<PAGE>   1

                            SCHEDULE 14A INFORMATION
 
          PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 (AMENDMENT NO.   )
 
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]  Preliminary Proxy Statement          [ ]  Confidential, for Use of the 
                                               Commission Only (as permitted by 
                                               Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                           Continental Airlines, Inc.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

--------------------------------------------------------------------------------
   (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
   [X]  No fee required.

   [ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

   (1)  Title of each class of securities to which transaction applies:

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   (2)  Aggregate number of securities to which transaction applies:

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   (3)  Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

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   (4)  Proposed maximum aggregate value of transaction:

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   (5)  Total fee paid:

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   [ ]  Fee paid previously with preliminary materials.

   [ ]  Check box if any part of the fee is offset as provided by Exchange Act
   Rule 0-11(a)(2) and identify the filing for which the offsetting fee was 
   paid previously. Identify the previous filing by registration statement 
   number, or the form or Schedule and the date of its filing.

   (1)  Amount Previously Paid:

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   (2)  Form, Schedule or Registration Statement No.:

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   (3)  Filing Party:

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   (4)  Date Filed:

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<PAGE>   2
 
                          [CONTINENTAL AIRLINES LOGO]
 
                                 April 4, 2000
 
To Our Stockholders:
 
     On behalf of the Board of Directors, we are pleased to invite you to attend
the Continental Airlines, Inc. 2000 Annual Meeting of Stockholders. As indicated
in the attached notice, the meeting will be held at The Hyatt Regency, 1200
Louisiana Street, Houston, Texas on Tuesday, May 23, 2000, at 10:00 a.m., local
time. At the meeting, in addition to acting on the matters described in the
attached proxy statement, there will be an opportunity to discuss other matters
of interest to you as a stockholder.
 
     Please date, sign and mail the enclosed proxy card in the envelope
provided, even if you plan to attend the meeting in person. You can also vote
your shares through the internet or by telephone, as described in the enclosed
proxy statement. We look forward to seeing you in Houston.
 
                                            Cordially,
 
                                            /S/ GORDON BETHUNE
                                            Gordon Bethune
                                            Chairman of the Board and Chief
                                            Executive Officer
 
                                            /S/ GREG BRENNEMAN
                                            Greg Brenneman
                                            President and Chief Operating
                                            Officer

<PAGE>   3
 
                           CONTINENTAL AIRLINES, INC.
                         1600 SMITH STREET, DEPT. HQSEO
                              HOUSTON, TEXAS 77002
 
                             ---------------------
 

                 NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
                            TO BE HELD MAY 23, 2000
 
                             ---------------------
 
     NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Continental Airlines, Inc., a Delaware corporation (the "Company" or
"Continental"), will be held at The Hyatt Regency, 1200 Louisiana Street,
Houston, Texas on Tuesday, May 23, 2000, at 10:00 a.m., local time, for the
following purposes:
 
          1. To elect thirteen directors to serve until the next annual meeting
     of stockholders;
 
          2. To consider and act upon a proposal to approve the Company's
     Incentive Plan 2000;
 
          3. To consider and act upon a proposal to ratify the appointment of
     Ernst & Young LLP as independent auditors of the Company and its
     subsidiaries for 2000; and
 
          4. To consider and act upon any other matters that may properly come
     before the Annual Meeting or any adjournment or adjournments thereof.
 
     The holders of record of the Company's common stock at the close of
business on March 24, 2000 are entitled to notice of and to vote at the Annual
Meeting.
 
                                            By Order of the Board of Directors,
 
                                            /s/Jeffery A. Smisek
                                            Jeffery A. Smisek
                                            Secretary
 
Houston, Texas
A
pril 4, 2000
 
     PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY BY MAIL IN
THE ENCLOSED ENVELOPE, OR AUTHORIZE YOUR PROXY OR DIRECT YOUR VOTE BY INTERNET
OR TELEPHONE AS DESCRIBED IN THE ENCLOSED PROXY STATEMENT, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON. IF YOU MAIL THE ENCLOSED PROXY, NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU DO ATTEND THE MEETING IN
PERSON AND DESIRE TO WITHDRAW YOUR PROXY, YOU MAY DO SO IN THE MANNER DESCRIBED
IN THE ENCLOSED PROXY STATEMENT AND VOTE PERSONALLY ON ALL MATTERS PROPERLY
BROUGHT BEFORE THE MEETING.

<PAGE>   4
 
                           CONTINENTAL AIRLINES, INC.
                         1600 SMITH STREET, DEPT. HQSEO
                              HOUSTON, TEXAS 77002
                             ---------------------
 
                                PROXY STATEMENT
 
                      2000 ANNUAL MEETING OF STOCKHOLDERS
                            TO BE HELD MAY 23, 2000
                             ---------------------
 
     This proxy statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of Continental Airlines, Inc., a
Delaware corporation (the "Company" or "Continental"), of proxies to be voted at
the 2000 Annual Meeting of Stockholders of the Company or any adjournment or
adjournments thereof (the "Meeting"), to be held at The Hyatt Regency, 1200
Louisiana Street, Houston, Texas on Tuesday, May 23, 2000, at 10:00 a.m., local
time, for the purposes set forth in the accompanying Notice of 2000 Annual
Meeting of Stockholders. This proxy statement and the accompanying proxy,
together with a copy of the Company's 1999 Annual Report, are being first mailed
or otherwise delivered to stockholders on or about April 4, 2000.
 
THE PROXY
 
     Stockholders giving proxies may revoke them at any time before they are
voted by notifying the Secretary of the Company in writing of such revocation or
by delivering to the Secretary a duly executed proxy bearing a later date. To be
effective, any such revocation or subsequent proxy must be received prior to the
commencement of voting at the Meeting. Revocation of internet or telephonic
proxies is accomplished automatically by granting a new proxy by the same means
prior to the deadlines described below. If a proxy is properly signed (or, in
the case of internet or telephonic voting, properly authenticated) by a holder
of common stock and is not revoked, it will be voted at the Meeting in the
manner specified on the proxy (or instructed by internet or telephone) or, if no
manner is specified or instructed, it will be voted "FOR" the election of
directors nominated by the Board of Directors of the Company (the "Board of
Directors" or the "Board"), "FOR" approval of the Incentive Plan 2000 and
ratification of the appointment of the Company's auditors, and, with respect to
other matters that may properly come before the Meeting, in the discretion of
the proxies.
 
     The Company will bear the costs of the solicitation of proxies. In addition
to the solicitation of proxies by mail, proxies may also be solicited by
internet, telephone, telegram, fax and in person by regular employees and
directors of the Company, none of whom will receive additional compensation
therefor, and by Morrow & Co., Inc., which the Company has retained to assist in
the solicitation of proxies for a fee estimated not to exceed $6,000 plus
reasonable out-of-pocket expenses. Arrangements will be made with brokerage
houses and with other custodians, nominees and fiduciaries to forward proxy
soliciting materials to beneficial owners, and the Company will reimburse such
persons for their reasonable out-of-pocket expenses incurred in connection
therewith.
 
INTERNET OR TELEPHONIC PROXIES
 
     Although you may return the proxy or voting form that accompanies this
proxy statement in the postage-paid envelope provided therefor, please consider
the following alternatives as well. Internet and telephonic proxies save the
Company money. Please note that certain of the internet and telephonic
procedures described below may not be available for shares held by Foreigners
(as defined below).
 
     Shares held by you of record. Stockholders with shares registered in their
names with Harris Trust and Savings Bank ("Harris"), the Company's transfer
agent and registrar, may authorize a proxy by internet at the following address:
www.harrisbank.com/wproxy or telephonically by calling Harris at (888) 515-8274.
Proxies

<PAGE>   5
 
submitted through Harris by internet or telephone must be received by midnight
(EDT) on May 21, 2000. The giving of such proxy will not affect your right to
vote in person should you decide to attend the Meeting.
 
     Shares held in a bank or brokerage account. A number of banks and brokerage
firms participate in a program that also permits stockholders to direct their
vote by internet or telephone. This option is separate from that offered by
Harris and will be reflected on the voting form from a bank or brokerage firm
that accompanies this proxy statement. If your shares are held in an account at
a bank or brokerage that participates in such a program, you may direct the vote
of those shares by internet or telephone by following the instructions on their
enclosed voting form. Votes directed by internet or telephone through such a
program must be received by midnight (EDT) on May 22, 2000. The directing of
such vote will not affect your right to vote in person should you decide to
attend the Meeting; however, you must first request a legal proxy either on the
internet or the voting form that accompanies this proxy statement. Requesting a
legal proxy will automatically cancel any voting directions you have previously
given by internet or by telephone with respect to such shares.
 
     The internet and telephone proxy procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their proxy instructions
and to confirm that such instructions have been properly recorded. Counsel has
advised the Company that the foregoing internet and telephone proxy procedures
are consistent with applicable legal requirements. Stockholders authorizing
proxies or directing the voting of shares by internet should bear in mind the
possibility that there may be costs associated with electronic access, such as
usage charges from internet access providers and telephone companies that must
be borne by the stockholder.
 
RECORD DATE AND VOTING SECURITIES
 
     The Board of Directors fixed the close of business on March 24, 2000 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Meeting. At the close of business on the record date, the Company
had outstanding 11,233,349 shares of Class A common stock, par value $.01 per
share, and 51,079,124 shares of Class B common stock, par value $.01 per share.
 
     Continental's Restated Certificate of Incorporation ("Charter") authorizes
the issuance of up to 10 million shares of preferred stock, 50 million shares
each of Class A common stock and Class D common stock, and 200 million shares of
Class B common stock. No shares of Class D common stock have been issued, and no
preferred stock is outstanding. Subject to certain limitations on voting by
non-U.S. citizens, each share of Class A common stock is entitled to ten votes
per share and each share of Class B common stock is entitled to one vote per
share. Shares of Class A common stock may be converted at any time into shares
of Class B common stock. The holders of shares representing a majority of the
aggregate voting power of the outstanding voting securities entitled to vote at
the Meeting, present or represented by proxy, will constitute a quorum for the
transaction of business at the Meeting.
 
     In establishing the presence of a quorum, abstentions and broker non-votes
(if any) will be included in the determination of the number of shares
represented at the Meeting. Abstentions are treated as votes cast and thus will
have the same effect as a vote against a proposal. As to a specific proposal,
however, broker non-votes are not treated as votes cast or shares entitled to
vote with respect to such matter and thus will not affect the election of
directors (who will be elected by a plurality of the votes cast for directors)
or the outcome of the proposals to approve the Company's Incentive Plan 2000 or
ratify the appointment of independent auditors (each of which requires approval
by a majority of the votes cast on the applicable proposal).
 
     THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS
CONTAINED IN THIS PROXY STATEMENT.
 
                                        2

<PAGE>   6
 
LIMITATION ON VOTING BY FOREIGN OWNERS
 
     The Charter defines "Foreign Ownership Restrictions" as "applicable
statutory, regulatory and interpretive restrictions regarding foreign ownership
or control of U.S. air carriers (as amended or modified from time to time)."
Such restrictions currently require that no more than 25% of the voting stock of
the Company be owned or controlled, directly or indirectly, by persons who are
not U.S. Citizens ("Foreigners") for purposes of the Foreign Ownership
Restrictions, and that the Company's president and at least two-thirds of its
directors or other managing officers be U.S. Citizens. For purposes of the
Charter, "U.S. Citizen" means (i) an individual who is a citizen of the United
States; (ii) a partnership each of whose partners is an individual who is a
citizen of the United States; or (iii) a corporation or association organized
under the laws of the United States or a State, the District of Columbia, or a
territory or possession of the United States, of which the president and at
least two-thirds of the board of directors and other managing officers are
citizens of the United States, and in which at least 75% of the voting interest
is owned or controlled by persons who are citizens of the United States. The
Charter provides that no shares of capital stock may be voted by or at the
direction of Foreigners, unless such shares are registered on a separate stock
record (the "Foreign Stock Record") maintained by the Company for the
registration of ownership of voting stock by Foreigners. The Company's bylaws
("Bylaws") further provide that no shares will be registered on the Foreign
Stock Record if the amount so registered would cause the Company to violate the
Foreign Ownership Restrictions or adversely affect the Company's operating
certificates or authorities. Registration on the Foreign Stock Record is made in
chronological order based on the date the Company receives a written request for
registration, except that shares acquired by Air Partners, L.P., a Texas limited
partnership ("Air Partners"), in connection with its original investment in the
Company that are subsequently transferred to any Foreigner are entitled to be
registered prior to, and to the exclusion of, other shares.
 
                    VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
 
     Northwest Airlines, Inc. (through an affiliate referred to hereafter
together with Northwest Airlines, Inc. as "Northwest") holds 8,661,224 shares of
the Class A common stock of the Company and holds a limited proxy to vote an
additional 842,913 such shares in certain circumstances. As of March 24, 2000,
the shares held by Northwest represented approximately 14% of the common equity
interest and approximately 50.3% of the fully-diluted voting power of the
Company. Together with its limited proxy, Northwest held the power to control
approximately 55.2% of the Company's fully diluted voting power under certain
limited circumstances at that date.
 
     The Company has a corporate governance agreement with certain affiliates of
Northwest (the "Northwest Parties") designed to assure the independence of the
Company's Board and management during the six-year term of the governance
agreement through November 20, 2004. Under the governance agreement, as amended,
the Northwest Parties have agreed not to beneficially own voting securities of
the Company in excess of 50.1% of the fully diluted voting power of the
Company's voting securities, subject to certain exceptions, including
third-party acquisitions or tender offers for 15% or more of the voting power of
the Company's voting securities and increases in voting power caused by
repurchases of common stock by Continental. The Northwest Parties have deposited
all voting securities of the Company beneficially owned by them (other than the
shares for which they hold only a limited proxy) in a voting trust with an
independent voting trustee requiring that such securities be voted (i) on all
matters other than the election of directors, in the same proportion as the
votes cast by other holders of voting securities, and (ii) in the election of
directors, for the election of Independent Directors (as defined) (who must
constitute a majority of the Board) nominated by the Board of Directors.
However, in the event of a merger or similar business combination or a
recapitalization, liquidation or similar transaction, a sale of all or
substantially all of the Company's assets, an issuance of voting securities that
would represent more than 20% of the voting power of the Company prior to
issuance, or any amendment of the Company's charter or bylaws that would
materially and adversely affect Northwest (each, an "Extraordinary
Transaction"), the shares may be voted as directed by the Northwest Party owning
such shares, and if a third party is soliciting proxies in an election of
directors, the shares may be voted at the option of such Northwest Party either
as recommended by the Company's Board of Directors or in the same proportion as
the votes cast by the other holders of voting securities.
                                        3

<PAGE>   7
 
     The Northwest Parties have also agreed to certain restrictions on the
transfer of voting securities owned by them, have agreed not to seek to affect
or influence the Company's Board of Directors or the control of the management
of the Company or the business, operations, affairs, financial matters or
policies of the Company or to take certain other actions, and have agreed to
take all actions necessary to cause Independent Directors to at all times
constitute at least a majority of the Company's Board of Directors. The Company
has granted preemptive rights to a Northwest Party with respect to issuances of
Class A common stock and certain issuances of Class B common stock. The
Northwest Parties have agreed that certain specified actions, together with any
material transactions between the Company and Northwest or its affiliates,
including any modifications or waivers of the governance agreement or the
Company's alliance agreement with Northwest, may not be taken without the prior
approval of a majority of the Board of Directors, including the affirmative vote
of a majority of the Independent Directors.
 
     The governance agreement also required the Company to adopt a shareholder
rights plan with reasonably customary terms and conditions, with an acquiring
person threshold of 15% of the outstanding voting power and with appropriate
exceptions for the Northwest Parties for actions permitted by and taken in
compliance with the governance agreement. A rights plan meeting these
requirements was adopted effective November 20, 1998, and was subsequently
amended to permit an acquiring person threshold of 20% for an Institutional
Investor (as defined therein).
 
     In addition to the governance agreement, which is scheduled to expire on
November 20, 2004, or if earlier, upon the date that the Northwest Parties cease
to beneficially own voting securities representing at least 10% of the fully
diluted voting power of the Company's voting securities, the Company has a
supplemental agreement with the Northwest Parties that extends the effect of a
number of the provisions of the governance agreement for an additional four
years. For instance, the Northwest Parties must act to ensure that a majority of
the Company's Board is comprised of Independent Directors, and certain specified
actions, together with material transactions between the Company and Northwest
or its affiliates, including any modifications or waivers of the supplemental
agreement or the alliance agreement, may not be taken without the prior approval
of a majority of the Board of Directors, including the affirmative vote of a
majority of the Independent Directors. The Northwest Parties will continue to
have the right to vote Company stock in their discretion on any Extraordinary
Transaction during the supplemental period, but also will be permitted to vote
in their discretion on other matters up to 20% of the outstanding voting power
(their remaining votes to be cast neutrally, except in a proxy contest, as
contemplated in the governance agreement), subject to their obligation set forth
in the previous sentence. If, during the term of the supplemental agreement, the
Company's rights plan were amended to allow certain parties to acquire more
shares than is currently permitted, or if the rights issued thereunder were
redeemed, the Northwest Parties could vote all of their shares in their
discretion. Certain transfer limitations are imposed on the Northwest Parties
during the supplemental period. The Company has granted preemptive rights to a
Northwest Party with respect to issuances of Class A common stock and certain
issuances of Class B common stock that occur during such period. The Company has
agreed to certain limitations upon its ability to amend its charter, bylaws,
executive committee charter and rights plan during the term of the supplemental
agreement. Following the supplemental period, the supplemental agreement
requires the Northwest Parties to take all actions necessary to cause
Continental's Board to have at least five independent directors, a majority of
whom will be required to approve material transactions between Continental and
Northwest or its affiliates, including the amendment, modification or waiver of
any provisions of the supplemental agreement or the alliance agreement.
 
     The following table sets forth, as of March 24, 2000 (except as otherwise
set forth below), certain information with respect to persons owning
beneficially (to the knowledge of the Company) more than five percent of any
class of the Company's voting securities. The table also sets forth the
respective general voting power of such persons. Information in the table is
based on reports that have been filed with the Securities and
 
                                        4

<PAGE>   8
 
Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and information furnished to the Company by
such holders.
 

<TABLE>
<CAPTION>
                                                         AMOUNT
                                                       AND NATURE                GENERAL
      NAME AND ADDRESS                                OF BENEFICIAL   PERCENT     VOTING
    OF BENEFICIAL HOLDER          TITLE OF CLASS        OWNERSHIP     OF CLASS   POWER(1)
    --------------------          --------------      -------------   --------   --------
<S>                            <C>                    <C>             <C>        <C>
Northwest Airlines
  Corporation                  Class A common stock     9,504,137(2)    84.6%      58.2%
  2700 Lone Oak Parkway
  Eagan, MN 55121
1998 CAI Partners, L.P.(3)     Class A common stock       613,403        5.5%       3.8%
1992 Air, Inc.(3)              Class A common stock       826,513        7.4%       5.1%
David Bonderman(3)             Class A common stock       842,913        7.5%       5.2%
AXA Financial, Inc.            Class B common stock    25,068,161(4)    49.1%      15.3%
  1290 Avenue of the Americas
  New York, NY 10104
</TABLE>

 
---------------
 
(1) Each share of Class A common stock is entitled to ten votes, and each share
    of Class B common stock is entitled to one vote. General Voting Power
    includes the combined total of the votes attributable to Class A common
    stock and Class B common stock outstanding at March 24, 2000. Shares of
    Class A common stock may be converted at any time into shares of Class B
    common stock. Because the Class A common stock has ten votes per share and
    the Class B common stock has one vote per share, such conversions
    effectively increase the relative voting power of those Class A stockholders
    who do not convert.
 
(2) As described above and based on reports filed with the SEC pursuant to the
    Exchange Act and information provided to the Company, Northwest Airlines
    Corporation (for purposes of this footnote, individually "Northwest") shares
    voting and dispositive power as to all such shares. Northwest beneficially
    owns 8,661,224 shares of Class A common stock, and has the right to vote in
    certain circumstances under a limited proxy granted to it an additional
    842,913 shares. The 8,661,224 owned shares have been placed in a voting
    trust, for which Wilmington Trust Company acts as trustee. Wilmington
    Trust's address is Rodney Square North, 1100 North Market Street,
    Wilmington, DE 19890, and the manner in which it is permitted to vote is
    described above. Of the shares subject to a limited proxy, 613,403 are held
    by 1998 CAI Partners, L.P., a Texas limited partnership ("CAIP"), 213,110
    are beneficially owned by 1992 Air, Inc. and 16,400 are beneficially owned
    by Bonderman Family Limited Partnership ("BFLP"). See also note 3 below.
 
(3) The principal business address of each such party is 201 Main Street, Suite
    2420, Fort Worth, TX 76102. 1992 Air GP is the general partner of CAIP and
    thus could be deemed to be the beneficial owner of the shares held by CAIP.
    1992 Air, Inc., as the majority general partner of 1992 Air GP and because
    of its direct ownership of 213,110 shares of Class A common stock, may be
    deemed to be the beneficial owner of an aggregate of 826,513 shares of Class
    A common stock. David Bonderman, as the controlling shareholder of 1992 Air,
    Inc. and the sole general partner of BFLP, may be deemed to be the
    beneficial owner of 842,913 shares of Class A common stock. The aggregate
    number of shares of Class A common stock that BFLP may be deemed to own is
    33,504, comprised of the 16,400 shares it owns directly and 17,104 shares it
    may be deemed to own beneficially because of its position as a limited
    partner of CAIP, and on the basis of certain provisions of the Limited
    Partnership Agreement of CAIP. David Bonderman and Donald Sturm, each a
    director of the Company, are also limited partners of CAIP. Not included in
    the amounts shown are 180,483 shares of Class B common stock owned by Mr.
    Bonderman, 26,000 shares of Class B common stock subject to outside director
    stock options held by Mr. Bonderman, and 682,450 shares of Class B common
    stock beneficially owned by BFLP, which Mr. Bonderman may be deemed to
    beneficially own.
 
(4) As of December 31, 1999, based on a report filed with the SEC pursuant to
    the Exchange Act in February 2000 by AXA Financial, Inc. (formerly The
    Equitable Companies Incorporated), AXA (which beneficially owns a majority
    interest in AXA Financial, Inc.), and a group of French mutual insurance
 
                                        5

<PAGE>   9
 
    companies (AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D.
    Mutuelle, AXA Assurances Vie Mutuelle, and AXA Courage Assurance
    Mutuelle)(which beneficially own a majority interest in AXA). The shares
    shown represent beneficial ownership by registered broker-dealer or
    investment advisor subsidiaries of AXA Financial, Inc. According to such
    report, the following such subsidiaries have an interest in the reported
    securities representing greater than 5% of the Class B common stock:
    Alliance Capital Management L.P. (21,735,261 shares) and Equitable Life
    Assurance Society of the United States (3,332,600 shares). AXA Financial,
    Inc. may be deemed to have sole voting power with respect to 8,832,404
    shares, shared voting power with respect to 13,087,540 shares, sole
    dispositive power with respect to 25,063,821 shares and shared dispositive
    power with respect to 4,340 shares.
 
BENEFICIAL OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table shows, as of March 24, 2000, the number of shares of
Class B common stock beneficially owned by each of the current directors, the
executive officers named below in the Summary Compensation Table, and all
executive officers and directors as a group. Also reflected in the amounts shown
are shares of Class A common stock, which are convertible into an equal number
of shares of Class B common stock and are set forth in the footnotes to the
table. See also "Voting Rights and Principal Stockholders."
 

<TABLE>
<CAPTION>
                                                         AMOUNT AND
                                                          NATURE OF
                                                         BENEFICIAL            PERCENT
NAME OF BENEFICIAL OWNERS                               OWNERSHIP(1)           OF CLASS
-------------------------                               ------------           --------
<S>                                                     <C>                    <C>
Thomas J. Barrack, Jr. ..............................       26,000(2)            *
Gordon M. Bethune....................................      572,694(3)            1.1%
David Bonderman......................................    1,731,846(4)            3.3%
Gregory D. Brenneman.................................      413,711(5)            *
Kirbyjon H. Caldwell.................................        5,288(6)            *
Patrick Foley........................................       26,000(7)            *
Lawrence W. Kellner..................................      209,651(8)            *
Douglas H. McCorkindale..............................       26,000(7)            *
C.D. McLean..........................................      215,769(9)            *
George G. C. Parker..................................      21,400(10)            *
Richard W. Pogue.....................................      14,600(11)            *
William S. Price III.................................      24,929(10)            *
Jeffery A. Smisek....................................     201,000(12)            *
Donald L. Sturm......................................     531,947(13)            1.0%
Karen Hastie Williams................................       20,000(7)            *
Charles A. Yamarone..................................      31,000(14)            *
All executive officers and directors as a group......   5,356,381(15)           10.3%
</TABLE>

 
---------------
 
  *  Less than 1%
 
 (1) The persons listed have the sole power to vote and dispose of the shares
     beneficially owned by them except as otherwise indicated. See also the
     previous table and text under the caption "Voting Rights and Principal
     Stockholders."
 
 (2) Includes 23,000 shares subject to vested director stock options and 3,000
     shares held in trust for the benefit of Mr. Barrack's children, as to which
     shares Mr. Barrack disclaims beneficial ownership.
 
 (3) Includes 570,000 shares subject to vested options, or vesting within 60
     days after March 24, 2000.
 
 (4) Includes 842,913 shares of Class A common stock described in note 3 to the
     previous table, 26,000 shares subject to vested director stock options and
     682,450 shares beneficially owned by BFLP.
 
 (5) Includes 411,500 shares subject to vested options, or vesting within 60
     days after March 24, 2000.
 
 (6) Includes 5,000 shares subject to vested director stock options.
 
 (7) Represents shares subject to vested director stock options.
 
                                        6

<PAGE>   10
 
 (8) Includes 207,500 shares subject to vested options, or vesting within 60
     days after March 24, 2000, and 200 shares owned by a relative of Mr.
     Kellner, as to which shares Mr. Kellner shares dispositive power but
     disclaims beneficial ownership.
 
 (9) Includes 213,750 shares subject to vested options, or vesting within 60
     days after March 24, 2000.
 
(10) Includes 20,000 shares subject to vested director stock options.
 
(11) Includes 10,000 shares subject to vested director stock options and 2,000
     shares of Class A common stock.
 
(12) Includes 195,000 shares subject to vested options, or vesting within 60
     days after March 24, 2000, and 2,000 shares of Class A common stock.
 
(13) Includes 26,000 shares subject to vested director stock options, 30,200
     shares held in trust for the benefit of one of Mr. Sturm's children and
     130,200 shares held in a charitable trust for which Mr. Sturm acts as
     Trustee. Also includes 147,019 shares of Class A common stock representing
     Mr. Sturm's proportionate interest in Class A common stock beneficially
     owned by CAIP. Mr. Sturm is a limited partner of CAIP and, as such, may be
     deemed to share voting and dispositive power with respect to the shares
     beneficially owned by CAIP that are attributable to such limited
     partnership interest.
 
(14) Includes 23,000 shares subject to vested director stock options.
 
(15) Includes 3,073,439 shares subject to vested options, or vesting within 60
     days after March 24, 2000, which are held by executive officers and
     non-employee directors of the Company, and 848,113 shares of Class A common
     stock. See also notes 4 and 13.
 
                              GENERAL INFORMATION
 
BOARD OF DIRECTORS MEETINGS
 
     Regular meetings of the Board of Directors are generally held four times
per year, and special meetings are scheduled when required. The Board held four
meetings in 1999.
 
STANDING COMMITTEES OF THE BOARD
 
     The Audit Committee has the authority and power to act on behalf of the
Board of Directors with respect to the appointment of independent auditors for
the Company and with respect to authorizing any special audit or audit-related
activities which, in its discretion, are deemed necessary to perform its
functions. The committee monitors the audit activities of the Company and its
subsidiaries to assure that they have implemented proper internal accounting
controls and reviews and discusses the Company's audited financial statements
with management and the independent auditors. The committee consists of three
non-employee directors and met four times in 1999.
 
     The Executive Committee exercises certain powers of the Board of Directors
between Board meetings. The committee, which consists of two non-employee
directors and one officer-director of the Company, held no formal meetings in
1999, but took several actions by unanimous written consent.
 
     The Finance and Strategy Committee reviews the Company's annual budget, its
short and long-term strategic plans and its plans for raising capital and
increasing liquidity, and makes recommendations to the Board of Directors
regarding implementation of those plans as the committee deems appropriate. The
committee, which consists of two officer-directors and three non-employee
directors, met once in 1999.
 
     The Human Resources Committee has the authority and power to act on behalf
of the Board of Directors with respect to all matters relating to the employment
of senior officers by the Company and its subsidiaries, including but not
limited to approval of compensation, benefits, incentives and employment
contracts. The committee administers the Company's stock option, employee stock
purchase and profit sharing plans, the executive bonus program and other
incentive programs. The committee consists of four non-employee directors and
met four times in 1999.
 
                                        7

<PAGE>   11
 
     The Independent Directors Committee reviews compliance by Northwest and its
affiliates with the provisions of the governance agreement, as amended, and
related agreements to assure that the standstill, voting, transfer, conduct,
board composition, approval and other requirements, restrictions, terms and
conditions of such agreements are adhered to and that the benefits thereunder
for the Company and its stockholders are fully protected. The Committee consists
of eight non-employee directors and met one time in 1999.
 
     The Company does not have a nominating committee.
 
     During 1999, each director of the Company attended at least 75% of the sum
of the total number of meetings of the Board and each committee of which he or
she was a member.
 

COMPENSATION OF DIRECTORS
 
     Members of the Board of Directors who are not full-time employees of the
Company are paid $35,000 per year, $2,000 (or $3,000 for the chairperson) for
each Board and committee meeting physically attended, $1,000 for each Board
meeting attended by telephone, and $500 for each committee meeting attended by
telephone. Directors who conduct Company business in their capacities as
directors on behalf of the Company at the request of the Board or the Chairman
of the Board are paid (i) for telephone participation in Board and Committee
meetings as if they were physically present, if their conducting Company
business makes it reasonably impracticable for them to attend the meeting in
person, and (ii) $3,000 per day spent outside the United States while conducting
such Company business. Stock options relating to 5,000 shares of Class B common
stock are granted to non-employee directors following each annual meeting of
stockholders and bear exercise prices equal to the fair market value of such
stock on such date. A grant of options to purchase 5,000 shares of Class B
common stock is also made to directors who are first elected to the Board other
than at an annual meeting of stockholders. In addition, each non-employee
director receives lifetime flight benefits, comprised of space-available
personal and family flight passes, a travel card permitting positive space
travel by the director, the director's family and certain other individuals
(which is taxable to the director, subject to the reimbursement of certain of
such taxes by the Company), a frequent flyer card and an airport lounge card.
During 1999, the value imputed by the Company to the use of such flight benefits
by the Company's non-employee directors, including the reimbursement of related
taxes by the Company, varied by director, but did not exceed $11,200 for any of
the directors.
 
     Full-time employees of the Company who serve as directors receive
reimbursement of expenses incurred in attending meetings, in addition to flight
and other benefits provided in their employment agreements or shared generally
by other employees of the Company.
 
EXECUTIVE OFFICERS
 
     The following table sets forth certain information with respect to the
Company's current executive officers:
 

<TABLE>
<CAPTION>
           NAME, AGE AND POSITION                     TERM OF OFFICE AND BUSINESS EXPERIENCE
           ----------------------                     --------------------------------------
<S>                                            <C>
GORDON M. BETHUNE, age 58....................  Chairman of the Board and Chief Executive Officer
  Chairman of the Board and Chief Executive    since September 1996. Director since August 1994;
  Officer                                      President and Chief Executive Officer (November
                                               1994-September 1996); President and Chief Operating
                                               Officer (February 1994-November 1994); various
                                               positions with The Boeing Company commencing in
                                               1988, including Vice President and General Manager
                                               of the Commercial Airplane Group Renton Division,
                                               Vice President and General Manager of the Customer
                                               Services Division and Vice President of Airline
                                               Logistics Support; Director of: Sysco Corporation;
                                               Honeywell International Inc.
</TABLE>

 
                                        8

<PAGE>   12
 

<TABLE>
<CAPTION>
           NAME, AGE AND POSITION                     TERM OF OFFICE AND BUSINESS EXPERIENCE
           ----------------------                     --------------------------------------
<S>                                            <C>
GREGORY D. BRENNEMAN, age 38.................  President and Chief Operating Officer since
  President, Chief Operating Officer and       September 1996. Director since June 1995; Chief
  Director                                     Operating Officer (May 1995- September 1996);
                                               Consultant to the Company (February-April 1995);
                                               various positions, including Vice President, with
                                               Bain & Company, Inc. (consulting firm) commencing in
                                               1987; Director of J. Crew Group Inc.
LAWRENCE W. KELLNER, age 41..................  Executive Vice President and Chief Financial Officer
  Executive Vice President and Chief           since November 1996. Senior Vice President and Chief
  Financial Officer                            Financial Officer (June 1995-November 1996);
                                               Executive Vice President and Chief Financial Officer
                                               of American Savings Bank, F.A. (November 1992-May
                                               1995); Director of Belden & Blake Corporation.
C.D. McLEAN, age 58..........................  Executive Vice President -- Operations since
  Executive Vice President -- Operations       November 1996. Senior Vice President -- Operations
                                               (April 1994-November 1996).
JEFFERY A. SMISEK, age 45....................  Executive Vice President, General Counsel and
  Executive Vice President, General Counsel    Secretary since November 1996. Senior Vice
  and Secretary                                President, General Counsel and Secretary (April
                                               1995-November 1996); Director of Tuboscope, Inc.
MICHAEL H. CAMPBELL, age 51..................  Senior Vice President -- Human Resources and Labor
  Senior Vice President -- Human Resources     Relations since January 1997. Partner, Ford &
  and Labor Relations                          Harrison LLP (law firm) (1978-1997).
MARK A. ERWIN, age 44........................  Senior Vice President -- Airport Services since
  Senior Vice President -- Airport Services    April 1995.
J. DAVID GRIZZLE, age 45.....................  Senior Vice President -- Corporate Development since
  Senior Vice President -- Corporate           November 1996. Vice President -- Alliance
  Development                                  Development (April 1995-November 1996).
GERALD LADERMAN, age 42......................  Senior Vice President -- Finance since January 2000.
  Senior Vice President -- Finance             Vice President -- Corporate Finance (June
                                               1995-December 1999); Vice President -- Aircraft
                                               Programs (May 1993-June 1995).
GEORGE L. MASON, age 53......................  Senior Vice President -- Technical Operations since
  Senior Vice President -- Technical           November 1996. Vice President -- Technical
  Operations                                   Operations (March 1994-November 1996).
DEBORAH L. McCOY, age 45.....................  Senior Vice President -- Flight Operations since
  Senior Vice President -- Flight Operations   September 1999. Vice President -- Flight Training
                                               and Inflight (April 1997-September 1999); Staff Vice
                                               President -- Standards Training and Performance (May
                                               1996-April 1997); Senior Director -- Operational
                                               Performance (December 1994-May 1996); Nominee for
                                               Director of Eaton Corp.
JAMES B. REAM, age 44........................  President of Continental Express, Inc. since October
  President of Continental Express, Inc.       1999. Senior Vice President -- Asia of Continental
                                               Airlines, Inc. (March 1998-October 1999); President
                                               and Chief Operating Officer of Continental
                                               Micronesia, Inc. ("CMI") (October 1996-April 1998);
                                               Executive Vice President and Chief Operating Officer
                                               of CMI (June 1996-October 1996); Vice
                                               President -- Finance of Continental Airlines, Inc.
                                               (December 1994-June 1996).
</TABLE>

 
                                        9

<PAGE>   13
 

<TABLE>
<CAPTION>
           NAME, AGE AND POSITION                     TERM OF OFFICE AND BUSINESS EXPERIENCE
           ----------------------                     --------------------------------------
<S>                                            <C>
BONNIE S. REITZ, age 47......................  Senior Vice President -- Sales and Distribution
  Senior Vice President -- Sales and           since November 1996. Vice President -- Marketing and
  Distribution                                 Sales (August 1994-November 1996).
BARRY P. SIMON, age 57.......................  Senior Vice President -- International since
  Senior Vice President                        November 1996. Senior Vice President -- Europe (June
                                               1995-November 1996); Senior Vice
                                               President -- Strategic Business Units (April
                                               1995-June 1995).
KUNIAKI (JUN) TSURUTA, age 64................  Senior Vice President -- Purchasing and Materials
  Senior Vice President -- Purchasing and      Services since November 1996. Vice
  Materials Services                           President -- Purchasing (April 1994-November 1996).
JOHN E. (NED) WALKER, age 48.................  Senior Vice President -- Worldwide Corporate
  Senior Vice President -- Worldwide           Communi- cations since March 2000; Vice
  Corporate Communications                     President -- Corporate Communications (November
                                               1994-March 2000).
JANET P. WEJMAN, age 42......................  Senior Vice President and Chief Information Officer
  Senior Vice President and Chief Information  since November 1996. Vice President and Chief
  Officer                                      Information Officer (February 1996-November 1996);
                                               Assistant Vice President of System Technology and
                                               User Training, Chicago & North Western Railroad
                                               (August 1992-November 1996).
</TABLE>

 
     There is no family relationship between any of the executive officers. All
officers are appointed by the Board of Directors to serve until their
resignation, death or removal.
 
COMPENSATION OF EXECUTIVE OFFICERS
 
     The following tables set forth (i) the aggregate amount of remuneration
paid by the Company during 1999, 1998 and 1997 to the chief executive officer
and the four other most highly compensated executive officers of the Company in
1999 and (ii) information regarding stock options exercised in 1999 and the
value of the options held by such individuals at the end of 1999. None of the
top five executive officers of the Company received an option grant during 1999.
 
                           SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                                   LONG-TERM COMPENSATION
                                                                              ---------------------------------
                                              ANNUAL COMPENSATION                     AWARDS            PAYOUTS
                                    ---------------------------------------   -----------------------   -------
                                                                 OTHER        RESTRICTED   SECURITIES
                                                                ANNUAL          STOCK      UNDERLYING    LTIP      ALL OTHER
NAME AND PRINCIPAL POSITION  YEAR    SALARY     BONUS(1)    COMPENSATION(2)     AWARDS      OPTIONS     PAYOUTS   COMPENSATION
---------------------------  ----   --------   ----------   ---------------   ----------   ----------   -------   ------------
<S>                          <C>    <C>        <C>          <C>               <C>          <C>          <C>       <C>
Gordon M. Bethune..........  1999   $860,840   $6,390,500       $6,012            $0              0       $0           $0
  Chairman of the Board and  1998    765,000    1,381,500        2,941             0        650,000        0            0
  Chief Executive Officer    1997    755,750      937,500        2,005             0        150,000        0            0
Gregory D. Brenneman.......  1999   $658,376   $4,412,500       $6,692            $0              0       $0           $0
  President and Chief        1998    586,508    1,018,752        6,316             0        550,000        0            0
  Operating Officer          1997    583,410      718,749        9,011             0         90,000        0            0
Lawrence W. Kellner........  1999   $476,310   $2,387,500       $7,872            $0              0       $0           $0
  Executive Vice President   1998    428,400      675,000       11,716             0        250,000        0            0
  and Chief Financial
    Officer                  1997    427,172      525,000        7,279             0         60,000        0            0
C.D. McLean................  1999   $435,815   $2,337,500       $1,152            $0              0       $0           $0
  Executive Vice President   1998    383,100      618,752        5,427             0        200,000        0            0
   -- Operations             1997    381,600      468,752        3,511             0         60,000        0            0
Jeffery A. Smisek..........  1999   $404,919   $2,300,000       $7,445            $0              0       $0           $0
  Executive Vice President,  1998    356,996      587,500        8,783             0        200,000        0            0
  General Counsel and        1997    355,992      437,500        9,561             0         60,000        0            0
  Secretary
</TABLE>

 
                                       10

<PAGE>   14
 
---------------
 
(1) 1999 and 1998 include stay bonus amounts paid in connection with Northwest's
    acquisition of certain of the Company's capital stock in November 1998. The
    Company also agreed to make charitable contributions in the executives'
    names, including to the We Care Trust (the employee assistance charitable
    fund of Continental), in the amount of $340,000 in the case of Mr. Bethune,
    $1,000,000 in the case of Mr. Brenneman, $250,000 in the case of Mr.
    Kellner, $250,000 in the case of Mr. McLean and $250,000 in the case of Mr.
    Smisek.
 
(2) Represents a tax adjustment relating to certain travel benefits provided by
    the Company.
 
         AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
 

<TABLE>
<CAPTION>
                                                       NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                      UNDERLYING UNEXERCISED        IN-THE-MONEY OPTIONS AT
                           SHARES                   OPTIONS AT FISCAL YEAR-END        FISCAL YEAR-END(1)
                          ACQUIRED       VALUE      ---------------------------   ---------------------------
         NAME            ON EXERCISE    REALIZED    EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
         ----            -----------   ----------   -----------   -------------   -----------   -------------
<S>                      <C>           <C>          <C>           <C>             <C>           <C>
Gordon M. Bethune......    137,500     $5,628,125     532,500        487,500      $7,768,750     $3,515,625
Gregory D. Brenneman...    137,500      5,371,094     381,500        412,500       5,289,063      3,023,438
Lawrence W. Kellner....     37,500      1,441,406     192,500        187,500       2,752,813      1,335,938
C.D. McLean............     18,750        732,422     198,750        150,000       3,317,656        984,375
Jeffery A. Smisek......     37,500      1,549,219     180,000        150,000       2,635,625        984,375
</TABLE>

 
---------------
 
(1) Determined based on the closing price of the Class B common stock on
    December 31, 1999 of $44.375.
 
EMPLOYMENT AGREEMENTS
 
     Agreements with Mr. Bethune and Mr. Brenneman. Continental has entered into
employment agreements with each of Mr. Bethune and Mr. Brenneman relating to his
service as an officer and director of the Company. The agreements provide for
(i) an annual base salary of not less than $850,000 for Mr. Bethune and $650,000
for Mr. Brenneman; (ii) participation in any Company cash bonus program at the
maximum level available to any executive (and not less than the Bonus Percentage
defined below); (iii) a supplemental executive retirement plan ("SERP"),
disability benefits and life insurance; (iv) flight benefits substantially
identical to those currently provided to non-employee directors ("Flight
Benefits"); and (v) perquisites and other matters. The "Bonus Percentage" is
equal to the annual percentage of base salary (i.e., 0% to 125%) paid or payable
under the Company's executive bonus program.
 
     Pursuant to the SERP, each executive receives a base retirement benefit in
the form of an annual straight life annuity in an amount equal to the product of
(x) 2.5% times (y) the number of his credited years of service (as defined,
which include additional credited years of service for each of the next five
years to induce the executive to remain in the employ of the Company, with the
executive receiving an additional three years of credited service if he receives
a Termination Payment (as defined below) under his employment agreement) times
(z) his final average compensation (including salary and cash bonuses, other
than bonuses paid prior to April 1, 1995, certain stay bonus amounts described
elsewhere in this proxy statement, and cash bonuses paid under any long-term
incentive plans or programs adopted by the Company). Amounts payable under the
Company's Retirement Plan are offset against the SERP benefit.
 
     Each agreement may be terminated at any time by either party, with or
without cause. Each agreement is in effect until November 20, 2003 and is
automatically extended for an additional five-year period on each successive
fifth anniversary of such date, unless earlier terminated or not extended by
either party. If the executive's employment agreement is not extended by the
executive, or is terminated by the Company for cause (as described in the
agreement) or by the executive without good cause (as described in the
agreement), the Company will provide him with (i) a lump-sum payment of
approximately $5.1 million (for Mr. Bethune) or $3.9 million (for Mr.
Brenneman), the amount to which he would have been entitled under his previous
employment agreement if he had left the employ of the Company following the
purchase in 1998 by Northwest of certain of the Company's capital stock (the
"Existing Severance"), (ii) the SERP benefit and (iii) Flight Benefits
(together, the "Base Benefits"). If his employment is terminated by the Company
for
 
                                       11

<PAGE>   15
 
reasons other than death, disability or cause, or if the Company does not extend
his employment agreement, or if the executive terminates his employment
agreement for good cause, then the Company shall, in addition to providing the
Base Benefits, (i) cause all options and any shares of restricted stock awarded
to the executive to vest, (ii) make a lump-sum cash severance payment to the
executive (calculated as described below, the "Termination Payment"), (iii)
provide the executive with out-placement, office and other perquisites for
certain specified periods, and (iv) provide the executive and his eligible
dependents with certain insurance benefits. Alternatively, if the Company
terminates the executive's employment due to death or disability, the Company
shall provide the Base Benefits and cause all options and any shares of
restricted stock awarded to the executive to vest, and the executive, or his
beneficiaries, will receive life insurance benefits or, upon the cessation of
long-term disability payments prior to the executive's attainment of age 65
while disabled, a Company payment, in an amount equal to the Termination
Payment. The "Termination Payment" referred to above is equal to three times the
sum of (a) the executive's then current annual base salary and (b) a deemed
annual bonus equal to the Bonus Percentage (with respect to the most recently
ended fiscal year) of such salary.
 
     The Company is required to maintain life insurance on the executive's
behalf in an amount not less than the Termination Payment. Each executive is
indemnified by the Company for his tax obligations with respect to payments or
other benefits under the agreement or otherwise to the extent that such payments
or other benefits are subject to an excise or other special additional tax that
would not have been imposed absent such payments or other benefits.
 
     Agreements with Other Named Executives. Continental has entered into
employment agreements with each of Messrs. Kellner, McLean and Smisek, which
agreements contain substantially identical terms. The agreements provide for an
annual base salary of not less than $470,000, $430,000 and $400,000,
respectively, participation in any Company cash bonus program at the maximum
level available to any executive, a SERP with terms similar to Mr. Bethune's and
based on the executive's compensation, Flight Benefits, perquisites and other
matters. Each of the agreements may be terminated at any time by either party,
with or without cause. Each agreement is for a two-year term of employment
ending in November 2000. If the applicable executive's employment is terminated
by expiration of the employment agreement, the executive will receive (i) Flight
Benefits, (ii) the applicable SERP benefit, (iii) vesting of all options and any
shares of restricted stock awarded to him, and (iv) office and other perquisites
for certain specified periods. If the Company terminates the executive's
employment for reasons other than death, disability or cause (as described in
the agreement), the executive will receive, in addition to the benefits he would
receive had the agreement expired, a severance payment (as described below),
certain out-placement services and certain insurance benefits for himself and
his eligible dependents. If the executive terminates his employment for any
reason, he will be entitled to Flight Benefits and the applicable SERP benefit.
Additionally, if the executive terminates his employment for good cause (as
described in the agreement), then the Company shall (i) make a severance payment
to the executive, (ii) provide the executive with out-placement services and
office and other perquisites, and (iii) provide the executive and his eligible
dependents with certain insurance benefits. The severance payment referenced
above is equal to the product of (A) the sum of (1) the executive's then current
annual base salary and (2) a deemed annual bonus equal to the Bonus Percentage
(with respect to the most recently ended fiscal year) of such salary, multiplied
by (B) a fraction, the numerator of which is the number of months in the
severance period (described below) and the denominator of which is 12. If the
executive's employment is terminated within two years after a Change in Control
(as defined in the Company's 1998 Stock Incentive Plan) or, if such termination
occurs prior to November 21, 2000, the severance period means the period
commencing on the date of termination and continuing for 36 months. If the
executive's employment is terminated prior to a Change in Control or after the
date which is two years after a Change in Control, the severance period means
the period commencing on the date of termination and continuing for 24 months.
Each of the executives is indemnified by the Company for his tax obligations
with respect to payments or other benefits under his agreement or otherwise to
the extent that such payments or other benefits are subject to an excise or
other special additional tax that would not have been imposed absent such
payments or other benefits.
 
                                       12

<PAGE>   16
 
RETIREMENT PLAN
 
     The Continental Airlines Retirement Plan (the "Retirement Plan"), adopted
in 1988, is a noncontributory, defined benefit pension plan. Substantially all
employees of Continental and certain designated affiliates are eligible to
participate in the Retirement Plan. The following table represents the estimated
annual benefits payable in the form of a single life annuity to participants in
specified service and compensation categories under the Retirement Plan as it
pertains to non-pilots. Under the Retirement Plan, final average compensation
means the average of the participant's highest five consecutive years of
compensation during the last ten calendar years with Continental and its
affiliates for participating employees other than pilots. For pilots, final
average compensation means the average of the participant's highest 60
consecutive months of compensation during the last 120 months with Continental
and its designated affiliates (with shorter averaging periods applying prior to
January 1, 2003). Final average compensation includes regular pay and shift
differential, and excludes bonuses, severance pay, incentive and other special
forms of pay. Regulations under the Internal Revenue Code of 1986, as amended
(the "Code"), currently limit the compensation covered by the Retirement Plan to
$170,000 for plan years beginning in 2000. This limit is indexed and is
increased from time to time in accordance with IRS regulations. The table
reflects benefit amounts calculated using the compensation limit and average
social security wage base in effect for participants who reach age 65 in 2000.
 
                               PENSION PLAN TABLE
 

<TABLE>
<CAPTION>
                                                  YEARS OF SERVICE
                              ---------------------------------------------------------
FINAL AVERAGE COMPENSATION       5        10        15        20        25        30
--------------------------    -------   -------   -------   -------   -------   -------
<S>                           <C>       <C>       <C>       <C>       <C>       <C>
$100,000....................  $ 7,456   $14,912   $22,368   $29,825   $37,281   $44,737
$125,000....................    9,506    19,012    28,518    38,025    47,531    57,037
$150,000....................   11,556    23,112    34,668    46,225    57,781    69,337
$170,000....................   13,196    26,392    39,588    52,785    65,981    79,177
</TABLE>

 
     Messrs. Bethune and McLean are estimated to have six credited years of
service under the plan and Messrs. Brenneman, Kellner and Smisek are estimated
to have five such years. In addition, each such officer's employment agreement
provides for certain supplemental retirement benefits, which benefits will be
offset by amounts received under the Retirement Plan. Under the Retirement Plan,
a retired participant's annual benefit commencing at or after the normal
retirement age of 65 (60 in the case of pilots) is equal to 1.19% of the
participant's final average compensation plus 0.45% of the participant's final
average compensation (or a variable percentage in the case of pilots) in excess
of the average Social Security wage base, multiplied by the participant's years
of participation up to the applicable maximum years of participation. Special
rules also apply for certain other work groups of the Company.
 
                                       13

<PAGE>   17
 
P
ERFORMANCE GRAPH
 
     The following graph compares the cumulative total return on the Class B
common stock (the more widely traded of the Company's common stocks) with the
cumulative total returns (assuming reinvestment of dividends) on the Standard &
Poor's Airline Index and the Standard & Poor's 500 Stock Index as if $100 were
invested in the Class B common stock and each such index on December 31, 1994.
[PERFORMANCE CHART]
 

<TABLE>
<CAPTION>
                                                  CONTINENTAL AIRLINES          S&P AIRLINE INDEX             S&P 500 INDEX
                                                  --------------------          -----------------             -------------
<S>                                             <C>                         <C>                         <C>
12/30/94                                                  100.00                     100.00                      100.00
12/29/95                                                  470.27                     145.86                      137.58
12/31/96                                                  610.81                     159.72                      169.17
12/31/97                                                 1040.54                     268.81                      225.61
12/31/98                                                  724.32                     260.01                      290.09
12/31/99                                                  959.46                     238.49                      351.13
</TABLE>

 

<TABLE>
<CAPTION>
                                          12/30/94   12/29/95   12/31/96   12/31/97    12/31/98   12/31/99
                                          --------   --------   --------   ---------   --------   --------
<S>                                       <C>        <C>        <C>        <C>         <C>        <C>
 Continental Airlines...................  $100.00    $470.27    $610.81    $1,040.54   $724.32    $959.46
 S&P Airline Index......................  $100.00    $145.86    $159.72    $  268.81   $260.01    $238.49
 S&P 500 Index..........................  $100.00    $137.58    $169.17    $  225.61   $290.09    $351.13
</TABLE>

 
EXECUTIVE COMPENSATION REPORT OF THE HUMAN RESOURCES COMMITTEE
 
  General Compensation Strategy
 
     In 1999, the Board's Human Resources Committee (the "Committee") continued
its prior compensation strategy, which is to:
 
     - Develop an appropriate linkage between compensation levels and the
       creation of stockholder value
 
     - Provide that the total compensation program will be able to attract,
       motivate and retain employees of outstanding talent
 
     - Achieve competitiveness of total compensation
 
     - Focus on variable pay to provide incentive to improve performance
 
     In considering appropriate executive compensation levels, the Committee
applies these factors to available marketplace compensation data for U.S.
airlines of comparable size, including industry peer airlines shown in the
performance graph, as well as available marketplace compensation data for
certain non-airline companies with historical revenue, stock appreciation, stock
volatility and other characteristics deemed comparable to the Company by the
Committee. The elements of compensation included in the competitive analysis
generally are base salaries, annual incentives and long-term incentives.
 
     Having announced in September 1997 its intention to bring all employees to
industry standard wages over a three-year period, the Company continued raising
the salaries and wages of certain non-executive employees
 
                                       14

<PAGE>   18
 
during 1999. Nearly all employees other than officers and other senior managers
of the Company are incentivized through the Company's profit sharing plan and
on-time arrival bonus structure, and all employees are able to participate in
the Company's success through participation in the employee stock purchase plan.
Executives' incentives are linked to the Company's performance through the
executive bonus program, through the award of stock options and through a new
long term incentive performance award program implemented under the Incentive
Plan 2000 submitted for stockholder approval at the Meeting. Other officers and
senior managers participate in an annual bonus program and are also awarded
stock options, and certain of such officers participate in the new long term
incentive performance award program.
 
     In conducting the programs applicable to executives, the Committee
considers the effects of Section 162(m) of the Internal Revenue Code, which
denies publicly held companies a tax deduction for annual compensation in excess
of one million dollars paid to their chief executive officer or any of their
four other most highly compensated executive officers who are employed on the
last day of a given year, unless their compensation is based on performance
criteria that are established by a committee of outside directors and approved,
as to their material terms, by such company's stockholders. Certain of the
Company's current compensation plans, such as its stock option plans, and the
programs implemented to date under the Incentive Plan 2000 proposed for
stockholder approval in this proxy statement, are designed to qualify as
performance-based compensation under Section 162(m). However, other awards, such
as cash payments from stay bonuses and restricted stock grants, do not so
qualify and are subject to the limitation on deductibility. Although certain
amounts recorded as compensation by the Company to certain of the most highly
compensated officers of the Company with respect to 1999 were limited by Section
162(m), such limitation did not result in the payment of increased federal
income taxes by the Company in 1999 due to the Company's significant net
operating loss carryforwards.
 
     Base Salaries. The Committee believes it is crucial to provide salaries
within a competitive market range in order to attract and retain highly talented
employees. The specific competitive markets considered depend on the nature and
level of the positions in question, the labor markets from which qualified
individuals are recruited, and the companies and industries competing for the
services of the Company's executives. Base salary levels are also dependent on
the performance of each individual employee over time. Thus, employees who
sustain higher levels of performance over time will have correspondingly higher
salaries. Salary adjustments are based on general levels of market increases in
salaries, individual performance, overall financial results and changes in job
duties and responsibilities. All base salary increases are based on a philosophy
of relative salary equity, market demand and pay-for-performance.
 
     Incentive Compensation. The Committee believes that appropriate base
salaries must be coupled with incentive compensation that not only attracts and
retains qualified employees, but rewards them for increased performance.
Compensation linked to the performance of the Company's common stock is one of
the best incentives to align employees' interests with those of stockholders and
to enhance performance. In addition, through the Incentive Plan 2000 proposed
for stockholder approval in this proxy statement, the Committee has sought to
define performance criteria relative to the Company's competitors, mitigate the
dilutive effect of relying solely on common stock-based awards as incentive
compensation, and develop programs designed to retain management in the face of
significant employment opportunities from other companies. The Company maintains
stock option plans for its executive officers and other senior managers, and an
employee stock purchase plan open to all employees of the Company, each of which
is designed to encourage employees, including the Company's executive officers
and key employees, to identify their interests with those of stockholders and
enhance the Company's performance. In addition, the Company maintains a profit
sharing plan, under which 15% of the Company's pre-tax earnings (before unusual
or nonrecurring items) is distributed to substantially all non-management
employees of the Company (other than employees whose collective bargaining
agreement provides otherwise or limits participation or who participate in
profit sharing arrangements required by local law) each year on a pro rata basis
according to specified earnings. Finally, the Company maintains an executive
bonus program, a management bonus program and a non-management on-time
performance bonus to focus employees on common goals and to encourage them to
work together to achieve profitability. The Committee believes that these
incentives play a significant part in the Company's continuing improvement and
success.
 
                                       15

<PAGE>   19
 
  1999 Executive Compensation
 
     Base Salaries. In the first quarter of 1999, salaries for substantially all
the Company's executive officers were increased, including the Chief Executive
Officer. None of the executive officers whose salaries were increased in 1999
had received salary increases in 1998. The adjustments resulted from the
Committee's review of competitive salaries at the time and the executives'
performance.
 
     Stock Incentives. Consistent with its compensation strategy, the Company
awarded stock options to certain officers and key employees during 1999. Options
granted during 1999 bear five-year terms and vest ratably over four years.
However, no options were granted to the five most highly compensated officers,
as they had received larger than normal grants in 1998 as discussed in last
year's proxy statement. In addition, none of the Company's other executive
officers received option grants in 1999. The Company also made no restricted
stock grants in 1999.
 
     Other Plans and Programs. The Company's executive bonus program, which
terminated on April 1, 2000, made the Company's executive officers and certain
additional officers recommended by the Chief Executive Officer and approved by
the Committee eligible to receive on a fiscal quarterly basis a cash bonus of up
to 125% of their salary for such quarter based on the Company's cumulative net
income earned through such quarter as compared to the cumulative net income
targeted through such quarter in the Company's annual financial plan approved by
the Board and adopted by the Committee. In 1999, the Company implemented a
deferred compensation plan in which directors and officers of the Company may
participate. The plan had been previously recommended by the Committee and
approved by the Board.
 
     As previously reported to stockholders, each of Messrs. Bethune, Brenneman,
Kellner, McLean and Smisek received monthly payments during 1999 pursuant to
stay bonus agreements with the Company entered into in 1998. These bonuses were
designed to encourage the officers to remain with the Company following
Northwest's purchase of certain capital stock of the Company and were payable
through February 2000. The Company also agreed to make charitable contributions
in each such executive's name, including to the We Care Trust (the employee
assistance charitable fund of Continental), during the same period. Also as
previously reported, certain other officers, including executive officers,
received stay bonus payments during the same period.
 
     As discussed elsewhere in this proxy statement, the Committee recommended
and the Board adopted the Company's Incentive Plan 2000, providing for the award
of cash and stock-based incentives, including long-term incentive awards, to
non-employee directors, officers and key employees. The plan is designed to
align participants' interests with those of stockholders and to reduce the
Company's historic dependence solely on stock options to achieve its goal of
attracting, retaining and incentivizing qualified personnel. The Committee has
adopted, subject to stockholder approval of the Incentive Plan 2000, three
incentive programs under the Incentive Plan 2000. The first program, the
Executive Bonus Performance Award Program, is similar to (and will replace) the
Company's recently terminated executive bonus program, but also provides an
alternate target for bonus payments of achievement of number 1, 2 or 3 in
EBITDAR margin ranking by the Company as compared to an industry group, together
with an operating income hurdle. The second program, the Long Term Incentive
Performance Award Program ("LTIP"), provides for cash incentive payments
determined by the Company's achievement over multi-year performance periods of
targeted EBITDAR margin rankings compared with an industry group, together with
an operating income hurdle. If the Incentive Plan 2000 is approved by
stockholders, the Committee anticipates reducing the size of future annual
option grants by approximately one-half to executives who participate in the
LTIP. The third program, the Officer Retention and Incentive Award Program
("Retention Program"), is designed to retain executives in light of significant
employment opportunities for such executives in other businesses, including the
e-commerce and internet industries, and to incentivize the Company's executives
to grow the value of the Company's investments in e-commerce and internet
businesses, including distribution and marketing channels for the Company. This
program permits executives to receive a cash payment measured by a portion of
the gain and profits associated with the Company's investments in e-commerce or
internet businesses. The Committee believes that the Retention Program will act
as a powerful retention tool for Company management, and will benefit the
Company from the direct incentive to foster investment in and growth of
e-commerce and internet businesses
 
                                       16

<PAGE>   20
 
strategic for the growth and development of the Company, including through cost
savings generated by more efficient means of distribution and marketing of the
Company's services.
 
  1999 CEO Compensation
 
     Mr. Bethune's salary was increased in the first quarter of 1999 as a result
of the Committee's review of competitive salaries at the time and his
performance as Chief Executive Officer. Along with other executive officers of
the Company, Mr. Bethune received certain bonus amounts in 1999 reflecting the
Company's success under the executive bonus program. In addition, as described
elsewhere in this proxy statement, Mr. Bethune received monthly payments during
1999 pursuant to a stay bonus agreement with the Company entered into in 1998 to
encourage him to remain with the Company following Northwest's purchase of
certain capital stock of the Company. Mr. Bethune did not receive any stock
options in 1999.
 
                                            Respectfully submitted,
 
                                            Human Resources Committee
                                            Thomas J. Barrack, Jr., Chairman
                                            Kirbyjon H. Caldwell
                                            George G. C. Parker
                                            Charles A. Yamarone
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Company's executive compensation programs are administered by the Human
Resources Committee of the Board of Directors. The committee is currently
composed of four independent, non-employee directors, and no member of the
committee has been an officer or employee of the Company or any of its
subsidiaries.
 

CERTAIN TRANSACTIONS
 
     The Company and America West Airlines, Inc. ("America West"), a subsidiary
of America West Holdings Corporation in which David Bonderman holds a
significant interest, entered into a series of agreements during 1994 related to
code-sharing and ground handling that have created substantial benefits for both
airlines. Mr. Bonderman is a director and stockholder of the Company. The
services provided are considered normal to the daily operations of both
airlines. As a result of these agreements, during 1999 Continental paid America
West $25 million and America West paid Continental $31 million.
 
     In November 1998, the Company and Northwest, a significant stockholder of
the Company, began implementing a long-term global alliance involving extensive
code-sharing, frequent flyer reciprocity and other cooperative activities. In
addition, Northwest and Continental provide other services to each other
considered normal to the daily operations of both airlines. As a result of these
latter arrangements, during 1999, Continental paid Northwest $7 million and
Northwest paid Continental $9 million.
 
     Karen Hastie Williams is a partner of Crowell & Moring LLP, a law firm that
has provided services to the Company and its subsidiaries for many years. The
Company's fee arrangement with Crowell & Moring LLP is negotiated on the same
basis as the Company's arrangements with its other outside legal counsel and is
subject to the same terms and conditions. The fees paid by the Company to
Crowell & Moring LLP are comparable to those it pays to other law firms for
similar services.
 
                                       17

<PAGE>   21
 
 
                                 PROPOSAL 1:
 
                             ELECTION OF DIRECTORS
 
     It is the intention of the persons named in the enclosed form of proxy,
unless otherwise instructed, to vote duly executed proxies for the election of
each nominee for director listed below. Pursuant to the Company's Bylaws,
directors will be elected by a plurality of the votes duly cast at the Meeting.
If elected, such nominee will hold office until the next annual meeting of
stockholders and until his or her respective successor has been duly elected and
has qualified. Management does not contemplate that any of the nominees will
become unavailable to serve for any reason, but if that should occur before the
Meeting, proxies will be voted for another nominee or nominees to be selected by
the Board of Directors.
 
     Air Partners, through which Northwest holds the majority of its Class A
common stock, has the limited right, in certain circumstances, to convert its
Class A common stock into Class D common stock. No person may hold or own Class
D common stock other than Air Partners and certain of its affiliates. The Class
D common stock, if issued, would permit Air Partners to elect one-third of the
directors to the Company's Board. To date, no shares of Class D common stock
have been issued.
 
     Continental's Board of Directors currently consists of thirteen persons.
Pursuant to the governance agreement described under "Voting Rights and
Principal Stockholders", the Company and the Northwest Parties agreed to take
all actions necessary to cause Independent Directors (as therein defined) to
constitute at least a majority of the Board of Directors. Ms. Williams and
Messrs. Caldwell, Foley, McCorkindale, Parker, Pogue, Sturm and Yamarone are
"Independent Directors" as defined by the governance agreement. Since the shares
owned by the Northwest Parties represented more than 50% of the outstanding
voting power at March 24, 2000, the foregoing Independent Directors are assured
of election at the Meeting.
 
     There is no family relationship between any of the nominees for director or
between any nominee and any executive officer.
 
     The following table shows, with respect to each nominee, (i) such person's
name and age, (ii) the period for which such person has served as a director of
the Company, (iii) all positions and offices with the Company currently held by
the nominee and his or her principal occupation and business experience during
the last five years, (iv) other directorships held by the nominee and (v) the
standing committees of the Board of Directors of which he or she is a member.
Each of the nominees is currently a director of the Company.
 

<TABLE>
<CAPTION>
                 NAME, AGE, POSITION
              AND COMMITTEE MEMBERSHIPS                    TERM OF OFFICE AND BUSINESS EXPERIENCE
              -------------------------                    --------------------------------------
<S>                                                    <C>
THOMAS J. BARRACK, JR., age 52.......................  Director since August 1994. Chairman and Chief
  (Human Resources Committee)                          Executive Officer of Colony Capital, Inc. and
                                                       Colony Advisors, Inc. (real estate
                                                       investments) since 1991; Director of: Public
                                                       Storage, Inc; Kennedy-Wilson, Inc.
GORDON M. BETHUNE, age 58............................  Director since August 1994. Chairman of the
  Chairman of the Board and Chief Executive Officer    Board and Chief Executive Officer since
  (Executive Committee, Finance and Strategy           September 1996. President and Chief Executive
  Committee)                                           Officer (November 1994-September 1996);
                                                       President and Chief Operating Officer
                                                       (February 1994-November 1994); various
                                                       positions with The Boeing Company commencing
                                                       in 1988, including Vice President and General
                                                       Manager of the Commercial Airplane Group
                                                       Renton Division, Vice President and General
                                                       Manager of the Customer Services Division and
                                                       Vice President of Airline Logistics Support;
                                                       Director of Sysco Corporation; Honeywell
                                                       International Inc.
</TABLE>

 
                                       18

<PAGE>   22
 

<TABLE>
<CAPTION>
                 NAME, AGE, POSITION
              AND COMMITTEE MEMBERSHIPS                    TERM OF OFFICE AND BUSINESS EXPERIENCE
              -------------------------                    --------------------------------------
<S>                                                    <C>
DAVID BONDERMAN, age 57..............................  Director since April 1993. Chairman of the
  (Executive Committee, Finance and Strategy           Board (May 1993-September 1996); Managing
  Committee)                                           Partner of Texas Pacific Group since 1992;
                                                       Director of: Bell & Howell Company, Inc.;
                                                       Beringer Wine Estates; Co-Star Realty
                                                       Information, Inc.; Denbury Resources, Inc.;
                                                       Ducati Motor Holding S.p.A.; Oxford Health
                                                       Plans, Inc.; Paradyne Networks, Inc.; Ryanair,
                                                       Ltd; and Washington Mutual, Inc.
GREGORY D. BRENNEMAN, age 38.........................  Director since June 1995. President and Chief
  President and Chief Operating Officer (Finance and   Operating Officer since September 1996. Chief
  Strategy Committee)                                  Operating Officer (May 1995-September 1996);
                                                       Consultant to the Company (February-April
                                                       1995); various positions, including Vice
                                                       President, with Bain & Company, Inc.
                                                       (consulting firm) commencing in 1987; Director
                                                       of J. Crew Group Inc.
KIRBYJON H. CALDWELL, age 46.........................  Director since May 1999. Senior Pastor of The
  (Human Resources Committee, Independent Directors    Windsor Village-St. John's United Methodist
  Committee)                                           Church, Houston, Texas since 1982. Director
                                                       of: Chase Bank of Texas National Association;
                                                       Chase Bank of Texas -- Houston Region;
                                                       Memorial Hermann Healthcare System; the
                                                       Greater Houston Partnership.
PATRICK FOLEY, age 68................................  Director since April 1993. Former Chairman of
  (Audit Committee, Independent Directors Committee)   the Board, President and Chief Executive
                                                       Officer of DHL Airways, Inc. (1988-1999);
                                                       Director of: Foundation Health Systems, Inc.;
                                                       Glenborough Realty Trust, Inc.; Flextronics
                                                       International Ltd.; Del Monte Foods Company.
DOUGLAS H. McCORKINDALE, age 60......................  Director since April 1993. Vice Chairman and
  (Independent Directors Committee)                    President of Gannett Co., Inc. (a nationwide
                                                       diversified communications company) since
                                                       September 1997; Vice Chairman and Chief
                                                       Financial and Administrative Officer of
                                                       Gannett Co., Inc. (1984-1997); Director of: a
                                                       group of Prudential Mutual Funds; Global
                                                       Crossing Ltd.
GEORGE G. C. PARKER, age 61..........................  Director since June 1996. Associate Dean for
  (Finance and Strategy Committee, Human Resources     Academic Affairs and Director of MBA Program
  Committee, Independent Directors Committee)          since 1993; Dean Witter Professor of Finance
                                                       and Management (since 1996) and Professor of
                                                       Management (1973-1996) at the Graduate School
                                                       of Business, Stanford University; Director of:
                                                       Affinity Group International, Inc.; BGI Mutual
                                                       Funds; Dresdner/RCM Global Mutual Funds; Tejon
                                                       Ranch Company.
</TABLE>

 
                                       19

<PAGE>   23
 

<TABLE>
<CAPTION>
                 NAME, AGE, POSITION
              AND COMMITTEE MEMBERSHIPS                    TERM OF OFFICE AND BUSINESS EXPERIENCE
              -------------------------                    --------------------------------------
<S>                                                    <C>
RICHARD W. POGUE, age 71.............................  Director since April 1993. Senior Advisor of
  (Executive Committee, Independent Directors          Dix & Eaton Incorporated (a public relations
  Committee)                                           firm) since 1994; Senior Partner (1993-1994)
                                                       and Managing Partner (1984-1992) of Jones,
                                                       Day, Reavis & Pogue (law firm); Director of:
                                                       Derlan Industries, Ltd.; Dix & Eaton
                                                       Incorporated; M.A. Hanna Co.; IT Group; Rotek
                                                       Incorporated; TRW Inc.
WILLIAM S. PRICE III, age 43.........................  Director since April 1993. Managing Partner of
  (Finance and Strategy Committee)                     Texas Pacific Group since 1992; Director of
                                                       AerFi Group plc; Belden & Blake Corporation;
                                                       Beringer Wine Estates; Del Monte Foods
                                                       Company; Denbury Resources, Inc.; Favorite
                                                       Brands, Inc.; VIVRA Inc.; Zilog, Inc.
DONALD L. STURM, age 68..............................  Director since 1993. Chairman of the Board and
  (Audit Committee, Independent Directors Committee)   Chief Executive Officer of: The Sturm Group
                                                       (private equity investment managers) since
                                                       1991; Sturm Banks of Colorado, Inc. (which
                                                       owns four banks) since 1993; Sturm Banks of
                                                       Wyoming, Inc. (which owns four banks) since
                                                       1993; Sturm Banks of Kansas City, Inc. (which
                                                       owns one bank) since 1996; Chairman of the
                                                       Board of FirstWorld Communications, Inc. since
                                                       January 1998 and MD Network since 1996;
                                                       Director of: HarvardNet (a DSL provider in the
                                                       northeast U.S.); Kaptech (a French telecom
                                                       company); Advantag-e (European web hosting
                                                       company); iVention group (an internet start-up
                                                       incubator company); Castle Rock Development
                                                       Company.
KAREN HASTIE WILLIAMS, age 55........................  Director since April 1993. Partner of Crowell
  (Audit Committee, Independent Directors Committee)   & Moring LLP (law firm) since 1982; Director
                                                       of: Crestar Financial Corporation; Gannett
                                                       Co., Inc.; and Washington Gas Light Company.
CHARLES A. YAMARONE, age 41..........................  Director since January 1995. Executive Vice
  (Human Resources Committee, Independent Directors    President of U.S. Bancorp Libra, a division of
  Committee)                                           U.S. Bancorp Investments, Inc., since January
                                                       1999; Executive Vice President and Research
                                                       Director of Libra Investments, Inc. (July
                                                       1994-January 1999); Director of El Paso
                                                       Electric Company.
</TABLE>

 
 
    THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED ABOVE, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY.
 
                                       20

<PAGE>   24
 

                                  PROPOSAL 2:
 
                                APPROVAL OF THE
                              INCENTIVE PLAN 2000
 
GENERAL
 
     As described above in its report, the Human Resources Committee has sought
to mitigate the dilutive effect of relying solely on stock options as the only
long-term means for incentivizing management's performance and aligning its
interests with those of stockholders by adopting other long-term incentive
programs under the Continental Airlines, Inc. Incentive Plan 2000 (as amended
and restated, the "Incentive Plan 2000") being submitted for stockholder
approval at the Meeting. Nevertheless, the Committee believes that appropriate
stock-based compensation should remain an important part of management's
compensation, and the Incentive Plan 2000 provides for up to 3,000,000 shares of
Class B common stock (subject to adjustment as described below) to be issued
under the plan. The Company's other stock-based incentive plans, other than the
Company's stock purchase plan which is open to all employees, have been largely
depleted. To permit both stock-based and other performance-based incentive
programs, the Committee recommended and the Board of Directors adopted the
Incentive Plan 2000, subject to approval of the Incentive Plan 2000 by the
stockholders of the Company at the Meeting.
 
     If stockholders do not approve the Incentive Plan 2000 at the Meeting, the
Company will not have sufficient shares authorized under stock-based incentive
plans to make appropriately competitive stock option grants to its officers,
including its executive officers, and other management, will not have an
executive bonus program (the Company's current program having terminated on
April 1, 2000), will not have a long term incentive program and will not have an
executive retention program.
 
     The purpose of the Incentive Plan 2000 is to enable the Company and its
subsidiaries to attract and retain capable persons to serve as directors and
employees and to provide a means whereby those individuals upon whom the
responsibilities of the successful administration and management of the Company
and its subsidiaries rest, and whose present and potential contributions to the
welfare of the Company and its subsidiaries are of importance, can acquire and
maintain stock ownership, thereby strengthening their concern for the welfare of
the Company and its subsidiaries. A further purpose of the Incentive Plan 2000
is to provide such individuals with additional non-stock-based incentive and
reward opportunities designed to attract and retain those individuals and
enhance the profitable growth of the Company and its subsidiaries.
 
SUMMARY OF THE INCENTIVE PLAN 2000 AND ASSOCIATED PROGRAMS
 
     The following summary provides a general description of certain features of
the Incentive Plan 2000, and the programs adopted by the Committee to implement
the Incentive Plan 2000. Copies of the Incentive Plan 2000 and the programs
adopted thereunder are on file and publicly available at the SEC and are also
available on the Company's website at www.continental.com. Capitalized terms not
otherwise defined herein have the meanings ascribed to them in the Incentive
Plan 2000 or such programs.
 
     The Incentive Plan 2000 provides that the Company may grant Options to
purchase shares of Class B common stock, Restricted Stock Awards, Performance
Awards, Incentive Awards and Retention Awards to certain employees or directors.
The terms applicable to these various types of Awards, including those terms
that may be established by the Administrator when making or administering
particular Awards, are set forth in detail in the Incentive Plan 2000. The
Administrator may make Awards under the Incentive Plan 2000 until October 3,
2009. The Incentive Plan 2000 will remain in effect (at least for the purpose of
governing outstanding Awards) until all Option Awards granted under the
Incentive Plan 2000 have been exercised or expired, all restrictions imposed
upon Restricted Stock Awards granted under the Incentive Plan 2000 have been
eliminated or the Restricted Stock Awards have been forfeited, and all
Performance Awards, Incentive Awards and Retention Awards granted under the
Incentive Plan 2000 have been satisfied or have terminated.
 
     Eligibility. Awards may be granted only to persons who, at the time of
grant, are directors of the Company or employees of the Company or one of its
subsidiaries. Awards may be granted on more than one
 
                                       21

<PAGE>   25
 
occasion to the same person, and Awards may consist of any combination of
Options, Restricted Stock Awards, Performance Awards, Incentive Awards and
Retention Awards, as is best suited to the circumstances of the particular
person. As of March 24, 2000, 11 non-employee directors were eligible to receive
Awards under the Incentive Plan 2000, and it is anticipated that approximately
530 employees (substantially all of the Company's management-level employees)
will receive Awards under the Incentive Plan 2000. The Company does not
anticipate that non-employee directors will receive Awards under the Incentive
Plan 2000 or programs adopted thereunder, other than normal stock option grants
as described under "General Information -- Compensation of Directors" above.
 
     Stock Options. The Administrator may grant options that entitle the
recipient to purchase shares of Class B common stock at a price equal to or
greater than the Market Value per Share on the date of grant. The Market Value
per Share of Class B common stock was $40.625 on March 24, 2000, which was the
closing price of the Class B common stock on the New York Stock Exchange on that
date. An Option shall be exercisable in whole or in such installments and at
such times as determined by the Administrator. The option price is payable in
full in the manner specified by the Administrator. The holder of an Option is
entitled to privileges and rights of a stockholder only with respect to shares
of Class B common stock purchased under the Option and for which certificates
representing such shares are registered in the Holder's name.
 
     Options granted under the Incentive Plan 2000 may be Options that are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code or Options that are not intended to so qualify. An Incentive
Stock Option will be treated as a Non-Qualified Option to the extent that the
aggregate Market Value per Share (determined at the time of grant) of Class B
common stock with respect to which Incentive Stock Options are first exercisable
by an individual during any calendar year under all incentive stock option plans
of the Company (and its parent and subsidiary corporations) exceeds $100,000. An
Incentive Stock Option may only be granted to an individual who is an employee
at the time the Option is granted. No Incentive Stock Option may be granted to
an individual if, at the time the Option is granted, such individual owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or of its parent or subsidiary corporation, within the
meaning of Section 422(b)(6) of the Code), unless (i) at the time such Option is
granted the option price is at least 110% of the Market Value per Share of the
Class B common stock subject to the Option and (ii) such Option by its terms is
not exercisable after the expiration of five years from the date of grant.
 
     An Option Grant Document may provide for the payment of the option price,
in whole or in part, by delivery of a number of shares of Class B common stock
(plus cash if necessary) having a Market Value per Share equal to such option
price. Moreover, an Option Grant Document may provide for a "cashless exercise"
of the Option by establishing procedures satisfactory to the Administrator with
respect thereto. The terms and conditions of the respective Option Grant
Documents need not be identical.
 
     The Administrator (concurrently with the grant of an Option or subsequent
to such grant) may, in its sole discretion, grant stock appreciation rights
("SARs") to any Holder of an Option. SARs may give the Holder of an Option the
right to surrender any exercisable Option or portion thereof in exchange for
cash, whole shares of Class B common stock, or a combination thereof, as
determined by the Committee, with a value equal to the excess of the Market
Value per Share, as of the date of such request, of one share of Class B common
stock over the Option price for such share multiplied by the number of shares
covered by the Option or portion thereof to be surrendered. Any SAR granted in
connection with an Incentive Stock Option is exercisable only when the Market
Value per Share of the Class B common stock exceeds the price specified in the
Option (or the portion of the Option to be surrendered). Upon exercise of any
SAR granted under the Incentive Plan 2000, the number of shares reserved for
issuance under the Incentive Plan 2000 will be reduced only to the extent that
shares of Class B common stock are actually issued in connection with the SAR
exercise. The Administrator may prescribe additional terms and conditions
governing any SARs.
 
     Options and SARs may be granted under the Incentive Plan 2000 in
substitution for stock options held by individuals employed by corporations who
become employees as a result of a merger or consolidation or other business
combination of the employing corporation with the Company or any subsidiary.
 
                                       22

<PAGE>   26
 
     Restricted Stock. A grant of Restricted Stock pursuant to a Restricted
Stock Award constitutes an immediate transfer to the recipient of record and
beneficial ownership of the shares of Restricted Stock in consideration of the
performance of services by the recipient (or other consideration determined by
the Administrator). The recipient is entitled immediately to voting and other
ownership rights in the shares, subject to restrictions referred to in the
Incentive Plan 2000 or contained in the related Grant Document. The transfer may
be made without additional consideration or in consideration of a payment by the
recipient that is less than the market value of the shares on the date of grant.
Each grant may, in the discretion of the Administrator, limit the recipient's
dividend rights during the period in which the shares are subject to a
substantial risk of forfeiture and restrictions on transfer. The terms and
conditions of the respective Restricted Stock Grant Documents need not be
identical.
 
     Restricted Stock must be subject, for a period or periods determined by the
Administrator at the date of grant, to one or more restrictions, including,
without limitation, a restriction that constitutes a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code and applicable
interpretive authority thereunder. For example, an Award could provide that the
Restricted Stock would be forfeited if the Holder ceased to serve the Company as
an employee during a specified period. In order to enforce these forfeiture
provisions, the transferability of Restricted Stock during the period or periods
during which such restrictions are to continue will be prohibited or restricted
in a manner and to the extent prescribed by the Administrator at the date of
grant. The Incentive Plan 2000 provides for a shorter period during which the
forfeiture provisions are to apply in the event of a Change in Control of the
Company.
 
     The Committee has resolved that all Restricted Stock Awards under the
Company's stock incentive plans (including the Incentive Plan 2000) shall vest
over at least a three-year period, or over at least a one-year period if vesting
is performance-based (or as otherwise provided in the applicable plan or award
agreement, such as upon a Change in Control).
 
     Performance Awards. The Administrator shall establish, with respect to and
at the time of each Performance Award, a performance period over which the
performance applicable to the Performance Award shall be measured. A Performance
Award shall be awarded to a Holder contingent upon future performance of the
Company or any subsidiary, division, or department thereof. The Administrator
shall establish the performance measures applicable to such performance within
the applicable time period permitted by Section 162(m) of the Code, with such
adjustments thereto as may be determined by the Administrator. The performance
measures may be absolute, relative to one or more other companies, relative to
one or more indexes, or measured by reference to the Company alone or the
Company together with its consolidated subsidiaries. The performance measures
established by the Administrator may be based upon (i) the price of a share of
Class B common stock, (ii) operating income or operating income margin, (iii)
earnings before interest, income taxes, depreciation, amortization and aircraft
rent ("EBITDAR") or EBITDAR margin, (iv) net income or net income margin, (v)
cash flow, (vi) total stockholder return, or (vii) a combination of any of the
foregoing, including any average, weighted average, minimum, hurdle, rate of
increase or other measure of any or any combination thereof. The Administrator,
in its sole discretion, may provide for an adjustable Performance Award value
based upon the level of achievement of performance measures.
 
     In determining the value of Performance Awards, the Administrator shall
take into account a Holder's responsibility level, performance, potential, other
Awards, and such other considerations as it deems appropriate. The
Administrator, in its sole discretion, may provide for a reduction in the value
of a Holder's Performance Award during the performance period, if permitted by
the applicable Grant Document.
 
     Following the end of the performance period, the Holder of a Performance
Award shall be entitled to receive payment of an amount not exceeding the
maximum value of the Performance Award, based on the achievement of the
performance measures for such performance period, as determined by the
Administrator and certified by the Committee as required by Section 162(m) of
the Code. Payment of a Performance Award may be made in cash, shares of Class B
common stock (valued at the Market Value per Share), or a combination thereof,
as determined by the Administrator. Payment shall be made in a lump sum, except
as otherwise set forth in the applicable Grant Document.
 
                                       23

<PAGE>   27
 
     A Performance Award will terminate if the Holder does not remain
continuously employed or in service as a director of the Company or a subsidiary
at all times during the applicable performance period, except as otherwise set
forth in the applicable Grant Document. The Company does not anticipate that
non-employee directors will receive Performance Awards.
 
     Long Term Incentive Performance Award Program. To implement in part the
Performance Award provisions described above, the Committee has adopted the
Continental Airlines, Inc. Long Term Incentive Performance Award Program
("LTIP") as a method to attract, motivate and retain key employees to assist in
the development and growth of the Company and its subsidiaries. Initial Awards
have been made thereunder. See "New Plan Benefits". The LTIP and Awards
thereunder are subject to the terms and limitations of the Incentive Plan 2000.
The LTIP is effective January 1, 2000, subject to approval of the Incentive Plan
2000 at the Meeting. If stockholders do not approve the Incentive Plan 2000, all
Awards under the LTIP will be void and the LTIP will terminate. The LTIP program
is designed to reduce the Company's reliance on stock options as the sole form
of long-term incentive compensation. The target pay-out of Awards under the LTIP
is designed to replace approximately one-half of the value of annual option
grants. The Committee anticipates that option grants during the next three years
will be one-half the size of prior grant levels (assuming approval of the
Incentive Plan 2000 by the stockholders, which will permit the Company to make
such option grants), after which time the Committee will re-examine the mix of
long-term incentive compensation.
 
     Eligible participants in the LTIP program will be all officers of the
Company of Staff Vice President or more senior rank, all officers of
subsidiaries of Vice President or more senior rank, and any other officers
determined by the Administrator. Each individual who is an eligible participant
as of the first day of a Performance Period (described below) is automatically a
participant and will receive an Award with respect to such Performance Period
unless otherwise determined by the Administrator prior to the first day of the
relevant Performance Period. An individual who becomes an eligible participant
after the first day of a Performance Period will be a participant and receive an
Award for such Performance Period only if selected by the Administrator prior to
the last day of the Performance Period.
 
     The LTIP is structured with three-year rolling performance periods (each, a
"Performance Period") beginning January 1, 2000, with a new three-year period
beginning each year. Notwithstanding the foregoing, the LTIP is phased in with
(i) a one-year Performance Period (January 1, 2000 to December 31, 2000) and
(ii) a two-year Performance Period (January 1, 2000 to December 31, 2001), which
will pay one-third and two-thirds of the pay-out for a full Performance Period,
respectively (assuming achievement of relevant performance targets). Pay-out of
Awards under the LTIP will be contingent upon achievement of the following two
performance targets: (i) the Company must place first, second or third in
EBITDAR margin compared to the Industry Group and (ii) the Company must achieve
a minimum average annual operating income hurdle over the Performance Period. If
the performance targets are not met, no pay-out is made. The initial annual
operating income hurdle for Performance Periods beginning January 1, 2000 is
$300 million, which amount may be adjusted by the Committee for Performance
Periods beginning after January 1, 2000. In no event may the LTIP program pay
out, with respect to any Performance Period, more than 5% of the Company's
actual average annual operating income for such Performance Period. Such
calculations are subject to adjustments for LTIP accruals and one time gains and
losses.
 
     The EBITDAR margin with respect to each company in the Industry Group and
each Performance Period is the cumulative EBITDAR for such company for such
Performance Period divided by such company's cumulative revenues over such
Performance Period. The Industry Group initially consists of the Company, AMR
Corporation, Delta Air Lines, Inc., Northwest Airlines Corporation, Trans World
Airlines, Inc., UAL Corporation, and US Airways Group, Inc. For Performance
Periods beginning after January 1, 2000, the Committee may (within 90 days after
the beginning of such Performance Period) add any US certificated scheduled
mainline air carrier to or remove any such company (other than the Company) from
the Industry Group. In addition, a company will be automatically removed from
the Industry Group during a Performance Period upon the occurrence of certain
extraordinary events with respect to such company, and if a company provides
publicly available statements of operations with respect to its airline business
separately from its other businesses, then that company's EBITDAR and EBITDAR
margin will be calculated based solely upon the separately provided airline
business statement of operations.
                                       24

<PAGE>   28
 
     The amount of any pay-out of an LTIP Award will be based on a percentage of
the recipient's cash compensation (which consists of the recipient's salary at
the end of the Performance Period plus a deemed bonus of either 125% or 37.5% of
salary) and will vary depending upon the recipient's officer ranking and the
Company's EBITDAR margin ranking (first, second or third). See "New Plan
Benefits" for a description of initial Awards under the LTIP.
 
     After the end of each Performance Period, the Committee will determine
whether the Company has satisfied the performance targets (i.e., EBITDAR margin
ranking and operating income hurdle) for the Performance Period and whether any
other material terms relating to the payment of an LTIP Award have been
satisfied. Upon receipt by the Company of the Committee's written certification
that the performance targets and any other material terms have been satisfied,
each participant who received an Award for the Performance Period and remained
continuously employed by the Company from the date of the Award through the last
day of the Performance Period will be entitled to the payment amount applicable
to the Award. All payments under the LTIP will be lump sum cash payments unless
the Committee determines to make payment in shares of Class B common stock or a
combination of cash and Class B common stock. Subject to certain exceptions, the
Committee also has the authority at any time prior to the last day of a
Performance Period to cancel all or a portion of a participant's LTIP Award and
substitute an Option for the Award, or portion thereof, so canceled.
 
     Executive Bonus Performance Award Program. To further implement the
Performance Award provisions of the Incentive Plan 2000, the Committee adopted
the Continental Airlines, Inc. Executive Bonus Performance Award Program
("Executive Performance Program") to replace the executive bonus program
approved by stockholders in 1996, which terminated on April 1, 2000. Initial
Awards have been made thereunder. See "New Plan Benefits". The new program
retains most features of the old program, but adds an alternative EBITDAR margin
performance target and a new operating income hurdle. The Executive Performance
Program and participation therein are subject to the terms and limitations of
the Incentive Plan 2000. Assuming approval by stockholders of the Incentive Plan
2000 at the Meeting, the Executive Performance Program is effective as of April
1, 2000. If stockholders do not approve the Incentive Plan 2000, the Executive
Performance Program will automatically terminate, no bonuses will be paid
thereunder and the Company will not have an executive bonus program.
 
     The Chief Executive Officer, the Chief Operating Officer, each Executive
Vice President and each Senior Vice President of the Company will automatically
participate in the Executive Performance Program for each fiscal year. Upon
recommendation by the Chief Executive Officer, the Committee may designate
additional officers of the Company or its subsidiaries to participate in the
program with respect to a particular fiscal year. The Chief Executive Officer
may terminate any individual's participation in the Executive Performance
Program upon written notice and subject to Committee ratification. Non-employee
directors do not participate in this program.
 
     Prior to each fiscal year beginning on or after January 1, 2000, the
Committee will establish a Budget for purposes of the Executive Performance
Program. The Budget consists of cumulative quarterly net income targets for the
fiscal year. Beginning with the fiscal quarter commenced April 1, 2000, each
participant in the Executive Performance Program who remains continuously
employed throughout the entire fiscal quarter with respect to which the bonus is
to be paid, will receive a cash bonus ("Quarterly Bonus") equal to the greater
of the Net Income Quarterly Bonus or the EBITDAR Margin Quarterly Bonus for such
quarter. A participant's "Net Income Quarterly Bonus" for a fiscal quarter is
calculated by multiplying the participant's cumulative base salary through such
quarter by either (x) 100% plus the percentage positive variance (up to 25%)
between the Company's actual cumulative net income through such quarter and the
cumulative net income target with respect to such quarter or (y) 100% less the
percentage negative variance between the Company's actual cumulative net income
through such quarter and the cumulative net income target with respect to such
quarter, less any Quarterly Bonuses received with respect to prior quarters in
the fiscal year. If the negative variance is greater than 25%, then no Net
Income Quarterly Bonus will be paid with respect to such quarter. A
participant's "EBITDAR Margin Quarterly Bonus" for a fiscal quarter is
calculated by multiplying the participant's cumulative base salary through such
quarter by either (x) 125%, if the Company ranks first, second or third when
comparing the cumulative EBITDAR margins through such quarter for all companies
in
                                       25

<PAGE>   29
 
the Industry Group and the Company achieves the operating income hurdle for such
quarter or (y) 0%, if the Company fails to achieve the ranking and operating
income hurdle referenced in the prior clause, less any Quarterly Bonuses
received with respect to prior quarters in the fiscal year. The annual operating
income hurdle is the same as that established under the LTIP program for the
relevant period, and the quarterly operating income hurdles are determined as
cumulative quarterly percentages of the annual amount as follows: (1) 19% with
respect to the first fiscal quarter; (2) 52.8% with respect to the second fiscal
quarter, (3) 83.6% with respect to the third fiscal quarter and (4) 100% with
respect to the fourth fiscal quarter. The definition of the Industry Group is
the same as used in the LTIP program, and EBITDAR and EBITDAR margins are
identically calculated as in the LTIP for the relevant periods.
 
     Incentive Awards. Incentive Awards are rights to receive shares of Class B
common stock (or the Market Value per Share thereof), or rights to receive an
amount equal to any appreciation or increase in the Market Value per Share of
Class B common stock over a specified period of time, which vest over a period
of time as established by the Administrator, without satisfaction of any
performance criteria or objectives. The Administrator may, in its discretion,
require payment or other conditions of the Holder respecting any Incentive
Award.
 
     The Administrator shall establish, with respect to and at the time of each
Incentive Award, a period over which the Award shall vest with respect to the
Holder. In determining the value of Incentive Awards, the Committee shall take
into account a Holder's responsibility level, performance, potential, other
Awards, and such other considerations as it deems appropriate.
 
     Following the end of the vesting period for an Incentive Award (or at such
other time as the applicable Grant Document may provide), the Holder of an
Incentive Award shall be entitled to receive payment of an amount, not exceeding
the maximum value of the Incentive Award, based on the then vested value of the
Award. Payment of an Incentive Award may be made in cash, shares of Class B
common stock (valued at the Market Value per Share), or a combination thereof as
determined by the Administrator. Payment shall be made in a lump sum, except as
otherwise set forth in the applicable Grant Document. Cash dividend equivalents
may be paid during or after the vesting period with respect to an Incentive
Award, as determined by the Administrator.
 
     An Incentive Award will terminate if the Holder does not remain
continuously employed or in service as a director of the Company or a subsidiary
at all times during the applicable vesting period, except as otherwise set forth
in the applicable Grant Document. The Committee has not implemented any program
under the Incentive Awards provisions of the Incentive Plan 2000.
 
     Retention Awards. A Retention Award is a right, which vests over a period
of time as established by the Committee, to receive a cash payment measured by a
portion of the gain and profits associated with an equity holding of the Company
or a subsidiary in an e-commerce or internet-based business. The portion of any
gain and profit is measured to the date the Retention Award (or portion thereof,
as applicable) is deemed surrendered for payment in accordance with its terms.
The Committee will designate each such equity holding and establish, within the
applicable time period permitted by Section 162(m) of the Code, the portion of
the gain and profits (not exceeding 3.75% for any individual holder nor 25% in
the aggregate for all holders) in such equity holding used to measure cash
payments to the holder of such Retention Award. The terms and conditions of the
respective Retention Award Grant Documents need not be identical.
 
     In determining the Retention Awards to be granted under the Incentive Plan
2000, the Committee shall take into account a Holder's responsibility level,
performance, potential, other Awards, and such other considerations as it deems
appropriate. The Committee, in its sole discretion, may provide for a reduction
in the value of a Holder's Retention Award during the period such Award is
outstanding if permitted by the applicable Grant Document.
 
     Following the vesting of a Retention Award in whole or in part (or at such
other times and subject to such other restrictions as the applicable Grant
Document may provide), the Holder of a Retention Award shall be entitled to
receive payment of an amount, not exceeding the maximum amount otherwise
permitted under the Incentive Plan 2000, based on such Holder's vested interest
in such Retention Award and the gain and profit
 
                                       26

<PAGE>   30
 
in the underlying equity holding, as certified by the Committee as required by
Section 162(m) of the Code. Payment will be made in cash and in a lump sum,
except as otherwise set forth in the applicable Grant Document. In no event
shall a Retention Award grant a Holder an interest in the equity holding, the
gain and profit in which is used to measure cash payments under such Award.
 
     A Retention Award will terminate if the Holder does not remain continuously
employed or in service as a director of the Company or a subsidiary at all times
during the applicable vesting period, except as otherwise set forth in the
applicable Grant Document. The Company does not anticipate that non-employee
directors will receive Retention Awards.
 
     Officer Retention and Incentive Award Program. The Committee adopted the
Continental Airlines, Inc. Officer Retention and Incentive Award Program
("Retention Program") to implement the Retention Award provisions of the
Incentive Plan 2000. The Retention Program and Retention Awards are subject to
the terms and limitations in the Incentive Plan 2000. Initial grants of
Retention Awards under the program have been made, subject to stockholder
approval of the Incentive Plan 2000. See "New Plan Benefits" below. If
stockholders do not approve the Incentive Plan 2000, the Retention Program will
automatically terminate and all Awards made thereunder will be void.
 
     All officers of the Company at the level of Staff Vice President or more
senior rank, all officers of subsidiaries of Vice President or more senior rank,
and other employees of the Company or a subsidiary designated by the Committee
are eligible to participate in the program. There are currently 61 officers of
the Company and its subsidiaries who have received Awards under the Retention
Program.
 
     The Retention Program is designed to retain the services of officers and
other employees of the Company and its subsidiaries designated by the Committee
by offering them an economic benefit measured by a portion of the gains and
profits associated with the equity holdings of the Company and its subsidiaries
in e-commerce or internet-based businesses, and to incentivize those officers to
grow the value of those investments. The Investments, the gain and profit from
which are to be used to measure payments under the program, will be selected by
the Committee for inclusion in the program and are expected to be principally in
businesses focused on distribution and marketing channels with a lower cost to
the Company than traditional distribution and marketing channels. Investments
will include additional equity holdings in or related to the business in which
an Investment is made that are acquired by the Company or a subsidiary based on
the satisfaction of performance targets, vesting provisions, or other terms and
conditions of agreements entered into by the Company or a subsidiary in
connection with the original Investment ("Follow-up Investments").
 
     For purposes of measurement under the program, each such Investment
generally will be divided into one million Phantom Units, and a Retention Award
will consist of rights ("PARs") to receive the difference, if any, between the
Market Value of a Phantom Unit (generally, fair market value of an Investment
divided by one million) and the Base Value of a Phantom Unit (generally, for
Awards granted concurrently with the acquisition of the Investment, the
out-of-pocket cost of the Investment paid to the issuer or seller thereof (but
not less than $100,000) divided by one million). The fair market value of
Distributions received with respect to Investments (including interest thereon
at 7% with respect to Distributions received in cash) will be included in Market
Value. The Committee shall determine both Market Value and Base Value, and may
(subject to certain limitations) determine that Base Value is greater than that
described above. If the date of grant of an Award is after the date of
acquisition of an Investment, then the Base Value of a Phantom Unit relating to
that Award will equal the value of such Phantom Unit as of such date of grant as
determined by the Committee in any manner that it deems appropriate. The total
number of PARs that may be subject to Awards granted with respect to a
particular Investment may not, for any individual participant, exceed 3.75% of
the number of Phantom Units into which the Investment has been divided, or with
respect to all participants, 25% of the number of Phantom Units into which the
Investment has been divided. Awards will vest quarterly over a four-year period,
or as otherwise determined by the Committee, and vesting of Follow-up
Investments will relate back to the original Investment for a participant
holding an Award with respect to such original Investment. Upon termination of
employment, a participant will retain the vested portions of his Awards under
the Retention Program, unless such termination is for cause, in which event all
of such participant's Awards will be canceled.
 
                                       27

<PAGE>   31
 
     Generally, vested Awards will be redeemed at the time the Company or a
subsidiary disposes of an Investment (including by way of a distribution to
stockholders), and the Company will make payments of remaining unpaid amounts as
related Awards vest (together with interest on the unpaid amounts at 7% from the
date of sale or other disposition). If the Investment is liquid (defined
generally to mean that the Company is permitted to sell all or substantially all
of the Investment under Rule 144 of the Securities Act, pursuant to an effective
registration statement or otherwise, there is not contractual or legal
prohibition on such sale, such sale or certain other transactions will not
result in short-swing profit liability to the Company under Section 16(b) of the
Securities Exchange Act, and there is an established trading market for the
applicable securities which can be used to reasonably determine fair market
value), a participant may redeem his vested Awards relating thereto at the end
of four window periods a year, subject to 10% of the Redemption Amount being
forfeited to the Company if the Committee determines such forfeiture to be
appropriate when initially making the grant of the Award. At the tenth
anniversary of the first date of grant of an Award to any individual under the
Retention Program related to a particular Investment, the Company will value
such Investment and all related Follow-up Investments and redeem all related
outstanding vested Awards. Before payment of any Redemption Amount, the
Committee must certify in writing that the related performance goal has been met
(that is, that the Market Value of a Phantom Unit subject to the Award exceeds
the Base Value of the Phantom Unit as of the date the Redemption Amount is
determined, and that the value of the Investment to which the Award relates and
the value of Investments in different equity holdings of the same entity,
together with the value of all Follow-up Investments with respect to such
Investments, exceeds the aggregate out-of-pocket cost of such Investments and
Follow-up Investments to the Company and its subsidiaries paid to the issuer or
seller thereof).
 
     Awards under the Retention Program do not create any interest in an
Investment (or constitute a sale, transfer, assignment, pledge or other
disposition thereof or of any interest therein), create an escrow or trust fund,
create any fiduciary relationship of the Company or any subsidiary or any
officer, director, employee or agent thereof with respect to any Investment or
any participant, or restrict or affect in any way the acquisition, holding,
voting, disposition or the taking of any action with respect to any Investment
by the Company or any subsidiary.
 
     The Committee may amend or terminate the Retention Program at any time,
provided that no amendment or termination will adversely affect the rights of
holders of outstanding Awards or the right to receive Awards (or the Base Value)
with respect to Follow-up Investments.
 
     Shares Subject to the Incentive Plan 2000; Award Limitations. Subject to
adjustment as provided in the Incentive Plan 2000, the aggregate number of
shares of Class B common stock that may be issued under the Incentive Plan 2000
shall not exceed 3,000,000 shares. There currently remain only approximately
935,000 shares of Class B common stock available to be issued under the
Company's other stock incentive plans. Shares shall be deemed to have been
issued under the Incentive Plan 2000 only to the extent actually issued and
delivered pursuant to an Award. To the extent that an Award lapses, the rights
of its Holder terminate, or an Award is paid in cash or is settled in a manner
such that all or some of the shares of Class B common stock covered by the Award
are not issued to the Holder, any shares of Class B common stock then subject to
such Award will again be available for the grant of an Award under the Incentive
Plan 2000. The maximum (i) number of shares of Class B common stock that may be
subject to Awards granted to any one individual during any calendar year may not
exceed 750,000 shares, (ii) number of shares of Class B common stock that may be
granted as Restricted Stock Awards may not exceed 250,000 shares, (iii) amount
of compensation that may be paid under all Performance Awards denominated in
cash (including the fair market value of any shares of Class B common stock paid
in satisfaction of such Performance Awards) granted to any one individual during
any calendar year may not exceed $10 million and any payment due with respect to
a Performance Award shall be paid no later than 10 years after the date of grant
of such Performance Award, and (iv) amount of compensation that may be paid
under all Retention Awards granted to any one individual during any calendar
year may not exceed 1% of the aggregate gross revenues of the Company and its
consolidated subsidiaries for the fiscal year of the Company that ends on
December 31, 2000, and any payment due with respect to a Retention Award shall
be paid no later than 11 years after the date of grant of such Retention Award
(in the case of clauses (i) and (ii), subject to adjustment as provided in the
Incentive
 
                                       28

<PAGE>   32
 
Plan 2000). The limitations set forth in clauses (i), (iii) and (iv) of the
preceding sentence shall be applied in a manner which will permit compensation
generated under the Incentive Plan 2000 which is intended to constitute
"performance-based" compensation for purposes of Section 162(m) of the Code to
be treated as such "performance-based" compensation.
 
     Change in Control. As used in the Incentive Plan 2000 (except as otherwise
provided in an applicable Grant Document), the term "Change in Control" shall
mean: (a) any person is or becomes the beneficial owner of securities
representing the greater of (i) 25% of the combined voting power of the
Company's outstanding securities and (ii) the proportion of the combined voting
power of the Company's outstanding securities beneficially owned by Northwest
Airlines Corporation ("Northwest") and any person controlling, controlled by or
under common control with Northwest; (b) individuals who constituted the Board
as of February 26, 1998 cease for any reason to constitute at least a majority
of the Board (unless such individual's election is approved by a vote of a
majority of the incumbent board or such individual was nominated by an Excluded
Person, as described below); (c) any merger, consolidation or other
reorganization or similar transaction in which the Company is not the
"Controlling Corporation" (as described below); or (d) any sale of all or
substantially all of the Company's assets, other than to Excluded Persons, or
any sale of all or substantially all of the Company's assets to Northwest or any
person controlling, controlled by or under common control with Northwest.
 
     Beneficial ownership as described in clause (a) above does not include
beneficial ownership by (1) the Company or any subsidiary of the Company, (2)
any employee benefit plan of the Company (with certain exceptions), (3)
Northwest or any person controlling, controlled by or under common control with
Northwest (unless Northwest is controlled by or under common control with Delta
Air Lines, Inc.), or (4) certain persons, and certain affiliates of such
persons, controlling Air Partners prior to the acquisition of Air Partners by
Northwest (persons referred to in clauses (1) through (4) above are referred to
as "Excluded Persons"). The persons in clause (3) of the previous sentence are
not deemed to be Excluded Persons if Northwest (together with any person
controlling, controlled by or under common control with Northwest) ceases to
beneficially own at least 25% of the combined voting power of the Company's
outstanding securities for 30 consecutive calendar days. The exclusion described
in clause (4) of the second preceding sentence will cease to have any effect
(and the persons described therein will cease to be Excluded Persons) if the
person acquiring beneficial ownership is not controlled by David Bonderman or
James Coulter or the person acquiring beneficial ownership (together with any
person controlling, controlled by or under common control with such person)
ceases to beneficially own at least 25% of the combined voting power of the
Company's outstanding securities for 30 consecutive calendar days.
 
     For purposes of clause (c) above, the Company will generally be considered
the "Controlling Corporation" in any merger, consolidation, reorganization or
similar transaction unless either (1) the Company's stockholders immediately
prior to such transaction (excluding the other party to the transaction and
persons acting in concert with such other party) would not, immediately after
such transaction, beneficially own securities of the resulting entity that would
entitle them to elect a majority of the board of the resulting entity, or (2)
those persons constituting the Company's board of directors immediately prior to
such transaction would not, immediately after such transaction, constitute a
majority of the directors of the resulting entity.
 
     Upon the occurrence of a Change in Control, with respect to each recipient
of an Award, (AA) all Options granted to such recipient and outstanding at such
time shall immediately vest and become exercisable in full, whether or not
otherwise exercisable (but subject, in the case of Incentive Stock Options, to
certain limitations) and, except as required by law, all restrictions on the
transfer of shares acquired pursuant to such Options shall terminate, (BB) all
restrictions applicable to such recipient's Restricted Stock and Incentive
Awards that are outstanding at such time shall be deemed to have been satisfied
and such Restricted Stock and Incentive Awards shall immediately vest in full,
and (CC) all Retention Awards granted to such recipient and outstanding at such
time shall immediately vest in full.
 
     With respect to Awards under the LTIP program, the performance targets for
each Performance Period that began prior to the date of the Change in Control
and which has not yet ended as of such date will be deemed satisfied and the
Company will be deemed to have achieved a first place EBITDAR margin ranking
 
                                       29

<PAGE>   33
 
for each such Performance Period. Additionally, the LTIP program, the Executive
Performance Program, and an individual's participation in such programs may not
be amended or terminated in contemplation of or in connection with a Change in
Control, unless there is adequate provision for making all payments otherwise
payable thereunder.
 
     If a Change in Control occurs and thereafter (or in connection therewith or
in contemplation thereof) during the year in which such Change in Control occurs
(a "Change Year"), a participant in the Executive Performance Program suffers a
Qualifying Event (as defined below), then such participant will receive an
amount in cash equal to (x) the aggregate Quarterly Bonuses such participant
would have received under the Executive Performance Program if the Company
achieved a cumulative number 1, 2 or 3 ranking with respect to each quarter
during the Change Year, less (y) the aggregate of the Quarterly Bonuses paid to
such participant pursuant to the Executive Performance Program during the Change
Year through the date immediately prior to the occurrence of the Qualifying
Event (with respect to the Company's 2000 fiscal year only, quarterly bonuses
paid under the Company's prior executive bonus program to persons who are
participants under the Executive Performance Program with respect to fiscal
quarters in 2000 ending prior to the quarter during which Stockholder Approval
is obtained shall be deducted for purposes of clause (y) of this sentence), and
such participant shall not be entitled to any additional Quarterly Bonuses with
respect to such Change Year. The term "Qualifying Event" with respect to a
participant means (i) the termination of such participant's participation in the
Executive Performance Program, (ii) the assignment to such participant of duties
materially inconsistent with the duties associated with his position as such
duties are constituted as of the first day of the Change Year, (iii) a material
diminution in the nature or scope of such participant's authority,
responsibilities, or title from those applicable to him as of the first day of
the Change Year, (iv) the occurrence of material acts or conduct on the part of
the Company or its officers or representatives which prevent such participant
from performing his duties and responsibilities as they existed on the first day
of the Change Year, (v) the Company requiring such participant to be permanently
based anywhere outside a major urban center in the state (or, if applicable,
foreign country, U.S. territory or other applicable sovereign entity) in which
he was based as of the first day of the Change Year, or (vi) the taking of any
action by the Company that would materially adversely affect the corporate
amenities enjoyed by such participant on the first day of the Change Year,
except in each case if such participant's employment with the Company and its
subsidiaries is terminated (a) upon such participant's death, (b) upon
disability entitling him or her to benefits under the Company's group long-term
disability plan, (c) for cause, which for purposes hereof shall mean (1) in the
case of a participant with an employment agreement with the Company or a
subsidiary, the involuntary termination by the Company (or, if applicable, a
subsidiary) of such participant's employment under circumstances that do not
require the Company (or such subsidiary) to pay to such participant a
"Termination Payment" or "Monthly Severance Amount", as such terms are defined
in such participant's employment agreement, and (2) in the case of a participant
who does not have an employment agreement with the Company or a subsidiary, the
involuntary termination by the Company (or, if applicable, a subsidiary) of such
participant's employment based upon a determination by the Committee or an
authorized officer of the Company (or such subsidiary) that such participant has
engaged in gross negligence or willful misconduct in the performance of, or such
participant has abused alcohol or drugs rendering him or her unable to perform,
the material duties and services required of him or her in his or her
employment, or (d) upon the voluntary resignation from employment of such
participant (other than in connection with circumstances which would permit such
participant to receive severance benefits pursuant to any contract of employment
between such participant and the Company or any of its subsidiaries).
 
     Provision is made for payment under the Incentive Plan 2000 (except as
otherwise provided in the applicable Grant Document) of (i) any excise taxes due
under Section 4999 of the Code with respect to amounts that are vested and/or
payable due to a Change in Control plus (ii) any taxes due on the payment of
such excise taxes described in clause (i).
 
     Transferability. No Awards (other than Incentive Stock Options) are
transferable by the recipient except (i) by will or the laws of descent and
distribution, (ii) pursuant to a qualified domestic relations order or (iii)
with respect to Awards of Non-Qualified Options, with the consent of the
Administrator. An Incentive Stock Option is not transferable other than by will
or the laws of descent and distribution and may not be
 
                                       30

<PAGE>   34
 
exercised during the Holder's lifetime except by the Holder or the Holder's
guardian or Personal Representative.
 
     In the discretion of the Administrator as set forth in an applicable Grant
Document, a percentage of the aggregate shares of Class B common stock obtained
from exercise of an Option shall not be transferable prior to the earliest to
occur of (x) termination of the relevant Option term, (y) the Holder's
retirement, death or disability or (z) termination of the Holder's employment
with the Company and its subsidiaries.
 
     Adjustments. The maximum number of shares that may be issued under the
Incentive Plan 2000, as well as the number or type of shares or other property
subject to outstanding Awards and the applicable option or purchase prices per
share shall be adjusted appropriately in the event of stock dividends, spin-offs
of assets or other extraordinary dividends, stock splits, combinations of
shares, recapitalizations, mergers, consolidations, reorganizations,
liquidations, issuances of rights or warrants, and similar transactions or
events. The Retention Program contains a similar adjustment provision relating
to adjustment of Retention Awards in the case of similar events with respect to
Investments, in the case of capital contributions or exercise of options or
warrants by the Company or a subsidiary relating to an Investment, or under
other appropriate circumstances.
 
     Administration and Amendments. The Incentive Plan 2000 provides that a
committee comprised solely of two or more "outside directors" (as defined by
Section 162(m) of the Code and applicable interpretive authority thereunder and
within the meaning of the term "Non-Employee Director" as defined by Rule 16b-3
under the Exchange Act) serves as the Administrator of Awards under the
Incentive Plan 2000 with respect to persons subject to Section 16 of the
Exchange Act. Until otherwise determined by the Board, the Human Resources
Committee serves as such committee under the Incentive Plan 2000. The Committee
or the Chief Executive Officer of the Company serves as Administrator with
respect to any person not subject to Section 16 of the Exchange Act, unless the
Incentive Plan 2000 specifies that the Committee shall take specific action (in
which case such action may only be taken by the Committee) or the Committee
specifies that it shall serve as Administrator.
 
     The Committee serves as Administrator of the Executive Performance Program
and the Retention Program, and as Administrator with respect to persons subject
to Section 16 of the Exchange Act with respect to grants of Options and LTIP
Awards.
 
     Subject to limitations described above regarding outstanding Awards, the
Board in its discretion may terminate the Incentive Plan 2000 at any time. The
Board has the right to amend the Incentive Plan 2000 or any part thereof from
time to time, and the Administrator may amend any Award (and its related Grant
Document) at any time, except as otherwise specifically provided in such Grant
Document or to the extent restricted by Section 162(m) of the Code with respect
to an Award which is intended to constitute "performance-based" compensation for
purposes of such section. Notwithstanding the foregoing, no change in any Award
theretofore granted may be made which would impair the rights of the Holder
thereof without the consent of such Holder. Without stockholder approval, the
Board may not amend the Incentive Plan 2000 to (a) increase the maximum
aggregate number of shares that may be issued under the Incentive Plan 2000 or
(b) change the class of individuals eligible to receive Awards under the
Incentive Plan 2000.
 
NEW PLAN BENEFITS
 
     The Company anticipates that a portion of the shares of Class B common
stock available for grants of Awards under the Incentive Plan 2000 will be
awarded to eligible employees in the form of stock options during 2000, promptly
following the determination by the Human Resources Committee of the size and
terms of stock option grants. Although the Human Resources Committee has not yet
determined the size and terms of those stock options, it currently anticipates
that they will be approximately one-half the size of normal annual grants for
officers, including the Company's executive officers, who participate in the
LTIP program. In addition, the Company anticipates that Options to purchase
5,000 shares of Class B common stock will be awarded under the Incentive Plan
2000 to each of the Company's non-employee directors elected at the Meeting if
the Incentive Plan 2000 is approved by the Company's stockholders, or options
will be granted to such directors under the Company's existing stock incentive
plans. See "General Information."
 
                                       31

<PAGE>   35
 
     The following table sets forth Awards that have been granted under the LTIP
program, the Executive Performance Program and the Retention Program, subject to
stockholder approval of the Incentive Plan 2000 at the Meeting.

<TABLE>
<CAPTION>
                                            LTIP(1)                               EXECUTIVE PERFORMANCE PROGRAM(2)
                        ------------------------------------------------   -----------------------------------------------
                                     EBITDAR MARGIN RANKING
                        ------------------------------------------------
   NAME AND POSITION    NOS. 4-7     NO. 3        NO. 2         NO. 1      75% OF TARGET   100% OF TARGET   125% OF TARGET
   -----------------    --------   ----------   ----------   -----------   -------------   --------------   --------------
<S>                     <C>        <C>          <C>          <C>           <C>             <C>              <C>
Gordon M. Bethune......    $0      $1,506,094   $2,008,125   $ 3,012,188    $  669,375       $  892,500       $1,115,625
  Chairman of the Board
  and Chief Executive
  Officer
Gregory D. Brenneman...    $0      $1,074,938   $1,382,063   $ 2,073,094    $  511,875       $  682,500       $  853,125
  President and Chief
  Operating Officer
Lawrence W. Kellner....    $0      $  555,188   $  832,781   $ 1,110,375    $  370,125       $  493,500       $  616,875
  Executive Vice
  President and Chief
  Financial Officer
C.D. McLean............    $0      $  507,938   $  761,906   $ 1,015,875    $  338,625       $  451,500       $  564,375
  Executive Vice
President -- Operations
Jeffery A. Smisek......    $0      $  472,500   $  708,750   $   945,000    $  315,000       $  420,000       $  525,000
  Executive Vice
  President and General
  Counsel
All current executive
  officers as a
  group................    $0      $6,643,856   $9,905,625   $14,053,331    $5,013,000       $6,684,000       $8,355,000
All current directors
  (other than executive
  officers) as a
  group................    $0      $        0   $        0   $         0    $        0       $        0       $        0
All employees (other
  than executive
  officers) as a
  group................    $0      $3,139,344   $4,483,813   $ 6,745,406    $1,436,250       $1,915,000       $2,393,750
 
<CAPTION>
                            PARS
                          AWARDED
                           UNDER
                         RETENTION
   NAME AND POSITION     PROGRAM(3)
   -----------------     ----------
<S>                      <C>
Gordon M. Bethune......    37,500
  Chairman of the Board
  and Chief Executive
  Officer
Gregory D. Brenneman...    25,000
  President and Chief
  Operating Officer
Lawrence W. Kellner....    12,500
  Executive Vice
  President and Chief
  Financial Officer
C.D. McLean............    12,500
  Executive Vice
President -- Operations
Jeffery A. Smisek......    12,500
  Executive Vice
  President and General
  Counsel
All current executive
  officers as a
  group................   171,880
All current directors
  (other than executive
  officers) as a
  group................         0
All employees (other
  than executive
  officers) as a
  group................    78,111
</TABLE>

 
---------------
 
(1) Amounts set forth in the table represent potential pay-out of Awards under
    the LTIP based on the individuals' current base salaries and a full
    three-year Performance Period beginning January 1, 2000 and ending December
    31, 2003. As described above, the LTIP is phased in with (i) a one-year
    Performance Period (January 1, 2000 to December 31, 2000) with potential
    pay-out equal to one-third of the amounts set forth in the table and (ii) a
    two-year Performance Period (January 1, 2000 to December 31, 2001) with
    potential pay-out equal to two-thirds of the amounts set forth in the table.
    In addition to the requirement that the Company achieve a number 1, 2 or 3
    EBITDAR margin ranking, pay-out is also contingent upon achievement of a
    minimum average annual operating income hurdle over the Performance Period
    (initially $300 million) and in no event may the LTIP program pay out, with
    respect to a Performance Period, more than 5% of the Company's actual
    average annual operating income over such Performance Period.
 
(2) Amounts shown represent potential annual benefits under the Executive
    Performance Program based on the individuals' current base salaries and
    contingent upon achievement of quarterly net income targets (or in the case
    of 125% pay-out, in the alternative the achievement of number 1, 2 or 3
    EBITDAR margin ranking and achievement of minimum operating income hurdles).
    With respect to the first quarter of 2000, the amount of bonus, if any,
    would be determined and paid pursuant to the Company's prior executive bonus
    program, which terminated April 1, 2000.
 
(3) The Company has made seven Awards of PARs (each in the amount set forth in
    the table) to each of the above named executive officers, the Company's
    other executive officers and other officers who currently participate in the
    Retention Program (61 persons) relating to seven Investments in six
    entities. The aggregate out-of-pocket cost of the Company's Investments in
    those entities paid to the issuer or seller thereof is less than $8 million.
    The Committee has determined that the Base Values assigned to Phantom
 
                                       32

<PAGE>   36
 
    Units relating to each of the Investments, for purposes of the program,
    reflect fair market value of the related Investment at the date of grant of
    the respective Awards.
 
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
 
     The following is a brief summary of certain of the U.S. federal income tax
consequences of certain transactions under the Incentive Plan 2000 based on
federal income tax laws in effect on January 1, 2000. This summary applies to
the Incentive Plan 2000 as normally operated and is not intended to provide or
supplement tax advice to eligible employees or directors. The summary contains
general statements based on current U.S. federal income tax statutes,
regulations and currently available interpretations thereof. This summary is not
intended to be exhaustive and does not describe state, local or foreign tax
consequences or the effect, if any, of gift, estate and inheritance taxes.
 
  Tax Consequences to Recipients
 
     Non-qualified Stock Options. In general: (i) no income will be recognized
by an optionee at the time a non-qualified stock option is granted; (ii) at the
time of exercise of a non-qualified stock option, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares if they
are nonrestricted on the date of exercise; and (iii) at the time of sale of
shares acquired pursuant to the exercise of a non-qualified stock option, any
appreciation (or depreciation) in the value of the shares after the date of
exercise will be treated as a capital gain (or loss).
 
     The total number of shares of Class B common stock subject to Awards
granted to any one recipient during any calendar year is limited under the
Incentive Plan 2000 for the purpose of qualifying any compensation realized upon
exercise of options that are granted by the Human Resources Committee as
"performance-based compensation" as defined in Section 162(m) of the Code in
order to preserve tax deductions by the Company with respect to any such
compensation in excess of one million dollars paid to "Covered Employees" (i.e.,
the Company's Chief Executive Officer and the four highest compensated officers
of the Company or those individuals deemed to be executive officers of the
Company (other than the Chief Executive Officer) and who are officers of the
Company on the last day of the year in question). Options granted by the Chief
Executive Officer will not qualify as "performance-based compensation" and will
be subject to the limitation on deductibility under Section 162(m) of the Code;
however, it is not anticipated that the Chief Executive Officer would have the
authority to make grants to Covered Employees.
 
     Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. However, upon
exercise, the difference between the fair market value and the exercise price
may be subject to the alternative minimum tax. If shares of Class B common stock
are issued to an optionee pursuant to the exercise of an Incentive Stock Option
and no disqualifying disposition of the shares is made by the optionee within
two years after the date of grant or within one year after the transfer of the
shares to the optionee, then upon the sale of the shares any amount realized in
excess of the option price will be taxed to the optionee as a capital gain and
any loss sustained will be a capital loss.
 
     If shares of Class B common stock acquired upon the exercise of Incentive
Stock Options are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to any excess of the fair market value of
the shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares in a sale or exchange) over the option price paid for
the shares. Any further gain (or loss) realized by the optionee generally will
be taxed as a capital gain (or loss).
 
     As described above with respect to non-qualified stock options, the
Incentive Plan 2000 has been designed to qualify any ordinary compensation
income recognized by optionees with respect to Incentive Stock Options granted
by the Human Resources Committee as "performance-based compensation" as defined
in Section 162(m) of the Code.
 
                                       33

<PAGE>   37
 
     Restricted Stock. A recipient of Restricted Stock generally will be subject
to tax at ordinary income tax rates on the fair market value of the Restricted
Stock reduced by any amount paid by the recipient at such time as the shares are
no longer subject either to a risk of forfeiture or restrictions on transfer for
purposes of Section 83 of the Code. However, a recipient who so elects under
Section 83(b) of the Code within 30 days of the date of transfer of the shares
will have taxable ordinary income on the date of transfer of the shares equal to
the excess of the fair market value of the shares (determined without regard to
the risk of forfeiture or restrictions on transfer) over any purchase price paid
for the shares. If a Section 83(b) election is made and the shares are
subsequently forfeited, the recipient will not be allowed to take a deduction
for the value of the forfeited shares. If a Section 83(b) election has not been
made, any dividends received with respect to Restricted Stock that are subject
at that time to a risk of forfeiture or restrictions on transfer generally will
be treated as compensation that is taxable as ordinary income to the recipient;
otherwise the dividends will be treated as dividends. Awards of Restricted Stock
to Covered Employees will not qualify as "performance-based compensation" and
the Company will be subject to the limitation on deductibility under Section
162(m) of the Code.
 
     Performance and Incentive Awards. An individual who has been granted a
Performance Award or an Incentive Award generally will not realize taxable
income at the time of grant. Whether a Performance Award or an Incentive Award
is paid in cash or shares of Class B common stock, the recipient will have
ordinary compensation income in the amount of (i) any cash paid at the time of
such payment and (ii) the fair market value of any shares of Class B common
stock either at the time the Performance or Incentive Award is paid in such
shares or at the time any restrictions on the shares (including restrictions
under Section 16(b) of the Exchange Act) subsequently lapse, depending on the
nature, if any, of the restrictions imposed and whether the recipient elects
under Section 83(b) of the Code to be taxed without regard to any such
restrictions. Any dividend equivalents paid with respect to an Incentive Award
prior to the actual issuance of shares under the award will be compensation
income to the recipient. Incentive Awards will not qualify as "performance-based
compensation" and the Company will be subject to the limitation on deductibility
under Section 162(m) of the Code. The Incentive Plan 2000 has been designed to
qualify any ordinary compensation income recognized by Covered Employees with
respect to Performance Awards granted by the Human Resources Committee as
"performance-based compensation" as defined in Section 162(m) of the Code.
Performance Awards granted by the Chief Executive Officer will not qualify as
"performance-based compensation" and will be subject to the limitation on
deductibility under Section 162(m) of the Code; however, it is not anticipated
that the Chief Executive Officer would have the authority to make grants to
Covered Employees.
 
     Retention Awards. An individual who has been granted a Retention Award
generally will not realize taxable income at the time of grant. The recipient of
a Retention Award will have ordinary compensation income in the amount of any
cash paid with respect to such award at the time of such payment. All Retention
Awards under the Retention Award Program must be granted by the Human Resources
Committee, and the Incentive Plan 2000 has been designed to qualify any ordinary
compensation income recognized by Covered Employees with respect to Retention
Awards as "performance-based compensation" as defined in Section 162(m) of the
Code.
 
  Tax Consequences to the Company or Subsidiary
 
     Section 162(m) of the Code limits the ability of the Company to deduct
compensation paid during a fiscal year to a Covered Employee in excess of one
million dollars, unless such compensation is based on performance criteria
established by the Human Resources Committee or meets another exception
specified in Section 162(m) of the Code. Certain Awards described above will not
qualify as "performance-based compensation" or meet any other exception under
Section 162(m) of the Code and, therefore, the Company's deductions with respect
to such Awards will be subject to the limitations imposed by such section. To
the extent a recipient recognizes ordinary income in the circumstances described
above, the Company or subsidiary for which the recipient performs services will
be entitled to a corresponding deduction provided that, among other things, (i)
the income meets the test of reasonableness, is an ordinary and necessary
business expense and is not an "excess parachute payment" within the meaning of
Section 280G of the Code and (ii) either the compensation is "performance-based"
within the meaning of Section 162(m) of the Code
 
                                       34

<PAGE>   38
 
or the one million dollar limitation of Section 162(m) of the Code is not
exceeded. No deduction will be available to the Company or any subsidiary for
any amount paid under the Incentive Plan 2000 with respect to (i) any excise
taxes due under Section 4999 of the Code with respect to amounts that are vested
and/or payable due to a Change in Control and (ii) any taxes due on the payment
of such excise taxes described in clause (i).
 
 
    THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCENTIVE
PLAN 2000, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED PROXY.
 

                                  PROPOSAL 3:
 
                          RATIFICATION OF APPOINTMENT
                            OF INDEPENDENT AUDITORS
 
     The firm of Ernst & Young LLP has been the Company's independent auditors
since 1993, and the Board of Directors desires to continue to engage the
services of this firm for the fiscal year ending December 31, 2000. Accordingly,
the Board of Directors, upon the recommendation of the Audit Committee, has
reappointed Ernst & Young LLP to audit the financial statements of the Company
and its subsidiaries for fiscal 2000 and report thereon. Stockholders are being
asked to vote upon the ratification of such appointment. If stockholders do not
ratify such appointment, the Audit Committee and Board will reconsider such
appointment.
 
     Representatives of Ernst & Young LLP will be present at the Meeting and
will be available to respond to appropriate questions and make a statement
should they so desire.
 
 
    THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 3
ON THE ENCLOSED PROXY.
 
                                 OTHER MATTERS
 
     Management knows of no business to be presented for action at the Meeting
other than that described in this proxy statement. If any other matters should
properly come before the Meeting calling for a vote of the stockholders, it is
the intention of the persons named in the accompanying proxy, unless otherwise
directed in such proxy, to vote on such matters in accordance with their best
judgment.
 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Each director, executive officer (and, for a specified period, certain
former directors and executive officers) and each holder of greater than ten
percent of a class of the Company's equity securities is required to report to
the SEC his or her pertinent position or relationship, as well as transactions
in such securities, by certain specified dates. During 1999, the initial report
for Deborah McCoy, an executive officer of the Company, was filed late.
 
                                       35

<PAGE>   39
 
2001 ANNUAL MEETING
 
     Any stockholder who desires to present proposals at the 2001 annual meeting
of stockholders and to have such proposals set forth in the proxy statement and
form of proxy mailed in conjunction with such annual meeting must submit such
proposals in writing to the Secretary of the Company no later than December 5,
2000. The Company's Bylaws require that for nominations of persons for election
to the Board of Directors of the Company or the proposal of business to be
considered by the stockholders at an annual meeting, a stockholder must give
timely written notice thereof. To be timely for the 2001 annual meeting of
stockholders, such notice must be delivered to the Secretary of the Company at
the principal executive offices of the Company not less than 70 days nor more
than 90 days prior to May 23, 2001, provided, that if the 2001 annual meeting of
stockholders is advanced by more than 20 days, or delayed by more than 70 days,
from May 23, 2001, such notice must be delivered not earlier than the ninetieth
day prior to the 2001 annual meeting and not later than the close of business on
the later of (a) the seventieth day prior to the 2001 annual meeting or (b) the
tenth day following the day on which public announcement of the date of the 2001
annual meeting is first made. The stockholder's notice must contain and be
accompanied by certain information as specified in the Bylaws. It is recommended
that any stockholder desiring to make a nomination or submit a proposal for
consideration obtain a copy of the Company's Bylaws, which may be obtained
without charge from the Secretary of the Company upon written request addressed
to the Secretary at the Company's principal executive offices.
 
     EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND MAIL PROMPTLY
THE ENCLOSED PROXY OR VOTE BY INTERNET OR TELEPHONE AS DESCRIBED ABOVE IN THE
PROXY STATEMENT.
 
 
                                           By Order of the Board of Directors,
 
                                            /s/JEFFERY A SMISEK
                                            Jeffery A. Smisek
                                            Secretary
 
Houston, Texas
April 4, 2000
 
     THE COMPANY WILL FURNISH TO INTERESTED SECURITY HOLDERS WITHOUT CHARGE,
UPON WRITTEN REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999. THE COMPANY WILL FURNISH ANY EXHIBIT TO SUCH
REPORT, UPON WRITTEN REQUEST, TO ANY SECURITY HOLDER REQUESTING SUCH REPORT UPON
PAYMENT OF REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING SUCH EXHIBIT.
REQUESTS FOR COPIES SHOULD BE ADDRESSED TO THE SECRETARY OF THE COMPANY AT THE
COMPANY'S HEADQUARTERS: 1600 SMITH, DEPT. HQSEO, HOUSTON, TEXAS 77002. THE
COMPANY'S FORM 10-K, INCLUDING EXHIBITS, IS ALSO AVAILABLE ON THE COMPANY'S
WEBSITE AT WWW.CONTINENTAL.COM.
 
                                       36

<PAGE>   40
COMMON STOCK
PROXY

CONTINENTAL AIRLINES, INC.

Annual Meeting of Stockholders - May 23, 2000
This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby authorizes Gordon M. Bethune, Jeffery A. Smisek and Scott
R. Peterson, and each of them, with full power of substitution, to represent and
vote the stock of the undersigned in Continental Airlines, Inc. as directed and,
in their sole discretion, on all other matters that may properly come before the
Annual Meeting of Stockholders to be held on May 23, 2000, and at any
adjournment or adjournments thereof, as if the undersigned were present and
voting thereat. The undersigned acknowledges receipt of the notice of annual
meeting and proxy statement with respect to such Annual Meeting and certifies
that, to the knowledge of the undersigned, all equity securities of the Company
owned of record or beneficially by the undersigned are owned and controlled only
by U.S. Citizens (as defined in the proxy statement), except as indicated on the
reverse side hereof.

Whether or not you expect to attend the Annual Meeting, please execute and
return this proxy, which may be revoked at any time prior to its use.

Nominees for Director:
Thomas J. Barrack, Jr.     01       Gordon M. Bethune         02
David Bonderman            03       Gregory D. Brenneman      04
Kirbyjon H. Caldwell       05       Patrick Foley             06
Douglas H. McCorkindale    07       George G. C. Parker       08
Richard W. Pogue           09       William S. Price III      10
Donald L. Sturm            11       Karen Hastie Williams     12
Charles A. Yamarone        13

This proxy, when properly executed,will be voted in the manner directed by the
undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS (PROPOSAL 1)
AND "FOR" PROPOSALS 2 AND 3.

The Board of Directors Recommends a Vote "FOR" Proposals 1, 2, and 3.

THIS FORM OF PROXY RELATES TO BOTH CLASS A AND CLASS B COMMON STOCK. IF YOU
RECEIVED TWO PROXY CARDS, PLEASE EXECUTE AND RETURN EACH.

SEE REVERSE



CONTINENTAL AIRLINES, INC.

Please mark vote in oval in the following manner using dark ink only. [ ]

1.       Election of Directors:                     For    Withhold    For All
         See Reverse Side.                                   All       Except 
         For, except vote withheld from the         [ ]      [ ]        [ ]
         following nominee(s):


<PAGE>   41

----------------------------------------------
                                                    For      Against    Abstain
2.       Approval of Incentive Plan 2000.           [ ]        [ ]        [ ]

                                                    For      Against    Abstain
3.       Ratification of Appointment of             [ ]        [ ]        [ ] 
         Independent Auditors.                      

Please mark this box ONLY if any Class A or         For
Class B common stock owned of record or             [ ]
beneficially by you is owned or controlled by
Foreigners (as defined in the proxy
statement), and indicate the number and class
so owned or controlled by Foreigners.

Class A
       ------------------------------------ 
Class B
       -------------------------------------


Dated:                                , 2000
      -------------------------------- 
Signature(s)
            --------------------------------
------------------------------------------------

NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.

<PAGE>   42
                               INDEX TO EXHIBITS





<TABLE>
EXHIBIT
  NO.       DESCRIPTION
-------     -----------
<S>         <C>
 99.1       Incentive plan 2000 as amended and restated effective as of
            March 27, 2000.

</TABLE>









<PAGE>   1
                                                                    EXHIBIT 99.1

                           CONTINENTAL AIRLINES, INC.

                               INCENTIVE PLAN 2000

                        AS AMENDED AND RESTATED EFFECTIVE
                              AS OF MARCH 27, 2000

                                   1. PURPOSE

     The purpose of the CONTINENTAL AIRLINES, INC. INCENTIVE PLAN 2000 is to
provide a means through which Continental Airlines, Inc. and its subsidiaries
may attract able persons to serve as directors, or to enter or remain in the
employ of the Company (as defined below) or its subsidiaries, and to provide a
means whereby those individuals upon whom the responsibilities of the successful
administration and management of the Company and its subsidiaries rest, and
whose present and potential contributions to the welfare of the Company and its
subsidiaries are of importance, can acquire and maintain stock ownership,
thereby strengthening their concern for the welfare of the Company and its
subsidiaries. A further purpose of the Plan is to provide such individuals with
additional incentive and reward opportunities designed to enhance the profitable
growth of the Company and its subsidiaries. So that the maximum incentive can be
provided, the Plan provides for granting Incentive Stock Options, Non-Qualified
Options, Restricted Stock Awards, Performance Awards, Incentive
 Awards, and
Retention Awards, or any combination of the foregoing, as is best suited to the
circumstances of the particular person.

                                 2. DEFINITIONS

     The following definitions (including any plural thereof) shall be
applicable throughout the Plan unless specifically modified by any Section:

     (a)  "ADMINISTRATOR" means (i) in the context of Awards made to, or the
administration (or interpretation of any provision) of the Plan as it relates
to, any person who is subject to Section 16 of the Exchange Act (including any
successor section to the same or similar effect, "Section 16"), the Committee,
or (ii) in the context of Awards made to, or the administration (or
interpretation of any provision) of the Plan as it relates to, any person who is
not subject to Section 16, the Chief Executive Officer of the Company (or, if
the Chief Executive Officer is not a Director of the Company, the Committee),
unless the Plan specifies that the Committee shall take specific action (in
which case such action may only be taken by the Committee) or the Committee (as
to any Award described in this clause (ii) or the administration or
interpretation of any specific provision of the Plan) specifies that it shall
serve as Administrator.

     (b)  "AWARD" means, individually or collectively, any Option, Restricted
Stock Award, Performance Award, Incentive Award, or Retention Award.

     (c)  "BOARD" means the Board of Directors of the Company.


<PAGE>   2

     (d)  "CODE" means the Internal Revenue Code of 1986, as amended from time
to time. Reference in the Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and any
regulations promulgated under such section.

     (e)  "COMMITTEE" means a committee of the Board comprised solely of two or
more outside Directors (within the meaning of the term "outside directors" as
used in section 162(m) of the Code and applicable interpretive authority
thereunder and within the meaning of "Non-Employee Director" as defined in Rule
16b-3). Such committee shall be the Human Resources Committee of the Board
unless and until the Board designates another committee of the Board to serve as
the Committee.

     (f)  "COMMON STOCK" means the Class B common stock, $.01 par value, of the
Company, or any security into which such Common Stock may be changed by reason
of any transaction or event of the type described in Section 12(b).

     (g)  "COMPANY" shall mean Continental Airlines, Inc., a Delaware
corporation, or any successor thereto.

     (h)  "DIRECTOR" means an individual elected to the Board by the
stockholders of the Company or by the Board under applicable corporate law who
is serving on the Board on the date the Plan is adopted by the Board or is
elected to the Board after such date.

     (i)  "DISABILITY" means, with respect to a Participant, such Participant's
disability entitling him or her to benefits under the Company's group long-term
disability plan; provided, however, that if such Participant is not eligible to
participate in such plan, then such Participant shall be considered to have
incurred a "Disability" if and when the Administrator determines in its
discretion that such Participant has become incapacitated for a period of at
least 180 days by accident, sickness, or other circumstance which renders such
Participant mentally or physically incapable of performing the material duties
and services required of him or her in his or her employment on a full-time
basis during such period.

     (j)  "employee" means any person (which may include a Director) in an
employment relationship with the Company or any parent or subsidiary corporation
(as defined in section 424 of the Code).

     (k)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     (l)  "GRANT DOCUMENT" means the document or documents evidencing an Award
under the Plan, which may be either an agreement between the Company and the
Holder as to the Award (with any amendments thereto) or a notice of grant of the
Award from the Company to the Holder (including any attached statement of the
terms and conditions of the Award and any modifications thereto made in
accordance with the Plan).


<PAGE>   3

     (m)  "HOLDER" means an employee or a non-employee Director who has been
granted an Option, a Restricted Stock Award, a Performance Award, an Incentive
Award, or a Retention Award.

     (n)  "INCENTIVE AWARD" means an Award granted under Section 10 of the Plan.

     (o)  "INCENTIVE STOCK OPTION" means an incentive stock option within the
meaning of section 422 of the Code.

     (p)  "MARKET VALUE PER SHARE" means, as of any specified date, the closing
sale price of the Common Stock on that date (or, if there are no sales on that
date, the last preceding date on which there was a sale) in the principal
securities market in which the Common Stock is then traded. If the Common Stock
is not publicly traded at the time a determination of "Market Value per Share"
is required to be made hereunder, the determination of such amount shall be made
by the Administrator in such manner as it deems appropriate.

     (q)  "NON-QUALIFIED OPTION" means an Option that is not an Incentive Stock
Option.

     (r)  "OPTION" means an Award under Section 7 of the Plan and includes both
Non-Qualified Options and Incentive Stock Options to purchase Common Stock.

     (s)  "PERFORMANCE AWARD" means an Award granted under Section 9 of the
Plan.

     (t)  "PERSONAL REPRESENTATIVE" means the person who upon the death,
disability, or incompetency of a Holder shall have acquired, by will or by the
laws of descent and distribution or by other legal proceedings, the right to
exercise an Option or the right to any Restricted Stock Award, Performance
Award, Incentive Award, or Retention Award theretofore granted or made to such
Holder.

     (u)  "PLAN" means the Continental Airlines, Inc. Incentive Plan 2000, as
amended from time to time.

     (v)  "RESTRICTED STOCK" means shares of Common Stock granted pursuant to a
Restricted Stock Award as to which neither the substantial risk of forfeiture
nor the restriction on transfer referred to in Section 8 of the Plan has
expired.

     (w)  "RESTRICTED STOCK AWARD" means an Award granted under Section 8 of the
Plan.

     (x)  "RETENTION AWARD" means an Award granted under Section 11 of the Plan.

     (y)  "RULE 16B-3" means Rule 16b-3 under the Exchange Act, as such rule may
be amended from time to time, and any successor rule, regulation or statute
fulfilling the same or similar function.

     (z)  "SAR" means a stock appreciation right granted in connection with an
Option under Section 7 of the Plan.


<PAGE>   4

     (aa) "subsidiary" means any entity (other than the Company) with respect to
which the Company, directly or indirectly through one or more other entities,
owns equity interests possessing 50 percent or more of the total combined voting
power of all equity interests of such entity (excluding voting power that arises
only upon the occurrence of one or more specified events).

                   3. EFFECTIVE DATE AND DURATION OF THE PLAN

     The Plan originally became effective on October 4, 1999. The Plan as set
forth herein constitutes an amendment and restatement of the Plan as previously
adopted by the Board, and shall supersede and replace in its entirety such
previously adopted plan. This amendment and restatement of the Plan shall be
effective as of March 27, 2000, provided that the Plan (as so amended and
restated) is approved by the stockholders of the Company at the Company's 2000
annual meeting of stockholders. Notwithstanding any provision of the Plan or in
any Grant Document under the Plan, no Option shall be exercisable and no Award
shall vest or be payable prior to such stockholder approval. No further Awards
may be granted under the Plan after October 3, 2009. The Plan shall remain in
effect (at least for the purpose of governing outstanding Awards) until all
Option Awards granted under the Plan have been exercised or expired, all
restrictions imposed upon Restricted Stock Awards granted under the Plan have
been eliminated or the Restricted Stock Awards have been forfeited, and all
Performance Awards, Incentive Awards and Retention Awards granted under the Plan
have been satisfied or have terminated.

                                4. ADMINISTRATION

     (a)  ADMINISTRATOR. The Plan shall be administered by the Administrator, so
that (i) Awards made to, and the administration (or interpretation of any
provision) of the Plan as it relates to, any person who is subject to Section
16, shall be made or effected by the Committee, and (ii) Awards made to, and the
administration (or interpretation of any provision) of the Plan as it relates
to, any person who is not subject to Section 16, shall be made or effected by
the Chief Executive Officer of the Company (or, if the Chief Executive Officer
is not a Director of the Company, the Committee), unless the Plan specifies that
the Committee shall take specific action (in which case such action may only be
taken by the Committee) or the Committee (as to any Award described in this
clause (ii) or the administration or interpretation of any specific provision of
the Plan) specifies that it shall serve as Administrator.

     (b)  POWERS. Subject to the express provisions of the Plan, the
Administrator shall have authority, in its discretion, to determine which
employees or Directors shall receive an Award, the time or times when such Award
shall be granted, whether an Incentive Stock Option or Non-Qualified Option
shall be granted, the number of shares to be subject to each Option and
Restricted Stock Award, and the value of each Performance Award, Incentive Award
and Retention Award. In making such determinations, the Administrator shall take
into account the nature of the services


<PAGE>   5

rendered by the respective employees or Directors, their present and potential
contribution to the Company's success and such other factors as the
Administrator in its discretion shall deem relevant. Subject to the express
provisions of the Plan, the Administrator shall also have the power to construe
the Plan and the respective agreements executed hereunder, to prescribe rules
and regulations relating to the Plan, and to determine the terms, restrictions
and provisions of the Grant Documents, including such terms, restrictions and
provisions as shall be requisite in the judgment of the Administrator to cause
designated Options to qualify as Incentive Stock Options, and to make all other
determinations necessary or advisable for administering the Plan. The
Administrator may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Grant Document relating to an Award in the
manner and to the extent it shall deem expedient to carry it into effect. The
determination of the Administrator on the matters referred to in this Section 4
shall be conclusive; provided, however, that in the event of any conflict in any
such determination as between the Committee and the Chief Executive Officer of
the Company, each acting in capacity as Administrator of the Plan, the
determination of the Committee shall be conclusive.

                5. SHARES SUBJECT TO THE PLAN, AWARD LIMITATIONS,
                               AND GRANT OF AWARDS

     (a)  SHARES SUBJECT TO THE PLAN; AWARD LIMITATIONS. The Administrator may
from time to time grant Awards to one or more employees or Directors determined
by it to be eligible for participation in the Plan in accordance with the
provisions of Section 6 hereof. Subject to adjustment as provided in Section
12(b) hereof, the aggregate number of shares of Common Stock that may be issued
under the Plan shall not exceed 3,000,000 shares. Shares shall be deemed to have
been issued under the Plan only to the extent actually issued and delivered
pursuant to an Award. To the extent that an Award lapses, the rights of its
Holder terminate, or an Award is paid in cash or is settled in a manner such
that all or some of the shares of Common Stock covered by the Award are not
issued to the Holder, any shares of Common Stock then subject to such Award
shall again be available for the grant of an Award under the Plan.
Notwithstanding any provision in the Plan to the contrary, (i) the maximum
number of shares of Common Stock that may be subject to Awards granted to any
one individual during any calendar year may not exceed 750,000 shares (subject
to adjustment as provided in Section 12(b)), (ii) the maximum number of shares
of Common Stock that may be granted as Restricted Stock Awards may not exceed
250,000 shares (subject to adjustment as provided in Section 12(b)), (iii) the
maximum amount of compensation that may be paid under all Performance Awards
denominated in cash (including the fair market value (priced at the Market Value
per Share) of any shares of Common Stock paid in satisfaction of such
Performance Awards) granted to any one individual during any calendar year may
not exceed $10 million, and any payment due with respect to a Performance Award
shall be paid no later than 10 years after the date of grant of such Performance
Award, and (iv) the maximum amount of compensation that may be paid under all
Retention Awards granted to any one individual during any calendar year may not
exceed 1% of the aggregate gross revenues of the Company and its


<PAGE>   6

consolidated subsidiaries for the fiscal year of the Company that ends on
December 31, 2000 (determined based on the regularly prepared and publicly
available statements of operations of the Company prepared in accordance with
United States generally accepted accounting principles, consistently applied),
and any payment due with respect to a Retention Award shall be paid no later
than 11 years after the date of grant of such Retention Award. The limitations
set forth in clauses (i), (iii), and (iv) of the preceding sentence shall be
applied in a manner which will permit compensation generated under the Plan
which is intended to constitute "performance-based" compensation for purposes of
section 162(m) of the Code to be treated as such "performance-based"
compensation.

     (b)  GRANT OF AWARDS. The Administrator may from time to time grant Awards
to one or more employees or Directors determined by it to be eligible for
participation in the Plan in accordance with the terms of this Plan.

     (c)  STOCK OFFERED. Subject to the limitations set forth in Section 5(a)
above, the stock to be offered pursuant to an Award may be authorized but
unissued Common Stock or Common Stock previously issued and outstanding and
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Awards at the termination of the Plan shall cease
to be subject to the Plan but, until termination of the Plan, the Company shall
at all times make available a sufficient number of shares to meet the
requirements of the Plan.

                                 6. ELIGIBILITY

     Awards may be granted only to persons who, at the time of grant, are
employees or Directors. An Award may be granted on more than one occasion to the
same person and, subject to the limitations set forth in the Plan, Awards may
include an Incentive Stock Option, a Non-Qualified Option, a Restricted Stock
Award, a Performance Award, an Incentive Award, a Retention Award or any
combination thereof.

                                7. STOCK OPTIONS

     (a)  OPTION PERIOD. The term of each Option shall be as specified by the
Administrator at the date of grant.

     (b)  LIMITATIONS ON EXERCISE OF OPTION. An Option shall be exercisable in
whole or in such installments and at such times as determined by the
Administrator.

     (c)  SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. An Incentive Stock
Option may be granted only to an individual who is an employee at the time the
Option is granted. To the extent that the aggregate Market Value per Share
(determined at the time the respective Incentive Stock Option is granted) of
Common Stock with respect to which Incentive Stock Options granted after 1986
are exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds $100,000, such Incentive Stock Options shall be
treated as Non-Qualified Options. The


<PAGE>   7

Administrator shall determine, in accordance with applicable provisions of the
Code, Treasury Regulations and other administrative pronouncements, which of a
Holder's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the Holder of such determination as
soon as practicable after such determination. No Incentive Stock Option shall be
granted to an individual if, at the time the Option is granted, such individual
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its parent or subsidiary corporation,
within the meaning of section 422(b)(6) of the Code, unless (i) at the time such
Option is granted the option price is at least 110% of the Market Value per
Share of the Common Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date of
grant. An Incentive Stock Option shall not be transferable otherwise than by
will or the laws of descent and distribution, and shall be exercisable during
the Holder's lifetime only by such Holder or the Holder's guardian or Personal
Representative.

     (d)  OPTION GRANT DOCUMENT. Each Option shall be evidenced by an Option
Grant Document in such form and containing such provisions not inconsistent with
the provisions of the Plan as the Administrator from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under section 422 of the Code. An Option Grant Document may provide for the
payment of the option price, in whole or in part, by delivery of a number of
shares of Common Stock (plus cash if necessary) having a Market Value per Share
equal to such option price. Moreover, an Option Grant Document may provide for a
"cashless exercise" of the Option by establishing procedures satisfactory to the
Administrator with respect thereto. The terms and conditions of the respective
Option Grant Documents need not be identical.

     (e)  OPTION PRICE AND PAYMENT. The price at which a share of Common Stock
may be purchased upon exercise of an Option shall be set forth in the Option
Grant Document and shall be determined by the Administrator but, subject to
adjustment as provided in Section 12(b), such purchase price shall not be less
than the Market Value per Share of a share of Common Stock on the date such
Option is granted. The Option or portion thereof may be exercised by delivery of
an irrevocable notice of exercise to the Company. The purchase price of the
Option or portion thereof shall be paid in full in the manner specified by the
Administrator. Separate stock certificates shall be issued by the Company for
those shares acquired pursuant to the exercise of an Incentive Stock Option and
for those shares acquired pursuant to the exercise of any Non-Qualified Option.

     (f)  STOCKHOLDER RIGHTS AND PRIVILEGES. The Holder of an Option shall be
entitled to all the privileges and rights of a stockholder only with respect to
such shares of Common Stock as have been purchased under the Option and for
which certificates representing such Common Stock have been registered in the
Holder's name.

     (g)  STOCK APPRECIATION RIGHTS. The Administrator (concurrently with the
grant of an Option or subsequent to such


<PAGE>   8

grant) may, in its sole discretion, grant stock appreciation rights ("SARs") to
any Holder of an Option. SARs may give the Holder of an Option the right, upon
written request, to surrender any exercisable Option or portion thereof in
exchange for cash, whole shares of Common Stock, or a combination thereof, as
determined by the Committee, with a value equal to the excess of the Market
Value per Share, as of the date of such request, of one share of Common Stock
over the Option price for such share multiplied by the number of shares covered
by the Option or portion thereof to be surrendered. In the case of any SAR which
is granted in connection with an Incentive Stock Option, such SAR shall be
exercisable only when the Market Value per Share of the Common Stock exceeds the
price specified therefor in the Option or portion thereof to be surrendered. In
the event of the exercise of any SAR granted hereunder, the number of shares
reserved for issuance under the Plan shall be reduced only to the extent that
shares of Common Stock are actually issued in connection with the exercise of
such SAR. Additional terms and conditions governing any such SARs may from time
to time be prescribed by the Administrator in its sole discretion.

     (h)  OPTIONS AND SARS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER
CORPORATIONS. Options and SARs may be granted under the Plan from time to time
in substitution for stock options held by individuals employed by corporations
who become employees as a result of a merger or consolidation or other business
combination of the employing corporation with the Company or any subsidiary.

                           8. RESTRICTED STOCK AWARDS

     (a)  OWNERSHIP OF RESTRICTED STOCK. Each grant of Restricted Stock pursuant
to a Restricted Stock Award will constitute an immediate transfer of record and
beneficial ownership of the shares of Restricted Stock to the recipient of the
grant in consideration of the performance of services by such recipient (or
other consideration determined by the Administrator), entitling the recipient to
all voting and other ownership rights, but subject to the restrictions
hereinafter referred to or contained in the related Grant Document. Each grant
may, in the discretion of the Administrator, limit the recipient's dividend
rights during the period in which the shares of Restricted Stock are subject to
a substantial risk of forfeiture and restrictions on transfer.

     (b)  SUBSTANTIAL RISK OF FORFEITURE AND RESTRICTIONS ON TRANSFER. Each
grant of Restricted Stock will provide that (i) the shares covered thereby will
be subject, for a period or periods determined by the Administrator at the date
of grant, to one or more restrictions, including, without limitation, a
restriction that constitutes a "substantial risk of forfeiture" within the
meaning of section 83 of the Code and applicable interpretive authority
thereunder, and (ii) during such period or periods during which such
restrictions are to continue, the transferability of the Restricted Stock
subject to such restrictions will be prohibited or restricted in a manner and to
the extent prescribed by the Administrator at the date of grant.

     (c)  RESTRICTED STOCK HELD IN TRUST. Shares of Common Stock


<PAGE>   9
awarded pursuant to each Restricted Stock Award will be held in trust by the
Company for the benefit of the recipient until such time as the applicable
restriction on transfer thereon shall have expired or otherwise lapsed, at which
time certificates representing such Common Stock will be delivered to the
recipient.

     (d)  RESTRICTED STOCK GRANT DOCUMENT; CONSIDERATION. Each grant of
Restricted Stock shall be evidenced by a Grant Document in such form and
containing such provisions not inconsistent with the provisions of the Plan as
the Administrator from time to time shall approve. The terms and conditions of
the respective Restricted Stock Grant Documents need not be identical. Each
grant of Restricted Stock may be made without additional consideration or in
consideration of a payment by the recipient that is less than the Market Value
per Share on the date of grant, as determined by the Administrator.

                              9. PERFORMANCE AWARDS

     (a)  PERFORMANCE PERIOD. The Administrator shall establish, with respect to
and at the time of each Performance Award, a performance period over which the
performance applicable to the Performance Award shall be measured.

     (b)  PERFORMANCE MEASURES. A Performance Award shall be awarded to a Holder
contingent upon future performance of the Company or any subsidiary, division,
or department thereof. The Administrator shall establish the performance
measures applicable to such performance within the applicable time period
permitted by section 162(m) of the Code, with such adjustments thereto as may be
determined by the Administrator. The performance measures may be absolute,
relative to one or more other companies, relative to one or more indexes, or
measured by reference to the Company alone or the Company together with its
consolidated subsidiaries. The performance measures established by the
Administrator may be based upon (i) the price of a share of Common Stock, (ii)
operating income or operating income margin, (iii) earnings before interest,
income taxes, depreciation, amortization and aircraft rent ("EBITDAR") or
EBITDAR margin, (iv) net income or net income margin, (v) cash flow, (vi) total
shareholder return, or (vii) a combination of any of the foregoing, including
any average, weighted average, minimum, hurdle, rate of increase or other
measure of any or any combination thereof. The Administrator, in its sole
discretion, may provide for an adjustable Performance Award value based upon the
level of achievement of performance measures.

     (c)  AWARDS CRITERIA. In determining the value of Performance Awards, the
Administrator shall take into account a Holder's responsibility level,
performance, potential, other Awards, and such other considerations as it deems
appropriate. The Administrator, in its sole discretion, may provide for a
reduction in the value of a Holder's Performance Award during the performance
period, if permitted by the applicable Grant Document.

     (d)  PAYMENT. Following the end of the performance period, the Holder of a
Performance Award shall be entitled to receive payment of an amount not
exceeding the maximum value of the


<PAGE>   10

Performance Award, based on the achievement of the performance measures for such
performance period, as determined by the Administrator and certified by the
Committee as required by section 162(m) of the Code. Payment of a Performance
Award may be made in cash, Common Stock (valued at the Market Value per Share),
or a combination thereof, as determined by the Administrator. Payment shall be
made in a lump sum, except as otherwise set forth in the applicable Grant
Document.

     (e)  TERMINATION OF EMPLOYMENT. A Performance Award shall terminate if the
Holder does not remain continuously in the employ (or in service as a Director)
of the Company or a subsidiary at all times during the applicable performance
period, except as otherwise set forth in the applicable Grant Document.

                              10. INCENTIVE AWARDS

     (a)  INCENTIVE AWARDS. Incentive Awards are rights to receive shares of
Common Stock (or the Market Value per Share thereof), or rights to receive an
amount equal to any appreciation or increase in the Market Value per Share of
Common Stock over a specified period of time, which vest over a period of time
as established by the Administrator, without satisfaction of any performance
criteria or objectives. The Administrator may, in its discretion, require
payment or other conditions of the Holder respecting any Incentive Award.

     (b)  AWARD PERIOD. The Administrator shall establish, with respect to and
at the time of each Incentive Award, a period over which the Award shall vest
with respect to the Holder.

     (c)  AWARDS CRITERIA. In determining the value of Incentive Awards, the
Committee shall take into account a Holder's responsibility level, performance,
potential, other Awards, and such other considerations as it deems appropriate.

     (d)  PAYMENT. Following the end of the vesting period for an Incentive
Award (or at such other time as the applicable Grant Document may provide), the
Holder of an Incentive Award shall be entitled to receive payment of an amount,
not exceeding the maximum value of the Incentive Award, based on the then vested
value of the Award. Payment of an Incentive Award may be made in cash, Common
Stock (valued at the Market Value per Share), or a combination thereof as
determined by the Administrator. Payment shall be made in a lump sum, except as
otherwise set forth in the applicable Grant Document. Cash dividend equivalents
may be paid during or after the vesting period with respect to an Incentive
Award, as determined by the Administrator.

     (e)  TERMINATION OF EMPLOYMENT. An Incentive Award shall terminate if the
Holder does not remain continuously in the employ (or in service as a Director)
of the Company or a subsidiary at all times during the applicable vesting
period, except as otherwise set forth in the applicable Grant Document.

                              11. RETENTION AWARDS

     (a)  RETENTION AWARDS. A Retention Award is a right, which


<PAGE>   11

vests over a period of time as established by the Committee, to receive a cash
payment measured by a portion (not exceeding 3.75% for any individual Holder nor
25% in the aggregate for all Holders) of the gain and profits (measured to the
date such Award (or portion thereof, as applicable) is deemed surrendered for
payment in accordance with its terms) associated with an equity holding of the
Company or a subsidiary in an e-commerce or internet-based business. The
Committee shall designate each such equity holding, a portion of the gain and
profits with respect to which shall determine the relevant cash payment that is
the subject of a Retention Award, and the Committee shall establish, with
respect to each Retention Award and within the applicable time period permitted
by Section 162(m) of the Code, the portion of the gain and profits in such
equity holding used to measure cash payments to the Holder of such Retention
Award.

     (b)  AWARDS CRITERIA. In determining the Retention Awards to be granted
under the Plan, the Committee shall take into account a Holder's responsibility
level, performance, potential, other Awards, and such other considerations as it
deems appropriate. The Committee, in its sole discretion, may provide for a
reduction in the value of a Holder's Retention Award during the period such
Award is outstanding, if permitted by the applicable Grant Document.

     (c)  PAYMENT. Following the vesting of a Retention Award in whole or in
part (or at such other times and subject to such other restrictions as the
applicable Grant Document may provide), the Holder of such Retention Award shall
be entitled to receive payment of an amount, not exceeding the maximum value of
the Retention Award, based on such Holder's vested interest in such Retention
Award and the gain and profit in the underlying equity holding, as certified by
the Committee as required by section 162(m) of the Code. Payment shall be made
in cash and in a lump sum, except as otherwise set forth in the applicable Grant
Document. In no event shall a Retention Award grant a Holder an interest in the
equity holding, the gain and profit in which is used to measure cash payments
under such Award.

     (d)  RETENTION AWARD GRANT DOCUMENT. Each grant of a Retention Award shall
be evidenced by a Grant Document in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve. The terms and conditions of the respective Retention Award Grant
Documents need not be identical. A Retention Award shall terminate if the Holder
does not remain continuously in the employ (or in service as a Director) of the
Company or a subsidiary at all times during the applicable vesting period,
except as otherwise set forth in the applicable Grant Document.

           12. RECAPITALIZATION, REORGANIZATION AND CHANGE IN CONTROL

     (a)  NO EFFECT ON RIGHT OR POWER. The existence of the Plan and the Awards
granted hereunder shall not affect in any way the right or power of the Board or
the stockholders of the Company or any subsidiary to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's or
any subsidiary's capital structure or its business, any merger


<PAGE>   12

or consolidation of the Company or any subsidiary, any issue of debt or equity
securities ahead of or affecting Common Stock or the rights thereof, the
dissolution or liquidation of the Company or any subsidiary or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.

     (b)  CHANGES IN COMMON STOCK. The provisions of Section 5(a) imposing
limits on the numbers of shares of Common Stock covered by Awards granted under
the Plan, as well as the number or type of shares or other property subject to
outstanding Awards and the applicable option or purchase prices per share, shall
be adjusted appropriately by the Committee in the event of stock dividends, spin
offs of assets or other extraordinary dividends, stock splits, combinations of
shares, recapitalizations, mergers, consolidations, reorganizations,
liquidations, issuances of rights or warrants and similar transactions or
events.

     (c)  CHANGE IN CONTROL. As used in the Plan (except as otherwise provided
in an applicable Grant Document), the term "Change in Control" shall mean:

     (aa) any person (within the meaning of Section 13(d) or 14(d) under the
Exchange Act, including any group (within the meaning of Section 13(d)(3) under
the Exchange Act), a "Person") is or becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company (such Person being referred to as an
"Acquiring Person") representing the greater of (x) 25% of the combined voting
power of the Company's outstanding securities and (y) the proportion of the
combined voting power of the Company's outstanding securities represented by
securities of the Company beneficially owned, directly or indirectly, by
Northwest Airlines Corporation ("Northwest") and any Person controlling,
controlled by or under common control with Northwest at the time of reference
(excluding, for purposes of determining such proportion of the combined voting
power under this clause (y), any securities beneficially owned by Northwest (and
any Person controlling, controlled by or under common control with Northwest)
which are deemed beneficially owned by such Acquiring Person); other than
beneficial ownership by (i) the Company or any subsidiary of the Company, (ii)
any employee benefit plan of the Company or any Person organized, appointed or
established pursuant to the terms of any such employee benefit plan (unless such
plan or Person is a party to or is utilized in connection with a transaction led
by Outside Persons), (iii) Northwest or any Person controlling, controlled by or
under common control with Northwest (unless Northwest is controlled by or under
common control with Delta Air Lines, Inc.), or (iv) (I) 1992 Air, Inc., (II) any
Person who controlled 1992 Air, Inc. as of February 26, 1998, including David
Bonderman and James Coulter, or (III) any Person controlled by any such Person
(Persons referred to in clauses (i) through (iv) hereof are hereinafter referred
to as "Excluded Persons"); or

     (bb) individuals who constituted the Board as of February 26, 1998 (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to February
26, 1998 whose


<PAGE>   13

appointment to fill a vacancy or to fill a new Board position or whose
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board or who
was nominated for election by Excluded Persons shall be considered as though
such individual were a member of the Incumbent Board; or

     (cc) the Company merges with or consolidates into or engages in a
reorganization or similar transaction with another entity (including Northwest)
pursuant to a transaction in which the Company is not the "Controlling
Corporation"; or

     (dd) the Company sells or otherwise disposes of all or substantially all of
its assets, other than to Excluded Persons, or the Company sells or otherwise
disposes of all or substantially all of its assets to Northwest or any Person
controlling, controlled by or under common control with Northwest.

     For purposes of clause (aa) above, if at any time there exist securities of
different classes entitled to vote separately in the election of directors, the
calculation of the proportion of the voting power held by a beneficial owner of
the Company's securities shall be determined as follows: first, the proportion
of the voting power represented by securities held by such beneficial owner of
each separate class or group of classes voting separately in the election of
directors shall be determined, provided that securities representing more than
50% of the voting power of securities of any such class or group of classes
shall be deemed to represent 100% of such voting power; second, such proportion
shall then be multiplied by a fraction, the numerator of which is the number of
directors which such class or classes is entitled to elect and the denominator
of which is the total number of directors elected to membership on the Board at
the time; and third, the product obtained for each such separate class or group
of classes shall be added together, which sum shall be the proportion of the
combined voting power of the Company's outstanding securities held by such
beneficial owner.

     For purposes of clause (aa) above, the term "Outside Persons" means any
Persons other than (I) Persons described in clauses (aa)(i) or (iii) or (iv)
above (as to Persons described in clause (aa)(iii) or (iv) above, while they are
Excluded Persons) and (II) members of senior management of the Company in office
immediately prior to the time the Acquiring Person acquires the beneficial
ownership described in clause (aa).

     For purposes of clause (cc) above, the Company shall be considered to be
the Controlling Corporation in any merger, consolidation, reorganization or
similar transaction unless either (1) the shareholders of the Company
immediately prior to the consummation of the transaction (the "Old
Shareholders") would not, immediately after such consummation, beneficially own,
directly or indirectly, securities of the resulting entity entitled to elect a
majority of the members of the Board of Directors or other governing body of the
resulting entity or (2) those persons who were directors of the Company
immediately prior to the consummation of the proposed transaction would not,
immediately after such consummation, constitute a majority of the directors of
the


<PAGE>   14

resulting entity, provided that (I) there shall be excluded from the
determination of the voting power of the Old Shareholders securities in the
resulting entity beneficially owned, directly or indirectly, by the other party
to the transaction and any such securities beneficially owned, directly or
indirectly, by any Person acting in concert with the other party to the
transaction, (II) there shall be excluded from the determination of the voting
power of the Old Shareholders securities in the resulting entity acquired in any
such transaction other than as a result of the beneficial ownership of Company
securities prior to the transaction and (III) persons who are directors of the
resulting entity shall be deemed not to have been directors of the Company
immediately prior to the consummation of the transaction if they were elected as
directors of the Company within 90 days prior to the consummation of the
transaction.

     The exclusion described in clause (aa)(iii) above shall cease to have any
force or effect (and the Persons described therein shall cease to be Excluded
Persons) if Northwest (together with any Person controlling, controlled by or
under common control with Northwest) ceases to be, for a period of thirty
consecutive calendar days, the beneficial owner, directly or indirectly, of
securities of the Company representing at least 25% of the combined voting power
of the Company's outstanding securities. The exclusion described in clause
(aa)(iv) above shall cease to have any force or effect (and the Persons
described therein shall cease to be Excluded Persons) if (A) the Person
acquiring beneficial ownership is not controlled by David Bonderman or James
Coulter, or (B) the Person acquiring beneficial ownership (together with any
Person controlling, controlled by or under common control with such Person)
ceases to be, for a period of thirty consecutive calendar days, the beneficial
owner, directly or indirectly, of securities of the Company representing at
least 25% of the combined voting power of the Company's outstanding securities.

     Upon the occurrence of a Change in Control, with respect to each recipient
of an Award hereunder, (AA) all Options granted to such recipient and
outstanding at such time shall immediately vest and become exercisable in full
(but subject, however, in the case of Incentive Stock Options, to the aggregate
fair market value, determined as of the date the Incentive Stock Options are
granted, of the stock with respect to which Incentive Stock Options are
exercisable for the first time by such recipient during any calendar year not
exceeding $100,000) and, except as required by law, all restrictions on the
transfer of shares acquired pursuant to such Options shall terminate, (BB) all
restrictions applicable to such recipient's Restricted Stock and Incentive
Awards that are outstanding at such time shall be deemed to have been satisfied
and such Restricted Stock and Incentive Awards shall immediately vest in full,
and (CC) all Retention Awards granted to such recipient and outstanding at such
time shall immediately vest in full.

     In addition, except as otherwise provided in the applicable Grant Document,
if a recipient of an Award hereunder becomes entitled to one or more payments
(with a "payment" including, without limitation, the vesting of an Award)
pursuant to the terms of the Plan (the "Total Payments"), which are or become
subject to the tax imposed by section 4999 of the Code (or any similar tax


<PAGE>   15

that may hereafter be imposed) (the "Excise Tax"), the Company or subsidiary for
whom the recipient is then performing services shall pay to the recipient an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the recipient, after reduction for any Excise Tax on the Total Payments and any
federal, state and local income or employment tax and Excise Tax on the Gross-Up
Payment, shall equal the Total Payments. For purposes of determining the amount
of the Gross-Up Payment, the recipient shall be deemed (aa) to pay federal
income taxes at the highest stated rate of federal income taxation (including
surtaxes, if any) for the calendar year in which the Gross-Up Payment is to be
made; and (bb) to pay any applicable state and local income taxes at the highest
stated rate of taxation (including surtaxes, if any) for the calendar year in
which the Gross-Up Payment is to be made. Any Gross-Up Payment required
hereunder shall be made to the recipient at the same time any Total Payment
subject to the Excise Tax is paid or deemed received by the recipient.

                    13. AMENDMENT AND TERMINATION OF THE PLAN

     Subject to the last sentence of Section 3 hereof, the Board in its
discretion may terminate the Plan at any time. The Board shall have the right to
amend the Plan or any part thereof from time to time, and the Administrator may
amend any Award (and its related Grant Document) at any time, except as
otherwise specifically provided in such Grant Document or to the extent
restricted by section 162(m) of the Code with respect to an Award which is
intended to constitute "performance-based" compensation for purposes of such
section; provided that no change in any Award theretofore granted may be made
which would impair the rights of the Holder thereof without the consent of such
Holder, and provided further that the Board may not, without approval of the
stockholders of the Company, amend the Plan to (a) increase the maximum
aggregate number of shares that may be issued under the Plan or (b) change the
class of individuals eligible to receive Awards under the Plan.

                                14. MISCELLANEOUS

     (a)  NO RIGHT TO AN AWARD. Neither the adoption of the Plan nor any action
of the Board or the Administrator shall be deemed to give an employee or
Director any right to be granted an Award except as may be evidenced by a Grant
Document from the Company reflecting a grant by the Company of an Award to such
person and setting forth the terms and conditions thereof. The Plan shall be
unfunded. The Company shall not be required to establish any special or separate
fund or to make any other segregation of funds or assets to assure the
performance of its obligations under any Award.

     (b)  NO EMPLOYMENT OR MEMBERSHIP RIGHTS CONFERRED. Nothing contained in the
Plan shall (i) confer upon any employee any right with respect to continuation
of employment with the Company or any subsidiary or (ii) interfere in any way
with the right of the Company or any subsidiary to terminate his or her
employment at any time. Nothing contained in the Plan shall confer upon any
Director any right with respect to continuation of membership on the Board.


<PAGE>   16

     (c)  OTHER LAWS; WITHHOLDING. The Company shall not be obligated to issue
any Common Stock pursuant to any Award granted under the Plan until there has
been compliance with applicable laws and regulations with respect thereto. No
fractional shares of Common Stock shall be delivered, nor shall any cash in lieu
of fractional shares be paid. The Company shall have the right to (i) make
deductions from any settlement or exercise of an Award made under the Plan,
including the delivery of shares, or require shares or cash or both be withheld
from any Award, in each case in an amount sufficient to satisfy withholding of
any taxes required by law, or (ii) take such other action as may be necessary or
appropriate to satisfy any such tax withholding obligations. The Administrator
may determine the manner in which such tax withholding may be satisfied, and may
permit shares of Common Stock (together with cash, as appropriate) to be used to
satisfy required tax withholding based on the Market Value per Share of any such
shares of Common Stock.

     (d)  NO RESTRICTION ON CORPORATE ACTION. Subject to the restrictions
contained in Section 13, nothing contained in the Plan shall be construed to
prevent the Company or any subsidiary from taking any corporate action, whether
or not such action would have an adverse effect on the Plan or any Award granted
hereunder. No employee, Director, beneficiary or other person shall have any
claim against the Company or any subsidiary as a result of any such action.

     (e)  RESTRICTIONS ON TRANSFER. An Award (other than an Incentive Stock
Option, which shall be subject to the transfer restrictions set forth in Section
7(c)) shall not be transferable otherwise than (i) by will or the laws of
descent and distribution, (ii) pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder, or (iii) with respect to Awards of
Non-Qualified Options, with the consent of the Administrator. In the discretion
of the Administrator, a percentage (determined by the Administrator and set
forth in the applicable Grant Document) of the aggregate shares of Common Stock
obtained from exercises of an Option (which percentage may be satisfied out of
particular exercises as determined by the Administrator and set forth in the
applicable Grant Document) shall not be transferable prior to the earliest to
occur of (x) the termination of the relevant Option term (or such shorter period
as may be determined by the Administrator and set forth in the Grant Document),
(y) the Holder's retirement, death or Disability, or (z) termination of the
Holder's employment with the Company and its subsidiaries.

     (f)  GOVERNING LAW. The Plan shall be construed in accordance with the laws
of the State of Texas.