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 JUNE 30, 1998
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.)
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(Address of principal executive offices)
(Zip Code)
713-834-2950
(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 August 11, 1998, 11,418,632 shares of Class A common stock
and 49,002,863 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 Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited)
Operating Revenue:
Passenger . . . . . . . $1,888 $1,646 $3,602 $3,210
Cargo and mail. . . . . 68 63 136 123
Other . . . . . . . . . 80 77 152 151
2,036 1,786 3,890 3,484
Operating Expenses:
Wages, salaries and
related costs. . . . . 521 429 1,018 843
Aircraft fuel . . . . . 183 210 373 439
Aircraft rentals. . . . 162 128 318 259
Commissions . . . . . . 152 147 293 285
Maintenance, materials
and repairs. . . . . . 152 128 305 253
Other rentals and
landing fees . . . . . 99 98 200 195
Depreciation and
amortization . . . . . 72 62 140 122
Other . . . . . . . . . 415 353 813 711
1,756 1,555 3,460 3,107
Operating Income . . . . 280 231 430 377
Nonoperating Income
(Expense):
Interest expense. . . . (44) (42) (84) (84)
Interest capitalized. . 15 8 28 14
Interest income . . . . 14 14 26 27
Other, net. . . . . . . 10 (3) 12 (2)
(5) (23) (18) (45)
Income before Income
Taxes and Extraordinary
Charge . . . . . . . . 275 208 412 332
Income Tax Provision . . (105) (77) (157) (123)
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
(Unaudited) (Unaudited)
Distributions on
Preferred Securities
of Trust, Net of
Applicable Income
Taxes of $2, $2, $4
and $4, respectively. . $ (3) $ (3) $ (7) $ (7)
Income before Extra-
ordinary Charge . . . . 167 128 248 202
Extraordinary Charge,
Net of Applicable
Income Taxes of $2. . . (4) - (4) -
Net Income . . . . . . . 163 128 244 202
Preferred Dividend
Requirements. . . . . . - - - (2)
Income Applicable to
Common Shares . . . . . $ 163 $ 128 $ 244 $ 200
Earnings per Common
Share:
Income Before Extra-
ordinary Charge . . . $ 2.74 $ 2.22 $ 4.13 $ 3.50
Extraordinary Charge . (0.06) - (0.05) -
Net Income . . . . . . $ 2.68 $ 2.22 $ 4.08 $ 3.50
Earnings per Common
Share Assuming
Dilution:
Income Before Extra-
ordinary Charge . . . $ 2.11 $ 1.63 $ 3.16 $ 2.58
Extraordinary Charge . (0.05) - (0.04) -
Net Income . . . . . . $ 2.06 $ 1.63 $ 3.12 $ 2.58
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)
June 30, December 31,
ASSETS 1998 1997
(Unaudited)
Current Assets:
Cash and cash equivalents, including
restricted cash and cash equivalents
of $14 and $15, respectively . . . . . . $1,067 $1,025
Short-term investments. . . . . . . . . . 117 -
Accounts receivable, net. . . . . . . . . 492 361
Spare parts and supplies, net . . . . . . 145 128
Deferred income taxes . . . . . . . . . . 111 111
Prepayments and other . . . . . . . . . . 125 103
Total current assets . . . . . . . . . . 2,057 1,728
Property and Equipment:
Owned property and equipment:
Flight equipment . . . . . . . . . . . . 2,170 1,636
Other. . . . . . . . . . . . . . . . . . 494 456
2,664 2,092
Less: Accumulated depreciation. . . . . 549 473
2,115 1,619
Purchase deposits for flight equipment 483 437
Capital leases:
Flight equipment. . . . . . . . . . . . . 356 274
Other . . . . . . . . . . . . . . . . . . 40 40
396 314
Less: Accumulated amortization . . . . . 160 145
236 169
Total property and equipment . . . . . . 2,834 2,225
Other Assets:
Routes, gates and slots, net. . . . . . . 1,396 1,425
Reorganization value in excess of
amounts allocable to identifiable
assets, net. . . . . . . . . . . . . . . - 164
Investments . . . . . . . . . . . . . . . 153 104
Other assets, net . . . . . . . . . . . . 215 184
Total other assets . . . . . . . . . . . 1,764 1,877
Total Assets. . . . . . . . . . . . . . $6,655 $5,830
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
(Unaudited)
Current Liabilities:
Current maturities of long-term debt. . . $ 177 $ 243
Current maturities of capital leases. . . 47 40
Accounts payable. . . . . . . . . . . . . 778 781
Air traffic liability . . . . . . . . . . 961 746
Accrued payroll and pensions. . . . . . . 167 158
Accrued other liabilities . . . . . . . . 370 317
Total current liabilities. . . . . . . . 2,500 2,285
Long-Term Debt . . . . . . . . . . . . . . 1,866 1,426
Capital Leases . . . . . . . . . . . . . . 223 142
Deferred Credits and Other Long-Term
Liabilities:
Deferred income taxes . . . . . . . . . . 416 435
Accruals for aircraft retirements and
excess facilities. . . . . . . . . . . . 84 123
Other . . . . . . . . . . . . . . . . . . 241 261
Total deferred credits and other
long-term liabilities . . . . . . . . . 741 819
Commitments and Contingencies
Continental-Obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trust Holding Solely
Convertible Subordinated
Debentures (A). . . . . . . . . . . . . . 242 242
(A) The sole assets of the Trust are convertible subordinated
debentures with an aggregate principal amount of $249 million,
which bear interest at the rate of 8-1/2% per annum and mature
on December 1, 2020. Upon repayment, the Continental-
Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
June 30, December 31,
1998 1997
(Unaudited)
Common Stockholders' Equity:
Class A common stock - $.01 par,
50,000,000 shares authorized;
11,418,932 and 8,379,464 shares issued
and outstanding, respectively. . . . . . $ - $ -
Class B common stock - $.01 par,
200,000,000 shares authorized;
51,066,488 and 50,512,010 shares
issued and outstanding, respectively . . 1 1
Additional paid-in capital . . . . . . . 662 639
Retained earnings . . . . . . . . . . . . 520 276
Treasury stock - 1,704,997 Class B shares
in 1998. . . . . . . . . . . . . . . . . (100) -
Total common stockholders' equity. . . . 1,083 916
Total Liabilities and Stockholders'
Equity . . . . . . . . . . . . . . . . $6,655 $5,830
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONTINENTAL AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Six Months
Ended June 30,
1998 1997
(Unaudited)
Net Cash Provided by Operating
Activities. . . . . . . . . . . . . . . $ 549 $414
Cash Flows from Investing Activities:
Purchase deposits paid in connection
with future aircraft deliveries. . . . (361) (116)
Capital expenditures. . . . . . . . . . (311) (176)
Purchase deposits refunded in
connection with aircraft delivered . . 287 16
Purchase of short-term investments. . . (117) -
Investment in partner airlines. . . . . (53) -
Purchase of warrants. . . . . . . . . . - (94)
Other . . . . . . . . . . . . . . . . . 3 -
Net cash used by investing
activities. . . . . . . . . . . . . . (552) (370)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term
debt, net. . . . . . . . . . . . . . . 395 155
Payments on long-term debt and
capital lease obligations. . . . . . . (301) (219)
Purchase of Class B treasury stock. . . (120) -
Proceeds from issuance of common
stock. . . . . . . . . . . . . . . . . 44 14
Dividends paid on preferred securities
of trust . . . . . . . . . . . . . . . (11) (11)
Redemption of preferred stock . . . . . - (48)
Other . . . . . . . . . . . . . . . . . 39 -
Net cash provided (used) by
financing activities. . . . . . . . . 46 (109)
Net Increase (Decrease) in Cash and
Cash Equivalents. . . . . . . . . . . . 43 (65)
Cash and Cash Equivalents - Beginning
of Period (A) . . . . . . . . . . . . . 1,010 985
Cash and Cash Equivalents - End of
Period (A). . . . . . . . . . . . . . . $1,053 $920
(A) Excludes restricted cash of $15 million and $76 million at
January 1, 1998 and 1997, respectively, and $14 million and $74
million at June 30, 1998 and 1997, respectively.
(continued on next page)
CONTINENTAL AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Six Months
Ended June 30,
1998 1997
(Unaudited)
Supplemental Cash Flow Information:
Interest paid . . . . . . . . . . . . . $ 72 $ 75
Income taxes paid . . . . . . . . . . . $ 4 $ 5
Investing and Financing Activities
Not Affecting Cash:
Property and equipment acquired
through the issuance of debt . . . . . $263 $183
Capital lease obligations incurred. . . $109 $ -
Reduction of capital lease
obligations in connection with
refinanced aircraft. . . . . . . . . . $ - $ 97
Financed purchase deposits for
flight equipment, net. . . . . . . . . $ - $ 13
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, 1997.
NOTE 1 - SHORT-TERM INVESTMENTS
During 1998, the Company began investing in commercial paper with
original maturities in excess of 90 days but less than 270 days.
These investments are classified as short-term investments in the
consolidated balance sheet. Short-term investments are stated at
cost, which approximates market value.
NOTE 2 - REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO
IDENTIFIABLE ASSETS
During 1998, the Company determined that it would be able to
recognize additional net operating losses ("NOLs") attributable to
the Company's predecessor as a result of the completion of several
transactions resulting in recognition of built-in gains for federal
income tax purposes. This benefit was used to reduce to zero
reorganization value in excess of amounts allocable to identifiable
assets. See Note 4.
NOTE 3 - EARNINGS PER SHARE
The following table sets forth the computations of basic and
diluted earnings per share (in millions):
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Numerator:
Income before extraordinary
charge . . . . . . . . . . . . $167 $128 $248 $202
Extraordinary charge, net of
applicable income taxes. . . . (4) - (4) -
Net income. . . . . . . . . . . 163 128 244 202
Preferred stock dividends . . . - - - (2)
Numerator for basic earnings per
share - income available to
common stockholders . . . . . . 163 128 244 200
Effect of dilutive securities:
Preferred Securities of Trust . 3 3 6 6
6-3/4% convertible subordinated
notes. . . . . . . . . . . . . 2 2 4 4
5 5 10 10
Numerator for diluted earnings
per share - income available
to common stockholders after
assumed conversions. . . . . . $168 $133 $254 $210
Denominator:
Denominator for basic earnings
per share - weighted-average
shares . . . . . . . . . . . . 60.7 57.4 59.9 57.1
Effect of dilutive securities:
Employee stock options . . . . 2.0 1.4 2.0 1.4
Warrants . . . . . . . . . . . 0.7 4.2 1.7 4.5
Restricted Class B common
stock . . . . . . . . . . . . - 0.4 - 0.4
Preferred Securities of Trust. 10.3 10.3 10.3 10.3
6-3/4% convertible subordinated
notes . . . . . . . . . . . . 7.6 7.6 7.6 7.6
Dilutive potential common
shares. . . . . . . . . . . . 20.6 23.9 21.6 24.2
Denominator for diluted
earnings per share - adjusted
weighted-average and assumed
conversions. . . . . . . . . . 81.3 81.3 81.5 81.3
NOTE 4 - INCOME TAXES
Income taxes for the three and six months ended June 30, 1998 and
1997 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, 1997, the Company had estimated NOL carryforwards
of $1.7 billion for federal income tax purposes that will expire
through 2009 and federal investment tax credit carryforwards of $45
million that will expire through 2001. As a result of the change
in ownership of the Company on April 27, 1993, the ultimate
utilization of the Company's NOLs and investment tax credits will
be limited. Reflecting this limitation, the Company recorded a
valuation allowance of $617 million at December 31, 1997.
Realization of a substantial portion of the Company's remaining
NOLs required the completion by April 27, 1998 of transactions
resulting in recognition of built-in gains for federal income tax
purposes. The Company consummated several such transactions
resulting in the elimination of reorganization value in excess of
amounts allocable to identifiable assets. In addition, the
deferred tax asset related to these NOLs and the related valuation
allowance (each totaling $164 million) were eliminated in the first
quarter of 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 5 - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 - "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the
adoption of SFAS 130 had no impact on the Company's net income or
shareholders' equity. SFAS 130 requires unrealized gains or losses
on the Company's available-for-sale securities and changes in
minimum pension liabilities, which prior to adoption were reported
separately in shareholders' equity, to be included in other
comprehensive income.
During the second quarter of 1998 and 1997, total comprehensive
income amounted to $158 million and $127 million, respectively.
For the six months ended June 30, 1998 and 1997, total
comprehensive income totaled $243 million and $201 million,
respectively.
NOTE 6 - OTHER
On January 26, 1998, the Company announced that, in connection with
an agreement by Air Partners, L.P. ("Air Partners") to dispose of
its interest in the Company to an affiliate of Northwest Airlines,
Inc. ("Northwest"), the Company had entered into a long-term global
alliance with Northwest (the "Northwest Alliance") involving
schedule coordination, frequent flyer reciprocity, executive lounge
access, airport facility coordination, code-sharing, the formation
of a joint venture among the two carriers and KLM Royal Dutch
Airlines with respect to their trans-Atlantic services, cooperation
regarding other alliance partners of the two carriers and regional
alliance development, certain coordinated sales programs, preferred
reservations displays and other activities. At August 11, 1998,
the alliance between Continental and Northwest continues to be
reviewed by the Department of Justice and the Department of
Transportation, and the parties have provided additional informa-
tion to both reviewing agencies. Continental cannot predict the
timing or outcome of these governmental processes.
In February 1998, the Company completed an offering of $773 million
of pass-through certificates to be used to finance (through either
leveraged leases or secured debt financings) the debt portion of
the acquisition cost of up to 24 aircraft scheduled to be delivered
through December 1998.
In addition, during the first quarter of 1998, Continental
completed several offerings totaling approximately $98 million
aggregate principal amount of tax-exempt special facilities revenue
bonds to finance certain airport facility projects. These bonds
are guaranteed by Continental and are payable solely from rentals
paid by Continental under long-term lease agreements with the
respective governing bodies.
In April 1998, the Company completed an offering of $187 million of
pass-through certificates to be used to refinance the debt related
to 14 aircraft currently owned by Continental. In connection with
this refinancing, Continental recorded a $4 million after tax
extraordinary charge to consolidated earnings in the second quarter
of 1998.
On April 24, 1998 Air Partners exercised warrants to purchase
2,298,134 shares of Class A common stock with an exercise price of
$7.50 per share and warrants to purchase 741,334 shares of Class A
common stock with an exercise price of $15.00 per share. The
Company no longer has any warrants outstanding.
In May 1998, Continental Express, Inc. ("Express"), the Company's
wholly owned regional carrier subsidiary, signed a letter of intent
to purchase 25 Embraer ERJ-135 ("ERJ-135") 37-seat regional jets,
deliverable through the third quarter of 1999, with options for an
additional 50 aircraft exercisable through 2005. The Company
currently plans on financing the new aircraft using lease financing
and expects to account for all of these aircraft as operating
leases.
On May 21, 1998, the stockholders of the Company approved the
Continental Airlines, Inc. 1998 Stock Incentive Plan (the
"Incentive Plan"). The Incentive Plan provides that the Company
may issue shares of restricted Class B common stock or grant
options to purchase shares of Class B common stock to non-employee
directors of the Company or employees of the Company or its
subsidiaries. Subject to adjustment as provided in the Incentive
Plan, the aggregate number of shares of Class B common stock that
may be issued under the Incentive Plan may not exceed 5,500,000
shares, which may be originally issued or treasury shares or a
combination thereof. As of June 30, 1998, employee stock options
relating to approximately 2,850,000 shares had been issued under
the Incentive Plan.
In June 1998, a new five-year collective bargaining agreement,
retroactive to October 1997, was ratified by Continental's pilots,
who are represented by the Independent Association of Continental
Pilots ("IACP"). The agreement becomes amendable in October 2002.
The Company began accruing for the increased costs of the new
agreement in the fourth quarter of 1997. The Company estimates
that the increased costs will be approximately $113 million for
1998. Also in June 1998, the pilots at Express, who are also
represented by the IACP, rejected a new five-year agreement which
had been submitted to them for ratification. The parties will
resume bargaining with respect to a revised Express contract with
the assistance of the National Mediation Board ("NMB") in the third
quarter of 1998. While it is not possible to predict the outcome
of those negotiations, the Company does not believe it will have a
material financial impact on the Company. The Company's
dispatchers, represented by the Transport Workers' Union ("TWU"),
ratified a new five-year collective bargaining agreement in June
1998. The agreement becomes amendable in October 2003. Collective
bargaining negotiations, which began in the fall of 1997, are
ongoing with the International Brotherhood of Teamsters (the
"Teamsters") for an initial collective bargaining agreement
covering the Company's mechanics and related employees. While it
is not possible to predict the outcome of these negotiations, the
Company does not believe they will have a material financial impact
on the Company.
Also in June 1998, the Company sold its remaining 317,140 shares of
its America West Holding Corporation ("America West") Class B
common stock realizing net proceeds of approximately $8.9 million
and recognizing a gain of $6 million.
In 1998, the Company's Board of Directors authorized the
expenditure of up to $200 million to repurchase shares of the
Company's common stock or convertible securities. No time limit
was placed on the duration of the repurchase program. Subject to
applicable securities laws, such purchases occur at times and in
amounts that the Company deems appropriate. As of August 11, 1998,
2,600,000 shares had been repurchased for a total of $152 million.
NOTE 7 - SEGMENTS DISCLOSURE
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 131 - "Disclosure
About Segments of an Enterprise and Related Information" ("SFAS
131"). Although SFAS 131 is effective beginning the first quarter
of 1998, Continental has elected not to report segment information
in interim financial statements in the first year of application
consistent with the provisions of the statement.
NOTE 8 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133 - Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), which
is required to be adopted in years beginning after June 15, 1999.
Management does not anticipate that the adoption of SFAS 133 will
have a significant effect on earnings or the financial position of
the Company.
NOTE 9 - SUBSEQUENT EVENTS
On August 11, 1998, the Company announced that Continental
Micronesia, Inc. ("CMI"), a wholly owned subsidiary of the Company,
plans to accelerate the retirement of its four 747 aircraft in
April 1999 and its remaining thirteen 727 aircraft by December
2000. The 747s will be replaced by DC-10-30s and the 727s will be
replaced with a reduced number of 737s. In addition, Express will
accelerate the retirement of certain turboprop aircraft by December
2000, including its fleet of 32 EMB-120 aircraft, as regional jets
are brought in to replace turboprops. CMI's fleet retirement
decisions will result in a nonrecurring charge of $65 million ($41
million after tax) and Express' fleet retirement decisions will
result in a nonrecurring charge of $57 million ($36 million after
tax). The combined charge will be $122 million ($77 million after
tax) and will be recorded in the third quarter of 1998.
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 Form 10-K for the year ended December 31, 1997 which
identify important factors 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, fare sale activities, excise and
similar taxes, changing levels of operations, fuel prices, foreign
currency exchange rates and general economic conditions.
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 and six months ended June 30, 1998 as compared to the
corresponding periods ended June 30, 1997.
Comparison of Three Months Ended June 30, 1998 to Three Months
Ended June 30, 1997
The Company recorded consolidated net income of $163 million for
the three months ended June 30, 1998 as compared to consolidated
net income of $128 million for the three months ended June 30,
1997.
Passenger revenue increased 14.7%, $242 million, during the quarter
ended June 30, 1998 as compared to the same period in 1997, which
was principally due to a 14.7% increase in revenue passenger miles.
Wages, salaries and related costs increased 21.4%, $92 million,
during the quarter ended June 30, 1998 as compared to the same
period in 1997, primarily due to an 11.6% increase in average full-
time equivalent employees and higher wage rates resulting from the
Company's decision to increase employee wages to industry standards
by the year 2000.
Aircraft fuel expense decreased 12.9%, $27 million, in the three
months ended June 30, 1998 as compared to the same period in the
prior year. The average price per gallon decreased 23.2% from
61.17 cents in the second quarter of 1997 to 46.96 cents in the
second quarter of 1998. This reduction was partially offset by a
13.0% increase in the quantity of jet fuel used principally
reflecting increased capacity.
Aircraft rentals increased $34 million or 26.6% due to the delivery
of new aircraft.
Maintenance, materials and repairs increased 18.8%, $24 million,
during the quarter ended June 30, 1998 as compared to the same
period in 1997. Aircraft maintenance expense in the second quarter
of 1997 was reduced by $16 million due to the reversal of reserves
that were no longer required as a result of the acquisition of 10
aircraft previously leased by the Company. In addition,
maintenance expense increased due to the volume and timing of
engine overhauls and routine maintenance as part of the Company's
ongoing maintenance program.
Depreciation and amortization expense increased 16.1%, $10 million,
in the second quarter of 1998 compared to the second quarter of
1997 primarily due to the addition of new aircraft and related
spare parts. These increases were partially offset by a reduction
in the amortization of reorganization value in excess of amounts
allocable to identifiable assets. See Note 2.
Other operating expense increased 17.6%, $62 million, in the three
months ended June 30, 1998 as compared to the same period in the
prior year, as a result of increases in passenger servicing
expense, aircraft servicing expense, reservations and sales expense
and other miscellaneous expense, primarily due to the 12.7%
increase in available seat miles.
The Company's other nonoperating income (expense) in the quarter
ended June 30, 1998 included a $6 million gain on the sale of
America West stock. Other nonoperating income (expense) in the
second quarter of 1997 included foreign exchange losses primarily
related to the Japanese yen.
Comparison of Six Months Ended June 30, 1998 to Six Months Ended
June 30, 1997
The Company recorded consolidated net income of $244 million and
$202 million for the six months ended June 30, 1998 and 1997,
respectively. Management believes that the Company benefitted in
the first quarter of 1997 from the expiration of the aviation trust
fund tax (the "ticket tax"). The ticket tax was reinstated on
March 7, 1997. Management believes that the ticket tax has a
negative impact on the Company, although neither the amount of such
negative impact directly resulting from the reimposition of the
ticket tax, nor the benefit realized by its previous expiration,
can be precisely determined.
The operating results of CMI declined during 1996, 1997 and the
first half of 1998 as a result of the continued weakness of the yen
against the dollar, a weak Japanese economy and increased fuel
costs in 1996 and 1997. CMI's operating results are not expected
to improve materially absent a significant improvement in the
Japanese economy or a significant strengthening of the yen.
Passenger revenue increased 12.2%, $392 million, during the six
months ended June 30, 1998 as compared to the same period in 1997.
The increase was due to a 12.9% increase in revenue passenger
miles, partially offset by a 1.4% decrease in yield.
Cargo and mail revenue increased 10.6%, $13 million, during the six
months ended June 30, 1998 as compared to the same period in 1997,
due to an increase in cargo capacity primarily in international
markets.
Wages, salaries and related costs increased 20.8%, $175 million,
during the six months ended June 30, 1998 as compared to the same
period in 1997, primarily due to an 11.4% increase in average full-
time equivalent employees and higher wage rates resulting from the
Company's decision to increase employee wages to industry standards
by the year 2000.
Aircraft fuel expense decreased 15.0%, $66 million, in the six
months ended June 30, 1998 as compared to the same period in the
prior year. The average price per gallon decreased 24.4% from
65.20 cents in the first six months of 1997 to 49.30 cents in the
first six months of 1998. This reduction was partially offset by
an 11.5% increase in the quantity of jet fuel used principally
reflecting increased capacity.
Aircraft rentals increased 22.8%, $59 million, during the six
months ended June 30, 1998 as compared to the same period in 1997,
due primarily to the delivery of new aircraft.
Maintenance, materials and repairs increased 20.6%, $52 million,
during the six months ended June 30, 1998 as compared to the same
period in 1997. Aircraft maintenance expense in the second quarter
of 1997 was reduced by $16 million due to the reversal of reserves
that were no longer required as a result of the acquisition of 10
aircraft previously leased by the Company. In addition,
maintenance expense increased due to the volume and timing of
engine overhauls as part of the Company's ongoing maintenance
program.
Depreciation and amortization expense increased 14.8%, $18 million,
in the first six months of 1998 compared to the same period in 1997
primarily due to the addition of new aircraft and related spare
parts. These increases were partially offset by a reduction in the
amortization of reorganization value in excess of amounts allocable
to identifiable assets. See Note 2.
Other operating expense increased 14.3%, $102 million, in the six
months ended June 30, 1998 as compared to the same period in the
prior year, primarily as a result of increases in passenger
servicing expense, aircraft servicing expense, reservations and
sales expense and other miscellaneous expense, primarily due to the
11.7% increase in available seat miles.
The Company's other nonoperating income (expense) in the six months
ended June 30, 1998 included a $6 million gain on the sale of
America West stock. Other nonoperating income (expense) in the
first six months of 1997 included foreign currency losses primarily
related to the Japanese yen.
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
June 30, Increase/
1998 1997 (Decrease)
Revenue passenger miles
(millions) (1). . . . . . . . . . 13,675 11,922 14.7 %
Available seat miles
(millions) (2). . . . . . . . . .18,574 16,486 12.7 %
Passenger load factor (3). . . . . 73.6% 72.3% 1.3 pts.
Breakeven passenger load
factor (4). . . . . . . . . . . . 59.0% 57.7% 1.3 pts.
Passenger revenue per available
seat mile (cents). . . . . . . . 9.39 9.31 0.9 %
Total revenue per available
seat mile (cents) . . . . . . . . 10.27 10.24 0.3 %
Operating cost per available
seat mile (cents) . . . . . . . . 8.85 8.90 (0.6)%
Average yield per revenue
passenger mile (cents) (5) . . . 12.75 12.87 (0.9)%
Average fare per revenue
passenger . . . . . . . . . . . .$154.80 $146.66 5.6 %
Revenue passengers (thousands) . .11,261 10,462 7.6 %
Average length of aircraft
flight (miles) . . . . . . . . . 1,038 944 10.0 %
Average daily utilization of
each aircraft (hours) (6). . . . 10:19 10:09 1.6 %
Actual aircraft in fleet at
end of period (7) . . . . . . . . 353 325 8.6 %
Six Months Ended Net
June 30, Increase/
1998 1997 (Decrease)
Revenue passenger miles
(millions) (1). . . . . . . . . . 25,747 22,813 12.9 %
Available seat miles
(millions) (2). . . . . . . . . .36,097 32,318 11.7 %
Passenger load factor (3). . . . . 71.3% 70.6% 0.7 pts.
Breakeven passenger load
factor (4). . . . . . . . . . . . 59.8% 58.3% 1.5 pts.
Passenger revenue per available
seat mile (cents). . . . . . . . 9.25 9.30 (0.5)%
Total revenue per available
seat mile (cents) . . . . . . . . 10.15 10.23 (0.8)%
Operating cost per available
seat mile (cents) . . . . . . . . 8.99 9.08 (1.0)%
Average yield per revenue
passenger mile (cents) (5) . . . 12.98 13.17 (1.4)%
Average fare per revenue
passenger . . . . . . . . . . . .$156.60 $148.78 5.3 %
Revenue passengers (thousands) . .21,333 20,201 5.6 %
Average length of aircraft
flight (miles) . . . . . . . . . 1,026 935 9.7 %
Average daily utilization of
each aircraft (hours) (6). . . . 10:16 10:12 0.7 %
Actual aircraft in fleet at
end of period (7) . . . . . . . . 353 325 8.6 %
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. One such arrangement began in June
1997 and another began in February 1998. For the three months
ended June 30, 1998, the table above excludes 346 million available
seat miles, and related revenue passenger miles and enplanements,
operated by Continental but purchased and marketed by the carrier,
and includes 43 million available seat miles, and related revenue
passenger miles and enplanements, operated by other carriers but
purchased and marketed by Continental. For the six months ended
June 30, 1998, the table above excludes 676 million available seat
miles, and related revenue passenger miles and enplanements,
operated by Continental but purchased and marketed by the other
carrier, and includes 65 million available seat miles, and related
revenue passenger miles and enplanements, operated by other
carriers but purchased and marketed by Continental.
(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 all-cargo 727 aircraft (six in 1998 and four in
1997) at CMI. During the first six months of 1998, the
Company took delivery of 27 aircraft and removed 11 aircraft
from service.
LIQUIDITY AND CAPITAL COMMITMENTS
In the first six months of 1998, the Company completed several
transactions intended to strengthen its long-term financial
position and enhance earnings.
In February 1998, the Company completed an offering of $773 million
of pass-through certificates to be used to finance (through either
leveraged leases or secured debt financings) the debt portion of
the acquisition cost of up to 24 aircraft scheduled to be delivered
through December 1998.
In addition, during the first quarter of 1998 Continental completed
several offerings totaling approximately $98 million aggregate
principal amount of tax-exempt special facilities revenue bonds to
finance certain airport facility projects. These bonds are
guaranteed by Continental and are payable solely from rentals paid
by Continental under long-term lease agreements with the respective
governing bodies.
In April 1998, the Company completed an offering of $187 million of
pass-through certificates used to refinance the debt related to 14
aircraft currently owned by Continental.
As of June 30, 1998, the Company had $1.1 billion in cash and cash
equivalents (excluding restricted cash of $14 million) and $117
million of short-term investments, compared to $1 billion in cash
and cash equivalents (excluding restricted cash of $15 million) as
of December 31, 1997. Net cash provided by operating activities
increased $135 million during the six months ended June 30, 1998
compared to the same period in the prior year primarily due to an
improvement in operating income. Net cash used by investing
activities increased $182 million for the six months ending June
30, 1998 compared to the same period in the prior year, primarily
as a result of higher capital and fleet-related expenditures and
the purchase of short-term investments. Net cash provided by
financing activities for the three months ended June 30, 1998
compared to the same period in the prior year increased $155
million primarily due to an increase in proceeds from 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, 1997,
deferred tax assets aggregating $1.1 billion, including
$631 million of NOLs. Realization of a substantial portion of the
Company's remaining NOLs required the completion by April 27, 1998
of transactions resulting in recognition of built-in gains for
federal income tax purposes. The Company consummated several such
transactions resulting in the elimination of reorganization value
in excess of amounts allocable to identifiable assets. To the
extent the Company were to determine in the future that additional
NOLs of the Company's predecessor could be recognized in the
accompanying consolidated financial statements, such benefit would
reduce routes, gates and slots.
As a result of NOLs, the Company will not pay United States federal
income taxes (other than alternative minimum tax) until it has
recorded approximately an additional $515 million of taxable income
following December 31, 1997. Section 382 of the Internal Revenue
Code ("Section 382") imposes limitations on a corporation's ability
to utilize NOLs if it experiences an "ownership change." In
general terms, an ownership change may result from transactions
increasing the ownership of certain stockholders in the stock of a
corporation by more than 50 percentage points over a three-year
period. Based on information currently available, the Company does
not believe that the Air Partners agreement to dispose of its
interest in the Company to an affiliate of Northwest will result in
an ownership change for purposes of Section 382.
Purchase Commitments. As of July 17, 1998, Continental had firm
commitments with The Boeing Company ("Boeing") to take delivery of
a total of 132 jet aircraft during the years 1998 through 2005 with
options for an additional 61 aircraft (exercisable subject to
certain conditions). These new aircraft will replace older, less
efficient Stage 2 aircraft and allow for growth of operations. The
estimated aggregate cost of the Company's firm commitments for the
Boeing aircraft is approximately $5.9 billion. As of July 17,
1998, Continental had completed or had third-party commitments for
a total of approximately $982 million in financing for its future
Boeing deliveries, and had commitments or letters of intent from
various sources for backstop financing for approximately one-third
of the anticipated remaining acquisition cost of such Boeing
deliveries. The Company currently plans on financing the new
Boeing aircraft with a combination of enhanced equipment trust
certificates, lease equity and other third-party financing, subject
to availability and market conditions. However, further financing
will be needed to satisfy the Company's capital commitments for
other aircraft and aircraft-related expenditures such as engines,
spare parts, simulators and related items. There can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments. Deliveries of new Boeing aircraft are
expected to increase aircraft rental, depreciation and interest
costs while generating cost savings in the areas of maintenance,
fuel and pilot training.
During the first six months of 1998, the Company took delivery of
27 aircraft of which 25 were financed through enhanced equipment
trust certificates.
As of July 17, 1998, Express had firm commitments for 22 Embraer
ERJ-145 ("ERJ-145") 50-seat regional jets and a letter of intent to
purchase 25 ERJ-135 37-seat regional jets, with options for an
additional 150 ERJ-145 and 50 ERJ-135 aircraft exercisable through
2008. Neither Express nor Continental will have any obligation to
take any such aircraft that are not financed by a third party and
leased to the Company. Express took delivery of 9 of the ERJ-145
firm aircraft in the first half of 1998 and will take delivery of
the remaining 47 firm aircraft through the third quarter of 1999.
The Company expects to account for all of these aircraft as
operating leases.
Continental expects its cash outlays for 1998 capital expenditures,
exclusive of fleet plan requirements, to aggregate $229 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 six
months ended June 30, 1998 aggregated $85 million, exclusive of
fleet plan requirements.
The Company expects to fund its future capital commitments through
internally generated funds together with general Company financings
and aircraft financing transactions. However, there can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments.
Year 2000 and Euro.
As described in its annual report on Form 10-K, the Company
implemented a Year 2000 project in early 1997 to ensure that the
Company's computer systems will function properly in the year 2000
and thereafter. The total cost for the project (excluding internal
payroll costs) is currently expected to approximate $12-15 million,
which is being funded with cash from operations. As of June 30,
1998, the Company had incurred and expensed approximately $7
million relating to its Year 2000 project.
The Company's Year 2000 project involves the review of a number of
internal and third-party components. Each component is subjected
to the project's five phases, which consist of inventory of
systems, evaluation and analysis, modification implementation, user
testing and integration compliance. The components are currently
in various stages of completion; however, the Company's entire Year
2000 project is anticipated to be completed by early 1999. This
should allow the Company sufficient time for any additional
analysis, modification and testing which may be required. The
Company's business, financial condition or results of operations
could be materially adversely affected by the failure of its
systems or those operated by third parties on which the Company's
business relies (including those of the Federal Aviation
Administration) to operate properly beyond 1999. There can be no
assurance that such systems will be modified for Year 2000
operational requirements on a timely basis. 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.
Effective January 1, 1999, eleven of the fifteen countries
comprising the European Union will begin a transition to a single
monetary unit, the "euro", which is scheduled to be completed by
July 1, 2002. The Company has developed a plan designed to allow
Continental to effectively operate in the euro. Management does
not anticipate that the implementation of this single currency plan
will have a material effect on the Company's operations or
financial condition.
Bond Financings. In December 1997, Continental substantially
completed construction of a new hangar and improvements to a cargo
facility at Continental's hub at Newark International Airport.
Continental completed the financing of these projects in April 1998
with $23 million of tax-exempt bonds. Continental is also planning
a major facility expansion at Newark which would require, among
other matters, agreements to be reached with the applicable airport
authority.
Continental has announced plans to expand its facilities at its
Hopkins International Airport hub in Cleveland, which expansion is
expected to be completed in the third quarter of 1999. The
expansion, which will include a new jet concourse for the regional
jet service offered by Express, as well as other facility
improvements, is expected to cost approximately $156 million and
will be funded principally by a combination of tax-exempt special
facilities revenue bonds (issued in March 1998) and general airport
revenue bonds (issued in December 1997) by the City of Cleveland.
In connection therewith, Continental has guaranteed the special
facilities revenue bonds and has entered into a long-term lease
with the City of Cleveland under which rental payments will be
sufficient to service both series of bonds.
Employees. In June 1998, a new five-year collective bargaining
agreement, retroactive to October 1997, was ratified by
Continental's pilots, who are represented by the IACP. The
agreement becomes amendable in October 2002. The Company began
accruing for the increased costs of the new agreement in the fourth
quarter of 1997. The Company estimates that the increased costs
will be approximately $113 million for 1998. Also in June 1998,
the pilots at Express, who are also represented by the IACP,
rejected a new five-year agreement which had been submitted to them
for ratification. The parties will resume bargaining with the
assistance of the NMB in the third quarter of 1998. While it is
not possible to predict the outcome of those negotiations, the
Company does not believe they will have a material financial impact
on the Company. The Company's dispatchers, represented by the TWU,
ratified a new five-year collective bargaining agreement in June
1998. The agreement becomes amendable in October 2003. Collective
bargaining negotiations, which began in the fall of 1997, are
ongoing with the Teamsters for an initial collective bargaining
agreement covering the Company's mechanics and related employees.
While is it not possible to predict the outcome of these
negotiations, the Company does not believe they will have a
material financial impact on the Company.
In September 1997, Continental announced that it intends to bring
all employees to industry standard wages (the average of the top
ten U.S. air carriers as ranked by the U.S. Department of
Transportation excluding Continental) within 36 months. The
announcement further stated that wage increases will be phased in
over the 36-month period as revenue, interest rates and rental
rates reached industry standards. Continental estimates that the
increased wages will aggregate approximately $500 million over the
36-month period.
Other. On January 26, 1998, the Company announced that, in
connection with an agreement by Air Partners to dispose of its
interest in the Company to an affiliate of Northwest, the Company
had entered into a long-term global alliance with Northwest. The
Company estimated at the time of the announcement that the alliance
with Northwest, when fully phased in over a three-year period,
would generate in excess of $500 million in additional annual pre-
tax operating income for the carriers, and anticipated that
approximately 45% of such pre-tax operating income would accrue to
the Company. Recently, United Airlines and Delta Air Lines, and
American Airlines and US Airways, respectively, announced plans to
form alliances, subject in certain cases to approval of such
companies' respective pilots' unions. If either or both planned
alliances are implemented, the anticipated benefit from the
Company's alliance with Northwest would be somewhat diminished.
The Company cannot currently estimate the impact of any such
alliances on its business or on the anticipated benefits from the
Northwest Alliance.
In February 1998, Continental began a block-space arrangement
whereby it is committed to purchase capacity on another carrier at
a cost of approximately $147 million per year. This arrangement is
for 10 years. Pursuant to other block-space arrangements, other
carriers are committed to purchase capacity on Continental.
In 1998, the Company's Board of Directors authorized the
expenditure of up to $200 million to repurchase shares of the
Company's common stock or convertible securities. No time limit
was placed on the duration of the repurchase program. Subject to
applicable securities laws, such purchases occur at times and in
amounts that the Company deems appropriate. As of August 11, 1998,
2,600,000 shares had been repurchased for a total of $152 million.
Historically, the Company has entered into petroleum call options
to provide some short-term protection against a sharp increase in
jet fuel prices. In light of declining fuel prices and the high
cost of call options with strike prices at spreads above current
prices, which have typically been purchased by the Company, the
Company's petroleum call option contracts currently provide
protection only against significantly higher fuel prices with
respect to approximately three months of the Company's fuel needs,
in the event of a fuel supply shortage resulting from a disruption
of oil imports or otherwise.
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders was held on May 21,
1998. The following individuals were elected to the Company's
Board of Directors to hold office for the ensuing year:
Nominee Votes for Votes Withheld
Thomas J. Barrack, Jr. 119,723,373 43,925
Lloyd M. Bentsen, Jr. 119,717,440 49,857
Gordon M. Bethune 119,722,321 44,976
David Bonderman 119,721,645 45,653
Gregory D. Brenneman 119,723,348 43,949
Patrick Foley 119,722,361 44,937
Douglas H. McCorkindale 119,723,213 44,085
George G. C. Parker 119,722,285 45,013
Richard W. Pogue 119,723,023 44,275
William S. Price III 119,723,427 43,871
Donald L. Sturm 119,723,325 43,973
Karen Hastie Williams 119,722,343 44,955
Charles A. Yamarone 119,723,271 44,027
The approval of the Company's 1998 Stock Incentive Plan was
proposed to enable the Company and its subsidiaries to attract
able persons to serve as directors and employees and to provide
such individuals with additional incentive and reward
opportunities. The Incentive Plan was voted on by the
stockholders as follows:
Votes Votes Broker
Votes For Against Abstaining Non-Votes
61,764,282 34,684,191 138,039 23,180,785
A proposal to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending
December 31, 1998 was voted on by the stockholders as follows:
Votes Votes Broker
Votes For Against Abstaining Non-Votes
119,644,848 81,447 41,002 -
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 Supplemental Agreement No. 5, including exhibits
and side letters, to Purchase Agreement No. 1951
between the Company and The Boeing Company
relating to the purchase of Boeing 737 aircraft,
dated October 10, 1997.
10.2 Continental Airlines, Inc. 1998 Stock Incentive
Plan -- incorporated by reference to Exhibit 4.3
to Continental's Form S-8 Registration Statement
(No. 333-57297) (the "S-8").
10.2 (a) Form of Employee Stock Option Grant pursuant to
the Company's 1998 Stock Incentive Plan --
incorporated by reference to Exhibit 4.4 to the
S-8.
10.3 Stay Bonus Agreement between the Company and
Gordon M. Bethune.
10.4 Stay Bonus Agreement between the Company and
Gregory D. Brenneman.
10.5 Stay Bonus Agreement between the Company and
Lawrence W. Kellner.
10.6 Stay Bonus Agreement between the Company and C.D.
McLean.
10.7 Stay Bonus Agreement between the Company and
Jeffery A. Smisek.
10.8 Forms of Stay Bonus Agreements for Other
Executive Officers.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
(i) Report dated April 21, 1998 reporting Item 7.
"Financial Statements and Exhibits". No
financial statements were filed with the report,
which included an Exhibit Index related to the
offering the Company's Pass Through Certificates,
Series 1998-2.
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: August 14, 1998 by: /s/ Lawrence W. Kellner
Lawrence W. Kellner
Executive Vice President and
Chief Financial Officer
(On behalf of Registrant)
Date: August 14, 1998 /s/ Michael P. Bonds
Michael P. Bonds
Vice President and Controller
(Chief Accounting Officer)
INDEX TO EXHIBITS
OF
CONTINENTAL AIRLINES, INC.
10.1 Supplemental Agreement No. 5, including exhibits and side
letters, to Purchase Agreement No. 1951 between the
Company and The Boeing Company relating to the purchase
of Boeing 737 aircraft, dated October 10, 1997. (1)
10.2 Continental Airlines, Inc. 1998 Stock Incentive Plan --
incorporated by reference to Exhibit 4.3 to Continental's
Form S-8 Registration Statement (No. 333-57297) (the "S-
8").
10.2 (a) Form of Employee Stock Option Grant pursuant to the
Company's 1998 Stock Incentive Plan -- incorporated by
reference to Exhibit 4.4 to the S-8.
10.3 Stay Bonus Agreement between the Company and Gordon M.
Bethune.
10.4 Stay Bonus Agreement between the Company and Gregory D.
Brenneman.
10.5 Stay Bonus Agreement between the Company and Lawrence W.
Kellner.
10.6 Stay Bonus Agreement between the Company and C.D. McLean.
10.7 Stay Bonus Agreement between the Company and Jeffery A.
Smisek.
10.8 Forms of Stay Bonus Agreements for Other Executive
Officers.
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
Supplemental Agreement No. 5
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 May 21,
1998, by and between THE BOEING COMPANY, a Delaware corporation
with its principal office in Seattle, Washington, (Boeing) and
CONTINENTAL AIRLINES, INC., a Delaware corporation with its
principal office in Houston, Texas (Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 1951 dated July 23, 1996, as amended and supplemented,
relating to Boeing Model 737-500, 737-600, 737-700 and 737-800
aircraft (the Agreement); and
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
WHEREAS, Boeing and Buyer signed Letter Agreement 6-1162-
GOC-131R1 "Special Matters" on March 27, 1998, replacing in its
entirety Letter Agreement 6-1162-GOC-131 "Special Matters" dated
October 10, 1997 without benefit of a supplemental agreement to
the Agreement, and
WHEREAS, Boeing and Buyer have mutually agreed to amend the
Purchase Agreement to incorporate the effect of these and certain
other changes;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree to amend the Purchase
Agreement as follows:
1. Table of Contents 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. 5.
1.2 Remove and replace, in its entirety, "ARTICLE 1.,
Subject Matter of Sale" with "ARTICLE 1., Subject Matter of Sale"
attached hereto, to reflect the addition of the Model 737-900
Aircraft.
1.3 Remove and replace, in its entirety, "ARTICLE 3.,
Price of Aircraft" with "ARTICLE 3., Price of Aircraft" attached
hereto, to reflect the addition of the Model 737-900 Aircraft.
1.4 Remove and replace, in its entirety, "ARTICLE 7.,
Changes to the Detail Specification" with "ARTICLE 7., Changes to
the Detail Specification" attached hereto, to reflect the
addition of the Model 737-900 Aircraft.
1.5 Remove and replace, in its entirety, "ARTICLE 8.,
Federal Aviation Requirements and Certificates" with "ARTICLE 8,
Federal Aviation Requirements and Certificates" attached hereto,
to reflect the addition of the Model 737-900 Aircraft.
1.6 Add a new Table T-5 entitled "Aircraft Deliveries and
Descriptions, Model 737-900 Aircraft" attached hereto for the
Model 737-900 Aircraft.
2. Exhibits
2.1 Exhibit A entitled "Aircraft Configuration" is revised
by adding thereto Exhibit A-5 attached hereto to incorporate the
configuration for the Model 737-900 Aircraft.
2.2 Remove and replace Page C1-I of Exhibit C entitled
"Customer Support Document" with new Page C1-I attached hereto,
to incorporate Model 737-924 Aircraft.
2. Exhibit D entitled "Aircraft Price Adjustment" is
revised by adding thereto Exhibit D-2 attached hereto to
incorporate the Aircraft Price Adjustment provisions for Aircraft
with a 1997 Base Price.
2.4 Remove and replace, in its entirety, Exhibit E
entitled "Buyer Furnished Equipment Provisions Document" with new
Exhibit E entitled "Buyer Furnished Equipment Provisions
Document" attached hereto, to incorporate Model 737-900 Aircraft.
2.5 Remove and replace, in its entirety, Exhibit F
entitled "Defined Terms Document" with new Exhibit F entitled
"Defined Terms Document" attached hereto, which deletes reference
to 737 sub-models and makes certain other changes.
3. Letter Agreements:
3.1 Remove and replace, in its entirety, Letter Agreement
1951-2R2, "Seller Purchased Equipment" with Letter Agreement
1951-2R3, "Seller Purchased Equipment", attached hereto, to
reflect the addition of the Model 737-900 Aircraft.
3.2 Remove and replace, in its entirety, Letter Agreement
1951-3R1, "Option Aircraft - Model 737-824 Aircraft" with Letter
Agreement 1951-3R2, "Option Aircraft - Model 737-824 Aircraft",
attached hereto, to [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
3.3 Remove and replace, in its entirety, Letter Agreement
1951-5R1, "[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT.] New Generation Aircraft" with Letter
Agreement 1951-5R2, "[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.] New Generation
Aircraft", attached hereto, to reflect the addition of the Model
737-900 Aircraft.
3.4 Remove and replace, in its entirety, Letter Agreement
1951-9, "Option Aircraft - Model 737-624 Aircraft" with Letter
Agreement 1951-9R1, "Option Aircraft - Model 737-624 Aircraft",
attached hereto, to reflect [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
3.5 Add new Letter Agreement 1951-12 "Option Aircraft -
Model 737-924 Aircraft", attached hereto, to incorporate
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3.6 Add new Letter Agreement 1951-13 "Configuration
Matters - Model 737-924", attached hereto, to incorporate
provisions for determining the configuration of the Model 737-924
Aircraft.
3.7 Remove and replace, in its entirety, Letter Agreement
6-1162-MMF-308R2, "Disclosure of Confidential Information" with
Letter Agreement 6-1162-MMF-308R3, "Disclosure of Confidential
Information", attached hereto, to revise the schedule of
confidential documents.
3.8 Remove and replace, in its entirety, Letter Agreement
6-1162-MMF-311R2, [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.] with Letter Agreement
6-1162-MMF-311R3, [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.] attached hereto, to
incorporate the Model 737-900 Aircraft.
3.9 Remove and replace, in its entirety, Letter Agreement
6-1162-GOC-131 "Special Matters" with Letter Agreement 6-1162-
GOC-131R1 "Special Matters", dated March 27, 1998. Additionally,
remove and replace, in its entirely, Letter Agreement 6-1162-GOC-
131R1 "Special Matters" with Letter Agreement 6-1162-GOC-131R2,
"Special Matters" attached hereto, to incorporate the Model 737-
900 Aircraft.
3.10 Add new Letter Agreement 6-1162-DMH-365 "[CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.] Model 737-924 Aircraft" attached hereto to
incorporate [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT.] the Model 737-924 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/ David 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 4
Aircraft Deliveries and
Descriptions - 737-800. . . . . . . . T-3 SA 4
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
1951-3R2 Option Aircraft-Model 737-824
Aircraft . . . . . . . . . . . . . . . SA 5
1951-4R1 Waiver of Aircraft Demonstration . . . SA 1
1951-5R2 [CONFIDENTIAL MATERIAL OMITTED AND FILED SA 5
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
1951-6 Configuration Matters. . . . . . . . .
1951-7R1 Spares Initial Provisioning. . . . . . SA 1
1951-8R2 Escalation Sharing - New Generation
Aircraft . . . . . . . . . . . . . . . SA 4
1951-9R1 Option Aircraft-Model 737-624
Aircraft . . . . . . . . . . . . . . . SA 5
1951-10 Configuration matters . . . . . . . . SA 1
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.] - Model 737-624
Aircraft
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 [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.]
6-1162-MMF-296 [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.]
6-1162-MMF-308R3 Disclosure of Confidential . . . SA 5
Information
6-1162-MMF-309R1 [CONFIDENTIAL MATERIAL OMITTED AND SA 1
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.]
6-1162-MMF-311R3 [CONFIDENTIAL MATERIAL OMITTED AND SA 5
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 [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.] SA 3
6-1162-MMF-379R1 [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.] SA 2
6-1162-GOC-015 [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.] SA 2
6-1162-GOC-131R2 Special Matters . . . . . . . . . SA 5
6-1162-DMH-365 [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.] SA 5
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
ARTICLE 1. Subject Matter of Sale.
1.1 The Aircraft. Boeing will manufacture and deliver to
Buyer and Buyer will purchase and accept delivery from Boeing the
Model 737 aircraft (the Aircraft) described below in the
quantities of the model types shown in Table 1, Aircraft
Deliveries and Descriptions for Model 737 Aircraft, to this
Agreement and manufactured in accordance with the detail
specifications identified below (Detail Specification).
1.1.1 Current Generation Aircraft.
Model 737-524 Aircraft (the Current
Generation Aircraft) which will be manufactured in accordance
with the Boeing detail specification as described in Exhibit A-4,
and as modified from time to time in accordance with this
Agreement.
1.1.2 New Generation Aircraft.
Model 737-724, Model 737-824, Model 737-624,
and Model 737-924 Aircraft (the New Generation Aircraft) which
will be manufactured in accordance with the Boeing detail
specifications described in Exhibits A-1, A-2, A-3 and A-5,
respectively, and as modified from time to time in accordance
with this Agreement.
1.2 Additional Goods and Services. In connection with
the sale of the Aircraft, Boeing will also provide to Buyer
certain other things under this Agreement, including data,
documents, training and services, all as described in this
Agreement.
1.3 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT.]
1.4 Defined Terms. For ease of use, certain terms are
treated as defined terms in this Agreement. Such terms are
identified with a capital letter and set forth and/or defined in
Exhibit F.
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Current Generation Aircraft.
3.1.1.1 Special Features are the features
listed in Exhibit A-4 which Buyer has selected for incorporation
in Current Generation Aircraft.
3.1.1.2 Base Airframe Price is the Aircraft
Basic Price excluding the price of Special Features and Engines.
3.1.1.3 Engine Price is the price
established by the Engine manufacturer for the Engines installed
on the Aircraft including all accessories, equipment and parts
set forth in Exhibit D-1.
3.1.1.4 Aircraft Basic Price is comprised
of the Base Airframe Price, the Engine Price and the price of the
Special Features.
3.1.1.5 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airframe, Engine and
Special Features) as calculated pursuant to Exhibit D-1.
3.1.1.6 Base Airplane Price is the Aircraft
Basic Price excluding the price of Special Features, but
including Engines.
3.1.2 New Generation Aircraft
3.1.2.1 Special Features are the features
listed in Exhibits A-1, A-2, A-3, and A-5, which Buyer has
selected for incorporation in New Generation Aircraft.
3.1.2.2 Base Airplane Price is the Aircraft
Basic Price excluding the price of Special Features, but
including Engines.
3.1.2.3 Aircraft Basic Price is comprised
of the Base Airplane Price and the price of the Special Features.
3.1.2.4 Economic Price Adjustment is the
adjustment to the Aircraft Basic Price (Base Airplane and Special
Features) as calculated pursuant to Exhibit D for Aircraft
expressed in July 1995 dollars and Exhibit D-2 for Aircraft
expressed in July 1997 dollars.
3.2 Aircraft Basic Price.
3.2.1 Current Generation Aircraft:
3.2.1.1 Model 737-524 Aircraft.
The Aircraft Basic Price of each
737-524 Aircraft, expressed in July 1995 dollars, is set forth
below:
Base Airframe Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED SEPAR-
Engine Price ATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
Aircraft Basic Price PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3.2.2 New Generation Aircraft.
3.2.2.1 Model 737-624 Aircraft.
The Aircraft Basic Price of
each 737-624 Aircraft, expressed in July 1995 dollars, is set
forth below:
Base Airplane Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED SEPAR-
ATELY WITH THE SECURITIES
Aircraft Basic Price AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3.2.2.2 Model 737-724 Aircraft.
The Aircraft Basic Price of
each 737-724 Aircraft, expressed in July 1995 dollars, is set
forth below:
Base Airplane Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILE SEPAR-
ATELY WITH THE SECURITIES
Aircraft Basic Price AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3.2.2.3 Model 737-824 Aircraft.
The Aircraft Basic Price of
each 737-824 Aircraft, expressed in July 1995 dollars, is set
forth below:
Base Airplane Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED SEPAR-
ATELY WITH THE SECURITIES
Aircraft Basic Price AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3.2.2.4 Model 737-924 Aircraft.
The Aircraft Basic Price of
each 737-924 Aircraft, expressed in July 1997 dollars, is set
forth below:
Base Airplane Price: [CONFIDENTIAL MATERIAL
Special Features OMITTED AND FILED SEPAR-
ATELY WITH THE SECURITIES
Aircraft Basic Price AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3.3 Aircraft Price. The total amount that Buyer is to
pay for the Aircraft at the time of delivery (Aircraft Price)
will be established at the time of delivery of such Aircraft to
Buyer and will be the sum of:
3.3.1 the Aircraft Basic Price, set forth in
Table 1; plus
3.3.2 the Economic Price Adjustments for the
Aircraft Basic Price, as calculated pursuant to the formulas set
forth in Exhibits D or D-1 or D-2, as applicable; plus
3.3.3 other price adjustments made pursuant to
this Agreement or other written agreements executed by Boeing and
Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance
payment purposes, the estimated delivery prices of the Aircraft
have been established, using currently available forecasts of the
escalation factors used by Boeing as of the date of signing this
Agreement. The Advance Payment Base Price of each Aircraft is
set forth in Table 1.
3.4.2 Adjustment of Advance Payment Base Prices -
Long-Lead Aircraft. For Aircraft scheduled for delivery 36
months or more after the date of this Agreement, the Advance
Payment Base Prices appearing in Article 3.4.1 will be used to
determine the amount of the first advance payment to be made by
Buyer on the Aircraft. No later than 25 months before the
scheduled month of delivery of each affected Aircraft, Boeing
will increase or decrease the Advance Payment Base Price of such
Aircraft as required to reflect the effects of (i) any
adjustments in the Aircraft Basic Price pursuant to this
Agreement and (ii) the then-current forecasted escalation factors
used by Boeing. Boeing will provide the adjusted Advance Payment
Base Prices for each affected Aircraft to Buyer, and the advance
payment schedule will be considered amended to substitute such
adjusted Advance Payment Base Prices.
ARTICLE 7. Changes to the Detail Specification.
7.1 Development Changes. Boeing may, at its own
expense and without Buyer's consent, incorporate Development
Changes in the Detail Specification and the Aircraft prior to
delivery to Buyer. Development Changes are defined as changes to
the basic specification for Model 737-500/-600/-700/-800/-900
aircraft that do not affect the Aircraft Purchase Price or
adversely affect Aircraft delivery, guaranteed weight, guaranteed
performance or compliance with the interchangeability or
replaceability requirements set forth in the Detail
Specification. If Boeing makes changes Pursuant to this
paragraph, Boeing will promptly notify Buyer of such changes.
ARTICLE 8. Federal Aviation Requirements and Certificates.
8.1 FAA Certificates.
8.1.1 Boeing will obtain from the Federal Aviation
Administration (FAA):
8.1.1.1 a Type Certificate (transport
category) issued pursuant to Part 21 of the Federal Aviation
Regulations for the type of aircraft covered by this Agreement,
and
8.1.1.2 a Standard Airworthiness Certificate
for each Aircraft issued pursuant to Part 21 of the Federal
Aviation Regulations, which will be provided to Buyer with
delivery of the Aircraft.
8.1.2 Boeing will not be obligated to obtain any
other certificates or approvals for the Aircraft.
8.1.3 If the use of either FAA certificate is
discontinued prior to delivery of an Aircraft, references in this
Agreement to such discontinued certificate will be deemed
references to its superseding FAA certificate. If the FAA does
not issue a superseding certificate, Boeing's only obligation
under this paragraph will be to comply with the Detail
Specification.
8.2 FAA Manufacturer Changes.
8.2.1 If the FAA, or any other governmental agency
having jurisdiction, requires any change to the Aircraft, data
relating to the Aircraft, or testing of the Aircraft in order to
obtain the Standard Airworthiness Certificate (Manufacturer
Change), such Manufacturer Change will be made prior to delivery
of such Aircraft.
8.2.2 If prior to Aircraft delivery a Manufacturer
Change is required to be incorporated in an Aircraft, it will be
incorporated at no charge to Buyer, unless the requirement is
promulgated subsequent to the date of this Agreement, in which
case Buyer will pay Boeing's charge only for Aircraft scheduled
for delivery to Buyer (a) 18 months or more after the date of
this Agreement or (b) after the date of Boeing's receipt of the
Type Certificate for the Model 737-600/-700/-800/-900, whichever
is later.
8.3 FAA Operator Changes.
8.3.1 Boeing will deliver each Aircraft with the
changes in equipment incorporated (or, at Boeing's sole
discretion, with suitable provisions for the incorporation of
such equipment) that is required by Federal Aviation Regulations
which (i) are generally applicable with respect to transport
category aircraft to be used in United States certified air
carriage and (ii) have to be complied with on or before the date
of delivery of such Aircraft (Operator Changes).
8.3.2 If Operator Changes are incorporated in an
Aircraft, Buyer will pay Boeing's charge applicable to such
Aircraft.
8.4 Delays; Changes to this Agreement. If delivery of
an Aircraft is delayed due to the incorporation of a Manufacturer
Change or an Operator Change, the delivery of the Aircraft will
be appropriately revised to reflect such delay. This Agreement
will also be revised to reflect appropriate changes in the
Aircraft Price, design, performance, weight and balance due to
the incorporation of a Manufacturer Change or an Operator Change.
Table 1 to Purchase Agreement 1951
Aircraft Deliveries and Descriptions, Model 737-900 Aircraft
Airframe Model/MTGW: 737-900 164,000
Engine Model: CFM56-7B26
Airframe Base Price:
Optional Features:
Sub-Total of Airframe and Features:
Engine Price (Per Aircraft):
Aircraft Basic Price (Excluding BFE/SPE):
Buyer Furnished Equipment (BFE) Estimate:
Seller Purchased Equipment (SPE) Estimate:
Detail Specification: D6-39127 Rev. 0
Price Base Year: Jul-97
Airframe and Engine Escalation Data:
Base Year Index (ECI):
Base Year Index (ICI):
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
AIRCRAFT CONFIGURATION
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit A-5 to Purchase Agreement Number 1951
Exhibit A-5 to
Purchase Agreement No. 1951
Page 2
AIRCRAFT CONFIGURATION
Dated May 21, 1998
relating to
BOEING MODEL 737-900 AIRCRAFT
Exhibit A-5
The Detail Specification is Boeing Detail Specification
D019A001CAL39P-1 dated as of TBD. Such Detail Specification will
be comprised of Boeing Specification D6-39127, Revision 0, dated
July 25, 1997 as amended to incorporate the Options listed below,
including the effects on Manufacturer's Empty Weight (MEW) and
Operating Empty Weight (OEW). Such Options are set forth in
Boeing Document D019ACR1CAL39P-1. As soon as practicable, Boeing
will furnish to Buyer copies of the Detail Specification, which
copies will reflect such Options. The Aircraft Basic Price
reflects and includes all effects of such Options, except such
Aircraft Basic Price does not include the price effects of any
Buyer Furnished Equipment or Seller Purchased Equipment.
The configuration for Buyer's 737-900 will be developed during
1998. For purposes of calculating the Advance Payment Base
Prices listed in Table 1, an estimated amount of [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.] has been assumed for Special Features, which includes
a thrust increase to 26,000 lbs.
CUSTOMER SUPPORT DOCUMENT NO. 1951
Dated May 21, 1998
Relating to
BOEING MODEL 737-524/-924 AIRCRAFT
This Customer Support Document is Exhibit C1 to and forms a
part of Purchase Agreement No. 1951 between The Boeing Company
(Boeing) and Continental Airlines, Inc. (Buyer) relating to the
purchase of Boeing Model 737-524 and Model 737-924 aircraft.
This Customer Support Document consists of the following parts:
PART A Boeing Maintenance Training Program
PART B Boeing Customer Support Services
PART C Boeing Flight Training Program
PART D Technical Data and Documents
PART E Buyer's Indemnification of Boeing and Insurance
PART F Alleviation or Cessation of Performance
AIRCRAFT PRICE ADJUSTMENT
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit D2 to Purchase Agreement Number 1951
New Generation Aircraft (1997 Base Price)
PRICE ADJUSTMENT DUE TO
ECONOMIC FLUCTUATIONS
AIRCRAFT PRICE ADJUSTMENT
(1997 Base Price)
Aircraft Price Adjustment for New Generation Aircraft
1. Formula.
The Aircraft Price Adjustment will be determined at the
time of Aircraft delivery in accordance with the following
formula:
Pa = (P)(L + M - 1)
Where:
Pa = Aircraft Price Adjustment.
L = .65 x ECI
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
M = .35 x ICI
[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
P = Aircraft Basic Price (as set forth in Article 3.2 of
this Agreement).
ECI = A value using the "Employment Cost Index for workers
in aerospace manufacturing" (aircraft manufacturing,
standard industrial classification code 3721,
compensation, base month and year June 1989 = 100),
as released by the Bureau of Labor Statistics, U.S.
Department of Labor on a quarterly basis for the
months of March, June, September and December,
calculated as follows: A three-month arithmetic
average value (expressed as a decimal and rounded to
the nearest tenth) will be determined using the
months set forth in the table below for the
applicable Aircraft, with the released Employment
Cost Index value described above for the month of
March also being used for the months of January and
February; the value for June also used for April and
May; the value for September also used for July and
August; and the value for December also used for
October and November.
ICI = The three-month arithmetic average of the released
monthly values for the Industrial Commodities Index
as set forth in the "Producer Prices and Price Index"
(Base Year 1982 = 100) as released by the Bureau of
Labor Statistics, U.S. Department of Labor values
(expressed as a decimal and rounded to the nearest
tenth) for the months set forth in the table below
for the applicable Aircraft.
In determining the value of L, the ratio of ECI divided by
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.] will be expressed as a decimal rounded
to the nearest ten-thousandth and then multiplied by .65 with the
resulting value also expressed as a decimal and rounded to the
nearest ten-thousandth.
In determining the value of M, the ratio of ICI divided by
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.] will be expressed as a decimal rounded
to the nearest ten-thousandth and then multiplied by .35 with the
resulting value also expressed as a decimal and rounded to the
nearest ten-thousandth.
Months to be Utilized
Month of Scheduled in Determining the
Aircraft Delivery Value of ECI and ICI
January June B, July B, Aug. B
February July B, Aug. B, Sept. B
March Aug. B, Sept. B, Oct. B
April Sept. B, Oct. B, Nov. B
May Oct. B, Nov. B, Dec. B
June Nov. B, Dec. B, Jan. D
July Dec. B, Jan. D, Feb. D
August Jan. D, Feb. D, Mar. D
September Feb. D, Mar. D, Apr. D
October Mar. D, Apr. D, May D
November Apr. D, May D, June D
December May D, June D, July D
The following definitions of B and D will apply:
B = The calendar year before the year in which the
scheduled month of delivery as set forth in Article 2.1 occurs.
D = The calendar year during which the scheduled month
of delivery as set forth in Article 2.1 occurs.
2. If at the time of delivery of an Aircraft Boeing is unable
to determine the Aircraft Price Adjustment because the applicable
values to be used to determine the ECI and ICI have not been
released by the Bureau of Labor Statistics, then:
2.1 The Aircraft Price Adjustment, to be used at the
time of delivery of the Aircraft, will be determined by utilizing
the escalation provisions set forth above. The values released
by the Bureau of Labor Statistics and available to Boeing 30 days
prior to scheduled Aircraft delivery will be used to determine
the ECI and ICI values for the applicable months (including those
noted as preliminary by the Bureau of Labor Statistics) to
calculate the Aircraft Price Adjustment. If no values have been
released for an applicable month, the provisions set forth in
Paragraph 2.2 below will apply. If prior to delivery of an
Aircraft the U.S. Department of Labor changes the base year for
determination of the ECI or ICI values as defined above, such
rebased values will be incorporated in the Aircraft Price
Adjustment calculation. The payment by Buyer to Boeing of the
amount of the Purchase Price for such Aircraft, as determined at
the time of Aircraft delivery, will be deemed to be the payment
for such Aircraft required at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S.
Department of Labor substantially revises the methodology used
for the determination of the values to be used to determine the
ECI and ICI values (in contrast to benchmark adjustments or other
corrections of previously released values), or for any reason has
not released values needed to determine the applicable Aircraft
Price Adjustment, the parties will, prior to delivery of any such
Aircraft, select a substitute for such values from data published
by the Bureau of Labor Statistics or other similar data reported
by non-governmental United States organizations, such substitute
to lead in application to the same adjustment result, insofar as
possible, as would have been achieved by continuing the use of
the original values as they may have fluctuated during the
applicable time period. Appropriate revision of the formula will
be made as required to reflect any substitute values. However,
if within 24 months from delivery of the Aircraft the Bureau of
Labor Statistics should resume releasing values for the months
needed to determine the Aircraft Price Adjustment, such values
will be used to determine any increase or decrease in the
Aircraft Price Adjustment from that determined at the time of
delivery of such Aircraft.
2.3 In the event escalation provisions are made
non-enforceable or otherwise rendered null and void by any agency
of the United States Government, the parties agree, to the extent
they may lawfully do so, to equitably adjust the Purchase Price
of any affected Aircraft to reflect an allowance for increases or
decreases in labor compensation and material costs occurring
since February, 1997, which is consistent with the applicable
provisions of paragraph 1 of this Exhibit D2.
3. For the calculations herein, the values released by the
Bureau of Labor Statistics and available to Boeing 30 days prior
to scheduled Aircraft delivery will be used to determine the ECI
and ICI values for the applicable months (including those noted
as preliminary by the Bureau of Labor Statistics) to calculate
the Aircraft Price Adjustment.
Note: Any rounding of a number, as required under this Exhibit D
with respect to escalation of the Aircraft price, will be
accomplished as follows: if the first digit of the
portion to be dropped from the number to be rounded is
five or greater, the preceding digit will be raised to the
next higher number.
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit E to Purchase Agreement Number 1951
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
Dated May 21, 1998
Relating to
BOEING MODEL 737 AIRCRAFT
This Buyer Furnished Equipment Provisions Document is
Exhibit E to and forms a part of Purchase Agreement No. 1951,
between The Boeing Company (Boeing) and CONTINENTAL AIRLINES,
INC. (Buyer) relating to the purchase of Boeing Model 737
aircraft.
BUYER FURNISHED EQUIPMENT PROVISIONS DOCUMENT
1. General.
Certain equipment to be installed in the Aircraft is
furnished to Boeing by Buyer at Buyer's expense. This equipment
is designated "Buyer Furnished Equipment" (BFE) and is listed in
the Detail Specification. On or before April 4, 1997 for Model
737-724, July 3, 1997 for Model 737-824, and TBD for Model 737-
924, Boeing will provide to Buyer a BFE Requirements On-
Dock/Inventory Document (BFE Document) or an electronically
transmitted BFE Report which may be periodically revised, setting
forth the items, quantities, on-dock dates and shipping
instructions relating to the in sequence installation of BFE.
For planning purposes, a preliminary BFE on-dock schedule is set
forth in the attachment to this Exhibit.
2. Supplier Selection.
Buyer will:
2.1 Select and notify Boeing of the suppliers of the
following BFE items by the following dates should these items not
be selected as SPE by Buyer:
Model 737-724 Model 737-824
Galley System 10/9/96 2/12/97
Seats (passenger) 9/03/96 9/03/96
Model 737-924 Model 737-524
Galley System TBD Complete
Seats (passenger) TBD Complete
2.2 Meet with Boeing and such selected BFE suppliers
promptly after such selection to:
2.2.1 complete BFE configuration design
requirements for such BFE; and
2.2.2 confirm technical data submittal dates for
BFE certification.
3. Buyer's Obligations.
Buyer will:
3.1 comply with and cause the supplier to comply with
the provisions of the BFE Document or BFE Report;
3.1.1 deliver technical data (in English) to
Boeing as required to support installation and FAA certification
in accordance with the schedule provided by Boeing or as mutually
agreed upon during the BFE meeting referred to above;
3.1.2 deliver BFE including production and/or
flight training spares to Boeing in accordance with the
quantities and schedule provided therein; and
3.1.3 deliver appropriate quality assurance
documentation to Boeing as required with each BFE part (D6-56586,
"BFE Product Acceptance Requirements");
3.2 authorize Boeing to discuss all details of the BFE
directly with the BFE suppliers;
3.3 authorize Boeing to conduct or delegate to the
supplier quality source inspection and supplier hardware
acceptance of BFE at the supplier location;
3.3.1 require supplier's contractual compliance to
Boeing defined source inspection and supplier delegation
programs, including availability of adequate facilities for
Boeing resident personnel; and
3.3.2 assure that Boeing identified supplier's
quality systems be approved to Boeing document D1-9000;
3.4 provide necessary field service representation at
Boeing's facilities to support Boeing on all issues related to
the installation and certification of BFE;
3.5 deal directly with all BFE suppliers to obtain
overhaul data, provisioning data, related product support
documentation and any warranty provisions applicable to the BFE;
3.6 work closely with Boeing and the BFE suppliers to
resolve any difficulties, including defective equipment, that
arise;
3.7 be responsible for modifying, adjusting and/or
calibrating BFE as required for FAA approval and for all related
expenses;
3.8 warrant that the BFE will meet the requirements of
the Detail Specification; and
3.9 be responsible for providing equipment which is FAA
certifiable at time of Aircraft delivery, or for obtaining
waivers from the applicable regulatory agency for non-FAA
certifiable equipment.
4. Boeing's Obligations.
Other than as set forth below, Boeing will provide for the
installation of and install the BFE and obtain certification of
the Aircraft with the BFE installed.
5. Nonperformance by Buyer.
If Buyer's nonperformance of obligations in this Exhibit
or in the BFE Document causes a delay in the delivery of the
Aircraft or causes Boeing to perform out-of-sequence or
additional work, Buyer will reimburse Boeing for all resulting
expenses and be deemed to have agreed to any such delay in
Aircraft delivery. In addition Boeing will have the right to:
5.1 provide and install specified equipment or suitable
alternate equipment and increase the price of the Aircraft
accordingly; and/or
5.2 deliver the Aircraft to Buyer without the BFE
installed.
6. Return of Equipment.
BFE not installed in the Aircraft will be returned to
Buyer in accordance with Buyer's instructions and at Buyer's
expense.
7. Title and Risk of Loss.
Title to and risk of loss of BFE will at all times remain
with Buyer or other owner. Boeing will have only such liability
for BFE as a bailee for mutual benefit would have, but will not
be liable for loss of use.
8. Indemnification of Boeing.
Buyer hereby indemnifies and holds harmless Boeing from
and against all claims and liabilities, including costs and
expenses (including attorneys' fees) incident thereto or incident
to successfully establishing the right to indemnification, for
injury to or death of any person or persons, including employees
of Buyer but not employees of Boeing, or for loss of or damage to
any property, including any Aircraft, arising out of or in any
way connected with any nonconformance or defect in any BFE and
whether or not arising in tort or occasioned in whole or in part
by the active, passive or imputed negligence of Boeing. This
indemnity will not apply with respect to any nonconformance or
defect caused solely by Boeing's installation of the BFE.
9. Patent Indemnity.
Buyer hereby indemnifies and holds harmless Boeing from
and against all claims, suits, actions, liabilities, damages and
costs arising out of any actual or alleged infringement of any
patent or other intellectual property rights by BFE or arising
out of the installation, sale or use of BFE by Boeing.
10. Definitions.
For the purposes of the above indemnities, the term
"Boeing" includes The Boeing Company, its divisions, subsidiaries
and affiliates, the assignees of each, and their directors,
officers, employees and agents.
Attachment A to
Exhibit E
BOEING MODEL 737 AIRCRAFT
Item Preliminary On-Dock Dates
Dates for 1st delivery of each model:
737-724 737-824
Jan 1998 Apr 1998
Aircraft Aircraft
Seats 10/14/97 2/17/98
Galleys 10/9/97 2/12/98
Electronics 10/1/97 2/3/98
Furnishings 10/7/97 2/9/98
737-924 737-524
May 2001 Jul 1997
Aircraft Aircraft
Seats TBD 6/5/97
Galleys TBD 6/2/97
Electronics TBD 5/27/97
Furnishings TBD 5/28/97
DEFINED TERMS DOCUMENT
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit F to Purchase Agreement Number 1951
DEFINED TERMS DOCUMENT
Dated May 21, 1998
Relating to
BOEING MODEL 737 AIRCRAFT
This Document is Exhibit F to and forms a part of Purchase
Agreement No. 1951 (Agreement) between The Boeing Company
(Boeing) and CONTINENTAL AIRLINES, INC. (Buyer) relating to the
purchase of Boeing Model 737 aircraft.
The following is a list of those terms and their definitions
as used and not otherwise defined in this Agreement or the
Customer Services General Terms Agreement (CSGTA). Such terms
are identified in the Agreement by the use of an initial capital
letter.
Advance Payment Boeing's estimate of Article 3
Base Price the Aircraft Price is
set forth in Article 3.
Agreement Purchase Agreement No. Opening paragraph
1951, including all of the Agreement
Exhibits, the Detail
Specification,
attachments, letter
agreements and other
written modifications
and amendments thereto.
Aircraft (includes The aircraft described in Article 1,
"the", "all", Article 1, Para. 1.1. Para. 1.1
"first", "last"
"such", etc.)
Aircraft Basic The amount set forth in Article 3, Para.
Price Article 3, Para. 3.2 3.1
Aircraft Price The total amount Buyer is Article 3, Para.
to pay for an Aircraft 3.3
which is described in
Article 3, 3.3
Aircraft Software The computer software Exhibit B,
included with the Part D-1, Para 1
Aircraft when the
Aircraft is delivered by
Boeing, described in
Exhibit B, Part D-1,
Para. 1.
Airframe Component A component described in Exhibit B Part C
Exhibit B, Part C, Para. Para. 1.1
1.1
Article An Article of the Article 6, Para.
Agreement. 6.4
Boeing The Seller of the Opening paragraph
Aircraft identified in of the Agreement
the opening paragraph of
the Agreement.
Boeing Warranty Part A of Exhibit B to Exhibit B, Part
the Agreement. A, Para. 1
Buyer The purchaser of the Opening paragraph
Aircraft identified in of the Agreement
the opening paragraph of
the Agreement.
Buyer Furnished Equipment provided by Article 4.2
Equipment or BFE Buyer pursuant to Exhibit
E for installation by
Boeing on the Aircraft.
Buyer Furnished Document provided by Article 13, Para.
Equipment Document Boeing to Buyer defining 13.1
requirements for BFE.
Exhibit E, Para. 1.
Covered Component An Airframe Component as Exhibit B Part C
described in Exhibit B, Para. 1.4
Part C, Para. 1.4.
Customer Support Exhibit C to the Article 12, Para.
Document Agreement. 12.5
Customer Support The Boeing services, Article 12, Para.
Services training and other 12.5
obligations described in
Exhibit C to the
Agreement.
Deposit The money paid by Buyer Article 5, Para.
to Boeing as part of the 5.1
acceptance of the
Aircraft proposal.
Detail The Boeing document that Article 1, Para.
Specification describes the 1.1
specifications of the
Aircraft modified from
time to time to include
developmental and Buyer
requested changes.
Development Changes to the basic Article 7, Para.
Change(s) specification that do not 7.1
affect price, delivery,
guaranteed weight,
performance or
interchangeability as
described in Article 7,
Para. 7.1.
Disclaimer and The disclaimer and Article 12,
Release Release set forth in Para. 12.2
Article 12, Para. 12.2
Documents The data and documents Exhibit C, Part D
provided by Boeing under Para. 2
the Agreement.
Economic Price Article 3, Para. 3.1.1.5 Article 3, Para.
Adjustment 3.1.1.5
Engine(s) The engines installed on Article 3,
the Aircraft as described Para. 3.1.1.3
in the Detail
Specification.
Excusable Delay A delay resulting from Article 6, Para.
any of the causes 6.1
described in Article 6,
Para. 6.1.
FAA The Federal Aviation Article 8, Para.
Administration of the 8.1.1
Department of
Transportation of the
United States, including
the Administrator of the
Federal Aviation
Administration, the
National Transportation
Safety Board and any
other authority or agency
of the Federal Government
of the United States
having like jurisdiction.
Failed Component A component as described Exhibit B Part C
in Exhibit B, Part C, Para. 1.6
Para. 1.6.
Failure Any breakage or defect as Exhibit B Part C
described in Exhibit B, Para. 1.5
Part C, Para. 5.
Federal Aviation The United States Federal Article 8, Para.
Regulations Aviation Regulations and, 8.1.1.1
if they are redesignated
or discontinued, any
comparable regulations or
parts thereof issued by
the FAA.
Field Service(s) Boeing-provided services Exhibit C, Part
as described in Exhibit B, Para. 2
C, Part B, Para. 2.
Field Service The length of time Boeing Exhibit C, Part
Period provides Field Service to B, Para. 2.1
Buyer as described in
Exhibit C, Part B, Para.
2.1.
Flight Training A planning conference as Exhibit C, Part
Planning Conference described in Exhibit C, Para. 2
Part C, Para. 2.
Flight Training The program of flight Exhibit C, Part C
Program training described in
Exhibit C, Part C.
Interface Problem A technical problem Exhibit B, Part
attributed to the design G, Para. 1
characteristics of the
Aircraft or its systems,
as described in
Exhibit B, Part G, Para.
1.
Landing Gear A component as described Exhibit B Part C
Component in Exhibit B, Part C, Para. 1.2
Para. 1.2.
Maintenance A planning conference as Exhibit C, Part
Training Planning described in Exhibit C, A, Para. 2
Conference Part A, Para. 2.
Maintenance The program of training Exhibit C, Part
Training Program described in Exhibit C, A, Para. 3
Part A, Para. 3.
Manufacturer A change to the Aircraft Article 8, Para.
Change(s) or performance required 8.2.1
of Boeing as described in
Article 8, Para. 8.2.1.
Operator Change(s) A change to the Aircraft Article 8, Para.
described in Article 8, 8.3.1
Para. 8.3.1.
Performance The written guarantees Article 1, Para.
Guarantees regarding the operational 1.3
performance of the
Aircraft set forth in the
Agreement or the Detail
Specification.
Policy (Boeing Exhibit B, Part C, Para. Exhibit B, Part
Service Life 2. C, Para. 2
Policy)
Price First Article 3, Para. 3.1.6. Article 3,
Published Para. 3.1.6
Product Assurance Exhibit B of the Article 12, Para.
Document Agreement. 12.1
Revenue Service Flight Training conducted Exhibit C, Part
Training on the Aircraft during E, Para. 1.1
revenue service with
cargo and/or passengers
on board, as described in
Exhibit C, Part C,
Para. 8.
Special Features Article 3, Para. 3.1.1..1 Article 3,
and 3.1.2.1 Para. 3.1.1
Standard A certificate issued by Article 8, Para.
Airworthiness the FAA, pursuant to Part 8.1.1.2
Certificate 21 of the Federal
Aviation Regulations as
described in Article 8,
Para. 8.1.1.2.
Target Delivery A non binding estimated Article 2,
Date delivery date provided Para. 2.2
for Buyer's planning
purposes, described in
Article 2.
Taxes The term "Taxes" defined Article 2, Para.
in Article 4, Para. 4.1. 2.3
Type Certificate A certificate issued by Article 8,
the FAA pursuant to Part Para. 8.1.1.1
21 of the Federal
Aviation Regulations
described in Article 8,
Para. 8.1.1.1.
Warranty Labor Rate The hourly labor rate Exhibit B, Part
defined in Exhibit B, B, Para. 5.3
Part B, Para. 5.3.
1951-2R3
May 21, 1998
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 1951-2R3 to
Purchase Agreement No. 1951 -
Seller Purchased Equipment
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-2R2 dated March 5,
1997.
For purposes of this Letter Agreement the following definitions
apply:
Seller Purchased Equipment (SPE) is Buyer Furnished Equipment
(BFE) that Boeing purchases for Buyer.
Developmental Buyer Furnished Equipment (DBFE) is all BFE not
previously certified for installation on the Aircraft.
This Letter Agreement does not include developmental avionics.
Developmental avionics are avionics that have not been previously
certified for installation on the Aircraft.
All other terms used herein and in the Agreement, and not defined
above, will have the same meaning as in the Agreement.
Buyer has requested and Boeing hereby agrees that Boeing will
purchase as SPE certain BFE identified by Buyer pursuant to
Change Requests. Accordingly, Boeing and Buyer agree with
respect to such SPE as follows:
1. Price.
Advance Payments. An estimated SPE price will be included
in the Aircraft Advance Payment Base Price for the purpose of
establishing the advance payments for each Aircraft. The
estimated price of this SPE for each Aircraft, expressed in 1995
U.S. dollars, except for the 737-900, which is expressed in 1997
U. S. dollars, is listed below.
Model Estimated Price
for SPE
737-500 [CONFIDENTIAL MATERIAL OMITTED AND FILED
737-600 SEPARATELY WITH THE SECURITIES AND EXCHANGE
737-700 COMMISSION PURSUANT TO A REQUEST FOR
737-800 CONFIDENTIAL TREATMENT.]
737-900
Aircraft Price. The Aircraft Price will be adjusted to
reflect (i) the actual costs charged Boeing by the SPE suppliers,
(ii) a handling fee of [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.] of such costs and (iii)
transportation charges. If all DBFE, except for developmental
avionics, is converted to SPE, Boeing will waive the handling fee
for all SPE.
2. Responsibilities.
2.1 With respect to SPE, Buyer is responsible for:
(i) selecting the supplier and advising Boeing as
to the price negotiated between Buyer and
supplier on or before:
Model Model Model Model
737-924 737-624 737-724 737-824
galleys tbd 7/1/97 10/6/96 2/12/97
seats tbd 2/7/97 9/3/96 9/3/96
(ii) selecting a FAA certifiable part; and
(iii) providing to Boeing the SPE part
specification/Buyer requirements.
2.2. With respect to SPE, Boeing is responsible for:
(i) placing and managing the purchase order with
the supplier;
(ii) coordinating with the suppliers on technical
issues;
(iii) ensuring that the delivered SPE complies with
the part specification;
(iv) obtaining certification of the Aircraft with
the SPE installed; and
(v) obtaining for Buyer the supplier's standard
warranty for the SPE. SPE is deemed to be BFE for purposes of
Exhibit B, the Product Assurance Document, of the Agreement.
3. Supplier Selection For SPE Galleys and Seats.
In addition to those responsibilities described above, for
SPE galleys and seats the following provisions apply with respect
to Buyer's selection of suppliers:
Galley Requirements. Buyer will provide Boeing not later
than August 7, 1996 the definitive galley configuration
requirements for the Model 737-724. Buyer will provide Boeing
not later than November 27, 1996 the definitive galley
configuration requirements for the Model 737-824. Buyer will
provide Boeing not later than May 1, 1997 the definitive galley
configuration requirements for the Model 737-624. Buyer will
provide Boeing not later than TBD the definitive galley
configuration requirements for the Model 737-924.
Bidder's List. Boeing has submitted to Buyer, for
information purposes, a bidder's list of existing suppliers of
seats and galleys.
Request for Quotation (RFQ). Boeing has issued its RFQ
inviting such potential bidders to submit bids for the galleys
and seats by July 15, 1996 for the Model 737-724 and -824
Aircraft. Boeing will advise such date for the Model 737-624 and
- -924 Aircraft.
Recommended Bidders. Boeing has submitted to Buyer a list
of recommended bidders from which to choose a supplier for the
galleys and seats. The recommendation is based on an evaluation
of the bids submitted using price, weight, warranty and schedule
as the criteria.
Supplier Selection. If Buyer selects a seat or galley
supplier that is not on the Boeing recommended list, such seat or
galley will become BFE and the provisions of Exhibit E, Buyer
Furnished Equipment Provisions Document, of the Agreement will
apply.
4. Changes.
After this Letter Agreement is signed, changes to SPE may
only be made by and between Boeing and the suppliers. Buyer's
contacts with SPE suppliers relating to design (including
selection of materials and colors), weights, prices (except for
price negotiation prior to the supplier selection date) or
schedules are for informational purposes only. If Buyer wants
changes made to any of the above, requests must be made directly
to Boeing for negotiating with the supplier.
5. Proprietary Rights.
Boeing's obligation to purchase SPE will not impose upon
Boeing any obligation to compensate Buyer or any supplier for any
proprietary rights Buyer may have in the design of the SPE.
6. Remedies.
If Buyer does not comply with the obligations above, Boeing
may:
(i) delay delivery of the Aircraft for the period of non-
compliance;
(ii) deliver the Aircraft without installing the SPE;
(iii) substitute a comparable part and invoice Buyer for the
cost; and/or
(iv) increase the Aircraft Price by the amount of Boeing's
additional costs attributable to such noncompliance.
7. Buyer Participation in Price Negotiations for SPE. Subject
to the following conditions, Boeing agrees that Buyer may
negotiate the price with vendors for certain items of BFE which
have been changed to SPE pursuant to this Letter Agreement.
a. Number of Items. Boeing and Buyer have mutually agreed
on a list of specific equipment (the SPE Item) for which Buyer
shall negotiate directly with the vendors to establish the price
for each SPE Item. The SPE Item list includes seats, galleys,
and interior furnishings. Buyer shall provide the price of the
SPE Item when Buyer notifies Boeing of the SPE Item vendor.
b. Required Dates. Boeing's agreement to permit Buyer to
negotiate prices with vendors for SPE Items is subject to Buyer's
agreement to meet all of Boeing's required dates with respect to
each SPE Item.
c. Right to Approve Selected Vendors. Boeing shall retain
the right to reasonably approve the list of vendors for each SPE
Item.
8. Buyer's Indemnification of Boeing.
Buyer will indemnify and hold harmless Boeing from and
against all claims and liabilities, including costs and expenses
(including attorneys' fees) incident thereto or incident to
successfully establishing the right to indemnification, for
injury to or death of any person or persons, including employees
of Buyer but not employees of Boeing, or for loss of or damage to
any property, including Aircraft, arising out of or in any way
connected with any nonconformance or defect in any SPE and
whether or not arising in tort or occasioned in whole or in part
by the negligence of Boeing, whether active, passive or imputed.
This indemnity will not apply with respect to any nonconformance
or defect caused solely by Boeing's installation of the SPE.
Very truly yours,
THE BOEING COMPANY
By /s/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO as of this
Date: May 21, 1998.
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
1951-3R2
May 21, 1998
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 1951-3R2 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 1951-3R1 dated October
10, 1996.
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.] 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, and concurrent
with the execution of the Agreement for the Aircraft, Buyer will
pay a deposit to Boeing of [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.] for each
Option Aircraft (the Option Deposit). 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.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
8. Applicability.
Except as otherwise specifically provided, limited or
excluded herein, all Option Aircraft [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
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/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
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 only to the extent that such increase is
attributable to an increase in Boeing's cost for purchased
equipment.
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.
1951-5R2
May 21, 1998
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 1951-5R2 to
Purchase Agreement No. 1951 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737-
624/-724/-824/-924 aircraft (the Aircraft). This Letter
Agreement supersedes and replaces in its entirety Letter
Agreement 1951-5R1 dated October 10, 1996.
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
Very truly yours,
THE BOEING COMPANY
By /s/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
1951-9R1
May 21, 1998
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 1951-9R1 to
Purchase Agreement No. 1951 -
Option Aircraft - Model 737-624 Aircraft
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737-624
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 1951-9 dated October
10, 1996.
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.] 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, and concurrent
with the execution of the Agreement for the Aircraft, Buyer will
pay a deposit to Boeing of [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.] for each
Option Aircraft (the Option Deposit). 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.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
8. Applicability.
Except as otherwise specifically provided, limited or
excluded herein, all Option Aircraft [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
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/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.,
By /s/ Brian Davis
Its Vice President
Attachment
Model 737-624 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft are
described by Boeing Detail Specification D6-38808-62, dated as of
even date herewith, 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 737-600
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 only to the extent that such increase is
attributable to an increase in Boeing's cost for purchased
equipment.
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.
1951-12
May 21, 1998
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Option Aircraft
Reference: Purchase Agreement No. 1951 dated July 23,
1996 (the Agreement) between The Boeing
Company (Boeing) and Continental Airlines,
Inc. (Buyer) relating to Model 737-900
aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Agreement. All
terms used but not defined in this Letter Agreement have the same
meaning as in the Agreement.
Boeing agrees to manufacture and sell to Buyer up to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.], on the same terms and conditions set
forth in the Agreement, subject to the terms and conditions set
forth below. 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 737
aircraft which are developed by Boeing between the date of the
Detail Specification and the signing of the supplemental
agreement to purchase the Option Aircraft;
(ii) Changes required to obtain required regulatory
certificates; and
(iii) Changes mutually agreed upon.
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
2.1 The pricing elements of the Option Aircraft are listed
in the Attachment.
2.2 Price Adjustments.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3. Payment.
3.1 Buyer 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 Buyer exercises an option, the
Deposit applicable to such aircraft will be credited against the
first advance payment due for such aircraft. If Buyer does not
exercise an option, Boeing will retain the Deposit.
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.
4.1 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.]
4.2 If Boeing must make production decisions which are
dependent on Buyer exercising an option earlier than the Option
Exercise Date, Boeing may accelerate the Option Exercise Date
subject to Buyer's agreement. If Boeing and Buyer fail to agree
to a revised Option Exercise Date, either party may terminate the
option and Boeing will refund to Buyer, without interest, any
Deposit and advance payments received by Boeing with respect to
the terminated Aircraft.
5. Contract Terms.
Boeing and Buyer 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 a supplemental agreement to the Agreement, and
other terms and conditions as may be agreed upon. In the event
the parties have not entered into a supplemental agreement within
30 days following option exercise, either party may terminate the
purchase of such Option Aircraft by giving written notice to the
other within 5 days. If Buyer and Boeing fail to enter into such
supplemental agreement, Boeing will retain the Deposit for that
Option Aircraft unless failure is attributable to Boeing's fault,
in which case the Deposit shall be promptly returned to Buyer
without interest.
8. 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.
Very truly yours,
THE BOEING COMPANY
By /s/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment
Attachment to
Letter Agreement 1951-12 Option Aircraft Delivery,
Description, Price and Advance Systems
Airframe Model/MTGW: 737-900 164,000
Engine Model: CFM56-7B26
Airframe Base Price:
Optional Features:
Sub-Total of Airframe and Features:
Engine Price (Per Aircraft):
Aircraft Basic Price (Excluding BFE/SPE):
Buyer Furnished Equipment (BFE) Estimate:
Seller Purchased Equipment (SPE) Estimate:
Refundable Deposit per Aircraft at Proposal Acceptance
Detail Specification: D6-39127 Rev. Orig.
Price Base Year: Jul-97
Airframe and Engine Escalation Data:
Base Year Index (ECI):
Base Yaer Index (ICI):
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
1951-13
May 21, 1998
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 1951-13 to
Purchase Agreement No. 1951 -
Configuration Matters - Model 737-924
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated as
of July 23, 1996 (the Agreement) between The Boeing Company
(Boeing) and Continental Airlines, Inc. (Buyer) relating to Model
737-924 aircraft (the Aircraft).
All terms used herein and not defined herein shall have the same
meaning as in the Agreement.
1. Aircraft Configuration.
1.1 Preliminary Configuration. Boeing and Buyer have
established a preliminary configuration (Preliminary
Configuration) for the Aircraft which is comprised of the Boeing
Specification D6-39127, Revision 0, dated July 25, 1997.
1.2 Selection of Change Requests for Final Configuration.
On or before September 30, 1998, or unless otherwise previously
agreed to between Boeing and Buyer, Boeing and Buyer will develop
a complete list of change requests (Accepted Change Requests)
selected for incorporation in the Aircraft. The Preliminary
Configuration, and Buyer's list of Accepted Change Requests and
master changes (Master Changes) will comprise the final
configuration (Final Configuration) of the Aircraft.
1.3 Amendment to the Agreement. Prior to October 30,
1998, Boeing and Buyer shall execute a Supplemental Agreement
amending the Agreement as required to reflect the Final
Configuration.
1.4. Buyer's Detail Specification. Within 90 days after
Final Configuration, Boeing will provide to Buyer the Detail
Specification reflecting the Aircraft Final Configuration. This
Detail Specification will also reflect changes made to Boeing's
basic Model 737-900 aircraft specification between July 25, 1997
and the date of execution of the Supplemental Agreement
referenced in paragraph 1.3 above.
2. Preliminary Pricing Estimates. Buyer understands that
Boeing cannot establish the final Aircraft Basic Price and
Advance Payment Base Price of the Aircraft until Final
Configuration of the Aircraft is known. For Buyer's planning
purposes, however, an estimate for the Aircraft Basic Price and
Advance Payment Base Price of the Aircraft has been established
using an estimated amount of Special Features, which may or may
not accurately reflect Buyer's final selection of special
features.
3. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
If the foregoing accurately reflects your understanding of the
matters treated herein, please so indicate by signature below.
Very truly yours,
THE BOEING COMPANY
By /s/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
May 21, 1998
6-1162-MMF-308R3
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-MMF-308R3 to
Purchase Agreement No. 1951 -
Disclosure of Confidential Information
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 6-1162-MMF-308R2 dated
October 10, 1997.
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
1. Boeing and Buyer each understand that certain commercial and
financial information contained in the documents listed below and
any documents that amend, supplement or supersede such documents
(Confidential Documents) is considered by the other party to be
confidential.
2. Boeing and Buyer agree that each party will treat the
Confidential Documents and the information contained therein as
confidential and will not, without the other party's prior
written consent, disclose such Confidential Documents or any
information contained therein to any other person or entity
except as may be required by (i) applicable law or governmental
regulations; or (ii) for financing the Aircraft in accordance
with the provisions of Article 10 of the Agreement.
3. In connection with any such disclosure or filing of the
Confidential Documents, or the information contained therein
pursuant to any such applicable law or governmental regulation,
Buyer or Boeing, as applicable, will request and use its best
reasonable efforts to obtain confidential treatment of such
Confidential Documents and the information contained therein.
Boeing and Buyer agree to cooperate with each other in making and
supporting any such request for confidential treatment.
Schedule of Confidential Documents
1. Letter Agreement No. 6-1162-MMF-295.
2. Letter Agreement No. 6-1162-MMF-296.
3. Letter Agreement No. 6-1162-MMF-309R1.
4. Letter Agreement No. 6-1162-MMF-311R1.
5. Letter Agreement No. 6-1162-MMF-312R1.
6. Letter Agreement No. 6-1162-MMF-319.
7. Letter Agreement No. 6-1162-MMF-378R1
8. Letter Agreement No. 6-1162-MMF-379R1.
9. Letter Agreement No. 6-1162-GOC-015
10. Letter Agreement No. 6-1162-DMH-365
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/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
6-1162-MMF-311R3
May 21, 1998
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Subject: Letter Agreement No. 6-1162-MMF-311R3 to
Purchase Agreement No. 1951 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1751 dated
July 23, 1996(the Agreement) between The Boeing Company (Boeing)
and Continental Airlines, Inc. (Buyer) relating to Model 737
aircraft (the Aircraft). This Letter Agreement supersedes and
replaces in its entirety Letter Agreement 6-1162-MMF-311R2 dated
October 10, 1997.
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
5. Confidential Treatment.
Boeing and Buyer agree that certain commercial and financial
information contained in this Letter Agreement is confidential
and subject to the confidentiality provisions of Letter Agreement
6-1162-MMF-308R3, Disclosure of Confidential Information.
If this Letter Agreement correctly states your understanding of
the matters treated herein, please so indicate by signature
below.
Very truly yours,
THE BOEING COMPANY
By /s/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Date: __________________
Continental Airlines, Inc.
Suite 1923
2929 Allen Parkway
Houston, TX 77019
Attention: Technical Department
Reference: Letter Agreement 6-1162-MMF-311R3 to
Boeing/CAL Purchase Agreement 1951
Transmitted by Facsimile: TBD
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
Very truly yours,
THE BOEING COMPANY
By: __________________
Its: __________________
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
May 21, 1998
6-1162-GOC-131R2
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-GOC-131R2 to Purchase
Agreement No. 1951 - Special Matters
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated as
of July 23, 1996 (the Agreement) between The Boeing Company
(Boeing) and Continental Airlines, Inc. (Buyer) relating to Model
737 aircraft (the Aircraft). This Letter Agreement supersedes
and replaces in its entirely Letter Agreement 6-1162-GOC-131R1,
dated March 27, 1998.
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
1. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
2. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.] Advance Payment Schedule.
2.1 Firm Aircraft. Notwithstanding the Advance Payment
Schedule contained in Article 5 of the Agreement, Buyer may pay
advance payments, according to the following schedule, for
Aircraft on firm order as of the date of signing Supplemental
Agreement No. 4 to the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
2.2 Option Aircraft. Notwithstanding the Advance Payment
Schedule contained in Article 5 of the Agreement, Buyer may pay
advance payments according to the following schedule for all
Option Aircraft.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
3. Payment of Interest on Deferred Advance Payments.
3.1 Interest Rate for Firm Aircraft. Buyer agrees to pay
interest on all amounts which are deferred pursuant to Paragraph
2.1 (excluding Firm Aircraft added from the exercise of options)
of this Letter Agreement at [CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
3.2 Interest Rate for Firm Aircraft Incorporated by
Supplemental Agreement 5. Buyer agrees to pay interest on all
amounts which are deferred pursuant to Paragraph 2.1 of this
Letter Agreement for Firm Aircraft incorporated by Supplemental
Agreement 5 at [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
3.3 Interest Rate for Option Aircraft. Buyer agrees to
pay interest on all amounts which are deferred pursuant to
Paragraph 2.2 of this Letter Agreement at [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.]
3.4 Delivery Delay Impact on Interest Calculations. If
the delivery of any Aircraft is delayed due to either an
excusable or a non-excusable delay, then interest on the deferred
advance payments in respect of such Aircraft will not accrue
during the time period from the last working day of the scheduled
delivery month to the day of delivery of the Aircraft. Payment
of any interest that has accrued prior to the start of the delay
but remains unpaid will be paid on the normal quarterly interest
payment schedule set forth in Paragraph 3.1 of this Letter
Agreement or on the delivery date of the Aircraft, whichever
comes first.
3.5 Boeing Invoice. Boeing shall submit to Buyer, not
less than fifteen (15) days prior to the end of each quarter, an
invoice for interest accrued during each such quarter. Buyer's
payment is due and payable to Boeing on the first business day of
the following month. Boeing's invoice will show interest accrued
during the quarter for each Aircraft for which advance payments
have been deferred. The invoice will also include interest
accrued on deferred advance payments with respect to other
aircraft in other purchase agreements between Buyer and Boeing.
4. Option Aircraft.
4.1 Option Deposits. Notwithstanding the amount specified
in paragraph 3 of Letter Agreements 1951-3R1 and 1951-9, Boeing
and Buyer agree that the Option Deposit shall be [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.] per aircraft for either a Model 737-624, 737-724,
737-824, or 737-924 Option Aircraft.
4.2 Option Aircraft Base Price Adjustment.
Notwithstanding the provisions of Paragraph 2.1.1 of the
Attachment to Letter Agreements 1951-3R2 and 1951-9R1, Boeing
agrees that the Base Airplane Price contained in Article 3 of
the Agreement shall apply to the [CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.] Aircraft
incorporated by Supplemental Agreement No. 1 dated October 10,
1996.
5. Model Substitution.
5.1 Model 737-724/-824 Aircraft. Buyer may elect to
substitute Model 737-824 for Model 737-724 or Model 737-724 for
Model 737-824 Aircraft for any Aircraft or Option Aircraft
delivering in 1999 or later. Buyer's model substitution notice
to Boeing must be in writing to Boeing no later than the first
day of the tenth month prior to delivery of each Aircraft.
5.2 Model 737-624 Aircraft. Buyer may elect to
substitute either Model 737-724 or 737-824 Aircraft for Model
737-624 Option Aircraft delivering in 2000 or later. Buyer's
written model substitution notice must be received by Boeing no
later than the first day of the tenth month prior to delivery of
each Aircraft.
5.3 Model 737-524 Aircraft. Buyer may elect to substitute
Model 737-324 for Model 737-524 Aircraft. Buyer's substitution
notice must be in writing and received by Boeing no later than
the first day of the tenth month prior to delivery of each
Aircraft if Customer and Boeing have previously agreed on a
configuration for the Model 737-324. If configuration for the
Model 737-324 has not been established, than the notice period
shall be the time required to configure the Model 737-324 plus 10
months.
5.4 Model 737-924 Aircraft. Buyer may elect to
substitute Model 737-724, or Model 737-824 Aircraft for Model
737-924 Option Aircraft delivering in January 2003 or later.
Buyer's written model substitution notice must be received by
Boeing no later than the first day of the tenth month prior to
delivery of each Aircraft.
6. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
7. Confidential Treatment.
Boeing and Buyer understand that certain information
contained in this Letter Agreement, including any attachments
hereto, are considered by both parties to be confidential.
Notwithstanding the provisions of Letter Agreement 6-1162-MMF-
308R2, Boeing and Buyer agree that each party will treat this
Letter Agreement and the information contained herein as
confidential and will not, without the other party's prior
written consent, disclose this Letter Agreement or any
information contained herein to any other person or entity except
as may be required by applicable law or governmental regulations.
Very truly yours,
THE BOEING COMPANY
By /s/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
6-1162-DMH-365
May 21, 1998
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway
Houston, Texas 77019
Subject: Letter Agreement No. 6-1162-DMH-365 to
Purchase Agreement No. 1951 -
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.] Model 737-
924
Ladies and Gentlemen:
This Letter Agreement amends Purchase Agreement No. 1951 dated as
July 23, 1996 (the Agreement) between THE BOEING COMPANY (Boeing)
and CONTINENTAL AIRLINES, INC. (Buyer) relating to Model 737-924
aircraft (the Aircraft).
All terms used herein and in the Agreement, and not defined
herein, will have the same meaning as in the Agreement.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
2. Confidential Treatment. Buyer understands that certain
commercial and financial information contained in this Letter
Agreement including any attachments hereto is considered by
Boeing as confidential. Buyer agrees that it will treat this
Letter Agreement and the information contained herein as
confidential and will not, without the prior written consent of
Boeing, disclose this Letter Agreement or any information
contained herein to any other person or entity except as provided
in Letter Agreement 6-1162-MMF-308R3.
Very truly yours,
THE BOEING COMPANY
By /s/ David M. Hurt
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: May 21, 1998
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.]
EXHIBIT 10.3
STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES
THIS STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES (this
"Agreement") is entered into between Continental Airlines, Inc., a
Delaware corporation (the "Company") and Gordon M. Bethune
("Executive").
Recitals:
WHEREAS, Air Partners, L.P., its partners and certain
affiliates haves entered into an Investment Agreement dated as of
January 25, 1998 with Northwest Airlines Corporation and its
affiliate (the "Investment Agreement"), which investment agreement
provides for the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P., subject to certain conditions;
and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P. contemplated by the Investment
Agreement (the "Acquisition") will, upon the closing thereof,
constitute a Change in Control for purposes of the Company's 1994
Incentive Equity Plan, as amended, and the Company's 1997 Stock
Incentive Plan, as amended, the Company's Executive Bonus Program
and Executive's employment agreement with the Company; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Change in Control. The parties agree that the Acquisition
will, upon the closing thereof, constitute a Change in Control for
purposes of the Company's 1994 Incentive Equity Plan, as amended,
the Company's 1997 Stock Incentive Plan, as amended, the Company's
Executive Bonus Program and Executive's employment agreement with
the Company or any subsidiary.
2. Payment of Stay Bonus. During the 15 month period
commencing with the first month following the date of closing of
the Acquisition, the Company shall pay to Executive as a stay bonus
an amount in cash of $444,000 per month, which payment shall be
paid on the last day of each month during such period; provided
that either (A) Executive remains in the employ of the Company or
its subsidiaries during the month in which such payment is made or
(B) if Executive's employment with the Company and its subsidiaries
is terminated by the Company at any time during such 15 month
period, the reason for any such termination is not for cause (i.e.,
pursuant to paragraph 2.2 (iii) or 2.2 (iv) of Executive's
employment agreement with the Company, as amended through the date
hereof or as such employment agreement may hereafter be amended).
If Executive's employment is terminated by the Company for cause
(as described in the foregoing sentence) during any month in such
15 month period, Company shall pay Executive the stay bonus with
respect to such month, pro-rated for the number of days he remained
employed by the Company or its subsidiaries during such month, and
shall have no obligation to pay any further stay bonus to Executive
thereafter. In addition, Company agrees to make, in the name of
Executive, one or more charitable contributions, on a monthly basis
on the last day of each month during such 15 month period, in an
aggregate monthly amount of $22,666.67, to such charities (and in
such amounts, not to exceed such aggregate monthly amount) as are
designated by Executive to Company from time to time in writing;
provided that either (A) Executive remains in the employ of the
Company or its subsidiaries during the month in which such
charitable contributions are made or (B) if Executive's employment
with the Company and its subsidiaries is terminated by the Company
during such 15 month period, the reason for any such termination is
not for cause (as described above). The Company may withhold from
all such payments all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
3. Miscellaneous. Company represents to Executive that the
execution, delivery and performance of this Agreement by Company
have been duly authorized by all necessary corporate action, that
this Agreement has been duly executed and delivered by Company, and
that this Agreement is a legal, valid and binding obligation of
Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally.
This Agreement shall be governed by the laws of the State of Texas.
This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, by merger or
otherwise. Except as provided in the preceding sentence, this
Agreement and the rights and obligations of the parties hereunder
are personal and neither this Agreement nor any right, benefit or
obligation of either party hereto shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of
the other party. Except for the agreement set forth in Section 1
above, this Agreement shall not affect the rights and obligations
of the parties under Executive's employment agreement with the
Company or any subsidiary. Nothing contained herein shall confer
upon Executive any right with respect to continuation of employment
with the Company or any subsidiary thereof, or interfere in any way
with the right of the Company or any subsidiary to terminate
Executive's employment at any time. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all
of which together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 14th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:____________________________
Name: Jeffery A. Smisek
Title: Executive Vice President
EXECUTIVE
________________________________
Gordon M. Bethune
EXHIBIT 10.4
STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES
THIS STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES (this
"Agreement") is entered into between Continental Airlines, Inc., a
Delaware corporation (the "Company") and Gregory D. Brenneman
("Executive").
Recitals:
WHEREAS, Air Partners, L.P., its partners and certain
affiliates haves entered into an Investment Agreement dated as of
January 25, 1998 with Northwest Airlines Corporation and its
affiliate (the "Investment Agreement"), which investment agreement
provides for the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P., subject to certain conditions;
and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P. contemplated by the Investment
Agreement (the "Acquisition") will, upon the closing thereof,
constitute a Change in Control for purposes of the Company's 1994
Incentive Equity Plan, as amended, and the Company's 1997 Stock
Incentive Plan, as amended, the Company's Executive Bonus Program
and Executive's employment agreement with the Company; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Change in Control. The parties agree that the Acquisition
will, upon the closing thereof, constitute a Change in Control for
purposes of the Company's 1994 Incentive Equity Plan, as amended,
the Company's 1997 Stock Incentive Plan, as amended, the Company's
Executive Bonus Program and Executive's employment agreement with
the Company or any subsidiary.
2. Payment of Stay Bonus. During the 15 month period
commencing with the first month following the date of closing of
the Acquisition, the Company shall pay to Executive as a stay bonus
an amount in cash of $300,000 per month, which payment shall be
paid on the last day of each month during such period; provided
that either (A) Executive remains in the employ of the Company or
its subsidiaries during the month in which such payment is made or
(B) if Executive's employment with the Company and its subsidiaries
is terminated by the Company at any time during such 15 month
period, the reason for any such termination is not for cause (i.e.,
pursuant to paragraph 2.2 (iii) or 2.2 (iv) of Executive's
employment agreement with the Company, as amended through the date
hereof or as such employment agreement may hereafter be amended).
If Executive's employment is terminated by the Company for cause
(as described in the foregoing sentence) during any month in such
15 month period, Company shall pay Executive the stay bonus with
respect to such month, pro-rated for the number of days he remained
employed by the Company or its subsidiaries during such month, and
shall have no obligation to pay any further stay bonus to Executive
thereafter. In addition, Company agrees to make, in the name of
Executive, one or more charitable contributions, on a monthly basis
on the last day of each month during such 15 month period, in an
aggregate monthly amount of $66,666.67, to such charities (and in
such amounts, not to exceed such aggregate monthly amount) as are
designated by Executive to Company from time to time in writing;
provided that either (A) Executive remains in the employ of the
Company or its subsidiaries during the month in which such
charitable contributions are made or (B) if Executive's employment
with the Company and its subsidiaries is terminated by the Company
during such 15 month period, the reason for any such termination is
not for cause (as described above). The Company may withhold from
all such payments all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
3. Miscellaneous. Company represents to Executive that the
execution, delivery and performance of this Agreement by Company
have been duly authorized by all necessary corporate action, that
this Agreement has been duly executed and delivered by Company, and
that this Agreement is a legal, valid and binding obligation of
Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally.
This Agreement shall be governed by the laws of the State of Texas.
This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, by merger or
otherwise. Except as provided in the preceding sentence, this
Agreement and the rights and obligations of the parties hereunder
are personal and neither this Agreement nor any right, benefit or
obligation of either party hereto shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of
the other party. Except for the agreement set forth in Section 1
above, this Agreement shall not affect the rights and obligations
of the parties under Executive's employment agreement with the
Company or any subsidiary. Nothing contained herein shall confer
upon Executive any right with respect to continuation of employment
with the Company or any subsidiary thereof, or interfere in any way
with the right of the Company or any subsidiary to terminate
Executive's employment at any time. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all
of which together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 14th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:____________________________
Name: Jeffery A. Smisek
Title: Executive Vice President
EXECUTIVE
________________________________
Gregory D. Brenneman
EXHIBIT 10.5
STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES
THIS STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES (this
"Agreement") is entered into between Continental Airlines, Inc., a
Delaware corporation (the "Company") and Lawrence W. Kellner
("Executive").
Recitals:
WHEREAS, Air Partners, L.P., its partners and certain
affiliates haves entered into an Investment Agreement dated as of
January 25, 1998 with Northwest Airlines Corporation and its
affiliate (the "Investment Agreement"), which investment agreement
provides for the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P., subject to certain conditions;
and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P. contemplated by the Investment
Agreement (the "Acquisition") will, upon the closing thereof,
constitute a Change in Control for purposes of the Company's 1994
Incentive Equity Plan, as amended, and the Company's 1997 Stock
Incentive Plan, as amended, the Company's Executive Bonus Program
and Executive's employment agreement with the Company; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Change in Control. The parties agree that the Acquisition
will, upon the closing thereof, constitute a Change in Control for
purposes of the Company's 1994 Incentive Equity Plan, as amended,
the Company's 1997 Stock Incentive Plan, as amended, the Company's
Executive Bonus Program and Executive's employment agreement with
the Company or any subsidiary.
2. Payment of Stay Bonus. During the 15 month period commencing
with the first month following the date of closing of the
Acquisition, the Company shall pay to Executive as a stay bonus an
amount in cash of $150,000 per month, which payment shall be paid
on the last day of each month during such period; provided that
either (A) Executive remains in the employ of the Company or its
subsidiaries during the month in which such payment is made or (B)
if Executive's employment with the Company and its subsidiaries is
terminated by the Company at any time during such 15 month period,
the reason for any such termination is not for cause (i.e.,
pursuant to paragraph 2.2 (iii) or 2.2 (iv) of Executive's
employment agreement with the Company, as amended through the date
hereof or as such employment agreement may hereafter be amended).
If Executive's employment is terminated by the Company for cause
(as described in the foregoing sentence) during any month in such
15 month period, Company shall pay Executive the stay bonus with
respect to such month, pro-rated for the number of days he remained
employed by the Company or its subsidiaries during such month, and
shall have no obligation to pay any further stay bonus to Executive
thereafter. In addition, Company agrees to make, in the name of
Executive, one or more charitable contributions, on a monthly basis
on the last day of each month during such 15 month period, in an
aggregate monthly amount of $16,666.67, to such charities (and in
such amounts, not to exceed such aggregate monthly amount) as are
designated by Executive to Company from time to time in writing;
provided that either (A) Executive remains in the employ of the
Company or its subsidiaries during the month in which such
charitable contributions are made or (B) if Executive's employment
with the Company and its subsidiaries is terminated by the Company
during such 15 month period, the reason for any such termination is
not for cause (as described above). The Company may withhold from
all such payments all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
3. Miscellaneous. Company represents to Executive that the
execution, delivery and performance of this Agreement by Company
have been duly authorized by all necessary corporate action, that
this Agreement has been duly executed and delivered by Company, and
that this Agreement is a legal, valid and binding obligation of
Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally.
This Agreement shall be governed by the laws of the State of Texas.
This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, by merger or
otherwise. Except as provided in the preceding sentence, this
Agreement and the rights and obligations of the parties hereunder
are personal and neither this Agreement nor any right, benefit or
obligation of either party hereto shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of
the other party. Except for the agreement set forth in Section 1
above, this Agreement shall not affect the rights and obligations
of the parties under Executive's employment agreement with the
Company or any subsidiary. Nothing contained herein shall confer
upon Executive any right with respect to continuation of employment
with the Company or any subsidiary thereof, or interfere in any way
with the right of the Company or any subsidiary to terminate
Executive's employment at any time. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all
of which together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 14th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:____________________________
Name: Jeffery A. Smisek
Title: Executive Vice President
EXECUTIVE
________________________________
Lawrence W. Kellner
EXHIBIT 10.6
STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES
THIS STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES (this
"Agreement") is entered into between Continental Airlines, Inc., a
Delaware corporation (the "Company") and C.D. McLean ("Executive").
Recitals:
WHEREAS, Air Partners, L.P., its partners and certain
affiliates haves entered into an Investment Agreement dated as of
January 25, 1998 with Northwest Airlines Corporation and its
affiliate (the "Investment Agreement"), which investment agreement
provides for the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P., subject to certain conditions;
and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P. contemplated by the Investment
Agreement (the "Acquisition") will, upon the closing thereof,
constitute a Change in Control for purposes of the Company's 1994
Incentive Equity Plan, as amended, and the Company's 1997 Stock
Incentive Plan, as amended, the Company's Executive Bonus Program
and Executive's employment agreement with the Company; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Change in Control. The parties agree that the Acquisition
will, upon the closing thereof, constitute a Change in Control for
purposes of the Company's 1994 Incentive Equity Plan, as amended,
the Company's 1997 Stock Incentive Plan, as amended, the Company's
Executive Bonus Program and Executive's employment agreement with
the Company or any subsidiary.
2. Payment of Stay Bonus. During the 15 month period
commencing with the first month following the date of closing of
the Acquisition, the Company shall pay to Executive as a stay bonus
an amount in cash of $150,000 per month, which payment shall be
paid on the last day of each month during such period; provided
that either (A) Executive remains in the employ of the Company or
its subsidiaries during the month in which such payment is made or
(B) if Executive's employment with the Company and its subsidiaries
is terminated by the Company at any time during such 15 month
period, the reason for any such termination is not for cause (i.e.,
pursuant to paragraph 2.2 (iii) or 2.2 (iv) of Executive's
employment agreement with the Company, as amended through the date
hereof or as such employment agreement may hereafter be amended).
If Executive's employment is terminated by the Company for cause
(as described in the foregoing sentence) during any month in such
15 month period, Company shall pay Executive the stay bonus with
respect to such month, pro-rated for the number of days he remained
employed by the Company or its subsidiaries during such month, and
shall have no obligation to pay any further stay bonus to Executive
thereafter. In addition, Company agrees to make, in the name of
Executive, one or more charitable contributions, on a monthly basis
on the last day of each month during such 15 month period, in an
aggregate monthly amount of $16,666.67, to such charities (and in
such amounts, not to exceed such aggregate monthly amount) as are
designated by Executive to Company from time to time in writing;
provided that either (A) Executive remains in the employ of the
Company or its subsidiaries during the month in which such
charitable contributions are made or (B) if Executive's employment
with the Company and its subsidiaries is terminated by the Company
during such 15 month period, the reason for any such termination is
not for cause (as described above). The Company may withhold from
all such payments all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
3. Miscellaneous. Company represents to Executive that the
execution, delivery and performance of this Agreement by Company
have been duly authorized by all necessary corporate action, that
this Agreement has been duly executed and delivered by Company, and
that this Agreement is a legal, valid and binding obligation of
Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally.
This Agreement shall be governed by the laws of the State of Texas.
This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, by merger or
otherwise. Except as provided in the preceding sentence, this
Agreement and the rights and obligations of the parties hereunder
are personal and neither this Agreement nor any right, benefit or
obligation of either party hereto shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of
the other party. Except for the agreement set forth in Section 1
above, this Agreement shall not affect the rights and obligations
of the parties under Executive's employment agreement with the
Company or any subsidiary. Nothing contained herein shall confer
upon Executive any right with respect to continuation of employment
with the Company or any subsidiary thereof, or interfere in any way
with the right of the Company or any subsidiary to terminate
Executive's employment at any time. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all
of which together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 14th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:____________________________
Name: Jeffery A. Smisek
Title: Executive Vice President
EXECUTIVE
________________________________
C.D. McLean
EXHIBIT 10.7
STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES
THIS STAY BONUS AGREEMENT FOR GROUP 1 EXECUTIVES (this
"Agreement") is entered into between Continental Airlines, Inc., a
Delaware corporation (the "Company") and Jeffery A. Smisek
("Executive").
Recitals:
WHEREAS, Air Partners, L.P., its partners and certain
affiliates haves entered into an Investment Agreement dated as of
January 25, 1998 with Northwest Airlines Corporation and its
affiliate (the "Investment Agreement"), which investment agreement
provides for the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P., subject to certain conditions;
and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P. contemplated by the Investment
Agreement (the "Acquisition") will, upon the closing thereof,
constitute a Change in Control for purposes of the Company's 1994
Incentive Equity Plan, as amended, and the Company's 1997 Stock
Incentive Plan, as amended, the Company's Executive Bonus Program
and Executive's employment agreement with the Company; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Change in Control. The parties agree that the Acquisition
will, upon the closing thereof, constitute a Change in Control for
purposes of the Company's 1994 Incentive Equity Plan, as amended,
the Company's 1997 Stock Incentive Plan, as amended, the Company's
Executive Bonus Program and Executive's employment agreement with
the Company or any subsidiary.
2. Payment of Stay Bonus. During the 15 month period commencing
with the first month following the date of closing of the
Acquisition, the Company shall pay to Executive as a stay bonus an
amount in cash of $150,000 per month, which payment shall be paid
on the last day of each month during such period; provided that
either (A) Executive remains in the employ of the Company or its
subsidiaries during the month in which such payment is made or (B)
if Executive's employment with the Company and its subsidiaries is
terminated by the Company at any time during such 15 month period,
the reason for any such termination is not for cause (i.e.,
pursuant to paragraph 2.2 (iii) or 2.2 (iv) of Executive's
employment agreement with the Company, as amended through the date
hereof or as such employment agreement may hereafter be amended).
If Executive's employment is terminated by the Company for cause
(as described in the foregoing sentence) during any month in such
15 month period, Company shall pay Executive the stay bonus with
respect to such month, pro-rated for the number of days he remained
employed by the Company or its subsidiaries during such month, and
shall have no obligation to pay any further stay bonus to Executive
thereafter. In addition, Company agrees to make, in the name of
Executive, one or more charitable contributions, on a monthly basis
on the last day of each month during such 15 month period, in an
aggregate monthly amount of $16,666.67, to such charities (and in
such amounts, not to exceed such aggregate monthly amount) as are
designated by Executive to Company from time to time in writing;
provided that either (A) Executive remains in the employ of the
Company or its subsidiaries during the month in which such
charitable contributions are made or (B) if Executive's employment
with the Company and its subsidiaries is terminated by the Company
during such 15 month period, the reason for any such termination is
not for cause (as described above). The Company may withhold from
all such payments all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
3. Miscellaneous. Company represents to Executive that the
execution, delivery and performance of this Agreement by Company
have been duly authorized by all necessary corporate action, that
this Agreement has been duly executed and delivered by Company, and
that this Agreement is a legal, valid and binding obligation of
Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally.
This Agreement shall be governed by the laws of the State of Texas.
This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, by merger or
otherwise. Except as provided in the preceding sentence, this
Agreement and the rights and obligations of the parties hereunder
are personal and neither this Agreement nor any right, benefit or
obligation of either party hereto shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of
the other party. Except for the agreement set forth in Section 1
above, this Agreement shall not affect the rights and obligations
of the parties under Executive's employment agreement with the
Company or any subsidiary. Nothing contained herein shall confer
upon Executive any right with respect to continuation of employment
with the Company or any subsidiary thereof, or interfere in any way
with the right of the Company or any subsidiary to terminate
Executive's employment at any time. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all
of which together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 14th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:____________________________
Name: Gordon M. Bethune
Title: Chief Executive Officer
EXECUTIVE
________________________________
Jeffery A. Smisek
EXHIBIT 10.8
FORMS OF STAY BONUS AGREEMENTS FOR OTHER EXECUTIVE OFFICERS
STAY BONUS AGREEMENT FOR EMPLOYEES
THIS STAY BONUS AGREEMENT FOR EMPLOYEES (this "Agreement") is
entered into between Continental Airlines, Inc., a Delaware
corporation (the "Company") and _________________ ("Employee").
Recitals:
WHEREAS, Air Partners, L.P., its partners and certain
affiliates haves entered into an Investment Agreement dated as of
January 25, 1998 with Northwest Airlines Corporation and its
affiliate (the "Investment Agreement"), which investment agreement
provides for the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P., subject to certain conditions;
and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P. contemplated by the Investment
Agreement (the "Acquisition") will, upon the closing thereof,
constitute a Change in Control for purposes of the Company's 1994
Incentive Equity Plan, as amended, and the Company's 1997 Stock
Incentive Plan, as amended; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Change in Control. The parties agree that the Acquisition
will, upon the closing thereof, constitute a Change in Control for
purposes of the Company's 1994 Incentive Equity Plan, as amended
and the Company's 1997 Stock Incentive Plan, as amended.
2. Payment of Stay Bonus. During the 15 month period commencing
with the first month following the date of closing of the
Acquisition, the Company shall pay to Employee as a stay bonus an
amount in cash of $_____________per month, which payment shall be
paid on the last day of each month during such period; provided
that Employee remains in the employ of the Company or its
subsidiaries during the month in which such payment is made. If
Employee's employment terminates during any such month, Company
shall pay Employee the stay bonus with respect to such month, pro-
rated for the number of days he remained employed by the Company or
its subsidiaries during such month. The Company may withhold from
all such payments all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
3. Miscellaneous. Company represents to Employee that the
execution, delivery and performance of this Agreement by Company
have been duly authorized by all necessary corporate action, that
this Agreement has been duly executed and delivered by Company, and
that the this Agreement is a legal, valid and binding obligation of
Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally.
This Agreement shall be governed by the laws of the State of Texas.
This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, by merger or
otherwise. Except as provided in the preceding sentence, this
Agreement and the rights and obligations of the parties hereunder
are personal and neither this Agreement nor any right, benefit or
obligation of either party hereto shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of
the other party. This Agreement shall not affect the rights and
obligations of the parties under Employee's employment agreement,
if any, with the Company or any subsidiary. Nothing contained
herein shall confer upon Employee any right with respect to
continuation of employment with the Company or any subsidiary
thereof, or interfere in any way with the right of the Company or
any subsidiary to terminate Employee's employment at any time. This
Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together constitute one and
the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 14th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:____________________________
Name: Jeffery A. Smisek
Title: Executive Vice President
EMPLOYEE
________________________________
STAY BONUS AGREEMENT FOR EMPLOYEES
THIS STAY BONUS AGREEMENT FOR EMPLOYEES (this "Agreement") is
entered into between Continental Airlines, Inc., a Delaware
corporation (the "Company") and ________________ ("Employee").
Recitals:
WHEREAS, Air Partners, L.P., its partners and certain
affiliates haves entered into an Investment Agreement dated as of
January 25, 1998 with Northwest Airlines Corporation and its
affiliate (the "Investment Agreement"), which investment agreement
provides for the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P., subject to certain conditions;
and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock and
warrants held by Air Partners, L.P. contemplated by the Investment
Agreement (the "Acquisition") will, upon the closing thereof,
constitute a Change in Control for purposes of the Company's 1994
Incentive Equity Plan, as amended, and the Company's 1997 Stock
Incentive Plan, as amended; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Change in Control. The parties agree that the Acquisition
will, upon the closing thereof, constitute a Change in Control for
purposes of the Company's 1994 Incentive Equity Plan, as amended
and the Company's 1997 Stock Incentive Plan, as amended.
2. Payment of Stay Bonus. During the 15 month period commencing
with the first month following the date of closing of the
Acquisition, the Company shall pay to Employee as a stay bonus an
amount in cash of $ ______________per month, which payment shall be
paid on the last day of each month during such period; provided
that Employee remains in the employ of the Company or its
subsidiaries during the month in which such payment is made. If
Employee's employment terminates during any such month, Company
shall pay Employee the stay bonus with respect to such month, pro-
rated for the number of days he remained employed by the Company or
its subsidiaries during such month. In addition, Company agrees to
make, in the name of Executive, one or more charitable
contributions, on a monthly basis on the last day of each month
during such 15 month period, in an aggregate monthly amount of
$____________, to such charities (and in such amounts, not to
exceed such aggregate monthly amount) as are designated by
Executive to Company from time to time in writing; provided that
Executive remains in the employ of the Company or its subsidiaries
during the month in which such charitable contributions are made.
The Company may withhold from all such payments all federal, state,
city and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee
deductions made with respect to Company's employees generally.
3. Miscellaneous. Company represents to Employee that the
execution, delivery and performance of this Agreement by Company
have been duly authorized by all necessary corporate action, that
this Agreement has been duly executed and delivered by Company, and
that the this Agreement is a legal, valid and binding obligation of
Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally.
This Agreement shall be governed by the laws of the State of Texas.
This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, by merger or
otherwise. Except as provided in the preceding sentence, this
Agreement and the rights and obligations of the parties hereunder
are personal and neither this Agreement nor any right, benefit or
obligation of either party hereto shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of
the other party. This Agreement shall not affect the rights and
obligations of the parties under Employee's employment agreement,
if any, with the Company or any subsidiary. Nothing contained
herein shall confer upon Employee any right with respect to
continuation of employment with the Company or any subsidiary
thereof, or interfere in any way with the right of the Company or
any subsidiary to terminate Employee's employment at any time. This
Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together constitute one and
the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 14th day of April, 1998.
CONTINENTAL AIRLINES, INC.
By:____________________________
Name: Jeffery A. Smisek
Title: Executive Vice President
EMPLOYEE
________________________________
5
6-MOS
DEC-31-1998
JUN-30-1998
1,067
117
492
0
145
2,057
2,834
709
6,655
2,500
0
242
0
1
1,082
6,655
3,890
3,890
0
0
3,460
0
84
412
157
248
0
4
0
244
4.08
3.12