Exhibit 99(c)(1)
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
AMERICAN AIRLINES, INC.
BONANZA ACQUISITIONS, INC.
and
RENO AIR, INC.
Dated as of November 19, 1998
Table of Contents
Page
BACKGROUND STATEMENT..............................................................................................1
STATEMENT OF THE AGREEMENT........................................................................................2
ARTICLE I
THE OFFERS
SECTION 1.01. The Offers.........................................................................................2
SECTION 1.02. Company Action.....................................................................................3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger.........................................................................................5
SECTION 2.02. Effective Time; Closing............................................................................5
SECTION 2.03. Effect of the Merger...............................................................................5
SECTION 2.04. Articles of Incorporation; By-laws.................................................................6
SECTION 2.05. Directors and Officers.............................................................................6
SECTION 2.06. Conversion of Securities...........................................................................6
SECTION 2.07. Employee Stock Options; Warrants...................................................................7
SECTION 2.08. Dissenting Shares..................................................................................8
SECTION 2.09. Surrender of Shares; Stock Transfer Books..........................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification....................................................................10
SECTION 3.02. Articles of Incorporation and By-laws.............................................................10
SECTION 3.03. Capitalization....................................................................................10
SECTION 3.04. Authority Relative to this Agreement..............................................................11
SECTION 3.05. No Conflict; Required Filings and Consents........................................................11
SECTION 3.06. Compliance........................................................................................12
SECTION 3.07. SEC Filings; Financial Statements.................................................................12
SECTION 3.08. Absence of Certain Changes or Events..............................................................13
SECTION 3.09. Absence of Litigation.............................................................................14
SECTION 3.10. Employee Benefit Plans............................................................................14
SECTION 3.11. Labor Matters.....................................................................................16
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement..................................................17
SECTION 3.13. Real Property and Leases..........................................................................17
SECTION 3.14. Trademarks, Patents and Copyrights................................................................18
SECTION 3.15. Taxes.............................................................................................18
SECTION 3.16. Environmental Matters.............................................................................19
SECTION 3.17. Aircraft..........................................................................................19
SECTION 3.18. Slots.............................................................................................19
SECTION 3.19. Brokers...........................................................................................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization............................................................................20
SECTION 4.02. Authority Relative to this Agreement..............................................................20
SECTION 4.03. No Conflict; Required Filings and Consents........................................................20
SECTION 4.04. Offer Documents; Proxy Statement..................................................................21
SECTION 4.05. Brokers...........................................................................................21
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.............................................22
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting.............................................................................25
SECTION 6.02. Proxy Statement...................................................................................25
SECTION 6.03. Company Board Representation; Section 14(f).......................................................25
SECTION 6.04. Access to Information; Confidentiality............................................................27
SECTION 6.05. No Solicitation of Transactions...................................................................27
SECTION 6.06. Existing Contracts Between Parent and the Company.................................................28
SECTION 6.07. Directors' and Officers' Indemnification and Insurance............................................28
SECTION 6.08. Notification of Certain Matters...................................................................29
SECTION 6.09. Further Action; Reasonable Best Efforts...........................................................30
SECTION 6.10. Redemption of Convertible Notes...................................................................30
SECTION 6.11. Preferred Stock...................................................................................30
SECTION 6.12. Public Announcements..............................................................................31
NYDOCS03/427679 15
ii
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger..........................................................................31
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.......................................................................................32
SECTION 8.02. Effect of Termination.............................................................................33
SECTION 8.03. Fees and Expenses; Commercial Arrangements........................................................33
SECTION 8.04. Amendment.........................................................................................35
SECTION 8.05. Waiver............................................................................................35
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements........................................36
SECTION 9.02. Notices...........................................................................................36
SECTION 9.03. Certain Definitions...............................................................................37
SECTION 9.04. Severability......................................................................................38
SECTION 9.05. Entire Agreement; Assignment......................................................................38
SECTION 9.06. Parties in Interest...............................................................................38
SECTION 9.07. Specific Performance..............................................................................39
SECTION 9.08. Governing Law.....................................................................................39
SECTION 9.09. Headings..........................................................................................39
SECTION 9.10. Counterparts......................................................................................39
ANNEX A Conditions to the Offers
ANNEX B Per Preferred Share Amount
NYDOCS03/427679 15
iii
Glossary of Defined Terms
Defined Term Location of Definition
--------------------------------------------------------------------------------------------------------------
Acquiring Person............................................................................ Section 8.03(a)
affiliate................................................................................... Section 9.03(a)
Agreement................................................................................... Preamble
Alternative Merger.......................................................................... Recitals
Articles of Merger.......................................................................... Section 2.02
beneficial owner............................................................................ Section 9.03(b)
Blue Sky Laws............................................................................... Section 3.05(b)
Board....................................................................................... Recitals
business day................................................................................ Section 9.03(c)
Certificate of Designation.................................................................. Section 2.04(a)
Certificates................................................................................ Section 2.09(b)
Code........................................................................................ Section 3.10(a)
Common Shares............................................................................... Recitals
Common Stock Offer.......................................................................... Recitals
Common Stock Merger Consideration........................................................... Section 2.06(a)
Company..................................................................................... Preamble
Company Common Stock........................................................................ Recitals
Company Preferred Stock..................................................................... Recitals
Competing Proposal.......................................................................... Section 8.03(a)(i)
Confidentiality Agreement................................................................... Section 6.04(b)
control..................................................................................... Section 9.03(d)
Convertible Notes........................................................................... Section 3.03(d)
Disclosure Schedule......................................................................... Section 3.01
Dissenting Shares........................................................................... Section 2.08(a)
Effective Time.............................................................................. Section 2.02
Environmental Laws.......................................................................... Section 3.16(a)
Environmental Permits....................................................................... Section 3.16(b)
ERISA....................................................................................... Section 3.10(a)
Exchange Act................................................................................ Section 1.02(b)
Expenses.................................................................................... Section 8.03(b)
Fee......................................................................................... Section 8.03(a)
Hazardous Substances........................................................................ Section 3.16(a)
HSR Act..................................................................................... Section 3.05(b)
HSR Condition............................................................................... Section 1.01(a)
Independent Directors....................................................................... Section 6.03(c)
Indemnified Parties......................................................................... Section 6.07(b)
IRS......................................................................................... Section 3.10(a)
knowledge and best knowledge................................................................ Section 9.03(e)
Liens....................................................................................... Section 3.13(b)
Glossary of Defined Terms
Defined Term Location of Definition
--------------------------------------------------------------------------------------------------------------
Material Adverse Effect..................................................................... Section 3.01(a)
Merger...................................................................................... Recitals
Merger Consideration........................................................................ Section 2.06(b)
Minimum Condition........................................................................... Section 1.01(a)
Multiemployer Plan.......................................................................... Section 3.10(b)
Multiple Employer Plan...................................................................... Section 3.10(b)
1997 Balance Sheet.......................................................................... Section 3.07(c)
Nevada Law.................................................................................. Recitals
Offers...................................................................................... Recitals
Offer Documents............................................................................. Section 1.01(b)
Offer to Purchase........................................................................... Section 1.01(b)
Operations Agreement........................................................................ Section 8.03(e)
Option...................................................................................... Section 2.07
Parent...................................................................................... Preamble
Paying Agent................................................................................ Section 2.09(a)
Per Common Share Amount..................................................................... Recitals
Per Preferred Share Amount.................................................................. Recitals
Per Share Amounts........................................................................... Recitals
Permitted Liens............................................................................. Section 3.13(b)
person...................................................................................... Section 9.03(f)
Plans....................................................................................... Section 3.10(a)
Preferred Shares............................................................................ Recitals
Preferred Stock Merger Consideration........................................................ Section 2.06(b)
Preferred Stock Offer....................................................................... Recitals
Primary Merger.............................................................................. Recitals
Proxy Statement............................................................................. Section 3.12
Purchaser................................................................................... Preamble
Returns..................................................................................... Section 3.15
Schedule 14D-9.............................................................................. Section 1.02(b)
Schedule 14D-1.............................................................................. Section 1.01(b)
SEC......................................................................................... Section 1.01(a)
SEC Reports................................................................................. Section 3.07(a)
Securities Act.............................................................................. Section 3.07(a)
Shares...................................................................................... Recitals
Slots....................................................................................... Section 3.18
Glossary of Defined Terms
Defined Term Location of Definition
--------------------------------------------------------------------------------------------------------------
Stockholder's Meeting....................................................................... Section 6.01(a)
Stock Option Plans.......................................................................... Section 2.07
subsidiary.................................................................................. Section 9.03(g)
Surviving Corporation....................................................................... Section 2.01
Tax......................................................................................... Section 3.15
Transactions................................................................................ Section 3.04
WARN........................................................................................ Section 3.10(f)
Warrant Agreement........................................................................... Section 3.03
Warrants.................................................................................... Section 3.03
iii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is
entered into as of this 19th day of November, 1998, by and among American
Airlines, Inc., a Delaware corporation ("Parent"), Bonanza Acquisitions, Inc., a
Nevada corporation and a wholly owned subsidiary of Parent ("Purchaser"), and
Reno Air, Inc., a Nevada corporation (the "Company").
BACKGROUND STATEMENT
The Board of Directors of the Company has determined that it
is in the best interests of the Company and its stockholders, and the Boards of
Directors of Parent and Purchaser have determined that it is in the best
interests of Parent and Purchaser, for Parent to acquire the Company. In
furtherance of such acquisition, it is proposed that Purchaser shall make a cash
tender offer (the "Common Stock Offer") to acquire all the issued and
outstanding shares of Common Stock, $0.01 par value per share, of the Company
("Company Common Stock"; shares of Company Common Stock being hereinafter
collectively referred to as "Common Shares") for $7.75 per Common Share (such
amount, or any greater amount per Common Share paid pursuant to the Common Stock
Offer, being hereinafter referred to as the "Per Common Share Amount"), net to
the seller in cash. In addition, Purchaser shall make a cash tender offer (the
"Preferred Stock Offer; and together with the Common Stock Offer, the "Offers"),
to acquire any and all of the issued and outstanding shares of Series A
Cumulative Convertible Exchangeable Preferred Stock, $0.001 par value per share,
of the Company ("Company Preferred Stock"; shares of Company Preferred Stock
being hereinafter collectively referred to as "Preferred Shares"; and together
with the Common Shares, the "Shares") for $27.50 per Preferred Share plus
accrued and unpaid dividends through the date Purchaser accepts for payment the
Preferred Shares (such amount, subject to reduction as described herein, or any
greater amount per Preferred Share paid pursuant to the Preferred Stock Offer,
being hereinafter referred to as the "Per Preferred Share Amount"; and together
with the Per Common Share Amount, the "Per Share Amounts")), net to the seller
in cash. The Board of Directors of the Company (the "Board") has unanimously
approved the making of the Offers and resolved and agreed to recommend that
holders tender their Common Shares and Preferred Shares pursuant to the Offers.
Also, in furtherance of such acquisition, the Boards of Directors of Parent,
Purchaser and the Company have each approved the merger of Purchaser with and
into the Company in accordance with the General Corporation Law of the State of
Nevada ("Nevada Law") and Article II hereof following the consummation of the
Offers pursuant to which the remaining Shares shall be converted into the right
to receive cash (the "Primary Merger") or the Common Shares will be converted
into the right to receive cash and the Preferred Shares shall remain issued and
outstanding (the "Alternative Merger"; the Primary Merger, together with the
Alternative Merger, being hereinafter collectively referred to as the "Merger").
STATEMENT OF THE AGREEMENT
In consideration of the mutual promises, covenants,
representations, and warranties made herein and of the mutual benefits to be
derived here from, Parent, Purchaser, and the Company agree as follows:
ARTICLE I
THE OFFERS
SECTION 1.01. The Offers. (a) Provided that this Agreement
shall not have been terminated in accordance with Section 8.01 and none of the
events set forth in Annex A hereto shall have occurred or be existing, Purchaser
shall commence the Offers as promptly as reasonably practicable after the date
hereof, but in no event later than five business days after the initial public
announcement of Purchaser's intention to commence the Offers. The obligation of
Purchaser to accept for payment and pay for Common Shares tendered pursuant to
the Common Stock Offer shall be subject to the condition (the "Minimum
Condition") that the number of Common Shares validly tendered and not withdrawn
prior to the expiration of the Common Stock Offer shall constitute at least a
majority of the then outstanding Common Shares on a fully diluted basis
(including, without limitation, all Common Shares issuable upon the conversion
of any convertible securities or upon the exercise of any options, warrants or
rights, but excluding Common Shares issuable upon the conversion of any
Preferred Shares to be accepted for payment and paid for by Purchaser pursuant
to the Preferred Stock Offer) and also shall be subject to the satisfaction of
the other conditions set forth in Annex A hereto. The obligation of Purchaser to
accept for payment and pay for Preferred Shares tendered pursuant to the
Preferred Stock Offer is subject to the condition that Purchaser has accepted
for payment and paid for the Common Shares tendered pursuant to the Common Stock
Offer. Purchaser expressly reserves the right to waive any such condition (other
than the Minimum Condition or the HSR Condition (as defined below)), to increase
the price per Common Share or Preferred Share payable in the Offers, and to make
any other changes in the terms and conditions of the Offers; provided, however,
that no change may be made which decreases the price per Share payable in the
Offers (other than as herein provided in respect of the Preferred Shares), which
changes the form of consideration to be paid in the Offers, or which reduces the
maximum number of Shares to be purchased in the Offers, or which extends the
expiration date of the Offers (which shall initially be twenty (20) business
days), or which imposes conditions to the Offers in addition to those set forth
in Annex A hereto; provided, further, however, that subject to the right of the
parties to terminate this Agreement pursuant to Section 8.01, the Common Stock
Offer (i) shall be extended (A) if, at the scheduled expiration of the Offers,
the condition to the Common Stock Offer relating to the expiration of the
required waiting periods under the HSR Act (the "HSR Condition") shall not be
satisfied, until such time as such condition is satisfied, and (B) for any
period required
2
by any rule, regulation or interpretation of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Common Stock Offer
and (ii) may be extended (A) if, at the
scheduled expiration of the Offers, any of the conditions to the Common Stock
Offer set forth in Annex A hereto shall not be satisfied or waived, until such
time as such condition is satisfied or waived, and (B) for a period of not more
than ten (10) business days if Purchaser determines in its sole discretion to so
extend the Common Stock Offer, provided that this Agreement may not be
terminated pursuant to Section 8.01(b), (c) or (d) during any extension pursuant
to this clause (ii)(B). Purchaser may extend the Preferred Stock Offer for a
period of not more than twenty (20) business days after the date upon which
Purchaser accepts for payment and pays for Common Shares pursuant to the Common
Stock Offer, if the number of Preferred Shares validly tendered and not
withdrawn prior to such date shall constitute less than 662/3% of the then
outstanding Preferred Shares. The Preferred Share Amount shall be reduced to the
amount set forth in Annex B opposite the dividend payment date for the dividend
most recently declared by the Board which has or had a record date prior to the
time Purchaser accepts Preferred Shares for payment pursuant to the Preferred
Stock Offer. The Per Share Amounts shall, subject to applicable withholding of
taxes, be net to the seller in cash, upon the terms and subject to the
conditions of the Offers. Subject to the terms and conditions of the Offers,
Purchaser shall pay, as promptly as practicable after expiration of each Offer,
for all Shares validly tendered to and not withdrawn from such Offer.
(b) As soon as reasonably practicable on the date of
commencement of the Offers, Purchaser shall file with the SEC a Tender Offer
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Offers, and take all steps
necessary to cause the Offer Documents (as defined below) to be disseminated to
holders of Common Shares and Preferred Shares as and to the extent required by
applicable federal securities laws. The Schedule 14D-1 shall contain or shall
incorporate by reference an offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule 14D-1, the Offer to Purchase and such other documents, together
with all supplements and amendments thereto, being referred to herein
collectively as the "Offer Documents"). Parent, Purchaser and the Company agree
to correct promptly any information provided by any of them for use in the Offer
Documents which shall have become false or misleading, and Parent and Purchaser
further agree to take all steps necessary to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Offer Documents as so corrected
to be disseminated to holders of Common Shares and Preferred Shares, in each
case as and to the extent required by applicable federal securities laws. The
Company and its counsel shall be given an opportunity to review and comment on
the Schedule 14D-1 and any amendments thereto prior to the filing thereof with
the SEC. Parent and Purchaser will provide the Company and its counsel with a
copy of any written comments or telephonic notification of any verbal comments
Parent or Purchaser may receive from the SEC or its staff with respect to the
Offer Documents promptly after
3
the receipt thereof and will provide the Company and its counsel with a copy of
any written responses and telephonic notification of any verbal response of
Parent, Purchaser or its counsel.
SECTION 1.02. Company Action. (a) The Company hereby approves
of and consents to the Offers and represents that (i) the Board, at a meeting
duly called and held on November 18, 1998, unanimously has (A) determined that
this Agreement and the Transactions contemplated hereby, including each of the
Offers and the Merger, taken together, are fair to and in the best interests of
the holders of the Common Shares, (B) approved and adopted this Agreement, the
Offers and the transactions contemplated hereby and thereby (including, without
limitation, for purposes of Section 78.438 of the Nevada Law), (C) amended the
Company's By-Laws to provide that the provisions of Sections 78.378 through
78.3793 of the Nevada Law shall not apply to the Company and to permit the
stockholders of the Company to take action by written consent and (D)
recommended that the stockholders of the Company accept the Offers and approve
and adopt this Agreement and the transactions contemplated hereby, and (ii)
SalomonSmithBarney Inc has delivered to the Board a written opinion that the
consideration to be received by the holders of the Common Shares pursuant to the
Common Stock Offer and the Merger, taken together, is fair to the holders of
such Shares from a financial point of view. Subject to the fiduciary duties of
the Board under applicable law as advised in writing by independent counsel, the
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Board described in the immediately preceding sentence. The
Company has been advised by each of its directors and executive officers that
they intend either to tender all the Shares beneficially owned by them to
Purchaser pursuant to the Offers or to vote the Shares beneficially owned by
them in favor of the approval and adoption by the stockholders of the Company of
this Agreement and the transactions contemplated hereby.
(b) As soon as reasonably practicable on the date of
commencement of the Offers, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing, subject to
the fiduciary duties of the Board under applicable law as advised in writing by
independent counsel, the recommendation of the Board described in Section
1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule
14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any other applicable federal securities laws. The Company,
Parent and Purchaser agree to correct promptly any information provided by any
of them for use in the Schedule 14D-9 which shall have become false or
misleading, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Parent, Purchaser and their counsel shall be given an
opportunity to review and comment on the Schedule 14D-9 and any amendments
thereto prior to the filing thereof with the SEC. The Company will provide
Parent and Purchaser and their counsel with a copy of any written comments or
telephonic notification of any verbal comments the Company may receive from the
SEC or its staff with respect to the Offer Documents promptly
4
after the receipt thereof and will provide Parent and Purchaser and their
counsel with a copy of any written responses and telephonic notification of any
verbal response of the Company or its counsel.
(c) The Company shall promptly cause to be furnished to
Purchaser mailing labels containing the names and addresses of all record
holders of the Shares and with security position listings of the Shares held in
stock depositories, each as of a recent date, together with all other available
listings and computer files containing names, addresses and security position
listings of record holders and beneficial owners of the Shares. The Company
shall furnish Purchaser with such additional information, including, without
limitation, updated listings and computer files of stockholders, mailing labels
and security position listings, and such other assistance as Parent, Purchaser
or their agents may reasonably request. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offers and
the Merger, Parent and Purchaser shall hold in confidence the information
contained in such labels, listings and files, shall use such information only in
connection with the Offers and the Merger, and, if this Agreement shall be
terminated in accordance with Section 8.01, shall deliver to the Company all
copies of such information then in their possession.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the
conditions set forth in Article VII, and in accordance with Nevada Law, at the
Effective Time (as hereinafter defined) Purchaser shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 2.02. Effective Time; Closing. As promptly as
practicable after the satisfaction or, if permissible, waiver of the conditions
set forth in Article VII, the parties hereto shall cause the Merger to be
consummated by filing this Agreement or articles of merger (in either case, the
"Articles of Merger") with the Secretary of State of the State of Nevada, in
such form as is required by, and executed in accordance with the relevant
provisions of, Nevada Law (the date and time of such filing being the "Effective
Time"). Prior to such filing, a closing shall be held at the offices of American
Airlines, Inc., 0000 Xxxx Xxxxxx Xxxxxxxxx, Xxxx Xxxxx, Xxxxx 00000, or such
other place as the parties shall agree, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
Article VII.
5
SECTION 2.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of Nevada
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04. Articles of Incorporation; By-laws. (a) Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time (i) if the Primary Merger is effected, the Articles of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, until thereafter amended
as provided by law and such Articles of Incorporation, or (ii) if the
Alternative Merger is effected, the Articles of Incorporation of the Company,
including, without limitation, the Certificate of Designations of Series A
Cumulative Convertible Exchangeable Preferred Stock $.001 par value per share of
the Company (the "Certificate of Designations"), as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Incorporation.
(b) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, (i) if the Primary Merger is effected,
the By-laws of Purchaser, as in effect immediately prior to the Effective Time,
shall be the By-laws of the Surviving Corporation until thereafter amended as
provided by law, the Articles of Incorporation of the Surviving Corporation and
such By-laws or (ii) if the Alternative Merger is effected, the By-laws of the
Company, as in effect immediately prior to the Effective Time, shall be the
By-laws of the Surviving Corporation until thereafter amended as provided by
law, the Articles of Incorporation of the Surviving Corporation and such
By-laws.
SECTION 2.05. Directors and Officers. The directors of
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and By-laws of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective Time,
by virtue of the Primary Merger or the Alternative Merger and without any action
on the part of Purchaser, the Company or the holders of any of the following
securities:
(a) Each Common Share issued and outstanding immediately prior
to the Effective Time (other than any Common Shares to be canceled
pursuant to Section 2.06(c)
6
and any Dissenting Shares (as hereinafter defined)) shall, pursuant to
the Primary Merger, be canceled and shall be converted automatically
into the right to receive an amount equal to the Per Common Share
Amount in cash (the "Common Stock Merger Consideration") payable,
without interest, to the holder of such Common Share, upon surrender,
in the manner provided in Section 2.09, of the certificate that
formerly evidenced such Common Share;
(b) Each Preferred Share issued and outstanding immediately
prior to the Effective Time (other than any Preferred Shares to be
canceled pursuant to Section 2.06(c) and any Dissenting Shares) shall,
pursuant to the Primary Merger, be canceled and converted automatically
into the right to receive an amount equal to the amount set forth in
Annex B opposite the dividend payment date for the dividend most
recently declared by the Board which has or had a record date prior to
the Effective Time, together with accrued and unpaid dividends through
the Effective Time in cash (the "Preferred Stock Merger Consideration";
and together with the Common Stock Merger Consideration, the "Merger
Consideration"), payable, without interest, to the holder of such
Preferred Share, upon surrender, in the manner provided in Section
2.09, of the certificate that formerly evidenced such Preferred Share,
provided, however, that in the event that less than 662/3% of the
Preferred Shares have voted to approve this Agreement and the Primary
Merger, the Alternative Merger shall be effected instead of the Primary
Merger, and each Preferred Share shall remain issued and outstanding as
a share of the Series A Cumulative Convertible Exchangeable Preferred
Stock, $0.001 par value per share, of the Surviving Corporation,
subject to the terms and conditions of the Certificate of Designations.
Pursuant to Section 7(e) of the Certificate of Designation, the holder
of each Preferred Share shall have the right to convert each such
Preferred Share into the amount of cash equal to the Common Stock
Merger Consideration which would be payable as a result of the Merger
with respect to the number of Common Shares or fraction thereof into
which such Preferred Shares could have been converted immediately prior
to the Effective Time, and such holder shall be entitled pursuant to
Section 8 of the Certificate of Designations, to effect such conversion
at an adjusted conversion price equal to the Special Conversion Price
(as defined in the Certificate of Designation);
(c) Each Share held in the treasury of the Company and each
Share owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent immediately prior to the Effective Time shall be
canceled without any conversion thereof and no payment or distribution
shall be made with respect thereto, provided, however, that in the
event that the Alternative Merger is effected, each Preferred Share
shall remain issued and outstanding and shall remain subject to the
terms and conditions of the Certificate of Designations; and
(d) Each share of Common Stock, par value $.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective
Time shall be converted into and
7
exchanged for one validly issued, fully paid and nonassessable share of
Common Stock, par value $.01 per share, of the Surviving Corporation.
SECTION 2.07. Employee Stock Options; Warrants. (a)
Immediately prior to the Effective Time, each outstanding option to purchase
Common Shares (in each case, an "Option") granted under (i) the Company's 1992
Stock Option Plan, (ii) the Company's Employee Stock Incentive Plan and (iii)
the Company's Directors Stock Option Plan (collectively, the "Stock Option
Plans"), whether or not then exercisable, shall be canceled by the Company, and
each holder of a canceled Option shall be entitled to receive from Purchaser at
the same time as payment for Common Shares is made by Purchaser in connection
with the closing of the Merger, in consideration for the cancellation of such
Option, an amount in cash equal to the product of (x) the number of Common
Shares previously subject to such Option and (y) the excess, if any, of the Per
Common Share Amount over the exercise price per Common Share previously subject
to such Option. The Company agrees to effectuate the cancellation of the Options
pursuant to this Section 2.07 by taking such action as may necessary under the
Company's 1992 Stock Option Plan, as amended and restated in 1994, the Company's
Employee Stock Incentive Plan and the Director's Stock Option Plan.
(b) From and after the Effective Time, pursuant to the
Warrants, (as hereinafter defined) the holder of each outstanding Warrant shall,
upon the payment of the exercise price under such Warrant, have the right to
exercise each such Warrant for an amount of cash equal to the Common Stock
Merger Consideration which would be payable as a result of the Merger with
respect to the number of Common Shares, or fraction thereof, for which such
Warrant could have been exercised immediately prior to the Effective Time.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any
provision of this Agreement to the contrary, Common Shares and Preferred Shares
that are outstanding immediately prior to the Effective Time and which are held
by stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such Common Shares and Preferred Shares in accordance with Nevada Law
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Common Stock Merger Consideration or Preferred Stock
Merger Consideration, as applicable. To the extent required under Nevada Law,
such stockholders shall be entitled to receive payment of the appraised value of
such Shares held by them in accordance with the provisions of such law, except
that all Dissenting Shares held by stockholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal of
such Shares under such law shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive the applicable Merger Consideration, without any interest thereon, upon
surrender, in the manner provided in Section 2.09, of the certificate or
certificates that formerly evidenced such Shares.
8
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to Nevada Law and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under Nevada Law. The Company shall not, except with
the prior written consent of Parent, make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, Purchaser shall designate a bank or trust company
reasonably acceptable to the Company to act as agent (the "Paying Agent") for
the holders of Shares in connection with the Merger to receive the funds to
which holders of Shares shall become entitled pursuant to Section 2.06(a) and
2.06(b).
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at the Effective
Time, a holder of record of Shares entitled to receive the Merger Consideration
pursuant to Section 2.06(a) or 2.06(b), a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates evidencing such Shares (the "Certificates") shall pass, only upon
proper delivery of the Certificates to the Paying Agent) and instructions for
use in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be canceled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Common Shares (including, without limitation, all
interest and other income received by the Paying Agent in respect of all funds
made available to it), and thereafter such holders shall be entitled to look to
the Surviving Corporation (subject to abandoned property, escheat and other
similar laws) only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither the Surviving Corporation nor the
Paying Agent
9
shall be liable to any holder of a Share for any Merger Consideration delivered
in respect of such Share to a public official pursuant to any abandoned
property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time,
the stock transfer books of the Company shall be closed and thereafter there
shall be no further registration of transfers of Common Shares or, provided that
the Primary Merger (and not the Alternative Merger) has been effected, the
Preferred Shares, on the records of the Company. From and after the Effective
Time, the holders of Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that:
SECTION 3.01. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect (as defined below). The Company is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. When used in connection with the Company, the term
"Material Adverse Effect" means any change or effect that, when taken together
with all other adverse changes and effects that are within the scope of the
representations and warranties made by the Company in this Agreement and which
are not individually or in the aggregate deemed to have a Material Adverse
Effect, is or is reasonably likely to be materially adverse to the business,
results of operations or financial condition of the Company, but excluding
changes or effects that (x) are directly caused by conditions affecting (A) the
United States economy as a whole or (B) the economy of the western region of the
United States as a whole or affecting the United States airline industry as a
whole, which conditions do not affect the Company in a disproportionate manner,
(y) are related to or result from any action or inaction on the part of Parent,
Purchaser or any affiliate thereof, including those in connection with the
currently existing commercial arrangements between such persons and the Company
or (z) are related to or result from the announcement of the Offers or the
Merger. Except as set forth in Section 3.01 of the Disclosure Schedule
previously delivered by the Company to Parent (the "Disclosure Schedule"), the
Company does not directly or indirectly own any equity or similar
10
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
SECTION 3.02. Articles of Incorporation and By-laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Articles of Incorporation and the By-laws, each as amended to date, of the
Company. Such Articles of Incorporation and By-laws are in full force and
effect. The Company is not in violation of any provision of its Articles of
Incorporation or By-laws, except for such violations as would not have a
Material Adverse Effect.
SECTION 3.03. Capitalization. The authorized capital stock of
the Company consists of 30,000,000 Common Shares and 10,000,000 Preferred
Shares. As of September 30, 1998, (i) 10,843,470 Common Shares were issued and
outstanding, all of which were validly issued, fully paid and nonassessable,
(ii) 1,436,000 Preferred Shares were issued and outstanding, all of which were
validly issued, fully paid and nonassessable, (iii) no Common Shares were held
in the treasury of the Company, (iv) 3,757,070 Common Shares were reserved for
future issuance pursuant to Options granted pursuant to the Company's Stock
Option Plans, (v) 4,164,400 Common Shares were reserved for issuance upon the
conversion of Preferred Shares, (vi) 65,431 Common Shares were reserved for
issuance upon the exercise of the warrants issued pursuant to the Placement
Agreement (the "Warrants") dated March 14, 1994 between the Company and Paradise
Valley Securities, Inc. (the "Warrant Agreement"), and (vii) 2,875,000 Common
Shares were reserved for issuance upon the conversion of the 9% Senior
Convertible Notes due September 30, 2002 issued by the Company pursuant to the
Indenture dated as of August 15, 1992 between the Company and Fleet National
Bank (formerly known as Shawmut Bank Connecticut, National Association) (the
"Convertible Notes"). Except as disclosed in Section 3.03 of the Disclosure
Schedule, since September 30, 1998 to the date of this Agreement, the Company
has not issued any Shares (other than pursuant to the exercise of Options
described in the preceding sentence), any warrants or other securities
convertible into or exercisable for Shares or granted any Options covering
Shares. Except as set forth in this Section 3.03 there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or obligating
the Company to issue or sell any shares of capital stock of, or other equity
interests in, the Company. All Common Shares subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any Shares or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in any other person.
SECTION 3.04. Authority Relative to this Agreement. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby (the "Transactions"). The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action
11
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
holders of a majority of the then outstanding Common Shares and (in the case of
the Primary Merger) at least 662/3% of the Preferred Shares, if and to the
extent required by applicable law, and the filing and recordation of appropriate
merger documents as required by Nevada Law). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Purchaser, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Articles of Incorporation or By-laws of the Company, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or by which any property or asset of the Company is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Company pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clause (iii) above, those events which, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Exchange Act, state
securities or "blue sky" laws ("Blue Sky Laws") and state takeover laws, the
pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), and filing and recordation of appropriate merger documents as
required by Nevada Law and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Offers or the Merger, or
otherwise prevent the Company from performing its obligations under this
Agreement, and would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.06. Compliance. The Company is not in conflict with,
nor in default or violation of, (i) any law, rule, regulation, order, judgment
or decree applicable to the Company or by which any property or asset of the
Company is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company or any
property or asset of the Company is
12
bound or affected, except for any such conflicts, defaults or violations that
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) The
Company has filed all forms, reports and documents required to be filed by it
with the SEC since December 31, 1995, and has heretofore delivered to Parent, in
the form filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal
years ended December 31, 1995, 1996, and 1997, respectively, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31, 1998, June 30, 1998 and
September 30, 1998, (iii) its Current Reports on Form 8-K filed on February 4,
1998, March 4, 1998, April 23, 1998, May 7, 1998 and August 26, 1998 and (iv)
all proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since January 1, 1996 (other than preliminary proxy
materials) and (v) all other forms, reports and other registration statements
(other than Quarterly Reports on Form 10-Q not referred to in clause (ii) above)
filed by the Company with the SEC since December 31, 1995 (the forms, reports
and other documents referred to in clauses (i), (ii), (iii), (iv) and (v) above
being referred to herein, collectively, as the "SEC Reports"). The SEC Reports
(i) were prepared in all material respects in accordance with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, as the case may be, and the rules and regulations thereunder and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each case,
any notes thereto) contained in the SEC Reports was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented the financial position, results of operations
and changes in financial position of the Company as at the respective dates
thereof and for the respective periods indicated therein (subject, in the case
of unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a Material
Adverse Effect).
(c) Except as and to the extent set forth on the balance sheet
of the Company as at December 31, 1997, including the notes thereto (the "1997
Balance Sheet"), the Company has no liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) which would be required to
be reflected on a balance sheet, or in the notes thereto, prepared in accordance
with generally accepted accounting principles, except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 1997 which would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) The Company has heretofore furnished to Parent complete
and correct copies of all amendments and modifications that have not been filed
by the Company with the SEC to all
13
agreements, documents and other instruments that previously had been filed by
the Company with the SEC and are currently in effect.
SECTION 3.08. Absence of Certain Changes or Events. Since
December 31, 1997, except as contemplated by this Agreement or disclosed in any
SEC Report filed since December 31, 1997 and prior to the date of this Agreement
or described in any press release listed in Section 3.08 of the Disclosure
Schedule, the Company has conducted its business only in the ordinary course and
in a manner consistent with past practice and, since December 31, 1997, there
has not been (i) any change in the business, results of operations or financial
condition of the Company having, individually or in the aggregate, a Material
Adverse Effect, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset of the Company and having,
individually or in the aggregate, a Material Adverse Effect, (iii) any change by
the Company in its accounting methods, principles or practices (other than as
required by generally accepted accounting principles), (iv) any revaluation by
the Company of any asset (including, without limitation, any writing down of the
value of inventory or writing off of notes or accounts receivable), other than
in the ordinary course of business consistent with past practice, (v) any entry
by the Company into any commitment or transaction material to the Company, (vi)
any declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities other than regular quarterly dividends on
the Preferred Shares not in excess of $0.5625 per Preferred Share or (vii) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of the Company, except in the
ordinary course of business consistent with past practice.
SECTION 3.09. Absence of Litigation. Except as disclosed in
Section 3.09 of the Disclosure Schedule or in the SEC Reports filed prior to the
date of this Agreement, there is no claim, action, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against the
Company, or any property or asset of the Company, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign, which (i) individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect or (ii) as of the date hereof, seeks to delay or
prevent the consummation of any Transaction. As of the date hereof, neither the
Company nor any property or asset of the Company is subject to any order, writ,
judgment, injunction, decree, determination or award having, individually or in
the aggregate, a Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. (a) Section 3.10 of
the Disclosure Schedule contains a true and complete list of all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and
14
all bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements to which the Company is
a party, with respect to which the Company has any obligation or which are
maintained, contributed to or sponsored by the Company for the benefit of any
current or former employee, officer or director of the Company (collectively,
the "Plans"). Each Plan is in writing and the Company has previously furnished
Parent with a true and complete copy of each Plan and a true and complete copy
of each material document prepared in connection with each such Plan, including,
without limitation, (i) a copy of each trust or other funding arrangement, (ii)
each summary plan description and summary of material modifications, (iii) the
most recently filed Internal Revenue Service ("IRS") Form 5500, (iv) the most
recently received IRS determination letter for each such Plan, and (v) the most
recently prepared actuarial report and financial statement in connection with
each such Plan. The Company does not have any express or implied commitment (i)
to create or incur material liability with respect to or cause to exist any
other employee benefit plan, program or arrangement, (ii) to enter into any
contract or agreement to provide compensation or benefits to any individual or
(iii) to modify, change or terminate any Plan, other than (x) with respect to a
modification, change or termination required by ERISA or the Internal Revenue
Code of 1986, as amended (the "Code") or (y) a modification, change or
termination which does not materially increase benefit accruals or contributions
required to be made by the Company.
(b) None of the Plans is a defined benefit pension plan
subject to Title IV of ERISA. None of the Plans is a multiemployer plan, within
the meaning of Section 3(37) of ERISA (a "Multiemployer Plan"), or other than as
specifically disclosed in Section 3.10 of the Disclosure Schedule, a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Company could incur liability under Section 4063 or 4064 of ERISA (a
"Multiple Employer Plan"). Other than as disclosed in Section 3.10 of the
Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any person, (ii)
obligates the Company to pay separation, severance, termination or other
benefits as a result of any Transaction or (iii) obligates the Company to make
any payment or provide any benefit that could be subject to a tax under Section
4999 of the Code as a result of any Transaction. Except as disclosed in Section
3.10 of the Disclosure Schedule, none of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company.
(c) Each Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS
that such Plan is so qualified, and each trust established in connection with
any Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
such trust is so exempt. To the knowledge of the Company, no fact or event has
occurred since the date of any such determination letter from the IRS that could
adversely affect the qualified status of any such Plan or the exempt status of
any such trust. Each trust maintained or contributed to by the
15
Company which is intended to be qualified as a voluntary employees' beneficiary
association exempt from federal income taxation under Sections 501(a) and 501
(c)(9) of the Code has received a favorable determination letter from the IRS
that it is so qualified and so exempt, and, to the knowledge of the Company, no
fact or event has occurred since the date of such determination by the IRS that
could adversely affect such qualified or exempt status.
(d) To the knowledge of the Company, there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. The Company is not currently liable
nor has it previously incurred any material liability for any tax or penalty
arising under Section 4971, 4972, 4979, 4980 or 4980B of the Code or Section
502(c) of ERISA, and, to the knowledge of the Company, no fact or event exists
which could give rise to any such liability. The Company has not incurred any
liability under, arising out of or by operation of Title IV of ERISA (other than
liability for premiums to the Pension Benefit Guaranty Corporation arising in
the ordinary course), including, without limitation, any liability in connection
with (i) the termination or reorganization of any employee pension benefit plan
subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan
or Multiple Employer Plan, and, to the knowledge of the Company, no fact or
event exists which could give rise to any such liability. No complete or partial
termination has occurred within the five years preceding the date hereof with
respect to any Plan. No reportable event (within the meaning of Section 4043 of
ERISA) has occurred or is expected to occur with respect to any Plan subject to
Title IV of ERISA. No asset of the Company is the subject of any lien arising
under Section 302(f) of ERISA or Section 4 12(n) of the Code; the Company has
not been required to post any security under Section 307 of ERISA or Section 401
(a)(29) of the Code; and, to the knowledge of the Company, no fact or event
exists which could give rise to any such lien or requirement to post any such
security.
(e) Each Plan is in compliance in all material respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company has performed all obligations
required to be performed by it under, is not in any respect in default under or
in violation of, and has no knowledge of any default or violation by any party
to, any Plan. No Plan has incurred an "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived. All contributions, premiums or payments required to be made with respect
to any Plan are fully deductible for income tax purposes and no such deduction
previously claimed has been challenged by any government entity. The 1997
Balance Sheet reflects an accrual of all amounts of employer contributions and
premiums accrued but unpaid with respect to the Plans.
(f) Other than as specifically disclosed in Section 3.10 of
the Disclosure Schedule, the Company has not incurred any liability under, and
has complied in all respects with, the Worker Adjustment Retraining Notification
Act and the regulations promulgated thereunder ("WARN") and does not reasonably
expect to incur any such liability as a result of actions taken or not taken
prior to the Effective Time. The Company has previously provided in writing to
Parent true and complete
16
lists of the following: (i) all the employees terminated or laid off by the
Company during the 90 days prior to the date hereof and (ii) all the employees
of the Company who have experienced a reduction in hours of work of more than
50% during any month during the 90 days prior to the date hereof and describes
all notices given by the Company in connection with WARN. The Company will, by
written notice to Parent and Purchaser, update such lists to include any such
terminations, layoffs and reductions in hours from the date hereof through the
Effective Time and will provide Parent and Purchaser with any related
information which they may reasonably request.
SECTION 3.11. Labor Matters. Except as set forth in Section
3.11 of the Disclosure Schedule, (i) there are no controversies pending or, to
the best knowledge of the Company, threatened between the Company and any of its
employees, which controversies have or could have a Material Adverse Effect;
(ii) the Company is not a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company, nor, to the
best knowledge of the Company, are there any activities or proceedings of any
labor union to organize any such employees; (iii) the Company has not materially
breached or otherwise failed to comply in any material respect with any material
provision of any such agreement or contract and there are no grievances
outstanding against the Company under any such agreement or contract; (iv) there
are no unfair labor practice complaints pending against the Company before the
National Labor Relations Board or any current union representation questions
involving employees of the Company; and (v) there is no strike, slowdown, work
stoppage or lockout, or, to the best knowledge of the Company, threat thereof,
by or with respect to any employees of the Company. The consent of the labor
unions which are a party to the collective bargaining agreements listed in
Section 3.11 of the Disclosure Schedule is not required to consummate the
Transactions.
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy
Statement. Neither the Schedule 14D-9 nor any information supplied by the
Company for inclusion in the Offer Documents shall, at the respective times the
Schedule 14D-9, the Offer Documents, or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to stockholders of
the Company, as the case may be, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. Neither the proxy statement to be
sent to the stockholders of the Company in connection with the Stockholders'
Meeting (as hereinafter defined) or the information statement to be sent to such
stockholders, as appropriate (such proxy statement or information statement, as
amended or supplemented, being referred to herein as the "Proxy Statement"),
shall, at the date the Proxy Statement (or any amendment or supplement thereto)
is first mailed to stockholders of the Company, at the time of the Stockholders'
Meeting and at the Effective Time, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading in any material respect.
17
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Purchaser or any of their
respective representatives which is contained in the Schedule 14D-9. The
Schedule 14D-9 and the Proxy Statement shall comply in all material respects as
to form with the requirements of the Exchange Act and the rules and regulations
thereunder.
SECTION 3.13. Real Property and Leases. (a) The Company has
sufficient title to, or leasehold interests in, all its properties and assets to
conduct its business as currently conducted or as contemplated to be conducted,
with only such exceptions as, individually or in the aggregate, would not have a
Material Adverse Effect.
(b) Except as set forth in Section 3.13 of the Disclosure
Schedule, each parcel of real property owned or leased by the Company (i) is
owned or leased free and clear of all mortgages, pledges, liens, security
interests, conditional and installment sale agreements, encumbrances, charges or
other claims of third parties of any kind (collectively, "Liens"), other than
(A) Liens for current taxes and assessments not yet past due, (B) inchoate
mechanics' and materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen' s and carriers' Liens arising in the ordinary course
of business of the Company consistent with past practice, and (D) all matters of
record, Liens and other imperfections of title and encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect
(collectively, "Permitted Liens"), and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the best knowledge of the Company, has any such condemnation,
expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit
of the Company to which the Company is a party requiring annual rental payments
in excess of $500,000 during the period of the lease, and all amendments and
modifications thereto are in full force and effect and have not been modified or
amended, and there exists no default under any such lease by the Company, nor
any event which with notice or lapse of time or both would constitute a default
thereunder by the Company, except as, individually or in the aggregate, would
not have a Material Adverse Effect.
SECTION 3.14. Trademarks, Patents and Copyrights. To the best
knowledge of the Company, the Company owns or possesses adequate licenses or
other valid rights to use all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, servicemarks, trade secrets,
applications for trademarks and for servicemarks, know-how and other proprietary
rights and information used or held for use in connection with, and material to,
the business of the Company as currently conducted, and the Company is unaware
of any assertion or claim challenging the validity of any of the foregoing
which, individually or in the aggregate, could have a Material Adverse Effect.
The conduct of the business of the Company as currently conducted does not and
will not conflict in any way with any patent, patent right, license, trademark,
trademark right, trade
18
name, trade name right, service xxxx, or copyright of any third party that,
individually or in the aggregate, could have a Material Adverse Effect. To the
best knowledge of the Company, there are no infringements of any propriety
rights owned by or licensed by or to the Company which, individually or in the
aggregate, could have a Material Adverse Effect. To the best knowledge of the
Company, the Company has not licensed or otherwise permitted the use by any
third party of any proprietary information on terms or in a manner which,
individually or in the aggregate, could have a Material Adverse Effect.
SECTION 3.15. Taxes. The Company has filed all returns and
reports ("Returns"), which are required to be filed by it in respect of any
Taxes (as hereinafter defined), and which the failure to file would have a
Material Adverse Effect. As of the time of filing and in all material respects,
the Returns correctly reflected the facts regarding the Taxes payable, income,
expenses, business, assets, operations and status of the Company and any other
information required to be shown thereon. The Company has paid or made provision
for payment of all Taxes shown on such Returns. Neither the IRS nor any other
taxing authority or agency, domestic or foreign, is now asserting or, to the
best knowledge of the Company, threatening to assert against the Company any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. The Company has not granted any waiver of any statute of
limitations with respect to, or any extension of the period of assessment of,
any federal, state, county, municipal or foreign income tax. The Company has not
made an election under Section 341(1) of the Code. For purposes of this
Agreement, "Tax" means all taxes, including net income, capital gains, gross
income, gross receipts, sales, use, transfer, ad valorem, franchise, profits,
license, capital, withholding, payroll, employment, excise, goods and services,
severance, stamp, occupation, premium, property, windfall profits, customs
duties or taxes, fees or assessments, or other governmental charges of any kind
whatsoever, together with any interest, fines and any penalties, additions to
tax or additional amount incurred or accrued under applicable law or assessed,
charged or imposed by any governmental authority.
SECTION 3.16. Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i) "Hazardous
Substances" means (A) those substances defined in or regulated under the
following federal statutes and their state counterparts, as each may be amended
from time to time, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum
and petroleum products including crude oil and any fractions thereof; (C)
natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) any other
contaminant; and (F) any substance with respect to which a federal, state or
local agency requires environmental investigation, monitoring, reporting or
remediation; and (ii) "Environmental Laws" means any federal, state or local law
relating to (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal
19
of Hazardous Substances or materials containing Hazardous Substances; or (C)
otherwise relating to pollution of the environment or the protection of human
health.
(b) To the best knowledge of the Company, except as described
in Section 3.16 of the Disclosure Schedule: (i) the Company has not violated and
is not in violation of any Environmental Law; (ii) none of the properties owned
or leased by the Company (including, without limitation, soils and surface and
ground waters) are contaminated with any Hazardous Substance; (iii) the Company
is not actually or potentially nor, to the best knowledge of the Company,
allegedly liable for any off-site contamination; (iv) the Company is not
actually or potentially nor, to the best knowledge of the Company, allegedly
liable under any Environmental Law (including, without limitation, pending or
threatened liens); (v) the Company has all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits")
and (vi) the Company has always been and is in compliance with its Environmental
Permits.
SECTION 3.17. Aircraft. Set forth on Section 3.17 of the
Disclosure Schedule is a complete and accurate list of all aircraft operated by
the Company at the date hereof.
SECTION 3.18. Slots. Set forth on Section 3.18 of the
Disclosure Schedule is a complete and accurate list of all takeoff and landing
slots and other similar takeoff and landing rights ("Slots") used by the Company
on the date hereof at Slot controlled airports, including a list of all slot
lease agreements.
SECTION 3.19. Brokers. No broker, finder or investment banker
(other than SalomonSmithBarney Inc) is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of the Company. The Company has heretofore
furnished to Parent a complete and correct copy of all agreements between the
Company and SalomonSmithBarney Inc pursuant to which such firm would be entitled
to any payment relating to the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 4.01. Corporate Organization. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and Nevada, respectively, and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is
20
now being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals would
not, individually or in the aggregate, have a material adverse effect on the
business or operations of Parent and Purchaser and their respective subsidiaries
taken as a whole.
SECTION 4.02. Authority Relative to this Agreement. Each of
Parent and Purchaser has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
Parent and Purchaser and the consummation by Parent and Purchaser of the
Transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of Parent or Purchaser are
necessary to authorize this Agreement or to consummate the Transactions (other
than, with respect to the Merger, the filing and recordation of appropriate
merger documents as required by Nevada Law). This Agreement has been duly and
validly executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Purchaser, enforceable against each
of Parent and Purchaser in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by Parent and Purchaser do not, and
the performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation, Articles of Incorporation or
By-laws of either Parent or Purchaser, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Parent or Purchaser or
by which any property or asset of either of them is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of Parent
or Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Purchaser is a party or by which Parent or Purchaser or any
property or asset of either of them is bound or affected , except for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a material adverse effect on the business
or operations of Parent or Purchaser and their respective subsidiaries taken as
a whole.
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Exchange Act,
Blue Sky Laws and state takeover laws, the HSR Act, and filing and recordation
of appropriate merger documents as required by Nevada Law and (ii) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or
21
delay consummation of the Offers or the Merger, or otherwise prevent Parent or
Purchaser from performing their respective obligations under this Agreement.
SECTION 4.04. Offer Documents; Proxy Statement. The Offer
Documents will not, at the time the Offer Documents are filed with the SEC or
are first published, sent or given to stockholders of the Company, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. The information supplied by Parent for inclusion in the
Proxy Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, at the time
of the Stockholders' Meeting and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading in any
material respect. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in any of the foregoing
documents or the Offer Documents. The Offer Documents shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 4.05. Brokers. No broker, finder or investment banker
(other than Xxxxxx Xxxxxxx & Co., Incorporated) is entitled to any brokerage,
finder's or other fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of Parent or Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the
Merger. (a) The Company covenants and agrees that, between the date of this
Agreement and the earlier of the time designees of Parent comprise a majority of
the Board of Directors of the Company or the Effective Time, unless Parent shall
otherwise agree in writing (which agreement shall not be unreasonably withheld
or delayed), it will do the following:
(i) conduct its business substantially as presently conducted
in the ordinary course of business consistent with past practice, and
will use all reasonable efforts to conduct its business in such a
manner that on the closing date of the Offers and at the Effective
Time, the
22
representations and warranties of the Company will be true and correct
in all material respects as though made on each respective closing
date;
(ii) continue to carry insurance with respect to its assets
and to the business substantially in the amounts and type carried by
the Company on the date of this Agreement;
(iii) continue to fund, in accordance with applicable
requirements, all employee benefit plans;
(iv) use all reasonable efforts to keep its business
organization intact, continue to operate in accordance with current
industry practices, preserve its labor force and make available to
Parent its officers and employees, and preserve for Parent the goodwill
of suppliers and customers of the Company and others having a business
relationship with the Company;
(v) maintain all items of its tangible assets in their current
condition, ordinary wear and tear excepted, and make all ordinary and
necessary repairs;
(vi) continue to use and operate the Slots used and operated
by the Company as of the date hereof in a manner consistent with prior
practice and in accordance with all applicable laws, and shall not
enter into any contract nor otherwise act, nor suffer or permit any
other person to act, to restrict, interfere with or prevent the use of
such Slots;
(vii) perform in all material respects its obligations under
all material contracts;
(viii) comply in all material respects with all applicable
laws and regulations, including, without limitation, laws and
regulations relating to the timely, complete, and correct filing of all
reports and maintenance of all records required by any governmental
authority to be filed or maintained;
(ix) notify Parent upon a replacement or exchange of any
aircraft or engine; and
(x) notify Parent of any incidents or accidents involving an
aircraft owned or operated by the Company that resulted or could
reasonably be expected to result in losses to the Company of in excess
of $2,000,000.
(b) The Company covenants and agrees that, between the date of
this Agreement and the earlier of the time designees of Parent comprise a
majority of the Board of Directors of the Company or the Effective Time, unless
Parent shall otherwise agree in writing (which agreement shall not be
unreasonably withheld or delayed), it will not do any of the following:
23
(i) amend or otherwise change its Articles of Incorporation
or By-laws or equivalent organizational documents;
(ii) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of (i) any shares of capital stock of any class of the Company, or any
options, warrants, convertible securities, or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company (except for the issuance of a maximum of 3,757,070 Common
Shares issuable pursuant to Options outstanding on the date hereof, a
maximum of 7,104,831 Common Shares issuable upon the exercise of
Warrants or upon the conversion of Preferred Shares or Convertible
Notes, in each case outstanding on the date hereof, and the issuance of
a maximum of 100,000 Options issued on terms consistent with prior
practice, and a maximum of 100,000 Common Shares issuable pursuant to
such Options, issued after the date hereof), or (ii) any assets of the
Company, except for sales in the ordinary course of business and in a
manner consistent with past practice;
(iii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, other than regular quarterly
dividends payable on the Preferred Shares not to exceed $0.5625 per
Preferred Share or in connection with the adoption of a Shareholder
Rights Plan;
(iv) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(v) except as disclosed in Section 5.01(b)(v) of the
Disclosure Schedule, (A) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets) any
corporation, partnership, other business organization or any division
thereof or any material amount of assets; (B) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans or advances, except in the
ordinary course of business and consistent with past practice; (C)
enter into any contract or agreement other than in the ordinary course
of business, consistent with past practice; (D) authorize any single
capital expenditure (other than expenditures for maintenance) which is
in excess of $500,000 or capital expenditures which are, in the
aggregate, in excess of $500,000; or (E) enter into or amend any
contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 5.01(b);
(vi) except as set forth in Section 5.01(b)(vi) of the
Disclosure Schedule, increase the compensation payable or to become
payable to, or the benefits provided to, its officers or key employees,
except for increases in accordance with past practices in salaries or
wages of employees of the Company who are not officers of the Company,
or grant any severance or
24
termination pay to, or enter into any employment or severance agreement
with any director, officer or other key employee of the Company, or
establish, adopt, enter into or amend in any material respect any
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(vii) except as set forth in Section 5.01(b)(vii) of the
Disclosure Schedule, hire or retain any single employee or consultant
at an annual rate of compensation in excess of $125,000, or employees
or consultants with annual rates of compensation in excess of $250,000
in the aggregate;
(viii) except as set forth in Section 5.01(b)(viii) of the
Disclosure Schedule, take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past
practice, with respect to accounting policies or procedures (including,
without limitation, procedures with respect to the payment of accounts
payable and collection of accounts receivable);
(ix) except as set forth in Section 5.01(b)(ix) of the
Disclosure Schedule, make any tax election or settle or compromise any
material federal, state, local or foreign income tax liability;
(x) except as set forth in Section 5.01(b)(x) of the
Disclosure Schedule, commence or settle any litigation, suit, claim,
action, proceeding, or investigation valued in excess of $300,000
either individually or in the aggregate, provided, however, that upon
prior notice to Parent, the Company may commence actions relating to
claims which are within 30 days of becoming barred by the applicable
statute of limitations or which constitute mandatory counterclaims in
any suit brought against the Company by any third party; or
(xi) amend, modify, or consent to the termination of any
material contract, or amend, modify, or consent to the termination of
the Company's rights thereunder, in a manner materially adverse to the
Company, other than in the ordinary course of business consistent with
past practice.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting. The Company, acting
through the Board, shall, if required by applicable law and the Company's
Articles of Incorporation and By-laws, (a) duly
25
call, give notice of, convene and hold an annual or special meeting of its
stockholders as soon as practicable following consummation of the Offers for the
purpose of considering and taking action on this Agreement and the transactions
contemplated hereby (the "Stockholder's Meeting") and (b) subject to its
fiduciary duties under applicable law as advised in writing by independent
counsel, (i) include in the Proxy Statement the unanimous recommendation of the
Board that the stockholders of the Company approve and adopt this Agreement and
the transactions contemplated hereby and (ii) use its best efforts to obtain
such approval and adoption. At the Stockholders' Meeting, Parent and Purchaser
shall cause all Shares then owned by them and their subsidiaries to be voted in
favor of the approval and adoption of this Agreement, the Merger and the
transactions contemplated hereby.
SECTION 6.02. Proxy Statement. If required by applicable law,
as soon as practicable following consummation of the Offers, the Company shall
file the Proxy Statement with the SEC under the Exchange Act, and shall use its
best efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser
and the Company shall cooperate with each other in the preparation of the Proxy
Statement, and the Company shall notify Parent of the receipt of any comments of
the SEC with respect to the Proxy Statement and of any requests by the SEC for
any amendment or supplement thereto or for additional information and shall
provide to Parent promptly copies of all correspondence between the Company or
any representative of the Company and the SEC. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give Parent and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and Purchaser
agrees to use its reasonable best efforts, after consultation with the other
parties hereto, to respond promptly to all such comments of and requests by the
SEC and to cause the Proxy Statement and all required amendments and supplements
thereto to be mailed to the holders of Shares entitled to vote at the
Stockholders' Meeting at the earliest practicable time.
SECTION 6.03. Company Board Representation; Section 14(f).
Subject to compliance with applicable law and the Company's Articles of
Incorporation, promptly upon the purchase by Purchaser of Common Shares pursuant
to the Offers, and from time to time thereafter, Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board as shall give Purchaser representation on the Board equal to the
product of the total number of directors on the Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Common Shares beneficially owned by Purchaser or any
affiliate of Purchaser following such purchase bears to the total number of
Common Shares then outstanding, and the Company shall, at such time, promptly
take all actions necessary to cause Purchaser's designees to be elected as
directors of the Company, including increasing the size of the Board or securing
the resignations of incumbent directors or both. At such times, the Company
shall use its best efforts to cause persons designated by Purchaser to
constitute the same percentage as persons designated by Purchaser shall
constitute of the Board of each committee of the Board to the extent permitted
by applicable law. Notwithstanding the foregoing, until the earlier of (i) the
time
26
Purchaser acquires a majority of the then outstanding Common Shares on a fully
diluted basis and (ii) the Effective Time, the Company shall use its best
efforts to ensure that all the members of the Board and each committee of the
Board as of the date hereof who are not employees of the Company shall remain
members of the Board and of each such committee.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 6.03 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under Section 14(f) and Rule 14f-1 to
fulfill such obligations. Parent or Purchaser shall supply to the Company and be
solely responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-l.
(c) Following the election of designees of Purchaser pursuant
to this Section 6.03, prior to the Effective Time, any amendment of this
Agreement or the Articles of Incorporation or By-laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Parent
or Purchaser or waiver of any of the Company's rights hereunder shall require
the concurrence of a majority of the directors of the Company then in office who
neither were designated by Purchaser nor are employees of the Company (the
"Independent Directors"). If the number of Independent Directors shall be
reduced below two for any reason whatsoever, the remaining Independent Director
shall designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of this Agreement or, if no Independent
Directors then remain, the other directors shall designate two persons to fill
such vacancies who shall not be officers or affiliates of the Company, or
officers or affiliates of Parent or any of its Subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement. The
Independent Directors shall have the authority to retain such counsel and other
advisors at the expense of the Company as are reasonably appropriate to the
exercise of their duties in connection with this Agreement, subject to approval
by the Company of the terms of such retention, which approval shall not be
unreasonably withheld. In addition, the Independent Directors shall have the
authority to institute any action, on behalf of the Company, to enforce
performance of this Agreement.
SECTION 6.04. Access to Information; Confidentiality. (a) From
the date hereof to the Effective Time, the Company shall, and shall cause the
officers, directors, employees, auditors and agents of the Company to, afford
the officers, employees and agents of Parent and Purchaser complete access at
all reasonable times to the officers, employees, agents, properties, offices,
plants and other facilities, books and records of the Company, and shall furnish
Parent and Purchaser with all financial, operating and other data and
information as Parent or Purchaser, through its officers, employees or agents,
may reasonably request.
27
(b) All information obtained by Parent or Purchaser pursuant
to this Section 6.04 shall be kept confidential in accordance with the
confidentiality agreement, dated June 12, 1998 (the "Confidentiality
Agreement"), between Parent and the Company.
(c) Pursuant to the requirements of the Confidentiality
Agreement, in the event of the termination of this Agreement in accordance with
Section 8.01, Parent and Purchaser shall, and shall use their reasonable best
efforts to cause their respective affiliates and their respective officers,
directors, employees and agents to, (i) return promptly every document furnished
to them by the Company or any officer, director, employee, auditor or agent of
the Company in connection with the Transactions and containing Confidential
Information and all copies thereof in their possession, and cause any other
parties to whom such documents may have been furnished promptly to return such
documents and all copies thereof, other than such documents as may have been
filed with the SEC or otherwise be publicly available, and (ii) destroy promptly
all documents created by them from any Confidential Information and all copies
thereof in their possession, and cause any other parties to whom such documents
may have been furnished to destroy promptly such documents and any copies
thereof.
(d) No investigation pursuant to this Section 6.04 shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
SECTION 6.05. No Solicitation of Transactions. The Company
shall not, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage the submission of any proposal or
offer from any person relating to any acquisition or purchase of all or (other
than in the ordinary course of business) any portion of the assets of, or any
equity interest in, the Company or any business combination with the Company or
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that nothing
contained in this Section 6.05 shall prohibit the Board from furnishing
information to, or entering into discussions or negotiations with, any person in
connection with an unsolicited (from the date of this Agreement) proposal in
writing by such person to acquire the Company pursuant to a merger,
consolidation, share exchange, share purchase, business combination or other
similar transaction or to acquire all or substantially all of the assets of the
Company, if, and only to the extent that, (i) the Board, after consultation with
independent legal counsel (which may include its regularly engaged independent
legal counsel), determines in good faith that such action is required for the
Board to comply with its fiduciary duties to stockholders imposed by Nevada Law
and (ii) prior to furnishing such information to, or entering into discussions
or negotiations with, such person, the Company uses its reasonable best efforts
to obtain from such person an executed confidentiality agreement on terms no
less favorable to the Company than those contained in the Confidentiality
Agreement. The Company immediately shall cease and cause to be terminated all
existing
28
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Company shall notify Parent promptly if any such
proposal or offer, or any inquiry or contact with any person with respect
thereto, is made and shall, in any such notice to Parent, indicate in reasonable
detail the identity of the person making such proposal, offer, inquiry or
contact and the terms and conditions of such proposal, offer, inquiry or
contact. The Company agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party.
SECTION 6.06. Existing Contracts Between Parent and the
Company. From the date hereof until the earlier of the Effective Time and the
termination of this Agreement in accordance with Section 8.01, Parent shall not
terminate (or take other adverse action against the Company in respect of) the
currently existing commercial contracts between Parent and the Company,
provided, however, that no provision of this Section 6.06 shall restrict or
prohibit Parent from exercising any rights of Parent in the event of a default
by the Company under any such contract. Parent shall also include the Company in
Parent's west coast promotions and advertisements for so long as there is a
frequent flyer arrangement between Parent and the Company. Additionally, the
Company shall be included in written frequent flyer promotional material
(in-flight and newsletter) on a level equal to Parent's other frequent flyer
partners.
SECTION 6.07. Directors' and Officers' Indemnification and
Insurance. (a) The Articles of Incorporation and By-laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in Article VIII of the Articles of
Incorporation and Article VII of the By-laws of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by law.
(b) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee, fiduciary and
agent of the Company (collectively, the "Indemnified Parties") against all costs
and expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or investigative,
arising out of or pertaining to, in whole or in part any action or omission in
their capacity as an officer, director, employee, fiduciary or agent (including
in connection with this Agreement and the transactions contemplated hereby),
whether occurring before or after the Effective Time, for a six-year period
after the date hereof. In the event of any such claim, action, suit, proceeding
or investigation, (i) the Company or the Surviving Corporation, as the case may
be, shall pay the reasonable fees and
29
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Company or the Surviving Corporation, promptly
after statements therefor are received and (ii) the Company and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld or delayed); and provided further that neither the
Company nor the Surviving Corporation shall be obligated pursuant to this
Section 6.07(b) to pay the fees and expenses of more than one counsel for all
Indemnified Parties in any single action except to the extent that two or more
of such Indemnified Parties shall have conflicting interests in the outcome of
such action; and provided further that, in the event that any claim for
indemnification is asserted or made within such six-year period, all rights to
indemnification in respect of such claim shall continue until the final
disposition of such claim.
(c) The Surviving Corporation shall use its best efforts to
maintain in effect for six years from the Effective Time and for so long
thereafter as any claim asserted prior to such date has not been fully
adjudicated, if available, the current directors' and officers' liability
insurance policies maintained by the Company or substitute therefor policies of
at least the same amounts and coverage containing terms and conditions which are
not materially less favorable to the insured parties with respect to matters
occurring prior to the Effective Time; provided, however, that in no event shall
the Surviving Corporation be required to expend pursuant to this Section 6.07(c)
more than an amount per year equal to 150% of current annual premiums paid by
the Company for such insurance (which premiums the Company represents and
warrants to be approximately $175,000 in the aggregate).
(d) In the event the Company or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the Company
or the Surviving Corporation, as the case may be, or at Parent's option, Parent,
shall assume the obligations set forth in this Section 6.07.
SECTION 6.08. Notification of Certain Matters. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate and (ii) any
failure of the Company, Parent or Purchaser, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.08 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
30
SECTION 6.09. Further Action; Reasonable Best Efforts. Upon
the terms and subject to the conditions hereof, each of the parties hereto shall
(i) make promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using its reasonable best efforts
to obtain all licenses, permits (including, without limitation, Environmental
Permits), consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company as are
necessary for the consummation of the Transactions and to fulfill the conditions
to the Offers and the Merger. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such action.
SECTION 6.10. Redemption of Convertible Notes. Immediately
after the date on which the Purchaser shall have accepted for payment all Common
Shares validly tendered and not withdrawn prior to the expiration date with
respect to the Common Stock Offer, the Company shall call for the redemption of,
and thereafter redeem, all of the outstanding Convertible Notes in accordance
with their terms.
SECTION 6.11. Preferred Stock. The Company covenants and
agrees as follows:
(a) Pursuant to Section 8 of the Certificate of Designations,
as soon as practicable after the acceptance for payment of the Common
Shares pursuant to the Common Stock Offer, the Company shall provide
the holders of all Preferred Shares with a notice of "Ownership Change"
(as defined in the Certificate of Designations). Each holder of
Preferred Shares, upon the occurrence of the Ownership Change shall
have the right, at the holder's option, to convert all, but not less
than all, of such holder's Preferred Shares into Common Shares, at an
adjusted conversion price per Common Share equal to the Special
Conversion Price (as defined in the Certificate of Designations),
subject to the option of the Company to provide to each such holder, in
lieu of Common Stock, cash equal to the Market Value (as defined in the
Certificate of Designations) of the Common Shares multiplied by the
number of Common Shares into which such Preferred Shares would have
been convertible at the Special Conversion Price.
(b) The Company shall exercise its option under Section 8 of
the Certificate of Designations to satisfy its obligations thereunder
by paying cash to the holders of Preferred Shares, in lieu of issuing
to such holders Common Stock upon the conversion of their Preferred
Shares.
31
SECTION 6.12. Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or any Transaction
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law or any listing
agreement with a national securities exchange to which Parent or the Company is
a party.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger. The respective
obligations of each party to effect the Primary Merger or the Alternative
Merger, as the case may be, shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Primary
Merger or the Alternative Merger contemplated hereby shall have been
approved and adopted by the affirmative vote of the stockholders of the
Company to the extent required by Nevada Law and the Articles of
Incorporation of the Company;
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated;
(c) No Order. No foreign, United States or state governmental
authority or other agency or commission or foreign, United States or
state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of
making the acquisition of Shares by Parent or Purchaser or any
affiliate of either of them illegal or otherwise restricting,
preventing or prohibiting consummation of the Transactions; and
(d) Offers. Purchaser shall have purchased all Common Shares
validly tendered and not withdrawn pursuant to the Common Stock Offer;
provided, however, that this condition shall not be applicable to the
obligations of Parent or Purchaser if, in breach of this Agreement or
the terms of the Common Stock Offer, Purchaser fails to purchase any
Common Shares validly tendered and not withdrawn pursuant to the Common
Stock Offer.
32
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated
and the Merger and the other Transactions may be abandoned at any time prior to
the Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of the
Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company; or
(b) By either Parent, Purchaser or the Company if (i)
Purchaser shall not have purchased Common Shares pursuant to the Common
Stock Offer on or before June 30, 1999; provided, however, that (x) the
right to terminate this Agreement under this Section 8.01(b)(i) shall
not be available to any such party if such party's failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of such purchase to occur on or before such date and
(y) if the waiting period (and any extension thereof) applicable to the
consummation of the Transactions under the HSR Act shall expire or
terminate less than ten (10) business days prior to June 30, 1999, the
right to terminate this Agreement pursuant to this clause (i) shall not
become effective until the tenth business day following the date of
such expiration or termination, or (ii) any court of competent
jurisdiction or other governmental authority shall have issued an
order, decree, ruling or taken any other action restraining, enjoining
or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; or
(c) By Parent if due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Annex A
hereto and provided that, in the case of the conditions set forth in
paragraph (e) or (f) thereof, Parent shall have provided five business
days prior written notice of such failure to the Company and such
condition shall have remained unsatisfied, Purchaser shall have (i)
terminated the Common Stock Offer without having accepted any Common
Shares for payment thereunder or (ii) failed to pay for Common Shares
pursuant to the Common Stock Offer prior to June 30, 1999, unless such
failure to pay for Common Shares shall have been caused by or resulted
from the failure of Parent or Purchaser to perform in any material
respect any material covenant or agreement of either of them contained
in this Agreement or the material breach by Parent or Purchaser of any
material representation or warranty of either of them contained in this
Agreement; and
(d) By the Company, upon approval of the Board, if (i) due to
an occurrence or circumstance that would result in a failure to satisfy
any condition set forth in Annex A hereto, Purchaser shall have (A)
terminated the Common Stock Offer without having accepted
33
any Common Shares for payment thereunder or (B) failed to pay for
Common Shares pursuant to the Common Stock Offer prior to June 30,
1999, unless such failure to pay for Common Shares shall have been
caused by or resulted from the failure of the Company to perform in any
material respect any material covenant or agreement of it contained in
this Agreement or the material breach by the Company of any material
representation or warranty of it contained in this Agreement or (ii)
prior to the purchase of Shares pursuant to the Offers, the Board shall
have withdrawn or modified in a manner adverse to Purchaser or Parent
its approval or recommendation of the Offers, this Agreement or the
Merger in order to approve the execution by the Company of a definitive
agreement providing for the acquisition of the Company or its assets by
merger or other business combination or in order to approve a tender
offer or exchange offer for Shares by a third party, in either case, as
determined by the Board in the exercise of its good faith judgment and
after consultation with its legal counsel and financial advisors, on
terms more favorable to the Company's stockholders than the Offers and
the Merger taken together, provided, however, that no termination
pursuant to this Section 8.01(d)(ii) shall be effective prior to the
payment by the Company of the Fee (as defined below) and the Expenses
(as defined below).
SECTION 8.02. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, and there shall be no liability on the part of any party
hereto, except (i) as set forth in Sections 8.03 and 9.01 and (ii) nothing
herein shall relieve any party from liability for any wilful breach hereof.
SECTION 8.03. Fees and Expenses; Commercial Arrangements.
(a) In the event that:
(i) any person (A) shall have become the beneficial owner of
more than 30% of the then outstanding Common Shares (an "Acquiring
Person") or (B) shall have commenced, proposed or communicated to the
Company a proposal that is publicly disclosed for a tender or exchange
offer for 30% or more (or which, assuming the maximum amount of
securities which could be purchased, would result in any person
beneficially owning 30% or more) of the then outstanding Common Shares
or otherwise for the direct or indirect acquisition of the Company or
all or substantially all of its assets for per Common Share
consideration having a value greater than the Per Common Share Amount
(a "Competing Proposal") and (w) the Offers shall have remained open
for at least 20 business days, (x) the Minimum Condition shall not have
been satisfied, (y) this Agreement shall have been terminated pursuant
to Section 8.01 and (z) such Competing Proposal shall be consummated or
a transaction of the type referred to in clause (B) above shall be
consummated with an Acquiring Person, in either case within 18 months
following the date of termination of this Agreement; or
(ii) this Agreement is terminated by the Company pursuant to
8.01(d)(ii);
34
then, in any such event, the Company shall pay Parent promptly (but in no event
later than one business day after the first of such events shall have occurred)
a fee of $3,000,000 (the "Fee"), which amount shall be payable in immediately
available funds, plus all Expenses (as hereinafter defined).
(b) If the Company is required to make any payment pursuant to
Section 8.03(a), then the Company shall reimburse each of Parent and Purchaser
(not later than one business day after submission of statements therefor) for
all out-of-pocket expenses and fees up to $1,000,000 in the aggregate
(including, without limitation, fees and expenses payable to all banks,
investment banking firms, other financial institutions and other persons and
their respective agents and counsel, for arranging, committing to provide or
providing any financing for the Transactions or structuring the Transactions and
all fees of counsel, accountants, experts and consultants to Parent and
Purchaser, and all printing and advertising expenses) actually incurred or
accrued by either of them or on their behalf in connection with the
Transactions, including, without limitation, the financing thereof, and actually
incurred or accrued by banks, investment banking firms, other financial
institutions and other persons and assumed by Parent or Purchaser in connection
with the negotiation, preparation, execution and performance of this Agreement,
the structuring and financing of the Transactions and any financing commitments
or agreements relating thereto (all the foregoing being referred to herein
collectively as the "Expenses").
(c) Except as set forth in this Section 8.03, all costs and
expenses incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such expenses, whether or not any Transaction is
consummated.
(d) In the event that the Company shall fail to pay the Fee or
any Expenses when due, the term "Expenses" shall be deemed to include the costs
and expenses actually incurred or accrued by Parent and Purchaser (including,
without limitation, fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 8.03, together with interest on
such unpaid Fee and Expenses, commencing on the date that the Fee or such
Expenses became due, at a rate equal to the rate of interest publicly announced
by Citibank, N.A., from time to time, in the City of New York, as such bank's
base rate plus 2.00%.
(e) If Parent terminates this Agreement pursuant to Section
8.01(b) or pursuant to Section 8.01(c) due to the failure to satisfy the
conditions set forth in paragraphs (a), (b), (e) or (f) of Annex A (other than
termination by Parent due to (i) a knowing or wilful breach by the Company of
any of the representations, warranties, covenants or agreements referenced in
paragraphs (e) or (f) of Annex A or (ii) a material breach by the Company of the
covenant contained in Section 6.05 of this Agreement), then Parent and the
Company shall take the following actions:
(i) extend the Amended and Restated Advantage
Participating Carrier Agreement dated March 28, 1995 between Parent and
the Company through April 30, 2001 (after which date such agreement
shall be terminable pursuant to the current terms thereof);
35
(ii) extend the term of the Operations Agreement
between Parent and the Company dated October 18, 1994 (the "Operations
Agreement") with respect to 50% of the Slots covered thereby through
December 31, 1999 and with respect to the remaining 50% of the Slots
covered thereby through December 31, 2000 (which to the extent
practicable shall consist of the most restrictive class of Slots)
(after which date the Operations Agreement shall be terminable pursuant
to the current terms thereof) and the Company agrees to waive any
claims that it may have any proprietary interest in any Slots covered
by the Operations Agreement;
(iii) for so long as there is a frequent flyer
arrangement between Parent and the Company, Parent shall include the
Company (A) in Parent's west coast promotions and advertisements and
(B) in written frequent flyer promotional material (in-flight and
newsletter) on a level equal to Parent's other frequent flyer partners;
and
(iv) Parent shall take the following actions:
(A) discuss in good faith with the Company the
provision to the Company of out-sourcing services in various
fields, including reservations, purchasing, sales and yield
management, subject to regulatory approval;
(B) review, on a case-by-case basis, exceptions to
the exclusivity provisions of the codeshare and frequent flyer
agreements between Parent and the Company, except that the
consent of Parent shall not be required for any such
arrangements with any airline that, as of the date hereof, (x)
presently codeshares with Parent, or (y) is a member of
"oneworld" (i.e., British Airways, Canadian Airlines
International, Cathay Pacific Airways, Qantas Airways); and
(C) review the possibility of placing the Company's
code on certain of Parent's flights, as Parent and the Company
both determine to be mutually beneficial;
SECTION 8.04. Amendment. Subject to Section 6.03, this
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after the approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company, no
amendment may be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger or the Alternative Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time,
any party hereto may (i) extend the time for the performance of any obligation
or other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained
36
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Article II and Section 6.07 shall survive the Effective Time
indefinitely and those set forth in Sections 6.04(b), 6.04(c) and 8.03 shall
survive termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
if to Parent or Purchaser:
American Airlines, Inc.
0000 Xxxx Xxxxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000
Attn: Corporate Secretary
Attn: Vice President - Corporate Development & Treasurer
Fax: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxx, Xx., Esq,
Fax: (000) 000-0000
37
if to the Company:
Reno Air, Inc.
000 Xxxxxx Xxx
Xxxx, Xxxxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx Xxxxxxxx, Esq.
Xxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
SECTION 9.03. Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any Common Shares means
a person who shall be deemed to be the beneficial owner of such Common
Shares (i) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the
right to vote pursuant to any agreement, arrangement or understanding
or (iii) which are beneficially owned, directly or indirectly, by any
other persons with whom such person or any of its affiliates or
associates or person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Common
Shares;
38
(c) "business day" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or,
in the case of determining a date when any payment is due, any day on
which banks are not required or authorized to close in the City of New
York;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise;
(e) "knowledge" and "best knowledge" mean, with respect to the
Company, the actual knowledge of the executive officers of the Company
and the persons who report directly to such executive officers;
(f) "person" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation,
a "person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government; and
(g) "subsidiary" or "subsidiaries" of any person means an
affiliate controlled by such person, directly or indirectly, through
one or more intermediaries.
SECTION 9.04. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Transactions is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersede, except as set forth in Sections 6.04(c), all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise, except that Parent and Purchaser may
assign all or any of their rights and obligations hereunder to any affiliate of
Parent provided that no such assignment shall relieve the assigning party of its
obligations hereunder if such assignee does not perform such obligations.
SECTION 9.06. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is
39
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 6.07 (which is intended to be for the benefit of the persons covered
thereby and may be enforced by such persons).
SECTION 9.07. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 9.08. Governing Law. Except to the extent that Nevada
Law applies to the Merger on a mandatory basis, this Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that State.
SECTION 9.09. Headings. The descriptive headings contained
in this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 9.10. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
40
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
AMERICAN AIRLINES, INC.
Attest: By
------------------------ ------------------------------
Title:
BONANZA ACQUISITIONS, INC.
Attest: By
------------------------ ------------------------------
Title:
RENO AIR, INC.
Attest: By
------------------------- -------------------------------
Title:
S-1
ANNEX A
Conditions to the Offers
Notwithstanding any other provision of the Offers, subject to
the applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act, Purchaser shall not be required to accept for payment or pay
for any Common Shares tendered pursuant to the Common Stock Offer, and may
(except as provided in the Merger Agreement) terminate or amend the Common Stock
Offer and may postpone the acceptance for payment of and payment for Common
Shares tendered, if (i) the Minimum Condition shall not have been satisfied,
(ii) any applicable waiting period under the HSR Act shall not have expired or
been terminated prior to the expiration of the Common Stock Offer, or (iii) at
any time on or after the date of this Agreement, and prior to the acceptance for
payment of Common Shares, any of the following conditions shall exist:
(a) there shall have been instituted or be pending any action
or proceeding by any court or governmental, administrative or
regulatory authority or agency, domestic or foreign, (i) challenging or
seeking to make illegal, materially delay or otherwise directly or
indirectly restrain or prohibit or make materially more costly the
making of the Offers, the acceptance for payment of, or payment for,
any Shares by Parent, Purchaser or any other affiliate of Parent or the
consummation of any other Transaction, or seeking to obtain material
damages in connection with any Transaction; (ii) seeking to prohibit or
limit materially the ownership or operation by the Company, Parent or
any of their subsidiaries of all or any material portion of the
business or assets of the Company, Parent or any of their subsidiaries,
or to compel the Company, Parent or any of their subsidiaries to
dispose of or hold separate all or any material portion of the business
or assets of the Company, Parent or any of their subsidiaries, as a
result of the Transactions; (iii) seeking to impose or confirm
limitations on the ability of Parent, Purchaser or any other affiliate
of Parent to exercise effectively full rights of ownership of any
Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offers or otherwise on all
matters properly presented to the Company's stockholders, including,
without limitation, the approval and adoption of this Agreement and the
transactions contemplated hereby; (iv) seeking to require divestiture
by Parent, Purchaser or any other affiliate of Parent of any Shares; or
(v) which otherwise has a Material Adverse Effect or which is
reasonably likely to have an adverse effect on the business, results of
operations or financial condition of Parent that is material in
relation to the benefits sought to be achieved by Parent in the
Transactions;
(b) there shall have been any action taken, or any statute,
rule, regulation, legislation, interpretation, judgment, order or
injunction enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to (i) Parent, the Company or any subsidiary or
affiliate of Parent or the Company or (ii) any Transaction, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the
routine application of the waiting period provisions of the HSR Act to
the Offers or the Merger, which is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect;
(d) (i) it shall have been publicly disclosed or Purchaser
shall have otherwise learned that beneficial ownership (determined for
the purposes of this paragraph as set forth in Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of the then outstanding Common
Shares has been acquired by any person, other than Parent or any of its
affiliates or (ii) (A) the Board or any committee thereof shall have
withdrawn or modified in a manner adverse to Parent or Purchaser the
approval or recommendation of the Offers, the Merger or the Merger
Agreement or approved or recommended any takeover proposal or any other
acquisition of Common Shares other than the Offers and the Merger or
(B) the Board or any committee thereof shall have resolved to do any of
the foregoing;
(e) any representation or warranty of the Company in the
Merger Agreement (without regard to any materiality qualifiers
contained therein) shall not be true and correct, in each case as if
such representation or warranty was made as of such time on or after
the date of this Agreement, but only if the aggregate effect of any
failures of such representations and warranties to be true and correct
would have a Material Adverse Effect, and the Company shall not have
delivered to Parent a certificate of the Company to such effect signed
by a duly authorized officer thereof and dated as of the date on which
Parent shall first accept Common Shares for payment;
(f) the Company shall have failed to perform in any material
respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with
by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms; or
(h) Purchaser and the Company shall have agreed that Purchaser
shall terminate the Offers or postpone the acceptance for payment of or
payment for Shares thereunder.
Notwithstanding any other provisions of the Offers, Purchaser
shall not be required to accept for payment or pay for any Preferred Shares
tendered pursuant to the Preferred Stock Offer unless and until the Purchaser
has accepted for payment and paid for the Common Shares pursuant to the Common
Stock Offer.
The foregoing conditions are for the sole benefit of Purchaser
and Parent and may be asserted by Purchaser or Parent, subject to the terms of
the Merger Agreement, regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser or Parent in whole or in part at any
time and from time to time in their sole discretion. The failure by Parent or
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed
A-2
a waiver with respect to any other facts and circumstances; and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
A-3
Annex B
Dividend Payment Date Per Preferred Share Amount
--------------------- --------------------------
December 15, 1998 110.00% $27.50
March 15, 1999 109.33% $27.33
June 15, 1999 108.68% $27.17
September 15, 1999 108.02% $27.01
December 15, 1999 107.34% $26.83
March 15, 2000 106.64% $26.66
June 15, 2000 105.95% $26.49
September 15, 2000 105.25% $26.31
December 15, 2000 104.53% $26.13
December 20, 2000 104.50% $26.13
