EXHIBIT 10.4
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 Xxxxxxxx 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, Amendment to Employment Agreement dated as of
September 30, 1996, Amendment to Employment Agreement dated as of
November 20, 1998, and Amendment to Employment Agreement dated as
of May 19, 1999 (as so amended, the "Existing Agreement"); and
WHEREAS, the Human Resources Committee of the Board of
Directors, at its September 16, 1999 meeting, authorized the
amendment of the employment agreements of certain officers of the
Company, including Executive, with respect to certain matters,
including the amendment and restatement of Executive's Existing
Agreement; and
WHEREAS, in connection therewith, the parties desire to amend
the Existing Agreement and restate it, as so amended, in its
entirety as this Agreement;
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 September
16, 1999.
1.2 Position. Company shall employ Executive in the
position of Executive Vice President and Chief Financial Officer,
or in such other position or positions as the parties mutually may
agree.
1.3 Duties and Services. Executive agrees to serve in the
position referred to in paragraph 1.2 and to perform diligently and
to the best of his abilities the duties and services appertaining
to such office 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 office 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 through the
date which is two years and a day after the date of closing of the
acquisition by an affiliate of Northwest Airlines Corporation of
beneficial ownership of the Class A common stock held by Air
Partners, L.P. (the "Acquisition") contemplated by the Investment
Agreement dated as of January 25, 1998, as amended, among Air
Partners, L.P., its partners and certain affiliates and Northwest
Airlines Corporation and its affiliate (the "Investment
Agreement").
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") or the Human Resources Committee of the Board of
Directors (the "HR Committee"), shall have the right to terminate
Executive's employment 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) for cause, which for purposes of this Agreement
shall mean Executive's gross negligence or willful misconduct
in the performance of, or Executive's abuse of alcohol or
drugs rendering him unable to perform, the material duties
and services required of him pursuant to this Agreement;
(iv) for Executive's material breach of any
provision of this Agreement which, if correctable, remains
uncorrected for 30 days following written notice to Executive
by Company of such breach; or
(v) for any other reason whatsoever, in the sole
discretion of the Board of Directors or the Human Resources
Committee.
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 HR Committee or other officers or representatives
of Company of duties materially inconsistent with the duties
associated with the position described in paragraph 1.2 as
such duties are constituted as of the Effective Date;
(ii) a material diminution in the nature or scope of
Executive's authority, responsibilities, or title from those
applicable to him as of the Effective Date;
(iii) the occurrence of material acts or conduct on
the part of Company or its officers or representatives which
prevent Executive from performing his duties and
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; 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) $470,000.00 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 at a level which is not less than the maximum participation
level made available to any other executive of Company at
substantially the same title or level of Executive (determined
without regard to period of service or other criteria that might
otherwise be necessary to entitle Executive to such level of
participation).
3.3 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.
3.4 Other Perquisites. During his employment hereunder,
Executive shall be afforded the following benefits as incidences of
his employment:
(i) 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.
(ii) Parking - Company shall provide at no expense
to Executive a parking place convenient to Executive's office
and a parking place at Intercontinental Airport in Houston,
Texas.
(iii) 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.
3.5 Supplemental Executive Retirement Plan.
(i) Base Benefit. 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) 2.5% times (b) the number of
Executive's credited years of service (as defined below) under
the Plan (but not in excess of 26 years) 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 sum of (1) the number of
Executive's years of benefit service with Company, calculated
as set forth in the Continental Retirement Plan (the "CARP")
beginning at January 1, 1995 ("Actual Years of Service"), (2)
an additional two years of service for each one year of
service credited to Executive pursuant to clause (1) of this
sentence for the period beginning on January 1, 2000 and
ending on December 31, 2004, and (3) three additional years
of service if Executive is paid the Termination Payment under
this Agreement. For purposes hereof, Executive's final
average compensation shall be equal to the greater of (A)
$470,000.00 or (B) 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
Executive's 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 Xxxxx
00, 0000, (xx) any Stay Bonus paid to Executive pursuant to
that certain Stay Bonus Agreement between Company and
Executive dated as of April 14, 1998, and (iii) any cash bonus
paid under a long term incentive plan or program adopted by
Company. Executive shall be vested immediately with respect
to benefits due under the Plan.
(ii) Offset for CARP Benefit. Any provisions of the
Plan to the contrary notwithstanding, the Base Benefit shall
be reduced by the actuarial equivalent (as defined below) of
the pension benefit, if any, paid or payable to Executive from
the CARP. In making such reduction, the Base Benefit and the
benefit paid or payable under the CARP shall be determined
under the provisions of each plan as if payable in the form
of an annual straight life annuity beginning on the Retirement
Date (as defined below). The net benefit payable under this
Plan shall then be actuarially adjusted based on the actuarial
assumptions set forth in paragraph 3.5(vii) for the actual
time and form of payments.
(iii) Normal and Early Retirement Benefits.
Executive's benefit under the Plan shall be payable in equal
monthly installments beginning on the first day of the month
following the Retirement Date (the "Normal Retirement
Benefit"). For purposes hereof, "Retirement Date" is defined
as the later of (a) the date on which Executive attains (or
in the event of Executive's earlier death, would have
attained) age 60 or (b) the date of Executive's retirement
from employment with Company. Notwithstanding the foregoing,
if Executive's employment with Company is terminated, for a
reason other than death, on or after the date Executive
attains age 55 or is credited with 10 Actual Years of Service
and prior to the Retirement Date, then Executive shall be
entitled to elect to commence to receive Executive's benefit
under the Plan as of the first day of any month coinciding
with or next following Executive's termination of employment,
or as the first day of any subsequent month preceding the
Retirement Date (an "Early Retirement Benefit"); provided,
however, that (1) written notice of such election must be
received by Company not less than 15 days prior to the
proposed date of commencement of the benefit, (2) each payment
under an Early Retirement Benefit shall be reduced to the
extent necessary to cause the value of such Early Retirement
Benefit (determined without regard to clause (3) of this
proviso) to be the actuarial equivalent of the value of the
Normal Retirement Benefit (in each case based on the actuarial
assumptions set forth in paragraph 3.5(vii) and adjusted for
the actual time and form of payments), and (3) each payment
under an Early Retirement Benefit that is made prior to the
Retirement Date shall be reduced by an additional 10% of the
amount of such payment as initially determined pursuant to
clause (2) of this proviso. The HR Committee may, in its sole
and absolute discretion, waive all or any part of the
reductions contemplated in clauses (2) and/or (3) of the
proviso of the preceding sentence.
(iv) Form of Retirement Benefit. If Executive is
not married on the date Executive's benefit under paragraph
3.5(iii) commences, then benefits under the Plan will be paid
to Executive in the form of a single life annuity for the life
of Executive. If Executive is married on the date Executive's
benefit under paragraph 3.5(iii) commences, then benefits
under the Plan will be paid in the form of a joint and
survivor annuity that is actuarially equivalent to the benefit
that would have been payable under the Plan to Executive if
Executive was not married on such date, with Executive's
spouse as of the date benefit payments commence being entitled
during such spouse's lifetime after Executive's death to a
benefit equal to 50% of the benefit payable to Executive
during their joint lifetimes.
(v) Death Benefit. Except as provided in this
paragraph 3.5(v), no benefits shall be paid under the Plan if
Executive dies prior to the date Executive's benefit commences
pursuant to paragraph 3.5(iii). In the event of Executive's
death prior to the commencement of Executive's benefit
pursuant to paragraph 3.5(iii), Executive's surviving spouse,
if Executive is married on the date of Executive's death, will
receive a single life annuity consisting of monthly payments
for the life of such surviving spouse determined as follows:
(a) if Executive dies on or before reaching the Retirement
Date, the death benefit such spouse would have received had
Executive terminated employment on the earlier of Executive's
actual date of termination of employment or Executive's date
of death, survived until the Retirement Date, began to receive
Executive's Plan benefit beginning immediately at the
Retirement Date, and died on the day after the Retirement
Date; or (b) if Executive dies after reaching the Retirement
Date, the death benefit such spouse would have received had
Executive begun to receive Executive's Plan benefit beginning
on the day prior to Executive's death. Payment of such
survivor annuity shall begin on the first day of the month
following the later of (1) Executive's date of death or (2)
the Retirement Date; provided, however, that if Executive was
eligible to elect an Early Retirement Benefit as of the date
of Executive's death, then Executive's surviving spouse shall
be entitled to elect to commence to receive such survivor
annuity as of the first day of the month next following the
date of Executive's death, or as the first day of any
subsequent month preceding the Retirement Date. Notice of
such election must be received by Company not less than 15
days prior to the proposed date of commencement of the
benefit, and each payment of such survivor annuity shall be
reduced based on the principles used for the reductions
described in clauses (2) and (3) of the proviso to the third
sentence of paragraph 3.5(iii).
(vi) Unfunded Benefit. The Plan is intended to
constitute an unfunded, unsecured plan of deferred
compensation. Further, it is the intention of Company that
the Plan be unfunded for purposes of the Internal Revenue Code
of 1986, as amended, and Title I of the Employee Retirement
Income Security Act of 1974, as amended. The Plan constitutes
a mere promise by Company to make benefit payments in the
future. Plan benefits hereunder provided are to be paid out
of Company's general assets, and Executive shall have the
status of, and shall have no better status than, a general
unsecured creditor of Company. Executive understands that he
must rely upon the general credit of Company for payment of
benefits under the Plan. Company shall establish a "rabbi"
trust to assist Company in meeting its obligations under the
Plan. The trustee of such trust shall be a nationally-
recognized and solvent bank or trust company that is not
affiliated with Company. Company shall transfer to the
trustee money and/or other property determined in the sole
discretion of the HR Committee based on the advice of the
Actuary (as defined below) on an as-needed basis in order to
assure that the benefit payable under the Plan is at all times
fully funded. The trustee shall pay Plan benefits to
Executive and/or Executive's spouse out of the trust assets
if such benefits are not paid by Company. Company shall
remain the owner of all assets in the trust, and the assets
shall be subject to the claims of Company creditors in the
event (and only in the event) Company ever becomes insolvent.
Neither Executive nor any beneficiary of Executive shall have
any preferred claim to, any security interest in, or any
beneficial ownership interest in any assets of the trust.
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.
(vii) Actuarial Equivalent. 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 the referenced different
type or payable at the referenced different age that can be
provided at the same cost as such specified benefit, as
computed by the Actuary and certified to Executive (or, in the
case of Executive's death, to his spouse) by the Actuary. The
actuarial assumptions used under the Plan to determine
equivalencies between different forms and times of payment
shall be the same as the actuarial assumptions then used in
determining benefits payable under the CARP. 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 Executive's spouse.
(viii) Medicare Payroll Taxes. 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.
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; provided, however, that Executive shall be provided
with Flight Benefits for the remainder of Executive's lifetime, the
benefits described in paragraph 3.5 shall continue to be payable,
the benefits described in clauses (2) through (4) of paragraph
4.7(vi) shall be provided for the time periods specified therein
and Company shall 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.
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 the benefits described in paragraph 3.5
shall continue to be payable, and if such termination shall be for
any reason other than those encompassed by paragraphs 2.2(i), (ii),
(iii) or (iv), then Company shall (a) pay Executive on or before
the effective date of such termination a lump-sum, cash payment in
an amount equal to the Termination Payment (as such term is defined
in paragraph 4.7) and 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, (b) provide
Executive with Flight Benefits (as such term is defined in para-
graph 4.7) for the remainder of Executive's lifetime, (c) provide
Executive with Outplacement Services (as such term is defined in
paragraph 4.7), and (d) provide Executive and his eligible
dependents with Continuation Coverage (as such term is defined in
paragraph 4.7) for the Severance Period.
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
employment, except Executive shall be provided Flight Benefits (as
such term is defined in paragraph 4.7) for the remainder of
Executive's lifetime, the benefits described in paragraph 3.5 shall
continue to be payable, 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 (a), (c) and (d) of paragraph 4.2.
4.4 Certain Additional Payments by Company. Notwith-
standing 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 (as such term is defined in
paragraph 4.7)) 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 pursuant to paragraphs 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) "Annualized Compensation" shall mean an amount
equal to the sum of (1) Executive's annual base salary
pursuant to paragraph 3.1 in effect immediately prior to
Executive's termination of employment hereunder 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(i). 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 (and its predecessor or any
successor plan or program) with respect to the most recent
fiscal year ended prior to Executive's termination of employment;
(ii) "Change in Control" shall have the meaning
assigned to such term in the 1998 Plan (as adopted by the
Board of Directors on April 14, 1998 and in effect on such
date, it being understood that such term shall be the new
Change in Control term contained in the 1998 Plan, and not the
alternate Change in Control term (identical to that contained
in the 1997 Stock Incentive Plan) also set forth in the 1998
Plan for the eventuality that the Acquisition does not close);
provided, however, that Company and Executive agree that the
Acquisition, upon the closing thereof, constituted a Change
in Control (as defined in the Existing Agreement prior to the
amendment to the Existing Agreement dated as of November 20,
1998) and will be considered to be, and to have the effect of,
a Change in Control under this Agreement;
(iii) "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;
(iv) "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 Executive's eligible family members
(as such eligibility is in effect on May 18, 1999), a
Universal Air Travel Plan (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 successor or successors thereto (a
"Similar Card")) in Executive's name for charging on an annual
basis up to the applicable Annual Travel Limit (as hereinafter
defined) with respect to such year in value (valued
identically to the calculation of imputed income resulting
from such flight benefits described below) of 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 Platinum 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 payment by the Company to Executive of an annual amount
(not to exceed in any year the applicable Annual Gross Up
Limit (as hereinafter defined) with respect to such year)
sufficient to pay, on an after tax basis (i.e., after the
payment by Executive of all taxes on such amount), the U.S.
federal, state and 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, lowest negotiated consolidator net fare, or other lowest
available fare) for the applicable itinerary (or similar
flights on or around the date of such flight), regardless of
the actual fare class booked or flown, or as otherwise
required by law) or resulting from any other flight benefits
extended to Executive as a result of Executive's service as
an executive of the Company;
(v) "Incentive Plan" shall mean Company's 1994
Incentive Equity Plan, as amended;
(vi) "Outplacement 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 or HR
Committee (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
three 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 a period of three years
beginning on the date of Executive's termination of employment
or a shorter period if such perquisites become unavailable to
the Company for use by Executive;
(vii) "Severance Period" shall mean:
(1) in the case of a termination of
Executive's employment with Company that occurs within two
years after the date upon which a Change in Control occurs,
a period commencing on the date of such termination and
continuing for thirty-six months; or
(2) in the case of a termination of
Executive's employment with Company that occurs prior to a
Change in Control or after the date which is two years after
a Change in Control occurs, a period commencing on the date
of such termination and continuing for twenty-four months; and
(viii) "Termination Payment" shall mean an amount
equal to Executive's Annualized Compensation multiplied by a
fraction, the numerator of which is the number of months in
the Severance Period and the denominator of which is twelve.
As used for purposes of Flight Benefits, with respect to any
year, the term "Annual Travel Limit" shall mean an amount
(initially $50,000), which amount shall be adjusted (i) annually
(beginning with the year 2000) by multiplying such amount by a
fraction, the numerator of which shall be the Company's average
fare per revenue passenger for its jet operations (excluding
regional jets) with respect to the applicable year as reported in
its Annual Report on Form 10-K (or, if not so reported, as
determined by the Company's independent auditors) (the "Average
Fare") for such year, and the denominator of which shall be the
Average Fare for the prior year, (ii) annually to add thereto any
portion of such amount unused since the year 1999, and (iii) after
adjustments described in clauses (i) and (ii) above, automatically
upon any change in the valuation methodology for imputed income
from flights (as compared with the valuation methodology for
imputed income from flights used by the Company as of May 18,
1999), so as to preserve the benefit of $50,000 annually (adjusted
in accordance with clauses (i) and (ii) above) of flights relative
to the valuations resulting from the valuation methodology used by
the Company as of May 18, 1999 (e.g., if a change in the valuation
methodology results, on average, in such flights being valued 15%
higher than the valuation that would result using the valuation
methodology used by the Company as of May 18, 1999, then the Annual
Travel Limit would be increased by 15% to $57,500, assuming no
other adjustments pursuant to clauses (i) and (ii) above). In
determining any adjustment pursuant to clause (iii) above, the
Company shall be entitled to rely on a good faith calculation
performed by its independent auditors based on a statistically
significant random sampling of flight valuations compared with the
applicable prior valuations of identical flights, which calculation
(and the basis for any adjustments pursuant to clauses (i) or (ii)
above) will be provided to Executive upon request. The Company
will promptly notify Executive in writing of any adjustments to the
Annual Travel Limit described in this paragraph.
As used for purposes of Flight Benefits, with respect to any
year, the term "Annual Gross Up Limit" shall mean an amount
(initially $10,000), which amount shall be adjusted (i) annually
(beginning with the year 2000) by multiplying such amount by a
fraction, the numerator of which shall be the Average Fare for such
year, and the denominator of which shall be the Average Fare for
the prior year, (ii) annually to add thereto any portion of such
amount unused since the year 1999, and (iii) after adjustments
described in clauses (i) and (ii) above, automatically upon any
change in the valuation methodology for imputed income from flights
(as compared with the valuation methodology for imputed income from
flights used by the Company as of May 18, 1999), so as to preserve
the benefit of $10,000 annually (adjusted in accordance with
clauses (i) and (ii) above) of tax gross up relative to the
valuations resulting from the valuation methodology used by the
Company as of May 18, 1999 (e.g., if a change in the valuation
methodology results, on average, in flights being valued 15% higher
than the valuation that would result using the valuation
methodology used by the Company as of May 18, 1999, then the Annual
Gross Up Limit would be increased by 15% to $11,500, assuming no
other adjustments pursuant to clauses (i) and (ii) above). In
determining any adjustment pursuant to clause (iii) above, the
Company shall be entitled to rely on a good faith calculation
performed by its independent auditors based on a statistically
significant random sampling of flight valuations compared with the
applicable prior valuations of identical flights, which calculation
(and the basis for any adjustments pursuant to clauses (i) or (ii)
above) will be provided to Executive upon request. The Company
will promptly notify Executive in writing of any adjustments to the
Annual Gross Up Limit described in this paragraph.
As used for purposes of Flight Benefits, a year may consist
of twelve consecutive months other than a calendar year, it being
the Company's practice as of May 18, 1999 for purposes of Flight
Benefits for a year to commence on December 1 and end on the
following November 30 (for example, the twelve-month period from
December 1, 1998 to November 30, 1999 is considered the year 1999
for purposes of Flight Benefits); provided that all calculations
for purposes of clause (i) in the prior two paragraphs shall be
with respect to fiscal years of the Company.
As used for purposes of Flight Benefits, the term "affiliates"
of the Company means any entity controlled by, controlling, or
under common control with the Company, it being understood that
control of an entity shall require the direct or indirect ownership
of a majority of the outstanding capital stock of such entity.
No tickets issued on the CO system in connection with the
Flight Benefits may be purchased other than directly from the
Company or its successor or successors (i.e., no travel agent or
other fee or commission based distributor may be used), nor may any
such tickets be sold or transferred by Executive or any other
person, nor may any such tickets be used by any person other than
the person in whose name the ticket is issued. 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 his 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 3.4(i) hereof, or which are for tickets in excess of the
applicable Annual Travel Limit. 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 or if Executive exceeds the
applicable Annual Travel Limit with respect to a year; provided,
that, immediately upon the Company's receipt of Executive's
reimbursement in full (or, in the case of exceeding the applicable
Annual Travel Limit, beginning the next following year and after
such reimbursement), 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, lowest negotiated
consolidator net fare or other lowest available fare) for the
applicable itinerary (or similar flights on or around 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 for which
the Company is obligated to provide the tax gross up described
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 paid to Executive.
Executive will be issued a UATP card (or Similar Card), a
Platinum 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, and an appropriate flight pass
identification 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 Texas Commerce Bank
National Association (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, Xxxx. XXXXX
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
If to Executive to : Xxxxxxxx X. Xxxxxxx
00000 Xxxxx Xxx
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 3.4(iii),
(ii) any signed written agreement heretofore executed by Company
and Executive with respect to awards under the Company's stock
option or other incentive plans, or (iii) any signed written
agreement hereafter executed by Company and Executive, this
Agreement constitutes the entire agreement of the parties with
regard to the subject matter hereof, and contains 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 are hereby null and void and
of no further force and effect (it being the specific intent of the
parties hereto that this Agreement shall amend and restate in its
entirety the Existing Agreement). 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 (if
applicable) and from the board of directors of any affiliate of
Company.
*******
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 16th day of September, 1999.
CONTINENTAL AIRLINES, INC.
By:________________________________
Name:
Title:
"EXECUTIVE"
______________________________
Xxxxxxxx X. Xxxxxxx
