2002 Stock Incentive Plan

 

 

EX-10.1 2 xjt013106e991.htm EXPRESSJET HOLDINGS, INC. EXHIBIT 10.1

EXPRESSJET HOLDINGS, INC.
LONG TERM INCENTIVE PLAN

            1.         Purpose.  The purpose of this ExpressJet Holdings, Inc. Long Term Incentive Plan (the “Plan”) is to encourage key employees of ExpressJet Holdings, Inc., a Delaware corporation (the “Company”), and its subsidiaries to devote their best efforts to the success of the Company and its subsidiaries.  In order to effectuate this purpose, the Board of Directors of the Company (the “Board”) has caused the Company to adopt this Plan, effective January 1, 2006.

            2.         Definitions.  As used herein, the following capitalized terms shall have the meanings set forth below:

                        (a)        “Base Salary” with respect to any Participant, shall mean the Participant’s base rate of pay during the Incentive Period, excluding any overtime, regional differentials, equity-based compensation, any payments under this Plan, any other bonuses and any other special payments

                        (b)        “Cause” with respect to any Participant, shall mean “Cause” as defined in such Participant’s employment agreement with the Company if such an agreement exists and contains a definition of Cause, or, if no such agreement exists or such agreement does not contain a definition of Cause, then Cause shall mean any of the following events that the Board has determined, in good faith, has occurred: (i) the Participant's continual or deliberate neglect of the performance of the Participant's material duties, including the failure to follow any lawful directive of the Board or the Participant’s supervisors; (ii) the Participant's failure to devote substantially all of the Participant's working time to the business of the Company and its subsidiaries; (iii) the Participant's engaging willfully in misconduct in connection with the performance of any of the Participant's duties, in any material respect, including, without limitation, the misappropriation of funds or securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company or its subsidiaries; (iv) the Participant's willful breach of any confidentiality or nondisclosure agreements with the Company (including this Agreement) or the Participant's violation, in any material respect, of any code or standard of behavior generally applicable to employees or executive employees of the Company; (v) the Participant's active disloyalty to the Company, including, without limitation, willfully aiding a competitor or improperly disclosing confidential information; or (vi) the Participant's engaging in conduct that may reasonably result in material injury to the reputation of the Company, including conviction or entry of a plea of nolo contendre for a felony or any crime involving fraud, embezzlement or moral turpitude under federal, state or local laws.

                        (c)        “Disability” with respect to any Participant, shall mean the Participant’s total and permanent disability within the meaning of the Company’s long-term disability plan in which the Participant participates, as determined by the Company.

                        (d)        “Incentive Bonus” shall mean the amount of the incentive bonus which is awarded to a Participant, determined in accordance with and subject to the terms and conditions of this Plan.



                        (e)        “Incentive Bonus Period” shall mean the period of employment determined by the Plan Administrator in its sole discretion which shall serve as the basis for a Participant’s Incentive Bonus, provided that for Participants who are designated as Participants in 2006 and who were employed by the Company or any of its subsidiaries in an eligible position on January 1, 2006, the Incentive Bonus Period shall commence on January 1, 2006 and shall end on such date as shall be determined by the Plan Administrator in its sole discretion.

                        (f)         “Participant” shall mean an individual who is designated by the Plan Administrator in writing as a participant in the Plan.

                        (g)        “Participation Agreement” shall mean a written notice and agreement provided by the Plan Administrator designating an employee as a Participant.  The Participation Agreement shall be substantially in the form set forth in Exhibit A hereto. The Participation Agreement shall designate the employee as a Participant and shall state the Participant’s Incentive Bonus Period, Participant’s Incentive Bonus, the Vesting Dates and any other terms and conditions that apply to the Incentive Bonus.

                        (h)        “Plan Administrator” shall mean the Human Resources Committee of the Board.

                        (i)         “Vesting Date shall mean one or more dates during the Incentive Bonus Period, as determined by the Plan Administrator, upon which a Participant’s right to receive all or any specified portion of the Participant’s Incentive Bonus shall vest and become non-forfeitable, subject to the terms and conditions of this Plan.

            3.         Term and Cost of the Plan. The Plan shall remain in effect until the later of June 30, 2009 or the date on which the last Incentive Bonus awarded under this Plan is paid.  The total value of all Incentive Bonuses payable under this Plan shall not exceed Fifteen Million Dollars ($15,000,000), with any shares of the Company’s Common Stock that are used to pay any Incentive Bonus being valued based on the closing price of a share of the Company’s Common Stock as reported in the Wall Street Journal for the first trading date immediately prior to the date on which the Plan Administrator makes the award of such Incentive Bonus.

            4.         Participation. Participation in the Plan shall be limited to the Company’s officers, Senior Director-level employees, Director-level employees, Senior Manager-level employees and certain Manager-level employees who the Plan Administrator shall from time to time, in its sole discretion, determine are key employees of the Company or any of its subsidiaries.   As soon as practicable after the Plan Administrator determines that an eligible employee shall be a Participant, the Plan Administrator shall provide a Participation Agreement to the Participant.

            5.         Incentive Bonus.  Each Participant shall be entitled to receive an Incentive Bonus in accordance with and subject to the terms and conditions of this Plan.

                        (a)        Determination of Incentive Bonus Awards.  The amount to be awarded as an Incentive Bonus to each Participant under the terms of this Plan shall be determined by the Plan Administrator in its sole discretion.  Awards shall be based upon the Participant’s Base Salary during the Incentive Bonus Period.  Incentive Bonuses shall be paid in accordance with the Vesting Dates determined by the Plan Administrator and shall be adjusted to reflect changes in a Participant’s position and Base Salary during the Performance Period, as determined by the Plan Administrator in its sole discretion.



                        (b)        Uniformity of Payment. In no event shall the Company be obligated to pay to any Participant or Participants any amount under this Plan by reason of payment of Incentive Bonuses to any other Participant or Participants under this Plan.

                        (c)        Right to Payment.  Except as provided otherwise in Section 6 of this Plan, Participants shall have no right to receive any Incentive Bonus payment with respect to any Vesting Date unless they are employed by the Company or one of its subsidiaries in an active status or on an authorized and qualified family, medical or military leave of absence on such Vesting Date.  Except as provided otherwise in Section 6 of this Plan, any cash portion of a Participant’s Incentive Bonus or portion thereof shall be paid within ten (10) business days following the Vesting Date of the Incentive Bonus or such portion thereof.  Under no circumstances shall payment of an Incentive Bonus or any portion thereof be made more than two and one-half (2 ˝) months after the end of the calendar year in which the Vesting Date occurs.  The applicable Restricted Stock Agreement will govern the terms of any portion of an Incentive Bonus payable in common stock.

                        (d)        Deferred Compensation.  No payment under this Plan is intended to constitute nonqualified deferred compensation within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.  However, any cash payment made under this Plan shall be subject to deferral under the Company’s 401(k) Savings Plan.

                        (e)        Form of Payment.  Each Incentive Bonus and portions thereof shall be paid in cash, or in shares of the Company’s Common Stock, or in a combination of both, as determined by the Plan Administrator in its sole discretion. Any payments made in shares of Common Stock shall be paid under the Company’s 2002 Stock Incentive Plan, shall be subject to such restrictions as the Plan Administrator shall determine, in its sole discretion, and shall be reflected in a Restricted Stock Agreement.

            6.         Termination of Employment.

                        (a)        Termination By Reason of Death or Disability.   As to the cash portion of an Incentive Bonus, if at any time a Participant’s employment is terminated prior to any Vesting Date due to the Participant’s death or Disability, the Participant (or the Participant’s named beneficiaries or devisees or heirs in the case of the Participant’s death) shall be paid the amount of the unpaid Incentive Bonus that would be payable if the Participant were to be employed by the Company at the next Vesting Date; such amount shall be paid within thirty (30) business days after the date of the Participant’s termination of employment and the Participant shall be paid no other amounts under this Plan.  The applicable Restricted Stock Agreement will govern the terms of any portion of an Incentive Bonus payable in common stock.

                        (b)        Termination Without Cause Before Vesting Date.   As to the cash portion of an Incentive Bonus, if a Participant’s employment is terminated prior to any Vesting Date by the Company without Cause, the Participant shall be paid the amount of the unpaid Incentive Bonus that would be payable if the Participant were to be employed by the Company at the next Vesting Date; such amount shall be paid within thirty (30) business days after the date of the Participant’s termination of employment and the Participant shall be paid no other amounts under this Plan.  The applicable Restricted Stock Agreement will govern the terms of any portion of an Incentive Bonus payable in common stock.



                        (c)        Termination for Cause or Resignation.   If a Participant’s employment is terminated by the Company for Cause or due to the Participant’s resignation prior to any  Vesting Date, the Participant shall not have any right to receive the Incentive Bonus that would otherwise have become payable on such Vesting Date or any Vesting Date thereafter.

            7.         No Right To Continued Employment; Impact on other Plans.  Nothing contained in this Plan shall (i) confer upon any Participant any right to continue in the employ of the Company or any of its subsidiaries, (ii) constitute any contract or agreement of employment, (iii) interfere in any way with the right of the Company or any of its subsidiaries to terminate a Participant’s employment at any time, with or without cause, or (iv) affect in any way a Participant’s rights under any other plan or agreement with the Company or any of its subsidiaries, including, without limitation, any employment or severance agreement.  Incentive Bonuses paid under this Plan shall not be taken into account to increase any benefits provided, or continue coverage, under any other plan, program, policy or arrangement of the Company or its subsidiaries, except as otherwise expressly provided in such other plan, program, policy or arrangement.

            8.         Successors; Non-Transferability.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume this Plan and all obligations of the Company hereunder in the same manner and to the same extent that the Company would be so obligated if no such succession had taken place.  No right or interest of any Participant under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner, except by beneficiary designation, will or the laws of descent and distribution.

            9.         Non-Disclosure.  This Plan is made available to a limited group of employees of the Company and it subsidiaries and disclosure of awards under this Plan by Participants to anyone, including other employees of the Company and its subsidiaries, other than the Participant’s spouse and financial and legal advisors, could cause undue harm to the Company.  Accordingly, a Participant shall not make any disclosures concerning awards under the Plan to anyone other than the Participant’s spouse, and/or the Participant’s legal and financial advisors or (ii) made such a disclosure to the Participant’s spouse and financial and legal advisors without advising the recipient of the disclosure of the nondisclosure provisions of this Plan and obtaining their agreement to comply with the nondisclosure provisions.  The Plan Administrator shall have the authority to forfeit any Participant’s rights to receive any payments under this Plan if the Company determines that the Participant has violated this provision of the Plan.

            10.       Plan Administration.  The Plan shall be administered by the Plan Administrator.  Subject to the terms of this Plan, the Plan Administrator shall have sole authority to interpret this Plan and to make all other determinations deemed necessary or advisable regarding the administration of this Plan.  All determinations and interpretations of the Plan Administrator shall be final, binding and conclusive on the Company, all Participants and all other interested persons.  Neither the Plan Administrator nor any employee, officer or director of the Company to whom any duty or power relating to this Plan has been delegated shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or the Incentive Bonuses, and the Company shall indemnify and hold harmless each such individual with respect to any such authorized action, determination or interpretation.



            11.       Amendment and Termination.  By action of the Board, in its sole discretion, the Company may terminate, amend or modify this Plan at any time; provided, however, that no termination, amendment, or modification of this Plan shall adversely affect in any material way any Incentive Bonus previously awarded pursuant to this Plan without the prior written consent of the Participant.

            12.       Taxes.  All amounts payable hereunder shall be subject to applicable federal, state and local tax withholding.

            13.       Unsecured General Creditors.  Participants and their beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company.  Amounts payable under the Plan are not and will not be transferred into a trust or otherwise set aside.  Any accounts under the Plan are for bookkeeping purposes only and do not represent a claim against the specific assets of the Company.  For purposes of the payment of benefits under this Plan, any and all of the Company’s assets shall be, and remain, the general, unpledged unrestricted assets of the Company.  The Company’s obligations under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

            14.       Governing Law.  This Plan shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of Texas (without regard to the conflicts of laws principles thereof) and applicable Federal law.

            15.       Severability.  The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect.

            16.       Captions. The captions preceding the sections of the Plan have been inserted solely as a matter of convenience and shall not define or limit the scope or intent of any section or provision of the plan.




Exhibit A

[Form of Participation Agreement]

[Insert Date]

[Insert Name and Address

of Employee]

Dear ______________,

            As you may know, ExpressJet Holdings, Inc. (the "Company") has adopted a Long Term Incentive (the “Plan”) in order to encourage certain key employees to devote their best efforts to the success of the Company and its subsidiaries. 

            You have been designated as a Participant in the Plan and have been awarded the Incentive Bonus outlined below.   A copy of the Plan is attached for your information.  I am happy to discuss any questions you might have regarding your Incentive Bonus; however, please note that you may not disclose your participation in the Plan and the terms and conditions of your Incentive Bonus to any other persons, except as set forth in Section 9 of the Plan.  A violation of Section 9 is grounds for the forfeiture of your Incentive Bonus.

Incentive Bonus

            Except as provided below, you will be eligible to receive an Incentive Bonus equal to  __ % of your Base Salary during the Incentive Period at each Vesting Date during the Incentive Period if you continue to be employed by the Company and its subsidiaries at each Vesting Date.  Your Incentive Period is the ______ year period beginning on _________________ and ending on _________________and your Vesting Dates are _________________________________________________.

            However, you will only be eligible to receive an Incentive Bonus with respect to any Vesting Date if:

     

•   

you are employed by the Company or one of its subsidiaries in an active status on each  Vesting Date or are on an authorized and qualified family, medical or military leave of absence on such date,  or

 

  

 

 

•   

The Company or its subsidiary by which you are employed terminates your employment prior to such Vesting Date for reasons that do not constitute Cause, as defined in Section 2(b) of the Plan. 



            Your Incentive Bonus will be paid to you in [cash] [$______ cash and ______ shares of the Company’s Common Stock.  The shares of Common Stock will be restricted pursuant to the terms of the attached Restricted Stock Agreement and will be governed by the terms of such agreement].

            You will not be paid your Incentive Bonus with respect to any Vesting Date if you resign from employment or if your employment is terminated for Cause prior to such Vesting Date.

            As to the cash portion of your Incentive Bonus, if your employment is terminated prior to a Vesting Date by reason of your death or disability, you, (or in the event of your death, your named beneficiaries or your heirs or devisees) will be paid that portion of your unpaid Incentive Bonus that would have vested at such Vesting Date. Your Restricted Stock Agreement will govern the terms of any portion of an Incentive Bonus payable in common stock.

            Nothing contained in this letter agreement conveys upon you the right to continue to be employed by the Company and its subsidiaries, constitutes a contract or agreement of employment, or restricts the right of the Company and its subsidiaries to terminate your employment at any time, with or without Cause.  This letter agreement is subject to the Plan, which governs the terms and conditions of your Incentive Bonus

            Please indicate your acceptance of the terms and conditions set forth in this letter agreement and the attached Plan, by signing and dating this letter below and returning it to me.

Sincerely yours,

[Officer of ExpressJet]

Agreed and Accepted.

______________________________            _______________
[Name]                                                            Date


 

 

  

EXPRESSJET HOLDINGS, INC.

2002 STOCK INCENTIVE PLAN

                                            I.                                                                                                                                                                                                                                           I.            PURPOSE

The purpose of the ExpressJet Holdings, Inc. 2002 Stock Incentive Plan is to provide a means through which ExpressJet Holdings, Inc., a Delaware corporation, and its subsidiaries may attract able persons to serve as directors, or to enter or remain in the employ of the Company (as defined below) or its subsidiaries, and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company and its subsidiaries rest, and whose present and potential contributions to the welfare of the Company and its subsidiaries are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company and its subsidiaries. A further purpose of the Plan is to provide such individuals with additional incentive and reward opportunities designed to enhance the profitable growth of the Company and its subsidiaries. Accordingly, the Plan provides that the Company may grant to certain employees or directors Restricted Stock Awards, Options, or any combination of the foregoing, as hereinafter set forth.

  1. DEFINITIONS

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

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

    1. "Award" means, individually or collectively, an Option or Restricted Stock Award.
    2. "Board" means the Board of Directors of the Company.
    3. "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations promulgated under such section.
    4. "Committee" means a committee of, and appointed by, the Board comprised solely of two or more outside Directors (within the meaning of the term "outside directors" as used in section 162(m) of the Code and within the meaning of the term "Non-Employee Director" as defined in Rule 16b-3); provided, however, that (i) for the period preceding the time at which the Company becomes a separate publicly held corporation (within the meaning of Treasury regulation section 1.162-27(c)(1)), the Board may appoint the Human Resources Committee of Continental Airlines, Inc. to serve as the Committee, and (ii) in the absence of the Board's appointment of a committee pursuant to the preceding provisions of this sentence, the Board shall serve as the Committee.
    5. "Common Stock" means the common stock, $.01 par value, of the Company, or any security into which such Common Stock may be changed by reason of any transaction or event of the type described in Section IX(b).
    6. "Company" shall mean ExpressJet Holdings, Inc., a Delaware corporation, or any successor thereto.
    7. "Director" means an individual elected to the Board by the stockholders of the Company or by the Board under applicable corporate law who is serving on the Board on the date the Plan is adopted by the Board or is elected to the Board after such date.
    8. "employee" means any person (which may include a Director) in an employment relationship with the Company or any subsidiary.
    9. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
    10. "Grant Document" means the document or documents evidencing an Award under the Plan, which may be either an agreement between the Company and the Holder as to the Award (with any amendments thereto) or a notice of grant of the Award from the Company to the Holder (including any attached statement of the terms and conditions of the Award and any modifications thereto made in accordance with the Plan).
    11. "Holder" means an employee or a non-employee Director who has been granted an Award.
    12. "Market Value per Share" means, as of any specified date, the closing sale price of the Common Stock on that date (or, if there are no sales on that date, the last preceding date on which there was a sale) in the principal securities market in which the Common Stock is then traded. If the Common Stock is not publicly traded at the time a determination of "Market Value per Share" is required to be made hereunder, the determination of such amount shall be made by the Administrator in such manner as it deems appropriate. Notwithstanding the foregoing, the "Market Value per Share" on the date of an initial public offering of Common Stock shall be the offering price under such initial public offering.
    13. "Option" means an Award granted under Section VII.
    14. "Plan" means the ExpressJet Holdings, Inc. 2002 Stock Incentive Plan, as amended from time to time.
    15. "Restricted Stock" means shares of Common Stock granted pursuant to a Restricted Stock Award as to which neither the substantial risk of forfeiture nor the restriction on transfers referred to in Section VIII has expired.
    16. "Restricted Stock Award" means an Award granted under Section VIII.
    17. "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as such rule may be amended from time to time, and any successor rule, regulation or statute fulfilling the same or similar function.
    18. "subsidiary" means any entity (other than the Company) with respect to which the Company, directly or indirectly through one or more other entities, owns equity interests possessing 50 percent or more of the total combined voting power of all equity interests of such entity (excluding voting power that arises only upon the occurrence of one or more specified events).
  1. EFFECTIVE DATE AND DURATION OF THE PLAN

The Plan shall become effective upon the date of its adoption by the Board; provided, that the Plan is approved by the stockholders of the Company within 12 months thereafter. Notwithstanding any provision of the Plan or in any Grant Document, no Option shall be exercisable, and no Restricted Stock Award shall vest, prior to such stockholder approval. No further Awards may be granted under the Plan after 10 years from the date the Plan is adopted by the Board. The Plan shall remain in effect until all Options granted under the Plan have been satisfied or expired, and all restrictions imposed upon Restricted Stock Awards granted under the Plan have been eliminated or the Restricted Stock Awards have been forfeited.

  1. ADMINISTRATION

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

    1. Powers. Subject to the express provisions of the Plan, the Administrator shall have authority, in its discretion, to determine which employees or Directors shall receive an Award, the time or times when such Award shall be granted, and the number of shares to be subject to each Award. In making such determinations, the Administrator shall take into account the nature of the services rendered by the respective employees or Directors, their present and potential contribution to the Company's success and such other factors as the Administrator in its discretion shall deem relevant. Subject to the express provisions of the Plan, the Administrator shall also have the power to construe the Plan and the respective agreements executed hereunder, to prescribe rules and regulations relating to the Plan, and to determine the terms, restrictions and provisions of the Grant Documents, and to make all other determinations necessary or advisable for administering the Plan. The Administrator may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Grant Document relating to an Award in the manner and to the extent it shall deem expedient to carry it into effect. The determination of the Administrator on the matters referred to in this Section IV shall be conclusive; provided, however, that in the event of any conflict in any such determination as between the Committee and the Chief Executive Officer of the Company, each acting in capacity as Administrator of the Plan, the determination of the Committee shall be conclusive.
  1. SHARES SUBJECT TO THE PLAN, AWARD LIMITATIONS,

AND GRANT OF AWARDS

                               a.                                           a.            Shares Subject to the Plan; Award Limitations. Subject to adjustment as provided in Section IX(b), the aggregate number of shares of Common Stock that may be issued under the Plan shall not exceed 3,200,000 shares. Shares shall be deemed to have been issued under the Plan only to the extent actually issued and delivered pursuant to an Award. To the extent that an Award lapses, the rights of its Holder terminate, or an Award is paid in cash or is settled in a manner such that all or some of the shares of Common Stock covered by the Award are not issued to the Holder, any shares of Common Stock then subject to such Award shall again be available for the grant of an Award under the Plan. Notwithstanding any provision in the Plan to the contrary, the maximum number of shares of Common Stock that (i) may be subject to Options granted to any one individual during any calendar year may not exceed 500,000 shares, and (ii) may be granted as Restricted Stock Awards may not exceed 500,000 (in each case subject to adjustment as provided in Section IX(b)). The limitation set forth in clause (i) of the preceding sentence shall be applied in a manner that will permit compensation generated in connection with Options awarded under the Plan by a committee comprised solely of two or more outside Directors to constitute "performance based" compensation for purposes of section 162(m) of the Code, including, without limitation, any shares subject to Options that are canceled or repriced being counted against such maximum number of shares to the extent required under section 162(m) of the Code and applicable interpretive authority thereunder.

    1. Grant of Awards. The Administrator may from time to time grant Awards to one or more employees or Directors determined by it to be eligible for participation in the Plan in accordance with the provisions of Section VI.
    2. Stock Offered. Subject to the limitations set forth in Section V(a) above, the stock to be offered pursuant to an Award may be authorized but unissued Common Stock or Common Stock previously issued and outstanding and reacquired by the Company. Any of such shares which remain unissued and which are not subject to outstanding Awards at the termination of the Plan shall cease to be subject to the Plan but, until termination of the Plan, the Company shall at all times make available a sufficient number of shares to meet the requirements of the Plan.
  1. ELIGIBILITY

Awards may be granted only to persons who, at the time of grant, are employees or Directors. An Award may be granted on more than one occasion to the same person and, subject to the limitations set forth in the Plan, Awards may consist of any combination of Options and Restricted Stock Awards.

  1. STOCK OPTIONS

                               a.                                           a.            Option Period. The term of each Option shall be as specified by the Administrator at the date of grant.

    1. Limitations on Exercise of Option. An Option shall be exercisable in whole or in such installments and at such times as determined by the Administrator.
    2. No Incentive Stock Options. Options granted under the Plan shall not constitute incentive stock options within the meaning of section 422 of the Code.
    3. Option Grant Document. Each Option shall be evidenced by an Option Grant Document in such form and containing such provisions not inconsistent with the provisions of the Plan as the Administrator from time to time shall approve. An Option Grant Document may provide for the payment of the option price, in whole or in part, by delivery of a number of shares of Common Stock (plus cash if necessary) having a Market Value per Share equal to such option price. Moreover, an Option Grant Document may provide for a "cashless exercise" of the Option by establishing procedures satisfactory to the Administrator with respect thereto. The terms and conditions of the respective Option Grant Documents need not be identical.
    4. Option Price and Payment. The price at which a share of Common Stock may be purchased upon exercise of an Option shall be set forth in the Option Grant Document and shall be determined by the Administrator but, subject to adjustment as provided in Section IX(b), such purchase price shall not be less than the Market Value per Share of a share of Common Stock on the date such Option is granted. The Option or portion thereof may be exercised by delivery of an irrevocable notice of exercise to the Company, as specified by the Administrator. The purchase price of the Option or portion thereof shall be paid in full in the manner specified by the Administrator.
    5. Stockholder Rights and Privileges. The Holder of an Option shall be entitled to all the privileges and rights of a stockholder only with respect to such shares of Common Stock as have been purchased under the Option and credited to the Holder's account or for which certificates representing such Common Stock have been registered in the Holder's name.
    6. Options in Substitution for Stock Options Granted by Other Entities. Options may be granted under the Plan from time to time in substitution for options held by individuals employed by corporations or other entities who become employees or Directors as a result of a merger or consolidation or other business transaction with the Company or any subsidiary.
  1. RESTRICTED STOCK AWARDS

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

    1. Substantial Risk of Forfeiture and Restrictions on Transfer. Each grant of Restricted Stock will provide that (i) the shares covered thereby will be subject, for a period or periods determined by the Administrator at the date of grant, to one or more restrictions, including, without limitation, a restriction that constitutes a "substantial risk of forfeiture" within the meaning of section 83 of the Code and applicable interpretive authority thereunder, and (ii) during such period or periods during which such restrictions are to continue, the transferability of the Restricted Stock subject to such restrictions will be prohibited or restricted in a manner and to the extent prescribed by the Administrator at the date of grant.
    2. Restricted Stock Held in Trust. Shares of Common Stock awarded pursuant to each Restricted Stock Award will be held in trust by the Company for the benefit of the recipient until such time as the applicable restriction on transfer thereof shall have expired or otherwise lapsed, at which time certificates representing such Common Stock will be delivered to the recipient or such Common Stock will be otherwise credited to the recipient's account.
    3. Restricted Stock Grant Document; Consideration. Each grant of Restricted Stock shall be evidenced by a Grant Document in such form and containing such provisions not inconsistent with the provisions of the Plan as the Administrator from time to time shall approve. The terms and conditions of the respective Restricted Stock Grant Documents need not be identical. Each grant of Restricted Stock may be made without additional consideration or in consideration of a payment by the recipient that is less than the Market Value per Share on the date of grant, as determined by the Administrator.
  1. RECAPITALIZATION, REORGANIZATION AND CHANGE IN CONTROL

                               a.                                           a.            No Effect on Right or Power. The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company or any subsidiary to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's or any subsidiary's capital structure or its business, any merger or consolidation of the Company or any subsidiary, any issue of debt or equity securities ahead of or affecting Common Stock or the rights thereof, the dissolution or liquidation of the Company or any subsidiary or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.

    1. Changes in Common Stock. The provisions of Section V(a) imposing limits on the numbers of shares of Common Stock that may be issued under the Plan and covered by Awards granted under the Plan, as well as the number or type of shares or other property subject to outstanding Awards and the applicable option prices per share, shall be adjusted appropriately by the Committee in the event of stock dividends, spin-offs of assets or other extraordinary dividends, stock splits, combinations of shares, recapitalizations, mergers, consolidations, reorganizations, liquidations, issuances of rights or warrants and similar transactions or events.
    2. Change in Control. As used in the Plan (except as otherwise provided in an applicable Grant Document), the term "Change in Control" shall mean (i) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, the holders of equity securities of the Company (and their respective affiliates) immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities of the resulting entity entitled to greater than 50% of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, (ii) the dissolution or liquidation of the Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Exchange Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the Company's outstanding securities, or (iv) as a result of or in connection with a contested election of Directors, the persons who were Directors of the Company immediately before such election shall cease to constitute a majority of the Board; provided, however, that the term "Change in Control" shall not include (A) any initial public offering of Common Stock, (B) any distribution to the stockholders of Continental Airlines, Inc. ("Continental") or other sale or disposition by Continental of any shares of Common Stock owned by Continental, (C) any equity security ownership or action taken by Continental, an affiliate of Continental, or the trustees of any employee benefit plan maintained by Continental prior to the date upon which Continental and such affiliates and trustees have distributed, sold or otherwise disposed of all of their respective shares of Common Stock, or during any period in which Continental or any such person is an "Exempt Person" within the meaning of that certain Amended and Restated Rights Agreement, dated as of April 2002 between the Company, Mellon Investor Services LLC, a New Jersey limited liability company and Continental, as the same may be amended from time to time, or any similar agreement into which the Company may enter in the future. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger or consolidation shall mean the surviving entity unless the surviving entity is a subsidiary of another entity and the holders of common stock of the Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, and (2) the term "affiliate" shall mean, with respect to an entity (the "first entity"), an individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization or other entity that, directly or indirectly, is controlled by, or is under common control with, the first entity (and the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the individual or entity, whether through the ownership of voting securities, by contract or otherwise).

Upon the occurrence of a Change in Control, with respect to each recipient of an Award hereunder, (x) all Options granted to such recipient and outstanding at such time shall immediately vest and become exercisable in full and, except as required by law, all restrictions on the transfer of shares acquired pursuant to such Options shall terminate, and (y) all restrictions applicable to such recipient's Restricted Stock Awards that are outstanding at such time shall be deemed to have been satisfied and such Restricted Stock Awards shall immediately vest in full.

In addition, except as otherwise provided in the applicable Grant Document, if a recipient of an Award hereunder becomes entitled to one or more payments (with a "payment" including, without limitation, the vesting of an Award) pursuant to the terms of the Plan (the "Total Payments"), which are or become subject to the tax imposed by section 4999 of the Code (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company or subsidiary for whom the recipient is then performing services shall pay to the recipient an additional amount (the "Gross-Up Payment") such that the net amount retained by the recipient, after reduction for any Excise Tax on the Total Payments and any federal, state and local income or employment tax and Excise Tax on the Gross-Up Payment, shall equal the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the recipient shall be deemed (aa) to pay federal income taxes at the highest stated rate of federal income taxation (including surtaxes, if any) for the calendar year in which the Gross-Up Payment is to be made, and (bb) to pay any applicable state and local income taxes at the highest stated rate of taxation (including surtaxes, if any) for the calendar year in which the Gross-Up Payment is to be made. Any Gross-Up Payment required hereunder shall be made to the recipient at the same time any Total Payment subject to the Excise Tax is paid or deemed received by the recipient.

  1. AMENDMENT AND TERMINATION OF THE PLAN

The Board in its discretion may terminate the Plan at any time with respect to any shares of Common Stock for which Awards have not theretofore been granted. The Board shall have the right to alter or amend the Plan or any part thereof from time to time, and the Administrator may amend any Award (and its related Grant Document) at any time, except as otherwise specifically provided in such Grant Document; provided that no change in the Plan or any Award theretofore granted may be made that would impair the rights of a Holder with respect to an Award theretofore granted without the consent of such Holder.

  1. MISCELLANEOUS

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

    1. No Employment or Membership Rights Conferred. Nothing contained in the Plan shall (i) confer upon any employee any right with respect to continuation of employment with the Company or any subsidiary or (ii) interfere in any way with the right of the Company or any subsidiary to terminate his or her employment at any time. Nothing contained in the Plan shall confer upon any Director any right with respect to continuation of membership on the Board.
    2. Other Laws; Withholding. The Company shall not be obligated to issue any Common Stock pursuant to any Award granted under the Plan until there has been compliance with applicable laws and regulations with respect thereto. No fractional shares of Common Stock shall be delivered, nor shall any cash in lieu of fractional shares be paid. The Company shall have the right to (i) make deductions from any settlement or exercise of an Award made under the Plan, including the delivery of shares, or require shares or cash or both be withheld from any Award, in each case in an amount sufficient to satisfy withholding of any federal, state or local taxes required by law, or (ii) take such other action as may be necessary or appropriate to satisfy any such tax withholding obligations. The Administrator may determine the manner in which such tax withholding may be satisfied, and may permit shares of Common Stock (together with cash, as appropriate) to be used to satisfy required tax withholding based on the Market Value per Share of any such shares of Common Stock.
    3. No Restriction on Corporate Action. Subject to the restrictions contained in Section X, nothing contained in the Plan shall be construed to prevent the Company or any subsidiary from taking any corporate action, whether or not such action would have an adverse effect on the Plan or any Award granted hereunder. No employee, Director, beneficiary or other person shall have any claim against the Company or any subsidiary as a result of any such action.
    4. Restrictions on Transfer. An Award shall not be transferable otherwise than (i) by will or the laws of descent and distribution, (ii) pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, or (iii) with the consent of the Administrator.
    5. Governing Law. The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflicts of law principles thereof.