United Airlines 2010 Annual Report Download - page 118

on the grant date. The expected life of the options was based on Continental’s historical experience for various
work groups. Expense was recognized only for those option awards expected to vest, using an estimated
forfeiture rate based on historical experience.
Profit Based RSU Awards. See Merger Impacts-Continental Predecessor Share-Based Awards, above, for a
discussion of the impact of the Merger on profit based RSU awards. Continental issued PBRSU awards pursuant
to its long-term incentive and RSU programs, which provided for cash payments to Continental’s officers upon
the achievement of specified profit sharing-based performance targets. The performance targets required that
Continental reach target levels of cumulative employee profit sharing during the performance period and that
Continental had net income calculated in accordance with U.S. generally accepted accounting principles for the
applicable fiscal year in which the cumulative profit sharing target was met. To serve as a retention feature,
payments related to the achievement of a performance target generally were made in annual increments over a
three-year period to participants who remain continuously employed by Continental through each payment date.
Payments also were conditioned on Continental having, at the end of the fiscal year preceding the date any
payment was made, a minimum unrestricted cash, cash equivalents and short-term investments balance as set by
the Human Resources Committee of Continental’s Board of Directors. If Continental did not achieve the
minimum cash balance applicable to a payment date, the payment was deferred until the next payment date
(March 1 of the next year), subject to a limit on the number of years payments could be carried forward. Payment
amounts were calculated based on the number of PBRSUs subject to the award, the average closing price of
Continental common stock during the 20 trading days preceding the payment date and the payment percentage
set by the Human Resources Committee of Continental’s Board of Directors for achieving the applicable profit
sharing-based performance target.
Continental accounted for the PBRSU awards as liability awards. Once it became probable that a profit
sharing-based performance target would be met, Continental measured the awards at fair value based on its
current stock price. The related expense was recognized ratably over the required service period, which ended on
each payment date, after adjustment for changes in the then-current market price of Continental’s common stock.
Employee Stock Purchase Plan. All of Continental’s employees (including Continental Micronesia, Inc.
employees) were eligible to participate in Continental’s 2004 Employee Stock Purchase Plan. At the end of each
fiscal quarter, participants could purchase shares of Continental’s common stock at a discount of 15% off the fair
market value of the stock on either the first day or the last day of the quarter (whichever was lower), subject to a
minimum purchase price of $10 per share. This discount was reduced to zero as the fair market value approached
$10 per share. If the fair market value was below the $10 per share minimum price on the last day of a quarter,
then the participants were not be permitted to purchase the common stock for such quarterly purchase period and
Continental refunded to those participants the amount of their unused payroll deductions. During 2010
(Predecessor Period), 2009 and 2008, approximately 0.8 million, 0.5 million and 1.1 million shares, respectively,
of Continental common stock were issued to participants at a weighted-average purchase price of $15.92, $11.81
and $12.76 per share, respectively. This plan was terminated prior to the Merger closing date.
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