Document:

COMPENSATION ADJUSTMENT AGREEMENT

EXHIBIT 10.8(a)

COMPENSATION REDUCTION AGREEMENT

THIS COMPENSATION REDUCTION AGREEMENT (this "Agreement") is entered into as of December 22, 2004, by and between Continental Airlines, Inc., a Delaware corporation ("Company"), and James E. Compton ("Executive").

W I T N E S S E T H:

WHEREAS, Company and Executive have heretofore entered into that certain Employment Agreement dated as of August 12, 2004 (the "Employment Agreement"); and

WHEREAS, Company has heretofore granted to Executive various awards under Company's Incentive Plan 2000, as amended (the "Incentive Plan 2000"), and the programs maintained under the Incentive Plan 2000, including Company's Annual Executive Bonus Program, as amended (the "Bonus Program"), Company's Long Term Incentive and RSU Program, as amended (the "LTIP/RSU Program"), and Company's Officer Retention and Incentive Award Program, as amended (the "Retention Program") (the Incentive Plan 2000, the Bonus Program, the LTIP/RSU Program and the Retention Program are collectively referred to herein as the "Compensation Programs"); and

WHEREAS, as part of Company's continuing efforts to reduce its costs of operation, Company desires to reduce the compensation it provides to Executive, and Executive is willing to accept such reduction, in an effort to enhance the financial health of Company and to preserve employment opportunities for Executive and others with Company.

NOW, THEREFORE, in consideration of the premises set forth above, the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and notwithstanding any provision to the contrary in the Employment Agreement, the Compensation Programs or the award notices issued to Executive under the Compensation Programs, Company and Executive hereby agree as follows:

	REDUCTION OF BASE SALARY:  Subject to Executive's continuous employment by Company from the date of this Agreement to February 28, 2005, commencing on February 28, 2005, and continuing until such time, if any, as the parties may agree to a different amount, Executive's annual base salary shall be reduced by 20% of the amount in effect on the date hereof (i.e., from Executive's current base salary of $450,000 to a reduced based salary of $360,000).  Executive acknowledges that such reduction in annual base salary will also result in a reduction in certain compensation and other benefits provided by Company to Executive pursuant to the terms of Company's benefit plans and programs, including, without limitation, under the Bonus Program, the LTIP/RSU Program, and Executive's supplemental executive retirement plan.

	REDUCTION IN OUTSTANDING AWARDS:  Set forth on Exhibit A attached hereto is a list of the stock options, restricted stock awards, RSUs (as such term is defined in the LTIP/RSU Program) and PARs (as such term is defined in the Retention Program) that have been awarded to Executive by Company prior to the date of this Agreement and in which Executive will not have a 100% vested and nonforfeitable interest as of the close of business on February 28, 2005 (determined based on the terms of the Compensation Programs and the applicable award notices issued thereunder, and assuming Executive's continuous employment by Company from the date of this Agreement until February 28, 2005).  Subject to Executive's continuous employment by Company from the date of this Agreement through February 28, 2005, effective as of the close of business on February 28, 2005, Executive hereby surrenders and forfeits to Company 20% of the portion of each award that is listed on Exhibit A in which Executive will not have a 100% vested and nonforfeitable interest as of the close of business on February 28, 2005 (labeled on Exhibit A as "Nonvested").  The surrender and forfeiture of the applicable percentage of the nonvested portion of each such award shall be applied separately as of each vesting date under such award that will occur after February 28, 2005.  For example, if, prior to the date of this Agreement, Executive has been granted a stock option with respect to 1,000 shares of Company's common stock and, as of the close of business on February 28, 2005, Executive has the vested right to exercise such option with respect to only 200 shares, then, as of the close of business on February 28, 2005, Executive shall surrender and forfeit to Company the right to purchase 160 shares of Company's common stock under such option (20% multiplied by 800 unvested option shares).  Further, if the original terms of such stock option provide that it was to become exercisable with respect to 200 additional shares on each of four dates that will occur after February 28, 2005, then such stock option shall become exercisable with respect to only 160 additional shares on each of such dates as the right to exercise such option with respect to 40 shares on each such vesting date has been surrendered and forfeited to Company pursuant to this paragraph.  If the provisions of this paragraph would result in the surrender and forfeiture of a fraction of a share or other unit subject to an award, then, notwithstanding the preceding provisions of this paragraph, such fractional share or unit shall not be surrendered and forfeited.

	NOTICES:  For purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be given in the same manner as indicated in the Employment Agreement.

	ASSIGNMENT:  This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise.  Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit, or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.

	AMENDMENT:  This Agreement may not be modified except by an agreement in writing executed by both Company and Executive.

	GOVERNING LAWS:  This Agreement shall be subject to and governed by the laws of the State of Texas, without giving effect to principles of conflicts of law.

	VALIDITY:  In the event that any portion or provision of this Agreement is found to be invalid or unenforceable, the other portions or provisions hereof shall not be affected thereby.

	COUNTERPARTS:  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

	EFFECT OF AGREEMENT:  Except as provided in any signed written agreement contemporaneously or hereafter executed by Company and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof.  Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect.  This Agreement constitutes an amendment to the Employment Agreement and, to the extent applicable, the award notices that have been issued to Executive prior to the date hereof pursuant to the Compensation Programs.  Neither this Agreement nor any action taken by Company in accordance with the terms of this Agreement shall give Executive any right to terminate Executive's employment under the Employment Agreement under circumstances that would give rise to the payment of a Termination Payment (or the payment or provision of related severance amounts and benefits) under the Employment Agreement.  Further, nothing in this Agreement shall confer to Executive any right of future employment with Company or any of its affiliates.

[Signatures begin on next page.]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
"COMPANY"

CONTINENTAL AIRLINES, INC

 

By:      /s/ Michael H. Campbell
Name:  Michael H. Campbell

Title:   Senior Vice President -
Human Resources and

Labor Relations

"EXECUTIVE"

 

 

/s/ James E. Compton____

JAMES E. COMPTON

 

 

EXHIBIT A

TO

COMPENSATION REDUCTION AGREEMENT

Stock Options

	
Date of Grant of Option
	
Nonvested Options as of February 28, 2005
	
Nonvested Options to be Surrendered and Forfeited as of February 28, 2005

	
6/28/2002
	
7,402
	
1,480

	 	 	 
	 	 	 

Restricted Stock Awards

	
Date of Grant of Award
	
Nonvested Shares as of February 28, 2005
	
Nonvested Shares to be Surrendered and Forfeited as of February 28, 2005

	
4/9/2002
	
3,124
	
625

	 	 	 
	 	 	 

RSUs

	
Performance Period Relating to the Award
	
Total Number of RSUs subject to Award (all Nonvested)
	
RSUs to be Surrendered and Forfeited as of February 28, 2005

	
April 1, 2004 to June 30, 2005
	
40,000
	
8,000

	
April 1, 2004 to March 31, 2006
	
40,000
	
8,000

	
April 1, 2004 to December 31, 2007
	
50,000
	
10,000

 

PARs

	
Date of Grant of Award
	
Investment to which Award Relates
	
Nonvested PARs as of February 28, 2005
	
Nonvested PARs to be Surrendered and Forfeited as of February 28, 2005

	
11/1/2001
	
LastMinuteTravel.com, Inc.
	
1,102
	
220

	
2/24/2003
	
Patheo, Inc.
	
3,145
	
629

	
11/13/2003
	
Hotwire, Inc.
	
$9,649.00
	
$1,929.80

	
11/15/2004
	
Orbitz, Inc.
	
$31,625.48
	
$6,325.10SEVERANCE AGREEMENT

EXHIBIT 10.10(c)

EARLY RETIREMENT AGREEMENT

This Early Retirement Agreement ("Agreement") is entered into between MICHAEL H. CAMPBELL ("Executive") and Continental Airlines, Inc. ("Continental" or the "Company"), and is effective on the Effective Date as defined below.

WHEREAS, Executive has advised the Company that he will retire at the end of 2004; and

WHEREAS, the Company wishes to retain the services of Executive for a period of time after his retirement to represent the Company in labor matters; and

WHEREAS, the Company and Executive are parties to that certain Employment Agreement dated as of July 25, 2000, as amended by letter agreements dated April 9, 2002, and March 12, 2004 between the Company and Executive (as amended, the "Employment Agreement"); and

WHEREAS, Executive is desirous of receiving additional consideration upon his retirement beyond that provided for in his Employment Agreement, and the Company is desirous of obtaining the services of Executive after his retirement and the releases and other agreements of Executive contained in this Agreement; 

NOW, THEREFORE, IT IS AGREED between Executive and Continental as follows:

	The terms of this Agreement are in addition to the terms contained in the Employment Agreement, and nothing herein shall affect any of Executive's or Continental's rights or obligations under the Employment Agreement, except as expressly set forth herein.  Executive will retire from the Company on December 30, 2004 (the "Retirement Date").  Each of Executive and Continental agree that Executive's separation from employment with Continental is voluntary and shall be treated as a resignation by Executive pursuant to paragraph 2.3(vii) under the Employment Agreement, and as a retirement under Executive's outstanding stock option awards, with the date of such retirement being the Retirement Date, but not as a retirement under the Continental Retirement Plan or any other compensation program of the Company, unless Executive is otherwise eligible for retirement thereunder.  Accordingly, pursuant to the Employment Agreement, Executive (and his spouse and eligible dependents, including future eligible dependents) shall, subject to the terms of the Employment Agreement, be provided Flight Benefits (as such term is defined in the Employment Agreement) and Continuation Coverage (as such term is defined in the Employment Agreement) for the remainder of Executive's lifetime. 

 

 

	 In addition, Continental shall pay Executive the amount of his Annual Bonus (as such term is defined in the Company's Annual Executive Bonus Program (the "Bonus Program")) for the 2004 fiscal year under the Bonus Program payable if and when other participants in the Bonus Program are paid such bonus.

	Executive hereby notifies the Company that Executive elects, pursuant to paragraph 3.5(iii) of the Employment Agreement, to take an Early Retirement Benefit under the supplemental executive retirement plan described in paragraph 3.5 of the Employment Agreement ("SERP") in the form of a Lump-Sum Payment (as such terms are defined in the SERP).  The SERP benefit will be paid to Executive on the Retirement Date. 

 

	Executive agrees that all his outstanding stock option grants are listed on Exhibit A hereto.  As provided in the applicable stock option grant documents upon a retirement of Executive, all options will vest effective on the Retirement Date and Executive will have until the close of business one year after the Retirement Date to exercise his options.  At the close of business on the date that is one year after the Retirement Date, all of Executive's options will expire whether or not exercised.

 

	As provided in the applicable grant documents with respect to Executive's restricted stock, all shares of Executive's restricted stock that are not vested as of the Retirement Date will be forfeited on the Retirement Date.  

	Executive agrees that, effective as of the Retirement Date, all of Executive's nonvested PARs granted to Executive under the Officer Retention and Incentive Award Program ("Retention Program") will be cancelled and Executive will have no rights to receive any further payments with respect to such PARs.

	As provided in the applicable award documents and terms of the respective programs, all of Executive's outstanding awards under the Company's Long Term Incentive Performance Award Program and the Company's Long Term Incentive and RSU Program will be forfeited on the Retirement Date.

	Executive agrees to represent the Company in labor matters as requested by the Company, including, without limitation, the negotiation of the Company's collective bargaining agreements, for a period of at least one year from the Retirement Date (the "Services").  Executive agrees to use his best efforts to obtain an Of Counsel position with the law firm of Ford & Harrison, through which he will provide the Services. The Company agrees to compensate Executive or, if Executive is employed by Ford & Harrison, Ford & Harrison for the Services at an hourly rate consistent with the senior partner rates charged by Ford & Harrison to its other airline clients.  Further, the Company agrees to reimburse Executive or, if Executive is employed by Ford & Harrison, Ford & Harrison for all reasonable out-of-pocket expenses incurred by Executive and Ford & Harrison in providing the Services to extent such expenses would typically be reimbursed by a client of Ford & Harrison. In addition to the fees described above, and as further consideration of Executive's agreement to so represent the Company, the Company will pay Executive $1,200,000, payable on the Retirement Date.

	Executive agrees, upon reasonable notice, to furnish such information and assistance, including but not limited to the provision of informal information, testimony at deposition and/or at trial, to Continental and its affiliates as Continental reasonably requests in connection with any potential or actual litigation in which it or any of its affiliates is, or may become, a party.   Continental shall pay Executive an amount per day of assistance as the parties may reasonably agree, not to exceed an amount equal to Executive's base salary at Continental at December 30, 2004 divided by 250, and shall reimburse Executive for his reasonable expenses incurred in connection with rendering such assistance. 

	Executive agrees not to make any public statement concerning Continental or its subsidiaries or affiliates or its or their respective stockholders, officers, directors, employees or agents unless the statement is approved in advance in writing by Continental's public relations and legal departments.  Executive agrees not to make any derogatory comments or references about Continental or its subsidiaries or affiliates, or their respective stockholders, officers, directors, employees or agents.

	Executive acknowledges and agrees that Executive would not be entitled to certain of the payments and benefits provided for in this Agreement, including in paragraph 4 of this Agreement (the "Separation Benefits"), upon Executive's voluntary termination of employment with the Company on the Retirement Date in the absence of this Agreement.

	In consideration of the Separation Benefits, Executive hereby releases Continental and each of its subsidiaries and affiliates and their respective stockholders, officers, directors, employees, representatives, agents and attorneys (collectively, "Releasees") from any and all claims or liabilities, known or unknown, of any kind, including, without limitation, any and all claims and liabilities relating to Executive's employment by, or services rendered to or for, Continental or any of its subsidiaries or affiliates, or relating to the cessation of such employment or under the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 1981, the Texas Commission on Human Rights Act, and any other statutory, tort, contract or common law cause of action, other than claims or liabilities arising from a breach by Continental of this Agreement or the Employment Agreement or of its obligations under Executive's outstanding grants of stock options or restricted stock or awards under the Retention Program (in each case as modified by this Agreement).  Continental hereby releases Executive from any and all claims or liabilities, known or unknown, of any kind in any way relating to or pertaining to Executive's employment by, or services rendered to or for, Continental or any of its subsidiaries or affiliates, other than fraud or intentional malfeasance harmful to Continental or any Releasee or claims arising from a breach by Executive of this Agreement or the Employment Agreement or Executive's obligations under Executive's outstanding grants of stock options or restricted stock or awards under the Retention Program (in each case as modified by this Agreement).  These releases are to be broadly construed in favor of the released persons.  The releases in this paragraph do not apply to any rights or claims that may arise after the date of execution of this Agreement by Executive.  Both parties agree that this Agreement is not and shall not be construed as an admission of any wrongdoing or liability on the part of either party.

	Except as specifically set forth herein, the obligations created by this Agreement, the Employment Agreement, and Executive's outstanding option grants, grants of restricted stock and awards under the Retention Program (PARs) are not released.  Executive further agrees that the amounts and covenants contained herein are of greater value than anything to which Executive is already entitled, and Executive will not file or permit to be filed on his behalf any claim or lawsuit relating to his employment or its termination, other than to enforce the provisions of this Agreement, the Employment Agreement, the option grants, grants of restricted stock or the awards to Executive under the Retention Program (in each case as modified by this Agreement).  Executive understands and agrees that, except for any vested benefits he may have pursuant to the Employee Retirement Income Security Act, he will not be entitled to any other compensation beyond that which Continental has agreed to provide herein, in the Employment Agreement or pursuant to the option grants.,.

	Executive has twenty-one (21) days to review and consider this Agreement.  This Agreement will become effective, enforceable and irrevocable seven days after the date on which Executive signs it (the "Effective Date").  During the seven-day period after Executive signs this Agreement, Executive may revoke this Agreement in writing addressed to the undersigned.  Of course, if Executive exercises his right to revoke, this Agreement shall be null and void and he will forfeit his right to receive amounts or other benefits that would otherwise be paid or provided to him hereunder. 

	Executive represents and agrees that he has been advised to and had the opportunity to thoroughly discuss all aspects of this Agreement with his private attorney, that he has carefully read and fully understands all of the provisions of this Agreement, and that he is knowingly and voluntarily entering into this Agreement.

	The parties acknowledge that, in the event of a breach of this Agreement, damages would not provide an adequate remedy and that the non-breaching party may seek specific performance of any provision contained herein.  If any party to this Agreement brings legal action to enforce the terms of this Agreement, the party which prevails in such legal action, in addition to the remedy or relief obtained in such action, shall be entitled to recover its or his expenses incurred in connection with such legal action, including without limitation, costs of court and attorneys' fees.

	The Company may withhold all applicable taxes from payments to be made hereunder.

	Executive agrees to hold in confidence and not disclose to any person or otherwise misuse business plans, trade secrets, financial information, or any other Confidential or Proprietary Information of Continental or its subsidiaries or affiliates.  "Confidential or Proprietary Information" means any information not generally known in the relevant trade or industry which was learned, discovered, developed, conceived, originated or prepared during Executive's employment with Continental or its subsidiaries or affiliates.

	The terms and conditions of this Agreement constitute the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersede any and all prior agreements and understandings, written or oral, between the parties with respect thereto. This Agreement shall be governed by the laws of the State of Texas.

*******

IN WITNESS WHEREOF, the undersigned have executed this Agreement, to be effective on the Effective Date.

Date of execution by Executive:EXECUTIVE

October 29, 2004/s/ Michael H. Campbell             

Michael H. Campbell

CONTINENTAL AIRLINES, INC.

 
By:  /s/ Jeffrey J. Misner             

Jeffrey J. Misner

Executive Vice President & 

Chief Financial Officer

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