Engine Price.)
L = .65 x ECI
ECIb where ECIb is the base year index
(as set forth in Table 1 of the
applicable purchase agreement)
M = .35 x ICI
ICIb where ICIb is the base year index
(as set forth in Table 1 of the
applicable purchase agreement)
P = Airframe Price plus Optional Features Price (as set
forth in the applicable purchase agreement).
ECI is a value determined using the U.S. Department of
Labor, Bureau of Labor Statistics "Employment Cost Index
for workers in aerospace manufacturing" (ECI code 3721),
calculated by establishing a three-month arithmetic average
value (expressed as a decimal and rounded to the nearest
tenth) using the values for the fifth, sixth and seventh
months prior to the month of scheduled delivery of the
applicable aircraft. As the Employment Cost Index values
are only released on a quarterly basis, the value released
for the month of March will be used for the months of
January and February; the value for June used for April and
May; the value for September used for July and August; and
the value for December used for October and November.
ICI is a value determined using the U.S. Department of
Labor, Bureau of Labor Statistics "Producer Prices and
Price Index - Industrial Commodities Index ", calculated as
a 3-month arithmetic average of the released monthly values
(expressed as a decimal and rounded to the nearest tenth)
using the values for the 5th, 6th and 7th months prior to
the month of scheduled delivery of the applicable aircraft.
As an example, for an aircraft scheduled to be delivered in
the month of January, the months June, July and August of
the preceding year will be utilized in determining the
value of ECI and ICI.
Note: i. In determining the values of L and M, all
calculations and resulting values will be expressed as a
decimal rounded to the nearest ten-thousandth.
ii. .65 is the numeric ratio attributed to labor in the
Airframe Price Adjustment formula.
iii. .35 is the numeric ratio attributed to materials in
the Airframe Price Adjustment formula.
iv. The denominators (base year indices) are the actual
average values reported by the U.S. Department of Labor,
Bureau of Labor Statistics (base year June 1989 = 100).
The applicable base year and corresponding denominator will
be provided by Boeing in the applicable purchase agreement.
2. Values to be Utilized in the Event of Unavailability.
2.1 If the Bureau of Labor Statistics 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 Airframe Price Adjustment, the parties
will, prior to the delivery of any such aircraft, select a
substitute from other Bureau of Labor Statistics data or similar
data reported by non-governmental organizations. Such substitute
will result in the same adjustment, insofar as possible, as would
have been calculated utilizing the original values adjusted for
fluctuation during the applicable time period. However, if within
24 months after 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 the aircraft.
2.2 Notwithstanding Article 2.1 above, if prior to the
scheduled delivery month of an aircraft the Bureau of Labor
Statistics changes the base year for determination of the ECI and
ICI values as defined above, such re-based values will be
incorporated in the Airframe Price Adjustment calculation.
2.3 In the event escalation provisions are made
non-enforceable or otherwise rendered 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, 1995, which is consistent with the applicable provisions
of paragraph 1 of this Exhibit D.
Note: i. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to the
scheduled delivery month of an aircraft 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 for the aircraft invoice at the time of
delivery. The values will be considered final and no
Aircraft Price Adjustments will be made after Aircraft
delivery for any subsequent changes in published Index
values.
ii. The maximum number of digits utilized in any part of
the Airframe Price Adjustment equation will be 4, where
rounding of the fourth digit will be increased to the next
highest digit when the 5th digit is equal to 5 or greater.
<PAGE>
Listing of Insurance Requirements
The following is a listing of the terms, limits, provisions and
coverages required by Article 8.2.1.
ISSUED TO: The Boeing Company
Post Office Box 3707
Mail Stop 13-57
Seattle, Washington 98124
Attn: Manager - Aviation Insurance for
Vice President - Employee Benefits,
Insurance and Taxes
CC: Boeing Commercial Airplane Group
P.O. Box 3707
Mail Stop 75-38
Seattle, Washington 98124-2207
U.S.A.
Attn: Vice President - Contracts
NAMED INSURED: Continental Airlines, Inc.
We hereby certify that in our capacity as Brokers to the Named
Insured, the following described insurance is in force on this
date:
Insurer Policy No. Participation
POLICY PERIOD: From [date and time of inception of the
Policy(ies)] to [date and time of expiration].
GEOGRAPHICAL LIMITS: Worldwide (however, as respects "Aircraft
Hull War and Allied Perils" Insurance, as
agreed by Boeing).
<PAGE>
AIRCRAFT INSURED: All Boeing manufactured aircraft owned or
operated by the Named Insured which are the
subject of the following purchase
agreement(s), entered into between The
Boeing Company and _________________
(hereinafter "Aircraft"):
Purchase Agreement No. ____ dated ______
Purchase Agreement No. ____ dated ______
COVERAGES:
1. Aircraft "all risks" Hull (Ground and Flight)
2. Aircraft Hull War and Allied Perils (as per LSW 555, or its
successor wording)
3. Airline Liability
Including, but not limited to, Bodily Injury, Property Damage,
Aircraft Liability, Liability War Risks, Passenger Legal Liability,
Premises/Operations Liability, Completed Operations/Products
Liability, Baggage Legal Liability (checked and unchecked), Cargo
Legal Liability, Contractual Liability and Personal Injury.
The above-referenced Airline Liability insurance coverage is
subject to War and Other Perils Exclusion Clause (AV48B) but all
sections, other than section (b) are reinstated as per AV52C, or
their successor endorsements.
LIMITS OF LIABILITY:
To the fullest extent of the Policy limits that the Named Insured
carries from the time of delivery of the first Aircraft under the
first Purchase Agreement listed under "Aircraft Insured" and
thereafter at the inception of each policy period, but in any event
no less than the following:
Combined Single Limit Bodily Injury and Property Damage: U.S.$ any
one occurrence each Aircraft (with aggregates as applicable).
(737-500/600) US$350,000,000
(737-300/700) US$400,000,000
(737-400) US$450,000,000
(737-800) US$500,000,000
(757-200) US$450,000,000
(757-300) US$550,000,000
(767-200) US$550,000,000
(767-300) US$700,000,000
(767-400ER) US$750,000,000
(777-200/300) US$800,000,000
(777-200X) US$750,000,000
(777-300X) US$900,000,000
(747-400) US$900,000,000
(In regard to all other models and/or derivatives, to be specified
by Boeing).
(In regard to Personal Injury coverage, limits are US$25,000,000
any one offense/aggregate.)
DEDUCTIBLES / SELF-INSURANCE
Any deductible and/or self-insurance amount (other than standard
market deductibles) are to be disclosed and agreed by Boeing.
SPECIAL PROVISIONS APPLICABLE TO BOEING:
It is certified that Insurers are aware of the terms and conditions
of AGTA-CAL and the following purchase agreements:
PA ______ dated _______
PA ______ dated _______
PA ______ dated _______
Each Aircraft manufactured by Boeing which is delivered to the
Insured pursuant to the applicable purchase agreement during the
period of effectivity of the policies represented by this
Certificate will be covered to the extent specified herein.
Insurers have agreed to the following:
A. In regard to Aircraft "all risks" Hull Insurance and
Aircraft Hull War and Allied Perils Insurance, Insurers agree to
waive all rights of subrogation or recourse against Boeing in
accordance with AGTA-CAL which was incorporated by reference into
the applicable purchase agreement.
B. In regard to Airline Liability Insurance, Insurers agree:
(1) To include Boeing as an additional insured in
accordance with Customer's undertaking in Article 8.2.1 of AGTA-CAL
which was incorporated by reference into the applicable purchase
agreement.
(2) To provide that such insurance will be primary and
not contributory nor excess with respect to any other insurance
available for the protection of Boeing;
(3) To provide that with respect to the interests of
Boeing, such insurance shall not be invalidated or minimized by any
action or inaction, omission or misrepresentation by the Insured or
any other person or party (other than Boeing) regardless of any
breach or violation of any warranty, declaration or condition
contained in such policies;
(4) To provide that all provisions of the insurance
coverages referenced above, except the limits of liability, will
operate to give each Insured or additional insured the same
protection as if there were a separate Policy issued to each.
C. In regard to all of the above referenced policies:
(1) Boeing will not be responsible for payment, set-off,
or assessment of any kind or any premiums in connection with the
policies, endorsements or coverages described herein;
(2) If a policy is canceled for any reason whatsoever,
or any substantial change is made in the coverage which affects the
interests of Boeing or if a policy is allowed to lapse for
nonpayment of premium, such cancellation, change or lapse shall not
be effective as to Boeing for thirty (30) days (in the case of war
risk and allied perils coverage seven (7) days after sending, or
such other period as may from time to time be customarily
obtainable in the industry) after receipt by Boeing of written
notice from the Insurers or the authorized representatives or
Broker of such cancellation, change or lapse; and
(3) For the purposes of the Certificate, "Boeing" is
defined as The Boeing Company, its divisions, subsidiaries,
affiliates, the assignees of each and their respective directors,
officers, employees and agents.
Subject to the terms, conditions, limitations and exclusions of the
relative policies.
<PAGE>
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
In connection with the sale by Continental Airlines, Inc. (Seller)
to ________________ (Purchaser) of the aircraft identified below,
reference is made to Purchase Agreement No. _____ dated as of
___________, 19__, between The Boeing Company (Boeing) and Seller
(the Purchase Agreement) under which Seller purchased certain
Boeing Model ________ aircraft, including the aircraft bearing
Manufacturer's Serial No.(s) ______________________ (the Aircraft).
The Purchase Agreement incorporated by reference Aircraft General
Terms Agreement AGTA-CAL (AGTA).
Capitalized terms used herein without definition will have the same
meaning as in the Purchase Agreement.
Seller has sold the Aircraft, including in that sale the transfer
to Purchaser of all remaining rights related to the Aircraft under
the Purchase Agreement. To accomplish this transfer of rights, as
authorized by the provisions of the Purchase Agreement:
(1) Purchaser acknowledges it has reviewed the Purchase Agreement
and agrees to be bound by and comply with all applicable terms and
conditions of the Purchase Agreement, including, without
limitation, the DISCLAIMER AND RELEASE and EXCLUSION OF
CONSEQUENTIAL AND OTHER DAMAGES in Article 12 of Part 2 of Exhibit
C to the AGTA and the insurance provisions in Article 8.2 of the
AGTA. Purchaser further agrees upon the written request of Boeing,
to promptly execute and deliver such further assurances and
documents and take such further action as Boeing may reasonably
request in order to obtain the full benefits of Purchaser's
agreements in this paragraph; and
(2) Seller will remain responsible for any payments due Boeing as
a result of obligations relating to the Aircraft incurred by Seller
to Boeing prior to the effective date of this letter.
<PAGE>
We request that Boeing acknowledge receipt of this letter and
confirm the transfer of rights set forth above by signing the
acknowledgment and forwarding one copy of this letter to each of
the undersigned.
Very truly yours,
Continental Airlines, Inc. Purchaser
By ______________________ ______________________
Its _____________________ Its __________________
Dated ___________________ Dated ________________
Receipt of the above letter is acknowledged and transfer of
rights under the Purchase Agreement with respect to the Aircraft
is confirmed, effective as of this date.
THE BOEING COMPANY
By ____________________
Its Attorney-in-Fact
Dated _________________
Aircraft Manufacturer's Serial Number ____________
<PAGE>
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
In connection with the lease by # (Lessor) to ___________
(Lessee) of the aircraft identified below, reference is made to
Purchase Agreement No. ____ dated as of ________, 19__, between
The Boeing Company (Boeing) and Lessor (the Purchase Agreement)
under which Lessor purchased certain Boeing Model _______
aircraft, including the aircraft bearing Manufacturer's Serial
No.(s) ___________________ (the Aircraft). The Purchase
Agreement incorporated by reference Aircraft General Terms
Agreement AGTA-CAL (AGTA).
Capitalized terms used herein without definition will have the
same meaning as in the Purchase Agreement.
Lessor has leased the Aircraft, including in that lease the
transfer to Lessee of all remaining rights related to the
Aircraft under the Purchase Agreement. To accomplish this
transfer of rights, as authorized by the provisions of the
Purchase Agreement:
(1) Lessor authorizes Lessee to exercise, to the exclusion of
Lessor, all rights and powers of Lessor with respect to the
remaining rights related to the Aircraft under the Purchase
Agreement. This authorization will continue until Boeing
receives written notice from Lessor to the contrary, addressed to
Vice President - Contracts, Mail Stop 75-38, Boeing Commercial
Airplane Group, P.O. Box 3707, Seattle, Washington 98124-2207.
Until Boeing receives such notice, Boeing is entitled to deal
exclusively with Lessee with respect to the Aircraft under the
Purchase Agreement. With respect to the rights and obligations
of Lessor under the Purchase Agreement, all actions taken or
agreements entered into by Lessee during the period prior to
Boeing's receipt of this notice are final and binding on Lessor.
Further, any payments made by Boeing as a result of claims made
by Lessee will be made to the credit of Lessee.
(2) Lessee accepts the authorization above, acknowledges it has
reviewed the Purchase Agreement and agrees to be bound by and
comply with all applicable terms and conditions of the Purchase
Agreement including, without limitation, the DISCLAIMER AND
RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES in
Article 12 of Part 2 of Exhibit C AGTA and the insurance
provisions in Article 8.2 of the AGTA. Lessee further agrees,
upon the written request of Boeing, to promptly execute and
deliver such further assurances and documents and take such
further action as Boeing may reasonably request in order to
obtain the full benefits of Lessee's agreements in this
paragraph.
(3) Lessor will remain responsible for any payments due Boeing
as a result of obligations relating to the Aircraft incurred by
Lessor to Boeing prior to the effective date of this Notice.
We request that Boeing acknowledges receipt of this letter and
confirm the transfer of rights set forth above by signing the
acknowledgment and forwarding one copy of this letter to each of
the undersigned.
Very truly yours,
# Lessee
By ______________________ By ___________________
Its _____________________ Its __________________
Dated ___________________ Dated ________________
Receipt of the above letter is acknowledged and transfer of
rights under the Purchase Agreement with respect to the Aircraft
is confirmed, effective as of this date.
THE BOEING COMPANY
By _____________________
Its ____________________
Dated __________________
Aircraft Manufacturer's Serial Number ____________
<PAGE>
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
1. Reference is made to Purchase Agreement No. ____ dated as of
__________, 19__, between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) (the Purchase Agreement),
under which Customer purchased certain Boeing Model ________
aircraft including the aircraft bearing Manufacturer's Serial
No.(s) _____________ (the Aircraft). The Purchase Agreement
incorporated by reference Aircraft General Terms Agreement AGTA-
CAL (AGTA).
Capitalized terms used herein without definition will have the
same meaning as in the Purchase Agreement.
To accomplish the appointment of an agent, Customer confirms:
A. Customer has appointed ____________________ as agent (Agent)
to act directly with Boeing with respect to the remaining
warranties under the Purchase Agreement with respect to the
Aircraft and requests Boeing to treat Agent as Customer for the
administration of claims with respect to such warranties;
provided however, Customer remains liable to Boeing to perform
the obligations of Customer under the Purchase Agreement.
B. Boeing may continue to deal exclusively with Agent
concerning the matters described herein unless and until Boeing
receives written notice from Customer to the contrary, addressed
to Vice President - Contracts, Mail Stop 75-38, Boeing Commercial
Airplane Group, P.O. Box 3707, Seattle, Washington 98124-2207,
U.S.A. With respect to the rights and obligations of Customer
under the Purchase Agreement, all actions taken by Agent or
agreements entered into by Agent relating to the administration
of such warranty claims during the period prior to Boeing's
receipt of such notice are final and binding on Customer.
Further, any payments made by Boeing as a result of claims made
by Agent will be made to the credit of Agent unless otherwise
specified when each claim is submitted.
C. Customer will remain responsible for any payments due Boeing
as a result of obligations relating to the Aircraft incurred by
Customer to Boeing prior to the effective date of this Notice.
We request that Boeing acknowledge receipt of this letter and
confirm the appointment of Agent as stated above by signing the
acknowledgment and forwarding one copy of this letter to each of
the undersigned.
Very truly yours,
Continental Airlines, Inc.
By _______________________
<PAGE>
AGENT'S AGREEMENT
Agent accepts the appointment as stated above, acknowledges it
has reviewed the Purchase Agreement and agrees that, in
exercising any rights or making any claims thereunder, Agent will
be bound by and comply with all applicable terms and conditions
of the Purchase Agreement including, without limitation, the
DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER
DAMAGES in Article 12 of Part 2 of Exhibit C to the AGTA. Agent
further agrees, upon the written request of Boeing, to promptly
execute and deliver such further assurances and documents and
take such further action as Boeing may reasonably request in
order to obtain the full benefits of the warranties under the
Purchase Agreement.
Very truly yours,
Agent
By __________________
Its _________________
Dated _______________
Receipt of the above letter is acknowledged and the appointment
of Agent with respect to the above-described rights under the
Purchase Agreement is confirmed, effective as of this date.
THE BOEING COMPANY
By __________________
Its _________________
Dated _______________
Aircraft Manufacturer's Serial Number __________
<PAGE>
Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Vice President - Contracts
Mail Stop 75-38
Ladies and Gentlemen:
This Agreement is entered into between ____________________
(Contractor) and Continental Airlines, Inc. (Customer) and will
be effective as of the date stated below.
In connection with Customer's provision to Contractor of certain
Materials, Proprietary Materials and Proprietary Information,
reference is made to Purchase Agreement No. _____ dated as of
_______ , 19___ between The Boeing Company (Boeing) and Customer.
Capitalized terms used herein without definition will have the
same meaning as in the Purchase Agreement.
Boeing has agreed to permit Customer to make certain Materials,
Proprietary Materials and Proprietary Information relating to
Customer's Boeing Model ________ aircraft, Manufacturer's Serial
Number ______, Registration No. ________ (the Aircraft) available
to Contractor in connection with Customer's contract with
Contractor (the Contract) to maintain/repair/modify the Aircraft.
As a condition of receiving the Proprietary Materials and
Proprietary Information, Contractor agrees as follows:
1. For purposes of this Agreement:
"Aircraft Software" means software that is installed and
used in the operation of an Aircraft.
"Materials" are defined as any and all items that are
created by Boeing or a third party, which are provided directly
or indirectly from Boeing and serve primarily to contain, convey
or embody information. Materials may include either tangible
embodiments (for example, documents or drawings), or intangible
embodiments (for example, software and other electronic forms) of
information but excludes Aircraft Software.
"Proprietary Information" means any and all proprietary,
confidential and/or trade secret information owned by Boeing or a
Third Party which is contained, conveyed or embodied in
Proprietary Materials.
"Proprietary Materials" means Materials that contain,
convey, or embody Proprietary Information.
"Third Party" means anyone other than Boeing, Customer and
Contractor.
2. Boeing has authorized Customer to grant to Contractor a
worldwide, non-exclusive, personal and nontransferable license to
use Proprietary Materials and Proprietary Information, owned by
Boeing, internally in connection with performance of the Contract
or as may otherwise be authorized by Boeing in writing.
Contractor will keep confidential and protect from disclosure to
any person, entity or government agency, including any person or
entity affiliated with Contractor, all Proprietary Materials and
Proprietary Information, except to the extent such disclosure is
required by law. Individual copies of all Materials are provided
to Contractor subject to copyrights therein, and all such
copyrights are retained by Boeing or, in some cases, by Third
Parties. Contractor is authorized to make copies of Materials
(except for Materials bearing the copyright legend of a Third
Party) provided, however, Contractor preserves the restrictive
legends and proprietary notices on all copies. All copies of
Proprietary Materials will belong to Boeing and be treated as
Proprietary Materials under this Agreement.
3. Contractor specifically agrees not to use Proprietary
Materials or Proprietary Information in connection with the
manufacture or sale of any part or design, excluding ground
support equipment and related tools that Boeing has specifically
designed for Customer use. Unless otherwise agreed with Boeing
in writing, Proprietary Materials and Proprietary Information may
be used by Contractor only for work on the Aircraft for which
such Proprietary Materials have been specified by Boeing.
Customer and Contractor recognize and agree that they are
responsible for ascertaining and ensuring that all Materials are
appropriate for the use to which they are put.
4. Contractor will not attempt to gain access to information by
reverse engineering, decompiling, or disassembling any portion of
any software provided to Contractor pursuant to this Agreement.
5. Upon Boeing's request at any time, Contractor will promptly
return to Boeing (or, at Boeing's option, destroy) all
Proprietary Materials, together with all copies thereof and will
certify to Boeing that all such Proprietary Materials and copies
have been so returned or destroyed.
6. To the extent required by a government regulatory agency
having jurisdiction over Contractor, Customer or the Aircraft,
Contractor is authorized to provide Proprietary Materials and
disclose Proprietary Information to the agency for the agency's
use in connection with Contractor's, authorized use of such
Proprietary Materials and/or Proprietary Information in
connection with Contractor's maintenance, repair, or modification
of the Aircraft. Contractor agrees to take reasonable steps to
prevent such agency from making any distribution or disclosure,
or additional use of the Proprietary Materials and Proprietary
Information so provided or disclosed. Contractor further agrees
to promptly notify Boeing upon learning of any (i) distribution,
disclosure, or additional use by such agency, (ii) request to
such agency for distribution, disclosure, or additional use, or
(iii) intention on the part of such agency to distribute,
disclose, or make additional use of the Proprietary Materials or
Proprietary Information.
7. Boeing is a third-party beneficiary under this Agreement,
and Boeing may enforce any and all of the provisions of the
Agreement directly against Contractor. Contractor hereby submits
to the jurisdiction of the Washington state courts and the United
States District Court for the Western District of Washington with
regard to any claims Boeing may make under this Agreement. It is
agreed that Washington law (excluding Washington's conflict-of-
law principles) governs this Agreement.
8. No disclosure or physical transfer by Boeing or Customer to
Contractor, of any Proprietary Materials or Proprietary
Information covered by this Agreement will be construed as
granting a license, other than as expressly set forth in this
Agreement or any ownership right in any patent, patent
application, copyright or proprietary information.
9. The provisions of this Agreement will apply notwithstanding
any markings or legends, or the absence thereof, on any
Proprietary Materials.
10. This Agreement is the entire agreement of the parties
regarding the ownership and treatment of Proprietary Materials
and Proprietary Information, and no modification of this
Agreement will be effective as against Boeing unless in writing
signed by authorized representatives of Contractor, Customer and
Boeing.
11. Failure by either party to enforce any of the provisions of
this Agreement will not be construed as a waiver of such
provisions. If any of the provision of this Agreement is held
unlawful or otherwise ineffective by a court of competent
jurisdiction, the remainder of the Agreement will remain in full
force.
ACCEPTED AND AGREED TO this
Date: _____________________, 19___
Continental Airlines, Inc. Contractor
By _____________________ _______________________
Its ____________________ _______________________
<PAGE>
October 10, 1997
6-1162-GOC-117
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Special Aircraft General Terms Agreement Provisions
Reference: Aircraft General Terms Agreement (the AGTA) between
The Boeing Company (Boeing) and Continental
Airlines, Inc. (Customer)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the AGTA. All terms
used but not defined in this Letter Agreement have the same
meaning as in the AGTA.
Boeing and Customer agree that the following provisions shall
apply in lieu of the provisions currently contained in the
referenced AGTA.
1. Article 2 - Price, Taxes and Payment
Remove and replace, in their entirety, Articles 2.2.1 and
2.2.2, with the following:
"In addition to the Purchase Price, Customer shall pay to
Boeing upon demand, which shall be accompanied by appropriate
documentation and invoice, (a) the amount of any sales, use,
value added or other similar transfer taxes, together with any
penalties, fines or interest thereon (other than any such
penalties, fines or interest resulting from the failure of Boeing
seasonably to pay any such tax which it has reason to believe is
applicable, unless such nonpayment is directed by Customer)
imposed by any federal, state or local taxing authority within
the United States and the amount of all taxes imposed by any
taxing authority outside the United States, required to be paid
by Boeing as a result of any sale, use, delivery, storage or
transfer of any Aircraft, accessory, equipment, part, Buyer
Furnished Equipment (as defined in paragraph 1.2 to the AGTA),
services, instructions or data furnished or delivered under any
Purchase Agreement incorporating this AGTA, and (b) if any such
Purchase Agreement has been assigned as to any Aircraft, pursuant
to Article 9.2 of this AGTA, the amount of any other fees, taxes
and related penalties, fines or interest thereon (other than any
such penalties, fines or interest resulting from the failure of
Boeing seasonably to pay any such fee or tax which it has reason
to believe is applicable, unless such nonpayment is directed by
Customer) imposed by any federal, state or local taxing authority
within the United States required to be paid by Boeing as a
result of the sale or delivery of any such Aircraft, accessory,
equipment, part, Buyer Furnished Equipment, services,
instructions or data furnished or delivered under any Purchase
Agreement incorporating this AGTA to the assignee. If Boeing has
reason to believe that any such tax is applicable, Boeing shall
separately state the amount of such tax in its invoice. If claim
is made against Boeing for any such tax, Boeing shall promptly
notify Customer. If seasonably requested by Customer in writing,
Boeing shall, at Customer's expense, take such action as Customer
may reasonably direct with respect to such claim, and any payment
by Boeing of such tax shall be made under protest, if protest is
necessary and proper. If payment is made, Boeing shall, at
Customer's expense, take such action as Customer may reasonably
direct to recover such payment and shall, if requested, permit
Customer in Boeing's name to file a claim or prosecute an action
to recover such payment."
2. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
3. Article 5 - Representatives, Inspection, Demonstration
Flights, Test Data and Performance Guarantee Compliance
Revise Article 5.5 - Special Aircraft Test Requirements, to
read as follows:
"Boeing and Customer shall mutually agree on the number of
aircraft that Boeing may use for flight and ground tests prior to
delivery if such tests are deemed necessary by Boeing
(a) to obtain the certificates required under Article 3.1,
and
(i) other aircraft of the type purchased under the
applicable Purchase Agreement incorporating this AGTA are not
available for such tests, or
(ii) special features incorporated in the aircraft
(but not incorporated in other aircraft of the type purchased
under the applicable Purchase Agreement incorporating this AGTA)
necessitate such tests, or
(iii) the Engines (as defined in Exhibit A to the
applicable Purchase Agreement) to be installed on the aircraft
are of different manufacture or type from those installed on
other aircraft of the type purchased under the applicable
Purchase Agreement incorporating this AGTA; or
(b) with Customer's prior written consent, to evaluate
actual or contemplated changes for the improvement of aircraft of
the type purchased under the applicable Purchase Agreement
incorporating this AGTA which may be offered for incorporation,
in production or by retrofit, in any aircraft.
Customer shall accept delivery of any aircraft used for such
flight and ground tests without any reduction in price for
depreciation or wear and tear resulting therefrom."
4. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
5. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6. Article 9 - Exculpatory Clause in Post-Delivery Sale or
Lease
Revise Article 9.5, Exculpatory Clause in Post-Delivery Sale
or Lease, to read as follows:
"If Customer, at any time up to three (3) years following
delivery of any Aircraft, sells or leases such Aircraft and
obtains from the transferee any exculpatory or indemnity clause
protecting Customer, Customer shall include in such clause equal
protection for Boeing (as Boeing is defined in Article 12.3 of
Part 2 to Exhibit C to the AGTA)."
7. Article 12 - Miscellaneous
Add a new Article 12.6, Amendments, that reads as follows:
"This AGTA may be changed only in writing signed by
authorized representatives of Boeing and Customer."
Add a new Article 12.7, Sample Certificates and Forms, that
reads as follows:
"The Certificates and Forms attached to this AGTA as
Appendix II through Appendix V are samples which illustrate a
form that is acceptable to Boeing. The actual form of any
required Certificate or Form is subject to future negotiation to
establish terms and conditions and Boeing agrees to accept
reasonable changes requested by Customer."
8. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
9. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
9.3 Warranty Claim Processing. Notwithstanding the
provisions of paragraph 6.3.2 of Part 2 of Exhibit C to the AGTA,
Boeing agrees to give written disposition of warranty claims to
Customer, and acknowledging Customer's request that such written
disposition occur within twenty (20) days of receipt of a
warranty claim from Customer, Boeing hereby agrees to give best
reasonable efforts to provide such disposition within 30 calendar
days or 20 business days.
9.4 Correction Time Objective. Revise the last sentence
of paragraph 9.3.1 of Part 2 of Exhibit C to the AGTA to read
"The objectives are measured from the date Boeing receives the
defective Boeing Product and a valid claim or repair order
describing the work to the date Boeing ships the correction."
10. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
11. Confidential Treatment
Boeing and Customer understand that certain information
contained in this Letter Agreement is considered by both parties
to be confidential. Boeing and Customer agree that each party
will treat this Letter Agreement and the information contained
herein as confidential and will not, without the other party's
prior written consent, disclose this Letter Agreement or any
information contained herein to any other person or entity except
(i) as may be required by applicable law or governmental
regulations, or (ii) in connection with the financing of the
Aircraft in accordance with the requirements of any Purchase
Agreement.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Exhibit 10.15(a)
October 10, 1997
6-1162-GOC-136
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Certain Long Term Contractual Matters
Reference: Aircraft General Terms Agreement (the AGTA) and all
Purchase Agreements in effect as of the date hereof
(the Purchase Agreements) between The Boeing Company
(Boeing) and Continental Airlines, Inc. (Customer)
Ladies and Gentlemen:
This Letter Agreement documents the agreement between Boeing and
Customer with respect to certain long term contractual matters.
All terms used but not defined in this Letter Agreement shall
have the same meaning as in the AGTA.
1. Requirement Aircraft.
In consideration of [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], and other
benefits received by Customer under this Letter Agreement, the
AGTA and Purchase Agreements in effect between Customer and
Boeing, and subject to the terms and conditions of this Letter
Agreement, Customer and Boeing agree that Customer shall purchase
all of Customer's requirements for new passenger aircraft with
seating capacities (in Customer's configuration) ranging between
100 and 400 seats and scheduled for delivery before January 1,
2018 from Boeing. Boeing agrees to sell to Customer all of
Customer's requirements for such aircraft. All such aircraft so
purchased from Boeing shall hereinafter be referred to as
Requirement Aircraft.
2. Availability of Aircraft.
If Boeing for any reason is unable to deliver a new
passenger aircraft that has a seating capacity between 100 and
400 seats in the time period required by Customer, Customer may
purchase or lease Boeing manufactured aircraft from another
source (e.g. leasing companies) to support that requirement. If,
after reasonable inquiry, no such Boeing aircraft are available
to Customer on terms and conditions deemed reasonable by Customer
for delivery in such time period, Customer may elect to purchase
or lease non-Boeing aircraft solely for delivery during that time
period, but this obligation to purchase and sell will otherwise
be unaffected.
3. Enforceability of Paragraphs 1 and 2.
Boeing has agreed with the European Commission (EC) as part
of their approval of Boeing's merger with McDonnell Douglas, that
Boeing will not enforce the provisions of this Letter Agreement
with Customer which require that all of Customer's requirements
for aircraft of designated sizes be purchased from Boeing.
Boeing will notify Customer promptly in the event of any change
in the agreement with the EC.
4. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
5. Addition of New Aircraft Models and Types.
In the event Customer elects to purchase aircraft models
and types that are not yet included in the Purchase Agreements,
Boeing agrees to negotiate with Customer in good faith to
establish the terms and conditions (to the extent not provided
herein) under which Boeing will sell and Customer will purchase
such additional aircraft models and types.
6. Corporate Ownership Change, Mergers and Acquisitions.
6.1 If Customer acquires a majority of the outstanding
capital stock of another air carrier, the terms of this Letter
Agreement shall apply to such entity, however, such air carrier
may honor its preexisting firm aircraft orders. If Customer
acquires less than a majority of the outstanding capital stock of
another air carrier, the terms of this Letter Agreement shall not
apply to the other air carrier.
6.2 If another air carrier acquires an interest in
Customer, the terms of this Letter Agreement shall not apply to
such other air carrier unless consented to in writing by such
other air carrier and Boeing.
6.3 In the event of a merger of Customer and another
air carrier, if Customer is the surviving entity, then the terms
of this Letter Agreement shall apply to such combined entity;
provided that such combined entity may honor the pre-existing
firm aircraft orders of the other air carrier.
6.4 In the event of a merger of Customer and another
air carrier, if Customer is not the surviving entity, then the
surviving entity shall be bound by the terms of this Letter
Agreement with respect to future aircraft purchases for the
combined fleet, but only on a proportional basis calculated by
dividing the number of seats in Customer's fleet on aircraft of
100 seats or more immediately prior to the effective date of the
merger by the number of seats in the combined fleet on aircraft
of 100 seats or more immediately after the effective date of the
merger (the Required Percentage). The surviving entity shall be
deemed to have met its obligations hereunder if, on the third
anniversary of the effective date of the merger, and on every
third anniversary thereafter until January 1, 2018, the sum of
the total number of seats on Requirement Aircraft purchased by
the surviving entity during the three year period immediately
preceding the applicable anniversary, divided by the sum of the
total number of seats on all new aircraft that have a seating
capacity between 100 and 400 seats purchased by the surviving
entity during such three year time period, is equal to or greater
than the Required Percentage. Excluded from this calculation
shall be all undelivered aircraft that were on firm order by both
entities prior to the effective date of the merger and aircraft
acquired pursuant to paragraphs 2 and 7 hereof.
This paragraph will not negate the obligation by the
surviving entity to honor contractual commitments made by
Customer or the other air carrier prior to the merger.
7. Used Aircraft.
Nothing under this Letter Agreement will prevent Customer
from (i) renewing existing leases for Boeing or non-Boeing
aircraft or (ii) acquiring or leasing used aircraft whether or
not manufactured by Boeing provided that such aircraft have been
in airline service at least one year.
8. Model Substitution.
Within a Model Type. [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Cross Model Substitution. [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
9. Advance Payments.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
10. Option Deposits.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
14. Pricing of Requirement Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
15. Credit Memoranda for Requirement Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
16. Aircraft Performance Guarantees.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
17. Customer Support Provisions for Future Requirement
Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
18. Warranty Provisions for Requirement Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
19. Assignment.
The commitments contained in this Letter Agreement may not
be assigned by either party without the prior written consent of
the other party, except either party may assign its interest to a
corporation that (i) results from any merger or reorganization of
such party or (ii) acquires substantially all the assets of such
party.
20. Confidential Treatment.
Boeing and Customer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties as confidential. Boeing
and Customer agree that each party will treat this Letter
Agreement and the information contained herein as confidential
and will not, without the other party's prior written consent,
disclose this Letter Agreement or any information contained
herein to any other person or entity except as may be required
by applicable law or governmental regulations
21. Miscellaneous.
21.1 GOVERNING LAW. THIS LETTER AGREEMENT WILL BE
INTERPRETED UNDER AND GOVERNED BY THE LAW OF THE STATE OF
WASHINGTON, U.S.A., EXCEPT THAT WASHINGTON'S CHOICE OF LAW RULES
SHALL NOT BE INVOKED FOR THE PURPOSE OF APPLYING THE LAW OF
ANOTHER JURISDICTION.
21.2 Amendments. This Letter Agreement may not be
amended or modified except in writing signed by both parties.
21.2 Headings. Headings used in this Letter Agreement
are for convenient reference only and are not intended to affect
the interpretation of this Letter Agreement.
21.3 Waiver/Severability. Failure by either party to
enforce any provision of this Letter Agreement will not be
construed as a waiver. If any provision of this Letter Agreement
is held unlawful or otherwise ineffective by a court of
competent jurisdiction, the remainder of the Letter Agreement
will remain in effect.
21.4 Entire Agreement.
This Letter Agreement contains the entire agreement of the
parties and supersedes all previous proposals, understandings,
commitments or representations whatsoever, oral or written, with
respect to the subject matter hereof.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Exhibit 10.16
PURCHASE AGREEMENT NUMBER 2060
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Relating to Boeing Model 767-400ER Aircraft
<PAGE>
TABLE OF CONTENTS
SA
ARTICLES NUMBER
1. Quantity, Model and Description
2. Delivery Schedule
3. Price
4. Payment
5. Miscellaneous
TABLE
1. Aircraft Information Table
EXHIBIT
A. Aircraft Configuration
B. Aircraft Delivery Requirements and
Responsibilities
SUPPLEMENTAL EXHIBITS
BFE1. BFE Variables
CS1. Customer Support Variables
EE1. Engine Escalation/Engine Warranty
and Patent Indemnity
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
TABLE OF CONTENTS
SA
LETTER AGREEMENTS NUMBER
2060-1 not used
2060-2 Demonstration Flights
2060-3 Spares Initial Provisioning
2060-4 Flight Crew Training Spares
2060-5 Escalation Sharing
<PAGE>
TABLE OF CONTENTS
SA
CONFIDENTIAL LETTER AGREEMENTS NUMBER
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-GOC-086 Special Matters
<PAGE>
Purchase Agreement No. 2060
between
The Boeing Company
and
Continental Airlines, Inc.
______________________________
This Purchase Agreement No. 2060 is dated as of
October 10, 1997, between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to the purchase and
sale of Model 767-400ER aircraft. The terms and conditions of the
Aircraft General Terms Agreement dated as of October 10, 1997,
between the parties, identified as AGTA-CAL (AGTA), are hereby
incorporated by reference into this Purchase Agreement.
Article 1. Quantity, Model and Description.
The aircraft to be delivered to Customer will be
designated as Model 767-400ER aircraft (the Aircraft). Boeing will
manufacture and sell to Customer Aircraft conforming to the
configuration described in Exhibit A, which is part of this
Purchase Agreement, in the quantities listed in Table 1 to the
Purchase Agreement.
Article 2. Delivery Schedule.
The Aircraft will be delivered to Customer in
accordance with the scheduled months of delivery listed in the
attached Table 1, which is part of this Purchase Agreement.
Exhibit B, which is part of this Purchase Agreement, describes
certain responsibilities for both Customer and Boeing in order to
accomplish the delivery of the Aircraft.
Article 3. Price.
3.1 Aircraft Basic Price. The Aircraft Basic Price
is listed in Table 1 and is subject to mutually agreed upon price
adjustments and the Escalation Adjustment.
3.2 Advance Payment Base Prices. The Advance
Payment Base Prices for the Aircraft are listed in Table 1 and were
calculated utilizing the latest escalation factors available to
Boeing on the date of this Purchase Agreement projected to the
month of scheduled delivery.
3.3 Boeing has not yet established the Aircraft
Basic Price for Aircraft scheduled to be delivered after December
31, 2002. The prices listed in Table 1 for such Aircraft are only
to provide Customer with an estimate of the applicable Advance
Payment Base Prices. Accordingly, the Aircraft Basic Price for
such Aircraft will be the sum of the Airframe Price, Optional
Features Prices and the Engine Price first published by Boeing for
the same model of aircraft and engines to be delivered after
December 31, 2002.
Article 4. Payment.
4.1 Boeing acknowledges receipt of a deposit in the
amount shown in Table 1 for each Aircraft (Deposit).
4.2 The amounts and payment dates for advance
payments to be made by Customer are set forth in the attached Table
1. Advance payments for each aircraft are due on the first
business day of the months listed in the attached Table 1.
4.3 For any Aircraft whose scheduled month of
delivery is less than [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT] from the date of this
Purchase Agreement, the total amount of advance payments due for
payment upon signing of this Purchase Agreement will include all
advance payments which are past due in accordance with the standard
advance payment schedule set forth in Table 1.
4.4 The Aircraft Price is the total amount Customer
will pay to Boeing at the time of delivery of each Aircraft. Such
Aircraft Price will be calculated at time of delivery using then
available escalation factors to calculate the Escalation
Adjustment. The invoice amount for an Aircraft will show the
Aircraft Price appropriately adjusted to account for previously
received applicable advance payments.
Article 5. Miscellaneous.
5.1 Buyer Furnished Equipment Variables.
Supplemental Exhibit BFE1, which is part of this Purchase
Agreement, contains vendor selection dates, on dock dates and other
variables applicable to the Aircraft.
5.2 Customer Support Variables. Supplemental
Exhibit CS1, which is part of this Purchase Agreement, contains
the variable information applicable to information, training
services and other things furnished by Boeing in support of the
Aircraft.
5.3 Engine Escalation Variables. Supplemental
Exhibit EE1 contains the applicable engine escalation formula, the
engine warranty and the engine patent indemnity for the Aircraft.
5.4 [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
5.6 Negotiated Agreement; Entire Agreement. This
Purchase Agreement, including the provisions of Article 8.2 of the
AGTA relating to insurance, and Article 11 of Part 2 of Exhibit C
of the AGTA relating to DISCLAIMER AND RELEASE and EXCLUSION OF
CONSEQUENTIAL AND OTHER DAMAGES, has been the subject of discussion
and negotiation and is understood by the parties; the Aircraft
Price and other agreements of the parties stated in this Purchase
Agreement were arrived at in consideration of such provisions.
This Purchase Agreement, including the AGTA, contains the entire
agreement between the parties and supersedes all previous
proposals, understandings, commitments or representations
whatsoever, oral or written, with respect to the subject matter
hereof, and may be changed only in writing signed by authorized
representatives of the parties.
CONTINENTAL AIRLINES, INC. THE BOEING COMPANY
By /s/ Brian Davis By /s/ Gunar O. Clem
Its Vice President Its Attorney in Fact
<PAGE>
<TABLE>
<CAPTION>
Table 1 to
Purchase Agreement No. 2060
Aircraft Delivery, Description, Price and Advance Payments
<S> <C> <C> <C> <C>
Airframe Model/MTGW: 767-400ER 440,000 Detail Specification: D019T003-A (3/13/97)
Engine Model/
Thrust Level: CF6-80C2B7F 62,100 Price Base Year: Jul-95
Airframe Base Price: [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
Optional Features: COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Sub-Total of Airframe and Features:
Engine Price (Per Aircraft):
Aircraft Basic Price (Excluding BFE/SPE):
Buyer Furnished Equipment (BFE) Estimate:
Seller Purchased Equipment (SPE) Estimate:
Refundable Deposit per Aircraft at Proposal Acceptance:
Airframe Escalation Data:
Base Year Index (ECI):
Base Year Index (ICI):
Engine Escalation Data:
Base Year Index (CPI):
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
</TABLE>
<PAGE>
AIRCRAFT CONFIGURATION
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit A to Purchase Agreement Number 2060
<PAGE>
AIRCRAFT CONFIGURATION
Dated October 10, 1997
relating to
BOEING MODEL 767-400ER AIRCRAFT
The Detail Specification is Boeing Detail Specification
D019T001-CAL-64E1 dated as of even date herewith. Such Detail
Specification will be comprised of Boeing Configuration
Specification D019T003, revision A, dated March 13, 1997 as amended
to incorporate the Options listed below, including the effects on
Manufacturer's Empty Weight (MEW) and Operating Empty Weight (OEW).
Such Options are set forth in Boeing Document D019TCR1-CAL-64E1.
As soon as practicable, Boeing will furnish to Buyer copies of the
Detail Specification, which copies will reflect such Options. The
Aircraft Basic Price reflects and includes all effects of such
Options, except such Aircraft Basic Price does not include the
price effects of any Buyer Furnished Equipment or Seller Purchased
Equipment.
<PAGE>
Exhibit A to
Purchase Agreement No. 2060
Page 2
The configuration for Customer's 767-400ER will be developed during
the first half of 1998. For purposes of calculating the Advance
Payment Base Prices listed in Table 1, an estimated amount of
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] has been assumed for Optional Features.
The [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] includes [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
<PAGE>
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit B to Purchase Agreement Number 2060
<PAGE>
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
relating to
BOEING MODEL 767-400ER AIRCRAFT
Both Boeing and Customer have certain documentation and approval
responsibilities at various times during the construction cycle
of Customer's Aircraft that are critical to making the delivery
of each Aircraft a positive experience for both parties. This
Exhibit B documents those responsibilities and indicates
recommended completion deadlines for the actions to be
accomplished. Failure to obtain such completion deadlines shall
not be deemed a breach of this Purchase Agreement or reduce or
amend the parties' obligations hereunder.
<PAGE>
1. GOVERNMENT DOCUMENTATION REQUIREMENTS.
Certain actions are required to be taken by Customer in advance
of the scheduled delivery month of each Aircraft with respect to
obtaining certain government issued documentation.
1.1 Airworthiness and Registration Documents.
Not later than 6 months prior to delivery of
each Aircraft, Customer will notify Boeing of the registration
number to be painted on the side of the Aircraft. In addition,
and not later than 3 months prior to delivery of each Aircraft,
Customer will, by letter to the regulatory authority having
jurisdiction, authorize the temporary use of such registration
numbers by Boeing during the pre-delivery testing of the
Aircraft.
Customer is responsible for furnishing any temporary or permanent
registration certificates required by any governmental authority
having jurisdiction to be displayed aboard the Aircraft after
delivery.
1.2 Certificate of Sanitary Construction.
1.2.1 U.S. Registered Aircraft. Boeing
will obtain from the United States Public Health Service, a
United States Certificate of Sanitary Construction to be
displayed aboard each Aircraft after delivery to Customer.
1.2.2 Non-U.S. Registered Aircraft. If
Customer requires a United States Certificate of Sanitary
Construction at the time of delivery of the Aircraft, Customer
will give written notice thereof to Boeing at least 3 months
prior to delivery. Boeing will then use its reasonable best
efforts to obtain the Certificate from the United States Public
Health Service and present it to Customer at the time of Aircraft
delivery.
1.3 Customs Documentation.
1.3.1 Import Documentation. If the
Aircraft is intended to be exported from the United States,
Customer must notify Boeing not later than 3 months prior to
delivery of each Aircraft of any documentation required by the
customs authorities or by any other agency of the country of
import.
1.3.2 General Declaration - U.S. If the
Aircraft is intended to be exported from the United States,
Boeing will prepare Customs Form 7507, General Declaration, for
execution by U.S. Customs immediately prior to the ferry flight
of the Aircraft. For this purpose, Customer will furnish to
Boeing not later than 20 days prior to delivery a complete crew
and passenger list and a complete ferry flight itinerary,
including point of exit from the United States for the Aircraft.
If Customer intends, during the ferry flight of an Aircraft, to
land at a U.S. airport after clearing Customs at delivery,
Customer must notify Boeing not later than 20 days prior to
delivery of such intention. If Boeing receives such
notification, Boeing will provide to Customer the documents
constituting a Customs permit to proceed, allowing such Aircraft
to depart after any such landing. Sufficient copies of completed
Form 7507, along with passenger manifest, will be furnished
Customer to cover U.S. stops scheduled for the ferry flight.
1.3.3 Export Declaration - U.S. If the
Aircraft is intended to be exported from the United States,
Boeing will prepare Form 7525V and, immediately prior to the
ferry flight, will submit such Form to U.S. Customs in Seattle in
order to obtain clearance for the departure of the Aircraft,
including any cargo, from the United States. U.S. Customs will
deliver the Export Declaration to the U.S. Department of Commerce
after export.
2. INSURANCE CERTIFICATES.
Unless provided earlier, Customer will provide to
Boeing not later than 30 days prior to delivery of the first
Aircraft, a copy of the requisite annual insurance certificate in
accordance with the requirements of Article 8 of the AGTA.
3 NOTICE OF FLYAWAY CONFIGURATION.
Not later than 20 days prior to delivery of the
Aircraft, Customer will provide to Boeing a configuration letter
stating the requested "flyaway configuration" of the Aircraft for
its ferry flight. This configuration letter should include:
(i) the name of the company which is to furnish
fuel for the ferry flight and any scheduled post-delivery
flight training, the method of payment for such fuel, and
fuel load for the ferry flight;
(ii) the cargo to be loaded and where it is to be
stowed on board the Aircraft and address where cargo is to
be shipped after flyaway;
(iii) any BFE equipment to be removed prior to
flyaway and returned to Boeing BFE stores for installation
on Customer's subsequent Aircraft;
(iv) a complete list of names and citizenship of
each crew member and non-revenue passenger who will be
aboard the ferry flight; and
(v) a complete ferry flight itinerary.
4. DELIVERY ACTIONS BY BOEING.
4.1 Schedule of Inspections. All FAA, Boeing,
Customer and, if required, U.S. Customs Bureau inspections will
be scheduled by Boeing for completion prior to delivery or
departure of the Aircraft. Customer will be informed of such
schedules.
4.2 Schedule of Demonstration Flights. All FAA and
Customer demonstration flights will be scheduled by Boeing for
completion prior to delivery of the Aircraft.
4.3 Schedule for Customer's Flight Crew. Boeing
will inform Customer of the date that a flight crew is required
for acceptance routines associated with delivery of the Aircraft.
4.4 Fuel Provided by Boeing. Boeing will provide
to Customer, without charge, the amount of fuel shown in U.S.
gallons in the table below for the model of Aircraft being
delivered and full capacity of engine oil at the time of delivery
or prior to the ferry flight of the Aircraft.
Aircraft Model Fuel Provided
767 [CONFIDENTIAL MATERIAL
OMITTED AND FILED
SEPARATELY WITH THE
SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL
TREATMENT]
4.5 Flight Crew and Passenger Consumables. Boeing
will provide food, coat hangers, towels, toilet tissue, drinking
cups and soap for the first segment of the ferry flight for the
Aircraft.
4.6 Delivery Papers, Documents and Data. Boeing
will have available at the time of delivery of the Aircraft
certain delivery papers, documents and data for execution and
delivery. Boeing will pre-position in Oklahoma City, Oklahoma,
for filing with the FAA at the time of delivery of the Aircraft
an executed original Form 8050-2, Aircraft Bill of Sale,
indicating transfer of title to the Aircraft from Boeing or
Boeing's sales subsidiary, to Customer.
4.7 Delegation of Authority. If specifically
requested in advance by Customer, Boeing will present a certified
copy of a Resolution of Boeing's Board of Directors, designating
and authorizing certain persons to act on its behalf in
connection with delivery of the Aircraft.
5. DELIVERY ACTIONS BY CUSTOMER.
5.1 Aircraft Radio Station License. At delivery
Customer will provide its Aircraft Radio Station License to be
placed on board the Aircraft following delivery.
5.2. Aircraft Flight Log. At delivery Customer
will provide the Aircraft Flight Log for the Aircraft.
5.3 Delegation of Authority. If necessary,
Customer will present to Boeing at delivery of the Aircraft an
original or certified copy of Customer's Delegation of Authority
designating and authorizing certain persons to act on its behalf
in connection with delivery of the specified Aircraft.
<PAGE>
BUYER FURNISHED EQUIPMENT VARIABLES
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit BFE1 to Purchase Agreement Number 2060
<PAGE>
BUYER FURNISHED EQUIPMENT VARIABLES
relating to
BOEING MODEL 767-400ER AIRCRAFT
This Supplemental Exhibit BFE1 contains vendor selection dates,
on-dock dates and other variables applicable to the Aircraft.
1. Supplier Selection.
Customer will select and notify Boeing of the suppliers of
the galley system and the passenger seats by a date to be
mutually agreed to by the parties during the 767-400
configuration discussions to be held in the first half of 1998.
2. On-dock Dates
On or before a date to be mutually agreed to by the parties
Boeing will provide to Customer a BFE Requirements On-
Dock/Inventory Document (BFE Document) or an electronically
transmitted BFE Report which may be periodically revised, setting
forth the items, quantities, on-dock dates and shipping
instructions relating to the in-sequence installation of BFE.
<PAGE>
CUSTOMER SUPPORT VARIABLES
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit CS1 to Purchase Agreement Number 2060
<PAGE>
CUSTOMER SUPPORT VARIABLES
relating to
BOEING MODEL 767-400 AIRCRAFT
Customer and Boeing will conduct planning conferences
approximately 12 months before delivery of the first Aircraft, or
as otherwise agreed, to develop and schedule a customized
Customer Support Program to be furnished by Boeing in support of
the Aircraft.
The customized Customer Services Program will be based upon and
equivalent to the entitlements summarized below.
Part 1: Maintenance and Flight Training Programs; Operations
Engineering Support
1. Maintenance Training.
1.1 Airplane General Familiarization Course; 1 class of
24 students;
1.2 Mechanical/Power Plant Systems Course; 2 classes of
15 students;
1.3 Electrical Systems Course; 2 classes of 15 students;
1.4 Avionics Systems Course; 2 classes of 15 students;
1.5 Corrosion Prevention & Control Course; 1 class of
10 students;
1.6 Aircraft Rigging Course; 1 class of 6 students;
1.7 Composite Repair for Technicians - Basic; 1 class of
8 students;
1.8 Training materials will be provided to each student.
In addition, one set of training materials used in
Boeing's training program, including visual aids,
Computer Based Training Courseware, color instrument
panel wall charts, text/graphics, video programs, etc.
will be provided for use in Customer's own training
program.
2. Flight Training.
2.1 Transition training for 8 flight crews (16 pilots) in 2
classes; The training will consist of ground school
(utilizing computer based training), fixed base
simulator, full flight simulator and actual aircraft
training on Customer's Aircraft.
2.2 Flight Dispatcher training; 2 classes of 6 students;
2.3 Flight Attendant training; 2 classes of 12 students;
2.4 Performance Engineer training in Boeing's regularly
scheduled courses; schedules are published twice
yearly.
2.5 Training materials will be provided to each student.
In addition, one set of training materials as used in
Boeing's training program, including visual aids,
Computer Based Training Courseware, color instrument
panel wall charts, text/graphics, video programs, etc.
will be provided for use in Customer's own training
program.
2.6 Additional Flight Operations Services:
a. Boeing flight crew personnel to assist in
ferrying the first aircraft to Customer's main
base;
b. Instructor pilots for 90 calendar days for
revenue service training assistance;
c. An instructor pilot to visit Customer 6 months
after revenue service training to review
Customer's flight crew operations for a 2 week
period.
3. Planning Assistance.
3.1 Maintenance and Ground Operations.
Upon request, Boeing will visit Customer's main base to
evaluate aircraft maintenance facilities, develop
recommendations and assist in maintenance planning.
3.2 Spares.
a) Recommended Spares Parts List (RSPL)
customized RSPL, data and documents will be
provided to identify spare parts required for
Customer's support program.
b) Illustrated Parts Catalog (IPC)
A customized IPC in accordance with ATA 100
will be provided.
c) Provisioning Training
Provisioning training will be provided for
Customer's personnel at Boeing's facilities,
where documentation and technical expertise are
available. Training is focused on the initial
provisioning process and calculations reflected
in the Boeing RSPL.
d) Spares Provisioning Conference
A provisioning conference will be conducted,
normally at Boeing's facilities where technical
data and personnel are available.
4. Technical Data and Documents
The following list contains the documents Customer will
receive to support the introduction and operation of the
Aircraft. Customer and Boeing will conduct a planning conference
approximately 12 months before the first delivery of the Aircraft
to mutually determine the proper format (e.g. digital or hard
copy) and quantity of Materials to be furnished to Customer.
4.1. Flight Operations.
Airplane Flight Manual
Operations Manual
Quick Reference Handbook
Weight and Balance Manual
Dispatch Deviation Procedures Guide
Flight Crew Training Manual
Baggage/Cargo Loading Manual
Performance Engineer's Manual
Jet Transport Performance Methods
FMC Supplemental Data Document
Operational Performance Software
4.2. Maintenance.
Aircraft Maintenance Manual
Wiring Diagram Manual
Systems Schematics Manual
Connector Part Number Options Document
Structural Repair Manual
Overhaul/Component Maintenance Manual
Standard Overhaul Practices Manual
Standard Wiring Practices Manual
Non-Destructive Test Manual
Service Bulletins and Index
Corrosion Prevention Manual
Fault Isolation Manual
Fuel Measuring Stick Calibration Document
Power Plant Buildup Manual
Built-In Test Equipment (BITE) Manual
Central Maintenance Computer System Reporting Table
In Service Activity Report
All Operator Letters
Service Letters
Structural Item Interim Advisory
Maintenance Tips
Combined Index
4.3. Maintenance Planning.
Maintenance Planning Data Document
Maintenance Planning Data Tasks Masterfile
Maintenance Task Cards and Index
Maintenance Inspection Intervals Report
4.4. Spares.
Illustrated Parts Catalog
Standards Books
4.5. Facilities and Equipment Planning.
Facilities and Equipment Planning Document
Special Tool and Ground Handling Equipment Drawings and
Index
Supplementary Tooling Documentation
System Test Equipment Document
Illustrated Tool and Equipment List/Manual
Aircraft Recovery Document
Airplane Characteristics for Airport Planning Document
Airplane Rescue and Fire Fighting Document
Engine Handling Document
4.6. Computer Software Index.
4.7. Supplier Technical Data.
Service Bulletins
Ground Support Equipment Data
Provisioning Information
Component Maintenance/Overhaul Manuals and Index
Publications Index
Product Support Supplier Directory
5. Additional Customer Support.
In response to a Customer request, Boeing agrees to provide
the following additional training and support to Customer at
no charge.
5.1 General Familiarization Courses.
Boeing will provide a total of 6 General
Familiarization Courses (5 in addition to the 1 General
Familiarization Courses described in paragraph 1.1
above).
5.2 Maintenance and Flight Training Materials.
Boeing will provide (i) a total of 2 sets of all
training materials (1 in addition to the 1 set
described in paragraphs 1.8 and 2.5 above), (ii) the
flight training material in digital format and (iii)
the source code for the flight training Computer Based
Training (CBT).
5.3 Maintenance Instructor in Houston.
On a mutually agreeable date 6 to 8 months prior to
delivery of the first Aircraft, Boeing will send a
maintenance instructor to Houston, Texas, for sixty
days. Such instructor will be qualified to assist
Customer with developing and teaching Customer's own
maintenance training courses and answer Customer's
questions related to the maintenance of the Aircraft.
Customer will provide the round trip airfare.
5.4 Additional Flight Training Course.
On a mutually agreeable schedule, Boeing will provide
transition training for a total of 24 pilots (8 pilots
in addition to the 16 pilots previously committed in
paragraph 2.1 above).
5.5 767 Engine Run-up Course.
On a mutually agreeable schedule provide one 767 engine
run-up course.
5.6 Extra Simulator Sessions
Provide one extra simulator session for 5 students for
two Avionics Systems Courses, for two Electrical
Systems Courses and for two Mechanical/Powerplant
Systems Courses, for a total of 6 extra simulator
sessions.
<PAGE>
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit EE1 to Purchase Agreement Number 2060
<PAGE>
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
relating to
BOEING MODEL 767-400ER AIRCRAFT
1. ENGINE ESCALATION.
(a) The Aircraft Basic Price of each Aircraft set forth in Table
1 of the Purchase Agreement includes an aggregate price for CF6-
80C2 engines and all accessories, equipment and parts provided by
the engine manufacturer. The adjustment in Engine price
applicable to each Aircraft (Engine Price Adjustment) will be
determined at the time of Aircraft delivery in accordance with
the following formula:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
(b) The following definitions will apply herein:
Pe = Engine Price Adjustment
Pb = Engine Base Price (per Aircraft), as set forth in Table
1 of the Purchase Agreement.
CPI is the Composite Price Index, a value determined using
the Bureau of Labor Statistics, U.S. Department of Labor
actual data in accordance with the formula below. The Index
values utilized in the formula will be the numbers shown in
the actual data for the ninth month prior to the month of
scheduled Aircraft delivery or the ninth month prior to the
Base Year Dollars month set forth in Table 1.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
L = The Labor Index will be equal to the quotient
of the value associated with the Aircraft
Delivery Month divided by the value associated
with the Base Year Dollar month in "Hourly
Earnings of Aircraft Engines and Engine Parts
Production Workers" SIC 3724, multiplied by 100
and then by 30%.
C = The Industrial Commodities Index will be equal
to 30% of the Producer Price Index for "all
commodities other than Farm and Foods," Code
3-15 associated with the scheduled Aircraft
delivery month.
M = The Metals and Metal Products Index will be
equal to 30% of the Producer Price Index for
"Metals and Metal Products," Code 10 associated
with the scheduled Aircraft delivery month.
E = The Fuel Index will be equal to 10% of the
Producer Price Index for "Fuel and Related
Products and Power," Code 5 associated with the
scheduled Aircraft delivery month.
The Engine Price Adjustment will not be made if it would result
in a decrease in the Engine Base Price.
(c) The values of the Average Hourly Earnings and Producer Price
Indices used will be those published as of a date 30 days prior
to the scheduled Aircraft delivery to Customer. Such values will
be considered final and no Engine Price Adjustment will be made
after Aircraft delivery for any subsequent changes in published
Index values.
(d) In the event the Engine price escalation provisions are made
non-enforceable or otherwise rendered null and void by any agency
of the United States Government, or if the U.S. Department of
Labor, Bureau of Labor Statistics (i) substantially revises the
methodology (in contrast to benchmark adjustments or other
corrections of previously published data) or (ii) discontinues
publication of any of the data referred to above, General
Electric Company (GE) agrees to meet jointly with Boeing and
Customer, (to the extent such parties may lawfully do so,) to
jointly select a substitute for the revised or discontinued data;
such substitute data to lead in application to the same
adjustment result, insofar as possible, as would have been
achieved by continuing the use of the original data as it may
have fluctuated had it not been revised or discontinued. If such
Engine price escalation provisions, methodology or data
publication are subsequently reinstated, Boeing will make
adjustments consistent with the agreements defined in this
Supplemental Exhibit EE1.
NOTE: The factor (CPI divided by the base year index) by
which the Engine Base Price is to be multiplied will be
expressed as a decimal and rounded to the nearest
thousandth. Any rounding of a number, as required
under this Supplemental Exhibit EE1 with respect to
escalation of the Engine 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.
2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN.
Boeing has obtained from GE the right to extend to Customer the
provisions of GE's Warranty and Product Support Plan; subject,
however, to Customer's acceptance of the conditions set forth
herein. Accordingly, Boeing hereby extends to Customer and
Customer hereby accepts the provisions of GE's Warranty and
Product Support Plan hereinafter set forth, and such Warranty and
Product Support Plan shall apply to all CF6 turbofan engines
including all Modules and Parts thereof (Engines) installed in
the Aircraft at the time of delivery or purchased from Boeing by
Customer for support of the Aircraft except that, if Customer and
GE have executed a General Terms Agreement covering the Engines,
then the terms of that Agreement shall be substituted for and
supersede the below-stated provisions and such provisions shall
be of no force or effect and neither Boeing nor GE shall have any
obligation arising therefrom. In consideration for Boeing's
extension of the GE Warranty and Product Support Plan to
Customer, Customer hereby releases and discharges Boeing from any
and all claims, obligations and liabilities whatsoever arising
out of the purchase or use of such CF6 turbofan engines and
Customer hereby waives, releases and renounces all its rights in
all such claims, obligations and liabilities except for the
provisions in paragraphs 2.1 (i) and 2.1 (iv) of Part 2 to
Exhibit C to the AGTA.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT] to Purchase Agreement Number
2060
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
relating to
BOEING MODEL 767 AIRCRAFT
This is the listing of Covered Components for the Aircraft which
relate to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Product Assurance Document to the AGTA and
is a part of Purchase Agreement No. 2060.
1. Wing.
(a) Upper and lower wing skins and stiffeners between the
forward and rear wing spars.
(b) Wing spar webs, chords and stiffeners.
(c) Inspar wing ribs.
(d) Inspar splice plates and fittings.
(e) Main landing gear support structure.
(f) Wing center section lower beams, spanwise beams and
floor beams, but not the seat tracks attached to the
beams.
(g) Wing-to-body structural attachments.
(h) Engine strut support fittings attached directly to wing
primary structure.
(i) Support structure in the wing for spoilers and spoiler
actuators; for aileron hinges and reaction links; and
for leading edge devices and trailing edge flaps.
(j) Leading edge device and trailing edge flap support
system.
(k) Aileron, leading edge device and trailing edge flap
internal, fixed attachment and actuator support
structure.
2. Body.
(a) External surface skins and doublers, longitudinal
stiffeners, longerons and circumferential rings and
frames between the forward pressure bulkhead and the
vertical stabilizer rear spar bulkhead, and structural
support and enclosure for the APU but excluding all
system components and related installation and
connecting devices, insulation, lining, and decorative
panels and related installation and connecting devices.
(b) Window and windshield structure but excluding the
windows and windshields.
(c) Fixed attachment structure of the passenger doors,
cargo doors and emergency exits excluding door
mechanisms and movable hinge components. Sills and
frames around the body openings for the passenger
doors, cargo doors and emergency exits, excluding scuff
plates and pressure seals.
(d) Nose wheel well structure, including the wheel well
walls, pressure deck, forward and aft bulkheads, and
the gear support structure.
(e) Main gear wheel well structure including pressure deck,
bulkheads and landing gear beam support structure.
(f) Floor beams and support posts in the control cab and
passenger cabin area, but excluding seat tracks.
(g) Forward and aft pressure bulkheads.
(h) Keel structure between the wing front spar bulkhead and
the main gear wheel well aft bulkhead, including
splices.
(i) Wing front and rear spar support bulkheads, and
vertical and horizontal stabilizer front and rear spar
support bulkheads including terminal fittings but
excluding all system components and related
installation and connecting devices, insulation,
lining, and decorative panels and related installation
and connecting devices.
(j) Support structure in the body for the stabilizer pivot
and stabilizer screw.
3. Vertical Stabilizer.
(a) External skins between front and rear spars including
splices.
(b) Front, rear and auxiliary spar chords, webs and
stiffeners, and attachment fittings between vertical
stabilizer and body.
(c) Inspar ribs.
(d) Support structure in the vertical stabilizer for rudder
hinges, reaction links and actuators.
(e) Rudder internal, fixed attachment and actuator support
structure.
(f) Rudder hinges and supporting ribs, excluding bearings.
4. Horizontal Stabilizer.
(a) External skins between front and rear spars.
(b) Front, rear and auxiliary spar chords, webs and
stiffeners.
(c) Inspar ribs.
(d) Stabilizer center section and fittings splicing to
outboard stabilizer including pivot and screw support
structure.
(e) Support structure in the horizontal stabilizer for the
elevator hinges, reaction links and actuators.
(f) Elevator internal, fixed attachment and actuator
support structure.
5. Engine Strut.
(a) Strut external surface skin and doublers and
stiffeners.
(b) Internal strut chords, frames and bulkheads.
(c) Strut to wing fittings and diagonal brace.
(d) Engine mount support fittings attached directly to
strut structure.
(e) For Aircraft equipped with General Electric or Pratt &
Whitney engines only, the engine mounted support
fittings.
6. Main Landing Gear.
(a) Outer cylinder.
(b) Inner cylinder.
(c) Upper and lower side strut, including spindles and
universals.
(d) Upper and lower drag strut, including spindles and
universals.
(e) Orifice support tube.
(f) Downlock links, including spindles and universals
(g) Torsion links.
(h) Bogie beam.
(i) Axles.
(j) Retraction Links.
7. Nose Landing Gear.
(a) Outer cylinder.
(b) Inner cylinder, including axles.
(c) Orifice support tube.
(d) Upper and lower drag strut, including lock links.
(e) Steering plates and steering collar.
(f) Torsion links.
(g) Actuator support beam and hanger.
(h) Retraction Links.
NOTE: The [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT] Policy does not
cover any bearings, bolts, bushings, clamps, brackets,
actuating mechanisms or latching mechanisms used in or on
the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT].
<PAGE>
October 10, 1997
2060-2
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Demonstration Flights
Reference: Purchase Agreement No. 2060 (the Purchase
Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to
Model 767-400ER aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
Definition of Terms:
Correction Costs: Customer's or a third party's direct labor
costs and the cost of any material required to correct a Flight
Discrepancy where direct labor costs are equal to the warranty
labor rate in effect between the parties at the time such labor
is expended.
Flight Discrepancy: A failure or malfunction of an Aircraft, or
the accessories, equipment or parts installed on the Aircraft
which results from a defect in the Aircraft, Boeing Product,
engine or Supplier Product or a nonconformance to the Detail
Specification for the Aircraft.
The AGTA provides that each aircraft will be test flown prior to
delivery for the purpose of demonstrating the functioning of such
Aircraft and its equipment to Customer; however, Customer may
elect to waive this test flight. For each test flight waived,
Boeing agrees to provide Customer an amount of jet fuel at
delivery that, together with the standard fuel entitlement,
totals [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] U.S. gallons.
Further, Boeing agrees to reimburse Customer for any Correction
Costs incurred as a result of the discovery of a Flight
Discrepancy during the first flight of the aircraft by Customer
following delivery to the extent such Correction Costs are not
covered under a warranty provided by Boeing, the engine
manufacturer or any of Boeing's suppliers.
Should a Flight Discrepancy be detected by Customer which
requires the return of the Aircraft to Boeing's facilities at
Seattle, Washington, so that Boeing may correct such Flight
Discrepancy, Boeing and Customer agree that title to and risk of
loss of such Aircraft will remain with Customer. Any such
correction by Boeing shall be at no cost to Customer. In
addition, it is agreed that Boeing will have responsibility for
the Aircraft while it is on the ground at Boeing's facilities in
Seattle, Washington, as is chargeable by law to a bailee for
mutual benefit, but Boeing shall not be chargeable for loss of
use.
To be reimbursed for Correction Costs, Customer shall submit a
written itemized statement describing any flight discrepancies
and indicating the Correction Cost incurred by Customer for each
discrepancy. This request must be submitted to Boeing's
Contracts Regional Director at Renton, Washington, within ninety
(90) days after the first flight by Customer.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
2060-3
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Spares Initial Provisioning
Reference: Purchase Agreement No. 2060 (the Purchase
Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to
Model 767-400ER aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
1. Applicability.
This Letter Agreement will apply to initial provisioning for
the Model 767-400ER Aircraft purchased by Customer under the
Purchase Agreement.
2. Initial Provisioning Meeting.
Boeing will conduct an initial provisioning meeting (Initial
Provisioning Meeting) with Customer to establish mutually
agreeable procedures to accomplish Customer's initial
provisioning of spare parts for the Aircraft. The parties will
agree, during the Initial Provisioning Meeting on the operational
data to be provided by Customer for Boeing's use in preparing its
quantity recommendations for initial provisioning of spare parts
for the Aircraft, exclusive of special tools, ground support
equipment, engines and engine parts (Provisioning Items). Such
operational data to be provided by Customer will be the data
described in Section E of Boeing Manual D6-49090, entitled
"Initial Provisioning Implementation Manual, Boeing Model 757,
767, 777, 747-400 and 737-300, -400 and -500" (Boeing Initial
Provisioning Implementation Manual) which will be furnished to
Customer prior to the Initial Provisioning Meeting. The parties
will also agree on the provisioning documentation data to be
provided by Boeing. Such data will be essentially in accordance
with the provisions of Chapter 1 of ATA International
Specification 2000, Revision 1, dated April 20, 1989, as
described in Boeing Initial Provisioning Implementation Manual
D6-49090 (such data will be hereinafter referred to collectively
as the "Provisioning Data"). Boeing will provide instruction in
the use of the initial provisioning documentation. This
instruction will be provided in conjunction with the Initial
Provisioning Meeting. In addition, the parties will discuss
spares ordering procedures and other matters related to the
provisioning for the Aircraft. The time and location for such
Initial Provisioning Meeting will be mutually agreed upon between
the parties.
3. Initial Provisioning Documentation.
3.1 Provisioning Data. Boeing will furnish Provisioning
Data to Customer on or about August 1, 1999. The Provisioning
Data will be as complete as possible and will cover Provisioning
Items selected by Boeing for review by Customer for initial
provisioning for the Aircraft. The Provisioning Data will set
forth the prices for Provisioning Items which are Boeing Spare
Parts and such prices will be firm and remain in effect until the
date or dates set forth below in Paragraph 4.1, Boeing Spare
Parts, by which orders must be placed with Boeing. Boeing will,
from time to time, until a date approximately 90 days following
delivery of the last Aircraft or until the delivery configuration
of each of the Aircraft is reflected in the Provisioning Data,
whichever is later, furnish to Customer revisions to the
Provisioning Data.
3.2 Provisioning IPC. Boeing will, on or about July 1,
1999, furnish to Customer a Boeing Illustrated Parts Catalog
(IPC), hereinafter referred to as the "Provisioning IPC." The
Provisioning IPC will be as complete as possible and will cover
Provisioning Items selected by Boeing for review by Customer for
initial provisioning for the Aircraft. Boeing will, from time to
time, until a date approximately 90 days following delivery of
the last Aircraft, or until the delivery configuration of each of
the Aircraft is reflected in the Provisioning IPC, whichever is
later, furnish to Customer revisions to the Provisioning IPC.
3.3 Buyer Furnished Equipment (BFE) Provisioning Data.
3.3.1 Boeing's Responsibility. Boeing will include
BFE end items in the Provisioning Data and Provisioning IPC for
BFE installed on Customer's Aircraft provided such equipment has
been installed on other Aircraft by Boeing and Boeing has data on
the BFE.
3.3.2 Customer's Responsibility. Customer will be
responsible for ensuring BFE data is provided to Boeing by the
BFE supplier in a format reasonably acceptable to Boeing for BFE
not covered by 3.3.1 above. If the data is not provided to
Boeing in a timely manner and in a format reasonably acceptable
to Boeing, such BFE equipment will not be included in Boeing's
Provisioning Data or IPC.
3.4 Other Data. Boeing will submit to Customer listings
of raw materials, standard parts and bulk materials to be used by
Customer in the maintenance and repair of the Aircraft.
4. Purchase from Boeing of Spare Parts as Initial Provisioning
for the Aircraft.
4.1 Boeing Spare Parts. Customer will place orders for
Provisioning Items by October 1, 1999; provided, however, that in
those instances where Boeing submits any revision to the
Provisioning Data, Customer will place orders for Boeing Spare
Parts covered by such revision within 90 days following the date
of such submittal. At Customer's request, Boeing will process
"controlled shipments" by shipping full or partial quantities of
an order on a schedule specified by Customer, provided the final
shipment is made no later than 24 months after receipt of the
order.
4.2 Vendor Provisioning Items. Customer may place orders
with Boeing for Provisioning Items which are manufactured by
vendors or to their detailed design and are covered by the
Provisioning Data as initial provisioning for the Aircraft. The
price to Customer for any such vendor Provisioning Item will be
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] of the vendor's quoted price to Boeing
therefor. If Customer elects to purchase such vendor Provisioning
Items from Boeing, Customer will place its orders therefor in
accordance with the provisions of Paragraph 4.1, Boeing Spare
Parts.
4.3 Ground Support Equipment and Special Tools. Customer
may place orders with Boeing for ground support equipment (GSE)
and special tools manufactured by vendors which Customer
determines it will initially require for maintenance, overhaul
and servicing of the Aircraft and/or engines. The price to
Customer for such GSE or special tools will be [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] of the vendor's quoted price to Boeing therefor. If
Customer elects to purchase such GSE and special tools from Boeing,
Customer will place its orders therefor by the date set forth in
Paragraph 4.1, Boeing Spare Parts or such later date as the parties
may mutually agree.
4.4 Spare Engines and Engine Spare Parts. Customer may
place orders with Boeing for spare engines and/or engine spare
parts which Customer determines it will initially require for
support of the Aircraft or for maintenance and overhaul of the
engines. The price to Customer for such spare engines or such
engine spare parts, will be [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] of the engine
manufacturer's quoted price to Boeing for the engine, and
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] of the engine manufacturer's quoted price
to Boeing for the engine spare parts. If Customer elects to
purchase such spare engines or engine spare parts through Boeing,
Customer will place its orders on a date to be mutually agreed upon
during the Initial Provisioning Meeting.
4.5 QEC Kits. Boeing will, on or about July 1, 1999,
furnish to Customer a listing of all components which could be
included in the Quick Engine Change (QEC) kits which may be
purchased by Customer from Boeing. Customer agrees to review
such listing and indicate by marking on one copy of such listing
those components that Customer desires included in its QEC kits.
Customer will return such marked copy to Boeing within 30 days
after Customer's receipt of such listing. Within 30 days after
Boeing's receipt of such marked copy, Boeing will republish such
listing to reflect only those components selected by Customer and
will provide copies of such republished listing to Customer.
Boeing will from time to time furnish revisions to such
republished listing until a date approximately 90 days after
delivery of the last QEC kit ordered by Customer for the
Aircraft. Boeing will furnish to Customer as soon as practicable
a statement setting forth a firm price for the QEC kit
configuration selected by Customer. Customer agrees to place
orders with Boeing for the QEC kits for the Aircraft by October
1, 1999.
4.6 Payment for Provisioning Items. The payment
provisions of the Customer Services General Terms Agreement
(CSGTA) between Boeing and Customer will be applicable to
Provisioning Items ordered by Customer from Boeing for the
Aircraft.
5. Delivery.
Boeing will, insofar as reasonably possible, deliver to
Customer the Spare Parts ordered by Customer in accordance with
the provisions of this letter on dates reasonably calculated to
conform to Customer's anticipated needs in view of the scheduled
deliveries of the Aircraft. Customer and Boeing will agree upon
the date to begin delivery of the Provisioning Spare Parts
ordered in accordance with this letter. Where appropriate,
Boeing will arrange for shipment of such Spare Parts, which are
manufactured by vendors, directly to Customer from the applicable
vendor's facility. The routing and method of shipment for
initial deliveries and all subsequent deliveries of such Spare
Parts will be as mutually agreed between Boeing and Customer.
6. Substitution for Obsolete Spare Parts.
6.1 Obligation to Substitute. In the event that, prior to
delivery of the first Aircraft pursuant to the Purchase
Agreement, any Spare Part purchased by Customer from Boeing in
accordance with this letter is rendered obsolete or unusable due
to the redesign of the Aircraft or of any accessory, equipment or
part thereof (other than a redesign at Customer's request),
Boeing will deliver to Customer new and usable Spare Parts in
substitution for such obsolete or unusable Spare Parts and
Customer will return the obsolete or unusable Spare Parts to
Boeing. Boeing will credit Customer's account with Boeing with
the price paid by Customer for any such obsolete or unusable
Spare Part and will invoice Customer for the purchase price of
any such substitute Spare Part delivered to Customer.
6.2 Delivery of Obsolete Spare Parts and Substitutes
Therefor. Obsolete or unusable Spare Parts returned by Customer
pursuant to this Item will be delivered to Boeing at its Seattle
Distribution Center, or such other destination as Boeing may
reasonably designate. Spare Parts substituted for such returned
obsolete or unusable Spare Parts will be delivered to Customer at
Boeing's Seattle Distribution Center, or such other Boeing
shipping point as Boeing may reasonably designate. Boeing will
pay the freight charges for the shipment from Customer to Boeing
of any such obsolete or unusable Spare Part and for the shipment
from Boeing to Customer of any such substitute Spare Part.
7. Repurchase of Provisioning Items.
7.1 Obligation to Repurchase. During a period commencing
1 year after delivery of the first Aircraft under the Purchase
Agreement, and ending 5 years after such delivery, Boeing will,
upon receipt of Customer's written request and subject to the
exceptions in Paragraph 7.2, Exceptions, repurchase unused and
undamaged Provisioning Items which (i) were recommended by Boeing
in the Provisioning Data as initial provisioning for the
Aircraft, (ii) were purchased by Customer from Boeing, and (iii)
are surplus to Customer's needs.
7.2 Exceptions. Boeing will not be obligated under
Paragraph 7.1, Obligation to Repurchase, to repurchase any of the
following: (i) quantities of Provisioning Items in excess of
those quantities recommended by Boeing in the Provisioning Data
for the Aircraft, (ii) QEC Kits, bulk material bits, raw material
kits, service bulletin kits, standards kits and components
thereof (except those components listed separately in the
Provisioning Data), (iii) Provisioning Items for which an Order
was received by Boeing more than 8 months after delivery of the
last Aircraft, (iv) Provisioning Items which have become obsolete
or have been replaced by other Provisioning Items as a result of
(a) Customer's modification of the Aircraft or (b) design
improvements by Boeing or the vendor (other than Provisioning
Items which have become obsolete because of a defect in design if
such defect has not been remedied by an offer by Boeing or the
vendor to provide no charge retrofit kits or replacement parts
which correct such defect), and (v) Provisioning Items which
become excess as a result of a change in Customer's operating
parameters, provided to Boeing pursuant to the Initial
Provisioning meeting in Paragraph 2, which were the basis of
Boeing's initial provisioning recommendations for the Aircraft.
7.3 Notification and Format. Customer will notify Boeing,
in writing, when Customer desires to return Provisioning Items
which Customer's review indicates are eligible for repurchase by
Boeing under the provisions of this Repurchase of Provisioning
Items paragraph. Customer's notification will include a detailed
summary, in part number sequence, of the Provisioning Items
Customer desires to return. Such summary will be in the form of
listings, tapes, diskettes or other media as may be mutually
agreed between Boeing and Customer, and will include part number,
nomenclature, purchase order number, purchase order date and
quantity to be returned. Within 5 business days after receipt of
Customer's notification, Boeing will advise Customer, in writing,
when Boeing's review of such summary will be completed, but in no
case will the Boeing review be completed more than 30 days after
receipt of Customer's notification.
7.4 Review and Acceptance by Boeing. Upon completion of
Boeing's review of any detailed summary submitted by Customer
pursuant to Paragraph 7.3, Boeing will issue to Customer a
Material Return Authorization (MRA) for those Provisioning Items
Boeing agrees are eligible for repurchase in accordance with this
Repurchase of Provisioning Items paragraph. Boeing will advise
Customer of the reason that any spare part included in Customer's
detailed summary is not eligible for return. Boeing's MRA will
state the date by which Provisioning Items listed in the MRA must
be redelivered to Boeing and Customer will arrange for shipment
of such Provisioning Items accordingly.
7.5 Price and Payment. The price of each Provisioning
Item repurchased by Boeing pursuant to this Repurchase of
Provisioning Items paragraph will be an amount equal to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] of the original invoice price thereof. In
the case of Provisioning Items manufactured by a vendor which were
purchased pursuant to Paragraph 4, Purchase from Boeing of Spare
Parts as Initial Provisioning for the Aircraft, hereof the
repurchase price will not include Boeing's [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
handling charge. Boeing will pay the repurchase price by issuing
a credit memorandum in favor of Customer which may be applied
against amounts due Boeing for the purchase of aircraft, Spare
Parts, services or data.
7.6 Delivery of Provisioning Items. Provisioning Items
repurchased by Boeing pursuant to this Repurchase of Provisioning
Items paragraph will be delivered to Boeing at its Seattle
Distribution Center, or such other destination as Boeing may
reasonably designate. Boeing will pay the freight charges for
the shipment from Customer to Boeing of any such Provisioning
Items.
8. Obsolete Spare Parts and Surplus Provisioning Items - Title
and Risk of Loss.
Title to and risk of loss of any obsolete or unusable Spare
Parts returned to Boeing pursuant to Paragraph 6, Substitution
for Obsolete Spare Parts, will pass to Boeing upon delivery
thereof to Boeing. Title to and risk of loss of any Spare Part
substituted for an obsolete or unusable Spare Part pursuant to
Paragraph 6, Substitution for Obsolete Spare Parts, will pass to
Customer upon delivery thereof to Customer. Title to and risk of
loss of any Provisioning Item repurchased by Boeing pursuant to
Paragraph 7, Repurchase of Provisioning Items, will pass to
Boeing upon delivery thereof to Boeing. With respect to the
obsolete or unusable Spare Parts which may be returned to Boeing
and the Spare Parts substituted therefor, pursuant to
Paragraph 6, and the Provisioning Items which may be repurchased
by Boeing, pursuant to Paragraph 7, the party which has risk of
loss of any such Spare Part or Provisioning Item will have the
responsibility of providing any insurance coverage for it desired
by such party.
9. Supplier Support.
Boeing has entered, or anticipates entering, into product
support agreements with suppliers (Boeing Suppliers) of major
system components manufactured by such Suppliers to be installed
on the Aircraft (Supplier Components). Such product support
agreements commit, or are expected to commit, the Boeing
Suppliers to provide to Boeing's customers and/or such customer's
designees support services with respect to the Supplier
Components which can be reasonably expected to be required during
the course of normal operation. This support includes but is not
limited to shelf-stock of certain spare parts, emergency spare
parts, timely delivery of spare parts, and technical data related
to the Supplier Components. Copies of such product support
agreements will be provided to Customer on or about October 1,
1999, in Boeing Document D6-56115, Volumes 1 and 2. In the event
Customer has used due diligence in attempting to resolve any
difficulty arising in normal business transactions between
Customer and a Boeing Supplier with respect to product support
for a Supplier Component manufactured by such Supplier and if
such difficulty remains unresolved, Boeing will, if requested by
Customer, assist Customer in resolving such difficulty.
Assistance will be provided by the Spares Supplier Support and
Data Management Organization within the Boeing Buyer Services
Division.
10. Termination for Excusable Delay.
In the event of termination of the Purchase Agreement with
respect to any Aircraft pursuant to Article 7 of the AGTA, such
termination will, if Customer so requests by written notice
received by Boeing within 15 days after such termination, also
discharge and terminate all obligations and liabilities of the
parties as to any Spare Parts which Customer had ordered pursuant
to the provisions of this letter as initial provisioning for such
Aircraft and which are undelivered on the date Boeing receives
such written notice.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10,1997
2060-4
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Flight Crew Training Spare Parts Support
Reference: Purchase Agreement No. 2060 (the Purchase
Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to
Model 767-400ER aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
Definition of Terms:
Flight Crew Training: Flight training occurring immediately
following delivery using Boeing facilities.
Removed Parts: Parts removed from an Aircraft during Flight Crew
Training.
Replacement Parts: Parts taken from Boeing inventory and
installed in an Aircraft because no Standby Parts are available.
Standby Parts: Parts which are owned by Customer and located at
Customer's designated storage area at Boeing to support Flight
Crew Training. The Standby Parts list, including part numbers,
exact quantities and on-dock dates, will be established during
the spares provisioning meeting.
Training Aircraft: The Aircraft delivered to Customer used for
Flight Crew Training.
1. Provisioning of Spare Parts
To support Flight Crew Training, Boeing agrees to provide
normal line maintenance and expendable spare parts at no charge
on the Training Aircraft; and, Customer agrees to provide Standby
Parts for the Training Aircraft.
If parts other than those discussed above fail, Boeing will
attempt to provide Replacement Parts for those failed parts in
order to prevent extended down time on the Training Aircraft. If
Boeing is unable to provide Replacement Parts, Customer will be
responsible for providing those parts.
2. Disposition of Removed Parts
Boeing may with Customer consent either:
(i) repair such Removed Parts, at no charge to
Customer, and either retain such parts as Standby Parts or
return the Removed Parts to Customer, at Customer expense;
or
(ii) return the Removed Parts to Customer at
Customer's expense; or
(iii) return the Removed Parts to the manufacturer
for repair or replacement under such manufacturer's
warranty. Upon Boeing's receipt of the repaired Removed
Parts or their replacements, Boeing may retain such Removed
Parts or their replacements as Standby Parts or return such
Removed Parts or their replacements to Customer, at
Customer's expense. Any Removed Parts returned to
Customer, or replacements, will be accomplished in
accordance with any written instructions from Customer
received by Boeing prior to such return.
3. Payment for of Replacement Parts
Boeing will invoice Customer for Replacement Parts at
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].
4. Redelivery of Standby Parts
Standby Parts not installed in the Training Aircraft will
be redelivered to Customer on board the last aircraft used for
Flight Crew Training.
5. Non-performance by Customer
If Customer's non-performance of obligations in this Letter
Agreement causes a delay in the Flight Crew Training, Customer
will be deemed to have agreed to any such delay in Flight Crew
Training. In addition, Boeing will have the right to:
(i) purchase Standby Parts and invoice Customer for
the price of such Parts and for any necessary adjustment
and calibration of such Parts;
(ii) cancel or reschedule the Flight Crew Training;
or
(iii) invoice Customer for any out-of-pocket
expenses, including but not limited to ground handling
expenses, maintenance costs and storage costs, that are
directly attributable to the delay in the Flight Crew
Training.
6. Customer Warranty
Customer warrants that the Standby Parts will meet the
requirements of the Detail Specification and be in a condition to
pass Boeing's receival inspection and functional test, and if not
in a new condition, will have an attached FAA Serviceable Parts
Tag.
7. Title and Risk of Loss
Title to and risk of loss of any Standby Parts or Removed
Parts will remain with Customer. Boeing will have only such
liability for Standby Parts and Removed Parts as a bailee for
mutual benefit would have, but will not be liable for loss of
use. For Replacement Parts, title will transfer to Customer at
the time such part is installed on the Training Aircraft.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
2060-5
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Escalation Sharing
Reference: Purchase Agreement No. 2060 (the Purchase Agreement)
between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Customer) relating to Model 767-
400ER aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
1. Commitment.
Boeing agrees to share one-half of the escalation, up to a
maximum of 3 percent per year, in each of the years 1997 and 1998
according to the terms in paragraph 2 below for any of Customer's
aircraft which are scheduled to deliver after December 31, 1996.
For the purpose of this Letter Agreement such aircraft are
referred to as "Eligible Aircraft."
All escalation calculations under this Letter Agreement will be
made in accordance with Exhibit D to the AGTA between Boeing and
Customer, using actual escalation indices published for the
applicable period.
2. Escalation Credit Memo.
2.1 Calculation - Eligible Aircraft Delivering in 1997.
At the time of delivery of each Eligible Aircraft
delivering in 1997, Boeing will issue to Customer a credit
memorandum (the 1997 Credit Memorandum) which will be applied to
the Aircraft Price of such Eligible Aircraft. The 1997 Credit
Memorandum is calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2.2 Calculation - Eligible Aircraft Delivering in 1998.
At the time of delivery of each Eligible Aircraft
delivering in 1998, Boeing will issue to Customer a credit
memorandum (the 1998 Credit Memorandum) which shall be applied to
the Aircraft Price of such Eligible Aircraft. The 1998 Credit
Memorandum shall be calculated as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
2.3 Eligible Aircraft Delivering after 1998.
For Eligible Aircraft delivering after the calendar
year 1998, the amount of the Credit Memorandum will be the amount
calculated pursuant to paragraph 2.2 above through December 1998.
This credit memorandum amount will be escalated from December
1998 to the month of delivery in accordance with Exhibit D to the
AGTA.
3. Advance Payment Base Price.
It is agreed that the Advance Payment Base Prices for the
Eligible Aircraft set forth in the Purchase Agreement include an
estimate for the escalation sharing Credit Memorandum pursuant to
this Letter Agreement.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
6-1162-GOC-084
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
Reference: Purchase Agreement No. 2060 (the Purchase Agreement)
between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Customer) relating to Model 767-
400ER aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Boeing and Customer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Boeing and Customer agree that each party will treat this Letter
Agreement and the information contained herein as confidential
and will not, without the other party's prior written consent,
disclose this Letter Agreement or any information contained
herein to any other person or entity except as may be required by
applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]<PAGE>
October 10, 1997
6-1162-GOC-085
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
Reference: Purchase Agreement No. 2060 (the Purchase Agreement)
between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Customer) relating to Model 767-
400ER aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
6-1162-GOC-086
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Special Matters
Reference: Purchase Agreement No. 2060 (the Purchase Agreement)
between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Customer) relating to Model 767-
400ER aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used and not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
1. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
3. Payment of Interest on Deferred Advance Payments.
3.1 Interest Rate for Firm Aircraft. Customer agrees to
pay interest on all amounts which are deferred pursuant to
Paragraph 2.1 of this Letter Agreement at [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. Such
interest shall accrue from and include the date on which such
payments would have been due but for the execution of this Letter
Agreement to but excluding the date on which such amounts are paid
in full. Interest shall be due and payable on the first business
day of each calendar quarter and on the delivery date of any
Aircraft that had a deferred advance payment schedule. (Note: the
interest rate as determined above will be use for the entire
calendar quarter; e.g., the interest rate determined based on
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].)
3.2 Delivery Delay Impact on Interest Calculations. If
the delivery of any Aircraft is delayed due to either an
excusable or a non-excusable delay, then interest on the deferred
advance payments in respect of such Aircraft will not accrue
during the time period from the last working day of the scheduled
delivery month to the day of delivery of the Aircraft. Payment
of any interest that has accrued prior to the start of the delay
but remains unpaid will be paid on the normal quarterly interest
payment schedule set forth in Paragraph 3.1 of this Letter
Agreement or on the delivery date of the Aircraft, whichever
comes first.
3.3 Boeing Invoice. Boeing shall submit to Customer,
not less than fifteen (15) days prior to the end of each quarter,
an invoice for interest accrued during each such quarter.
Customer's payment is due and payable to Boeing on the first
business day of the following month. Boeing's invoice will show
interest accrued during the quarter for each Aircraft for which
advance payments have been deferred. The invoice will also
include interest accrued on deferred advance payments with
respect to other aircraft in other purchase agreements between
Customer and Boeing.
4. Model Substitution.
After delivery of the [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Aircraft,
Customer may elect to substitute Model 777-200IGW aircraft for any
undelivered Aircraft, subject to (i) Boeing having an available
position in the desired delivery month, (ii) the configuration of
the substitute aircraft having been established, (iii) Boeing
production constraints, and (iv) receipt of written concurrence
from the engine manufacturer acceptable to both Customer and
Boeing.
5. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6. CF6-80C2B8F Engines.
Boeing and General Electric have entered into a Memorandum of
Understanding with respect to the offerability of the CF6-80C2B8F
(B8F) engine on model 767-400 aircraft. The definitive agreement
between Boeing and General Electric is scheduled to be
executed by the end of October, 1997. In the event Customer
selects the B8F engine for the Aircraft after Boeing and General
Electric have entered into a definitive agreement to offer the B8F
engine, Boeing will make the necessary revisions to the Purchase
Agreement to reflect the installation of such B8F engines. Boeing
commits that the price Boeing charges Customer for the B8F engines
will be the same price that General Electric charges Boeing for
such B8F engines.
7. Aircraft Invoices.
Upon Customer request, at time of Aircraft delivery Boeing
agrees to provide a separate invoice addressed to the owner/trustee
of such Aircraft specifying the dollar amount to be received at
time of delivery. [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
8. Assignment of Credits.
Customer may not assign the credit memoranda described in
this Letter Agreement without Boeing's prior written consent
other than in circumstances where Boeing provides or arranges
lease equity financing to Customer in respect of an Aircraft.
9. Confidential Treatment.
Boeing and Customer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Boeing and Customer agree that each party will treat this Letter
Agreement and the information contained herein as confidential
and will not, without the other party's prior written consent,
disclose this Letter Agreement or any information contained
herein to any other person or entity except as may be required by
applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By__/s/ Gunar O. Clem_________
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By___/s/ Brian Davis___________
Its___Vice President____________
EXHIBIT 10.16(a)
Supplemental Agreement No. 1
to
Purchase Agreement No. 2060
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 767 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of December 18,
1997, 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 (Customer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 2060 dated October 10, 1997, (the Purchase Agreement)
relating to Boeing Model 767-400ER aircraft, (Aircraft); and
WHEREAS, Customer has purchased [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
additional Model 777-200IGW aircraft and as a result Customer
wishes to delete from the Purchase Agreement the [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] Aircraft that deliver in [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]; and
WHEREAS, Boeing and Customer have mutually agreed to amend
the Purchase Agreement to incorporate the effect of these and
certain other changes;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree to amend the Purchase
Agreement as follows:
1. Table of Contents:
Remove and replace, in its entirety, the "Table of
Contents", with the Table of Contents attached hereto, to reflect
the changes made by this Supplemental Agreement No. 1.
2. Table 1:
Remove and replace, in its entirety, "Table 1, Aircraft
Delivery, Description, Price and Advance Payments" with the
revised "Table 1, Aircraft Delivery, Description, Price and
Advance Payments", pages 1 and 2, attached hereto, to reflect the
revised delivery schedule for the Aircraft.
The Purchase Agreement will be deemed to be supplemented to the
extent herein provided as of the date hereof and as so
supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: /s/ Gunar P. Clem By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
<PAGE>
TABLE OF CONTENTS
ARTICLES Revised By:
1. Quantity, Model and Description
2. Delivery Schedule
3. Price
4. Payment
5. Miscellaneous
TABLE
1. Aircraft Information Table SA No. 1
EXHIBIT
A. Aircraft Configuration
B. Aircraft Delivery Requirements and Responsibilities
SUPPLEMENTAL EXHIBITS
BFE1. BFE Variables
CS1. Customer Support Variables
EE1. Engine Escalation/Engine Warranty
and Patent Indemnity
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
TABLE OF CONTENTS
LETTER AGREEMENTS Revised By:
2060-1 not used
2060-2 Demonstration Flights
2060-3 Spares Initial Provisioning
2060-4 Flight Crew Training Spares
2060-5 Escalation Sharing
<PAGE>
TABLE OF CONTENTS
CONFIDENTIAL LETTER AGREEMENTS Revised By:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-GOC-086 Special Matters
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 December 18, 1997
<PAGE>
<TABLE>
<CAPTION>
Table 1 to
Supplemental Agreement No. 1 to Purchase Agreement No. 2060
Aircraft Delivery, Description, Price and Advance Payments
<S> <C> <C> <C> <C>
Airframe Model/MTGW: 767-400ER 440,000 Detail Specification: D019T003-A (3/13/97)
Engine Model/
Thrust Level: CF6-80C2B7F 62,100 Price Base Year: Jul-95
Airframe Base Price: [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
Optional Features: COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Sub-Total of Airframe and Features:
Engine Price (Per Aircraft):
Aircraft Basic Price (Excluding BFE/SPE):
Buyer Furnished Equipment (BFE) Estimate:
Seller Purchased Equipment (SPE) Estimate:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
</TABLE>
Exhibit 10.17
PURCHASE AGREEMENT NO. 2061*
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Relating to Boeing Model 777-200IGW Aircraft
* Purchase Agreement No. 2061 was formerly known as Purchase
Agreement No. 1785.<PAGE>
TABLE OF CONTENTS
SA
ARTICLES NUMBER
1. Quantity, Model and Description
2. Delivery Schedule
3. Price
4. Payment
5. Miscellaneous
TABLE
1. Aircraft Information Table
EXHIBIT
A. Aircraft Configuration
B. Aircraft Delivery Requirements and Responsibilities
SUPPLEMENTAL EXHIBITS
BFE1. BFE Variables
CS1. Customer Support Variables
EE1. Engine Escalation/Engine Warranty and Patent Indemnity
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
TABLE OF CONTENTS
SA
LETTER AGREEMENTS NUMBER
2061-1 Option Aircraft
2061-2 Demonstration Flights
2061-3 Installation of Cabin Systems Equipment
2061-4 Spares Initial Provisioning
2061-5 Flight Crew Training Spares
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
TABLE OF CONTENTS
SA
CONFIDENTIAL LETTER AGREEMENTS NUMBER
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-GOC-089 Special Matters
<PAGE>
Purchase Agreement No. 2061
between
The Boeing Company
and
Continental Airlines, Inc.
______________________________
This amended and restated Purchase Agreement No.
2061 (formerly known as Purchase Agreement No. 1785) is dated as
of October 10, 1997, between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to the purchase
and sale of Model 777-200IGW aircraft. The terms and conditions
of the Aircraft General Terms Agreement dated as of October 10,
1997, between the parties, identified as AGTA-CAL (AGTA), are
hereby incorporated by reference into this Purchase Agreement.
RECITALS
A. Boeing and Customer previously entered into Purchase
Agreement No. 1785 dated March 18, 1993, as amended and
supplemented.
B. Boeing and Customer now desire to further amend and restate
the terms and conditions of their agreement and to reflect their
entire agreement in this amended and restated Purchase Agreement
No. 2061 (Purchase Agreement).
C. For the avoidance of doubt, this Purchase Agreement contains
the entire agreement between the parties and replaces and
supersedes Purchase Agreement No. 1785.
Now therefore, the parties agree as follows:
Article 1. Quantity, Model and Description.
The aircraft to be delivered to Customer will be
designated as Model 777-200IGW aircraft (the Aircraft). Boeing
will manufacture and sell to Customer Aircraft conforming to the
configuration described in Exhibit A, which is part of this
Purchase Agreement, in the quantities listed in Table 1 to the
Purchase Agreement.
Article 2. Delivery Schedule.
The Aircraft will be delivered to Customer in
accordance with the scheduled months of delivery listed in the
attached Table 1, which is part of this Purchase Agreement.
Exhibit B, which is part of this Purchase Agreement, describes
certain responsibilities for both Customer and Boeing in order to
accomplish the delivery of the Aircraft.
Article 3. Price.
3.1 Aircraft Basic Price. The Aircraft Basic
Price is listed in Table 1 and is subject to mutually agreed upon
price adjustments and the Escalation Adjustment.
3.2 Advance Payment Base Prices. The Advance
Payment Base Prices for the Aircraft are listed in Table 1 and
were calculated utilizing the latest escalation factors available
to Boeing on the date of this Purchase Agreement projected to the
month of scheduled delivery.
3.3 Boeing has not yet established the Aircraft
Basic Price for Aircraft scheduled to be delivered after December
31, 2002. The prices listed in Table 1 for such Aircraft are
only to provide Customer with an estimate of the applicable
Advance Payment Base Prices. Accordingly, the Aircraft Basic
Price for such Aircraft will be the sum of the Airframe Price,
Optional Features Prices and the Engine Price first published by
Boeing for the same model of aircraft and engines to be delivered
after December 31, 2002.
Article 4. Payment.
4.1 Boeing acknowledges receipt of a deposit in
the amount shown in Table 1 for each Aircraft (Deposit).
4.2 The amounts and payment dates for advance
payments to be made by Customer are set forth in the attached
Table 1.Advance payments for each aircraft are due on the first
business day of the months listed in the attached Table 1.
4.3 For any Aircraft whose scheduled month of
delivery is less than [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] from the date of this
Purchase Agreement, the total amount of advance payments due for
payment upon signing of this Purchase Agreement will include all
advance payments which are past due in accordance with the
standard advance payment schedule set forth in Table 1.
4.4 The Aircraft Price is the total amount
Customer will pay to Boeing at the time of delivery of each
Aircraft. Such Aircraft Price will be calculated at time of
delivery using then available escalation factors to calculate the
Escalation Adjustment. The invoice amount for an Aircraft will
show the Aircraft Price appropriately adjusted to account for
previously received advance payments.
Article 5. Miscellaneous.
5.1 Buyer Furnished Equipment Variables.
Supplemental Exhibit BFE1, which is part of this Purchase
Agreement, contains vendor selection dates, on dock dates and
other variables applicable to the Aircraft.
5.2 Customer Support Variables. Supplemental
Exhibit CS1, which is part of this Purchase Agreement, contains
the variable information applicable to information, training
services and other things furnished by Boeing in support of the
Aircraft.
5.3 Engine Escalation Variables. Supplemental
Exhibit EE1 contains the applicable engine escalation formula,
the engine warranty and the engine patent indemnity for the
Aircraft.
5.4 [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
5.6 Negotiated Agreement; Entire Agreement.
This Purchase Agreement, including the provisions of Article 8.2
of the AGTA relating to insurance, and Article 11 of Part 2 of
Exhibit C of the AGTA relating to DISCLAIMER AND RELEASE and
EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has been the
subject of discussion and negotiation and is understood by the
parties; the Aircraft Price and other agreements of the parties
stated in this Purchase Agreement were arrived at in
consideration of such provisions. This Purchase Agreement,
including the AGTA, contains the entire agreement between the
parties and supersedes all previous proposals, understandings,
commitments or representations whatsoever, oral or written, with
respect to the subject matter hereof, and may be changed only in
writing signed by authorized representatives of the parties.
CONTINENTAL AIRLINES, INC. THE BOEING COMPANY
By /s/ Brian Davis By /s/ Gunar O. Clem
Its Vice President Its Attorney in Fact
<PAGE>
<TABLE>
<CAPTION>
Table 1 to
Purchase Agreement No. 2061
Aircraft Delivery, Description, Price and Advance Payments
<S> <C> <C> <C> <C>
Airframe Model/MTGW: 777-2001GW 580,000 Detail Specification: D019W004-A (2/29/96)
Engine Model/
Thrust Level: GE90-85B Price Base Year: Jul-95
Airframe Base Price: [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
Optional Features: COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Sub-Total of Airframe and Features:
Engine Price (Per Aircraft):
Aircraft Basic Price (Excluding BFE/SPE):
Buyer Furnished Equipment (BFE) Estimate:
In-Flight Entertainment Equipment (IFE) Estimate:
Refundable Deposit per Aircraft at Proposal Acceptance:
Airframe Escalation Data:
Base Year Index (ECI):
Base Year Index (ICI):
Engine Escalation Data:
Base Year Index (CPI):
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
</TABLE>
<PAGE>
AIRCRAFT CONFIGURATION
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit A to Purchase Agreement Number 2061
<PAGE>
AIRCRAFT CONFIGURATION
Dated October 10, 1997
relating to
BOEING MODEL 777-200IGW AIRCRAFT
The Detail Specification is Boeing Detail Specification
D019W001-CAL-2B dated as of even date herewith. Such Detail
Specification will be comprised of Boeing Configuration
Specification/ D019W004, revision a dated February 29, 1996, as
amended to incorporate the Options listed below, including the
effects on Manufacturer's Empty Weight (MEW) and Operating Empty
Weight (OEW). Such Options are set forth in Boeing Document
D019WCR1-CAL-2B. As soon as practicable, Boeing will furnish to
Buyer copies of the Detail Specification, which copies will
reflect such Options. The Aircraft Basic Price reflects and
includes all effects of such Options, except such Aircraft Basic
Price does not include the price effects of any Buyer Furnished
Equipment or Seller Purchased Equipment.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
013OCH7471 [CONFIDENTIAL
INTERIOR ARRANGEMENT COLLECTOR - TWO CLASS MATERIAL OMITTED
- - 285 PASSENGERS (50 B/C, 235 E/C) AND FILED SEPARATELY
WITH THE SECURITIES
0220CG7003 AND EXCHANGE
CERTIFICATION OF TAKEOFF AND LANDING WITH ACOMMISSION PURSUANT
15-KNOT TAILWIND TO A REQUEST FOR
CONFIDENTIAL
0221CG7002 TREATMENT]
ALTERNATE DISPATCH CAPABILITY LANDING GEAR
EXTENDED DURING REVENUE FLIGHT -
CERTIFICATION
0252CG7002
AIRPLANE FLIGHT AND OPERATIONS MANUALS -
TEMPERATURE IN DEGREES CELSIUS
0254CG7001
USPHS CERTIFICATE OF SANITARY CONSTRUCTION
0310CG7053
HIGH GROSS WEIGHT AIRPLANE MAXIMUM
STRUCTURAL DESIGN TAKEOFF WEIGHT - INCREASE
FROM 632,000 TO 648,000 POUNDS
0350CG7002
TAKEOFF PERFORMANCE IMPROVEMENT - ALTERNATE
FORWARD CENTER OF GRAVITY LIMITS
1110CG7018
ADD EXTERIOR DECORATIVE PAINT ON THE LOWER
LOBE FUSELAGE
1135CH7058
INTERIOR PLACARDS - REVISION - UNIQUE
SYMBOLOGY INSTEAD OF STANDARD ALPHANUMERIC
2127CH7015
IN FLIGHT ENTERTAINMENT ELECTRICAL
EQUIPMENT COOLING SYSTEM FOR PWS AT 1F-1C -
PROVISIONS
2165CG7001
ENVIRONMENTAL CONTROL SYSTEM (ECS)
TEMPERATURE INDICATIONS IN DEGREES
FAHRENHEIT
2210CG7003
3-DIGIT MACH NUMBER DISPLAY
2210CG7025
BANK ANGLE HOLD AT AUTOPILOT/FLIGHT
DIRECTOR ENGAGE - OPERATIONAL PROGRAM
CONFIGURATION (OPC) ACTIVATED OPTION
2210CG7051
INHIBIT GLIDE SLOPE CAPTURE BEFORE
LOCALIZER CAPTURE - FLIGHT CONTROL SYSTEM
2300CH7114
IN FLIGHT ENTERTAINMENT SYSTEM - PROVISIONS
- - TBD SUPPLIERS
2300CH7324
ENTERTAINMENT AND COMMUNICATIONS SYSTEM
COLLECTOR - DUAL CLASS, 285 PASSENGERS -
CSE - MATSUSHITA 2000E INTERACTIVE IN-SEAT
VIDEO
2311CH7021
HF ANTENNA COUPLER - REPLACEMENT - BFE -
ROCKWELL
2311CH7027
HF COMMUNICATION SYSTEM - PARTIAL
PROVISIONS - HF DATA RADIO - DUAL SYSTEM
2311CH7039
DUAL HF COMMUNICATION SYSTEM - REPLACEMENT
- - HF VOICE DATA RADIO - BFE - ROCKWELL
INTERNATIONAL CORP.
2312CH7036
VHF COMMUNICATIONS - 8.33 KHZ FREQUENCY
SPACING - ACTIVATION
2312CH7037$12,400
TRIPLE VHF COMMUNICATIONS - ARINC 750/716 -
TRANCEIVER INSTALLATION - BFE - ROCKWELL
INTERNATIONAL CORP
2315CG7078
SATCOM SYSTEM WITH HIGH-GAIN TOP-MOUNT
ANTENNA SYSTEM AND A LOW-GAIN TOP-MOUNT
ANTENNA SYSTEM - INSTALLATION - ROCKWELL
2318CG7091
PASSENGER TELEPHONE SYSTEM - INSTALLATION -
E12 EQUIPMENT RACK
2318CH7176
PASSENGER TELEPHONE SYSTEM - INSTALLATION
OF AN ARINC 746 GTE AIRFONE CABIN
TELECOMMUNICATIONS UNIT (CTU)
2318CH7286
PASSENGER TELEPHONE SYSTEM - INSTALLATION -
GTE DUAL NORTH AMERICAN TELECOMMUNICATIONS
SYSTEM - CSE
2321CG7002
SELECTIVE CALLING EQUIPMENT (SELCAL)
DECODER - INSTALLATION - COLTECH - BFE
2331CH7066
PRE-RECORDED ANNOUNCEMENT MACHINE AND
BOARDING MUSIC MACHINE - INSTALLATION - MAS
2332CH7401
VIDEO ENTERTAINMENT PLAYER(S) -
INSTALLATION
2332CH7403
VIDEO ENTERTAINMENT - INSTALLATION OF
LIQUID CRYSTAL DISPLAY (LCD) COLOR VIDEO
MONITORS ON VERTICAL SURFACES
2332CH7405
VIDEO ENTERTAINMENT - INSTALLATION OF VIDEO
SYSTEM DISTRIBUTION PROVISIONS
2332CH7406
VIDEO ENTERTAINMENT - INSTALLATION OF VIDEO
DISTRIBUTION UNITS
2332CH7407
VIDEO ENTERTAINMENT - INSTALLATION OF
LIQUID CRYSTAL DISPLAY (LCD) COLOR VIDEO
MONITORS IN THE OVERDOOR AREAS
2332CH7427
RANDOM ACCESS DEVICE (RAD) - INSTALLATION
2332CH7467
VIDEO ENTERTAINMENT SYSTEM - POWER CONTROL
SWITCH
2332CH7572
IN-FLIGHT ENTERTAINMENT - HEAD END
EQUIPMENT FOR IN-SEAT PASSENGER SERVICES
SYSTEM AND AUDIO - MATSUSHITA 2000E SYSTEM
2332CH7573
IN-FLIGHT ENTERTAINMENT - HEAD END
EQUIPMENT FOR OVERHEAD VIDEO AND/OR IN-SEAT
BROADCAST VIDEO - MATSUSHITA 2000E SYSTEM
2332CH7574
IN-FLIGHT ENTERTAINMENT - HEAD END
EQUIPMENT FOR IN-SEAT INTERACTIVE VIDEO -
MATSUSHITA 2000E SYSTEM
2332CH7612
ENTERTAINMENT AND COMMUNICATION SYSTEM -
INSTALLATION - WIRING PROVISIONS FOR AVOD-
MAS 2000E
2332CH7625
IN-FLIGHT ENTERTAINMENT - HEAD END
EQUIPMENT FOR IN-SEAT INTEGRATED TELEPHONES
- - MATSUSHITA 2000E SYSTEM
2332CH7712
IN-FLIGHT ENTERTAINMENT - IN-SEAT VIDEO
INSTALLATION - MATSUSHITA 2000E SYSTEM
2332CH7730
DIGITAL INTERFACE UNIT (DIU) - AIRSHOW 420
2332CH7738
VIDEO ENTERTAINMENT - INSTALLATION OF FIXED
OVER AISLE LCD VIDEO MONITORS - 13.8"
2334CH7083
AUDIO ENTERTAINMENT PLAYER(S) -
INSTALLATION
2339CH7024
CABIN PRINTER - INSTALLATION - PASSENGER
COMPARTMENT - THERMAL
2351CH7033
SELF MUTING - PIN SELECT - AUDIO MANAGEMENT
UNIT IN E/E BAY
2351CH7034
HEADPHONE AND HAND HELD MICROPHONE -
REVISION - FIRST/SECOND OBSERVER - BFE
2351CH7035
BOOM MICROPHONE/HEADSET - REVISION - BFE
PLANTONICS INSTEAD OF BFE TELEX -
CAPT/FIRST OFFICER
2451CG7010
GALLEY POWER FEEDER - SUPPLY ADDITIONAL
POWER FOR GALLEYS AFT OF DOOR 4
2454CH7003
ELECTRICAL POWER OUTLET FOR PERSONAL
COMPUTER - INSTALLATION - BUSINESS CLASS
AND THE FIRST (7) ROWS OF ECONOMY CLASS
PASSENGER
2501CG7017
DOOR 1 LEFT CABIN MODULE WITH TWO
LAVATORIES
2501CG7022
DOOR 1 RIGHT CABIN MODULE WITH GALLEYS F-1,
F-2, F-3 (9.5 CARTS) AND LAVATORY 1F-1C
2504CG7001
CABIN MODULE WITH GALLEYS A-1, A-2, AND A-3
(16 CARTS) - INSTALLATION
2520CH7103
INTERIOR COLOR/MATERIAL - REVISION -
PASSENGER CABIN
2520CH7104
TAPIS "ULTRA LEATHER HP" DECORATIVE MURALS
- - INSTALLATION - BFE
2522CG7001
WIRING FOR POWERED SEATS - INSTALLATION -
DOOR 1 TO DOOR 2
2522CG7009
WIRING FOR POWERED SEATS - INSTALLATION -
DOOR 2 TO MID-CABIN
2524CH7367
CLOSETS WITH FOOTWELL, 21 INCH FULL-HEIGHT
OUTBOARD - INSTALLATION
2524CH7368
INNOVINT BASSINET FITTINGS - INSTALLATION -
PASSENGER CABIN
2524CH7375
SFE CLASS DIVIDERS WITH FOOTWELLS, FOLD
DOWN PANELS, AND VIEW WINDOW - INSTALLATION
2525CG7004
INSTALLATION OF AN ADDITIONAL SELLER
FURNISHED (SFE) WALL-MOUNTED SINGLE
ATTENDANT SEAT
2525CH7154
ATTENDANT SEAT HARNESS - REVISION - FOUR
POINT HARNESS WITH ROTARY BUCKLE
2526CH7112
PURSER WORK STATION - 38-INCH STAND-UP WORK
STATION AT LOCATION 1F-1C - NON-AVOD WITH
PROVISIONS FOR MATSUSHITA 2000E AVOD
2527CH7006
GALLEY AND ENTRY MAT - REPLACEMENT - SFE
LONCOIN
2527CH7072
CARPET - INSTALLATION - BFE INSTEAD OF SFE
2528CG7049
CENTER OVERHEAD STOWAGE BINS - INSTALLATION
DUAL-MODE LINKAGE FOR 2-4-3 OR 3-3-3
ECONOMY CLASS SEATING
2528CH7144
OVERDOOR STOWAGE COMPARTMENT DOORS,
LOCKABLE - REVISIONS - DOORS 1 AND 4 LEFT
AND RIGHT
2528CH7146
SFE WALL-MOUNTED MAGAZINE RACK BUSTLES -
INSTALLATION - FORWARD FACE OF A4 GALLEY,
3F-LC LAV & 3F-RC LAV
2529CG7033
FLIGHT CREW REST PARTIAL PROVISIONS -
INSTALLATION - DOOR 1 LEFT
2531CG7003
RETRACTABLE TIE-DOWN FITTINGS FOR GALLEY
CARTS - INSTALLATION - DOOR 2
2531CG7004
RETRACTABLE TIE-DOWN FITTINGS FOR GALLEY
CARTS - INSTALLATION - DOOR 3
2531CG7005
RETRACTABLE TIE-DOWN FITTINGS FOR GALLEY
CARTS - INSTALLATION - DOOR 4
2533CG7001
GALLEY CHILLER (BFE) INSTALLATION - DOOR 2
FLEXIBLE GALLEY LOCATION
2540CG7010
LAVATORY BI-FOLD DOOR - INSTALLATION
INSTEAD OF PANEL DOOR
2541CH7019
FIRST CLASS LAVATORY - INSTALLATION - AFT
OF DOOR 2 RIGHT
2542CG7001
DIAPER CHANGING TABLES - INSTALLATION IN
LAVATORIES
2542CG7012
DOT LAVATORY - INSTALLATION OF SIDEWALL
LAVATORY FOR DISABLED PERSON
2542CG7022
TOILETRY BOTTLE RACKS - INSTALLATION IN
LAVATORIES
2542CH7112
D.O.T. LAVATORY UPGRADE - REVISION -
SIDEWALL LAV AFT OF DOOR 2 LEFT
2542CH7113
LAVATORY AMENITIES - PROVISIONS - LIQUID
SOAP DISPENSER
2542CH7114
COMPOSITE SINK DECK - INSTALLATION -
LAVATORY
2553CG7001
CARGO COMPARTMENT FLOOR - INSTALLATION -
FORWARD LOWER HOLD CARGO COMPARTMENT
2553CG7005
CAPABILITY TO CARRY LD-4 AND LD-8
CONTAINERS - INSTALLATION - FORWARD LOWER
HOLD CARGO COMPARTMENT
2553CG7041
CAPABILITY TO CARRY LD-4 AND LD-8
CONTAINERS - INSTALLATION - AFT LOWER HOLD
CARGO COMPARTMENT WITH LARGE CARGO DOOR
2553CG7042
CARGO COMPARTMENT FLOOR FOR THE LARGE CARGO
DOOR- INSTALLATION - AFT LOWER HOLD CARGO
COMPARTMENT
2620CG7005
FIRE BOTTLE COMMONALITY - ENGINES AND APU
3141CG7002
BFE SOFTWARE AND/OR TABLES INSTALLATION -
AIMS
3161CG7010
GRID HEADING DISPLAY
3161CG7013
ADDITION OF HEIGHT ABOVE TOUCH DOWN ZONE
COLOR BAR TO THE PRIMARY FLIGHT DISPLAY
3161CG7030
PASSENGER DOOR SLIDE/RAFT ARMING HANDLE
POSITION INDICATION - DOOR SYNOPTIC AND
EICAS MESSAGE
3161CG7110
FLIGHT DECK COMMUNICATIONS FUNCTION (FDCF)
AUTOMATIC RESET - ACTIVATION - AIMS
3310CH7003
STERILE COCKPIT LIGHT INDICATION -
INSTALLATION
3321CH7008
COOL WHITE LIGHTS - INSTALLATION -
PASSENGER COMPARTMENT
3324CH7023
"NO SMOKING" SIGN - REVISION - ALWAYS ON
3430CH7054
MULTI-MODE RECEIVER (MMR) - REPLACEMENT OF
PROVISIONS FOR GLOBAL POSITIONING SYSTEM
INSTALLATION IN MMR
3430CH7060
MULTI-MODE RECEIVER (MMR) - INSTALLATION OF
ILS/GPS - BFE - ROCKWELL INTERNATIONAL CORP
3431CH7012
INSTRUMENT LANDING SYSTEM (ILS) - DELETION
OF EXISTING RECEIVERS
3433CG7004
RADIO ALTIMETER (RA) - INSTALLATION -
ROCKWELL INTERNATIONAL - BFE
3443CH7045
DUAL WEATHER RADAR SYSTEM - INSTALLATION -
ARINC 708A PREDICTIVE WINDSHEAR/WEATHER
RADAR SYSTEM AND ARINC 708A PARTIAL WIRING
3445CG7003
TRAFFIC ALERT AND COLLISION AVOIDANCE
SYSTEM (TCAS II) - INSTALLATION - ROCKWELL
INTERNATIONAL - BFE
3446CH7039
ALTITUDE VOICE CALLOUT ACTIVATION -
REVISION - GROUND PROXIMITY WARNING
COMPUTER
3446CH7085
ENHANCED GROUND PROXIMITY WARNING SYSTEM
(EGPWS) - PARTIAL PROVISIONS - PHASE II
(BOEING INTEGRATED DESIGN)
3451CG7003
VOR MARKER BEACON (M/B) - INSTALLATION -
ROCKWELL INTERNATIONAL - BFE
3453CG7005
AIR TRAFFIC CONTROL (ATC), ROCKWELL
INTERNATIONAL MODE "S" TRANSPONDERS AND
GABLES ENGINEERING CONTROL PANEL -
INSTALLATION -
3457CG7003
AUTOMATIC DIRECTION FINDER (ADF) -
INSTALLATION - ROCKWELL INTERNATIONAL - BFE
- - WITH CAPTIVE MOUNTING FASTENERS IN
ANTENNA
3458CH7015
GLOBAL POSITIONING SYSTEM (GPS) - DELETION
OF EXISTING GPS SENSOR UNIT
3461CG7004
BUYER FURNISHED NAVIGATION DATA BASE
3510CG7012
TWO 115 CU FT FLIGHT CREW OXYGEN CYLINDERS
- - INSTALLATION -
3510CG7028
FLIGHT CREW OXYGEN MASKS AND SMOKE GOGGLES
- - INSTALLATION - EROS - BFE
3520CG7001
EXTRA OXYGEN MASK FOR EACH OUTBOARD SEAT
PSU
3521CG7004
CHEMICAL OXYGEN SYSTEM - INSTALLATION OF
22-MINUTE GENERATORS
4630CG7002
DUAL DISK DRIVE - INSTALLATION -
MAINTENANCE ACCESS TERMINAL
4900CG7003
AUXILIARY POWER UNIT - INSTALL MUFFLER IN
EXHAUST SYSTEM
5235CG7001
LARGE DOOR AND CONTAINER/PALLET HANDLING
EQUIPMENT - INSTALLATION - AFT LOWER HOLD
CARGO COMPARTMENT
5301CG7007
ADDITIONAL SEAT TRACK - INSTALLATION - BL
0.0, AFT DOOR - TRANSVERSE GALLEYS
7200CG7012
GE AIRCRAFT ENGINES (GEAE) - GE90-85B
ENGINES
7900CG7012
LUBRICATING OIL TYPE - SPECIFIED - MOBIL
254
CR'S 116 TOTAL
</TABLE>
<PAGE>
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit B to Purchase Agreement Number 2061
<PAGE>
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
relating to
BOEING MODEL 777-200IGW AIRCRAFT
Both Boeing and Customer have certain documentation and approval
responsibilities at various times during the construction cycle
of Customer's Aircraft that are critical to making the delivery
of each Aircraft a positive experience for both parties. This
Exhibit B documents those responsibilities and indicates
recommended completion deadlines for the actions to be
accomplished. Failure to obtain such completion deadlines shall
not be deemed a breach of this Purchase Agreement or reduce or
amend the parties' obligations hereunder.
<PAGE>
1. GOVERNMENT DOCUMENTATION REQUIREMENTS.
Certain actions are required to be taken by Customer in advance
of the scheduled delivery month of each Aircraft with respect to
obtaining certain government issued documentation.
1.1 Airworthiness and Registration Documents.
Not later than 6 months prior to delivery of each
Aircraft, Customer will notify Boeing of the registration number
to be painted on the side of the Aircraft. In addition, and not
later than 3 months prior to delivery of each Aircraft, Customer
will, by letter to the regulatory authority having jurisdiction,
authorize the temporary use of such registration numbers by
Boeing during the pre-delivery testing of the Aircraft.
Customer is responsible for furnishing any temporary or permanent
registration certificates required by any governmental authority
having jurisdiction to be displayed aboard the Aircraft after
delivery.
1.2 Certificate of Sanitary Construction.
1.2.1 U.S. Registered Aircraft. Boeing will
obtain from the United States Public Health Service, a United
States Certificate of Sanitary Construction to be displayed
aboard each Aircraft after delivery to Customer.
1.2.2 Non-U.S. Registered Aircraft. If
Customer requires a United States Certificate of Sanitary
Construction at the time of delivery of the Aircraft, Customer
will give written notice thereof to Boeing at least 3 months
prior to delivery. Boeing will then use its reasonable best
efforts to obtain the Certificate from the United States Public
Health Service and present it to Customer at the time of Aircraft
delivery.
1.3 Customs Documentation.
1.3.1 Import Documentation. If the Aircraft is
intended to be exported from the United States, Customer must
notify Boeing not later than 3 months prior to delivery of each
Aircraft of any documentation required by the customs authorities
or by any other agency of the country of import.
1.3.2 General Declaration - U.S. If the
Aircraft is intended to be exported from the United States,
Boeing will prepare Customs Form 7507, General Declaration, for
execution by U.S. Customs immediately prior to the ferry flight
of the Aircraft. For this purpose, Customer will furnish to
Boeing not later than 20 days prior to delivery a complete crew
and passenger list and a complete ferry flight itinerary,
including point of exit from the United States for the Aircraft.
If Customer intends, during the ferry flight of an Aircraft, to
land at a U.S. airport after clearing Customs at delivery,
Customer must notify Boeing not later than 20 days prior to
delivery of such intention. If Boeing receives such
notification, Boeing will provide to Customer the documents
constituting a Customs permit to proceed, allowing such Aircraft
to depart after any such landing. Sufficient copies of completed
Form 7507, along with passenger manifest, will be furnished
Customer to cover U.S. stops scheduled for the ferry flight.
1.3.3 Export Declaration - U.S. If the
Aircraft is intended to be exported from the United States,
Boeing will prepare Form 7525V and, immediately prior to the
ferry flight, will submit such Form to U.S. Customs in Seattle in
order to obtain clearance for the departure of the Aircraft,
including any cargo, from the United States. U.S. Customs will
deliver the Export Declaration to the U.S. Department of Commerce
after export.
2. INSURANCE CERTIFICATES.
Unless provided earlier, Customer will provide to
Boeing not later than 30 days prior to delivery of the first
Aircraft, a copy of the requisite annual insurance certificate in
accordance with the requirements of Article 8 of the AGTA.
3 NOTICE OF FLYAWAY CONFIGURATION.
Not later than 20 days prior to delivery of the
Aircraft, Customer will provide to Boeing a configuration letter
stating the requested "flyaway configuration" of the Aircraft for
its ferry flight. This configuration letter should include:
(i) the name of the company which is to furnish fuel
for the ferry flight and any scheduled post-delivery flight
training, the method of payment for such fuel, and fuel load
for the ferry flight;
(ii) the cargo to be loaded and where it is to be
stowed on board the Aircraft and address where cargo is to
be shipped after flyaway;
(iii) any BFE equipment to be removed prior to flyaway
and returned to Boeing BFE stores for installation on
Customer's subsequent Aircraft;
(iv) a complete list of names and citizenship of each
crew member and non-revenue passenger who will be aboard the
ferry flight; and
(v) a complete ferry flight itinerary.
4. DELIVERY ACTIONS BY BOEING.
4.1 Schedule of Inspections. All FAA, Boeing,
Customer and, if required, U.S. Customs Bureau inspections will
be scheduled by Boeing for completion prior to delivery or
departure of the Aircraft. Customer will be informed of such
schedules.
4.2 Schedule of Demonstration Flights. All FAA and
Customer demonstration flights will be scheduled by Boeing for
completion prior to delivery of the Aircraft.
4.3 Schedule for Customer's Flight Crew. Boeing will
inform Customer of the date that a flight crew is required for
acceptance routines associated with delivery of the Aircraft.
4.4 Fuel Provided by Boeing. Boeing will provide to
Customer, without charge, the amount of fuel shown in U.S.
gallons in the table below for the model of Aircraft being
delivered and full capacity of engine oil at the time of delivery
or prior to the ferry flight of the Aircraft.
Aircraft Model Fuel Provided
777 [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
4.5 Flight Crew and Passenger Consumables. Boeing
will provide food, coat hangers, towels, toilet tissue, drinking
cups and soap for the first segment of the ferry flight for the
Aircraft.
4.6 Delivery Papers, Documents and Data. Boeing will
have available at the time of delivery of the Aircraft certain
delivery papers, documents and data for execution and delivery.
Boeing will pre-position in Oklahoma City, Oklahoma, for filing
with the FAA at the time of delivery of the Aircraft an executed
original Form 8050-2, Aircraft Bill of Sale, indicating transfer
of title to the Aircraft from Boeing, or Boeing's sales
subsidiary, to Customer.
4.7 Delegation of Authority. If specifically
requested in advance by Customer, Boeing will present a certified
copy of a Resolution of Boeing's Board of Directors, designating
and authorizing certain persons to act on its behalf in
connection with delivery of the Aircraft.
5. DELIVERY ACTIONS BY CUSTOMER.
5.1 Aircraft Radio Station License. At delivery
Customer will provide its Aircraft Radio Station License to be
placed on board the Aircraft following delivery.
5.2. Aircraft Flight Log. At delivery Customer will
provide the Aircraft Flight Log for the Aircraft.
5.3 Delegation of Authority. If necessary, Customer
will present to Boeing at delivery of the Aircraft an original or
certified copy of Customer's Delegation of Authority designating
and authorizing certain persons to act on its behalf in
connection with delivery of the specified Aircraft.
<PAGE>
BUYER FURNISHED EQUIPMENT VARIABLES
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit BFE1 to Purchase Agreement Number 2061
<PAGE>
BUYER FURNISHED EQUIPMENT VARIABLES
relating to
BOEING MODEL 777-200IGW AIRCRAFT
This Supplemental Exhibit BFE1 contains vendor selection dates,
on-dock dates and other variables applicable to the Aircraft.
1. Supplier Selection.
1.1 Customer has selected and notified Boeing of the
suppliers of the following BFE items:
Galley System
Seats (passenger)
Video/ Cabin Mgt. System
2. On-dock Dates
On or before December 1997, Boeing will provide to Customer a BFE
Requirements On-Dock/Inventory Document (BFE Document) or an
electronically transmitted BFE Report which may be periodically
revised, setting forth the items, quantities, on-dock dates and
shipping instructions relating to the in-sequence installation of
BFE. For planning purposes, a preliminary BFE on-dock schedule
is set forth below:
Item Preliminary On-Dock Dates
Seats [CONFIDENTIAL MATERIAL OMITTED AND FILED
Galleys SEPARATELY WITH THE SECURITIES AND
Electronics * EXCHANGE COMMISSION PURSUANT TO A
Furnishings REQUEST FOR CONFIDENTIAL TREATMENT]
*Early date reflects mounting equipment and transceiver
requirements.
<PAGE>
CUSTOMER SUPPORT VARIABLES
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit CS1 to Purchase Agreement Number 2061
<PAGE>
CUSTOMER SUPPORT VARIABLES
relating to
BOEING MODEL 777-200IGW AIRCRAFT
Customer and Boeing will conduct planning conferences
approximately 12 months prior to delivery of the first Aircraft,
or as mutually agreed, in order to develop and schedule a
customized Customer Support Program to be furnished by Boeing in
support of the Aircraft.
The customized Customer Services Program will be based upon and
equivalent to the entitlements summarized below.
1. Maintenance Training.
1.1 Airplane General Familiarization Course; 2 classes of
24 students;
1.2 Mechanical/Electrical Systems Course (Instructor);
1 class of 15 students;
1.3 Avionics Systems Course (Instructor); 1 class of
15 students;
1.4 Mechanical/Electrical Systems Course (Line and Base);
2 classes of 15 students;
1.5 Avionics Systems Course (Line and Base); 1 class of
15 students;
1.6 Engine Run-Up Course; 2 classes of 3 students;
1.7 Corrosion Prevention & Control Course; 1 class of
10 students;
1.8 Aircraft Rigging Course; 1 class of 6 students;
1.9 Advanced Composite Repair Course; 1 class of
8 students;
1.10 Digital Data Familiarization Course; 1 class of
15 students;
1.11 Cabin Management System (CMS) Configuration Database
Generator (CDG) Familiarization Course; 1 class of
6 students;
1.12 Training materials will be provided to each student.
In addition, one set of training materials as used in
Boeing's training program, including visual aids,
Computer Based Training Courseware, color instrument
panel wall charts, text/graphics, video programs,
etc. will be provided for use in Customer's own
training program.
2. Flight Training.
2.1 Transition training for 8 flight crews (16 pilots) in
2 classes; The training will consist of ground school
(utilizing computer based training), fixed base
simulator, full flight simulator and actual aircraft
training on Customer's Aircraft.
2.2 Flight Dispatcher training; 2 classes of 6 students;
2.3 Flight Attendant training; 2 classes of 12 students;
2.4 Performance Engineer training in Boeing's regularly
scheduled courses; schedules are published twice
yearly.
2.5 Training materials will be provided to each student.
In addition, one set of training materials as used in
Boeing's training program, including visual aids,
Computer Based Training Courseware, color instrument
panel wall charts, text/graphics, video programs,
etc. will be provided for use in Customer's own
training program.
2.6 Additional Flight Operations Services:
a. Boeing flight crew personnel to assist in
ferrying the first aircraft to Customer's main
base;
b. Instructor pilots for 90 calendar days for
revenue service training assistance;
c. An instructor pilot to visit Customer 6 months
after revenue service training to review
Customer's flight crew operations for a 2 week
period.
3. Planning Assistance.
3.1 Maintenance and Ground Operations.
Upon request, Boeing will visit Customer's main base
to evaluate aircraft maintenance facilities, develop
recommendations and assist in maintenance planning.
3.2 Spares.
a) Recommended Spares Parts List (RSPL)
A customized RSPL, data and documents will be
provided to identify spare parts required for
Customer's support program.
b) Illustrated Parts Catalog (IPC)
A customized IPC in accordance with ATA 100 will
be provided.
c) Provisioning Training
Provisioning training will be provided for
Customer's personnel at Boeing's facilities,
where documentation and technical expertise are
available. Training is focused on the initial
provisioning process and calculations reflected
in the Boeing RSPL.
d) Spares Provisioning Conference
A provisioning conference will be conducted,
normally at Boeing's facilities where technical
data and personnel are available.
4. Technical Data and Documents.
The following list contains the documents Customer will
receive to support the introduction and operation of the
Aircraft. Customer and Boeing will conduct a planning conference
approximately 12 months before the first delivery of the Aircraft
to mutually determine the proper format (e.g. digital or hard
copy) and quantity of Materials to be furnished to Customer.
4.1 Flight Operations.
Airplane Flight Manual
Operations Manual and Checklist
Planning and Performance Manual
Weight and Balance Manual
Dispatch Deviation Procedures Guide
Flight Crew Training Manual
Baggage/Cargo Loading Manual
Fault Reporting Manual
Performance Engineer's Manual
Jet Transport Performance Methods
FMC Supplemental Data Document
Operational Performance Software
4.2 Maintenance.
Maintenance Manual
Wiring Diagram Manual
Systems Schematics Manual
Structural Repair Manual
Component Maintenance Manual
Standard Overhaul Practices Manual
Standard Wiring Practices Manual
Non-Destructive Test Manual
Service Bulletins and Index
Corrosion Prevention Manual
Fault Isolation Manual
Ramp Maintenance Manual
Interior Reconfiguration Document
Power Plant Buildup Manual (except Rolls Royce)
In Service Activity Report
Significant Service Item Summary
All Operators Letters
Service Letters
Structural Item Interim Advisory
Combined Index
Maintenance Tips
Configuration Data Base Generator User Guide
4.3 Maintenance Planning.
Maintenance Planning Data Document
Maintenance Task Cards and Index
Maintenance Inspection Intervals Report
4.4 Spares.
Illustrated Parts Catalog
Standards Books
4.5 Facilities and Equipment Planning.
Facilities and Equipment Planning Document
Special Tool & Ground Handling Equipment Drawings &
Index
Supplementary Tooling Documentation
System Test Equipment Document
Illustrated Tool and Equipment List/Manual
Aircraft Recovery Document
Airplane Characteristics for Airport Planning
Document
Airplane Rescue and Fire Fighting Document
Engine Handling Document
4.6 Computer Software Index.
4.7 Supplier Technical Data.
Service Bulletins
Component Maintenance Manuals and Index
Publications Index
Product Support Supplier Directory
5. Additional Customer Support.
In response to a Customer request, Boeing agrees to provide
the following additional training and support to Customer at
no charge.
5.1 General Familiarization Courses.
Boeing will provide a total of 6 General
Familiarization Courses (4 in addition to the 2
General Familiarization Courses described in
paragraph 1.1 above).
5.2 Maintenance and Flight Training Materials.
Boeing will provide (i) a total of 2 sets of all
training materials (1 in addition to the 1 set
described in paragraphs 1.12 and 2.5 above), (ii) the
flight training material in digital format and (iii)
the source code for the flight training Computer
Based Training (CBT).
5.3 Maintenance Instructor in Houston.
On a mutually agreeable date in the first quarter of
1998, Boeing will send a maintenance instructor to
Houston, Texas, for sixty days. Such instructor will
be qualified to assist Customer with developing and
teaching Customer's own maintenance training courses
and answer Customer's questions related to the
maintenance of the Aircraft. Customer will provide
the round trip airfare.
5.4 Additional Flight Training Course.
On a mutually agreeable schedule, Boeing will provide
transition training for a total of 24 pilots (8
pilots in addition to the 16 pilots previously
committed in paragraph 2.1 above).
<PAGE>
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit EE1 to Purchase Agreement Number 2061
<PAGE>
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
relating to
BOEING MODEL 777-200IGW AIRCRAFT
1. ENGINE ESCALATION.
(a) The Aircraft Basic Price of each Aircraft set forth in Table
1 of the Purchase Agreement includes an aggregate price for GE90
engines and all accessories, equipment and parts provided by the
engine manufacturer. The adjustment in Engine price applicable
to each Aircraft (Engine Price Adjustment) will be determined at
the time of Aircraft delivery in accordance with the following
formula:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
(b) The following definitions will apply herein:
Pe = Engine Price Adjustment
Pb = Engine Base Price (per Aircraft), as set forth in
Table 1 of the Purchase Agreement.
CPI is the Composite Price Index, a value determined using
the Bureau of Labor Statistics, U.S. Department of Labor
actual data in accordance with the formula below. The Index
values utilized in the formula will be the numbers shown in
the actual data for the ninth month prior to the month of
scheduled Aircraft delivery or the ninth month prior to the
Base Year Dollars month set forth in Table 1.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
L = The Labor Index will be equal to the
quotient of the value associated with the
Aircraft Delivery Month divided by the value
associated with the Base Year Dollar month
in "Hourly Earnings of Aircraft Engines and
Engine Parts Production Workers" SIC 3724,
multiplied by 100 and then by 55%.
C = The Industrial Commodities Index will be
equal to 10% of the Producer Price Index for
"all commodities other than Farm and Foods,"
Code 3-15 associated with the scheduled
Aircraft delivery month.
M = The Metals and Metal Products Index will be
equal to 25% of the Producer Price Index for
"Metals and Metal Products," Code 10
associated with the scheduled Aircraft
delivery month.
E = The Fuel Index will be equal to 10% of the
Producer Price Index for "Fuel and Related
Products and Power," Code 5 associated with
the scheduled Aircraft delivery month.
The Engine Price Adjustment will not be made if it would result
in a decrease in the Engine Base Price.
(c) The values of the Average Hourly Earnings and Producer Price
Indices used will be those published as of a date 30 days prior
to the scheduled Aircraft delivery to Customer. Such values will
be considered final and no Engine Price Adjustment will be made
after Aircraft delivery for any subsequent changes in published
Index values.
(d) In the event the Engine price escalation provisions are made
non-enforceable or otherwise rendered null and void by any agency
of the United States Government, or if the U.S. Department of
Labor, Bureau of Labor Statistics (i) substantially revises the
methodology (in contrast to benchmark adjustments or other
corrections of previously published data) or (ii) discontinues
publication of any of the data referred to above, General
Electric Company (GE) agrees to meet jointly with Boeing and
Customer, (to the extent such parties may lawfully do so,) to
jointly select a substitute for the revised or discontinued data;
such substitute data to lead in application to the same
adjustment result, insofar as possible, as would have been
achieved by continuing the use of the original data as it may
have fluctuated had it not been revised or discontinued. If such
Engine price escalation provisions, methodology or data
publication are subsequently reinstated, Boeing will make
adjustments consistent with the agreements defined in this
Supplemental Exhibit EE1.
NOTE: The factor (CPI divided by the base year index) by which
the Engine Base Price is to be multiplied will be
expressed as a decimal and rounded to the nearest
thousandth. Any rounding of a number, as required under
this Supplemental Exhibit EE1 with respect to escalation
of the Engine 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.
2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN.
Boeing has obtained from GE the right to extend to Customer the
provisions of GE's warranty as set forth below (herein referred
to as the "Warranty"); subject, however, to Customer's acceptance
of the conditions set forth herein. Accordingly, Boeing hereby
extends to Customer and Customer hereby accepts the provisions of
the Warranty as hereinafter set forth, and such Warranty shall
apply to all GE90 type Engines (including all Modules and Parts
thereof) installed in the Aircraft at the time of delivery or
purchased from Boeing by Customer for support of the Aircraft
except that, if Customer and GE have executed, or hereafter
execute, a General Terms Agreement covering the Engines, then the
terms of that Agreement shall be substituted for and supersede
the provisions of paragraphs 1 through 11 below and paragraphs 1
through 11 below shall be of no force or effect and neither
Boeing nor GE shall have any obligation arising therefrom. In
consideration for Boeing's extension of the Warranty to Customer,
Customer hereby releases and discharges Boeing from any and all
claims, obligations and liabilities whatsoever arising out of the
purchase or use of such GE90 type Engines and Customer hereby
waives, releases and renounces all its rights in all such claims,
obligations and liabilities except for the provisions in
paragraphs 2.1 (i) and 2.1 (iv) of Part 2 to Exhibit C to the
AGTA. In addition, Customer hereby releases and discharges GE
from any and all claims, obligations and liabilities whatsoever
arising out of the purchase or use of such GE90 type Engines
except as otherwise expressly assumed by GE in the Warranty or
General Terms Agreement between Customer and GE and Customer
hereby waives, releases and renounces all its rights in all such
claims, obligations and liabilities.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
GE90 Warranty Parts List*
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
*Warranty Parts List may change
<PAGE>
GE90 Warranty Parts List* (Cont.)
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
*Warranty Parts List may change
<PAGE>
GE90 Warranty Parts List* (Cont.)
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
* Warranty Parts List may change
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Supplemental Exhibit [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] to Purchase Agreement
Number 2061
<PAGE>
COVERED [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] COMPONENTS
relating to
BOEING MODEL 777-200IGW AIRCRAFT
This is the listing of Covered Components for the Aircraft which
relate to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] Product Assurance Document to the
AGTA and is a part of Purchase Agreement No. 2061.
1. Wing.
(a) Upper and lower wing skins and stiffeners between the
forward and rear wing spars.
(b) Wing spar webs, chords and stiffeners.
(c) Inspar wing ribs.
(d) Inspar splice plates and fittings.
(e) Upper wing fold hinge, end ribs and lower latch lugs.
(f) Main landing gear support structure.
(g) Wing center section lower beams, spanwise beams and
floor beams, but not the seat tracks attached to the
beams.
(h) Wing-to-body structural attachments.
(i) Engine strut support fittings attached directly to
wing primary structure.
(j) Support structure in the wing for spoilers and spoiler
actuators; for aileron hinges and reaction links; and
for leading edge devices and trailing edge flaps.
(k) Leading edge device and trailing edge flap support
system.
(l) Aileron, leading edge device and trailing edge flap
internal, fixed attachment and actuator support
structure.
2. Body.
(a) External surface skins and doublers, longitudinal
stiffeners, longerons and circumferential rings and
frames between the forward pressure bulkhead and the
vertical stabilizer rear spar bulkhead, and structural
support and enclosure for the APU but excluding all
system components and related installation and
connecting devices, insulation, lining, and decorative
panels and related installation and connecting
devices.
(b) Window and windshield structure but excluding the
windows and windshields.
(c) Fixed attachment structure of the passenger doors,
cargo doors and emergency exits, excluding door
mechanisms and movable hinge components. Sills and
frames around the body openings for the passenger
doors, cargo doors and emergency exits, excluding
scuff plates and pressure seals.
(d) Nose wheel well structure, including the wheel well
walls, pressure deck, forward and aft bulkheads, and
the gear support structure.
(e) Main gear wheel well structure including pressure
deck, bulkheads and landing gear beam support
structure.
(f) Floor beams and support posts in the control cab and
passenger cabin area, but excluding seat tracks.
(g) Forward and aft pressure bulkheads.
(h) Keel structure between the wing front spar bulkhead
and the main gear wheel well aft bulkhead, including
splices.
(i) Wing front and rear spar support bulkheads, and
vertical and horizontal stabilizer front and rear spar
support bulkheads including terminal fittings but
excluding all system components and related
installation and connecting devices, insulation,
lining, and decorative panels and related installation
and connecting devices.
(j) Support structure in the body for the stabilizer pivot
and stabilizer screw.
3. Vertical Stabilizer.
(a) External skins between front and rear spars.
(b) Front and rear spars including stiffeners.
(c) Attachment fittings between vertical stabilizer and
body.
(d) Inspar ribs.
(e) Support structure in the vertical stabilizer for
rudder hinges, reaction links and actuators.
(f) Rudder internal, fixed attachment and actuator support
structure.
(g) Rudder hinges and supporting ribs, excluding bearings.
4. Horizontal Stabilizer.
(a) External skins between front and rear spars.
(b) Front and rear spars including splices and stiffeners.
(c) Inspar ribs.
(d) Stabilizer splice fittings and pivot and screw support
structure.
(e) Support structure in the horizontal stabilizer for the
elevator hinges, reaction links and actuators.
(f) Elevator internal, fixed attachment and actuator
support structure.
(g) Elevator hinges and supporting ribs, excluding
bearings.
5. Engine Strut.
(a) Strut external surface skin and doublers and
stiffeners.
(b) Internal strut chords, frames and bulkheads.
(c) Strut to wing fittings and diagonal brace.
(d) Engine mount support fittings attached directly to
strut structure.
(e) For Aircraft equipped with General Electric or Pratt &
Whitney engines only, the engine mounted support
fittings.
6. Main Landing Gear.
(a) Outer cylinder.
(b) Inner cylinder.
(c) Upper and lower side strut, including spindles and
universals.
(d) Upper and lower drag strut, including spindles and
universals.
(e) Orifice support tube.
(f) Downlock links including spindles and universals.
(g) Torsion links.
(h) Bogie beam.
(i) Axles.
(j) Steering crank arm.
(k) Steering rod.
(l) Retraction Links
7. Nose Landing Gear.
(a) Outer cylinder.
(b) Inner cylinder, including axles.
(c) Orifice support tube.
(d) Upper and lower drag strut, including lock links.
(e) Steering plates and steering collar.
(f) Torsion links.
(g) Actuator support beam and hanger.
(h) Retraction Links.
NOTE: The [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Policy does not cover any bearings, bolts, bushings,
clamps, brackets, actuating mechanisms or latching
mechanisms used in or on the [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Components.
<PAGE>
October 10, 1997
2061-1
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Option Aircraft
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to
Model 777-200IGW aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
Boeing agrees to manufacture and sell to Customer additional
Model 777-200IGW aircraft as Option Aircraft. The delivery
months, number of aircraft, Advance Payment Base Price per
aircraft and advance payment schedule are listed in the
Attachment to this Letter Agreement (the Attachment).
1. Aircraft Description and Changes
1.1 Aircraft Description: The Option Aircraft are
described by the Detail Specification listed in the Attachment.
1.2 Changes: The Detail Specification will be revised to
include:
(i) Changes applicable to the basic Model 777
aircraft which are developed by Boeing between
the date of the Detail Specification and the
signing of the definitive agreement to purchase
the Option Aircraft;
(ii) Changes required to obtain required regulatory
certificates; and
(iii) Changes mutually agreed upon.
2. Price
2.1 The pricing elements of the Option Aircraft are listed
in the Attachment.
2.2 Price Adjustments.
2.2.1 Optional Features. The Optional Features
Prices for the Option Aircraft will be adjusted to Boeing's
current prices as of the date of execution of the definitive
agreement for the Option Aircraft.
2.2.2 Escalation Adjustments. The Airframe Price and
the Optional Features Prices for Option Aircraft delivering
before January 2003, will be escalated on the same basis as the
Aircraft.
The engine manufacturer's current escalation provisions, listed
in Exhibit Supplement EE1 to the Purchase Agreement, have been
estimated to the months of scheduled delivery using commercial
forecasts to calculate the Advance Payment Base Price listed in
the Attachment to this Letter Agreement. The engine escalation
provisions will be revised if they are changed by the engine
manufacturer prior to the signing of a definitive agreement for
the Option Aircraft.
2.2.3 Base Price Adjustments. The Airframe Price
and the Engine Price of the Option Aircraft delivering before
January, 2003, will be adjusted to Boeing's and the engine
manufacturer's then current prices as of the date of execution of
the definitive agreement for the Option Aircraft.
2.2.4 Prices for Long Lead Time Aircraft. Boeing
and the engine manufacturer have not established prices and
escalation provisions for Model 777-200IGWaircraft and engines
for delivery in the year 2003 and after. When prices and the
pricing bases are established for the Model 777-200IGW aircraft
delivering in the year 2003 and after, the information listed in
the Attachment will be appropriately amended.
3. Payment.
3.1 Customer will pay a deposit to Boeing in the amount
shown in the Attachment for each Option Aircraft (Deposit), on
the date of this Letter Agreement. If Customer exercises an
option, the Deposit will be credited against the first advance
payment due. If Customer does not exercise an option, Boeing
will retain the Deposit for that Option Aircraft.
3.2 Following option exercise, advance payments in the
amounts and at the times listed in the Attachment will be payable
for the Option Aircraft. The remainder of the Aircraft Price for
the Option Aircraft will be paid at the time of delivery.
4. Option Exercise.
Customer may exercise an option by giving written notice to
Boeing on or before the date [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] prior to the
first business day of the applicable delivery month listed in the
Attachment (Option Exercise Date).
5. Contract Terms.
Boeing and Customer will use their best efforts to reach a
definitive agreement for the purchase of an Option Aircraft,
including the terms and conditions contained in this Letter
Agreement, in the Purchase Agreement, and other terms and
conditions as may be agreed upon to add the Option Aircraft to
the Purchase Agreement as an Aircraft. In the event the parties
have not entered into a definitive agreement within 30 days
following option exercise, either party may terminate the
purchase of such Option Aircraft by giving written notice to the
other within 5 days. If Customer and Boeing fail to enter into
such definitive agreement, Boeing will retain the Deposit for
that Option Aircraft unless failure is attributable to Boeing's
fault, in which case the Deposit shall be promptly returned to
Customer without interest.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment
<PAGE>
<TABLE>
<CAPTION>
Attachment to
Letter Agreement No. 2061-1
Option Aircraft Delivery, Description, Price and Advance Payments
<S> <C> <C> <C> <C>
Airframe Model/MTGW: 777-2001GW 580,000 Detail Specification: D019W004-A (2/29/96)
Engine Model/
Thrust Level: GE90-85B Price Base Year: Jul-95
Airframe Base Price: [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
Optional Features: COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Sub-Total of Airframe and Features:
Engine Price (Per Aircraft):
Aircraft Basic Price (Excluding BFE/SPE):
Buyer Furnished Equipment (BFE) Estimate:
In-Flight Entertainment Equipment (IFE) Estimate:
Refundable Deposit per Aircraft at Proposal Acceptance:
Airframe Escalation Data:
Base Year Index (ECI):
Base Year Index (ICI):
Engine Escalation Data:
Base Year Index (CPI):
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
</TABLE>
<PAGE>
October 10, 1997
2061-2
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Demonstration Flights
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to
Model 777-200IGW aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
Definition of Terms:
Correction Costs: Customer's or a third party's direct labor
costs and the cost of any material required to correct a Flight
Discrepancy where direct labor costs are equal to the warranty
labor rate in effect between the parties at the time such labor
is expended.
Flight Discrepancy: A failure or malfunction of an Aircraft, or
the accessories, equipment or parts installed on the Aircraft
which results from a defect in the Aircraft, Boeing Product,
engine or Supplier Product or a nonconformance to the Detail
Specification for the Aircraft.
The AGTA provides that each aircraft will be test flown prior to
delivery for the purpose of demonstrating the functioning of such
Aircraft and its equipment to Customer; however, Customer may
elect to waive this test flight. For each test flight waived,
Boeing agrees to provide Customer an amount of jet fuel at
delivery that, together with the standard fuel entitlement,
totals [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] U.S. gallons.
Further, Boeing agrees to reimburse Customer for any Correction
Costs incurred as a result of the discovery of a Flight
Discrepancy during the first flight of the aircraft by Customer
following delivery to the extent such Correction Costs are not
covered under a warranty provided by Boeing, the engine
manufacturer or any of Boeing's suppliers.
Should a Flight Discrepancy be detected by Customer which
requires the return of the Aircraft to Boeing's facilities at
Seattle, Washington, so that Boeing may correct such Flight
Discrepancy, Boeing and Customer agree that title to and risk of
loss of such Aircraft will remain with Customer. Any such
correction by Boeing shall be at no cost to Customer. In
addition, it is agreed that Boeing will have responsibility for
the Aircraft while it is on the ground at Boeing's facilities in
Seattle, Washington, as is chargeable by law to a bailee for
mutual benefit, but Boeing shall not be chargeable for loss of
use.
To be reimbursed for Correction Costs, Customer shall submit a
written itemized statement describing any flight discrepancies
and indicating the Correction Cost incurred by Customer for each
discrepancy. This request must be submitted to Boeing's
Contracts Regional Director at Renton, Washington, within ninety
(90) days after the first flight by Customer.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
2061-3
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Installation of Cabin Systems Equipment
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to
Model 777-200IGW aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
Customer has requested that Boeing install in the Aircraft the
inflight entertainment and cabin communications systems (IFE/CCS)
described in Attachment A to this Letter Agreement.
Because of the complexity of the IFE/CCS, special attention and
additional resources will be required during the development,
integration, certification, and manufacture of the Aircraft to
achieve proper operation of the IFE/CCS at the time of delivery
of the Aircraft. To assist Customer, Boeing will perform the
functions of project manager (the Project Manager) as set forth
in Attachment B.
1. Responsibilities.
1.1 Customer will:
1.1.1 Provide Customer's IFE/CCS system requirements
to Boeing;
1.1.2 Select the IFE/CCS suppliers (Suppliers) from
among those suppliers identified in the Change Request/s/ listed
in Attachment A to this Letter Agreement;
1.1.3 Promptly after selecting Suppliers, participate
with Boeing in meetings with Suppliers to ensure that Supplier's
functional system specifications meet Customer's and Boeing's
respective requirements;
1.1.4 Select Supplier part numbers;
1.1.5 Negotiate and obtain agreements on product
assurance, product support following Aircraft delivery (including
spares support), and any other special business arrangements
directly with Suppliers;
1.1.6 Provide pricing information for part numbers
selected above to Boeing by a mutually selected date;
1.1.7 Negotiate and obtain agreements with any
required service providers; and
1.1.8 Include in Customer's contract with any seat
supplier a condition obligating such seat supplier to enter into
and comply with a Boeing approved bonded stores agreement. This
bonded stores agreement will set forth the procedures concerning
the use, handling and storage for the Boeing owned IFE/CCS
equipment during the time such equipment is under the seat
supplier's control.
1.2 Boeing will:
1.2.1 Perform the Project Manager functions stated in
Attachment B;
1.2.2 Provide Aircraft interface requirements to
Suppliers;
1.2.3 Assist Suppliers in the development of their
IFE/CCS system specifications and approve such specifications;
1.2.4 Negotiate terms and conditions (except for
price, product assurance, product support following Aircraft
delivery and any other special business arrangements) and enter
into contracts with Suppliers for the purchase of IFE/CCS and
manage such contracts for the IFE/CCS;
1.2.5 Be responsible for ensuring that the Suppliers
deliver to Boeing on-dock requirements for those Supplier part
numbers which have been previously certified and remain unchanged
throughout the Boeing purchase contract period of performance.
1.2.6 Coordinate the resolution of technical issues
with Suppliers;
1.2.7 Ensure that at time of Aircraft delivery the
IFE/CCS configuration and functionality meets the requirements of
the Change Requests contained in Attachment A to this Letter
Agreement as such Attachment A may be amended from time to time;
and
1.2.8 Obtain FAA certification of the Aircraft with
the IFE/CCS installed therein.
2. Software.
IFE/CCS systems may contain software of the following two
types.
2.1 Systems Software. The software required to operate
and certify the IFE/CCS systems on the Aircraft is the "Systems
Software" and is part of the IFE/CCS.
2.2 Customer's Software. The software accessible to the
Aircraft passengers which controls Customer's specified optional
features is "Customer's Software" and is not part of the IFE/CCS.
2.2.1 Customer is solely responsible for specifying
Customer's Software functional and performance requirements and
ensuring that Customer's Software meets such requirements.
Customer and Customer's Software supplier will have total
responsibility for the writing, certification, modification,
revision, or correction of any of Customer's Software. Boeing
will not perform the functions and obligations described in
paragraph 1.2 above, nor the Project Manager's functions
described in Attachment B, for Customer's Software.
2.2.2 The omission of any Customer's Software or the
lack of any functionality of Customer's Software will not be a
valid condition for Customer's rejection of the Aircraft at the
time of Aircraft delivery unless such omission or lack of
functionality is due to a breach by Boeing of its obligations
under this Purchase Agreement.
2.2.3 Boeing has no obligation to approve any
documentation to support Customer's Software certification.
Boeing will only review and operate Customer's Software if in
Boeing's reasonable opinion such review and operation is
necessary to certify the IFE/CCS system on the Aircraft.
2.2.4 Boeing will not be responsible for obtaining
FAA certification for Customer's Software.
3. Changes.
3.1 After Boeing and Supplier have entered into a contract
for the purchase of the IFE/CCS, changes to such contract may
only be made by Boeing. Any Customer request for changes to the
IFE/CCS specification after the Boeing/Supplier contract has been
signed must be made in writing directly to Boeing. Boeing shall
respond to such request by Customer in a timely manner. If such
change is technically feasible and Boeing has the resources and
time to incorporate such change, then Boeing shall negotiate with
the Supplier to incorporate such change into the contract for the
IFE/CCS. Any Supplier price increase resulting from such a
change will be negotiated between Customer and Supplier.
3.2 Boeing and Customer recognize that the developmental
nature of the IFE/CCS may require changes to the IFE/CCS or the
Aircraft in order to ensure (i) compatibility of the IFE/CCS with
the Aircraft and all other Aircraft systems, and (ii) FAA
certification of the Aircraft with the IFE/CCS installed therein.
In such event Boeing will notify Customer and recommend to
Customer the most practical means for incorporating any such
change. If within 15 days after such notification Customer and
Boeing through negotiations cannot mutually agree on the
incorporation of any such change or alternate course of action,
then the remedies available to Boeing in Paragraph 5 shall apply.
3.3 The incorporation into the Aircraft of any mutually
agreed change to the IFE/CCS may result in Boeing adjusting the
price of the Change Request contained in Attachment A to this
Letter Agreement.
3.4 Boeing's obligation to obtain FAA certification of the
Aircraft with the IFE/CCS installed is limited to the IFE/CCS as
described in Attachment A, as Attachment A may be amended from
time to time.
3.5 Boeing shall notify Customer in a timely manner in the
event of a default by a Supplier under the Supplier's contract
with Boeing. Within 15 days of Customer's receipt of such
notification, Boeing and Customer shall agree through
negotiations on an alternative Supplier or other course of
action. If Boeing and Customer are unable to agree on an
alternative Supplier or course of action within such time, the
remedies available to Boeing in Paragraph 5 shall apply.
4. Exhibits B and C to the AGTA.
IFE/CCS is deemed to be BFE for the purposes of Exhibit B,
Customer Support Document, and Exhibit C, the Product Assurance
Document, of the AGTA.
5. Boeing's Remedies.
If Customer does not comply with any of its obligations set
forth herein, Boeing may:
5.1 delay delivery of the Aircraft pursuant to the
provisions of Article 7, Excusable Delay, of the AGTA; or
5.2 deliver the Aircraft without part or all of the
IFE/CCS installed, or with part or all of the IFE/CCS
inoperative.
Boeing may also increase the Aircraft Price by the amount of
Boeing's additional out-of-pocket costs, including but not
limited to extra engineering costs, factory disruption costs, and
storage costs, attributable to such noncompliance.
6. Advance Payments.
6.1 Estimated Price for the IFE/CCS. An estimated price
for the IFE/CCS purchased by Boeing will be included in the
Aircraft Advance Payment Base Price to establish the advance
payments for each Aircraft. The estimated price for the Boeing
purchased IFE/CCS installed on each Aircraft by Change Request
2300CH7324 is [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] U.S. dollars expressed in 1995
dollars.
6.2 Aircraft Price. The Aircraft Price will include the
actual IFE/CCS prices and any associated transportation costs
charged Boeing by Suppliers.
7. Customer's Indemnification of Boeing.
Customer will indemnify and hold harmless Boeing from and
against all claims and liabilities, including costs and expenses
(including attorneys' fees) incident thereto or incident to
successfully establishing the right to indemnification, for
injury to or death of any person or persons, including employees
of Customer but not employees of Boeing, or for loss of or damage
to any property, including Aircraft, arising out of or in any way
connected with any nonconformance or defect in any IFE/CCS, and
whether or not arising in tort or occasioned in whole or in part
by the negligence of Boeing, whether active, passive or imputed.
This indemnity will not apply with respect to any nonconformance
or defect caused solely by Boeing's handling or installation of
the IFE/CCS.
If the foregoing correctly sets forth your understanding of our
agreement with respect to the matters treated above, please
indicate your acceptance and approval below.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
Attachment A
Cabin Systems Equipment
The following Change Request describes the items of
equipment that under the terms and conditions of this Letter
Agreement are considered to be IFE/CCS. Each such Change Request
is fully described in Change Request Document D019WCR1-CAL-2B.
Change Request Number and Title
2300CH7324
ENTERTAINMENT AND COMMUNICATIONS SYSTEM COLLECTOR - DUAL CLASS,
285 PASSENGERS - CSE - MATSUSHITA 2000E INTERACTIVE IN-SEAT VIDEO
<PAGE>
Attachment B
Project Manager
This Attachment B describes the functions that Boeing will
perform as Project Manager to support (i) the development and
integration of the IFE/CCS and (ii) the FAA certification of the
IFE/CCS when installed on the Aircraft.
1. Project Management
Boeing will perform the following functions for the IFE/CCS.
Boeing will have authority to make day-to-day management
decisions, and decisions on technical details which in Boeing's
reasonable opinion do not significantly affect form, fit,
function, cost or aesthetics. Boeing will be responsible for:
A. Managing the development of all program schedules;
B. Evaluating and approving Supplier's program management
and developmental plans;
C. Defining program metrics and status requirements;
D. Scheduling and conducting program status reviews on a
weekly basis, or such other time period as may be
mutually agreed;
E. Scheduling and conducting design and schedule reviews
with Customer and Suppliers;
F. Monitoring compliance with schedules;
G. Evaluating and approving any recovery plans or plan
revisions which may be required of either Suppliers or
Customer;
H. Leading the development of a joint IFE/CCS project
management plan (the Program Plan) and;
I. Managing the joint development of the System
Specification
2. System Integration
Boeing's performance as Project Manager will include the
functions of systems integrator (Systems Integrator). As Systems
Integrator Boeing will perform the following functions:
A. As required, assist Suppliers in defining their system
specifications for the IFE/CCS, approve such
specifications and develop an overall system functional
specification;
B. Coordinate Boeing, Customer and Supplier teams to
ensure sufficient Supplier and Supplier sub system
testing and an overall cabin system acceptance test are
included in the Program Plan; and
C. Organize and conduct technical coordination meetings
with Customer and Suppliers to review responsibilities,
functionality, Aircraft installation requirements and
overall program schedule, direction and progress.
3. Seat Integration
A. Boeing will coordinate the interface requirements
between seat suppliers and Suppliers. Interface
requirements are defined in Boeing Document Nos. D6-
36230, "Passenger Seat Design and Installation"; D6-
36238, "Passenger Seat Structural Design and Interface
Criteria"; D222W232, "Seat Wiring and Control
Requirements"; and D222W013-4, "Seat Assembly
Functional Test Plan".
B. The Suppliers will be required to coordinate
integration testing and provide seat assembly
functional test procedures for seat electronic parts to
seat suppliers and Boeing, as determined by Boeing.
C. The Suppliers will assist the seat suppliers in the
preparation of seat assembly functional test plans.
<PAGE>
October 10, 1997
2061-4
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Spares Initial Provisioning
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing) and
Continental Airlines, Inc. (Customer) relating to
Model 777-200IGW aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
1. Applicability.
This letter will apply to initial provisioning for the
Model 777-200IGW Aircraft purchased by Customer under the
Purchase Agreement.
2. Initial Provisioning Meeting.
Boeing will conduct an initial provisioning meeting (Initial
Provisioning Meeting) with Customer to establish mutually
agreeable procedures to accomplish Customer's initial
provisioning of spare parts for the Aircraft. The parties will
agree, during the Initial Provisioning Meeting on the operational
data to be provided by Customer for Boeing's use in preparing its
quantity recommendations for initial provisioning of spare parts
for the Aircraft, exclusive of special tools, ground support
equipment, engines and engine parts (Provisioning Items). Such
operational data to be provided by Customer will be the data
described in Section E of Boeing Manual D6-49090, entitled
"Initial Provisioning Implementation Manual, Boeing Model 757,
767, 777, 747-400 and 737-300, -400 and -500" (Boeing Initial
Provisioning Implementation Manual) which will be furnished to
Customer prior to the Initial Provisioning Meeting. The parties
will also agree on the provisioning documentation data to be
provided by Boeing. Such data will be essentially in accordance
with the provisions of Chapter 1 of ATA International
Specification 2000, Revision 1, dated April 20, 1989, as
described in Boeing Initial Provisioning Implementation Manual
D6-49090 (such data will be hereinafter referred to collectively
as the "Provisioning Data"). Boeing will provide instruction in
the use of the initial provisioning documentation. This
instruction will be provided in conjunction with the Initial
Provisioning Meeting. In addition, the parties will discuss
spares ordering procedures and other matters related to the
provisioning for the Aircraft. The time and location for such
Initial Provisioning Meeting will be mutually agreed upon between
the parties.
3. Initial Provisioning Documentation.
3.1 Provisioning Data. Boeing will furnish Provisioning
Data to Customer on or about December 15, 1997. The
Provisioning Data will be as complete as possible and will cover
Provisioning Items selected by Boeing for review by Customer for
initial provisioning for the Aircraft. The Provisioning Data
will set forth the prices for Provisioning Items which are Boeing
Spare Parts and such prices will be firm and remain in effect
until the date or dates set forth below in Paragraph 4.1, Boeing
Spare Parts, by which orders must be placed with Boeing. Boeing
will, from time to time, until a date approximately 90 days
following delivery of the last Aircraft or until the delivery
configuration of each of the Aircraft is reflected in the
Provisioning Data, whichever is later, furnish to Customer
revisions to the Provisioning Data.
3.2 Provisioning IPC. Boeing will, on or about December 1,
1997, furnish to Customer a Boeing Illustrated Parts Catalog
(IPC), hereinafter referred to as the "Provisioning IPC." The
Provisioning IPC will be as complete as possible and will cover
Provisioning Items selected by Boeing for review by Customer for
initial provisioning for the Aircraft. Boeing will, from time to
time, until a date approximately 90 days following delivery of
the last Aircraft, or until the delivery configuration of each of
the Aircraft is reflected in the Provisioning IPC, whichever is
later, furnish to Customer revisions to the Provisioning IPC.
3.3 Buyer Furnished Equipment (BFE) Provisioning Data.
3.3.1 Boeing's Responsibility. Boeing will include
BFE end items in the Provisioning Data and Provisioning IPC for
BFE installed on Customer's Aircraft provided such equipment has
been installed on other Aircraft by Boeing and Boeing has data on
the BFE.
3.3.2 Customer's Responsibility. Customer will be
responsible for ensuring BFE data is provided to Boeing by the
BFE supplier in a format reasonably acceptable to Boeing for BFE
not covered by 3.3.1 above. If the data is not provided to
Boeing in a timely manner and in a format reasonably acceptable
to Boeing, such BFE equipment will not be included in Boeing's
Provisioning Data or IPC.
3.4 Other Data. Boeing will submit to Customer listings of
raw materials, standard parts and bulk materials to be used by
Customer in the maintenance and repair of the Aircraft.
4. Purchase from Boeing of Spare Parts as Initial Provisioning
for the Aircraft.
4.1 Boeing Spare Parts. Customer will place orders for
Provisioning Items on or about January 15, 1998; provided,
however, that in those instances where Boeing submits any
revision to the Provisioning Data, Customer will place orders for
Boeing Spare Parts covered by such revision within 90 days
following the date of such submittal. At Customer's request,
Boeing will process "controlled shipments" by shipping full or
partial quantities of an order on a schedule specified by
Customer, provided the final shipment is made no later than 24
months after receipt of the order.
4.2 Vendor Provisioning Items. Customer may place orders
with Boeing for Provisioning Items which are manufactured by
vendors or to their detailed design and are covered by the
Provisioning Data as initial provisioning for the Aircraft. The
price to Customer for any such vendor Provisioning Item will be
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] of the vendor's quoted price to Boeing
therefor. If Customer elects to purchase such vendor
Provisioning Items from Boeing, Customer will place its orders
therefor in accordance with the provisions of Paragraph 4.1,
Boeing Spare Parts.
4.3 Ground Support Equipment and Special Tools. Customer
may place orders with Boeing for ground support equipment (GSE)
and special tools manufactured by vendors which Customer
determines it will initially require for maintenance, overhaul
and servicing of the Aircraft and/or engines. The price to
Customer for such GSE or special tools will be [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] of the vendor's quoted price to Boeing therefor. If
Customer elects to purchase such GSE and special tools from
Boeing, Customer will place its orders therefor by the date set
forth in Paragraph 4.1, Boeing Spare Parts or such later date as
the parties may mutually agree.
4.4 Spare Engines and Engine Spare Parts. Customer may
place orders with Boeing for spare engines and/or engine spare
parts which Customer determines it will initially require for
support of the Aircraft or for maintenance and overhaul of the
engines. The price to Customer for such spare engines or such
engine spare parts, will be [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] of the engine
manufacturer's quoted price to Boeing for the engine, and
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] of the engine manufacturer's quoted price
to Boeing for the engine spare parts. If Customer elects to
purchase such spare engines or engine spare parts through Boeing,
Customer will place its orders on a date to be mutually agreed
upon during the Initial Provisioning Meeting.
4.5 QEC Kits. Boeing will, on or about September 15,
1997, furnish to Customer a listing of all components which could
be included in the Quick Engine Change (QEC) kits which may be
purchased by Customer from Boeing. Customer agrees to review
such listing and indicate by marking on one copy of such listing
those components that Customer desires included in its QEC kits.
Customer will return such marked copy to Boeing within 30 days
after Customer's receipt of such listing. Within 30 days after
Boeing's receipt of such marked copy, Boeing will republish such
listing to reflect only those components selected by Customer and
will provide copies of such republished listing to Customer.
Boeing will from time to time furnish revisions to such
republished listing until a date approximately 90 days after
delivery of the last QEC kit ordered by Customer for the
Aircraft. Boeing will furnish to Customer as soon as practicable
a statement setting forth a firm price for the QEC kit
configuration selected by Customer. Customer agrees to place
orders with Boeing for the QEC kits for the Aircraft by December
15, 1997.
4.6 Payment for Provisioning Items. The payment provisions
of the Customer Services General Terms Agreement (CSGTA) between
Boeing and Customer will be applicable to Provisioning Items
ordered by Customer from Boeing for the Aircraft.
5. Delivery.
Boeing will, insofar as reasonably possible, deliver to
Customer the Spare Parts ordered by Customer in accordance with
the provisions of this letter on dates reasonably calculated to
conform to Customer's anticipated needs in view of the scheduled
deliveries of the Aircraft. Customer and Boeing will agree upon
the date to begin delivery of the Provisioning Spare Parts
ordered in accordance with this letter. Where appropriate,
Boeing will arrange for shipment of such Spare Parts, which are
manufactured by vendors, directly to Customer from the applicable
vendor's facility. The routing and method of shipment for
initial deliveries and all subsequent deliveries of such Spare
Parts will be as mutually agreed between Boeing and Customer.
6. Substitution for Obsolete Spare Parts.
6.1 Obligation to Substitute. In the event that, prior to
delivery of the first Aircraft pursuant to the Purchase
Agreement, any Spare Part purchased by Customer from Boeing in
accordance with this letter is rendered obsolete or unusable due
to the redesign of the Aircraft or of any accessory, equipment or
part thereof (other than a redesign at Customer's request),
Boeing will deliver to Customer new and usable Spare Parts in
substitution for such obsolete or unusable Spare Parts and
Customer will return the obsolete or unusable Spare Parts to
Boeing. Boeing will credit Customer's account with Boeing with
the price paid by Customer for any such obsolete or unusable
Spare Part and will invoice Customer for the purchase price of
any such substitute Spare Part delivered to Customer.
6.2 Delivery of Obsolete Spare Parts and Substitutes
Therefor. Obsolete or unusable Spare Parts returned by Customer
pursuant to this Item will be delivered to Boeing at its Seattle
Distribution Center, or such other destination as Boeing may
reasonably designate. Spare Parts substituted for such returned
obsolete or unusable Spare Parts will be delivered to Customer at
Boeing's Seattle Distribution Center, or such other Boeing
shipping point as Boeing may reasonably designate. Boeing will
pay the freight charges for the shipment from Customer to Boeing
of any such obsolete or unusable Spare Part and for the shipment
from Boeing to Customer of any such substitute Spare Part.
7. Repurchase of Provisioning Items.
7.1 Obligation to Repurchase. During a period commencing 1
year after delivery of the first Aircraft under the Purchase
Agreement, and ending 5 years after such delivery, Boeing will,
upon receipt of Customer's written request and subject to the
exceptions in Paragraph 7.2, Exceptions, repurchase unused and
undamaged Provisioning Items which (i) were recommended by Boeing
in the Provisioning Data as initial provisioning for the
Aircraft, (ii) were purchased by Customer from Boeing, and (iii)
are surplus to Customer's needs.
7.2 Exceptions. Boeing will not be obligated under
Paragraph 7.1, Obligation to Repurchase, to repurchase any of the
following: (i) quantities of Provisioning Items in excess of
those quantities recommended by Boeing in the Provisioning Data
for the Aircraft, (ii) QEC Kits, bulk material kits, raw material
kits, service bulletin kits, standards kits and components
thereof (except those components listed separately in the
Provisioning Data), (iii) Provisioning Items for which an Order
was received by Boeing more than 8 months after delivery of the
last Aircraft, (iv) Provisioning Items which have become obsolete
or have been replaced by other Provisioning Items as a result of
(a) Customer's modification of the Aircraft or (b) design
improvements by Boeing or the vendor (other than Provisioning
Items which have become obsolete because of a defect in design if
such defect has not been remedied by an offer by Boeing or the
vendor to provide no charge retrofit kits or replacement parts
which correct such defect), and (v) Provisioning Items which
become excess as a result of a change in Customer's operating
parameters, provided to Boeing pursuant to the Initial
Provisioning meeting in Paragraph 2, which were the basis of
Boeing's initial provisioning recommendations for the Aircraft.
7.3 Notification and Format. Customer will notify Boeing,
in writing, when Customer desires to return Provisioning Items
which Customer's review indicates are eligible for repurchase by
Boeing under the provisions of this Repurchase of Provisioning
Items paragraph. Customer's notification will include a detailed
summary, in part number sequence, of the Provisioning Items
Customer desires to return. Such summary will be in the form of
listings, tapes, diskettes or other media as may be mutually
agreed between Boeing and Customer, and will include part number,
nomenclature, purchase order number, purchase order date and
quantity to be returned. Within 5 business days after receipt of
Customer's notification, Boeing will advise Customer, in writing,
when Boeing's review of such summary will be completed, but in no
case will the Boeing review be completed more than 30 days after
receipt of Customer's notification.
7.4 Review and Acceptance by Boeing. Upon completion of
Boeing's review of any detailed summary submitted by Customer
pursuant to Paragraph 7.3, Boeing will issue to Customer a
Material Return Authorization (MRA) for those Provisioning Items
Boeing agrees are eligible for repurchase in accordance with this
Repurchase of Provisioning Items paragraph. Boeing will advise
Customer of the reason that any spare part included in Customer's
detailed summary is not eligible for return. Boeing's MRA will
state the date by which Provisioning Items listed in the MRA must
be redelivered to Boeing and Customer will arrange for shipment
of such Provisioning Items accordingly.
7.5 Price and Payment. The price of each Provisioning Item
repurchased by Boeing pursuant to this Repurchase of Provisioning
Items paragraph will be an amount equal to [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] of
the original invoice price thereof. In the case of Provisioning
Items manufactured by a vendor which were purchased pursuant to
Paragraph 4, Purchase from Boeing of Spare Parts as Initial
Provisioning for the Aircraft, hereof the repurchase price will
not include Boeing's [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] handling charge. Boeing
will pay the repurchase price by issuing a credit memorandum in
favor of Customer which may be applied against amounts due Boeing
for the purchase of aircraft, Spare Parts, services or data.
7.6 Delivery of Provisioning Items. Provisioning Items
repurchased by Boeing pursuant to this Repurchase of Provisioning
Items paragraph will be delivered to Boeing at its Seattle
Distribution Center, or such other destination as Boeing may
reasonably designate. Boeing will pay the freight charges for
the shipment from Customer to Boeing of any such Provisioning
Items.
8. Obsolete Spare Parts and Surplus Provisioning Items - Title
and Risk of Loss.
Title to and risk of loss of any obsolete or unusable Spare
Parts returned to Boeing pursuant to Paragraph 6, Substitution
for Obsolete Spare Parts, will pass to Boeing upon delivery
thereof to Boeing. Title to and risk of loss of any Spare Part
substituted for an obsolete or unusable Spare Part pursuant to
Paragraph 6, Substitution for Obsolete Spare Parts, will pass to
Customer upon delivery thereof to Customer. Title to and risk of
loss of any Provisioning Item repurchased by Boeing pursuant to
Paragraph 7, Repurchase of Provisioning Items, will pass to
Boeing upon delivery thereof to Boeing. With respect to the
obsolete or unusable Spare Parts which may be returned to Boeing
and the Spare Parts substituted therefor, pursuant to
Paragraph 6, and the Provisioning Items which may be repurchased
by Boeing, pursuant to Paragraph 7, the party which has risk of
loss of any such Spare Part or Provisioning Item will have the
responsibility of providing any insurance coverage for it desired
by such party.
9. Supplier Support.
Boeing has entered, or anticipates entering, into product
support agreements with suppliers (Boeing Suppliers) of major
system components manufactured by such Suppliers to be installed
on the Aircraft (Supplier Components). Such product support
agreements commit, or are expected to commit, the Boeing
Suppliers to provide to Boeing's customers and/or such customer's
designees support services with respect to the Supplier
Components which can be reasonably expected to be required during
the course of normal operation. This support includes but is not
limited to shelf-stock of certain spare parts, emergency spare
parts, timely delivery of spare parts, and technical data related
to the Supplier Components. Copies of such product support
agreements will be provided to Customer on or about January 15,
1998 in Boeing Document D6-56115, Volumes 1 and 2. In the event
Customer has used due diligence in attempting to resolve any
difficulty arising in normal business transactions between
Customer and a Boeing Supplier with respect to product support
for a Supplier Component manufactured by such Supplier and if
such difficulty remains unresolved, Boeing will, if requested by
Customer, assist Customer in resolving such difficulty.
Assistance will be provided by the Spares Supplier Support and
Data Management Organization within the Boeing Buyer Services
Division.
10. Termination for Excusable Delay.
In the event of termination of the Purchase Agreement with
respect to any Aircraft pursuant to Article 7 of the AGTA, such
termination will, if Customer so requests by written notice
received by Boeing within 15 days after such termination, also
discharge and terminate all obligations and liabilities of the
parties as to any Spare Parts which Customer had ordered pursuant
to the provisions of this letter as initial provisioning for such
Aircraft and which are undelivered on the date Boeing receives
such written notice.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10,1997
2061-5
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Flight Crew Training Spare Parts Support
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Customer)
relating to Model 777-200IGW aircraft (the
Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
Definition of Terms:
Flight Crew Training: Flight training occurring immediately
following delivery using Boeing facilities.
Removed Parts: Parts removed from an Aircraft during Flight Crew
Training.
Replacement Parts: Parts taken from Boeing inventory and
installed in an Aircraft because no Standby Parts are available.
Standby Parts: Parts which are owned by Customer and located at
Customer's designated storage area at Boeing to support Flight
Crew Training. The Standby Parts list, including part numbers,
exact quantities and on-dock dates, will be established during
the spares provisioning meeting.
Training Aircraft: The Aircraft delivered to Customer used for
Flight Crew Training.
1. Provisioning of Spare Parts
To support Flight Crew Training, Boeing agrees to provide
normal line maintenance and expendable spare parts at no charge
on the Training Aircraft; and, Customer agrees to provide Standby
Parts for the Training Aircraft.
If parts other than those discussed above fail, Boeing will
attempt to provide Replacement Parts for those failed parts in
order to prevent extended down time on the Training Aircraft. If
Boeing is unable to provide Replacement Parts, Customer will be
responsible for providing those parts.
2. Disposition of Removed Parts
Boeing may with Customer consent either:
(i) repair such Removed Parts, at no charge to
Customer, and either retain such parts as Standby Parts or
return the Removed Parts to Customer, at Customer expense;
or
(ii) return the Removed Parts to Customer at
Customer's expense; or
(iii) return the Removed Parts to the manufacturer
for repair or replacement under such manufacturer's
warranty. Upon Boeing's receipt of the repaired Removed
Parts or their replacements, Boeing may retain such Removed
Parts or their replacements as Standby Parts or return such
Removed Parts or their replacements to Customer, at
Customer's expense. Any Removed Parts returned to Customer,
or replacements, will be accomplished in accordance with any
written instructions from Customer received by Boeing prior
to such return.
3. Payment for Replacement Parts
Boeing will invoice Customer for Replacement Parts at
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] for such part.
4. Redelivery of Standby Parts
Standby Parts not installed in the Training Aircraft will be
redelivered to Customer on board the last aircraft used for
Flight Crew Training.
5. Non-performance by Customer
If Customer's non-performance of obligations in this Letter
Agreement causes a delay in the Flight Crew Training, Customer
will be deemed to have agreed to any such delay in Flight Crew
Training. In addition, Boeing will have the right to:
(i) purchase Standby Parts and invoice Customer for
the price of such Parts and for any necessary
adjustment and calibration of such Parts; or
(ii) cancel or reschedule the Flight Crew Training; or
(iii) invoice Customer for any out-of-pocket expenses,
including but not limited to ground handling expenses,
maintenance costs and storage costs, that are directly
attributable to the delay in the Flight Crew Training.
6. Customer Warranty
Customer warrants that the Standby Parts will meet the
requirements of the Detail Specification and be in a condition to
pass Boeing's receival inspection and functional test, and if not
in a new condition, will have an attached FAA Serviceable Parts
Tag.
7. Title and Risk of Loss
Title to and risk of loss of any Standby Parts or Removed
Parts will remain with Customer. Boeing will have only such
liability for Standby Parts and Removed Parts as a bailee for
mutual benefit would have, but will not be liable for loss of
use. For Replacement Parts, title will transfer to Customer at
the time such part is installed on the Training Aircraft.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10, 1997
2061-6
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Customer)
relating to Model 777 aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
October 10, 1997
6-1162-GOC-087
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Customer)
relating to Model 777-200IGW aircraft (the
Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Boeing and Customer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Boeing and Customer agree that each party will treat this Letter
Agreement and the information contained herein as confidential
and will not, without the other party's prior written consent,
disclose this Letter Agreement or any information contained
herein to any other person or entity except as may be required by
applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
October 10, 1997
6-1162-GOC-088
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Customer)
relating to Model 777-200IGW aircraft (the
Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
<PAGE>
October 10,1997
6-1162-GOC-089
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Special Matters
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Customer)
relating to Model 777-200IGW aircraft (the
Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used and not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
1. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Option Aircraft Pricing.
2.1 Airframe Base Price. Notwithstanding the provisions
of Paragraph 2.2.3 of Letter Agreement 2061-1, the Airframe Price
for the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Option Aircraft described in Letter
Agreement 2061-1 shall be [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] for the
Aircraft presented in Table 1 to the Purchase Agreement.
2.2 Optional Features Prices. Notwithstanding the
provisions of Paragraph 2.2.1 of Letter Agreement 2061-1, the
Optional Features Prices for the [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] Option Aircraft
described in Letter Agreement 2061-1 [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
3. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
4. Payment of Interest on Deferred Advance Payments.
4.1 Interest Rate for Firm Aircraft. Customer agrees to
pay interest on all amounts which are deferred pursuant to
Paragraph 3.1 of this Letter Agreement at [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
Such interest shall accrue from and include the date on which
such payments would have been due but for the execution of this
Letter Agreement to but excluding the date on which such amounts
are paid in full. Interest shall be due and payable on the first
business day of each calendar quarter and on the delivery date of
any Aircraft that had a deferred advance payment schedule.
(Note: the interest rate as determined above will be use for the
entire calendar quarter; e.g., the interest rate determined based
on [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].)
4.2 Interest Rate for Option Aircraft. Customer agrees
to pay interest on all amounts which are deferred pursuant to
Paragraph 3.2 of this Letter Agreement at [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
4.3 Delivery Delay Impact on Interest Calculations. If
the delivery of any Aircraft is delayed due to either an
excusable or a non-excusable delay, then interest on the deferred
advance payments in respect of such Aircraft will not accrue
during the time period from the last working day of the scheduled
delivery month to the day of delivery of the Aircraft. Payment
of any interest that has accrued prior to the start of the delay
but remains unpaid will be paid on the normal quarterly interest
payment schedule set forth in Paragraph 4.1 of this Letter
Agreement or on the delivery date of the Aircraft, whichever
comes first.
4.4 Boeing Invoice. Boeing shall submit to Customer,
not less than fifteen (15) days prior to the end of each quarter,
an invoice for interest accrued during each such quarter.
Customer's payment is due and payable to Boeing on the first
business day of the following month. Boeing's invoice will show
interest accrued during the quarter for each Aircraft for which
advance payments have been deferred. The invoice will also
include interest accrued on deferred advance payments with
respect to other aircraft in other purchase agreements between
Customer and Boeing.
5. Option Aircraft Deposits.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6. Model Substitution.
6.1 Customer may elect to substitute other Model 777
aircraft then currently in production for the Aircraft subject to
(i) Boeing receiving Customer's written notice 15 months prior
the scheduled delivery month, (ii) Boeing production constraints,
and (iii) receipt of written concurrence from the engine
manufacturer acceptable to both Customer and Boeing.
6.2 Customer may elect to substitute Model 767 aircraft
then currently in production for the Aircraft subject to (i)
Boeing having an available position in the desired delivery
month, (ii) Boeing production constraints, (iii) the
configuration of the substitute aircraft having been established,
and (iv) receipt of acceptable written concurrence from the
engine manufacturer.
7. Aircraft Invoices.
Upon Customer request, at time of Aircraft delivery Boeing
agrees to provide a separate invoice addressed to the
owner/trustee of such Aircraft specifying the dollar amount to be
received at time of delivery. [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
8. Assignment of Credits.
Customer may not assign the credit memoranda described in
this Letter Agreement without Boeing's prior written consent
other than in circumstances where Boeing provides or arranges
lease equity financing to Customer in respect of an Aircraft.
9. Confidential Treatment.
Boeing and Customer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Boeing and Customer agree that each party will treat this Letter
Agreement and the information contained herein as confidential
and will not, without the other party's prior written consent,
disclose this Letter Agreement or any information contained
herein to any other person or entity except as may be required by
applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: October 10, 1997
CONTINENTAL AIRLINES, INC.
By___/s/ Brian Davis ___________
Its___Vice President_____ _
EXHIBIT 10.17(a)
Supplemental Agreement No. 1
to
Purchase Agreement No. 2061
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 777 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of December 18,
1997, 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 (Customer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 2061 dated October 10, 1997, (the Purchase Agreement)
relating to Boeing Model 777-200IGW aircraft, (Aircraft); and
WHEREAS, Customer wishes to add to the Purchase Agreement
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Aircraft that deliver in [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]; and
WHEREAS, Boeing and Customer have mutually agreed to amend
the Purchase Agreement to incorporate the effect of these and
certain other changes;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree to amend the Purchase
Agreement as follows:
1. Table of Contents:
Remove and replace, in its entirety, the "Table of
Contents", with the Table of Contents attached hereto, to reflect
the changes made by this Supplemental Agreement No. 1.
2. Table 1:
Remove and replace, in its entirety, "Table 1, Aircraft
Delivery, Description, Price and Advance Payments" with the
revised "Table 1, Aircraft Delivery, Description, Price and
Advance Payments", pages 1 and 2, attached hereto, to reflect the
revised delivery schedule for the Aircraft.
3. Letter Agreements:
Add Letter Agreement 6-1162-GOC-172, "Additional Matters",
to the Purchase Agreement to (i) confirm the [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] payment schedule for the Aircraft added by this
Supplemental Agreement No. 1, (ii) establish the interest rate
applicable to such [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] payments and (iii)
document that the [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT] Aircraft added by this
Supplemental Agreement No. 1 will replace [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Model 767-400ER aircraft contained in Purchase Agreement No.
2060.
The Purchase Agreement will be deemed to be supplemented to the
extent herein provided as of the date hereof and as so
supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: /s/Gunar O. Clem By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
<PAGE>
TABLE OF CONTENTS
ARTICLES Revised By:
1. Quantity, Model and Description
2. Delivery Schedule
3. Price
4. Payment
5. Miscellaneous
TABLE
1. Aircraft Information Table SA No. 1
EXHIBIT
A. Aircraft Configuration
B. Aircraft Delivery Requirements
and Responsibilities
SUPPLEMENTAL EXHIBITS
BFE1. BFE Variables
CS1. Customer Support Variables
EE1. Engine Escalation/Engine Warranty
and Patent Indemnity
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
TABLE OF CONTENTS
LETTER AGREEMENTS Revised By:
2061-1 Option Aircraft
2061-2 Demonstration Flights
2061-3 Installation of Cabin Systems Equipment
2061-4 Spares Initial Provisioning
2061-5 Flight Crew Training Spares
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
<PAGE>
TABLE OF CONTENTS
CONFIDENTIAL LETTER AGREEMENTS Revised By:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-GOC-089 Special Matters
6-1162-GOC-172 Additional Matters SA No. 1
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 December 18, 1997
<PAGE>
<TABLE>
<CAPTION>
Table 1 to
Supplemental Agreement No. 1 to Purchase Agreement No. 2061
Aircraft Delivery, Description, Price and Advance Payments
<S> <C> <C> <C> <C>
Airframe Model/MTGW: 777-200IGW 580,000 Detail Specification: D019W004-A (2/29/96)
Engine Model: GE90-85B Price Base Year: Jul-95
Airframe Base Price:
Optional Features:
Sub-Total of Airframe and Features:
Engine Price (Per Aircraft):
Aircraft Basic Price (Excluding BFE/SPE):
Buyer Furnished Equipment (BFE) Estimate:
In-Flight Entertainment Equipment (IFE) Estimate:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
</TABLE>
<PAGE>
December 18, 1997
6-1162-GOC-172
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Additional Matters
Reference: Purchase Agreement No. 2061 (the Purchase
Agreement) between The Boeing Company
(Boeing) and Continental Airlines, Inc.
(Customer) relating to Model 777-200IGW
aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used and not defined in this Letter
Agreement shall have the same meaning as in the Purchase
Agreement.
1. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Payment Schedule.
Notwithstanding the Advance Payment Schedule contained in
Table 1 of the Purchase Agreement, Customer may pay advance
payments according to the following schedule for the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Aircraft added under Supplemental
Agreement No. 1 to the Purchase Agreement.
Due Date of Payment Amount Due per Aircraft
(Percentage times Advance
Payment Base Price)
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Payment of Interest on Deferred Advance Payments.
Customer agrees to pay interest on all amounts which are
deferred pursuant to Paragraph 1 of this Letter Agreement at
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]. Such interest shall accrue from and
include the date on which such payments would have been due but
for the execution of this Letter Agreement to but excluding the
date on which such amounts are paid in full. Interest shall be
due and payable on the first business day of each calendar
quarter and on the delivery date of any Aircraft that had a
deferred advance payment schedule. (Note: the interest rate as
determined above will be use for the entire calendar quarter;
e.g., the interest rate determined based [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].)
3. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
4. Customer's Right to Confirm.
Boeing agrees that Customer may cancel the exercise of the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] Aircraft added under Supplemental
Agreement No. 1 to the Purchase Agreement by giving Boeing
written notice of such cancellation on or before January 2, 1998.
5. Confidential Treatment.
Boeing and Customer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Boeing and Customer agree that each party will treat this Letter
Agreement and the information contained herein as confidential
and will not, without the other party's prior written consent,
disclose this Letter Agreement or any information contained
herein to any other person or entity except as may be required by
applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By /s/ Gunar O. Clem
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: December 18, 1997
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its___Vice President___________
EXHIBIT 10.22(a)
FIRST AMENDMENT
TO THE
GOVERNANCE AGREEMENT
This First Amendment to the Governance Agreement dated as of
March 2, 1998, is by and among Continental Airlines, Inc., a
Delaware corporation (the "Company"), Newbridge Parent
Corporation, a Delaware corporation (the "Stockholder"), and
Northwest Airlines Corporation, a Delaware corporation that is
the holder of all of the outstanding stock of the Stockholder
("Parent").
WHEREAS, the Company, the Stockholder and the Parent have
entered into that certain Governance Agreement dated as of
January 25, 1998 (the "Governance Agreement"), pursuant to which
the Parent and the Stockholder have agreed, among other things,
that they and their respective Affiliates will not, subject to
certain exceptions set forth in the Governance Agreement,
Beneficially Own any Voting Securities in excess of the Permitted
Percentage; and
WHEREAS, the Parent and the Stockholder have proposed to
enter into a Purchase Agreement (the "Barlow Agreement") with
Barlow Investors III, LLC, a California limited partnership
("Barlow"), and the guarantors signatory thereto, pursuant to
which the Parent and the Stockholder would acquire Beneficial
Ownership of 979,000 shares of Class A Common Stock Beneficially
Owned by Barlow;
WHEREAS, the Parent and the Stockholder entering into the
Barlow Agreement would cause them to Beneficially Own Voting
Securities in excess of the Permitted Percentage as in effect on
the date hereof; and
WHEREAS, the Parent and the Stockholder have requested that
the Company consent to their entering into the Barlow Agreement,
and the Company is willing to agree thereto subject to the terms
and conditions of this First Amendment; and
WHEREAS, the Company, the Parent and the Stockholder desire
to clarify the effect of the conversion of shares of Class A
Common Stock to Class B Common Stock by the holders thereof under
Section 1.01 of the Governance Agreement.
NOW THEREFORE, the Company, the Stockholder and the Parent,
intending to be legally bound, hereby agree as follows:
1. Capitalized terms not otherwise defined herein shall
have their respective meanings set forth in the Governance
Agreement.
2. Section 1.01(d) of the Governance Agreement is amended
and restated to read in its entirety as set forth below:
(d) (i) Except as otherwise set forth in this
subsection (d), if at any time the Parent or the
Stockholder becomes aware that it and its Affiliates
Beneficially Own more than the Permitted Percentage,
then the Parent shall promptly notify the Company, and
the Parent and the Stockholder, as appropriate, shall
promptly take all action necessary to reduce the amount
of Voting Securities Beneficially Owned by such Persons
to an amount not greater than the Permitted Percentage.
(ii) If the Voting Securities Beneficially Owned
by the Stockholder and its Affiliates exceed the
Permitted Percentage (A) solely by reason of
repurchases of Voting Securities by the Company or (B)
as a result of the transactions otherwise permitted by
the terms of this Agreement, then the Stockholder shall
not be required to reduce the amount of Voting
Securities Beneficially Owned by such Persons and the
percentage of the Fully Diluted Voting Power
represented by the Voting Securities Beneficially Owned
by such Persons shall become the Permitted Percentage.
(iii) Notwithstanding the provisions of Section
1.01(a), if the Voting Securities Beneficially Owned by
the Stockholder and its Affiliates exceed the Permitted
Percentage solely by reason of the Parent's and the
Stockholder's entering into (A) the Purchase Agreement
dated as of March 2, 1998 (the "Barlow Agreement")
among the Parent, the Stockholder, Barlow Investors
III, LLC, a California limited liability company
("Barlow"), and the guarantors signatory thereto,
respecting the sale by Barlow of 979,000 shares of
Class A Common Stock to the Stockholder, and (B) the
Investment Agreement, and the purchase of (C) the
979,000 shares of Class A Common Stock pursuant to the
Barlow Agreement, and (D) Voting Securities pursuant to
the Investment Agreement, the Stockholder and its
Affiliates shall not be required to reduce the amount
of Voting Securities Beneficially Owned by such
Persons; provided that the Permitted Percentage shall
not be changed as a result thereof, and, if the Fully
Diluted Voting Power of the Voting Securities
Beneficially Owned by the Stockholder and its
Affiliates is subsequently reduced to or below the
Permitted Percentage, neither the Stockholder, the
Parent, nor any of their respective Affiliates shall
Beneficially Own any Voting Securities in excess of the
Permitted Percentage after such reduction.
(iv) Notwithstanding the provisions of Section
1.01(a), if the Voting Securities Beneficially Owned by
the Stockholders and its Affiliates exceed the
Permitted Percentage solely by reason of the conversion
of shares of Class A Common Stock into shares of Class
B Common Stock by the holders thereof, the Stockholder
and its Affiliates shall not be required to reduce the
amount of Voting Securities Beneficially Owned by such
Persons; provided that, the Permitted Percentage shall
not be changed as a result of any such conversion, and
if the Fully Diluted Voting Power of the Voting
Securities Beneficially Owned by the Stockholder and
its Affiliates is subsequently reduced to or below the
Permitted Percentage, neither the Stockholder, the
Parent, nor any of their respective Affiliates shall
Beneficially Own any Voting Securities in excess of the
Permitted Percentage after such reduction.
3. The Company hereby represents and warrants to the
Parent and the Stockholder that this First Amendment to the
Governance Agreement has been approved by a Majority Vote.
4. This First Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
5. Except as expressly modified by this First Amendment
to the Governance Agreement, all of the terms, conditions and
provisions of the Governance Agreement shall remain unchanged and
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to the Governance Agreement to be executed as of
the date first referred to above.
Northwest Airlines Corporation
By: /s/ Douglas M. Steenland
Name:Douglas M Steenland
Title:Senior Vice President,
General Counsel and Secretary
Newbridge Parent Corporation
By: /s/Douglas M. Steenland
Name:Douglas M. Steenland
Title:Vice President, Secretary
And Assistant Treasurer
Continental Airlines, Inc.
By: /s/Jeffery A. Smisek
Name:Jeffery A. Smisek
Title:Executive Vice President,
General Counsel and Secretary
EXHIBIT 10.23
GE Aircraft Engines
General Electric Company
One Neumann Way
Cincinnati, OH 45215-1988 USA
Tel. 513/243-2000
LETTER AGREEMENT NO. 11
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Gentlemen:
WHEREAS, General Electric Company ("GE") and Continental
Airlines, Inc. ("Airline") have entered into Amended and Restated
General Terms Agreement No. 6-8057 dated as of November 1, 1994,
as amended (together with Letter Agreement Nos. 1 through 10
thereto, collectively, the "Agreement"). This Letter Agreement
No. 11 amends and supplements the Agreement by providing for
applicable terms and conditions governing the sale by GE and the
purchase by Airline from GE of spare CF6 and GE90 engines and
related equipment and spare parts therefor in support of
Airline's fleet of GE-powered aircraft; and
WHEREAS, Airline has ordered from The Boeing Company ("Boeing")
(i) thirty (30) new firm 767-400ER aircraft for delivery in the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] time period, [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and
(ii) ten (10) new firm 777-200 aircraft for delivery in the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] time period [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
WHEREAS, Airline and Boeing have entered into an agreement
whereby Airline has agreed that in the event Airline purchases
any new 737 through 777 sized aircraft prior to December 31,
2017, such aircraft shall be aircraft manufactured by Boeing. GE
is not a party to this Purchase Agreement and any reference to
such Purchase Agreement is only for the convenience of Airline.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows:
I. Airline agrees that when Airline acquires directly from
Boeing new 737 through 777 sized aircraft (other than 757
aircraft), including derivatives, for delivery by December
31, 2017 (except for those for which neither GE nor CFMI
has an application) which are in addition to the Firm 767
Aircraft and Firm 777 Aircraft, [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] Airline shall equip all such additional
aircraft with GE or CFMI engines. If, for any reason
other than one defined in the Agreement as an "Excusable
Delay" (Article VIII), GE or CFMI is unable to deliver
such engines in the time period required by Airline,
Airline may purchase engines from another source.
II. Airline agrees that in the event Airline acquires directly
from an aircraft manufacturer for delivery by December 31,
2017, with or without Boeing's consent, additional new 737
through 777 sized aircraft, including derivatives, which
are not manufactured by Boeing, such additional aircraft
shall be equipped with GE of CFMI engines (except for
those for which neither GE nor CFMI has an application).
If, for any reason, other than one defined in the
Agreement as an "Excusable Delay" (Article VIII), GE or
CFMI is unable to deliver such engines in the time period
required by Airline, Airline may purchase engines from
another source.
The additional aircraft referred to in paragraph I above
and in this paragraph II shall be individually or
collectively referred to as the "Follow-On Aircraft."
III. If Airline purchases Follow-On Aircraft, Airline agrees to
purchase a quantity of spare engines which are equivalent
to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT] percent [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] (rounded to the nearest whole
spare engine) of the quantity of new engines installed on
each model of Follow-On Aircraft.
IV. GE agrees to provide Airline the following Special
Allowances, subject to all of the conditions set forth in
Attachment A hereto.
A. Follow-On Aircraft Allowance
In consideration of Airline purchasing and taking
delivery of new CF6 powered Follow-on Aircraft for
delivery through December 31, 2017, GE will provide
Airline an allowance per aircraft as defined by the
formula below:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
In consideration of Airline purchasing and taking
delivery of new GE90 powered Follow-On Aircraft for
delivery through December 31, 2017, GE will provide
Airline an allowance per aircraft as defined by the
formula below:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
These Follow-On Aircraft Allowances will be earned by
Airline, on a pro rata basis, upon delivery of each
shipset of CF6 and GE90 Engines to the aircraft
manufacturer for installation on Airline's Follow-On
Aircraft.
Upon concurrence by the aircraft manufacturer, GE will
make the Follow-On Aircraft Allowances available for use
toward the purchase of the respective Follow-On Aircraft
to which such allowance relates.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
The obligations set forth in this Letter Agreement No. 11 are in
addition to and form part of the obligations set forth in the
Agreement.
Counterparts: This Letter Agreement No. 11 may be executed by the
parties hereto in two or more counterparts and by the different
parties hereto on separate counterparts each of which shall be
deemed to be an original but all of which when taken together
shall constitute one and the same document. Delivery of an
executed counterpart of a signature page to this Agreement by fax
shall be effective as delivery of a manually executed
counterpart.
Please indicate your agreement with the foregoing by signing the
original and one copy in the space provided below and returning
the same to the undersigned whereby this Letter Agreement No. 11
shall become effective as of December 22, 1997.
Very truly yours,
CONTINENTAL AIRLINES, INC.
By: /s/ Brian Davis By: /s/ James L. Raphael
Typed Name: Brian Davis Typed Name: James L. Raphael
Title: Vice President Title: Sales Director
Date: 12/22/97 Date 12/22/97
<PAGE>
1.Allowance for Initial Aircraft Sale Only
Any allowance described in this Letter Agreement No. 11
applies only to new CF6 powered Follow-on Aircraft and new
GE90 powered Follow-On 777 Aircraft (individually or
collectively, the "CF6/GE90 Follow-On Aircraft") and does
not apply to an aircraft that has been the subject of a
previous GE proposal or offer or, to an aircraft that has
been previously sold or otherwise acquired through resale,
lease, trade or exchange.
2. Allowance Not Paid
If: (a) Airline for any reason: terminates, cancels,
revokes or delays beyond the Follow-On Delivery Period
(defined as a period of time not to exceed December 31,
2017 unless such delay occurs as a result of an Excusable
Delay) its order for Follow-On Aircraft or some portion
thereof, or (b) Airline fails to perform, in any material
respect, any of the allowance conditions or other material
terms of the Agreement, in addition to the other remedies
that may be available to GE in this Attachment A, and, with
respect to a failure to perform, in any material respect,
any of the other material terms of the Agreement, such
other remedies that may be available to GE at law or in
equity, any allowance which may have been earned by Airline
upon delivery of GE engines to the aircraft manufacturer
for affected Aircraft shall become an unearned allowance,
and will not be paid; provided, however, that such an
unearned allowance relating to a delayed CF6/GE90 Follow-On
Aircraft may be reinstated and paid to Airline upon
delivery of such CF6/GE90 Follow-On Aircraft if (i) such
delay was not attributable to a breach by Airline under the
applicable aircraft manufacturer's purchase agreement, this
Agreement or any other applicable agreement, and (ii)
Airline accepts such CF6/GE90 Follow-On Aircraft promptly
when tendered by Boeing; and (iii) such acceptance occurs
not later than the Follow-On Delivery Period, subject to
excusable delay as defined in paragraph 10 hereof.
3. Adjustment of Allowances
In the event Airline fails to (i) take delivery of at least
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT] the respective CF6 and
GE90 Follow-On Aircraft Allowances described in Article
IV.A of Letter Agreement No. 11 will be reduced according
to the following table:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT]
and such reduced allowance will be applicable to (i) all
CF6 powered Follow-On Aircraft delivered to Airline through
December 31, 2017 and (ii) all GE90-powered Follow-On
Aircraft delivered to Airline through December 31, 2017.
The Special Allowances described in Article IV.A. will not
be applicable to Follow-On Aircraft delivered after
December 31, 2017.
The cut-off dates set forth in this paragraph 3 are subject
to extension for excusable delay [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT].
4. Assignability of Allowances
The allowances described herein are exclusively for the
benefit of Airline, and are not assignable, except in
connection with Airline's financing of the Aircraft.
5. Set Off for Outstanding Balance
Allowances will be made available by GE at the time of
CF6/GE90 Follow-On Aircraft delivery provided Airline has
no accounts aggregating in excess of [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] outstanding for ninety (90) days or more payable
to GE for the purchase of GE Aircraft Engines products and
services for which GE shall have notified airline (to the
attention of Chief Financial Officer) at least ninety (90)
days prior to such scheduled CF6/GE90 Follow-On Aircraft
delivery. In the event of such outstanding accounts
receivable, the amounts of such outstanding accounts
receivable shall be deducted by GE from the allowances that
are payable at the time of scheduled Aircraft delivery.
However, no such deduction will occur for those past due
amounts that Airline has contested in good faith, provided
that Airline has notified GE of such contest within sixty
(60) days after Airline received the invoice(s) therefor.
6. Cancellation of CF6/GE90 Follow-On Spare Engines
In the event Airline cancels any purchase order for
CF6/GE90 Follow-On Aircraft spare engine(s) prior to
scheduled delivery to Airline, except in circumstances
constituting Excusable Delay, (i) GE will retain, and
Airline will forfeit, any spare engine progress payments
made to GE for such canceled spare engine, and (ii) if
written notice of cancellation is received by GE at least
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT] prior to the scheduled
engine delivery date, Airline will pay a cancellation
charge of [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] of the
engine price, [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].
7. Cancellation or Failure to Accept Delivery of Installed
Engines
If airline cancels any purchase order for, or otherwise
fails to take delivery of, installed CF6/GE90 Follow-On
Aircraft engine(s) (individually or collectively, the
"Engine"), the parties agree that harm or damage will be
sustained by GE as a result. The parties agree that any
such cancellation or failure to accept delivery of the
Engine (except in circumstances constituting Excusable
Delay) will subject Airline to a cancellation charge of
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT] of the installed Engine
price, (determined as of the date of scheduled Engine
delivery to the aircraft manufacturer). If Airline
provides notice of cancellation at least [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] prior to the scheduled delivery
date of the aircraft, the parties acknowledge this charge
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT] and to be a reasonable
estimate of the harm or damage to GE. To the extent that
GE gets paid cancellation fees by or receives credit or
other quantifiable consideration from the aircraft
manufacturer with respect to installed Engines for
Airline's canceled aircraft or aircraft for which Airline
has failed to accept delivery when duly tendered, GE will
credit airline the value of such fees, credits or other
quantifiable consideration against such cancellation charge
and any other amounts owed to GE by Airline for damages
relating to any such cancellation or failure to accept
delivery.
8. Additional Damages; Confidentiality
In the event written notice of cancellation (of spare or
installed engines) is not received by GE more than
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT] prior to scheduled
delivery date to Airline for a spare engine, or
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT] prior to the delivery
date of the aircraft for an installed engine, GE will also
retain all remedies available to it for damages in law or
equity in excess of such cancellation charge.
Airline agrees to cooperate with GE to maintain the
confidentiality of any proprietary information disclosed by
GE in connection with proving any such additional harm or
damages, provided that any such disclosure shall be at GE's
discretion.
9. Planned Aircraft Not Operated for Planned Period
If, within the [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] following
delivery of each CF6/GE90 Follow-On Aircraft for which a
special allowance was provided by GE under this Letter
Agreement No. 11, Airline fails to operate (other than as a
result of mechanical problem or due to an event of loss)
such CF6/GE90 Follow-On Aircraft, the special allowances
earned and/or paid on such CF6/GE90 Follow-On Aircraft
shall be proportionately reduced. Airline will reimburse
GE an amount equal to the proportionate share of the
special allowances earned and/or paid with respect to such
CF6/GE90 Follow-On Aircraft, (based on the percentage of
the six-month minimum period the CF6/GE90 Follow-On
Aircraft was actually operated by Airline), with interest
on such amount. The special allowance reimbursement is due
no later than 30 days from the time Airline ceases to
operate such CF6/GE90 Follow-On Aircraft.
Interest will be calculated at [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]. For purposes of the foregoing, Airline shall
be deemed to operate such CF6/GE90 Follow-On Aircraft even
though such CF6/GE90 Follow-On Aircraft are (i) operated by
any majority owned affiliate or subsidiary of Airline or
(ii) operated by any other airline with whom Airline has
entered into a code sharing or other marketing arrangement.
10. Excusable Delay
"Excusable Delay" with respect to an installed engine as
used in this Attachment A means a delay in delivery of an
Aircraft not attributable to a failure of Airline to timely
perform its obligations under the aircraft manufacturer's
purchase agreement (without giving effect to any
supplement, modification or waiver thereto which directly
or indirectly results in a permitted delay of the scheduled
delivery of an aircraft unless GE shall have consented
thereto, which consent shall not be unreasonably withheld),
including any event of force majeure or a default by the
aircraft manufacturer, provided, that airline accepts such
aircraft promptly when tendered by the aircraft
manufacturer.
An "Excusable Delay" with respect to a spare engine as used
in this Attachment A means a delay in delivery of a spare
engine not attributable to a failure of Airline to timely
perform its obligations under the purchase agreement
between Airline and GE, including any event of default by
GE or event of force majeure provided, that Airline accepts
such spare engine promptly when tendered by GE after an
event of force majeure.
EXHIBIT 21.1
SUBSIDIARIES OF CONTINENTAL AIRLINES, INC.
Subsidiary STATE OF INCORPORATION
Air Micronesia, Inc. Delaware
Continental Express, Inc. Delaware
Continental Micronesia, Inc. Delaware
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated
February 9, 1998 (except for Note 13, as to which the date is
March 18, 1998) with respect to the consolidated financial
statements and our report dated March 18, 1998 with respect to
the schedule of Continental Airlines, Inc. (the "Company")
included in the Annual Report (Form 10-K) for 1997 filed with the
Securities and Exchange Commission, into the following:
(i) the Company's Registration Statements on Form S-8 (Nos.
33-81324, 33-60009 and 333-06993) relating to the
Company's 1994 Incentive Equity Plan;
(ii) the Company's Registration Statement on Form S-8 (No.
333-23165) relating to the Company's 1997 Stock Incentive
Plan;
(iii) the Company's Registration Statements on Form S-8 (Nos.
33-81326 and 33-59995) relating to the Company's 1994
Restricted Stock Grant;
(iv) the Company's Registration Statement on Form S-8 (No.
333-16723) relating to the Company's 1997 Employee Stock
Purchase Plan;
(v) the Company's Registration Statement on Form S-8 (No. 33-
81328) relating to the Company's 1994 Employee Stock
Purchase Plan;
(vi) the Company's Registration Statement on Form S-3 (No.
333-07899) relating to the Company's 6-3/4% Convertible
Subordinated Notes and the related Offering Circular;
(vii) the Company's Registration Statement on Form S-3 (No.
333-09739) relating to Warrants, Class A Common Stock and
Class B Common Stock and sales by certain Selling
Securityholders and the related Prospectus;
(viii) the Registration Statement on Form S-3 (No. 333-04601) of
the Company and Continental Airlines Finance Trust
relating to 8-1/2% Convertible Trust Originated Preferred
SecuritiesSM and the related Offering Memorandum;
(ix) the Company's Registration Statement on Form S-3 (No.
333-34545) relating to the Company's Pass Through
Certificates for $1,850,000,000 and the related
Prospectus;
<PAGE>
(x) the Company's Registration Statement on Form S-3 (No.
333-31285) relating to the Company's Pass Through
Certificates for $250,000,000 and the related Prospectus;
and
(xi) the Company's Registration Statement on Form S-3 (No.
333-29255) relating to the Company's Debt Securities
(Debt Shelf) and the related Prospectus.
ERNST & YOUNG
Houston, Texas
March 18, 1998
EXHIBIT 24.1
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 18, 1998 By: /s/ Thomas J. Barrack, Jr.
Print Name: Thomas J. Barrack, Jr.
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ L. M. Bentsen
Print Name: L. M. Bentsen
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Gordon Bethune
Print Name: Gordon Bethune
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ David Bonderman
Print Name: David Bonderman
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 20, 1998 By: /s/ Michael P. Bonds
Print Name: Michael P. Bonds
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Greg Brenneman
Print Name: Gregory D. Brenneman
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Pat Foley
Print Name: Pat Foley
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 24, 1998 By: /s/ Lawrence W. Kellner
Print Name: Lawrence W. Kellner
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Douglas McCorkindale
Print Name: Douglas McCorkindale
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ George Parker
Print Name: George Parker
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Richard W. Pogue
Print Name: Richard W. Pogue
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 13, 1998 By: /s/ William S. Price
Print Name: William S. Price
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Donald L. Sturm
Print Name: Donald L. Sturm
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Karen Hastie Williams
Print Name: Karen Hastie Williams
<PAGE>
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 Lawrence W.
Kellner and Jeffery A. Smisek, or either of them, the
undersigned's true and lawful attorney or attorneys to execute in
the name, place and stead of the undersigned the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (and any
amendments thereto), to be filed by the Company under the
Securities Exchange Act of 1934, as amended, as fully and
effectively in all respects as the undersigned could do if
personally present.
IN WITNESS WHEREOF, the undersigned has signed this Power of
Attorney on and as of the date set forth below.
Date: February 11, 1998 By: /s/ Charles A. Yamarone
Print Name: Charles A. Yamarone
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,025
<SECURITIES> 0
<RECEIVABLES> 361
<ALLOWANCES> 23
<INVENTORY> 128
<CURRENT-ASSETS> 1,728
<PP&E> 2,225
<DEPRECIATION> 618
<TOTAL-ASSETS> 5,830
<CURRENT-LIABILITIES> 2,285
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 915
<TOTAL-LIABILITY-AND-EQUITY> 5,830
<SALES> 7,213
<TOTAL-REVENUES> 7,213
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,497
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> 640
<INCOME-TAX> 237
<INCOME-CONTINUING> 389
<DISCONTINUED> 0
<EXTRAORDINARY> 4
<CHANGES> 0
<NET-INCOME> 385
<EPS-PRIMARY> 6.65
<EPS-DILUTED> 4.99
</TABLE>
