SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 27, 2000
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-09781 74-2099724
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1600 Smith Street, Dept. HQSEO, Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 324-2950
(Registrant's telephone number, including area code)
<PAGE>
Item 5.Other Events.
On March 27, 2000, the Board of Directors of Continental Airlines,
Inc. amended and approved the restatement of the Company's
Incentive Plan 2000 and the Human Resources Committee of the Board
adopted the Continental Airlines, Inc. Officer Rentention and
Incentive Award Program under such plan. The amended and restated
plan and the new program are attached hereto as exhibits.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Incentive Plan 2000
99.2 Officer Retention and Incentive Award Program
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, Continental Airlines, Inc. has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
CONTINENTAL AIRLINES, INC.
By /s/ Jeffery A. Smisek
Jeffery A. Smisek
Executive Vice President
and General Counsel
March 28, 2000
<PAGE>
EXHIBIT INDEX
99.1 Incentive Plan 2000
99.2 Officer Retention and Incentive Award Program
EXHIBIT 99.1
CONTINENTAL AIRLINES, INC.
INCENTIVE PLAN 2000
AS AMENDED AND RESTATED EFFECTIVE
AS OF MARCH 27, 2000
1. PURPOSE
The purpose of the Continental Airlines, Inc. Incentive Plan
2000 is to provide a means through which Continental Airlines, Inc.
and its subsidiaries may attract able persons to serve as
directors, or to enter or remain in the employ of the Company (as
defined below) or its subsidiaries, and to provide a means whereby
those individuals upon whom the responsibilities of the successful
administration and management of the Company and its subsidiaries
rest, and whose present and potential contributions to the welfare
of the Company and its subsidiaries are of importance, can acquire
and maintain stock ownership, thereby strengthening their concern
for the welfare of the Company and its subsidiaries. A further
purpose of the Plan is to provide such individuals with additional
incentive and reward opportunities designed to enhance the
profitable growth of the Company and its subsidiaries. So that the
maximum incentive can be provided, the Plan provides for granting
Incentive Stock Options, Non-Qualified Options, Restricted Stock
Awards, Performance Awards, Incentive Awards, and Retention Awards,
or any combination of the foregoing, as is best suited to the
circumstances of the particular person.
2. DEFINITIONS
The following definitions (including any plural thereof) shall
be applicable throughout the Plan unless specifically modified by
any Section:
(a) "Administrator" means (i) in the context of Awards
made to, or the administration (or interpretation of any provision)
of the Plan as it relates to, any person who is subject to Section
16 of the Exchange Act (including any successor section to the same
or similar effect, "Section 16"), the Committee, or (ii) in the
context of Awards made to, or the administration (or interpretation
of any provision) of the Plan as it relates to, any person who is
not subject to Section 16, the Chief Executive Officer of the
Company (or, if the Chief Executive Officer is not a Director of
the Company, the Committee), unless the Plan specifies that the
Committee shall take specific action (in which case such action may
only be taken by the Committee) or the Committee (as to any Award
described in this clause (ii) or the administration or
interpretation of any specific provision of the Plan) specifies
that it shall serve as Administrator.
(b) "Award" means, individually or collectively, any
Option, Restricted Stock Award, Performance Award, Incentive Award,
or Retention Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time. Reference in the Plan to any section of
the Code shall be deemed to include any amendments or successor
provisions to such section and any regulations promulgated under
such section.
(e) "Committee" means a committee of the Board comprised
solely of two or more outside Directors (within the meaning of the
term "outside directors" as used in section 162(m) of the Code and
applicable interpretive authority thereunder and within the meaning
of "Non-Employee Director" as defined in Rule 16b-3). Such
committee shall be the Human Resources Committee of the Board
unless and until the Board designates another committee of the
Board to serve as the Committee.
(f) "Common Stock" means the Class B common stock, $.01
par value, of the Company, or any security into which such Common
Stock may be changed by reason of any transaction or event of the
type described in Section 12(b).
(g) "Company" shall mean Continental Airlines, Inc., a
Delaware corporation, or any successor thereto.
(h) "Director" means an individual elected to the Board by
the stockholders of the Company or by the Board under applicable
corporate law who is serving on the Board on the date the Plan is
adopted by the Board or is elected to the Board after such date.
(i) "Disability" means, with respect to a Participant,
such Participant's disability entitling him or her to benefits
under the Company's group long-term disability plan; provided,
however, that if such Participant is not eligible to participate in
such plan, then such Participant shall be considered to have
incurred a "Disability" if and when the Administrator determines in
its discretion that such Participant has become incapacitated for
a period of at least 180 days by accident, sickness, or other
circumstance which renders such Participant mentally or physically
incapable of performing the material duties and services required
of him or her in his or her employment on a full-time basis during
such period.
(j) "employee" means any person (which may include a
Director) in an employment relationship with the Company or any
parent or subsidiary corporation (as defined in section 424 of the
Code).
(k) "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
(l) "Grant Document" means the document or documents
evidencing an Award under the Plan, which may be either an
agreement between the Company and the Holder as to the Award (with
any amendments thereto) or a notice of grant of the Award from the
Company to the Holder (including any attached statement of the
terms and conditions of the Award and any modifications thereto
made in accordance with the Plan).
(m) ''Holder'' means an employee or a non-employee
Director who has been granted an Option, a Restricted Stock Award,
a Performance Award, an Incentive Award, or a Retention Award.
(n) ''Incentive Award'' means an Award granted under
Section 10 of the Plan.
(o) "Incentive Stock Option" means an incentive stock
option within the meaning of section 422 of the Code.
(p) "Market Value per Share" means, as of any specified
date, the closing sale price of the Common Stock on that date (or,
if there are no sales on that date, the last preceding date on
which there was a sale) in the principal securities market in which
the Common Stock is then traded. If the Common Stock is not
publicly traded at the time a determination of "Market Value per
Share" is required to be made hereunder, the determination of such
amount shall be made by the Administrator in such manner as it
deems appropriate.
(q) ''Non-Qualified Option'' means an Option that is not
an Incentive Stock Option.
(r) "Option" means an Award under Section 7 of the Plan
and includes both Non-Qualified Options and Incentive Stock Options
to purchase Common Stock.
(s) ''Performance Award'' means an Award granted under
Section 9 of the Plan.
(t) ''Personal Representative'' means the person who upon
the death, disability, or incompetency of a Holder shall have
acquired, by will or by the laws of descent and distribution or by
other legal proceedings, the right to exercise an Option or the
right to any Restricted Stock Award, Performance Award, Incentive
Award, or Retention Award theretofore granted or made to such
Holder.
(u) "Plan" means the Continental Airlines, Inc. Incentive
Plan 2000, as amended from time to time.
(v) "Restricted Stock" means shares of Common Stock
granted pursuant to a Restricted Stock Award as to which neither
the substantial risk of forfeiture nor the restriction on transfer
referred to in Section 8 of the Plan has expired.
(w) "Restricted Stock Award" means an Award granted under
Section 8 of the Plan.
(x) "Retention Award" means an Award granted under Section
11 of the Plan.
(y) "Rule 16b-3" means Rule 16b-3 under the Exchange Act,
as such rule may be amended from time to time, and any successor
rule, regulation or statute fulfilling the same or similar
function.
(z) "SAR" means a stock appreciation right granted in
connection with an Option under Section 7 of the Plan.
(aa) "subsidiary" means any entity (other than the Company)
with respect to which the Company, directly or indirectly through
one or more other entities, owns equity interests possessing 50
percent or more of the total combined voting power of all equity
interests of such entity (excluding voting power that arises only
upon the occurrence of one or more specified events).
3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan originally became effective on October 4, 1999. The
Plan as set forth herein constitutes an amendment and restatement
of the Plan as previously adopted by the Board, and shall supersede
and replace in its entirety such previously adopted plan. This
amendment and restatement of the Plan shall be effective as of
March 27, 2000, provided that the Plan (as so amended and restated)
is approved by the stockholders of the Company at the Company's
2000 annual meeting of stockholders. Notwithstanding any provision
of the Plan or in any Grant Document under the Plan, no Option
shall be exercisable and no Award shall vest or be payable prior to
such stockholder approval. No further Awards may be granted under
the Plan after October 3, 2009. The Plan shall remain in effect
(at least for the purpose of governing outstanding Awards) until
all Option Awards granted under the Plan have been exercised or
expired, all restrictions imposed upon Restricted Stock Awards
granted under the Plan have been eliminated or the Restricted Stock
Awards have been forfeited, and all Performance Awards, Incentive
Awards and Retention Awards granted under the Plan have been
satisfied or have terminated.
4. ADMINISTRATION
(a) Administrator. The Plan shall be administered by the
Administrator, so that (i) Awards made to, and the administration
(or interpretation of any provision) of the Plan as it relates to,
any person who is subject to Section 16, shall be made or effected
by the Committee, and (ii) Awards made to, and the administration
(or interpretation of any provision) of the Plan as it relates to,
any person who is not subject to Section 16, shall be made or
effected by the Chief Executive Officer of the Company (or, if the
Chief Executive Officer is not a Director of the Company, the
Committee), unless the Plan specifies that the Committee shall take
specific action (in which case such action may only be taken by the
Committee) or the Committee (as to any Award described in this
clause (ii) or the administration or interpretation of any specific
provision of the Plan) specifies that it shall serve as
Administrator.
(b) Powers. Subject to the express provisions of the Plan,
the Administrator shall have authority, in its discretion, to
determine which employees or Directors shall receive an Award, the
time or times when such Award shall be granted, whether an
Incentive Stock Option or Non-Qualified Option shall be granted,
the number of shares to be subject to each Option and Restricted
Stock Award, and the value of each Performance Award, Incentive
Award and Retention Award. In making such determinations, the
Administrator shall take into account the nature of the services
rendered by the respective employees or Directors, their present
and potential contribution to the Company's success and such other
factors as the Administrator in its discretion shall deem relevant.
Subject to the express provisions of the Plan, the Administrator
shall also have the power to construe the Plan and the respective
agreements executed hereunder, to prescribe rules and regulations
relating to the Plan, and to determine the terms, restrictions and
provisions of the Grant Documents, including such terms,
restrictions and provisions as shall be requisite in the judgment
of the Administrator to cause designated Options to qualify as
Incentive Stock Options, and to make all other determinations
necessary or advisable for administering the Plan. The
Administrator may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Grant Document
relating to an Award in the manner and to the extent it shall deem
expedient to carry it into effect. The determination of the
Administrator on the matters referred to in this Section 4 shall be
conclusive; provided, however, that in the event of any conflict in
any such determination as between the Committee and the Chief
Executive Officer of the Company, each acting in capacity as
Administrator of the Plan, the determination of the Committee shall
be conclusive.
5. SHARES SUBJECT TO THE PLAN, AWARD LIMITATIONS,
AND GRANT OF AWARDS
(a) Shares Subject to the Plan; Award Limitations. The
Administrator may from time to time grant Awards to one or more
employees or Directors determined by it to be eligible for
participation in the Plan in accordance with the provisions of
Section 6 hereof. Subject to adjustment as provided in Section
12(b) hereof, the aggregate number of shares of Common Stock that
may be issued under the Plan shall not exceed 3,000,000 shares.
Shares shall be deemed to have been issued under the Plan only to
the extent actually issued and delivered pursuant to an Award. To
the extent that an Award lapses, the rights of its Holder
terminate, or an Award is paid in cash or is settled in a manner
such that all or some of the shares of Common Stock covered by the
Award are not issued to the Holder, any shares of Common Stock then
subject to such Award shall again be available for the grant of an
Award under the Plan. Notwithstanding any provision in the Plan to
the contrary, (i) the maximum number of shares of Common Stock that
may be subject to Awards granted to any one individual during any
calendar year may not exceed 750,000 shares (subject to adjustment
as provided in Section 12(b)), (ii) the maximum number of shares of
Common Stock that may be granted as Restricted Stock Awards may not
exceed 250,000 shares (subject to adjustment as provided in Section
12(b)), (iii) the maximum amount of compensation that may be paid
under all Performance Awards denominated in cash (including the
fair market value (priced at the Market Value per Share) of any
shares of Common Stock paid in satisfaction of such Performance
Awards) granted to any one individual during any calendar year may
not exceed $10 million, and any payment due with respect to a
Performance Award shall be paid no later than 10 years after the
date of grant of such Performance Award, and (iv) the maximum
amount of compensation that may be paid under all Retention Awards
granted to any one individual during any calendar year may not
exceed 1% of the aggregate gross revenues of the Company and its
consolidated subsidiaries for the fiscal year of the Company that
ends on December 31, 2000 (determined based on the regularly
prepared and publicly available statements of operations of the
Company prepared in accordance with United States generally
accepted accounting principles, consistently applied), and any
payment due with respect to a Retention Award shall be paid no
later than 11 years after the date of grant of such Retention
Award. The limitations set forth in clauses (i), (iii), and (iv) of
the preceding sentence shall be applied in a manner which will
permit compensation generated under the Plan which is intended to
constitute "performance-based" compensation for purposes of section
162(m) of the Code to be treated as such "performance-based"
compensation.
(b) Grant of Awards. The Administrator may from time to
time grant Awards to one or more employees or Directors determined
by it to be eligible for participation in the Plan in accordance
with the terms of this Plan.
(c) Stock Offered. Subject to the limitations set forth in
Section 5(a) above, the stock to be offered pursuant to an Award
may be authorized but unissued Common Stock or Common Stock
previously issued and outstanding and reacquired by the Company.
Any of such shares which remain unissued and which are not subject
to outstanding Awards at the termination of the Plan shall cease to
be subject to the Plan but, until termination of the Plan, the
Company shall at all times make available a sufficient number of
shares to meet the requirements of the Plan.
6. ELIGIBILITY
Awards may be granted only to persons who, at the time of
grant, are employees or Directors. An Award may be granted on more
than one occasion to the same person and, subject to the
limitations set forth in the Plan, Awards may include an Incentive
Stock Option, a Non-Qualified Option, a Restricted Stock Award, a
Performance Award, an Incentive Award, a Retention Award or any
combination thereof.
7. STOCK OPTIONS
(a) Option Period. The term of each Option shall be as
specified by the Administrator at the date of grant.
(b) Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as
determined by the Administrator.
(c) Special Limitations on Incentive Stock Options. An
Incentive Stock Option may be granted only to an individual who is
an employee at the time the Option is granted. To the extent that
the aggregate Market Value per Share (determined at the time the
respective Incentive Stock Option is granted) of Common Stock with
respect to which Incentive Stock Options granted after 1986 are
exercisable for the first time by an individual during any calendar
year under all incentive stock option plans of the Company and its
parent and subsidiary corporations exceeds $100,000, such Incentive
Stock Options shall be treated as Non-Qualified Options. The
Administrator shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other
administrative pronouncements, which of a Holder's Incentive Stock
Options will not constitute Incentive Stock Options because of such
limitation and shall notify the Holder of such determination as
soon as practicable after such determination. No Incentive Stock
Option shall be granted to an individual if, at the time the Option
is granted, such individual owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporation, within the
meaning of section 422(b)(6) of the Code, unless (i) at the time
such Option is granted the option price is at least 110% of the
Market Value per Share of the Common Stock subject to the Option
and (ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant. An Incentive Stock
Option shall not be transferable otherwise than by will or the laws
of descent and distribution, and shall be exercisable during the
Holder's lifetime only by such Holder or the Holder's guardian or
Personal Representative.
(d) Option Grant Document. Each Option shall be evidenced
by an Option Grant Document in such form and containing such
provisions not inconsistent with the provisions of the Plan as the
Administrator from time to time shall approve, including, without
limitation, provisions to qualify an Incentive Stock Option under
section 422 of the Code. An Option Grant Document may provide for
the payment of the option price, in whole or in part, by delivery
of a number of shares of Common Stock (plus cash if necessary)
having a Market Value per Share equal to such option price.
Moreover, an Option Grant Document may provide for a "cashless
exercise" of the Option by establishing procedures satisfactory to
the Administrator with respect thereto. The terms and conditions of
the respective Option Grant Documents need not be identical.
(e) Option Price and Payment. The price at which a share
of Common Stock may be purchased upon exercise of an Option shall
be set forth in the Option Grant Document and shall be determined
by the Administrator but, subject to adjustment as provided in
Section 12(b), such purchase price shall not be less than the
Market Value per Share of a share of Common Stock on the date such
Option is granted. The Option or portion thereof may be exercised
by delivery of an irrevocable notice of exercise to the Company.
The purchase price of the Option or portion thereof shall be paid
in full in the manner specified by the Administrator. Separate
stock certificates shall be issued by the Company for those shares
acquired pursuant to the exercise of an Incentive Stock Option and
for those shares acquired pursuant to the exercise of any Non-
Qualified Option.
(f) Stockholder Rights and Privileges. The Holder of an
Option shall be entitled to all the privileges and rights of a
stockholder only with respect to such shares of Common Stock as
have been purchased under the Option and for which certificates
representing such Common Stock have been registered in the Holder's
name.
(g) Stock Appreciation Rights. The Administrator
(concurrently with the grant of an Option or subsequent to such
grant) may, in its sole discretion, grant stock appreciation rights
("SARs") to any Holder of an Option. SARs may give the Holder of
an Option the right, upon written request, to surrender any
exercisable Option or portion thereof in exchange for cash, whole
shares of Common Stock, or a combination thereof, as determined by
the Committee, with a value equal to the excess of the Market Value
per Share, as of the date of such request, of one share of Common
Stock over the Option price for such share multiplied by the number
of shares covered by the Option or portion thereof to be
surrendered. In the case of any SAR which is granted in connection
with an Incentive Stock Option, such SAR shall be exercisable only
when the Market Value per Share of the Common Stock exceeds the
price specified therefor in the Option or portion thereof to be
surrendered. In the event of the exercise of any SAR granted
hereunder, the number of shares reserved for issuance under the
Plan shall be reduced only to the extent that shares of Common
Stock are actually issued in connection with the exercise of such
SAR. Additional terms and conditions governing any such SARs may
from time to time be prescribed by the Administrator in its sole
discretion.
(h) Options and SARs in Substitution for Stock Options
Granted by Other Corporations. Options and SARs may be granted
under the Plan from time to time in substitution for stock options
held by individuals employed by corporations who become employees
as a result of a merger or consolidation or other business
combination of the employing corporation with the Company or any
subsidiary.
8. RESTRICTED STOCK AWARDS
(a) Ownership of Restricted Stock. Each grant of
Restricted Stock pursuant to a Restricted Stock Award will
constitute an immediate transfer of record and beneficial ownership
of the shares of Restricted Stock to the recipient of the grant in
consideration of the performance of services by such recipient (or
other consideration determined by the Administrator), entitling the
recipient to all voting and other ownership rights, but subject to
the restrictions hereinafter referred to or contained in the
related Grant Document. Each grant may, in the discretion of the
Administrator, limit the recipient's dividend rights during the
period in which the shares of Restricted Stock are subject to a
substantial risk of forfeiture and restrictions on transfer.
(b) Substantial Risk of Forfeiture and Restrictions on
Transfer. Each grant of Restricted Stock will provide that (i) the
shares covered thereby will be subject, for a period or periods
determined by the Administrator at the date of grant, to one or
more restrictions, including, without limitation, a restriction
that constitutes a "substantial risk of forfeiture" within the
meaning of section 83 of the Code and applicable interpretive
authority thereunder, and (ii) during such period or periods during
which such restrictions are to continue, the transferability of the
Restricted Stock subject to such restrictions will be prohibited or
restricted in a manner and to the extent prescribed by the
Administrator at the date of grant.
(c) Restricted Stock Held in Trust. Shares of Common Stock
awarded pursuant to each Restricted Stock Award will be held in
trust by the Company for the benefit of the recipient until such
time as the applicable restriction on transfer thereon shall have
expired or otherwise lapsed, at which time certificates
representing such Common Stock will be delivered to the recipient.
(d) Restricted Stock Grant Document; Consideration. Each
grant of Restricted Stock shall be evidenced by a Grant Document in
such form and containing such provisions not inconsistent with the
provisions of the Plan as the Administrator from time to time shall
approve. The terms and conditions of the respective Restricted
Stock Grant Documents need not be identical. Each grant of
Restricted Stock may be made without additional consideration or in
consideration of a payment by the recipient that is less than the
Market Value per Share on the date of grant, as determined by the
Administrator.
9. PERFORMANCE AWARDS
(a) Performance Period. The Administrator shall
establish, with respect to and at the time of each Performance
Award, a performance period over which the performance applicable
to the Performance Award shall be measured.
(b) Performance Measures. A Performance Award shall be
awarded to a Holder contingent upon future performance of the
Company or any subsidiary, division, or department thereof. The
Administrator shall establish the performance measures applicable
to such performance within the applicable time period permitted by
section 162(m) of the Code, with such adjustments thereto as may be
determined by the Administrator. The performance measures may be
absolute, relative to one or more other companies, relative to one
or more indexes, or measured by reference to the Company alone or
the Company together with its consolidated subsidiaries. The
performance measures established by the Administrator may be based
upon (i) the price of a share of Common Stock, (ii) operating
income or operating income margin, (iii) earnings before interest,
income taxes, depreciation, amortization and aircraft rent
("EBITDAR") or EBITDAR margin, (iv) net income or net income
margin, (v) cash flow, (vi) total shareholder return, or (vii) a
combination of any of the foregoing, including any average,
weighted average, minimum, hurdle, rate of increase or other
measure of any or any combination thereof. The Administrator, in
its sole discretion, may provide for an adjustable Performance
Award value based upon the level of achievement of performance
measures.
(c) Awards Criteria. In determining the value of
Performance Awards, the Administrator shall take into account a
Holder's responsibility level, performance, potential, other
Awards, and such other considerations as it deems appropriate. The
Administrator, in its sole discretion, may provide for a reduction
in the value of a Holder's Performance Award during the performance
period, if permitted by the applicable Grant Document.
(d) Payment. Following the end of the performance period,
the Holder of a Performance Award shall be entitled to receive
payment of an amount not exceeding the maximum value of the
Performance Award, based on the achievement of the performance
measures for such performance period, as determined by the
Administrator and certified by the Committee as required by section
162(m) of the Code. Payment of a Performance Award may be made in
cash, Common Stock (valued at the Market Value per Share), or a
combination thereof, as determined by the Administrator. Payment
shall be made in a lump sum, except as otherwise set forth in the
applicable Grant Document.
(e) Termination of Employment. A Performance Award shall
terminate if the Holder does not remain continuously in the employ
(or in service as a Director) of the Company or a subsidiary at all
times during the applicable performance period, except as otherwise
set forth in the applicable Grant Document.
10. INCENTIVE AWARDS
(a) Incentive Awards. Incentive Awards are rights to
receive shares of Common Stock (or the Market Value per Share
thereof), or rights to receive an amount equal to any appreciation
or increase in the Market Value per Share of Common Stock over a
specified period of time, which vest over a period of time as
established by the Administrator, without satisfaction of any
performance criteria or objectives. The Administrator may, in its
discretion, require payment or other conditions of the Holder
respecting any Incentive Award.
(b) Award Period. The Administrator shall establish, with
respect to and at the time of each Incentive Award, a period over
which the Award shall vest with respect to the Holder.
(c) Awards Criteria. In determining the value of
Incentive Awards, the Committee shall take into account a Holder's
responsibility level, performance, potential, other Awards, and
such other considerations as it deems appropriate.
(d) Payment. Following the end of the vesting period for
an Incentive Award (or at such other time as the applicable Grant
Document may provide), the Holder of an Incentive Award shall be
entitled to receive payment of an amount, not exceeding the maximum
value of the Incentive Award, based on the then vested value of the
Award. Payment of an Incentive Award may be made in cash, Common
Stock (valued at the Market Value per Share), or a combination
thereof as determined by the Administrator. Payment shall be made
in a lump sum, except as otherwise set forth in the applicable
Grant Document. Cash dividend equivalents may be paid during or
after the vesting period with respect to an Incentive Award, as
determined by the Administrator.
(e) Termination of Employment. An Incentive Award shall
terminate if the Holder does not remain continuously in the employ
(or in service as a Director) of the Company or a subsidiary at all
times during the applicable vesting period, except as otherwise set
forth in the applicable Grant Document.
11. RETENTION AWARDS
(a) Retention Awards. A Retention Award is a right, which
vests over a period of time as established by the Committee, to
receive a cash payment measured by a portion (not exceeding 3.75%
for any individual Holder nor 25% in the aggregate for all Holders)
of the gain and profits (measured to the date such Award (or
portion thereof, as applicable) is deemed surrendered for payment
in accordance with its terms) associated with an equity holding of
the Company or a subsidiary in an e-commerce or internet-based
business. The Committee shall designate each such equity holding,
a portion of the gain and profits with respect to which shall
determine the relevant cash payment that is the subject of a
Retention Award, and the Committee shall establish, with respect to
each Retention Award and within the applicable time period
permitted by Section 162(m) of the Code, the portion of the gain
and profits in such equity holding used to measure cash payments to
the Holder of such Retention Award.
(b) Awards Criteria. In determining the Retention Awards
to be granted under the Plan, the Committee shall take into account
a Holder's responsibility level, performance, potential, other
Awards, and such other considerations as it deems appropriate. The
Committee, in its sole discretion, may provide for a reduction in
the value of a Holder's Retention Award during the period such
Award is outstanding, if permitted by the applicable Grant
Document.
(c) Payment. Following the vesting of a Retention Award
in whole or in part (or at such other times and subject to such
other restrictions as the applicable Grant Document may provide),
the Holder of such Retention Award shall be entitled to receive
payment of an amount, not exceeding the maximum value of the
Retention Award, based on such Holder's vested interest in such
Retention Award and the gain and profit in the underlying equity
holding, as certified by the Committee as required by section
162(m) of the Code. Payment shall be made in cash and in a lump
sum, except as otherwise set forth in the applicable Grant
Document. In no event shall a Retention Award grant a Holder an
interest in the equity holding, the gain and profit in which is
used to measure cash payments under such Award.
(d) Retention Award Grant Document. Each grant of a
Retention Award shall be evidenced by a Grant Document in such form
and containing such provisions not inconsistent with the provisions
of the Plan as the Committee from time to time shall approve. The
terms and conditions of the respective Retention Award Grant
Documents need not be identical. A Retention Award shall terminate
if the Holder does not remain continuously in the employ (or in
service as a Director) of the Company or a subsidiary at all times
during the applicable vesting period, except as otherwise set forth
in the applicable Grant Document.
12. RECAPITALIZATION, REORGANIZATION AND CHANGE IN CONTROL
(a) No Effect on Right or Power. The existence of the Plan
and the Awards granted hereunder shall not affect in any way the
right or power of the Board or the stockholders of the Company or
any subsidiary to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
or any subsidiary's capital structure or its business, any merger
or consolidation of the Company or any subsidiary, any issue of
debt or equity securities ahead of or affecting Common Stock or the
rights thereof, the dissolution or liquidation of the Company or
any subsidiary or any sale, lease, exchange or other disposition of
all or any part of its assets or business or any other corporate
act or proceeding.
(b) Changes in Common Stock. The provisions of Section
5(a) imposing limits on the numbers of shares of Common Stock
covered by Awards granted under the Plan, as well as the number or
type of shares or other property subject to outstanding Awards and
the applicable option or purchase prices per share, shall be
adjusted appropriately by the Committee in the event of stock
dividends, spin offs of assets or other extraordinary dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of rights
or warrants and similar transactions or events.
(c) Change in Control. As used in the Plan (except as
otherwise provided in an applicable Grant Document), the term
"Change in Control" shall mean:
(aa) any person (within the meaning of Section 13(d) or 14(d)
under the Exchange Act, including any group (within the meaning of
Section 13(d)(3) under the Exchange Act), a "Person") is or becomes
the "beneficial owner" (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
securities of the Company (such Person being referred to as an
"Acquiring Person") representing the greater of (x) 25% of the
combined voting power of the Company's outstanding securities and
(y) the proportion of the combined voting power of the Company's
outstanding securities represented by securities of the Company
beneficially owned, directly or indirectly, by Northwest Airlines
Corporation ("Northwest") and any Person controlling, controlled by
or under common control with Northwest at the time of reference
(excluding, for purposes of determining such proportion of the
combined voting power under this clause (y), any securities
beneficially owned by Northwest (and any Person controlling,
controlled by or under common control with Northwest) which are
deemed beneficially owned by such Acquiring Person); other than
beneficial ownership by (i) the Company or any subsidiary of the
Company, (ii) any employee benefit plan of the Company or any
Person organized, appointed or established pursuant to the terms of
any such employee benefit plan (unless such plan or Person is a
party to or is utilized in connection with a transaction led by
Outside Persons), (iii) Northwest or any Person controlling,
controlled by or under common control with Northwest (unless
Northwest is controlled by or under common control with Delta Air
Lines, Inc.), or (iv) (I) 1992 Air, Inc., (II) any Person who
controlled 1992 Air, Inc. as of February 26, 1998, including David
Bonderman and James Coulter, or (III) any Person controlled by any
such Person (Persons referred to in clauses (i) through (iv) hereof
are hereinafter referred to as "Excluded Persons"); or
(bb) individuals who constituted the Board as of February 26,
1998 (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any individual
becoming a director subsequent to February 26, 1998 whose
appointment to fill a vacancy or to fill a new Board position or
whose nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board or who was nominated for election by
Excluded Persons shall be considered as though such individual were
a member of the Incumbent Board; or
(cc) the Company merges with or consolidates into or engages
in a reorganization or similar transaction with another entity
(including Northwest) pursuant to a transaction in which the
Company is not the "Controlling Corporation"; or
(dd) the Company sells or otherwise disposes of all or
substantially all of its assets, other than to Excluded Persons, or
the Company sells or otherwise disposes of all or substantially all
of its assets to Northwest or any Person controlling, controlled by
or under common control with Northwest.
For purposes of clause (aa) above, if at any time there exist
securities of different classes entitled to vote separately in the
election of directors, the calculation of the proportion of the
voting power held by a beneficial owner of the Company's securities
shall be determined as follows: first, the proportion of the voting
power represented by securities held by such beneficial owner of
each separate class or group of classes voting separately in the
election of directors shall be determined, provided that securities
representing more than 50% of the voting power of securities of any
such class or group of classes shall be deemed to represent 100% of
such voting power; second, such proportion shall then be multiplied
by a fraction, the numerator of which is the number of directors
which such class or classes is entitled to elect and the
denominator of which is the total number of directors elected to
membership on the Board at the time; and third, the product
obtained for each such separate class or group of classes shall be
added together, which sum shall be the proportion of the combined
voting power of the Company's outstanding securities held by such
beneficial owner.
For purposes of clause (aa) above, the term "Outside Persons"
means any Persons other than (I) Persons described in clauses
(aa)(i) or (iii) or (iv) above (as to Persons described in clause
(aa)(iii) or (iv) above, while they are Excluded Persons) and (II)
members of senior management of the Company in office immediately
prior to the time the Acquiring Person acquires the beneficial
ownership described in clause (aa).
For purposes of clause (cc) above, the Company shall be
considered to be the Controlling Corporation in any merger,
consolidation, reorganization or similar transaction unless either
(1) the shareholders of the Company immediately prior to the
consummation of the transaction (the "Old Shareholders") would not,
immediately after such consummation, beneficially own, directly or
indirectly, securities of the resulting entity entitled to elect a
majority of the members of the Board of Directors or other
governing body of the resulting entity or (2) those persons who
were directors of the Company immediately prior to the consummation
of the proposed transaction would not, immediately after such
consummation, constitute a majority of the directors of the
resulting entity, provided that (I) there shall be excluded from
the determination of the voting power of the Old Shareholders
securities in the resulting entity beneficially owned, directly or
indirectly, by the other party to the transaction and any such
securities beneficially owned, directly or indirectly, by any
Person acting in concert with the other party to the transaction,
(II) there shall be excluded from the determination of the voting
power of the Old Shareholders securities in the resulting entity
acquired in any such transaction other than as a result of the
beneficial ownership of Company securities prior to the transaction
and (III) persons who are directors of the resulting entity shall
be deemed not to have been directors of the Company immediately
prior to the consummation of the transaction if they were elected
as directors of the Company within 90 days prior to the
consummation of the transaction.
The exclusion described in clause (aa)(iii) above shall cease
to have any force or effect (and the Persons described therein
shall cease to be Excluded Persons) if Northwest (together with any
Person controlling, controlled by or under common control with
Northwest) ceases to be, for a period of thirty consecutive
calendar days, the beneficial owner, directly or indirectly, of
securities of the Company representing at least 25% of the combined
voting power of the Company's outstanding securities. The exclusion
described in clause (aa)(iv) above shall cease to have any force or
effect (and the Persons described therein shall cease to be
Excluded Persons) if (A) the Person acquiring beneficial ownership
is not controlled by David Bonderman or James Coulter, or (B) the
Person acquiring beneficial ownership (together with any Person
controlling, controlled by or under common control with such
Person) ceases to be, for a period of thirty consecutive calendar
days, the beneficial owner, directly or indirectly, of securities
of the Company representing at least 25% of the combined voting
power of the Company's outstanding securities.
Upon the occurrence of a Change in Control, with respect to
each recipient of an Award hereunder, (AA) all Options granted to
such recipient and outstanding at such time shall immediately vest
and become exercisable in full (but subject, however, in the case
of Incentive Stock Options, to the aggregate fair market value,
determined as of the date the Incentive Stock Options are granted,
of the stock with respect to which Incentive Stock Options are
exercisable for the first time by such recipient during any
calendar year not exceeding $100,000) and, except as required by
law, all restrictions on the transfer of shares acquired pursuant
to such Options shall terminate, (BB) all restrictions applicable
to such recipient's Restricted Stock and Incentive Awards that are
outstanding at such time shall be deemed to have been satisfied and
such Restricted Stock and Incentive Awards shall immediately vest
in full, and (CC) all Retention Awards granted to such recipient
and outstanding at such time shall immediately vest in full.
In addition, except as otherwise provided in the applicable
Grant Document, if a recipient of an Award hereunder becomes
entitled to one or more payments (with a "payment" including,
without limitation, the vesting of an Award) pursuant to the terms
of the Plan (the "Total Payments"), which are or become subject to
the tax imposed by section 4999 of the Code (or any similar tax
that may hereafter be imposed) (the "Excise Tax"), the Company or
subsidiary for whom the recipient is then performing services shall
pay to the recipient an additional amount (the "Gross-Up Payment")
such that the net amount retained by the recipient, after reduction
for any Excise Tax on the Total Payments and any federal, state and
local income or employment tax and Excise Tax on the Gross-Up
Payment, shall equal the Total Payments. For purposes of
determining the amount of the Gross-Up Payment, the recipient shall
be deemed (aa) to pay federal income taxes at the highest stated
rate of federal income taxation (including surtaxes, if any) for
the calendar year in which the Gross-Up Payment is to be made; and
(bb) to pay any applicable state and local income taxes at the
highest stated rate of taxation (including surtaxes, if any) for
the calendar year in which the Gross-Up Payment is to be made. Any
Gross-Up Payment required hereunder shall be made to the recipient
at the same time any Total Payment subject to the Excise Tax is
paid or deemed received by the recipient.
13. AMENDMENT AND TERMINATION OF THE PLAN
Subject to the last sentence of Section 3 hereof, the Board in
its discretion may terminate the Plan at any time. The Board shall
have the right to amend the Plan or any part thereof from time to
time, and the Administrator may amend any Award (and its related
Grant Document) at any time, except as otherwise specifically
provided in such Grant Document or to the extent restricted by
section 162(m) of the Code with respect to an Award which is
intended to constitute "performance-based" compensation for
purposes of such section; provided that no change in any Award
theretofore granted may be made which would impair the rights of
the Holder thereof without the consent of such Holder, and provided
further that the Board may not, without approval of the
stockholders of the Company, amend the Plan to (a) increase the
maximum aggregate number of shares that may be issued under the
Plan or (b) change the class of individuals eligible to receive
Awards under the Plan.
14. MISCELLANEOUS
(a) No Right to an Award. Neither the adoption of the Plan
nor any action of the Board or the Administrator shall be deemed to
give an employee or Director any right to be granted an Award
except as may be evidenced by a Grant Document from the Company
reflecting a grant by the Company of an Award to such person and
setting forth the terms and conditions thereof. The Plan shall be
unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of funds
or assets to assure the performance of its obligations under any
Award.
(b) No Employment or Membership Rights Conferred. Nothing
contained in the Plan shall (i) confer upon any employee any right
with respect to continuation of employment with the Company or any
subsidiary or (ii) interfere in any way with the right of the
Company or any subsidiary to terminate his or her employment at any
time. Nothing contained in the Plan shall confer upon any Director
any right with respect to continuation of membership on the Board.
(c) Other Laws; Withholding. The Company shall not be
obligated to issue any Common Stock pursuant to any Award granted
under the Plan until there has been compliance with applicable laws
and regulations with respect thereto. No fractional shares of
Common Stock shall be delivered, nor shall any cash in lieu of
fractional shares be paid. The Company shall have the right to (i)
make deductions from any settlement or exercise of an Award made
under the Plan, including the delivery of shares, or require shares
or cash or both be withheld from any Award, in each case in an
amount sufficient to satisfy withholding of any taxes required by
law, or (ii) take such other action as may be necessary or
appropriate to satisfy any such tax withholding obligations. The
Administrator may determine the manner in which such tax
withholding may be satisfied, and may permit shares of Common Stock
(together with cash, as appropriate) to be used to satisfy required
tax withholding based on the Market Value per Share of any such
shares of Common Stock.
(d) No Restriction on Corporate Action. Subject to the
restrictions contained in Section 13, nothing contained in the Plan
shall be construed to prevent the Company or any subsidiary from
taking any corporate action, whether or not such action would have
an adverse effect on the Plan or any Award granted hereunder. No
employee, Director, beneficiary or other person shall have any
claim against the Company or any subsidiary as a result of any such
action.
(e) Restrictions on Transfer. An Award (other than an
Incentive Stock Option, which shall be subject to the transfer
restrictions set forth in Section 7(c)) shall not be transferable
otherwise than (i) by will or the laws of descent and distribution,
(ii) pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder, or (iii) with respect
to Awards of Non-Qualified Options, with the consent of the
Administrator. In the discretion of the Administrator, a percentage
(determined by the Administrator and set forth in the applicable
Grant Document) of the aggregate shares of Common Stock obtained
from exercises of an Option (which percentage may be satisfied out
of particular exercises as determined by the Administrator and set
forth in the applicable Grant Document) shall not be transferable
prior to the earliest to occur of (x) the termination of the
relevant Option term (or such shorter period as may be determined
by the Administrator and set forth in the Grant Document), (y) the
Holder's retirement, death or Disability, or (z) termination of the
Holder's employment with the Company and its subsidiaries.
(f) Governing Law. The Plan shall be construed in
accordance with the laws of the State of Texas.
EXHIBIT 99.2
CONTINENTAL AIRLINES, INC.
OFFICER RETENTION AND INCENTIVE AWARD PROGRAM
I. PURPOSE OF PROGRAM
This Continental Airlines, Inc. Officer Retention and
Incentive Award Program (the "Program") has been adopted by the
Human Resources Committee of the Board of Directors of Continental
Airlines, Inc., a Delaware corporation (the "Company"), to
implement the Retention Award provisions of the Continental
Airlines, Inc. Incentive Plan 2000 (as amended from time to time,
the "Incentive Plan 2000") adopted by the Board of Directors of the
Company. The Program is intended to provide a method for
attracting, motivating, and retaining key employees to assist in
the development and growth of the Company and its Subsidiaries.
The Program and Awards hereunder shall be subject to the terms of
the Incentive Plan 2000, including the limitations on the maximum
amount that may be paid with respect to Awards contained therein.
II. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Where the following words and phrases are
used in the Program, they shall have the respective meanings set
forth below, unless the context clearly indicates to the contrary:
(a) "Award" means the award of one or more PARs to a
Participant under the Program in accordance with Article IV.
Awards hereunder constitute Retention Awards (as such term is
defined in the Incentive Plan 2000) under the Incentive Plan 2000.
(b) "Award Notice" means a written notice issued by the
Company to a Participant evidencing such Participant's receipt of
an Award and setting forth certain terms and conditions with
respect thereto in accordance with Section 4.2.
(c) "Base Value" means, with respect to each Phantom Unit
subject to an Award with a Date of Grant that is concurrent with
the date of the acquisition by the Company or a Subsidiary of the
Investment to which such Award relates, an amount equal to (i) the
actual out-of-pocket cost of such Investment (as determined by the
Committee) to the Company or a Subsidiary that is paid to the
issuer or seller of such Investment (but, in no event, less than
$100,000) divided by (ii) the number of Phantom Units into which
such Investment is divided (with the result rounded to the nearest
cent). Notwithstanding the foregoing, (i) with respect to such
Awards relating to Follow-up Investments, at any time prior to a
Change in Control (provided, if the Change in Control is the result
of a business combination with Northwest Airlines Corporation
("Northwest") or any Person (as defined in the Incentive Plan 2000)
controlling, controlled by or under common control with Northwest,
that a Change in Control shall have been deemed to occur pursuant
to the first sentence of Section 5.4 hereof), and (ii) with respect
to all other such Awards, the Committee may, in its sole
discretion, determine at the time of the grant of any such Award
that the Base Value of such a Phantom Unit shall be greater than
the amount set forth in the preceding sentence, and the Committee
shall make each such determination based on such factors and
information as it deems relevant. If the Date of Grant of an Award
is after the date of the acquisition by the Company or a Subsidiary
of the Investment to which such Award relates, then the Base Value
of the Phantom Unit relating to such Award shall mean the value of
such Phantom Unit as of such Date of Grant as determined by the
Committee in such manner as it deems appropriate, and the Committee
may consider such factors and information as it deems relevant in
making each such determination.
(d) "Cause" means (i) in the case of a Participant with an
employment agreement with the Company or a Subsidiary, the
involuntary termination of such Participant's employment by the
Company (or, if applicable, a Subsidiary) under circumstances that
do not require the Company (or such Subsidiary) to pay to such
Participant a "Termination Payment" or "Monthly Severance Amount,"
as such terms (or a comparable term) are defined in such
Participant's employment agreement, and (ii) in the case of a
Participant who does not have an employment agreement with the
Company or a Subsidiary, the involuntary termination of such
Participant's employment by the Company (or, if applicable, a
Subsidiary) based upon a determination by the Committee or an
authorized officer of the Company (or such Subsidiary) that such
Participant has engaged in gross negligence or willful misconduct
in the performance of, or such Participant has abused alcohol or
drugs rendering him or her unable to perform, the material duties
and services required of him or her in his or her employment.
(e) "Change in Control" shall have the same meaning as is
assigned to such term under the Incentive Plan 2000, as in effect
on the Effective Date.
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Committee" means the individuals serving from time to
time as the "Committee" under the Incentive Plan 2000.
(h) "Company" means Continental Airlines, Inc., a Delaware
corporation.
(i) "Date of Grant" means the effective date of the grant
of an Award to a Participant.
(j) "Disability" means, with respect to a Participant, such
Participant's disability entitling him or her to benefits under the
Company's group long-term disability plan; provided, however, that
if such Participant is not eligible to participate in such plan,
then such Participant shall be considered to have incurred a
"Disability" if and when the Committee determines in its discretion
that such Participant has become incapacitated for a period of at
least 180 days by accident, sickness, or other circumstance which
renders such Participant mentally or physically incapable of
performing the material duties and services required of him or her
in his or her employment on a full-time basis during such period.
(k) "Disposition" means, with respect to each Investment,
a transfer, sale, exchange or other disposition of all or a portion
of such Investment by the Company or a Subsidiary, as applicable,
to one or more Transferees. A Disposition shall include a
Stockholder Disposition. A Disposition shall not include the
exercise of a convertible security (including an option or
warrant), but such an exercise shall require an adjustment to
related Awards pursuant to Section 4.6. The Committee may
determine that a transaction involving an exchange of a security
for other consideration is not a Disposition (1) to the extent such
other consideration consists of securities other than cash or
Publicly Traded securities that are Liquid, or (2) to the extent
that such transaction is effected on a tax-free basis to the
Company or the applicable Subsidiary (and, in connection with such
determination, the Committee may make any appropriate adjustments
to related Awards pursuant to Section 4.6). For purposes of
determining Market Value under the Program, the net proceeds of a
Disposition of an Investment shall be allocated to Phantom Units in
accordance with the number of Phantom Units into which such
Investment is divided.
(l) "Distribution" means, with respect to each Investment,
a dividend or other distribution (other than a dividend or
distribution that the Committee has determined should be included
as a part of such Investment or with respect to which an adjustment
is made to an outstanding Award pursuant to Section 4.6) received
with respect to such Investment by the Company or a Subsidiary, as
applicable. For purposes of determining Market Value under the
Program, Distributions with respect to an Investment shall be
allocated to Phantom Units in accordance with the number of Phantom
Units into which such Investment is divided.
(m) "Effective Date" means March 27, 2000.
(n) "Eligible Employee" means any individual who is an
Officer or any other person in an employment relationship with the
Company or any parent or subsidiary corporation (as defined in
Section 424 of the Code).
(o) "Excess Disposition" shall have the meaning assigned to
such term in Section 6.2(a).
(p) "Existing Investment" shall have the meaning set forth
in Section 2.1(q) as it applies to a particular Follow-up
Investment.
(q) "Follow-up Investment" means, with respect to each
equity holding in an e-commerce or internet-based business that
already constitutes an Investment subject to the Program (an
"Existing Investment"), any other equity holding in or related to
such business that is acquired by the Company or a Subsidiary based
on the satisfaction of performance targets, vesting provisions, or
other terms and conditions set forth in one or more agreements (as
the same may be amended from time to time) to which the Company or
a Subsidiary is a party, which agreement(s) were entered into in
connection with (and at or around the time the Company or a
Subsidiary acquired) the Existing Investment.
(r) "Incentive Plan 2000" means the Continental Airlines,
Inc. Incentive Plan 2000, as amended from time to time.
(s) "Investment" means each equity holding of the Company
or a Subsidiary in an e-commerce or internet-based business.
Equity holdings in different but affiliated entities shall be
considered separate Investments, and different equity holdings in
the same entity shall be considered separate Investments. The term
"Investment" shall include a Follow-up Investment, but each Follow-
up Investment shall be considered a new separate Investment.
Notwithstanding the foregoing, with respect to an equity holding in
an e-commerce or internet-based business (other than an equity
holding that constitutes a Follow-up Investment) that is acquired
by the Company or a Subsidiary after the Effective Date, the
Company's Chief Executive Officer shall provide prompt written
notice to the Committee of the acquisition of such equity holding,
and such equity holding shall be considered an Investment subject
to the Program as of the date of its acquisition unless (i) the
Company's Chief Executive Officer fails to provide such notice to
the Committee within 60 days after the date of such acquisition or
(ii) the Committee determines (in its sole discretion), within 90
days after the date of such acquisition, that such equity holding
shall not be considered an Investment for purposes of the Program,
and delivers written notice thereof within such 90 day period to
the Secretary of the Company. If the Chief Executive Officer
fails to give the notice specified in clause (i) of the foregoing
sentence within the time period specified therein, the Committee
may nonetheless at any time determine that an equity holding in an
e-commerce or internet-based business that is acquired by the
Company or a Subsidiary after the Effective Date shall be
considered an Investment for purposes of the Program, provided that
any Award (other than an Award with respect to a Follow-up
Investment) relating thereto is made by the Committee within 90
days after such determination by the Committee. With respect to
each equity holding so considered an Investment for purposes of the
Program acquired by the Company or a Subsidiary after the Effective
Date, the Committee shall determine, within 90 days after the date
of such acquisition (or, with respect to an Award described in the
immediately preceding sentence, at the time of the Award), whether
a Participant will forfeit 10% of the Redemption Amount upon a
redemption of the Award (or any portion thereof) relating to such
Investment pursuant to Section 6.1 hereof. In connection with the
adoption of the Program, the Committee shall designate which
Investments acquired prior to the Effective Date by the Company or
a Subsidiary shall be subject to the Program as of such date, and
whether a Participant will forfeit 10% of the Redemption Amount
upon a redemption of any of the Awards (or any portion thereof)
relating to such Investments pursuant to Section 6.1 hereof. For
purposes of Section 2.1(q) and this Section 2.1(s), an "equity
holding" means any interest (including, without limitation, an
option or warrant) in an entity other than an instrument that is
treated as indebtedness under applicable local law and which has no
substantial equity features.
(t) "Investment Period" means (i) with respect to each
Investment (other than a Follow-up Investment), the 10-year period
beginning on the first Date of Grant of an Award to any individual
with respect to such Investment, and (ii) with respect to each
Follow-up Investment, the 10-year period beginning on the first
Date of Grant of an Award to any individual with respect to the
original Existing Investment to which such Follow-up Investment
relates.
(u) "Liquid" shall mean, with respect to each Investment,
a determination by the Committee that (i) the Company or a
Subsidiary, as applicable, could sell all or substantially all of
such Investment under Rule 144 promulgated under the Securities Act
of 1933, pursuant to an effective registration statement under the
Securities Act of 1933 (or under a similar procedure under foreign
law), or otherwise without material transfer restrictions being
imposed on a non-affiliate Transferee as a result thereof, (ii) any
such sale is not prohibited by law, regulation, court or
administrative order, rule of an exchange or market, contract, or
otherwise, (iii) any such sale will not result in liability of the
Company or any Subsidiary under Section 16(b) of the Securities
Exchange Act of 1934, as amended (either because of transactions
(including Award redemptions) already effected or because of
prospective transactions (including Award redemptions) determined
by the Committee to be reasonably probable), and (iv) there is an
established public trading market for the securities comprising
such Investment which can be used to reasonably determine the
Market Value of the Phantom Units relating to such Investment. An
Investment shall also be considered Liquid if the Committee
determines that the Company or a Subsidiary could readily acquire
by conversion, exchange, exercise or otherwise one or more
securities that satisfy the requirements set forth in the preceding
sentence with respect to all or substantially all of such
Investment, and, under such circumstances, the Committee shall make
appropriate and equitable adjustments to affected PARs and Awards
(including, without limitation, adjustments to the determinations
of the Base Value and Market Value applicable to related Phantom
Units) in connection with any redemption thereof under Article VI.
(v) "Market Value" shall mean, with respect to each Phantom
Unit and as of a specified date, the Committee's determination of
the value of such Phantom Unit as of such date (with the result
rounded to the nearest cent). Market Value shall be determined
separately with respect to Awards relating to a Phantom Unit that
have different Dates of Grant. Market Value shall be determined by
the Committee as follows:
(i) If a Disposition (other than a Stockholder Disposition)
has occurred with respect to all or a portion of the
Investment to which such Phantom Unit relates, then the
Market Value of such Phantom Unit as of the date of
such Disposition shall equal the sum of (A) the fair
market value of the Distributions allocable to such
Phantom Unit that have been received by the Company or
a Subsidiary with respect to such Investment from the
Date of Grant of the applicable Award to the date of
such Disposition (increased, in the case of any
Distribution received in cash, by 7% per annum from the
date of receipt of such Distribution by the Company or
a Subsidiary to the date of such Disposition) and (B)
the fair market value of the net proceeds to the
Company or a Subsidiary with respect to such
Disposition that are allocable to such Phantom Unit.
The fair market value determinations required pursuant
to the preceding sentence shall be made in good faith
by the Committee as of the date of such Disposition.
(ii) If a Disposition of all or a portion of the Investment
to which such Phantom Unit relates has not occurred and
if such Investment is Publicly Traded as of the date
the Market Value of such Phantom Unit is required to be
made under the Program, then the Market Value as of
such date of such Phantom Unit shall equal the sum of
(A) the fair market value of the Distributions
allocable to such Phantom Unit that have been received
by the Company or a Subsidiary with respect to such
Investment from the Date of Grant of the applicable
Award to the date of such valuation (increased, in the
case of any Distribution received in cash, by 7% per
annum from the date of receipt of such Distribution by
the Company or a Subsidiary to the date of such
valuation) and (B) the fair market value of such
Phantom Unit based on the average of the high and low
sales price of the security that constitutes the
related Investment as of the date of such valuation (or
the next following Trading Day on which a sale occurs
if no sale occurs on such date) on the principal
exchange for such Investment. The fair market value
determinations required pursuant to the preceding
sentence shall be made in good faith by the Committee
as of the date of such valuation.
(iii) If a Stockholder Disposition of the Investment to which
such Phantom Unit relates has occurred at a time when
such Investment is Publicly Traded, then the Market
Value of such Phantom Unit as of the date of such
Stockholder Disposition shall be determined as provided
in clause (ii) above (applied by substituting the date
of such Stockholder Disposition for the date of such
valuation referred to in clause (ii)).
(iv) If a Disposition of such Investment has not occurred
and the Investment to which such Phantom Unit relates
is not Publicly Traded as of the date the Market Value
of such Phantom Unit is required to be made under the
Program, then the Market Value shall be determined by
the Committee. The Committee's determination shall be
made in good faith and shall be based on a valuation
opinion prepared by a Valuation Expert who shall be
selected by the Committee. The Committee shall cause
the opinion of the Valuation Expert (who shall
determine the fair market value of the Investment to
which such Phantom Unit relates) to be prepared no
later than 60 days after the date as of which the
Market Value is being determined. The Market Value
determined by the Committee based on the opinion of the
Valuation Expert shall be increased by the Committee to
reflect the fair market value (determined in good faith
by the Committee) of the Distributions allocable to
such Phantom Unit that have been received by the
Company or a Subsidiary with respect to such Investment
from the Date of Grant of the applicable Award to the
date of such valuation (increased, in the case of any
Distribution received in cash, by 7% per annum from the
date of receipt of such Distribution by the Company or
a Subsidiary to the date of such valuation). All costs
and expenses of the Valuation Expert shall be borne by
the Company.
(w) "Measurement Date" shall have the meaning assigned to
such term in Section 6.3.
(x) "Nonvested PARs" means the PARs subject to a
Participant's Award that are not Vested PARs.
(y) "Officer" means any individual who is in an employment
relationship with the Company or any parent or subsidiary
corporation (as defined in Section 424 of the Code) and who is
either (i) a Staff Vice President or more senior officer of the
Company or (ii) a Vice President or more senior officer of a
Subsidiary.
(z) "Officer Percentage" means, with respect to each
Officer and each Date of Grant, the percentage (rounded as
appropriate) obtained by dividing the "Classification Percentage"
for such Officer obtained in accordance with the following schedule
by the number of Officers as of such Date of Grant included among
the "Classification of Officers" corresponding to such
"Classification Percentage" as described in the following schedule,
but in no event more than the "Maximum Percentage" corresponding to
such "Classification Percentage:"
Classification Maximum
Classification of Officers Percentage Percentage
Chief Executive Officer of
the Company 3.75% 3.75%
President of the Company 2.5% 2.5%
Executive Vice Presidents
of the Company 3.75% 1.25%
Senior Vice Presidents of
the Company and
President of Continental
Express, Inc. 7.1875% 0.599%
Participants in the Company's
Executive Bonus Program
(and not included in one of
the above classifications) 2.8125% 0.3125%
Category 1 officers of the
Company and the Subsidiaries
(and not included in one of
the above classifications) 0.5% 0.25%
Category 2 officers of the
Company and the Subsidiaries
(and not included in one of
the above classifications) 3.5% 0.2058%
Category 3 officers of the
Company and the Subsidiaries
(and not included in one of
the above classifications) 1.0% 0.0625%
The Committee shall determine from time to time the Category 1,
Category 2, and Category 3 officers of the Company and the
Subsidiaries, which may be different for different Awards.
(aa) "PAR" means the right to receive the difference, if any
between the Market Value of a Phantom Unit and the Base Value of
such Phantom Unit.
(bb) "Participant" means an Eligible Employee who has
received an Award under the Program pursuant to Article IV;
provided, however, that at no time shall there be more than 100
Participants under the Program with outstanding Awards unless the
Company has received an opinion of counsel acceptable to the
Committee that additional Participants with outstanding Awards
above such number shall not cause the Program or the Company to be
considered an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(cc) "Performance Goal" means, with respect to each Award,
that (i) the Market Value of a Phantom Unit subject to such Award
exceeds the Base Value of such Phantom Unit as of the date as of
which a Redemption Amount is determined with respect to such Award,
and (ii) the value of the Investment to which such Award relates
and the value of Investments in different equity holdings in the
same entity, together with the value of all Follow-up Investments
with respect to such Investments, exceeds the aggregate out-of
pocket cost of such Investments and such Follow-up Investments to
the Company and the Subsidiaries paid to the issuer or seller
thereof (determined as of the date as of which a Redemption Amount
is determined with respect to such Award). For purposes of clause
(ii) of the preceding sentence, the Committee shall determine the
value of the applicable Investments and Follow-up Investments by
reference to (A) the value of each portion of such Investments with
respect to which a Disposition has occurred as of the date of such
Disposition, (B) the value of the portions of such Investments
retained by the Company or a Subsidiary as of the date as of which
the applicable Redemption Amount is determined, and (C) the value
of the Distributions received by the Company or a Subsidiary with
respect to such Investments prior to the date referred to in clause
(B) (valued as of the date of receipt of each such Distribution).
Further, the Committee shall determine the aggregate out-of pocket
cost of the applicable Investments and Follow-up Investments
without regard to any amount paid under the Program with respect
thereto.
(dd) "Phantom Unit" means the Committee's determination of
the unit by which to measure value, price, or amount with regard to
any particular Investment. At the time that the first Award is
made with respect to an Investment, the Committee shall determine
in its sole discretion the number of Phantom Units into which such
Investment shall be divided. If the Committee does not designate
the number of Phantom Units into which a particular Investment is
to be divided, then the Investment shall be divided into one
million Phantom Units.
(ee) "Program" means this Continental Airlines, Inc. Officer
Retention and Incentive Award Program, as amended from time to
time.
(ff) "Publicly Traded" means, with respect to a particular
Investment, that securities which are of the same class as the
securities constituting all or substantially all of such Investment
are either (i) registered under section 12 of the Securities
Exchange Act of 1934, as amended, and listed on a U.S. national or
regional stock exchange or reported by the NASDAQ National Market
System or (ii) listed for trading on a national or regional stock
exchange or market in a foreign country. An Investment shall also
be considered to be Publicly Traded if the Committee determines
that the Company or a Subsidiary could readily acquire by
conversion, exchange, exercise or otherwise one or more securities
described in the preceding sentence with respect to all or
substantially all of such Investment, and, under such
circumstances, the Committee shall make appropriate and equitable
adjustments to affected PARs and Awards (including, without
limitation, adjustments to the determinations of the Base Value and
Market Value applicable to related Phantom Units) in connection
with any redemption thereof under Article VI.
(gg) "Redeemable PARs" shall have the meaning assigned to
such term in Section 6.2(a).
(hh) "Redemption Amount" means, with respect to a particular
Vested PAR, the difference, if any (but not less than zero), as of
a specified date between (i) the Market Value as of such date of
the Phantom Unit relating to such PAR and (ii) the Base Value as of
such date of such Phantom Unit.
(ii) "Redemption Election" shall have the meaning assigned
to such term in Section 6.1.
(jj) "Redemption Notice" shall have the meaning assigned to
such term in Section 6.1.
(kk) "Retirement" means, with respect to a Participant, the
earlier of (i) the first date upon which such Participant has both
attained 50 years of age and completed 20 or more years of service
for vesting purposes under the Continental Retirement Plan, (ii)
the first date upon which such Participant has both attained 55
years of age and completed 10 or more years of service for vesting
purposes under the Continental Retirement Plan, or (iii) the date
upon which such Participant has attained 65 years of age.
(ll) "Stockholder Disposition" means, with respect to each
Investment, a distribution or other disposition of all or a portion
of such Investment to the Company's stockholders on a pro-rata
basis.
(mm) "Subsidiary" means any entity (other than the Company)
with respect to which the Company, directly or indirectly through
one or more other entities, owns equity interests possessing 50
percent or more of the total combined voting power of all equity
interests of such entity (excluding voting power that arises only
upon the occurrence of one or more specified events).
(nn) "Termination of Service" means the termination of a
Participant's employment for any reason whatsoever so that such
Participant is no longer an employee of the Company or any
Subsidiary.
(oo) "Trading Day" means, with respect to any Investment
that is Liquid, a day during which trading in securities generally
occurs in the principal securities market in which such Investment
is traded.
(pp) "Transferee" means any person, corporation,
partnership, limited liability company or partnership, association,
trust, or other entity or organization that is not the Company or
a Subsidiary.
(qq) "Valuation Expert" means, with respect to each
Investment, a nationally recognized investment banking firm
experienced in the valuation of property similar to such
Investment.
(rr) "Vested Interest" means the portion, if any, of an
Award that is vested in accordance with Article V.
(ss) "Vested PARs" means the number of PARs subject to a
Participant's Award in which such Participant has a Vested
Interest, determined by multiplying (i) the total number of PARs
subject to such Award at the Date of Grant by (ii) the
Participant's Vested Interest as of the date the number of Vested
PARs is being determined.
(tt) "Window Period" shall mean the 15-day period that
begins on (and includes) the first business day of the month of
each February, May, August, and November.
(uu) "Window Redemption Date" means, with respect to each
Window Period and each Investment, the first Trading Day that
occurs with respect to such Investment after the last day of such
Window Period.
2.2 Number, Gender, Headings, and Periods of Time.
Wherever appropriate herein, words used in the singular shall be
considered to include the plural, and words used in the plural
shall be considered to include the singular. The masculine gender,
where appearing in the Program, shall be deemed to include the
feminine gender. The headings of Articles, Sections, and
Paragraphs herein are included solely for convenience. If there is
any conflict between such headings and the text of the Program, the
text shall control. All references to Articles, Sections, and
Paragraphs are to the Program unless otherwise indicated. Any
reference in the Program to a period or number of days, weeks,
months, or years shall mean, respectively, calendar days, calendar
weeks, calendar months, or calendar years unless expressly provided
otherwise.
III. ADMINISTRATION
3.1 Administration by the Committee. The Program shall be
administered by the Committee. The action by a majority of the
members of the Committee shall be the act of the Committee. The
Committee may delegate such administrative matters hereunder as it
deems appropriate to officers of the Company to the extent such
delegation does not cause compensation hereunder which is intended
to constitute "performance-based" compensation for purposes of
section 162(m) of the Code not to be treated as such "performance-
based" compensation.
3.2 Powers of the Committee. The Committee shall supervise
the administration and enforcement of the Program according to the
terms and provisions hereof and shall have the sole discretionary
authority and all of the powers necessary to accomplish these
purposes. The Committee shall have all of the powers specified for
it under the Program, including, without limitation, the power,
right, or authority: (a) to select Eligible Employees to receive
Awards under the Program; (b) to determine all provisions,
conditions, and terms relating to any Award, including, without
limitation, determinations as to the Date of Grant, the Base Value,
the Market Value, the number of PARs subject to an Award, and any
adjustments thereto; (c) from time to time to establish rules and
procedures for the administration of the Program, which are not
inconsistent with the provisions of the Program or the Incentive
Plan 2000, and any such rules and procedures shall be effective as
if included in the Program; (d) to construe in its discretion all
terms, provisions, conditions, and limitations of the Program, any
Award, and any Award Notice; (e) to correct any defect or to supply
any omission or to reconcile any inconsistency that may appear in
the Program or in any Award or Award Notice in such manner and to
such extent as the Committee shall deem appropriate; (f) to make
determinations as to whether a Disposition of an Investment has
occurred; (g) to make determinations as to whether an Investment is
Publicly Traded and/or Liquid; (h) to make determinations as to
whether an equity holding constitutes a Follow-up Investment; (i)
to make determinations as to whether the Performance Goal
applicable to an Award has been satisfied; (j) to make
determinations than an equity holding is not an Investment,
pursuant to Section 2.1(s) hereof; (k) to determine whether, with
respect to an Award, a Participant will forfeit 10% of the
Redemption Amount upon a redemption of the Award (or any portion
thereof) relating to such Investment pursuant to Section 6.1
hereof; (l) to certify in writing, prior to the payment of any
amount under the Program with respect to an Award, whether the
Performance Goal relating to such Award has in fact been satisfied;
and (m) to make all other determinations necessary or advisable for
the administration of the Program. If the Committee determines
that the cost of administration of the Program, or the cost to the
Company or its Subsidiaries of administration or oversight of
Investments, becomes material, the Committee may take such costs
into account in determining Base Value relating to future Awards.
3.3 Committee Decisions Conclusive; Standard of Care. The
Committee shall, in its sole discretion exercised in good faith
(which, for purposes of this Section 3.3, shall mean the
application of reasonable business judgment), make all decisions
and determinations and take all actions necessary in connection
with the administration of the Program. All such decisions,
determinations, and actions by the Committee shall be final,
binding, and conclusive upon all persons. The Committee shall not
be liable for any decision, determination, or action taken in good
faith or upon reliance in good faith on the records of the Company
or information presented to the Committee by the Company's
officers, employees, or other persons (including the Valuation
Experts and their employees and representatives) as to matters the
Committee reasonably believes are within such other person's
professional or expert competence. If a Participant disagrees with
any decision, determination, or action made or taken by the
Committee, then the dispute will be limited to whether the
Committee has satisfied its duty to make such decision or
determination or take such action in good faith. No liability
whatsoever shall attach to or be incurred by any past, present or
future stockholders, officers or directors, as such, of the Company
or any of its Subsidiaries, under or by reason of the Program or
the administration thereof, and each Participant, in consideration
of receiving benefits and participating hereunder, expressly waives
and releases any and all claims relating to any such liability.
IV. PARTICIPATION, AWARDS AND AWARD NOTICES
4.1 Participation. Each individual who is an Eligible
Employee is eligible to be selected to be a Participant in the
Program. Subject to the provisions of Sections 4.3, 4.4, and 4.5,
(a) participation in the Program and the granting of Awards to
Eligible Employees shall be determinations made by and in the
discretion of the Committee and (b) Awards shall be granted by the
Committee from time to time, and at such times, as the Committee in
its sole discretion may determine. The Committee may grant any
number of Awards to any one Eligible Employee without regard to the
number of Awards granted to any other Eligible Employee.
4.2 Award Notices. The Company shall provide an Award
Notice to each individual who receives an Award relating to a
particular Investment. Each Award Notice evidencing an Award shall
specify (a) the Date of Grant of such Award, (b) the Investment to
which such Award relates, (c) the number of PARs subject to such
Award, (d) the Base Value of each Phantom Unit subject to a PAR
granted under such Award, (e) the number of Phantom Units into
which the related Investment has been divided (if other than one
million Phantom Units), (f) the vesting schedule and/or other
requirements pursuant to which the Participant who holds such Award
shall obtain a Vested Interest (to the extent such schedule or
requirements differ from the provisions contained in Article V),
(g) whether the Participant will forfeit 10% of the Redemption
Amount upon a redemption of the Award (or any portion thereof)
relating to such Investment pursuant to Section 6.1 hereof, and
(h) such other terms and conditions as the Committee may determine
in its sole discretion.
4.3 Limitations on PARs. The aggregate number of PARs that
may be subject to Awards granted with respect to a particular
Investment shall not exceed (a) with respect to any one
Participant, 3.75% of the number of Phantom Units into which such
Investment has been divided, and (b) with respect to all
Participants, 25% of the number of Phantom Units into which such
Investment has been divided.
4.4 Special Provisions Concerning Awards to Officers.
Unless an affected Officer is notified otherwise in writing by the
Committee prior to the last day of the 90-day period referred to in
clause (ii) of the fourth sentence of Section 2.1(s) (or, if
applicable, prior to the Date of Grant of an Award referred to in
the fifth sentence of Section 2.1(s)) with respect to an Investment
that becomes subject to the Program:
(a) each Officer who is employed by the Company or a
Subsidiary on the date an Investment is acquired by the
Company or a Subsidiary, as applicable (or, with respect to an
Investment described in the fifth sentence of Section 2.1(s),
the Date of Grant of an Award described in such sentence),
shall receive an Award with respect to such Investment as of
such date (provided, however, that Officers who are so
employed on the Effective Date shall receive an Award on such
date with respect to Investments acquired by the Company or a
Subsidiary prior to such date which are made subject to the
Program by the Committee as of such date); and
(b) the number of PARs that shall be subject to each
Award to an Officer pursuant to Section 4.4(a) shall be no
less than an amount equal to (i) the Officer Percentage that
is applicable to such Officer as of the Date of Grant of such
Award multiplied by (ii) the number of Phantom Units into
which the Investment that is the subject of such Award has
been divided (with the result rounded down to the nearest
whole PAR).
Notwithstanding the foregoing, the provisions of this Section 4.4
shall not apply with respect to any Follow-up Investment.
4.5 Special Provisions Concerning Awards with respect to
Follow-up Investments. If (a) a Participant has received an Award
with respect to an Existing Investment prior to the date a Follow-
up Investment with respect to such Existing Investment is acquired
by the Company or a Subsidiary, (b) such Participant is either an
Eligible Employee or has a Vested Interest in such Award as of the
date of such acquisition, and (c) such Award has not been canceled
pursuant to Section 5.3, then such Participant shall receive an
Award with respect to such Follow-up Investment as of the date the
Follow-up Investment is acquired by the Company or a Subsidiary.
In the case of a Participant who is an Eligible Employee at the
time such Award is made, (i) such Participant's Vested Interest in
such Award shall at all times be equal to his or her Vested
Interest in his or her Award relating to the Existing Investment
and (ii) the number of PARs subject to such Award shall be no less
than an amount that bears the same ratio to the number of Phantom
Units into which such Follow-up Investment has been divided as the
number of PARs subject to such Participant's Award relating to the
Existing Investment bears to the number of Phantom Units into which
the Existing Investment was divided. In the case of a Participant
who is not an Eligible Employee at the time such Award is made, (A)
such Participant's Vested Interest in such Award shall at all times
be equal to 100% and (B) the number of PARs subject to such Award
shall equal (1) such Participant's Vested Interest in his or her
Award relating to the Existing Investment multiplied by (2) an
amount that bears the same ratio to the number of Phantom Units
into which such Follow-up Investment has been divided as the number
of PARs subject to such Participant's Award relating to the
Existing Investment bears to the number of Phantom Units into which
the Existing Investment was divided. The provisions of this Section
4.5 shall apply separately to each Award held by a Participant with
respect to such Existing Investment.
4.6 Adjustments to Outstanding Awards. In the event of (a)
any recapitalization, reorganization, merger, consolidation,
combination, split-up, split-off, spin-off, exchange, or other
relevant change in capitalization of any company or other entity
issuing securities constituting an Investment occurring after the
date of the grant of any Award relating to such Investment, (b) a
capital contribution by the Company or a Subsidiary to any company
or entity issuing securities constituting an Investment occurring
after the date of the grant of any Award relating to such
Investment, (c) the exercise by the Company or a Subsidiary of an
option, warrant, or other purchase right constituting an Investment
after the date of the grant of any Award relating to such
Investment, or (d) the occurrence of any other event which, in the
judgment and sole discretion of the Committee, should cause a
change in the rights of the Participants with respect to their
Awards under the Program, then the Committee shall make such
adjustments under the Program and to any outstanding Awards with
respect to the number of PARs subject to such Awards, the Base
Value of the Phantom Units subject to such PARs, the number of
Phantom Units relating to such Investment or any other term or
condition applicable to such PARs or Awards (including, without
limitation, dividing an Award into two or more Awards) as, in the
sole discretion of the Committee, shall (i) be equitable and
appropriate under the circumstances, (ii) be consistent with the
intent of the Program, and (iii) preclude an increase in the
compensation payable to a Participant with respect to an Award
beyond that which was intended under the Program. Subject to the
principles set forth in clauses (i), (ii), and (iii) of the
preceding sentence, Awards may also be adjusted by the Committee as
provided in other provisions of the Program. Any adjustments made
by the Committee pursuant to this Section shall be final, binding,
and conclusive on all parties.
V. VESTING OF AWARDS
5.1 Determination of Vested Interest. Subject to the
provisions of Section 4.5, a Participant shall obtain a Vested
Interest in an Award at the rate of 6.25% for each full three-month
period (commencing on the Date of Grant of such Award) that the
Participant remains continuously employed by the Company or a
Subsidiary. Further, if a Participant incurs a Termination of
Service by reason of death, Disability or Retirement, then such
Participant shall obtain on the date of such termination a 100%
Vested Interest in all then outstanding Awards held by such
Participant; provided, however, that if such Retirement occurs
prior to the second anniversary of the Effective Date, (a) such
Participant's Vested Interest in all Awards shall be frozen, (b)
the Vested Interest of such Participant in his or her Awards shall
not increase after such date, and (c) the Nonvested PARs
(determined as of such date) subject to such Awards shall be
surrendered to the Company and canceled. Notwithstanding the
preceding provisions of this Section, the Committee may, in its
sole discretion, provide in an Award Notice or in an employment
agreement a different vesting schedule or vesting provisions
pursuant to which a Participant shall acquire a Vested Interest in
his or her Award(s).
5.2 Termination of Service other than for Cause and not by
reason of death, Disability or Retirement. Except as provided in
Section 5.4 and unless otherwise provided in an Award Notice or a
Participant's employment agreement, as of the date a Participant
incurs a Termination of Service other than for Cause (and not by
reason of death, Disability or Retirement), (a) such Participant's
Vested Interest in all Awards shall be frozen, (b) the Vested
Interest of such Participant in his or her Awards shall not
increase after such date, and (c) the Nonvested PARs (determined as
of such date) subject to such Awards shall be surrendered to the
Company and canceled; provided, however, that if, upon such
Participant's Termination of Service other than for Cause (and not
by reason of death, Disability or Retirement) any of such
Participant's stock options granted under the Incentive Plan 2000
or any other stock option plan or program of the Company vest in
their entirety (except as a result of the expiration of an
employment agreement occuring prior to the second anniversary of
the Effective Date), then such Participant's Awards shall vest in
their entirety (so that such Participant has a 100% Vested Interest
in such Awards).
5.3 Termination of Service for Cause. Upon a determination
by the Committee that a Participant has incurred a Termination of
Service for Cause, (a) all outstanding Awards (including the Vested
PARs and Nonvested PARs subject thereto) shall be canceled,
effective as of the date of such Termination of Service, (b) no
outstanding PARs under Awards held by such Participant shall be
redeemable, and (c) no amount, including, without limitation, any
amount payable under Article VI, shall be paid under the Program to
such Participant from and after the date of such Termination of
Service. Such Participant shall surrender all outstanding Awards
to the Company, and all Awards of such Participant shall be
canceled.
5.4 Special Change in Control Vesting Provisions. A
Participant who is employed by the Company or a Subsidiary on the
date a Change in Control occurs shall obtain on such date a 100%
Vested Interest in all then outstanding Awards held by such
Participant; provided, that if the Change in Control is the result
of a business combination with Northwest or any Person (as defined
in the Incentive Plan 2000) controlling, controlled by or under
common control with Northwest, then the Committee shall determine
whether, in connection with such business combination, a change in
the composition of the persons with authority to exercise policy-
making functions with respect to the business of the Company has or
is reasonably expected to occur, such that the expectations of
employees of the Company concerning the direction and management of
the Company would be reasonably expected to be materially affected,
and a Change in Control shall be deemed to occur as a result of
such business combination only if the Committee determines that
such a change has or is reasonably expected to occur.
Notwithstanding any determination by the Committee that such a
change has not or is not reasonably expected to occur, if a
Participant who is employed by the Company or a Subsidiary on the
date of the closing of a business combination with Northwest or any
Person controlling, controlled by or under common control with
Northwest which, but for the determination by the Committee, would
constitute a Change in Control, incurs a Termination of Service at
any time during the two-year period following the date of such
closing, and such Termination of Service is for any reason other
than Cause or the voluntary resignation of such Participant, then
such Participant shall obtain on the date of such Termination of
Service a 100% Vested Interest in all then outstanding Awards held
by such Participant.
5.5 Accelerated Vesting. At any time, and from time to
time, the Committee may in its sole discretion accelerate the
vesting of an Award such that the Participant who holds such Award
will have a greater Vested Interest than such Participant would
have otherwise had pursuant to the preceding provisions of this
Article V or the vesting schedule set forth in the Award Notice
evidencing such Award or such Participant's employment agreement.
Actions by the Committee pursuant to this Section may vary among
Participants and may vary among the Awards held by an individual
Participant.
VI. AWARD REDEMPTIONS
6.1 Redemptions Elected by a Participant. On or before the
first day of each Window Period, the Committee shall (a) identify
each Investment that the Committee anticipates will be Liquid as of
the Window Redemption Date immediately following the last day of
such Window Period and (b) provide notice of the same (the
"Redemption Notice") to each Participant who is expected to be
holding Vested PARs (determined as of such Window Redemption Date)
under an Award relating to such Investment as of such Window
Redemption Date. During each Window Period, a Participant who has
received a Redemption Notice (or, should the Committee fail to
deliver such notice, who should have received a Redemption Notice
hereunder) may elect by irrevocable written notice to the Committee
to redeem as of the next following Window Redemption Date all or
any portion of such Participant's unredeemed Vested PARs that
relate to an Investment that is both (1) specified in the
Committee's Redemption Notice for such Window Period (or, but for
the failure to deliver such notice, would have been so specified)
and (2) Liquid as of such Window Redemption Date. Any such
election (a "Redemption Election") must specify the Award to which
such election relates and the number of such Participant's
unredeemed Vested PARs under such Award to which such election
shall apply. If a Participant makes a Redemption Election with
respect to an Award, then the Company shall pay to the Participant
the Redemption Amount applicable to the Vested PARs that are the
subject of such Redemption Election; provided, however, that if the
Committee has made a determination described in the Award Notice
that the Participant will forfeit 10% of the Redemption Amount upon
a redemption of the Award (or any portion thereof) pursuant to this
Section 6.1, then such Participant shall receive a payment of only
90% of such Redemption Amount, and the remaining 10% of such
Redemption Amount shall be forfeited to the Company. The amount
described in the preceding sentence shall be determined as of the
applicable Window Redemption Date (and the Market Value of the
Phantom Unit subject to each such PAR shall be determined under (A)
Section 2.1(v)(i) if the Company or a Subsidiary, as applicable,
makes a Disposition corresponding to a Participant's Redemption
Election or (B) Section 2.1(v)(ii) if no such Disposition is made),
and shall be paid to the Participant in a single lump sum cash
payment as soon as administratively practicable, but not later than
30 days, after the applicable Window Redemption Date. Upon such
redemption, the PARs so redeemed shall be surrendered to the
Company, and all such redeemed PARs shall be canceled. If a
Participant makes a Redemption Election with respect to an Award
and the Investment relating to such Award is not Liquid as of the
applicable Window Redemption Date, then such Redemption Election
shall be void and of no effect. Notwithstanding the preceding
provisions of this Section, prior to any payment pursuant to this
Section with respect to an Award, the Committee must certify in
writing that the Performance Goal was satisfied with respect to
such Award as of the applicable Window Redemption Date. Such
certification shall be made as soon as administratively feasible,
but no later than 30 days, after the end of the applicable Window
Period and shall be delivered to the Secretary of the Company. For
purposes of this Section, approved minutes of the Committee in
which the certification is made shall be treated as a written
certification.
6.2 Redemption Upon Disposition of All or a Portion of an
Investment.
(a) For purposes of this Section 6.2, each Investment shall
be deemed to be subdivided into a number of sub-investments equal
to the number of Phantom Units into which such Investment was
divided. A number of such sub-investments equal to the number of
PARs that have been awarded to a Participant under an Award
relating to such Investment shall be associated with such
Participant's Award. Upon any Disposition of all or a portion of
an Investment, the Company or a Subsidiary, as applicable, shall be
deemed to have first disposed of the sub-investments corresponding
to PARs that have been redeemed pursuant to Section 6.1
contemporaneously with or prior to such Disposition, and no
payments under this Section 6.2 shall be made with respect to the
disposition of any such sub-investments. The remaining provisions
of this Section 6.2 shall apply only when (and to the extent that)
the Company and the Subsidiaries have disposed of a number of sub-
investments that exceed the corresponding number of PARs that have
been redeemed pursuant to Section 6.1 and this Section 6.2 prior to
such disposition (an "Excess Disposition"). As soon as
administratively feasible after the Disposition of all or a portion
of an Investment that results in an Excess Disposition, the
Committee shall determine, with respect to each outstanding Award
relating to such Investment, the number of PARs, if any, that shall
be subject to redemption or cancellation pursuant to this Section
6.2 in connection with such Disposition. Such number of PARs with
respect to an outstanding Award (the "Redeemable PARs") shall equal
A multiplied by B, where A equals (i) the number of sub-investments
that constitute such Excess Disposition divided by (ii) the number
of sub-investments into which such Investment was deemed divided
pursuant to this Section 6.2(a), and B equals the number of
unredeemed PARs subject to such outstanding Award at the time of
such Disposition. The Committee shall also determine and certify in
writing whether the Performance Goal was satisfied (determined as
of the date of such Excess Disposition) with respect to each then
outstanding Award relating to such Investment. If the Performance
Goal was not so satisfied with respect to such an Award, then the
Redeemable PARs shall be surrendered to the Company and canceled.
If the Performance Goal was so satisfied with respect to such
Award, then the Redeemable PARs shall be redeemed as provided in
this Section. The Committee certifications required pursuant to
this Section shall be delivered to the Secretary of the Company.
For purposes of this Section, approved minutes of the Committee in
which the certifications are made shall be treated as a written
certification.
(b) Upon the occurrence of an Excess Disposition, the
outstanding Redeemable PARs related thereto with respect to which
the Performance Goal was satisfied as provided above shall remain
outstanding, and each Participant who holds such Redeemable PARs
shall continue to obtain a Vested Interest therein in accordance
with the provisions of Article V until such Participant's Vested
Interest becomes frozen in accordance with Article V or the Award
under which such Redeemable PARs were granted is forfeited in
accordance with Article V. Subject to the provisions of Section
5.3, as soon as administratively feasible, but not more than 10
days, after the later of the date of the Excess Disposition or the
certification required by the Committee pursuant to Section 6.2(a),
the Company shall make a redemption payment to each Participant who
is entitled to a redemption pursuant to this Section in an amount
equal to the Redemption Amount (determined as of the date of the
Excess Disposition) applicable to the Redeemable PARs that are
Vested PARs (determined as of the date of the Excess Disposition).
In addition, within 10 days after each date upon which such
Participant's remaining Redeemable PARs become Vested PARs, the
Company shall make an additional redemption payment to such
Participant in an amount equal to the Redemption Amount (determined
as of the date of the Excess Disposition) applicable to such
Redeemable PARs that become Vested PARs, together with 7% interest
(compounded annually) on such additional redemption payment for the
period beginning on the date of the payment to such Participant
pursuant to the preceding sentence and ending on the date of
payment of such additional redemption payment. Upon payment by the
Company with respect to a Redeemable PAR as provide above, the PAR
so redeemed shall be surrendered to the Company and canceled. All
payments under this Section shall be made in cash.
6.3 Redemption Upon Expiration of Investment Period. As
soon as administratively feasible after the last day of the
Investment Period relating to an Investment, the Committee shall
certify in writing whether the Performance Goal was satisfied
(determined as of the last day of such Investment Period (or as of
the first business day following such date if such date is not a
business day) (the "Measurement Date")) with respect to each then
outstanding Award relating to such Investment. If the Performance
Goal was not so satisfied with respect to such an Award, then such
Award shall be surrendered to the Company and canceled. If the
Performance Goal was so satisfied with respect to such an Award,
then the Company shall redeem the Vested PARs under such Award
(determined as of the Measurement Date), and such Award (including
the Vested PARs and Nonvested PARs subject thereto) shall be
surrendered to the Company and canceled. The amount paid by the
Company to a Participant who is entitled to a redemption payment
pursuant to this Section with respect to such Participant's Vested
PARs shall be the Redemption Amount applicable to such Vested PARs
(determined as of the Measurement Date). A redemption payment
provided for in this Section shall be paid to the Participant in a
single lump sum cash payment as soon as administratively
practicable, but not later than 60 days, after the last day of the
applicable Investment Period. The Committee certifications
required pursuant to this Section shall be delivered to the
Secretary of the Company. For purposes of this Section, approved
minutes of the Committee in which the certifications are made shall
be treated as a written certification.
6.4 Limitations with respect to Redemption Payments.
Notwithstanding any provision herein to the contrary, (a) except as
expressly provided in this Article VI, a Participant shall not have
any right to any payment under the Program, (b) in no event shall
a payment be made with respect to the portion of an Award in which
a Participant does not have a Vested Interest, and (c) in no event
shall a payment be made with respect to an Award in excess of the
limitations on the maximum amount that may be paid with respect to
Awards contained in the Incentive Plan 2000.
VII. STOCKHOLDER APPROVAL, TERMINATION,
AND AMENDMENT OF PROGRAM
7.1 Stockholder Approval. The Program shall be effective
as of the Effective Date; provided that the Incentive Plan 2000 is
approved by the Company's stockholders in the manner required under
section 162(m) of the Code at the Company's 2000 annual meeting of
stockholders. Notwithstanding any provision herein to the contrary,
no payment under the Program shall be made to or on behalf of any
Participant unless the Incentive Plan 2000 is so approved by the
Company's stockholders. If the Company's stockholders do not so
approve the Incentive Plan 2000, then (a) all Awards under the
Program shall be void ab initio and of no further effect and (b)
the Program shall terminate.
7.2 Termination and Amendment. The Committee may amend
the Program at any time and from time to time, and the Committee
may at any time terminate the Program; provided, however, that the
Program may not be amended or terminated in a manner that would
impair (a) the rights of a Participant with respect to an
outstanding Award or (b) the right of a Participant with respect to
an Existing Investment as of the date of such amendment or
termination to receive (or the Base Value of) an Award with respect
to a related Follow-up Investment pursuant to Section 4.5, without,
in each such case, the consent of such Participant. The Committee
shall remain in existence after the termination of the Program for
the period determined necessary by the Committee to facilitate the
termination of the Program, and all provisions of the Program that
are necessary, in the opinion of the Committee, for equitable
operation of the Program during such period shall remain in force.
VIII. MISCELLANEOUS PROVISIONS
8.1 No Effect on Employment Relationship or SERP. For all
purposes of the Program, a Participant shall be considered to be in
the employment of the Company as long as he or she remains employed
on a full-time basis by the Company or any Subsidiary. Nothing in
the adoption of the Program, the grant of Awards, or the payment of
amounts under the Program shall confer on any person the right to
continued employment by the Company or any Subsidiary or affect in
any way the right of the Company (or a Subsidiary, if applicable)
to terminate such employment at any time. Unless otherwise provided
in a written employment agreement, the employment of each
Participant shall be on an at-will basis, and the employment
relationship may be terminated at any time by either the
Participant or the Participant's employer for any reason
whatsoever, with or without cause. Any question as to whether and
when there has been a termination of a Participant's employment for
purposes of the Program, and the reason for such termination, shall
be determined solely by and in the discretion of the Committee, and
its determination shall be final, binding, and conclusive on all
parties. Any Participant who has a supplemental executive
retirement plan (SERP) with the Company or any Subsidiary
understands and agrees, by accepting any Award under the Program,
that any Redemption Amount paid with respect to any Award
constitutes a cash bonus paid under a long term incentive plan or
program adopted by Company and thus shall be excluded from such
Participant's cash compensation for purposes of calculating
benefits payable under such SERP.
8.2 Prohibition Against Assignment or Encumbrance. No
Award, PAR, or other right, title, interest, or benefit hereunder
shall ever be assignable or transferable, or liable for, or charged
with any of the torts or obligations of a Participant or any person
claiming under a Participant, or be subject to seizure by any
creditor of a Participant or any person claiming under a
Participant. No Participant or any person claiming under a
Participant shall have the power to anticipate or dispose of any
Award, PAR, or other right, title, interest, or benefit hereunder
in any manner until the same shall have actually been distributed
free and clear of the terms of the Program. Payments with respect
to an Award shall be payable only to the Participant (or (a) in the
event of a Disability that renders such Participant incapable of
conducting his or her own affairs, any payment due under the
Program to such Participant shall be made to his or her duly
appointed legal representative and (b) in the event of the death of
a Participant, any payment due under the Program to such
Participant shall be made to his or her estate). The provisions of
the Program shall be binding on all successors and assigns of a
Participant, including without limitation the estate of such
Participant and the executor, administrator or trustee of such
estate, or any receiver or trustee in bankruptcy or representative
of the Participant's creditors.
8.3 Unfunded, Unsecured Program. The Program shall
constitute an unfunded, unsecured obligation of the Company to make
payments of incentive compensation to certain individuals from its
general assets in accordance with the Program. Each Award and PAR
granted under the Program merely constitutes a mechanism for
measuring such incentive compensation and does not constitute a
property right or interest in the Company, any Subsidiary, or any
of their assets (including, without limitation, any Investment or
any Distribution with respect to any Investment). Neither the
establishment of the Program, the granting of Awards, nor any other
action taken in connection with the Program shall be deemed to (a)
create any interest in an Investment (nor to constitute the direct
or indirect sale, transfer, assignment, pledge or other disposition
thereof (or of any part thereof) or of any interest therein), (b)
create an escrow or trust fund of any kind, (c) create any
fiduciary relationship of the Company or any Subsidiary, or of any
officer, director, employee or agent thereof, with respect to any
Investment or any Participant, or (d) restrict or affect in any way
the acquisition, holding, voting, disposition or the taking of any
action with respect to any Investment by the Company or any
Subsidiary.
8.4 No Rights of Participant. No Participant shall have
any security or other interest in any assets of the Company or any
Subsidiary (including, without limitation, any Investment or any
Distribution with respect to any Investment) as a result of
participation in the Program. Participants and all persons claiming
under Participants shall rely solely on the unsecured promise of
the Company set forth herein, and nothing in the Program, an Award
or an Award Notice shall be construed to give a Participant or
anyone claiming under a Participant any right, title, interest, or
claim in or to any specific asset, fund, entity, reserve, account,
or property of any kind whatsoever owned by the Company or any
Subsidiary or in which the Company or any Subsidiary may have an
interest now or in the future; but each Participant shall have the
right to enforce any claim hereunder in the same manner as a
general creditor. Neither the establishment of the Program nor
participation hereunder shall create any right in any Participant
to make any decision, or provide input with respect to any
decision, relating to any Investment or the business of the Company
or any Subsidiary.
8.5 Tax Withholding. The Company and the Subsidiaries are
hereby directed to deduct and withhold, or cause to be withheld,
from a Participant's payment under the Program, or from any other
payment to such Participant, an amount necessary to satisfy any and
all tax withholding obligations arising under applicable local,
state, federal, or foreign laws associated with such payment. The
Company and the Subsidiaries may take any other action as may in
its opinion be necessary to satisfy all obligations for the payment
and withholding of such taxes.
8.6 No Effect on Other Compensation Arrangements. Nothing
contained in the Program or any Participant's Award or Award Notice
shall prevent the Company or any Subsidiary from adopting or
continuing in effect other or additional compensation arrangements
affecting any Participant. Nothing in the Program shall be
construed to affect the provisions of any other plan or program
maintained by the Company or any Subsidiary.
8.7 Subsidiaries. The Company may require any Subsidiary
employing a Participant to assume and guarantee the Company's
obligations hereunder to such Participant, either at all times or
solely in the event that such Subsidiary ceases to be a Subsidiary.
8.8 Governing Law. Except to the extent federal law
applies and preempts state law, the Program shall be construed,
enforced, and administered according to the laws of the State of
Texas, excluding any conflict-of-law rule or principle that might
refer construction of the Program to the laws of another State or
country.
*******
IN WITNESS WHEREOF, the undersigned officer of the Company
acting pursuant to authority granted to him by the Committee has
executed this instrument on the Effective Date.
CONTINENTAL AIRLINES, INC.
By:/s/ Jeffery A. Smisek
Jeffery A. Smisek
Executive Vice President
