EXHIBIT 10.22
CONTINENTAL AIRLINES, INC.
LONG TERM INCENTIVE PERFORMANCE AWARD PROGRAM
I. PURPOSE OF PROGRAM
This Continental Airlines, Inc. Long Term Incentive
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 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
value of 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) "Administrator" means (i) in the context of Awards made
to, or the administration (or interpretation of any provision) of
the Program as it relates to, any person who is subject to Section
16 of the Securities Exchange Act of 1934, as amended (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 Program
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 Program 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
Program) specifies that it shall serve as Administrator.
(b) "Award" means, with respect to each Participant for a
Performance Period, such Participant's opportunity to earn a
Payment Amount for such Performance Period upon the satisfaction of
the terms and conditions of the Program. Awards hereunder
constitute Performance Awards (as such term is defined in the
Incentive Plan 2000) under the Incentive Plan 2000.
(c) "Award Notice" means a written notice issued by the
Company to a Participant evidencing such Participant's receipt of
an Award with respect to a Performance Period.
(d) "Base Amount" means the sum of (i) the annual base rate
of pay paid or payable in cash by the Company and the Subsidiaries
to or for the benefit of a Participant for services rendered or
labor performed, plus (ii) an additional amount equal to (1) for
all Participants other than those described in Section 2.1(z)(vi),
2.1(z)(vii) or 2.1(z)(viii) below, 125% of the amount described in
clause (i), and (2) for all Participants described in Section
2.1(z)(vi), 2.1(z)(vii) or 2.1(z)(viii) below, 37.5% of the amount
described in clause (i). Base Amount shall be determined without
reduction for amounts a Participant could have received in cash in
lieu of (A) elective deferrals under the Company's Deferred
Compensation Plan or (B) elective contributions made on such
Participant's behalf by the Company or a Subsidiary pursuant to a
qualified cash or deferred arrangement (as defined in section
401(k) of the Code) or pursuant to a plan maintained under section
125 of the Code.
(e) "Board" means the Board of Directors of the Company.
(f) "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 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 Administrator 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.
(g) "Change in Control" shall have the same meaning as is
assigned to such term under the Incentive Plan 2000, as in effect
on October 4, 1999.
(h) "Change Year" means the calendar year during which a
Change in Control occurs.
(i) "Code" means the Internal Revenue Code of 1986, as
amended.
(j) "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).
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.
(k) "Company" means Continental Airlines, Inc., a Delaware
corporation.
(l) "Company Stock" means the Class B common stock, par
value $0.01 per share, of the Company.
(m) "Disability" or "Disabled" 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.
(n) "EBITDAR" means, with respect to each company in the
Industry Group and each Performance Period, the aggregate earnings
of such company and its consolidated subsidiaries during the
Performance Period, 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 the fiscal year of a company in the
Industry Group is not the calendar year, then such company's
EBITDAR for a Performance Period shall be determined based upon the
fiscal quarters of such company that coincide with the fiscal
quarters contained in such Performance Period. Further, 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.
(o) "EBITDAR Margin" means, with respect to each company in
the Industry Group and each Performance Period, the cumulative
EBITDAR for such company for such Performance Period 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 such Performance Period. If the fiscal year of a
company in the Industry Group is not the calendar year, then such
company's EBITDAR Margin for a Performance Period shall be
determined based upon the fiscal quarters of such company that
coincide with the fiscal quarters contained in such Performance
Period. Further, 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 Margin shall be determined based solely upon the
separately provided statements of operations pertaining to its
airline business.
(p) "Effective Date" means January 1, 2000.
(q) "Eligible Employee" means any individual who is (i) a
staff vice president or more senior officer of the Company or (ii)
a vice president or more senior officer of a Subsidiary, or (iii)
any other officer of the Company or any Subsidiary designated by
the Administrator as an Eligible Employee for purposes of the
Program.
(r) "GAAP" means United States generally accepted
accounting principles, consistently applied.
(s) "Incentive Plan 2000" means the Continental Airlines,
Inc. Incentive Plan 2000, as amended from time to time.
(t) "Industry Group" means, with respect to each
Performance Period, the companies determined in accordance with the
provisions of Article V for such Performance Period.
(u) "Market Value per Share" means, as of any specified
date, the closing sales price of Company 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
Company Stock is then traded.
(v) "Number 1 Ranking," "Number 2 Ranking," and "Number 3
Ranking" shall have the meanings assigned to such terms in Section
2.1(bb).
(w) "Operating Income Hurdle" with respect to a Performance
Period means the achievement by the Company, during such
Performance Period, of an average annual operating income of $300
million (or, with respect to any Performance Period beginning after
the Effective Date, such other amount as may be established by the
Committee prior to the commencement of the applicable Performance
Period) or more, 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 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.
(x) "Participant" means an Eligible Employee who has
received an Award under the Program with respect to a Performance
Period pursuant to Section 4.1.
(y) "Payment Amount" means, with respect to each
Participant and each Performance Period for which the Performance
Target is satisfied, an amount equal to (i) such Participant's Base
Amount in effect as of the earlier of (1) the last day of such
Performance Period, (2) the date of such Participant's death or
Disability, or (3) the day immediately preceding the date upon
which such Participant suffers a Qualifying Event in connection
with, after, or in contemplation of a Change in Control, multiplied
by (ii) the Payout Percentage applicable to such Participant for
such Performance Period; provided, however, that the Payment Amount
with respect to each Participant with respect to the Performance
Period commencing on January 1, 2000 and ending on December 31,
2000 shall be one-third of the amount calculated in accordance with
the foregoing formula, and the Payment Amount with respect to each
Participant with respect to the Performance Period commencing on
January 1, 2000 and ending on December 31, 2001 shall be two-thirds
of the amount calculated in accordance with the foregoing formula.
Notwithstanding the foregoing, in no event shall the aggregate
Payment Amounts with respect to any Performance Period exceed 5% of
the actual average annual operating income of the Company and its
consolidated subsidiaries with respect to such Performance Period
(the "Program Cap"), 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 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. All Payment Amounts with
respect to any Performance Period in which the Program Cap would,
but for the foregoing limitation, be exceeded shall be reduced pro-
rata so that the aggregate Payment Amounts equal the Program Cap.
(z) "Payout Percentage" means, with respect to each
Performance Period for which the Performance Target is satisfied:
(i) In the case of a Participant who is the
Company's Chief Executive Officer as of the
earlier of (1) the last day of such
Performance Period, (2) the date of such
Participant's death or Disability, or (3) the
day immediately preceding the date upon which
such Participant suffers a Qualifying Event in
connection with, after, or in contemplation of
a Change in Control, (A) 150% if the Company
achieves a Number 1 Ranking for such
Performance Period, (B) 100% if the Company
achieves a Number 2 Ranking for such
Performance Period, and (C) 75% if the Company
achieves a Number 3 Ranking for such
Performance Period;
(ii) In the case of a Participant who is the
Company's President as of the earlier of (1)
the last day of such Performance Period, (2)
the date of such Participant's death or
Disability, or (3) the day immediately
preceding the date upon which such Participant
suffers a Qualifying Event in connection with,
after, or in contemplation of a Change in
Control, (A) 135% if the Company achieves a
Number 1 Ranking for such Performance Period,
(B) 90% if the Company achieves a Number 2
Ranking for such Performance Period, and (C)
70% if the Company achieves a Number 3 Ranking
for such Performance Period;
(iii) In the case of a Participant who is an
Executive Vice President of the Company as of
the earlier of (1) the last day of such
Performance Period, (2) the date of such
Participant's death or Disability, or (3) the
day immediately preceding the date upon which
such Participant suffers a Qualifying Event in
connection with, after, or in contemplation of
a Change in Control, (A) 100% if the Company
achieves a Number 1 Ranking for such
Performance Period, (B) 75% if the Company
achieves a Number 2 Ranking for such
Performance Period, and (C) 50% if the Company
achieves a Number 3 Ranking for such
Performance Period;
(iv) In the case of a Participant who is a Senior
Vice President of the Company (or who is the
President of Continental Express, Inc.) as of
the earlier of (1) the last day of such
Performance Period, (2) the date of such
Participant's death or Disability, or (3) the
day immediately preceding the date upon which
such Participant suffers a Qualifying Event in
connection with, after, or in contemplation of
a Change in Control, (A) 70% if the Company
achieves a Number 1 Ranking for such
Performance Period, (B) 50% if the Company
achieves a Number 2 Ranking for such
Performance Period, and (C) 30% if the Company
achieves a Number 3 Ranking for such
Performance Period;
(v) In the case of a Participant (other than a
Participant described in any of clauses (i),
(ii), (iii) or (iv) above) who is a
participant in the Company's Executive Bonus
Program as of the earlier of (1) the last day
of such Performance Period, (2) the date of
such Participant's death or Disability, or (3)
the day immediately preceding the date upon
which such Participant suffers a Qualifying
Event in connection with, after, or in
contemplation of a Change in Control, (A) 55%
if the Company achieves a Number 1 Ranking for
such Performance Period, (B) 40% if the
Company achieves a Number 2 Ranking for such
Performance Period, and (C) 25% if the Company
achieves a Number 3 Ranking for such
Performance Period;
(vi) In the case of a Participant who is designated
as a Category 1 officer by the Administrator
and is not described in any of clauses (i),
(ii), (iii), (iv) or (v) above as of the
earlier of (1) the last day of such
Performance Period, (2) the date of such
Participant's death or Disability, or (3) the
day immediately preceding the date upon which
such Participant suffers a Qualifying Event in
connection with, after, or in contemplation of
a Change in Control, (A) 85% if the Company
achieves a Number 1 Ranking for such
Performance Period, (B) 55% if the Company
achieves a Number 2 Ranking for such
Performance Period, and (C) 40% if the Company
achieves a Number 3 Ranking for such
Performance Period;
(vii) In the case of a Participant who is designated
as a Category 2 officer by the Administrator
and is not described in any of clauses (i),
(ii), (iii), (iv), (v) or (vi) above as of the
earlier of (1) the last day of such
Performance Period, (2) the date of such
Participant's death or Disability, or (3) the
day immediately preceding the date upon which
such Participant suffers a Qualifying Event in
connection with, after, or in contemplation of
a Change in Control, (A) 65% if the Company
achieves a Number 1 Ranking for such
Performance Period, (B) 40% if the Company
achieves a Number 2 Ranking for such
Performance Period, and (C) 30% if the Company
achieves a Number 3 Ranking for such
Performance Period; and
(viii) In the case of a Participant who is designated
as a Category 3 officer by the Administrator
and is not described in any of clauses (i),
(ii), (iii), (iv), (v), (vi) or (vii) above as
of the earlier of (1) the last day of such
Performance Period, (2) the date of such
Participant's death or Disability, or (3) the
day immediately preceding the date upon which
such Participant suffers a Qualifying Event in
connection with, after, or in contemplation of
a Change in Control, (A) 30% if the Company
achieves a Number 1 Ranking for such
Performance Period, (B) 20% if the Company
achieves a Number 2 Ranking for such
Performance Period, and (C) 15% if the Company
achieves a Number 3 Ranking for such
Performance Period.
Notwithstanding the foregoing, if an Eligible Employee becomes a
Participant and receives an Award with respect to a Performance
Period after the first day of such Performance Period, the
Administrator may, in its sole discretion, reduce the percentages
set forth in this Section 2.1(z) as they shall apply to such
Participant for such Performance Period.
(aa) "Performance Period" means: (i) as to the first
Performance Period under the Program, the period commencing on the
Effective Date and ending on December 31, 2000, (ii) as to the
second Performance Period under the Program, the period commencing
on the Effective Date and ending on December 31, 2001, (iii) as to
the third Performance Period under the Program, the period
commencing on the Effective Date and ending on December 31, 2002,
and (iv) each three-year period commencing on the first day of a
calendar year that begins after the Effective Date.
Notwithstanding the foregoing, no new Performance Period shall
commence on or after the date upon which a Change in Control
occurs, unless otherwise determined by the Committee.
(bb) "Performance Target" means, with respect to a
Performance Period, that (1) the EBITDAR Margin for the Company for
such Performance Period ranks first (a "Number 1 Ranking"), second
(a "Number 2 Ranking"), or third (a "Number 3 Ranking") when
comparing the EBITDAR Margins for such Performance Period for all
companies comprising the Industry Group as of the last day of such
Performance Period, and (2) the Operating Income Hurdle with
respect to such Performance Period has been achieved.
(cc) "Program" means this Continental Airlines, Inc. 1999
Long Term Incentive Performance Award Program, as amended from time
to time.
(dd) "Qualifying Event" means, with respect to a
Participant, (i) the termination of such Participant's employment
with the Company, (ii) the assignment to such Participant by the
Board or the Administrator or other officers or representatives of
the Company (or, if applicable, a Subsidiary) of duties materially
inconsistent with the duties associated with his or her 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 or her as of the first day of the Change Year,
(iv) the occurrence of material acts or conduct on the part of the
Company (or, if applicable, a Subsidiary) or its officers or
representatives which prevent such Participant from performing his
or her duties and responsibilities as they existed on the first day
of the Change Year, (v) the Company (or, if applicable, a
Subsidiary) 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 or she was based as of the first day
of the Change Year, or (vi) the taking of any action by the Company
(or, if applicable, a Subsidiary) 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 is terminated (1) for
Cause, (2) upon such Participant's death or Disability, or (3) upon
the voluntary resignation of such Participant (other than in
connection with circumstances which would permit such Participant
to receive severance benefits (including a "Termination Payment" or
"Monthly Severance Amount," as such terms are defined in such
Participant's employment agreement) pursuant to any contract of
employment between such Participant and the Company or any
Subsidiary).
(ee) "Stock Options" means options to acquire shares of
Company Stock, awarded under a stock incentive plan established and
maintained by the Company. Stock Options shall not constitute
incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended. Each Stock Option shall
(i) have a purchase price per share equal to the fair market value
(determined under the stock incentive plan under which such Stock
Option is granted) of a share of Company Stock as of the date of
grant of such Stock Option (which shall be the date of the
Cancellation Notice described in Section 6.6), (ii) become
exercisable on each anniversary of the date of grant thereof (until
such Stock Option is exercisable in full), in an amount equal to
that percentage of the shares covered thereby as is equal to (A)
100% divided by (B) the number of full years (rounded up to the
next highest number of full years, and in no event less than one
year) between the date of grant of such Stock Option and the last
day of the Performance Period for the Award (or portion thereof)
which has been cancelled and replaced by the Stock Option, (iii)
have a term of at least five years from the date of grant, and
(iv) except as described in clauses (ii) and (iii) above, have the
same terms as other non-qualified stock options granted by the
Company to employees under the relevant stock incentive plan
established and maintained by the Company.
(ff) "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).
(gg) "Trading Day" means a day during which trading in
securities generally occurs in the principal securities market in
which Company Stock is traded.
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 this 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 Administrator. The Program 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 Program 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 Program
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
Program) specifies that it shall serve as Administrator. The action
of a majority of the members of the Committee will be the act of
the Committee.
3.2 Powers of the Administrator. The Administrator 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 Administrator (which shall be
limited solely to the Committee with respect to clauses (e), (f),
(g), (h), (i) and (j) below) shall have all of the powers specified
for it under the Program, including, without limitation, the power,
right, or authority: (a) to designate an Eligible Employee as a
Participant with respect to a Performance Period at any time prior
to the last day of such period, (b) 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, (c) to construe in its
discretion all terms, provisions, conditions, and limitations of
the Program and any Award, (d) to correct any defect or to supply
any omission or to reconcile any inconsistency that may appear in
the Program in such manner and to such extent as the Administrator
shall deem appropriate, (e) to designate the companies that will
comprise the Industry Group with respect to each Performance Period
that begins after January 1, 2000, as described in Article V, (f)
to make determinations as to EBITDAR and EBITDAR Margin with
respect to each company in the Industry Group for each Performance
Period, (g) to make determinations as to the Operating Income
Hurdle for each Performance Period, (h) to make determinations as
to whether the Performance Targets for the various Performance
Periods were satisfied, (i) to certify in writing, prior to the
payment of any amount under the Program with respect to a
Performance Period, whether the Performance Target relating to such
Performance Period and any other material terms of the Program have
in fact been satisfied, (j) to determine whether to cancel and
replace Awards, and make all related determinations and valuations,
under Section 6.6, and (k) to make all other determinations
necessary or advisable for the administration of the Program. The
Administrator may correct any defect or supply any omission or
reconcile any inconsistency in the Program or in any Award or Award
Notice in the manner and to the extent it shall deem expedient to
carry it into effect.
3.3 Administrator Decisions Conclusive; Standard of Care.
The Administrator 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 Administrator shall be final,
binding, and conclusive upon all persons. However, 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. The Administrator shall not 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 Administrator by the Company's officers,
employees, or other persons (including the Company's outside
auditors) as to matters the Administrator 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 Administrator, then the dispute will be
limited to whether the Administrator 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 AND AWARD NOTICES
4.1 Participation. Each individual who is an Eligible
Employee on the first day of a Performance Period shall
automatically be a Participant and receive an Award with respect to
such Performance Period, unless otherwise determined by the
Administrator prior to the first day of the relevant Performance
Period. Each individual who becomes an Eligible Employee after the
first day of a Performance Period shall become a Participant and
receive an Award with respect to such Performance Period only if
such individual is selected prior to the last day of such
Performance Period by the Administrator in its sole discretion for
participation in the Program with respect to such Performance
Period.
4.2 Award Notices. The Company shall provide an Award
Notice to each Eligible Employee who becomes a Participant with
respect to a Performance Period within 30 days after such Eligible
Employee becomes such a Participant; provided, however, that Award
Notices for the Performance Periods that begin on the Effective
Date shall be provided on or before March 31, 2000. Each Award
Notice shall specify (a) the Performance Period to which the Award
relates and (b) the potential Payout Percentages applicable to such
Award based on the Participant's position as of the date of
issuance of the Award Notice.
V. INDUSTRY GROUP
5.1 Initial Designation. 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) within 90
days after the first day of each Performance Period 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 Performance Period and (b) the Industry Group for
each Performance Period shall be subject to adjustment as provided
in Section 5.2.
5.2 Adjustments to the Industry Group During a Performance
Period. Except as provided in clause (a) of the proviso to Section
5.1, no company shall be added to, or removed from, the Industry
Group for a Performance Period during such period; provided,
however, that a company (other than the Company) shall be removed
from the Industry Group for a Performance Period if (a) during such
period, (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 any fiscal year of such company that ends
during such Performance Period 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.
VI. AWARD PAYMENTS
6.1 Determinations and Certification by the Committee. As
soon as administratively feasible after the end of each Performance
Period, the Committee shall determine (a) with respect to each
company comprising the Industry Group as of the last day of such
Performance Period, the EBITDAR and EBITDAR Margin for such company
for such Performance Period, (b) whether the Performance Target for
such Performance Period and whether any other material terms
relating to the payment of an Award have been satisfied, and (c) if
the Performance Target for such Performance Period and any other
material terms relating to the payment of an Award have been
satisfied, whether the Company achieved a Number 1 Ranking, a
Number 2 Ranking, or a Number 3 Ranking for such Performance
Period. The Committee's determination as to whether the
Performance Target for a Performance Period and any other material
terms relating to the payment of an Award have been satisfied and,
if so, whether the Company achieved a Number 1 Ranking, a Number 2
Ranking, or a Number 3 Ranking for such Performance Period shall be
certified by the Committee in writing and delivered to the
Secretary of the Company. For purposes of the preceding sentence,
approved minutes of the Committee meeting in which the
certification is made shall be treated as a written certification.
6.2 Eligibility for Payment of Awards. Upon the
Committee's written certification in accordance with Section 6.1
that a Performance Target for a Performance Period and any other
material terms relating to the payment of an Award have been
satisfied, each Participant who has received an Award with respect
to such Performance Period and who has remained continuously
employed by the Company from the date he or she received such Award
until the last day of such Performance Period shall be entitled to
the Payment Amount applicable to such Participant's Award for such
Performance Period. Except as provided in Section 6.3 and Section
6.4, if a Participant's employment with the Company terminates for
any reason whatsoever prior to the last day of a Performance
Period, then such Participant shall not be entitled to receive any
payment under the Program with respect to his or her Award for such
Performance Period, unless otherwise determined by the
Administrator. Payment of the amount to which a Participant
becomes entitled pursuant to this Section 6.2 shall be made by the
Company within five business days after the Committee's written
certification of the satisfaction of the applicable Performance
Target.
6.3 Death or Disability. Except as provided in Section
6.4, if during a Performance Period with respect to which a
Participant has received an Award, such Participant dies or becomes
Disabled, then as to such Participant only (a) the Administrator,
based on publicly available data with respect to each Performance
Period that began prior to the date of such Participant's death or
Disability and which has not ended as of such date, shall as
promptly as practicable determine the actual EBITDAR Margin and
operating income performance of the Company and its consolidated
subsidiaries through the most recent practicable date, and shall
determine, based on such data and publicly available data with
respect to the companies contained in the Industry Group (and, if
deemed appropriate by the Administrator, annualizing or otherwise
making assumptions with respect to any relevant data), whether the
Company has achieved the Performance Target through such most
recent practicable date, and if so whether the Company has achieved
a Number 1 Ranking, Number 2 Ranking or Number 3 Ranking through
such most recent practicable date, and (b) the provisions of
Sections 6.1 and 6.2 shall cease to apply with respect to each such
Performance Period. With respect to each such Performance Period
that the Performance Target has been satisfied in the manner
described in clause (a) of the preceding sentence, such Participant
(or, in the case of death, such Participant's estate) shall (i)
receive a payment from the Company, within five business days after
the determination by the Administrator referred to in clause (a) of
the foregoing sentence, equal to the Payment Amount applicable to
such Participant's Award for such Performance Period multiplied by
a fraction, the numerator of which is the number of days during the
period beginning on the first day of such Performance Period and
ending on the date such Participant died or became Disabled, and
the denominator of which is the number of days in the entire
Performance Period, and (ii) not be entitled to any additional
payment under the Program with respect to such Performance Period.
6.4 Change in Control. Upon the occurrence of a Change in
Control, (a) the Performance Target for each Performance Period
that began prior to the date of such Change in Control and which
has not ended as of such date shall be deemed to have been
satisfied, (b) the Company shall be deemed to have achieved a
Number 1 Ranking for each such Performance Period, and (c) the
provisions of Sections 6.1, 6.2 and 6.3 shall cease to apply with
respect to each such Performance Period. If a Change in Control
occurs and thereafter (or in connection therewith or in
contemplation thereof) during a Performance Period described in the
preceding sentence a Participant who has received an Award with
respect to such Performance Period dies, becomes Disabled or
suffers a Qualifying Event, then, with respect to each such
Performance Period, such Participant (or, in the case of death,
such Participant's estate) shall (i) upon the occurrence of the
death, Disability or Qualifying Event, receive a payment from the
Company equal to the Payment Amount applicable to such
Participant's Award for such Performance Period multiplied by a
fraction, the numerator of which is the number of days during the
period beginning on the first day of such Performance Period and
ending on the date such Participant died, became Disabled or
suffered the Qualifying Event, and the denominator of which is the
number of days in the entire Performance Period, and (ii) not be
entitled to any additional payment under the Program with respect
to such Performance Period. If a Change in Control occurs and a
Participant who has received an Award with respect to a Performance
Period described in the first sentence of this Section 6.4 did not
die, become Disabled or suffer a Qualifying Event during such
Performance Period as described in the preceding sentence and such
Participant remained continuously employed by the Company from the
date he or she received such Award until the last day of such
Performance Period, then, with respect to each such Performance
Period, such Participant shall receive a payment from the Company
on the last day of such Performance Period in an amount equal to
the Payment Amount applicable to such Participant's Award for such
Performance Period.
6.5 Form of Payment of Awards. All payments to be made
under the Program to a Participant with respect to an Award shall
be paid in a single lump sum payment (unless otherwise specified in
an Award Notice), which payment shall be in cash, unless in the
sole discretion of the Committee such payment is made either (a) in
shares of Company Stock (subject to any limitations contained in
the Incentive Plan 2000), but if and only if at the time of payment
the Company has an effective registration statement under the
Securities Act of 1933, as amended, covering the issuance of
Company Stock under the Program, or (b) in a combination of cash
and/or shares of Company Stock. If the Committee elects to direct
the Company to pay all or a portion of a payment due under the
Program in shares of Company Stock, then the number of shares of
Company Stock shall be determined by dividing the amount of such
payment to be paid in shares of Company Stock by the Market Value
per Share on the Trading Day immediately preceding the date of such
payment, and rounding such number down to the nearest whole share.
6.6 Cancellation and Replacement of Awards by the
Committee. The Committee may at any time prior to the last day of
a Performance Period (other than after, or in contemplation of, a
Change in Control, or as to any Award, after the death or
Disability of the Participant), in its sole discretion, with or
without cause, for any reason that in the opinion of the Committee
is in the best interests of the Company, direct the Company to
cancel all or any portion of a Participant's Award for such
Performance Period, and simultaneously replace such Award (or
portion thereof) so cancelled with Stock Options. In determining
whether the decision to cancel all or a portion of a Participant's
Award is in the best interests of the Company, the Committee shall
make its determination in good faith (which, for this purpose,
shall mean that the Committee shall exercise reasonable business
judgment). This contractual duty to make such decision in good
faith is in lieu of, and subsumes, any and all other express or
implied duties, in contract, tort, or otherwise, that might
otherwise be imposed upon the Committee or the Company with respect
to such decision. A decision by the Committee to cause such a
cancellation may vary among Participants and may vary among the
Awards held by an individual Participant. To effect such a
cancellation, the Committee shall cause the Company to deliver to
the Participant a written notice (the "Cancellation Notice")
specifying the Participant's Award (or portion thereof) to be
cancelled, accompanied by a grant document for the Stock Options
replacing the cancelled Award (or portion thereof). Upon delivery
of the Cancellation Notice accompanied by such grant document for
the Stock Options replacing the cancelled Award (or portion
thereof), the Award (or portion thereof) that is to be cancelled as
specified in such notice shall be canceled. Any portion of such
Award not so cancelled shall remain outstanding. The Stock Options
to be granted to a Participant upon cancellation of all or any
portion of such Participant's Award shall have a Black-Scholes
value (determined by the Committee in good faith and using
assumptions consistent with those used by the Company in
calculating Black-Scholes values for proxy statement purposes) at
least as great as the value of the Award (or portion thereof) being
cancelled, with the value of an Award (or portion thereof) being
cancelled to be equal to the payment a Participant who satisfied
all conditions to payment would have received with respect thereto
(based on the Participant's position and Base Amount in effect on
the date of cancellation of such Participant's Award) if the
Company had satisfied the Performance Target and achieved a Number
2 Ranking during the relevant Performance Period.
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 (in its entirety or as it
applies to one or more specified Subsidiaries) with respect to
Performance Periods that have not commenced as of the date of such
Committee action; provided, however, that the Program may not be
amended in a manner that would impair the rights of any Participant
with respect to any outstanding Award without the consent of such
Participant, or 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 Amounts as in effect immediately prior to
such Change in Control) pursuant to Section 6.4 of this Program (as
in effect on the date of stockholder approval described in Section
7.1) with respect to such Change in Control shall be made in
connection with any such amendment or termination. 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. 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 Administrator,
and its determination shall be final, binding, and conclusive on
all parties.
8.2 Prohibition Against Assignment or Encumbrance. No
Award 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 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 permitted
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 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.
Neither the establishment of the Program, the granting of Awards,
nor any other action taken in connection with the Program shall be
deemed to create an escrow or trust fund of any kind.
8.4 No Rights of Participant. No Participant shall have
any security or other interest in any assets of the Company or any
Subsidiary or in Company Stock 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 the
business of the Company or any Subsidiary.
8.5 Tax Withholding. The Company and the Subsidiaries
shall deduct and withhold, or cause to be withheld, from a
Participant's payment, including the delivery of shares, made 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 their 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 compensation 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. The Program shall be construed in
accordance with the laws of the State of Texas.
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 14th day of October, 1999,
effective as of January 1, 2000.
CONTINENTAL AIRLINES, INC.
By: _____________________
Jeffery A. Smisek
Executive Vice President