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EXHIBIT 10.4
INITIAL PUBLIC OFFERING
AND
DISTRIBUTION AGREEMENT
BY AND BETWEEN
CONTINENTAL AIRLINES, INC.
AND
EXPRESSJET HOLDINGS, INC.
Dated as of __________ __, 2001,
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TABLE OF CONTENTS
1. Definitions.........................................................................................2
2. The Initial Public Offering and the Distribution....................................................8
2.1 The Initial Public Offering...................................................................8
2.2 The Distribution..............................................................................8
2.3 Certain Stockholder Matters...................................................................9
2.4 Further Assurances Regarding the Distribution.................................................9
2.5 Abandonment of the Distribution...............................................................10
3. Expenses............................................................................................10
3.1 General.......................................................................................10
3.2 Certain Expenses Relating to the Initial Public Offering......................................10
3.3 Certain Expenses Relating to the Distribution.................................................10
4. Covenants to Preserve Tax-free Status of the Distribution...........................................10
4.1 Restrictions on Holdings......................................................................11
4.2 Cooperation and Other Covenants...............................................................12
4.3 Indemnification For Tax Liabilities...........................................................14
4.4 Procedure for Indemnification for Tax Liabilities.............................................15
4.5 Arbitration...................................................................................16
4.6 Exclusive Remedies............................................................................16
5. Certain Other Covenants.............................................................................17
5.1 Financial and Other Information...............................................................17
5.2 Other Covenants...............................................................................23
5.3 Covenant Regarding Continental Preferred Stock................................................23
6. Indemnification.....................................................................................23
6.1 Indemnification by Holdings...................................................................23
6.2 Indemnification by Continental................................................................24
6.3 Other Liabilities.............................................................................24
6.4 Tax Effects of Indemnification................................................................25
6.5 Effect of Insurance Upon Indemnification......................................................25
6.6 Procedure for Indemnification Involving Third-party Claims....................................26
6.7 Procedure for Indemnification Not Involving Third-Party Claims................................27
6.8 Exclusive Remedies............................................................................27
7. Miscellaneous.......................................................................................27
7.1 Survival......................................................................................27
7.2 Complete Agreement............................................................................27
7.3 Authority.....................................................................................28
7.4 Governing Law.................................................................................28
7.5 Consent to Exclusive Jurisdiction.............................................................28
7.6 Notices.......................................................................................28
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7.7 Amendment and Modification....................................................................29
7.8 Binding Effect; Assignment....................................................................29
7.9 Third Party Beneficiaries.....................................................................29
7.10 Counterparts..................................................................................29
7.11 Waiver........................................................................................30
7.12 Severability..................................................................................30
7.13 Remedies......................................................................................30
7.14 Performance...................................................................................30
7.15 References; Construction......................................................................30
Exhibits
Agreements Subject to Section 5.2(c)......................................................................Exhibit A
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INITIAL PUBLIC OFFERING AND
DISTRIBUTION AGREEMENT
This INITIAL PUBLIC OFFERING AND
DISTRIBUTION AGREEMENT (this
"Agreement") is made and entered into as of _________ __, 2001, by and between
Continental Airlines, Inc., a Delaware corporation ("Continental"), and
ExpressJet Holdings, Inc., a Delaware corporation and a wholly owned subsidiary
of Continental ("Holdings"). Certain capitalized terms used herein are defined
in Section 1 of this Agreement.
WHEREAS, Continental has contributed all of the outstanding capital
stock of ExpressJet to Holdings (the "Contribution"), which Contribution was
made in order to provide for more efficient administration of current and
prospective businesses, to provide for possible expansion and diversification
into other areas, to provide potential state tax efficiency and benefits, and to
provide for greater flexibility of business operations;
WHEREAS, Continental owns all of the issued and outstanding Holdings
common stock;
WHEREAS, Holdings has previously filed the IPO Registration Statement
with the SEC but it has not yet become effective;
WHEREAS, Continental intends to enter into an Exchange Agreement
("Exchange Agreement") with ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. ("SSB") prior to
consummation of the Initial Public Offering pursuant to which SSB would exchange
debt obligations of Continental held by SSB for shares of Class A Common Stock
owned by Continental (the "Exchange");
WHEREAS, the parties currently contemplate that, reasonably promptly
following the execution of this Agreement, Holdings shall consummate the Initial
Public Offering;
WHEREAS, immediately following the consummation of the Exchange and the
Initial Public Offering, Continental shall own more than 80% of the voting power
of the outstanding Holdings Capital Stock;
WHEREAS, concurrently with the execution of this Agreement, Continental
and Holdings are entering into the Registration Rights Agreement;
WHEREAS, Continental intends, soon after the six-month anniversary of
consummation of the Initial Public Offering, to distribute to holders of shares
of Continental Common Stock, through a spin-off, the outstanding shares of
Holdings Common Stock then owned directly or indirectly by Continental;
WHEREAS, the parties intend that the Contribution, the Exchange and the
Distribution all are part of a single plan of reorganization within the meaning
of Treasury Regulation Section 1.368-2(g) and that this Agreement evidences that
plan;
WHEREAS, the Distribution is intended to qualify as a tax-free spin-off
under Section 355 of the Code; and
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WHEREAS, the parties intend in this Agreement to set forth the
principal arrangements between them regarding the Exchange, the Initial Public
Offering and the Distribution;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Abandonment Notice" has the meaning set forth in Section 2.5.
"Active Trade or Business" means the active conduct of the trade or
business (as defined in Section 355(b)(2) of the Code) conducted indirectly by
Holdings as a result of its ownership of the stock of ExpressJet immediately
prior to the Distribution Date.
"Affiliate" means a Holdings Affiliate or a Continental Affiliate, as
the case may be.
"Agreement" has the meaning set forth in the Preamble.
"Annual Financial Statements" has the meaning set forth in Section
5.1(a)(vi).
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday unless such day shall be a day when financial institutions in New York,
New York or Houston, Texas are authorized by law to close.
"Class A Common Stock" means the Class A common stock, par value $.01
per share, of Holdings.
"Class B Common Stock" means the Class B common stock, par value $.01
per share, of Holdings.
"Claim" has the meaning set forth in Section 6.7.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with the rules and regulations promulgated thereunder.
"Continental" has the meaning set forth in the Preamble.
"Continental Affiliate" means a Person that, after giving effect to the
Distribution, directly or indirectly through one or more intermediaries, is
Controlled by Continental.
"Continental Annual Statements" has the meaning set forth in Section
5.1(b)(ii).
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"Continental's Auditors" has the meaning set forth in Section
5.1(b)(ii).
"Continental Business" means any business or operations of Continental
or any Continental Affiliates.
"Continental Common Stock" means the Class B common stock, par value
$0.01 per share, of Continental.
"Continental Determination" means, with respect to any transaction
otherwise prohibited by Section 4.1, a determination by Continental as to
whether the consummation of such transaction would jeopardize the Tax-Free
Status of the Distribution.
"Continental Disclosure Portions" means all material set forth in, or
incorporated by reference into, either the IPO Registration Statement or the
Distribution Registration Statement, as applicable, to the extent relating
exclusively to (i) Continental and the Continental Affiliates, (ii) the
Continental Business, (iii) Continental's intentions with respect to the
Distribution or (iv) the terms of the Distribution, including, without
limitation, the form, structure and terms of any transaction(s) and/or
offering(s) to effect the Distribution and the timing of and conditions to the
consummation of the Distribution.
"Continental Public Filings" has the meaning set forth in Section
5.1(a)(xiii).
"Continental Transfer Agent" means Mellon Investor Services LLC, in its
capacity as the transfer agent and registrar for the Continental Common Stock,
or a successor transfer agent and registrar.
"Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"CPR Rules" means the Rules for Non-Administered Arbitration of
Business Disputes promulgated by the Center for Public Resources, as in effect
on the date hereof.
"Dispute Notice" means written notice of any dispute between
Continental and Holdings arising out of or relating to this Agreement, which
shall set forth, in reasonable detail, the nature of the dispute.
"Distribution" means the distribution of Holdings Common Stock by
Continental after the Initial Public Offering that has the effect that all
shares of Holdings Common Stock held by Continental are distributed to
Continental stockholders, whenever such transaction shall occur.
"Distribution Date" means any date determined by Continental, in its
sole and absolute discretion, to be the date on which shares of Holdings Common
Stock held by Continental are distributed in connection with the Distribution.
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"Distribution Registration Statement" means any and all registration
statements, information statements or other documents filed by any party with
the SEC in connection with any transaction constituting part of the
Distribution, in each case as supplemented or amended from time to time.
"Exchange" has the meaning set forth in the recitals.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"Exchange Agreement" has the meaning set forth in the recitals.
"ExpressJet" means ExpressJet Airlines, Inc., a wholly owned subsidiary
of Holdings.
"Favorable Continental Determination" means, with respect to any
transaction otherwise prohibited by Section 4.1, a determination by Continental
that the consummation of such transaction would not jeopardize the Tax-Free
Status of the Distribution.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Holdings" has the meaning set forth in the Preamble.
"Holdings Affiliate" means a Person that, after giving effect to the
Distribution, directly or indirectly through one or more intermediaries, is
Controlled by Holdings.
"Holdings' Auditors" has the meaning set forth in Section 5.1(b)(i).
"Holdings Business" means any business or operations of Holdings or any
Holdings Affiliates, including, in all cases, any predecessor entities.
"Holdings Capital Stock" means all classes or series of capital stock
of Holdings.
"Holdings Common Stock" means the Class A Common Stock and the Class B
Common Stock.
"Holdings Public Documents" has the meaning set forth in Section
5.1(a)(ix).
"Holdings Transfer Agent" means Mellon Investor Services LLC, in its
capacity as the transfer agent and registrar for the Holdings Common Stock, or a
successor transfer agent and registrar.
"Holdings Underwriting Agreement" means the Underwriting Agreement to
be entered into by Holdings and the underwriters in connection with the offering
of Class A Common Stock by Holdings in the Initial Public Offering.
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"Indemnifying Party" means a Person that is obligated to provide
indemnification under this Agreement.
"Indemnitee" means a Person that is entitled to seek indemnification
under this Agreement.
"Indemnity Payment" means an amount that an Indemnifying Party is
required to pay to an Indemnitee under this Agreement.
"Initial Public Offering" means the initial public offering of shares
of Class A Common Stock as contemplated by the IPO Registration Statement.
"Insurance Proceeds" means the payment received by an insured from an
insurance carrier or paid by an insurance carrier on behalf of the insured, net
of any applicable premium adjustment and tax effect.
"IPO Registration Statement" means the Registration Statement on Form
S-1, Registration No. 333-64808 of Holdings, as supplemented and amended from
time to time.
"IRS" means Internal Revenue Service of the U.S. Department of Treasury
or any successor agency.
"Losses" means all losses, liabilities, claims, obligations, demands,
judgments, damages, dues, penalties, assessments, fines (civil or criminal),
costs, liens, expenses, forfeitures, settlements, or fees, reasonable attorneys'
fees and court costs, of any nature or kind, whether or not the same would
properly be reflected on a balance sheet, and "Loss" means any of these.
"Negotiation Period" means the period of 20 Business Days following the
initial meeting of the representatives of Continental and Holdings following the
receipt of a Dispute Notice.
"Notice" means any notice, request, claim, demand, or other
communication under this Agreement.
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, any other form of business or professional entity
or any governmental entity or any department, agency or political subdivision
thereof.
"Pre-Distribution Period" means the period of time from the date hereof
until the Distribution Date.
"Proposed Acquisition Transaction" means a transaction or series of
transactions as a result of which one or more Persons would (directly or
indirectly) acquire, or have the right to acquire, from Holdings or one or more
holders of outstanding shares of Holdings Capital Stock, a number of shares of
Holdings Capital Stock that would, when combined with the number of shares of
Holdings Capital Stock sold pursuant to the Initial Public Offering, comprise
50% or
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more of (A) the value of all outstanding shares of Holdings Capital Stock as of
the date of such transaction, or in the case of a series of transactions, the
date of the last transaction of such series, or (B) the total combined voting
power of all outstanding shares of Voting Stock of Holdings as of the date of
such transaction, or in the case of a series of transactions, the date of the
last transaction of such series.
"Quarterly Financial Statements" has the meaning set forth in Section
5.1(a)(v).
"Registration Rights Agreement" means the Registration Rights Agreement
to be entered into between Continental and Holdings concurrently with the
execution and delivery of this Agreement.
"Regulation S-K" means Regulation S-K of the General Rules and
Regulations promulgated by the SEC.
"Regulation S-X" means Regulation S-X of the General Rules and
Regulations promulgated by the SEC.
"Representation Date" means any date on which Holdings makes any
representation (i) to the IRS or to counsel selected by Continental for the
purpose of obtaining a Subsequent Tax Opinion or Subsequent Tax Ruling, or (ii)
to Continental for the purpose of any Continental Determination made pursuant to
Section 4.1.
"Representation Letters" means the representation letters and any other
materials (including, without limitation, the ruling request and the related
supplemental submissions to the IRS) delivered or deliverable by Continental and
others in connection with the rendering by Tax Counsel and the issuance by the
IRS of the Tax Opinions/Rulings, which to the extent related to Holdings shall
be in form and substance reasonably satisfactory to Holdings.
"Representative" means, with respect to any Person, any of such
Person's directors, officers, employees, agents, consultants, advisors,
accountants or attorneys.
"Request" has the meaning set forth in Section 6.7.
"SEC" means the United States Securities and Exchange Commission or any
successor agency.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, together with the rules and regulations promulgated thereunder.
"Separate Counsel" has the meaning set forth in Section 6.6(b).
"SSB" has the meaning set forth in the recitals.
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"SSB Underwriting Agreement" means the Underwriting Agreement to be
entered into by Holdings, SSB and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., as sole
underwriter, in connection with the offering of Class A Common Stock by SSB in
the Initial Public Offering.
"Subsequent Tax Opinion" means an opinion of counsel selected by
Continental, in its sole and absolute discretion, confirming, in form and
substance reasonably satisfactory to Continental, that, as a consequence of the
consummation of the transaction subject to such opinion, no income, gain or loss
for U.S. federal income tax purposes will be recognized by Continental, the
stockholders or former stockholders of Continental, or any Continental Affiliate
with respect to the Distribution.
"Subsequent Tax Ruling" means an IRS private letter ruling confirming,
in form and substance reasonably satisfactory to Continental, that, as a
consequence of the consummation of the transaction subject to such ruling, no
income, gain or loss for U.S. federal income tax purposes will be recognized by
Continental, the stockholders or former stockholders of Continental, or any
Continental Affiliate with respect to the Distribution.
"Subsidiary" means with respect to any specified Person, any
corporation or other legal entity of which such Person or any of its
Subsidiaries Controls or owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote with respect to the election of
members to the board of directors or similar governing body; provided, however,
that for the purposes of this Agreement, neither Holdings nor any of the
Subsidiaries of Holdings shall be deemed to be Subsidiaries of Continental or of
any of the Subsidiaries of Continental.
"Tax" means (i) any income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on, minimum, estimated,
or other tax, assessment, or governmental charge of any kind whatsoever imposed
by any governmental authority, including any interest, penalty, or addition
thereto, whether disputed or not; (ii) liability for the payment of any amounts
of the type described in clause (i) above arising as a result of being (or
having been) a member of any group or being (or having been) included or
required to be included in any Tax Return related thereto; and (iii) liability
for the payment of any amounts of the type described in clause (i) above as a
result of any Holdings or implied obligation to indemnify or otherwise assume or
succeed to the liability of any other Person.
"Tax Agreement" means the Tax Agreement between Continental and
Holdings, dated as of ______________, 2001, as amended from time to time.
"Tax Control" means the definition of "control" set forth in Section
368(c) of the Code (or in any successor statute or provision), as such
definition may be amended from time to time.
"Tax Counsel" means the law firm of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., or another
law firm as determined by Continental.
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"Tax-Free Status of the Distribution" means the nonrecognition of
taxable income, gain or loss for U.S. federal income tax purposes to
Continental, Continental Affiliates and Continental's stockholders in connection
with the Distribution.
"Tax Opinions/Rulings" means the opinions of Tax Counsel and the
rulings by the IRS deliverable to Continental in connection with the
Distribution.
"Tax-Related Losses" means (i) all federal, state and local Taxes
(calculated without the benefit of any tax net operating losses or tax credits
but including assessed interest and penalties) incurred in connection with any
settlement, final determination, judgment or otherwise; (ii) all accounting,
legal and other professional fees, and court costs incurred in connection with
such taxes; and (iii) all costs and expenses that may result from adverse tax
consequences to Continental or Continental's stockholders (including all costs,
expenses and damages associated with stockholder litigation or controversies)
payable by Continental or Continental Affiliates.
"Third-Party Claim" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person other than Continental or any Continental Affiliate or
Holdings or any Holdings Affiliate which gives rise to a right of
indemnification hereunder.
"Value" means with respect to any trade or business (or portion
thereof), the fair market value of the assets constituting such trade or
business, less the current liabilities associated with such trade or business,
in each case determined as of the Distribution Date.
"Voting Stock" means with respect to any Person, all classes and series
of the capital stock of such Person entitled to vote generally in the election
of directors.
2. The Initial Public Offering and the Distribution.
2.1 The Initial Public Offering. Holdings shall (i) consult with, and
cooperate in all respects with, Continental in connection with the pricing of
the Class A Common Stock to be offered in the Initial Public Offering, (ii) at
Continental's direction, execute and deliver the Holdings Underwriting Agreement
and the SSB Underwriting Agreement, each in such form and substance as is
reasonably satisfactory to Continental and (iii) at Continental's direction,
promptly take any and all actions necessary or desirable to consummate the
Exchange and the Initial Public Offering as contemplated by the IPO Registration
Statement, the Exchange Agreement, the Holdings Underwriting Agreement and the
SSB Underwriting Agreement.
2.2 The Distribution. Continental intends, soon after the six-month
anniversary of the consummation of the Initial Public Offering, to engage in a
Distribution by means of a spin-off of all shares of Holdings Common Stock that
Continental owns to its stockholders. Subject to receipt of an adequate Tax
Opinion/Ruling, Continental shall, in its sole and absolute discretion,
determine whether to proceed with all or any part of a Distribution and all
terms of the Distribution, including, without limitation, the form, structure
and terms of any transaction(s) and/or offering(s) to effect the Distribution
and the timing of and conditions to the
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consummation of the Distribution. In addition, Continental may at any time and
from time to time until the completion of the Distribution modify or change the
terms of the Distribution, including, without limitation, by accelerating or
delaying the timing of the consummation of all or part of the Distribution.
Holdings shall cooperate with Continental in all respects to accomplish the
Distribution and shall, at Continental's direction, promptly take any and all
actions necessary or desirable to effect the Distribution, including, without
limitation, the registration under the Securities Act of Holdings Common Stock
on an appropriate registration form or forms to be designated by Continental and
the listing of Holdings Common Stock on any exchange or interdealer quotation
system reasonably requested by Continental. Continental shall select any
investment banker(s) and manager(s) in connection with the Distribution, as well
as any financial printer, solicitation and/or exchange agent and outside counsel
for Continental; provided that nothing herein shall prohibit Holdings from
engaging (at its own expense) its own financial, legal, accounting and other
advisors in connection with the Distribution.
2.3 Certain Stockholder Matters. From and after the distribution of
Holdings Common Stock in connection with any transaction(s) included as part of
the Distribution and until such Holdings Common Stock is duly transferred in
accordance with applicable law, Holdings shall regard the Persons receiving
Holdings Common Stock in such transaction(s) as record holders of Holdings
Common Stock in accordance with the terms of such transaction(s) without
requiring any action on the part of such Persons. Holdings agrees that, subject
to any transfers of such stock, (a) each such holder shall be entitled to
receive all dividends payable on, and exercise voting rights and all other
rights and privileges with respect to, the shares of Holdings Common Stock then
held by such holder and (b) each such holder shall be entitled, without any
action on the part of such holder, to receive one or more certificates
representing, or other evidence of ownership of, the shares of Holdings Common
Stock then held by such holder. Continental shall cooperate, and shall instruct
the Continental Transfer Agent to cooperate, with Holdings and the Holdings
Transfer Agent, and Holdings shall cooperate, and shall instruct the Holdings
Transfer Agent to cooperate, with Continental and the Continental Transfer
Agent, in connection with all aspects of the Distribution and all other matters
relating to the issuance and delivery of certificates representing, or other
evidence of ownership of, the shares of Holdings Common Stock distributed to the
holders of Continental Common Stock in connection with any transaction(s)
included as part of the Distribution. Following the Distribution, Continental
shall instruct the Continental Transfer Agent to deliver to the Holdings
Transfer Agent true, correct and complete copies of the stock and transfer
records reflecting the holders of Continental Common Stock receiving shares of
Holdings Common Stock in connection with any transaction(s) included as part of
the Distribution.
2.4 Further Assurances Regarding the Distribution. In addition to the
actions specifically provided for elsewhere in this Agreement, Holdings shall,
at Continental's direction, use all commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
commercially reasonably necessary, proper or expeditious under applicable laws,
regulations and agreements in order to consummate and make effective the
Distribution as promptly as reasonably practicable. Without limiting the
generality of the foregoing, Holdings shall, at Continental's direction,
cooperate with Continental, and execute and deliver, or use all commercially
reasonable efforts to cause to have executed and delivered, all instruments,
including instruments of conveyance, assignment and transfer, and to make all
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filings with, and to obtain all consents, approvals or authorizations of, any
domestic or foreign governmental or regulatory authority requested by
Continental in order to consummate and make effective the Distribution.
2.5 Abandonment of the Distribution. The parties acknowledge and agree
that, while Continental intends to consummate the Distribution soon after the
six-month anniversary of the consummation of the Initial Public Offering,
Continental will not be obligated in any respect to proceed with or complete the
Distribution and that Continental may, in its sole and absolute discretion, at
any time abandon its plans to proceed with or complete the Distribution. The
completion of the Distribution is dependent on the receipt of a favorable ruling
from the IRS on the tax free status of the Distribution for Continental and its
stockholders. In the event that Continental so determines that it no longer
intends to proceed with or complete the Distribution, Continental may provide to
Holdings a written notification of such determination (an "Abandonment Notice").
Effective as of the date of the Abandonment Notice and subject to any conditions
set forth in the Abandonment Notice, Sections 4.1 and 4.2 of this Agreement
shall terminate, become null and void and have no further force and effect.
3. Expenses.
3.1 General. Except as otherwise provided in this Agreement or any
other agreement between the parties relating to the Initial Public Offering or
the Distribution, all costs and expenses of either party hereto in connection
with the Initial Public Offering and the Distribution shall be paid by the party
that incurs such costs and expenses.
3.2 Certain Expenses Relating to the Initial Public Offering. Holdings
shall be responsible for the payment of all of Holdings' and Continental's
costs, fees and expenses relating to the Exchange and the Initial Public
Offering (excluding any discounts or commissions paid to SSB in connection with
the Exchange), including, but not limited to, the payment of (a) the costs, fees
and expenses of all of Continental's financial, legal, accounting and other
advisors incurred in connection with the Exchange or Initial Public Offering and
(b) any internal fees, costs and expenses incurred by Continental or any
Continental Affiliate in connection with the Exchange and the Initial Public
Offering.
3.3 Certain Expenses Relating to the Distribution. Continental shall be
responsible for the payment of all costs, fees and expenses relating to the
Distribution; provided that Holdings shall be responsible for the payment of (a)
the costs, fees and expenses of all of Holdings' financial, legal, accounting
and other advisors incurred in connection with the Distribution and (b) any
internal fees, costs and expenses incurred by Holdings or any Holdings Affiliate
in connection with the Distribution.
4. Covenants to Preserve Tax-free Status of the Distribution. Holdings
and Continental hereby represent and warrant to, and covenant and agree with,
each other as follows:
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4.1 Restrictions on Holdings.
(a) Pre-Distribution Period. Holdings shall not take any action (such
action to include, if relevant, the issuance of Holdings Capital Stock upon the
exercise by the holders thereof of options or convertible securities issued by
Holdings) during the Pre-Distribution Period if, as a result of taking such
action, Holdings would issue a number of shares of Holdings Capital Stock
(including by way of the exercise of stock options or convertible securities or
the issuance of restricted stock) that would cause Continental to cease to have
Tax Control of Holdings, unless prior to the consummation of such transaction
Continental has determined, in its sole and absolute discretion, that such
transaction would not jeopardize the Tax-Free Status of the Distribution.
Notwithstanding the foregoing provisions of this Section 4.1(a), Holdings shall
be permitted to issue stock options to its employees so long as (i) Holdings
repurchases sufficient shares of issued and outstanding Holdings Capital Stock
on or prior to the date such options are exercisable to insure that, assuming
the exercise of all exercisable options, Continental would not cease to have Tax
Control of Holdings and (ii) Holdings provides Continental with prior written
notification of the procedures by which Holdings intends to comply with its
obligation described in clause (i) above and Continental approves of such
procedures (which approval shall not be unreasonably withheld). All of the
restrictions on Holdings contained in this Section 4.1 shall apply to Holdings
during the Pre-Distribution Period as well as the other periods specified in
this Section 4.1.
(b) Proposed Acquisition Transactions. Until the first day after the
two-year anniversary of the Distribution Date, (i) neither Holdings nor any
Holdings Affiliate shall (A) make any solicitations to any Person with respect
to any Proposed Acquisition Transaction, (B) enter into any negotiations or
material discussions with any Person with respect to any Proposed Acquisition
Transaction, (C) approve or acquiesce to any Proposed Acquisition Transaction,
(D) enter into any agreement or arrangement that includes a Proposed Acquisition
Transaction, or (E) enter into any Proposed Acquisition Transaction; and (ii) to
the extent Holdings has the right or ability to prohibit or prevent any other
Person from engaging in such activities, Holdings shall use all reasonable
efforts to prohibit or prevent such other Person from engaging in such
activities, unless (in the case of both (i) and (ii)) Continental has
determined, in its sole and absolute discretion, that such Proposed Acquisition
Transaction would not jeopardize the Tax-Free Status of the Distribution.
(c) Continuation of Active Trade or Business. Until the first day after
the two-year anniversary of the Distribution Date,
(i) Holdings shall continue to conduct the Active Trade or
Business.
(ii) Holdings shall continue to conduct the Active Trade or
Business primarily through officers and employees of Holdings or its
Subsidiaries (and not primarily through independent contractors) who are not
also officers or employees of Continental or of any Continental Affiliates. For
purposes of this Section 4.1(c), asset retirements, sale-leaseback arrangements
and discontinuances of product lines within a trade or business the conduct of
which is continued shall not be deemed a discontinuance of a trade or business
or portion thereof.
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(d) Continuity of Business.
(i) Until the first day after the two-year anniversary of the
Distribution Date, (A) Holdings shall not voluntarily dissolve or liquidate, and
(B) except in the ordinary course of business, neither Holdings nor any of its
Subsidiaries shall sell, transfer, or otherwise dispose of or agree to dispose
of assets (including, for such purpose, any shares of capital stock of such
Subsidiaries) that, in the aggregate, constitute more than (x) 60% of the gross
assets of Holdings or (y) 60% of the consolidated gross assets of Holdings and
such Subsidiaries, unless prior to the consummation of such transaction
Continental has determined, in its sole and absolute discretion, that such
transaction would not jeopardize the Tax-Free Status of the Distribution. The
amount of gross assets of Holdings and such Subsidiaries shall be based on the
fair market value of each such asset as of the Distribution Date.
(ii) Sales, transfers or other dispositions by Holdings or any
of its Subsidiaries to Holdings or one or more of its Subsidiaries shall not be
included in any determinations under this Section 4.1(d) of whether such 60% or
more of the gross assets of Holdings or 60% of the consolidated gross assets of
Holdings and such Subsidiaries have been sold, transferred or otherwise disposed
of.
(iii) Solely for purposes of this Section 4.1(d), Holdings
shall not be treated as directly or indirectly controlling a Subsidiary unless
Holdings owns, directly or indirectly, shares of capital stock of such
Subsidiary constituting Tax Control.
(e) Miscellaneous Actions. Until the first day after the two-year
anniversary of the Distribution Date, Holdings shall not take, or permit any of
its Subsidiaries to take, any other actions or enter into any transaction or
series of transactions or agree to enter into any other transactions that could
jeopardize the Tax-Free Status of the Distribution, including any action or
transaction that might be inconsistent with any representation made in the
Representation Letters, unless prior to the consummation of such action or
transaction Continental has determined, in its sole and absolute discretion,
that such action or transaction would not jeopardize the Tax-Free Status of the
Distribution.
(f) Permitted Actions and Transactions. Notwithstanding the foregoing,
the provisions of Section 4.1 shall not prohibit Holdings from implementing any
transaction if with respect to such transaction Continental obtains a Subsequent
Tax Ruling or a Subsequent Tax Opinion or Holdings obtains a Subsequent Tax
Ruling.
4.2 Cooperation and Other Covenants.
(a) Notice of Subsequent Holdings Actions. Each of Holdings and
Continental shall furnish the other with a copy of any ruling requests or other
documents delivered to the IRS that relates to the Distribution or that could
otherwise be reasonably expected to have an effect on the Tax-Free Status of the
Distribution.
(b) Cooperation. (i) Each of Holdings and Continental shall cooperate
with the other and shall take (or refrain from taking) all such actions as the
other may reasonably request in connection with Continental making a Continental
Determination referred to in Section 4.1.
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Such cooperation shall include, without limitation, providing any information
and/or representations reasonably requested by the other to enable either party
(or counsel for such party) to obtain and maintain any Subsequent Tax Opinion or
Subsequent Tax Ruling that would permit any action described in Section 4.1 to
be taken by Holdings or a Holdings Affiliate. From and after any Representation
Date in connection with obtaining any Favorable Continental Determination or the
receipt of a Subsequent Tax Opinion or Subsequent Tax Ruling and until the first
day after the two-year anniversary of the date of such Favorable Continental
Determination or receipt, neither party shall take any action that would have
caused such representation to be untrue or refrain from taking any action the
failure of which would have caused such representation to be untrue unless in
either case the other party has determined, in its sole and absolute discretion,
that such action would not jeopardize the Tax-Free Status of the Distribution.
(ii) In the event that Holdings notifies Continental that it
desires to take one of the actions described in Section 4.1 and Continental
concludes that such action might jeopardize the Tax-Free Status of the
Distribution, Continental shall, at the request of Holdings, elect either to (i)
use all commercially reasonable efforts to obtain a Subsequent Tax Opinion or
Subsequent Tax Ruling that would permit Holdings to take the specified action,
and Holdings shall cooperate in connection with such efforts, or (ii) provide
all reasonable cooperation to Holdings in connection with Holdings obtaining a
Subsequent Tax Ruling in form and substance reasonably satisfactory to
Continental; provided, however, that the reasonable costs and expenses incurred
by Continental of obtaining any such Subsequent Tax Opinion or Subsequent Tax
Ruling shall be borne by Holdings.
(iii) In the event that Continental, at any time prior to the
Distribution Date, ceases to own Holdings Capital Stock constituting Tax Control
and such failure was not caused by any breach by Holdings of any of its
representations, warranties, covenants or other agreements made pursuant to this
Agreement or otherwise, Holdings shall cooperate with Continental and shall take
all actions as Continental may reasonably request so as to permit Continental to
regain ownership of Holdings Capital Stock which constitutes Tax Control and
would not jeopardize the Tax-Free Status of the Distribution.
(iv) In the event that Continental, at any time prior to the
Distribution Date, ceases to own Holdings Capital Stock constituting Tax Control
and such failure was caused by any breach by Holdings of any of its
representations, warranties, covenants or other agreements made pursuant to this
Agreement or otherwise, in addition to any monetary damages or other
indemnification obligations owing pursuant to Section 4.3 hereof, Holdings shall
promptly take all actions, including, but not limited to, the purchase of
Holdings Capital Stock in the open market, necessary so as to permit Continental
to regain ownership of Holdings Capital Stock which constitutes Tax Control and
would not jeopardize the Tax-Free Status of the Distribution.
(c) Notice.
(i) Until all restrictions set forth in Section 4.1 have
expired, Holdings shall give Continental written notice of any intention to
effect or permit an action or transaction described in Section 4.1 and which is
prohibited thereunder at such time within a period of time
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reasonably sufficient to enable Continental (A) to make the determination
referred to in Section 4.1 or (B) to prepare and seek any Subsequent Tax Opinion
or Subsequent Tax Ruling in connection with such proposed action or transaction.
Each such notice by Holdings shall set forth the terms and conditions of the
proposed action or transaction, including, without limitation, as applicable,
the nature of any related action proposed to be taken by the Board of Directors
of Holdings, the approximate number of shares of Holdings Capital Stock proposed
to be transferred or issued, the approximate Value of Holdings' assets (or
assets of any of Holdings' Subsidiaries) proposed to be transferred, the
proposed timetable for such action or transaction, and the number of shares of
Holdings Capital Stock otherwise then owned by the other party to the proposed
action or transaction, all with sufficient particularity to enable Continental
to make any such required Continental Determination, including information
required to prepare and seek a Subsequent Tax Opinion or Subsequent Tax Ruling
in connection with such proposed action or transaction.
(ii) Promptly, but in any event within 30 Business Days, after
Continental receives such written notice from Holdings, Continental shall
evaluate such information and notify Holdings in writing (A) of such Continental
Determination or (B) of Continental's intent to seek a Subsequent Tax Opinion or
Subsequent Tax Ruling and the proposed date for submission of the request
therefor, which date shall not be more than 45 days after the date Continental
so notifies Holdings of Continental's intent to seek a Subsequent Tax Opinion or
Subsequent Tax Ruling, provided that such 45-day period shall be appropriately
extended for any period of noncompliance by Holdings with Section 4.2(b). If
Continental makes a determination that an action or transaction described in
Section 4.1 would jeopardize the Tax-Free Status of the Distribution, such
notice to Holdings shall set forth, in reasonable detail, the reasons therefor.
Continental shall notify Holdings promptly, but in any event within two Business
Days, after the receipt of a Subsequent Tax Opinion or Subsequent Tax Ruling.
4.3 Indemnification For Tax Liabilities.
(a) Indemnification. Notwithstanding any other provision of this
Agreement or any provision of the Tax Agreement to the contrary, Holdings shall
indemnify, defend and hold harmless Continental and each Continental Affiliate
(or any successor to any of them) against any and all Tax-Related Losses
incurred by Continental in connection with any proposed tax assessment or tax
controversy with respect to the Distribution to the extent caused by (i) any
breach by Holdings of any of its representations, warranties or covenants made
pursuant to this Agreement or (ii) the taking of any action described in Section
4.1 regardless of whether a Subsequent Tax Opinion or Subsequent Tax Ruling has
been received or Continental has consented to the taking of such action. All
interest or penalties incurred in connection with such Tax-Related Losses shall
be computed for the time period up to and including the date that Holdings pays
its indemnification obligation in full.
(b) Timing and Method of Tax Indemnification Payments. Holdings shall
pay any amount due and payable to Continental pursuant to this Section 4.3 on or
before the 15th day following the earlier of agreement or determination that
such amount is due and payable to Continental. All payments pursuant to this
Section 4.3 shall be made by wire transfer to a bank
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account designated by Continental for such purpose, and on the date of such wire
transfer Holdings shall give Continental notice of the transfer.
4.4 Procedure for Indemnification for Tax Liabilities.
(a) Notice of Claim. If Continental receives notice of the assertion of
any Third-Party Claim with respect to which Holdings may be obligated under
Section 4.3 to provide indemnification, Continental shall give Holdings notice
thereof (together with a copy of such Third-Party Claim, process or other legal
pleading) promptly after becoming aware of such Third-Party Claim; provided,
however, that the failure of Continental to give notice as provided in this
Section shall not relieve Holdings of its obligations under Section 4.3, except
to the extent that Holdings is actually prejudiced by such failure to give
notice. Such notice shall describe such Third-Party Claim in reasonable detail.
(b) Obligation of Indemnifying Party.
(i) Continental and Holdings shall jointly control the defense
of, and cooperate with each other with respect to defending, any Third-Party
Claim with respect to which Holdings is obligated under Section 4.3 to provide
indemnification, provided that Holdings shall forfeit such joint control right
with respect to a particular Third-Party Claim if Holdings or any Holdings
Affiliate makes any public statement or filing, or takes any action (including,
but not limited to, the filing of any submission or pleading, or the giving of a
deposition or production of documents, in any administrative or court
proceeding) in connection with such Third-Party Claim that is inconsistent in a
material respect with any representation or warranty made by Holdings in this
Agreement or the Representation Letters or in connection with the Tax
Opinions/Rulings, any Subsequent Tax Ruling or any Subsequent Tax Opinion.
(ii) Holdings and Continental shall exercise their rights to
jointly control the defense of any such Third-Party Claim solely for the purpose
of defeating such Third-Party Claim and, unless required by applicable law,
neither Holdings nor Continental shall make any statements or take any actions
that could reasonably result in the shifting of liability for any Losses arising
out of such Third-Party Claim from the party making such statement or taking
such action (or any of its Affiliates) to the other party (or any of its
Affiliates).
(iii) Statements made or actions taken by either Holdings or
Continental in connection with the defense of any such Third-Party Claim shall
not prejudice the rights of such party in any subsequent action or proceeding
between the parties.
(iv) If either Continental or Holdings fails to jointly defend
any such Third-Party Claim, the other party shall solely defend such Third-Party
Claim and the party failing to jointly defend shall use commercially reasonable
efforts to cooperate with the other party in its defense of such Third-Party
Claim; provided, however, that Continental may not compromise or settle any such
Third-Party Claim without the prior written consent of Holdings, which consent
shall not be unreasonably withheld or delayed. All costs and expenses of either
party in connection with, and during the course of, the joint control of the
defense of any such Third-Party Claim shall be initially paid by the party that
incurs such costs and expenses. Such costs
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and expenses shall be reallocated and reimbursed in accordance with the
respective indemnification obligations of the parties at the conclusion of the
defense of such Third-Party Claim.
4.5 Arbitration. Any dispute between the parties arising out of or
relating to this Section 4, including the interpretation of this Section 4, or
any actual or purported breach of this Section 4, shall be resolved only in
accordance with the following provisions:
(a) Negotiation. Continental and Holdings shall attempt in good faith
to resolve any such dispute promptly through negotiations of the parties. In the
event of any such dispute, either party may deliver a Dispute Notice to the
other party, and within 20 Business Days after the receipt of such Dispute
Notice, the appropriate representatives of Continental and Holdings shall meet
to attempt to resolve such dispute. If such dispute has not been resolved within
the Negotiation Period, or if one of the parties fails or refuses to negotiate
such dispute, the issue shall be settled by arbitration pursuant to Section
4.5(b). The results of such arbitration shall be final and binding on the
parties.
(b) Arbitration Procedure. Either party may initiate arbitration with
regard to such dispute by giving the other party written notice either (i) at
any time following the end of the Negotiation Period, or (ii) if the parties do
not meet within 20 Business Days of the receipt of the Dispute Notice, at any
time thereafter. The arbitration shall be conducted by three arbitrators in
accordance with the CPR Rules, except as otherwise provided in this Section 4.5.
Within 20 days following receipt of the written notice of arbitration,
Continental and Holdings shall each appoint one arbitrator. The two arbitrators
so appointed shall appoint the third arbitrator. If either Continental or
Holdings shall fail to appoint an arbitrator within such 20-day period, the
arbitration shall be by the sole arbitrator appointed by the other party.
Whether selected by Continental and Holdings or otherwise, each arbitrator
selected to resolve such dispute shall be a tax attorney or tax accountant who
is generally recognized in the tax community as a qualified and competent tax
practitioner with experience in the tax area involved in the issue or issues to
be resolved. Such arbitrators shall be empowered to determine whether Holdings
is required to indemnify Continental pursuant to Section 4.3 and to determine
the amount of the related indemnification payment. Each of Continental and
Holdings shall bear 50% of the aggregate expenses of the arbitrators. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
▇▇.▇▇. 1-14. The place of arbitration shall be Houston, Texas. The final
decision of the arbitrators shall be rendered no later than one year from the
date of the written notice of arbitration.
4.6 Exclusive Remedies. Except for the right to pursue equitable
remedies, the remedies provided in this Section 4 shall be deemed the sole and
exclusive remedies of the parties with respect to the subject matters of the
indemnification provisions of this Section 4.
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5. Certain Other Covenants.
5.1 Financial and Other Information.
(a) Financial Information. Holdings agrees that, for so long as
Continental is required to consolidate Holdings' results of operations and
financial position or to account for its investment in Holdings under the equity
method of accounting (determined in accordance with generally accepted
accounting principles consistently applied):
(i) Holdings shall, and shall cause each of its Subsidiaries
to, maintain a system of internal accounting controls that will provide
reasonable assurance that: (A) Holdings' and such Subsidiaries' books, records
and accounts fairly reflect all transactions and dispositions of assets and (B)
the specific objectives of accounting control are achieved.
(ii) Holdings shall, and shall cause each of its Subsidiaries
to, maintain a fiscal year which commences on January 1 and ends on December 31
of each calendar year.
(iii) Holdings shall deliver to Continental a trial balance
submission, which shall include amounts relating to each of its Subsidiaries, in
such format and detail as Continental may request, with respect to each month,
within five Business Days following the last day of each such month.
(iv) As soon as practicable, and in any event within five
Business Days after the end of each quarter in each fiscal year of Holdings,
Holdings shall deliver to Continental a consolidated income statement and
balance sheet for Holdings and its Subsidiaries for such fiscal quarter.
(v) As soon as practicable, and in any event within 10
Business Days after the end of each of the first three fiscal quarters in each
fiscal year of Holdings and no later than five days before Holdings intends to
file its Quarterly Financial Statements (as defined below) with the SEC,
Holdings shall deliver to Continental drafts of (A) the consolidated financial
statements of Holdings and its Subsidiaries (and notes thereto) for such periods
and for the period from the beginning of the current fiscal year to the end of
such quarter, setting forth in each case in comparative form for each such
fiscal quarter of Holdings the consolidated figures (and notes thereto) for the
corresponding quarter and periods of the previous fiscal year and all in
reasonable detail and prepared in accordance with Article 10 of Regulation S-X,
and (B) a discussion and analysis by management of Holdings' and its
Subsidiaries' financial condition and results of operations for such fiscal
period, including, without limitation, an explanation of any material adverse
change, all in reasonable detail and prepared in accordance with Item 303(b) of
Regulation S-K. The information set forth in (A) and (B) above is herein
referred to as the "Quarterly Financial Statements." No later than the earlier
of (x) two Business Days prior to the date Holdings publicly files the Quarterly
Financial Statements with the SEC or otherwise makes such Quarterly Financial
Statements publicly available or (y) two Business Days prior to the date on
which Continental intends to file its quarterly financial statements with the
SEC (as evidenced by written notice from Continental to Holdings of such
intended filing date at least 10 Business Days prior to such intended filing
date), Holdings shall deliver to Continental the final form of the Quarterly
Financial Statements certified by the chief financial officer of Holdings as
presenting fairly, in all material respects, the financial condition and results
of operations of Holdings and its Subsidiaries; provided that Holdings may
continue to revise such Quarterly Financial Statements prior to the filing
thereof in order to make corrections and non-substantive
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changes which corrections and changes shall be delivered by Holdings to
Continental as soon as practicable, and in any event within eight hours after
such filing; and, provided, further, that Continental and Holdings financial
representatives shall actively consult with each other regarding any changes
(whether or not substantive) which Holdings may consider making to its Quarterly
Financial Statements and related disclosures during the three Business Days
immediately prior to any anticipated filing with the SEC, and Holdings shall
obtain Continental's consent prior to making any change to Holdings' Quarterly
Financial Statements or related disclosures which would have an effect upon
Continental's financial statements or related disclosures. In addition to the
foregoing, no Quarterly Financial Statement or any other document which refers,
or contains information with respect, to the ownership of Holdings by
Continental, the separation of Holdings from Continental or the Distribution
shall be filed with the SEC or otherwise made public by Holdings or any of its
Subsidiaries without the prior written consent of Continental, which consent
will not be unreasonably withheld.
(vi) Holdings shall deliver to Continental as soon as
practicable, and in any event within 20 Business Days after the end of each
fiscal year of Holdings and no later than 10 days before Holdings intends to
file its Annual Financial Statements (as defined below) with the SEC, (A) drafts
of the consolidated financial statements of Holdings (and notes thereto) for
such year, setting forth in each case in comparative form the consolidated
figures (and notes thereto) for the previous fiscal year and all in reasonable
detail and prepared in accordance with Regulation S-X and (B) a discussion and
analysis by management of Holdings' and its Subsidiaries' financial condition
and results of operations for such year, including, without limitation, an
explanation of any material adverse change, all in reasonable detail and
prepared in accordance with Item 303(a) of Regulation S-K. The information set
forth in (A) and (B) above is herein referred to as the "Annual Financial
Statements." No later than the earlier of (1) five Business Days prior to the
date Holdings publicly files the Annual Financial Statements with the SEC or
otherwise makes such Annual Financial Statements publicly available or (2) five
Business Days prior to the date on which Continental intends to file its annual
financial statements with the SEC (as evidenced by written notice from
Continental to Holdings of such intended filing date at least ten Business Days
prior to such intended filing date), Holdings shall deliver to Continental the
final form of the Annual Financial Statements certified by the chief financial
officer of Holdings as presenting fairly, in all material respects, the
financial condition and results of operations of Holdings and its Subsidiaries;
provided that Holdings may continue to revise such Annual Financial Statements
prior to the filing thereof in order to make corrections and non-substantive
changes which corrections and changes shall be delivered by Holdings to
Continental as soon as practicable, and in any event within eight hours after
such filing; and, provided, further, that Continental and Holdings financial
representatives shall actively consult with each other regarding any changes
(whether or not substantive) which Holdings may consider making to its Annual
Financial Statements and related disclosures during the three Business Days
immediately prior to any anticipated filing with the SEC, and Holdings shall
obtain Continental's consent prior to making any change to Holdings' Annual
Financial Statements or related disclosures which would have an effect upon
Continental's financial statements or related disclosures. In addition to the
foregoing, no Annual Financial Statement or any other document which refers, or
contains information with respect, to the ownership of Holdings by Continental,
the separation of Holdings from Continental or the Distribution shall be filed
with the SEC or otherwise made public by Holdings or any of its Subsidiaries
without the
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prior written consent of Continental, which consent will not be unreasonably
withheld. In any event, Holdings shall deliver to Continental, no later than 20
Business Days after the end of each fiscal year of Holdings, the final form of
the Annual Financial Statements accompanied by an opinion thereon by Holdings'
independent certified public accountants.
(vii) Holdings shall deliver to Continental all Quarterly and
Annual Financial Statements of each Subsidiary of Holdings which is itself
required to file financial statements with the SEC or otherwise make such
financial statements publicly available, with such financial statements to be
provided in the same manner and detail and on the same time schedule as those
financial statements of Holdings required to be delivered to Continental
pursuant to this Section 5.1(a).
(viii) All information provided by Holdings or any of its
Subsidiaries to Continental pursuant to Sections 5.1(a)(iii) through (vii)
inclusive shall be consistent in terms of format and detail and otherwise with
the procedures in effect on the date hereof with respect to the provision of
such financial information by Holdings and its Subsidiaries, as applicable, to
Continental (and, where appropriate, as presently presented in financial reports
to Continental's Board of Directors), with such changes therein as may be
requested by Continental from time to time consistent with changes in reporting
by sectors and Subsidiaries of Continental.
(ix) Holdings and each of its Subsidiaries which files
information with the SEC shall deliver to Continental: (A) as soon as the same
are prepared, substantially final drafts of: (x) all reports, notices and proxy
and information statements to be sent or made available by Holdings or any of
its Subsidiaries to their security holders, (y) all regular, periodic and other
reports to be filed under Sections 13, 14 and 15 of the Exchange Act (including
Reports on Forms 10-K, 10-Q and 8-K and Annual Reports to Shareholders), and (z)
all registration statements and prospectuses to be filed by Holdings or any of
its Subsidiaries with the SEC or any securities exchange or interdealer
quotation system pursuant to the listed company manual (or similar requirements)
of such exchange or quotation system (collectively, the documents identified in
clauses (x), (y) and (z) are referred to herein as "Holdings Public Documents"),
and (B) as soon as practicable, but in no event later than four Business Days
(except where impracticable in the case of a report on Form 8-K) prior to the
date the same are printed, sent or filed, whichever is earliest, final copies of
all such Holdings Public Documents; provided that Holdings may continue to
revise such Holdings Public Documents prior to the filing thereof in order to
make corrections and non-substantive changes which corrections and changes shall
be delivered by Holdings to Continental as soon as practicable, and in any event
within eight hours after such filing; and, provided, further, that Continental
and Holdings financial representatives shall actively consult with each other
regarding any changes (whether or not substantive) which Holdings may consider
making to any of its Holdings Public Documents and related disclosures prior to
any anticipated filing with the SEC, and Holdings shall obtain Continental's
consent prior to making any change to its Holdings Public Documents or related
disclosures which would have an effect upon Continental's financial statements
or related disclosures. In addition to the foregoing, no Holdings Public
Document or any other document which refers, or contains information with
respect, to the ownership of Holdings by Continental, the separation of Holdings
from Continental or the Distribution shall be filed with the SEC or otherwise
made
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public by Holdings or any of its Subsidiaries without the prior written consent
of Continental, which consent will not be unreasonably withheld.
(x) Holdings shall, as promptly as practicable, deliver to
Continental copies of all annual and other budgets and financial projections
(consistent in terms of format and detail and otherwise with the procedures in
effect on the date hereof) relating to Holdings or any of its Subsidiaries and
shall provide Continental an opportunity to meet with management of Holdings to
discuss such budgets and projections, which obligations may be satisfied by
delivery of such copies to Continental's designees to Holdings' Board of
Directors, if any.
(xi) With reasonable promptness, Holdings shall deliver to
Continental such additional financial and other information and data with
respect to Holdings and its Subsidiaries and their business, properties,
financial positions, results of operations and prospects as from time to time
may be reasonably requested by Continental.
(xii) A reasonable period of time prior to issuance, Holdings
shall deliver to Continental copies of substantially final drafts of all press
releases and other statements to be made available by Holdings or any of its
Subsidiaries to employees of Holdings or any of its Subsidiaries or to the
public concerning material developments in the business, properties, earnings,
results of operations, financial condition or prospects of Holdings or any of
its Subsidiaries or the relationship between (A) Holdings or any of its
Subsidiaries and (B) Continental or any of its Affiliates. Continental shall
have the right to review and comment on such press releases and other
statements. Holdings shall include in any final press release or other statement
all reasonable comments of Continental. In addition, prior to the issuance of
any such press release or public statement, Holdings shall consult with
Continental regarding any changes (other than typographical or other similar
minor changes) to such substantially final drafts. Immediately following the
issuance thereof, Holdings shall deliver to Continental copies of final drafts
of all press releases and other public statements. Holdings and Continental will
consult with each other as to the timing of their annual and quarterly earnings
releases and will give each other an opportunity to review the information
therein relating to Holdings and its Subsidiaries and to comment thereon.
(xiii) Holdings shall cooperate fully, and cause its
accountants to cooperate fully, with Continental to the extent requested by
Continental in the preparation of Continental's public earnings releases,
quarterly reports on Form 10-Q, Annual Reports to Shareholders, Annual Reports
on Form 10-K, any Current Reports on Form 8-K and any other proxy, information
and registration statements, reports, notices, prospectuses and any other
filings made by Continental with the SEC, any national securities exchange or
otherwise made publicly available (collectively, "Continental Public Filings").
Holdings agrees to provide to Continental all information that Continental
reasonably requests in connection with any Continental Public Filings or that,
in the judgment of Continental's legal department, is required to be disclosed
or incorporated by reference therein under any law, rule or regulation. Such
information shall be provided by Holdings in a timely manner on the dates
requested by Continental (which may be earlier than the dates on which Holdings
otherwise would be required hereunder to have such information available) to
enable Continental to prepare, print and release all Continental Public Filings
on such dates as Continental shall determine. Holdings shall cause its
accountants to
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consent to any reference to them as experts in any Continental Public Filings
required under any law, rule or regulation. If and to the extent requested by
Continental, Holdings shall diligently and promptly review all drafts of such
Continental Public Filings and prepare in a diligent and timely fashion any
portion of such Continental Public Filing pertaining to Holdings. Prior to any
printing or public release of any Continental Public Filing, an appropriate
executive officer of Holdings shall, if requested by Continental, certify that
the information relating to Holdings, any Holdings Affiliate or the Holdings
Business in such Continental Public Filing is accurate, true and correct in all
material respects. Unless required by law, rule or regulation, Holdings shall
not publicly release any financial or other information which conflicts with the
information with respect to Holdings, any Holdings Affiliate or the Holdings
Business that is included in any Continental Public Filing without Continental's
prior written consent. Prior to the release or filing thereof, Continental shall
provide Holdings with a draft of any portion of a Continental Public Filing
containing information relating to Holdings and its Subsidiaries and shall give
Holdings an opportunity to review such information and comment thereon; provided
that Continental shall determine in its sole discretion the final form and
content of all Continental Public Filings.
(b) Auditors and Audits; Annual Statements and Accounting. Holdings
agrees that, for so long as Continental is required to consolidate Holdings'
results of operations and financial position or to account for its investment in
Holdings under the equity method of accounting (in accordance with generally
accepted accounting principles):
(i) Holdings shall not select a different accounting firm than
Ernst & Young LLP to serve as its (and its Subsidiaries') independent certified
public accountants ("Holdings' Auditors") without Continental's prior written
consent (which shall not be unreasonably withheld).
(ii) Holdings shall use its best efforts to enable the
Holdings Auditors to complete their audit such that they will date their opinion
on Holdings' audited annual financial statements on the same date that
Continental's independent certified public accountants ("Continental's
Auditors") date their opinion on Continental's audited annual financial
statements (the "Continental Annual Statements"), and to enable Continental to
meet its timetable for the printing, filing and public dissemination of the
Continental Annual Statements.
(iii) Holdings shall provide to Continental on a timely basis
all information that Continental reasonably requires to meet its schedule for
the preparation, printing, filing, and public dissemination of the Continental
Annual Statements. Without limiting the generality of the foregoing, Holdings
will provide all required financial information with respect to Holdings and its
Subsidiaries to Holdings' Auditors in a sufficient and reasonable time and in
sufficient detail to permit Holdings' Auditors to take all steps and perform all
reviews necessary to provide sufficient assistance to Continental's Auditors
with respect to information to be included or contained in the Continental
Annual Statements. Continental will provide in a timely manner to Holdings all
information that is reasonably necessary for Holdings to comply with this
Section 5.1(b)(iii).
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(iv) Holdings shall authorize Holdings' Auditors to make
available to Continental's Auditors both the personnel who performed or are
performing the annual audit of Holdings and work papers related to the annual
audit of Holdings, in all cases within a reasonable time prior to Holdings'
Auditors' opinion date, so that Continental's Auditors are able to perform the
procedures they consider necessary to take responsibility for the work of
Holdings' Auditors as it relates to Continental's Auditors' report on the
Continental Annual Statements, all within sufficient time to enable Continental
to meet its timetable for the printing, filing and public dissemination of the
Continental Annual Statements.
(v) Holdings shall provide Continental's internal auditors
access to Holdings' and its Subsidiaries, books and records so that Continental
may conduct reasonable audits relating to the financial statements provided by
Holdings pursuant hereto as well as to the internal accounting controls and
operations of Holdings and its Subsidiaries.
(vi) Holdings shall give Continental as much prior notice as
reasonably practical of any proposed determination of, or any significant
changes in, its accounting estimates or accounting principles from those in
effect on the date hereof. Holdings will consult with Continental and, if
requested by Continental, Holdings will consult with Continental's auditors with
respect thereto. Holdings will not make any such determination or changes
without Continental's prior written consent if such a determination or a change
would be sufficiently material to be required to be disclosed in Holdings'
financial statements as filed with the SEC or otherwise publicly disclosed
therein.
(vii) Notwithstanding clause (vi) above, Holdings shall make
any changes in its accounting estimates or accounting principles that are
requested by Continental in order for Holdings' accounting estimates and
principles to be consistent with those of Continental.
Nothing in this Section 5.1 shall require Holdings to violate any
agreement with any of its customers regarding the confidentiality of
commercially sensitive information relating to that customer or its business;
provided that in the event that Holdings is required under this Section 5.1 to
disclose any such information, Holdings shall use all commercially reasonable
efforts to seek to obtain such customer's consent to the disclosure of such
information.
5.2 Other Covenants. Holdings hereby covenants and agrees that, for so
long as Continental beneficially owns at least 50% of the value of all
outstanding shares of Holdings Capital Stock or 50% of the total combined voting
power of all outstanding shares of Voting Stock of Holdings:
(a) Holdings shall not, without the prior written consent of
Continental (which it may withhold in its sole and absolute discretion), take,
or cause to be taken, directly or indirectly, any action, including making or
failing to make any election under the law of any state, which has the effect,
directly or indirectly, of restricting or limiting the ability of Continental to
freely sell, transfer, assign, pledge or otherwise dispose of shares of Holdings
Common Stock or would restrict or limit the rights of any transferee of
Continental as a holder of Holdings Common Stock. Without limiting the
generality of the foregoing, Holdings shall not, without the prior written
consent of Continental (which it may withhold in its sole and absolute
discretion), take
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any action, or recommend to its stockholders any action, which would among other
things, limit the legal rights of, or deny any benefit to, Continental as a
Holdings stockholder in a manner not applicable to Holdings stockholders
generally.
(b) Holdings shall not, without the prior written consent of
Continental (which it may withhold in its sole and absolute discretion), issue
any shares of Holdings Capital Stock or any rights, warrants or options to
acquire Holdings Capital Stock (including, without limitation, securities
convertible or exchangeable for Holdings Capital Stock), if after giving effect
to such issuances and considering all of the shares of Holdings Capital Stock
acquirable pursuant to such rights, warrants and options to be outstanding on
the date of such issuance (whether or not then exercisable), Continental would
own less than 50% of the value of all outstanding shares of Holdings Capital
Stock or 50% of the total combined voting power of all outstanding shares of
Voting Stock of Holdings.
(c) To the extent that Continental is a party to any contract or
agreement with a third party (i) that provides that certain actions of
Continental's Subsidiaries may result in Continental being in breach of or in
default under such agreement and Continental has advised Holdings of the
existence, and has made available to Holdings copies, of such contract or
agreement (or the relevant portions thereof), (ii) to which Holdings or any of
its Subsidiaries is a party or (iii) under which Holdings or any of its
Subsidiaries has performed any obligations on or before the date hereof,
Holdings shall not take, and shall cause its Subsidiaries not to take, any
actions that reasonably could result in Continental being in breach of or in
default under any such contract or agreement. As of the date hereof, the
contracts and agreements described in clause (i) above are set forth or
generally described on Exhibit A attached hereto. Holdings hereby acknowledges
and agrees that Continental has made available to Holdings copies of each
contract or agreement (or the relevant portion thereof) described on Exhibit A.
The parties acknowledge and agree that, after the date hereof, Continental may
in good faith (and not solely with the intention of imposing restrictions on
Holdings pursuant to this covenant) enter into additional contracts or
agreements that provide that certain actions of Continental's Subsidiaries may
result in Continental being in breach of or in default under such agreements. In
such event, Exhibit A shall be deemed to be automatically amended to reflect the
addition of any other contracts or agreements (or relevant portions thereof) of
which Continental advises Holdings after the date hereof in accordance with this
Section 5.2(c).
5.3 Covenant Regarding Continental Preferred Stock. For so long as
Holdings shall constitute a Subsidiary or Affiliate of Continental, in each case
as such terms are defined in the Certificate of Designations of Series B
Preferred Stock (Par Value $0.01) of Continental, Holdings shall not take any
actions that reasonably could result in the occurrence of any event described in
Section 4(2) of such Certificate of Designations in respect of which the holder
of the Series B Preferred Stock would be entitled to vote.
6. Indemnification.
6.1 Indemnification by Holdings. Subject to Section 6.3, Holdings shall
indemnify, defend and hold harmless Continental, all Continental Affiliates and
each of their respective directors, officers and employees (in their capacities
as such), from and against:
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(a) all Losses relating to, arising out of, or due to, directly or
indirectly, any breach by Holdings or any Holdings Affiliate of any of the
provisions of this Agreement;
(b) all Losses relating to, arising out of, or due to, directly or
indirectly, any incorrect, inaccurate or incomplete financial and other
information provided by Holdings or any Holdings Affiliate to Continental
pursuant to Section 5.1 of this Agreement;
(c) all Losses relating to, arising out of, or due to any untrue
statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the IPO Registration Statement or the omission
or alleged omission to state (whether pursuant to direct statement or
incorporation by reference) in the IPO Registration Statement a material fact
required to be stated therein or necessary to make the statements therein not
misleading other than with respect to the Continental Disclosure Portions; and
(d) all Losses relating to, arising out of, or due to any untrue
statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Distribution Registration Statement or the
omission or alleged omission to state (whether pursuant to direct statement or
incorporation by reference) in the Distribution Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading other than with respect to the Continental Disclosure
Portions.
6.2 Indemnification by Continental. Subject to Section 6.3, Continental
shall indemnify, defend, and hold harmless Holdings, all Holdings Affiliates,
and each of their respective directors, officers and employees (in their
capacities as such), from and against:
(a) all Losses relating to, arising out of, or due to, directly or
indirectly, any breach by Continental or any Continental Affiliate of any of the
provisions of this Agreement;
(b) all Losses relating to, arising out of, or due to any untrue
statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Continental Disclosure Portions of the IPO
Registration Statement or the omission or alleged omission to state (whether
pursuant to direct statement or incorporation by reference) in the Continental
Disclosure Portions of the IPO Registration Statement a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and
(c) all Losses relating to, arising out of, or due to any untrue
statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Continental Disclosure Portions of the
Distribution Registration Statement or the omission or alleged omission to state
(whether pursuant to direct statement or incorporation by reference) in the
Continental Disclosure Portions of the Distribution Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
6.3 Tax Liabilities. Except as provided in Section 6.4, this Section 6
shall not be applicable to any Tax-Related Losses, which shall be governed by
Section 4 of this Agreement.
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6.4 Tax Effects of Indemnification.
(a) Any indemnification payment made under this Agreement shall be
characterized for tax purposes as if such payment were made immediately prior to
the Distribution Date, and shall therefore be treated, to the extent permitted
by law, as either (i) a distribution from Holdings to Continental or (ii) a
capital contribution from Continental to Holdings.
(b) The amount of any Loss or Tax-Related Losses for which
indemnification is provided under this Agreement shall be (i) increased to take
account of net Tax cost, if any, incurred by the Indemnitee arising from the
receipt or accrual of an Indemnity Payment hereunder (grossed up for such
increase) and (ii) reduced to take account of net Tax benefit, if any, realized
by the Indemnitee arising from incurring or paying such Loss or Tax-Related
Losses. In computing the amount of any such Tax cost or Tax benefit, the
Indemnitee shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt or
accrual of any Indemnity Payment hereunder or incurring or paying any
indemnified Loss or Tax-Related Losses. Any Indemnity Payment hereunder shall
initially be made without regard to this Section 6.4 and shall be increased or
reduced to reflect any such net Tax cost (including gross-up) or net Tax benefit
only after the Indemnitee has actually realized such cost or benefit. For
purposes of this Agreement, an Indemnitee shall be deemed to have "actually
realized" a net Tax cost or a net Tax benefit to the extent that, and at such
time as, the amount of Taxes payable by such Indemnitee is increased above or
reduced below, as the case may be, the amount of Taxes that such Indemnitee
would be required to pay but for the receipt or accrual of the Indemnity Payment
or the incurrence or payment of such Loss or Tax-Related Losses, as the case may
be. The amount of any increase or reduction hereunder shall be adjusted to
reflect any final determination (which shall include the execution of Form
870-AD or successor form) with respect to the Indemnitee's liability for Taxes,
and payments between Continental and Holdings to reflect such adjustment shall
be made if necessary.
6.5 Effect of Insurance Upon Indemnification. The amount which an
Indemnifying Party is required to pay to any Indemnitee pursuant to this Section
6 shall be reduced (including retroactively) by any Insurance Proceeds and other
amounts actually recovered by such Indemnitee in reduction of the related Loss,
it being understood and agreed that each of Holdings and Continental shall use
commercially reasonable efforts to collect any such proceeds or other amounts to
which it or any of its Affiliates is entitled, without regard to whether it is
the Indemnifying Party hereunder. No Indemnitee shall be required, however, to
collect any such proceeds or other amounts prior to being entitled to
indemnification from an Indemnifying Party hereunder. If an Indemnitee receives
an Indemnity Payment in respect of a Loss and subsequently receives Insurance
Proceeds or other amounts in respect of such Loss, then such Indemnitee shall
pay to such Indemnifying Party an amount equal to the difference between (a) the
sum of the amount of such Indemnity Payment and the amount of such Insurance
Proceeds or other amounts actually received and (b) the amount of such Loss, in
each case adjusted (at such time as appropriate adjustment can be determined) to
reflect any premium adjustment attributable to such claim.
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6.6 Procedure for Indemnification Involving Third-party Claims.
(a) Notice of Claim. If any Indemnitee receives notice of the assertion
of any Third-Party Claim with respect to which an Indemnifying Party is
obligated under this Agreement to provide indemnification (other than pursuant
to Section 4), such Indemnitee shall give such Indemnifying Party notice thereof
(together with a copy of such Third-Party Claim, process or other legal
pleading) promptly after becoming aware of such Third-Party Claim; provided,
however, that the failure of any Indemnitee to give notice as provided in this
Section shall not relieve any Indemnifying Party of its obligations under this
Section 6, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice. Such notice shall describe such
Third-Party Claim in reasonable detail.
(b) Obligation of Indemnifying Party. An Indemnifying Party, at such
Indemnifying Party's own expense and through counsel chosen by such Indemnifying
Party (which counsel shall be reasonably acceptable to the Indemnitee), may
elect to defend any Third-Party Claim. If an Indemnifying Party elects to defend
a Third-Party Claim, then, within ten Business Days after receiving notice of
such Third-Party Claim (or sooner, if the nature of such Third-Party Claim so
requires), such Indemnifying Party shall notify the Indemnitee of its intent to
do so, and such Indemnitee shall cooperate in the defense of such Third-Party
Claim. Such Indemnifying Party shall pay such Indemnitee's reasonable
out-of-pocket expenses incurred in connection with such cooperation. Such
Indemnifying Party shall keep the Indemnitee reasonably informed as to the
status of the defense of such Third-Party Claim. After notice from an
Indemnifying Party to an Indemnitee of its election to assume the defense of a
Third-Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Section 6 for any legal or other expenses subsequently
incurred by such Indemnitee in connection with the defense thereof other than
those expenses referred to in the preceding sentence; provided, however, that
such Indemnitee shall have the right to employ one law firm as counsel, together
with a separate local law firm in each applicable jurisdiction ("Separate
Counsel"), to represent such Indemnitee in any action or group of related
actions (which firm or firms shall be reasonably acceptable to the Indemnifying
Party) if, in such Indemnitee's reasonable judgment at any time, either a
conflict of interest between such Indemnitee and such Indemnifying Party exists
in respect of such claim, or there may be defenses available to such Indemnitee
that are different from or in addition to those available to such Indemnifying
Party and the representation of both parties by the same counsel would be
inappropriate, and in that event (i) the reasonable fees and expenses of such
Separate Counsel shall be paid by such Indemnifying Party (it being understood,
however, that the Indemnifying Party shall not be liable for the expenses of
more than one Separate Counsel (excluding local counsel) with respect to any
Third-Party Claim (even if against multiple Indemnitees)) and (ii) each of such
Indemnifying Party and such Indemnitee shall have the right to conduct its own
defense in respect of such claim. If an Indemnifying Party elects not to defend
against a Third-Party Claim, or fails to notify an Indemnitee of its election as
provided in this Section 6 within the period of ten Business Days described
above, the Indemnitee may defend, compromise, and settle such Third-Party Claim
and shall be entitled to indemnification hereunder (to the extent permitted
hereunder); provided, however, that no such Indemnitee may compromise or settle
any such Third-Party Claim without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the Indemnifying Party shall not, without the
prior written
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consent of the Indemnitee, (i) settle or compromise any Third-Party Claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to the Indemnitee of a
written release from all liability in respect of such Third-Party Claim or (ii)
settle or compromise any Third-Party Claim in any manner that would be
reasonably likely to have a material adverse effect on the Indemnitee.
(c) Joint Defense of Certain Claims. Notwithstanding the provisions of
Section 6.6(b), Continental and Holdings shall jointly control the defense of,
and cooperate with each other with respect to defending, any Third-Party Claim
with respect to which each party is claiming that it is entitled to
indemnification under Section 6.1 or 6.2. If either Continental or Holdings
fails to defend jointly any such Third-Party Claim, the other party shall solely
defend such Third-Party Claim and the party failing to defend jointly shall use
all commercially reasonable efforts to cooperate with the other party in its
defense of such Third-Party Claim; provided, however, that neither party may
compromise or settle any such Third-Party Claim without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed. All costs and expenses of either party in connection with, and during
the course of, the joint control of the defense of any such Third-Party Claim
shall be initially paid by the party that incurs such costs and expenses. Such
costs and expenses shall be reallocated and reimbursed in accordance with the
respective indemnification obligations of the parties at the conclusion of the
defense of such Third-Party Claim.
6.7 Procedure for Indemnification Not Involving Third-Party Claims. If
any Indemnitee desires to assert against an Indemnifying Party any claim for
indemnification under this Section 6 other than a Third-Party Claim (a "Claim"),
the Indemnitee shall deliver to the Indemnifying Party notice of its demand for
satisfaction of such Claim (a "Request"), specifying in reasonable detail the
amount of such Claim and the basis for asserting such Claim. Within 30 days
after the Indemnifying Party has been given a Request, the Indemnifying Party
shall either (i) satisfy the Claim requested to be satisfied in such Request by
delivering to the Indemnitee payment by wire transfer or a certified or bank
cashier's check payable to the Indemnified Party in immediately available funds
in an amount equal to the amount of such Claim, or (ii) notify the Indemnitee
that the Indemnifying Party contests such Claim by delivering to the Indemnitee
a Dispute Notice, stating that the Indemnifying Party objects to such Claim and
specifying in reasonable detail the basis for contesting such Claim.
6.8 Exclusive Remedies. Except for the right to pursue equitable
remedies, the remedies provided in this Section 6 shall be deemed the sole and
exclusive remedies of the parties with respect to the subject matters of the
indemnification provisions of this Section 6.
7. Miscellaneous.
7.1 Survival. The representations and warranties contained in this
Agreement shall survive the execution and delivery hereof and the Distribution
Date until the expiration of all applicable statutes of limitations.
7.2 Complete Agreement. Except as otherwise set forth in this
Agreement, this Agreement and the exhibits hereto shall constitute the entire
agreement between the parties
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hereto with respect to the subject matter hereof and shall supersede all prior
agreements and understandings, whether written or oral, between the parties with
respect to such subject matter.
7.3 Authority. Each of the parties hereto represents to the other that
(a) it has the corporate power and authority to execute, deliver and perform
this Agreement, (b) the execution, delivery and performance of this Agreement by
it has been duly authorized by all necessary corporate action, (c) it has duly
and validly executed and delivered this Agreement, and (d) this Agreement is a
legal, valid and binding obligation, enforceable against it in accordance with
its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.
7.4 Governing Law This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas (other than the laws regarding
conflicts of laws) as to all matters, including matters of validity,
construction, effect, performance and remedies.
7.5 Consent to Exclusive Jurisdiction. Any action, suit or proceeding
arising out of any claim that the parties cannot settle through good faith
negotiations (except any claim to which Section 4.5 applies) shall be litigated
exclusively in the state courts of ▇▇▇▇▇▇ County of the State of Texas. Each of
the parties hereto hereby irrevocably and unconditionally (a) submits to the
jurisdiction of such state courts of Texas for any such action, suit or
proceeding, (b) agrees not to commence any such action, suit or proceeding
except in such state courts of Texas, (c) waives, and agrees not to plead or to
make, any objection to the venue of any such action, suit or proceeding in such
state courts of Texas, (d) waives, and agrees not to plead or to make, any claim
that any such action, suit or proceeding brought in such state courts of Texas
has been brought in an improper or otherwise inconvenient forum, (e) waives, and
agrees not to plead or to make, any claim that such state courts of Texas lack
personal jurisdiction over it, and (f) waives its right to remove any such
action, suit or proceeding to the federal courts except when such courts are
vested with sole and exclusive jurisdiction by statute. Continental and Holdings
shall cooperate with each other in connection with any such action, suit or
proceeding to obtain reliable assurances that confidential treatment will be
accorded any information that either party shall reasonably deem to be
confidential or proprietary. Each of the parties hereto further covenants and
agrees that, until the expiration of all applicable statutes of limitations
relating to potential claims under this Agreement, each such party shall
maintain a duly appointed agent for the service of summonses and other legal
process in the State of Texas.
7.6 Notices. All Notices shall be in writing and shall be deemed given
upon (a) a transmitter's confirmation of a receipt of a facsimile transmission
(but only if followed by confirmed delivery by a standard overnight courier the
following Business Day or if delivered by hand the following Business Day), or
(b) confirmed delivery by a standard overnight courier or delivered by hand, to
the parties at the following addresses:
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if to Continental:
Continental Airlines, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President - Corporate Development
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Continental Airlines, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to Holdings, to:
ExpressJet Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either party hereto may have furnished to the other
party by a Notice in writing in accordance with this Section 7.6.
7.7 Amendment and Modification. This Agreement may not be amended or
modified in any respect except by a written agreement signed by both of the
parties hereto.
7.8 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon the parties hereto and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except with respect to a merger of either party with another Person,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either party hereto without the prior written consent of
the other party, which consent shall not be unreasonably withheld or delayed.
7.9 Third Party Beneficiaries. The Indemnitees and their respective
successors shall be third party beneficiaries of the indemnification provisions
of Sections 4 and 6, as applicable, and shall be entitled to enforce those
provisions and in connection with such enforcement shall be subject to Section
7.5 in each such case as fully and to the same extent as if they were parties to
this Agreement. Except as provided in the previous sentence, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, and no Person (other than as provided in the
previous sentence) shall be deemed a third party beneficiary under or by reason
of this Agreement.
7.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The Agreement may be
executed by facsimile signature.
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7.11 Waiver. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the party against which such
waiver is to be asserted. Unless otherwise expressly provided in this Agreement,
no delay or omission on the part of any party in exercising any right or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any right or privilege under this Agreement
operate as a waiver of any other right or privilege under this Agreement nor
shall any single or partial exercise of any right or privilege preclude any
other or further exercise thereof or the exercise of any other right or
privilege under this Agreement. No failure by either party to take any action or
assert any right or privilege hereunder shall be deemed to be a waiver of such
right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.
7.12 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.13 Remedies. Except as otherwise provided herein, each of Continental
and Holdings shall be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including reasonable attorneys'
fees) caused by any breach of any provision of this Agreement and to exercise
all other rights existing in its favor. Each of Continental and Holdings
acknowledges and agrees that under certain circumstances the breach by
Continental or any of its Affiliates or Holdings or any of its Affiliates of a
term or provision of this Agreement will materially and irreparably harm the
other party, that money damages will accordingly not be an adequate remedy for
such breach and that the non-defaulting party, in its sole discretion and in
addition to its rights under this Agreement and any other remedies it may have
at law or in equity and notwithstanding Section 7.5, may apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any breach of the provisions of this Agreement.
7.14 Performance. Unless a higher standard of effort is otherwise
required herein, each of the parties hereto shall use all commercially
reasonable efforts to cause to be performed all actions, agreements and
obligations set forth herein to be performed by any Affiliate of such party.
7.15 References; Construction. The table of contents and the section
and other headings and subheadings contained in this Agreement and the exhibits
hereto are solely for the purpose of reference, are not part of the agreement of
the parties hereto, and shall not in any way affect the meaning or
interpretation of this Agreement or any exhibit hereto. All references to days
or months shall be deemed references to calendar days or months. All references
to "$" shall be deemed references to United States dollars. Unless the context
otherwise requires, any reference to a "Section" or an "Exhibit" shall be deemed
to refer to a section of this Agreement or an exhibit to this Agreement, as
applicable. The words "hereof," "herein" and "hereunder"
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and words of similar import referring to this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement. Whenever the
words "include," "includes" or "including" are used in this Agreement, unless
otherwise specifically provided, they shall be deemed to be followed by the
words "without limitation." This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpretation against the
party drafting or causing the document to be drafted.
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IN WITNESS WHEREOF, the parties hereto have caused this Initial Public
Offering and
Distribution Agreement to be duly executed and delivered as of the
date and year first written above.
CONTINENTAL AIRLINES, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
EXPRESSJET HOLDINGS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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