EXHIBIT 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement")
is made by and between CONTINENTAL AIRLINES, INC., a Delaware
corporation ("Company"), and XXXXXX X. XXXXXXX ("Executive").
W I T N E S S E T H:
WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996 and Amendment to Employment Agreement dated as of
September 30, 1996 (as so amended, the "Existing Agreement"); and
WHEREAS, Air Partners, L.P., its partners and certain
affiliates have entered into an Investment Agreement dated as of
January 25, 1998, as amended, with Northwest Airlines Corporation
and its affiliate (the "Investment Agreement"), which investment
agreement provides for the acquisition by an affiliate of Northwest
Airlines Corporation of beneficial ownership of the Class A common
stock and warrants held by Air Partners, L.P., subject to certain
conditions; and
WHEREAS, the acquisition by an affiliate of Northwest Airlines
Corporation of beneficial ownership of the Class A common stock
held by Air Partners, L.P. contemplated by the Investment Agreement
(the "Acquisition") will, upon the closing thereof, constitute a
Change in Control for purposes of the Company's 1994 Incentive
Equity Plan, as amended, the Company's 1997 Stock Incentive Plan,
as amended, the Company's Executive Bonus Program and the Existing
Agreement; and
WHEREAS, the Human Resources Committee and the Board of
Directors of the Company have deemed it advisable and in the best
interests of the Company and its stockholders to assure management
continuity for the Company and, consistent therewith, have
authorized the execution, delivery and performance by the Company
of this Agreement;
WHEREAS, in connection therewith, the parties desire to amend
the Existing Agreement and restate it, as so amended, in its
entirety as this Agreement, effective as of the Effective Date (as
defined below);
NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein, Company and
Executive agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment; Effective Date. Company agrees to employ
Executive and Executive agrees to be employed by Company, beginning
as of the Effective Date (as hereinafter defined) and continuing
for the period of time set forth in Article 2 of this Agreement,
subject to the terms and conditions of this Agreement. For
purposes of this Agreement, the "Effective Date" shall be the date
of the closing of the Acquisition contemplated by the Investment
Agreement.
1.2 Positions. From and after the Effective Date, Company
shall employ Executive in the positions of Chairman of the Board
and Chief Executive Officer of Company, or in such other positions
as the parties mutually may agree, and shall, for the full term of
Executive's employment hereunder, cause Executive to be nominated
for election as a director of Company and use its best efforts to
secure such election.
1.3 Duties and Services. Executive agrees to serve in the
positions referred to in paragraph 1.2 and, if elected, as a
director of Company and to perform diligently and to the best of
his abilities the duties and services appertaining to such offices
as set forth in the Bylaws of Company in effect on the Effective
Date, as well as such additional duties and services appropriate to
such offices which the parties mutually may agree upon from time to
time.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other
provisions hereof, Company agrees to employ Executive for a five-
year period beginning on the Effective Date. Said term of
employment shall be extended automatically for an additional
successive five-year period as of the fifth anniversary of the
Effective Date and as of the last day of each successive five-year
period of time thereafter that this Agreement is in effect;
provided, however, that if, prior to the date which is six months
before the last day of any such five-year term of employment,
either party shall give written notice to the other that no such
automatic extension shall occur, then Executive's employment shall
terminate on the last day of the five-year term of employment
during which such notice is given.
2.2 Company's Right to Terminate. Notwithstanding the
provisions of paragraph 2.1, Company, acting pursuant to an express
resolution of the Board of Directors of Company (the "Board of
Directors"), shall have the right to terminate Executive's employ-
ment under this Agreement at any time for any of the following
reasons:
(i) upon Executive's death;
(ii) upon Executive's becoming incapacitated for a
period of at least 180 days by accident, sickness or other
circumstance which renders him mentally or physically
incapable of performing the material duties and services
required of him hereunder on a full-time basis during such
period;
(iii) if, in carrying out his duties hereunder,
Executive engages in conduct that constitutes willful gross
neglect or willful gross misconduct resulting in material
economic harm to Company;
(iv) upon the conviction of Executive for a felony or
any crime involving moral turpitude; or
(v) for any other reason whatsoever, in the sole
discretion of the Board of Directors.
2.3 Executive's Right to Terminate. Notwithstanding the
provisions of paragraph 2.1, Executive shall have the right to
terminate his employment under this Agreement at any time for any
of the following reasons:
(i) the assignment to Executive by the Board of
Directors or other officers or representatives of Company of
duties materially inconsistent with the duties associated with
the positions described in paragraph 1.2 as such duties are
constituted as of the Effective Date, or the failure to elect
or reelect Executive to any of the positions described in
paragraph 1.2 or the removal of him from any such positions;
(ii) a material diminution in the nature or scope of
Executive's authority, responsibilities, or titles from those
applicable to him as of the Effective Date, including a
change in the reporting structure so that Executive reports to
someone other than the Board of Directors;
(iii) the occurrence of acts or conduct on the part of
Company, its Board of Directors, or its officers,
representatives or stockholders which prevent Executive from,
or substantively hinder Executive in, performing his duties or
responsibilities pursuant to this Agreement;
(iv) Company requiring Executive to be permanently
based anywhere outside a major urban center in Texas;
(v) the taking of any action by Company that would
materially adversely affect the corporate amenities enjoyed by
Executive on the Effective Date;
(vi) a material breach by Company of any provision of
this Agreement which, if correctable, remains uncorrected for
30 days following written notice of such breach by Executive
to Company, it being agreed that any reduction in Executive's
then current annual base salary, or any reduction in
Executive's annual cash bonus opportunity as a percentage of
such base salary from that percentage in effect on the
Effective Date (i.e, 0% to 125% of base salary) or any
material change in the frequency of payment thereof or the
performance factors on which such bonus is based, shall
constitute a material breach by Company of this Agreement; or
(vii) for any other reason whatsoever, in the sole
discretion of Executive.
2.4 Notice of Termination. If Company or Executive desires
to terminate Executive's employment hereunder at any time prior to
expiration of the term of employment as provided in paragraph 2.1,
it or he shall do so by giving written notice to the other party
that it or he has elected to terminate Executive's employment
hereunder and stating the effective date and reason for such
termination, provided that no such action shall alter or amend any
other provisions hereof or rights arising hereunder.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the period of this Agreement,
Executive shall receive a minimum annual base salary equal to the
greater of (i) $750,000.00 or (ii) such amount as the parties
mutually may agree upon from time to time. Executive's annual base
salary shall be paid in equal installments in accordance with
Company's standard policy regarding payment of compensation to
executives but no less frequently than semimonthly.
3.2 Bonus Programs. Executive shall participate in each
cash bonus program maintained by Company on and after the Effective
Date (including, without limitation, any such program maintained
for the year during which the Effective Date occurs) at a level
which is not less than the maximum participation level made
available to any Company executive (determined without regard to
period of service or other criteria that might otherwise be
necessary to entitle Executive to such level of participation);
provided that Company shall at all times maintain Executive's
annual cash bonus opportunity as a percentage of his base salary in
an amount which is at least as great as that in effect on the
Effective Date (i.e, 0% to 125% of base salary) and shall not
change in any material respect the payment frequency thereof or the
performance factors on which such bonus is based.
3.3 Life Insurance. During the period of this Agreement,
Company shall maintain one or more policies of life insurance on
the life of Executive providing an aggregate death benefit in an
amount not less than the Termination Payment (as such term is
defined in paragraph 4.7). Executive shall have the right to
designate the beneficiary or beneficiaries of the death benefit
payable pursuant to such policy or policies up to an aggregate
death benefit in an amount equal to the Termination Payment. To
the extent that Company's purchase of, or payment of premiums with
respect to, such policy or policies results in compensation income
to Executive, Company shall pay to Executive an additional payment
(the "Policy Payment") in an amount such that after payment by
Executive of all taxes imposed on Executive with respect to the
Policy Payment, Executive retains an amount of the Policy Payment
equal to the taxes imposed upon Executive with respect to such
purchase or the payment of such premiums. If for any reason
Company fails to maintain the full amount of life insurance
coverage required pursuant to the preceding provisions of this
paragraph 3.3, Company shall, in the event of the death of
Executive while employed by Company, pay Executive's designated
beneficiary or beneficiaries an amount equal to the sum of (1) the
difference between the Termination Payment and any death benefit
payable to Executive's designated beneficiary or beneficiaries
under the policy or policies maintained by Company and (2) such
additional amount as shall be required to hold Executive's estate,
heirs, and such beneficiary or beneficiaries harmless from any
additional tax liability resulting from the failure by Company to
maintain the full amount of such required coverage.
3.4 Vacation and Sick Leave. During each year of his
employment, Executive shall be entitled to vacation and sick leave
benefits equal to the maximum available to any Company executive,
determined without regard to the period of service that might
otherwise be necessary to entitle Executive to such vacation or
sick leave under standard Company policy.
3.5 Supplemental Executive Retirement Plan.
(i) Company agrees to pay Executive the deferred
compensation benefits set forth in this paragraph 3.5 as a
supplemental 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 (a) 1.6% times (b) the number of Executive's credited years of
service (as defined below) under the Plan times (c) 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
Company, calculated as set forth in the Continental Airlines
Retirement Plan beginning at January 1, 1995; provided, however,
that if Executive is paid the Termination Payment under 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 (1) $750,000 or (2) the average of the five highest
annual cash compensation amounts (or, if Executive has been
employed less than five years by Company, the average over the full
years employed by Company) paid to Executive by 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 (including any amounts deferred (other than Stay Bonus
amounts described below) pursuant to any deferred compensation plan
of the Company), but shall exclude (i) any cash bonus paid on or
prior to March 31, 1995, and (ii) any Stay Bonus paid to Executive
pursuant to that certain Stay Bonus Agreement between Company and
Executive dated as of April 14, 1998. 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 the later of (A) the date
on which Executive attains (or in the event of his earlier death,
would have attained) age 65 or (B) the date of his retirement from
employment with Company. If Executive is not married 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 spouse as of the Retirement Date being entitled during
her lifetime after Executive's 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 Executive
had retired with a joint and survivor annuity on the date 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. Executive
shall be vested immediately with respect to benefits due under the
Plan. If Executive's employment with Company terminates for any
reason prior to February 14, 1999, 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.
(ii) Executive understands that he must rely upon the
general credit of Company for payment of benefits under the Plan.
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 Company or will cause Executive to be more than a general
creditor of Company.
(iii) 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 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 Company and reasonably satisfactory to Executive
and/or his spouse.
(iv) Company shall indemnify Executive on a fully
grossed-up, after-tax basis for any Medicare payroll taxes (plus
any income taxes on such indemnity payments) incurred by Executive
in connection with the accrual and/or payment of benefits under the
Plan.
3.6 Additional Disability Benefit. If Executive shall
begin to receive long-term disability insurance benefits pursuant
to a plan maintained by Company and if such benefits cease prior to
Executive's attainment of age 65 and while Executive remains
disabled, then Company shall immediately pay Executive upon the
cessation of such benefits a lump-sum, cash payment in an amount
equal to the Termination Payment. If Executive receives payment of
a Termination Payment pursuant to the provisions of Article 4, then
the provisions of this paragraph 3.6 shall terminate. If Executive
shall be disabled at the time his employment with Company
terminates and if Executive shall not be entitled to the payment of
a Termination Payment pursuant to the provisions of Article 4 upon
such termination, then Executive's right to receive the payment
upon the occurrence of the circumstances described in this
paragraph 3.6 shall be deemed to have accrued as of the date of
such termination and shall survive the termination of this
Agreement.
3.7 Other Perquisites. During his employment hereunder,
Executive shall be afforded the following benefits as incidences of
his employment:
(i) Automobile - Company will continue to lease an
automobile (including replacements therefor) of Executive's
choice for Executive's use in accordance with its current
practices with respect thereto during the term of this
Agreement. Company agrees to take such actions as may be
necessary to permit Executive, at his option, to acquire title
to any automobile subject to such a lease at the completion of
the lease term by Executive paying the residual payment then
owing under the lease.
(ii) Business and Entertainment Expenses - Subject to
Company's standard policies and procedures with respect to
expense reimbursement as applied to its executive employees
generally, Company shall reimburse Executive for, or pay on
behalf of Executive, reasonable and appropriate expenses
incurred by Executive for business related purposes, including
dues and fees to industry and professional organizations,
costs of entertainment and business development, and costs
reasonably incurred as a result of Executive's spouse
accompanying Executive on business travel. Company shall also
pay on behalf of Executive the expenses of one athletic club
selected by Executive.
(iii) Parking - Company shall provide at no expense to
Executive a reserved parking place convenient to Executive's
headquarters office and a reserved parking place at Xxxxxx
Xxxx Intercontinental Airport in Houston, Texas consistent
with past practice.
(iv) Other Company Benefits - Executive and, to the
extent applicable, Executive's family, dependents and
beneficiaries, shall be allowed to participate in all
benefits, plans and programs, including improvements or
modifications of the same, which are now, or may hereafter be,
available to similarly-situated Company employees. Such
benefits, plans and programs may include, without limitation,
profit sharing plan, thrift plan, annual physical
examinations, health insurance or health care plan, life
insurance, disability insurance, pension plan, pass privileges
on Continental Airlines, Flight Benefits and the like.
Company shall not, however, by reason of this paragraph be
obligated to institute, maintain, or refrain from changing,
amending or discontinuing, any such benefit plan or program,
so long as such changes are similarly applicable to executive
employees generally; provided, however, that Company shall not
change, amend or discontinue Executive's Flight Benefits
without his consent.
ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION
4.1 By Expiration. If Executive's employment hereunder
shall terminate upon expiration of the term provided in paragraph
2.1 hereof, then all compensation and all benefits to Executive
hereunder shall terminate contemporaneously with termination of his
employment, except that the Company shall pay Executive on or
before the effective date of such termination a lump sum, cash
payment in an amount equal to the Existing Severance, the benefits
described in paragraph 3.5 shall continue to be payable, Executive
shall be provided Flight Benefits (as such term is defined in
paragraph 4.7) for the remainder of Executive's lifetime, and, if
such termination shall result from Company's delivery of the
written notice described in paragraph 2.1, then Company shall (i)
cause all options and shares of restricted stock awarded to
Executive, including, without limitation, any such awards under
Company's 1998 Stock Incentive Plan (the "1998 Plan"), and other
Awards (as defined in the 1998 Plan) made to Executive under the
1998 Plan, to vest immediately upon such termination and, with
respect to options, be exercisable in full for 30 days after such
termination, (ii) pay Executive on or before the effective date of
such termination a lump-sum, cash payment in an amount equal to the
Termination Payment, (iii) provide Executive with Outplacement,
Office and Related Services (as such term is defined in paragraph
4.7 and for the time periods described therein), and (iv) provide
Executive and his eligible dependents with Continuation Coverage
(as such term is defined in paragraph 4.7) for a period of three
years beginning on the effective date of such termination.
4.2 By Company. If Executive's employment hereunder shall
be terminated by Company prior to expiration of the term provided
in paragraph 2.1 hereof then, upon such termination, regardless of
the reason therefor, all compensation and all benefits to Executive
hereunder shall terminate contemporaneously with the termination of
such employment, except that the Company shall pay Executive on or
before the effective date of such termination a lump sum, cash
payment in an amount equal to the Existing Severance, the benefits
described in paragraph 3.5 shall continue to be payable, Executive
shall be provided Flight Benefits for the remainder of Executive's
lifetime, and:
(i) if such termination shall be for any reason
other than those encompassed by paragraphs 2.2(i), (ii), (iii)
or (iv), then Company shall provide Executive with the
payments and benefits described in clauses (i) through (iv) of
paragraph 4.1; and
(ii) if such termination shall be for a reason
encompassed by paragraphs 2.2(i) or (ii), then Company shall
(1) cause all options and shares of restricted stock awarded
to Executive, including, without limitation, any such awards
under Company's 1998 Plan, and other Awards (as defined in
the 1998 Plan) made to Executive under the 1998 Plan, to vest
immediately upon such termination and, with respect to
options, be exercisable in full for 30 days after such
termination, and (2) provide Executive (or his designated
beneficiary or beneficiaries) with the benefits contemplated
under paragraph 3.3 or paragraph 3.6, as applicable.
4.3 By Executive. If Executive's employment hereunder
shall be terminated by Executive prior to expiration of the term
provided in paragraph 2.1 hereof then, upon such termination,
regardless of the reason therefor, all compensation and benefits to
Executive hereunder shall terminate contemporaneously with the
termination of such employment, except that the Company shall pay
Executive on or before the effective date of such termination a
lump sum, cash payment in an amount equal to the Existing
Severance, the benefits described in paragraph 3.5 shall continue
to be payable, Executive shall be provided Flight Benefits for the
remainder of Executive's lifetime and, if such termination shall be
pursuant to paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi),
then Company shall provide Executive with the payments and benefits
described in clauses (i) through (iv) of paragraph 4.1.
4.4 Certain Additional Payments by Company.
Notwithstanding anything to the contrary in this Agreement, if any
payment, distribution or provision of a benefit by Company to or
for the benefit of Executive, whether paid or payable, distributed
or distributable or provided or to be provided pursuant to the
terms of this Agreement or otherwise (a "Payment"), would be
subject to an excise or other special additional tax that would not
have been imposed absent such Payment (including, without
limitation, any excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended), or any interest or penalties
with respect to such excise or other additional tax (such excise or
other additional tax, together with any such interest or penalties,
are hereinafter collectively referred to as the "Excise Tax"),
Company shall pay to Executive an additional payment (a "Gross-up
Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to
such taxes), including any income taxes and Excise Taxes imposed on
any Gross-up Payment, Executive retains an amount of the Gross-up
Payment (taking into account any similar gross-up payments to
Executive under the Incentive Plan) equal to the Excise Tax imposed
upon the Payments. Company and Executive shall make an initial
determination as to whether a Gross-up Payment is required and the
amount of any such Gross-up Payment. Executive shall notify
Company in writing of any claim by the Internal Revenue Service
which, if successful, would require Company to make a Gross-up
Payment (or a Gross-up Payment in excess of that, if any, initially
determined by Company and Executive) within ten business days after
the receipt of such claim. Company shall notify Executive in
writing at least ten business days prior to the due date of any
response required with respect to such claim if it plans to contest
the claim. If Company decides to contest such claim, Executive
shall cooperate fully with Company in such action; provided,
however, Company shall bear and pay directly or indirectly all
costs and expenses (including additional interest and penalties)
incurred in connection with such action and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect
thereto, imposed as a result of Company's action. If, as a result
of Company's action with respect to a claim, Executive receives a
refund of any amount paid by Company with respect to such claim,
Executive shall promptly pay such refund to Company. If Company
fails to timely notify Executive whether it will contest such claim
or Company determines not to contest such claim, then Company shall
immediately pay to Executive the portion of such claim, if any,
which it has not previously paid to Executive.
4.5 Payment Obligations Absolute. Company's obligation to
pay Executive the amounts and to make the arrangements provided in
this Article 4 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which
Company (including its subsidiaries and affiliates) may have
against him or anyone else. All amounts payable by Company shall
be paid without notice or demand. Executive shall not be obligated
to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Article 4, and,
except as provided in paragraph 4.7 with respect to Continuation
Coverage, the obtaining of any such other employment (or the
engagement in any endeavor as an independent contractor, sole
proprietor, partner, or joint venturer) shall in no event effect
any reduction of Company's obligations to make (or cause to be
made) the payments and arrangements required to be made under this
Article 4.
4.6 Liquidated Damages. In light of the difficulties in
estimating the damages upon termination of this Agreement, Company
and Executive hereby agree that the payments and benefits, if any,
to be received by Executive pursuant to this Article 4 shall be
received by Executive as liquidated damages. Payment of the
Termination Payment and the Existing Severance pursuant to
paragraphs 4.1, 4.2 or 4.3 shall be in lieu of any severance
benefit Executive may be entitled to under any severance plan or
policy maintained by Company.
4.7 Certain Definitions and Additional Terms. As used
herein, the following capitalized terms shall have the meanings
assigned below:
(i) "Continuation Coverage" shall mean the continued
coverage of Executive and his eligible dependents under
Company's welfare benefit plans available to executives of
Company who have not terminated employment (or the provision
of equivalent benefits), including, without limitation,
medical, health, dental, life insurance, disability, vision
care, accidental death and dismemberment, and prescription
drug, at no greater cost to Executive than that applicable to
a similarly situated Company executive who has not terminated
employment; provided, however, that (1) subject to clause (2)
below, the coverage under a particular welfare benefit plan
(or the receipt of equivalent benefits) shall terminate upon
Executive's receipt of comparable benefits from a subsequent
employer and (2) if Executive (and/or his eligible dependents)
would have been entitled to retiree coverage under a
particular welfare benefit plan had he voluntarily retired on
the date of his termination of employment, then such coverage
shall be continued as provided in such plan upon the
expiration of the period Continuation Coverage is to be
provided pursuant to this Article 4. Notwithstanding any
provision in this Article 4 to the contrary, Executive's
entitlement to any benefit continuation pursuant to Section
601 et. seq. of the Employee Retirement Income Security Act of
1974, as amended, shall commence at the end of the period of,
and shall not be reduced by the provision of, any applicable
Continuation Coverage;
(ii) "Existing Severance" shall mean the sum of five
million sixty two thousand five hundred dollars ($5,062,500),
which sum represents the severance payable to Executive upon
termination of employment by him after a Change in Control (as
defined in the Existing Agreement) caused by the Acquisition
under the Existing Agreement;
(iii) "Flight Benefits" shall mean flight benefits on
each airline operated by the Company or any of its affiliates
or any successor or successors thereto (the "CO system"),
consisting of the highest priority space available flight
passes for Executive and his eligible family members (as such
eligibility is in effect on the date hereof), a UATP card (or,
in the event of discontinuance of the UATP program, a similar
charge card permitting the purchase of air travel through
direct billing to the Company or any of its affiliates or any
successor or successors thereto (a "Similar Card")) in
Executive's name for charging flights (in any fare class) on
the CO system for Executive, Executive's spouse, Executive's
family and significant others as determined by Executive, a
Gold Elite OnePass Card (or similar highest category successor
frequent flyer card) in Executive's name for use on the CO
system, a membership for Executive and Executive's spouse in
the Company's President's Club (or any successor program
maintained in the CO system) and reimbursement (while an
officer of the Company) of up to $10,000 annually for U.S.
federal, state or local income taxes on imputed income
resulting from such flights (such imputed income to be
calculated during the term of such Flight Benefits at the
lowest published fare (i.e., 21 day advance purchase coach
fare or other lowest available fare) for the applicable flight
on the date of such flight, regardless of the actual fare
class booked or flown, or as otherwise required by law);
(iv) "Outplacement, Office and Related Services"
shall mean (1) outplacement services, at Company's cost and
for a period of twelve months beginning on the date of
Executive's termination of employment, to be rendered by an
agency selected by Executive and approved by the Board of
Directors (with such approval not to be unreasonably
withheld), (2) appropriate and suitable office space at the
Company's headquarters (although not on its executive office
floor) or at a comparable location in downtown Houston for
use by Executive, together with appropriate and suitable
secretarial assistance, at Company's cost and for a period of
ten years beginning on the date of Executive's termination of
employment, (3) a reserved parking place convenient to the
office so provided and a reserved parking place at Xxxxxx Xxxx
Intercontinental Airport in Houston, Texas consistent with
past practice, at Company's cost and for as long as Executive
retains a residence in Houston, Texas, and (4) other
incidental perquisites (such as free or discount air travel,
car rental, phone or similar service cards) currently enjoyed
by Executive as a result of his position, to the extent then
available for use by Executive, for Executive's lifetime or a
shorter period if such perquisites become unavailable to the
Company for use by Executive; and
(v) "Termination Payment" shall mean an amount equal
to three times the sum of (1) Executive's annual base salary
pursuant to paragraph 3.1 in effect immediately prior to
Executive's termination of employment and (2) a deemed annual
bonus which shall be equal to the Bonus Percentage of the
amount described in clause (1) of this paragraph 4.7(v). The
"Bonus Percentage" shall be a percentage equal to the annual
percentage of base salary (i.e., 0% to 125%) paid or payable
to a participant under the Company's Executive Bonus Program
(or any successor plan or program) with respect to the most
recent fiscal year ended prior to Executive's termination of
employment.
Executive agrees that, after receipt of an invoice or other
accounting statement therefor, he will promptly (and in any event
within 45 days after receipt of such invoice or other accounting
statement) reimburse the Company for all charges on Executive's
UATP card (or Similar Card) which are not for flights on the CO
system and which are not otherwise reimbursable to Executive under
the provisions of paragraph 3.7(ii) hereof. Executive agrees that
the credit availability under Executive's UATP card (or Similar
Card) may be suspended if Executive does not timely reimburse the
Company as described in the foregoing sentence; provided, that,
immediately upon the Company's receipt of Executive's reimbursement
in full, the credit availability under Executive's UATP card (or
Similar Card) will be restored. The sole cost to Executive of
flights on the CO system pursuant to use of Executive's Flight
Benefits will be the imputed income with respect to flights on the
CO system charged on Executive's UATP card (or Similar Card),
calculated throughout the term of Executive's Flight Benefits at
the lowest published fare (i.e., 21 day advance purchase coach fare
or other lowest available fare) for the applicable flight on the
date of such flight, regardless of the actual fare class booked or
flown, or as otherwise required by law, and reported to Executive
as required by applicable law. With respect to any period with
respect to which the Company is obligated to provide up to $10,000
of reimbursement for income taxes as described in paragraph
4.7(iii) above, Executive will provide to the Company, upon
request, a calculation or other evidence of Executive's marginal
tax rate sufficient to permit the Company to calculate accurately
the amount to be so reimbursed to Executive, and Executive
understands that the Company will not make any gross-up payment to
Executive with respect to the income attributable to such
reimbursement. Executive agrees that he will not resell or permit
to be resold any tickets issued on the CO system in connection with
the Flight Benefits. Executive shall be issued a UATP card (or
Similar Card), a Gold Elite OnePass Card (or similar highest
category successor frequent flyer card), a membership card in the
Company's Presidents Club (or any successor program maintained in
the CO system) for Executive and Executive's spouse, an appropriate
flight pass identification card and an Employee Travel Card, each
valid at all times during the term of Executive's Flight
Benefits.
ARTICLE 5: MISCELLANEOUS
5.1 Interest and Indemnification. If any payment to
Executive provided for in this Agreement is not made by Company
when due, Company shall pay to Executive interest on the amount
payable from the date that such payment should have been made until
such payment is made, which interest shall be calculated at 3% plus
the prime or base rate of interest announced by Chase Bank of Texas
N.A. (or any successor thereto) at its principal office in Houston,
Texas (but not in excess of the highest lawful rate), and such
interest rate shall change when and as any such change in such
prime or base rate shall be announced by such bank. If Executive
shall obtain any money judgment or otherwise prevail with respect
to any litigation brought by Executive or Company to enforce or
interpret any provision contained herein, Company, to the fullest
extent permitted by applicable law, hereby indemnifies Executive
for his reasonable attorneys' fees and disbursements incurred in
such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money
judgment obtained by Executive from the earliest date that payment
to him should have been made under this Agreement until such
judgment shall have been paid in full, which interest shall be
calculated at the rate set forth in the preceding sentence.
5.2 Notices. For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing
and shall be deemed to have been duly given when personally
delivered or when mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to Company to : Continental Airlines, Inc.
0000 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
If to Executive to : Xx. Xxxxxx X. Xxxxxxx
0000 Xxx Xxxxx
Xxxxxxx, Xxxxx 00000
or to such other address as either party may furnish to the other
in writing in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.
5.3 Applicable Law. This contract is entered into under,
and shall be governed for all purposes by, the laws of the State of
Texas.
5.4 No Waiver. No failure by either party hereto at any
time to give notice of any breach by the other party of, or to
require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent
time.
5.5 Severability. If a court of competent jurisdiction
determines that any provision of this Agreement is invalid or
unenforceable, then the invalidity or unenforceability of that
provision shall not affect the validity or enforceability of any
other provision of this Agreement, and all other provisions shall
remain in full force and effect.
5.6 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original,
but all of which together will constitute one and the same
Agreement.
5.7 Withholding of Taxes and Other Employee Deductions.
Company may withhold from any benefits and payments made pursuant
to this Agreement all federal, state, city and other taxes as may
be required pursuant to any law or governmental regulation or
ruling and all other normal employee deductions made with respect
to Company's employees generally.
5.8 Headings. The paragraph headings have been inserted
for purposes of convenience and shall not be used for interpretive
purposes.
5.9 Gender and Plurals. Wherever the context so requires,
the masculine gender includes the feminine or neuter, and the
singular number includes the plural and conversely.
5.10 Successors. This Agreement shall be binding upon and
inure to the benefit of Company and any successor of the Company,
including without limitation any person, association, or entity
which may hereafter acquire or succeed to all or substantially all
of the business or assets of Company by any means whether direct or
indirect, by purchase, merger, consolidation, or otherwise. Except
as provided in the preceding sentence, this Agreement, and the
rights and obligations of the parties hereunder, are personal and
neither this Agreement, nor any right, benefit or obligation of
either party hereto, shall be subject to voluntary or involuntary
assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party.
5.11 Term. This Agreement has a term co-extensive with the
term of employment as set forth in paragraph 2.1. Termination
shall not affect any right or obligation of any party which is
accrued or vested prior to or upon such termination.
5.12 Entire Agreement. Except as provided in (i) the
benefits, plans, and programs referenced in paragraph 3.7(iv) and
any awards under the Company's stock incentive or similar plans,
and (ii) that certain Stay Bonus Agreement dated as of April 14,
1998 between Company and Executive, this Agreement, as of the
Effective Date, will constitute the entire agreement of the parties
with regard to the subject matter hereof, and will contain all the
covenants, promises, representations, warranties and agreements
between the parties with respect to employment of Executive by
Company. Without limiting the scope of the preceding sentence, all
prior understandings and agreements among the parties hereto
relating to the subject matter hereof (including, without
limitation, the Existing Agreement, but only from and after the
Effective Date) are, as of the Effective Date, null and void and of
no further force and effect. Any modification of this Agreement
shall be effective only if it is in writing and signed by the party
to be charged.
5.13 Deemed Resignations. Any termination of Executive's
employment shall constitute an automatic resignation of Executive
as an officer of Company and each affiliate of Company, and an
automatic resignation of Executive from the Board of Directors and
from the board of directors of any affiliate of Company.
5.14 Executive Bonus Program. Executive agrees that the
payment to Executive of the Existing Severance hereunder will not
be deemed to be "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" within the meaning of clause (d) of the
last sentence of Section 5 of the Company's Executive Bonus
Program, as in effect on the date hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 20th day of November, 1998, but to be effective
as of the Effective Date.
CONTINENTAL AIRLINES, INC.
By: __________________________
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President
"EXECUTIVE"
________________________________
XXXXXX X. XXXXXXX
APPROVED:
_______________________________
Xxxxxx X. Xxxxxxx, Xx.
Chair, Human Resources Committee
