Exhibit 7
SECOND AMENDMENT
TO THE
GOVERNANCE AGREEMENT
This Second Amendment to the Governance Agreement dated as of November
20, 1998, is by and among Continental Airlines, Inc., a Delaware corporation
(the "Company"), Newbridge Parent Corporation, a Delaware corporation (the
"Stockholder"), and Northwest Airlines Corporation, a Delaware corporation that
is the holder of all of the outstanding stock of the Stockholder (the "Parent").
WHEREAS, the Company, the Stockholder and the Parent have entered into
that certain Governance Agreement dated as of January 25, 1998, as amended by
the First Amendment dated as of March 2, 1998 (the "Governance Agreement"),
pursuant to which, among other things, (i) the Parent and the Stockholder have
agreed to deposit immediately following the Closing the Voting Securities
Beneficially Owned by them or any of their Affiliates into a voting trust (the
"Voting Trust") to be established by them with an independent voting trustee
that will provide that such Voting Securities will be voted as specified in the
Governance Agreement and (ii) the Company has agreed to cause a person
designated by the Stockholder to be elected to the Company's board of directors
immediately following the Closing;
WHEREAS, the Parent has been in discussions with the United States
Department of Justice ("DOJ") regarding the terms of the Investment Agreement,
and the Parent and the Company have been in discussions with DOJ regarding the
terms of the Alliance Agreement and the Governance Agreement (the Investment
Agreement, the Alliance Agreement and the
Governance Agreement together, the "Agreements") in connection with DOJ's
antitrust review of the transactions contemplated by the Investment Agreement;
WHEREAS, the Parent and the Company believe that the transactions
contemplated by the Agreements are procompetitive and beneficial to consumers;
WHEREAS, DOJ has expressed concerns about the effect on competition of
certain terms of the Agreements;
WHEREAS, the Parent and the Stockholder believe that certain changes
to the Governance Agreement with respect to the provisions described above are
desirable to obviate the concerns of DOJ;
WHEREAS, the Parent and the Stockholder have requested that the
Company agree to amend such provisions of the Governance Agreement to obviate
the concerns of DOJ; and
WHEREAS, the Company is willing to agree to these amendments to
facilitate the prompt closing of the transactions contemplated by the Investment
Agreement and the subsequent realization by the Company and its stockholders of
the expected benefits of the Alliance Agreement.
NOW THEREFORE, the Company, the Stockholder and the Parent, intending
to be legally bound, hereby agree as follows:
1. Capitalized terms not otherwise defined herein shall have their
respective meanings set forth in the Governance Agreement.
2. All references in Sections 1 through 9 of the Governance Agreement
to the "Investment Agreement" are hereby modified to refer to the
Investment Agreement as amended
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by Amendment No. 1 thereto dated February 27, 1998 and Amendment No. 2
dated as of November 20, 1998.
3. Section 1.02 of the Governance Agreement is amended by renumbering
clause (vi) as clause (vii) and adding a new clause (vi) with the following
text: "Transfers of Voting Securities to the B/C/P Group."
4. The following definition shall be added to Section 9 (which,
pursuant to Section 7 hereof, is to be renumbered as Section 8) after the
definition of "Associate": "`B/C/P Group'" shall mean Xxxxx Xxxxxxxxx, Xxxxx
Xxxxxxx or Xxxxxxx X. Xxxxx, III, or any Person with respect to which one or
more of them (i) directly or indirectly controls at least 50.1% of the voting
power, (ii) directly or indirectly controls at least 50.1% of the equity, or
(iii) directly or indirectly controls in a manner substantially similar to the
control that the general partner of Air Partners has over Air Partners pursuant
to and as provided in the "Partnership Agreement" (as defined in the Investment
Agreement), which Persons described in clause (iii) shall include 1998 CAI
Partners, L.P., a Texas limited partnership, under its partnership agreement and
ownership structure in effect on the date hereof."
5. The definition of "Beneficially Own" and "Beneficial Ownership" is
hereby amended by adding the following at the end thereof: "; for the avoidance
of doubt, securities with respect to which the Stockholder or the Parent has
been granted a proxy pursuant to the Investment Agreement shall be deemed to be
beneficially owned by the Stockholder or the Parent."
6. Section 1.03 of the Governance Agreement is amended and restated to
read in its entirety as set forth below:
Section 1.03. Voting Trust. Immediately following the
Closing, the Stockholder and the Parent shall cause AP to
deposit the Shares, and the Stockholder and the Parent shall
deposit any other shares of Voting Securities Beneficially
Owned by either of them or any of their Affiliates, into a
voting trust (the "Voting Trust") to be established pursuant
to a voting trust agreement (the
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"Voting Trust Agreement") with an independent voting trustee
in a form reasonably satisfactory to Parent and the Company
and which shall include the following provisions for the
voting of the shares of Voting Securities deposited therein:
until the Standstill Termination Date, all such shares shall
(a) be voted or consented on all matters submitted to a vote
of the Company's stockholders, other than the election of
directors, either (i) in the case of votes at a stockholders
meeting, in the same proportion as the votes cast by other
holders of Voting Securities, or (ii) in the case of
consents, so that the percentage of Stockholder Voting Power
consented to on any matter equals the percentage of all
other outstanding Voting Securities so consented; provided,
that with respect to (x) any vote on a merger,
reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company, any sale of all
or substantially all of the Company's assets or any issuance
of Voting Securities that would represent in excess of 20%
of the Voting Power prior to such issuance, including any of
the foregoing involving the Stockholder or the Parent, or
(y) any amendment to the Company's amended and restated
certificate of incorporation or by-laws that would
materially and adversely affect the Stockholder (including
through its effect on the Alliance Agreement and the rights
of the Voting Securities Beneficially Owned by the
Stockholder), such shares may be voted as directed by the
Stockholder and (b) in the election of directors, for the
election of the Independent Directors nominated by the Board
of Directors of the Company determined by a Majority Vote;
provided, that with respect to any election of directors in
respect of which any Person other than the Company is
soliciting proxies, the Stockholder and the Parent shall
cause all such shares to be voted, at the option of the
Stockholder, either (i) as recommended by the Board of
Directors or (ii) in the same proportion as the votes cast
by the other holders of Voting Securities. The Voting Trust
Agreement shall also provide that the Voting Trust shall not
issue voting trust certificates or any interest in the
Voting Trust to a Person other than the Stockholder or any
of its Affiliates.
7. Section 1.04 of the Governance Agreement is amended by (a) deleting
from clause (a) thereof the words "by virtue of the Stockholder's representation
on the Board of Directors of the Company, if any," (b) replacing the language in
the parenthetical expression at the end of clause (a) thereof with the words "it
being agreed that this paragraph shall not prohibit the Parent and its
Subsidiaries, and their respective directors, officers and employees, from
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engaging in ordinary course business activities with the Company or having
periodic discussions with directors, officers and employees of the Company
regarding the Company's business, it being understood that such matters shall
not include matters that, under applicable antitrust laws, could not be
discussed among competitors" and (c) replacing the language in clause (ii) of
the proviso at the end of Section 1.04 in its entirety with the words
"[intentionally omitted]".
8. Section 2.01 of the Governance Agreement is amended and restated to
read in its entirety as set forth below:
Section 2.01. Composition of Board of Directors.
(a) The individuals listed on Exhibit 2.01 hereto shall, for
purposes of this Agreement, constitute the Independent Directors
immediately after the consummation of the Stock Purchase (the
"Closing").
(b) Following the Closing, and until the Standstill Termination
Date, the Company, the Parent, the Stockholder and their respective
Affiliates shall take all such actions as are required under
applicable law to cause Independent Directors to constitute at all
times at least a majority of the Board of Directors. At each annual
meeting of stockholders of the Company following the Closing, or at
any time that a vacancy in a seat previously occupied by an
Independent Director on the Board of Directors is to be filled, the
identity of the Independent Director or Directors to stand for
election to the Board of Directors or to fill the vacancy, as the case
may be, shall be determined by a Majority Vote.
(c) Without the prior written consent of the Parent, the Company
shall not amend, alter or repeal its amended and restated certificate
of incorporation or by-laws so as to eliminate or diminish the ability
of stockholders of the Company to act by written consent or Section
1.10 of the Company's by-laws.
9. Section 7 of the Governance Agreement ("Post-Standstill Termination
Date Board Composition") is deleted, Section 8, Section 8.01, and Section 9 are
renumbered as Section 7, Section 7.01 and Section 8 respectively, references in
the Governance Agreement to Section 8, Section 8.01 and Section 9 shall be
modified accordingly, the phrase "except the
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obligations of the Stockholder and the Parent pursuant to Section 7" is deleted
from Section 6.07(c) and the phrase "(other than their obligations pursuant to
Section 7)" is deleted from Section 8.01(c) (renumbered as Section 7.01(c)) the
two times it appears.
10. The phrase "no less than 15% of the Voting Securities" in the last
sentence of Section 8.01(c) of the Governance Agreement shall be changed to
"Voting Securities representing no less than 15% of the Total Voting Power".
11. The Company hereby represents and warrants to the Parent and the
Stockholder that this Second Amendment to the Governance Agreement has been
approved by a Majority Vote.
12. This Second Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
13. Except as expressly modified by this Second Amendment to the
Governance Agreement, all of the terms, conditions and provisions of the
Governance Agreement shall remain unchanged and in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to the Governance Agreement to be executed as of the date first
referred to above.
Northwest Airlines Corporation
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
Executive Vice President, General Counsel
and Secretary
Newbridge Parent Corporation
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxxx
Vice President, Secretary and
Assistant Treasurer
Continental Airlines, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Executive Vice President,
General Counsel and Secretary
[Signature Page to Second Amendment]
