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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 0-9781
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2929 Allen Parkway
Houston, Texas 77019
(Address of principal executive offices)
(Zip Code)
713-834-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _____
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No _____
_______________
As of August 4, 1995, 6,301,056 shares of Class A common stock and
20,893,678 shares of Class B common stock were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CERTIFICATE OF ELIMINATION
OF
8% CUMULATIVE PREFERRED STOCK AND
12% CUMULATIVE PREFERRED STOCK OF
CONTINENTAL AIRLINES, INC.
Pursuant to Section 151(g) of the General Corporation Law
of the State of Delaware
Continental Airlines, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in its
Restated Certificate of Incorporation, and in accordance with the provisions
of Section 151(g) of the General Corporation Law of the State of Delaware,
its Board of Directors has adopted the following resolutions to the effect
that all outstanding shares of the Corporation's 8% Cumulative Preferred
Stock, $.01 par value each (the "8% Cumulative Preferred Stock"), and 12%
Cumulative Preferred Stock, $.01 par value each (the "12% Cumulative
Preferred Stock"), be acquired by the Corporation, and that upon such
acquisition, no shares of the 8% Cumulative Preferred Stock and the 12%
Cumulative Preferred Stock shall be issued or reissued by the Corporation:
RESOLVED, that all shares of 8% Cumulative Preferred Stock and 12%
Cumulative Preferred Stock acquired by the Corporation pursuant to the
8% Preferred Exchange and the 12% Preferred Exchange be retired; and
RESOLVED, that upon the retirement of all outstanding shares of the
8% Cumulative Preferred Stock and the 12% Cumulative Preferred Stock, the
Corporation shall not issue any additional shares of 8% Cumulative
Preferred Stock or 12% Cumulative Preferred Stock, and that the
Corporation file with the Secretary of State of the State of Delaware a
certificate to the foregoing effect, which certificate, pursuant to
Section 151(g) of the Delaware General Corporation Law, shall have the
effect of eliminating from the Corporation's Restated Certificate of
Incorporation the certificates of designation with respect to the 8%
Cumulative Preferred Stock and the 12% Cumulative Preferred Stock,
respectively, and shall return the retired shares of 8% Cumulative
Preferred Stock and 12% Cumulative Preferred Stock to the status of
authorized but unissued Preferred Stock of the Corporation.
The Corporation further certifies that all outstanding shares of the
8% Cumulative Preferred Stock and the 12% Cumulative Preferred Stock have
been repurchased by the Corporation, that no shares of the 8% Cumulative
Preferred Stock and the 12% Cumulative Preferred Stock are outstanding as of
the date hereof, and that no shares of the 8% Cumulative Preferred Stock and
the 12% Cumulative Preferred Stock will be issued or reissued from and after
the date hereof.
* * *
IN WITNESS WHEREOF, the undersigned officer of the Corporation
subscribes to this Certificate of Elimination of 8% Cumulative Preferred
Stock and 12% Cumulative Preferred Stock and affirms that the statements made
herein are true under penalties of perjury as of this 30th day of June, 1995.
CONTINENTAL AIRLINES, INC.
By:__________________________
Name:
Title:
CERTIFICATE OF DESIGNATIONS
OF
SERIES A 8% CUMULATIVE
PREFERRED STOCK
OF
CONTINENTAL AIRLINES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Continental Airlines, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in its
Restated Certificate of Incorporation, and in accordance with the provisions
of Section 151 of the General Corporation Law of the State of Delaware, its
Board of Directors (the "Board of Directors") adopted resolutions creating a
series of its Preferred Stock, $.01 par value, designated as Series A 8%
Cumulative Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock,
$.01 par value, of the Corporation be, and it hereby is, created, and that
the designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions thereof (in
addition to the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the Corporation's Restated
Certificate of Incorporation that are applicable to the Preferred Stock), are
as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series A 8%
Cumulative Preferred Stock" ("Series A 8% Preferred Stock") and the number of
shares constituting such series shall be 300,000, which number may be
decreased and, but only for purposes of Section 2(b) below, increased by the
Board of Directors without a vote of stockholders; provided, however, that
such number may not be decreased below the number of then currently
outstanding shares of Series A 8% Preferred Stock.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series A 8% Preferred Stock, in
preference to the holders of shares of the Corporation's Class A Common
Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock,
each par value $.01 per share (collectively, the "Common Stock"), and to any
other capital stock of the Corporation ranking junior to Series A 8%
Preferred Stock as to payment of dividends, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds of the
Corporation legally available for the payment of dividends, cumulative
dividends payable in cash, subject to Section 2(b), at the annual rate of $8
per share, and, subject to the other provisions of this Section 2, no more.
Dividends payable in respect of the outstanding shares of Series A 8%
Preferred Stock shall begin to accrue and be cumulative from the respective
dates of original issue of such shares (which dates shall be reflected on the
certificates evidencing the same), and shall be payable in quarterly payments
on May 30, August 29, November 29 and March 1 (or, if any such day is not a
Business Day, as defined in Section 8, the Business Day next preceding such
day) in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date" and any dividend not paid on such date in cash or in
additional shares of Series A 8% Preferred Stock as provided herein being
referred to herein as "past due") for each of the fiscal quarters ended March
31, June 30, September 30 and December 31, respectively, commencing in
respect of each share of Series A 8% Preferred Stock on the first Quarterly
Dividend Payment Date which is at least seven days after the date of original
issue thereof; provided, however, that if any applicable dividend payment or
redemption payment is not made on a Quarterly Dividend Payment Date or the
date set for such redemption, respectively, thereafter Series A 8% Preferred
Stock shall accrue additional dividends in respect of all such dividend
payments and redemption payments that are past due and unpaid at (A) an
annual rate of 8% or (B) such lesser rate as may be the maximum rate that is
permitted by applicable law (in either case compounded quarterly), with the
amount of such additional dividends added to accrued dividend payments or
redemption payments, respectively, until all such dividend payments and
redemption payments shall have been paid in full (or declared and funds
sufficient therefor Set Apart for Payment, as defined in Section 8).
(b) Notwithstanding the provisions of Section 2(a) above, any
dividend accumulating through December 31, 1996 (payable March 1, 1997) shall
be declared and paid in additional shares of Series A 8% Preferred Stock, to
the extent legally permissible, in lieu of declaration and payment thereof in
cash. The number of shares of Series A 8% Preferred Stock to be issued in
lieu of cash dividends shall be calculated based on a value of $100 per share
of Series A 8% Preferred Stock. The shares of Series A 8% Preferred Stock
issued shall be fully paid and non-assessable. No certificates for
fractional shares shall be issued, and the Corporation shall round off any
fractional share to the next lower whole share amount. In determining such
fractional shares, the Corporation shall aggregate all shares of Series A 8%
Preferred Stock held by a Registered Holder thereof. The Corporation shall
pay, if there are funds legally available therefor, to each holder in cash an
amount equal to the value (based on a $100 value per share) of any fractional
share not issued in accordance with this Section 2(b).
(c) The amount of dividends payable shall be determined on the
basis of twelve 30-day months and a 360-day year. Dividends paid on the
shares of Series A 8% Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date (a "Regular
Record Date") for the determination of holders of shares of Series A 8%
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall be no more than 60 days nor less than ten days prior
to the date fixed for the payment thereof. Any dividend declared by the
Board of Directors as payable and punctually paid or Set Apart for Payment on
a Quarterly Dividend Payment Date will be paid to the Persons, as defined in
Section 8, in whose names Series A 8% Preferred Stock is registered at the
close of business on the Regular Record Date set with respect to that
Quarterly Dividend Payment Date (the "Registered Holders"). Any dividend not
so paid or Set Apart for Payment shall forthwith cease to be payable to such
Registered Holders and may be paid to the Registered Holders at the close of
business on the record date for the payment of such defaulted dividends and
interest to be fixed by the Board of Directors (a "Special Record Date").
The Board of Directors shall provide Registered Holders of Series A 8%
Preferred Stock not less than 10 days' prior notice of a Special Record Date.
Subject to Section 2(b), all such payments shall be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
(d) The Registered Holder of any shares of Series A 8% Preferred
Stock, upon the Corporation's written request therefor containing a
reasonably complete description of the basis for such request, shall
reimburse the Corporation for any and all withholding tax liabilities
incurred by the Corporation in connection with any dividends paid or
distributions made (including, without limitation, in connection with any
redemption of Series A 8% Preferred Stock) to such holder in respect of
Series A 8% Preferred Stock. Each Registered Holder, by acceptance of the
certificate evidencing such holder's shares of Series A 8% Preferred Stock,
shall be deemed to have agreed to the terms of this Section 2(d).
(e) The holders of shares of Series A 8% Preferred Stock shall not
be entitled to receive any dividends or other distributions in respect of
such shares of Series A 8% Preferred Stock except as provided in these
designations of Series A 8% Preferred Stock.
Section 3. Voting Rights.
(a) So long as any shares of Series A 8% Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of shares
shall then be required by law, without first obtaining the consent or
approval of the holders of at least a majority of the number of then-
outstanding shares of Series A 8% Preferred Stock, voting as a single class,
given in person or by proxy at a meeting at which the holders of such shares
shall be entitled to vote separately as a class, or by written consent, the
Corporation shall not: (i) authorize or create any class or series, or any
shares of any class or series, of stock having any preference or priority as
to dividends or upon redemption, liquidation, dissolution, or winding up over
Series A 8% Preferred Stock ("Senior Stock"); provided, however, that no
such vote shall be required with respect to the authorization or creation by
the Corporation of one or more series of Senior Stock if the proceeds of the
Corporation's issuance of such Senior Stock are sufficient, and are used, to
redeem all outstanding shares of Series A 8% Preferred Stock; (ii) authorize
or create any class or series, or any shares of any class or series, of stock
(other than the Series A 12% Cumulative Preferred Stock) ranking on a parity
(either as to dividends or upon redemption, liquidation, dissolution or
winding up) with Series A 8% Preferred Stock ("Parity Stock"); provided,
however, that no such vote shall be required with respect to the
authorization or creation by the Corporation of one or more new series of
Parity Stock if (A) (x) the aggregate purchase price (excluding transaction-
related expenses) of all shares of each such series is equal to or greater
than the aggregate liquidation preference of all shares of such series, (y)
the aggregate liquidation preference (excluding accrued but unpaid dividends)
of all shares of all such series of Preferred Stock does not exceed $25
million, and (z) shares of any such new series shall be issued only to an
employee stock ownership plan, employee stock ownership trust or other
similar arrangement organized and maintained by the Corporation for the
benefit of its employees or (B) the proceeds of the Corporation's issuance of
such Parity Stock are sufficient, and are used, to redeem all outstanding
shares of Series A 8% Preferred Stock; (iii) reclassify, convert or exchange
any shares of stock of the Corporation into shares of Senior Stock or Parity
Stock; (iv) authorize any security exchangeable for, convertible into, or
evidencing the right to purchase any shares of Senior Stock or Parity Stock;
(v) amend, alter or repeal (by merger or otherwise) the Corporation's
Restated Certificate of Incorporation), as it may be amended from time to
time (the "Restated Certificate of Incorporation" to alter or change the
preferences, rights or powers of Series A 8% Preferred Stock so as to affect
Series A 8% Preferred Stock adversely or (except for purposes of Section 2(b)
above) to increase the authorized number of shares of Series A 8% Preferred
Stock; or (vi) effect the voluntary liquidation, dissolution or winding up of
the Corporation, or the sale, lease, conveyance or exchange of all or
substantially all of the assets, property or business of the Corporation, or
the merger or consolidation of the Corporation with or into any other Person;
provided, however, that, except as otherwise specifically required by the
Restated Certificate of Incorporation, no separate vote of the holders of
Series A 8% Preferred Stock as a class shall be required in the case of such
a merger or consolidation or a sale, lease, conveyance or exchange of all or
substantially all of the assets, property or business of the Corporation (a
"reorganization") if (A)(i) the resulting surviving or acquiring Person will
have after such reorganization no stock either authorized or outstanding
ranking (either as to dividends or upon redemption, liquidation, dissolution
or winding up) prior to, or on a parity with, Series A 8% Preferred Stock or
the stock of the resulting, surviving or acquired Person issued in exchange
therefor (except any stock of the Corporation authorized or outstanding
immediately preceding such reorganization ranking prior to or on a parity
with the Series A 8% Preferred Stock, as aforesaid ("Grandfathered Stock"),
or any stock of the resulting, surviving or acquiring Person containing
substantially the same relative rights and preferences as any Grandfathered
Stock and issued in exchange therefor), and (ii) each holder of shares of
Series A 8% Preferred Stock immediately preceding such reorganization will
receive in exchange therefor the same number of shares of stock, with
substantially the same preferences, rights and powers, of the resulting,
surviving, or acquiring Person, or if the Corporation is the surviving Person
and Series A 8% Preferred Stock remains outstanding, without change to its
preferences, rights and powers, or (B) the Corporation redeems all
outstanding shares of Series A 8% Preferred Stock simultaneously with the
effectiveness of such merger, consolidation or reorganization.
(b) Whenever (i) there shall have occurred nine (9) consecutive
Quarterly Dividend Payment Dates on which dividends payable on shares of
Series A 8% Preferred Stock pursuant to the terms of Section 2(a) shall not
have been paid in cash at the annual rate of $8 per share or in additional
shares of Series A 8% Preferred Stock in accordance with Section 2(b) (a
"Dividend Default"), (ii) the Corporation shall have violated any of the
restrictions in Section 4 and such violation shall be continuing or (iii) the
Corporation shall not have redeemed shares of Series A 8% Preferred Stock
within five days of the date (a "Redemption Date") of any redemption of which
it has given, or is required to give, notice pursuant to Section 5(c),
regardless of whether there shall be funds legally available to effect such
redemption (a "Redemption Default"), thereafter and until the third
consecutive Quarterly Dividend Payment Date on which dividends on Series A 8%
Preferred Stock shall have been paid in cash (or in additional shares of
Series A 8% Preferred Stock in accordance with Section 2(b)) in full (and no
dividend arrearages shall exist on the Series A 8% Preferred Stock)
(hereinafter a cure of such Dividend Default) or such covenant shall have
been complied with, or such redemption shall have been performed or all funds
necessary therefor Set Apart for Payment, as the case may be, the holders of
shares of Series A 8% Preferred Stock shall have the right, notwithstanding
anything to the contrary in the Restated Certificate of Incorporation or By-
Laws of the Corporation (the "By-Laws"), voting together as a single class,
to elect one director. This right to elect a director may be exercised at
any annual meeting or at any special meeting called for such purpose as
hereinafter provided or at any adjournments thereof, or by the written
consent delivered to the Secretary of the Corporation, of the holders of a
majority of all outstanding shares of Series A 8% Preferred Stock as of the
record date of such written consent, until any Dividend Default or Redemption
Default shall have been cured, and any covenant violation shall cease to be
continuing, at which time the term of office of the director so elected shall
terminate automatically. So long as such right to vote continues (and unless
such right has been exercised by written consent of the holders of a majority
of the outstanding shares of Series A 8% Preferred Stock as hereinbefore
authorized), the Secretary of the Corporation may call, and upon the written
request of the holders of record of a majority of the outstanding shares of
Series A 8% Preferred Stock addressed to him or her at the principal office
of the Corporation shall call, a special meeting of the holders of Series A
8% Preferred Stock for the election of a director as provided herein. Such
meeting shall be held within 30 days after delivery of such notice to the
Secretary, at the place and upon the notice provided by law and in the By-
Laws or in the notice of meeting. No such special meeting or adjournment
thereof shall be held on a date less than 30 days before any annual meeting
of stockholders or any special meeting in lieu thereof. If at any such
annual or special meeting or any adjournment thereof the holders of a
majority of the then outstanding shares of Series A 8% Preferred Stock
entitled to vote in such election shall be present or represented by proxy,
or if the holders of the majority of the outstanding shares of Series A 8%
Preferred Stock shall have acted by written consent in lieu of a meeting with
respect thereto, then the authorized number of directors shall be increased
by one and the holders of Series A 8% Preferred Stock, voting as a class,
shall be entitled to elect the additional director. The absence of a quorum
of the holders of any other class or series of capital stock of the
Corporation at any such annual or special meeting shall not affect the
exercise by the holders of Series A 8% Preferred Stock of their voting
rights. The director so elected shall serve until the next annual meeting or
until his or her successor shall be elected and shall qualify, unless the
director's term of office shall have terminated under the circumstances set
forth in the second sentence of this Section 3(b). If the director elected
by the holders of Series A 8% Preferred Stock as a class dies or becomes
incapacitated, the holders of Series A 8% Preferred Stock then outstanding
and entitled to vote for such director by written consent as hereinabove
provided, or at a special meeting of such holders called as provided above,
may elect his or her successor to hold office for the unexpired term.
Holders of Series A 8% Preferred Stock shall have the right to remove, with
or without cause, any director originally elected by such holders, upon the
affirmative vote of a majority of such holders by written consent as
hereinabove provided or at a special meeting of such holders called as
provided above. The rights of the holders of Series A 8% Preferred Stock to
elect directors pursuant to the terms of this Section 3(b) shall not be
affected adversely by the voting or other rights applicable to any other
security of the Corporation.
(c) Except as otherwise provided in these designations of Series
A 8% Preferred Stock or in the Restated Certificate of Incorporation, or as
required by law, the holders of shares of Series A 8% Preferred Stock shall
have no voting rights and their consent shall not be required for the taking
of any corporate action.
Section 4. Certain Restrictions.
(a) Whenever (i) dividends on shares of Series A 8% Preferred Stock
pursuant to the terms of Section 2(a) or 2(b) shall not have been paid in
full at or before 30 days following any Quarterly Dividend Payment Date, or
(ii) the Corporation shall have not redeemed shares of Series A 8% Preferred
Stock within five Business Days of a Redemption Date, thereafter and until
all accrued and unpaid dividends, whether or not declared, shall have been
paid in full or all such redemption payments shall have been made or all
necessary funds for such redemption shall have been Set Apart for Payment, as
the case may be, the Corporation shall not, nor shall it permit any
Subsidiary, as defined in Section 8, of the Corporation to: (A) declare or
pay dividends, or make any other distributions, on any shares of Common Stock
or other capital stock of the Corporation ranking junior (either as to
dividends or upon redemption, liquidation, dissolution or winding up) to
Series A 8% Preferred Stock, other than dividends or distributions payable in
capital stock of the Corporation ranking junior to Series A 8% Preferred
Stock with respect to dividends and upon redemption, liquidation, dissolution
or winding up ("Junior Stock"); (B) declare or pay dividends, or make any
other distributions on any shares of Parity Stock, other than dividends or
distributions payable in Junior Stock or Parity Stock, except dividends paid
ratably on Series A 8% Preferred Stock and all Parity Stock on which
dividends are payable or in arrears, in proportion to the total amounts to
which the holders of all such shares are then entitled; or (C) redeem or
purchase or otherwise acquire for consideration (other than Junior Stock) any
shares of Junior Stock or Parity Stock (other than, with respect to Parity
Stock, ratably with Series A 8% Preferred Stock).
(b) The Corporation shall not permit any of its Subsidiaries to
purchase or otherwise acquire for consideration any shares of capital stock
of the Corporation unless the Corporation, pursuant to Section 4(a), could
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Redemption.
(a) The Corporation may redeem, in whole or in part, any
outstanding shares of Series A 8% Preferred Stock at any time, but only out
of funds legally available therefor, by paying therefor in cash $100 per
share plus an amount equal to all Accrued Dividends, as defined in Section 8,
thereon to the date of redemption (the "Redemption Price"). If less than all
outstanding shares of Series A 8% Preferred Stock are to be redeemed, the
Corporation shall redeem shares pro rata among the holders thereof in
accordance with the respective numbers of shares of Series A 8% Preferred
Stock held by each of them.
(b) On April 27, 2003, the Corporation shall redeem all outstanding
shares of Series A 8% Preferred Stock, if any, but only out of funds legally
available therefor, by paying the Redemption Price therefor.
(c) (i) Notice of any redemption of shares of Series A 8%
Preferred Stock pursuant to this Section 5 shall be mailed not less than 30,
but not more than 60, days prior to the date fixed for redemption to each
holder of shares of Series A 8% Preferred Stock to be redeemed, at such
holder's address as it appears on the transfer books of the Corporation. In
order to facilitate the redemption of shares of Series A 8% Preferred Stock,
the Board of Directors may fix a record date for the determination of the
holders of shares of Series A 8% Preferred Stock to be redeemed, not more
than 60 days or less than 30 days prior to the date fixed for such
redemption.
(ii) Notice having been given pursuant to Section 5(c)(i), from and
after the date specified therein as the date of redemption, unless default
shall be made by the Corporation in providing for the payment of the
applicable redemption price, all dividends on Series A 8% Preferred Stock
thereby called for redemption shall cease to accrue, and from and after the
earlier of (x) the date of redemption so specified, unless default shall be
made by the Corporation as aforesaid, and (y) the date (prior to the date of
redemption so specified) on which funds of the Corporation sufficient for the
payment of the Redemption Price shall have been Set Apart for Payment thereof
if the notice of redemption shall state the intention of the Corporation so
to deposit such funds on a date specified in such notice, all rights of
holders thereof as stockholders of the Corporation, except the right to
receive the applicable Redemption Price (but without interest), shall cease
and terminate. Any interest allowed on moneys so deposited shall be paid to
the Corporation. Any moneys so deposited which shall remain unclaimed by the
holders of such Series A 8% Preferred Stock at the end of six years after the
redemption date shall to the fullest extent permitted by law become the
property of, and be paid by such bank or trust company to, the Corporation.
If the Corporation shall default in providing for the redemption price as
required pursuant to this Section 5, dividends on such Series A 8% Preferred
Stock shall continue to accrue and be added to the required redemption
payments as provided in Section 2(a).
Section 6. Reacquired Shares.
Any shares of Series A 8% Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation or any Subsidiary of the Corporation in
any manner whatsoever shall be retired promptly after the acquisition
thereof, and, if necessary to provide for the lawful redemption or purchase
of such shares, the capital represented by such shares shall be reduced in
accordance with the General Corporation Law of the State of Delaware. The
Corporation shall take all actions necessary so that all such shares become
authorized but unissued shares of Preferred Stock, $.01 par value, of the
Corporation and may be reissued as part of another series of Preferred Stock,
$.01 par value, of the Corporation subject to the conditions or restrictions
on authorizing or creating any class or series, or any shares of any class or
series, set forth in Section 3(a).
Section 7. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall liquidate, dissolve or wind up,
whether pursuant to federal bankruptcy laws, state laws or otherwise, no
distribution shall be made (i) to the holders of shares of Junior Stock,
unless prior thereto the holders of shares of Series A 8% Preferred Stock
shall have received $100 per share plus an amount equal to all Accrued
Dividends thereon to the date of such payment or (ii) to the holders of
shares of Parity Stock, except distributions made ratably on Series A 8%
Preferred Stock and all such Parity Stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up of the Corporation.
(b) Neither the consolidation, merger or other business combination
of the Corporation with or into any other Person or Persons, nor the sale,
lease, exchange or conveyance of all or any part of the property, assets or
business of the Corporation to a Person or Persons other than the holders of
Junior Stock shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 7.
Section 8. Definitions.
As used in these designations of Series A 8% Preferred Stock, the
following terms shall have the meanings indicated.
"Accrued Dividends" to a particular date (the "Applicable Date")
means all unpaid dividends payable pursuant to Section 2(a) or Section 2(b),
whether or not declared, accrued to the Applicable Date.
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified.
"Business Day" means any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Person" means any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a corporation, a
partnership, a trust or other entity.
"Set Apart for Payment" means, when used with respect to funds of
the Corporation to be used to pay dividends or effect redemptions of shares
of Series A 8% Preferred Stock, that the funds of the Corporation to be used
to pay dividends on or effect redemptions of any shares of Series A 8%
Preferred Stock to the Corporation shall have irrevocably deposited with a
bank or trust company doing business in the Borough of Manhattan in the City
of New York, and having a capital and surplus of at least $50 million, in
trust for the exclusive benefit of the holders of shares of Series A 8%
Preferred Stock, funds sufficient to satisfy such payment of redemption
obligation.
"Subsidiary" of any Person means any corporation or other entity of
which all the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
Section 9. Rank.
Series A 8% Preferred Stock will rank, with respect to dividends and
upon distribution of assets in liquidation, dissolution or winding up, prior
to the Common Stock and pari passu with the Series A 12% Cumulative Preferred
Stock of the Corporation.
* * *
IN WITNESS WHEREOF, the undersigned officer of the Corporation
subscribes this Certificate of Designations of Series A 8% Cumulative
Preferred Stock and affirms that the statements made herein are true under
penalties of perjury this 30th day of June, 1995.
CONTINENTAL AIRLINES, INC.
By:__________________________
Name:
Title:
ATTEST:
By:_____________________
Name:
Title:
CERTIFICATE OF DESIGNATIONS
OF
SERIES A 12% CUMULATIVE
PREFERRED STOCK
OF
CONTINENTAL AIRLINES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Continental Airlines, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in its
Restated Certificate of Incorporation, and in accordance with the provisions
of Section 151 of the General Corporation Law of the State of Delaware, its
Board of Directors (the "Board of Directors") adopted resolutions creating a
series of its Preferred Stock, $.01 par value, designated as Series A 12%
Cumulative Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock,
$.01 par value, of the Corporation be, and it hereby is, created, and that
the designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions thereof (in
addition to the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the Corporation's Restated
Certificate of Incorporation that are applicable to the Preferred Stock), are
as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series A 12%
Cumulative Preferred Stock" ("Series A 12% Preferred Stock") and the number
of shares constituting such series shall be 1,000,000, which number may be
decreased and, but only for purposes of Section 2(b) below, increased by the
Board of Directors without a vote of stockholders; provided, however, that
such number may not be decreased below the number of then currently
outstanding shares of Series A 12% Preferred Stock.
Section 2. Dividends and Distributions.
(a) The holders of shares of Series A 12% Preferred Stock, in
preference to the holders of shares of the Corporation's Class A Common
Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock,
each par value $.01 per share (collectively, the "Common Stock"), and to any
other capital stock of the Corporation ranking junior to Series A 12%
Preferred Stock as to payment of dividends, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds of the
Corporation legally available for the payment of dividends, cumulative
dividends payable in cash, subject to Section 2(b), at the annual rate of $12
per share and, subject to the other provisions of this Section 2, no more.
Dividends payable in respect of the outstanding shares of Series A 12%
Preferred Stock shall begin to accrue and be cumulative from the respective
dates of original issue of such shares (which dates shall be reflected on the
certificates evidencing the same), and shall be payable in quarterly payments
on May 30, August 29, November 29, and March 1 (or, if any such day is not a
Business Day, as defined in Section 8, the Business Day next preceding such
day) in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date" and any dividend not paid on such date either in cash
or in additional shares of Series A 12% Preferred Stock as provided herein
being referred to herein as "past due") for each of the fiscal quarters ended
March 31, June 30, September 30 and December 31, respectively, commencing in
respect of each share of Series A 12% Preferred Stock on the first Quarterly
Dividend Payment Date which is at least seven days after the date of original
issue thereof; provided, however, that if any applicable dividend payment or
redemption payment is not made on a Quarterly Dividend Payment Date or the
date set for such redemption, respectively, thereafter Series A 12% Preferred
Stock shall accrue additional dividends in respect of all such dividend
payments and redemption payments that are past due and unpaid at (A) an
annual rate of 12% or (B) such lesser rate as may be the maximum rate that is
permitted by applicable law (in either case compounded quarterly), with the
amount of such additional dividends added to accrued dividend payments or
redemption payments, respectively, until all such dividend payments and
redemption payments shall have been paid in full (or declared and funds
sufficient therefor Set Apart for Payment, as defined in Section 8).
(b) To the extent Net Income, as defined below, for any calendar
quarter is less than the amount of the dividend due on all outstanding shares
of Series A 12% Preferred Stock on the Quarterly Dividend Payment Date with
respect to such calendar quarter, dividends may be declared and paid, at the
election of the Board of Directors, in additional shares of Series A 12%
Preferred Stock, to the extent legally permissible, in lieu of declaration
and payment thereof in cash. "Net Income" means earnings from operations
before interest and taxes, less interest on all debt instruments (including
capital leases), plus non-operating income, less non-operating expenses, less
income taxes (i) for so long as the Corporation is required to file periodic
reports under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as specified in the Corporation's Quarterly Report on Form 10-Q
required to be filed with respect to the fiscal quarter for which Net Income
is being determined or in the Corporation's unaudited quarterly reports,
which shall be prepared in accordance with generally accepted accounting
principles (except for the absence of detailed notes or other exceptions
customary for interim financial statements), consistently applied (the
"Corporation's Quarterly Reports"), with respect to the fourth fiscal quarter
in any year, and (ii) during any period when the Corporation is not required
to file periodic reports under the Exchange Act, as specified in the
Corporation's Quarterly Reports. In addition, notwithstanding the provisions
of Section 2(a) above, any dividend accumulating through December 31, 1996
(payable March 1, 1997) shall be declared and paid in additional shares of
Series A 12% Preferred Stock, to the extent legally permissible, in lieu of
declaration and payment thereof in cash. The number of shares of Series A
12% Preferred Stock to be issued in lieu of cash dividends shall be
calculated based on a value of $100 per share of Series A 12% Preferred
Stock. The shares of Series A 12% Preferred Stock issued shall be fully paid
and non-assessable. No certificates for fractional shares shall be issued,
and the Corporation shall round off any fractional share to the next lower
whole share amount. In determining such fractional shares, the Corporation
shall aggregate all shares of Series A 12% Preferred Stock held by a
Registered Holder thereof. The Corporation shall pay, if there are funds
legally available therefor, to each holder in cash an amount equal to the
value (based on a $100 value per share) of any fractional share not issued in
accordance with this Section 2(b).
(c) The amount of dividends payable shall be determined on the
basis of twelve 30-day months and a 360-day year. Dividends paid on the
shares of Series A 12% Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall
be allocated pro rata on a share-by-share-basis among all such shares at the
time outstanding. The Board of Directors may fix a record date (a "Regular
Record Date") for the determination of holders of shares of Series A 12%
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall be no more than 60 days nor less than ten days prior
to the date fixed for the payment thereof. Any dividend declared by the
Board of Directors as payable and punctually paid or Set Apart for Payment on
a Quarterly Dividend Payment Date will be paid to the Persons, as defined in
Section 8, in whose names Series A 12% Preferred Stock is registered at the
close of business on the Regular Record Date set with respect to that Quarter
Dividend Payment Date (the "Registered Holders"). Any dividend not so paid
or Set Apart for Payment shall forthwith cease to be payable to such
Registered Holders and may be paid to the Registered Holders at the close of
business on the record date for the payment of such defaulted dividends and
interest to be fixed by the Board of Directors (a "Special Record Date").
The Board of Directors shall provide Registered Holders of Series A 12%
Preferred Stock not less than 10 days' prior notice of a Special Record Date.
Subject to Section 2(b), all such payments shall be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
(d) The Registered Holder of any shares of Series A 12% Preferred
Stock, upon the Corporation's written request therefor containing a
reasonably complete description of the basis for such request, shall
reimburse the corporation for any and all withholding tax liabilities
incurred by the Corporation in connection with any dividends paid or
distributions made (including, without limitation, in connection with any
redemption of Series A 12% Preferred Stock) to such holder in respect of
Series A 12% Preferred Stock. Each Registered Holder, by acceptance of the
certificate evidencing such holder's shares of Series A 12% Preferred Stock,
shall be deemed to have agreed to the terms of this Section 2(d).
(e) The holders of shares of Series A 12% Preferred Stock shall not
be entitled to receive any dividends or other distributions in respect of
such shares of Series A 12% Preferred Stock except as provided in these
designations of Series A 12% Preferred Stock.
Section 3. Voting Rights.
(a) So long as any shares of Series A 12% Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of shares
shall then be required by law, without first obtaining the consent or
approval of the holders of at least a majority of the number of then-
outstanding shares of Series A 12% Preferred Stock, voting as a single class,
given in person or by proxy at a meeting at which the holders of such shares
shall be entitled to vote separately as a class, or by written consent, the
Corporation shall not: (i) authorize or create any class or series, or any
shares of any class or series, of stock having any preference or priority as
to dividends or upon redemption, liquidation, dissolution, or winding up over
Series A 12% Preferred Stock ("Senior Stock"); provided, however, that no
such vote shall be required with respect to the authorization or creation by
the Corporation of one or more series of Senior Stock if the proceeds of the
Corporation's issuance of such Senior Stock are sufficient, and are used, to
redeem all outstanding shares of Series A 12% Preferred Stock; (ii) authorize
or create any class or series, or any shares of any class or series, of stock
(other than the Series A 8% Cumulative Preferred Stock) of the Corporation
ranking on a parity (either as to dividends or upon redemption, liquidation,
dissolution or winding up) with Series A 12% Preferred Stock ("Parity
Stock"); provided, however, that no such vote shall be required with respect
to the authorization or creation by the Corporation of one or more new series
of Parity Stock if (A)(x) the aggregate purchase price (excluding
transaction-related expenses) of all shares of each such series is equal to
or greater than the aggregate liquidation preference of all shares of such
series, (y) the aggregate liquidation preference (excluding accrued but
unpaid dividends) of all shares of all such series of Preferred Stock does
not exceed $25 million, and (z) shares of any such new series shall be issued
only to an employee stock ownership plan, employee stock ownership trust or
other similar arrangement organized and maintained by the Corporation for the
benefit of its employees or (B) the proceeds of the Corporation's issuance of
such Parity Stock are sufficient, and are used, to redeem all outstanding
shares of Series A 12% Preferred Stock; (iii) reclassify, convert or exchange
any shares of stock of the Corporation into shares of Senior Stock or Parity
Stock; (iv) authorize any security exchangeable for, convertible into, or
evidencing the right to purchase any shares of Senior Stock or Parity Stock;
(v) amend, alter or repeal (by merger or otherwise) the Corporation's
Restated Certificate of Incorporation, as it may be amended from time to time
(the "Restated Certificate of Incorporation") to alter or change the
preferences, rights or powers of Series A 12% Preferred Stock so as to affect
Series A 12% Preferred Stock adversely or (except for purposes of Section
2(b) above) to increase the authorized number of shares of Series A 12%
Preferred Stock; or (vi) effect the voluntary liquidation, dissolution or
winding up of the Corporation, or the sale, lease, conveyance or exchange of
all or substantially all of the assets, property or business of the
Corporation, or the merger or consolidation of the Corporation with or into
any other Person; provided, however, that, except as otherwise specifically
required by the Restated Certificate of Incorporation, no separate vote of
the holders of Series A 12% Preferred Stock as a class shall be required in
the case of such a merger or consolidation or a sale, lease, conveyance or
exchange of all or substantially all of the assets, property or business of
the Corporation (a "reorganization") if (A)(i) the resulting, surviving or
acquiring Person will have after such reorganization no stock either
authorized or outstanding ranking (either as to dividends or upon redemption,
liquidation, dissolution or winding up) prior to, or on a parity with, Series
A 12% Preferred Stock or the stock of the resulting, surviving or acquiring
Person issued in exchange therefor (except any stock of the Corporation
authorized or outstanding immediately preceding such reorganization ranking
prior to or on a parity with the Series A 12% Preferred Stock, as aforesaid
("Grandfathered Stock"), or any stock of the resulting, surviving or
acquiring Person containing substantially the same relative rights and
preferences as any Grandfathered Stock and issued in exchange therefor), and
(ii) each holder of shares of Series A 12% Preferred Stock immediately
preceding such reorganization will receive in exchange therefor the same
number of shares of stock, with substantially the same preferences, rights
and powers, of the resulting, surviving, or acquiring Person, or, if the
Corporation is the surviving Person and Series A 12% Preferred Stock remains
outstanding, without change to its preferences, rights and powers, or (B) the
Corporation redeems all outstanding shares of Series A 12% Preferred Stock
simultaneously with the effectiveness of such merger, consolidation or
reorganization.
(b) Subject to compliance with Foreign Ownership Restrictions, as
defined in the Restated Certificate of Incorporation, whenever (i) there
shall have occurred nine (9) consecutive Quarterly Dividend Payment Dates on
which dividends payable on shares of Series A 12% Preferred Stock pursuant to
the terms of Section 2(a) shall not have been paid in cash at the annual rate
of $12 per share or in additional shares of Series A 12% Preferred Stock in
accordance with Section 2(b) (a "Dividend Default"), (ii) the Corporation
shall have violated any of the covenants in Section 4 and such violation
shall be continuing or (iii) the Corporation shall not have redeemed shares
of Series A 12% Preferred Stock within five days of the date (a "Redemption
Date") of any redemption of which it has given, or is required to give,
notice pursuant to Section 5(c), regardless of whether there shall be funds
legally available to effect such redemption (a "Redemption Default"),
thereafter and until the third consecutive Quarterly Dividend Payment Date on
which dividends on Series A 12% Preferred Stock shall have been paid in cash
(or in additional shares of Series A 12% Preferred Stock in accordance with
Section 2(b)) in full (and no dividend arrearages shall exist on the Series
A 12% Preferred Stock) (hereinafter a cure of such Dividend Default) or such
covenant shall have been complied with, or such redemption shall have been
performed or all funds necessary therefor Set Apart for Payment, as the case
may be, the holders of shares of Series A 12% Preferred Stock shall have the
right, notwithstanding anything to the contrary in the Restated Certificate
of Incorporation or By-Laws of the Corporation (the "By-Laws"), voting
together as a single class, to elect one director. This right to elect a
director may be exercised at any annual meeting or at any special meeting
called for such purpose as hereinafter provided or at any adjournments
thereof, or by the written consent delivered to the Secretary of the
Corporation of the holders of a majority of all outstanding shares of Series
A 12% Preferred Stock as of the record date of such written consent, until
any Dividend Default or Redemption Default shall have been cured, and any
covenant violation shall cease to be continuing, at which time the term of
office of the director so elected shall terminate automatically. So long as
such right to vote continues (and unless such right has been exercised by
written consent of the holders of a majority of the outstanding shares of
Series A 12% Preferred Stock as herein before authorized), the Secretary of
the Corporation may call, and upon the written request of the holders of
record of a majority of the outstanding shares of Series A 12% Preferred
Stock addressed to him or her at the principal office of the Corporation
shall call, a special meeting of the holders of Series A 12% Preferred Stock
for the election of a director as provided herein. Such meeting shall be
held within 30 days after delivery of such notice to the Secretary, at the
place and upon the notice provided by law and in the By-Laws or in the notice
of meeting. No such special meeting or adjournment thereof shall be held on
a date less than 30 days before any annual meeting of stockholders or any
special meeting in lieu thereof. If at any such annual or special meeting or
any adjournment thereof the holders of a majority of the then outstanding
shares of Series A 12% Preferred Stock entitled to vote in such election
shall be present or represented by proxy, or if the holders of a majority of
the outstanding shares of Series A 12% Preferred Stock shall have acted by
written consent in lieu of a meeting with respect thereto, then the
authorized number of directors shall be increased by one and the holders of
Series A 12% Preferred Stock, voting as a class, shall be entitled to elect
the additional director. The absence of a quorum of the holders of any other
class or series of capital stock of the Corporation at any such annual or
special meeting shall not affect the exercise by the holders of Series A 12%
Preferred Stock of their voting rights. The director so elected shall serve
until the next annual meeting or until his or her successor shall be elected
and shall qualify, unless the director's term of office shall have terminated
under the circumstances set forth in the second sentence of this Section
3(b). If the director elected by the holders of Series A 12% Preferred Stock
as a class dies or becomes incapacitated, the holders of Series A 12%
Preferred Stock then outstanding and entitled to vote for such director by
written consent as herein above provided, or at a special meeting of such
holders called as provided above, may elect his or her successor to hold
office for the unexpired term. Holders of Series A 12% Preferred Stock shall
have the right to remove, with or without cause, any director originally
elected by such holders, upon the affirmative vote of a majority of such
holders by written consent as herein above provided or at a special meeting
of such holders called as provided above. The rights of the holders of
Series A 12% Preferred Stock to elect directors pursuant to the terms of this
Section 3(b) shall not be affected adversely by the voting or other rights
applicable to any other security of the Corporation. All rights of holders
of Series A 12% Preferred Stock under this Section 3(b) shall be subject to
Foreign Ownership Restrictions.
(c) Except as otherwise provided in this Certificate of Designation
of Series A 12% Cumulative Preferred Stock or in the Restated Certificate of
Incorporation, or as required by law, the holders of shares of Series A 12%
Preferred Stock shall have no voting rights and their consent shall not be
required for the taking of any corporate action.
Section 4. Certain Restrictions.
(a) Whenever (i) dividends on shares of Series A 12% Preferred
Stock pursuant to the terms of Section 2(a) or 2(b) shall not have been paid
in full at or before 30 days following any Quarterly Dividend Payment Date,
or (ii) the Corporation shall have not redeemed shares of Series A 12%
Preferred Stock within five Business Days of a Redemption Date, thereafter
and until all accrued and unpaid dividends, whether or not declared, shall
have been paid in full or all such redemption payments shall have been made
or all necessary funds for such redemption shall have been Set Apart for
payment, as the case may be, the Corporation shall not, nor shall it permit
any Subsidiary, as defined in Section 8, of the Corporation to: (A) declare
or pay dividends, or make any other distributions, on any shares of Common
Stock or other capital stock of the Corporation ranking junior (either as to
dividends or upon redemption, liquidation, dissolution or winding up) to
Series A 12% Preferred Stock, other than dividends or distributions payable
in capital stock of the Corporation ranking junior to Series A 12% Preferred
Stock with respect to dividends and upon redemption, liquidation, dissolution
or winding up ("Junior Stock"); (B) declare or pay dividends, or make any
other distributions, on any shares of Parity Stock, other than dividends or
distributions payable in Junior Stock or Parity Stock, except dividends paid
ratably on Series A 12% Preferred Stock and all Parity Stock on which
dividends are payable or in arrears, in proportion to the total amounts to
which the holders of all such shares are then entitled; or (C) redeem or
purchase or otherwise acquire for consideration (other than Junior Stock) any
shares of Junior Stock or Parity Stock (other than, with respect to Parity
Stock, ratably with Series A 12% Preferred Stock).
(b) The Corporation shall not permit any of its Subsidiaries to
purchase or otherwise acquire for consideration any shares of capital stock
of the Corporation unless the Corporation, pursuant to Section 4(a), could
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Redemption.
(a) The Corporation may redeem, in whole or in part, any
outstanding shares of Series A 12% Preferred Stock at any time, but only out
of funds legally available therefor, by paying therefor in cash $100 per
share plus an amount equal to all Accrued Dividends, as defined in Section 8,
thereon to the date of redemption (the "Redemption Price"). If less than all
outstanding shares of Series A 12% Preferred Stock are to be redeemed, the
Corporation shall redeem shares pro rata among the holders thereof in
accordance with the respective numbers of shares of Series A 12% Preferred
Stock held by each of them.
(b) On April 27, 2003, the Corporation shall redeem all outstanding
shares of Series A 12% Preferred Stock, if any, but only out of funds legally
available therefor by paying the Redemption Price therefor.
(c) (i) Notice of any redemption of shares of Series A 12%
Preferred Stock pursuant to this Section 5 shall be mailed not less than 30,
but not more than 60, days prior to the date fixed for redemption to each
holder of shares of Series A 12% Preferred Stock to be redeemed, at such
holder's address as it appears on the transfer books of the Corporation. In
order to facilitate the redemption of shares of Series A 12% Preferred Stock,
the Board of Directors may fix a record date for the determination of the
holders of shares of Series A 12% Preferred Stock to be redeemed, not more
than 60 days or less than 30 days prior to the date fixed for such
redemption.
(ii) Notice having been given pursuant to Section 5(c)(i), from and
after the date specified therein as the date of redemption, unless default
shall be made by the Corporation in providing for the payment of the
applicable redemption price, all dividends on Series A 12% Preferred Stock
thereby called for redemption shall cease to accrue, and from and after the
earlier of (x) the date of redemption so specified, unless default shall be
made by the Corporation as aforesaid, and (y) the date (prior to the date of
redemption so specified) on which funds of the Corporation sufficient for the
payment of the Redemption Price shall have been Set Apart for Payment thereof
if the notice of redemption shall state the intention of the Corporation so
to deposit such funds on a date specified in such notice, all rights of
holders thereof as stockholders of the Corporation, except the right to
receive the applicable Redemption Price (but without interest), shall cease
and terminate. Any interest allowed on moneys so deposited shall be paid to
the Corporation. Any moneys so deposited which shall remain unclaimed by the
holders of such Series A 12% Preferred Stock at the end of six years after
the redemption date shall to the fullest extent permitted by law become the
property of, and be paid by such bank or trust company to, the Corporation.
If the Corporation shall default in providing for the redemption price as
required pursuant to this Section 5, dividends on such Series A 12% Preferred
Stock shall continue to accrue and be added to the required redemption
payments as provided in Section 2(a).
Section 6. Reacquired Shares.
Any shares of Series A 12% Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation or any Subsidiary of the Corporation in
any manner whatsoever shall be retired promptly after the acquisition
thereof, and, if necessary to provide for the lawful redemption or purchase
of such shares, the capital represented by such shares shall be reduced in
accordance with the General Corporation Law of the State of Delaware. The
Corporation shall take all actions necessary so that all such shares become
authorized but unissued shares of Preferred Stock, $.01 par value, of the
Corporation and may be reissued as part of another series of Preferred Stock,
$.01 par value, of the Corporation subject to the conditions or restrictions
on authorizing or creating any class or series, or any shares of any class or
series, set forth in Section 3(a).
Section 7. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall liquidate, dissolve or wind up,
whether pursuant to federal bankruptcy laws, state laws or otherwise, no
distribution shall be made (i) to the holders of shares of Junior Stock,
unless prior thereto the holders of shares of Series A 12% Preferred Stock
shall have received $100 per share plus an amount equal to all Accrued
Dividends thereon to the date if such payment or (ii) to the holders of
shares of Parity Stock, except distributions made ratably on Series A 12%
Preferred Stock and all such Parity Stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up of the Corporation.
(b) Neither the consolidation, merger or other business combination
or the Corporation with or into any other Person or Persons, nor the sale,
lease, exchange or conveyance of all or any part of the property, assets or
business of the Corporation to a Person or Persons other than the holders of
Junior Stock shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 7.
Section 8. Definitions.
As used in these designations of Series A 12% Preferred Stock, the
following terms shall have the meanings indicated.
"Accrued Dividends" to a particular date (the "Applicable Date")
means all unpaid dividends payable pursuant to Section 2(a) or Section 2(b),
whether or not declared, accrued to the Applicable Date.
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified.
"Business Day" means any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Person" means any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a corporation, a
partnership, a trust or other entity.
"Set Apart for Payment" means, when used with respect to funds of
the Corporation to be used to pay dividends or effect redemptions of shares
of Series A 12% Preferred Stock, that the funds of the Corporation to be used
to pay dividends on or effect redemptions of any shares of Series A 12%
Preferred Stock to the Corporation shall have irrevocably deposited with a
bank or trust company doing business in the Borough of Manhattan in The City
of New York, and having a capital and surplus of at least $50 million, in
trust for the exclusive benefit of the holders of shares of Series A 12%
Preferred Stock, funds sufficient to satisfy such payment or redemption
obligation.
"Subsidiary" of any Person means any corporation or other entity of
which all the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
Section 9. Rank.
Series A 12% Preferred Stock will rank, with respect to dividends
and upon distribution of assets in liquidation, dissolution or winding up,
prior to the Common Stock and pari passu with the Series A 8% Cumulative
Preferred Stock of the Corporation.
* * *
IN WITNESS WHEREOF, the undersigned officer of the Corporation
subscribes this Certificate of Designations of Series A 12% Cumulative
Preferred Stock and affirms that the statements made herein are true under
penalties of perjury this 30th day of June, 1995.
CONTINENTAL AIRLINES, INC.
By:__________________________
Name: Jeffery A. Smisek
Title: Secretary
ATTEST:
By:_____________________________
Name: Scott R. Peterson
Title: Assistant Secretary
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between CONTINEN-
TAL AIRLINES, INC., a Delaware corporation ("Company"), and GORDON M. BETHUNE
("Executive").
W I T N E S S E T H:
WHEREAS, Company is desirous of employing Executive in an executive
capacity on the terms and conditions, and for the consideration, hereinafter
set forth and Executive is desirous of being employed by Company on such
terms and conditions and for such consideration;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, Company and Executive agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment; Effective Date. Company agrees to employ Executive and
Executive agrees to be employed by Company, beginning as of the Effective
Date (as hereinafter defined) and continuing for the period of time set forth
in Article 2 of this Agreement, subject to the terms and conditions of this
Agreement. For purposes of this Agreement, the "Effective Date" shall be
June 6, 1995.
1.2 Positions. From and after the Effective Date, Company shall employ
Executive in the positions of President and Chief Executive Officer of
Company, or in such other positions as the parties mutually may agree, and
shall, for the full term of Executive's employment hereunder, cause Executive
to be nominated for election as a director of Company and use its best
efforts to secure such election.
1.3 Duties and Services. Executive agrees to serve in the positions
referred to in paragraph 1.2 and, if elected, as a director of Company and to
perform diligently and to the best of his abilities the duties and services
appertaining to such offices as set forth in the Bylaws of Company in effect
on the Effective Date, as well as such additional duties and services appro-
priate to such offices which the parties mutually may agree upon from time to
time.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other provisions
hereof, Company agrees to employ Executive for a three-year period beginning
on the Effective Date. Said term of employment shall be extended
automatically for an additional successive three-year period as of the third
anniversary of the Effective Date and as of the last day of each successive
three-year period of time thereafter that this Agreement is in effect;
provided, however, that if, prior to the date which is six months before the
last day of any such three-year term of employment, either party shall give
written notice to the other that no such automatic extension shall occur,
then Executive's employment shall terminate on the last day of the three-year
term of employment during which such notice is given.
2.2 Company's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Company, acting pursuant to an express resolution of the Board
of Directors of Company (the "Board of Directors"), shall have the right to
terminate Executive's employment under this Agreement at any time for any of
the following reasons:
(i) upon Executive's death;
(ii) upon Executive's becoming incapacitated for a period of
at least 180 days by accident, sickness or other circumstance which
renders him mentally or physically incapable of performing the material
duties and services required of him hereunder on a full-time basis
during such period;
(iii) for cause, which for purposes of this Agreement shall
mean Executive's gross negligence or willful misconduct in the
performance of the material duties and services required of him pursuant
to this Agreement;
(iv) for Executive's material breach of any provision of this
Agreement which, if correctable, remains uncorrected for 30 days
following written notice to Executive by Company of such breach; or
(v) for any other reason whatsoever, in the sole discretion
of the Board of Directors.
2.3 Executive's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Executive shall have the right to terminate his employment
under this Agreement at any time for any of the following reasons:
(i) the assignment to Executive by the Board of Directors or
other officers or representatives of Company of duties materially
inconsistent with the duties associated with the positions described in
paragraph 1.2 as such duties are constituted as of the Effective Date;
(ii) a material diminution in the nature or scope of
Executive's authority, responsibilities, or titles from those applicable
to him as of the Effective Date;
(iii) the occurrence of material acts or conduct on the part of
Company or its officers or representatives which prevent Executive from
performing his duties and responsibilities pursuant to this Agreement;
(iv) Company requiring Executive to be permanently based
anywhere outside a major urban center in Texas;
(v) the taking of any action by Company that would materially
adversely affect the corporate amenities enjoyed by Executive on the
Effective Date;
(vi) a material breach by Company of any provision of this
Agreement which, if correctable, remains uncorrected for 30 days
following written notice of such breach by Executive to Company; or
(vii) for any other reason whatsoever, in the sole discretion
of Executive.
2.4 Notice of Termination. If Company or Executive desires to
terminate Executive's employment hereunder at any time prior to expiration of
the term of employment as provided in paragraph 2.1, it or he shall do so by
giving written notice to the other party that it or he has elected to termi-
nate Executive's employment hereunder and stating the effective date and
reason for such termination, provided that no such action shall alter or
amend any other provisions hereof or rights arising hereunder.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the period of this Agreement, Executive shall
receive a minimum annual base salary equal to the greater of (i) $550,000.00
or (ii) such amount as the parties mutually may agree upon from time to time.
Executive's annual base salary shall be paid in equal installments in accor-
dance with Company's standard policy regarding payment of compensation to
executives but no less frequently than semimonthly.
3.2 Bonus Programs. Executive shall participate in each cash bonus
program maintained by Company on and after the Effective Date (including,
without limitation, any such program maintained for the year during which the
Effective Date occurs) at a level which is not less than the maximum partici-
pation level made available to any Company executive (determined without
regard to period of service or other criteria that might otherwise be neces-
sary to entitle Executive to such level of participation).
3.3 Life Insurance. During the period of this Agreement, Company shall
maintain one or more policies of life insurance on the life of Executive
providing an aggregate death benefit in an amount not less than the Termina-
tion Payment (as such term is defined in paragraph 4.7). Executive shall
have the right to designate the beneficiary or beneficiaries of the death
benefit payable pursuant to such policy or policies up to an aggregate death
benefit in an amount equal to the Termination Payment. To the extent that
Company's purchase of, or payment of premiums with respect to, such policy or
policies results in compensation income to Executive, Company shall pay to
Executive an additional payment (the "Policy Payment") in an amount such that
after payment by Executive of all taxes imposed on Executive with respect to
the Policy Payment, Executive retains an amount of the Policy Payment equal
to the taxes imposed upon Executive with respect to such purchase or the
payment of such premiums. If for any reason Company fails to maintain the
full amount of life insurance coverage required pursuant to the preceding
provisions of this paragraph 3.3, Company shall, in the event of the death of
Executive while employed by Company, pay Executive's designated beneficiary
or beneficiaries an amount equal to the sum of (1) the difference between the
Termination Payment and any death benefit payable to Executive's designated
beneficiary or beneficiaries under the policy or policies maintained by
Company and (2) such additional amount as shall be required to hold
Executive's estate, heirs, and such beneficiary or beneficiaries harmless
from any additional tax liability resulting from the failure by Company to
maintain the full amount of such required coverage.
3.4 Vacation and Sick Leave. During each year of his employment,
Executive shall be entitled to vacation and sick leave benefits equal to the
maximum available to any Company executive, determined without regard to the
period of service that might otherwise be necessary to entitle Executive to
such vacation or sick leave under standard Company policy.
3.5 Supplemental Executive Retirement Plan.
(i) Company agrees to pay Executive the deferred compensation
benefits set forth in this paragraph 3.5 as a supplemental retirement plan
(the "Plan"). The base retirement benefit under the Plan (the "Base
Benefit") shall be in the form of an annual straight life annuity in an
amount equal to the product of (a) 1.6% times (b) the number of Executive's
credited years of service (as defined below) under the Plan times (c) the
Executive's final average compensation (as defined below). For purposes
hereof, Executive's credited years of service under the Plan shall be equal
to the number of Executive's years of benefit service with Company,
calculated as set forth in the Continental Airlines Retirement Plan beginning
at January 1, 1995; provided, however, that if Executive is paid the
Termination Payment under this Agreement, Executive shall be further credited
with three (3) additional years of service under the Plan. For purposes
hereof, Executive's final average compensation shall be equal to the greater
of (1) $550,000 or (2) the average of the five highest annual cash
compensation amounts paid to Executive by Company during the consecutive ten
calendar years immediately preceding his termination of employment at
retirement or otherwise. For purposes hereof, cash compensation shall
include base salary plus cash bonuses other than any cash bonus paid on or
prior to March 31, 1995. All benefits under the Plan shall be payable in
equal monthly installments beginning on the first day of the month following
the Retirement Date. For purposes hereof, "Retirement Date" is defined as
the later of (A) the date on which Executive attains (or in the event of his
earlier death, would have attained) age 65 or (B) the date of his retirement
from employment with Company. If Executive is not married on the Retirement
Date, benefits under the Plan will be paid to Executive during his lifetime
in the form of the Base Benefit. If Executive is married on the Retirement
Date, benefits under the Plan will be paid in the form of a joint and
survivor annuity that is actuarially equivalent (as defined below) to the
Base Benefit, with Executive's spouse as of the Retirement Date being
entitled during her lifetime after Executive's death to a benefit (the
"Survivor's Benefit") equal to 50% of the benefit payable to Executive during
their joint lifetimes. In the event of Executive's death prior to the
Retirement Date, his surviving spouse, if he is married on the date of his
death, will receive beginning on the Retirement Date an amount equal to the
Survivor's Benefit calculated as if Executive had retired with a joint and
survivor annuity on the date before his date of death. The amount of any
benefits payable to Executive and/or his spouse under the Continental
Airlines Retirement Plan shall be offset against benefits due under the Plan.
Executive shall be vested immediately with respect to benefits due under the
Plan. If Executive's employment with Company terminates for any reason prior
to February 14, 1999, Company shall provide further benefits under the Plan
to ensure that Executive is treated for all purposes as if he were fully
vested under the Continental Airlines Retirement Plan.
(ii) Executive understands that he must rely upon the general
credit of Company for payment of benefits under the Plan. Company has not
and will not in the future set aside assets for security or enter into any
other arrangement which will cause the obligation created to be other than a
general corporate obligation of Company or will cause Executive to be more
than a general creditor of Company.
(iii) For purposes of the Plan, the terms "actuarial
equivalent," or "actuarially equivalent" when used with respect to a
specified benefit shall mean the amount of benefit of a different type or
payable at a different age that can be provided at the same cost as such
specified benefit, as computed by the Actuary. The actuarial assumptions
used to determine equivalencies between different forms of annuities under
the Plan shall be the 1984 Unisex Pensioners Mortality 50% male, 50% female
calculation (with males set back one year and females set back five years),
with interest at an annual rate of 7%. The term "Actuary" shall mean the
individual actuary or actuarial firm selected by Company to service its
pension plans generally or if no such individual or firm has been selected,
an individual actuary or actuarial firm appointed by Company and reasonably
satisfactory to Executive and/or his spouse.
(iv) Company shall indemnify Executive on a fully grossed-up,
after-tax basis for any Medicare payroll taxes (plus any income taxes on such
indemnity payments) incurred by Executive in connection with the accrual
and/or payment of benefits under the Plan.
3.6 Additional Disability Benefit. If Executive shall begin to receive
long-term disability insurance benefits pursuant to a plan maintained by
Company and if such benefits cease prior to Executive's attainment of age 65
and while Executive remains disabled, then Company shall immediately pay
Executive upon the cessation of such benefits a lump-sum, cash payment in an
amount equal to the Termination Payment. If Executive receives payment of a
Termination Payment pursuant to the provisions of Article 4, then the provi-
sions of this paragraph 3.6 shall terminate. If Executive shall be disabled
at the time his employment with Company terminates and if Executive shall not
be entitled to the payment of a Termination Payment pursuant to the
provisions of Article 4 upon such termination, then Executive's right to
receive the payment upon the occurrence of the circumstances described in
this paragraph 3.6 shall be deemed to have accrued as of the date of such
termination and shall survive the termination of this Agreement.
3.7 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following benefits as incidences of his employment:
(i) Automobile - Company has leased an automobile for
Executive's use pursuant to a lease agreement dated July 11, 1994 with
Chase Auto Leasing Corp., and Company will continue its performance
thereof and its current practices with respect thereto during the term
of this Agreement. Company agrees to take such actions as may be
necessary to permit Executive, at his option, to acquire title to the
automobile at the completion of the lease term by Executive paying the
residual payment then owing under the lease.
(ii) Business and Entertainment Expenses - Subject to
Company's standard policies and procedures with respect to expense
reimbursement as applied to its executive employees generally, Company
shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business related
purposes, including dues and fees to industry and professional
organizations, costs of entertainment and business development, and
costs reasonably incurred as a result of Executive's spouse accompanying
Executive on business travel.
(iii) Parking - Company shall provide at no expense to
Executive a parking place convenient to Executive's office and a parking
place at Intercontinental Airport in Houston, Texas.
(iv) Other Company Benefits - Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may
hereafter be, available to similarly-situated Company employees. Such
benefits, plans and programs may include, without limitation, profit
sharing plan, thrift plan, annual physical examinations, health
insurance or health care plan, life insurance, disability insurance,
pension plan, pass privileges on Continental Airlines, and the like.
Company shall not, however, by reason of this paragraph be obligated to
institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to executive employees generally.
ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION
4.1 By Expiration. If Executive's employment hereunder shall terminate
upon expiration of the term provided in paragraph 2.1 hereof, then all
compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of his employment, except that the
benefits described in paragraph 3.5 shall continue to be payable, Executive
and his eligible family members shall be provided with Termination Pass
Privileges (as such term is defined in paragraph 4.7) for a period of three
years beginning on the effective date of such termination and thereafter with
SOR Pass Privileges (as such term is defined in paragraph 4.7) for the
remainder of Executive's lifetime, and, if such termination shall result from
Company's delivery of the written notice described in paragraph 2.1, then
Company shall (i) cause all options and shares of restricted stock awarded to
Executive, including, without limitation, any such awards under Company's
1994 Incentive Equity Plan, as amended (the "Incentive Plan"), and other
Awards (as defined in the Incentive Plan) made to Executive under the
Incentive Plan, to vest immediately upon such termination, (ii) pay Executive
on or before the effective date of such termination a lump-sum, cash payment
in an amount equal to the Termination Payment, (iii) provide Executive with
Outplacement Services (as such term is defined in paragraph 4.7), and (iv)
provide Executive and his eligible dependents with Continuation Coverage (as
such term is defined in paragraph 4.7) for a period of three years beginning
on the effective date of such termination.
4.2 By Company. If Executive's employment hereunder shall be
terminated by Company prior to expiration of the term provided in paragraph
2.1 hereof then, upon such termination, regardless of the reason therefor,
all compensation and all benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment, except that the
benefits described in paragraph 3.5 shall continue to be payable, Executive
and his eligible family members shall be provided with Termination Pass
Privileges for a period of three years beginning on the effective date of
such termination and thereafter with SOR Pass Privileges for the remainder of
Executive's lifetime, and:
(i) if such termination shall be for any reason other than
those encompassed by paragraphs 2.2(i), (ii), (iii) or (iv), then
Company shall provide Executive with the payments and benefits described
in clauses (i) through (iv) of paragraph 4.1; and
(ii) if such termination shall be for a reason encompassed by
paragraphs 2.2(i) or (ii), then Company shall (1) cause all options and
shares of restricted stock awarded to Executive, including, without
limitation, any such awards under the Incentive Plan, and other Awards
(as defined in the Incentive Plan) made to Executive under the Incentive
Plan, to vest immediately upon such termination, and (2) provide
Executive (or his designated beneficiary or beneficiaries) with the
benefits contemplated under paragraph 3.3 or paragraph 3.6, as
applicable.
4.3 By Executive. If Executive's employment hereunder shall be
terminated by Executive prior to expiration of the term provided in paragraph
2.1 hereof then, upon such termination, regardless of the reason therefor,
all compensation and benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment, except that the
benefits described in paragraph 3.5 shall continue to be payable, Executive
and his eligible family members shall be provided with Termination Pass
Privileges for a period of three years beginning on the effective date of
such termination and thereafter with SOR Pass Privileges for the remainder of
Executive's lifetime and, if such termination shall be pursuant to paragraphs
2.3(i), (ii), (iii), (iv), (v), or (vi) or for any reason whatsoever
following the occurrence of a Change in Control (as such term is defined in
the Incentive Plan (as amended by the First Amendment thereto) in effect as
of the date of this Agreement), then Company shall provide Executive with the
payments and benefits described in clauses (i) through (iv) of paragraph 4.1.
If Executive's employment hereunder shall be terminated by Executive prior to
January 12, 1996 for any reason (other than those encompassed by paragraphs
2.3(i), (ii), (iii), (iv), (v), or (vi)) and if a Change in Control has not
occurred prior to such termination, then Executive shall promptly refund to
Company $750,000 (which amount represents 50% of the cash bonus paid to
Executive by Company on July 12, 1994).
4.4 Certain Additional Payments by Company. Notwithstanding anything
to the contrary in this Agreement, if any payment, distribution or provision
of a benefit by Company to or for the benefit of Executive, whether paid or
payable, distributed or distributable or provided or to be provided pursuant
to the terms of this Agreement or otherwise (a "Payment"), would be subject
to an excise or other special additional tax that would not have been imposed
absent such Payment (including, without limitation, any excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended), or any
interest or penalties with respect to such excise or other additional tax
(such excise or other additional tax, together with any such interest or
penalties, are hereinafter collectively referred to as the "Excise Tax"),
Company shall pay to Executive an additional payment (a "Gross-up Payment")
in an amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any
income taxes and Excise Taxes imposed on any Gross-up Payment, Executive
retains an amount of the Gross-up Payment (taking into account any similar
gross-up payments to Executive under the Incentive Plan) equal to the Excise
Tax imposed upon the Payments. Company and Executive shall make an initial
determination as to whether a Gross-up Payment is required and the amount of
any such Gross-up Payment. Executive shall notify Company in writing of any
claim by the Internal Revenue Service which, if successful, would require
Company to make a Gross-up Payment (or a Gross-up Payment in excess of that,
if any, initially determined by Company and Executive) within ten business
days after the receipt of such claim. Company shall notify Executive in
writing at least ten business days prior to the due date of any response
required with respect to such claim if it plans to contest the claim. If
Company decides to contest such claim, Executive shall cooperate fully with
Company in such action; provided, however, Company shall bear and pay
directly or indirectly all costs and expenses (including additional interest
and penalties) incurred in connection with such action and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax or
income tax, including interest and penalties with respect thereto, imposed as
a result of Company's action. If, as a result of Company's action with
respect to a claim, Executive receives a refund of any amount paid by Company
with respect to such claim, Executive shall promptly pay such refund to
Company. If Company fails to timely notify Executive whether it will contest
such claim or Company determines not to contest such claim, then Company
shall immediately pay to Executive the portion of such claim, if any, which
it has not previously paid to Executive.
4.5 Payment Obligations Absolute. Company's obligation to pay
Executive the amounts and to make the arrangements provided in this Article 4
shall be absolute and unconditional and shall not be affected by any cir-
cumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which Company (including its subsidiaries
and affiliates) may have against him or anyone else. All amounts payable by
Company shall be paid without notice or demand. Executive shall not be
obligated to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Article 4, and, except as
provided in paragraph 4.7 with respect to Continuation Coverage, the obtain-
ing of any such other employment (or the engagement in any endeavor as an
independent contractor, sole proprietor, partner, or joint venturer) shall in
no event effect any reduction of Company's obligations to make (or cause to
be made) the payments and arrangements required to be made under this
Article 4.
4.6 Liquidated Damages. In light of the difficulties in estimating the
damages upon termination of this Agreement, Company and Executive hereby
agree that the payments and benefits, if any, to be received by Executive
pursuant to this Article 4 shall be received by Executive as liquidated
damages. Payment of the Termination Payment pursuant to paragraphs 4.1, 4.2,
or 4.3 shall be in lieu of any severance benefit Executive may be entitled to
under any severance plan or policy maintained by Company.
4.7 Certain Definitions and Additional Terms. As used herein, the
following capitalized terms shall have the meanings assigned below:
(i) "Continuation Coverage" shall mean the continued coverage
of Executive and his eligible dependents under Company's welfare benefit
plans available to executives of Company who have not terminated
employment (or the provision of equivalent benefits), including, without
limitation, medical, health, dental, life insurance, disability, vision
care, accidental death and dismemberment, and prescription drug, at no
greater cost to Executive than that applicable to a similarly situated
Company executive who has not terminated employment; provided, however,
that (1) subject to clause (2) below, the coverage under a particular
welfare benefit plan (or the receipt of equivalent benefits) shall
terminate upon Executive's receipt of comparable benefits from a
subsequent employer and (2) if Executive (and/or his eligible
dependents) would have been entitled to retiree coverage under a
particular welfare benefit plan had he voluntarily retired on the date
of his termination of employment, then such coverage shall be continued
as provided in such plan upon the expiration of the period Continuation
Coverage is to be provided pursuant to this Article 4. Notwithstanding
any provision in this Article 4 to the contrary, Executive's entitlement
to any benefit continuation pursuant to Section 601 et. seq. of the
Employee Retirement Income Security Act of 1974, as amended, shall
commence at the end of the period of, and shall not be reduced by the
provision of, any applicable Continuation Coverage;
(ii) "Outplacement Services" shall mean outplacement services,
at Company's cost and for a period of twelve months beginning on the
date of Executive's termination of employment, to be rendered by an
agency selected by Executive and approved by the Board of Directors
(with such approval not to be unreasonably withheld);
(iii) "SOR Pass Privileges" shall mean (1) pass privileges on
each airline operated by Company or any of its affiliates (or any
successor or successors thereto) at Chief Executive Officer retiree
grade and (2) membership in Company's President's Club (or any successor
program maintained by Company or any of its affiliates or any successor
or successors thereto);
(iv) "Termination Payment" shall mean an amount equal to three
times the sum of (1) Executive's annual base salary pursuant to
paragraph 3.1 in effect immediately prior to Executive's termination of
employment and (2) a deemed annual bonus which shall be equal to 25% of
the amount described in clause (1) of this paragraph 4.7(iv); and
(v) "Termination Pass Privileges" shall mean (1) pass
privileges on each airline operated by Company or any of its affiliates
(or any successor or successors thereto) at the highest type and
priority Executive received at any time during the six-month period
preceding his termination of employment (or, if higher, at the date
hereof), subject to any changes in policy generally applicable to the
Chief Executive Officer (or other highest ranking officer of the
Company) who is employed by Company and entitled to such type and
priority of pass privileges and (2) membership in Company's President's
Club (or any successor program maintained by Company or any of its
affiliates or any successor or successors thereto).
Executive's receipt of SOR Pass Privileges and Termination Pass Privileges
shall be conditioned upon Executive's delivery to Company of all effective
pass cards, UATP cards, PAC cards and ticket stock in Executive's possession
on the date of his termination of employment. Executive shall be issued an
Employee Travel Card valid at all times during the term of Executive's SOR
Pass Privileges and Termination Pass Privileges.
ARTICLE 5: MISCELLANEOUS
5.1 Interest and Indemnification. If any payment to Executive provided
for in this Agreement is not made by Company when due, Company shall pay to
Executive interest on the amount payable from the date that such payment
should have been made until such payment is made, which interest shall be
calculated at 3% plus the prime or base rate of interest announced by Texas
Commerce Bank N.A. (or any successor thereto) at its principal office in
Houston, Texas (but not in excess of the highest lawful rate), and such
interest rate shall change when and as any such change in such prime or base
rate shall be announced by such bank. If Executive shall obtain any money
judgment or otherwise prevail with respect to any litigation brought by
Executive or Company to enforce or interpret any provision contained herein,
Company, to the fullest extent permitted by applicable law, hereby
indemnifies Executive for his reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such
fees and disbursements and (ii) to pay prejudgment interest on any money
judgment obtained by Executive from the earliest date that payment to him
should have been made under this Agreement until such judgment shall have
been paid in full, which interest shall be calculated at the rate set forth
in the preceding sentence.
5.2 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Company to : Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: General Counsel
If to Executive to: Mr. Gordon M. Bethune
3340 Del Monte
Houston, Texas 77019
or to such other address as either party may furnish to the other in writing
in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
5.3 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas.
5.4 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
5.5 Severability. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the
validity or enforceability of any other provision of this Agreement, and all
other provisions shall remain in full force and effect.
5.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together will constitute one and the same Agreement.
5.7 Withholding of Taxes and Other Employee Deductions. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city and other taxes as may be required pursuant to any law
or governmental regulation or ruling and all other normal employee deductions
made with respect to Company's employees generally.
5.8 Headings. The paragraph headings have been inserted for purposes
of convenience and shall not be used for interpretive purposes.
5.9 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and conversely.
5.10 Successors. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise.
Except as provided in the preceding sentence, this Agreement, and the rights
and obligations of the parties hereunder, are personal and neither this
Agreement, nor any right, benefit or obligation of either party hereto, shall
be subject to voluntary or involuntary assignment, alienation or transfer,
whether by operation of law or otherwise, without the prior written consent
of the other party.
5.11 Term. This Agreement has a term co-extensive with the term of
employment as set forth in paragraph 2.1. Termination shall not affect any
right or obligation of any party which is accrued or vested prior to or upon
such termination.
5.12 Entire Agreement. Except as provided in (i) the benefits, plans,
and programs referenced in paragraph 3.7(iv), (ii) any signed written
agreement heretofore or contemporaneously executed by Company and Executive
with respect to Awards (as defined in the Incentive Plan) under the Incentive
Plan, or (iii) any signed written agreement hereafter executed by Company and
Executive, this Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants,
promises, representations, warranties and agreements between the parties with
respect to employment of Executive by Company. Without limiting the scope of
the preceding sentence, all prior understandings and agreements among the
parties hereto relating to the subject matter hereof (including, without
limitation, that certain Second Amended and Restated Employment Compensation
Agreement by and between Company and Executive dated as of January 10, 1995)
are hereby null and void and of no further force and effect. Any
modification of this Agreement shall be effective only if it is in writing
and signed by the party to be charged.
5.13 Deemed Resignations. Any termination of Executive's employment
shall constitute an automatic resignation of Executive as an officer of
Company and each affiliate of Company, and an automatic resignation of
Executive from the Board of Directors and from the board of directors of any
affiliate of Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 5th day of June, 1995, to be effective as of the Effective Date.
CONTINENTAL AIRLINES, INC.
By:
Name: Jeffery A. Smisek
Title: Senior Vice President
"EXECUTIVE"
GORDON M. BETHUNE
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between CONTINEN-
TAL AIRLINES, INC., a Delaware corporation ("Company"), and GREGORY D.
BRENNEMAN ("Executive").
W I T N E S S E T H:
WHEREAS, Company is desirous of employing Executive in an executive
capacity on the terms and conditions, and for the consideration, hereinafter
set forth and Executive is desirous of being employed by Company on such
terms and conditions and for such consideration;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, Company and Executive agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment; Effective Date. Company agrees to employ Executive and
Executive agrees to be employed by Company, beginning as of the Effective
Date (as hereinafter defined) and continuing for the period of time set forth
in Article 2 of this Agreement, subject to the terms and conditions of this
Agreement. For purposes of this Agreement, the "Effective Date" shall be
June 6, 1995.
1.2 Position. From and after the Effective Date, Company shall employ
Executive in the position of Chief Operating Officer of Company (and
Executive shall be a member of the Office of the Chairman), or in such other
position or positions as the parties mutually may agree. At the first
regularly scheduled meeting of Company's stockholders that occurs after the
Effective Date and for the remaining term of Executive's employment
hereunder, Company shall cause Executive to be nominated for election as a
director of Company and use its best efforts to secure such election.
1.3 Duties and Services. Executive agrees to serve in the position
referred to in paragraph 1.2 and, if elected, as a director of Company and to
perform diligently and to the best of his abilities the duties and services
appertaining to such office as set forth in the Bylaws of Company in effect
on the Effective Date, as well as such additional duties and services
appropriate to such office which the parties mutually may agree upon from
time to time.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Term. Unless sooner terminated pursuant to other provisions
hereof, Company agrees to employ Executive for a three-year period beginning
on the Effective Date. Said term of employment shall be extended
automatically for an additional successive three-year period as of the third
anniversary of the Effective Date and as of the last day of each successive
three-year period of time thereafter that this Agreement is in effect;
provided, however, that if, prior to the date which is six months before the
last day of any such three-year term of employment, either party shall give
written notice to the other that no such automatic extension shall occur,
then Executive's employment shall terminate on the last day of the three-year
term of employment during which such notice is given.
2.2 Company's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Company, acting pursuant to an express resolution of the Board
of Directors of Company (the "Board of Directors"), shall have the right to
terminate Executive's employment under this Agreement at any time for any of
the following reasons:
(i) upon Executive's death;
(ii) upon Executive's becoming incapacitated for a period of
at least 180 days by accident, sickness or other circumstance which
renders him mentally or physically incapable of performing the material
duties and services required of him hereunder on a full-time basis
during such period;
(iii) for cause, which for purposes of this Agreement shall
mean Executive's gross negligence or willful misconduct in the
performance of the material duties and services required of him pursuant
to this Agreement;
(iv) for Executive's material breach of any provision of this
Agreement which, if correctable, remains uncorrected for 30 days
following written notice to Executive by Company of such breach; or
(v) for any other reason whatsoever, in the sole discretion
of the Board of Directors.
2.3 Executive's Right to Terminate. Notwithstanding the provisions of
paragraph 2.1, Executive shall have the right to terminate his employment
under this Agreement at any time for any of the following reasons:
(i) the assignment to Executive by the Board of Directors or
other officers or representatives of Company of duties materially
inconsistent with the duties associated with the position described in
paragraph 1.2 as such duties are constituted as of the Effective Date;
(ii) a material diminution in the nature or scope of
Executive's authority, responsibilities, or title from those applicable
to him as of the Effective Date;
(iii) the occurrence of material acts or conduct on the part of
Company or its officers or representatives which prevent Executive from
performing his duties and responsibilities pursuant to this Agreement;
(iv) Company requiring Executive to be permanently based
anywhere outside a major urban center in Texas;
(v) the taking of any action by Company that would materially
adversely affect the corporate amenities enjoyed by Executive on the
Effective Date;
(vi) a material breach by Company of any provision of this
Agreement which, if correctable, remains uncorrected for 30 days
following written notice of such breach by Executive to Company; or
(vii) for any other reason whatsoever, in the sole discretion
of Executive.
2.4 Notice of Termination. If Company or Executive desires to
terminate Executive's employment hereunder at any time prior to expiration of
the term of employment as provided in paragraph 2.1, it or he shall do so by
giving written notice to the other party that it or he has elected to
terminate Executive's employment hereunder and stating the effective date and
reason for such termination, provided that no such action shall alter or
amend any other provisions hereof or rights arising hereunder.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the period of this Agreement, Executive shall
receive a minimum annual base salary equal to the greater of (i) $525,000.00
or (ii) such amount as the parties mutually may agree upon from time to time.
Executive's annual base salary shall be paid in equal installments in
accordance with Company's standard policy regarding payment of compensation
to executives but no less frequently than semimonthly.
3.2 Bonus Programs. Executive shall participate in each cash bonus
program maintained by Company on and after the Effective Date (including,
without limitation, participation effective as of April 27, 1995 in any such
program maintained for the year during which such date occurs) at a level
which is not less than the maximum participation level made available to any
Company executive (determined without regard to period of service or other
criteria that might otherwise be necessary to entitle Executive to such level
of participation).
3.3 Life Insurance. During the period of this Agreement, Company shall
maintain one or more policies of life insurance on the life of Executive
providing an aggregate death benefit in an amount not less than the
Termination Payment (as such term is defined in paragraph 4.7). Executive
shall have the right to designate the beneficiary or beneficiaries of the
death benefit payable pursuant to such policy or policies up to an aggregate
death benefit in an amount equal to the Termination Payment. To the extent
that Company's purchase of, or payment of premiums with respect to, such
policy or policies results in compensation income to Executive, Company shall
pay to Executive an additional payment (the "Policy Payment") in an amount
such that after payment by Executive of all taxes imposed on Executive with
respect to the Policy Payment, Executive retains an amount of the Policy
Payment equal to the taxes imposed upon Executive with respect to such
purchase or the payment of such premiums. If for any reason Company fails to
maintain the full amount of life insurance coverage required pursuant to the
preceding provisions of this paragraph 3.3, Company shall, in the event of
the death of Executive while employed by Company, pay Executive's designated
beneficiary or beneficiaries an amount equal to the sum of (1) the difference
between the Termination Payment and any death benefit payable to Executive's
designated beneficiary or beneficiaries under the policy or policies
maintained by Company and (2) such additional amount as shall be required to
hold Executive's estate, heirs, and such beneficiary or beneficiaries
harmless from any additional tax liability resulting from the failure by
Company to maintain the full amount of such required coverage.
3.4 Vacation and Sick Leave. During each year of his employment,
Executive shall be entitled to vacation and sick leave benefits equal to the
maximum available to any Company executive, determined without regard to the
period of service that might otherwise be necessary to entitle Executive to
such vacation or sick leave under standard Company policy.
3.5 Additional Disability Benefit. If Executive shall begin to receive
long-term disability insurance benefits pursuant to a plan maintained by
Company and if such benefits cease prior to Executive's attainment of age 65
and while Executive remains disabled, then Company shall immediately pay
Executive upon the cessation of such benefits a lump-sum, cash payment in an
amount equal to the Termination Payment. If Executive receives payment of a
Termination Payment pursuant to the provisions of Article 4, then the
provisions of this paragraph 3.5 shall terminate. If Executive shall be
disabled at the time his employment with Company terminates and if Executive
shall not be entitled to the payment of a Termination Payment pursuant to the
provisions of Article 4 upon such termination, then Executive's right to
receive the payment upon the occurrence of the circumstances described in
this paragraph 3.5 shall be deemed to have accrued as of the date of such
termination and shall survive the termination of this Agreement.
3.6 Stock Options and Restricted Stock.
(i) Executive and Company have entered into an agreement
evidencing Company's award to Executive of an option to acquire 275,000
shares of Company's Class B Common Stock under Company's 1994 Incentive
Equity Plan, as amended (the "Incentive Plan").
(ii) Executive and Company have entered into an agreement
evidencing Company's award to Executive of restricted stock under the
Incentive Plan with respect to 75,000 shares of Company's Class B Common
Stock.
3.7 Relocation Expenses.
(i) Company shall purchase Executive's home located at 2402
Norwalk, Colleyville, Texas 76034, on a date selected by Executive on or
before June 15, 1995. The purchase price shall be paid in cash and shall be
equal to Executive's actual costs incurred prior to the Effective Date to
acquire such home and to make improvements to such home; provided that such
purchase price shall not exceed $475,000. Executive shall provide Company
with appropriate documentation in support of the purchase price.
(ii) Company shall pay any and all reasonable costs and
expenses associated with transporting Executive's personal and household
effects from the home described in paragraph 3.7(i) to Houston, Texas.
(iii) Company shall pay Executive's reasonable and actual
closing costs incurred in connection with the purchase of a new principal
residence in or around Houston, Texas, including reasonable and customary
legal fees to effect a closing, title fees, title insurance, appraisal fees,
recording fees for deed and mortgage, mortgage application fees, credit
verification fees, transfer fees and document taxes, and a loan origination
or loan assumption fee not to exceed one and one-half percentage points
(1.5%) of the principal amount of the mortgage loan incurred by Executive
with respect to the purchase of such new principal residence.
3.8 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following benefits as incidences of his employment:
(i) Allowance for Automobile or Club Memberships - Company
shall provide Executive with an automobile on substantially the same
terms and conditions as Company currently provides an automobile for its
Chief Executive Officer.
(ii) Business and Entertainment Expenses - Subject to
Company's standard policies and procedures with respect to expense
reimbursement as applied to its executive employees generally, Company
shall reimburse Executive for, or pay on behalf of Executive, reasonable
and appropriate expenses incurred by Executive for business related
purposes, including dues and fees to industry and professional
organizations, costs of entertainment and business development, and
costs reasonably incurred as a result of Executive's spouse accompanying
Executive on business travel.
(iii) Parking - Company shall provide at no expense to
Executive a parking place convenient to Executive's office and a parking
place at Intercontinental Airport in Houston, Texas.
(iv) Other Company Benefits - Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may
hereafter be, available to similarly-situated Company employees. Such
benefits, plans and programs may include, without limitation, profit
sharing plan, thrift plan, annual physical examinations, health
insurance or health care plan, life insurance, disability insurance,
pension plan, pass privileges on Continental Airlines, and the like.
Company shall not, however, by reason of this paragraph be obligated to
institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to executive employees generally.
ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION
4.1 By Expiration. If Executive's employment hereunder shall terminate
upon expiration of the term provided in paragraph 2.1 hereof, then all
compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of his employment, except that Executive
and his eligible family members shall be provided with Termination Pass
Privileges (as such term is defined in paragraph 4.7) for a period of three
years beginning on the effective date of such termination and thereafter with
SOR Pass Privileges (as such term is defined in paragraph 4.7) for the
remainder of Executive's lifetime and, if such termination shall result from
Company's delivery of the written notice described in paragraph 2.1, then
Company shall (i) cause all options and shares of restricted stock awarded to
Executive, including, without limitation, any such awards under the Incentive
Plan, and other Awards (as defined in the Incentive Plan) made to Executive
under the Incentive Plan, to vest immediately upon such termination, (ii) pay
Executive on or before the effective date of such termination a lump-sum,
cash payment in an amount equal to the Termination Payment, (iii) provide
Executive with Outplacement Services (as such term is defined in paragraph
4.7), and (iv) provide Executive and his eligible dependents with
Continuation Coverage (as such term is defined in paragraph 4.7) for a period
of three years beginning on the effective date of such termination.
4.2 By Company. If Executive's employment hereunder shall be
terminated by Company prior to expiration of the term provided in paragraph
2.1 hereof then, upon such termination, regardless of the reason therefor,
all compensation and all benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment, except that
Executive and his eligible family members shall be provided with Termination
Pass Privileges for a period of three years beginning on the effective date
of such termination and thereafter with SOR Pass Privileges for the remainder
of Executive's lifetime, and:
(i) if such termination shall be for any reason other than
those encompassed by paragraphs 2.2(i), (ii), (iii) or (iv), then
Company shall provide Executive with the payments and benefits described
in clauses (i) through (iv) of paragraph 4.1; and
(ii) if such termination shall be for a reason encompassed by
paragraphs 2.2(i) or (ii), then Company shall (1) cause all options and
shares of restricted stock awarded to Executive, including, without
limitation, any such awards under the Incentive Plan, and other Awards
(as defined in the Incentive Plan) made to Executive under the Incentive
Plan, to vest immediately upon such termination, and (2) provide
Executive (or his designated beneficiary or beneficiaries) with the
benefits contemplated under paragraph 3.3 or paragraph 3.5, as
applicable.
4.3 By Executive. If Executive's employment hereunder shall be
terminated by Executive prior to expiration of the term provided in paragraph
2.1 hereof then, upon such termination, regardless of the reason therefor,
all compensation and benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment, except that
Executive and his eligible family members shall be provided with Termination
Pass Privileges for a period of three years beginning on the effective date
of such termination and thereafter with SOR Pass Privileges for the remainder
of Executive's lifetime and, if such termination shall be pursuant to
paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi) or for any reason
whatsoever following the occurrence of a Change in Control (as such term is
defined in the Incentive Plan (as amended by the First Amendment thereto) in
effect as of the date of this Agreement), then Company shall provide
Executive with the payments and benefits described in clauses (i) through
(iv) of paragraph 4.1.
4.4 Certain Additional Payments by Company. Notwithstanding anything
to the contrary in this Agreement, if any payment, distribution or provision
of a benefit by Company to or for the benefit of Executive, whether paid or
payable, distributed or distributable or provided or to be provided pursuant
to the terms of this Agreement or otherwise (a "Payment"), would be subject
to an excise or other special additional tax that would not have been imposed
absent such Payment (including, without limitation, any excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended), or any
interest or penalties with respect to such excise or other additional tax
(such excise or other additional tax, together with any such interest or
penalties, are hereinafter collectively referred to as the "Excise Tax"),
Company shall pay to Executive an additional payment (a "Gross-up Payment")
in an amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any
income taxes and Excise Taxes imposed on any Gross-up Payment, Executive
retains an amount of the Gross-up Payment (taking into account any similar
gross-up payments to Executive under the Incentive Plan) equal to the Excise
Tax imposed upon the Payments. Company and Executive shall make an initial
determination as to whether a Gross-up Payment is required and the amount of
any such Gross-up Payment. Executive shall notify Company in writing of any
claim by the Internal Revenue Service which, if successful, would require
Company to make a Gross-up Payment (or a Gross-up Payment in excess of that,
if any, initially determined by Company and Executive) within ten business
days after the receipt of such claim. Company shall notify Executive in
writing at least ten business days prior to the due date of any response
required with respect to such claim if it plans to contest the claim. If
Company decides to contest such claim, Executive shall cooperate fully with
Company in such action; provided, however, Company shall bear and pay
directly or indirectly all costs and expenses (including additional interest
and penalties) incurred in connection with such action and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax or
income tax, including interest and penalties with respect thereto, imposed as
a result of Company's action. If, as a result of Company's action with
respect to a claim, Executive receives a refund of any amount paid by Company
with respect to such claim, Executive shall promptly pay such refund to
Company. If Company fails to timely notify Executive whether it will contest
such claim or Company determines not to contest such claim, then Company
shall immediately pay to Executive the portion of such claim, if any, which
it has not previously paid to Executive.
4.5 Payment Obligations Absolute. Company's obligation to pay
Executive the amounts and to make the arrangements provided in this Article 4
shall be absolute and unconditional and shall not be affected by any cir-
cumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which Company (including its subsidiaries
and affiliates) may have against him or anyone else. All amounts payable by
Company shall be paid without notice or demand. Executive shall not be
obligated to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Article 4, and, except as
provided in paragraph 4.7 with respect to Continuation Coverage, the obtain-
ing of any such other employment (or the engagement in any endeavor as an
independent contractor, sole proprietor, partner, or joint venturer) shall in
no event effect any reduction of Company's obligations to make (or cause to
be made) the payments and arrangements required to be made under this
Article 4.
4.6 Liquidated Damages. In light of the difficulties in estimating the
damages upon termination of this Agreement, Company and Executive hereby
agree that the payments and benefits, if any, to be received by Executive
pursuant to this Article 4 shall be received by Executive as liquidated
damages. Payment of the Termination Payment pursuant to paragraphs 4.1, 4.2,
or 4.3 shall be in lieu of any severance benefit Executive may be entitled to
under any severance plan or policy maintained by Company.
4.7 Certain Definitions and Additional Terms. As used herein, the
following capitalized terms shall have the meanings assigned below:
(i) "Continuation Coverage" shall mean the continued coverage
of Executive and his eligible dependents under Company's welfare benefit
plans available to executives of Company who have not terminated
employment (or the provision of equivalent benefits), including, without
limitation, medical, health, dental, life insurance, disability, vision
care, accidental death and dismemberment, and prescription drug, at no
greater cost to Executive than that applicable to a similarly situated
Company executive who has not terminated employment; provided, however,
that (1) subject to clause (2) below, the coverage under a particular
welfare benefit plan (or the receipt of equivalent benefits) shall
terminate upon Executive's receipt of comparable benefits from a
subsequent employer and (2) if Executive (and/or his eligible
dependents) would have been entitled to retiree coverage under a
particular welfare benefit plan had he voluntarily retired on the date
of his termination of employment, then such coverage shall be continued
as provided in such plan upon the expiration of the period Continuation
Coverage is to be provided pursuant to this Article 4. Notwithstanding
any provision in this Article 4 to the contrary, Executive's entitlement
to any benefit continuation pursuant to Section 601 et. seq. of the
Employee Retirement Income Security Act of 1974, as amended, shall
commence at the end of the period of, and shall not be reduced by the
provision of, any applicable Continuation Coverage;
(ii) "Outplacement Services" shall mean outplacement services,
at Company's cost and for a period of twelve months beginning on the
date of Executive's termination of employment, to be rendered by an
agency selected by Executive and approved by the Board of Directors
(with such approval not to be unreasonably withheld);
(iii) "SOR Pass Privileges" shall mean (1) pass privileges on
each airline operated by Company or any of its affiliates (or any
successor or successors thereto) at Chief Operating Officer retiree
grade and (2) membership in Company's President's Club (or any successor
program maintained by Company or any of its affiliates or any successor
or successors thereto);
(iv) "Termination Payment" shall mean an amount equal to three
times the sum of (1) Executive's annual base salary pursuant to
paragraph 3.1 in effect immediately prior to Executive's termination of
employment and (2) a deemed annual bonus which shall be equal to 25% of
the amount described in clause (1) of this paragraph 4.7(iv); and
(v) "Termination Pass Privileges" shall mean (1) pass
privileges on each airline operated by Company or any of its affiliates
(or any successor or successors thereto) at the highest type and
priority Executive received at any time during the six-month period
preceding his termination of employment (or, if higher, at the date
hereof), subject to any changes in policy generally applicable to the
Chief Executive Officer and Chief Operating Officer (or other highest
ranking officer of the Company) who is employed by Company and entitled
to such type and priority of pass privileges and (2) membership in
Company's President's Club (or any successor program maintained by
Company or any of its affiliates or any successor or successors
thereto).
Executive's receipt of SOR Pass Privileges and Termination Pass Privileges
shall be conditioned upon Executive's delivery to Company of all effective
pass cards, UATP cards, PAC cards and ticket stock in Executive's possession
on the date of his termination of employment. Executive shall be issued an
Employee Travel Card valid at all times during the term of Executive's SOR
Pass Privileges and Termination Pass Privileges.
ARTICLE 5: MISCELLANEOUS
5.1 Interest and Indemnification. If any payment to Executive provided
for in this Agreement is not made by Company when due, Company shall pay to
Executive interest on the amount payable from the date that such payment
should have been made until such payment is made, which interest shall be
calculated at 3% plus the prime or base rate of interest announced by Texas
Commerce Bank National Association (or any successor thereto) at its
principal office in Houston, Texas (but not in excess of the highest lawful
rate), and such interest rate shall change when and as any such change in
such prime or base rate shall be announced by such bank. If Executive shall
obtain any money judgment or otherwise prevail with respect to any litigation
brought by Executive or Company to enforce or interpret any provision
contained herein, Company, to the fullest extent permitted by applicable law,
hereby indemnifies Executive for his reasonable attorneys' fees and
disbursements incurred in such litigation and hereby agrees (i) to pay in
full all such fees and disbursements and (ii) to pay prejudgment interest on
any money judgment obtained by Executive from the earliest date that payment
to him should have been made under this Agreement until such judgment shall
have been paid in full, which interest shall be calculated at the rate set
forth in the preceding sentence.
5.2 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to Company to : Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: General Counsel
If to Executive to : Mr. Gregory D. Brenneman
31 Hollymead
The Woodlands, Texas 77381
or to such other address as either party may furnish to the other in writing
in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
5.3 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas.
5.4 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
5.5 Severability. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the
validity or enforceability of any other provision of this Agreement, and all
other provisions shall remain in full force and effect.
5.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together will constitute one and the same Agreement.
5.7 Withholding of Taxes and Other Employee Deductions. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city and other taxes as may be required pursuant to any law
or governmental regulation or ruling and all other normal employee deductions
made with respect to Company's employees generally.
5.8 Headings. The paragraph headings have been inserted for purposes
of convenience and shall not be used for interpretive purposes.
5.9 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and conversely.
5.10 Successors. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise.
Except as provided in the preceding sentence, this Agreement, and the rights
and obligations of the parties hereunder, are personal and neither this
Agreement, nor any right, benefit or obligation of either party hereto, shall
be subject to voluntary or involuntary assignment, alienation or transfer,
whether by operation of law or otherwise, without the prior written consent
of the other party.
5.11 Term. This Agreement has a term co-extensive with the term of
employment as set forth in paragraph 2.1. Termination shall not affect any
right or obligation of any party which is accrued or vested prior to or upon
such termination.
5.12 Entire Agreement. Except as provided in (i) the benefits, plans,
and programs referenced in paragraph 3.8(iv), (ii) any signed written
agreement heretofore or contemporaneously executed by Company and Executive
with respect to Awards (as defined in the Incentive Plan) under the Incentive
Plan, or (iii) any signed written agreement hereafter executed by Company and
Executive, this Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants,
promises, representations, warranties and agreements between the parties with
respect to employment of Executive by Company. Without limiting the scope of
the preceding sentence, all prior understandings and agreements among the
parties hereto relating to the subject matter hereof (including, without
limitation, that certain Memorandum of Understanding by and among Company,
Executive, and Turnworks, Inc. dated as of April 27, 1995, but excluding the
Termination Agreement between Company and Turnworks, Inc. referred to
therein) are hereby null and void and of no further force and effect. Any
modification of this Agreement shall be effective only if it is in writing
and signed by the party to be charged.
5.13 Deemed Resignations. Any termination of Executive's employment
shall constitute an automatic resignation of Executive as an officer of
Company and each affiliate of Company, and an automatic resignation of
Executive from the Board of Directors and from the board of directors of any
affiliate of Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 5th day of June, 1995, to be effective as of the Effective Date.
CONTINENTAL AIRLINES, INC.
By:
Name: Jeffery A. Smisek
Title: Senior Vice President
"EXECUTIVE"
GREGORY D. BRENNEMAN