Exhibit 10.8(e)
SECOND AMENDED AND RESTATED EMPLOYMENT COMPENSATION AGREEMENT
This Agreement dated as of January 10, 1995 between Continental
Airlines, Inc. (the "Company"), a Delaware corporation, and Gordon M.
Bethune (the "Executive"),
W I T N E S S E T H:
WHEREAS the Company and the Executive (each referred to herein
individually as a "Party" and collectively as the "Parties") have entered
into an Employment Agreement dated as of February 14, 1994 (the "Employment
Agreement") a letter agreement dated February 14, 1994 (the February Letter
Agreement") a letter agreement dated July 7, 1994 (the "Letter Agreement")
an amendment to the Employment Agreement styled First Amendment to
Employment Agreement dated as of July 12, 1994 (the "First Amendment") and
a Amended and Restated Employment Compensation Agreement dated January 10,
1995 (the "First Amended and Restated Agreement"), and
WHEREAS to implement the agreement of the parties with respect to the
supplemental executive retirement plan set forth in Section 18 below, the
Company and the executive desire to further amend the Employment Agreement
and to restate the Employment Agreement as amended to date,
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Parties hereto agree that the Employment
Agreement hereby be amended and restated in its entirety as follows:
1. Employment - The Company agrees to employ the Executive, and the
Executive agrees to remain in the employ of the Company under the terms and
conditions herein provided.
2. Position - During his employment hereunder, the Executive agrees
to serve the Company and the Company shall employ the Executive in such
capacity or capacities as may be specified from time to time by the Board
of Directors of the Company, subject to the provisions of Section 5(a)(ii)
hereof and that such Executive shall not be required to work at a location
other than one within the contiguous 48 states of the United States of
America.
3. Term - The Executive's employment shall be one at will, to-wit:
either the Executive or the Company shall have the right to terminate it at
any time, with or without cause, and without any liability or obligation of
either Party to the other except as may be expressly specified in this
Agreement.
4. Compensation - The Company will pay the Executive a base salary
at an initial annual rate of $550,000, payable in substantially equal semi-
monthly installments. During his employment with the Company, the
Executive's salary shall be reviewed periodically in accordance with
Company policy and such review may result in an increase in said salary
which such amount shall be substituted for the specified amount set forth
in this Section.
5. Termination of Employment -
(a) A "Termination of Employment" shall be defined as any one of
the following: (i) the termination of the Executive's employment by the
Company for any reason other than (A) willful misconduct or gross neglect
of duty by the Executive, (B) retirement under the ordinary retirement
program of the Company, (C) disability of the Executive resulting in
compensated absence from his duties to the Company on a full-time basis for
over 180 days or (D) death of the Executive; (ii) the termination of the
Executive's employment by the Executive after providing the Company with
ten business days' prior written notice that the Executive is terminating
employment because of (A) a material reduction in the responsibilities or
title of the Executive or of the corporate amenities to which he was
entitled immediately prior thereto or (B) a reduction of the Executive's
cash compensation by more than 10% below the highest annual salary from
time to time in effect for the Executive; provided, however, that no
Termination of Employment shall occur pursuant to the preceding clause (ii)
if the circumstances described in the preceding clauses (ii)(A) and (ii)(B)
are corrected prior to the expiration of ten business days from the date
the Executive provided notice to the Company of his intent to terminate
employment; and (iii) the Termination of the Executive's employment by the
Executive following a Change in Control. For purposes hereof, a Change in
Control shall be deemed to have occurred if (a) any corporation, person or
other entity completes a tender or exchange offer for shares of the
Company's common stock pursuant to which purchases are made of more than
50% of the Company's common stock, (b) the Company merges with or
consolidates into another corporation pursuant to a transaction in which
the holders of the Company's common stock immediately prior to such merger
or consolidation own less than 50% of the common stock of the Company into
which the Company is merged or consolidated immediately after such merger
or consolidation or the Company sells or otherwise disposes of all or
substantially all of its assets, (c) any person other than Air Canada or
Air Partners owns, directly or indirectly, securities entitling such person
to, or such person does in fact, elect a majority of the Company Board of
Directors, or (d) either Air Canada or Air Partners ceases to own, directly
or indirectly, securities entitling such person to elect one-sixth of the
Board of Directors of the Company, provided that this clause (d) shall not
apply in the case of a sale by Air Canada of all or any portion of its
shares to another foreign air carrier.
(b) Upon a Termination of Employment, or upon the expiration of
long term disability insurance benefits (prior to the Executive's regular
retirement date) while the Executive remains disabled, the Company will pay
the Executive (subject to provisions of Section 9 hereof) as severance pay
or liquidated damages, or both, a lump sum amount equal to 300% of his then
current Annual Compensation from the Company. For purposes hereof, "Annual
Compensation" shall mean the annualized rate of pay as set forth in
Section 4 hereof plus a Deemed Annual Bonus. The "Deemed Annual Bonus"
shall be equal to 25% of the annualized pay rate set forth in Section 4
hereof.
(c) Executive shall be under no obligation to mitigate his
damage resulting from a Termination of Employment and no future earnings by
Executive from any source shall be payable to the Company or shall reduce
the sums due from the Company pursuant to this Agreement.
(d) For a period of three years following a Termination of
Employment, the Executive shall continue in the Company's group insurance
programs, including long-term disability insurance (or be provided
substantially comparable benefits), provided he has not accepted other
employment that provides comparable benefits. The Executive's entitlement
to benefit continuation pursuant to the Consolidated Omnibus Budget
Reconciliation Act shall commence at the end of such period.
(e) For three years following a Termination of Employment, and
provided all annual pass cards in the possession of the Executive have been
surrendered to the Company, the Executive and his eligible family members
shall be entitled to pass privileges on Continental Airlines of the same
type and priority as the Executive received prior to the Termination of
Employment, subject to any changes in policy generally applicable to
officers of Continental Airlines still in the employ thereof. In addition,
upon termination of Executive's employment for any reason, Executive and
eligible family members shall be entitled to a lifetime pass at senior
officer retiree grade. Passes shall be issued upon individual requests
directly to the Continental Airlines pass bureau.
6. Indemnification - The Company shall indemnify the Executive
against all losses, including legal fees and expenses, arising from claims
against the Executive in connection with the Executive's good-faith
execution of his employment hereunder, to the fullest extent permitted by
the General Corporation Law of the State of Delaware.
7. Tax Indemnity - The Company shall indemnify Executive on a fully
grossed-up after-tax basis against any tax liability (including, without
limitation, excise taxes incurred pursuant to IRC Paragraph 4999) resulting
from the payment of severance or the provision of other benefits following
a Termination of Employment pursuant to this Agreement (excluding benefits
provided for under Section 18), to the extent that Executive's tax payments
are at a higher percentage of total income than they would have been absent
such payment of severance or provision of benefits. To the extent not
otherwise provided for in this Agreement, the Company shall also indemnify
Executive with respect to any medicare payroll taxes (plus any income taxes
imposed on such indemnity payments) as incurred by Executive in connection
with the deferral of compensation under the supplemental executive
retirement plan set forth in Section 18.
8. Life Insurance - The Company shall maintain life insurance for
the Executive in the amount of the severance payable to Executive pursuant
to Section 5 hereof. In the absence of such life insurance, the Company
shall pay Executive's beneficiary or beneficiaries an amount equal to such
severance in the event of the death of Executive while employed by the
Company. The Company shall hold Executive harmless from any tax liability
accruing to Executive as a result of the purchase of such insurance, and
likewise shall hold Executive's estate, heirs and assigns harmless from any
tax liability accruing because of the failure to maintain such insurance.
9. Post-Termination Obligations - All payments and benefits due to
the Executive hereunder shall be subject to the Executive's compliance with
the following provisions during the applicability of this Agreement and for
one full year after the expiration or termination hereof;
(a) The Executive shall, upon reasonable notice, furnish such
information and proper assistance to the Company and its affiliates as may
reasonably be required in connection with any litigation in which it or any
of its affiliates is, or may become, a party.
(b) The Executive will not discuss with any other employee of
the Company or its affiliates the formation or operations of any business
intended to compete with the Company or its affiliates, or the possible
future employment of such other employee by any business.
(c) Any public statements made by the Executive concerning the
Company or its affiliates, officers, directors or employees shall be
submitted for approval in writing from the Company's public relations and
legal departments.
If the Executive fails to comply with the above obligations, the
Company may cease extending benefits to the Executive and may recover by
appropriate action instituted in any court of competent jurisdiction any
severance payments theretofore paid to the Executive.
10. Consolidation, Merger, Sale of Assets - This Agreement shall be
binding upon and inure to the benefit of the Executive and the Company and
its successors and assigns, including without limitation any corporation
with or into which the Company may be consolidated or merged or to which
the Company sells or transfers all or substantially all of its assets.
11. Notices - Written notices required or furnished under this
Agreement shall be sent to the following addresses:
to the Company: Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: Corporate Secretary
to the Executive: Gordon M. Bethune
Information to be treated
confidentially by
Continental Airlines, Inc.
Notices shall be effective on the first business day following receipt
thereof. Notices sent by mail shall be deemed received on the date of
delivery shown on the return receipt.
12. Amendments - This Agreement may not amended or changed, orally or
in writing, except by the written agreement of the Parties.
13. Governing Law - This Agreement and any dispute arising under or
relating to any provision of this Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
14. Confidentiality - Except as provided by law, all information
provided by either Party to the other hereunder, including the terms and
conditions of the Agreement, shall be treated by the Party receiving such
information as confidential, and shall not be disclosed by such Party to
any party without the prior written consent of the Party from which the
information was obtained. This obligation of confidentiality shall survive
termination of this Agreement.
15. Severability - If any one or more of the provisions contained in
this Agreement are held to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
16. Previous Agreements - This Agreement constitutes the entire
understanding and agreement of the Parties with respect to the subject
matter hereof and replaces and supersedes any and all previous employment
agreements, either written or verbal, between the Parties including without
limitation the February Letter Agreement, the Letter Agreement, the
Employment Agreement, the First Amendment and the First Amended and
Restated Agreement.
17. Captions - All Section titles or captions contained in this
Agreement are for convenience only and shall not be deemed as part of this
Agreement.
18. Supplemental Executive Retirement Plan -
(a) The Company agrees to pay Executive the deferred
compensation benefits set forth in this Section 18 as a supplemental
executive retirement plan (the "Plan"). The base retirement benefit under
the Plan (the "Base Benefit") shall be in the form of an annual straight
life annuity in an amount equal to the product of (i) 1.6% times (ii) the
number of Executive's credited years of service (as defined below) under
the Plan times (iii) the Executive's final average compensation (as defined
below). For purposes hereof, Executive's credited years of service under
the Plan shall be equal to the number of Executive's years of benefit
service with the Company, calculated as set forth in the Continental
Airlines Retirement Plan beginning at January 1, 1995; provided, however
that if a Termination of Employment occurs and Executive is paid severance
pay under Section 5(b) of this Agreement, Executive shall be further
credited with three (3) additional years of service under the Plan. For
purposes hereof, Executive's final average compensation shall be equal to
the greater of (i) $550,000 or (ii) the average of the five highest annual
cash compensation amounts paid to Executive by the Company during the
consecutive ten calendar years immediately preceding his termination of
employment at retirement or otherwise. For purposes hereof, cash
compensation shall include base salary plus cash bonuses other than the
bonus set forth in Section 19 below and any other bonus paid on or prior to
March 31, 1995. All benefits under the Plan shall be payable in equal
monthly installments beginning on the first day of the month following the
Retirement Date. For purposes hereof, "Retirement Date: is defined as
later of the (i) date on which Executive attains (or in the event of his
earlier death), would have attained) age 65 or (ii) the date of his
retirement from employment with the Company. If Executive is single on the
Retirement Date, benefits under the Plan will be paid to Executive during
his lifetime in the form of the Base Benefit. If Executive is married on
the Retirement Date, benefits under the Plan will be paid in the form of a
joint and survivor annuity that is actuarially equivalent (as defined
below) to the Base Benefit, with Executive's surviving spouse being
entitled during her lifetime after his death to a benefit (the "Survivor's
Benefit") equal to 50% of the benefit payable to Executive during their
joint lifetimes. In the event of Executive's death prior to the Retirement
Date, his surviving spouse, if he is married on the date of his death, will
receive beginning on the Retirement Date an amount equal to the Survivor's
Benefit calculated as if the Executive had retired with a joint and
survivor annuity on the day before his date of death. The amount of any
benefits payable to Executive and/or his spouse under the Continental
Airlines Retirement Plan shall be offset against benefits due under the
Plan. If Executive's employment with the Company terminates for any reason
prior to February 14, 1999, the Company shall provide further benefits
under the Plan to ensure that Executive is treated for all purposes as if
he were fully vested under the Continental Airlines Retirement Plan.
(b) The Executive understands that he must rely upon the general
credit of the Company for payment of benefits under the Plan. The Company
has not and will not in the future set aside assets for security or enter
into any other arrangement which will cause the obligation created to be
other than a general corporate obligation of the Company or will cause
Executive to be more than a general creditor of the Company.
(c) For purposes of the Plan, the terms "actuarial equivalent", or
"actuarially equivalent" when used with respect to a specified benefit
shall mean the amount of benefit of a different type or payable at a
different age that can be provided at the same cost as such specified
benefit, as computed by the Actuary. The actuarial assumptions used to
determine equivalencies between different forms of annuities under the Plan
shall be the 1984 Unisex Pensioners Mortality 50% male, 50% female
calculation (with males set back one year and females set back five years),
with interest at an annual rate of 7%. The term "Actuary" shall mean the
individual actuary or actuarial firm selected by the Company to service its
pension plans generally or if no such individual or firm has been selected,
an individual actuary or actuarial firm appointed by the Company and
reasonably satisfactory to Executive and/or his spouse.
19. Bonus Payments. On July 12, 1994, the Company paid to Executive
a cash bonus in the amount of $1,500,000. Executive and the Company agree
that: (i) if Executive voluntarily terminates his employment with the
Company prior to January 12, 1995, Executive will refund to the Company the
entire amount of the bonus ($1,500,000); (ii) if Executive voluntarily
terminates his employment with the Company on or after January 12, 1995 but
prior to January 12, 1996, Executive will refund to the Company one-half of
the bonus ($750,000); and (iii) the bonus will be fully earned if Executive
does not voluntarily terminate his employment with the Company on or before
January 12, 1996.
20. Stock Options - Pursuant to the Company's 1994 Incentive Equity
Plan (the "Incentive Plan") the Company has awarded and granted to
Executive options to purchase 125,000 shares of Class B Common stock at an
exercise price of $14.125, and options to purchase 125,000 shares of Class
B Common Stock at an exercise price of $11.00 (together, the "1994 Stock
Options") with 25% of the shares covered by such stock options vesting
annually on a cumulative basis commencing January 2, 1995. The Company
further agreed to award and grant to Executive, pursuant to the Incentive
Plan, options (the "1995 Stock Options") to purchase 25,000 shares of Class
B Common Stock effective January 2, 1995, at an exercise price equal to the
market price (as defined in the Incentive Plan, of shares of such stock on
January 2, 1995, with 25% of the shares covered by the 1995 Stock Option
vesting annually on a cumulative basis commencing January 2, 1995. In the
event of a termination of Executive's employment by the Company for any
reason other than cause, the Company shall cause any unvested options under
the 1994 and 1995 Stock Options to vest immediately. The 1994 Stock
Options and the 1995 Stock Options are evidenced, by certain Amended and
Restated Stock Option Grants with respect thereto, and the Company and the
Executive acknowledge and agree that any and all other agreements with
respect to Executive's stock option grants have been superseded and
replaced thereby.
21. Restricted Stock Award - Pursuant to the Incentive Plan,
Executive has been awarded restricted stock grants for a total of 75,000
shares of the Company's Class B Common Stock with 50% of such restricted
stock vesting on March 1, 1995 and 50% vesting on March 1, 1996. In the
event of a termination of Executive's employment by the Company for any
reason other than cause, the Company shall cause any unvested stock under
such grants to vest immediately. Such grant of restricted stock is
evidenced by that certain restricted Stock Grant Agreement, executed by the
Company September 21, 1994, and Company and Executive acknowledge and agree
that any and all other agreements with respect to Executive's restricted
stock grants have been superseded and replaced thereby.
22. Automobile - The Company has leased an automobile for Executive's
use pursuant to a lease agreement dated July 11, 1994 with Chase Auto
Leasing Corp. The Company agrees to take such action as may be necessary
to permit Executive, at his option, to take title to the automobile at the
completion of the lease term by paying the residual payment then owing
under the lease.
The parties hereto have executed this Agreement as of the date and
year first above written.
CONTINENTAL AIRLINES, INC. (the
"Company")
By /s/ Joni K. Ffrench
/s/ Gordon M. Bethune
GORDON M. BETHUNE ("Executive")