EXHIBIT 10.21
CONTINENTAL AIRLINES, INC.
EXECUTIVE BONUS PERFORMANCE AWARD PROGRAM
1. Purpose. This Continental Airlines, Inc. Executive Bonus
Performance 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 in part the Performance 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, and is intended to provide a method for
attracting, motivating, and retaining key officers of the Company
and its subsidiaries and to compensate such officers based on
performance goals consisting of achievement of cumulative quarterly
net income targets or EBITDAR margin rankings of the Company and
its consolidated subsidiaries as described herein. The Program and
participation hereunder shall be subject to the terms of the
Incentive Plan 2000, including the limitations on the maximum value
of awards contained therein.
2. Participants. Each of the Chief Executive Officer, the
Chief Operating Officer, each Executive Vice President and each
Senior Vice President of the Company shall automatically
participate in the Program with respect to each fiscal year, and,
with respect to a particular fiscal year, such other officers of
the Company or its subsidiaries shall participate in the Program as
may be recommended to the Human Resources Committee of the Board of
Directors of the Company (the "Committee") by the Chief Executive
Officer of the Company and designated by the Committee to be a
participant in the Program with respect to such fiscal year. Each
of the foregoing persons is referred to herein as a "Participant",
and the right to participate in the Program for a fiscal year or
portion thereof constitutes a Performance Award (as such term is
defined in the Incentive Plan 2000) under the Incentive Plan 2000.
The Chief Executive Officer shall have the power to terminate any
Participant's participation in the Program upon written notice to
such Participant of such termination, subject to ratification of
such action by the Committee.
3. Definitions. Where the following words and phrases are
used in this Program, they shall have the respective meanings set
forth below, unless the context clearly indicates to the contrary:
(a) "Budget" with respect to a fiscal year means the
cumulative quarterly net income targets, as established
by the Committee with respect to such fiscal year or
portion thereof, whether or not they are the same as
those contained in or derived from the Annual Financial
Plan of the Company with respect to such fiscal year
contemplated by Section 3.3 of the By-Laws of the
Company.
(b) "Cumulative Actual Net Income" with respect to a quarter
means the aggregate consolidated net income of the
Company and its consolidated subsidiaries, as shown on
the regularly prepared statement of operations of the
Company prepared in accordance with GAAP, as adjusted
for unbudgeted (i) one-time gains or losses from the
disposal of assets, (ii) write-offs of assets
(including aircraft and associated parts), and (iii) any
other item of gain, loss, or expense determined to be
extraordinary or unusual in nature or infrequent in
occurrence, in each case under clauses (i), (ii) and
(iii) as determined by the Committee, for the period
commencing on the first day of the fiscal year of the
Company in which such quarter occurs and ending on the
last day of such quarter.
(c) "Cumulative Base Salary" with respect to a quarter means
the aggregate of the Participant's base salary earned,
while a Participant under the Program, during the period
commencing on the first day of the fiscal year of the
Company in which such quarter occurs and ending on the
last day of such quarter.
(d) "Cumulative EBITDAR" with respect to a quarter means,
with respect to each company in the Industry Group, the
aggregate earnings of such company and its consolidated
subsidiaries during the period commencing on the first
day of the fiscal year of the Company in which such
quarter occurs and ending on the last day of such
quarter, determined prior to the charges, costs, and
expenses associated with interest, income taxes,
depreciation, amortization, and aircraft rent. EBITDAR
shall be determined based on the regularly prepared and
publicly available statements of operations of each
company in the Industry Group prepared in accordance
with GAAP (and if necessary to determine certain items,
based on Form 41 data filed by such company with the
Department of Transportation); provided, however, that
EBITDAR shall be adjusted to exclude (i) non-operating
income or expense, (ii) write-offs of assets (including
aircraft and associated parts), (iii) one-time gains or
losses from the disposal of assets, and (iv) any other
item of gain, loss, or expense determined to be
extraordinary or unusual in nature or infrequent in
occurrence, in each case under clauses (i), (ii), (iii)
and (iv) as determined by the Committee in accordance
with GAAP. If a company in the Industry Group provides
publicly available statements of operations with respect
to its airline business that are separate from the
statements of operations provided with respect to its
other businesses, then such company's EBITDAR shall be
determined based solely upon the separately provided
statements of operations pertaining to its airline
business.
(e) "Cumulative EBITDAR Margin" means, with respect to each
company in the Industry Group and each quarter, the
Cumulative EBITDAR for such company with respect to such
quarter, divided by such company's cumulative revenues
(determined on a consolidated basis based on the
regularly prepared and publicly available statements of
operations of such company prepared in accordance with
GAAP) over the period commencing on the first day of the
fiscal year of the Company in which such quarter occurs
and ending on the last day of such quarter. If a company
in the Industry Group provides publicly available
statements of operations with respect to its airline
business that are separate from the statements of
operations provided with respect to its other
businesses, then such company's Cumulative EBITDAR
Margin shall be determined based solely upon the
separately provided statements of operations pertaining
to its airline business.
(f) "Cumulative Number 1, Number 2 or Number 3 Ranking" with
respect to a quarter means the Company ranks first,
second or third when comparing the Cumulative EBITDAR
Margins with respect to such quarter for all companies
comprising the Industry Group as of the last day of such
quarter, and that the Company has achieved the Operating
Income Hurdle with respect to such quarter.
(g) "Cumulative Target Net Income" with respect to a quarter
means the aggregate consolidated net income of the
Company and its consolidated subsidiaries, as set forth
in the Budget, for the period commencing on the first
day of the fiscal year of the Company in which such
quarter occurs and ending on the last day of such
quarter.
(h) "EBITDAR Margin Quarterly Bonus" with respect to a
Participant for a fiscal quarter shall be equal to (i)
the dollar amount calculated by multiplying such
Participant's Cumulative Base Salary with respect to
such quarter by (x) 125%, if the Company has a
Cumulative Number 1, Number 2 or Number 3 Ranking with
respect to such quarter, or (y) 0 (zero)%, if the
Company does not have a Cumulative Number 1, Number 2 or
Number 3 Ranking with respect to such quarter, less (ii)
the amount of the Quarterly Bonuses (as defined below)
received by such Participant with respect to prior
quarters in the fiscal year in which such quarter ends.
With respect to the Company's 2000 fiscal year only,
quarterly bonuses paid under the Company's prior
executive bonus program to persons who are Participants
under this Program with respect to fiscal quarters in
2000 ending prior to the quarter during which
Stockholder Approval is obtained shall be deducted for
purposes of clause (ii) of the foregoing sentence.
(i) "GAAP" means United States generally accepted accounting
principles, consistently applied.
(j) "Industry Group" has the meaning set forth in Section 5
hereof.
(k) "LTIP Program" means the Continental Airlines, Inc. Long
Term Incentive Performance Award Program, as amended
from time to time.
(l) "Net Income Quarterly Bonus" with respect to a
Participant for a fiscal quarter shall be equal to (i)
the dollar amount calculated by multiplying such
Participant's Cumulative Base Salary with respect to
such quarter by (x) (in the case of a positive variance
(which shall include a zero variance)), 100% plus the
positive variance, if any, expressed as a percentage
(but in no event more than 25%), between the Cumulative
Actual Net Income with respect to such quarter, and the
Cumulative Target Net Income with respect to such
quarter, or (y) (in the case of a negative variance),
100% less the absolute value of the negative variance,
expressed as a percentage, between the Cumulative Actual
Net Income with respect to such quarter, and the
Cumulative Target Net Income with respect to such
quarter (provided, that if such negative variance is
greater than negative 25% (e.g., negative 30%), then
such negative variance shall be deemed negative 100%),
less (ii) the amount of the Quarterly Bonuses received
by such Participant with respect to prior quarters in
the fiscal year in which such quarter ends. With respect
to the Company's 2000 fiscal year only, quarterly
bonuses paid under the Company's prior executive bonus
program to persons who are Participants under this
Program with respect to fiscal quarters in 2000 ending
prior to the quarter during which Stockholder Approval
is obtained shall be deducted for purposes of clause
(ii) of the foregoing sentence.
(m) "Operating Income Hurdle" with respect to a quarter
means the achievement by the Company, during the period
commencing on the first day of the fiscal year of the
Company in which such quarter occurs and ending on the
last day of such quarter, of an operating income equal
to or greater than (1) with respect to the first fiscal
quarter, 19%, (2) with respect to the second fiscal
quarter, 52.8%, (3) with respect to the third fiscal
quarter, 83.6% and (4) with respect to the fourth fiscal
quarter, 100%, of the dollar amount of the "Operating
Income Hurdle" with respect to the "Performance Period"
(as such terms are defined in the LTIP Program)
commencing on the first day of the fiscal year of the
Company in which such quarter occurs, as reflected on
the regularly prepared and publicly available statements
of operations of the Company and its consolidated
subsidiaries prepared in accordance with GAAP, adjusted
to exclude (i) accruals with respect to the LTIP
Program, (ii) write-offs of assets (including aircraft
and associated parts), (iii) one-time gains or losses
from the disposal of assets, and (iv) any other item of
gain, loss, or expense determined to be extraordinary or
unusual in nature or infrequent in occurrence, in each
case under clauses (i), (ii), (iii) and (iv) as
determined by the Committee in accordance with GAAP.
4. Quarterly Bonuses. Commencing with the Company's
fiscal quarter during which Stockholder Approval (as defined below)
is obtained, each Participant in the Program who has remained
continuously employed by the Company or a subsidiary during the
entire fiscal quarter with respect to which the Quarterly Bonus (as
defined below) is to be paid, shall receive, on a fiscal quarterly
basis as soon as reasonably practicable after the certification by
the Committee described in Section 6 below with respect to such
quarter, a cash bonus (a "Quarterly Bonus"), if any, equal to the
greater of the Net Income Quarterly Bonus or the EBITDAR Margin
Quarterly Bonus for such quarter.
5. Industry Group. The Industry Group shall consist of
the Company, AMR Corporation, Delta Air Lines, Inc., Northwest
Airlines Corporation, Trans World Airlines, Inc., UAL Corporation,
and US Airways Group, Inc.; provided, however, that (a) prior to
commencement of each fiscal year of the Company that begins after
January 1, 2000, the Committee may in its discretion add any United
States certificated scheduled mainline air carrier to, or remove
any such company (other than the Company) from, the Industry Group
for such fiscal year and (b) the Industry Group shall be subject to
adjustment as provided in the following paragraph.
Except as provided in clause (a) of the proviso to the
preceding paragraph, no company shall be added to, or removed from,
the Industry Group during any fiscal quarter; provided, however,
that a company (other than the Company) shall be removed from the
Industry Group for a fiscal quarter and subsequent quarters of a
fiscal year if (a) during such fiscal quarter, (i) such company
ceases to maintain publicly available statements of operations
prepared in accordance with GAAP, (ii) such company is not the
surviving entity in any merger, consolidation, or other
reorganization (or survives only as a subsidiary of an entity other
than a previously wholly owned subsidiary of such company), (iii)
such company sells, leases, or exchanges all or substantially all
of its assets to any other person or entity (other than a
previously wholly owned subsidiary of such company), or (iv) such
company is dissolved and liquidated, or (b) more than 20% of such
company's revenues (determined on a consolidated basis based on the
regularly prepared and publicly available statements of operations
of such company prepared in accordance with GAAP) for such fiscal
quarter are attributable to the operation of businesses other than
such company's airline business and such company does not provide
publicly available statements of operations with respect to its
airline business that are separate from the statements of
operations provided with respect to its other businesses.
6. Administration. The Program will be administered by
the Committee, which at all times will consist of not less than two
persons, each of whom is an "outside director" within the meaning
of section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The action of a majority of the members of the
Committee will be the act of the Committee. The Committee shall,
prior to the commencement of each fiscal year of the Company
beginning on or after January 1, 2000, establish in writing the
Budget for such fiscal year for purposes of this Program. In
establishing the Budget, the Committee may in its discretion adopt
as targets cumulative quarterly net income amounts derived from the
net income amounts contained in the Annual Financial Plan of the
Company contemplated by Section 3.3 of the Company's By-Laws.
The interpretation and construction by the Committee of any
provision of the Program, and any determination or action by the
Committee pursuant to any provision hereof, will be final and
conclusive for all purposes, and each Participant's participation
in the Program is expressly subject to the foregoing. No member of
the Committee shall be liable for any action or determination taken
or made 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
Company's outside auditors) as to matters such member 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.
As to each fiscal quarter during which the Program is
effective, the Committee will certify in writing, prior to the
payment of any Quarterly Bonus with respect to such quarter,
whether the Cumulative Target Net Income and Cumulative Number 1,
Number 2 or Number 3 Ranking performance goals set forth herein
have been met and whether any other material terms relating to the
payment of such Quarterly Bonuses have been satisfied, to the
extent required by section 162(m) of the Code.
7. Payments upon a Change in Control. If a Change in Control
occurs (as such term is defined in the Incentive Plan 2000, as in
effect on October 4, 1999) and thereafter (or in connection
therewith or in contemplation thereof) during the year in which
such Change in Control occurs (a "Change Year"), a Participant
suffers a Qualifying Event (as herein defined), then such
Participant shall, upon the occurrence of the Qualifying Event,
receive an amount in cash from the Company equal to (x) the
aggregate Quarterly Bonuses such Participant would have received
under the Program had the Company achieved a Cumulative Number 1,
Number 2 or Number 3 Ranking with respect to each quarter during
the Change Year, less (y) the aggregate of the Quarterly Bonuses
paid to such Participant pursuant to the Program during the Change
Year through the date immediately prior to the occurrence of the
Qualifying Event (with respect to the Company's 2000 fiscal year
only, quarterly bonuses paid under the Company's prior executive
bonus program to persons who are Participants under this Program
with respect to fiscal quarters in 2000 ending prior to the quarter
during which Stockholder Approval is obtained shall be deducted for
purposes of clause (y) of the foregoing sentence), and such
Participant shall not be entitled to any additional Quarterly
Bonuses with respect to such Change Year. As used herein, the term
"Qualifying Event" with respect to a Participant means (i) the
termination of such Participant's participation in the Program,
(ii) the assignment to such Participant by the Board of Directors
or the Committee or other officers or representatives of the
Company of duties materially inconsistent with the duties
associated with his position as such duties are constituted as of
the first day of the Change Year, (iii) a material diminution in
the nature or scope of such Participant's authority,
responsibilities, or title from those applicable to him as of the
first day of the Change Year, (iv) the occurrence of material acts
or conduct on the part of the Company or its officers or
representatives which prevent such Participant from performing his
duties and responsibilities as they existed on the first day of the
Change Year, (v) the Company requiring such Participant to be
permanently based anywhere outside a major urban center in the
state (or, if applicable, foreign country, U.S. territory or other
applicable sovereign entity) in which he was based as of the first
day of the Change Year, or (vi) the taking of any action by the
Company that would materially adversely affect the corporate
amenities enjoyed by such Participant on the first day of the
Change Year, except in each case if such Participant's employment
with the Company and its subsidiaries is terminated (a) upon such
Participant's death, (b) upon disability entitling him or her to
benefits under the Company's group long-term disability plan, (c)
for cause, which for purposes hereof shall mean (1) in the case of
a Participant with an employment agreement with the Company or a
subsidiary, the involuntary termination by the Company (or, if
applicable, a subsidiary) of such Participant's employment 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 are defined in such Participant's
employment agreement, and (2) in the case of a Participant who does
not have an employment agreement with the Company or a subsidiary,
the involuntary termination by the Company (or, if applicable, a
subsidiary) of such Participant's employment 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, or (d) upon the voluntary
resignation from employment of such Participant (other than in
connection with circumstances which would permit such Participant
to receive severance benefits pursuant to any contract of
employment between such Participant and the Company or any of its
subsidiaries).
8. Amendments, Termination and Other Matters. Subject to the
other provisions of this Section 8, this Program may be amended
from time to time or terminated by the Committee; provided that
this Program may not be amended by the Committee without the
further approval of the stockholders of the Company if such
amendment would result in the Program no longer satisfying the
requirements of section 162(m) of the Code, and this Program may
not be amended or terminated in contemplation of or in connection
with a Change in Control, nor may any Participant's participation
herein be terminated in contemplation of or in connection with a
Change in Control, unless adequate and effective provision for the
making of all payments otherwise payable (based on Participants'
base salaries as in effect immediately prior to such Change in
Control) pursuant to Section 7 of this Program (as in effect on the
date of Stockholder Approval) with respect to such Change in
Control shall be made in connection with any such amendment or
termination.
Participation in the Program by a Participant shall terminate
upon such Participant's termination of employment with the Company
and its subsidiaries or as otherwise set forth herein, and no
Participant shall have any right to continue to participate in the
Program or have any vested right to any bonus or other payment
hereunder (except as aforesaid in connection with a Change in
Control and except with respect to quarterly periods which have
already passed prior to such amendment or termination or prior to
such Participant's termination of employment with the Company and
its subsidiaries).
Participation in the Program shall not confer any right of
future employment. The Program is not intended to create a pension
or welfare benefit plan and is intended to be exempt from
application of the Employee Retirement Income Security Act of 1974,
as amended. The Program is unfunded and shall not create, or be
construed to create, a trust or separate fund or funds, and each
Participant shall be entitled only to look to the Company for any
benefit hereunder, and shall have no greater right than an
unsecured creditor of the Company.
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 this 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.
No bonus 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
bonus 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
bonuses hereunder shall be payable only to the Participant (or 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 this 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.
This Program shall be construed in accordance with the laws of
the State of Texas.
9. Tax Withholding. The Company shall have the right to
withhold from any payment hereunder all applicable federal, state,
local and other taxes as required by law.
10. Effective Date. This Program shall be effective as
of the first day of the fiscal quarter during which 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 ("Stockholder Approval").
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 the Program shall automatically terminate
and no bonuses shall be paid hereunder.
The Company's current executive bonus program, as in effect on
October 4, 1999 (sometimes referred to herein as the Company's
"prior executive bonus program"), is hereby terminated as of the
first day of the fiscal quarter during which the Company's 2000
annual meeting of stockholders occurs.
IN WITNESS WHEREOF, the undersigned officer of the Company
acting pursuant to authority granted to him by the Committee has
executed this instrument on this 8th day of February, 2000,
effective as stated above.
CONTINENTAL AIRLINES, INC.
By:_____________________________
Jeffery A. Smisek
Executive Vice President