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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Continental Airlines, Inc.
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(Name of Registrant as Specified In Its Charter)
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[CONTINENTAL AIRLINES LOGO]
April 3, 2001
To Our Stockholders:
On behalf of the Board of Directors, we are pleased to invite you to attend
the Continental Airlines, Inc. 2001 Annual Meeting of Stockholders. As indicated
in the attached notice, the meeting will be held at The Hyatt Regency, 1200
Louisiana Street, Houston, Texas on Tuesday, May 15, 2001, at 10:00 a.m., local
time. At the meeting, in addition to acting on the matters described in the
attached proxy statement, there will be an opportunity to discuss other matters
of interest to you as a stockholder.
Please authorize your proxy or direct your vote by internet or telephone as
described in the enclosed proxy statement, even if you plan to attend the
meeting in person. Alternatively, you can date, sign and mail the enclosed proxy
card in the envelope provided. We look forward to seeing you in Houston.
Cordially,
/s/ GORDON BETHUNE
Gordon Bethune
Chairman of the Board and Chief
Executive Officer
/s/ GREG BRENNMAN
Greg Brenneman
President and Chief Operating
Officer
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CONTINENTAL AIRLINES, INC.
1600 SMITH STREET, DEPT. HQSEO
HOUSTON, TEXAS 77002
---------------------
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2001
---------------------
The 2001 annual meeting of stockholders of Continental Airlines, Inc. will
be held at The Hyatt Regency, 1200 Louisiana Street, Houston, Texas on Tuesday,
May 15, 2001, at 10:00 a.m., local time, for the following purposes:
1. To elect thirteen directors to serve until the next annual meeting
of stockholders;
2. To consider and act upon a proposal to amend the company's 1997
Employee Stock Purchase Plan;
3. To consider and act upon a proposal to ratify the appointment of
Ernst & Young LLP as independent auditors of the company and its
subsidiaries for 2001; and
4. To consider and act upon any other matters that may properly come
before the annual meeting or any adjournment or adjournments thereof.
The holders of record of the company's common stock at the close of
business on March 23, 2001 are entitled to notice of and to vote at the meeting.
A list of the stockholders entitled to vote at the meeting will be available for
examination, during ordinary business hours, for ten days before the meeting at
our principal place of business, 1600 Smith Street, Houston, Texas.
/s/ Jeffery A. Smisek
Jeffery A. Smisek
Secretary
Houston, Texas
April 3, 2001
PLEASE AUTHORIZE YOUR PROXY OR DIRECT YOUR VOTE BY INTERNET OR TELEPHONE AS
DESCRIBED IN THE ENCLOSED PROXY STATEMENT, EVEN IF YOU PLAN TO ATTEND THE
MEETING IN PERSON. ALTERNATIVELY, YOU MAY DATE, SIGN AND MAIL THE ENCLOSED PROXY
AND RETURN IT PROMPTLY BY MAIL IN THE ENVELOPE PROVIDED. IF YOU MAIL THE PROXY
CARD, NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU DO ATTEND
THE MEETING IN PERSON AND WANT TO WITHDRAW YOUR PROXY, YOU MAY DO SO AS
DESCRIBED IN THE ENCLOSED PROXY STATEMENT AND VOTE IN PERSON ON ALL MATTERS
PROPERLY BROUGHT BEFORE THE MEETING.
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CONTINENTAL AIRLINES, INC.
1600 SMITH STREET, DEPT. HQSEO
HOUSTON, TEXAS 77002
---------------------
PROXY STATEMENT
2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2001
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THE MEETING
PURPOSE, PLACE, DATE AND TIME
We are providing this proxy statement to you in connection with the
solicitation on behalf of Continental's board of directors of proxies to be
voted at the company's 2001 annual stockholders meeting or any postponement or
adjournment of that meeting. The meeting will be held at The Hyatt Regency, 1200
Louisiana Street, Houston, Texas on Tuesday, May 15, 2001, at 10:00 a.m., local
time, for the purposes set forth in the accompanying Notice of 2001 Annual
Meeting of Stockholders. This proxy statement and the accompanying proxy, which
are accompanied or preceded by a copy of Continental's 2000 Annual Report, are
being first mailed or otherwise delivered to stockholders on or about April 3,
2001.
RECORD DATE; STOCKHOLDERS ENTITLED TO VOTE; QUORUM; VOTE REQUIRED
Stockholders of record at the close of business on March 23, 2001, the
record date, are entitled to notice of and to vote at the meeting and at any
postponement or adjournment of the meeting. At the close of business on the
record date, Continental had outstanding 53,616,893 shares of Class B common
stock. Subject to certain limitations on voting by non-U.S. citizens, as
described below, each share of Class B common stock is entitled to one vote per
share.
Under U.S. law, no more than 25% of the voting stock of a U.S. air carrier
such as Continental may be owned or controlled, directly or indirectly, by
persons who are not U.S. citizens and Continental itself must be a U.S. citizen.
For these purposes, a "U.S. citizen" means:
- an individual who is a citizen of the United States;
- a partnership each of whose partners is an individual who is a citizen of
the United States; or
- a corporation or association organized under the laws of the United
States or a state, the District of Columbia, or a territory or possession
of the United States, of which the president and at least two-thirds of
the board of directors and other managing officers are citizens of the
United States, and in which at least 75% of the voting interest is owned
or controlled by persons who are citizens of the United States.
In addition, the U.S. Department of Transportation has broad authority to
determine on a case-by-case basis whether an air carrier is effectively owned
and controlled by citizens of the United States, and has indicated that the
ownership of less than 50% of an air carrier's total equity securities by
non-citizens of the United States, taken alone, is not indicative of foreign
control of the air carrier.
In order to comply with these rules, our certificate of incorporation
provides that persons who are not U.S. citizens may not vote shares of our
capital stock unless the shares are registered on a separate stock record
maintained by us. We will not register shares on this record if the amount
registered would cause us to violate the foreign ownership rules or adversely
affect our operating certificates or authorities. Registration on this record is
made in chronological order based on the date we receive a written request for
registration. An
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affiliate of AXA Financial, Inc. has requested that all shares beneficially
owned by AXA Financial, Inc. and its affiliates be included on our foreign stock
record. See "Voting Rights and Principal Stockholders." Because of the number of
shares currently held by AXA Financial, Inc. and its affiliates, the
registration on our foreign stock record, and thus the voting, of shares owned
by any other Continental stockholders that are not U.S. citizens is currently
precluded.
A quorum of stockholders is necessary for a valid meeting. The required
quorum for the transaction of business at the annual meeting is a majority of
the total outstanding shares of stock entitled to vote at the meeting, either
present in person or represented by proxy. Abstentions will be included in
determining the number of shares present at the meeting for the purpose of
determining the presence of a quorum, as would broker non-votes. A broker
non-vote occurs under stock exchange rules when a broker is not permitted to
vote on a matter without instructions from the beneficial owner of the shares
and no instruction is given. However, the nature of the proposals to be
considered at the meeting allows brokers discretionary voting in the absence of
timely instructions from beneficial owners, so there should not be any broker
non-votes in connection with the meeting.
Abstentions are treated as votes cast and thus will have the same effect as
a vote against a proposal. Directors are elected by a plurality of the votes
cast for directors, while the amendment of the company's 1997 Employee Stock
Purchase Plan and the ratification of the appointment of independent auditors
each requires approval by a majority of the votes cast on the applicable
proposal.
VOTING OF PROXIES
Although you may return the proxy card or voting form that accompanies this
proxy statement in the enclosed postage-paid envelope, we ask that you vote
instead by internet or telephone. Internet and telephonic proxies save us money.
Please note that the telephonic voting procedures described below are not
available for shares held by non-U.S. citizens.
Shares Held by You of Record. Stockholders with shares registered in their
names with Mellon Investor Services LLC, Continental's transfer agent and
registrar, may authorize a proxy by internet at the following internet address:
http://www.proxyvoting.com/cal or telephonically by calling Mellon Investor
Services at 1-800-840-1208. Proxies submitted through Mellon Investor Services
by internet or telephone must be received by 4:00 p.m. east coast time on May
14, 2001. The giving of such proxy will not affect your right to vote in person
if you decide to attend the meeting.
Shares Held in a Bank or Brokerage Account. A number of banks and
brokerage firms participate in a program that also permits stockholders to
direct their vote by internet or telephone. This option is separate from that
offered by Mellon Investor Services and will be reflected on the voting form
from a bank or brokerage firm that accompanies this proxy statement. If your
shares are held in an account at a bank or brokerage that participates in such a
program, you may direct the vote of those shares by internet or telephone by
following the instructions on their enclosed voting form. Votes directed by
internet or telephone through such a program must be received by 11:59 p.m. east
coast time on May 14, 2001. Directing the voting of your shares will not affect
your right to vote in person if you decide to attend the meeting; however, you
must first request a legal proxy either on the internet or the voting form that
accompanies this proxy statement. Requesting a legal proxy prior to the
deadlines described above will automatically cancel any voting directions you
have previously given by internet or by telephone with respect to your shares.
The internet and telephone proxy procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their proxy instructions
and to confirm that those instructions have been properly recorded. Stockholders
authorizing proxies or directing the voting of shares by internet should
understand that there may be costs associated with electronic access, such as
usage charges from internet access providers and telephone companies, that must
be borne by the stockholder.
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REVOCATION OF PROXIES
You can revoke your proxy before it is exercised at the meeting in any of
three ways:
- by submitting written notice to our Secretary before the meeting that you
have revoked your proxy;
- by timely submitting another proxy by telephone, via the internet or by
mail that is later dated and, if by mail, that is properly signed; or
- by voting in person at the meeting.
EXPENSES OF SOLICITATION
In addition to the solicitation of proxies by mail, proxies may also be
solicited by internet, telephone, telegram, fax or in person by regular
employees and directors of Continental, none of whom will receive additional
compensation for that solicitation. In addition, we have retained Mellon
Investor Services to assist in the solicitation of proxies for a fee estimated
not to exceed $6,000 plus reasonable out-of-pocket expenses. Arrangements will
be made with brokerage houses and with other custodians, nominees and
fiduciaries to forward proxy soliciting materials to beneficial owners, and we
will reimburse them for their reasonable out-of-pocket expenses incurred in
doing so.
OTHER MATTERS TO BE ACTED ON AT THE ANNUAL MEETING
We will not act on any matters at the meeting other than those indicated on
the accompanying Notice and procedural matters related to the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS
CONTAINED IN THIS PROXY STATEMENT.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
The company has one class of common stock outstanding, called Class B
common stock, which is entitled to one vote per share, subject to the
limitations on voting by non-U.S. citizens described above. The following table
sets forth, as of March 23, 2001 (except as otherwise set forth below), certain
information with respect to persons owning beneficially (to our knowledge) more
than five percent of any class of our voting securities. The table also sets
forth the respective voting power of those persons, which may vary from the
percentage of shares held due to the restrictions on foreign voting. These
restrictions may decrease the voting power of non-U.S. citizens, effectively
increasing the voting power of U.S. citizens. Unless otherwise noted,
information in the table is based on reports that have been filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, and information furnished to us by such holders.
BENEFICIAL
OWNERSHIP OF
NAME AND ADDRESS OF CLASS B PERCENT VOTING
BENEFICIAL HOLDER COMMON STOCK OF CLASS POWER(1)
------------------- ------------ -------- --------
AXA Financial, Inc. ........................................ 20,707,085(2) 38.6% 25.0%
1290 Avenue of the Americas
New York, NY 10104
Wellington Management Company, LLP.......................... 3,618,300(3) 6.8% 8.4%
75 State Street
Boston, MA 02109
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(1) As described above under "Stockholders Entitled to Vote," voting by persons
who are not U.S. citizens is limited by statute to 25% of Continental's
voting power, and our certificate of incorporation and bylaws restrict
voting of our stock to ensure compliance with these laws. Also as described
above, an affiliate of AXA Financial, Inc. has requested that all of the
shares beneficially owned by AXA Financial, Inc. and its affiliates be
included on our foreign stock record, thus currently precluding inclusion on
that record
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(and voting) of our common stock by any of our other stockholders that are
not U.S. citizens. If an appropriate regulatory or judicial authority
determined that the voting by AXA Financial, Inc. or its affiliates of all
their shares would not violate the statutory restrictions, then the current
voting limitations would no longer be in effect with respect to those
shares, and the voting power of shares held by all of Continental's
stockholders would be proportional to their beneficial ownership of Class B
common stock.
(2) According to an amendment to Schedule 13G filed with the SEC pursuant to the
Exchange Act in March 2001, the AXA Parties may be deemed to have owned as
of February 28, 2001, for purposes of Regulation 13D-G, up to 20,707,085
shares of Class B common stock. The AXA Parties are comprised of (i) AXA, a
French company ("AXA"), (ii) AXA Conseil Vie Assurance Mutuelle, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, and AXA Courtage
Assurance Mutuelle, each a French mutual insurance company (collectively
referred to as "Mutuelles AXA"), (iii) AXA Financial, Inc., a Delaware
corporation, and (iv) a subsidiary of AXA Financial, Inc., Alliance Capital
Management L.P. AXA and Mutuelles AXA have disclaimed beneficial ownership
of the securities held by AXA Financial, Inc. and its subsidiaries for
purposes of Regulation 13D-G, and AXA Financial, Inc. has not admitted that
the shares beneficially owned by its affiliates are owned by non-U.S.
citizens for purposes of U.S. federal aviation statutes or Continental's
certificate of incorporation or bylaws. As to the amounts shown in the
table, the AXA Parties may be deemed to have the following power over the
shares: sole voting power (5,727,757), sole dispositive power (20,703,840),
shared voting power (8,720,695) and shared dispositive power (3,245).
According to the 13G amendment, only Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, NY 10105, had an interest in the reported
securities representing greater than 5% of the Class B common stock.
(3) According to a Schedule 13G filed with the SEC pursuant to the Exchange Act
in February 2001, Wellington Management Company, LLP as investment adviser
for various clients, may be deemed to have owned as of December 31, 2000 for
purposes of Regulation 13D-G 3,618,300 shares of Class B common stock.
Wellington reported that it had shared power to vote 295,700 of those shares
and shared power to dispose of all of those shares. It also reported that
none of its clients, other than Vanguard Windsor Funds, was known by it to
own more than five percent of the Class B common stock. Representatives of
those funds have advised us that the Vanguard Windsor Funds-Windsor Fund,
P.O. Box 2600, V37, Valley Forge, PA 19482, may be deemed to have owned as
of February 28, 2001 for purposes of Regulation 13D-G 3,457,800 shares of
Class B common stock. The fund may be deemed to have sole voting power and
shared dispositive power over all of those shares.
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BENEFICIAL OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of March 23, 2001, the number of shares of
Class B common stock beneficially owned by each of our current directors, our
executive officers named below in the Summary Compensation Table, and all
executive officers and directors as a group.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNERS OWNERSHIP(1) OF CLASS
------------------------- ------------ --------
Thomas J. Barrack, Jr. ..................................... 31,000(2) *
Gordon M. Bethune........................................... 393,777(3) *
David Bonderman............................................. 1,959,531(4) 3.7%
Gregory D. Brenneman........................................ 337,816(5) *
Kirbyjon H. Caldwell........................................ 10,288(6) *
Patrick Foley............................................... 31,000(7) *
Lawrence W. Kellner......................................... 173,081(8) *
Douglas H. McCorkindale..................................... 31,000(7) *
C.D. McLean................................................. 147,625(9) *
George G. C. Parker......................................... 26,400(10) *
Richard W. Pogue............................................ 20,240(11) *
William S. Price III........................................ 29,929(10) *
Jeffery A. Smisek........................................... 152,245(12) *
Donald L. Sturm............................................. 208,219(13) *
Karen Hastie Williams....................................... 25,000(7) *
Charles A. Yamarone......................................... 36,000(14) *
All executive officers and directors as a group............. 4,347,356(15) 7.8%
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* Less than 1%
(1) The persons listed have the sole power to vote and dispose of the shares
beneficially owned by them except as otherwise indicated.
(2) Includes 28,000 shares subject to vested director stock options and 3,000
shares held in trust for the benefit of Mr. Barrack's children, as to which
shares Mr. Barrack disclaims beneficial ownership.
(3) Includes 362,500 shares subject to vested options, or vesting within 60
days after March 23, 2001, and 30,000 restricted shares scheduled to vest
in 33 1/3% increments on each of July 25, 2001, 2002 and 2003.
(4) Includes 31,000 shares subject to vested director stock options, 762,645
shares held by 1998 CAI Partners, L.P. ("CAIP"), 704,098 shares held by
Bonderman Family Limited Partnership ("BFLP") and 281,305 shares held by
1992 Air, Inc. 1992 Air GP is the general partner of CAIP and thus could be
deemed to be the beneficial owner of the shares held by CAIP. 1992 Air,
Inc. is the majority general partner of 1992 Air GP and thus could be
deemed to be the beneficial owner of the shares attributable to 1992 Air
GP. David Bonderman is the controlling shareholder of 1992 Air, Inc. and
the sole general partner of BFLP and thus could be deemed to be the
beneficial owner of the shares owned by and attributable to 1992 Air, Inc.
and the shares owned by BFLP.
(5) Includes 305,000 shares subject to vested options, or vesting within 60
days after March 23, 2001, and 30,000 restricted shares scheduled to vest
in 33 1/3% increments on each of July 25, 2001, 2002 and 2003.
(6) Includes 10,000 shares subject to vested director stock options.
(7) Represents shares subject to vested director stock options.
(8) Includes 140,000 shares subject to vested options, or vesting within 60
days after March 23, 2001, 30,000 restricted shares scheduled to vest in
33 1/3% increments on each of July 25, 2001, 2002 and 2003, and 200 shares
owned by a relative of Mr. Kellner, as to which shares Mr. Kellner shares
dispositive power but disclaims beneficial ownership.
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(9) Includes 115,000 shares subject to vested options, or vesting within 60
days after March 23, 2001, and 30,000 restricted shares scheduled to vest
in 33 1/3% increments on each of July 25, 2001, 2002 and 2003.
(10) Includes 25,000 shares subject to vested director stock options.
(11) Includes 15,000 shares subject to vested director stock options.
(12) Includes 115,000 shares subject to vested options, or vesting within 60
days after March 23, 2001, and 30,000 restricted shares scheduled to vest
in 33 1/3% increments on each of July 25, 2001, 2002 and 2003.
(13) Includes 31,000 shares subject to vested director stock options and 30,200
shares held in trust for the benefit of one of Mr. Sturm's children. Also
includes 147,019 shares representing Mr. Sturm's proportionate interest in
CAIP; Mr. Sturm is a limited partner of CAIP and may be deemed to share
voting and dispositive power with respect to these shares.
(14) Includes 28,000 shares subject to vested director stock options.
(15) Includes 2,137,725 shares subject to vested options, or vesting within 60
days after March 23, 2001, which are held by executive officers and
non-employee directors of Continental, and 150,000 restricted shares
reflected in the foregoing footnotes.
GENERAL INFORMATION
BOARD OF DIRECTORS MEETINGS
Regular meetings of our board of directors are generally held four times
per year, and special meetings are scheduled when required. The board held seven
meetings in 2000.
STANDING COMMITTEES OF THE BOARD
The Audit Committee has the authority and power to act on behalf of the
board of directors with respect to the appointment of our independent auditors
and with respect to authorizing any special audit or audit-related activities
which, in the committee's discretion, are deemed necessary to perform its
functions. The committee monitors the audit activities of Continental and its
subsidiaries to assure that they have implemented proper internal accounting
controls and reviews and discusses the company's audited financial statements
with management and the independent auditors. See "Report of the Audit
Committee" below. The committee consists of three non-employee directors and met
five times in 2000.
The Executive Committee exercises certain powers of the board of directors
between board meetings. The committee, which consists of two non-employee
directors and one officer-director of the company, held no formal meetings in
2000, but did take action by unanimous written consent.
The Finance and Strategy Committee reviews our annual budget, our short and
long-term strategic plans and our capital expenditure plans, and makes
recommendations to the board of directors regarding implementation of those
plans as the committee deems appropriate. The committee, which consists of two
officer-directors and three non-employee directors, met once in 2000.
The Human Resources Committee has the authority and power to act on behalf
of the board of directors with respect to all matters relating to the employment
of senior officers by Continental and its subsidiaries, including approval of
compensation, benefits, incentives and employment contracts. The committee
administers our stock option, employee stock purchase and profit sharing plans,
executive bonus program and other incentive programs. The committee consists of
four non-employee directors and met six times in 2000.
The Independent Directors Committee reviewed compliance by Northwest
Airlines Corporation and its affiliates with the provisions of the former
governance agreement between Northwest and Continental and other related
agreements to assure that the standstill, voting, transfer, conduct, board
composition, approval and other requirements, restrictions, terms and conditions
of those agreements were adhered to and that the benefits thereunder for
Continental and its stockholders were fully protected. The committee consisted
of eight non-employee directors and met five times in 2000. As a result of our
purchase of most of our Class A
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common stock from Northwest and an affiliate and the termination of the
governance and related agreements in January 2001, the Independent Directors
Committee will be dissolved.
We do not have a nominating committee.
During 2000, each director attended at least 75% of the sum of the total
number of meetings of the board and each committee of which he or she was a
member.
COMPENSATION OF DIRECTORS
Members of our board of directors who are not our full-time employees
receive:
- $35,000 per year;
- $2,000 (or $3,000 for the chairperson) for each board and committee
meeting physically attended;
- $1,000 for each board meeting attended by telephone;
- $500 for each committee meeting attended by telephone;
- stock options to purchase 5,000 shares of Class B common stock at the
grant date fair market value following each annual stockholders meeting
and upon election to the board if they are first elected to the board
other than at an annual stockholders meeting; and
- lifetime flight benefits, comprised of space-available personal and
family flight passes, a travel card permitting positive space travel by
the director, the director's family and certain other individuals (which
is taxable to the director, subject to the reimbursement of certain of
such taxes by the company), a frequent flyer card and an airport lounge
card.
In addition, directors who conduct Continental business in their capacities as
directors on Continental's behalf at the request of the board or the Chairman of
the Board are paid (i) for telephone participation in board and committee
meetings as if they were physically present, if their conducting that business
makes it impractical for them to attend the meeting in person, and (ii) $3,000
per day spent outside the United States while conducting that business.
During 2000, the value we imputed to the use of the flight benefits shown
above, including our reimbursement of related taxes, varied by director, but did
not exceed $12,450 for any of the outside directors.
Our full-time employees who serve as directors receive reimbursement of
expenses incurred in attending meetings, in addition to flight and other
benefits provided in their employment agreements or shared generally by our
other employees.
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EXECUTIVE OFFICERS
The following table sets forth information with respect to our current
executive officers:
NAME, AGE AND POSITION TERM OF OFFICE AND BUSINESS EXPERIENCE
---------------------- --------------------------------------
GORDON M. BETHUNE, age 59....................... Chairman of the Board and Chief Executive Officer
Chairman of the Board and Chief Executive since September 1996. Director since August 1994;
Officer President and Chief Executive Officer (November
1994-September 1996); President and Chief Operating
Officer (February 1994-November 1994); various
positions with The Boeing Company commencing in
1988, including Vice President and General Manager
of the Commercial Airplane Group Renton Division,
Vice President and General Manager of the Customer
Services Division and Vice President of Airline
Logistics Support; Director of: Honeywell
International Inc.; ANC Rental Corporation.
GREGORY D. BRENNEMAN, age 39.................... President, Chief Operating Officer since September
President, Chief Operating Officer and 1996. Director since June 1995; Chief Operating
Director Officer (May 1995-September 1996); Consultant to
the company (February-April 1995); various
positions, including Vice President, with Bain &
Company, Inc. (consulting firm) commencing in 1987;
Director of: J. Crew Group, Inc.; The Home Depot,
Inc.
LAWRENCE W. KELLNER, age 42..................... Executive Vice President and Chief Financial
Executive Vice President and Chief Financial Officer since November 1996. Senior Vice President
Officer and Chief Financial Officer (June 1995-November
1996); Director of Belden & Blake Corporation.
C.D. McLEAN, age 59............................. Executive Vice President -- Operations since
Executive Vice President -- Operations November 1996. Senior Vice President -- Operations
(April 1994-November 1996).
JEFFERY A. SMISEK, age 46....................... Executive Vice President, General Counsel and
Executive Vice President, General Counsel and Secretary since November 1996. Senior Vice
Secretary President, General Counsel and Secretary (April
1995-November 1996); Director of Varco
International, Inc.
MICHAEL H. CAMPBELL, age 52..................... Senior Vice President -- Human Resources and Labor
Senior Vice President -- Human Resources and Relations since January 1997. Partner, Ford &
Labor Relations Harrison LLP (law firm) (1978-1997).
JAMES COMPTON, age 45........................... Senior Vice President -- Pricing and Revenue
Senior Vice President -- Pricing and Revenue Management since February 2001. Vice
Management President -- Pricing and Revenue Management (August
1999-February 2001); Vice President -- Pricing
(January 1998-August 1999); Staff Vice President
-- Pricing (January 1996-January 1998).
MARK A. ERWIN, age 45........................... Senior Vice President -- Airport Services since
Senior Vice President -- Airport Services April 1995.
J. DAVID GRIZZLE, age 46........................ Senior Vice President -- Corporate Development
Senior Vice President -- Corporate Development since November 1996. Vice President -- Alliance
Development (April 1995-November 1996).
GLEN W. HAUENSTEIN, age 40...................... Senior Vice President -- Scheduling since February
Senior Vice President -- Scheduling 2001. Vice President Scheduling (January
1998-February 2001); Staff Vice President --
Scheduling (January 1996-January 1998).
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NAME, AGE AND POSITION TERM OF OFFICE AND BUSINESS EXPERIENCE
---------------------- --------------------------------------
GERALD LADERMAN, age 43......................... Senior Vice President -- Finance since January
Senior Vice President -- Finance 2000. Vice President -- Corporate Finance (June
1995-December 1999).
GEORGE L. MASON, age 54......................... Senior Vice President -- Technical Operations since
Senior Vice President -- Technical Operations November 1996. Vice President -- Technical
Operations (March 1994-November 1996).
DEBORAH L. McCOY, age 46........................ Senior Vice President -- Flight Operations since
Senior Vice President -- Flight Operations September 1999. Vice President -- Flight Training
and Inflight (April 1997-September 1999); Staff
Vice President -- Standards Training and
Performance (May 1996-April 1997); Senior
Director -- Operational Performance (December
1994-May 1996); Director of Eaton Corp.
JAMES B. REAM, age 45........................... President of Continental Express, Inc. since
President of Continental Express, Inc. October 1999. Senior Vice President -- Asia of
Continental Airlines, Inc. (March 1998-October
1999); President and Chief Operating Officer of
Continental Micronesia, Inc. (October 1996-April
1998); Executive Vice President and Chief Operating
Officer of Continental Micronesia, Inc. (June
1996-October 1996); Vice President -- Finance of
Continental Airlines, Inc. (December 1994-June
1996).
BONNIE S. REITZ, age 48......................... Senior Vice President -- Sales and Distribution
Senior Vice President -- Sales and since November 1996. Vice President -- Marketing
Distribution and Sales (August 1994-November 1996).
BARRY P. SIMON, age 58.......................... Senior Vice President -- International since
Senior Vice President November 1996. Senior Vice President -- Europe
(June 1995-November 1996).
KUNIAKI (JUN) TSURUTA, age 65................... Senior Vice President -- Purchasing and Materials
Senior Vice President -- Purchasing and Services since November 1996. Vice
Materials Services President -- Purchasing (April 1994-November 1996).
JOHN E. (NED) WALKER, age 49.................... Senior Vice President -- Worldwide Corporate
Senior Vice President -- Worldwide Corporate Communications since March 2000; Vice President --
Communications Corporate Communications (November 1994-March
2000).
JANET P. WEJMAN, age 43......................... Senior Vice President and Chief Information Officer
Senior Vice President and Chief Information since November 1996. Vice President and Chief
Officer Information Officer (February 1996-November 1996);
Assistant Vice President of System Technology and
User Training, Chicago & North Western Railroad
(August 1992-November 1995).
There is no family relationship between any of the executive officers. All
officers are appointed by the board of directors to serve until their
resignation, death or removal.
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth (i) the aggregate amount of remuneration we
paid during 2000, 1999 and 1998 to the chief executive officer and our four
other most highly compensated executive officers in 2000, (ii) the number of
shares of Class B common stock subject to options granted to them during 2000
and the Black-Scholes value of those options, (iii) information regarding stock
options they exercised in 2000 and the value of the options they held at the end
of 2000, and (iv) information regarding long-term incentive awards made to them
during 2000.
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SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ----------------------- --------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) OPTIONS PAYOUTS COMPENSATION
--------------------------- ---- -------- ---------- --------------- ---------- ---------- -------- ------------
Gordon M. Bethune......... 2000 $966,879 $2,145,540 $3,830 $1,620,000 75,000 $781,875 $0
Chairman of the Board and 1999 860,840 6,390,500 6,012 0 0 0 0
Chief Executive Officer 1998 765,000 1,381,500 2,941 0 650,000 0 0
Gregory D. Brenneman...... 2000 $723,730 $1,527,608 $4,534 $1,620,000 63,500 $511,313 $0
President and Chief 1999 658,376 4,412,500 6,692 0 0 0 0
Operating Officer 1998 586,508 1,018,752 6,316 0 550,000 0 0
Lawrence W. Kellner....... 2000 $580,781 $1,095,710 $8,833 $1,620,000 30,000 $390,094 $0
Executive Vice President 1999 476,310 2,387,500 7,872 0 0 0 0
and Chief Financial 1998 428,400 675,000 11,716 0 250,000 0 0
Officer
C.D. McLean............... 2000 $459,820 $ 871,093 $1,091 $1,620,000 30,000 $253,969 $0
Executive Vice President 1999 435,815 2,337,500 1,152 0 0 0 0
-- Operations 1998 383,100 618,752 5,427 0 200,000 0 0
Jeffery A. Smisek......... 2000 $427,172 $ 831,250 $7,020 $1,620,000 30,000 $236,250 $0
Executive Vice President, 1999 404,919 2,300,000 7,445 0 0 0 0
General Counsel and 1998 356,996 587,500 8,783 0 200,000 0 0
Secretary
---------------
(1) Each year shown includes stay bonus amounts paid in connection with the
acquisition by Northwest Airlines Corporation and its affiliates of certain
of our capital stock in November 1998. The company also agreed to make
charitable contributions in the executives' names, including to the We Care
Trust (the employee assistance charitable fund of Continental), over those
same periods in the amount of $340,000 in the case of Mr. Bethune,
$1,000,000 in the case of Mr. Brenneman, and $250,000 in the case of each of
Messrs. Kellner, McLean and Smisek.
(2) Represents a tax adjustment relating to certain travel benefits we provided
to the executives.
(3) Determined based on the closing price of the Class B common stock on the
date the restricted shares were granted. At the end of 2000, each of the
named officers held 30,000 shares of restricted stock valued at $1,548,750
based on the December 29, 2000 closing price of the Class B common stock of
$51.625. The shares held by each of the named officers vest in 33 1/3%
increments on each of July 25, 2001, July 25, 2002 and July 25, 2003.
Although we have paid no dividends on our common stock, any dividends would
be payable upon both vested and non-vested shares.
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OPTION GRANTS DURING 2000
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE GRANT DATE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE VALUE(2)
---- ---------- --------------- --------- ---------- ----------
Gordon M. Bethune.................. 75,000 5.1% $42.0625 5/23/05 $1,321,733
Gregory D. Brenneman............... 63,500 4.4% $42.0625 5/23/05 1,119,067
Lawrence W. Kellner................ 30,000 2.1% $42.0625 5/23/05 528,693
C.D. McLean........................ 30,000 2.1% $42.0625 5/23/05 528,693
Jeffery A. Smisek.................. 30,000 2.1% $42.0625 5/23/05 528,693
---------------
(1) The options vest in annual 25% increments commencing May 23, 2001.
(2) Estimated using the Black-Scholes option pricing model, which requires the
input of highly subjective assumptions, including expected stock price
volatility. The model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully
transferable, unlike our employee stock options. These differences and
changes in the subjective input assumptions can materially affect the
estimated values shown. Consequently, the model does not necessarily provide
a reliable estimate of the options' value. The estimated values shown are
based on the following input assumptions: risk-free interest rate of 6.5%;
dividend yield of 0%; volatility factor of the expected market price of our
common stock of 47%; and a weighted average expected life of the options of
3.6 years.
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
Gordon M. Bethune....... 370,000 $8,245,968 325,000 400,000 $4,156,250 $4,873,438
Gregory D. Brenneman.... 244,000 5,454,398 275,000 338,500 3,574,375 4,181,594
Lawrence W. Kellner..... 130,000 2,912,869 125,000 155,000 1,579,375 1,866,250
C.D. McLean............. 148,750 3,538,499 100,000 130,000 1,163,750 1,450,625
Jeffery A. Smisek....... 130,000 2,912,718 100,000 130,000 1,163,750 1,450,625
---------------
(1) Determined based on the closing price of the Class B common stock on
December 29, 2000 of $51.625.
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LONG TERM INCENTIVE PLANS -- AWARDS IN 2000
The following table sets forth awards granted under our Long Term Incentive
Performance Award Program (or LTIP) and our Officer Retention and Incentive
Award Program (or Retention Program), each of which has been implemented under
our Incentive Plan 2000.
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER NON-STOCK
NUMBER OF SHARES, OTHER PERIOD PRICE-BASED PLANS
UNITS OR UNTIL MATURATION ------------------------------------
NAME OTHER RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
---- ----------------- ---------------- ---------- ---------- ----------
Gordon M. Bethune...... LTIP Awards(1) (1) $3,713,906 $4,691,250 $6,645,938
37,500 PARs(2) (2) (2) (2) (2)
Gregory D. Brenneman... LTIP Awards(1) (1) $2,650,688 $3,261,938 $4,637,251
25,000 PARs(2) (2) (2) (2) (2)
Lawrence W. Kellner.... LTIP Awards(1) (1) $1,690,407 $2,340,562 $2,990,719
12,500 PARs(2) (2) (2) (2) (2)
C.D. McLean............ LTIP Awards(1) (1) $1,425,844 $2,011,782 $2,597,719
12,500 PARs(2) (2) (2) (2) (2)
Jeffery A. Smisek...... LTIP Awards(1) (1) $1,361,250 $1,923,750 $2,486,250
12,500 PARs(2) (2) (2) (2) (2)
---------------
(1) Amounts set forth in the table represent potential payout of awards under
the LTIP based on awards made in 2000, and include target amounts actually
paid out as set forth in the Summary Compensation Table above. Payouts are
based on Continental's achievement of number 1, 2 or 3 in EBITDAR margin
ranking compared to an industry group. Payout is also contingent upon our
achievement of a minimum average annual operating income hurdle over the
performance period (initially $300 million) and in no event may the LTIP pay
out, with respect to a performance period, more than 5% of our actual
average annual operating income over the performance period. The LTIP was
phased in with (i) a one-year performance period (January 1, 2000 to
December 31, 2000) with actual payout as set forth in the Summary
Compensation Table above, (ii) a two-year performance period (January 1,
2000 to December 31, 2001) with potential payout estimated based on the
individual's current base salary, and (iii) a three-year performance period
(January 1, 2000 to December 31, 2002) with potential payout estimated based
on the individual's current base salary.
(2) During 2000, we made 13 awards of PARs (each in the amount set forth in the
table) to each of the above named executive officers relating to 13
investments in 8 enterprises. Each PAR is a right, which generally vests
quarterly over a four-year period, to receive a cash payment measured by a
portion of the gain and profits associated with an equity holding of
Continental or a subsidiary in an e-commerce or internet-based business over
the deemed initial base values. The PARs awarded in 2000 to Messrs. Bethune,
Brenneman, Kellner, McLean and Smisek in each case relate to 3.75%, 2.5%,
1.25%, 1.25%, and 1.25%, respectively, of the potential total gain
attributable to each equity holding for which PARs were awarded. The Human
Resources Committee has determined that the base values assigned to PARs
relating to each of the investments, for purposes of the program, reflect
fair market value of the related investment at the date of grant of the
respective awards. The aggregate base values of all 13 investments were
approximately $23 million. The payout of the PARs will generally not occur
until and unless Continental realizes a gain on the applicable equity
investment. We are unable to estimate future payouts of the Retention
Program awards.
EMPLOYMENT AGREEMENTS
Agreements with Mr. Bethune and Mr. Brenneman. We have entered into
employment agreements with each of Mr. Bethune and Mr. Brenneman, effective July
25, 2000, relating to his service as an officer and director of Continental. The
agreements provide for:
- an annual base salary of not less than $1,042,500 for Mr. Bethune and
$757,500 for Mr. Brenneman;
- one-time grants in 2000 of 30,000 restricted shares of Class B common
stock that vest in annual one-third increments;
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- participation in any cash bonus program we adopt at the maximum level
available to any executive (and not less than the 0% to 125% of base
salary paid or payable under our current executive bonus performance
award program);
- a supplemental executive retirement plan (or SERP, as explained below),
disability benefits and life insurance;
- flight benefits substantially identical to those currently provided to
non-employee directors (referred to below as "Flight Benefits"); and
- perquisites and other matters.
Each agreement may be terminated at any time by either party, with or
without cause. Each agreement is in effect until July 25, 2005 and is
automatically extended for an additional five-year period on each successive
fifth anniversary of such date, unless earlier terminated or not extended by
either party. If the executive's employment agreement is not extended by the
executive, or is terminated by Continental for cause (as described in the
agreement) or by the executive without good cause (as described in the
agreement), the executive will receive:
- a lump-sum payment of approximately $5.1 million (for Mr. Bethune) or
$3.9 million (for Mr. Brenneman), the amount to which he would have been
entitled under his previous employment agreement if he had left our
employ following the purchase in 1998 by Northwest Airlines Corporation
and its affiliates of a majority of our voting power;
- the SERP benefit; and
- Flight Benefits and other perquisites (together with the SERP and
lump-sum payments, the "Base Benefits").
If we terminate his employment for reasons other than death, disability or
cause, or if we do not extend his employment agreement, or if the executive
terminates his employment agreement for good cause, then we must, in addition to
providing the Base Benefits:
- cause all options, shares of restricted stock, LTIP awards, Retention
Program awards and similar incentives awarded to the executive to vest;
- make a lump-sum cash severance payment to the executive (calculated as
described below, the "Termination Payment");
- provide the executive with out-placement, office and other perquisites
for certain specified periods; and
- provide the executive and his eligible dependents with certain insurance
benefits.
In addition to these benefits, if we terminate the executive's employment due to
death or disability, in lieu of out-placement services and the Termination
Payment, certain life insurance or disability payments, as appropriate, would be
made.
The "Termination Payment" referred to above is equal to three times the sum
of (a) the executive's then current annual base salary and (b) the amount of
such salary times 125%.
We are required to maintain life insurance on the executive's behalf in an
amount not less than the Termination Payment. Each executive is indemnified by
the company for his tax obligations with respect to payments or other benefits
under the agreement or otherwise to the extent that such payments or other
benefits are subject to an excise or other special additional tax that would not
have been imposed absent such payments or other benefits.
Pursuant to the SERP, each executive receives a base retirement benefit in
the form of an annual straight life annuity in an amount equal to the product of
(x) 2.5% times (y) the number of his credited years of service (as defined,
which include additional credited years of service for each of the next four
years to induce
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the executive to remain in our employ, with the executive receiving up to an
additional 23 years in the case of Mr. Bethune and 19 years in the case of Mr.
Brenneman of credited service if he receives a Termination Payment under his
employment agreement) times (z) his final average compensation. Final average
compensation includes salary and cash bonuses -- other than bonuses paid prior
to April 1, 1995, certain stay bonus amounts described in the Summary
Compensation Table, amounts paid under the LTIP or similar program or the
Retention Program, proceeds to the executive from any awards under any option,
stock incentive or similar plan, and any Termination Payment or certain similar
payments. Amounts payable under Continental's general retirement plan are offset
against the SERP benefit.
Agreements with Other Named Executives. We have also entered into
employment agreements, effective July 25, 2000, with each of Messrs. Kellner,
McLean and Smisek, which provide for an annual base salary of not less than
$693,500, $451,500 and $420,000, respectively. The agreements also provide for
participation in any cash bonus program we implement at the maximum level
available to any executive, a SERP with terms similar to those of Messrs.
Bethune and Brenneman and based on the executive's compensation, Flight
Benefits, perquisites and other matters. Each of the agreements may be
terminated at any time by either party, with or without cause. Each agreement is
for a five-year term of employment ending in July 2005 and is otherwise
substantially identical to those of Messrs. Bethune and Brenneman. However, the
Termination Payments of Messrs. Kellner, McLean and Smisek are limited to two
times the sum of (a) the executive's then current annual base salary and (b) the
amount of such salary times 125% unless their termination occurs within two
years following a change of control, and there is no lump-sum payment included
in their Base Benefits.
RETIREMENT PLAN
The Continental Airlines Retirement Plan, adopted in 1988, is a
noncontributory, defined benefit pension plan. The following table represents
the estimated annual benefits payable in the form of a single life annuity to
participants in specified service and compensation categories under the plan as
it pertains to non-pilots. Under the plan, final average compensation means the
average of the participant's highest five consecutive years of compensation
during the last ten calendar years with Continental and its affiliates for
participating employees other than pilots. For pilots, final average
compensation means the average of the participant's highest 60 consecutive
months of compensation during the last 120 months with Continental and its
designated affiliates (with shorter averaging periods applying prior to January
1, 2003). Final average compensation includes regular pay and shift
differential, and generally excludes bonuses, severance pay, incentive and other
special forms of pay. Regulations under the Internal Revenue Code of 1986, as
amended (the "Code"), currently limit the compensation covered by the Retirement
Plan to $170,000 for plan years beginning in 2000. This limit is indexed and is
increased from time to time in accordance with IRS regulations. The table
reflects benefit amounts calculated using the compensation limit and average
social security wage base in effect for participants who reach age 65 in 2002.
PENSION PLAN TABLE
YEARS OF SERVICE
---------------------------------------------------------
FINAL AVERAGE COMPENSATION 5 10 15 20 25 30
-------------------------- ------- ------- ------- ------- ------- -------
$100,000............................ $ 7,410 $14,821 $22,231 $29,641 $37,051 $44,462
$125,000............................ 9,460 18,921 28,381 37,841 47,301 56,762
$150,000............................ 11,510 23,021 34,531 46,041 57,551 69,062
$170,000............................ 13,150 26,301 39,451 52,601 65,751 78,902
Messrs. Bethune and McLean are estimated to have seven credited years of
service under the plan and Messrs. Brenneman, Kellner and Smisek are estimated
to have six years of service. In addition, each of their employment agreements
provides for certain supplemental retirement benefits, which benefits will be
offset by amounts received under the retirement plan. Under the plan, a retired
participant's annual benefit commencing at or after the normal retirement age of
65 (60 in the case of pilots) is equal to 1.19% of the participant's final
average compensation plus 0.45% of the participant's final average compensation
(or a variable
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percentage in the case of pilots) in excess of the average Social Security wage
base, multiplied by the participant's years of participation up to the
applicable maximum years of participation. Special rules also apply for certain
of our other work groups. During the second quarter of this year, Continental is
offering eligible employees a one-time opportunity to retire with a supplemental
benefit equal to $1,000 multiplied by the retiree's years of service, up to a
maximum of 30 years.
PERFORMANCE GRAPH
The following graph compares the cumulative total return on our Class B
common stock with the cumulative total returns (assuming reinvestment of
dividends) on the Standard & Poor's Airline Index and the Standard & Poor's 500
Stock Index as if $100 were invested in the Class B common stock and each of
those indices on December 29, 1995.
[PERFORMANCE CHART]
12/29/95 12/31/96 12/31/97 12/31/98 12/31/99 12/29/00
-------- -------- -------- -------- -------- --------
Continental Airlines................... $100.00 $129.89 $221.26 $154.02 $204.02 $237.36
S&P Airline Index...................... $100.00 $109.51 $184.30 $178.26 $176.79 $263.42
S&P 500 Index.......................... $100.00 $122.96 $163.98 $210.85 $255.22 $231.98
EXECUTIVE COMPENSATION REPORT OF THE HUMAN RESOURCES COMMITTEE
General Compensation Strategy
In 2000, the Human Resources Committee of the board of directors continued
its prior compensation strategy, which is to:
- Develop an appropriate linkage between compensation levels and the
creation of stockholder value
- Provide that the total compensation program will be able to attract,
motivate and retain employees of outstanding talent
- Achieve competitiveness of total compensation
- Focus on variable pay to provide incentive to improve performance
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In considering appropriate executive compensation levels, the committee
applies these factors to available marketplace compensation data for certain
non-airline companies with historical revenue, stock appreciation, stock
volatility and other characteristics deemed by the committee to be comparable to
ours and also for U.S. airlines of comparable size, including industry peer
airlines shown in the performance graph. The elements of compensation included
in the competitive analysis generally are base salaries, annual incentives and
long-term incentives. Because we compete for executive talent principally with
companies other than airlines, the committee emphasizes compensation data from
non-airline companies in its analysis of competitive compensation packages.
In July 2000, we completed a three-year program bringing all employees to
industry standard wages and also announced and began to implement a phased plan
to bring employee benefits to industry standard levels for all employees by
2003. The plan provides for increases in vacation, paid holidays, increased
401(k) matching contributions by the company and additional past service
retirement credit for most senior employees. Nearly all of our employees other
than officers and other senior managers are incentivized through the company's
profit sharing plan and on-time arrival bonus structure, and all employees are
able to participate in our success through participation in the employee stock
purchase plan. As discussed elsewhere in this proxy statement, we propose that
the employee stock purchase plan be amended to extend its term and to increase
the number of shares that may be issued under the plan to keep this valuable
incentive tool available for all employees. Executives' incentives are linked to
Continental's performance through the executive bonus performance award program,
through the award of stock options and through a long term incentive performance
award program implemented in 2000. The company also implemented in 2000 its
officer retention and incentive award program to retain officers and encourage
the company's participation in more cost-effective distribution and marketing
channels. Our Chief Executive Officer and the four other officers named above in
the Summary Compensation Table were also awarded restricted shares of Class B
common stock in 2000 in connection with renewals or modifications of their
employment agreements, in recognition of Continental's performance and as
additional incentive during the three-year vesting period for such shares. Other
officers also participate in the long term incentive performance award program
and, together with senior managers, are awarded stock options.
In conducting the programs applicable to executives, the committee
considers the effects of section 162(m) of the Internal Revenue Code, which
denies publicly held companies a tax deduction for annual compensation in excess
of one million dollars paid to their chief executive officer or any of their
four other most highly compensated executive officers who are employed on the
last day of a given year, unless their compensation is based on performance
criteria that are established by a committee of outside directors and approved,
as to their material terms, by that company's stockholders. Certain of our
current compensation plans, such as our stock option plans, the executive bonus
performance award program, the long term incentive performance award program and
the officer retention and incentive award program, are designed to qualify as
performance-based compensation under Section 162(m). However, the salary of our
Chief Executive Officer in excess of one million dollars and other awards, such
as cash payments from stay bonuses and restricted stock grants, do not so
qualify and are subject to the limitation on deductibility. Although certain
amounts recorded as compensation by the company to certain of the most highly
compensated officers of the company with respect to 2000 were limited by section
162(m), that limitation did not result in the payment of increased federal
income taxes by the company in 2000 due to its significant net operating loss
carryforwards.
Base Salaries. The committee believes it is crucial to provide salaries
within a competitive market range in order to attract and retain highly talented
employees. The specific competitive markets considered depend on the nature and
level of the positions in question, the labor markets from which qualified
individuals are recruited, and the companies and industries competing for the
services of our executives. Base salary levels are also dependent on the
performance of each individual employee over time. Thus, employees who sustain
higher levels of performance over time will have correspondingly higher
salaries. Salary adjustments are based on competitive market salaries and
general levels of market increases in salaries, individual performance, overall
financial results and changes in job duties and responsibilities. All base
salary increases are based on a philosophy of relative salary equity, market
demand and pay-for-performance.
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Incentive Compensation. The committee believes that appropriate base
salaries must be coupled with incentive compensation that not only attracts and
retains qualified employees, but also rewards them for increased performance.
Compensation linked to the performance of our common stock is one of the best
incentives to align employees' interests with those of stockholders and to
enhance performance. In addition, through the adoption last year of the
Incentive Plan 2000, the committee has sought to define performance criteria
relative to our competitors, mitigate the dilutive effect of relying solely on
common stock-based awards as incentive compensation, and develop programs
designed to retain management in the face of significant employment
opportunities and recruiting efforts from other companies. We have implemented
stock option plans for our executive officers and other senior managers, and an
employee stock purchase plan open to all of our employees, each of which is
designed to encourage employees, including our executive officers and key
employees, to identify their interests with those of stockholders and enhance
Continental's performance. In addition, we implemented a profit sharing plan,
under which 15% of the company's pre-tax earnings (before unusual or
nonrecurring items) is distributed to substantially all non-management employees
(other than employees whose collective bargaining agreement provides otherwise
or limits participation or who participate in profit sharing arrangements
required by local law) each year on a pro rata basis according to specified
earnings. Finally, we have implemented an executive bonus performance award
program, a long term incentive performance award program, an officer retention
and incentive award program, a management bonus program and a non-management
on-time performance bonus to focus employees on common goals and to encourage
them to work together to achieve profitability. The committee believes that
these incentives play a significant part in Continental's continued performance
and success.
2000 Executive Compensation
Base Salaries. In early 2000, the base salaries of our executive officers,
including the Chief Executive Officer, were increased in line with general
salary increases of our middle level management. Subsequently, in connection
with the renewal or modification of employment agreements of our senior
executives in mid-2000, the base salaries of certain of our senior executives
listed in the Summary Compensation Table above, including our Chief Executive
Officer, were increased to make them more competitive. In early 2001, the base
salaries of certain of our senior executives listed in the Summary Compensation
Table (excluding our Chief Executive Officer and another senior officer whose
base salary was adjusted in mid-2000) were increased to make them more
competitive.
Stock Incentives. Consistent with our compensation strategy, stock options
were awarded to certain officers and key employees during 2000. These options
bear five-year terms and vest ratably over four years. Significantly fewer
options were awarded to officers than in prior annual grants as the officers
also received awards under the long term incentive performance award program,
which was designed, in part, to reduce the company's reliance on equity-based
compensation. As noted above, the Chief Executive Officer and the four other
officers named above in the Summary Compensation Table were also awarded
restricted shares of Class B common stock in 2000 in connection with the renewal
or modification of their employment agreements.
Other Plans and Programs. The executive bonus performance award program
makes our executive officers and certain additional officers recommended by the
Chief Executive Officer and approved by the committee eligible to receive on a
fiscal quarterly basis a cash bonus of up to 125% of their salary for that
quarter based on Continental's cumulative net income earned through that quarter
as compared to the cumulative net income targeted through that quarter in the
annual financial plan approved by the board and adopted by the committee. The
program also provides an alternate target for bonus payments of achievement of
number 1, 2 or 3 in EBITDAR margin ranking by Continental as compared to an
industry group, together with achievement of an operating income hurdle. In
1999, the company also implemented a deferred compensation plan in which
directors and officers of the company may participate. The plan had been
previously recommended by the committee and approved by the board.
As previously reported to stockholders, each of Messrs. Bethune, Brenneman,
Kellner, McLean and Smisek received payments during the first two months of
2000, which were the final payments under the stay bonus agreements entered into
in 1998 to encourage the officers to remain with Continental following the
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purchase of a majority of Continental's voting stock by Northwest Airlines and
its affiliates. The company also agreed to make charitable contributions in each
such executive's name, including to the We Care Trust (the employee assistance
charitable fund of Continental), during the same period. Also as previously
reported, certain other officers, including executive officers, received stay
bonus payments during the same period.
In addition, we adopted last year under the Incentive Plan 2000 the officer
retention and incentive award program. This program was designed to retain
executives in light of significant employment opportunities for such executives
in other businesses, including the e-commerce and internet industries, and to
incentivize our executives to grow the value of Continental's investments in
e-commerce and internet businesses, including more cost effective distribution
and marketing channels. This program permits executives to receive cash payments
measured by a portion of the gain and profits associated with Continental's
investments in e-commerce or internet businesses. The committee believes that
the retention program acts as a retention tool for management, and will benefit
the company from the direct incentive to foster investment in and growth of
e-commerce and internet businesses strategic for its growth and development,
including through cost savings generated by more efficient means of distribution
and marketing.
2000 CEO Compensation
Mr. Bethune's salary was increased in mid-2000 in connection with a
modification of his employment agreement, as a result of the committee's review
of competitive salaries at the time and his performance as Chief Executive
Officer. Along with other executive officers, Mr. Bethune received bonus amounts
in 2000 under the executive bonus performance award program reflecting
Continental's success, and received stock options, restricted stock, awards
under the long term incentive award program and awards under our officer
retention and incentive award program as incentives for continued performance.
In addition, as described elsewhere in this proxy statement, Mr. Bethune
received two final payments during 2000 pursuant to a stay bonus agreement
entered into in 1998.
Respectfully submitted,
Human Resources Committee
Thomas J. Barrack, Jr., Chairman
Kirbyjon H. Caldwell
George G. C. Parker
Charles A. Yamarone
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our executive compensation programs are administered by the Human Resources
Committee of the board of directors. The committee is currently composed of four
independent, non-employee directors, and no member of the committee has been an
officer or employee of Continental or any of its subsidiaries.
CERTAIN TRANSACTIONS
In December 2000, we sold to America West Holdings Corporation for
approximately $10.8 million our right of first refusal on certain stock of
America West Holdings Corporation held by an affiliate of David Bonderman, one
of our directors and stockholders, together with our remaining investment in
America West Holdings Corporation. Mr. Bonderman holds a significant interest in
America West Holdings Corporation. In 1994, we entered into a series of
agreements with America West Airlines, Inc., a subsidiary of America West
Holdings Corporation, related to code-sharing and ground handling that have
created substantial benefits for both airlines. The services provided are
considered normal to the daily operations of both airlines. As a result of these
agreements, we paid America West Airlines $28 million in 2000, and they paid us
$33 million.
In November 2000, we entered into a number of agreements with Northwest
Airlines Corporation and some of its affiliates under which we repurchased in
January 2001 most of our Class A common stock owned by Northwest for $450
million. In November 1998, we began implementing with Northwest Airlines, Inc. a
long-term global alliance involving extensive code-sharing, frequent flyer
reciprocity and other cooperative
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activities. The services provided are considered normal to the daily operations
of both airlines. As a result of this alliance, we paid Northwest Airlines, Inc.
$10 million in 2000 and they paid us $14 million in 2000.
Also in November 2000, we entered into an agreement to pay 1992 Air, Inc.
$10 million in cash for its sale to us of its right of first offer to purchase
the shares of Class A common stock that we purchased from Northwest Airlines
Corporation and an affiliate. This transaction was consummated in January 2001.
1992 Air, Inc. is an affiliate of David Bonderman, one of our directors.
Karen Hastie Williams, one of our directors, is a partner of Crowell &
Moring LLP, a law firm that has provided services to us and our subsidiaries for
many years. Our fee arrangement with Crowell & Moring LLP is negotiated on the
same basis as our arrangements with other outside legal counsel and is subject
to the same terms and conditions. The fees we paid to Crowell & Moring LLP are
comparable to those we pay to other law firms for similar services.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three non-employee members of the board
of directors. Each year, directors being considered for inclusion on the
committee provide a written statement to the full board detailing any
relationships they have with the company, directly or indirectly, that might
affect their independence from the company. Based in part on these
representations, the board elects the committee members if it determines that
(1) all such members are "independent" as that concept is defined in rules
promulgated by the New York Stock Exchange and the Securities and Exchange
Commission, (2) all such members are financially literate and (3) at least one
of such members has accounting or related financial management expertise.
The board of directors has elected the undersigned as members of the
committee and adopted a charter setting forth the procedures and
responsibilities of the Audit Committee. The committee reviews the charter
annually and reports to the board on its adequacy in light of applicable New
York Stock Exchange rules. The board then considers and approves the charter
consistent with those rules, and the company furnishes a written affirmation to
the New York Stock Exchange relating to clauses 1-3 of the foregoing paragraph
and the adequacy of the Audit Committee charter. A copy of the current charter
of the Audit Committee is attached to this proxy statement as Appendix A.
Among other responsibilities enumerated in Appendix A, the committee's
charter requires the committee to:
(a) obtain annually from the independent auditors a written
communication delineating all relationships between such auditors and the
company as required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees";
(b) discuss with the independent auditors the nature and scope of any
disclosed relationships and professional services and take, or recommend
the board take, appropriate action to ensure the continuing independence of
the auditors;
(c) review the annual financial statements of the company, and the
related management's discussion and analysis of financial condition and
results of operations, prior to the filing thereof with the Securities and
Exchange Commission;
(d) based on the review and discussion of the audited financial
statements with management and the independent auditors, recommend to the
board whether to include the audited financial statements in the company's
annual report on Form 10-K; and
(e) discuss with the independent auditors any matters required to be
communicated to the Audit Committee, including those matters required by
Statement on Auditing Standards No. 61, "Communication with Audit
Committees".
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The Audit Committee fulfilled the foregoing responsibilities during the
past year. Based on its reviews and discussions as set forth above, the
committee recommended to the board of directors the inclusion of the audited
financial statements of the company and its subsidiaries in the company's annual
report on Form 10-K for the year ended December 31, 2000.
Respectfully submitted,
Audit Committee
Karen Hastie Williams, Chairperson
Patrick Foley
Donald L. Sturm
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PROPOSAL 1:
ELECTION OF DIRECTORS
It is the intention of the persons named in the enclosed form of proxy,
unless otherwise instructed, to vote duly executed proxies for the election of
each nominee for director listed below. Pursuant to our bylaws, directors will
be elected by a plurality of the votes duly cast at the stockholders meeting. If
elected, each nominee will hold office until the next annual meeting of
stockholders and until his or her respective successor has been duly elected and
has qualified. We do not expect any of the nominees to be unavailable to serve
for any reason, but if that should occur before the meeting, we anticipate that
proxies will be voted for another nominee or nominees to be selected by the
board of directors.
Our board of directors currently consists of thirteen persons. There is no
family relationship between any of the nominees for director or between any
nominee and any executive officer.
The following table shows, with respect to each nominee, (i) the nominee's
name and age, (ii) the period for which the nominee has served as a director,
(iii) all positions and offices with Continental currently held by the nominee
and his or her principal occupation and business experience during the last five
years, (iv) other directorships held by the nominee and (v) the standing
committees of the board of directors of which he or she is a member. Each of the
nominees is currently on our board.
NAME, AGE, POSITION
AND COMMITTEE MEMBERSHIPS TERM OF OFFICE AND BUSINESS EXPERIENCE
------------------------- --------------------------------------
THOMAS J. BARRACK, JR., age 53....................... Director since 1994. Chairman and Chief
(Human Resources Committee) Executive Officer of Colony Capital, LLC and
Colony Advisors, Inc. (real estate
investments) since 1991; Director of: Public
Storage, Inc; Kennedy-Wilson, Inc.
GORDON M. BETHUNE, age 59............................ Director since 1994. Chairman of the Board and
Chairman of the Board and Chief Executive Officer Chief Executive Officer since September 1996.
(Executive Committee, Finance and Strategy President and Chief Executive Officer
Committee) (November 1994-September 1996); President and
Chief Operating Officer (February
1994-November 1994); various positions with
The Boeing Company commencing in 1988,
including Vice President and General Manager
of the Commercial Airplane Group Renton
Division, Vice President and General Manager
of the Customer Services Division and Vice
President of Airline Logistics Support;
Director of: Honeywell International Inc.; ANC
Rental Corporation.
DAVID BONDERMAN, age 58.............................. Director since 1993. Chairman of the Board
(Executive Committee, Finance and Strategy (May 1993-September 1996); Managing Partner of
Committee) Texas Pacific Group (a private investment
firm) since 1992; Director of: Bell & Howell
Company, Inc.; Co-Star Realty Information,
Inc.; Denbury Resources, Inc.; Ducati Motor
Holding S.p.A.; J. Crew Group, Inc.; Magellan
Health Services, Inc.; ON Semiconductor
Corporation; Oxford Health Plans, Inc.;
Paradyne Networks, Inc.; Ryanair, Ltd.;
Seagate Technology, Inc.; and Washington
Mutual, Inc.
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NAME, AGE, POSITION
AND COMMITTEE MEMBERSHIPS TERM OF OFFICE AND BUSINESS EXPERIENCE
------------------------- --------------------------------------
GREGORY D. BRENNEMAN, age 39......................... Director since 1995. President and Chief
President and Chief Operating Officer (Finance and Operating Officer since September 1996. Chief
Strategy Committee) Operating Officer (May 1995-September 1996);
Consultant to the company (February-April
1995); various positions, including Vice
President, with Bain & Company, Inc.
(consulting firm) commencing in 1987; Director
of: J. Crew Group, Inc.; The Home Depot, Inc.
KIRBYJON H. CALDWELL, age 47......................... Director since 1999. Senior Pastor of The
(Human Resources Committee, Independent Directors Windsor Village-United Methodist Church,
Committee) Houston, Texas since 1982. Director of: Chase
Bank of Texas National Association; Chase Bank
of Texas -- Houston Region; Memorial Hermann
Healthcare System; the Greater Houston
Partnership.
PATRICK FOLEY, age 69................................ Director since 1993. Former Chairman of the
(Audit Committee, Independent Directors Committee) Board, President and Chief Executive Officer
of DHL Airways, Inc. (1988-1999); Director of:
Foundation Health Systems, Inc.; Glenborough
Realty Trust, Inc.; Flextronics International
Ltd.; Del Monte Foods Company.
DOUGLAS H. McCORKINDALE, age 61...................... Director since 1993. Chairman, President and
(Independent Directors Committee) CEO of Gannett Co., Inc. ("Gannett") (a
nationwide diversified communications company)
since February 2001; Vice Chairman, President
and CEO of Gannett (June 2000-February 2001);
Vice Chairman and President of Gannett
(1997-2000); Vice Chairman and Chief Financial
and Administrative Officer of Gannett Co.,
Inc. (1984-1997); Director of: a group of
Prudential Mutual Funds; Global Crossing Ltd.
GEORGE G. C. PARKER, age 62.......................... Director since 1996. Associate Dean for
(Finance and Strategy Committee, Human Resources Academic Affairs and Director of MBA Program
Committee, Independent Directors Committee) since 1993; Dean Witter Professor of Finance
and Management (since 1996) and Professor of
Management (1973-1996) at the Graduate School
of Business, Stanford University; Director of:
Affinity Group International, Inc.; BGI Mutual
Funds; Dresdner/ RCM Global Mutual Funds;
Tejon Ranch Company.
RICHARD W. POGUE, age 72............................. Director since 1993. Senior Advisor of Dix &
(Executive Committee, Independent Directors Eaton Incorporated (a public relations firm)
Committee) since 1994; Senior Partner (1993-1994) and
Managing Partner (1984-1992) of Jones, Day,
Reavis & Pogue (law firm); Director of: Dix &
Eaton Incorporated; IT Group; Rotek
Incorporated; TRW Inc.
WILLIAM S. PRICE III, age 44......................... Director since 1993. Managing Partner of Texas
(Finance and Strategy Committee) Pacific Group (a private investment firm)
since 1992; Director of: Belden & Blake
Corporation; Del Monte Foods Company; Denbury
Resources, Inc.; Gemplus International, S.A.;
Verado Holdings, Inc.; and several private
companies.
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NAME, AGE, POSITION
AND COMMITTEE MEMBERSHIPS TERM OF OFFICE AND BUSINESS EXPERIENCE
------------------------- --------------------------------------
DONALD L. STURM, age 69.............................. Director since 1993. Chairman of the Board and
(Audit Committee, Independent Directors Committee) Chief Executive Officer of: Sturm Group, Inc.
(private equity investment managers) since
1991; Sturm Banks of Colorado, Inc. (which
owns four banks) since 1993; Sturm Banks of
Wyoming, Inc. (which owns four banks) since
1993; Sturm Banks of Kansas City, Inc. (which
owns one bank) since 1996; Chairman of the
Board of Verado Holdings, Inc. since January
1998 and MD Network LLC since 1996; Director
of: Kaptech (a French telecom company);
Hostmark Limited (European web hosting
company); iVention Group LLC (a technology
incubator); Castle Rock Development Company.
KAREN HASTIE WILLIAMS, age 56........................ Director since 1993. Partner of Crowell &
(Audit Committee, Independent Directors Committee) Moring LLP (law firm) since 1982; Director of:
The Chubb Corporation; Gannett Co., Inc.;
Charles E. Smith Residential Realty Co.;
SunTrust-MidAtlantic Bank; and Washington Gas
Light Company.
CHARLES A. YAMARONE, age 42.......................... Director since 1995. Executive Vice President
(Human Resources Committee, Independent Directors of U.S. Bancorp Libra (an institutional
Committee) broker-dealer), a division of U.S. Bancorp
Investments, Inc., since January 1999;
Executive Vice President and Research Director
of Libra Investments, Inc. (July 1994-January
1999); Director of El Paso Electric Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED ABOVE, WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY.
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PROPOSAL 2:
APPROVAL OF AMENDMENT TO THE
1997 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
Subject to the approval of stockholders, the Board of Directors, on the
recommendation of the Human Resources Committee, has amended the Continental
Airlines, Inc. 1997 Employee Stock Purchase Plan. The proposed amendment
increases the number of shares of Class B common stock covered by the plan by
2,500,000 shares (from 1,750,000 to 4,250,000 shares) and extends the term of
the plan from December 31, 2001 to December 31, 2010.
Substantially all of the 1,750,000 shares originally authorized under the
plan have been purchased by employees. The purpose of the proposed amendment is
to continue providing a valuable incentive to our employees to identify their
interests with those of other stockholders.
SUMMARY OF PLAN
The following summary provides a general description of certain features of
the plan. Copies of the plan are on file and publicly available at the
Securities and Exchange Commission and are also available on our website at
www.continental.com. Capitalized terms not otherwise defined below have the
meanings ascribed to them in the plan.
Participation. An eligible employee may elect to participate in the plan
for any calendar quarter (an "Option Period") during the period from July 1,
1997 to December 31, 2001, or December 31, 2010 if stockholders approve the
amendment to the plan, by designating a percentage of the employee's Eligible
Compensation to be deducted from compensation for each pay period and paid into
the plan for the employee's account. The designated percentage may not be less
than 1% nor more than 10%. An eligible employee may participate in the plan only
by means of payroll deduction. No employee will be granted an option under the
plan that permits such employee's rights to purchase Class B common stock to
accrue at a rate that exceeds $25,000 of fair market value of such stock
(determined at the time such option is granted) for the calendar year in which
the option is outstanding. Unless an employee's payroll deductions are withdrawn
(as described below), the aggregate payroll deductions credited to the
employee's account are used to purchase shares of Class B common stock at the
end of the Option Period; provided that the maximum number of shares that an
employee may purchase in any Option Period is 2,500 (subject to certain
adjustments contained in the plan). The per share purchase price of the stock is
85% of the lesser of the fair market value of the stock on the Date of Grant
(the first day of the Option Period) or on the Date of Exercise (the last day of
the Option Period). For all purposes under the plan, the fair market value of a
share of stock on a particular date is equal to the closing price of the Class B
common stock on the New York Stock Exchange on that date as reported by The Wall
Street Journal in the New York Stock Exchange Composite Transactions (or, if no
shares of stock have been traded on that date, on the next regular business date
on which shares of the Class B common stock are so traded). Payroll deductions
are included in the general funds of the company, free of any trust or other
arrangement and may be used for any corporate purpose. No interest is paid or
credited to any Participant.
Shares Available under the Plan; Adjustments. Subject to adjustment as
provided in the plan, the number of shares of Class B common stock that
currently may be purchased by participating employees under the plan may not in
the aggregate exceed 1,750,000 shares, which may be originally issued or
reacquired shares, including shares bought on the market or otherwise for
purposes of the plan. If stockholders approve the amendment to the plan, an
additional 2,500,000 shares will be available under the plan, subject to
adjustment as provided in the plan. Shares subject to the plan are adjusted in
the event of a change in the Class B common stock by reason of a stock dividend
or by reason of a subdivision, stock split, reverse stock split,
recapitalization, reorganization, combination, reclassification of shares or
other similar change. Upon any such event, the maximum number of shares that may
be subject to any option, and the number and purchase price of shares subject to
options outstanding under the plan, will also be adjusted accordingly.
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Eligibility. All employees of the company and its Participating Companies
(currently Continental Express, Inc. and Continental Micronesia, Inc.) as of a
Date of Grant are eligible to participate in the plan, but no eligible employee
may participate if the employee would own (directly or indirectly) 5% or more of
the total combined voting power of all classes of stock of Continental or a
subsidiary, taking into account options to purchase stock and stock that may be
purchased under the plan. No employee of the company would currently be
prevented from participating by reason of this limitation. Approximately 55,000
employees are currently eligible to participate in the plan.
Changes in and Withdrawal of Payroll Deductions. A Participant may elect
to decrease, suspend or resume payroll deductions during a relevant Option
Period by delivering to the company a new payroll deduction authorization in the
manner specified by the company. A Participant may withdraw in whole from the
plan, but not in part, at any time prior to the Date of Exercise relating to a
particular Option Period by timely delivering to the company a notice of
withdrawal in the manner specified by the company. The company will promptly
refund to the Participant the amount of the Participant's payroll deductions
under the plan that have not been otherwise returned or used upon exercise of
options, and thereafter the Participant's payroll deduction authorization and
interest in unexercised options under the plan will terminate.
Delivery of Shares; Restrictions on Transfer. As soon as practicable after
each Date of Exercise, the company delivers to a custodian one or more
certificates representing (or otherwise causes to be credited to the account of
the custodian) the aggregate number of whole shares of Class B common stock
respecting options exercised on that Date of Exercise (for both whole and
fractional shares) of all of the participating eligible employees under the
plan. Any remaining amount representing a fractional share is not certificated
(or otherwise credited) and is carried forward to the next Date of Exercise for
certification (or credit) as part of a whole share. The custodian keeps the
records of the beneficial interests of each Participant in shares held by the
custodian by means of Participant accounts under the plan, and provides each
Participant with periodic statements of their accounts. A Participant may not
generally transfer or otherwise dispose of the shares for a period of six months
from the Date of Exercise. During this six-month period, the company (or the
custodian) retains custody of the shares.
Termination of Employment; Leaves of Absence. Except as described below,
if the employment of a Participant terminates for any reason, then the
Participant's participation in the plan ceases and the company refunds the
amount of the Participant's payroll deductions under the plan that have not yet
been otherwise returned or used upon exercise of options. If the employment of a
Participant terminates, due to retirement, death or disability, the Participant,
or the Participant's personal representative, as applicable, may elect either to
(i) withdraw all of the accumulated unused payroll deductions and Class B common
stock credited to the Participant's account or (ii) exercise the Participant's
option for the purchase of Class B common stock at the end of the Option Period.
Any excess cash in the Participant's account would be returned to the
Participant or such personal representative. If no such election is timely
received by the company, the Participant or personal representative will
automatically be deemed to have elected the second alternative. Each Participant
may designate a beneficiary to make any election and receive any amount of cash
or stock distributable under such plan after the Participant's death.
During a paid leave of absence approved by the company and meeting Internal
Revenue Service regulations, a Participant's elected payroll deductions
continue. A Participant may not contribute to the plan during an unpaid leave of
absence. If a Participant takes an unpaid leave of absence that is approved by
the company, meets Internal Revenue Service regulations, and begins within 90
days prior to the last day of an Option Period, then such Participant's payroll
deductions for such Option Period that were made prior to the leave may remain
in the plan and be used to purchase Class B common stock on the Date of Exercise
relating to such Option Period. If a Participant takes a leave of absence not
described above, then the Participant is considered to have withdrawn from the
plan.
Restriction Upon Assignment of Option. An option granted under the plan
may not be transferred other than by will or the laws of descent and
distribution. However, the plan permits an employee to designate a beneficiary
who may exercise an option under the plan after the employee's death. Subject to
certain limited exceptions, each option is exercisable, during the employee's
lifetime, only by the employee to whom granted.
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Administration and Amendments. The plan is administered by the Human
Resources Committee of the Board. In connection with its administration of the
plan, the Committee is authorized to interpret the plan.
The plan may be amended from time to time by the Board or the Human
Resources Committee, but no change in any option theretofore granted may be made
that would impair the rights of a Participant without the consent of that
Participant.
The benefits and amounts to be received by any Participant under the plan
are not currently determinable as they depend entirely upon the level of
participation elected by an eligible employee and the price of the Class B
common stock.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the U.S. federal income tax
consequences of certain transactions under the plan based on federal income tax
laws in effect on January 1, 2001. This summary applies to the plan as normally
operated and is not intended to provide or supplement tax advice to eligible
employees. The summary contains general statements based on current U.S. federal
income tax statutes, regulations and currently available interpretations
thereof. This summary is not intended to be exhaustive and does not describe
state, local or foreign tax consequences or the effect, if any, of gift, estate
and inheritance taxes. The plan is not qualified under Section 401(a) of the
Code.
Tax Consequences to Participants. A Participant's payroll deductions to
purchase Class B common stock are made on an after-tax basis. There is no tax
liability to the Participant when shares of Class B common stock are purchased
pursuant to the plan. However, the Participant may incur tax liability upon
disposition (including by way of gift) of the shares acquired under the plan.
The Participant's U.S. federal income tax liability will depend on whether the
disposition is a qualifying disposition or a disqualifying disposition as
described below.
If a qualifying disposition of the shares is made by the Participant (i.e.,
a disposition that occurs more than two years after the first day of the Option
Period in which the shares were purchased), or in the event of death (whenever
occurring) while owning the shares, the Participant will recognize in the year
of disposition (or, if earlier, the year of the Participant's death) ordinary
income in an amount equal to the lesser of (i) the excess of the fair market
value of the shares at the time of disposition (or death) over the amount paid
for the shares (the "Option Price") or (ii) 15% of the fair market value of the
shares at the Date of Grant (the beginning of the Option Period). Upon the sale
of the shares, any amount realized in excess of the ordinary income recognized
by the Participant will be taxed to the Participant as a long-term capital gain.
If the shares are sold at less than the Option Price, then there will be no
ordinary income, but there will be a capital loss equal to the difference
between the sales price and the Option Price.
If a disqualifying disposition of the shares is made (i.e., a disposition
(other than by reason of death) within two years after the first day of the
Option Period in which the shares were purchased) the Participant generally will
recognize ordinary income in the year of disposition in an amount equal to any
excess of the fair market value of the shares at the Date of Exercise over the
Option Price for the shares (even if no gain is realized on the sale or if a
gratuitous transfer is made). Any further gain (or loss) realized by the
Participant generally will be taxed as short-term or long-term capital gain (or
loss) depending on the holding period.
Tax Consequences to the Company or Participating Company. The company, or
the Participating Company for which a Participant performs services, will be
entitled to a deduction only if the Participant makes a disqualifying
disposition of any shares purchased under the plan. In such a case, the company
or such Participating Company can deduct as a compensation expense the amount
that is ordinary income to the Participant provided that, among other things,
(i) the amount meets the test of reasonableness, is an ordinary and necessary
business expense and is not an "excess parachute payment" within the meaning of
Section 280G of the Code, (ii) any applicable reporting obligations are
satisfied and (iii) the one million dollar limitation of Section 162(m) of the
Code is not exceeded.
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NEW PLAN BENEFITS
Although the number of shares that may be purchased under the plan by an
employee is subject to the discretion of that employee (subject to the plan
limits), the following table sets forth the number of shares purchased by the
specified individuals and groups under the plan during 2000. The dollar value of
the shares set forth in the table will depend upon the future market prices of
our stock.
1997 EMPLOYEE STOCK PURCHASE PLAN BENEFITS
SHARES
PURCHASED
DURING
NAME AND POSITION 2000
----------------- ---------
Gordon M. Bethune........................................... 611
Chairman of the Board and Chief Executive Officer
Gregory D. Brenneman........................................ 604
President and Chief Operating Officer
Lawrence W. Kellner......................................... 606
Executive Vice President and Chief Financial Officer
C.D. McLean................................................. 605
Executive Vice President -- Operations
Jeffery A. Smisek........................................... 604
Executive Vice President, General Counsel and Secretary
All current executive officers as a group................... 6,636
All current directors (other than executive officers) as a
group..................................................... 0
All employees (other than executive officers) as a group.... 439,051
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE 1997 EMPLOYEE STOCK PURCHASE PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON
THE ENCLOSED PROXY.
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PROPOSAL 3:
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has been our independent auditors since 1993,
and the board of directors desires to continue to engage the services of this
firm for the fiscal year ending December 31, 2001. Accordingly, the board of
directors, upon the recommendation of the Audit Committee, has reappointed Ernst
& Young LLP to audit the financial statements of Continental and its
subsidiaries for fiscal 2001 and report on those financial statements.
Stockholders are being asked to vote upon the ratification of the appointment.
The fees Ernst & Young LLP charged us for the last fiscal year were: Annual
Audit -- $822,000, Financial Information Systems Design and Implementation
services -- $793,000, and All Other services -- $3,589,000 (including $2,289,000
of Audit Related services). Financial Information Systems Design and
Implementation services consist entirely of fees billed by the Ernst & Young
consulting group prior to its sale on May 27, 2000, to Cap Gemini, a separate
French public company. If stockholders do not ratify the appointment of Ernst &
Young LLP, the Audit Committee and board will reconsider their appointment.
Representatives of Ernst & Young LLP will be present at the stockholders
meeting and will be available to respond to appropriate questions and make a
statement should they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 3
ON THE ENCLOSED PROXY.
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OTHER MATTERS
We have not received notice as required under our bylaws of any other
matters to be proposed at the meeting. Consequently, the only matters to be
acted on at the meeting are those described in this proxy statement, along with
any necessary procedural matters related to the meeting. As to procedural
matters, or any other matters that were determined to be properly brought before
the meeting calling for a vote of the stockholders, it is the intention of the
persons named in the accompanying proxy, unless otherwise directed in that
proxy, to vote on those matters in accordance with their best judgment.
2002 ANNUAL MEETING
Any stockholder who wants to present a proposal at the 2002 annual meeting
of stockholders and to have that proposal set forth in the proxy statement and
form of proxy mailed in conjunction with that annual meeting must submit that
proposal in writing to the Secretary of the company no later than December 4,
2001. Our bylaws require that for nominations of persons for election to the
board of directors or the proposal of business to be considered by the
stockholders at an annual meeting, a stockholder must give timely written notice
thereof. To be timely for the 2002 annual meeting of stockholders, that notice
must be delivered to the Secretary of the company at our principal executive
offices not less than 70 days and not more than 90 days prior to May 15, 2002.
However, if the 2002 annual meeting of stockholders is advanced by more than 20
days, or delayed by more than 70 days, from May 15, 2002, then the notice must
be delivered not earlier than the ninetieth day prior to the 2002 annual meeting
and not later than the close of business on the later of (a) the seventieth day
prior to the 2002 annual meeting or (b) the tenth day following the day on which
public announcement of the date of the 2002 annual meeting is first made. The
stockholder's notice must contain and be accompanied by certain information as
specified in the bylaws. We recommend that any stockholder desiring to make a
nomination or submit a proposal for consideration obtain a copy of our bylaws,
which may be obtained without charge from the Secretary of the company upon
written request addressed to the Secretary at our principal executive offices.
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE BY INTERNET OR
TELEPHONE AS DESCRIBED ABOVE IN THE PROXY STATEMENT, OR SIGN, DATE AND MAIL
PROMPTLY THE ENCLOSED PROXY.
CONTINENTAL'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2000, INCLUDING EXHIBITS, IS AVAILABLE ON THE COMPANY'S WEBSITE AT
WWW.CONTINENTAL.COM. WE WILL FURNISH A COPY OF THE 10-K TO INTERESTED SECURITY
HOLDERS WITHOUT CHARGE, UPON WRITTEN REQUEST. WE WILL ALSO FURNISH ANY EXHIBIT
TO THE 10-K, IF REQUESTED IN WRITING AND ACCOMPANIED BY PAYMENT OF REASONABLE
FEES RELATING TO OUR FURNISHING THE EXHIBIT. REQUESTS FOR COPIES SHOULD BE
ADDRESSED TO THE SECRETARY OF CONTINENTAL AT THE COMPANY'S HEADQUARTERS: 1600
SMITH, DEPT. HQSEO, HOUSTON, TEXAS 77002.
29
33
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
CONTINENTAL AIRLINES, INC.
ESTABLISHMENT
1. The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Continental Airlines, Inc., a Delaware corporation (the "Company"),
has been established, and this Charter approved and adopted, as amended, by the
resolution of the Board adopted on May 23, 2000 pursuant to Article III of the
Bylaws of the Company.
2. As of May 23, 2000, the Committee is comprised of three directors. The
Committee shall at all times consist of at least three directors, and may
consist of such greater number of directors as the Board appoints to the
Committee from time to time by resolution of the Board. Each member of the
Committee shall be a person who qualifies to be a member of an audit committee
pursuant to Paragraph 303.00 of the New York Stock Exchange Listed Company
Manual. The Committee shall be comprised of directors who are independent of
management and the Company. "Independence" shall be defined to conform to the
rules promulgated from time to time by the Securities and Exchange Commission
("SEC") and the New York Stock Exchange ("NYSE") and such determination shall be
confirmed by the Board of Directors. All Audit Committee members must be
financially literate, and at least one member must have accounting or related
financial management expertise. The qualifications of financial literacy and
expertise will be determined and confirmed by the Board of Directors.
3. The members of the Committee shall be appointed or reappointed at the
meeting of the Board immediately following each annual meeting of stockholders
of the Company. Each member of the Committee shall continue as a member thereof
until his or her successor is appointed or until his or her earlier death,
resignation, removal or cessation as a director of the Company.
PROCESS
4. The Chairman of the Board or, if the Chairman of the Board shall fail to
do so, the members of the Committee, shall appoint a Chair of the Committee from
among the members of the Committee. If the Chair of the Committee is not present
at any meeting of the Committee, the members of the Committee shall appoint an
acting Chair for such meeting. The Secretary of the Company, or any Assistant
Secretary of the Company, shall attend each meeting of the Committee and shall
act as secretary of such meeting.
5. The time and place of meetings of the Committee and the procedures to be
followed at such meetings shall be determined from time to time by the members
of the Committee; provided that:
(a) a quorum for meetings shall be a majority of the members, present
in person or by telephone or other telecommunications device permitting all
persons participating in the meeting to speak to and hear each other;
(b) the affirmative vote of a majority of the members of the Committee
shall be the act of the Committee;
(c) the Committee may act by unanimous written consent signed by each
member of the Committee;
(d) the Committee shall keep minutes of its proceedings and shall
deliver the same (and reports and recommendations to the Board) to the
Secretary of the Company;
(e) all minutes of meetings of the Committee, and all unanimous
written consents of the Committee, shall be filed with the records of
meetings of the Committee:
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(f) the Chair, or any member of the Committee, or the Secretary of the
Company at the direction of the Chair of the Committee, the Chairman of the
Board or the Chief Executive Officer of the Company, shall have the
authority to call meetings of the Committee; and
(g) notice of the time and place of every regular meeting of the
Committee (which meeting shall be deemed a regular meeting if it occurs on
the same date as a meeting of the Board of Directors) shall be given in
writing or by facsimile transmission to each member of the Committee at
least five days before any such regular meeting, and notice of the time and
place of every special meeting of the Committee shall be given in writing
or by facsimile transmission to each member of the Committee not later than
the close of business on the second day next preceding the day of the
meeting; provided that in each case a member may waive notice of any
meeting.
AUDIT RELATED DUTIES
6. The Committee shall review and assess at least annually the adequacy of
this Charter in light of applicable law and the rules of the SEC and NYSE. A
copy of this Charter as it may be amended from time to time shall be included in
the Company's proxy statement relating to its annual meeting of stockholders at
least once every three years.
7. The Committee shall review at least annually the internal audit
procedures of the Company and advise and make recommendations to the Board on
auditing practices and procedures.
8. The Committee shall meet at least annually with the Company's
independent auditors, review any report and recommendations of such auditors,
and review the scope of such auditors' proposed audit and audit procedures to be
realized.
9. The Committee shall review at least annually with management and the
Company's independent auditors the effectiveness of the accounting and financial
controls of the Company and its subsidiaries and the implementation of
additional or improved internal control procedures.
10. The Committee shall recommend annually to the Board the appointment or
reappointment of independent auditors for the Company and its subsidiaries and
the remuneration of such auditors, and shall provide the Board with such
information relating thereto, and the reasons for any change in independent
auditors (including the response thereto of the incumbent auditors), as the
Board may request. The independent auditors are ultimately accountable to the
Committee and the Board of Directors, which have ultimate authority in deciding
to engage, evaluate and, if appropriate, terminate their services.
11. The Committee shall obtain annually from the independent auditors a
written communication delineating all relationships between such auditors and
the Company as required by Independence Standards Board No. 1, "Independence
Discussions with Audit Committees." In addition, the Committee shall review with
the independent auditors the nature and scope of any disclosed relationships or
professional services and take, or recommend the Board take, appropriate action
to ensure the continuing independence of the auditors.
12. The Committee shall review the annual financial statements of the
Company, and the related management's discussion and analysis of financial
condition and results of operations, prior to the filing thereof with the
Securities and Exchange Commission. Based on the review and discussion of the
audited financial statements with management and the independent auditors, the
Committee will recommend to the Board whether to include the audited financial
statements in the Company's annual report on Form 10-K.
13. The Committee shall review the Company's quarterly financial statements
with management and the independent auditors prior to their filing with the SEC
to determine that the independent auditors do not take exception to the
disclosure and content of the financial statements, and discuss any other
matters required to be communicated to the Committee by the auditors, including
those matters required by Statement on Auditing Standards No. 61, "Communication
with Audit Committees." The Chair of the Committee may represent the entire
Committee for purposes of this review.
14. The Committee shall, to the extent it determines appropriate, review
from time to time the expenses of the senior officers (and, if it so desires,
any other officers) of the Company charged to the Company or any
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35
of its subsidiaries, and any transactions between the Company or any of its
subsidiaries and any affiliate of the Company.
15. The Committee shall review any material foreign currency risk
management strategies, jet fuel hedging strategies and other material usage by
the Company or any of its subsidiaries of hedges, options, futures, swaps or
other derivative products or securities.
16. The Committee shall review with management and the Company's
independent auditors any material changes in accounting policies or practices
and the impact thereof on the Company's financial statements, and shall review
any material components of the Company's financial statements involving
management's judgment or estimates. The Committee shall also review with the
independent auditors their judgments about the quality of accounting principles
and the clarity of financial disclosure practices used or proposed to be used
and any other matters as may be required by Statement on Auditing Standards No.
61, "Communication with Audit Committees," as applicable and as may be modified
from time to time.
17. The Committee shall prepare or cause to be prepared on its behalf a
report to be included in the Company's proxy statement relating to its annual
meeting of stockholders and addressing the matters required to be included
therein by the rules of the SEC and/or NYSE as then in effect.
18. The Committee shall provide sufficient opportunity (at least annually)
for the internal and independent auditors to meet with the members of the
Committee without members of management present.
ENVIRONMENTAL RELATED DUTIES
19. The Committee shall review the Company's environmental policies,
programs, standards, reporting and accountability in the context of competitive,
legal and operational circumstances.
20. The Committee shall review such reports as it may request from
management or environmental consultants or advisors regarding environmental
risks or liabilities and the nature and extent of the Company's compliance with
environmental laws, rules and regulations, the nature and extent of any
noncompliance and the reasons therefor, and the Company's plans to correct or
remedy any such noncompliance.
21. The Committee shall review periodically with management and legal
counsel any material environmental proceedings, claims or other contingencies
involving the Company or any of its subsidiaries.
22. The Committee shall review such other environmental matters affecting
the Company or any of its subsidiaries as the Committee shall from time to time
determine appropriate or as the Board may specifically direct.
MISCELLANEOUS
23. The Committee shall fulfill such other duties and responsibilities as
assigned to the Committee from time to time by the Board.
24. The Committee shall report on its activities to the Board.
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36
PLEASE MARK
YOUR VOTES AS [X]
INDICATED IN
THIS EXAMPLE
1. Election of Directors:
FOR AGAINST ABSTAIN
FOR ALL NOMINEES WITHHOLD 2. Approval of Amendment to 1997
LISTED BELOW AUTHORITY Employee Stock Purchase Plan: [ ] [ ] [ ]
(EXCEPT AS MARKED TO VOTE FOR ALL NOMINEES
TO THE CONTRARY) LISTED BELOW 3. Ratification of Independent
Auditors: [ ] [ ] [ ]
[ ] [ ]
01 Thomas J. Barrack, Jr., 02 Gordon M. Bethune, 03 David Bonderman, Please mark this box ONLY if stock owned of record [ ]
04 Gregory D. Brenneman, 05 Kirbyjon H. Caldwell, 06 Patrick Foley, or beneficially by you is owned or controlled by
07 Douglas H. McCorkindale, 08 George G. C. Parker, 09 Richard W. persons who are not U.S. citizens (as defined in the
Pogue, 10 William S. Price III, 11 Donald L. Sturm, 12 Karen Hastie Proxy Statement) and indicate the number and class so
Williams, 13 Charles A. Yamarone. owned or controlled by persons who are not U.S.
citizens.
(Instruction: To withhold authority to vote for any nominee, write
that nominee's name on the line below.)
-------------------------------------------------------------------- Please disregard if you have previously
provided your consent decision. [ ]
By checking the box to the right, I consent
to future delivery of annual reports, proxy
statements, prospectuses and other materials
and stockholder communications electronically
via the internet at a webpage which will be
disclosed to me. I understand that the Company
may no longer distribute printed materials to me
for any future stockholder meeting until
such consent is revoked. I understand that I
may revoke my consent at any time by contacting
the Company's transfer agent, Mellon
Investor Services, LLC, Ridgefield Park,
NJ and that costs normally associated with
electronic delivery, such as usage and
telephone charges as well as any costs I
may incur in printing documents, will be my
responsibility.
SIGNATURE OF STOCKHOLDER(S) _________________________ TITLE (IF APPLICABLE) ________________________ DATE _______________________
Note: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
[COMPUTER LOGO] VOTE BY INTERNET OR TELEPHONE [TELEPHONE LOGO]
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF THREE WAYS:
1. VOTE BY INTERNET: Follow the instructions at our Website Address:
http://www.proxyvoting.com/cal
OR
2. VOTE BY PHONE: CALL TOLL-FREE 1-800-840-1208 ON A TOUCH-TONE PHONE
24 hours a day-7 days a week
THERE IS NO CHARGE TO YOU FOR THIS CALL. - HAVE YOUR PROXY CARD IN HAND.
YOU WILL BE ASKED TO ENTER A CONTROL NUMBER, WHICH IS LOCATED IN THE BOX IN THE
LOWER RIGHT HAND CORNER OF THIS FORM
OPTION 1: To vote as the Board of Directors recommends press 1.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
OPTION 2: If you choose to vote against or abstain, press 0
Proposal 1 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
TELEPHONE VOTING IS UNAVAILABLE FOR SHARES NOT HELD BY U.S. CITIZENS (AS
DEFINED IN THE PROXY STATEMENT).
OR
3. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in
the enclosed envelope.
NOTE: IF YOU VOTE BY INTERNET OR TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR
PROXY CARD. THANK YOU FOR VOTING.
37
CONTINENTAL AIRLINES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby authorizes Gordon M. Bethune, Jeffery A. Smisek and
Scott R. Peterson, and each of them, with full power of substitution, to
represent and vote the stock of the undersigned in Continental Airlines, Inc. as
directed and, in their sole discretion, on all other matters that may properly
come before the Annual Meeting of Stockholders to be held on May 15, 2001, and
at any adjournment or adjournments thereof, as if the undersigned were present
and voting thereat. The undersigned acknowledges receipt of the notice of annual
meeting and proxy statement with respect to such annual meeting and certifies
that, to the knowledge of the undersigned, all equity securities of Continental
Airlines, Inc. owned of record or beneficially by the undersigned are owned and
controlled only by U.S. citizens (as defined in the proxy statement), except as
indicated on the reverse side hereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE YOUR
SHARES. AS EXPLAINED ON THE OTHER SIDE OF THIS PROXY, YOU MAY VOTE BY INTERNET
OR BY TELEPHONE, OR YOU MAY EXECUTE AND RETURN THIS PROXY, WHICH MAY BE
REVOKED AT ANY TIME PRIOR TO ITS USE.
This proxy, when properly executed, will be voted in the manner directed
by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF DIRECTORS NAMED ON THE OTHER SIDE OF THIS PROXY
(PROPOSAL 1) AND "FOR" PROPOSALS 2 AND 3.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
38
AMENDMENT TO
CONTINENTAL AIRLINES, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
This Amendment (this "Amendment") to Continental Airlines, Inc. 1997
Employee Stock Purchase Plan (the "Plan") is dated as of February 6, 2001, and
has been approved by the Board of Directors of Continental Airlines, Inc. on
February 6, 2001, subject to approval of this Amendment by the stockholders of
the Company within 12 months of the date hereof as required by the Internal
Revenue Code of 1986, as amended:
Pursuant to paragraph 15 of the Plan, the Plan is hereby amended as follows:
1. The first sentence of paragraph 5 of the Plan is hereby amended to
substitute the phrase "4,250,000 shares" in the place of the phrase
"1,750,000 shares" therein.
2. The last sentence of paragraph 14 of the Plan is hereby amended to
substitute the phrase "December 31, 2010" in the place of the phrase
"December 31, 2001" therein.
3. The Plan, as amended by this Amendment, shall continue in full force and
4. Capitalized terms used in this Amendment without definition are defined in
the Plan and are used in this Amendment with the same meanings as in the
Plan.
IN WITNESS WHEREOF, the undersigned has executed this Amendment on behalf
of the Company as of February 6, 2001.
CONTINENTAL AIRLINES, INC.
By:
------------------------------
Jeffery A. Smisek
Executive Vice President and
General Counsel