<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Continental Airlines, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[CONTINENTAL AIRLINES LOGO]
April 6, 1999
To Our Stockholders:
On behalf of the Board of Directors, we are pleased to invite you to attend
the Continental Airlines, Inc. 1999 Annual Meeting of Stockholders. As indicated
in the attached notice, the meeting will be held at The Hyatt Regency, 1200
Louisiana Street, Houston, Texas on Tuesday, May 18, 1999, at 9:30 a.m., local
time. At the meeting, in addition to acting on the matters described in the
attached proxy statement, there will be an opportunity to discuss other matters
of interest to you as a stockholder.
Please date, sign and mail the enclosed proxy card in the envelope
provided, even if you plan to attend the meeting in person. You can also vote
your shares by telephone or through the internet, as described in the enclosed
proxy statement. We look forward to seeing you in Houston.
Cordially,
/s/ GORDON BETHUNE
Gordon Bethune
Chairman of the Board and Chief
Executive Officer
/s/ GREG BRENNEMAN
Greg Brenneman
President and Chief Operating
Officer
<PAGE> 3
CONTINENTAL AIRLINES, INC.
1600 SMITH STREET, DEPT. HQSEO
HOUSTON, TEXAS 77002
---------------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
---------------------
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
Continental Airlines, Inc., a Delaware corporation (the "Company" or
"Continental"), will be held at The Hyatt Regency, 1200 Louisiana Street,
Houston, Texas on Tuesday, May 18, 1999, at 9:30 a.m., local time, for the
following purposes:
1. To elect thirteen directors to serve until the next annual meeting
of stockholders;
2. To consider and act upon a proposal to ratify the appointment of
Ernst & Young LLP as independent auditors of the Company and its
subsidiaries for 1999; and
3. To consider and act upon any other matters that may properly come
before the Annual Meeting or any adjournment or adjournments thereof.
The holders of record of the Company's common stock at the close of
business on March 23, 1999 are entitled to notice of and to vote at the Annual
Meeting.
By Order of the Board of Directors,
/s/ JEFFERY A. SMISEK
Jeffery A. Smisek
Secretary
Houston, Texas
April 6, 1999
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY BY MAIL IN
THE ENCLOSED ENVELOPE, OR AUTHORIZE YOUR PROXY OR DIRECT YOUR VOTE BY TELEPHONE
OR INTERNET AS DESCRIBED IN THE ENCLOSED PROXY STATEMENT, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON. IF YOU MAIL THE ENCLOSED PROXY, NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU DO ATTEND THE MEETING IN
PERSON AND DESIRE TO WITHDRAW YOUR PROXY, YOU MAY DO SO IN THE MANNER DESCRIBED
IN THE ENCLOSED PROXY STATEMENT AND VOTE PERSONALLY ON ALL MATTERS PROPERLY
BROUGHT BEFORE THE MEETING.
<PAGE> 4
CONTINENTAL AIRLINES, INC.
1600 SMITH STREET, DEPT. HQSEO
HOUSTON, TEXAS 77002
---------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
---------------------
This proxy statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of Continental Airlines, Inc., a
Delaware corporation (the "Company" or "Continental"), of proxies to be voted at
the 1999 Annual Meeting of Stockholders of the Company or any adjournment or
adjournments thereof (the "Meeting"), to be held at The Hyatt Regency, 1200
Louisiana Street, Houston, Texas on Tuesday, May 18, 1999, at 9:30 a.m., local
time, for the purposes set forth in the accompanying Notice of 1999 Annual
Meeting of Stockholders. This proxy statement and the accompanying proxy,
together with a copy of the Company's 1998 Annual Report, are being first mailed
or otherwise delivered to stockholders on or about April 6, 1999.
THE PROXY
Stockholders giving proxies may revoke them at any time before they are
voted by notifying the Secretary of the Company in writing of such revocation or
by delivering to such Secretary a duly executed proxy bearing a later date. To
be effective, any such revocation or subsequent proxy must be received prior to
the commencement of voting at the Meeting. Revocation of telephonic or internet
proxies is accomplished automatically by granting a new proxy by such means
prior to the deadlines described below. If a proxy is properly signed (or, in
the case of internet or telephonic voting, properly authenticated) by a holder
of common stock and is not revoked, it will be voted at the Meeting in the
manner specified on the proxy (or instructed by internet or telephone) or, if no
manner is specified or instructed, it will be voted "FOR" the election of
directors nominated by the Board of Directors of the Company (the "Board of
Directors" or the "Board") and "FOR" approval of the ratification of the
appointment of Ernst & Young LLP as independent auditors of the Company and its
subsidiaries for 1999.
The Company will bear the costs of the solicitation of proxies. In addition
to the solicitation of proxies by mail, proxies may also be solicited by
internet, telephone, telegram, fax and in person by regular employees and
directors of the Company, none of whom will receive additional compensation
therefor, and by Morrow & Co., Inc., which the Company has retained to assist in
the solicitation of proxies for a fee estimated not to exceed $6,000 plus
reasonable out-of-pocket expenses. Arrangements will be made with brokerage
houses and with other custodians, nominees and fiduciaries to forward proxy
soliciting materials to beneficial owners, and the Company will reimburse such
persons for their reasonable out-of-pocket expenses incurred in connection
therewith.
TELEPHONIC OR INTERNET PROXIES
Although you may return the proxy or voting form that accompanies this
proxy statement in the postage-paid envelope provided therefor, please consider
the following alternatives as well. Internet and telephonic proxies save the
Company money. Please note that the internet and telephonic procedures described
below cannot be used for shares held by Foreigners (as defined on page 3).
Shares held by you of record. Stockholders with shares registered in their
names with Harris Trust and Savings Bank ("Harris"), the Company's transfer
agent and registrar, may authorize a proxy telephonically by calling Harris at
(888)515-8274, or by internet at the following address:
www.harrisbank.com/wproxy. Proxies
<PAGE> 5
submitted through Harris by telephone or internet must be received by midnight
(EDT) on May 16, 1999. The giving of such proxy will not affect your right to
vote in person should you decide to attend the Meeting.
Shares held in a bank or brokerage account. A number of banks and brokerage
firms participate in a program that also permits stockholders to direct their
vote by telephone or internet. This option is separate from that offered by
Harris and will be reflected on the voting form from such banks or brokerage
firms that accompanies this proxy statement. If your shares are held in an
account at a bank or brokerage that participates in such a program, you may
direct the vote of those shares by telephone or internet by following the
instructions on their enclosed voting form. Votes directed by telephone or
internet through such a program must be received by midnight (EDT) on May 17,
1999. The directing of such vote will not affect your right to vote in person
should you decide to attend the Meeting; however, you must first request a legal
proxy either on the internet or the voting form that accompanies this proxy
statement. Requesting a legal proxy will automatically cancel any voting
directions you have previously given by internet or by telephone with respect to
such shares.
The telephone and internet proxy procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their proxy instructions
and to confirm that such instructions have been properly recorded. Counsel has
advised the Company that the foregoing telephone and internet proxy procedures
are consistent with applicable legal requirements. Stockholders authorizing
proxies or directing the voting of shares by internet should bear in mind the
possibility that there may be costs associated with electronic access, such as
usage charges from internet access providers and telephone companies that must
be borne by the stockholder.
RECORD DATE AND VOTING SECURITIES
The Board of Directors fixed the close of business on March 23, 1999 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Meeting. At the close of business on the record date, the Company
had outstanding 11,406,732 shares of Class A common stock, par value $.01 per
share, and 57,078,212 shares of Class B common stock, par value $.01 per share.
Continental's Restated Certificate of Incorporation ("Charter") authorizes
the issuance of up to 10 million shares of preferred stock, 50 million shares
each of Class A common stock and Class D common stock, and 200 million shares of
Class B common stock. No shares of Class D common stock have been issued, and no
preferred stock is outstanding. Subject to certain limitations on voting by
non-U.S. citizens, each share of Class A common stock is entitled to ten votes
per share and each share of Class B common stock is entitled to one vote per
share. Shares of Class A common stock may be converted at any time into shares
of Class B common stock. The holders of shares representing a majority of the
aggregate voting power of the outstanding voting securities entitled to vote at
the Meeting, present or represented by proxy, will constitute a quorum for the
transaction of business at the Meeting.
In establishing the presence of a quorum, abstentions and broker non-votes
(if any) will be included in the determination of the number of shares
represented at the Meeting. Abstentions are treated as votes cast and thus will
have the same effect as a vote against a proposal. As to a specific proposal,
however, broker non-votes are not treated as votes cast or shares entitled to
vote with respect to such matter and thus will not affect the election of
directors (who will be elected by a plurality of the votes cast for directors)
or the ratification of the appointment of independent auditors (which requires
approval by a majority of the votes cast).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS
CONTAINED IN THIS PROXY STATEMENT.
2
<PAGE> 6
LIMITATION ON VOTING BY FOREIGN OWNERS
The Charter defines "Foreign Ownership Restrictions" as "applicable
statutory, regulatory and interpretive restrictions regarding foreign ownership
or control of U.S. air carriers (as amended or modified from time to time)."
Such restrictions currently require that no more than 25% of the voting stock of
the Company be owned or controlled, directly or indirectly, by persons who are
not U.S. Citizens ("Foreigners") for purposes of the Foreign Ownership
Restrictions, and that the Company's president and at least two-thirds of its
directors or other managing officers be U.S. Citizens. For purposes of the
Charter, "U.S. Citizen" means (i) an individual who is a citizen of the United
States; (ii) a partnership each of whose partners is an individual who is a
citizen of the United States; or (iii) a corporation or association organized
under the laws of the United States or a State, the District of Columbia, or a
territory or possession of the United States, of which the president and at
least two-thirds of the board of directors and other managing officers are
citizens of the United States, and in which at least 75% of the voting interest
is owned or controlled by persons who are citizens of the United States. The
Charter provides that no shares of capital stock may be voted by or at the
direction of Foreigners, unless such shares are registered on a separate stock
record (the "Foreign Stock Record") maintained by the Company for the
registration of ownership of voting stock by Foreigners. The Company's bylaws
("Bylaws") further provide that no shares will be registered on the Foreign
Stock Record if the amount so registered would cause the Company to violate the
Foreign Ownership Restrictions or adversely affect the Company's operating
certificates or authorities. Registration on the Foreign Stock Record is made in
chronological order based on the date the Company receives a written request for
registration, except that shares acquired by Air Partners, L.P., a Texas limited
partnership ("Air Partners"), in connection with its original investment in the
Company that are subsequently transferred to any Foreigner are entitled to be
registered prior to, and to the exclusion of, other shares.
NORTHWEST TRANSACTION
On November 20, 1998, an affiliate of Northwest Airlines, Inc. (which
affiliate is referred to hereafter together with Northwest Airlines, Inc. as
"Northwest") completed its acquisition of certain equity of the Company held by
Air Partners and its affiliates, together with certain Class A common stock of
the Company held by certain other investors, totaling 8,661,224 shares of the
Class A common stock (the "Air Partners Transaction"). In connection with the
Air Partners Transaction, the Company announced that it had entered into a
long-term global alliance with Northwest (the "Northwest Alliance").
As of March 23, 1999, Northwest held approximately 12.7% of the common
equity interest and 45.8% of the fully-diluted voting power of the Company. In
addition, Northwest holds a limited proxy to vote certain additional shares of
the Company's common stock under certain circumstances that would raise its
voting power to approximately 50.3% of the Company's fully diluted voting power.
In connection with the Air Partners Transaction, the Company entered into a
corporate governance agreement with certain affiliates of Northwest (the
"Northwest Parties") designed to assure the independence of the Company's Board
and management during the six-year term of the governance agreement. Under the
governance agreement, as amended, the Northwest Parties have agreed not to
beneficially own voting securities of the Company in excess of 50.1% of the
fully diluted voting power of the Company's voting securities, subject to
certain exceptions, including third-party acquisitions or tender offers for 15%
or more of the voting power of the Company's voting securities and a limited
exception permitting a one-time ownership of approximately 50.4% of the fully
diluted voting power. The Northwest Parties have deposited all voting securities
of the Company beneficially owned by them (other than the shares for which they
hold only a limited proxy) in a voting trust with an independent voting trustee
requiring that such securities be voted (i) on all matters other than the
election of directors, in the same proportion as the votes cast by other holders
of voting securities, and (ii) in the election of directors, for the election of
Independent Directors (as defined) (who must constitute a majority of the Board)
nominated by the Board of Directors. However, in the event of a merger or
similar business combination or a recapitalization, liquidation or similar
transaction, a sale of all or substantially all of the Company's assets, or an
issuance of voting securities that would represent more than 20% of the voting
power of the Company prior to issuance, or any amendment of the Company's
charter or
3
<PAGE> 7
bylaws that would materially and adversely affect Northwest (each, an
"Extraordinary Transaction"), the shares may be voted as directed by the
Northwest Party owning such shares, and if a third party is soliciting proxies
in an election of directors, the shares may be voted at the option of such
Northwest Party either as recommended by the Company's Board of Directors or in
the same proportion as the votes cast by the other holders of voting securities.
The Northwest Parties have also agreed to certain restrictions on the
transfer of voting securities owned by them, have agreed not to seek to affect
or influence the Company's Board of Directors or the control of the management
of the Company or the business, operations, affairs, financial matters or
policies of the Company or to take certain other actions, and have agreed to
take all actions necessary to cause Independent Directors to at all times
constitute at least a majority of the Company's Board of Directors. The Company
has granted preemptive rights to a Northwest Party with respect to issuances of
Class A common stock and certain issuances of Class B common stock. The
Northwest Parties have agreed that certain specified actions, together with any
material transactions between the Company and Northwest or its affiliates,
including any modifications or waivers of the governance agreement or the
alliance agreement, may not be taken without the prior approval of a majority of
the Board of Directors, including the affirmative vote of a majority of the
Independent Directors.
The governance agreement also required the Company to adopt a shareholder
rights plan with reasonably customary terms and conditions, with an acquiring
person threshold of 15% and with appropriate exceptions for the Northwest
Parties for actions permitted by and taken in compliance with the governance
agreement. A rights plan meeting these requirements was adopted effective
November 20, 1998.
The governance agreement will expire on November 20, 2004, or if earlier,
upon the date that the Northwest Parties cease to beneficially own voting
securities representing at least 10% of the fully diluted voting power of the
Company's voting securities. However, in response to concerns raised by the
Department of Justice ("DOJ") in its antitrust review of the Northwest Alliance,
the Air Partners Transaction and the related governance agreement between the
Company and the Northwest Parties (collectively, the "Northwest Transaction"), a
supplemental agreement was adopted, which extended the effect of a number of the
provisions of the governance agreement for an additional four years. For
instance, the Northwest Parties must act to ensure that a majority of the
Company's Board is comprised of Independent Directors, and certain specified
actions, together with material transactions between the Company and Northwest
or its affiliates, including any modifications or waivers of the supplemental
agreement or the alliance agreement, may not be taken without the prior approval
of a majority of the Board of Directors, including the affirmative vote of a
majority of the Independent Directors. The Northwest Parties will continue to
have the right to vote Company stock in their discretion on any Extraordinary
Transaction during the supplemental period, but also will be permitted to vote
in their discretion on other matters up to 20% of the outstanding voting power
(their remaining votes to be cast neutrally, except in a proxy contest, as
contemplated in the governance agreement), subject to their obligation set forth
in the previous sentence. If, during the term of the supplemental agreement, the
Company's rights plan were amended to allow certain parties to acquire more
shares than is currently permitted, or if the rights issued thereunder were
redeemed, the Northwest Parties could vote all of their shares in their
discretion. Certain transfer limitations are imposed on the Northwest Parties
during the supplemental period. The Company has granted preemptive rights to a
Northwest Party with respect to issuances of Class A common stock and certain
issuances of Class B common stock that occur during such period. The Company has
agreed to certain limitations upon its ability to amend its charter, bylaws,
executive committee charter and rights plan during the term of the supplemental
agreement. Following the supplemental period, the supplemental agreement
requires the Northwest Parties to take all actions necessary to cause
Continental's Board to have at least five independent directors, a majority of
whom will be required to approve material transactions between Continental and
Northwest or its affiliates, including the amendment, modification or waiver of
any provisions of the supplemental agreement or the alliance agreement.
4
<PAGE> 8
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 23, 1999 (except as otherwise
set forth below), certain information with respect to persons owning
beneficially (to the knowledge of the Company) more than five percent of any
class of the Company's voting securities. The table also sets forth the
respective general voting power of such persons. Information in the table is
based on reports that have been filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and information furnished to the Company by such
holders.
<TABLE>
<CAPTION>
AMOUNT
AND NATURE GENERAL
NAME AND ADDRESS OF BENEFICIAL PERCENT VOTING
OF BENEFICIAL HOLDER TITLE OF CLASS OWNERSHIP OF CLASS POWER(1)
-------------------- -------------- ------------- -------- --------
<S> <C> <C> <C> <C>
Northwest Airlines Corporation Class A common stock 9,514,868(2) 83.4% 55.6%
2700 Lone Oak Parkway
Eagan, MN 55121
1998 CAI Partners, L.P.(3) Class A common stock 624,134 5.5% 3.7%
1992 Air, Inc.(3) Class A common stock 837,244 7.3% 4.9%
David Bonderman(3) Class A common stock 853,644 7.5% 5.0%
The Equitable Companies Incorporated Class B common stock 18,148,429(4) 31.8% 10.6%
1290 Avenue of the Americas
New York, NY 10104
Neuberger Berman, LLC Class B common stock 4,638,257(5) 8.1% 2.7%
605 Third Ave.
New York, NY 10158-3698
Wellington Management Company, LLP Class B common stock 3,043,184(6) 5.3% 1.8%
75 State Street
Boston, MA 02109
Vanguard/Windsor Funds Inc. Class B common stock 2,862,250(7) 5.0% 1.7%
P.O. Box 2600, V37
Valley Forge, PA 19482
</TABLE>
- ---------------
(1) Each share of Class A common stock is entitled to ten votes, and each share
of Class B common stock is entitled to one vote. General Voting Power
includes the combined total of the votes attributable to Class A common
stock and Class B common stock outstanding at March 23, 1999. Shares of
Class A common stock may be converted at any time into shares of Class B
common stock. Because the Class A common stock has ten votes per share and
the Class B common stock has one vote per share, such conversions
effectively increase the relative voting power of those Class A stockholders
who do not convert.
(2) As described above under "Northwest Transaction," and based on reports filed
with the SEC pursuant to the Exchange Act and information provided to the
Company, Northwest Airlines Corporation (for purposes of this footnote,
individually "Northwest") shares voting and dispositive power as to all such
shares. Northwest beneficially owns 8,661,224 shares of Class A common
stock, and has the right to vote in certain circumstances under a limited
proxy granted to it an additional 853,644 such shares. The 8,661,224 owned
shares have been placed in a voting trust, for which Wilmington Trust
Company acts as trustee. Wilmington Trust's address is Rodney Square North,
1100 North Market Street, Wilmington DE 19890, and the manner in which it is
permitted to vote is described above under "Northwest Transaction." Of the
shares subject to a limited proxy, 624,134 are held by 1998 CAI Partners,
L.P., a Texas limited partnership ("CAIP"), 213,110 are beneficially owned
by 1992 Air, Inc. and 16,400 are beneficially owned by Bonderman Family
Limited Partnership ("BFLP").
(3) The principal business address of each such party is 201 Main Street, Suite
2420, Fort Worth, TX 76102. 1992 Air GP is the general partner of CAIP and
thus could be deemed to be the beneficial owner of the shares held by CAIP.
David Bonderman and Donald Sturm, each a director of the Company, and BFLP
5
<PAGE> 9
are limited partners of CAIP. 1992 Air, Inc, as the majority general partner
of 1992 Air GP and because of its direct ownership of 213,110 shares of
Class A common stock, may be deemed to be the beneficial owner of an
aggregate of 837,244 shares of Class A common stock. David Bonderman, as the
controlling shareholder of 1992 Air, Inc. and the sole general partner of
BFLP, may be deemed to be the beneficial owner of 853,644 shares of Class A
common stock. The aggregate number of shares of Class A common stock that
BFLP may be deemed to own is 33,504, comprised of the 16,400 shares it owns
directly and the 17,104 shares it may be deemed to own beneficially because
of its position as a limited partner of CAIP, and on the basis of certain
provisions of the Limited Partnership Agreement of CAIP. Does not include
180,483 shares of Class B common stock owned by Mr. Bonderman, 21,000 such
shares subject to outside director stock options, or 682,450 such shares
beneficially owned by BFLP, which Mr. Bonderman may be deemed to own.
(4) As of December 31, 1998, based on a report filed with the SEC pursuant to
the Exchange Act in February 1998 by The Equitable Companies Incorporated
("Equitable"), as parent holding company for AXA Conseil Vie Assurance
Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, and
AXA Courage Assurance Mutuelle (as a group, which beneficially own a
majority interest in AXA), and their subsidiaries. The shares shown
represent beneficial ownership by registered broker-dealer or investment
advisor subsidiaries of Equitable. According to such report, none of such
subsidiaries has an interest in the reported securities representing greater
than 5% of the Class B common stock other than Alliance Capital Management
L.P. (14,376,832 shares) and Equitable Life Assurance Society of the United
States (3,770,597 shares). Equitable may be deemed to have sole voting power
with respect to 7,326,337 shares, shared voting power with respect to
8,255,300 shares, sole dispositive power with respect to 18,148,029 shares
and shared dispositive power with respect to 400 shares.
(5) Based on a report filed with the SEC under the Exchange Act in February
1999, the shares reported represent the aggregated beneficial ownership of
Neuberger Berman, LLC and Neuberger Berman Management Inc. The filing
persons reported the amounts as a registered broker dealer, investment
advisor and investment company. The reporting persons may be deemed to have
sole voting power with respect to 1,399,857 shares, shared voting power with
respect to 3,235,000 shares, sole dispositive power with respect to no
shares and shared dispositive power with respect to 4,638,257 shares.
(6) As of December 31, 1998, based on a report filed with the SEC pursuant to
the Exchange Act in January 1999, Wellington shared dispositive power, but
had no voting power with respect to of the referenced shares, which were
held by investment advisory clients of Wellington. According to the report,
the sole client known to Wellington to have in excess of five percent of the
Class B common stock was the Vanguard Windsor Fund.
(7) Based on a report filed with the SEC in February 1999, the Vanguard Windsor
Fund -- Windsor Fund has sole voting power and shared dispositive power for
all the shares shown.
6
<PAGE> 10
BENEFICIAL OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of March 23, 1999, the number of shares of
Class B common stock beneficially owned by each of the current directors, the
executive officers named below in the Summary Compensation Table, and all
executive officers and directors as a group. Also reflected in the amounts shown
are shares of Class A common stock, which are convertible into an equal number
of shares of Class B common stock and are set forth in the footnotes to the
table. See also "Voting Rights and Principal Stockholders."
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNERS OWNERSHIP(1) OF CLASS
------------------------- ------------ --------
<S> <C> <C>
Thomas J. Barrack, Jr................................ 21,000(2) *
Lloyd M. Bentsen, Jr................................. 24,160(3) *
Gordon M. Bethune.................................... 547,029(4) 1.0%
David Bonderman...................................... 1,737,577(5) 3.0%
Gregory D. Brenneman................................. 439,370(6) *
Patrick Foley........................................ 21,000(7) *
Lawrence W. Kellner.................................. 201,722(8) *
Douglas H. McCorkindale.............................. 21,000(7) *
C.D. McLean.......................................... 184,300(9) *
George G. C. Parker.................................. 16,400(3) *
Richard W. Pogue..................................... 8,500(10) *
William S. Price III................................. 15,000(7) *
Jeffery A. Smisek.................................... 187,830(11) *
Donald L. Sturm...................................... 557,147(12) 1.0%
Karen Hastie Williams................................ 21,000(7) *
Charles A. Yamarone.................................. 26,000(13) *
All executive officers and directors as a group...... 4,973,965(14) 7.0%
</TABLE>
- ---------------
* Less than 1%
(1) The persons listed have the sole power to vote and dispose of the shares
beneficially owned by them except as otherwise indicated. See also the
previous table and text under the caption "Voting Rights and Principal
Stockholders."
(2) Includes 18,000 shares subject to vested director stock options and 3,000
shares held in trust for the benefit of Mr. Barrack's children as to which
shares Mr. Barrack disclaims beneficial ownership.
(3) Includes 15,000 shares subject to vested director stock options.
(4) Includes 545,000 shares subject to vested options, or vesting within 60
days after March 23, 1999.
(5) Includes 853,644 shares of Class A common stock described in note 3 to the
previous table, 21,000 shares subject to vested director stock options and
682,450 shares beneficially owned by BFLP.
(6) Includes 411,500 shares subject to vested options, or vesting within 60
days after March 23, 1999.
(7) Represents shares subject to vested director stock options.
(8) Includes 182,500 shares subject to vested options, or vesting within 60
days after March 23, 1999, and 200 shares owned by a relative of Mr.
Kellner, as to which shares Mr. Kellner shares dispositive power but
disclaims beneficial ownership.
(9) Includes 182,500 shares subject to vested options, or vesting within 60
days after March 23, 1999.
(10) Includes 5,000 shares subject to vested director stock options and 2,000
shares of Class A common stock.
(11) Includes 182,500 shares subject to vested options, or vesting within 60
days after March 23, 1999, and 2,000 shares of Class A common stock.
7
<PAGE> 11
(12) Includes 21,000 shares subject to vested director stock options, 60,400
shares held in trusts for the benefit of Mr. Sturm's children and 130,200
shares held in a charitable trust for which Mr. Sturm acts as Trustee. Also
includes 147,019 shares of Class A common stock representing Mr. Sturm's
proportionate interest in Class A common stock beneficially owned by CAIP.
Mr. Sturm is a limited partner of CAIP and, as such, may be deemed to share
voting and dispositive power with respect to the shares beneficially owned
by CAIP that are attributable to such limited partnership interest.
(13) Includes 18,000 shares subject to vested director stock options.
(14) Includes 2,704,264 shares subject to vested options or vesting within 60
days after March 23, 1999, which are held by executive officers and
non-employee directors of the Company, and 858,844 shares of Class A common
stock. See also notes 5 and 12.
GENERAL INFORMATION
BOARD OF DIRECTORS MEETINGS
Regular meetings of the Board of Directors are generally held four times
per year, and special meetings are scheduled when required. The Board held eight
meetings in 1998.
STANDING COMMITTEES OF THE BOARD
The Audit Committee has the authority and power to act on behalf of the
Board of Directors with respect to the appointment of independent auditors for
the Company and with respect to authorizing any special audit or audit-related
activities which, in its discretion, are deemed necessary to perform its
functions. The committee monitors the audit activities of the Company and its
subsidiaries to assure that they have implemented proper internal accounting
controls. The committee consists of four non-employee directors and met three
times in 1998.
The Executive Committee exercises certain powers of the Board of Directors
between Board meetings. The committee, which consists of two non-employee
directors and one officer-director of the Company, held no formal meetings in
1998, but took numerous actions by unanimous written consent.
The Finance and Strategy Committee reviews the Company's annual budget, its
short and long-term strategic plans and its plans for raising capital and
increasing liquidity, and makes recommendations to the Board of Directors
regarding implementation of those plans as the committee deems appropriate. The
committee, which consists of two officer-directors and three non-employee
directors, met once in 1998.
The Human Resources Committee has the authority and power to act on behalf
of the Board of Directors with respect to all matters relating to the employment
of senior officers by the Company and its subsidiaries, including but not
limited to approval of compensation, benefits, incentives and employment
contracts. The committee administers the Company's stock option, employee stock
purchase and profit sharing plans and the Executive Bonus Program. The committee
consists of four non-employee directors and met seven times in 1998.
The Company does not have a nominating committee.
During 1998, each director of the Company other than Mr. Bentsen attended
over 75% of the sum of the total number of meetings of the Board and each
committee of which he or she was a member.
COMPENSATION OF DIRECTORS
Effective January 1, 1999, members of the Board of Directors who are not
full-time employees of the Company are paid $35,000 per year, $2,000 (or $3,000
for the chairperson) for each Board and committee meeting physically attended,
$1,000 for each Board meeting attended by telephone, and $500 for each committee
meeting attended by telephone. Directors who conduct Company business in their
capacities as directors on behalf of the Company at the request of the Board or
the Chairman of the Board are paid (i) for telephone participation in Board and
Committee meetings as if they were physically present, if their
8
<PAGE> 12
conducting Company business makes it reasonably impracticable for them to attend
the meeting in person, and (ii) $3,000 per day spent outside the United States
while conducting such Company business. The Board authorized compensation for
members of a special committee formed to review the Air Partners Transaction and
related matters in the amount of $2,000 for each meeting attended personally or
by telephone and a one-time fee of $25,000 for the chairman of the committee in
recognition of the substantial demands placed on his time while serving as such
chair. The committee, which was comprised of Messrs. Bentsen, McCorkindale,
Parker (Chairman), Pogue and Yamarone, met twice in 1998. Stock options relating
to 5,000 shares of Class B common stock are granted to non-employee directors
following each annual meeting of stockholders and bear exercise prices equal to
the fair market value of such stock on such date. A grant of options to purchase
5,000 shares of Class B common stock is also made to directors who are first
elected to the Board other than at an annual meeting of stockholders. In
addition, each non-employee director receives lifetime flight benefits,
comprised of space-available personal and family flight passes, a travel card
permitting positive space travel by the director, the director's family and
certain other individuals (which is taxable to the director, subject to the
payment of certain of such taxes by the Company during Board service), a
frequent flyer card and an airport lounge card. During 1998, the value imputed
by the Company to the use of such flight benefits by the Company's non-employee
directors, including the payment of related taxes by the Company, varied by
director, but did not exceed $18,500 for any of the directors.
Full-time employees of the Company who serve as directors receive
reimbursement of expenses incurred in attending meetings, in addition to flight
and other benefits provided in their employment agreements or shared generally
by other employees of the Company.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's current executive officers:
<TABLE>
<CAPTION>
NAME, AGE AND POSITION TERM OF OFFICE AND BUSINESS EXPERIENCE
---------------------- --------------------------------------
<S> <C>
GORDON M. BETHUNE, age 57..................... Chairman of the Board and Chief Executive
Chairman of the Board and Officer since September 1996. Director since
Chief Executive Officer August 1994; President and Chief Executive
Officer (November 1994-September 1996);
President and Chief Operating Officer
(February 1994-November 1994); various
positions with The Boeing Company commencing
in 1988, including Vice President and Gen-
eral Manager of the Commercial Airplane Group
Renton Division, Vice President and General
Manager of the Customer Services Division and
Vice President of Airline Logistics Support;
Director of Sysco Corporation, and nominee for
director of Honeywell Inc.
GREGORY D. BRENNEMAN, age 37.................. President and Chief Operating Officer since
President, Chief Operating Officer September 1996. Director since June 1995;
and Director Chief Operating Officer (May 1995-September
1996); Consultant to the Company
(February-April 1995); various positions,
including Vice President, with Bain & Com-
pany, Inc. (consulting firm) for more than
five years; Director of Browning-Ferris
Industries, Inc.; J. Crew Group Inc.
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
NAME, AGE AND POSITION TERM OF OFFICE AND BUSINESS EXPERIENCE
---------------------- --------------------------------------
<S> <C>
LAWRENCE W. KELLNER, age 40................... Executive Vice President and Chief Financial
Executive Vice President and Officer since November 1996. Senior Vice
Chief Financial Officer President and Chief Financial Officer (June
1995-November 1996); Executive Vice President
and Chief Financial Officer of American
Savings Bank, F.A. (November 1992-May 1995);
Director of Belden & Blake Corporation.
C.D. McLEAN, age 57........................... Executive Vice President -- Operations since
Executive Vice President -- Operations November 1996. Senior Vice President
-- Operations (April 1994-November 1996).
JEFFERY A. SMISEK, age 44..................... Executive Vice President, General Counsel and
Executive Vice President, Secretary since November 1996. Senior Vice
General Counsel and Secretary President and Secretary (April 1995-November
1996); General Counsel since March 1995;
Partner, Vinson & Elkins L.L.P. (law firm)
prior to March 1995 for more than five years;
Director of Tuboscope Inc.
MICHAEL H. CAMPBELL, age 50................... Senior Vice President -- Human Resources and
Senior Vice President -- Human Labor Relations since January 1997. Partner,
Resources and Labor Relations Ford & Harrison LLP (law firm) (1978-1997).
MARK A. ERWIN, age 43......................... Senior Vice President -- Airport Services
Senior Vice President -- Airport Services since April 1995. Vice President -- Newark Hub
(1994-1995).
J. DAVID GRIZZLE, age 44...................... Senior Vice President -- Corporate Development
Senior Vice President -- Corporate since November 1996. Vice
Development President -- Alliance Development (April
1995-November 1996); Vice President -- Asia
and Pacific Development (May 1993-April 1995).
GEORGE L. MASON, age 52....................... Senior Vice President -- Technical Operations
Senior Vice President -- Technical since November 1996. Vice
Operations President -- Technical Operations (March
1994-November 1996).
JAMES B. REAM, age 43......................... Senior Vice President -- Asia since March
Senior Vice President -- Asia 1998; President and Chief Operating Officer of
Continental Micronesia, Inc. ("CMI") (October
1996-April 1998); Executive Vice President and
Chief Operating Officer of CMI (June
1996-October 1996); Vice President -- Finance
of Continental Airlines, Inc. (December
1994-June 1996); Managing Direc-
tor -- Financial Planning of American
Airlines, Inc. (1992-1994).
BONNIE S. REITZ, age 46....................... Senior Vice President -- Sales and
Senior Vice President -- Sales and Distribution since November 1996. Vice
Distribution President -- Marketing and Sales (August
1994-November 1996); Vice Presi-
dent -- Marketing and Sales of System One
Information Management, Inc. (1989-1994).
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
NAME, AGE AND POSITION TERM OF OFFICE AND BUSINESS EXPERIENCE
---------------------- --------------------------------------
<S> <C>
BARRY P. SIMON, age 56........................ Senior Vice President -- International since
Senior Vice President -- International November 1996. Senior Vice President -- Europe
(June 1995-November 1996); Senior Vice Presi-
dent -- Strategic Business Units (April 1995-
June 1995); Senior Vice President -- Widebody
Division (August 1994-April 1995); Senior Vice
President and General Counsel (June
1990-August 1994), except Senior Vice
President, General Counsel and Director, GAF
Corporation (January-March 1993).
KUNIAKI TSURUTA, age 63....................... Senior Vice President -- Purchasing and
Senior Vice President -- Purchasing and Materials Services since November 1996. Vice
Materials Services President -- Purchasing (April 1994-November
1996).
JANET P. WEJMAN, age 41....................... Senior Vice President and Chief Information
Senior Vice President and Chief Officer since November 1996. Vice President
Information Officer and Chief Information Officer (February
1996-November 1996); President, North Western
Aviation, Inc. (flight school in Chicago,
Illinois) (since August 1995); independent
consultant (August 1995-February 1996); Assis-
tant Vice President of System Technology and
User Training, Chicago & North Western
Railroad (August 1992-August 1995).
</TABLE>
There is no family relationship between any of the executive officers. All
officers are appointed by the Board of Directors to serve until their
resignation, death or removal.
11
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth (i) the aggregate amount of remuneration
paid by the Company during 1998, 1997 and 1996 to the chief executive officer
and the four other most highly compensated executive officers of the Company in
1998, (ii) the number of shares of Class B common stock subject to options
granted to such individuals during 1998 and the Black-Scholes value thereof and
(iii) information regarding stock options exercised in 1998 and the value of the
options held by such individuals at the end of 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
--------------------------------------- RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS OPTIONS COMPENSATION
--------------------------- ---- -------- ---------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gordon M. Bethune................. 1998 $765,000 $1,381,500 $ 2,941 $0 650,000 $ 0
Chairman of the Board and 1997 755,750 937,500 2,005 0 150,000 0
Chief Executive Officer 1996 604,755 882,292 1,052 0 220,000 1,572,500(3)
Gregory D. Brenneman.............. 1998 $586,508 $1,018,752 $ 6,316 $0 550,000 $ 0
President and Chief Operating 1997 583,410 718,749 9,011 0 90,000 0
Officer 1996 535,500 787,502 5,957 0 154,000 776,563(3)
Lawrence W. Kellner............... 1998 $428,400 $ 675,000 $11,716 $0 250,000 $ 0
Executive Vice President 1997 427,172 525,000 7,279 0 60,000 0
and Chief Financial Officer 1996 390,172 569,128 7,106 0 70,000 0
C.D. McLean....................... 1998 $383,100 $ 618,752 $ 5,427 $0 200,000 $ 0
Executive Vice President 1997 381,600 468,752 3,511 0 60,000 0
-- Operations 1996 321,625 473,438 3,586 0 70,000 0
Jeffery A. Smisek................. 1998 $356,996 $ 587,500 $ 8,783 $0 200,000 $ 0
Executive Vice President, 1997 355,992 437,500 9,561 0 60,000 0
General Counsel and Secretary 1996 316,415 465,625 4,766 0 70,000 0
</TABLE>
- ---------------
(1) 1998 includes stay bonus.
(2) Represents a tax adjustment relating to certain travel benefits provided by
the Company.
(3) Represents payments made to Messrs. Bethune and Brenneman in 1996 in
connection with the waiver of certain rights under their respective
employment agreements.
OPTION GRANTS DURING 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE GRANT DATE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE VALUE(2)
---- ---------- --------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gordon M. Bethune......... 150,000 2.3% $56.8125 05/21/03 $2,765,040
500,000 7.8 35.0000 11/23/03 5,453,213
Gregory D. Brenneman...... 120,000 1.9 56.8125 05/21/03 2,212,032
430,000 6.7 35.0000 11/23/03 4,689,763
Lawrence W. Kellner....... 60,000 0.9 56.8125 05/21/03 1,106,016
190,000 3.0 35.0000 11/23/03 2,072,221
C.D. McLean............... 60,000 0.9 56.8125 05/21/03 1,106,016
140,000 2.2 35.0000 11/23/03 1,526,900
Jeffery A. Smisek......... 60,000 0.9 56.8125 05/21/03 1,106,016
140,000 2.2 35.0000 11/23/03 1,526,900
</TABLE>
- ---------------
(1) The options vest in annual 25% increments commencing May 21, 1999 and
November 23, 1999, respectively.
12
<PAGE> 16
(2) Estimated using the Black-Scholes option pricing model. Such model requires
the input of highly subjective assumptions, including expected stock price
volatility. The model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully
transferable, unlike the Company's employee stock options. These
differences, and changes in the subjective input assumptions, can materially
affect the estimated values shown. Consequently, such model does not
necessarily provide a reliable estimate of the options' value. The estimated
values shown are based on the following input assumptions: risk-free
interest rate of 4.9%; dividend yield of 0%; volatility factor of the
expected market price of the Company's common stock of 40%; and a weighted
average expected life of the options of 3.0 years.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gordon M. Bethune............. 0 0 507,500 650,000 $6,336,406 $0
Gregory D. Brenneman.......... 0 0 381,500 550,000 5,134,000 0
Lawrence W. Kellner........... 0 0 167,500 250,000 1,826,563 0
C.D. McLean................... 0 0 167,500 200,000 1,850,000 0
Jeffery A. Smisek............. 0 0 167,500 200,000 1,934,375 0
</TABLE>
- ---------------
(1) Determined based on the closing price of the Class B common stock on
December 31, 1998 of $33.50.
EMPLOYMENT AGREEMENTS
Agreements with Mr. Bethune and Mr. Brenneman. In connection with the
closing of the Air Partners Transaction, Continental entered into a new
employment agreement with each of Mr. Bethune and Mr. Brenneman relating to his
service as an officer and director of the Company. The agreements provide for
(i) an annual base salary of not less than $750,000 for Mr. Bethune and $575,000
for Mr. Brenneman; (ii) participation in any Company cash bonus program at the
maximum level available to any executive (and not less than the Bonus Percentage
defined below); (iii) a supplemental executive retirement plan ("SERP"),
disability benefits and life insurance; (iv) flight benefits substantially
identical to those currently provided to non-employee directors ("Flight
Benefits"); and (v) perquisites and other matters. The "Bonus Percentage" is
equal to the annual percentage of base salary (i.e., 0% to 125%) paid or payable
under the Company's Executive Bonus Program.
Pursuant to the SERP, each executive receives a base retirement benefit in
the form of an annual straight life annuity in an amount equal to the product of
(x) 1.6% times (y) the number of his credited years of service (with the
executive receiving an additional three years of credited service if he receives
a Termination Payment (as defined below) under his employment agreement) times
(z) his final average compensation (including salary and cash bonuses, other
than bonuses paid prior to April 1, 1995 and stay bonus amounts received in
connection with the Air Partners Transaction). Amounts payable under the
Company's Retirement Plan are offset against the SERP benefit.
Each agreement may be terminated at any time by either party, with or
without cause. Each agreement is in effect until November 20, 2003 and is
automatically extended for an additional five-year period on each successive
fifth anniversary of such date, unless earlier terminated or not extended by
either party. If the executive's employment agreement is not extended by the
executive, or is terminated by the Company for cause (as described in the
agreement) or by the executive without good cause (as described in the
agreement), the Company will provide him with (i) a lump-sum payment of
approximately $5.1 million (for Mr. Bethune) or $3.9 million (for Mr.
Brenneman), the amount to which he would have been entitled under his previous
employment agreement if he had left the employ of the Company following the Air
Partners Transaction (the "Existing Severance"), (ii) the SERP benefit and (iii)
Flight Benefits (together, the "Base
13
<PAGE> 17
Benefits"). If his employment is terminated by the Company for reasons other
than death, disability or cause, or if the Company does not extend his
employment agreement, or if the executive terminates his employment agreement
for good cause, then the Company shall, in addition to providing the Base
Benefits, (i) cause all options and any shares of restricted stock awarded to
the executive to vest, (ii) make a lump-sum cash severance payment to the
executive (calculated as described below, the "Termination Payment"), (iii)
provide the executive with out-placement, office and other perquisites for
certain specified periods, and (iv) provide the executive and his eligible
dependents with certain insurance benefits. Alternatively, if the Company
terminates the executive's employment due to death or disability, the Company
shall provide the Base Benefits and cause all options and any shares of
restricted stock awarded to the executive to vest, and the executive, or his
beneficiaries, will receive life insurance benefits or, upon the cessation of
long-term disability payments prior to the executive's attainment of age 65
while disabled, a Company payment, in an amount equal to the Termination
Payment. The "Termination Payment" referred to above is equal to three times the
sum of (a) the executive's then current annual base salary and (b) a deemed
annual bonus equal to the Bonus Percentage (with respect to the most recently
ended fiscal year) of such salary.
The Company is required to maintain life insurance on the executive's
behalf in an amount not less than the Termination Payment. Each executive is
indemnified by the Company for his tax obligations with respect to payments or
other benefits under the agreement or otherwise to the extent that such payments
or other benefits are subject to an excise or other special additional tax that
would not have been imposed absent such payments or other benefits. See also
"Certain Transactions."
Agreements with Other Named Executives. Continental has entered into
employment agreements with each of Messrs. Kellner, McLean and Smisek, which
agreements were amended in connection with the Air Partners Transaction and
contain substantially identical terms. The agreements provide for an annual base
salary of not less than $420,000, $375,000 and $350,000, respectively,
participation in any Company cash bonus program at the maximum level available
to any executive, a SERP with terms similar to Mr. Bethune's and based on the
executive's compensation, Flight Benefits, perquisites and other matters. Each
of the agreements may be terminated at any time by either party, with or without
cause. Each agreement is for a two-year term of employment ending in November
2000. If the applicable executive's employment is terminated by expiration of
the employment agreement, the executive will receive (i) Flight Benefits, (ii)
the applicable SERP benefit, (iii) vesting of all options and any shares of
restricted stock awarded to him, and (iv) office and other perquisites for
certain specified periods. If the Company terminates the executive's employment
for reasons other than death, disability or cause (as described in the
agreement), the executive will receive, in addition to the benefits he would
receive had the agreement expired, a severance payment (as described below),
certain out-placement services and certain insurance benefits for himself and
his eligible dependents. If the executive terminates his employment for any
reason, he will be entitled to Flight Benefits and the applicable SERP benefit.
Additionally, if the executive terminates his employment for good cause (as
described in the agreement), then the Company shall (i) make a severance payment
to the executive, (ii) provide the executive with out-placement services and
office and other perquisites, and (iii) provide the executive and his eligible
dependents with certain insurance benefits. The severance payment referenced
above is equal to the product of (A) the sum of (1) the executive's then current
annual base salary and (2) a deemed annual bonus equal to the Bonus Percentage
(with respect to the most recently ended fiscal year) of such salary, multiplied
by (B) a fraction, the numerator of which is the number of months in the
severance period (described below) and the denominator of which is 12. If the
executive's employment is terminated within two years after a Change in Control
(as defined in the Company's 1998 Stock Incentive Plan) or, if such termination
occurs within two years of the Air Partners Transaction, the severance period
means the period commencing on the date of termination and continuing for 36
months. If the executive's employment is terminated prior to a Change in Control
or after the date which is two years after a Change in Control, the severance
period means the period commencing on the date of termination and continuing for
24 months. Each of the executives is indemnified by the Company for his tax
obligations with respect to payments or other benefits under his agreement or
otherwise to the extent that such payments or other benefits are subject to an
excise or other special additional tax that would not have been imposed absent
such payments or other benefits. See also"Certain Transactions."
14
<PAGE> 18
RETIREMENT PLAN
The Continental Airlines, Inc. Retirement Plan (the "Retirement Plan"),
adopted in 1988, is a noncontributory, defined benefit pension plan.
Substantially all employees of Continental and certain designated affiliates are
eligible to participate in the Retirement Plan. The following table represents
the estimated annual benefits payable in the form of a single life annuity to
participants in specified service and compensation categories under the
Retirement Plan as it pertains to non-pilots. Under the Retirement Plan, final
average compensation means the average of the participant's highest five
consecutive years of compensation during the last ten calendar years with
Continental and its affiliates for participating employees other than pilots.
For pilots, final average compensation means the average of the participant's
highest 60 consecutive months of compensation during the last 120 months with
Continental and its designated affiliates (with shorter averaging periods
applying prior to January 1, 2003). Final average compensation includes regular
pay and shift differential, and excludes bonuses, severance pay, incentive and
other special forms of pay. Regulations under the Internal Revenue Code of 1986,
as amended (the "Code"), currently limit the compensation covered by the
Retirement Plan to $160,000. This limit is indexed and is increased from time to
time in accordance with IRS regulations. The table reflects benefit amounts
calculated using the compensation limit and average social security wage base in
effect for participants who reach age 65 in 1999.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------
FINAL AVERAGE COMPENSATION 5 10 15 20 25 30
- -------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000.................... $ 7,500 $14,999 $22,499 $29,998 $37,498 $44,998
$125,000.................... 9,550 19,099 28,649 38,198 47,748 57,298
$150,000.................... 11,600 23,199 34,799 46,398 57,998 69,598
$160,000.................... 12,420 24,839 37,259 49,678 62,098 74,518
</TABLE>
The estimated credited years of service for Messrs. Bethune, Brenneman,
Kellner, McLean and Smisek are five years, four years, four years, five years
and four years, respectively. In addition, each such officer's employment
agreement provides for certain supplemental retirement benefits, which benefits
will be offset by amounts received under the Retirement Plan. Under the
Retirement Plan, a retired participant's annual benefit commencing at or after
the normal retirement age of 65 (60 in the case of pilots) is equal to 1.19% of
the participant's final average compensation plus 0.45% of the participant's
final average compensation (or a variable percentage in the case of pilots) in
excess of the average Social Security wage base, multiplied by the participant's
years of participation up to a maximum of 30 years.
15
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Class B
common stock (the more widely traded of the Company's common stocks) with the
cumulative total returns (assuming reinvestment of dividends) on the Standard &
Poor's Airline Index and the Standard & Poor's 500 Stock Index as if $100 were
invested in the Class B common stock and each such index on December 31, 1993.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Continental Airlines........................ $100 $ 45.12 $212.20 $275.61 $469.51 $326.83
S&P Airline Index........................... $100 $ 69.69 $101.65 $111.31 $187.33 $181.20
S&P 500 Index............................... $100 $101.32 $139.40 $171.40 $228.59 $293.92
</TABLE>
EXECUTIVE COMPENSATION REPORT OF THE HUMAN RESOURCES COMMITTEE
General Compensation Strategy
In 1998, the Human Resources Committee of the Board of Directors of
Continental Airlines, Inc. (the "Committee") continued its prior compensation
strategy, which is to:
- Develop an appropriate linkage between compensation levels and the
creation of stockholder value
- Provide that the total compensation program will be able to attract,
motivate and retain employees of outstanding talent
- Achieve competitiveness of total compensation
- Focus on variable pay to provide incentive to improve performance
In considering appropriate executive compensation levels, the Committee
applies these factors to available marketplace compensation data for U.S.
airlines of comparable size, including industry peer airlines shown in the
performance graph, as well as available marketplace compensation data for
certain non-airline
16
<PAGE> 20
companies with historical revenue, stock appreciation, stock volatility and
other characteristics deemed comparable to the Company by the Committee. The
elements of compensation included in the competitive analysis generally are base
salaries, annual incentives and long-term incentives.
Having announced in September 1997 its intention to bring all employees to
industry standard wages over a three-year period, the Company raised the
salaries and wages of non-executive employees during 1998. Nearly all employees
other than officers and other senior managers of the Company are incentivized
through the Company's profit sharing plan and on-time arrival bonus structure,
and all employees are able to participate in the Company's success through
participation in the employee stock purchase plan approved by stockholders in
1997. Executives' incentives are linked to the Company's performance through the
quarterly Executive Bonus Program and through the award of stock options. Other
officers and senior managers participate in an annual bonus program and are
awarded stock options. No shares of restricted stock were awarded in 1998.
In conducting the programs applicable to executives, the Committee
considers the effects of Section 162(m) of the Code, which denies publicly held
companies a tax deduction for annual compensation in excess of one million
dollars paid to their chief executive officer or any of their four other most
highly compensated executive officers who are employed on the last day of a
given year, unless their compensation is based on performance criteria that are
established by a committee of outside directors and approved, as to their
material terms, by such company's stockholders. Certain of the Company's
compensation plans, such as its stock option plans, are designed to qualify as
performance-based compensation under Section 162(m). However, other awards, such
as cash payments from stay bonuses and restricted stock grants, do not so
qualify and are subject to the limitation on deductibility. Although certain
amounts recorded as compensation by the Company to certain of the most highly
compensated officers of the Company with respect to 1998 were limited by Section
162(m), such limitation did not result in the payment of increased federal
income taxes by the Company in 1998 due to the Company's significant net
operating loss carryforwards.
Base Salaries. The Committee believes it is crucial to provide salaries
within a competitive market range in order to attract and retain highly talented
employees. The specific competitive markets considered depend on the nature and
level of the positions in question, the labor markets from which qualified
individuals are recruited, and the companies and industries competing for the
services of the Company's executives. In addition to their retention elements,
base salary levels are also dependent on the performance of each individual
employee over time. Thus, employees who sustain higher levels of performance
over time will have correspondingly higher salaries. Salary adjustments are
based on general levels of market increases in salaries, individual performance,
overall financial results and changes in job duties and responsibilities. All
base salary increases are based on a philosophy of relative salary equity,
market demand and pay-for-performance.
Incentive Compensation. The Committee believes that appropriate base
salaries must be coupled with incentive compensation that not only attracts and
retains qualified employees, but rewards them for increased performance.
Compensation linked to the performance of the Company's common stock is one of
the best incentives to align employees' interests with those of stockholders and
to enhance performance. The Company maintains stock option plans for its
executive officers and other senior managers, and an employee stock purchase
plan open to all employees of the Company, each of which is designed to
encourage employees, including the Company's executive officers and key
employees, to identify their interests with those of stockholders and enhance
the Company's performance. In addition, the Company maintains a profit sharing
plan, under which 15% of the Company's pre-tax earnings (before unusual or
nonrecurring items) is distributed to substantially all non-management employees
of the Company (other than employees whose collective bargaining agreement
provides otherwise or who participate in profit sharing arrangements required by
local law) each year on a pro rata basis according to base salary. Finally, the
Company maintains an Executive Bonus Program, a management bonus program and a
non-management on-time performance bonus to focus employees on common goals and
to encourage them to work together to achieve profitability. The Committee
believes that these incentives play a significant part in the Company's
continuing improvement and success.
17
<PAGE> 21
1998 Executive Compensation
Base Salaries. None of the Company's executive officers received salary
increases in 1998. Salary adjustments had been made in late 1996 for certain
officers and in 1997 for others. In the first quarter of 1999, salary
adjustments were made for substantially all the Company's executive officers,
including the Chief Executive Officer.
Stock Incentives. Consistent with its compensation strategy, the Company
awarded stock options to executive officers and key employees during 1998.
Options granted to the five most highly compensated officers, as well as stock
option exercises by those individuals, are described in the Summary Compensation
and other tables included above. Options granted during 1998 bear five-year
terms and vest ratably over four years. The grants made to officers of the
Company in 1998, including the Company's executive officers, were larger than in
previous years, since all of the options granted to the Company's officers prior
to January 25, 1998 vested fully upon consummation of the Northwest Transaction.
Consistent with the compensation strategy outlined above, the Committee deemed
it appropriate to provide significant grants (in addition to normal annual
grants) vesting over a four-year period to induce the Company's officers to
remain in the employ of the Company after the Northwest Transaction and to tie
their incentives to stock price performance. The Company made no restricted
stock grants in 1998.
Other Plans. The Company's Executive Bonus Program makes the Company's
executive officers and certain additional officers recommended by the Chief
Executive Officer and approved by the Committee eligible to receive on a fiscal
quarterly basis a cash bonus of up to 125% of their salary for such quarter
based on the Company's cumulative net income earned through such quarter as
compared to the cumulative net income targeted through such quarter in the
Company's annual financial plan approved by the Board. The Company maintained a
separate annual bonus program for other officers and management employees
throughout 1998. In 1998, the Committee recommended and the Board adopted a
deferred compensation plan in which directors and officers of the Company may
participate beginning in 1999.
As previously reported to stockholders, each of Messrs. Bethune, Brenneman,
Kellner, McLean and Smisek entered into a stay bonus agreement with the Company
in 1998, pursuant to which the Company agreed to pay stay bonuses to those
executive officers in equal monthly installments over the fifteen-month period
following the closing of the Northwest Transaction; provided that the applicable
executive remains in the employ of the Company during the month in which the
payment is made or, if the executive's employment is terminated by the Company,
such termination is not for cause. The Company also agreed to make charitable
contributions in each such executive's name, including to the We Care Trust (the
employee assistance charitable fund of Continental), in equal monthly
installments over the same period and subject to the same provisos. The Company
also entered into new or amended employment agreements with each of such
executives, and with other executive officers of the Company, upon consummation
of the Northwest Transaction, to further incentivize such officers to remain in
the employ of the Company.
Also as previously reported, the Company entered into stay bonus agreements
in 1998 with certain of its other officers, including executive officers,
calling for payment of stay bonuses over a fifteen-month period following the
closing of the Northwest Transaction, and implemented a severance program with
respect to certain officers and other managers who participate in the Company's
stock option program but who do not have employment agreements with the Company
as of the date of a Change in Control (as defined).
1998 CEO Compensation
Mr. Bethune did not receive a base salary increase in 1998. Although the
Company continued to exceed its financial goals, the Committee believed that Mr.
Bethune's base salary remained competitive in 1998 at the time of the
Committee's review in early 1998. Mr. Bethune's salary was subsequently
increased in the first quarter of 1999 as a result of the Committee's review of
competitive salaries at the time and his performance as Chief Executive Officer.
Along with other executive officers of the Company, Mr. Bethune received certain
18
<PAGE> 22
bonus amounts in 1998 reflecting the Company's success under the Executive Bonus
Program and received a significant grant of stock options (in addition to his
normal annual grant) to incentivize him to remain with the Company after the
closing of the Northwest Transaction and to tie his incentives to stock price
performance. In addition, as described elsewhere in this proxy statement, in
1998 Mr. Bethune entered into a stay bonus agreement with the Company to
encourage him to remain with the Company following the Northwest Transaction,
and entered into a new employment agreement with the Company.
Respectfully submitted,
Human Resources Committee
Thomas J. Barrack, Jr., Chairman
Douglas H. McCorkindale
George G. C. Parker
Charles A. Yamarone
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's executive compensation programs are administered by the Human
Resources Committee of the Board of Directors. The committee is currently
composed of four independent, non-employee directors, and no member of the
committee has been an officer or employee of the Company or any of its
subsidiaries.
CERTAIN TRANSACTIONS
The Company and America West Airlines, Inc. ("America West"), a subsidiary
of America West Holdings Corporation, in which David Bonderman holds a
significant interest, entered into a series of agreements during 1994 related to
code-sharing and ground handling that have created substantial benefits for both
airlines. Mr. Bonderman is a director of the Company and holds a significant
interest in the Company. The services provided are considered normal to the
daily operations of both airlines. As a result of these agreements, during 1998
Continental paid America West $15 million and America West paid Continental $27
million.
In November 1998, the Company and Northwest, a significant stockholder of
the Company, began implementing a long-term global alliance involving extensive
code-sharing, frequent flyer reciprocity and other cooperative activities. In
addition, Northwest and Continental provide other services to each other
considered normal to the daily operations of both airlines. As a result of these
latter agreements, during 1998, Continental paid Northwest $3.4 million and
Northwest paid Continental $3.5 million.
Karen Hastie Williams is a partner of Crowell & Moring, a law firm that has
provided services to the Company and its subsidiaries for many years. The
Company's fee arrangement with Crowell & Moring is negotiated on the same basis
as the Company's arrangements with its other outside legal counsel and is
subject to the same terms and conditions. The fees paid by the Company to
Crowell & Moring are comparable to those it pays to other law firms for similar
services.
During 1998 in connection with the Air Partners Transaction, each of
Messrs. Bethune, Brenneman, Kellner, McLean and Smisek entered into a Stay Bonus
Agreement with the Company, pursuant to which the Company has agreed to pay a
stay bonus of $6.66 million in the case of Mr. Bethune, $4.5 million in the case
of Mr. Brenneman, and $2.25 million in the case of each of Messrs. Kellner,
McLean and Smisek, payable in equal monthly installments over the fifteen-month
period following the closing of the Air Partners Transaction; provided that the
applicable executive remains in the employ of the Company during the month in
which the payment is made or, if the executive's employment is terminated by the
Company, such termination is not for cause. In addition, the Company agreed to
make charitable contributions in the executive's name, including to the We Care
Trust (the employee assistance charitable fund of Continental), in the amount of
$340,000 in the case of Mr. Bethune, $1,000,000 in the case of Mr. Brenneman,
and $250,000 in the case of each of Messrs. Kellner, McLean and Smisek, in equal
monthly installments over the same period and subject
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<PAGE> 23
to the same provisos. Also during 1998 in connection with the Air Partners
Transaction, the Company entered into stay bonus agreements with certain of its
other officers calling for payment of up to an aggregate of $9.5 million over a
fifteen-month period following the closing of the Air Partners Transaction.
PROPOSAL 1:
ELECTION OF DIRECTORS
It is the intention of the persons named in the enclosed form of proxy,
unless otherwise instructed, to vote duly executed proxies for the election of
each nominee for director listed below. Pursuant to the Company's Bylaws,
directors will be elected by a plurality of the votes duly cast at the Meeting.
If elected, such nominee will hold office until the next annual meeting of
stockholders and until his or her respective successor has been duly elected and
has qualified. Management does not contemplate that any of the nominees will
become unavailable to serve for any reason, but if that should occur before the
Meeting, proxies will be voted for another nominee or nominees to be selected by
the Board of Directors.
Air Partners has the limited right, in certain circumstances, to convert
its Class A common stock into Class D common stock. No person may hold or own
Class D common stock other than Air Partners and certain of its affiliates. The
Class D common stock, if issued, would permit Air Partners to elect one-third of
the directors to the Company's Board. To date, no shares of Class D common stock
have been issued. In the Air Partners Transaction, the Northwest Parties
acquired Air Partners and could exercise Air Partners' rights under this
provision, subject to the terms of the governance agreement described above
under the caption "Northwest Transaction".
Continental's Board of Directors currently consists of thirteen persons.
Pursuant to the governance agreement, the Company and the Northwest Parties
agreed to take all actions necessary following the closing of the Air Partners
Transaction to cause Independent Directors (as therein defined) to constitute at
least a majority of the Board of Directors. Ms. Williams and Messrs. Bentsen,
Foley, McCorkindale, Parker, Pogue, Sturm and Yamarone are "Independent
Directors" as defined by the governance agreement. Since the shares owned by the
Northwest Parties represented more than 50% of the outstanding voting power at
March 23, 1999, the foregoing Independent Directors are assured of election at
the Meeting.
There is no family relationship between any of the nominees for director or
between any nominee and any executive officer.
The following table shows, with respect to each nominee, (i) such person's
name and age, (ii) the period for which such person has served as a director of
the Company, (iii) all positions and offices with the Company currently held by
the nominee and his or her principal occupation and business experience during
the last five years, (iv) other directorships held by the nominee and (v) the
standing committees of the Board of Directors of which he or she is a member.
Each of the nominees is currently a director of the Company.
<TABLE>
<CAPTION>
NAME, AGE, POSITION
AND COMMITTEE MEMBERSHIPS TERM OF OFFICE AND BUSINESS EXPERIENCE
------------------------- --------------------------------------
<S> <C>
THOMAS J. BARRACK, JR., age 51............. Director since August 1994. Chief Executive
(Human Resources Committee) Officer of Colony Capital, Inc. and Colony
Advisors, Inc. (real estate investments)
since 1991; Officer of Keystone, Inc. (a
private investment firm) (1987-1991);
Director of: Public Storage, Inc; Kennedy-
Wilson, Inc.; Harvey's Acquisition Corp.
LLOYD M. BENTSEN, JR., age 78.............. Director since September 1996. Retired.
(Audit Committee) Shareholder of Verner, Liipfert, Bernhard,
McPherson and Hand (law firm) (1995-1999);
United States Secretary of the Treasury
(1993-1995); Member of the United States
Senate (1971-1993).
</TABLE>
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<PAGE> 24
<TABLE>
<CAPTION>
NAME, AGE, POSITION
AND COMMITTEE MEMBERSHIPS TERM OF OFFICE AND BUSINESS EXPERIENCE
------------------------- --------------------------------------
<S> <C>
GORDON M. BETHUNE, age 57.................. Director since August 1994. Chairman of the
Chairman of the Board and Chief Executive Board and Chief Executive Officer since
Officer (Executive Committee, Finance and September 1996. President and Chief
Strategy Committee) Executive Officer (November 1994-September
1996); President and Chief Operating
Officer (February 1994-November 1994);
various positions with The Boeing Company
commencing in 1988, including Vice
President and General Manager of the
Commercial Airplane Group Renton Division,
Vice President and General Manager of the
Customer Services Division and Vice
President of Airline Logistics Support;
Director of Sysco Corporation, and nomi-
nee for director of Honeywell Inc.
DAVID BONDERMAN, age 56.................... Director since April 1993. Chairman of the
(Executive Committee, Finance and Board (May 1993-September 1996); Managing
Strategy Committee) Partner of Texas Pacific Group since 1992;
Director of: Bell & Howell Holdings
Company; Beringer Wine Estates; Denbury
Resources, Inc.; Realty Information Group,
L.P.; Washington Mutual, Inc.
GREGORY D. BRENNEMAN, age 37............... Director since June 1995. President and
President and Chief Operating Officer Chief Operating Officer since September
(Finance and Strategy Committee) 1996. Chief Operating Officer (May
1995-September 1996); Consultant to the
Company (February-April 1995); various
positions, including Vice President, with
Bain & Company, Inc. (consulting firm) for
more than five years; Director of Brown-
ing-Ferris Industries, Inc.; J. Crew Group
Inc.
PATRICK FOLEY, age 67...................... Director since April 1993. Chairman of the
(Audit Committee) Board, President and Chief Executive
Officer of DHL Airways, Inc. since 1988;
Director of: Foundation Health Systems,
Inc.; Glenborough Realty Trust, Inc.;
Flextronics International Ltd.; Del Monte
Foods Company.
DOUGLAS H. McCORKINDALE, age 59............ Director since April 1993. Vice Chairman
(Human Resources Committee) and President of Gannett Co., Inc. (a
nationwide diversified communications
company) since September 1997; Vice
Chairman and Chief Financial and
Administrative Officer of Gannett Co., Inc.
(1984-1997); Director of: a group of
Prudential Mutual Funds; Frontier
Corporation.
GEORGE G. C. PARKER, age 60................ Director since June 1996. Associate Dean
(Finance and Strategy Committee, Human for Academic Affairs and Director of MBA
Resources Committee) Program since 1993; Dean Witter Professor
of Finance and Management (since 1996) and
Professor of Management (1973-1996) at the
Graduate School of Business, Stanford
University; Director of: California
Casualty Group of Insurance Companies; Bai-
lard, Biehl, and Kaiser, Inc.; RCM/Dresdner
Global Mutual Funds; H. Warshow & Sons,
Inc.; Community First Banking Group.
</TABLE>
21
<PAGE> 25
<TABLE>
<CAPTION>
NAME, AGE, POSITION
AND COMMITTEE MEMBERSHIPS TERM OF OFFICE AND BUSINESS EXPERIENCE
------------------------- --------------------------------------
<S> <C>
RICHARD W. POGUE, age 70................... Director since April 1993. Senior Advisor
(Executive Committee) of Dix & Eaton (a public relations firm)
since 1994; Senior Partner (1993-1994) and
Managing Partner (1984-1992) of Jones, Day,
Reavis & Pogue (law firm); Director of:
Derlan Industries, Ltd.; M.A. Hanna Co.; IT
Group; KeyCorp; LAI Associates, Inc.; Rotek
Incorporated; TRW Inc.
WILLIAM S. PRICE III, age 42............... Director since April 1993. Managing Partner
(Finance and Strategy Committee) of Texas Pacific Group since 1992; Director
of AerFi Group plc; Belden & Blake
Corporation; Beringer Wine Estates; Del
Monte Foods Company; Denbury Resources,
Inc.; Favorite Brands, Inc.; VIVRA Inc.;
Zilog, Inc.
DONALD L. STURM, age 67.................... Director since April 1993. Chairman of the
(Audit Committee) Board and Chief Executive Officer of: Sturm
Banks of Colorado, Inc. (which owns four
banks) since 1993; Sturm Banks of Wyoming,
Inc. (which owns four banks) since 1993;
Sturm Banks of Kansas City, Inc. (which
owns one bank) since 1996; Chairman of the
Board of FirstWorld Communications, Inc.
(local telephone exchange carrier) since
January 1998.
KAREN HASTIE WILLIAMS, age 54.............. Director since April 1993. Partner of
(Audit Committee) Crowell & Moring (law firm) since 1982;
Director of: Federal National Mortgage
Association; Crestar Financial Corporation;
Gannett Co., Inc.; and Washington Gas Light
Company.
CHARLES A. YAMARONE, age 40................ Director since January 1995. Executive Vice
(Human Resources Committee) President of U.S. Bancorp Libra, a division
of U.S. Bancorp Investments, Inc., since
January 1999; Executive Vice President and
Research Director of Libra Investments,
Inc. (July 1994-January 1999); Senior Vice
President and General Counsel of Libra
Investments, Inc. (1991-1994); Director of
El Paso Electric Company.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED ABOVE, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY.
22
<PAGE> 26
PROPOSAL 2:
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has been the Company's independent auditors
since 1993, and the Board of Directors desires to continue to engage the
services of this firm for the fiscal year ending December 31, 1999. Accordingly,
the Board of Directors, upon the recommendation of the Audit Committee, has
reappointed Ernst & Young LLP to audit the financial statements of the Company
and its subsidiaries for fiscal 1999 and report thereon. Stockholders are being
asked to vote upon the ratification of such appointment. If stockholders do not
ratify such appointment, the Audit Committee and Board will reconsider such
appointment.
Representatives of Ernst & Young LLP will be present at the Meeting and
will be available to respond to appropriate questions and make a statement
should they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 2
ON THE ENCLOSED PROXY.
OTHER MATTERS
Management knows of no business to be presented for action at the Meeting
other than that described in this proxy statement. If any other matters should
properly come before the Meeting calling for a vote of the stockholders, it is
the intention of the persons named in the accompanying proxy, unless otherwise
directed in such proxy, to vote on such matters in accordance with their best
judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director, executive officer (and, for a specified period, certain
former directors and executive officers) and each holder of greater than ten
percent of a class of the Company's equity securities is required to report to
the SEC his or her pertinent position or relationship, as well as transactions
in such securities, by certain specified dates. During 1998, David Grizzle, an
executive officer of the Company, filed a report three days late relating to a
charitable contribution of shares of the Company's Class A common stock.
23
<PAGE> 27
2000 ANNUAL MEETING
Any stockholder who desires to present proposals at the 2000 annual meeting
of stockholders and to have such proposals set forth in the proxy statement and
form of proxy mailed in conjunction with such annual meeting must submit such
proposals in writing to the Secretary of the Company no later than December 8,
1999. The Company's Bylaws require that for nominations of persons for election
to the Board of Directors of the Company or the proposal of business to be
considered by the stockholders at an annual meeting, a stockholder must give
timely written notice thereof. To be timely for the 1999 annual meeting of
stockholders, such notice must be delivered to the Secretary of the Company at
the principal executive offices of the Company not less than 70 days nor more
than 90 days prior to May 18, 2000, provided, that if the 2000 annual meeting of
stockholders is advanced by more than 20 days, or delayed by more than 70 days,
from May 18, 2000, such notice must be delivered not earlier than the ninetieth
day prior to the 2000 annual meeting and not later than the close of business on
the later of (a) the seventieth day prior to the 2000 annual meeting or (b) the
tenth day following the day on which public announcement of the date of the 2000
annual meeting is first made. The stockholder's notice must contain and be
accompanied by certain information as specified in the Bylaws. It is recommended
that any stockholder desiring to make a nomination or submit a proposal for
consideration obtain a copy of the Company's Bylaws, which may be obtained
without charge from the Secretary of the Company upon written request addressed
to the Secretary at the Company's principal executive offices.
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND MAIL PROMPTLY
THE ENCLOSED PROXY OR VOTE BY TELEPHONE OR INTERNET AS DESCRIBED ABOVE IN THE
PROXY STATEMENT.
By Order of the Board of Directors,
/s/ JEFFREY A. SMISEK
Jeffery A. Smisek
Secretary
Houston, Texas
April 6, 1999
THE COMPANY WILL FURNISH TO INTERESTED SECURITY HOLDERS WITHOUT CHARGE,
UPON WRITTEN REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1998. THE COMPANY WILL FURNISH ANY EXHIBIT TO SUCH
REPORT, UPON WRITTEN REQUEST, TO ANY SECURITY HOLDER REQUESTING SUCH REPORT UPON
PAYMENT OF REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING SUCH EXHIBIT.
REQUESTS FOR COPIES SHOULD BE ADDRESSED TO THE SECRETARY OF THE COMPANY AT THE
COMPANY'S HEADQUARTERS: 1600 SMITH, DEPT. HQSEO, HOUSTON, TEXAS 77002.
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<PAGE> 28
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. Election of Directors.
See Reverse Side. / / / / / /
For, except vote withheld from the
following nominees:
__________________________________
FOR AGAINST ABSTAIN
2. Ratification of Appointment of
Independent Auditors. / / / / / /
Please mark this box ONLY if any Class / /
A or Class B common stock owned of
record or beneficially by you is
owned or controlled by Foreigners (as
defined in the proxy statement), and
indicate the number and class so
owned or controlled by Foreigners.
Class A ___________________________
Class B ___________________________
Dated: _____________________ , 1999
Signatures: _______________________
___________________________________
NOTE: Please sign exactly as name
appears hereon. Joint owners should
each sign. When signing as attorney,
executor, administrator, trustee, or
guardian, please give full title as
such.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
CONTROL NUMBER
- -------------- [CONTINENTAL AIRLINES LOGO]
- --------------
VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY 7 DAYS A WEEK
Continental encourages you to take advantage of the new and convenient ways to
vote your shares. If voting by proxy, this year you may vote by mail, or choose
one of the two methods described below. Your telephone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if you
marked, signed, and returned your proxy card. To vote by telephone or Internet,
read the accompanying proxy statement and then follow these easy steps:
TO VOTE BY PHONE _____________________________________________________________
Call toll free 1-888-515-8274 in the United States or
Canada any time on a touch tone telephone. There is NO
CHARGE to you for the call.
Enter the 6-digit Control Number located above.
Option #1: To vote as the Board of Directors recommends on
ALL proposals: Press 1.
When asked, please confirm your vote by
pressing 1
Option #2: If you choose to vote on each proposal
separately, please press 0 and follow
the simple recorded instructions.
________________________________________________________________________________
TO VOTE BY INTERNET ___________________________________________________________
Go to the following website:
www.harrisbank.com/wproxy
Enter the information requested on your computer screen,
including your 6-digit CONTROL NUMBER located above.
Follow the simple instructions on the screen.
___________________________________________________________
If you vote by telephone or the Internet, DO NOT mail back the proxy card.
THANK YOU FOR VOTING!
________________________________________________________________________________
<PAGE> 29
CONTINENTAL AIRLINES, INC.
ANNUAL MEETING OF STOCKHOLDERS -- MAY 18, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes Gordon M. Bethune, Jeffery A. Smisek and
P Scott R. Peterson, and each of them, with full power of substitution, to
represent and vote the stock of the undersigned in Continental Airlines,
R Inc. as directed and, in their sole discretion, on all other matters that
may properly come before the Annual Meeting of Stockholders to be held on
O May 18, 1999, and at any adjournment or adjournments thereof, as if the
undersigned were present and voting thereat. The undersigned acknowledges
X receipt of the notice of annual meeting and proxy statement with respect to
such Annual Meeting and certifies that, to the knowledge of the
Y undersigned, all equity securities of the Company owned of record or
beneficially by the undersigned are owned and controlled only by U.S.
Citizens (as defined in the proxy statement), except as indicated on the
reverse side hereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE EXECUTE AND
RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
Nominees for Director:
Thomas J. Barrack, Jr. 01 Lloyd M. Bentsen, Jr. 02
Gordon M. Bethune 03 David Bonderman 04
Gregory D. Brenneman 05 Patrick Foley 06
Douglas H. McCorkindale 07 George G. C. Parker 08
Richard W. Pogue 09 William S. Price III 10
Donald L. Sturm 11 Karen Hastie Williams 12
Charles A. Yamarone 13
================================================
THIS FORM OF PROXY RELATES TO BOTH CLASS A AND
CLASS B COMMON STOCK. IF YOU RECEIVED TWO
PROXY CARDS, PLEASE EXECUTE AND RETURN EACH.
================================================
This proxy, when properly executed, will be voted in the manner directed
by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF
DIRECTORS (PROPOSAL 1) AND "FOR" PROPOSAL 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
=============
SEE REVERSE
=============
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