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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 SEPTEMBER 30, 1996
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, Suite 2010
Houston, Texas 77019
(Address of principal executive offices)
(Zip Code)
713-834-2950
(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 October 11, 1996, 9,280,000 shares of Class A common stock
and 46,771,324 shares of Class B common stock were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXHIBIT 3.1
BY-LAWS
OF
CONTINENTAL AIRLINES, INC.
Including all amendments through September 30, 1996
TABLE OF CONTENTS
Page
ARTICLE I
Stockholders. . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Annual Meeting . . . . . . . . . . . 1
Section 1.2 Special Meetings . . . . . . . . . . 1
Section 1.3 Place of Meeting . . . . . . . . . . 2
Section 1.4 Notice of Meetings . . . . . . . . . 2
Section 1.5 Quorum . . . . . . . . . . . . . . . 2
Section 1.6 Voting . . . . . . . . . . . . . . . 3
Section 1.7 Presiding Officer and Secretary. . . 4
Section 1.8 Proxies. . . . . . . . . . . . . . . 4
Section 1.9 List of Stockholders . . . . . . . . 4
Section 1.10 Notice of Stockholder Business
and Nominations. . . . . . . . . . 5
Section 1.11 Inspectors of Elections; Opening
and Closing the Polls. . . . . . . 8
ARTICLE II
Directors . . . . . . . . . . . . . . . . . . . . . 9
Section 2.1 Powers and Duties of Directors;
Number . . . . . . . . . . . . . . 9
Section 2.2 Election; Term, Vacancies. . . . . . 10
Section 2.3 Resignation. . . . . . . . . . . . . 10
Section 2.4 Removal. . . . . . . . . . . . . . . 10
Section 2.5 Meetings . . . . . . . . . . . . . . 10
Section 2.6 Quorum and Voting. . . . . . . . . . 12
Section 2.7 Written Consent of Directors in
Lieu of a Meeting. . . . . . . . . 12
Section 2.8 Compensation . . . . . . . . . . . . 12
ARTICLE III
Committees of the Board of Directors. . . . . . . . 13
Section 3.1 Creation . . . . . . . . . . . . . . 13
Section 3.2 Committee Procedure. . . . . . . . . 14
Section 3.3 Certain Definitions. . . . . . . . . 14
ARTICLE IV
Officers, Agents and Employees. . . . . . . . . . . 14
Section 4.1 Appointments and Term of Office. . . 15
Section 4.2 Resignation and Removal. . . . . . . 15
Section 4.3 Compensation and Bond. . . . . . . . 16
Section 4.4 Chairman of the Board. . . . . . . . 16
Section 4.5 Chief Executive Officer. . . . . . . 16
Section 4.6 President. . . . . . . . . . . . . . 17
Section 4.7 Chief Operating Officer. . . . . . . 17
Section 4.8 Vice Presidents. . . . . . . . . . . 17
Section 4.9 Treasurer. . . . . . . . . . . . . . 17
Section 4.10 Secretary. . . . . . . . . . . . . . 18
Section 4.11 Assistant Treasurers . . . . . . . . 18
Section 4.12 Assistant Secretaries. . . . . . . . 18
Section 4.13 Delegation of Duties . . . . . . . . 19
Section 4.14 Loans to Officers and Employees,
Guaranty of Obligations of
Officers and Employees . . . . . . 19
ARTICLE V
Indemnification . . . . . . . . . . . . . . . . . . 19
Section 5.1 Indemnification of Directors,
Officers, Employees and Agents . . 19
ARTICLE VI
Common Stock. . . . . . . . . . . . . . . . . . . . 21
Section 6.1 Certificates . . . . . . . . . . . . 21
Section 6.2 Transfers of Stock . . . . . . . . . 22
Section 6.3 Lost, Stolen or Destroyed
Certificates . . . . . . . . . . . 22
Section 6.4 Stockholder Record Date. . . . . . . 22
ARTICLE VII
Ownership by Aliens . . . . . . . . . . . . . . . . 24
Section 7.1 Foreign Stock Record . . . . . . . . 24
Section 7.2 Maximum Percentage . . . . . . . . . 24
Section 7.3 Recording of Shares. . . . . . . . . 24
ARTICLE VIII
General Provisions. . . . . . . . . . . . . . . . . 26
Section 8.1 Fiscal Year. . . . . . . . . . . . . 26
Section 8.2 Dividends. . . . . . . . . . . . . . 26
Section 8.3 Checks, Notes, Drafts, Etc.. . . . . 26
Section 8.4 Corporate Seal . . . . . . . . . . . 26
Section 8.5 Waiver of Notice . . . . . . . . . . 26
ARTICLE IX
Restated Certificate of Incorporation to Govern . . 27
Section 9.1 Restated Certificate of
Incorporation to Govern. . . . . . 27
BY-LAWS
OF
CONTINENTAL AIRLINES, INC.
Incorporated under the Laws of the State of Delaware
ARTICLE I
Stockholders
Section 1.1 Annual Meeting. The annual meeting of
stockholders of the Corporation for the election of Directors and
for the transaction of any other proper business shall be held at
such time and date in each year as the Board of Directors may
determine from time to time. The annual meeting in each year shall
be held at such place within or without the State of Delaware as
may be fixed by the Board of Directors, or if not so fixed, at the
principal business office of the Corporation.
Section 1.2 Special Meetings. Subject to the rights of the
holders of any class or series of preferred stock of the
Corporation, or any other series or class of stock as set forth in
the Restated Certificate of Incorporation of the Corporation (as it
may be amended from time to time in accordance with its terms and
applicable law, the "Restated Certificate of Incorporation"), to
elect additional Directors under specified circumstances, special
meetings of the stockholders may be called only by (i) stockholders
holding Common Stock constituting more than 50% of the voting power
of the outstanding shares of Common Stock, (ii) the Chief Executive
Officer or (iii) the Board of Directors.
Section 1.3 Place of Meeting. The Board of Directors may
designate the place of meeting for any meeting of the stockholders.
If no designation is made by the Board of Directors, the place of
meeting shall be the principal executive offices of the
Corporation.
Section 1.4 Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, unless
notice is waived in writing by all stockholders entitled to vote at
the meeting, a written notice of the meeting shall be given which
shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose for which the meeting is
called.
Unless otherwise provided by law, and except as to any
stockholder duly waiving notice, the written notice of any meeting
shall be given personally or by mail, not less than ten nor more
than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, notice shall be
deemed given when deposited in the mail, postage prepaid, directed
to the stockholder at his or her address as it appears on the
records of the Corporation.
When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any
business which might have been transacted at the original meeting.
If, however, the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5 Quorum. Except as otherwise provided by law,
by the Restated Certificate of Incorporation, or by these By-Laws
in respect of the vote required for a specified action, at any
meeting of stockholders the holders of a majority of the aggregate
voting power of the outstanding stock entitled to vote thereat,
either present or represented by proxy, shall constitute a quorum
for the transaction of any business, but the stockholders present,
although less than a quorum, may adjourn the meeting to another
time or place and, except as provided in the last paragraph of
Section 1.4, notice need not be given of the adjourned meeting.
Section 1.6 Voting. Except as otherwise provided by the
Restated Certificate of Incorporation or these By-Laws, whenever
Directors are to be elected at a meeting, they shall be elected by
a plurality of the votes cast at the meeting by the holders of
stock entitled to vote. Whenever any corporate action, other than
the election of Directors, is to be taken by vote of stockholders
at a meeting, it shall be authorized by a majority of the votes
cast at the meeting by the holders of stock entitled to vote
thereon, except as otherwise required by law, by the Restated
Certificate of Incorporation or by these By-Laws.
Except as otherwise provided by law, or by the Restated
Certificate of Incorporation or these By-Laws, each holder of
record of stock of the Corporation entitled to vote on any matter
at any meeting of stockholders shall be entitled to one vote for
each share of such stock standing in the name of such holder on the
stock ledger of the Corporation on the record date for the
determination of the stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote
for Directors or the vote on any other matter at a meeting shall be
by written ballot, but otherwise the method of voting and the
manner in which votes are counted shall be discretionary with the
presiding officer at the meeting.
Section 1.7 Presiding Officer and Secretary. At every
meeting of stockholders the Chairman of the Board or the Chief
Executive Officer, as designated by the Board of Directors, or, if
neither is present, or in the absence of any such designation, the
appointee of the meeting, shall preside. The Secretary, or in his
or her absence an Assistant Secretary, or if none be present, the
appointee of the presiding officer of the meeting, shall act as
secretary of the meeting.
Section 1.8 Proxies. Each stockholder entitled to vote at
a meeting of stockholders may authorize another person or persons
to act for him or her by proxy executed in writing by the
stockholder or as otherwise permitted by law, or by his or her duly
authorized attorney-in-fact. Such proxy must be filed with the
Secretary of the Corporation or his or her representative at or
before the time of the meeting.
Section 1.9 List of Stockholders. The officer who has
charge of the stock ledger of the Corporation shall prepare and
make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to which
stockholders are the stockholders entitled to examine the stock
ledger or the list required by this Section 1.9, or to vote in
person or by proxy at any meeting of stockholders.
Section 1.10 Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Subject to Section
2.2 of these By-Laws, nominations of persons for election to the
Board of Directors of the Corporation and the proposal of business
to be considered by the stockholders may be made at an annual
meeting of stockholders (a) pursuant to the Corporation's notice of
meeting delivered pursuant to Section 1.4 of these By-Laws, (b) by
or at the direction of the Board of Directors or (c) by any
stockholder of the Corporation who is entitled to vote at the
meeting, who complied with the notice procedures set forth in
clauses (2) and (3) of paragraph (A) of this Section 1.10 and who
was a stockholder of record at the time such notice is delivered to
the Secretary of the Corporation.
(2) For nominations or other business to be
properly brought before an annual meeting by a stockholder pursuant
to clause (c) of paragraph (A) (1) of this Section 1.10, the
stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive
offices of the Corporation not less than seventy days nor more than
ninety days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date
of the annual meeting is advanced by more than twenty days, or
delayed by more than seventy days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not
earlier than the ninetieth day prior to such annual meeting and not
later than the close of business on the later of the seventieth day
prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first
made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
reelection as a Director all information relating to such person
that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including such person's
written consent to being named in the proxy statement as a nominee
and to serving as a Director if elected; (b) as to any other
business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and
such beneficial owner.
(3) Notwithstanding anything in the second
sentence of paragraph (A) (2) of this Section 1.10 to the contrary,
in the event that the number of Directors to be elected to the
Board of Directors is increased and there is no public announcement
naming all of the nominees for Director or specifying the size of
the increased Board of Directors made by the Corporation at least
eighty days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this Section
1.10 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on
the tenth day following the day on which such public announcement
is first made by the Corporation.
(B) Special Meeting of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's
notice of meeting pursuant to Section 1.4 of these By-Laws.
Subject to Section 2.2 of these By-Laws, nominations of persons for
election to the Board of Directors may be made at a special meeting
of stockholders at which Directors are to be elected pursuant to
the Corporation's notice of meeting (i) by or at the direction of
the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies
with the notice procedures set forth in this Section 1.10 and who
is a stockholder of record at the time such notice is delivered to
the Secretary of the Corporation. Nominations by stockholders of
persons for election to the Board of Directors may be made at such
a special meeting of stockholders if the stockholder's notice as
required by paragraph (A) (2) of this Section 1.10 shall be
delivered to the Secretary at the principal executive offices of
the Corporation not earlier than the ninetieth day prior to such
special meeting and not later than the close of business on the
later of the seventieth day prior to such special meeting or the
tenth day following the day on which public announcement is first
made of the date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting.
(C) General. (1) Only persons who are nominated in
accordance with the procedures set forth in this Section 1.10 shall
be eligible to serve as Directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
this Section 1.10. Except as otherwise provided by law, the
Restated Certificate of Incorporation or these By-Laws, the
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in
this Section 1.10 and, if any proposed nomination or business is
not in compliance with this Section 1.10, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 1.10, "public
announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions
of this Section 1.10, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in
this Section 1.10. Nothing in this Section 1.10 shall be deemed to
affect any rights of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act.
Section 1.11 Inspectors of Elections; Opening and Closing
the Polls. The Board of Directors by resolution shall appoint one
or more inspectors, which inspector or inspectors may include
individuals who serve the Corporation in other capacities,
including, without limitation, as officers, employees, agents or
representatives of the Corporation, to act at the meeting and make
a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate has been appointed to act, or if all
inspectors or alternates who have been appointed are unable to act,
at the meeting of stockholders, the chairman of the meeting shall
appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by the
General Corporation Law of the State of Delaware (the "GCL").
The chairman of the meeting shall fix and announce at the
meeting the time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting.
ARTICLE II
Directors
Section 2.1 Powers and Duties of Directors; Number. The
business of the Corporation shall be managed by or under the
direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things as
are not directed or required to be exercised or done by the
stockholders by the Restated Certificate of Incorporation, by these
By-Laws, or by law. Except as otherwise permitted by or consistent
with Foreign Ownership Restrictions (as defined in the Restated
Certificate of Incorporation), at no time shall more than one-third
of the Directors in office be Aliens (as defined in the Restated
Certificate of Incorporation). The Board shall adopt the Annual
Capital Expenditure Budget and the Annual Financial Plan, both as
defined in Section 3.3, for each fiscal year not later than the
last day of the preceding fiscal year or at such later time as
shall be determined by resolution of the Board.
The number of Directors which shall constitute the whole Board
of Directors shall be determined from time to time by resolution of
the Board of Directors (provided that no decrease in the number of
Directors which would have the effect of shortening the term of an
incumbent Director may be made by the Board of Directors). If the
Board of Directors makes no such determination, the number of
Directors shall be twelve.
Section 2.2 Election; Term; Vacancies. Each Director shall
hold office until the next annual election and until his or her
successor is elected and qualified, or until his earlier death,
resignation or removal. The Directors shall be elected annually
by the stockholders in the manner specified by the Restated
Certificate of Incorporation and these By-Laws, except that if
there be a vacancy in the Board of Directors by reason of death,
resignation or otherwise, such vacancy may also be filled for the
unexpired term by a majority affirmative vote of the Board of
Directors; provided, that in the event of a vacancy by reason of
death, resignation or otherwise of a Class D Director, such vacancy
shall be filled for the unexpired term by the holders of Class D
Common Stock, voting separately as a class by a majority
affirmative vote thereof.
Section 2.3 Resignation. Any Director may resign at any
time upon written notice to the Corporation. Any such resignation
shall take effect at the time specified therein or, if the time be
not specified, upon receipt thereof, and the acceptance of such
resignation, unless required by the terms thereof, shall not be
necessary to make such resignation effective.
Section 2.4 Removal. Any Director may be removed at any
time, with or without cause, by vote at a meeting or written
consent of the holders of stock entitled to vote on the election of
such Director pursuant to the Restated Certificate of
Incorporation.
Section 2.5 Meetings.
(A) Annual Meeting. Immediately after each annual meeting of
stockholders, the duly elected Directors shall hold an inaugural
meeting for the purpose of organization, election of officers, and
the transaction of other business, at such place as shall be fixed
by the person presiding at the meeting of stockholders at which
such Directors are elected.
(B) Regular Meetings. Regular meetings of the Board of
Directors shall be held on such dates and at such times and places
as shall be designated from time to time by the Board of Directors;
provided, that regular meetings of the Board of Directors can be
waived at the request of the Chief Executive Officer if at least a
majority of the Directors agree in writing to such waiver at least
seven days before the date of the meeting to be so waived. The
Secretary shall forward to each Director, at least five days before
any such regular meeting, a notice of the time and place of the
meeting, together with the agenda for the meeting or in lieu
thereof a notice of waiver if the regular meeting has been waived.
(C) Special Meetings. Special meetings of the Directors may
be called by the Chairman of the Board, the Chairman of the
Executive Committee, the Chief Executive Officer or a majority of
the Directors, at such time and place as shall be specified in the
notice or waiver thereof. Notice of each special meeting,
including the time and place of the meeting and the agenda
therefor, shall be given by the Secretary or by the person calling
the meeting to each Director by causing the same to be delivered
personally or by facsimile transmission not later than the close of
business on the second day next preceding the day of the meeting.
(D) Location; Methods of Participation. Meetings of the
Board of Directors, regular or special, may be held at any place
within or without the State of Delaware at such place as is
indicated in the notice or waiver of notice thereof. Members of
the Board of Directors, or of any committee designated by the
Board, may participate in a meeting of the Board of Directors or
such committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting by such means shall constitute presence in person at
such meeting.
Section 2.6 Quorum and Voting. A majority of the total
number of Directors (excluding those who must recuse themselves
under the terms of the Restated Certificate of Incorporation or
these By-Laws, or by law)("Recused Directors") shall constitute a
quorum for the transaction of business, but, if there be less than
a quorum at any meeting of the Board of Directors, a majority of
the Directors present may adjourn the meeting from time to time,
and no further notice thereof need be given other than announcement
at the meeting which shall be so adjourned. Except as otherwise
provided by law, by the Restated Certificate of Incorporation, or
by these By-Laws, the affirmative vote of a majority of the
Directors present at a meeting (excluding Recused Directors) at
which a quorum is present shall be the act of the Board of
Directors.
Section 2.7 Written Consent of Directors in Lieu of a
Meeting. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of
the Board or committee.
Section 2.8 Compensation. Directors may receive
compensation for services to the Corporation in their capacities as
Directors or otherwise in such manner and in such amounts as may be
fixed from time to time by the Board of Directors.
ARTICLE III
Committees of the Board of Directors
Section 3.1 Creation. The Board of Directors, by
resolution or resolutions passed by a majority of the whole Board
of Directors (except as otherwise provided in the Restated
Certificate of Incorporation), may designate one or more
committees, each to consist of such number of Directors of the
Corporation as shall be specified in such resolution; provided,that
for so long as there shall be any Class D Directors (as defined in
Section 3.3), any such committee shall include (if so requested by
any Class D Director), to the extent consistent with applicable
laws and regulations, such number of Class D Directors as shall not
be greater than the number of Directors equal to the same
percentage of the Directors comprising such committee as the
percentage of the total number of Class D Directors on the whole
Board of Directors; provided further, that for so long as there
shall be any Class D Directors, any executive or other similar
committee of the Board with full power to take all actions which
may lawfully be taken by the Board, and any nominating committee of
the Board, shall consist, to the extent consistent with applicable
laws and regulations, only of a Director that is an officer of the
Corporation (or his or her designee) and a Class D Director. Each
committee of the Board shall have and may exercise such powers and
duties as may be provided in such resolution, except that no such
committee shall have the power to elect Directors or the power or
authority reserved for the whole Board of Directors pursuant to
Section 141(c)(1) of the GCL, except as otherwise set forth in such
Section 141(c)(1). Pursuant to and subject to the foregoing, the
Board of Directors shall at all times designate an Executive
Committee with full power to take all actions which may lawfully be
taken by the Board, and the chairperson of the Executive Committee
shall, as long as Air Partners (as defined in the Restated
Certificate of Incorporation) may convert (or has converted) shares
of Class A common stock of the Corporation into Class D common
stock of the Corporation pursuant to Article Fourth, Section
2(e)(i) of the Restated Certificate of Incorporation and such Class
D common stock would not then be (or has not been) converted into
Class A common stock pursuant to Article Fourth, Section 2(e) (ii)
or (iii) of the Restated Certificate of Incorporation, be appointed
from among the members of such committee by a majority of the whole
Board of Directors.
Section 3.2 Committee Procedure. Each committee of the
Board of Directors shall meet at the times stated by the Board in
the resolution or resolutions establishing such committee or on
notice to all members given by any member of such committee. The
Board by resolution or resolutions shall establish the rules of
procedure to be followed by each committee, which shall include a
requirement that such committee keep regular minutes of its
proceedings and deliver to the Secretary the same. The affirmative
vote of a majority of the members of any such committee shall
constitute the act of such committee.
Section 3.3 Certain Definitions.
(A) Annual Capital Expenditure Budget. When used in these
By-Laws, the term "Annual Capital Expenditure Budget" shall mean an
annual capital expenditure budget, which shall be approved by the
Board of Directors not later than the last day of the preceding
fiscal year (or at such later time determined by the Board pursuant
to Section 2.1).
(B) Annual Financial Plan. When used in these By-Laws, the
term "Annual Financial Plan" shall mean an annual financial plan,
which shall be approved by the Board of Directors not later than
the last day of the preceding fiscal year (or at such later time
determined by the Board pursuant to Section 2.1).
(C) Class D Director. When used in these By-Laws, the term
"Class D Director" shall mean a Director elected by the holders of
Class D Common Stock or elected by Directors to fill a vacancy
created by the departure of a Class D Director.
ARTICLE IV
Officers, Agents and Employees
Section 4.1 Appointment and Term of Office. The officers
of the Corporation shall include a Chairman of the Board, a Chief
Executive Officer, a President, and a Secretary, and may also
include a Chief Operating Officer, a Treasurer, one or more Vice
Presidents (who may be further classified by such descriptions as
"executive", "senior", "assistant", "staff" or otherwise, as the
Board of Directors shall determine), one or more Assistant
Secretaries and one or more Assistant Treasurers. All such
officers shall be appointed by the Board of Directors. Any number
of such offices may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than
one capacity. Except as may be prescribed otherwise by the Board
of Directors in a particular case, all such officers shall hold
their offices at the pleasure of the Board for an unlimited term
and need not be reappointed annually or at any other periodic
interval. The Board of Directors may appoint, and may delegate
power to appoint, such other officers, agents and employees as it
may deem necessary or proper, who shall hold their offices or
positions for such terms, have such authority and perform such
duties as may from time to time be determined by or pursuant to
authorization of the Board of Directors.
Section 4.2 Resignation and Removal. Any officer may
resign at any time upon written notice to the Corporation. Any
officer, agent or employee of the Corporation may be removed by the
Board of Directors with or without cause at any time. The Board of
Directors may delegate such power of removal as to officers, agents
and employees not appointed by the Board of Directors. Such
removal shall be without prejudice to a person's contract rights,
if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract
rights.
Section 4.3 Compensation and Bond. The compensation of the
officers of the Corporation shall be fixed by the Board of
Directors, but this power may be delegated to any officer by the
Board of Directors. The Corporation may secure the fidelity of any
or all of its officers, agents or employees by bond or otherwise.
Section 4.4 Chairman of the Board. The Chairman of the
Board shall be selected from the members of the Board of Directors
and shall preside at all meetings of the Board of Directors. In
addition, the Chairman of the Board shall have such other powers
and duties as may be delegated to him or her by the Board of
Directors. The Chairman of the Board shall not be deemed to be an
officer of the Corporation for purposes of Article III of these
By-Laws unless he or she shall also be the Chief Executive Officer.
Section 4.5 Chief Executive Officer. The Chief Executive
Officer shall be the chief executive officer of the Corporation
and, in the absence of the Chairman of the Board (or if there be
none), he or she shall preside at all meetings of the Board of
Directors. The Chief Executive Officer shall have general charge
of the business affairs of the Corporation. He or she may employ
and discharge employees and agents of the Corporation, except such
as shall be appointed by the Board of Directors, and he or she may
delegate these powers. The Chief Executive Officer may vote the
stock or other securities of any other domestic or foreign
corporation of any type or kind which may at any time be owned by
the Corporation, may execute any stockholders' or other consents in
respect thereof and may in his or her discretion delegate such
powers by executing proxies, or otherwise, on behalf of the
Corporation. The Board of Directors by resolution from time to
time may confer like powers upon any other person.
Section 4.6 President. The President shall have such
powers and perform such duties as the Board of Directors or the
Chief Executive Officer may from time to time prescribe.
Section 4.7 Chief Operating Officer. The Chief Operating
Officer of the Company shall have general charge of the operating
affairs of the Corporation, and shall have such other powers and
duties as the Chief Executive Officer or the Board of Directors
shall delegate to him or her from time to time.
Section 4.8 Vice Presidents. Each Vice President shall
have such powers and perform such duties as the Board of Directors
or the Chief Executive Officer may from time to time prescribe.
Section 4.9 Treasurer. The Treasurer shall have charge of
all funds and securities of the Corporation, may endorse the same
for deposit or collection when necessary and deposit the same to
the credit of the Corporation in such banks or depositaries as the
Board of Directors may authorize. He or she may endorse all
commercial documents requiring endorsements for or on behalf of the
Corporation and may sign all receipts and vouchers for payments
made to the Corporation. He or she shall have all such further
powers and duties as generally are incident to the position of
Treasurer or as may be assigned to him or her by the Board of
Directors or the Chief Executive Officer.
Section 4.10 Secretary. The Secretary shall distribute all
materials to be distributed in connection with regular and special
meetings of the Board of Directors, record all the proceedings of
the meetings of the stockholders and Directors in a book to be kept
for that purpose and shall also record therein all action taken by
written consent of the Directors, and committees of the Board of
Directors in lieu of a meeting. He or she shall attend to the
giving and serving of all notices of the Corporation. He or she
shall have custody of the seal of the Corporation and shall attest
the same by his or her signature whenever required. He or she
shall have charge of the stock ledger and such other books and
papers as the Board of Directors may direct, but he or she may
delegate responsibility for maintaining the stock ledger to any
transfer agent appointed by the Board of Directors. He or she
shall have all such further powers and duties as generally are
incident to the position of Secretary or as may be assigned to him
or her by the Board of Directors or the Chief Executive Officer.
Section 4.11 Assistant Treasurers. In the absence or
inability to act of the Treasurer, any Assistant Treasurer may
perform all the duties and exercise all the powers of the
Treasurer. The performance of any such duty shall, in respect of
any other person dealing with the Corporation, be conclusive
evidence of his or her power to act. An Assistant Treasurer shall
also perform such other duties as the Treasurer or the Board of
Directors may assign to him or her.
Section 4.12 Assistant Secretaries. In the absence or
inability to act of the Secretary, any Assistant Secretary may
perform all the duties and exercise all the powers of the
Secretary. The performance of any such duty shall, in respect of
any other person dealing with the Corporation, be conclusive
evidence of his or her power to act. An Assistant Secretary shall
also perform such other duties as the Secretary or the Board of
Directors may assign to him or her.
Section 4.13 Delegation of Duties. In case of the absence
of any officer of the Corporation, or for any other reason that the
Board of Directors may deem sufficient, the Board of Directors may
confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any Director.
Section 4.14 Loans to Officers and Employees; Guaranty of
Obligations of Officers and Employees. The Corporation may lend
money to, or guarantee any obligation of, or otherwise assist any
officer or other employee of the Corporation or any subsidiary,
including any officer or employee who is a Director of the
Corporation or any subsidiary, whenever, in the judgment of the
Directors, such loan, guaranty or assistance may reasonably be
expected to benefit the Corporation. The loan, guaranty or other
assistance may be with or without interest, and may be unsecured,
or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the
Corporation.
ARTICLE V
Indemnification
Section 5.1 Indemnification of Directors, Officers,
Employees and Agents. No Director of the Corporation shall be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a Director, except
for liability (i) for any breach of the Director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the GCL, or
(iv) for any transaction from which the Director derived any
improper personal benefit. If the GCL is amended to authorize
corporate action further eliminating or limiting the personal
liability of Directors, then the liability of Directors of the
Corporation shall be eliminated or limited to the full extent
permitted by the GCL, as so amended.
The Corporation shall indemnify to the full extent permitted
by the laws of the State of Delaware as from time to time in effect
any person who was or is a party or is threatened to be made a
party to, or otherwise requires representation by counsel in
connection with, any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (whether or not an action by or in the right of the
Corporation), by reason of the fact that he or she is or was a
Director or officer of the Corporation, or, while serving as a
Director or officer of the Corporation, is or was serving at the
request of the Corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been
taken or omitted in such capacity. The right to indemnification
conferred by this Article V also shall include the right of such
persons to be paid in advance by the Corporation for their expenses
(including attorneys' fees) to the full extent permitted by the
laws of the State of Delaware, as from time to time in effect. The
right to indemnification conferred on such persons by this Article
V shall be a contract right.
Unless otherwise determined by the Board of Directors, the
Corporation shall indemnify to the full extent permitted by the
laws of the State of Delaware as from time to time in effect any
person who was or is a party or is threatened to be made a party
to, or otherwise requires representation by counsel in connection
with, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (whether or not an action by or in the right of the
Corporation), by reason of the fact that he or she is or was an
employee (other than an officer) or agent of the Corporation, or is
or was serving at the request of the Corporation as a Director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity.
The rights and authority conferred in this Article V shall not
be exclusive of any other right which any person seeking
indemnification or advancement of expenses may have or hereafter
acquire under any statute, provision of the Restated Certificate of
Incorporation or these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in his or
her official capacity and as to action in another capacity while
holding such office and shall continue as to a person who has
ceased to be a Director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such
a person. Neither the amendment or repeal of this Article V nor
the adoption of any provision of the Restated Certificate of
Incorporation or these By-Laws or of any statute inconsistent with
this Article V shall eliminate or reduce the effect of this Article
V in respect of any acts or omissions occurring prior to such
amendment, repeal or adoption or an inconsistent provision.
ARTICLE VI
Common Stock
Section 6.1 Certificates. Certificates for stock of the
Corporation shall be in such form as shall be approved by the Board
of Directors and shall be signed in the name of the Corporation by
the Chairman of the Board or the Chief Executive Officer or the
President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary. Such
certificates may be sealed with the seal of the Corporation or a
facsimile thereof. Any of or all the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of
issue.
Section 6.2 Transfers of Stock. Upon surrender to any
transfer agent of the Corporation of a certificate for shares of
the Corporation duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the
duty of the Corporation, provided such succession, assignment or
transfer is not prohibited by the Restated Certificate of
Incorporation, these By-Laws, applicable law or contractual
prohibitions, to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon
its books.
Section 6.3 Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new stock certificate in the place of any
certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of
the lost, stolen or destroyed certificate or his or her legal
representative to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate. The Board
of Directors may require such owner to satisfy other reasonable
requirements.
Section 6.4 Stockholder Record Date. In order that the
Corporation may determine the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be
more than 60 nor less than ten days before the date of such
meeting, nor more than 60 days prior to any other action. Only
such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to notice of, and to vote at, such meeting
and any adjournment thereof, or to give such consent, or to receive
payment of such dividend or other distribution, or to exercise such
rights in respect of any such change, conversion or exchange of
stock, or to participate in such action, as the case may be,
notwithstanding any transfer of any stock on the books of the
Corporation after any record date so fixed.
If no record date is fixed by the Board of Directors, (a) the
record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the date on which notice is
given, or, if notice is waived by all stockholders entitled to vote
at the meeting, at the close of business on the day next preceding
the day on which the meeting is held and (b) the record date for
determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE VII
Ownership by Aliens
Section 7.1 Foreign Stock Record. There shall be
maintained a separate stock record, designated the "Foreign Stock
Record," for the registration of Voting Stock, as defined in
Section 7.2, that is Beneficially Owned (as defined in the Restated
Certificate of Incorporation) by Aliens, as defined in the Restated
Certificate of Incorporation ("Alien Stock"). The Beneficial
Ownership by Aliens of Voting Stock shall be determined in
conformity with regulations prescribed by the Board of Directors.
Section 7.2 Maximum Percentage. At no time shall ownership
of shares representing more than the Maximum Percentage, as defined
below, be registered in the Foreign Stock Record. As used herein,
(a) "Maximum Percentage" means the maximum percentage of voting
power of Voting Stock, as defined below, which may be voted by, or
at the direction of, Aliens without violating Foreign Ownership
Restrictions or adversely affecting the Corporation's operating
certificates or authorities, and (b) "Voting Stock" means all
outstanding shares of capital stock of the Corporation issued from
time to time by the Corporation and Beneficially Owned by Aliens
which, but for the provisions of Section 1 of Article Sixth of the
Restated Certificate of Incorporation, by their terms may vote (at
the time such determination is made) for the election of Directors
of the Corporation, except shares of Preferred Stock that are
entitled to vote for the election of Directors solely as a result
of the failure to pay dividends by the Corporation or other breach
of the terms of such Preferred Stock.
Section 7.3 Recording of Shares. If at any time there
exist shares of Voting Stock that are Alien Stock but that are not
registered in the Foreign Stock Record, the Beneficial Owner
thereof may request, in writing, the Corporation to register
ownership of such shares on the Foreign Stock Record and the
Corporation shall comply with such request, subject to the
limitation set forth in Section 7.2. The order in which Alien
Stock shall be registered on the Foreign Stock Record shall be
chronological, based on the date the Corporation received a written
request to so register such shares of Alien Stock; provided, that
for so long as any transferee of Air Partners is an Alien, shares
of Voting Stock held by such transferee which were originally
acquired by Air Partners pursuant to the Investment Agreement,
dated as of November 9, 1992, as amended, among the Corporation,
Air Canada and Air Partners (the "Investment Agreement"), or upon
conversion or exchange of such securities, or as a dividend or
distribution in respect of such securities (collectively "AP
Original Equity Securities") shall be registered on the Foreign
Ownership Record prior to, and to the exclusion of, any other
shares of Alien Stock whether or not any such other shares of Alien
Stock are registered on the Foreign Stock Record at the time that
any such transferee of Air Partners requests that shares of AP
Original Equity Securities be so registered. If at any time the
Corporation shall find that the combined voting power of Voting
Stock then registered in the Foreign Stock Record exceeds the
Maximum Percentage, there shall be removed from the Foreign Stock
Record the registration of such number of shares so registered as
is sufficient to reduce the combined voting power of the shares so
registered to an amount not in excess of the Maximum Percentage.
The order in which such shares shall be removed shall be reverse
chronological order based upon the date the Corporation received a
written request to so register such shares of Alien Stock;
provided, that for so long as any transferee of Air Partners is an
Alien, shares of AP Original Equity Securities owned by such
transferee shall not be removed from the Foreign Ownership Record
(regardless of the date on which such shares were registered
thereon) until all other outstanding shares of Alien Stock have
been so removed.
ARTICLE VIII
General Provisions
Section 8.1 Fiscal Year. The fiscal year of the
Corporation shall begin the first day of January and end on the
last day of December of each year.
Section 8.2 Dividends. Dividends upon the capital stock
may be declared by the Board of Directors at any regular or special
meeting and may be paid in cash or in property or in shares of the
capital stock. Before paying any dividend or making any
distribution of profits, the Directors may set apart out of any
funds of the Corporation available for dividends a reserve or
reserves for any proper purpose and may alter or abolish any such
reserve or reserves.
Section 8.3 Checks, Notes, Drafts, Etc. Checks, notes,
drafts, acceptances, bills of exchange and other orders or
obligations for the payment of money shall be signed by such
officer or officers or person or persons as the Board of Directors
or a duly authorized committee thereof, the Chief Executive Officer
or the Treasurer may from time to time designate.
Section 8.4 Corporate Seal. The seal of the Corporation
shall be circular in form and shall bear, in addition to any other
emblem or device approved by the Board of Directors, the name of
the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Delaware." The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 8.5 Waiver of Notice. Whenever notice is required
to be given by statute, or under any provision of the Restated
Certificate of Incorporation or these By-Laws, a written waiver
thereof, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to
notice. In the case of a stockholder, such waiver of notice may be
signed by such stockholder's attorney or proxy duly appointed in
writing. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the stockholders, Directors or members of a committee of
Directors need be specified in any written waiver of notice.
ARTICLE IX
Restated Certificate of Incorporation to Govern
Section 9.1 Restated Certificate of Incorporation to
Govern. Notwithstanding anything to the contrary herein, if any
provision contained herein is inconsistent with or conflicts with
a provision of the Restated Certificate of Incorporation, such
provision herein shall be superseded by the inconsistent provision
in the Restated Certificate of Incorporation, to the extent
necessary to give effect to such provision in the Restated
Certificate of Incorporation.
EXHIBIT 10.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Gordon M. Bethune ("Executive").
WITNESSETH:
WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996 (the "Existing Agreement"); and
WHEREAS, the Human Resources Committee of the Board of
Directors of the Company, on September 30, 1996, authorized the
execution and delivery on behalf of the Company of this Amendment;
and
WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Executive agree as follows:
1. Paragraph 4.7(iv) of the Existing Agreement is hereby amended
to read in its entirety as follows:
"(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 hereunder and (2) a
deemed annual bonus which shall be equal to the Bonus
Percentage of the amount described in clause (1) of this
paragraph 4.7(iv). The "Bonus Percentage" shall be a
percentage equal to the annual percentage of base salary
(i.e., 0% to 125%) paid or payable to a participant under the
Company's Executive Bonus Program (and its predecessor or any
successor plan or program) with respect to the most recent
fiscal year ended prior to Executive's termination of
employment; provided that, with respect to fiscal year 1996
only, no amount attributable to the 25% cash bonus paid
January 2, 1996 and approved by the Human Resources Committee
of the Board of Directors of the Company at its meeting on
November 2, 1995 shall be included in the Bonus Percentage."
2. The Existing Agreement, as amended by this Amendment, is
hereby ratified and confirmed and shall continue in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 30th day of September, 1996.
CONTINENTAL AIRLINES, INC.
By: _________________________
Name:
Title:
EXECUTIVE
_____________________________
Gordon M. Bethune
EXHIBIT 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and Gregory D. Brenneman ("Executive").
WITNESSETH:
WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996 (the "Existing Agreement"); and
WHEREAS, the Human Resources Committee of the Board of
Directors of the Company, on September 30, 1996, authorized the
execution and delivery on behalf of the Company of this Amendment;
and
WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Executive agree as follows:
1. The first sentence of Paragraph 1.2 of the Existing Agreement
is hereby amended to read in its entirety as follows:
"From and after September 30, 1996, Company shall employ
Executive in the position of President and Chief Operating
Officer of Company, or in such other position or positions as
the parties may mutually agree."
2. A new sentence is hereby added as the last sentence of
Paragraph 1.3 of the Existing Agreement as follows:
"Company shall, during the term of this Agreement, disclose or
entrust trade secrets or confidential information to
Executive, shall provide Executive the opportunity to develop
business good will, or shall disclose or entrust business
opportunities to Executive."
3. Paragraph 4.7(iv) of the Existing Agreement is hereby amended
to read in its entirety as follows:
"(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 hereunder and (2) a
deemed annual bonus which shall be equal to the Bonus
Percentage of the amount described in clause (1) of this
paragraph 4.7(iv). The "Bonus Percentage" shall be a
percentage equal to the annual percentage of base salary
(i.e., 0% to 125%) paid or payable to a participant under the
Company's Executive Bonus Program (and its predecessor or any
successor plan or program) with respect to the most recent
fiscal year ended prior to Executive's termination of
employment; provided that, with respect to fiscal year 1996
only, no amount attributable to the 25% cash bonus paid
January 2, 1996 and approved by the Human Resources Committee
of the Board of Directors of the Company at its meeting on
November 2, 1995 shall be included in the Bonus Percentage."
4. A new Paragraph 4.8 is hereby added to the Existing Agreement
to read in its entirety as follows:
"4.8 Covenant Not to Compete. As part of the consideration
for the compensation and benefits to be paid to Executive
hereunder, in keeping with Executive's duties as a fiduciary,
and to protect the trade secrets and confidential information
of Company that will be disclosed to Executive, the business
goodwill of Company that will be developed in Executive, or
the business opportunities that will be disclosed or entrusted
to Executive by Company, Company and Executive agree to the
non-competition provisions of this paragraph 4.8. Executive
agrees that during the period of Executive's non-competition
obligations hereunder, Executive will not, directly or
indirectly for Executive or others, in any State, territory or
protectorate of the United States in which Company is
qualified to do business or in any foreign country in which
Company has an office, station or branch as of the date of
termination of Executive's employment with the Company, engage
in an executive capacity in any business competitive with the
business conducted by Company at the date of such termination.
These non-competition obligations shall extend through
June 6, 1999. These non-competition obligations shall
terminate and be inapplicable, however, if Executive's
employment with the Company is terminated (A) by Company
pursuant to paragraph 2.2(v), (B) by Executive pursuant to
paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi), or (C) 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 Board of Directors on April 19, 1996 and in
effect on such date)."
5. The Existing Agreement, as amended by this Amendment, is
hereby ratified and confirmed and shall continue in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 30th day of September, 1996.
CONTINENTAL AIRLINES, INC.
By: _________________________
Name:
Title:
EXECUTIVE
_____________________________
Gregory D. Brenneman
EXHIBIT 10.3
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") is
made by and between Continental Airlines, Inc., a Delaware
corporation ("Company"), and __________________ ("Executive").
WITNESSETH:
WHEREAS, Company and Executive are parties to that certain
Amended and Restated Employment Agreement dated as of November 15,
1995, as amended by Amendment to Employment Agreement dated as of
April 19, 1996 (the "Existing Agreement"); and
WHEREAS, the Human Resources Committee of the Board of
Directors of the Company, on September 30, 1996, authorized the
execution and delivery on behalf of the Company of this Amendment;
and
WHEREAS, Company and Executive desire to amend the Existing
Agreement as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
promises, covenants and obligations contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Executive agree as follows:
1. Paragraph 4.7(i) of the Existing Agreement is hereby amended
to read in its entirety as follows:
"(i) "Annualized Compensation" shall mean an amount equal to
the sum of (1) Executive's annual base salary pursuant to
paragrpah 3.1 in effect immediately prior to Executive's
termination of employment hereunder and (2) a deemed annual
bonus which shall be equal to the Bonus Percentage of the
amount described in clause (1) of this paragraph 4.7(i). The
"Bonus Percentage" shall be a percentage equal to the annual
percentage of base salary (i.e., 0% to 125%) paid or payable
to a participant under the Company's Executive Bonus Program
(and its predecessor or any successor plan or program) with
respect to the most recent fiscal year ended prior to
Executive's termination of employment; provided that, with
respect to fiscal year 1996 only, no amount attributable to
the 25% cash bonus paid January 2, 1996 and approved by the
Human Resources Committee of the Board of Directors of the
Company at its meeting on November 2, 1995 shall be included
in the Bonus Percentage."
2. The Existing Agreement, as amended by this Amendment, is
hereby ratified and confirmed and shall continue in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the 30th day of September, 1996.
CONTINENTAL AIRLINES, INC.
By: _________________________
Name:
Title:
EXECUTIVE
_____________________________
EXHIBIT 10.4
THIRD AMENDMENT TO
CONTINENTAL AIRLINES, INC.
1994 INCENTIVE EQUITY PLAN
The Board of Directors of Continental Airlines, Inc., at a meeting
held on September 30, 1996, adopted the following resolution
amending the Continental Airlines, Inc. 1994 Incentive Equity Plan,
as amended:
NOW THEREFORE, BE IT RESOLVED that, pursuant to the
authority granted to this Board under Paragraph 15 of the
Company's 1994 Incentive Equity Plan, as amended (the "Plan"),
the first clause of Paragraph 5 of the Plan, and clause (a) of
Paragraph 5 of the Plan, are hereby amended to read in their
entirety as follows:
"5. Outside Director Stock Options. Notwithstanding any
other provision of the Plan, (A) each Outside Director
shall automatically receive on the day of each annual
stockholders meeting (and, if such director is first
elected to the Board after September 1, 1996 other than
at an annual stockholders meeting, on the later of (i)
the date of such director's first election to the Board
or (ii) September 30, 1996) a grant of options to
purchase 5,000 shares of Common Stock, and (B) each
Outside Director who was elected as a director of the
Company on June 26, 1996 shall automatically receive, on
September 30, 1996 (which shall be the date of grant
thereof), a grant of options to purchase 2,000 shares of
Common Stock, in each case in accordance with the
following provisions:
(a) The Committee and Board shall have no discretion
with respect to Outside Director Stock Options. Each
grant will be made with an Option Price equal to 100% of
the Market Value per Share on the date of grant thereof."
Exhibit 11.1
Page 1 of 6
EXHIBIT 99.1
Risk Factors Relating to the Company
Continental's History of Operating Losses
Although Continental recorded net income of $224 million in 1995
and $272 million in the nine months ended September 30, 1996, it
had experienced significant operating losses in the previous eight
years. In the long term, Continental's viability depends on its
ability to sustain profitable results of operations.
Leverage and Liquidity
Continental has successfully negotiated a variety of agreements to
increase its liquidity during 1995 and 1996. Nevertheless,
Continental remains more leveraged and has significantly less
liquidity than certain of its competitors, several of whom have
available lines of credit and/or significant unencumbered assets.
Accordingly, Continental may be less able than certain of its
competitors to withstand a prolonged recession in the airline
industry.
As of September 30, 1996, Continental and its consolidated
subsidiaries had approximately $1.7 billion (including current
maturities) of long-term indebtedness and capital lease obligations
and had approximately $870 million of minority interest,
Continental-obligated mandatorily redeemable preferred securities
of subsidiary trust, redeemable warrants, redeemable preferred
stock and common stockholders' equity. Common stockholders' equity
reflects the adjustment of the Company's balance sheet and the
recording of assets and liabilities at fair market value as of
April 27, 1993 in accordance with fresh start reporting.
During the first and second quarters of 1995, in connection with
negotiations with various lenders and lessors, Continental ceased
or reduced contractually required payments under various
agreements, which produced a significant number of events of
default under debt, capital lease and operating lease agreements.
Through agreements reached with the various lenders and lessors,
Continental has cured all of these events of default. The last
such agreement was put in place during the fourth quarter of 1995.
As of September 30, 1996, Continental had approximately $865
million of cash and cash equivalents, including restricted cash and
cash equivalents of $70 million. Continental does not have general
lines of credit and has significant encumbered assets.
Continental had firm commitments with The Boeing Company ("Boeing")
to take delivery of 43 new jet aircraft during the years 1997
through 2002. During the third quarter of 1996, Continental
amended the terms of its commitments with Boeing to take delivery
of a total of 61 jet aircraft during the years 1997 through 2003
with options for an additional 23 aircraft. These amendments
changed the aircraft mix and timing of delivery of aircraft, in
order to more closely match Continental's anticipated future
aircraft needs. In addition, in October 1996, Continental placed
an order for 60 firm 737-500 and 737-600 aircraft that will replace
older, less efficient Stage 2 aircraft between August 1997 and
December 1999. The estimated aggregate cost of the Company's firm
commitment Boeing aircraft is in excess of $4 billion. The Company
has commitments of approximately $1.4 billion of backstop financing
for its Boeing aircraft orders. Continental currently plans to
finance the indebtedness on its new aircraft using enhanced
equipment trust certificates or similar financing, subject to
availability and market conditions. However, further financing
will be needed to satisfy the Company's capital commitments for new
Boeing aircraft. There can be no assurance that sufficient
financing will be available for all aircraft and other capital
expenditures not covered by firm financing commitments. The
Company has also entered into agreements with several outside
parties to lease four DC-10-30 aircraft and to purchase three DC-
10-30 aircraft and two MD-82 aircraft. These nine aircraft are
expected to be delivered during the period from October 1996
through mid-year 1997, and the Company expects to finance the
aircraft to be purchased from available cash or from third party
sources.
In addition, in March 1996, Continental's wholly owned subsidiary,
Continental Express, Inc. ("Express"), entered into an agreement to
acquire eight new ATR aircraft. As of September 1996, five of
these aircraft had been delivered. The aircraft are being
accounted for as operating leases. In conjunction with the
acquisition, the Company is returning eight older ATR aircraft
accounted for as capital leases. As of September 1996, four of
these aircraft had been returned. Also, in September 1996, Express
announced an order for 25 firm EMB-145 50-seat regional jets with
options for an additional 175 aircraft. Express plans to account
for these aircraft as operating leases. Neither Express nor
Continental will have any obligation to take aircraft which are not
financed by a third party and leased to Express. Continental will
guarantee Express' obligations under the operating leases. Express
will take delivery of the 25 firm aircraft during the period from
December 1996 through the third quarter of 1998.
For 1996, Continental expects to incur cash expenditures under
operating leases relating to aircraft of approximately $568
million, compared with $521 million for 1995, and approximately
$229 million relating to facilities and other rentals, the same
amount as for 1995. In addition, Continental has capital
requirements relating to compliance with regulations that are
discussed below. See "Regulatory Matters."
In July 1996, Continental's 91%-owned subsidiary, Continental
Micronesia, Inc. ("CMI"), consummated a $320 million secured term
loan financing with a group of banks and other financial
institutions. The loan was made in two tranches -- a $180 million
five-year amortizing term loan with a floating interest rate of
LIBOR plus 175 basis points and a $140 million seven-year
amortization extended loan with a floating interest rate of LIBOR
plus 200 basis points. The loan is secured by the stock of CMI and
substantially all its unencumbered assets, consisting primarily of
CMI's route authorities, and is guaranteed by Continental and Air
Micronesia, Inc. ("AMI") (CMI's parent company).
CMI used the net proceeds of the financing to prepay $160 million
in principal amount of indebtedness to an affiliate of General
Electric Company (General Electric Company and affiliates,
collectively "GE") and to pay transaction costs, and Continental
used the $136 million in proceeds received by it as an indirect
dividend from CMI, together with approximately $28 million in cash
on hand, to prepay approximately $164 million in principal amount
of indebtedness to GE. The bank financing does not contain any
restrictive covenants at the Continental parent level, and none of
the assets of Continental Airlines, Inc. (other than its stock in
AMI) is pledged in connection with the new financing.
The bank financing contains significant financial covenants
relating to CMI, including maintenance of a minimum fixed charge
coverage ratio, a minimum consolidated net worth and minimum
liquidity, and covenants restricting CMI's leverage, its incurrence
of certain indebtedness and its pledge of assets. The financial
covenants also limit the ability of CMI to pay dividends to
Continental.
In July 1996, the Company announced its plan to expand its gates
and related facilities in Terminal B, as well as planned
improvements at Terminal C, at Continental's Houston
Intercontinental Airport hub. The expansion is expected to cost
approximately $115 million, which the Company expects will be
funded principally by the issuance of tax-exempt debt by the
applicable municipal authority. In connection therewith, the
Company expects to enter into long-term leases (or amendments to
existing leases) with the applicable municipal authority containing
rental payments sufficient to service the related tax-exempt debt.
Aircraft Fuel
Since fuel costs constitute a significant portion of Continental's
operating costs (approximately 12.5% for the year ended December
31, 1995 and 12.8% for the nine months ended September 30, 1996),
significant changes in fuel costs would materially affect the
Company's operating results. Jet fuel prices have recently
increased. Fuel prices continue to be susceptible to international
events, and the Company cannot predict near or longer-term fuel
prices. The Company has entered into petroleum option contracts to
provide some short-term protection (currently approximately six
months) against a sharp increase in jet fuel prices. In the event
of a fuel supply shortage resulting from a disruption of oil
imports or otherwise, higher fuel prices or curtailment of
scheduled service could result.
Certain Tax Matters
The Company's United States federal income tax return reflects net
operating loss carryforwards ("NOLs") of $2.6 billion, subject to
audit by the Internal Revenue Service, of which $1.3 billion are
not subject to the limitations of Section 382 of the Internal
Revenue Code ("Section 382"). As a result, the Company will not
pay United States federal income taxes (other than alternative
minimum tax) until it has recorded approximately an additional $1.3
billion of taxable income following December 31, 1995. For
financial reporting purposes, Continental began accruing tax
expense on its income statement during the second quarter of 1996.
Section 382 imposes limitations on a corporation's ability to
utilize NOLs if it experiences an "ownership change." In general
terms, an ownership change may result from transactions increasing
the ownership of certain stockholders in the stock of a corporation
by more than 50 percentage points over a three-year period. The
sale of the Company's common stock in its secondary offering gave
rise to an increase in percentage ownership by certain stockholders
for this purpose. Based upon the advice of its counsel, Cleary,
Gottlieb, Steen & Hamilton, the Company believes that such
percentage increase did not give rise to an ownership change under
Section 382. However, no assurance can be given that future
transactions, whether within or outside the control of the Company,
will not cause a change in ownership, thereby substantially
limiting the potential utilization of the NOLs in a given future
year. In the event that an ownership change should occur,
utilization of Continental's NOLs would be subject to an annual
limitation under Section 382 determined by multiplying the value of
the Company's stock (including both common and preferred stock) at
the time of the ownership change by the applicable long-term tax
exempt rate (which was 5.63% for September 1996). Unused annual
limitations may be carried over to later years, and the amount of
the limitation may under certain circumstances be increased by the
built-in gains in assets held by the Company at the time of the
change that are recognized in the five-year period after the
change. Under current conditions, if an ownership change were to
occur, Continental's NOL utilization would be limited to
approximately $100 million per year.
In connection with the Company's 1993 reorganization under Chapter
11 of the U.S. bankruptcy code effective April 27, 1993 (the
"Reorganization") and the recording of assets and liabilities at
fair market value under the American Institute of Certified Public
Accountants' Statement of Position 90-7 - "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
the Company recorded a deferred tax liability at April 27, 1993,
net of the amount of the Company's estimated realizable NOLs as
required by Statement of Financial Accounting Standards No. 109 -
"Accounting for Income Taxes." Realization of a substantial
portion of the Company's NOLs will require the completion during
the five-year period following the Reorganization of transactions
resulting in recognition of built-in gains for federal income tax
purposes. The Company has consummated one such transaction, which
had the effect of realizing approximately 40% of the built-in gains
required to be realized over the five-year period, and currently
intends to consummate one or more additional transactions. If the
Company were to determine in the future that not all such
transactions will be completed, an adjustment to the net deferred
tax liability of up to $116 million would be charged to income in
the period such determination was made.
CMI
CMI's operating profit margins have consistently been greater than
the Company's margins overall. In addition to its non-stop service
between Honolulu and Tokyo, CMI's operations focus on the
neighboring islands of Guam and Saipan, resort destinations that
cater primarily to Japanese travelers. Because the majority of
CMI's traffic originates in Japan, its results of operations are
substantially affected by the Japanese economy and changes in the
value of the yen as compared to the dollar. Appreciation of the
yen against the dollar during 1993 and 1994 increased CMI's
profitability and a decline of the yen against the dollar may be
expected to decrease it. The yen has declined against the dollar
during 1996 as compared to 1995. To reduce the potential negative
impact on CMI's dollar earnings, CMI, from time to time, purchases
average rate options as a hedge against a portion of its expected
net yen cash flow position. Any significant and sustained decrease
in traffic or yields to and from Japan could materially adversely
affect Continental's consolidated profitability.
Principal Stockholders
As of September 30, 1996, Air Canada held approximately 10.0% of
the common equity interests and 4.0% of the general voting power of
the Company, and Air Partners, L.P. ("Air Partners") held
approximately 9.8% of the common equity interests and 39.3% of the
general voting power of the Company. In addition, assuming
exercise of all of the warrants held by Air Partners, approximately
23.2% of the common equity interests and 52.0% of the general
voting power would be held by Air Partners. Air Canada has
announced its intention to divest its interest in the Company
during December 1996 or early 1997, subject to market conditions.
At any time after January 1, 1997, shares of Class A common stock
may be freely converted into an equal number of shares of Class B
common stock. Such conversion would effectively increase the
relative voting power of those Class A stockholders who do not
convert.
Various provisions in the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation")
and Bylaws (the "Bylaws") currently provide Air Partners with the
right to elect one-third of the directors in certain circumstances;
these provisions could have the effect of delaying, deferring or
preventing a change in control of the Company.
Risk Factors Relating to the Airline Industry
Industry Conditions and Competition
The airline industry is highly competitive and susceptible to price
discounting. The Company has in the past both responded to
discounting actions taken by other carriers and initiated
significant discounting actions itself. Continental's competitors
include carriers with substantially greater financial resources, as
well as smaller carriers with lower cost structures. Airline
profit levels are highly sensitive to, and during recent years have
been severely impacted by, changes in fuel costs, fare levels (or
"average yield") and passenger demand. Passenger demand and yields
have been adversely affected by, among other things, the general
state of the economy, international events and actions taken by
carriers with respect to fares. From 1990 to 1993, these factors
contributed to the domestic airline industry's incurring
unprecedented losses. Although fare levels have increased
recently, significant industry-wide discounts could be
reimplemented at any time, and the introduction of broadly
available, deeply discounted fares by a major United States airline
would likely result in lower yields for the entire industry and
could have a material adverse effect on the Company's operating
results.
The airline industry has consolidated in past years as a result of
mergers and liquidations and may further consolidate in the future.
Among other effects, such consolidation has allowed certain of
Continental's major competitors to expand (in particular) their
international operations and increase their market strength.
Furthermore, the emergence in recent years of several new carriers,
typically with low cost structures, has further increased the
competitive pressures on the major United States airlines. In many
cases, the new entrants have initiated or triggered price
discounting. Aircraft, skilled labor and gates at most airports
continue to be readily available to start-up carriers. Although
management believes that Continental is better able than some of
its major competitors to compete with fares offered by start-up
carriers because of its lower cost structure, competition with new
carriers or other low cost competitors on Continental's routes
could negatively impact Continental's operating results.
Regulatory Matters
In the last several years, the United States Federal Aviation
Administration (the "FAA") has issued a number of maintenance
directives and other regulations relating to, among other things,
retirement of older aircraft, collision avoidance systems, airborne
windshear avoidance systems, noise abatement, commuter aircraft
safety and increased inspections and maintenance procedures to be
conducted on older aircraft. The Company expects to continue
incurring expenses for the purpose of complying with the FAA's
noise and aging aircraft regulations. In addition, several
airports have recently sought to increase substantially the rates
charged to airlines, and the ability of airlines to contest such
increases has been restricted by federal legislation, U.S.
Department of Transportation regulations and judicial decisions.
Management believes that the Company benefitted significantly from
the expiration of the aviation trust fund tax (the "ticket tax") on
December 31, 1995, although the amount of any such benefit directly
resulting from the expiration of the ticket tax cannot precisely be
determined. The ticket tax was reimposed on August 27, 1996, and
is again scheduled to expire on December 31, 1996. Management
believes that the reimposition of the ticket tax has a negative
impact on the Company, although the amount of such negative impact
directly resulting from the reimposition of the ticket tax cannot
be precisely determined.
Additional laws and regulations have been proposed from time to
time that could significantly increase the cost of airline
operations by imposing additional requirements or restrictions on
operations. Laws and regulations have also been considered that
would prohibit or restrict the ownership and/or transfer of airline
routes or takeoff and landing slots. Also, the availability of
international routes to United States carriers is regulated by
treaties and related agreements between the United States and
foreign governments that are amendable. Continental cannot predict
what laws and regulations may be adopted or their impact, but there
can be no assurance that laws or regulations currently proposed or
enacted in the future will not adversely affect the Company.