UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 0-9781
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
(Address of principal executive offices)
(Zip Code)
713-324-2950
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No _____
_______________
As of April 15, 1999, 11,406,732 shares of Class A common stock and
56,869,435 shares of Class B common stock were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Three Months
Ended March 31,
1999 1998
(Unaudited)
Operating Revenue:
Passenger . . . . . . . . . . . . . . . $1,900 $1,714
Cargo and mail. . . . . . . . . . . . . 67 68
Other . . . . . . . . . . . . . . . . . 89 72
2,056 1,854
Operating Expenses:
Wages, salaries and related costs . . . 616 497
Aircraft rentals. . . . . . . . . . . . 184 156
Aircraft fuel . . . . . . . . . . . . . 150 190
Commissions . . . . . . . . . . . . . . 143 141
Maintenance, materials and repairs. . . 143 153
Other rentals and landing fees. . . . . 114 101
Depreciation and amortization . . . . . 85 68
Other . . . . . . . . . . . . . . . . . 461 398
1,896 1,704
Operating Income . . . . . . . . . . . . 160 150
Nonoperating Income (Expense):
Interest expense. . . . . . . . . . . . (53) (40)
Interest income . . . . . . . . . . . . 15 12
Interest capitalized. . . . . . . . . . 13 13
Other, net. . . . . . . . . . . . . . . 13 2
(12) (13)
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of dollars, except per share data)
Three Months
Ended March 31,
1999 1998
(Unaudited)
Income before Income Taxes and
Cumulative Effect of a Change in
Accounting Principle. . . . . . . . . . $ 148 $ 137
Income Tax Provision . . . . . . . . . . (58) (52)
Distributions on Preferred Securities
of Trust, net of applicable income
taxes of $2 in 1998 . . . . . . . . . . - (4)
Income before Cumulative Effect of a
Change in Accounting Principle. . . . . 90 81
Cumulative Effect of a Change in
Accounting Principle, net of
applicable income taxes of $3
in 1999 . . . . . . . . . . . . . . . . (6) -
Net Income . . . . . . . . . . . . . . . $ 84 $ 81
Earnings per Common Share:
Income Before Cumulative Effect of
Change in Accounting Principle . . . . $ 1.32 $ 1.38
Cumulative Effect of a Change in
Accounting Principle, net of tax . . . (0.09) -
Net Income. . . . . . . . . . . . . . . $ 1.23 $ 1.38
Earnings per Common Share Assuming
Dilution:
Income Before Cumulative Effect of a
Change in Accounting Principle. . . . $ 1.19 $ 1.06
Cumulative Effect of a Change in
Accounting Principle, net of tax. . . (0.08) -
Net Income . . . . . . . . . . . . . . $ 1.11 $ 1.06
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
March 31, December 31,
ASSETS 1999 1998
(Unaudited)
Current Assets:
Cash and cash equivalents, including
restricted cash and cash equivalents
of $11 . . . . . . . . . . . . . . . . . $1,397 $1,399
Accounts receivable, net. . . . . . . . . 534 449
Spare parts and supplies, net . . . . . . 187 166
Deferred income taxes . . . . . . . . . . 234 234
Prepayments and other . . . . . . . . . . 177 106
Total current assets . . . . . . . . . . 2,529 2,354
Property and Equipment:
Owned property and equipment:
Flight equipment . . . . . . . . . . . . 2,800 2,459
Other. . . . . . . . . . . . . . . . . . 688 632
3,488 3,091
Less: Accumulated depreciation. . . . . 674 625
2,814 2,466
Purchase deposits for flight equipment 431 410
Capital leases:
Flight equipment. . . . . . . . . . . . . 375 361
Other . . . . . . . . . . . . . . . . . . 57 56
432 417
Less: Accumulated amortization . . . . . 189 178
243 239
Total property and equipment . . . . . . 3,488 3,115
Other Assets:
Routes, gates and slots, net. . . . . . . 1,169 1,181
Investments . . . . . . . . . . . . . . . 151 151
Other assets, net . . . . . . . . . . . . 268 285
Total other assets . . . . . . . . . . . 1,588 1,617
Total Assets. . . . . . . . . . . . . . $7,605 $7,086
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
(Unaudited)
Current Liabilities:
Current maturities of long-term debt. . . $ 161 $ 184
Current maturities of capital leases. . . 48 47
Accounts payable. . . . . . . . . . . . . 745 843
Air traffic liability . . . . . . . . . . 1,037 854
Accrued payroll and pensions. . . . . . . 259 265
Accrued other liabilities . . . . . . . . 251 249
Total current liabilities. . . . . . . . 2,501 2,442
Long-Term Debt . . . . . . . . . . . . . . 2,598 2,267
Capital Leases . . . . . . . . . . . . . . 212 213
Deferred Credits and Other Long-Term
Liabilities:
Deferred income taxes . . . . . . . . . . 439 372
Accruals for aircraft retirements and
excess facilities. . . . . . . . . . . . 89 95
Other . . . . . . . . . . . . . . . . . . 379 393
Total deferred credits and other
long-term liabilities . . . . . . . . . 907 860
Commitments and Contingencies
Continental-Obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trust Holding Solely
Convertible Subordinated
Debentures. . . . . . . . . . . . . . . . - 111
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
March 31, December 31,
1999 1998
(Unaudited)
Common Stockholders' Equity:
Class A common stock - $.01 par,
50,000,000 shares authorized;
11,406,732 shares issued
and outstanding. . . . . . . . . . . . . $ - $ -
Class B common stock - $.01 par,
200,000,000 shares authorized;
57,789,644 and 53,370,741 shares
issued, respectively . . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . 733 634
Retained earnings . . . . . . . . . . . . 744 659
Accumulated other comprehensive income. . (60) (88)
Treasury stock - 871,100 and 399,524
Class B shares, respectively, at cost. . (31) (13)
Total common stockholders' equity. . . . 1,387 1,193
Total Liabilities and Stockholders'
Equity . . . . . . . . . . . . . . . . $7,605 $7,086
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Three Months
Ended March 30,
1999 1998
(Unaudited)
Cash Flows From Operating Activities:
Net income. . . . . . . . . . . . . . .$ 84 $ 81
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation. . . . . . . . . . . . . 66 45
Deferred income taxes . . . . . . . . 55 50
Amortization. . . . . . . . . . . . . 19 23
Gain on sale of investments . . . . . (20) -
Cumulative effect of a change in
accounting principle, net. . . . . . 6 -
Other, net. . . . . . . . . . . . . . (5) (6)
Changes in operating assets and
liabilities:
Increase in air traffic liability . 183 146
Decrease in accounts payable. . . . (98) (116)
Increase in accounts receivable . . (89) (95)
Increase in prepayments and other
current assets . . . . . . . . . . (71) (21)
Other . . . . . . . . . . . . . . . (4) (7)
Net cash provided by operating
activities . . . . . . . . . . . . . . 126 100
Cash Flows from Investing Activities:
Purchase deposits paid in connection
with future aircraft deliveries. . . . (260) (171)
Purchase deposits refunded in
connection with aircraft delivered . . 223 116
Capital expenditures. . . . . . . . . . (150) (139)
Purchase of short-term investments. . . - (184)
Proceeds from sale of investments . . . 20 -
Other . . . . . . . . . . . . . . . . . 12 (8)
Net cash used by investing
activities. . . . . . . . . . . . . . (155) (386)
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Three Months
Ended March 31,
1999 1998
(Unaudited)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term
debt, net. . . . . . . . . . . . . . . $ 168 $ -
Payments on long-term debt and
capital lease obligations. . . . . . . (112) (63)
Purchase of Class B common stock. . . . (39) (26)
Dividends paid on preferred securities
of trust . . . . . . . . . . . . . . . - (6)
Other . . . . . . . . . . . . . . . . . 10 24
Net cash provided (used) by
financing activities. . . . . . . . . 27 (71)
Net Decrease in Cash and
Cash Equivalents. . . . . . . . . . . . (2) (357)
Cash and Cash Equivalents - Beginning
of Period (A) . . . . . . . . . . . . . 1,388 1,010
Cash and Cash Equivalents - End of
Period (A). . . . . . . . . . . . . . . $1,386 $ 653
Supplemental Cash Flow Information:
Interest paid . . . . . . . . . . . . . $ 32 $ 25
Income taxes paid . . . . . . . . . . . $ 2 $ 2
Investing and Financing Activities
Not Affecting Cash:
Property and equipment acquired
through the issuance of debt . . . . . $ 237 $ 154
Capital lease obligations incurred. . . $ 14 $ 53
Conversion of trust originated
preferred securities . . . . . . . . . $ 111 $ -
(A) Excludes restricted cash of $11 million and $15 million at
January 1, 1999 and 1998, respectively, and $11 million and $16
million at March 31, 1999 and 1998, respectively.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONTINENTAL AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In the opinion of management, the unaudited consolidated financial
statements included herein contain all adjustments necessary to
present fairly the financial position, results of operations and
cash flows for the periods indicated. Such adjustments are of a
normal, recurring nature. The accompanying consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto contained in the Annual
Report of Continental Airlines, Inc. (the "Company" or
"Continental") on Form 10-K for the year ended December 31, 1998
(the "1998 10-K").
Certain reclassifications have been made in the prior year's
financial statements to conform to the current year presentation.
NOTE 1 - EARNINGS PER SHARE
The following table sets forth the computations of basic and
diluted earnings per share (in millions):
Three Months Ended
March 31,
1999 1998
Numerator:
Income before cumulative effect of
change in accounting principle . . . $ 90 $ 81
Cumulative effect of change in
accounting principle, net of
applicable income taxes. . . . . . . (6) -
Net income. . . . . . . . . . . . . . 84 81
Numerator for basic earnings per
share - income available to
common stockholders . . . . . . . . . 84 81
Effect of dilutive securities:
Preferred Securities of Trust . . . . - 3
6-3/4% convertible subordinated
notes. . . . . . . . . . . . . . . . 2 2
2 5
Numerator for diluted earnings per
share - income available to common
stockholders after assumed
conversions. . . . . . . . . . . . . $ 86 $ 86
Denominator:
Denominator for basic earnings
per share - weighted-average
shares . . . . . . . . . . . . . . . 68.5 58.9
Effect of dilutive securities:
Employee stock options . . . . . . . 1.3 2.0
Warrants . . . . . . . . . . . . . . - 2.7
Preferred Securities of Trust. . . . 0.3 10.3
6-3/4% convertible subordinated
notes . . . . . . . . . . . . . . . 7.6 7.6
Dilutive potential common
shares. . . . . . . . . . . . . . . 9.2 22.6
Denominator for diluted
earnings per share - adjusted
weighted-average and assumed
conversions. . . . . . . . . . . . . 77.7 81.5
NOTE 2 - INCOME TAXES
Income taxes for the three months ended March 31, 1999 and 1998
were provided at the estimated annual effective tax rate. Such
rate differs from the federal statutory rate of 35%, primarily due
to state income taxes and the effect of certain expenses that are
not deductible for income tax purposes.
At December 31, 1998, the Company had estimated net operating
losses ("NOLs") of $1.1 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 a change in ownership of the Company on April 27, 1993,
the ultimate utilization of the Company's NOLs and investment tax
credits may be limited. Reflecting this limitation, the Company
recorded a valuation allowance of $263 million as of December 31,
1998.
To the extent the Company were to determine in the future that
additional NOLs of the Company's predecessor could be recognized in
the accompanying consolidated financial statements, such benefit
would reduce routes, gates and slots.
NOTE 3 - COMPREHENSIVE INCOME
The Company includes unrealized gains or losses on available-for-
sale securities, changes in minimum pension liabilities and changes
in the fair value of derivative financial instruments which qualify
for hedge accounting in other comprehensive income. During the
first quarters of 1999 and 1998, total comprehensive income
amounted to $112 million and $84 million, respectively. The
significant difference between net income and total comprehensive
income during the first quarter of 1999 was attributable to the $22
million increase in fair value (net of applicable income taxes and
hedge ineffectiveness) related to petroleum swap contracts held by
the Company as of March 31, 1999 to hedge a portion of anticipated
jet fuel purchases through September 30, 1999.
NOTE 4 - CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
Continental adopted Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities ("SOP 98-5)") in the first quarter of
1999. SOP 98-5 amended Statement of Position 88-1, "Accounting for
Developmental and Preoperating Costs, Purchases and Exchanges of
Take-Off and Landing Slots, and Airframe Modifications" by
requiring preoperating costs related to the integration of new
types of aircraft to be expensed as incurred and requiring all
unamortized start-up costs (e.g., pilot training costs related to
induction of new aircraft) to be expensed upon adoption. This
resulted in the Company recording a $6 million cumulative effect of
a change in accounting principle, net of tax, in the first quarter
of 1999.
NOTE 5 - PREFERRED SECURITIES OF TRUST
In December 1998, the Company called for redemption the remaining
8-1/2% Convertible Trust Originated Preferred Securities ("TOPrS")
outstanding. As a result of the call, the remaining 2,298,327
TOPrS were converted into 4,752,522 shares of Class B common stock
during January 1999.
NOTE 6 - REGULATORY MATTERS
Continental has previously disclosed its plans for a major facility
expansion at Newark International Airport ("Newark") which would
require, among other matters, agreements to be reached with the
applicable airport authority and significant tax-exempt bond
financing for the project. An ongoing dispute between the
executive branches of the states of New Jersey and New York has
delayed the approval by the Board of Commissioners of the Port
Authority of New York and New Jersey of the proposed expansion and,
consequently, financing therefor. The Company's plans for future
growth of its Newark hub could be delayed if the dispute is not
timely resolved, and the Company could be forced to alter such
plans, including the anticipated usage and size of its aircraft
fleet, if a suitable agreement is not reached in a timely fashion.
As more fully described in the Risk Factors section of the
Company's 1998 10-K, airlines are subject to extensive regulatory
and legal compliance requirements that engender significant costs
and in some cases reduce revenue. For instance, "passenger bill of
rights" legislation has been introduced in Congress that would,
among other things, require the payment of compensation to
passengers as a result of certain delays, and limit the ability of
carriers to prohibit or restrict usage of certain tickets in
manners currently prohibited or restricted. The Department of
Transportation (the "DOT") has proposed rules that would
significantly limit major carriers' ability to compete with new
entrant carriers. If adopted, these measures could have the effect
of raising ticket prices, reducing revenue and increasing costs.
The Federal Aviation Administration has designated John F. Kennedy
International Airport, New York LaGuardia Airport, Chicago O'Hare
International Airport and Ronald Reagan Washington National Airport
in Washington, D.C. ("Reagan National") as "high density traffic
airports" and has limited the number of departure and arrival slots
at those airports. Currently, such slots may be voluntarily sold
or transferred between 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 could, if adopted, significantly affect
operations at high density traffic airports, significantly change
the value of the slots, expand slots to other airports or eliminate
slots entirely. The DOT has proposed the elimination of slot
restrictions at high density airports other than Reagan National.
Legislation containing a similar proposal is currently pending
consideration before the full House of Representatives. The
Company cannot predict whether any of these proposals will be
adopted. However, if legislation or regulation eliminating slots
is adopted, the value of such slots could be deemed to be
permanently impaired, resulting in a loss being charged to earnings
for the relevant period. Moreover, the elimination of slots could
have an adverse effect upon future results of operations of the
Company.
NOTE 7 - OTHER
On January 5, 1999, the Company's mechanics ratified an initial
three-year collective bargaining agreement between the Company and
the International Brotherhood of Teamsters ("IBT"). The contract
becomes amendable in January 2002.
In February 1999, the Company completed an offering of $806 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 22 aircraft scheduled to be delivered from
March 1999 through September 1999.
The Company holds a membership interest in The SITA Foundation
("SITA"), an organization which provides data communication
services to the airline industry. SITA's primary asset is its
ownership in Equant N.V. ("Equant"). In February 1999, SITA sold
a portion of its interest in Equant in a secondary public offering
and distributed the pro rata proceeds to certain of its members
(including Continental) that elected to participate in the
offering. Continental recorded a gain of $20 million ($12 million
after tax) related to this transaction. The gain is included in
other nonoperating income (expense) in the accompanying
consolidated statement of operations.
In March 1999, the Company completed a $160 million Credit
Facility, with a maturity date of March 2001, to finance pre-
delivery deposits for certain new Boeing aircraft to be delivered
between March 1999 and March 2002.
Also in March 1999, a tentative initial agreement was reached
between Continental Express, Inc. ("Express"), a wholly owned
subsidiary of the Company, and its mechanics, which are represented
by the IBT. If ratified, the agreement will become amendable in
January 2003.
NOTE 8 - SUBSEQUENT EVENTS
On April 15, 1999, the Company announced a $500 million increase in
the size of its stock repurchase program, bringing the total size
of the program to $800 million. As of April 15, 1999, the Company
had repurchased 5,632,100 shares of Class B common stock for $266
million under this program.
Also on April 15, 1999, the Company exercised its right and called
for redemption on May 25, 1999, all $230 million of its 6-3/4%
Convertible Subordinated Notes due 2006. The notes are convertible
into shares of Class B common stock at a conversion price of
$30.195 per share. The $230 million of notes, unless earlier
converted, will be redeemed for 104.725 percent of their principal
amount plus accrued interest to the date of redemption.
ITEM 2. 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 risk factors set forth in
the Company's 1998 10-K which identify important factors such as
the Company's leverage and its liquidity, its history of operating
losses, the cost of aircraft fuel, labor matters, certain tax
matters, regional and global economic downturns, the significant
ownerhsip interest of Northwest Airlines in the Company and risks
relating to the Company's strategic alliance with Northwest
Airlines, year 2000 computer risk, competition and industry
conditions, regulatory matters and the seasonal nature of the
airline business, that could cause actual results to differ
materially from those in the forward-looking statements.
Continental's results of operations are impacted by seasonality
(the second and third quarters are generally stronger than the
first and fourth quarters) as well as numerous other factors that
are not necessarily seasonal, including the extent and nature of
competition from other airlines, employee job actions (including at
other airlines), fare sale activities, excise and similar taxes,
changing levels of operations, fuel prices, foreign currency
exchange rates, changes in regulations and aviation treaties and
general economic conditions. Although the results in Asia of
Continental Micronesia, Inc. ("CMI"), a wholly owned subsidiary of
the Company, have declined in recent years, the Company
successfully redeployed CMI capacity into the stronger U.S.
domestic markets and CMI's recent results have improved. In
addition, the Company believes it is well positioned to respond to
market conditions in the event of a sustained economic downturn for
the following reasons: underdeveloped hubs with strong local
traffic; a flexible fleet plan; a strong cash balance, a $225
million unused revolving credit facility and a well developed
alliance network.
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 months ended March 31, 1999 as compared to the
corresponding period in 1998.
The Company recorded consolidated net income of $84 million for the
first quarter of 1999 as compared to consolidated net income of $81
million for the three months ended March 31, 1998. Net income for
the first quarter of 1999 included the cumulative effect of a
change in accounting principle charge ($6 million, net of taxes)
related to the write-off of pilot training costs.
Passenger revenue increased 10.9%, $186 million, during the first
quarter ended March 31, 1999 as compared to the same period in
1998, which was principally due to a 13.8% increase in revenue
passenger miles, partially offset by a 3.4% decrease in yield. The
Company estimates that passenger revenue increased by $19 million
due to a significant number of flight cancellations at one of its
competitors. The decrease in yield was due to lower industry-wide
fare levels and a 6.7% increase in average stage length.
Other operating revenue increased 23.6%, $17 million, primarily due
to an increase in revenue related to the Company's frequent flyer
program, OnePass.
Wages, salaries and related costs increased 23.9%, $119 million,
during the quarter ended March 31, 1999 as compared to the same
period in 1998, primarily due to a 10.0% increase in average full-
time equivalent employees to support increased flying, increased
on-time bonus payments and higher wage rates resulting from the
Company's decision to increase employee wages to industry standards
by the year 2000.
Aircraft rentals increased 18.0%, $28 million, due to the delivery
of new aircraft.
Aircraft fuel expense decreased 21.1%, $40 million, in the three
months ended March 31, 1999 as compared to the same period in the
prior year. The average price per gallon decreased 25.4% from
51.79 cents in the first quarter of 1998 to 38.62 cents in the
first quarter of 1999. This reduction was partially offset by a
5.4% increase in the quantity of jet fuel used, principally
reflecting increased capacity. See "Fuel Hedging" below.
Maintenance, materials and repairs decreased 6.5%, $10 million,
during the quarter ended March 31, 1999 as compared to the same
period in 1998 due to newer aircraft and the volume and timing of
engine overhauls as part of the Company's ongoing maintenance
program.
Other rentals and landing fees increased 12.9%, $13 million,
primarily due to higher facilities rent and landing fees resulting
from increased operations.
Depreciation and amortization expense increased 25.0%, $17 million,
in the first quarter of 1999 compared to the first quarter of 1998
due principally to the addition of new aircraft and related spare
parts. These increases were partially offset by a $2 million
reduction in the amortization of routes, gates and slots resulting
from the recognition of previously unbenefited NOLs during 1998.
Other operating expense increased 15.8%, $63 million, in the three
months ended March 31, 1999 as compared to the same period in the
prior year, as a result of increases in passenger and aircraft
servicing expense, reservations and sales expense and other
miscellaneous expense, resulting primarily from a 20.9% increase in
enplanements.
Interest expense increased 32.5%, $13 million, due to an increase
in long-term debt resulting from the purchase of new aircraft.
The Company's other nonoperating income (expense) in 1999 includes
a $20 million gain on the sale of a portion of the Company's
indirect interest in Equant, partially offset by foreign currency
losses of $6 million, principally the Brazilian Real.
Certain Statistical Information
An analysis of statistical information for Continental's jet
operations, excluding regional jet operations, for the periods
indicated is as follows:
Three Months Ended Net
March 31, Increase/
1999 1998 (Decrease)
Revenue passenger miles
(millions) (1). . . . . . . . . .13,737 12,072 13.8 %
Available seat miles
(millions) (2). . . . . . . . . .19,225 17,523 9.7 %
Passenger load factor (3). . . . . 71.5% 68.9% 2.6 pts.
Breakeven passenger load
factor (4). . . . . . . . . . . . 63.5% 60.6% 2.9 pts.
Passenger revenue per available
seat mile (cents). . . . . . . . 9.13 9.12 0.1 %
Total revenue per available
seat mile (cents) . . . . . . . . 10.04 10.01 0.3 %
Operating cost per available
seat mile (cents) . . . . . . . . 9.21 9.14 0.8 %
Average yield per revenue
passenger mile (cents) (5) . . . 12.78 13.23 (3.4)%
Average fare per revenue
passenger . . . . . . . . . . . .$144.23 $154.88 (6.9)%
Revenue passengers (thousands) . .12,174 10,072 20.9 %
Average length of aircraft
flight (miles) . . . . . . . . . 1,083 1,015 6.7 %
Average daily utilization of
each aircraft (hours) (6). . . . 10:11 10:13 (0.3)%
Actual aircraft in fleet at
end of period (7) . . . . . . . . 365 346 5.5 %
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. The table above excludes 699
million and 330 million available seat miles, and related revenue
passenger miles and enplanements, operated by Continental but
purchased and marketed by the other carrier, and includes 232
million and 22 million available seat miles, and related revenue
passenger miles and enplanements, operated by other carriers but
purchased and marketed by Continental for the quarters ended March
31, 1999 and March 31, 1998, respectively.
__________________
(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) The average revenue received for each mile a revenue
passenger is carried.
(6) The average number of hours per day that an aircraft flown in
revenue service is operated (from gate departure to gate
arrival).
(7) Excludes six all-cargo 727 aircraft at CMI in 1999 and 1998.
During the first three months of 1999, the Company took
delivery of 13 aircraft and removed 11 aircraft from service.
LIQUIDITY AND CAPITAL COMMITMENTS
In February 1999, the Company completed an offering of $806 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 22 aircraft scheduled to be delivered from
March 1999 through September 1999.
In March of 1999, the Company completed a $160 million Credit
Facility, with a maturity date of March 2001, to finance pre-
delivery deposits for certain new Boeing aircraft to be delivered
between March 1999 and March 2002.
On April 15, 1999, the Company announced a $500 million increase in
the size of its stock repurchase program, bringing the total size
of the program to $800 million. As of April 15, 1999, the Company
had repurchased 5,632,100 shares of Class B common stock for $266
million under this program.
Also on April 15, 1999, the Company exercised its right and called
for redemption on May 25, 1999, all $230 million of its 6-3/4%
Convertible Subordinated Notes due 2006. The notes are convertible
into shares of Class B common stock at a conversion price of
$30.195 per share. The $230 million of notes, unless earlier
converted, will be redeemed for 104.725 percent of their principal
amount plus accrued interest to the date of redemption.
As of March 31, 1999 and December 31, 1998, the Company had
$1.4 billion in cash and cash equivalents (excluding restricted
cash of $11 million). Net cash provided by operating activities
increased $26 million during the three months ended March 31, 1999
compared to the same period in the prior year primarily due to an
improvement in operating income. Net cash used by investing
activities decreased $231 million for the three months ended March
31, 1999 compared to the same period in the prior year, primarily
as a result of the purchase of short-term investments in the first
quarter of 1998. Net cash provided by financing activities for the
three months ended March 31, 1999 compared to the same period in
the prior year increased $98 million primarily due to an increase
in proceeds from the issuance of long-term debt partially offset by
an increase in payments on long-term debt and capital lease
obligations.
Deferred Tax Assets. The Company had, as of December 31, 1998,
deferred tax assets aggregating $803 million, including
$372 million of NOLs and a valuation allowance of $263 million. To
the extent the Company were to determine in the future that
additional NOLs of the Company's predecessor could be recognized in
the accompanying consolidated financial statements, such benefit
would further reduce routes, gates and slots.
As a result of NOLs, the Company will not pay United States federal
income taxes (other than alternative minimum tax) until it has
recorded approximately an additional $1.1 billion of taxable income
following December 31, 1998. 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.
On November 20, 1998, an affiliate of Northwest Airlines, Inc.
completed its acquisition of certain equity of the Company
previously held by Air Partners, L.P. and its affiliates, together
with certain Class A common stock of the Company held by certain
other investors, totaling 8,661,224 shares of Class A common stock
(the "Air Partners Transaction"). Based on information currently
available, the Company does not believe that the Air Partners
Transaction resulted in an ownership change for purposes of Section
382.
Purchase Commitments. Continental has substantial commitments for
capital expenditures, including for the acquisition of new
aircraft. As of April 15, 1999, Continental had agreed to acquire
a total of 111 Boeing jet aircraft through 2005. The Company
anticipates taking delivery of 61 Boeing jet aircraft in 1999 (13
of which were delivered during the first quarter of 1999 and
financed through enhanced equipment trust certificates, with the
Company purchasing nine of those aircraft and leasing the other
four). Continental also has options for an additional 105 Boeing
aircraft (exercisable subject to certain conditions). The
estimated aggregate cost of the Company's firm commitments for
Boeing aircraft is approximately $5.2 billion. Continental
currently plans to finance its new Boeing aircraft with a
combination of enhanced pass through trust certificates, lease
equity and other third party financing, subject to availability and
market conditions. As of April 15, 1999, Continental had
approximately $787 million in financing arranged for such future
Boeing deliveries. In addition, Continental has commitments or
letters of intent for backstop financing for approximately one-
third of the anticipated remaining acquisition cost of such Boeing
deliveries. In addition, at April 15, 1999, Continental has firm
commitments to purchase 32 spare engines related to the new Boeing
aircraft for approximately $167 million which will be deliverable
through December 2004.
As of April 15, 1999, Express had firm commitments to acquire 34
Embraer ERJ-145 ("ERJ-145") 50-seat regional jets and 25 Embraer
ERJ-135 ("ERJ-135") 37-seat regional jets, with options for an
additional 125 ERJ-145 and 50 ERJ-135 aircraft exercisable through
2008. Express anticipates taking delivery of 19 ERJ-145 (three of
which were delivered in the first quarter of 1999) and six ERJ-135
regional jets in 1999 and the remainder of its firm orders through
the third quarter of 2001. Neither Express nor Continental will
have any obligation to take any of the firm ERJ-145 aircraft that
are not financed by a third party and leased to Continental.
Additional 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 continue to increase aircraft rental,
depreciation and interest costs while generating cost savings in
the areas of maintenance, fuel and pilot training.
Continental expects its cash outlays for 1999 capital expenditures,
exclusive of fleet plan requirements, to aggregate $254 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 the three
months ended March 31, 1999 aggregated $55 million, exclusive of
fleet plan expenditures.
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 Year 2000 issue arises as a result of computer programs having
been written using two digits (rather than four) to define the
applicable year, among other problems. Any information technology
("IT") systems that have time-sensitive software might recognize a
date using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations and system failures. The problem
also extends to many "non-IT" systems; that is, operating and
control systems that rely on embedded chip systems. In addition,
the Company is at risk from Year 2000 failures on the part of third
party-suppliers and governmental agencies with which the Company
interacts.
The Company uses a significant number of computer software programs
and embedded operating systems that are essential to its
operations. For this reason, the Company implemented a Year 2000
project in late 1996 so that the Company's computer systems would
function properly in the year 2000 and thereafter. The Company's
Year 2000 project involves the review of a number of internal and
third-party systems. Each system is subjected to the project's
five phases which consist of systems inventory, evaluation and
analysis, modification implementation, user testing and integration
compliance. The systems are currently in various stages of
completion. The Company anticipates completing its review or
modification implementation of systems in June 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 and on-site visits
with its significant suppliers, vendors and governmental agencies
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 may be
vulnerable to their failure to remediate their own Year 2000
problems. The Company's business is dependent upon certain
domestic and foreign 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 equipment or systems or those operated by other parties to
operate properly beyond 1999. Although the Company currently has
day-to-day operational contingency plans, management is in the
process of updating these plans for possible Year 2000-specific
operational requirements. To facilitate the completion of these
plans, the Company has hired an outside consultant. The Company
anticipates completing the revision of current contingency plans
and the creation of additional contingency plans by September 1999.
In addition, the Company will continue to monitor third-party
(including governmental) readiness and will modify its contingency
plans accordingly. While the Company does not currently expect any
significant modification of its operations in response to the Year
2000 issue, in a worst-case scenario the Company could be required
to alter its operations significantly.
The total cost of the Company's Year 2000 project (excluding
internal payroll) is currently estimated at $16-18 million and has
been and will be funded through cash from operations. As of March
31, 1999, the Company had incurred and expensed approximately $16
million relating to its Year 2000 project. The cost of the Year
2000 project is limited by the substantial outsourcing of the
Company's systems and the significant implementation of new systems
following the Company's emergence from bankruptcy. 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 July 1996, the Company announced plans to
expand its gates and related facilities into Terminal B at Bush
Intercontinental Airport, 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 and
January 1999, the City of Houston completed the offering of $190
million and $46 million, respectively, aggregate principal amount
of tax-exempt special facilities revenue bonds (the "IAH Bonds").
The IAH Bonds are unconditionally guaranteed by Continental. 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 majority of the Company's expansion project is
expected to be completed during the summer of 1999.
Employees. In September 1997, the Company announced a plan to
bring all employees to industry standard wages no later than the
end of the year 2000. Wage increases began in 1997, and will
continue to be phased in through 2000 as revenue, interest rates
and rental rates reach industry standards.
On January 5, 1999, the Company's mechanics ratified an initial
three-year collective bargaining agreement between the Company and
the IBT. The contract becomes amendable in January 2002.
In March 1999, a tentative initial agreement was reached between
Express and its mechanics, which are represented by the IBT. If
ratified, the agreement will become amendable in January 2003.
The International Association of Machinists is currently seeking to
represent the Company and Express's approximately 8,000 fleet
service employees. The National Mediation Board has determined
that a sufficient showing of interest exists to proceed with an
election. Ballots for the election will be sent to all eligible
employees on April 30, 1999. Returns will be counted on June 4,
1999. The Company does not expect this organizing effort to have
a material adverse impact on the Company or its relations with its
airport service employees.
Fuel Hedging.
The Company uses a combination of petroleum swap contracts,
petroleum call options, and jet fuel purchase commitments to
provide some short-term protection against a sharp increase in jet
fuel prices. At December 31, 1998, the fair value of the Company's
petroleum swap contracts, which hedged anticipated fuel purchases
through March 31, 1999, was approximately $6 million (loss).
During the first quarter, the Company had entered into petroleum
swap contracts to hedge jet fuel prices for approximately 50% of
its anticipated fuel requirements through September 30, 1999, the
fair value of which was approximately $34 million at March 31,
1999. As of April 22, 1999, the fair value of the petroleum swap
contracts was approximately $44 million. The fair value has been
recorded in other assets with the offset to other comprehensive
income, net of applicable income taxes and hedge ineffectiveness.
Other.
Management believes that the Company's costs are likely to be
affected in the future by (i) higher aircraft ownership costs 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 and the internet
for bookings, and reduced interest expense.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The information called for by this item is provided under the
caption "Fuel Hedging" under Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations. Also
see Item 7A. Quantitative and Qualitative Disclosures About Market
Risk in Continental's 1998 10-K.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Following the announcement of the long-term global alliance with
Northwest, the Air Partners Transaction and the related governance
agreement between the Company and certain affiliates of Northwest
(collectively, the "Northwest Transaction"), six separate lawsuits
were filed against the Company and its Directors and certain other
parties (the "Stockholder Litigation"). The complaints in the
Stockholder Litigation generally alleged that the Company's
Directors improperly accepted the Northwest Transaction in
violation of their fiduciary duties owed to the stockholders 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. On April 1,
1999, the plaintiffs voluntarily dismissed their lawsuit. On April
12, 1999, the judge approved the dismissal. Although the dismissal
is without prejudice, so the plaintiffs could again file their
claim, the Company does not expect them to do so.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 First Supplemental Special Facilities Lease
Agreement dated as of March 1, 1998, and relating
to the Special Facilities Lease Agreement dated
as of October 24, 1997 by and between the Company
and the City of Cleveland, Ohio regarding certain
concourse expansion projects at Hopkins
International Airport.
10.2 Amendment of Executive Bonus Program effective
January 1, 1999.
10.3 Supplemental Agreement No. 15, including side
letter, to Purchase Agreement No. 1783 between
the Company and The Boeing Company ("Boeing"),
effective April 27, 1993, relating to the
purchase of Boeing 757 aircraft, dated February
18, 1999. (1)
10.4 Supplemental Agreement No. 9, including side
letter, to Purchase Agreement No. 1951 between
the Company and Boeing, dated July 23, 1996,
relating to the purchase of Boeing 737 aircraft
("P.A. 1951"), dated February 18, 1999. (1)
10.4(a) Supplemental Agreement No. 10, including side
letters, to P.A. 1951, dated March 19, 1999. (1)
10.5 Supplemental Agreement No. 4, including side
letter, to Purchase Agreement No. 2061 between
the Company and Boeing, dated October 10, 1997,
relating to the purchase of Boeing 777 aircraft
("P.A. 2061"), dated February 3, 1999. (1)
10.5(a) Supplemental Agreement No. 5, including side
letter, to P.A. 2061, dated March 26, 1999. (1)
27.1 Financial Data Schedule.
(1) The Company has applied to the Commission for confidential
treatment of a portion of this exhibit.
(b) Reports on Form 8-K:
(i) Report dated February 8, 1999 with respect to
Item 7. Financial Statements and Exhibits,
related to the Offering of Continental Airlines,
Inc.'s Pass Through Certificates Series 1999-1.
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date: April 23, 1999 by: /s/ Lawrence W. Kellner
Lawrence W. Kellner
Executive Vice President and
Chief Financial Officer
(On behalf of Registrant)
Date: April 23, 1999 /s/ Michael P. Bonds
Michael P. Bonds
Vice President and Controller
(Chief Accounting Officer)
INDEX TO EXHIBITS
OF
CONTINENTAL AIRLINES, INC.
10.1 First Supplemental Special Facilities Lease Agreement
dated as of March 1, 1998, and relating to the Special
Facilities Lease Agreement dated as of October 24, 1997
by and between the Company and the City of Cleveland,
Ohio regarding certain concourse expansion projects at
Hopkins International Airport.
10.2 Amendment of Executive Bonus Program effective January
1, 1999.
10.3 Supplemental Agreement No. 15, including side letter, to
Purchase Agreement No. 1783 between the Company and The
Boeing Company ("Boeing"), effective April 27, 1993,
relating to the purchase of Boeing 757 aircraft, dated
February 18, 1999. (1)
10.4 Supplemental Agreement No. 9, including side letter, to
Purchase Agreement No. 1951 between the Company and
Boeing, dated July 23, 1996, relating to the purchase of
Boeing 737 aircraft ("P.A. 1951"), dated February 18,
1999. (1)
10.4(a) Supplemental Agreement No. 10, including side letters, to
P.A. 1951, dated March 19, 1999. (1)
10.5 Supplemental Agreement No. 4, including side letter, to
Purchase Agreement No. 2061 between the Company and
Boeing, dated October 10, 1997, relating to the purchase
of Boeing 777 aircraft ("P.A. 2061"), dated February 3,
1999. (1)
10.5(a) Supplemental Agreement No. 5, including side letter, to
P.A. 2061, dated March 26, 1999. (1)
27.1 Financial Data Schedule.
___________________
(1) The Company has applied to the Commission for
confidential treatment of a portion of this exhibit.
Exhibit 10.1
EXECUTION COPY
CLEVELAND HOPKINS INTERNATIONAL AIRPORT
FIRST SUPPLEMENTAL
SPECIAL FACILITIES LEASE AGREEMENT
WITH
CONTINENTAL AIRLINES, INC.
________________________
1997 Concourse Expansion
________________________
Dated as of
March 1, 1998
________________________
TABLE OF CONTENTS
Page
Section 1. Use of Defined Terms . . . . . . . . . . . . 2
Section 2. Leased Premises; Existing Lease. . . . . . . 3
Section 3. Space in and Adjacent to Terminal Building . 3
Section 4. Indemnification-Bond Matters . . . . . . . . 3
Section 5. Baggage Handling System Special Premises . . 4
Section 6 Basic Rent . . . . . . . . . . . . . . . . . 6
Section 7. Determination and Annual Adjustment of
Basic Rent . . . . . . . . . . . . . . . . . 6
Section 8. Damage or Destruction. . . . . . . . . . . . 7
Section 9. Delivery of Possession . . . . . . . . . . . 8
Section 10. Holding Over . . . . . . . . . . . . . . . . 9
Section 11. Indenture Section 5.02 . . . . . . . . . . . 9
Section 12. Cost Allocation; Budget; Maintenance and
Repair . . . . . . . . . . . . . . . . . . . 9
Section 13. Release of Leased Property . . . . . . . . . 9
Section 14. No Personal Liability. . . . . . . . . . . . 10
Section 15. Interpretation of Agreement. . . . . . . . . 10
Section 16. Entire Agreement; Amendment. . . . . . . . . 10
Section 17. Severability . . . . . . . . . . . . . . . . 10
Section 18. Recording; Memorandum of Lease . . . . . . . 10
Section 19. Letter Agreement Dated February 19, 1998 . . 10
Section 20. Counterparts . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . 11
Exhibit A [Reserved]
Exhibit B-1 Concourse D Special Premises
Exhibit B-2 Concourse C Expansion Special Premises
Exhibit B-3 [Reserved]
Exhibit B-4 [Reserved]
Exhibit B-5 Baggage Handling System Special Premises
Exhibit C Cost Allocation Policy
Exhibit D-1 Form of Disbursement Request -- From Bond Proceeds
Exhibit D-2 [Reserved]
Exhibit E [Reserved]
Exhibit F Maintenance and Repair Responsibilities
Exhibit G [Reserved]
Exhibit H [Reserved]
Exhibit I 1997 Concourse Expansion Budget
Exhibit J [Reserved]
Exhibit K [Reserved]
Exhibit L Letter Agreement Dated February 19, 1998
THIS FIRST SUPPLEMENTAL SPECIAL FACILITIES LEASE AGREEMENT
("Supplemental Agreement") is made and entered into as of this 1st
day of March, 1998 upon the terms and conditions set forth herein,
by and between the CITY OF CLEVELAND, a municipal corporation and
political subdivision of the State of Ohio ("City"), and
CONTINENTAL AIRLINES, INC., a corporation organized and existing
under the laws of the State of Delaware and authorized to do
business in the State of Ohio ("Airline"), to supplement the 1997
Special Facilities Lease defined and described below, under the
following circumstances (capitalized words and terms in these
preambles, unless stated otherwise or unless the context dictates
otherwise, shall have the meanings given to them in Article I
hereof):
WITNESSETH:
WHEREAS, City owns and operates Cleveland Hopkins
International Airport ("Airport"); and
WHEREAS, the Council of City, pursuant to Ordinance No.
1585-A-76, passed on August 16, 1976, authorized City to enter into
agreements and leases substantially in the form attached to that
Ordinance as Exhibit A setting forth the terms on which certain
airlines would lease portions of the Airport from City and be
permitted to use the Airport's facilities; and
WHEREAS, the Council of City, pursuant to Ordinance No.
2551-A-82, passed on June 15, 1983, authorized City to enter into
additional such agreements and leases with additional Scheduled
Airlines (as defined therein); and
WHEREAS, pursuant to Ordinance Nos. 657-87 and 325-87, each
passed by the Council of the City on March 30, 1987, City entered
into an Agreement and Lease with Airline, dated as of May 15, 1987
(the "Original Lease"); and
WHEREAS, Section 20.20 of the Original Lease and Section 3(e)
of Ordinance No. 1773-A-76, passed by the Council of City on August
16, 1976 permit City to issue Special Revenue Bonds to finance and
refinance the construction of any Special Facilities (both as
defined in the Original Lease); and
WHEREAS, pursuant to Ordinance No. 2044-97 (the "Bond
Ordinance"), passed by the Council of City on January 26, 1998, the
Council of City authorized City, among other things, to issue and
deliver its $75,120,000 Airport Special Revenue Bonds, Series 1998
(Continental Airlines, Inc. Project) (the "Bonds"); and
WHEREAS, pursuant to Ordinance No. 561-97, passed by the
Council of City on June 2, 1997 the Council of City authorized
City, among other things, to execute and deliver a Special
Facilities Lease, and City and Airline did thereafter execute a
Special Facilities Lease Agreement dated as of October 24, 1997
(the "1997 Special Facilities Lease") which 1997 Special Facilities
Lease, among other things, secures repayment of bond service
charges on the Bonds by Airline; and
WHEREAS, pursuant to the Bond Ordinance, the Council of City
authorized City, among other things, to issue the Bonds for
additional airport facilities, including certain Special Facilities
not included in the 1997 Special Facilities Lease, and to execute
and deliver this Supplemental Agreement, which is necessary and
appropriate to consummate the transactions contemplated by the Bond
Ordinance and the Bonds;
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants, agreements and conditions contained herein,
the parties hereto agree as follows:
Section 1. Use of Defined Terms. Unless otherwise defined
herein and except as otherwise stated herein, all capitalized words
and terms defined in the Original Lease or the 1997 Special
Facilities Lease and used herein are used herein with the
definition assigned to them in the Original Lease or the 1997
Special Facilities Lease, respectively, and upon the execution and
delivery of this Supplemental Agreement, the term "Agreement" shall
include and incorporate this Supplemental Agreement together with
the 1997 Special Facilities Lease. The following words and terms
are used herein with the following definitions, which definitions
supplement and amend the definitions set forth in Article I of the
1997 Special Facilities Lease:
"Baggage Handling System Special Premises" means that portion
of the Continental Special Facilities relating to certain baggage
handling system improvements, as more specifically described in
Exhibit B-5 hereto.
"Baggage Handling System Term" means the term of this
Agreement pertaining to the Baggage Handling System Special
Premises.
"Bonds" means the City's $75,120,000 Airport Special Revenue
Bonds, Series 1998 (Continental Airlines, Inc. Project), dated as
of March 1, 1998, issued to pay a portion of the Costs of the
Facilities of the Project, as defined in the Bond Ordinance.
"Concourse C Expansion Special Premises" means that portion of
the Continental Special Facilities located on or in Concourse C, as
more specifically described in Exhibit B-2 to the 1997 Special
Facilities Lease, as amended by Exhibit B-2 hereto.
"Concourse D Special Premises" means that portion of the
Continental Special Facilities located on or in Concourse D, as
more specifically described in Exhibit B-1 to the 1997 Special
Facilities Lease, as amended by Exhibit B-1 hereto.
"Concourse Improvements" means the Concourse C Expansion
Special Premises, the Concourse D Special Premises and, except as
otherwise provided herein, the Baggage Handling System Special
Premises.
"Commencement of Occupancy": (a) for purposes of determining
the Term of the lease of each element of the Continental Special
Facilities pursuant to Section 3.01 of this Agreement, means the
date on which the construction of the applicable Continental
Special Facilities (the Concourse C Expansion Special Premises, the
Concourse D Special Premises, the Deicing Pad Special Premises, the
Hydrant Fueling System Special Premises, or the Baggage Handling
System Special Premises, as the case may be), together in each case
with any associated GARB Improvements, has been substantially
completed and such element is usable for its intended purposes; and
(b) for purposes of the payment of Basic Rent for the Concourse D
Special Premises and the Concourse C Expansion Special Premises,
means the earlier of (i) the end of the capitalized interest period
for the GARBs or (ii) the date on which construction of the
Concourse D Special Premises or the Concourse C Expansion Special
Premises, respectively, and, as to each, any associated GARB
Improvements, has been substantially completed and the Concourse D
Special Premises or the Concourse C Expansion Special Premises,
respectively, is usable by Airline for its intended purposes; and
(c) for purposes of payment of Basic Rent for the Baggage Handling
System Special Premises, means the date on which the expansion of
the Terminal Building to house the additional bag claim device to
be known as carousel 11 is substantially completed and useable for
baggage claim functions.
"Continental Special Facilities" means the Concourse D Special
Premises (as more specifically described in Exhibit B-1 to the 1997
Special Facilities Lease, as amended by Exhibit B-1 hereto), the
Concourse C Expansion Special Premises (as more specifically
described in Exhibit B-2 to the 1997 Special Facilities Lease, as
amended by Exhibit B-2 hereto), the Deicing Pad Special Premises
(as more specifically described in Exhibit B-3 to the 1997 Special
Facilities Lease), the Hydrant Fueling System Special Premises (as
more specifically described in Exhibit B-4 to the 1997 Special
Facilities Lease) and the Baggage Handling Special Premises (as
more specifically described in Exhibit B-5 hereto), which premises
shall, except as otherwise provided herein with respect to the
Baggage Handling System Special Premises, be reserved for the
exclusive use and control of Airline to service its passengers,
customers and operations and shall not be open to, available for,
or used by the general public and/or by the passengers, customers
or operations of other airlines or persons.
Section 2. Leased Premises; Existing Lease. City, in
consideration of the payment of Basic Rent, Bond Rent and
Additional Bond Rent and the covenants and agreements stated in the
1997 Special Facilities Lease, as supplemented and amended by this
Supplemental Agreement, agrees to lease the Continental Special
Facilities to Airline, and does hereby confirm the lease made to
Airline pursuant to the 1997 Special Facilities Lease, as hereby
amended and supplemented, and Airline acknowledges such lease of
the Continental Special Facilities. The 1997 Special Facilities
Lease shall remain in full force and effect as originally written,
except as hereby supplemented and amended.
Section 3. Space in and Adjacent to Terminal Building.
Section 2.02(a) of the 1997 Special Facilities Lease is hereby
amended and restated to read in its entirety as follows:
"a. From and after its commencing to occupy the Concourse
Improvements, Airline shall lease the following Concourse
Improvements for the respective purposes shown:
Concourse C
(1) Airline lounge 10,548 square feet
(2) Incident Center 1,000 square feet
(3) Group Lounge 2,500 square feet
Concourse D
(4) Holdroom, passenger
and related space 52,482 square feet
(5) Concourse office and
Operations space 49,871 square feet
(6) Ramp control tower 1,927 square feet
From and after commencing to occupy the Baggage Handling
System Special Premises, Airline shall lease the following
improvements in the Terminal Building for the respective purposes
shown:
(7) Space housing bag claim carousel 11
and space housing lost baggage
rooms 4,000 square feet"
Section 4. Indemnification - Bond Matters. (a) Airline
agrees to indemnify and hold harmless City, its officers and
employees and the members of the Council of City from any claims,
liabilities, costs and expenses incurred on account of (i) the
authorization, issuance, sale, redemption or servicing of the Bonds
or the provision by Airline of any information or certification
furnished in connection therewith (including, without limitation,
any information furnished by Airline for and included in, or used
as a basis for preparation of, any certifications, information
statements or reports made or furnished by City or Airline to
assure the exclusion of the interest on the Bonds from gross income
for federal income tax purposes), or (ii) Airline's failure to
comply with any requirement of this Agreement or the Code
pertaining to the exclusion of the interest on the Bonds from gross
income for federal income tax purposes. Nothing set forth in the
preceding sentence shall be construed to affect the rights and/or
obligations of Airline or City under the 1997 Special Facilities
Lease.
(b) Airline agrees to indemnify the Trustee under the
Indenture with respect to the Bonds for, and to hold it harmless
against, all liabilities, claims, costs and expenses (including
reasonable attorney's fees and expenses) incurred without
negligence or willful misconduct on the part of the Trustee on
account of any action taken or omitted to be taken by the Trustee
in accordance with the terms of the Agreement, the Bonds or the
Indenture, or any action taken at the request of or with the
consent of Airline, including the costs and expenses of the Trustee
in defending itself against any such claim, action or proceeding
brought in connection with the exercise or performance of any of
its powers or duties under the Agreement, the Bonds or the
Indenture.
Section 5. Baggage Handling System Special Premises.
(a) Lease Term. Paragraph (b) of Section 3.01 of the 1997
Special Facilities Lease is amended to add, following existing
subparagraph 3.01(b)(4) thereof, the following subparagraph (5):
"The Baggage Handling System Term shall begin upon the
Commencement of Occupancy of the Baggage Handling System Special
Premises and, unless earlier terminated pursuant to any of the
provisions of this Agreement, shall terminate on the earlier to
occur of the following: (i) that date which is 80 percent of the
weighted average reasonably expected economic life of the
Continental Special Facilities and Related Facilities; or (ii) 30
Years from the Commencement of Occupancy of the Baggage Handling
System Special Premises."
(b) Construction, Operation and Maintenance of Baggage
Handling System Special Premises. The Baggage Handling System
Special Premises shall be constructed, operated and maintained as
an element of the Continental Special Premises pursuant to and in
accordance with the terms of the 1997 Special Facilities Lease
(including but not limited to Articles V and VI thereof), as
amended hereby. To facilitate disbursements from the Construction
Fund to pay Costs of Facilities with respect to the Baggage
Handling System Special Premises, Exhibit D-1 to the 1997 Special
Facilities Lease is hereby amended and restated in its entirety as
Exhibit D-1 hereto.
Airline agrees that in addition to the normal City review of
plans and specifications for all improvements at the Airport,
Airline and City will work cooperatively so that baggage claim or
outbound baggage devices replaced or constructed by Airline and
City at the Airport will be of identical kind, or at least
comparable quality, to the baggage claim and outbound baggage
devices being replaced or constructed by Airline. Airline will
share information with City and will otherwise cooperate and
coordinate in the design, construction and implementation phasing
of such baggage systems toward the goal that the Airport as a whole
will eventually have largely uniform and comparable quality baggage
handling equipment; provided, however, nothing in this commitment
shall require Airline to delay, subject to the necessary City
approvals, the construction and use of the baggage systems to be
financed with special revenue bonds.
Airline shall provide to the Director of Port Control of City
and the Commissioner of Cleveland Hopkins International Airport, at
the notice address provided for the Director of Port Control in
Section 17.05 of the 1997 Special Facilities Lease, copies of all
manufacturers' warranty, if any, maintenance and repair materials
for the equipment and facilities included in the Baggage Handling
System Special Premises, including schedules of each manufacturer's
recommended maintenance activities, and any amendments or
supplements thereto. On or before the Commencement of Occupancy of
the Baggage Handling System Special Premises, Airline shall provide
its proposed maintenance schedule to the City for approval, which
approval shall not be withheld if the schedule comports with the
manufacturer's recommended maintenance schedule. If said schedule
is modified, Airline shall provide such modified schedule to City
for approval, which approval shall not be withheld if the modified
schedule comports with the manufacturer's recommended maintenance
schedule.
On the anniversary date of the Commencement of Occupancy of
the Baggage Handling System Special Premises, and each anniversary
date thereafter for the duration of the Baggage Handling System
Term, Airline shall provide to the Director of Port Control of City
and the Commissioner of Cleveland Hopkins International Airport, at
the notice address provided for the Director of Port Control in
Section 17.05 of the 1997 Special Facilities Lease, certification
that maintenance of the Baggage Handling System Special Premises
has been performed in accordance with the prior approved
maintenance schedule. Failure to provide such certification shall
not be deemed an event of default under the Agreement unless City
notifies Airline of such failure in writing within 60 days of the
date on which the certification in question is due and Airline
fails to provide the certification within 30 days after receiving
City's written notice.
(c) City's Option to Purchase. City shall have the right to
purchase from Airline its leasehold rights under the Agreement to
the Baggage Handling System Special Premises at any time. The
purchase price shall be equal to the original cost of the Baggage
Handling System Special Premises less depreciation, calculated by
utilizing a 15-year useful life, adjusted for new replacement
components to the Baggage Handling System Special Premises paid for
by Airline, except for those necessary construction improvements to
the Terminal Building itself, which will be based upon a 40-year
useful life, provided that (i) Airline is not then currently in
default under the Agreement in its obligation to provide the annual
maintenance certification described in Section 5(b) hereof, and
(ii) Airline provides maintenance certification of the type
described in Section 5(b) hereof, which is dated the date of City's
purchase of the Baggage Handling System Special Premises; and
provided further that said purchase price may be decreased by a
further reasonable amount (A) upon City's demonstration that
Airline did not in fact maintain the Baggage Handling System
Special Premises in accordance with the manufacturer's
recommendations and the prior approved maintenance schedule
described in Section 5(b) hereof, and (B) only if City provides
Airline with written notice of any failure to so properly maintain
the Baggage Handling System Special Premises within 60 days of the
City obtaining knowledge thereof. The Baggage Handling System Term
shall terminate upon payment of the purchase price in accordance
with this Section 5.
Notwithstanding any contrary provision in the Agreement, City
shall have the right to purchase from Airline its rights and
interests in the Baggage Handling System Special Premises as
provided in this Section 5 without any obligation to purchase any
other elements of the Continental Special Facilities or any other
facilities.
Airline acknowledges that City may fund the purchase of
Airline's leasehold interest in the Baggage Handling System Special
Premises with general airport revenue bonds. In the event that
such purchase occurs during the term of the Original Lease or any
replacement thereof requiring a majority in interest ("MII") action
by airlines with respect to the funding of such purchase, Airline
agrees to unconditionally provide MII approval of City's purchase
of the Baggage Handling System Special Premises from Airline.
Airline agrees that it will take such actions as may be requested
by City to implement Airline's support of City's purchase of the
Baggage Handling System Special Premises under applicable MII
procedures (Section 8.07 of the Original Lease), including the
timely delivery of its vote in support of the acquisition.
In the event that City funds the purchase of Airline's
leasehold interest in the Baggage Handling System Special Premises
with certain general airport revenue bonds, the debt service on
those certain bonds shall be allocated to the appropriate Airport
cost center in accordance with the Original Lease or any agreement
succeeding or superseding the Original Lease.
In the event City exercises its right to purchase Airline's
leasehold interest in the Baggage Handling System Special Premises
pursuant to this Section 5, all of the proceeds of such purchase
shall immediately be delivered by Airline to the Trustee for
deposit in the Redemption Account of the Bond Fund, and thereafter
used by the Trustee to the greatest extent possible to redeem Bonds
at the earliest optional redemption date when no premium is payable
(unless Airline directs to redeem at an earlier optional redemption
date by paying the applicable premium) under Section 4.01(a) or, if
applicable, Section 4.01(b), of the Indenture.
Following purchase by City of Airline's leasehold rights under
the Agreement in the Baggage Handling System Special Premises,
Airline shall have a right to preferential use of such Premises
under the terms of the Original Lease, if it is then in effect, or,
if there is an agreement which succeeds or supersedes the Original
Lease, then Airline shall have preferential use of such Premises
under the terms of that agreement for the remainder of that
agreement. Airline's use of the Baggage Handling System Special
Premises following such purchase shall be subject to all applicable
rules and regulations adopted from time to time by City, as those
rules and regulations may be amended from time to time, pursuant to
Section 9.01 of the Agreement.
(d) Determination and Annual Adjustment of Basic Rent.
Notwithstanding any other provision of this Supplemental Agreement
to the contrary, the Baggage Handling System Special Premises shall
constitute "Terminal Building Space" for purposes of the
determination and annual adjustment of Basic Rent pursuant to
Section 7.03 of the 1997 Special Facilities Lease.
(e) Public Access to Premises. Notwithstanding any contrary
provisions of this Agreement:
(i) Those portions of the Baggage Handling System Special
Premises that are necessary for the public to access any and all
baggage claim devices located in the Terminal Building and/or any
points of entrance or exit shall be open to the public.
(ii) Those portions of the Baggage Handling System Special
Premises that are necessary for the purpose of transporting baggage
to any baggage claim devices in the Terminal Building shall be open
to the City, other airlines, and other persons, for such purposes.
Section 6. Basic Rent. Section 7.02 of the 1997 Special
Facilities Lease is amended and restated in its entirety to read as
follows:
"From and after Airline's Commencement of Occupancy of space
in the Concourse D Special Premises, the Concourse C Expansion
Special Premises, or the Baggage Handling System Special Premises,
respectively, Airline shall pay to City Basic Rent for such space
in such premises. The amount of Basic Rent to be paid each
calendar year shall be determined pursuant to Section 7.03."
Section 7. Determination and Annual Adjustment of Basic Rent.
Paragraph (a) of Section 7.03 of the 1997 Special Facilities Lease
is amended and restated in its entirety to read as follows:
"a. As long as the Original Lease remains in effect, the
Basic Rent payable by Airline pursuant to Section 7.02 hereof shall
be determined and readjusted annually as though such Basic Rent
were "Rentals" for purposes of Article VIII of the Original Lease.
For purposes of making such adjustments, the parties hereto
acknowledge and agree that:
(i) The Concourse C Expansion Special Premises and the
Concourse D Special Premises shall constitute part of the
"Concourses", the Baggage Handling System Special Premises
shall constitute part of the "Terminal Building" and the
Concourse C Expansion Special Premises, the Concourse D
Special Premises and the Baggage Handling System Special
Premises shall further constitute "Terminal Concourse Space or
Terminal Building Space leased to a Scheduled Airline" for the
purpose of allocating the rent due under the Original Lease,
provided however that the Concourse Improvement Factor,
referred to in Section 8.04(a)(iii) of the Original Lease,
allocable to the Concourse C Expansion Special Premises, shall
exclude any debt incurred prior to the Effective Date, and
provided further that the Terminal Improvement Factor,
referred to in Section 8.04(a)(ii) of the Original Lease,
allocable to the Baggage Handling System Special Premises,
shall exclude any general airport revenue bond debt incurred
to construct new leased space and shall include any general
airport revenue bond debt incurred which benefits all leased
space in the Terminal Building.
(ii) Debt service requirements of the GARBs allocable
to the connector tunnel described herein at Section 5.02(a)(i)
shall be allocated solely to Concourse D Special Premises for
purposes of calculating the Concourse Improvement Factor
referred to in Section 8.04(a)(iii) of the Original Lease.
Costs allocable to a subsequent connector to Concourse D shall
be allocated solely to the Terminal Complex cost center
excluding the Concourse D cost center."
Section 8. Damage or Destruction. Paragraph (b) of Section
10.03 of the Special Facilities Lease is amended and restated in
its entirety to read as follows:
"b. If there is damage, destruction or loss of any portion
of the Continental Special Facilities or the GARB Improvements
listed at Section 5.02(a)(i) hereof by a risk required to be
insured against under Section 10.04, and the facilities or
improvements so damaged or destroyed are not capable of being
repaired or replaced within:
1. 12 months, if the damage, destruction or loss is related
to the Concourse D Special Premises, then Airline shall have the
option, exercisable by written notice given to City within 60 days
after the occurrence of such event, to terminate this Agreement
forthwith; or
2. 9 months, if the damage, destruction or loss is related
to the Concourse C Expansion Special Premises, then Airline shall
have the option, exercisable by written notice given to City within
60 days after the occurrence of such event, to terminate its
rights, obligations, and responsibilities under this Agreement with
respect to the Concourse C Expansion Special Premises forthwith; or
3. 9 months, if the damage, destruction or loss is related
to the Hydrant Fueling System Special Premises, then Airline shall
have the option, exercisable by written notice given to City within
60 days after the occurrence of such event, to terminate its
rights, obligations, and responsibilities under this Agreement with
respect to the Hydrant Fueling System Special Premises forthwith;
or
4. 90 days, if the damage, destruction or loss is related
to the Deicing Pad Special Premises, then Airline shall have the
option, exercisable by written notice given to City within 60 days
after the occurrence of such event, to terminate its rights,
obligations, and responsibilities under this Agreement with respect
to the Deicing Pad Special Premises forthwith; or
5. 12 months, if the damage, destruction or loss is related
to the Baggage Handling System Special Premises, then Airline shall
have the option, exercisable by written notice given to City within
60 days after the occurrence of such event, to terminate its
rights, obligations and responsibilities under this Agreement with
respect to the Baggage Handling System Special Premises;
provided, however, that precalculations of such time periods shall
exclude consideration of reasonably anticipated acts of superior
governmental authorities and weather conditions; and provided
further, that, if (i) Airline proceeds in good faith with the
diligent repair or replacement of the damaged or destroyed premises
and (ii) the actual time period of such repair exceeds the
applicable time period specifically set forth above in subsections
(1) through (4) of this sentence (not adjusted for reasonably
anticipated acts of superior governmental authorities and weather
conditions), then Airline shall be entitled to an abatement of the
GARB debt service component of Basic Rent described in Section
10.03(a)(iii) hereof for that time period representing the
difference between the actual time period of such repair and such
applicable time period. If this Agreement, or any of Airline's
rights, obligations, and responsibilities hereunder with respect to
a portion of the Continental Special Facilities, as the case may
be, is or are thus terminated: (i) City shall have all rights to
any insurance proceeds it receives as a consequence of the damage
or destruction to the GARB Improvements; (ii) Airline shall have
all rights to any insurance proceeds it receives as a consequence
of the damage or destruction to the Continental Special Facilities,
which, to the extent Bonds are outstanding, Airline agrees to apply
to the payment of Bond Service Charges by depositing such net
proceeds with the Trustee for application in accordance with the
Indenture; and (iii) if any Bonds are outstanding, there shall be
no abatement in the Bond Rent payable by Airline. If this
Agreement, or any of Airline's rights, obligations, and
responsibilities hereunder with respect to a portion of the
Continental Special Facilities, as the case may be, is not or are
not terminated as aforesaid, or if such facilities or improvements
so damaged or destroyed are capable of being repaired or replaced
within the pertinent time period described in the first sentence of
this Section 10.03(b), the provisions of Section 10.03(a) hereof
shall apply; provided, however, that if such damage, destruction or
loss occurs within six months of the Expiration Date, or the
scheduled expiration of the Term of the applicable portion of the
Continental Special Facilities (i.e., Concourse C Expansion Term,
Concourse D Term, Deicing Pad Term, Hydrant Fueling System Term and
Baggage Handling System Term), as the case may be, then Airline
shall have the option either to effect such repair, replacement,
restoration or rebuilding or, in lieu thereof, to terminate
forthwith this Agreement or its rights, obligations, and
responsibilities hereunder with respect to the applicable portion
of the Continental Special Facilities, as the case may be, and make
payment to City of all insurance proceeds received by reason of
such damage, destruction or loss, less an amount equal to the Bond
debt service that would remain as of the date of termination based
on the Assumed Amortization, which withheld amount, to the extent
Bonds are outstanding, Airline agrees to apply to the payment of
Bond Service Charges by depositing such net proceeds with the
Trustee."
Section 9. Delivery of Possession. Article XV of the 1997
Special Facilities Lease is amended and restated in its entirety to
read as follows:
"Except as otherwise may be required under Section 6.03(c) of
this Agreement with respect to the Hydrant Fueling System Special
Premises or under the First Supplemental Special Facilities Lease
with respect to the Baggage Handling System Special Premises,
Airline agrees to yield and deliver to City possession of each
particular element of the Continental Special Facilities (i.e., the
Concourse D Special Premises, the Concourse C Expansion Special
Premises, the Deicing Pad Special Premises, the Hydrant Fueling
System Special Premises and the Baggage Handling System Special
Premises) at the termination of the applicable Term herein, by
expiration or otherwise, or of any applicable renewal or extension,
in good condition in accordance with its express obligations
hereunder, except for damage or loss due to reasonable wear and
tear or fire or other casualty."
Section 10. Holding Over. Article XVI of the 1997 Special
Facilities Lease is amended and restated in its entirety to read as
follows:
"If Airline shall, with the consent of City, hold over after
the expiration or earlier termination of any Term contained in this
Agreement as applicable to any element of the Continental Special
Facilities (i.e., the Concourse D Special Premises, the Concourse
C Expansion Special Premises, the Deicing Pad Special Premises, the
Hydrant Fueling System Special Premises and the Baggage Handling
System Special Premises), the resulting tenancy shall, unless
otherwise mutually agreed, be for an indefinite period of time on
a month-to-month basis. During such month-to-month tenancy,
Airline shall pay to City the same rate of Basic Rent as in effect
at the expiration of the final Additional Term and thereafter as
subsequently adjusted as herein provided, unless a different rate
shall be agreed upon, and shall be bound by all of the additional
provisions of this Agreement insofar as they may be pertinent."
Section 11. Indenture Section 5.02. Section 5.02 of the
Indenture is hereby incorporated by reference as if fully rewritten
herein. In the event City takes over control of the construction
fund related to construction of all or a part of the Continental
Special Facilities pursuant to Section 5.02 of the Indenture,
Airline agrees to assign to City any existing contracts relating to
construction of the Continental Special Facilities, and City agrees
to accept the assignment of any such contracts assigned to it and
to assume all further obligations under such contracts to the
extent of the proceeds of the Bonds in that construction fund
available for the purpose.
Section 12. Cost Allocation; Maintenance and Repair; Budget.
As a result of the amendments to the scope of the Continental
Special Facilities as set forth herein, (i) attached hereto as
Exhibit C is an amended Cost Allocation Policy, which Cost
Allocation Policy shall supersede the Cost Allocation Policy set
forth as Exhibit C to the 1997 Special Facilities Lease, and (ii)
attached hereto as Exhibit F is an amended Maintenance and Repair
Responsibilities that shall supersede the Maintenance and Repair
Responsibilities set forth in Exhibit F of the 1997 Special
Facilities Lease and that may be supplemented or amended from time
to time upon agreement by Airline and the Director of Port Control
of City, which supplemented or amended Exhibit F shall be attached
to the Agreement and thereupon be deemed incorporated. Attached
hereto as a draft Exhibit I is an amended 1997 Concourse Expansion
Budget prepared by Airline and submitted to City for its review and
approval and, upon that approval, such Exhibit I (as the same may
be revised prior to approval) shall be attached to the Agreement
and thereupon be deemed incorporated in the Agreement as Exhibit I,
superseding the 1997 Concourse Expansion Budget set forth as
Exhibit I to the 1997 Special Facilities Lease. Such superseding
Exhibit I may be supplemented or amended from time to time
thereafter upon agreement by Airline and City, which supplemented
or amended Exhibit I shall be attached to the Agreement and
thereupon be deemed incorporated. Approval of any amendments of
the 1997 Concourse Expansion Budget shall be made by the Director
of Port Control and the Fiscal Officer, which approval shall be
evidenced by their certifications on the amended Exhibit I.
Section 13. Release of Leased Property. On City's exercise
of any option to purchase Airline's leasehold interest in any
portion of the Continental Special Facilities granted in the
Agreement, Airline shall deliver, or cause to be delivered, upon
payment of the purchase price to Airline by City, any necessary or
appropriate documents conveying to City all of the Airline's
interests in such portion of the Continental Special Facilities,
subject to the following: (i) those liens and encumbrances (if
any) to which title to said interest was subject when conveyed to
Airline; (ii) those liens and encumbrances created by City or to
the creation or suffering of which City consented in writing; and
(iii) those liens and encumbrances resulting from the failure of
City to perform or observe any of the agreements on its part
contained in the Agreement. Those documents shall be executed and
delivered by the appropriate officials of Airline without the need
for any further action by Airline or City.
Section 14. No Personal Liability. No elected official,
director, officer, agent or employee of either party shall be
charged personally or held contractually liable by or to the other
party under any term or provision of this Supplemental Agreement or
because of any breach thereof or because of its or their execution
or attempted execution.
Section 15. Interpretation of Agreement. This Supplemental
Agreement shall be deemed to have been made in, and be construed in
accordance with the laws of, the State of Ohio.
Section 16. Entire Agreement; Amendment. The 1997 Special
Facilities Lease, as supplemented by this Supplemental Agreement,
constitutes the entire agreement between the parties hereto with
respect to the Continental Special Facilities and supersedes all
other representations or statements heretofore made, oral or
written, except as otherwise herein provided. This Supplemental
Agreement may be amended only in writing, and executed by duly
authorized representatives of the parties hereto in accordance with
the terms applicable to amendments to the Agreement as set forth in
the Indenture, provided that the description of the improvements
set forth in the 1997 Special Facilities Lease as herein revised
may be revised from time to time on the written request of Airline
approved in writing by the Director of Port Control on behalf of
City, provided that no such revision materially alters the
Continental Special Facilities as initially contemplated hereunder.
Section 17. Severability. In the event any covenant,
condition or provision herein contained is held to be invalid by a
court of competent jurisdiction, the invalidity of any such
covenant, condition or provision shall in no way affect any other
covenant, condition or provision herein contained, provided the
invalidity of any such covenant, condition or provision does not
materially prejudice either City, Trustee, Bondholders, or Airline
in their respective rights and obligations contained in the valid
covenants, conditions and provisions of this Agreement.
Section 18. Recording; Memorandum of Lease. This
Supplemental Agreement shall be recorded with the Recorder of
Cuyahoga County or, in the alternative, in the event that either
party so requests, the parties hereto shall execute, attest,
acknowledge and deliver for recording with the Recorder of Cuyahoga
County a short form Memorandum of Lease of this Supplemental
Agreement, to be executed pursuant hereto in the form and content
prescribed by Section 5301.251 of the Ohio Revised Code.
Section 19. Letter Agreement Dated February 19, 1998.
Airline and City have memorialized certain other agreements
pertaining to the Agreement that are contained in a Letter
Agreement dated February 19, 1998, attached hereto as Exhibit L.
Those provisions of said Letter Agreement that pertain to the
agreement, specifically excluding paragraphs numbered "2" and "3",
are hereby incorporated into this Supplemental Agreement. To the
extent that such provisions in the Letter Agreement conflict with
any other provisions in the Agreement, the latter shall govern.
Section 20. Counterparts. This Supplemental Agreement may be
executed in multiple counterparts, each of which shall be deemed an
original, but all of which together shall constitute the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be duly executed as of the day and year first above
written.
WITNESSES as to those signing on CITY OF CLEVELAND
behalf of the City of Cleveland:
_____________________________________ By: ___________________
Printed Name:________________________ Michael R. White, Mayor
Printed Name:________________________
_____________________________________ By: ___________________
Printed Name:________________________ Martin Carmody, Director
of Finance
Printed Name:________________________
_____________________________________ By: ____________________
Printed Name:________________________ ________________________,
__________ of Port Control
Printed Name:________________________
The within instrument is hereby approved as
to legal form and correctness on March _____, 1998
Director of Law
By ___________________________
Assistant Director of Law
WITNESSES as to those signing on CONTINENTAL AIRLINES, INC.
behalf of Continental Airlines, Inc.:
___________________________________ By:_______________________
Printed Name:______________________ Holden Shannon,
Vice President,
Corporate Real Estate
___________________________________
Printed Name:______________________
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
Before me, a Notary Public in and for said County, personally
appeared Michael R. White, known to me to be the person who, as
Mayor of the City of Cleveland, executed the above and foregoing
Agreement and acknowledged that, being duly authorized by Ordinance
of the Council of the City of Cleveland, he signed said Agreement
for and on behalf of the said City as its free and voluntary act,
and as his own free and voluntary act.
IN WITNESS WHEREOF, I have hereunto set my hand and notarial
seal this _______ day of __________________, 1998.
_____________________________
Notary Public
My commission expires:
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
Before me, a Notary Public in and for said County, personally
appeared Martin Carmody, known to me to be the person who, as
Director of Finance of the City of Cleveland, executed the above
and foregoing Agreement and acknowledged that, being duly
authorized by Ordinance of the Council of the City of Cleveland, he
signed said Agreement for and on behalf of the said City as its
free and voluntary act, and as his own free and voluntary act.
IN WITNESS WHEREOF, I have hereunto set my hand and notarial
seal this _______ day of __________________, 1998.
______________________________
Notary Public
My commission expires:
STATE OF OHIO)
) SS:
COUNTY OF CUYAHOGA )
Before me, a Notary Public in and for said County, personally
appeared __________________________________, known to me to be the
person who, as _______________________________________________ of
Port Control of the City of Cleveland, executed the above and
foregoing Agreement and acknowledged that, being duly authorized by
Ordinance of the Council of the City of Cleveland, she signed said
Agreement for and on behalf of the said City as its free and
voluntary act, and as her own free and voluntary act.
IN WITNESS WHEREOF, I have hereunto set my hand and notarial
seal this _______ day of __________________, 1998.
____________________________
Notary Public
My commission expires:
STATE OF ________ )
) SS:
COUNTY OF _________ )
Before me, a Notary Public in and for said County, personally
appeared Holden Shannon, known to me to be the person who, as Vice
President, Corporate Real Estate, of Continental Airlines, Inc.,
executed the above and foregoing Agreement and acknowledged that,
being duly authorized by Resolution of the Board of Directors of
said Corporation, he signed said Agreement for and on behalf of the
said Corporation as its free and voluntary act and as his own free
and voluntary act.
IN WITNESS WHEREOF, I have hereunto set my hand and notarial
seal this ______ day of ________________________, 1998.
_________________________
Notary Public
My commission expires:
Exhibit B-1
Concourse D Special Premises
(Concourse D Generally. A proposed Concourse D (of approximately
170,000 gross square feet) is to be constructed parallel to
Concourse C and to accommodate up to 12 EMB 145 regional jets and
up to 24 turbo-prop aircraft for the Continental Express, Inc.,
operation. The new Concourse D will include passenger facilities,
airline operation support, building support, and concessions,
including all necessary furniture, equipment, and utilities.
Concourse D is to be configured with a central two-story component
providing concourse-level jetbridge loading of the regional jets.
The ramp level of this component will house Airline operations and
building support.)
Concourse D Special Premises. The Concourse D Special Premises
consist of the following exclusive use areas and facilities of
Concourse D: holdroom, passenger and related space, concourse
office and operations space, a ramp control tower, and furniture,
equipment, and other moveable personal property necessary or
appropriate for the use of Concourse D. In addition, the Concourse
D facilities leased to Airline will include nonexclusive use rights
with respect to the building support facilities funded in part with
the proceeds of the Bonds. The diagrams on the immediately
following two pages depict the approximate dimensions and proposed
locations of the various elements of the Concourse D Special
Premises. The diagram on the third page following this page
depicts the approximate height and dimensions of the Concourse D
ramp control tower.
Exhibit B-2
Concourse C Expansion Special Premises
(Concourse C Expansion Generally. Improvements to the existing
Concourse C are to include a new approximately 10,548 square-foot
Presidents Club (an airline lounge) on the concourse level, removal
of the existing Presidents Club (to allow for holdroom expansion),
jetbridge reconfiguration for revised aircraft layout, improvements
of operations areas at the ramp level underneath the new
President's Club, including an approximately 1,000 square-foot
incident center and an approximately 2,500 square-foot group room,
and construction, installation or relocation of all necessary
utilities.)
Concourse C Expansion Special Premises. The exclusive use areas
comprising the Concourse C Expansion Special Premises will include
the new Presidents Club, the incident center and the group room
(beneath the new Presidents Club), as well as all necessary or
appropriate furniture, equipment, and other moveable personal
property. The diagram on the following page is attached for the
purpose of generally depicting the proposed location of these
facilities.
Exhibit B-5
Baggage Handling System Special Premises
Baggage Handling System Special Premises. Improvements to baggage
handling systems located in the Terminal Building are to include
further expansion of the bag claim area (of approximately 4,000
square feet) beyond that referenced in Exhibit J-7 of the
Agreement, including an additional bag claim device, replacement of
an outbound bag support system, and replacement of baggage claim
devices 8 and 9. The diagram on the following page is attached for
the purpose of generally depicting the proposed location of the
building expansion.
Exhibit C
Cost Allocation Policy
GARB-Related Costs
. All costs associated with the connector tunnel between
Concourses C & D, including its vertical transportation
components, moving sidewalks, structure, mechanical,
electrical, and plumbing systems, and architectural fit-up
. All site and ramp costs for the area five feet outside of the
Concourse D building perimeter (concourse-level floor plate
projected downward) and beyond
. Costs of constructing and installing utilities in that area
which is five feet outside of the Concourse D building
perimeter (concourse-level floor plate projected downward) and
beyond
. Costs of relocating underground utilities in public areas or
preferential use areas
. Within the footprint of Concourse D, all costs associated with
non-exclusive spaces, such as:
. All retail and concession areas
. Certain building support areas/systems
. Public toilet rooms
. Public circulation
. Drive-through lanes (2)
. Drive-through triturator
. All costs associated with the permanent rental car relocation
. All costs associated with the outbound bag room, bag claim and
security check point expansion in the Terminal Building
Bond-Related Costs
. All site and ramp costs of the area extending from the face of
the Concourse D building at ramp level (note five-foot overhang
of concourse level) to a point 10 feet outward
. Costs of constructing and installing utilities in Airline's
Concourse D leasehold, including costs of constructing and
installing utilities in the area extending from the face of the
Concourse D building at ramp level to a point 10 feet outward
. All costs associated with the Hydrant Fueling System Special
Premises, the Deicing Pad Special Premises ("Pad 2"), and the
Baggage Handling Systems Special Premises
. All costs associated with the airline lounge ("Presidents
Club") on Concourse C
. Within the footprint of Concourse D, all costs associated with
exclusive use spaces, such as:
. Airline operations areas:
. Ramp control tower
. Dedicated communications rooms
. Jetbridges and other equipment
. Cart staging
. GSE parking
. Airline passenger facilities:
. Holdrooms
. Ticketing areas
. Service centers
. Site preparation costs associated with the interim relocation
of rental car facilities for which Airline shall not receive
reimbursement from other sources of funds
GARB-Related/Bond-Related Mixed Costs
. All Costs of the Facilities not directly allocable to GARB-
related costs or Bond-related costs in accordance with the
foregoing provisions of this Cost Allocation Policy shall be
allocated as follows:
. Concourse D
64.76% to Bonds
35.24% to GARBs
(based on the ratio of exclusive use square footage (104,280
square feet) to non-exclusive use/non-"shared" square footage
(56,753 square feet, representing 75,779 square feet of non-
exclusive use space minus 19,026 square feet of "shared"
building support systems space -- see below))
. Ground Service Equipment Paving
09.23% to Bonds
90.77% to GARBs
(based on the ratio of square footage under the Concourse D
building and within five feet outside of the Concourse D
building perimeter (concourse-level floor plate projected
downward) (10,860 square feet) to the square footage more
than five feet outside of the Concourse D building perimeter
(106,740 square feet))
. Site Paving
00.91% to Bonds
99.09% to GARBs
(based on the ratio of square yardage within five feet
outside of the Concourse D building perimeter (concourse-
level floor plate projected downward) (1,200 square yards) to
the square yardage more than five feet outside of the
Concourse D building perimeter (131,100 square yards))
. Direct Costs
45.51% to Bonds
54.49% to GARBs
(based on the ratio of the Bond-related portions of the 1997
Concourse Expansion Budget ($65,864,747) to the GARB-related
portions of said Budget ($78,854,637); the parties agree that
these percentages are subject to change to reflect Bond-
funded items not listed on the 1997 Concourse Expansion
Budget (Exhibit I))
. Building Support Systems for Concourse D
Costs of certain elevators, fire stairs and dedicated egress,
MEP systems distribution, and dumpster locations shall be
allocated according to the percentages specified under
"Concourse D" above. The diagrams on the following two pages
depict the location of the 19,026 square feet of "shared"
building support systems space subject to such allocation.
. Relocation of Utilities within Exclusive Leased Areas
50.00% to Bonds
50.00% to GARBs
Exhibit D-1
Form of Disbursement Request -- from Bond Proceeds
TO: Chase Manhattan Trust Company, National Association,
as Trustee
Date: __________________________ Requisition No. __________
This Disbursement Request is made pursuant to Article V of the
Special Facilities Lease Agreement dated October 24, 1997, as
supplemented and amended by the First Supplemental Special
Facilities Lease Agreement dated as of March 1, 1998, each between
Continental Airlines, Inc., and the City of Cleveland, Ohio
(collectively, the "Agreement"), and the Trust Indenture dated as
of March 1, 1998, between the City of Cleveland, Ohio, and you
relating to the City's $75,120,000 Airport Special Revenue Bonds,
Series 1988 (Continental Airlines, Inc. Project). Capitalized
words have the meanings set forth in the Agreement. A copy of this
Disbursement Request (with all attachments) is being submitted to
the City's Project Manager (City of Cleveland, Department of Port
Control, Cleveland Hopkins International Airport, 5300 Riverside
Drive, Cleveland, Ohio 44135-3193) and Fiscal Officer (City of
Cleveland, Department of Finance, Cleveland City Hall, 601 Lakeside
Avenue, Cleveland, Ohio 44114, attn: Director).
Airline requests payment or reimbursement for its payment of
Costs of Facilities of the Continental Special Facilities in the
respective amounts set forth in the attached Requisition Schedule.
In connection therewith Airline represents and agrees as follows:
1. The Costs of the Facilities for which payment or
reimbursement is requested are for (fill in the amounts):
Concourse C $_______________________________
Concourse D (including interim
rental car facilities
relocation) $_______________________________
Deicing Pad $_______________________________
Hydrant Fueling System $_______________________________
Baggage Handling System $_______________________________
Utilities $_______________________________
Direct Labor $_______________________________
Costs of Issuance $_______________________________
Other Nonconstruction Costs $_______________________________
2. Obligations in the amounts stated in the attached
Requisition Schedule have been incurred by Airline for Costs of the
Facilities referenced in Paragraph 1, and each item specified in
the Requisition Schedule is properly payable from the Construction
Fund and has not been the subject of a prior requisition for
payment from the GARBs or the Bonds.
3. There has not been filed with or served upon Airline
notice of any lien, right to lien or attachment upon, or claim
affecting the right to receive payment of, any of the monies
payable to any of the payees listed in the Requisition Schedule
which has not been released or will not be released simultaneously
with the payment of such obligation.
4. The portion of the work for which payment is being
requisitioned has been satisfactorily performed in accordance with
applicable plans and specifications approved, or deemed approved,
pursuant to the Agreement.
5. $______________________ of the costs listed in the
attached Requisition Schedule represent costs of issuance with
respect to the Bonds (within the meaning of Section 147(g)(2) of
the Code). The total costs of issuance paid to date, including the
payments to be made pursuant to this Requisition, are not in excess
of 2% of the proceeds of the Bonds.
6. Either (i) at least 95% of the net proceeds of the Bonds
expended to the date of the payment hereby requested from the
Construction Fund will have been used to acquire, construct, and
equip an airport facility within the meaning of Section 142 of the
Code, or (ii) 100% of the net proceeds of the Bonds hereby
requested from the Construction Fund, other than amounts requested
in (5) above, if any, will be used to acquire, construct and equip
an airport facility within the meaning of Section 142 of the Code.
7. Except as permitted by the Code, no obligation for which
payment or reimbursement is sought was originally paid before
February 13, 1997.
8. No Event of Default or Construction Period Event of
Default by Airline under the Agreement has occurred and is
continuing.
CONTINENTAL AIRLINES, INC.
By: ____________________________
Printed Name: __________________
Title: _________________________
[Attach Requisition Schedule, including invoices (or copies
thereof).]
REQUISITION SCHEDULE
This Requisition Schedule applies to Requisition No. ___________,
requesting disbursement of funds from the Construction Fund
pursuant to the Trust Indenture dated as of March 1, 1998 between
the City of Cleveland, Ohio, and Chase Manhattan Trust Company,
National Association, as Trustee.
Invoices (or copies thereof) are attached to support each
amount.
Payee Amount Purpose
Exhibit F
Maintenance and Repair Responsibilities
Responsibility Definition or Responsible
Center Reference Item Party
Air Conditioning/Heating: 1 a to h City
Central System 1 i City
Air Distribution 2 a to g to lease City
line
2 a & b within City
leasehold
2 c to g within Airline
leasehold
Domestic Hot Water; 3 a & b to lease line City
Circulating Hot Water 3 a & b within Airline
Heat; Chilled Water leasehold
Distribution System
Temperature Controls
which includes: 4 a to e to lease City
line
4 a to e within Airline
leasehold
Water & Sewerage:
Main & Rough-In Lines to lease line City
within leasehold City
Fixtures to lease line City
within leasehold Airline
Rough-In Stoppages (which
may include use of
diagnostic cameras to
identify such stoppages) City
Fixture Stoppages Airline
Storm Drains to lease line City
within leasehold City
Power Supply:
Line side City
Main Feed City
Circuit Panels to lease line City
within leasehold Airline
Backup Generators for
Concourses C and D Airline
Fire Protection System 5 a, c, e City
5 b, d Airline
Building Structure
Interior 6 a to g to leasehold City
Interior 6 a to g within Airline
leasehold
Exterior 6 a, e, f Airline
Exterior 6 b, c, d, g, h City
Cleaning 7 a to j within Airline
leasehold
Extermination within leasehold Airline
Window Washing
Interior within leasehold Airline
Interior to lease line City
Exterior within leasehold
(ramp level) Airline
Exterior within leasehold
(boarding level) City
Exterior to lease line City
Interior and Exterior
Windows of Ramp
Control Tower on
Concourse D Airline
Loading Bridges/Mech Systems 8 a & b Airline
Electrical
Interior 9 a to g within Airline
leasehold
Interior 9 a to g to lease City
line
Exterior 9 a, d, f City
Exterior 9 b to lease line City
Exterior 9 b, c, e within Airline
leasehold
Exterior 9 g Airline
Plumbing & Fixtures
Within leasehold 10 a to f Airline
Public Area 10 a to f City
Preferential Ramp & Apron 11 a to e, g, h Airline
11 f, i City
Security Access Points and
Associated Controls 12 a within leasehold Airline
12 b City
Environmental 13 a to d Airline
Miscellaneous:
Public Address System 14 a City
F.I.D.S. 14 b Airline
Airline Finishes & 14 c Airline
Improvements
Elevators/Escalators 14 d City
Speedwalks 14 e City
Stairwells 14 f Airline
14 g City
Triturator 14 h City
Baggage Facilities:
Outbound Bag Support 15 a Airline
System
Baggage Conveyor 15 b Airline
Baggage Claim Area -- 15 c Airline
Interior
Baggage Claim Area -- 15 d City
Interior
Baggage Claim Area -- City
Exterior
DEFINITIONS AND REFERENCES
1. Air Conditioning/Heating
Central Systems within apron-level mechanical rooms which
serve public areas and Airline leasehold within the terminal which
includes:
a. Air Handlers
b. Heating and Ventilating Units
c. Exhaust Fans
d. Perimeter/Reheat Convertor Systems
e. Pneumatic Compressors and Filtration Systems
f. High/Low Pressure Reducing Stations
g. Circulating Hot Water Heat and Condensate Distribution
System from Valve Room II to Penthouse Mechanical
Rooms
h. Chilled Water Supply and Return from Valve Room II to
Penthouse Mechanical Rooms
i. Heating and ventilating units, unit heaters, exhaust
fans and associated controls, both electric and
pneumatic, which serve exclusive use premises
2. Central Systems Air Distribution which includes:
a. Supply, return and exhaust duct work in ceiling space
of tenant areas
b. Associated hardware with duct work such as: Volume
dampers and diverting vanes
c. Repair and cleaning of all ceiling diffusers for
supply, return and exhaust air
d. Balancing of system
e. Air distribution as listed above on zones off existing
systems back to the main supply air duct and return
air duct
f. Cleaning of coil face annually
g. Associated dampers, linkage filters and motors (Mixed
Boxes)
3. Domestic Hot Water, High Pressure Steam, Chilled Water
Distribution Systems:
a. Associated piping, valves and strainers back to the
main supply and return connection
b. All pipe covering in ceiling back to the main supply
and return connections
4. Temperature Controls which include:
a. All thermostats pneumatic or electric maintenance and
calibration
b. All wiring and pneumatic control tubing from
thermostats to operating device to ceiling
c. Pneumatic control and electric control valves,
including diaphragms, valve stem and seat
d. Thermostats and maintenance and repair of other unit
heaters
e. All temperature controls and associated systems listed
above connecting to existing systems back to the main
connections
5. Fire Protection System
a. Sprinklers
b. Fire Hoses
c. Fire Alarms
d. Fire Extinguishers
e. Hydrants
6. Building Structure
Interior
a. Maintenance and repair of walls and columns such as
painting, plastering, wall papering and cove base
b. Maintenance and repair of metal and wooden doors and
associated hardware such as hinges, door knob
assemblies, locks and latch assemblies
c. Maintenance and repair of any glass panels or door
glass
d. Maintenance and repair to plaster, dropped or metal
ceilings and associated framework
e. Maintenance and repairs to ceramic tile, wooden and
carpeted floors
f. Maintenance, repairs and cleaning of signs
g. Maintenance and repair of ticket counters and holdroom
furniture/fixtures
Exterior:
a. Painting, maintenance and repair of exclusive area
such as overhead doors, window and door frame work
b. Caulking of walls, windows, panels and framework
c. Masonry and carpentry repairs to architectural facades
or building skin
d. Roof drains to remain free of debris
e. All attached enclosures such as canopies and conveyor
housing
f. Maintenance, repairs and cleaning of tenant signs
g. Cleaning and repairs to glass
h. Roof maintenance
7. Cleaning
Cleaning of demised premises which includes:
a. Walls
b. Ceilings
c. Floors
d. Windows
e. Fixtures
f. Furniture
g. Ceiling Diffusers
h. Trash Removal including dumpsters in accordance with
City specifications
i. Equipment storage areas
j. Holdroom areas
8. Loading Bridges/Mechanical Systems
a. Daily maintenance and repair of loading bridges.
Maintenance and repair of mechanical support
equipment, including inbound and outbound baggage
conveyor systems, scales, etc., by acceptable
contractor or by Airline's maintenance personnel.
b. ADA-required lift for jetways/commuter walkways
9. Electrical
Interior:
a. Cleaning of fixtures and shades
b. Replacement of burnt bulbs
c. Replacement of burnt ballasts and starters
d. Repairs to wall outlets and wall switches
e. All associated wiring within Airline's space
f. Replacement of burnt bulbs and ballast for signs
g. Airline installed panels
Exterior:
a. Maintenance, repairs and cleaning of perimeter flood,
apron and obstruction lighting and associated wiring
and conduit
b. Maintenance and repairs to weatherproof outlets,
electrical panels, transformers, local disconnects and
associated wiring and conduit
c. Maintenance and repairs to luminated tenant signs
d. Fixed pole ramp lighting
e. Ground power system
f. Electrical panels and transformers for public areas
and fixed pole ramp lighting
g. Tenant-installed lighting
10. Plumbing
a. All water closets, lavs, urinal and associated piping
and hardware such as flushometers, faucets and soap
dispensers
b. Sanitary napkin dispensers
c. Towel dispensers and trash containers
d. Partitions and hardware such as hinges, door latch
assembly and coat hooks
e. Water fountains piping and refrigeration compressors
and controls
f. Floor drains are to have proper catch basin with
strainer to keep drain free of debris
11. Preferential Ramp and Apron
a. Daily FOD inspection and removal of debris, grease,
oil, fuel or other foreign material on ramp or apron
areas
b. Cleaning with degreasing solvent on a routine basis
consistent with usage
c. Maintenance and repairs to bumpers, rails or other
guides
d. Striping for parking of aircraft and ground equipment
in accordance with approved City procedures
e. Ramp and apron drains to be cleaned of debris on a
scheduled basis
f. Minor pavement repairs
g. Sweeping
h. Snow removal, ice removal, and sanding
i. Operation and maintenance of snow melters; structural
pavement repairs and rehabilitation
12. Security Access
a. Door hardware, i.e.: latches, locksets, hinges,
closures, door frames, thresholds and panic hardware
b. All electronic components i.e.: card reader, keypad,
push buttons, audio visual units, door strikes and
magnetic locks
13. Environmental Health and Safety
a. Storage Tank Systems (if applicable)
1. Maintenance, testing, management, removal and
remediation, (if required), compliance with
regulations and associated documentation for any
storage tanks located on leased premises
including responsibility for releases and
remedial actions
2. Compliance with all applicable Federal, State,
and City Rules and Regulations
b. Oil, gas, grease, sand, and any other similar
interceptors and or separators (if applicable)
1. Required maintenance and associated documentation
to ensure efficient operation and proper disposal
of any residual per applicable regulations
c. Spill Prevention and Control Countermeasures (SPCC)
(if applicable)
1. Maintenance of and compliance with a current
certified SPCC Plan, which is reviewed annually
and updated and re-certified by a professional
engineer every 3 years
2. Reporting of releases which exceed Reportable
Quantities to appropriate Federal and State
Agencies and City personnel
d. Environmental Health and Safety
1. Compliance with all applicable Federal, State and
City Regulations including LSP Services
pertaining to all environmental health and safety
issues
14. Miscellaneous
a. Maintenance of existing public address system
b. Maintenance of tenant's flight information display
systems (F.I.D.S.)
c. Airline installed finishes and improvements
d. Maintenance of elevators/escalators
e. Speedwalks
f. Stairwells leading to exclusive use premises (4)
g. Stairwells leading to mechanical room used by City or
freight elevator used by City and Airline (2 -- col.
lines 7.1 and 8, and 21 and 21.9)
h. Triturator
15. Baggage Facilities
a. Replacement of belt feeder system from ticket counters
to curbside
b. Replacement of claim devices with respect to Airport
carousels 7, 8 and 9
c. Maintenance and repair pertaining to all space within
exclusive use rooms and that space on the baggage-
claim-carousel side of the partition separating the
baggage claim area and the public walkway
d. Maintenance and repair pertaining to all space outside
of the partition separating the baggage claim area and
the public walkway
Exhibit I
1997 Concourse Expansion budget
Exhibit L
Letter Agreement Dated February 19, 1998
Exhibit 10.2
Amendment of Executive Bonus Program
WHEREAS, the Company's Executive Bonus Program (the "Bonus
Program") provides for certain payments to be made to participants
upon the occurrence of a "Qualifying Event" (such as termination
without cause, constructive termination or termination of
participation in the Executive Bonus Program) during the year in
which a Change in Control (as defined in the Bonus Program) occurs;
and
WHEREAS, this Committee, which has authority to amend the
Bonus Program, deems it advisable to amend the Bonus Program to
provide for the new Change in Control definition contained in the
1998 [Stock Incentive] Plan to be applicable to the Bonus Program,
effective on the first day of the year following the year in which
the Acquisition is consummated (so that the original Change in
Control definition is applicable for the year in which the
Acquisition is consummated, and thereafter the new Change in
Control provision will be applicable);
NOW THEREFORE, BE IT RESOLVED, that pursuant to Section 6 of
the Company's Executive Bonus Program (the "Bonus Program"), the
definition of "Change in Control" contained in Section 5 of the
Bonus Program be and hereby is amended, effective on the first day
of the year following the year in which the Acquisition is
consummated, to be the same as the new definition of "Change in
Control" contained in Section IX(c) of the 1998 Plan.
Exhibit 10.3
Supplemental Agreement No. 15
to
Purchase Agreement No. 1783
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 757 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of
February 18, 1999, by and between THE BOEING COMPANY, a Delaware
corporation with its principal office in Seattle, Washington,
(Boeing) and CONTINENTAL AIRLINES, INC., a Delaware corporation
with its principal office in Houston, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 1783 dated March 18, 1993 (the Agreement), as amended and
supplemented, relating to Boeing Model 757-200 aircraft (the
Aircraft); and
WHEREAS, Boeing and Buyer have agreed on a method for dealing
with delayed Aircraft to be delivered in 1999,and
WHEREAS, Boeing and Buyer have mutually 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 and Articles:
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. 15.
2. Letter Agreements:
Add new Letter Agreement 6-1162-DMH-680, "Delivery Delay
Resolution Program", attached hereto, to reflect the agreement
between Buyer and Boeing regarding delayed aircraft to be delivered
in 1999.
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/ D. M. Hurt By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
TABLE OF CONTENTS
ARTICLES Page Revised
By
ARTICLE 1. Subject Matter of Sale. . . . . . . 1-1 SA#12
ARTICLE 2. Delivery, Title and Risk of Loss. . 2-1 SA#12
ARTICLE 3. Price of Aircraft . . . . . . . . . 3-1 SA#12
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#12
TABLE OF CONTENTS (Continued)
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#11
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
1783-5 Promotional Support SA#2
1783-6 Configuration Matters SA#2
1783-7 Price Adjustment on Rolls-Royce SA#2
Engines
1783-8 Spare Parts Provisioning SA#2
1783-9R1 Escalation Sharing SA#10
6-1162-WLJ-359 Aircraft Performance Guarantees SA#2
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
TABLE OF CONTENTS (Continued)
6-1162-WLJ-380 Performance Guarantees, Demonstrated SA#2
Compliance
6-1162-WLJ-384 [CONFIDENTIAL MATERIAL OMITTED AND SA#2
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
6-1162-WLJ-393 [CONFIDENTIAL MATERIAL OMITTED AND SA#2
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-WLJ-405 Certain Additional Contractual SA#2
Matters
6-1162-WLJ-409 Satisfaction of Conditions Relating SA#2
to the Purchase Agreement
6-1162-WLJ-497 [CONFIDENTIAL MATERIAL OMITTED AND SA#3
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-RGP-946R1 Special Provisions Relating to SA#5
the Rescheduled Aircraft
6-1162-MMF-289R1 [CONFIDENTIAL MATERIAL OMITTED AND SA#10
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
6-1162-MMF-319 Special Provisions Relating to SA#7
the Rescheduled Aircraft
6-1162-GOC-132R1 Special Matters SA#14
6-1162-DMH-680 Delivery Delay Resolution Program SA#15
TABLE OF CONTENTS (Continued)
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 10, 1997
Supplemental Agreement No. 11 July 30, 1998
Supplemental Agreement No. 12 September 29,1998
Supplemental Agreement No. 13 November 16, 1998
Supplemental Agreement No. 14 December 17,1998
Supplemental Agreement No. 15 February 18,1999
February 18, 1999
6-1162-DMH-680
Continental Airlines, Inc.
1600 Smith Street
Houston, TX 77002
Subject: Delivery Delay Resolution Program
Reference: (a) Purchase Agreement No. 1951 between The Boeing
Company (Boeing) and Continental Airlines, Inc.
(Customer) relating to Model 737 aircraft
(b) Purchase Agreement No. 1783 between Boeing and
Customer relating to Model 757 aircraft
(c) Letter Agreement 6-1162-DMH-678 dated December
29, 1998, Subject: 1998 Delivery Delay Settlement
Ladies and Gentlemen:
This Letter Agreement amends and supplements the above reference
(a) and (b) Purchase Agreements (the Agreements). All terms used
but not defined in this Letter Agreement have the same meaning as
in the Agreements.
1. Revised Delivery of Aircraft.
Boeing has found it necessary to reschedule the delivery
month of certain Aircraft ( the Delayed Aircraft) as set forth
below:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Boeing shall deliver each Delayed Aircraft in accordance with the
terms of the Agreements during or before the Revised Schedule Month
specified above. The calendar interval between the original
schedule and revised schedule described above is the "Delay
Period."
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Aircraft Purchase Price.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
3. Advance Payments Adjustments for Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
4. Monetary Adjustment for Delivery Delay.
Boeing will pay to Customer on the date of delivery the
settlement amount calculated from the table provided in Attachment
A hereto for each day of delay, beginning with the first day of the
month following the Original Scheduled Month to and including the
day prior to the date for delivery of each such Delayed Aircraft.
The settlement amount, so calculated, will be provided to Customer
in the form of a credit memorandum, which amount may be used for
Boeing goods and services or may be applied against the purchase
price of the Delayed Aircraft.
5. Purchase Agreement Revision.
Except as specifically set forth in this Letter Agreement, the
rights and obligations of the parties under the terms and
conditions of the Agreements, including the provisions of Article
6, Excusable Delay, remain in full force and effect.
6. EXCLUSIVE REMEDY.
THE OBLIGATIONS OF BOEING EXPRESSLY SET FORTH IN THIS LETTER
AGREEMENT ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND CUSTOMER
HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER 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 THE DELAY IN DELIVERY OF THE DELAYED
AIRCRAFT. BOEING'S PERFORMANCE OF ITS OBLIGATIONS HEREUNDER SHALL
CONSTITUTE FULL AND FINAL SETTLEMENT AND SATISFACTION OF ALL CLAIMS
OR CAUSES OF ACTION OF CUSTOMER AGAINST BOEING RELATING TO THE
DELAY IN DELIVERY OF THE DELAYED AIRCRAFT AND WILL BE REFLECTED IN
A REDUCED INVOICE AMOUNT OR A CREDIT MEMORANDUM.
7. Confidential Treatment. Customer understands that certain
commercial and financial information contained in this Letter
Agreement and the attachments hereto are considered by Boeing as
confidential. Customer 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 to the extent required by law or
governmental regulation.
Very truly yours,
THE BOEING COMPANY
By /s/ D. M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: February 18, 1999
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment A to
Letter Agreement No. 6-1162-DMH-680
COMPENSATION TABLE
The following table identifies the daily amount Boeing is required
to pay in settlement to compensation Customer for the delayed
delivery.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Exhibit 10.4
Supplemental Agreement No. 9
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
February 18, 1999, 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 (the Agreement), as amended and
supplemented, relating to Boeing Model 737-500, 737-600, 737-700,
737-800, and 737-900 aircraft (the Aircraft); and
WHEREAS, Boeing and Buyer have agreed on a method for dealing
with delayed Aircraft to be delivered in 1999,and
WHEREAS, Boeing and Buyer have mutually 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 and Articles:
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. 9.
2. Letter Agreements:
Add new Letter Agreement 6-1162-DMH-680, "Delivery Delay
Resolution Program", attached hereto, to reflect the agreement
between Buyer and Boeing regarding delayed aircraft to be delivered
in 1999.
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/ D. M. Hurt By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale. . . . . . . . . . . 1-1 SA 5
2. Delivery, Title and Risk
of Loss . . . . . . . . . . . . . . . . . . 2-1
3. Price of Aircraft . . . . . . . . . . . . . 3-1 SA 5
4. Taxes . . . . . . . . . . . . . . . . . . . 4-1
5. Payment . . . . . . . . . . . . . . . . . . 5-1
6. Excusable Delay . . . . . . . . . . . . . . 6-1
7. Changes to the Detail Specification . . . . 7-1 SA 5
8. Federal Aviation Requirements and
Certificates and Export License . . . . . . 8-1 SA 5
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
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 8
Aircraft Deliveries and
Descriptions - 737-800. . . . . . . . . . . T-3 SA 7
Aircraft Deliveries and
Descriptions - 737-600. . . . . . . . . . . T-4 SA 4
Aircraft Deliveries and
Descriptions - 737-900. . . . . . . . . . . T-5 SA 5
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
A-5 Aircraft Configuration - Model 737-924. . . SA 5
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 (1995 Base Price) . . . SA 1
D1 Airframe and Engine Price Adjustments -
Current Generation Aircraft . . . . . . . . SA 1
D2 Aircraft Price Adjustments - New
Generation Aircraft (1997 Base Price) . . . SA 5
E Buyer Furnished Equipment
Provisions Document . . . . . . . . . . . . SA 5
F Defined Terms Document. . . . . . . . . . . SA 5
TABLE OF CONTENTS
SA
Number
LETTER AGREEMENTS
1951-1 Not Used. . . . . . . . . . . . . . .
1951-2R3 Seller Purchased Equipment. . . . . . SA 5
1951-3R5 Option Aircraft-Model 737-824 Aircraft SA 8
1951-4R1 Waiver of Aircraft Demonstration. . . SA 1
1951-5R2 Promotional Support - New Generation. SA 5
Aircraft
1951-6 Configuration Matters . . . . . . . .
1951-7R1 Spares Initial Provisioning . . . . . SA 1
1951-8R2 Escalation Sharing - New Generation
Aircraft. . . . . . . . . . . . . . . SA 4
1951-9R3 Option Aircraft-Model 737-724 Aircraft SA 7
1951-11R1 Escalation Sharing-Current Generation
Aircraft. . . . . . . . . . . . . . . SA 4
1951-12 Option Aircraft - Model 737-924 Aircraft SA 5
1951-13 Configuration Matters - Model 737-924 SA 5
TABLE OF CONTENTS
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-MMF-295 Performance Guarantees - Model
737-724 Aircraft. . . . . .
6-1162-MMF-296 Performance Guarantees - Model
737-824 Aircraft. . . . . .
6-1162-MMF-308R3 Disclosure of Confidential . SA 5
Information
6-1162-MMF-309R1 [CONFIDENTIAL MATERIAL OMITTED SA 1
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-MMF-311R3 [CONFIDENTIAL MATERIAL OMITTED SA 5
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. .
6-1162-MMF-378R1 Performance Guarantees - Model
737-524 Aircraft. . . . . . SA 3
6-1162-GOC-015 [CONFIDENTIAL MATERIAL OMITTED SA 2
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-GOC-131R2 Special Matters . . . . . . . SA 5
6-1162-DMH-365 Performance Guarantees - Model
737-924 Aircraft. . . . . . SA 5
6-1162-DMH-624 [CONFIDENTIAL MATERIAL OMITTED SA 8
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
6-1162-DMH-680 Delivery Delay Resolution Program SA 9
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 10,1997
Supplemental Agreement No. 5 . . . . . . . . . . May 21,1998
Supplemental Agreement No. 6 . . . . . . . . . . July 30,1998
Supplemental Agreement No. 7 . . . . . . . . . . November 12,1998
Supplemental Agreement No. 8 . . . . . . . . . . December 7,1998
Supplemental Agreement No. 9 . . . . . . . . . . February 18,1999
February 18, 1999
6-1162-DMH-680
Continental Airlines, Inc.
1600 Smith Street
Houston, TX 77002
Subject: Delivery Delay Resolution Program
Reference: (a) Purchase Agreement No. 1951 between The Boeing
Company (Boeing) and Continental Airlines, Inc.
(Customer) relating to Model 737 aircraft
(b) Purchase Agreement No. 1783 between Boeing and
Customer relating to Model 757 aircraft
(c) Letter Agreement 6-1162-DMH-678 dated December
29, 1998, Subject: 1998 Delivery Delay Settlement
Ladies and Gentlemen:
This Letter Agreement amends and supplements the above reference
(a) and (b) Purchase Agreements (the Agreements). All terms used
but not defined in this Letter Agreement have the same meaning as
in the Agreements.
1. Revised Delivery of Aircraft.
Boeing has found it necessary to reschedule the delivery
month of certain Aircraft ( the Delayed Aircraft) as set forth
below:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Boeing shall deliver each Delayed Aircraft in accordance with the
terms of the Agreements during or before the Revised Schedule Month
specified above. The calendar interval between the original
schedule and revised schedule described above is the "Delay
Period."
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Aircraft Purchase Price.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
3. Advance Payments Adjustments for Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
4. Monetary Adjustment for Delivery Delay.
Boeing will pay to Customer on the date of delivery the
settlement amount calculated from the table provided in Attachment
A hereto for each day of delay, beginning with the first day of the
month following the Original Scheduled Month to and including the
day prior to the date for delivery of each such Delayed Aircraft.
The settlement amount, so calculated, will be provided to Customer
in the form of a credit memorandum, which amount may be used for
Boeing goods and services or may be applied against the purchase
price of the Delayed Aircraft.
5. Purchase Agreement Revision.
Except as specifically set forth in this Letter Agreement, the
rights and obligations of the parties under the terms and
conditions of the Agreements, including the provisions of Article
6, Excusable Delay, remain in full force and effect.
6. EXCLUSIVE REMEDY.
THE OBLIGATIONS OF BOEING EXPRESSLY SET FORTH IN THIS LETTER
AGREEMENT ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND CUSTOMER
HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER 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 THE DELAY IN DELIVERY OF THE DELAYED
AIRCRAFT. BOEING'S PERFORMANCE OF ITS OBLIGATIONS HEREUNDER SHALL
CONSTITUTE FULL AND FINAL SETTLEMENT AND SATISFACTION OF ALL CLAIMS
OR CAUSES OF ACTION OF CUSTOMER AGAINST BOEING RELATING TO THE
DELAY IN DELIVERY OF THE DELAYED AIRCRAFT AND WILL BE REFLECTED IN
A REDUCED INVOICE AMOUNT OR A CREDIT MEMORANDUM.
7. Confidential Treatment. Customer understands that certain
commercial and financial information contained in this Letter
Agreement and the attachments hereto are considered by Boeing as
confidential. Customer 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 to the extent required by law or
governmental regulation.
Very truly yours,
THE BOEING COMPANY
By /s/ D. M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: February 18, 1999
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment A to
Letter Agreement No. 6-1162-DMH-680
COMPENSATION TABLE
The following table identifies the daily amount Boeing is required
to pay in settlement to compensation Customer for the delayed
delivery.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
Exhibit 10.4(a)
Supplemental Agreement No. 10
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
March 19, 1999, 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 (the Agreement), as amended and
supplemented, relating to Boeing Model 737-500, 737-600, 737-700,
737-800, and 737-900 aircraft (the Aircraft); and
WHEREAS, Buyer has requested to exercise [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] and
WHEREAS, Buyer has requested to exercise [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] and
WHEREAS, Boeing and Buyer have mutually agreed that the
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] and;
WHEREAS, Boeing and Buyer have mutually 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 and Articles:
1.1 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. 10.
1.2 Remove and replace, in its entirely, Table T-2 entitled
"Aircraft Deliveries and Descriptions, Model 737-700 Aircraft" with
new Table T-2 attached hereto for the Model 737-700 Aircraft
reflecting the addition of [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT].
2. Letter Agreements:
2.1 Remove and replace, in its entirety, Letter Agreement
1951-3R5, "Option Aircraft - Model 737-824 Aircraft" with Letter
Agreement 1951-3R6, "Option Aircraft - Model 737-824 Aircraft",
attached hereto, to reflect the deletion of the [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT].
2.2 Remove and replace, in its entirety, Letter Agreement
1951-9R3, "Option Aircraft - Model 737-724 Aircraft" with Letter
Agreement 1951-9R4, "Option Aircraft - Model 737-724 Aircraft",
attached hereto, to reflect the deletion of the [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT].
The Agreement will be deemed to be supplemented to the extent
herein provided 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/ D. M. Hurt By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
TABLE OF CONTENTS
Page SA
Number Number
ARTICLES
1. Subject Matter of Sale. . . . . . . . . . . 1-1 SA 5
2. Delivery, Title and Risk of Loss. . . . . . 2-1
3. Price of Aircraft . . . . . . . . . . . . . 3-1 SA 5
4. Taxes . . . . . . . . . . . . . . . . . . . 4-1
5. Payment . . . . . . . . . . . . . . . . . . 5-1
6. Excusable Delay . . . . . . . . . . . . . . 6-1
7. Changes to the Detail Specification . . . . 7-1 SA 5
8. Federal Aviation Requirements and
Certificates and Export License . . . . . . 8-1 SA 5
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
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 10
Aircraft Deliveries and
Descriptions - 737-800. . . . . . . . . . . T-3 SA 7
Aircraft Deliveries and
Descriptions - 737-600. . . . . . . . . . . T-4 SA 4
Aircraft Deliveries and
Descriptions - 737-900. . . . . . . . . . . T-5 SA 5
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
A-5 Aircraft Configuration - Model 737-924. . . SA 5
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 (1995 Base Price) . . . SA 1
D1 Airframe and Engine Price Adjustments -
Current Generation Aircraft . . . . . . . . SA 1
D2 Aircraft Price Adjustments - New
Generation Aircraft (1997 Base Price) . . . SA 5
E Buyer Furnished Equipment
Provisions Document . . . . . . . . . . . . SA 5
F Defined Terms Document. . . . . . . . . . . SA 5
TABLE OF CONTENTS
SA
Number
LETTER AGREEMENTS
1951-1 Not Used . . . . . . . . . . . . . . .
1951-2R3 Seller Purchased Equipment . . . . . . SA 5
1951-3R6 Option Aircraft-Model 737-824 Aircraft SA 10
1951-4R1 Waiver of Aircraft Demonstration . . . SA 1
1951-5R2 Promotional Support - New Generation . SA 5
Aircraft
1951-6 Configuration Matters. . . . . . . . .
1951-7R1 Spares Initial Provisioning. . . . . . SA 1
1951-8R2 Escalation Sharing - New Generation
Aircraft . . . . . . . . . . . . . . . SA 4
1951-9R4 Option Aircraft-Model 737-724 Aircraft SA 10
1951-11R1 Escalation Sharing-Current Generation
Aircraft . . . . . . . . . . . . . . . SA 4
1951-12 Option Aircraft - Model 737-924
Aircraft . . . . . . . . . . . . . . . SA 5
1951-13 Configuration Matters - Model 737-924. SA 5
TABLE OF CONTENTS
SA
Number
RESTRICTED LETTER AGREEMENTS
6-1162-MMF-295 Performance Guarantees - Model
737-724 Aircraft. . . . . . .
6-1162-MMF-296 Performance Guarantees - Model
737-824 Aircraft. . . . . . .
6-1162-MMF-308R3 Disclosure of Confidential . SA 5
Information
6-1162-MMF-309R1 [CONFIDENTIAL MATERIAL . . . SA 1
OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
6-1162-MMF-311R3 [CONFIDENTIAL MATERIAL . . . SA 5
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
6-1162-MMF-378R1 Performance Guarantees - Model
737-524 Aircraft. . . . . . . SA 3
6-1162-GOC-015 [CONFIDENTIAL MATERIAL . . . SA 2
OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
6-1162-GOC-131R2 Special Matters . . . . . . . SA 5
6-1162-DMH-365 Performance Guarantees - Model
737-924 Aircraft. . . . . . . SA 5
6-1162-DMH-624 [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL
TREATMENT]. . . . . . . . . . SA 8
6-1162-DMH-680 Delivery Delay Resolution
Program . . . . . . . . . . . SA 9
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 10,1997
Supplemental Agreement No. 5 . . . . . . . May 21,1998
Supplemental Agreement No. 6 . . . . . . . July 30,1998
Supplemental Agreement No. 7 . . . . . . . November 12,1998
Supplemental Agreement No. 8 . . . . . . . December 7,1998
Supplemental Agreement No. 9 . . . . . . . February 18,1999
Supplemental Agreement No. 10. . . . . . . March 19,1999
Table 1 to
Purchase Agreement 1951
Aircraft Deliveries and Descriptions
Model 737-700 Aircraft
CFM45-7B24 Engines
Detail Specification No. D6-38808-42 dated January 6, 1997
Exhibit A-1
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
1951-3R6
March 19, 1999
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
Subject: Letter Agreement No. 1951-3R6 to
Purchase Agreement No. 1951 -
Option Aircraft - Model 737-824 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 737-824
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-3R5 dated December
7, 1998.
All terms used and not defined herein shall have the same meaning
as in the Agreement.
In consideration of Buyer's purchase of the Aircraft, Boeing hereby
agrees to manufacture and sell up to forty-one (41) additional
Model 737-824 Aircraft (the Option Aircraft) to Buyer, on the same
terms and conditions set forth in the Agreement, except as
otherwise described in Attachment A hereto, and subject to the
terms and conditions set forth below.
1. Delivery.
The Option Aircraft will be delivered to Buyer during or
before the months set forth in the following schedule:
Month and Year Number of
of Delivery Option Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
3. Option Aircraft Deposit.
In consideration of Boeing's grant to Buyer of options to
purchase the Option Aircraft as set forth herein, Buyer will pay a
deposit to Boeing of $200,000 for each Option Aircraft (the Option
Deposit) on the date of this Letter Agreement. In the event Buyer
exercises an option herein for an Option Aircraft, the amount of
the Option Deposit for such Option Aircraft will be credited
against the first advance payment due for such Option Aircraft
pursuant to the advance payment schedule set forth in Article 5 of
the Agreement.
In the event that Buyer does not exercise its option to purchase a
particular Option Aircraft pursuant to the terms and conditions set
forth herein, Boeing shall be entitled to retain the Option Deposit
for such Option Aircraft.
4. Option Exercise.
To exercise its option to purchase the Option Aircraft,
Buyer shall give written notice thereof to Boeing on or before the
first business day of the month in each Option Exercise Date shown
below:
Option Aircraft Option Exercise Date
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
5. Contract Terms.
Within thirty (30) days after Buyer exercises an option to
purchase Option Aircraft pursuant to paragraph 4 above, Boeing and
Buyer will use their best reasonable efforts to enter into a
supplemental agreement amending the Agreement to add the applicable
Option Aircraft to the Agreement as a firm Aircraft (the Option
Aircraft Supplemental Agreement).
In the event the parties have not entered into such an Option
Aircraft Supplemental Agreement within the time period contemplated
herein, either party shall have the right, exercisable by written
or telegraphic notice given to the other within ten (10) days after
such period, to cancel the purchase of such Option Aircraft.
6. Cancellation of Option to Purchase.
Either Boeing or Buyer may cancel the option to purchase an
Option Aircraft if any of the following events are not accomplished
by the respective dates contemplated in this Letter Agreement, or
in the Agreement, as the case may be:
(i) purchase of the Aircraft under the Agreement for any
reason not attributable to the cancelling party;
(ii) payment by Buyer of the Option Deposit with respect
to such Option Aircraft pursuant to paragraph 3 herein; or
(iii) exercise of the option to purchase such Option
Aircraft pursuant to the terms hereof.
Any cancellation of an option to purchase by Boeing which is based
on the termination of the purchase of an Aircraft under the
Agreement shall be on a one-for-one basis, for each Aircraft so
terminated.
Cancellation of an option to purchase provided by this letter
agreement shall be caused by either party giving written notice to
the other within ten (10) days after the respective date in
question. Upon receipt of such notice, all rights and obligations
of the parties with respect to an Option Aircraft for which the
option to purchase has been cancelled shall thereupon terminate.
Boeing shall promptly refund to Buyer, without interest, any
payments received from Buyer with respect to the affected Option
Aircraft. Boeing shall be entitled to retain the Option Deposit
unless cancellation is attributable to Boeing's fault, in which
case the Option Deposit shall also be returned to Buyer without
interest.
7. Applicability.
Except as otherwise specifically provided, limited or
excluded herein, all Option Aircraft that are added to the
Agreement by an Option Aircraft Supplemental Agreement as firm
Aircraft shall benefit from all the applicable terms, conditions
and provisions of the 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/ D. M. Hurt
Its Attorney In Fact
ACCEPTED AND AGREED TO this
Date: March 19, 1999
CONTINENTAL AIRLINES, INC.,
By /s/ Brian Davis
Its Vice President
Attachment
Model 737-824 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft are
described by Boeing Detail Specification D6-38808, Revision E,
dated September 15, 1995, as amended and revised pursuant to the
Agreement.
1.2 Changes. The Option Aircraft Detail Specification
shall be revised to include:
(1) Changes applicable to the basic Model 737-800
aircraft which are developed by Boeing between the date of the
Detail Specification and the signing of an Option Aircraft
Supplemental Agreement.
(2) Changes mutually agreed upon.
(3) Changes required to obtain a Standard
Certificate of Airworthiness.
1.3 Effect of Changes.Changes to the Detail Specification
pursuant to the provisions of the clauses above shall include the
effects of such changes upon Option Aircraft weight, balance,
design and performance.
2. Price Description.
2.1 Price Adjustments.
2.1.1 Base Price Adjustments. The base aircraft
price (pursuant to Article 3 of the Agreement) of the Option
Aircraft will be adjusted to Boeing's and the engine manufacturer's
then-current prices as of the date of execution of the Option
Aircraft Supplemental Agreement.
2.1.2 Special Features. The price for special
features incorporated in the Option Aircraft Detail Specification
will be adjusted to Boeing's then-current prices for such features
as of the date of execution of the Option Aircraft Supplemental
Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].
2.1.3 Escalation Adjustments. The base airframe
and special features price will be escalated according to the
applicable airframe and engine manufacturer escalation provisions
contained in Exhibit D of the Agreement.
Buyer agrees that the engine escalation provisions will be adjusted
if they are changed by the engine manufacturer prior to signing the
Option Aircraft Supplemental Agreement. In such case, the then-
current engine escalation provisions in effect at the time of
execution of the Option Aircraft Supplemental Agreement will be
incorporated into such agreement.
2.1.4 Price Adjustments for Changes. Boeing may
adjust the basic price and the advance payment base prices for any
changes mutually agreed upon by Buyer and Boeing subsequent to the
date that Buyer and Boeing enter into the Option Aircraft
Supplemental Agreement.
2.1.5 BFE to SPE. An estimate of the total price
for items of Buyer Furnished Equipment (BFE) changed to Seller
Purchased Equipment (SPE) pursuant to the Detail Specification is
included in the Option Aircraft price build-up. The purchase price
of the Option Aircraft will be adjusted by the price charged to
Boeing for such items plus 10% of such price.
3. Advance Payments.
3.1 Buyer shall pay to Boeing advance payments for the
Option Aircraft pursuant to the schedule for payment of advance
payments provided in the Purchase Agreement.
1951-9R4
March 19, 1999
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
Subject: Letter Agreement No. 1951-9R4 to
Purchase Agreement No. 1951 -
Option Aircraft - Model 737-724 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 737-724
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-9R3 dated November
12, 1998.
All terms used and not defined herein shall have the same meaning
as in the Agreement.
In consideration of Buyer's purchase of the Aircraft, Boeing hereby
agrees to manufacture and sell up to - [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
additional Model 737-724 Aircraft (the Option Aircraft) to Buyer,
on the same terms and conditions set forth in the Agreement, except
as otherwise described in Attachment A hereto, and subject to the
terms and conditions set forth below.
1. Delivery.
The Option Aircraft will be delivered to Buyer during or
before the months set forth in the following schedule:
Month and Year Number of
of Delivery Option Aircraft
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
2. Price. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
3. Option Aircraft Deposit.
In consideration of Boeing's grant to Buyer of options to
purchase the Option Aircraft as set forth herein, Buyer will pay a
deposit to Boeing of $200,000 for each Option Aircraft (the Option
Deposit) on the date of this Letter Agreement. In the event Buyer
exercises an option herein for an Option Aircraft, the amount of
the Option Deposit for such Option Aircraft will be credited
against the first advance payment due for such Option Aircraft
pursuant to the advance payment schedule set forth in Article 5 of
the Agreement.
In the event that Buyer does not exercise its option to purchase a
particular Option Aircraft pursuant to the terms and conditions set
forth herein, Boeing shall be entitled to retain the Option Deposit
for such Option Aircraft.
4. Option Exercise.
To exercise its option to purchase the Option Aircraft,
Buyer shall give written notice thereof to Boeing on or before the
first business day of the month in each Option Exercise Date shown
below:
Option Aircraft Option Exercise Date
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
5. Contract Terms.
Within thirty (30) days after Buyer exercises an option to
purchase Option Aircraft pursuant to paragraph 4 above, Boeing and
Buyer will use their best reasonable efforts to enter into a
supplemental agreement amending the Agreement to add the applicable
Option Aircraft to the Agreement as a firm Aircraft (the Option
Aircraft Supplemental Agreement).
In the event the parties have not entered into such an Option
Aircraft Supplemental Agreement within the time period contemplated
herein, either party shall have the right, exercisable by written
or telegraphic notice given to the other within ten (10) days after
such period, to cancel the purchase of such Option Aircraft.
6. Cancellation of Option to Purchase.
Either Boeing or Buyer may cancel the option to purchase an
Option Aircraft if any of the following events are not accomplished
by the respective dates contemplated in this Letter Agreement, or
in the Agreement, as the case may be:
(i) purchase of the Aircraft under the Agreement for any
reason not attributable to the cancelling party;
(ii) payment by Buyer of the Option Deposit with respect
to such Option Aircraft pursuant to paragraph 3 herein; or
(iii) exercise of the option to purchase such Option
Aircraft pursuant to the terms hereof.
Any cancellation of an option to purchase by Boeing which is based
on the termination of the purchase of an Aircraft under the
Agreement shall be on a one-for-one basis, for each Aircraft so
terminated.
Cancellation of an option to purchase provided by this letter
agreement shall be caused by either party giving written notice to
the other within ten (10) days after the respective date in
question. Upon receipt of such notice, all rights and obligations
of the parties with respect to an Option Aircraft for which the
option to purchase has been cancelled shall thereupon terminate.
Boeing shall promptly refund to Buyer, without interest, any
payments received from Buyer with respect to the affected Option
Aircraft. Boeing shall be entitled to retain the Option Deposit
unless cancellation is attributable to Boeing's fault, in which
case the Option Deposit shall also be returned to Buyer without
interest.
7. Applicability.
Except as otherwise specifically provided, limited or
excluded herein, all Option Aircraft that are added to the
Agreement by an Option Aircraft Supplemental Agreement as firm
Aircraft shall benefit from all the applicable terms, conditions
and provisions of the 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/ D. M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: March 19, 1999
CONTINENTAL AIRLINES, INC.,
By /s/ Brian Davis
Its Vice President
Attachment
Model 737-724 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft are
described by Boeing Detail Specification D6-38808-42, dated as of
January 6, 1997, as amended and revised pursuant to the Agreement.
1.2 Changes. The Option Aircraft Detail Specification
shall be revised to include:
(1) Changes applicable to the basic Model 737-700
aircraft which are developed by Boeing between the date of the
Detail Specification and the signing of an Option Aircraft
Supplemental Agreement.
(2) Changes mutually agreed upon.
(3) Changes required to obtain a Standard
Certificate of Airworthiness.
1.3 Effect of Changes. Changes to the Detail
Specification pursuant to the provisions of the clauses above shall
include the effects of such changes upon Option Aircraft weight,
balance, design and performance.
2. Price Description.
2.1 Price Adjustments.
2.1.1 Base Price Adjustments. The base aircraft
price (pursuant to Article 3 of the Agreement) of the Option
Aircraft will be adjusted to Boeing's and the engine manufacturer's
then-current prices as of the date of execution of the Option
Aircraft Supplemental Agreement.
2.1.2 Special Features. The price for special
features incorporated in the Option Aircraft Detail Specification
will be adjusted to Boeing's then-current prices for such features
as of the date of execution of the Option Aircraft Supplemental
Agreement [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].
2.1.3 Escalation Adjustments. The base airframe and
special features price will be escalated according to the
applicable airframe and engine manufacturer escalation provisions
contained in Exhibit D of the Agreement.
Buyer agrees that the engine escalation provisions will be adjusted
if they are changed by the engine manufacturer prior to signing the
Option Aircraft Supplemental Agreement. In such case, the then-
current engine escalation provisions in effect at the time of
execution of the Option Aircraft Supplemental Agreement will be
incorporated into such agreement.
2.1.4 Price Adjustments for Changes. Boeing may
adjust the basic price and the advance payment base prices for any
changes mutually agreed upon by Buyer and Boeing subsequent to the
date that Buyer and Boeing enter into the Option Aircraft
Supplemental Agreement.
2.1.5 BFE to SPE. An estimate of the total price for
items of Buyer Furnished Equipment (BFE) changed to Seller
Purchased Equipment (SPE) pursuant to the Detail Specification is
included in the Option Aircraft price build-up. The purchase price
of the Option Aircraft will be adjusted by the price charged to
Boeing for such items plus 10% of such price.
3. Advance Payments.
3.1 Buyer shall pay to Boeing advance payments for the
Option Aircraft pursuant to the schedule for payment of advance
payments provided in the Agreement.
Exhibit 10.5
Supplemental Agreement No. 4
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 February
3, 1999, 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, Boeing and Customer have mutually agreed to revise
the delivery of Option Aircraft in Letter Agreement 2061-1R1 by
deleting Option Aircraft delivering in [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and
adding Option Aircraft 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. 4.
2. Letter Agreements:
Remove and replace, in its entirety, Letter Agreement
2061-1R1 "Option Aircraft" with the revised Letter Agreement 2061-
1R2, attached hereto, to reflect the revised delivery of Option
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/ D. M. Hurt By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
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. 2
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
SLP1. Service Life Policy Components
TABLE OF CONTENTS
LETTER AGREEMENTS Revised By:
2061-1R2 Option Aircraft SA No. 4
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 REQUST FOR
CONFIDENTIAL TREATMENT]
TABLE OF CONTENTS
CONFIDENTIAL LETTER AGREEMENTS Revised By:
6-1161-GOC-087 Aircraft Performance Guarantees
6-1162-GOC-088 Promotion Support
6-1162-GOC-089R1 Special Matters SA No. 3
6-1162-GOC-172 Additional Matters SA No. 1
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 December 18, 1997
Supplemental Agreement No. 2 July 30, 1998
Supplemental Agreement No. 3 September 25, 1998
Supplemental Agreement No. 4 February 3, 1999
February 1999
2061-1R2
Continental Airlines, Inc.
1600 Smith Street
Houston, TX 77002
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. This Letter
Agreement supersedes and replaces in its entirely Letter Agreement
2061-1 dated October 10, 1997.
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 TREATEMENT] months 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. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATEMENT]
Very truly yours,
THE BOEING COMPANY
By: /s/ D. M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: February 3, 1999
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment
Attachment to
Letter Agreement 2061-1R2 Option
Aircraft Delivery, Description, Price and Advance Payments
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATEMENT]
Exhibit 10.5(a)
Supplemental Agreement No. 5
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 March
26, 1999, 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, (the Aircraft); and
WHEREAS, Boeing and Customer have mutually agreed to
[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. 5.
2. Table 1
Remove and replace, in its entirety, "Table 1", with the
"Table 1" attached hereto, to reflect the [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
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/ D. M. Hurt By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President
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. 5
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
SLP1. Service Life Policy Components
TABLE OF CONTENTS
LETTER AGREEMENTS Revised By:
2061-1R2 Option Aircraft SA No. 4
2061-2 Demonstration Flights
2061-3 Installation of Cabin Systems Equipment
2061-4 Spares Initial Provisioning
2061-5 Flight Crew Training Spares
2061-6 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
TABLE OF CONTENTS
CONFIDENTIAL LETTER AGREEMENTS Revised By:
6-1161-GOC-087 Aircraft Performance Guarantees
6-1162-GOC-088 Promotion Support
6-1162-GOC-089R1 Special Matters SA No. 3
6-1162-GOC-172 Additional Matters SA No. 1
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 December 18, 1997
Supplemental Agreement No. 2 July 30, 1998
Supplemental Agreement No. 3 September 25, 1998
Supplemental Agreement No. 4 February 3, 1999
Supplemental Agreement No. 5 March 26, 1999
Table 1
to Purchase Agreement 2061
Aircraft Delivery, Description, Price and Advance Payments
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
5
3-MOS
DEC-31-1999
MAR-31-1999
1,397
0
534
0
187
2,529
3,488
863
7,605
2,501
0
0
0
1
1,386
7,605
2,056
2,056
0
0
1,896
0
53
148
58
90
0
0
6
84
1.23
1.11