Exhibit (g)(7)
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING is entered into as of November 10, 1999,
among the counsel for plaintiffs ("Plaintiffs counsel") in the Actions (as
defined herein), and the counsel for Comair Holdings, Inc. ("Comair"), the
members of Comair's Board of Directors (the "Comair Board"), and Delta Air
Lines, Inc. ("Delta"), respectively. Except as otherwise stated in this
Memorandum of Understanding, capitalized terms herein have the meaning given
them in the Agreement and Plan of Merger dated as of October 17, 1999 among
Comair, Delta and Kentucky Sub., Inc. (the "Merger Agreement").
WHEREAS, on October 18, 1999, Delta and Comair publicly announced that
they had entered into the Merger Agreement; and
WHEREAS, beginning on October 19, 1999 and thereafter, several
class action lawsuits (the "Actions") on behalf of a putative class of Comair
common stockholders were commenced in the Circuit Court of Kentucky for Xxxxx
County, where Comair is headquartered, and relating to the tender offer by
Kentucky Sub, Inc. for shares of Comair and the subsequent merger of Kentucky
Sub., Inc. with and into Comair, as set forth in the Merger Agreement (the
"Transaction"); and
WHEREAS the actions were consolidated by the Courts' Order entered
November 2, 1999 under the caption In re Comair Holdings, Inc. Shareholder
Litig., Case No. 99 CI 1213; and
WHEREAS also beginning on October 19, 1999 and thereafter, several class
action lawsuits on behalf of a putative class of Comair common stockholders
were commenced in the Supreme Court of the State of New York, Nassau County
(the "New York Action"), the Circuit Court of Kentucky for Jefferson County
(the "Jefferson County Actions"), and the Ohio Court of Common Pleas for
Xxxxxxxx County (the "Ohio Action") and also relating to the Transaction; and
WHEREAS the Actions, the New York Action, the Jefferson County Actions and
the Ohio Action all seek injunctive and other equitable relief, monetary
damages, and/or recission with respect to the Transaction based upon the
allegations, inter alia, that the conduct of the members of the Comair Board in
connection with the Transaction constituted a breach of their fiduciary duties
to Comair and the Comair shareholders and that Delta allegedly aided and
abetted such breaches of fiduciary duty; and
WHEREAS Plaintiffs in the Actions, the New York Action, the Jefferson
County Actions, and the Ohio Action continue to maintain that Defendants have
committed and attempted to commit violations of law and breaches of fiduciary
duty and have acted in an improper manner toward Comair shareholders; and
WHEREAS Defendants deny that they have committed or have attempted to
commit any violation of law or breach of duty, including breach of any duty to
Comair or Comair shareholders, or have otherwise acted in any improper manner;
and
WHEREAS Plaintiffs' counsel in the Actions, the New York Action, the
Jefferson County Actions, and the Ohio Action believe that time is of the
essence if any
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settlement is to be meaningful for Comair shareholders because any meaningful
equitable relief must occur before the November 19, 1999 date the Tender Offer
will close, and because this Court has previously denied a motion by Plaintiffs
in the Actions for a temporary injunction enjoining the Transaction and the
Circuit Court in Jefferson County has previously denied a motion for a
temporary restraining order enjoining the Transaction made by the Jefferson
County plaintiffs; and
WHEREAS the parties in the Actions, the New York Action, the Jefferson
County Actions, and the Ohio Action have reached an agreement in principle
providing for the proposed settlement of the Actions on the terms and
conditions set forth below (the "Settlement"); and
WHEREAS the parties in the Actions, the New York Action, the Jefferson
County Actions, and the Ohio Action believe that the proposed Settlement is
fair and in the best interests of the public shareholders of Comair;
NOW THEREFORE, IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS:
I. PRINCIPAL TERMS OF SETTLEMENT
As a result of the efforts of plaintiffs and Plaintiff's counsel in the
Actions, the New York Action, the Jefferson County Actions, and the Ohio
Action, their communications with Defendants through their counsel, and
their litigation efforts, the parties agree in principle as follows:
A. Subject to the approval of the respective boards of directors of
Comair and Delta, the Defendants will modify the Transaction by
amending the terms of Section 11.04[b] of the Merger Agreement to
reduce the $50,000,000
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termination fee payable to Delta under that Section (either because
another bidder offers to pay a higher price or otherwise) to $0. If
this change in the Merger Agreement is not made within four calendar
days, this Memorandum of Understanding shall be null and void.
B. Defendants shall provide Plaintiffs' counsel the opportunity to
review and comment upon the disclosures contained in the
publicly-filed disclosure documents relating to the Transaction,
including those yet to be filed, and will make such additions and
changes to these publicly filed disclosure documents as Defendants
and Plaintiffs' counsel shall in good faith agree.
C. Counsel for the Defendants shall meet with Plaintiffs' counsel and
such experts as are retained by Plaintiffs' counsel and provide them
with additional information concerning the Transaction, the
considerations of the Comair board leading up to the entering of the
Merger Agreement, and the strategic alternatives considered by the
Comair board prior to entering the Merger Agreement. Such
presentation shall demonstrate that the Comair board made
substantial efforts to consider and pursue alternatives to selling
Comair to Delta, and acted in the best interests of Comair
shareholders in making the decision to enter into the Transaction.
Plaintiffs agree that any information or material received by
Plaintiffs' counsel shall be used solely for the purposes described
in this paragraph and shall be held strictly confidential, provided,
however, that Plaintiffs' counsel shall be free to disclose to
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plaintiffs and the Court such information as Defendants and
Plaintiffs' counsel shall in good faith agree.
D. The Defendants shall provide Plaintiffs' counsel with the opportunity
to review all documents considered by Comair's Board with respect to
the Transaction and such other documents as Plaintiffs' counsel in
the Actions and Defendants shall in good faith agree upon, and
subject to agreement among counsel, shall provide members of the
Comair Board and individuals from Delta involved in the Transaction
for deposition. Should such discovery suggest facts inconsistent with
those discussed in Paragraph C above, this Memorandum of
Understanding shall be null and void.
E. Defendants shall make arrangements so that Comair shareholders
calling Xxxxxx & Company, the information agent for the Offer, will,
upon request, receive a copy of the provisions of the Kentucky
Business Corporations Code governing the exercise of dissenters'
rights to appraisal.
F. Defendants shall make arrangements so that Comair shareholders
calling Xxxxxx & Company, the information agent for the Offer, and
expressing concern about the tax consequences of the Transaction,
will be advised to consult their tax advisor before making any
decisions about how to treat the Transaction for tax purposes.
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G. To the extent that dissenters rights to appraisal are properly
perfected by any Comair shareholder in connection with the Merger and
remain unsettled in accordance with Kentucky law, Comair or is
successors shall commence a proceeding, naming as parties all
dissenters whose properly perfected demands for payment remain
unsettled at that time. Accordingly, any evidence introduced in favor
of any one dissenting shareholder's argument for a higher price may
be considered in favor of all shareholders seeking a higher share
price through appraisal. Comair or its successor shall pay to such
dissenting shareholders the amount payable by it, as determined and
assessed by the Court pursuant to any final judgment in such
proceeding.
II. STIPULATION OF SETTLEMENT
The parties to the Actions will attempt in good faith to agree upon and
execute an appropriate Stipulation of Settlement (the "Stipulation") and such
other documentation as may be required in order to obtain Final Court Approval
(as defined below) of the Settlement and the dismissal of all the pending
actions upon the terms set forth in this Memorandum of Understanding
(collectively, the "Settlement Documents"). The Stipulation will expressly
provide for certification of a non-opt out settlement class, and the Settlement
Agreement shall make clear that the right of any Comair shareholder to
dissenters' statutory rights of appraisal shall be preserved. The Stipulation
will also expressly provide for the settlement class to include all Comair
shareholders from May 19, 1999 through and including the Effective Time as
defined in the Merger Agreement
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(the "Class") and their successors in interest and transferees; for entry of a
judgment dismissing the Actions "with prejudice" and without attorneys fees or
costs to any party except as expressly provided herein; for a complete release
and settlement of all claims of shareholders, whether asserted directly,
derivatively or otherwise, against Defendants or any of their families, parent
entities, affiliates, subsidiaries, predecessors, successors or assigns, and
each and all of their respective past, present or future officers, directors,
associates, stockholders, controlling persons, representatives, employees,
attorneys, financial or investment advisors, consultants, accountants,
investment bankers, commercial bankers, engineers, advisors or agents, heirs,
executors, trustees, general or limited partners or partnerships, personal
representatives, estates or administrators, which have been, or could have
been, asserted, whether known or unknown and whether arising under federal,
state or any other law (including, without limitation, the federal securities
laws), relating to the Transaction, and the actions of the Comair Board
(including each member of the Comair Board), Delta, or Kentucky Sub, Inc.
relating to the Transaction, the related disclosure materials, the events
described in such disclosure materials, disclosures, facts and allegations that
are or could (insofar as such transactions, disclosures, facts and allegations
relate to, or occurred in connection with, the subject matter of the Actions)
be the subject of the Actions; that defendants have denied and continue to deny
that they have committed or attempted to commit any violations of law or
breaches of fiduciary duty; that Defendants are entering into the Stipulation
solely because the proposed Settlement would eliminate the burden, inherent
risk, and expense of further litigation, and is in the best interests of Comair
and all its shareholders; and that
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any of the Defendants shall have the right to withdraw from the proposed
Settlement in the event that (x) any claims related to the Transaction or the
subject matter of the Action (whether direct, derivative or otherwise) are
pending or are commenced against any person in any court prior to Final Court
Approval of the Settlement that have not been dismissed or stayed in
contemplation of dismissal or (y) any of the additional conditions set forth in
IV below shall not have been satisfied. The parties agree to use their good
faith efforts to obtain the dismissal or stay in contemplation of dismissal of
any action covered by clause (x) in the foregoing sentence and further agree
that Defendants shall have the right to withdraw from this Memorandum of
Understanding if such efforts do not result in the dismissal or stay in
contemplation of dismissal of such an action.
III. NOTICE AND COURT APPROVAL
Subject to prior Court approval of the Stipulation and the form of the
Settlement Documents, the parties to the Actions will present the Settlement
Documents to the Court for approval as soon as practicable following
dissemination of appropriate notice of the proposed Settlement to Comair
shareholders. The funds to pay the costs and expenses related to providing such
notice will be paid by Defendants and shall not come from monies that otherwise
would go to Comair shareholders. As used herein, "Final Court Approval" of the
Settlement means that the Court has entered an Order approving the Settlement
and that such Order is finally affirmed on appeal or is no longer subject to
appeal and the time for any petition for reargument, appeal or review, by
certiorari or otherwise, has expired. Subject to the terms and conditions of
this Memorandum of
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Understanding and the contemplated Stipulation of Settlement, Plaintiffs
counsel in the Actions, the New York Action, the Jefferson County Actions, and
the Ohio Action will apply for an award of fees in an amount not exceeding in
the aggregate $675,000 and an award of expenses in an amount not exceeding
$75,000, which Defendants and other releasees will not oppose, to be paid by
Defendants in the amount awarded by the Court within thirty days of such award.
This fee and partial reimbursement of expenses will not come from monies that
would otherwise go to Comair shareholders and shall be paid to the Law Offices
of Xxxxxxx X. Xxxxxxx which shall have the responsibility for allocating it
among Plaintiffs' Counsel.
IV. OTHER CONDITIONS
The consummation of the Settlement is subject to: (a) consummation of the
Transaction as contemplated in the Merger Agreement; (b) the drafting and
execution of the Settlement Documents and the other agreements necessary to
effectuate the terms of the proposed Settlement; (c) the completion by
Plaintiffs counsel of discovery in the Actions reasonably satisfactory to
Plaintiffs' counsel; and (d) Final Court Approval (as defined above) of the
Settlement and dismissal of the Actions with prejudice. This Memorandum of
Understanding shall be null and void and of no force and effect if (i) any of
these conditions are not met; (ii) Defendants withdraw from this Memorandum of
Understanding as expressly permitted in this Memorandum of Understanding; or
(iii) Plaintiffs' counsel in the Actions determine that the Settlement is not
fair and reasonable following additional discovery. In such an event, this
Memorandum of Understanding shall not be deemed to prejudice in any way the
positions of the parties with respect to the
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Actions and shall not entitle any party to recover any costs or expenses
incurred in connection with the implementation of this Memorandum of
Understanding.
V. INTERIM STAY OF THE ACTIONS
The parties agree that except as expressly provided herein, the Actions,
the New York Action, Jefferson County Actions and the Ohio Action shall be
stayed pending submission of the proposed Settlement to the Court for its
consideration. Plaintiffs' counsel agrees that all Defendants' time to answer
or otherwise respond to the complaints in these actions is extended for the
duration of the stay. Counsel shall enter into such documentation as shall be
required to effectuate the foregoing agreements.
VI. MISCELLANEOUS
(a) This Memorandum of Understanding may be executed in counterparts by
any of the signatories hereto and as so executed shall constitute one
agreement; (b) this Memorandum of Understanding and the Settlement
contemplated by it shall be governed by and construed in accordance
with the laws of the Commonwealth of Kentucky; (c) this Memorandum of
Understanding shall be binding upon and inure to the benefit of the
parties and their respective agents, executors, heirs, successors,
and assigns, subject to the conditions set forth herein; (d)
Plaintiffs and their counsel represent that none of the claims or
causes of action asserted in the Actions have been assigned,
encumbered or in any manner transferred, in whole or in part; (e)
except as provided herein, or pursuant to the Kentucky appraisal
statutes, no party shall bear any expenses, costs,
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damages or fees alleged or incurred by any other party or their
respective attorneys, experts, advisors, agents or representatives;
(f) reasonably promptly following the execution of this Memorandum of
Understanding by the parties, Defendants shall publicly disclose the
terms of the proposed Settlement in a manner deemed reasonable by the
Defendants; and (g) the provisions contained in this Memorandum of
Understanding shall not be deemed a presumption, concession or
admission by any party, including an admission of breach of duty,
liability, default or wrongdoing as to any facts or claims alleged or
asserted in the Actions, or in any other action or proceedings, and
shall not be interpreted, construed, deemed, invoked, offered or
received in evidence or otherwise used by any person in the Actions
or in any other action or proceeding of any nature whatsoever.
XXXXXX XXXX & XXXXXX, PSC
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx
000 Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxx 00000
(000)000-0000
11
LAW OFFICES OF XXXXXXX X. XXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxx
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
GENE MESH & ASSOCIATES
By: /s/ Gene Mesh
---------------------------------------
Gene Mesh
R. Xxxxxxx Xxxxxx
Xxxxxxx X. Xxxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
(000) 000-0000
XXXXXXX XXXXXXX XXXXX & XXXXXXX, P.C.
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Xxxxx Xxxxxxx
Koppers Building, 26th Floor
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
(000) 000-0000
Attorneys for Plaintiffs in the Actions
MIDDLETON & XXXXXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxxxx, III
---------------------------------------
Xxxxxxx X. Xxxxxxxxx, III
0000 Xxxxx & Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
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Of Counsel:
XXXXXXX XXXXX XXXXXXX XXXXX & XXXXXX LLP
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
(000) 000-0000
LAW OFFICES OF XXXXXXX X. XXXXXXX
000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Of Counsel:
XXXXXXX & XXXXXX, LLC
0000 X. Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
(000) 000-0000
Attorneys for Plaintiffs in the Jefferson County Actions
XXXXX & XXXXXXX
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Of Counsel:
XXXXX XXXXX & XXXXX
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
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Attorneys for Plaintiffs in the New York Action
XXXXXXXXX XXXXXXXX & LIFSHITZ, LLP
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Of Counsel:
XXXXXXX & XXXX
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
(000) 000-0000
Attorneys for Plaintiffs in the Ohio Action
SHEARMAN & STERLING
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------
Xxxx X. Xxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Of Counsel:
XXXXXXX, XXXXXXXX & XXXXXXX, P.L.L.
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
(000) 000-0000
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Attorneys for Comair and the Members of the
Comair Board of Directors
XXXXX XXXX & XXXXXXXX
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Of Counsel:
XXXXXXX, HEAD & XXXXXXX
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
XXXXX, XXXXXXX & XXXXX
Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
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