<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
RENO AIR, INC.
(Name of Subject Company)
------------------------
BONANZA ACQUISITIONS, INC.
and
AMERICAN AIRLINES, INC.
(Bidder)
------------------------
COMMON STOCK, $0.01 PAR VALUE
SERIES A CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, $0.001 PAR VALUE
(Title of Class of Securities)
------------------------
759741101 AND 759741705
(CUSIP Number of Class of Securities)
------------------------
ANNE H. MCNAMARA, ESQ.
GENERAL COUNSEL
American Airlines, Inc.
Bonanza Acquisitions, Inc.
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
(817) 963-1234
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
------------------------
COPY TO:
JOHN A. MARZULLI, JR., ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 848-8590
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE
<S> <C>
$175,432,525.30* $35,086.51
</TABLE>
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Not applicable_______________________________________
Form or Registration No.: Not applicable____________________________________
Filing Party: Not applicable________________________________________________
Date Filed: Not applicable__________________________________________________
* Note: For purposes of calculating fee only. This amount assumes (i) the
purchase of 10,843,470 outstanding shares of Common Stock of Reno Air, Inc.
and 6,697,501 shares of Common Stock which may be issued upon the exercise
of outstanding options and warrants and the conversion of outstanding
convertible notes, in each case, at $7.75 in cash per share and (ii) the
purchase of 1,436,000 outstanding shares of Series A Cumulative Convertible
Exchangeable Preferred Stock, at $27.50 in cash per share. The amount of the
filing fee as calculated in accordance with Regulation 240.0-11 of the
Securities Exchange Act of 1934, as amended, equals 1/50 of one percent of
the value of the shares to be purchased.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (the "Statement") relates to
the offer by Bonanza Acquisitions, Inc., a Nevada corporation ("Purchaser") and
a wholly owned subsidiary of American Airlines, Inc., a Delaware corporation
("Parent"), a wholly owned subsidiary of AMR Corporation, to purchase all of the
issued and outstanding shares of Common Stock, par value $0.01 per share (the
"Common Stock") and all of the issued and outstanding shares of Series A
Cumulative Convertible Exchangeable Preferred Stock, par value $0.001 per share
(the "Preferred Stock"; and, together with the Common Stock, the "Shares"), of
Reno Air, Inc., a Nevada corporation (the "Company"), at a price of $7.75 per
share of Common Stock and $27.50 per share of Preferred Stock plus accrued and
unpaid dividends (subject to reduction as provided in the Offer to Purchase (as
hereinafter defined)), in each case net to the seller in cash, upon the terms
and subject to the conditions set forth in Purchaser's Offer to Purchase, dated
November 24, 1998 (the "Offer to Purchase"), a copy of which is attached hereto
as Exhibit (a)(1) and in the related Letters of Transmittal, copies of which are
attached hereto as Exhibits (a)(2) and (a)(3) (which together constitute the
"Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Reno Air, Inc., a Nevada corporation
(the "Company"), which has its principal executive offices at 220 Edison Way,
Reno, Nevada 89502.
(b) The classes of equity securities being sought are all of the issued and
outstanding shares of Common Stock, par value $0.01 per share and any and all of
the issued and outstanding shares of the Series A Cumulative Convertible
Exchangeable Preferred Stock, par value $0.001 per share, of the Company. The
information set forth in the Introduction and Section 1 ("Terms of the Offer;
Expiration Date") of the Offer to Purchase is incorporated herein by reference.
(c) The information concerning the principal markets in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer
to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser and Parent. The
information concerning the name, state or other place of organization, principal
business and address of the principal office of each of Purchaser and Parent,
and the information concerning the name, business address, present principal
occupation or employment and the name, principal business and address of any
corporation or other organization in which such employment or occupation is
conducted, material occupations, positions, offices or employments during the
last five years and citizenship of each of the executive officers and directors
of Purchaser and Parent are set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser and Parent") and Schedule I of the Offer to
Purchase and are incorporated herein by reference.
(e) and (f) During the last five years, none of Purchaser or Parent, and, to
the best knowledge of Purchaser and Parent, none of the persons listed in
Schedule I of the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Parent") and Section 10 ("Background of the Offer; Contacts with
the Company; the Merger Agreement; Employment Agreements") is incorporated
herein by reference.
2
<PAGE>
(b) The information set forth in the Introduction, Section 7 ("Certain
Information Concerning the Company"), Section 8 ("Certain Information Concerning
Purchaser and Parent"), Section 10 ("Background of the Offer; Contacts with the
Company; the Merger Agreement; Employment Agreements") and Section 11 ("Purpose
of the Offer; Plans for the Company After the Offer and the Merger") of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 ("Financing of the Offer and
the Merger") of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company; the Merger Agreement;
Employment Agreements") and Section 11 ("Purpose of the Offer; Plans for the
Company After the Offer and the Merger") of the Offer to Purchase is
incorporated herein by reference.
(f) and (g) The information set forth in Section 13 ("Effect of the Offer on
the Market for Shares, Exchange Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Parent") and Section 11 ("Purpose of the Offer; Plans for the
Company After the Offer and the Merger") of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser and Parent"), Section 10 ("Background of the
Offer; Contacts with the Company; the Merger Agreement; Employment Agreements")
and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and
the Merger") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference. The financial statements of Parent and Purchaser are not material to
a decision by a security holder of the Company to sell, tender or hold Shares.
ITEM 10. ADDITIONAL INFORMATION.
(a) [Not applicable.]
(b) and (c) The information set forth in Section 15 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) [Not applicable.]
3
<PAGE>
(e) [Not applicable.]
(f) The information set forth in the Offer to Purchase is incorporated
herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Form of Offer to Purchase dated November 24, 1998.
(a)(2) Form of Letter of Transmittal with Respect to the Common Stock.
(a)(3) Form of Letter of Transmittal with Respect to the Preferred Stock.
(a)(4) Form of Notice of Guaranteed Delivery with Respect to the Common Stock.
(a)(5) Form of Notice of Guaranteed Delivery with Respect to the Preferred Stock.
(a)(6) Form of Letter from Morgan Stanley & Co. Incorporated to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(7) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees
to Clients.
(a)(8) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(9) Summary Advertisement as published in The Wall Street Journal on November 24, 1998.
(a)(10) Press Release issued by Parent on November 18, 1998.
(b)(1) Not Applicable.
(c)(1) Agreement and Plan of Merger, dated as of November 19, 1998, among Parent, Purchaser
and the Company.
(c)(2) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Vicki W. Bretthauer.
(c)(3) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Beverley Grear.
(c)(4) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and W. Stephen Jackson.
(c)(5) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Joanne Dowty Smith.
(c)(6) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Steven A. Rossum.
(c)(7) Confidentiality Agreement dated as of June 12, 1998 between Parent and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
4
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete, and
correct.
November 24, 1998
<TABLE>
<S> <C> <C>
BONANZA ACQUISITIONS, INC.
By: /s/ CHARLES D. MARLETT
-----------------------------------------
Name: Charles D. MarLett
Title: Corporate Secretary
</TABLE>
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete, and
correct.
November 24, 1998
<TABLE>
<S> <C> <C>
AMERICAN AIRLINES, INC.
By: /s/ CHARLES D. MARLETT
-----------------------------------------
Name: Charles D. MarLett
Title: Corporate Secretary
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. NUMBERING SYSTEM
- ----------- -------------------
<C> <S> <C>
(a)(1) Form of Offer to Purchase dated November 24, 1998...................................
(a)(2) Form of Letter of Transmittal with Respect to the Common Stock......................
(a)(3) Form of Letter of Transmittal with Respect to the Preferred Stock...................
(a)(4) Form of Notice of Guaranteed Delivery with Respect to the Common Stock..............
(a)(5) Form of Notice of Guaranteed Delivery with Respect to the Preferred Stock...........
(a)(6) Form of Letter from Morgan Stanley & Co. Incorporated to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees......................................
(a)(7) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees
to Clients..........................................................................
(a)(8) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9............................................................................
(a)(9) Summary Advertisement as published in The Wall Street Journal on November 24,
1998................................................................................
(a)(10) Press Release issued by Parent on November 19, 1998.................................
(c)(1) Agreement and Plan of Merger, dated as of November 19, 1998, among Parent, Purchaser
and the Company.....................................................................
(c)(2) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Vicki W. Bretthauer.
(c)(3) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Beverley Grear.
(c)(4) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and W. Stephen Jackson.
(c)(5) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Joanne Dowty Smith.
(c)(6) Employment Agreement dated as of November 19, 1998 by and among the Company, Parent
and Steven A. Rossum.
(c)(7) Confidentiality Agreement dated as of June 12, 1998 between Parent and the Company.
</TABLE>
<PAGE>
OFFERS TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND ANY AND ALL OUTSTANDING SHARES OF SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
RENO AIR, INC.
BY
BONANZA ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN AIRLINES, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMR CORPORATION
AT
$7.75 NET PER COMMON SHARE
AND
$27.50 NET PER PREFERRED SHARE
(SUBJECT TO REDUCTION AS HEREIN PROVIDED)
--------------------------
THE OFFERS AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 22, 1998, UNLESS EITHER OR BOTH OF THE OFFERS ARE
EXTENDED.
--------------------------
THE COMMON STOCK OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE COMMON STOCK
OFFER AT LEAST A MAJORITY OF THE COMMON SHARES THEN OUTSTANDING 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, FOR PURPOSES OF SUCH
CALCULATION, 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 (II) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED,
APPLICABLE TO THE PURCHASE OF THE COMMON SHARES PURSUANT TO THE COMMON
STOCK OFFER HAVING EXPIRED OR BEEN TERMINATED. THE PREFERRED STOCK
OFFER IS CONDITIONED UPON PURCHASER HAVING ACCEPTED FOR PAYMENT AND
PAID FOR COMMON SHARES PUR SUANT TO THE
COMMON STOCK OFFER.
--------------------------
THE BOARD OF DIRECTORS OF RENO AIR, INC. (THE "COMPANY") UNANIMOUSLY HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER (EACH AS DEFINED HEREIN),
TAKEN TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
HOLDERS OF THE COMMON STOCK AND HAS APPROVED AND ADOPTED THE
MERGER AGREEMENT, THE OFFERS AND THE TRANSACTIONS
CONTEMPLATED THEREBY AND RECOMMENDS THAT COMMON
STOCKHOLDERS ACCEPT AND TENDER THEIR SHARES PURSUANT
TO THE COMMON STOCK OFFER AND THAT PREFERRED
STOCKHOLDERS ACCEPT AND TENDER THEIR
SHARES PURSUANT TO THE PREFERRED STOCK
OFFER.
--------------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF HIS SHARES OF
COMMON STOCK, $0.01 PAR VALUE PER SHARE (THE "COMMON SHARES"), OR SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, $0.001 PAR VALUE PER SHARE
(THE "PREFERRED SHARES"; AND TOGETHER WITH THE COMMON SHARES, "SHARES") OF THE
COMPANY SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF
TRANSMITTAL AND MAIL OR DELIVER IT TOGETHER WITH THE CERTIFICATE(S) EVIDENCING
TENDERED SHARES, AND ANY OTHER REQUIRED DOCUMENTS, TO THE DEPOSITARY OR TENDER
SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN
SECTION 3 OR (2) REQUEST HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE TO EFFECT THE TRANSACTION FOR HIM. ANY STOCKHOLDER WHOSE SHARES
ARE REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY
OR OTHER NOMINEE MUST CONTACT SUCH BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR OTHER NOMINEE IF HE DESIRES TO TENDER SUCH SHARES.
A STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES EVIDENCING
SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH THE
PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, MAY TENDER SUCH SHARES BY
FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3.
QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT OR TO THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE
NUMBERS SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES
OF THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE NOTICE OF
GUARANTEED DELIVERY MAY ALSO BE OBTAINED FROM THE INFORMATION AGENT OR FROM
BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
<PAGE>
NOVEMBER 24, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C>
INTRODUCTION................................................................................................... 1
1. Terms of the Offer; Expiration Date................................................................. 5
2. Acceptance for Payment and Payment for Shares....................................................... 7
3. Procedures for Accepting the Offer and Tendering Shares............................................. 8
4. Withdrawal Rights................................................................................... 10
5. Certain Federal Income Tax Consequences............................................................. 11
6. Price Range of Shares; Dividends.................................................................... 11
7. Certain Information Concerning the Company.......................................................... 13
8. Certain Information Concerning Purchaser and Parent................................................. 14
9. Financing of the Offer and the Merger............................................................... 16
10. Background of the Offer; Contacts with the Company; the Merger Agreement;
Employment Agreements............................................................................. 16
11. Purpose of the Offer; Plans for the Company After the Offer and the Merger.......................... 29
12. Dividends and Distributions......................................................................... 32
13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration.... 33
14. Certain Conditions of the Offer..................................................................... 34
15. Certain Legal Matters and Regulatory Approvals...................................................... 36
16. Fees and Expenses................................................................................... 39
17. Miscellaneous....................................................................................... 39
Schedule I. Directors and Executive Officers of Parent and Purchaser.......................................... I-1
</TABLE>
<PAGE>
To the Holders of Common Stock and
Preferred Stock of Reno Air, Inc.:
INTRODUCTION
Bonanza Acquisitions, Inc., a Nevada corporation ("Purchaser") and a wholly
owned subsidiary of American Airlines, Inc., a Delaware corporation ("Parent"),
a wholly owned subsidiary of AMR Corporation, a Delaware corporation, hereby (i)
offers to purchase (the "Common Stock Offer") all of the issued and outstanding
shares of Common Stock, $0.01 par value per share (the "Common Stock"; shares of
Common Stock being hereinafter collectively referred to as "Common Shares"), and
(ii) offers to purchase (the "Preferred Stock Offer"; and together with Common
Stock Offer and the related Letters of Transmittal (collectively, the "Letter of
Transmittal"), the "Offer") any and all of the issued and outstanding shares of
Series A Cumulative Convertible Exchangeable Preferred Stock, $0.001 par value
per share (the "Preferred Stock"; shares of Preferred Stock being hereinafter
collectively referred to as "Preferred Shares"; and, together with the Common
Shares, "Shares") of Reno Air, Inc., a Nevada corporation (the "Company"), for
$7.75 per share of Common Stock or any higher amount paid per Common Share
pursuant to the Common Stock Offer (the "Per Common Share Amount") and $27.50
per share of Preferred Stock or any higher amount paid per Preferred Share
pursuant to the Preferred Stock Offer, plus accrued and unpaid dividends through
the date Purchaser accepts for payment the Preferred Shares (such amount,
subject to reduction as described herein, the "Per Preferred Share Amount"), in
each case net to the seller in cash, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the Letter of Transmittal.
The Per Preferred Share Amount shall be reduced from $27.50 (plus accrued and
unpaid dividends) to $27.33 (plus accrued and unpaid dividends) in the event the
holders of Preferred Shares become entitled to the regular quarterly dividend
for the first quarter of 1999, which the Company is expected to pay on March 15.
The Per Preferred Share Amount is subject to further reduction in the event that
holders become entitled to subsequent quarterly dividends. See Section 10.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), which is acting as Dealer
Manager for the Offer (in such capacity, the "Dealer Manager"), First Chicago
Trust Company of New York (the "Depositary") and D.F. King & Co., Inc. (the
"Information Agent") incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") UNANIMOUSLY HAS
DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED BELOW) AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW),
TAKEN TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF THE
COMMON STOCK AND HAS APPROVED AND ADOPTED THE MERGER AGREEMENT, THE OFFER AND
THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT THE COMMON
STOCKHOLDERS ACCEPT AND TENDER THEIR SHARES PURSUANT TO THE COMMON STOCK OFFER
AND THAT THE PREFERRED STOCKHOLDERS ACCEPT AND TENDER THEIR SHARES PURSUANT TO
THE PREFERRED STOCK OFFER.
Salomon Smith Barney Inc. ("Salomon Smith Barney") has delivered to the
Board its written opinion that the consideration to be received by the holders
of the Common Shares pursuant to each of the Common Stock Offer and the Merger,
taken together, is fair to such holders of the Common Shares from a financial
point of view. A copy of the opinion of Salomon Smith Barney is contained in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9"), which is being mailed to stockholders herewith. Salomon Smith Barney
also made a presentation to the Board that the price to be received by the
holders of Preferred Shares in the Preferred Stock Offer is in an amount that is
economically equivalent to the dividends payable to such holders through, and
the price payable to such holders on, the first date that the Preferred Shares
become optionally redeemable in accordance with their terms.
<PAGE>
THE COMMON STOCK OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE
BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT
LEAST A MAJORITY OF THE COMMON SHARES THEN OUTSTANDING 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, FOR PURPOSES OF SUCH CALCULATION, 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 (THE "MINIMUM CONDITION")
AND (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS
ACT OF 1976, AS AMENDED (THE "HSR ACT"), APPLICABLE TO THE PURCHASE OF THE
COMMON SHARES PURSUANT TO THE COMMON STOCK OFFER HAVING EXPIRED OR BEEN
TERMINATED (THE "HSR CONDITION"). THE PREFERRED STOCK OFFER IS CONDITIONED UPON
PURCHASER HAVING ACCEPTED FOR PAYMENT AND PAID FOR THE COMMON SHARES PURSUANT TO
THE COMMON STOCK OFFER. SEE SECTION 14, WHICH SETS FORTH IN FULL THE CONDITIONS
TO THE OFFER. THE PREFERRED STOCK OFFER IS NOT CONDITIONED UPON THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN, PRIOR TO THE EXPIRATION OF THE PREFERRED
STOCK OFFER, ANY MINIMUM NUMBER OF PREFERRED SHARES.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 19, 1998 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides among other things, that after the
purchase of Shares pursuant to the Offer, the approval of the merger by the
stockholders of the Company and the satisfaction of the other conditions set
forth in the Merger Agreement and in accordance with the relevant provisions of
the laws of the State of Nevada applicable to corporations ("Nevada Law"),
Purchaser will be merged with and into the Company, and the Shares will be
converted into the right to receive cash (the "Primary Merger") or, under the
circumstances described below, 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").
The Company will continue as the surviving corporation (the "Surviving
Corporation") and will become a subsidiary of Parent. At the effective time of
the Merger (the "Effective Time"), (a) each Common Share issued and outstanding
immediately prior to the Effective Time (other than any Common Shares held in
the treasury of the Company or owned by Purchaser, Parent or any direct or
indirect wholly owned subsidiary of Parent, and other than Common Shares held by
stockholders who shall have demanded and perfected appraisal rights, if any,
under Nevada Law) will be canceled and converted automatically into the right to
receive the Per Common Share Amount in cash, without interest (the "Common Stock
Merger Consideration"), and (b) each Preferred Share issued and outstanding
immediately prior to the Effective Time (other than any Preferred Shares held in
the treasury of the Company or owned by Purchaser, Parent or any direct or
indirect wholly owned subsidiary of Parent, and other than Preferred Shares held
by stockholders who shall have demanded and perfected appraisal rights, if any,
under Nevada Law) will, pursuant to the Primary Merger, be canceled and
converted automatically into the right to receive the amount in cash described
below, without interest (the "Preferred Stock Merger Consideration"; and
together with the Common Stock Merger Consideration, the "Merger
Consideration"). The Preferred Stock Merger Consideration will initially be
equal to the Per Preferred Share Amount paid pursuant to the Preferred Stock
Offer. However, as with the Per Preferred Share Amount, the Preferred Stock
Merger Consideration will be reduced based upon the number of regular quarterly
Preferred Stock dividends to which the holders of Preferred Shares become
entitled, with the amount reducing to $27.33 if the holders become entitled to
receive the dividend for the first quarter of 1999 and to $27.17 if they become
the entitled to receive the dividend for the second quarter of 1999. See Section
10 for a complete description of the Preferred Stock Merger Consideration should
the Merger be delayed beyond such time. Unless holders of at least 66 2/3% of
the Preferred Shares vote to approve the Merger Agreement and the Primary
Merger, the Alternative Merger shall be effected instead of the Primary Merger,
and each Preferred Share shall remain issued and
2
<PAGE>
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 of Series
A Cumulative Convertible Exchangeable Preferred Stock, $0.001 par value per
share of the Company (the "Certificate of Designations"). Pursuant to Section
7(e) of the Certificate of Designations, the holder of each Preferred Share, (x)
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 (y) 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 Designations). See Section 10. At the time that Purchaser
acquires Common Shares constituting a majority of the outstanding voting power
of the Company on a fully diluted basis, certain special conversion rights of
the Preferred Shares under Section 8 of the Certificate of Designations shall be
triggered. See Section 10. The Merger Agreement is more fully described in
Section 10.
The Merger Agreement provides that, subject to compliance with applicable
law and the Company's Articles of Incorporation, promptly upon the purchase by
Purchaser of Shares pursuant to the Offer, 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 will 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. In the Merger Agreement, the
Company has agreed to 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. The Merger
Agreement provides that following the election or appointment of Purchaser's
designees in accordance with the immediately preceding paragraph and prior to
the Effective Time, any amendment of the Merger Agreement or the Articles of
Incorporation or the By-laws of the Company, any termination of the Merger
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 thereunder, will require the concurrence
of a majority of those directors of the Company then in office who were neither
designated by Purchaser nor are employees of the Company (the "Independent
Directors").
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company to the extent required
by Nevada Law. See Section 11. Under the Company's Articles of Incorporation and
Nevada Law, the affirmative vote of the holders of a majority of the outstanding
Common Shares is required to approve and adopt the Merger Agreement. In order to
effect the Primary Merger, the affirmative vote of the holders of 66 2/3% of
Preferred Shares is also required. No consent is required from the Preferred
Shares in order to effect the Alternative Merger. Consequently, if Purchaser
acquires (pursuant to the Offer, or otherwise) at least a majority of the
outstanding Common Shares and 66 2/3% of the Preferred Shares, Purchaser will
have sufficient voting power to approve and adopt the Merger Agreement and the
Primary Merger without the vote of any other stockholder. If Purchaser acquires
at least a majority of the outstanding Common Shares, but fails to acquire at
least 66 2/3% of the Preferred Shares, Purchaser will nevertheless have
sufficient voting power to approve and adopt the Merger Agreement and the
Alternative Merger without the vote of any other stockholder. Under such
circumstances, Purchaser may, but is not required to, submit the Primary Merger
to the holders of Preferred Stock for their approval.
Under Nevada Law, if Purchaser acquires, pursuant to the Offer, or
otherwise, at least 90% of the then outstanding Common Shares AND at least 90%
of the then outstanding Preferred Shares, Purchaser will have the ability to
approve and adopt a merger of the Company with and into the Purchaser. Parent
and Purchaser, however, do not intend to effect any merger of the Company with
Purchaser in which the
3
<PAGE>
Company is NOT the Surviving Corporation. The Merger and the Alternative Merger
therefore CANNOT be effected without a vote of the Company's stockholders acting
at a meeting or by written consent. A significant period of time may therefore
be required to effect the Merger. Pursuant to the Merger Agreement, the Company
has amended the By-laws to permit stockholder action by written consent. See
Section 11.
The Company has advised Purchaser that as of September 30, 1998: (i)
10,843,470 Common Shares were issued and outstanding, (ii) 1,436,000 shares of
Preferred Stock were issued and outstanding, (iii) no Common Shares were held in
the treasury of the Company, (iv) 3,757,070 Common Shares were reserved for
issuance pursuant to employee and director stock options, (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 (the "Warrants") issued pursuant to the Placement Agreement dated as of
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 (the "Convertible Notes") issued by the Company pursuant to the
Indenture dated as of August 15, 1992 (the "Indenture") between the Company and
Fleet National Bank (formerly known as Shawmut Bank Connecticut, National
Association). As a result, as of such date, the Minimum Condition would be
satisfied if Purchaser acquired all of the outstanding Common Shares and at
least 6,400 Preferred Shares or if 66 2/3% of the Preferred Shares are acquired
pursuant to the Preferred Stock Offer 9,464,600 Common Shares. In light of the
fact that a significant portion of the Common Shares reserved for issuance are
issuable at exercise or conversion prices which are higher than the Per Common
Share Amount, Parent anticipates that, with the consent of the Company, it will,
if necessary, subject to the waiver or satisfaction of the other conditions to
the Common Stock Offer, reduce the Minimum Condition to a number of Common
Shares which, as of an appropriate record date for the special Stockholders
Meeting to be called to consider the Merger, would ensure the approval and
adoption of the Merger Agreement by the Company's stockholders.
The Offer is not being made for (nor will tenders be accepted of) any of the
Convertible Notes. Holders of Convertible Notes who wish to participate in the
Offer must first convert their Convertible Notes into Common Shares in
accordance with the terms of the Indenture and tender the Common Shares issued
upon such conversion pursuant to the Offer. Under the Indenture, any holder of
Convertible Notes may, at his option, convert the principal amount thereof into
that number of Common Shares obtained by dividing the principal amount thereof
by the conversion price of $10.00, subject to adjustment under certain
circumstances. None of the Company, the Board, Parent or Purchaser has made or
will make any recommendation to the holders of the Convertible Notes regarding
the desirability of converting the Convertible Notes to Common Stock. The
Convertible Notes are currently redeemable by the Company and under the Merger
Agreement, the Company has agreed to redeem the Convertible Notes immediately
after Purchaser has accepted for payment and paid for the Common Shares tendered
pursuant to the Common Stock Offer. However, Parent has the right to waive the
Company's obligation to redeem the Convertible Notes. Holders of Convertible
Notes who convert such Convertible Notes into Common Shares will have no right
under the Indenture to revoke an effective conversion. Accordingly, if the Offer
terminates or expires without the purchase of Common Shares or if Common Shares
tendered after conversion by a holder of Convertible Notes are not purchased for
any reason, the converting holder will no longer have any rights under the
Indenture. Pursuant to Section 10.18 of the Indenture, after consummation of the
Merger, each holder of a Convertible Note then outstanding will be entitled to
receive, upon conversion, an amount in cash equal to the Common Stock Merger
Consideration that would have been received by such holder upon consummation of
the Merger had such holder converted his Convertible Note immediately prior to
the Effective Time. See Section 11.
The Offer is not being made for (nor will tenders be accepted of) any of the
Warrants. Holders of Warrants who wish to participate in the Offer must first
exercise their Warrants to purchase Common Shares in accordance with the terms
of the Warrant Agreement, and tender the Common Shares issued upon such exercise
pursuant to the Offer. None of the Company, the Board, Parent or Purchaser has
made
4
<PAGE>
or will make any recommendation to the holders of the Warrants regarding the
desirability of exercising the Warrants to purchase Common Stock. Holders of
Warrants who exercise such Warrants to purchase Common Shares will have no right
under the Warrant Agreement to revoke an effective exercise. Accordingly, if the
Offer terminates or expires without the purchase of Common Shares or if Common
Shares tendered after the exercise of Warrants are not purchased for any reason,
the exercising holder will no longer have any rights under the Warrant
Agreement. From and after the Effective Time, pursuant to the Warrants, the
holder of each outstanding Warrant shall, upon the payment of the exercise price
under such Warrant, be entitled to receive, upon exercise of such Warrant an
amount of cash equal to the Common Stock Merger Consideration that would have
been received by such holder upon consummation of the Merger had such holder
exercised such Warrant immediately prior to the Effective Time.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if either or both of the Offers are extended
or amended, the terms and conditions of such extension or amendment), Purchaser
will accept for payment and pay for (i) all Common Shares validly tendered prior
to the Common Offer Expiration Date (as hereinafter defined) and (ii) all
Preferred Shares validly tendered prior to the Preferred Offer Expiration Date
(as hereinafter defined), and not withdrawn as permitted by Section 4. The term
"Common Offer Expiration Date" means 12:00 midnight, New York City time, on
Tuesday, December 22, 1998, unless and until Purchaser, in its sole discretion
(but subject to the terms and conditions of the Merger Agreement), shall have
extended the period during which the Common Stock Offer is open, in which event
the term "Common Offer Expiration Date" shall mean the latest time and date at
which the Common Stock Offer, as so extended by Purchaser, shall expire. The
term "Preferred Offer Expiration Date" means 12:00 midnight, New York City time,
on Tuesday, December 22, 1998, unless and until Purchaser, in its sole
discretion (but subject to the terms and conditions of the Merger Agreement),
shall have extended the period during which the Preferred Stock Offer is open,
in which event the term "Preferred Offer Expiration Date" shall mean the latest
time and date at which the Preferred Stock Offer, as so extended by Purchaser,
shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which either or both
of the Offers are open, including the occurrence of any of the conditions
specified in Section 14, by giving written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to such Offer, subject to the rights of a
tendering stockholder to withdraw his Shares. See Section 4.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "SEC"), Purchaser also expressly reserves the right, in its sole
discretion (but subject to the terms and conditions of the Merger Agreement), at
any time and from time to time, (i) to delay acceptance for payment of, or,
regardless of whether such Shares were theretofore accepted for payment, payment
for, any Shares pending receipt of any regulatory approval specified in Section
15, (ii) to terminate the Offer and not accept for payment any Shares upon the
occurrence of any of the conditions specified in Section 14, and (iii) to waive
any condition (other than the HSR Condition) or otherwise amend the Offer in any
respect, by giving written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof. The
Merger Agreement provides that, without the consent of the Company, Purchaser
will not (i) reduce the Per Common Share Amount or the Per Preferred Share
Amount (other than as herein provided in respect of the Preferred Shares)
payable pursuant to the Offer, (ii) change the form of consideration payable
pursuant to the Offer, (iii) reduce the maximum number of Shares to be purchased
in the Offer, (iv) extend the expiration date of the Offer (which shall
initially be twenty (20) business days) or (v) impose conditions to the Offer in
addition to those set forth in Section 14; PROVIDED, HOWEVER, that subject to
the right of the parties to terminate the Merger Agreement, the Common
5
<PAGE>
Stock Offer (i) shall be extended (A) if, at the scheduled expiration of the
Offer, the HSR Condition shall not be satisfied, until such time as such
condition is satisfied, and (B) for any period required by any rule, regulation
or interpretation of 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 Offer,
any of the conditions to the Common Stock Offer set forth in Section 14 shall
not be satisfied or waived, until such time as such conditions are satisfied or
waived, and (B) for a period of not more than 10 business days if Purchaser
determines in its sole discretion to so extend the Common Stock Offer, PROVIDED
that the Merger Agreement may not be terminated pursuant to Section 8.01(b), (c)
or (d) of the Merger Agreement during any extension pursuant to the provisions
described in this clause (ii)(B). Purchaser may extend the Preferred Stock Offer
for a period of not more than 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 66 2/3% of the then
outstanding Preferred Shares. Purchaser acknowledges that (i) Rule 14e-1(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer and (ii)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the first sentence of this paragraph), any Shares upon
the occurrence of any of the conditions specified in Section 14 without
extending the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled applicable Expiration
Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that material changes be promptly disseminated to
stockholders in a manner reasonably designed to inform them of such changes) and
without limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules l4d-4(c)
and l4d-6(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Common Offer
Expiration Date, Purchaser should decide to decrease the number of Shares being
sought or to increase or decrease the consideration being offered in the Offer,
such decrease in the number of Shares being sought or such increase or decrease
in the consideration being offered will be applicable to all stockholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
6
<PAGE>
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the applicable Offer (including, if the applicable
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment, and will pay for, all Shares
validly tendered prior to the applicable Expiration Date and not properly
withdrawn promptly after the later to occur of (i) the applicable Expiration
Date, (ii) the expiration or termination of any applicable waiting periods under
the HSR Act, and (iii) the satisfaction or waiver of the conditions to the Offer
set forth in Section 14. Subject to applicable rules of the SEC, Purchaser
expressly reserves the right to delay acceptance for payment of, or payment for,
Shares pending receipt of any regulatory approvals specified in Section 15 or in
order to comply in whole or in part with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees or an Agent's Message
(as defined below), in connection with the book-entry transfer and (iii) any
other documents required under the Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to,
and received by, the Depositary and forming a part of the Book-Entry
Confirmation which states that the Book-Entry Transfer Facility has received an
express acknowledgment from the participant in the Book-Entry Transfer Facility
tendering the Shares which are the subject of the Book-Entry Confirmation, that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that the Purchaser may enforce such agreement against such
participant.
On November 23, 1998, Parent filed with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") a Premerger Notification and Report Form under the HSR Act with
respect to the Offer. Accordingly, it is anticipated that the waiting period
under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York
City time, on Tuesday, December 8, 1998. Prior to the expiration or termination
of such waiting periods, the FTC or the Antitrust Division may extend any such
waiting periods by requesting additional information from Parent with respect to
the Offer. If such a request is made with respect to the purchase of Common
Shares in the Offer, the waiting period will expire at 11:59 p.m., New York City
time, on the tenth calendar day after substantial compliance by Parent with such
a request. Thereafter, the waiting periods may only be extended by court order.
The waiting periods under the HSR Act may be terminated prior to their
expiration by the FTC and the Antitrust Division. Parent has requested early
termination of the waiting periods, although there can be no assurance that this
request will be granted. See Section 15 for additional information regarding the
HSR Act.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives written notice to the Depositary of
Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon
the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering stockholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in Section 3, such Shares will be credited
7
<PAGE>
to an account maintained at the Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the appropriate
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and either (i)
the Share Certificates evidencing tendered Shares must be received by the
Depositary at such address or such Shares must be tendered pursuant to the
procedure for book-entry transfer described below and a Book-Entry Confirmation
must be received by the Depositary (including an Agent's Message if the
tendering stockholder has not delivered a Letter of Transmittal), in each case
prior to the applicable Expiration Date, or (ii) the tendering stockholder must
comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer within
two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at the Book-Entry Transfer Facility,
the appropriate Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, together with any required signature guarantees, or
an Agent's Message, and any other required documents, must, in any case, be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the applicable Expiration Date, or the
tendering stockholder must comply with the guaranteed delivery procedure
described below. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Depositary.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Security Transfer Agent Medallion
Signature Program, or by any other "eligible guarantor institution," as such
term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing
being referred to as an "Eligible Institution"), except in cases where Shares
are tendered (i) by a registered holder of Shares who has not completed either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of
8
<PAGE>
the registered holder(s) appear on the Share Certificate, with the signature(s)
on such Share Certificate or stock powers guaranteed by an Eligible Institution.
See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
applicable Expiration Date, or such stockholder cannot complete the procedure
for delivery by book-entry transfer on a timely basis, such Shares may
nevertheless be tendered, provided that all the following conditions are
satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is received
prior to the applicable Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together with
the appropriate Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or, in
the case of a book-entry transfer, an Agent's Message, and any other
documents required by the Letter of Transmittal are received by the
Depositary within three NASDAQ National Market System ("NASDAQ") trading
days after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in the
form of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the appropriate Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message, and any other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity, in the tender of any
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of Purchaser, Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. Purchaser's interpretation
of the terms and conditions of the Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after November 19,
1998). All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such stockholder
9
<PAGE>
with respect to such Shares (and such other Shares and securities) will be
revoked without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such stockholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
UNDER THE "BACKUP WITHHOLDING" PROVISIONS OF U.S. FEDERAL INCOME TAX LAW,
THE DEPOSITARY MAY BE REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS OF CASH PURSUANT
TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO
PAYMENT TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH
SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION
9 OF THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to an Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
applicable Expiration Date and, unless theretofore accepted for payment by
Purchaser pursuant to such Offer, may also be withdrawn at any time after
January 22, 1999. If Purchaser extends the Offer, is delayed in its acceptance
for payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the applicable Expiration Date by following one
of the procedures described in Section 3.
10
<PAGE>
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of
the principal federal income tax consequences of the Offer and the Merger to
holders whose Shares are purchased pursuant to the Offer or whose Shares are
converted into the right to receive cash in the Merger (whether upon receipt of
the Merger Consideration or pursuant to the proper exercise of dissenter's
rights). The discussion applies only to holders of Shares in whose hands Shares
are capital assets, and may not apply to Shares received pursuant to the
exercise of employee stock options or otherwise as compensation, or to holders
of Shares who are not citizens or residents of the United States of America.
THE TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION
PURPOSES ONLY AND IS BASED UPON PRESENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES
MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR
TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED TO SUCH STOCKHOLDER AND
THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of the offer price and the receipt of cash pursuant to the
Merger (whether as Merger Consideration or pursuant to the proper exercise of
dissenter's rights) will be a taxable transaction for federal income tax
purposes (and also may be a taxable transaction under applicable state, local
and other income tax laws). In general, for federal income tax purposes, a
holder of Shares will recognize gain or loss equal to the difference between
such holder's adjusted tax basis in the Shares sold pursuant to the Offer or
converted to cash in the Merger and the amount of cash received therefor. Gain
or loss must be determined separately for each block of Shares (i.e., Shares
acquired at the same cost in a single transaction) sold pursuant to the Offer or
converted to cash in the Merger. Such gain or loss will be capital gain or loss.
Individual holders will be subject to tax on the net amount of such gain at a
maximum rate of 20% provided that the shares were held for more than 12 months.
Special rules (and generally lower maximum rates) apply to individuals in lower
tax brackets. The deduction of capital losses is subject to certain limitations.
Stockholders should consult their own tax advisors in this regard. In the event
the Alternative Merger is effected, holders of Preferred Shares will not
recognize any gain or loss at the Effective Time in connection with the
consummation of the Merger, as their Preferred Shares shall remain outstanding.
Holders of Preferred Shares will, however, recognize a gain or loss to the
extent they sell Preferred Shares to Purchaser pursuant to the Preferred Stock
Offer.
Payments in connection with the Offer or the Merger may be subject to backup
withholding at a 31% rate. Backup withholding generally applies if a stockholder
(i) fails to furnish such stockholder's social security number or taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) fails
properly to report interest or dividends or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is such stockholder's correct number and that such stockholder
is not subject to backup withholding. Backup withholding is not an additional
tax but merely an advance payment, which may be refunded to the extent it
results in an overpayment of tax. Certain persons, including corporations and
financial institutions generally, are exempt from backup withholding. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each stockholder should consult with
such stockholder's own tax advisor as to such stockholder's qualifications for
exemption from withholding and the procedure for obtaining such exemption.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Common Shares are listed and
principally traded on NASDAQ. The following table sets forth, for the quarters
indicated, the high and low sales prices per Common Share on NASDAQ as reported
by the Dow Jones News Service, according to published financial sources.
According to the Form 10-K (as defined herein) of the Company, no cash dividends
have been declared by the Company on the Common Stock and the Company does not
anticipate that any dividends will be declared on the Common Stock for the
foreseeable future.
11
<PAGE>
COMMON STOCK MARKET DATA
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C> <C> <C>
1996:
First Quarter........................................................... $ 12 5/8 $ 7
Second Quarter.......................................................... 14 1/4 10 1/4
Third Quarter........................................................... 12 1/2 7 5/8
Fourth Quarter.......................................................... 8 5/8 6 3/4
1997:
First Quarter........................................................... $ 7 5/8 $ 6 3/8
Second Quarter.......................................................... 8 15/16 6 1/2
Third Quarter........................................................... 9 1/16 6 13/16
Fourth Quarter.......................................................... 7 5/8 4 1/2
1998:
First Quarter........................................................... $ 8 1/2 $ 4 1/2
Second Quarter.......................................................... 8 1/2 6 11/16
Third Quarter........................................................... 7 1/2 4 7/16
Fourth Quarter (through November 23, 1998).............................. 8 1/8 3 7/16
</TABLE>
On November 13, 1998, the last full trading day prior to the appearance of
certain news stories concerning a possible transaction between Parent and the
Company, the closing price per Common Share as reported on NASDAQ was $6 9/16.
On November 18, 1998, the last full trading day prior to the announcement of the
execution of the Merger Agreement and of Purchaser's intention to commence the
Offer, the closing price per Common Share as reported on NASDAQ was $7 1/4. On
November 23, 1998, the last full trading day prior to the commencement of the
Offer, the closing price per Common Share as reported on NASDAQ was $7 1/4.
The Preferred Shares are listed and principally traded on the NASDAQ
SmallCap Market. The following table sets forth, for the quarters indicated, the
high and low sales prices per Preferred Share on the NASDAQ SmallCap Market, as
well as the dividends paid on the Preferred Shares, according to published
financial sources. The Preferred Shares began trading on the NASDAQ SmallCap
Market on May 19, 1998. Therefore, there is no trading data available prior to
these dates for the Preferred Shares.
PREFERRED STOCK MARKET DATA
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
----- --------- -----------
<S> <C> <C> <C>
1998:
- --------------------------------------------------------------------
First Quarter..................................................... -- -- $ 0.5625
Second Quarter (beginning May 19, 1998)........................... 27 21 7/8 $ 0.5625
Third Quarter..................................................... 23 17 $ 0.5625
Fourth Quarter (through November 23, 1998)........................ 271/2 15 $ 0.5625
</TABLE>
On November 13, 1998, the last full trading day prior to the appearance of
certain news stories concerning a possible transaction between Parent and the
Company, the closing price per Preferred Share as reported on NASDAQ was $21. On
November 18, 1998, the last full trading day prior to the announcement of the
execution of the Merger Agreement and of Purchaser's intention to commence the
Offer, the closing price per Preferred Share as reported on the NASDAQ SmallCap
Market was $22. On November 23, 1998, the last full trading day prior to the
commencement of the Offer, the closing price per Preferred Share as reported on
the NASDAQ SmallCap Market was $27 1/8.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
12
<PAGE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the SEC and other public sources. Neither Purchaser nor Parent assumes
any responsibility for the accuracy or completeness of the information
concerning the Company furnished by the Company or contained in such documents
and records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to Purchaser or Parent.
GENERAL. The Company is a Nevada corporation with its principal executive
offices located at 220 Edison Way, Reno, Nevada 89502. The Company is a national
air carrier operating primarily in the western United States. The Company's
primary strategy is to provide low-cost, low-fare and high quality all-jet
scheduled airline passenger service. The Company also transports cargo and mail
and provides charter service.
FINANCIAL INFORMATION. Set forth below is certain selected financial
information relating to the Company which has been excerpted or derived from the
audited financial statements contained in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the "Form 10-K") and the
unaudited financial statements contained in the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (the "Form 10-Q"). More
comprehensive financial information is included in the Form 10-K, the Form 10-Q
and other documents filed by the Company with the SEC. The summary financial
information that follows is qualified in its entirety by reference to such
reports and other documents, including the financial statements and related
notes contained therein. Such reports and other documents may be examined and
copies may be obtained from the offices of the SEC in the manner set forth
below.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
SEPTEMBER 30 DECEMBER 31
---------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
STATEMENT OF OPERATIONS DATA:
Operating revenues................................. $ 293,667 $ 292,754 $ 383,924 $ 349,884 $ 256,508
Operating income (loss)............................ 7,511 1,322 (10,649) 2,484 3,609
Non-operating expense, net......................... (183) (1,298) 978 454 1,658
Net income (loss).................................. 7,328 24 (11,627) 2,030 1,951
Net income (loss) applicable to common stock....... 4,907 24 (12,345) 2,030 1,818
Net income (loss) per common share................. .46 -- (1.18) 0.20 0.20
Net income (loss) per common share assuming
dilution......................................... .45 -- (1.18) 0.19 0.18
BALANCE SHEET DATA:
Current assets..................................... 83,010 65,360 86,678 55,118 72,064
Total assets....................................... 176,945 173,041 193,409 143,706 99,484
Current liabilities................................ 67,306 85,293 80,397 67,015 53,802
Long-term debt..................................... 50,520 61,044 62,584 50,698 28,755
Total liabilities.................................. 135,744 159,954 158,685 131,575 90,581
Shareholders' equity............................... 41,201 13,087 34,724 12,131 8,903
Working capital (deficit).......................... -- -- 6,281 (11,897) 18,262
</TABLE>
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the
13
<PAGE>
SEC relating to its business, financial condition and other matters. Information
as of particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in proxy statements distributed to
the Company's stockholders and filed with the SEC. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and also should be available for
inspection at the SEC's regional offices located at Seven World Trade Center,
13th Floor, New York, New York 10048 and the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials may also be obtained by mail, upon payment of the SEC's customary
fees, by writing to its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The SEC also maintains a World Wide Web site on
the Internet at http://www.sec.gov that contains reports and other information
regarding registrants that file electronically with the SEC.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser is a
newly incorporated Nevada corporation organized in connection with the Offer and
the Merger and has not carried on any activities other than in connection with
the Offer and the Merger. The principal offices of Purchaser are located at 4333
Amon Carter Boulevard, Fort Worth, Texas 76155. Purchaser is a wholly owned
subsidiary of Parent.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
Parent is a Delaware corporation with its principal offices located at 4333
Amon Carter Boulevard, Fort Worth, Texas 76155. The principal activity of Parent
is air transportation. Parent is a wholly owned subsidiary of AMR Corporation, a
Delaware corporation. The common stock of AMR Corporation is listed on the New
York Stock Exchange.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of Purchaser, Parent and AMR Corporation, and certain other information
are set forth in Schedule I hereto.
FINANCIAL INFORMATION. Set forth below is certain selected consolidated
financial information relating to Parent which has been excerpted or derived
from the audited financial statements contained in the Parent's Annual Report on
Form 10-K for the year ended December 31, 1997 (the "Parent Form 10-K") and the
unaudited financial statements contained in Parent's Form 10-Q for the quarter
ended September 30, 1998 (the "Parent Form 10-Q"). More comprehensive financial
information is included in the Parent Form 10-K, the Parent Form 10-Q and other
documents which have been filed by Parent with the SEC. The summary financial
information that follows is qualified in its entirety by reference to such
reports and other documents, including the financial statements and related
notes contained therein. Such reports and other documents may be examined and
copies may be obtained from the offices of the SEC in the manner set forth
below.
14
<PAGE>
PARENT'S SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL NINE MONTHS
ENDED FISCAL YEAR ENDED
SEPTEMBER 30 DECEMBER 31
-------------------- -------------------------------
1998 1997 1997 1996(1) 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Operating Revenues................................... $ 12,425 $ 11,886 $ 15,856 $ 15,136 $ 14,503
Operating Income........................................... 1,504 1,412 1,447 1,331 601
Net Earnings............................................... 898 580 780 705 208
BALANCE SHEET DATA:
Total Assets............................................... 18,998 18,198 17,753 17,562 17,629
Total Liabilities.......................................... 12,749 13,088 12,399 13,034 13,983
Stockholder's Equity....................................... 6,249 5,110 5,354 4,528 3,646
</TABLE>
- ------------------------
(1) In 1995, approximately 2,100 mechanics and fleet service clerks and 300
flight attendants elected early retirement under programs offered in
connection with renegotiated union labor contracts, and the majority of
these employees left Parent's workforce during 1996. Parent recorded
restructuring costs of $332 million in 1995 related to these early
retirement programs. Also in 1995, Parent recorded an additional $145
million in restructuring costs related to the writedown of certain McDonnell
Douglas DC-10 aircraft.
AVAILABLE INFORMATION. Parent is subject to the reporting requirements of
the Exchange Act and, in accordance therewith, is required to file reports and
other information with the SEC relating to its business, financial condition and
other matters. Such reports and other information should be available for
inspection at the public reference facilities of the SEC located at 450 Fifth
Street, N.W., Washington, DC 20549, and at the regional offices of the SEC
located in the Northwestern Atrium Center, 500 West Madison Street (Suite 1400),
Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New
York 10048. Such reports and other information may also be obtained at the web
site that the SEC maintains at http://www.sec.gov. Copies should be obtainable
by mail, upon payment of the SEC's customary charges, by writing to the SEC's
principal office at 450 Fifth Street, N.W., Washington, DC 20549.
Except as described in this Offer to Purchase, (i) none of Purchaser, Parent
nor, to the best knowledge of Purchaser and Parent, any of the persons listed in
Schedule I to this Offer to Purchase or any associate or majority-owned
subsidiary of Purchaser, Parent or any of the persons so listed beneficially
owns or has any right to acquire, directly or indirectly, any Shares and (ii)
none of Purchaser, Parent nor, to the best knowledge of Purchaser and Parent,
any of the persons or entities referred to above nor any director, executive
officer or subsidiary of any of the foregoing has effected any transaction in
the Shares during the past 60 days.
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, none of Purchaser, Parent nor, to the best knowledge of
Purchaser and Parent, any of the persons listed in Schedule I to this Offer to
Purchase has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or voting of such securities, finder's fees, joint ventures, loan
or option arrangements, puts or calls, guaranties of loans, guaranties against
loss, guarantees of profits, division of profits or loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, since
January 1, 1995, neither Purchaser nor Parent nor, to the best knowledge of
Purchaser and Parent, any of the persons listed on Schedule I hereto has had any
business relationship or transaction with the Company or any of its executive
officers, directors or affiliates that is required to be reported under the
rules and regulations of the SEC applicable to the Offer. Except as set forth in
this
15
<PAGE>
Offer to Purchase, since January 1, 1995, there have been no contacts,
negotiations or transactions between any of Purchaser, Parent or any of their
respective subsidiaries or, to the knowledge of Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase, on the one hand, and the
Company or its affiliates, on the other hand, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required
by Purchaser to consummate the Offer and the Primary Merger and to pay related
fees and expenses is estimated to be approximately $130,000,000. The total
amount of funds required to complete the Alternative Merger (assuming that no
Preferred Shares are purchased pursuant to the Preferred Stock Offer) is
estimated to be approximately $90,000,000. Purchaser will obtain all of such
funds from Parent. Parent will provide such funds from its working capital.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER
AGREEMENT; EMPLOYMENT AGREEMENTS.
COMMERCIAL ARRANGEMENTS BETWEEN PARENT AND THE COMPANY.
Parent and the Company have, since 1993, had several on-going commercial
arrangements between them.
The Company entered into a MultiHost Agreement on April 14, 1997 with The
SABRE Group, Inc., an affiliate of Parent. The agreement grants the Company a
licence to use SABRE, a computerized travel reservation system. The agreement
expires in November, 2004.
Parent and Company entered into an Amended and Restated AAdvantage
Participating Carrier Agreement dated March 28, 1995 (the "AAdvantage
Agreement"), which has been subsequently amended, which provides for the accrual
and redemption of frequent flyer points by members of Parent's frequent flyer
program on the Company's flights in the Western Region (defined as areas within
the United States falling within the Pacific and Mountain time zones) as well as
selected routes to Chicago, Anchorage and Vancouver. The agreement may be
terminated by either party, with or without cause, on at least 210 days' prior
notice. Pursuant to the AAdvantage Agreement, Parent has the right for 120 days
following a change in control of the Company to (i) exclude any routes from the
accrual and redemption of frequent flyer points and (ii) to terminate the
agreement on 30 days prior written notice.
On October 24, 1994, Parent and the Company executed an Amended and Restated
Agreement of Sublease, which has been subsequently amended, relating to the
sublease by the Company from Parent of five gates and related terminal space and
facilities at San Jose International Airport in San Jose, California. This
agreement expires in November 2007. Pursuant to the sublease, the Company must
obtain Parent's consent, which may be withheld at Parent's sole discretion,
prior to any transfer, assignment or sublet by the Company.
The Company also subleases from Parent gates and other related terminal
space and facilities at John Wayne Airport in Orange County, California pursuant
to an Agreement of Sublease, dated October 18, 1994. This agreement has been
extended to December 31, 1998, and may be terminated by either party on prior
notice as provided in the agreement.
In addition, Parent and Company have entered into an Operations Agreement,
dated October 18, 1994 (the "Operations Agreement"), pursuant to which Company
has been allocated seven slots at John Wayne Airport as well as several more
slots, whose number vary from month to month based on a formula tied to the
Company's and Parent's seat capacity. This Agreement also provides for the
permanent allocation of two additional slots to the Company, which will remain
with the Company upon termination or expiration of this Agreement. This
Agreement has been extended to December 31, 1998 and may be terminated by either
party on prior notice as provided in the agreement.
16
<PAGE>
Parent and its affiliates also provide ground handling services on behalf of
the Company at several airports pursuant to various agreements. These agreements
are terminable by either party on 30 to 60 days' notice.
Under certain circumstances, the agreements described above may be modified
if the Offer and the Merger are not consummated. See Section 10.
From time to time over the past several years, representatives of the
Company and Parent have met personally or spoken to each other by telephone to
discuss the various business relationships between the two companies.
BACKGROUND OF THE OFFER.
On March 25, 1998, Donald J. Carty, Chairman, Chief Executive Officer and
President of Parent, Joseph R. O'Gorman, Chairman, Chief Executive Officer and
President of the Company, Robert Fornaro, consultant on strategic planning
issues to the Company, and Jeffrey C. Campbell, Vice President-Corporate
Development and Treasurer of Parent met at Parent's headquarters in Fort Worth,
Texas to discuss opportunities to expand the marketing alliance between Parent
and the Company. Messrs. Carty and O'Gorman met privately afterwards and in that
subsequent discussion broached the possibility of Parent purchasing the Company.
On or about May 11, 1998, Andrew A. Cuomo, President of Airline Management
Services, Inc., an affiliate of Parent ("Airline Management Services") met with
Messrs. O'Gorman and Fornaro, Joanne D. Smith, Senior Vice President--Marketing
and Planning of the Company and Steven A. Rossum, Senior Vice President, General
Counsel and Corporate Secretary of the Company at the Parent's headquarters in
Fort Worth, Texas regarding an expanded marketing relationship.
On June 11, 1998, Gerard J. Arpey, Senior Vice President-Finance and
Planning and Chief Financial Officer of Parent, Messrs. Campbell, Cuomo and
O'Gorman and Vicki W. Bretthauer, Vice President-Administration of the Company
met at the Admirals Club at Dallas Fort-Worth Airport to discuss the
commencement of due diligence inquiries by Parent of the Company and the terms
of a confidentiality agreement. On June 12, 1998, the parties executed a
confidentiality agreement.
Over the next several months representatives of Parent conducted due
diligence on the Company.
On September 24, 1998, Messrs. Arpey, Campbell and O'Gorman met at a hotel
near the St. Louis, Missouri airport in which Parent indicated it would be
interested in pursuing an acquisition of Company.
On September 28, 1998, Parent provided a draft merger agreement to the
Company.
On October 13, 1998, Mr. Cuomo; legal representatives of Parent; Mr. Rossum;
W. Stephen Jackson, Senior Vice President and Chief Financial Officer of the
Company; representatives of Salomon Smith Barney, financial advisors to the
Company, and legal representatives of the Company met in New York City to
discuss terms and conditions of a possible merger between Parent and the
Company. Salomon Smith Barney also made a presentation regarding the strategic
and financial rationale of a possible transaction. On October 14, 1998, Mr.
Cuomo and Mr. Rossum met at the Admirals Club at LaGuardia Airport to continue
the discussions of the terms and conditions of a merger between Parent and the
Company as well as the scope of due diligence efforts by Parent.
Discussions followed over the next several weeks between representatives of
Parent and the Company and their legal and financial advisors concerning a
proposed structure of the transaction, the scope of Parent's due diligence
investigations and the terms and conditions of employment agreements (the
"Employment Agreements") with five of the Company's officers, Messrs. Rossum and
Jackson and Mmes. Smith and Bretthauer and Beverley Grear, Senior Vice
President--Operations (the "Executives").
On October 22, 1998, Mr. Carty had a telephone conversation with Mr.
O'Gorman proposing a meeting at Parent's headquarters on November 4, 1998 to
discuss terms of a potential transaction. From and after October 23, 1998
representatives of Parent and the Company and their legal and financial
17
<PAGE>
advisors had numerous telephone conversations regarding various terms and
conditions of a potential transaction between Parent and Company.
On November 4, 1998, Mr. Carty and Mr. O'Gorman met at Parent's headquarters
to discuss the terms and conditions of a possible merger between Parent and the
Company.
Between November 5, 1998 and on November 15, 1998, senior management and
legal advisors of each of the Company and Parent regularly discussed the
proposed terms and conditions of a possible transaction between Parent and the
Company, as well as the terms and conditions of the Employment Agreements.
On November 15, 1998, senior management and legal advisors of each of the
Company and Parent met at Parent's headquarters in Fort Worth, Texas to discuss
terms and conditions of a merger agreement between Parent and the Company, as
well as the terms and conditions of the Employment Agreements.
Between November 16 and 18, 1998, Mr. Rossum continued negotiations with
various business and legal representatives of Parent at Parent's headquarters.
On November 17, 1998 Mr. Carty and Mr. O'Gorman met at Parent's headquarters to
discuss final terms and conditions, including price. On the same date, Mr.
O'Gorman also met with Mr. Arpey regarding the terms and conditions of the
Merger Agreement and the Employment Agreements. On November 17 and 18, 1998, Mr.
O'Gorman had follow-up conversations with Mr. Carty regarding final terms and
conditions, including price.
On November 18, 1998, Parent's board of directors, at a regularly scheduled
meeting, authorized and approved, the Offer, the Merger and the Merger
Agreement.
On November 18, 1998, the board of directors of the Company convened a
meeting at the Wyndham Hotel in Dallas, Texas at which representatives of
Salomon Smith Barney presented their opinion regarding the fairness of the
Common Stock Offer and the Merger to the holders of Common Shares, from a
financial point of view. Salomon Smith Barney also made a presentation to the
board of directors that the price to be received by the holders of the Preferred
Shares in the Preferred Stock Offer was in an amount that was economically
equivalent to the present value of the dividends payable to such holders
through, and the price payable to such holders on, the first date that the
Preferred Shares become optionally redeemable in accordance with their terms.
Mr. Fornaro also orally reported at the meeting that although the Company was
well managed under Mr. O'Gorman's management team, it was not well-positioned
strategically, Mr. Fornaro stated that the Company was susceptible to a downturn
in the economy, competitive threats (including from Parent), and the risk of
Parent not renewing on favorable terms many of the commercial arrangements
between the Company and Parent or its affiliates. The board of directors of the
Company then unanimously approved the Offers, the Merger and the Merger
Agreement and determined that the terms of the Offers, and the Merger are in the
best interests of the Company and its stockholders.
On November 19, 1998, Parent, Purchaser and the Company executed and
delivered the Merger Agreement; Parent, the Company and the Executives executed
and delivered the Employment Agreements; and Parent and the Company each issued
separate press releases.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1") filed by Purchaser and Parent with the Commission in connection with the
Offer. Such summary is qualified in its entirety by reference to the Merger
Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of Purchaser's intention to commence
the Offer. The obligation of Purchaser to accept for payment Common Shares
tendered pursuant to the Common Stock Offer is subject to the satisfaction of
the Minimum Condition and certain other conditions that are described in Section
14 hereof. The obligation of Purchaser to accept for payment Preferred Shares
tendered pursuant to the Preferred Stock Offer is
18
<PAGE>
subject to the condition that Purchaser shall have purchased Common Shares
pursuant to the Common Stock Offer. The Preferred Stock Offer is not conditioned
upon there being validly tendered and not withdrawn, prior to the expiration of
the Preferred Stock Offer, any minimum number of Preferred Shares. Purchaser and
Parent have agreed that no change in the Offer may be made (i) which reduces the
Per Common Share Amount or the Per Preferred Share Amount (other than as herein
provided in respect of the Preferred Shares) payable in the Offer, (ii) which
changes the form of consideration payable in the Offer, (iii) which reduces the
maximum number of Shares to be purchased in the Offer, (iv) which extends the
expiration date of the Offer (which shall initially be twenty (20) business
days) or (v) which imposes conditions to the Offer in addition to those set
forth in Section 14 hereof without the prior consent of the Company; PROVIDED,
HOWEVER, that subject to the right of the parties to terminate the Merger
Agreement, the Common Stock Offer (i) shall be extended (A) if, at the scheduled
expiration of the Offer, the HSR Condition shall not be satisfied, until such
time as such condition is satisfied, and (B) for any period required by any
rule, regulation or interpretation of 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 Offer, any of the conditions to the Common Stock Offer set
forth in Section 14 shall not be satisfied or waived, until such time as such
conditions are 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 the Merger Agreement may not be terminated
pursuant to Section 8.01(b), (c) or (d) of the Merger Agreement during any
extension pursuant to the provisions described in 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 66 2/3% of the then outstanding Preferred Shares. The Per Preferred
Share Amount shall be reduced from $27.50 to $27.33 (plus accrued and compared
dividends) in the event that the holders of Preferred Shares become entitled to
receive quarterly dividends for the first quarter of 1999, and shall be further
reduced as to the extent the holders of Preferred Shares become entitled to
receive additional quarterly dividends. The Per Preferred Share Amount will be
reduced to the amounts listed below as the holders of Preferred Shares become
entitled to receive quarterly dividends payable on the following dates: June 15,
1999--$27.17; September 15, 1999--$27.01; December 15, 1999--$26.83; March 15,
2000--$26.66; June 15, 2000--$26.49; September 15, 2000--$26.31; December 15,
2000-- $26.13.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Nevada Law, at the Effective
Time, Purchaser shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Purchaser will cease and the Company
will continue as the Surviving Corporation and will become a subsidiary of
Parent. Upon consummation of the Merger, each share of Common Stock and
Preferred Stock issued and outstanding (other than any Shares held in the
treasury of the Company, or owned by Purchaser, Parent or any direct or indirect
wholly owned subsidiary of Parent and any Shares which are held by stockholders
who have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such Shares in
accordance with Nevada Law) shall be canceled or converted automatically into
the right to receive the Merger Consideration. The Preferred Stock Merger
Consideration shall be equal to the Per Preferred Share Amount so long as the
holders of Preferred Shares do not become entitled to receive any dividends
after the Preferred Offer Expiration Date. To the extent the holders of
Preferred Shares do become so entitled to receive dividends, the Preferred Stock
Merger Consideration shall be reduced to the amounts described in the previous
paragraph which correspond with the date of the Effective Time. Unless at least
66 2/3% of the Preferred Shares vote to approve the Merger Agreement and the
Primary Merger, the Alternative Merger shall be effected instead of the Primary
Merger, and each Preferred Share shall instead 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
19
<PAGE>
7(e) of the Certificate of Designations, the holder of each Preferred Share; (x)
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 (y) 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 Designations).
Pursuant to the Merger Agreement, 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 exchanged for one validly issued,
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that, 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, or (ii) if the Alternative Merger is effected, the
Articles of Incorporation of the Company, including, without limitation, the
Certificate of Designations, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation. The
Merger Agreement also provides that, at the Effective Time, (i) if the Primary
Merger is effected, the By-laws of the Purchaser, as in effect immediately prior
to the Effective Time, will be the By-laws of the Surviving Corporation or (ii)
if the Alternative Merger is effected, the By-laws of the Company, as in effect
immediately prior to the Effective Time, will be the By-laws of the Surviving
Corporation.
AGREEMENTS OF PARENT, PURCHASER AND THE COMPANY. Pursuant to the Merger
Agreement, the Company shall, if required by applicable law and the Company's
Articles of Incorporation and By-laws in order to consummate the Merger, duly
call, give notice of, convene and hold an annual or special meeting of its
stockholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby (the "Stockholders' Meeting"), or, if
permitted, to cause the stockholders of the Company to act on the Merger
Agreement and the transactions contemplated thereby by written consent. If
Purchaser acquires at least a majority of the outstanding Common Shares, and
66 2/3% of the Preferred Shares, Purchaser will have sufficient voting power to
approve the Primary Merger, even if no other stockholder votes in favor of the
Primary Merger. If Purchaser acquires at least a majority of the outstanding
Common Shares, but fails to acquire at least 66 2/3% of the Preferred Shares,
Purchaser will nevertheless have sufficient voting power to approve and adopt
the Merger Agreement and the Alternative Merger, even if no other stockholder
votes in favor of the Alternative Merger.
The Merger Agreement provides that the Company shall, if required by
applicable law, as soon as practicable following consummation of the Offer, file
with the SEC under the Exchange Act, and use its best efforts to have cleared by
the SEC, a proxy statement and related proxy materials or an information
statement (if appropriate) (such proxy statement or information statement as
amended or supplemented being referred to herein as the "Proxy Statement") with
respect to the Stockholders' Meeting and shall cause the Proxy Statement to be
mailed to stockholders of the Company at the earliest practicable time. The
Company has agreed, subject to its fiduciary duties under applicable law as
advised in writing by counsel, to include in the Proxy Statement the unanimous
recommendation of the Board that the stockholders of the Company approve and
adopt the Merger Agreement and the transactions contemplated thereby and to use
its best efforts to obtain such approval and adoption. Parent and Purchaser have
agreed to cause all Shares then owned by them and their subsidiaries to be voted
in favor of approval and adoption of the Merger Agreement and the transactions
contemplated thereby.
20
<PAGE>
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the Effective Time, unless
Parent shall otherwise agree in writing (which agreement shall not be
unreasonably withheld or delayed), the businesses of the Company shall be
conducted only in, and the Company shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company shall use its reasonable efforts to preserve intact the business
organization of the Company, to keep available the services of the current
officers, employees and consultants of the Company and to preserve the current
relationships of the Company with customers, suppliers and other persons with
which the Company has significant business relations. The Merger Agreement
provides that by way of amplification and not limitation, and except as
contemplated therein, the Company has covenanted and agreed that, between the
date of the Merger Agreement and 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: (a) amend or otherwise change
its Articles of Incorporation or By-laws or equivalent organizational documents;
(b) 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 employee and director stock options
and a maximum of 7,104,831 Common Shares issuable upon the exercise of the
Warrants or upon conversion of the Preferred Shares or Convertible Notes, in
each case outstanding on the date of the Merger Agreement and the issuance of a
maximum of 100,000 employee stock options issued on terms consistent with prior
practice, and a maximum of 100,000 Common Shares issuable pursuant to such
employee stock options, issued after the date of the Merger Agreement) or (ii)
any assets of the Company, except for sales in the ordinary course of business
and in a manner consistent with past practice; (c) 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, except for 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;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock; (e) except as
disclosed to Parent on the date of the Merger Agreement, (i) 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, (ii) 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, (iii) enter into any contract or agreement
other than in the ordinary course of business, consistent with past practice,
(iv) 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 (v) enter into or amend any
contract, agreement, commitment or arrangement with respect to any of the
foregoing matters; (f) except as disclosed to Parent on the date of the Merger
Agreement, 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 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; (g) except as disclosed to Parent on the date of the Merger
Agreement, 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; (h) except as
disclosed to Parent on the date of the Merger Agreement, take any action, other
than reasonable and usual actions in the ordinary course of business and
consistent with past practice, with respect to accounting
21
<PAGE>
policies or procedures (including, without limitation, procedures with respect
to the payment of accounts payable and collection of accounts receivable); (i)
except as disclosed to Parent on the date of the Merger Agreement, make any tax
election or settle or compromise any material federal, state, local or foreign
income tax liability; (j) except as disclosed to Parent on the date of the
Merger Agreement, 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 (k) 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.
The Merger Agreement provides that, 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 Offer, 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. The Merger Agreement also provides that, 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. Until the earlier of (i) the time 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 of the
Merger Agreement who are not employees of the Company shall remain members of
the Board and of each such committee.
The Merger Agreement provides that following the election or appointment of
Purchaser's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment of the Merger Agreement or the
Articles of Incorporation or By-laws of the Company, any termination of the
Merger 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 thereunder, will require the
concurrence of a majority of 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 the Merger
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 the Merger 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 the Merger 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 the Merger
Agreement.
22
<PAGE>
Pursuant to the Merger Agreement, until 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. Parent and Purchaser have
agreed to keep such information confidential, except in certain circumstances.
The Company has agreed that it 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.
Notwithstanding the foregoing, the Merger Agreement permits the Board to furnish
information to, or enter into discussions or negotiations with, any person in
connection with an unsolicited (from the date of the Merger 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 dated as of June 12, 1998 between Parent and the Company. Pursuant to
the Merger Agreement, the Company has agreed to immediately cease and cause to
be terminated all existing discussions or negotiations with any parties
conducted prior to the date of the Merger Agreement with respect to any of the
foregoing. Moreover, the Company has agreed (x) to notify Parent promptly if any
such proposal or offer, or any inquiry or contact with any person with respect
thereto, is made and to indicate in reasonable detail in such notice the
identity of the person making such proposal, offer, inquiry or contact and the
terms thereof, and (y) not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is or may become a party.
The Merger Agreement provides that from the date thereof until the earlier
of the Effective Time and the termination of the Merger Agreement, 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 the Merger Agreement 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.
23
<PAGE>
The Merger Agreement provides that 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, as amended and restated
in 1994, (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 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 has agreed to effectuate the cancellation of the Options by
taking such action as may necessary under the Company's Stock Option Plans.
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.
The Merger Agreement further provides that the Articles of Incorporation and
the 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 adversely
affect 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.
The Merger Agreement also provides that 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 the Merger
Agreement and the transactions contemplated thereby), whether occurring before
or after the Effective Time, for a six-year period after the date of the Merger
Agreement. In the event of any such claim, action, suit, proceeding or
investigation, the Merger Agreement provides that (i) the Company or the
Surviving Corporation, as the case may be, shall pay the reasonable fees and
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 may not
be unreasonably withheld or delayed); and PROVIDED, FURTHER, that neither the
Company nor the Surviving Corporation shall be obligated 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.
The Merger Agreement provides that 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
24
<PAGE>
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) with respect to matters occurring
prior to the Effective Time; PROVIDED, HOWEVER, that in no event shall the
Surviving Corporation be required to expend more than an amount per year equal
to 150% of the current annual premiums paid by the Company for such insurance
(which annual premiums the Company has represented to Parent and Purchaser to be
approximately $175,000 in the aggregate).
The Merger Agreement provides that 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 described
above. The Merger Agreement provides that the obligations described above shall
survive the Effective Time indefinitely.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto shall (i) make promptly its respective filings, and
thereafter make any other required submissions, under the HSR Act with respect
to the transactions contemplated by the Merger Agreement 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 contemplated by the Merger Agreement, 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 contemplated by the Merger Agreement and to fulfill the
conditions to the Offer 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 the Merger Agreement, the proper
officers and directors of each party to the Merger Agreement are required to use
their reasonable best efforts to take all such action.
The Merger Agreement provides that immediately after the date upon which
Purchaser shall have accepted for payment all Common Shares validly tendered and
not withdrawn prior to the Common Stock Offer Expiration Date, the Company shall
call for the redemption of, and thereafter redeem, all of the outstanding
Convertible Notes in accordance with their terms.
The Merger Agreement provides that 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). Pursuant to the Merger Agreement, 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. The Company has agreed to 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.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to the Company's filings with the SEC, the
financial statements of the Company, the absence of certain changes or events
concerning the Company's business, compliance with law and certain contracts,
litigation, employee benefit plans, labor matters, real property and leases,
trademarks, patents and copyrights, environmental matters, taxes, aircraft,
slots and similar takeoff and landing rights at certain airports, and brokers.
25
<PAGE>
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligations of each party to effect the Primary Merger or the Alternative
Merger, as the case may be, are subject to the satisfaction at or prior to the
Effective Time of the following conditions: (a) the Merger Agreement and the
Primary Merger or the Alternative Merger contemplated thereby 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) 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 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 contemplated by the Merger
Agreement; and (d) Purchaser or its permitted assignee 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 the Merger 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.
TERMINATION; FEES AND EXPENSES; COMMERCIAL ARRANGEMENTS. The Merger
Agreement provides that it may be terminated and the Merger and the other
transactions contemplated by the Merger Agreement may be abandoned at any time
prior to the Effective Time, notwithstanding any requisite approval and adoption
of the Merger Agreement and the transactions contemplated by the Merger
Agreement by the stockholders of the Company: (a) by mutual written consent duly
authorized by the Boards of Directors of Parent, Purchaser and the Company; (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 the Merger Agreement
under this clause shall not be available to any such party if such party's
failure to fulfill any obligation under the Merger 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 contemplated by the Merger Agreement 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 the provisions
described in 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 or 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; (c) by Parent if due to an occurrence
or circumstance that would result in a failure to satisfy any condition set
forth in Section 14 hereof, 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 the Merger Agreement or the material breach by Parent or Purchaser of any
material representation or warranty of either of them contained in the Merger
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 Section 14 hereof, Purchaser shall have (A) terminated
the Common Stock Offer without having accepted any 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 the Merger
Agreement or the material breach by the Company of any material representation
or warranty of it contained in the Merger Agreement or (ii) prior
26
<PAGE>
to the purchase of Shares pursuant to the Offer, the Board shall have withdrawn
or modified in a manner adverse to Purchaser or Parent its approval or
recommendation of the Offer, the Merger 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 Offer
and the Merger taken together; PROVIDED, HOWEVER, that no termination of the
Merger Agreement pursuant to this clause shall be effective prior to the payment
by the Company of the Fee (as defined below) and the Expenses (as defined
below).
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void and there shall be no
liability thereunder on the part of any party thereto except (i) under the
provisions of the Merger Agreement related to the Fees and the Expenses
described below, (ii) under certain other provisions of the Merger Agreement
which survive termination and (iii) liability of any party for wilful breach of
the Merger Agreement.
The Merger Agreement provides that in the event that (a) any person (i)
shall have become the beneficial owner of more than 30% of the then outstanding
Common Shares (an "Acquiring Person") or (ii) 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 Offer shall have
remained open for at least 20 business days, (x) the Minimum Condition shall not
have been satisfied, (y) the Merger Agreement shall have been terminated
pursuant to the provisions described above and (z) such Competing Proposal shall
be consummated or a transaction of the type referred to in clause (ii) above
shall be consummated with an Acquiring Person, in either case within 18 months
following the date of termination of the Merger Agreement; or (b) the Merger
Agreement is terminated by the Company pursuant to the provisions described in
clause (d)(ii) of the second preceding paragraph; 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 defined below).
The Merger Agreement provides that if the Company is required to pay a Fee
pursuant to the provisions described in the immediately preceding paragraph,
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 contemplated by the Merger Agreement or structuring such
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 contemplated by the Merger Agreement, 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 the Merger Agreement, the structuring and financing
of the transactions contemplated by the Merger Agreement, and any financing
commitments or agreements relating thereto (all of the foregoing being referred
to herein collectively as the "Expenses"). Except as set forth in this
paragraph, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated by the Merger Agreement shall be
paid by the party incurring such expenses, whether or not any such transaction
is consummated. 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
27
<PAGE>
the collection under and enforcement of the provisions of the Merger Agreement
providing for such payments, 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%.
If Parent terminates the Merger Agreement pursuant to the above described
termination provisions of the Merger Agreement due to the failure to satisfy the
conditions set forth in paragraphs (a), (b), (e) or (f) of Section 14 (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 Section 14 or (ii) a material breach by the Company of
its covenant not to solicit any Competing Transaction), then Parent and the
Company shall take the following actions: (i) extend the AAdvantage Agreement
through April 30, 2001 (after which date such agreement shall be terminable
pursuant to the current terms thereof); (ii) extend the term of 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 shall agree 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; 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.
EMPLOYMENT AGREEMENTS
Prior to the execution of the Employment Agreements, each of the Executives
had employment agreements with the Company which terminated upon the third
anniversary of a change in control of the Company (the "Prior Employment
Agreements"). Pursuant to the Prior Employment Agreements, following a change in
control, if the employment of the Executive is terminated without cause by the
Company or by the Executive for good reason, such Executive would be entitled to
receive (i) the entire salary which would otherwise be payable to him for the
remainder of the employment period, plus (ii) an amount equal to three times the
maximum annual bonus payable to such Executive in accordance with the Company's
incentive bonus plan. In addition, the Prior Employment Agreements provide that
upon a change in control, the Executives would be entitled to (i) receive
lifetime unlimited free positive space airline travel for the Executive and
members of his or her family, (ii) participate in all other benefits, plans and
programs made available to the successor company's most senior executive
officers and (iii) receive, under certain circumstances, lifetime medical
coverage for the Executive and members of his or her family.
On November 19, 1998, as a condition to Parent's willingness to enter into
the Merger Agreement, and as consideration for the Executives terminating the
Prior Employment Agreements, the Company and Parent entered into the Employment
Agreements with the Executives. Each of the Employment Agreements has an initial
term of 24 months commencing upon the Effective Time. Under the Employment
Agreements, Parent and the Company agreed to continue to pay each Executive the
base salary each Executive was entitled to receive under his or her respective
Prior Employment Agreement. Beginning in calendar year 1999, each of the
Executives shall be entitled to participate in Parent's incentive compensation
plan.
Each of the Executives will be entitled to receive awards of stock options
pursuant to AMR Corporation's Performance Share Program (the "Performance Share
Program") and Career Equity
28
<PAGE>
Program (the "Career Equity Program") as well as receive employee stock options
annually on the same basis as other employees of Parent of like rank and
position.
At the Effective Time, each Executive shall receive (i) a payment equal to
150% of the Executive's annual base salary, (ii) 2,500 stock options to purchase
common stock of AMR Corporation, (iii) 1,000 shares of deferred stock under the
Performance Share Program and (iv) 1,000 shares of deferred stock under the
Career Equity Program.
The Employment Agreements provide that if an Executive is terminated without
"Cause" (as defined in each Employment Agreement) or resigns for "Good Reason"
(as defined in each Employment Agreement): (i) Parent shall pay the Executive
two times the Executive's annual base salary, (ii) the Executive shall be
entitled to receive various fringe benefits (including, without limitation,
medical insurance and air travel) until the 30 month anniversary of the
Effective Time, and (iii) the Executive shall become entitled to exercise any
stock options that were vested at the time of termination. The Employment
Agreements also provide that if an Executive is terminated for Cause or resigns
without Good Reason, the Executive will not be entitled to any additional
compensation.
If upon the expiration of the initial 24 month term of employment under each
Employment Agreement: (i) an Executive is not offered continued employment with
Parent or elects not to accept such offer, such Executive shall receive the same
payments and benefits as if such Executive had been terminated without Cause,
and (ii) an Executive is offered and accepts continued employment with Parent,
such Executive shall receive a payment equal to two times such Executive's base
salary, and shall continue to receive air travel benefits, at the same level as
existed during the employment period, up until the 30 month anniversary of the
Effective Time.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER.
PURPOSE OF THE OFFER. The purpose of the Offer and the Merger is for Parent
to acquire control of, and the entire equity interest in, the Company. The
purpose of the Primary Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer. Upon consummation of the Primary Merger, the Company will
become a wholly owned subsidiary of Parent. Unless at least 66 2/3% of the
Preferred Shares vote in favor of the Merger, however, the Alternative Merger
shall be effected instead of the Primary Merger and the Preferred Shares shall
remain outstanding and held by the holders thereof, subject to the terms and
conditions of the Certificate of Designations. The Offer is being made pursuant
to the Merger Agreement.
Under Nevada Law, the approval of the Board and the affirmative vote of the
holders of a majority of the outstanding Common Shares is required to approve
and adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. The Board of Directors of the Company has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, and the only remaining required corporate action of the Company is the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby by the requisite vote of the holders of Common Shares. The affirmative
vote of the holders of 66 2/3% of the Preferred Shares is also required for the
approval and adoption of the Primary Merger. No approval of the holders of
Preferred Shares is required for the approval and adoption of the Alternative
Merger. Accordingly, if Purchaser acquires at least a majority of the Common
Shares and at least 66 2/3% of the Preferred Shares, Purchaser will have
sufficient voting power to cause the approval and adoption of the Merger
Agreement and the Primary Merger without the affirmative vote of any other
stockholder. If Purchaser acquires at least a majority of the outstanding Common
Shares, but fails to acquire at least 66 2/3% of the Preferred Shares, Purchaser
will nevertheless have sufficient voting power to approve and adopt the Merger
Agreement and the Alternative Merger, without the affirmative vote of any other
stockholder. Under such circumstances, Purchaser may, but is not required to,
submit the Primary Merger to the holders of Preferred Stock for their approval.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as soon as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby or, if permitted,
to cause the stockholders to act on the Merger Agreement and the transactions
contemplated
29
<PAGE>
thereby by written consent. Parent and Purchaser have agreed that all Shares
owned by them and their subsidiaries will be voted in favor of the Merger
Agreement and the transactions contemplated thereby.
If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement
provides that Purchaser will be entitled to designate representatives to serve
on the Board in proportion to Purchaser's ownership of Common Shares following
such purchase. See Section 10. Subject to the requirement that certain actions
be approved by the Independent Directors, Purchaser expects that such
representation would permit Purchaser to exert substantial influence over the
Company's conduct of its business and operations.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders may have certain rights under Nevada Law
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. Such rights to dissent, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value of the
Shares, as of the day prior to the date on which the stockholders' vote was
taken approving the Merger (excluding any element of value arising from the
accomplishment or expectation of the Merger), required to be paid in cash to
such dissenting holders for their Shares. In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. In determining the fair value of the Shares, the
court is required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, asset values and
earning capacity. Upon consummation of the Merger, if, as of the record date
fixed to determine the stockholders of the Company entitled to receive notice of
and to vote at the meeting of stockholders of the Company to act upon the
Merger, Shares are neither (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. (the "NASD") nor
(ii) held of record by more than 2,000 holders, holders of Shares who do not
vote in favor of the Merger and who comply with applicable statutory procedures
under Nevada Law will be entitled to receive a judicial determination and
payment of the "fair value" (excluding any element of value arising from the
accomplishment or expectation of the Offer and Merger) of their Shares (subject
to certain exceptions). The value so determined could be the same as, or more or
less than, the price per Share offered pursuant to the Offer or proposed to be
paid in the Merger. However, if, as of such record date, the Common Shares
continue to be listed on NASDAQ, no rights of dissent will be available to
holders of the Common Shares. If the Preferred Shares continue to be listed on
the NASDAQ SmallCap Market as of such record date, no rights of dissent will be
available to holders of Preferred Shares.
CONVERTIBLE NOTES. According to the Form 10-K, at December 31, 1997,
$28,750,000 aggregate principal amount of the Convertible Notes was outstanding.
The Offer is not being made for (nor will tenders be accepted of) any of the
Convertible Notes. Holders of Convertible Notes who wish to participate in the
Offer must first convert their Convertible Notes into Common Shares in
accordance with the terms of the Indenture, and then tender the Common Shares
issued upon such conversion pursuant to the Offer. Under the Indenture, any
holder of Convertible Notes may, at his option, convert the principal amount
thereof into that number of Common Shares obtained by dividing the principal
amount thereof by the conversion price of $10.00, subject to adjustment under
certain circumstances. None of the Company, the Board, Parent or Purchaser has
made or will make any recommendation to the holders of the Convertible Notes
regarding the desirability of converting the Convertible Notes to Common Stock.
The Convertible Notes are currently redeemable by the Company and under the
Merger Agreement, the Company has agreed to redeem the Convertible Notes
immediately after Purchaser has accepted for payment and paid for the Common
Shares tendered pursuant to the Common Stock Offer. However, Parent has the
right to waive the Company's obligation to redeem the Convertible Notes. The
redemption price will be determined in accordance with the terms set forth in
the Indenture. Holders of Convertible Notes who convert such Convertible Notes
into Common Shares will have no right under the Indenture to revoke an effective
conversion. Accordingly, if the Offer terminates or expires without the purchase
of any Common Shares or if any Common Shares tendered after conversion by any
holder of Convertible Notes are not purchased for any reason, the converting
holders will no longer have any rights under the
30
<PAGE>
Indenture. Pursuant to Section 10.18 of the Indenture, after consummation of the
Merger, each holder of a Convertible Note then outstanding will be entitled to
receive, upon conversion, an amount in cash equal to the Common Stock Merger
Consideration that would have been received by such holder upon consummation of
the Merger had such holder converted his Convertible Note immediately prior to
the Effective Time.
The Indenture provides that the Company may not consolidate with or merge
into any other corporation or convey or transfer substantially all of its assets
unless the acquiror is a U.S. corporation and it expressly assumes the payment
of principal and interest on the Convertible Notes as well as the Company's
obligations under the Indenture. The Indenture also provides that upon (i) any
reclassification or change of outstanding Common Shares issuable upon conversion
of Convertible Notes, (ii) any consolidation or merger to which the Company is a
party, other than a merger in which the Company is the continuing corporation
and which does not result in any reclassification of, or change in, outstanding
Common Shares of the Company or (iii) any sale or conveyance of all or
substantially all of the property or business of the Company, then the Company,
or such successor, must deliver to the trustee under the Indenture a
supplemental indenture providing that the holder of each Convertible Note then
outstanding shall have the right to convert such Convertible Note into the kind
and amount of shares of stock and other securities and property (including cash)
receivable upon such reclassification, merger or conveyance by a holder of the
number of Common Shares deliverable upon conversion of such Convertible Note
immediately prior to such reclassification, merger or conveyance. In the case of
a consolidation, merger or conveyance, if the stock or other property (including
cash) includes stock or property of a corporation other than the successor or
purchasing corporation, then the supplemental indenture must be executed by such
other corporation and must contain provisions to protect the holders of
Convertible Notes. In addition, upon a "Change of Control" (as defined in the
Indenture) the Company is required to offer to repurchase from all holders of
Convertible Notes, all or any part of each holder's Convertible Notes at a
purchase price equal to 100% of the aggregate principal amount thereof. If the
Convertible Notes are not redeemed prior to the Merger, Parent intends to cause
the Surviving Corporation to comply with the above described provisions of the
Indenture.
WARRANTS. According to the Company, Warrants to purchase an aggregate of
65,431 Common Shares are currently outstanding. The Offer is not being made for
(nor will tenders be accepted of) any of the Warrants. Holders of Warrants who
wish to participate in the Offer must first exercise their Warrants to purchase
Common Shares in accordance with the terms of the Warrant Agreement and then
tender the Common Shares issued upon such exercise pursuant to the Offer. None
of the Company, the Board, Parent or Purchaser has made or will make any
recommendation to the holders of the Warrants regarding the desirability of
exercising the Warrants to purchase Common Shares. Holders of Warrants who
exercise such Warrants to purchase Common Shares will have no right under the
Warrant Agreement to revoke an effective exercise. Accordingly, if the Offer
terminates or expires without the purchase of Common Shares or if Common Shares
tendered after the exercise of Warrants are not purchased for any reason, the
exercising holder will no longer have any rights under the Warrant Agreement.
From and after the Effective Time, pursuant to the Warrants, 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.
PREFERRED STOCK. Pursuant to the Certificate of Designations, from and
after December 15, 1999, the Company may exchange the Preferred Shares for notes
of the Company bearing interest at the same rate that the Preferred Shares
currently receive dividends and having a principal amount equal to the
liquidation value of the Preferred Shares for which such notes are exchanged. On
and after December 20, 2000, the Company may redeem the Preferred Shares at a
price per Preferred Share equal to 104.5% of the liquidation value thereof, or
$26.125 per Preferred Share. In the event that the Alternative Merger is
consummated, Parent intends to cause the Surviving Corporation to redeem the
Preferred Shares as of
31
<PAGE>
December 20, 2000, and may, based upon its analysis at the time, exchange the
Preferred Shares for notes on December 15, 1999.
The SEC has adopted Rule 13e-3 under the Exchange Act which is applicable to
certain "going private" transactions and which may under certain circumstances
be applicable to the Merger or another business combination following the
purchase of Shares pursuant to the Offer in which Purchaser seeks to acquire the
remaining Shares not held by it. Purchaser believes, however, that Rule 13e-3
will not be applicable to the Merger. Rule 13e-3 requires, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction, be filed
with the SEC and disclosed to stockholders prior to consummation of the
transaction.
PLANS FOR THE COMPANY. It is expected that, initially following the Merger,
the business and operations of the Company will, except as set forth in this
Offer to Purchase, be continued by the Company substantially as they are
currently being conducted, except that Parent intends to manage the Company as
part of the Airline Group of AMR Corporation. Parent will continue to evaluate
the business and operations of the Company during the pendency of the Offer and
after the consummation of the Offer and the Merger, and will take such actions
as it deems appropriate under the circumstances then existing. Parent intends to
seek additional information about the Company during this period. Thereafter,
Parent intends to review such information as part of a comprehensive review of
the Company's business, operations, capitalization and management with a view to
optimizing exploitation of the Company's potential in conjunction with Parent's
businesses. It is expected that the business and operations of the Company will
be combined with those of Parent. Parent may cause the Company to be merged with
Parent after the consummation of the Merger.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company, a sale or transfer of a material amount of assets of the
Company or any material change in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business, or the composition of the Board or the Company's management.
12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the
Company shall not, between the date of the Merger Agreement and the Effective
Time, without the prior written consent of Parent, (a) issue, sell, pledge,
dispose of, grant, encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of 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 employee and director stock options outstanding on the date of the
Merger Agreement, and 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 as of the date of the Merger Agreement, and the
issuance of a maximum of 100,000 employee stock options issued on terms
consistent with prior practice, and a maximum of 100,000 Common Shares issuable
pursuant to such employee stock options, issued after the date of the Merger
Agreement) or (b) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock. See Section
10. If, however, the Company should, during the pendency of the Offer, (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
acquire or otherwise cause a reduction in the number of outstanding Shares or
(iii) issue or sell any additional Shares, shares of any other class or series
of capital stock, other voting securities or any securities convertible into, or
options, rights, or warrants, conditional or otherwise, to acquire, any of the
foregoing, then, without prejudice to Purchaser's rights under Section 14,
Purchaser may (subject to the provisions of the Merger Agreement) make such
adjustments to the purchase price and other terms of the Offer (including the
number and type of securities to be purchased) and the Merger as it deems
appropriate to reflect such split, combination or other change.
32
<PAGE>
If, on or after November 19, 1998, the Company should declare or pay any
dividend on the Shares or make any other distribution (including the issuance of
additional shares of capital stock pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares purchased pursuant to the Offer, other than regular quarterly dividends
on the Preferred Shares declared and paid at times consistent with past practice
and in an amount not in excess of $0.5625 per Preferred Share, then, without
prejudice to Purchaser's rights under Section 14, (i) the purchase price per
Share payable by Purchaser pursuant to the Offer will be reduced (subject to the
Merger Agreement) to the extent any such dividend or distribution is payable in
cash and (ii) any non-cash dividend, distribution or right shall be received and
held by the tendering stockholder for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all the rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by Purchaser in its sole discretion.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Common Shares and Preferred Shares by
Purchaser pursuant to the Offer will reduce the number of Common Shares and
Preferred Shares that might otherwise trade publicly and will reduce the number
of holders of Common Shares and Preferred Shares, which could adversely affect
the liquidity and market value of the remaining Common Shares and Preferred
Shares held by the public.
Purchaser intends to cause the Common Shares and Preferred Shares not to be
listed for quotation on NASDAQ or the Pacific Stock Exchange (the "PSE") and the
Preferred Shares not to be listed for quotation on the NASDAQ SmallCap Market,
following consummation of the Offer.
The Common Shares are currently traded on NASDAQ and the PSE. The Preferred
Shares are currently traded on the NASDAQ SmallCap Market. Depending upon the
number of Shares of each class purchased pursuant to the Offer, the Common
Shares and Preferred Shares may no longer meet the standards for continued
inclusion for listing on NASDAQ, the PSE or the NASDAQ SmallCap Market,
respectively.
According to NASDAQ's published guidelines, the Common Shares would not be
eligible to be included for listing if, among other things, (i) the number of
Common Shares publicly held falls below 750,000, (ii) the number of holders of
Common Shares falls below 400, (iii) the aggregate market value of such publicly
held Common Shares does not exceed $5,000,000 or (iv) there are not at least two
registered and active market makers for the Common Shares, one of which may be a
market maker entering a stabilizing bid. If these standards are not met,
quotations for the Common Shares might continue to be published in the NASDAQ
SmallCap Market.
Under NASDAQ rules governing the NASDAQ SmallCap Market, neither the Common
Shares nor the Preferred Shares would be eligible for a continued listing for
quotation on the NASDAQ SmallCap Market if, among other things, (i) the number
of holders of the Shares of such class falls below 300, (ii) the number of
publicly held Shares of such class falls below 500,000, (iii) the aggregate
market value of such publicly held Shares of such class does not exceed
$1,000,000 or (iv) there are not at least two registered and active market
makers for such class of Shares, one of which may be a market maker entering a
stabilizing bid. In such an event, NASDAQ rules provide that the securities
would no longer qualify for listing and inclusion in NASDAQ or the NASDAQ
SmallCap Market, and NASDAQ would cease to provide any quotations. Shares held
directly or indirectly by an officer or director of the Company or by a
beneficial owner of more than 10% of the Shares will ordinarily not be
considered as being publicly held for this purpose.
33
<PAGE>
According to the PSE's published guidelines, the Common Shares would not be
eligible to be included for listing if, among other things, (i) the number of
Common Shares publicly held falls below 200,000, (ii) the number of holders of
Common Shares falls below 400 or (iii) the aggregate market value of such
publicly held Common Shares does not exceed $1,000,000. If these standards are
not met, the PSE rules provide that the securities would no longer qualify for
listing and inclusion in the PSE, and the PSE would cease to provide any
quotations.
In the event either the Common Shares or the Preferred Shares were no longer
eligible for NASDAQ or PSE quotation, quotations might still be available from
other sources. The extent of the public market for each class of Shares and the
availability of such quotations would, however, depend upon the number of
holders of each class of Shares remaining at such time, the interest in
maintaining a market in each class of Shares on the part of securities firms,
the possible termination of registration of each class of Shares under the
Exchange Act as described below and other factors.
The Common Shares and Preferred Shares are currently "margin securities", as
such term is defined under the rules of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among other
things, of allowing brokers to extend credit on the collateral of such
securities. Depending upon factors similar to those described above regarding
listing and market quotations, following the Offer it is possible that the
Common Shares and the Preferred Shares might no longer constitute "margin
securities" for purposes of the margin regulations of the Federal Reserve Board,
in which event such Shares could no longer be used as collateral for loans made
by brokers.
Each class of Shares is currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the SEC if
such class of Shares is not listed on a national securities exchange and there
are fewer than 300 record holders. The termination of the registration of Common
Shares or Preferred Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of such Shares
and to the SEC and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholders' meetings and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to such Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended. If
registration of the Common Shares or Preferred Shares under the Exchange Act
were terminated, such Shares would no longer be "margin securities" or be
eligible for NASDAQ reporting. Purchaser currently intends to seek to cause the
Company to terminate the registration of the Common Shares and Preferred Shares
under the Exchange Act as soon after consummation of the Offer as the
requirements for termination of registration are met.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, 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 terminate or amend the Common Stock Offer and may (except as
provided in the Merger Agreement) postpone the acceptance for payment of and
payment for, Common Shares tendered, if (i) the Minimum Condition shall not have
been satisfied, (ii) the HSR Condition shall not have been satisfied, or (iii)
at any time on or after November 19, 1998, and prior to the acceptance for
payment of 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 Offer, 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 contemplated by the Merger
Agreement, or seeking to obtain material damages in connection with any
34
<PAGE>
transaction contemplated by the Merger Agreement; (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 contemplated by the Merger
Agreement; (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 acquired by Purchaser pursuant to the Offer,
including, without limitation, the right to vote any Shares acquired by
Purchaser pursuant to the Offer or otherwise on all matters properly presented
to the Company's stockholders, including, without limitation, the approval and
adoption of the Merger Agreement and the transactions contemplated thereby; (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 (as
defined below) 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 contemplated by the Merger Agreement;
(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 contemplated by the Merger Agreement, 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 Offer 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 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 the Merger 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 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 (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 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 Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal or any other
acquisition of Shares other than the Offer 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 the Merger 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 the Purchaser
shall first accept Common Shares for payment;
35
<PAGE>
(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 Offer or postpone the payment for Shares thereunder.
In addition, notwithstanding any other provisions of the Offer, 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 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 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.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Parent and discussions of representatives of Parent with
representatives of the Company during Parent's investigation of the Company (see
Section 10), neither Purchaser nor Parent is aware of any license or other
regulatory permit that appears to be material to the business of the Company and
the Subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set forth
below, of any approval or other action by any domestic (federal or state) or
foreign governmental, administrative or regulatory authority or agency which
would be required prior to the acquisition of Shares by Purchaser pursuant to
the Offer. Should any such approval or other action be required, it is
Purchaser's present intention to seek such approval or action. Purchaser does
not currently intend, however, to delay the purchase of Shares tendered pursuant
to the Offer pending the outcome of any such action or the receipt of any such
approval (subject to Purchaser's right to decline to purchase Shares if any of
the conditions in Section 14 shall have occurred). There can be no assurance
that any such approval or other action, if needed, would be obtained without
substantial conditions or that adverse consequences might not result to the
business of the Company, Purchaser or Parent or that certain parts of the
businesses of the Company, Purchaser or Parent might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such approval or other action or in the event that such approval was not
obtained or such other action was not taken. Purchaser's obligation under the
Offer to accept for payment and pay for Shares is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section 15.
See Section 14.
STATE TAKEOVER LAWS; ANTITAKEOVER PROVISIONS IN ARTICLES OF
INCORPORATION. The Company is incorporated in Nevada and is subject to the
provisions of the Nevada Law. Pursuant to Sections 78.378 to 78.3793 of the
Nevada Law (the "Nevada Control Share Acquisition Statute"), an "acquiring
person," who acquires a "controlling interest" in an "issuing corporation," may
not exercise voting rights on any "control share" unless such voting rights are
conferred by a majority vote of the disinterested stockholders of the issuing
corporation at a meeting of such stockholders. In the event that the control
shares are accorded full voting rights and the acquiring person acquires control
shares with a majority or more of all the voting power, any stockholder, other
than the acquiring person, who does not vote in favor of authorizing voting
36
<PAGE>
rights for the control shares, is entitled to demand payment for the fair value
of such stockholder's shares,
and the corporation must comply with the demand. For purposes of the provisions
under this subsection, "acquiring person" means any person who, individually or
in association with others, acquires or offers to acquire, directly or
indirectly, the ownership of outstanding voting shares of an issuing corporation
sufficient to enable the acquiring person, individually or in association with
others, directly or indirectly, to exercise (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, and/or (iii) a
majority or more of the voting power of the issuing corporation in the election
of directors. Voting rights must be conferred by a majority of the outstanding
voting shares of disinterested stockholders as each threshold is reached and/or
exceeded.
"Control share" means those outstanding voting shares of an issuing
corporation which an acquiring person acquires or offers to acquire in an
acquisition or within 90 days immediately preceding the date when the acquiring
person became an acquiring person. "Issuing corporation" means a corporation
that is organized in Nevada, has 200 or more stockholders (at least 100 of whom
are stockholders of record and residents of Nevada) and does business in Nevada
directly or through an affiliated corporation.
The above provisions of the Nevada Control Share Acquisition Statute do not
apply if, before an acquisition is made, the Articles of Incorporation or Bylaws
of the Company in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provide that said provisions do not
apply. The Company has represented in the Merger Agreement that the Company's
Board of Directors has amended its Bylaws to provide that the provisions of the
Nevada Control Share Acquisition Statute do not apply to the Company.
Sections 78.411 to 78.444 of the Nevada Law (the "Nevada Business
Combination Statute") restrict the ability of a "resident domestic corporation"
to engage in any combination with an "interested stockholder" for three years
following the interested stockholder's date of acquiring the shares that caused
such stockholder to become an interested stockholder, unless the combination or
the purchase of shares by the interested stockholder on the interested
stockholder's date of acquiring the shares that caused such stockholder to
become an interested stockholder is approved by the board of directors of the
resident domestic corporation before that date.
If the combination was not previously approved, the interested stockholder
may effect a combination after the three-year period only if such stockholder
receives approval from a majority of the disinterested shares or the offer meets
certain fair price criteria.
For purposes of the above provisions, "resident domestic corporation" means
a Nevada corporation that has 200 or more stockholders. "Interested stockholder"
means any person, other than the resident domestic corporation or its
subsidiaries, who is (i) the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the resident
domestic corporation, or (ii) an affiliate or associate of the resident domestic
corporation and, at any time within three years immediately before the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the then outstanding shares of the resident domestic
corporation. The above provisions do not apply to corporations that so elect in
their articles of incorporation or in a charter amendment approved by a majority
of the outstanding voting shares of disinterested stockholders. Such a charter
amendment, however, would not become effective for 18 months after its passage
and could apply only to stock acquisitions occurring after its effective date.
The Company's Articles of Incorporation do not exclude the Company from the
restrictions imposed by such provisions.
The Company has represented in the Merger Agreement, that the Company's
Board of Directors has approved the Offer, the Purchaser's purchase of Shares
pursuant to the Offer and the Merger. Accordingly, the Merger will not be
subject to the restrictions under the Nevada Business Combination Statute.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal
37
<PAGE>
executive offices or principal places of business, or whose business operations
otherwise have substantial economic effects, in such states. In EDGAR V. MITE
CORP., the Supreme Court of the United States invalidated on constitutional
grounds the Illinois Business Takeover Statute, which, as a matter of state
securities law, made takeovers of corporations meeting certain requirements more
difficult. However, in 1987 in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the
Supreme Court held that the State of Indiana may, as a matter of corporate law
and, in particular, with respect to those aspects of corporate law concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without the prior approval of the
remaining stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders in
the state and were incorporated there. Subsequently, in TLX ACQUISITION CORP. V.
TELEX CORP., a federal district court in Oklahoma ruled that certain Oklahoma
corporate governance statutes were unconstitutional insofar as they applied to
corporations incorporated outside Oklahoma because they could subject such
corporations to inconsistent regulations. Similarly, in TYSON FOODS, INC. V.
MCREYNOLDS, a federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of
Appeals for the Sixth Circuit. In December 1988, a federal district court in
Florida held in GRAND METROPOLITAN PLC V. BUTTERWORTH that the provisions of the
Florida Affiliated Transactions Act and the Florida Control Share Acquisition
Act were unconstitutional as applied to corporations incorporated outside of
Florida.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws. Should
any person seek to apply any state takeover law, Purchaser will take such action
as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer, and the Merger. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 14.
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Shares by Purchaser pursuant to the Offer is subject to such requirements.
See Section 2.
Pursuant to the HSR Act, on November 23, 1998, Parent filed a Premerger
Notification and Report Form in connection with the purchase of Shares pursuant
to the Offer with the Antitrust Division and the FTC. Under the provisions of
the HSR Act applicable to the Offer, the purchase of Shares pursuant to the
Offer may not be consummated until the expiration of a 15-calendar day waiting
period following the filing by Parent. Accordingly, the waiting period under the
HSR Act applicable to the purchase of Shares pursuant to the Offer will expire
at 11:59 p.m., New York City time, on Tuesday, December 8, 1998, unless such
waiting period is earlier terminated by the FTC and the Antitrust Division or
extended by a request from the FTC or the Antitrust Division for additional
information or documentary material prior to the expiration of the waiting
period. Pursuant to the HSR Act, Parent has requested early termination of the
waiting period applicable to the Offer. There can be no assurance, however, that
the 15-day HSR Act waiting period will be terminated early. If either the FTC or
the Antitrust Division were to request additional information or documentary
material from Parent with respect to the Offer, the waiting period with respect
to the Offer would expire at 11:59 p.m., New York City time, on the tenth
calendar day after the date of substantial compliance by Parent with such
request. Thereafter, the waiting period could be
38
<PAGE>
extended only by court order. If the acquisition of Shares is delayed pursuant
to a request by the FTC or the Antitrust Division for additional information or
documentary material pursuant to the HSR Act, the Offer may, but need not, be
extended and, in any event, the purchase of and payment for Shares will be
deferred until 10 days after the request is substantially complied with, unless
the extended period expires on or before the date when the initial 15-day period
would otherwise have expired, or unless the waiting period is sooner terminated
by the FTC and the Antitrust Division. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order. Any such extension
of the waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See Section 4. It is a condition to the Offer
that the waiting period applicable under the HSR Act to the Offer expire or be
terminated. See Section 2 and Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Parent, the Company or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Parent
relating to the businesses in which Parent, the Company and their respective
subsidiaries are engaged, Parent and Purchaser believe that the Offer will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, what the result would be. See Section 14 for certain
conditions to the Offer, including conditions with respect to litigation.
16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Morgan Stanley & Co., Incorporated ("Morgan Stanley") is acting as Dealer
Manager in connection with the Offer and has provided certain financial advisory
services in connection with the acquisition of the Company and Parent has agreed
to pay Morgan Stanley its customary fee for such services. Parent has also
agreed to reimburse Morgan Stanley for all reasonable out-of-pocket expenses
incurred by Morgan Stanley, including the reasonable fees and expenses of legal
counsel, and to indemnify Morgan Stanley against certain liabilities and
expenses in connection with its engagement, including certain liabilities under
the federal securities laws.
Purchaser and Parent have retained D.F. King & Co., Inc. ("D.F. King"), as
the Information Agent, and First Chicago Trust Company of New York, as the
Depositary, in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telecopy, telegraph and personal
interview and may request banks, brokers, dealers and other nominee stockholders
to forward materials relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, D.F. King will be paid its customary fee and will also be reimbursed for
certain out-of-pocket expenses and may be indemnified against certain
liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws. Purchaser will pay the Depositary
its customary fee for its services in connection with the Offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Depositary
against certain liabilities and expenses in connection therewith, including
under federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by Purchaser for customary handling and mailing
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes
39
<PAGE>
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, Purchaser will make a good faith effort
to comply with any such state statute. If, after such good faith effort,
Purchaser cannot comply with any such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of Purchaser by the Dealer Manager or by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and Purchaser have filed with the SEC the Schedule 14D-1,
together with exhibits, furnishing certain additional information with respect
to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits,
may be inspected at, and copies may be obtained from, the same places and in the
same manner as set forth in Section 7 (except that they will not be available at
the regional offices of the SEC).
BONANZA ACQUISITIONS, INC.
November 24, 1998
40
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business address thereof for the past five years of each
director and executive officer of Parent. Each such person is a citizen of the
United States of America. Unless otherwise indicated, the current business
address of each person is 4333 Amon Carter Boulevard, Fort Worth, Texas 76155.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with Parent.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Gerard J. Arpey, 40................. Senior Vice President/Finance and Planning and Chief Financial Officer of
Parent since 1992.
Robert W. Baker, 54................. Executive Vice President-Operations of Parent since 1989.
David L. Boren, 57.................. Director of Parent since 1994. President, University of Oklahoma, 1000 Asp
660 Parrington Oval, Avenue, Norman, Oklahoma 73019-4076, since 1994. Director of Phillips
Room 110 Petroleum Company, 411 Skeeler Avenue, Bartlesville, Oklahoma 74004, since
Norman, Oklahoma 73019 1994. Director of Texas Instruments, Inc., 8505 Forest Lane, Dallas, Texas
75243, since 1995. Director of Torchmark Corporation, 2001 3rd Avenue
South, Birmingham, Alabama 35233, since 1996. From 1979 through 1994, he
was a United States Senator for Oklahoma.
Peter M. Bowler, 43................. Senior Vice President of Parent and President of American Eagle since
October 1998. Vice President-Passenger Sales of Parent from 1996 to
September 1998. Managing Director-Reservations of Parent, 1996. Division
Managing Director-Passenger Sales of Parent from 1993 to 1996. Managing
Director-Food and Beverage Services of Parent from 1991 to 1993.
Edward A. Brennan, 64............... Director of Parent since 1987. Chairman, President and Chief Executive
400 North Michigan Avenue Officer, Sears, Roebuck and Co., 3333 Beverly Road, Hoffman Estates,
Suite 400 Illinois 60179 from 1986 to 1995. Director of Allstate Corporation,
Chicago, Illinois 60611 Allstate Plaza, 2775 Sanders Road, Northbrook, Illinois, since 1993.
Director of Morgan Stanley Dean Witter & Co., 1585 Broadway, New York, New
York 10036, since 1993. Director of Minnesota Mining and Manufacturing
Company, 3M Center, St. Paul, Minnesota 55144-1000, since 1986. Director of
Unicom Corporation, 10 South Dearborn Street, 37th Floor, Chicago, Illinois
60690-3005, since 1995. Director of Dean Foods Company, 3600 North River
Road, Franklin Park, Illinois 60131, since 1996. Director of The SABRE
Group Holdings, Inc., 4255 Amon Carter Boulevard, Fort Worth, Texas 76155,
since 1996.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Donald J. Carty, 52................. Chairman, President and Chief Executive Officer of Parent since May 1998.
He became an Executive Vice President of Parent in 1991 and was named the
President of Parent in 1995. Director of Parent since April 1998. Director
of Dell Computer Corporation, One Dell Way, Round Rock, Texas 78682-2244,
since 1992. Director of Brinker International, Inc., 6820 LBJ Freeway,
Dallas, Texas 75240, since 1998.
Armando M. Codina, 52............... Director of Parent since 1995. Chairman of the Board and Chief Executive
Two Alhambra Plaza, PH2 Officer of Codina Group, Inc., Two Alhambra Plaza, PH2, Coral Gables,
Coral Gables, Florida 33134 Florida 33134, since 1978. Director of BellSouth Corporation, 1155
Peachtree Street, N.E., Atlanta, Georgia 30309-3610, since 1992. Director
of Winn Dixie Stores, Inc., 5050 Edgewood Court, Jacksonville, Florida
32254-3699, since 1987. Director of FPL Group, Inc., 700 Universe
Boulevard, Juno Beach, Florida 33408, since 1994. Director of American
Bankers Insurance Group, Inc., 11222 Quail Roost Drive, Miami, Florida
33157-6595, since 1987.
Charles T. Fisher, III, 69.......... Director of Parent since 1968. Chairman, CEO and President of NBD Bank and
Renaissance Center NBD Bancorp, Inc., 111 Woodward Ave., Detroit, Michigan 48226 from 1982 to
Tower 100, Suite 3520 1993. Director of General Motors Corporation, 100 Renaissance Center,
Detroit, Michigan 48243 Detroit, Michigan 48243-7301, since 1977. Honorary Director, BankOne
Corporation, One First National Plaza, Chicago, Illinois 60670, since 1998.
Daniel P. Garton, 41................ Senior Vice President-Customer Service of Parent since October 1998. Senior
Vice President of Parent and President of American Eagle from 1995 to
September 1998. Senior Vice President and Chief Financial Officer of
Continental Airlines, Inc., 2929 Allen Pkwy., Ste. 2010, Houston, TX 77019
from 1993 to 1995. Vice President-Financial Planning and Analysis of Parent
from 1992 to 1993.
Earl G. Graves, 63.................. Director of Parent since 1995. Chairman and Chief Executive Officer, Earl
130 Fifth Avenue G. Graves, Limited, 130 Fifth Avenue, New York, New York, 10011-4399, since
New York, New York 10011-4399 1970. Chairman and Chief Executive Officer of Pepsi- Cola of Washington,
D.C., L.P., 3900 Penn Belt Place, Forrestville, Maryland 20747, since 1990.
Director of Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut 06156,
since 1996. Director of Chrysler Corporation, 1000 Chrysler Drive, Auburn
Hills, Michigan 48326-2766, since 1990. Director of Federated Department
Stores, Inc., 7 West 7th Street, Cincinnati, Ohio 45202, since 1994.
Director of Rohm and Haas Company, 100 Independence Mall West,
Philadelphia, Pennsylvania 19106, since 1984.
Michael W. Gunn, 53................. Senior Vice President-Marketing of Parent since 1985.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Dee J. Kelly, 69.................... Director of Parent since 1983. Partner, Kelly, Hart & Hallman, P.C., 201
201 Main Street Main Street, Suite 2500, Fort Worth, Texas 76102, since 1979. Director of
2500 First City Bank Tower Justin Industries, Inc., 2821 West 7th Street, Fort Worth, Texas 76107,
Fort Worth, Texas 76102 since 1986. Director of The SABRE Group Holdings, Inc., 4255 Amon Carter
Boulevard, Fort Worth, Texas 76155, since 1996.
Thomas J. Kiernan, 53............... Senior Vice President-Human Resources of Parent since 1993.
Charles D. MarLett, 44.............. Corporate Secretary of Parent since 1987.
Ann D. McLaughlin, 57............... Director of Parent since 1990. Chairman of The Aspen Institute, 1333 New
4320 Garfield Street NW Hampshire Avenue NW, Suite 1070, Washington, D.C. 20036, since 1996.
Washington, DC 20007 President of the Federal City Council, Washington, D.C., 1155 15th Street,
NW, Washington, D.C. 20005 from 1990 to 1995. President and Chief Executive
Officer of New American Schools Development Corporation, 1100 Wilson Blvd.,
Arlington, Virginia 22209 from 1992 to 1993. Director of General Motors
Corporation, 100 Renaissance Center, Detroit, Michigan 48243-7301, since
1990. Director of Kellogg Company, One Kellogg Square, Battle Creek,
Michigan 49016-3599, since 1989. Director of Host Marriott Corporation,
10400 Fernwood Road, Bethesda, Maryland 20817, since 1993. Director of
Union Camp Corporation, 1600 Valley Road, Wayne, New Jersey 07470, since
1989. Director of Vulcan Materials Company, 1 Metroplex Drive, Birmingham,
Alabama 35209, since 1990. Director of Nordstrom, Inc., 1501 5th Avenue,
Seattle, Washington 98101, since 1992. Director of Harman International
Industries, Inc., 1101 Pennsylvania Avenue NW, Suite 1010, Washington, D.C.
20004, since 1995. Director of Sedgwick Group, plc, Sackville, House,
143-149 Fenchurch Street, London, EC3M 6BN, U.K., since 1995. Director of
Donna Karan International, Inc., 550 7th Avenue, New York, New York, 10018,
since 1997. Director of Fannie Mae, 3900 Wisconsin Avenue NW, Washington,
D.C., 20016-2892, since 1994.
Anne H. McNamara, 51................ Senior Vice President and General Counsel of Parent since 1988. Director of
LG&E Energy Corporation, 220 West Main Street, Louisville, Kentucky 40202,
since 1991. Director of Louisville Gas & Electric, 220 West Main Street,
Louisville, Kentucky 40202, since 1991. Director of Kentucky Utilities, 220
West Main Street, Louisville, Kentucky 40202, since 1998. Director of The
SABRE Group Holdings, Inc., 4255 Amon Carter Boulevard, Fort Worth, Texas
76155, since 1996.
Charles H. Pistor, Jr., 68.......... Director of Parent since 1982. Vice Chair, Southern Methodist University,
4200 Belclaire 6425 Boaz Lane, Dallas, Texas 75275, from 1991 to 1995. President of the
Dallas, Texas 75205 American Bankers Association, 1120 Connecticut Avenue NW, Washington, D.C.
20036, from 1987 to 1988. Director of Fortune Brands, Inc., 1700 East
Putnam Avenue, Old Greenwich, Connecticut 06870-0811, since 1985. Director
of Centex Corporation, 2728 North Harwood, Dallas, Texas 75201-1516, since
1987. Director of Oryx Energy Company, 13155 Noel Road, Dallas, Texas
75240-5067, since 1988. Director of Zale Corporation, 901 West Walnut Hill
Lane,
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------ ---------------------------------------------------------------------------
Irving, Texas 75038-1003, since 1997.
<S> <C>
William K. Ris, Jr., 51............. Vice President-Government Affairs for Parent since 1996. Executive Vice
President, The Wexler Group, 1317 F Street N.W., Washington, D.C. 20004
from 1983 to 1996.
Joe M. Rodgers, 65.................. Director of Parent since 1989. Chairman, The JMR Group, P.O. Box 158838,
2000 Glen Echo Road Nashville, Tennessee 37215-8838, since 1984. Director of Gaylord
Suite 100 Entertainment Company, 1 Gaylord Drive, Nashville, Tennessee 37214, since
Nashville, Tennessee 1991. Director of Lafarge Corporation, 11130 Sunrise Valley Drive, Suite
37215-8838 300, Reston, Virginia 20191-4329, since 1989. Director of SunTrust Bank,
Nashville, N.A., P.O. Box 305110, Nashville, Tennessee 37230, since 1989.
Director of Thomas Nelson, Inc., P. O. Box 141000, Nashville, Tennessee
37214-1000, since 1992. Director of Tractor Supply Company, 320 Plus Park
Boulevard, Nashville, Tennessee 37217, since 1995.
Judith Rodin, 54.................... Director of Parent since 1997. President, University of Pennsylvania, 100
100 College Hall College Hall, Philadelphia, Pennsylvania 19104-6380, since 1994. Provost of
Philadelphia, Pennsylvania Yale University, P.O. Box 208236, New Haven, Connecticut 06520-8236, from
19104-6380 1992 through 1994. Director of Aetna Inc., 151 Farmington Avenue, Hartford,
Connecticut 06156-3215, since 1995. Director of Electronic Data Systems
Corporation, 5400 Legacy Drive, Plano, Texas 75024, since 1996.
Maurice Segall, 69.................. Director of Parent since 1985. Senior Lecturer at the Massachusetts
E52-504 Institute of Technology (Sloan School of Management), 77 Massachusetts
50 Memorial Drive Avenue, Cambridge, Massachusetts 02139-4307, since 1989. Chairman,
Cambridge, Massachusetts 02142-1347 President and Chief Executive Officer of Zayre Corporation, 770 Cochituate
Road, Farmingham, Massachusetts 01701 from 1978 to 1989. Director of
Harcourt General, Inc., 27 Boylston Street, Chestnut Hill, Massachusetts
02167, since 1986. Director of Cabot Industrial Trust, Two Center Plaza,
Suite 200, Boston Massachusetts 02108, since 1998.
</TABLE>
I-4
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business address thereof for the past five years of each
director and executive officer of Purchaser. Each person is a citizen of the
United States of America. Unless otherwise indicated, the current business
address of each person is 4333 Amon Carter Boulevard, Fort Worth, Texas 76155.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with Purchaser.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME, AGE AND EMPLOYMENT; MATERIAL POSITIONS HELD
CURRENT BUSINESS DURING THE PAST FIVE YEARS AND
ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Gerard J. Arpey, 40 Director and President of Purchaser since October 1998. See Parent, above.
Robert W. Baker, 54 Director of Purchaser since October 1998. See Parent, above.
Jeffrey C. Campbell, 38 Treasurer of Purchaser since October 1998. Vice President-Corporate
Development and Treasurer of Parent since 1998. Managing Director-Corporate
Finance and Banking of Parent from 1995 to 1998. Managing
Director-International Planning of Parent from 1993 to 1995.
Donald J. Carty, 52 Chairman of Purchaser since October 1998. See Parent, above.
Charles D. MarLett, 44 Secretary of Purchaser since October 1998. See Parent, above.
Anne H. McNamara, 51 General Counsel of Purchaser since October 1998. See Parent, above.
</TABLE>
I-5
<PAGE>
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Attn: Corporate Actions Attn: Corporate Actions Attn: Corporate Actions
Suite 4660 Suite 4680 c/o Securities Transfer and
P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services, Inc.
Jersey City, New Jersey New York, New York 10005 100 William Street, Galleria
07303-2569 New York, New York 10038
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A stockholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free: 1-800-347-4750
or
Call Collect: (212) 269-5550
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
(212) 761-4638
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
RENO AIR, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 24, 1998
OF
BONANZA ACQUISITIONS INC.
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN AIRLINES, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMR CORPORATION
---------------------------------------------------------------
THE OFFERS AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON TUESDAY, DECEMBER 22, 1998, UNLESS EITHER OR BOTH OF THE OFFERS ARE EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Attn: Corporate Actions Attn: Corporate Actions Attn: Corporate Actions
Suite 4660 Suite 4680 c/o Securities Transfer
P.O. Box 2569 14 Wall Street, 8th Floor and Reporting Services,
Jersey City, New Jersey New York, New York 10005 Inc.
07303-2569 100 William Street,
Galleria
New York, New York 10038
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the book-entry transfer procedure described in
"Section 3. Procedures for Accepting the Offer and Tendering Shares" of the
Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares ("Share Certificates") are not immediately available, or who cannot
deliver his Share Certificates and all other documents required hereby to the
Depositary prior to the Common Offer Expiration Date (as defined in "Section 1.
Terms of the Offer, Expiration Date" of the Offer to Purchase) or who cannot
comply with the procedure for delivery by book-entry transfer on a timely basis,
may tender such Shares by following the procedure for guaranteed delivery set
forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of
the Offer to Purchase. See Instruction 2.
<PAGE>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket No. (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivery is by book-entry transfer, give the following:
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK SHARES TENDERED
- ----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Need not be completed by stockholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
<CAPTION>
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Bonanza Acquisitions, Inc., a Nevada
corporation ("Purchaser") and a wholly owned subsidiary of American Airlines,
Inc., a Delaware corporation ("Parent"), the above-described shares of Common
Stock, $0.01 par value per share, of Reno Air, Inc., a Nevada corporation (the
"Company") (all shares of such Common Stock from time to time outstanding being,
collectively, the "Shares") pursuant to Purchaser's offer to purchase all
Shares, at $7.75 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated November 24,
1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"). The undersigned understands that
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after November 19, 1998 (collectively,
"Distributions") and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Share Certificates evidencing such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by the Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Gerard J. Arpey, Jeffrey C.
Campbell and Charles D. MarLett and each of them, as the attorneys and proxies
of the undersigned, each with full power of substitution, to vote in such manner
as each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of shareholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with other
terms of the Offer. Such acceptance for payment shall revoke all other proxies
and powers of attorney granted by the undersigned at any time with respect to
such Shares (and all Shares and other securities issued in Distributions in
respect of such Shares), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the undersigned with respect thereto. The undersigned understands
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's acceptance of such Shares for payment, Purchaser must be able to
exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's stockholders then
scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment by
Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restriction,
charges and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned, upon request, shall execute and
deliver all additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions. In addition, the undersigned shall
remit and transfer promptly to the Depositary for the account of Purchaser all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and pending such remittance and transfer
or appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by Purchaser in
its sole discretion.
<PAGE>
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" in the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. The undersigned recognizes that Purchaser has no
obligation, pursuant to the Special Payment Instructions, to transfer any Shares
from the name of the registered holder(s) thereof if Purchaser does not purchase
any of the Shares tendered hereby.
<PAGE>
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or
Share Certificates evidencing Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Issue / / Check / / Share Certificate(s) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
------------------------------------------------------------------
------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be mailed to someone other than the undersigned, or the
undersigned at an address other than that shown under "Description of Shares
Tendered".
Issue / / Check / / Share Certificate(s) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
-----------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
__________________________________________________________________________
__________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated: ___________, 199_
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates or on a security position listing by a person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, please provide the following
information and see Instruction 5).
Name(s): ___________________________________________________________________
PLEASE PRINT
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
INCLUDE ZIP CODE
Area Code and Telephone No.: ( )__________________________________________
Taxpayer Identification or Social Security No.: ____________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTION ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION
GUARANTEE IN SPACE BELOW.
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Security Transfer Agent
Medallion Signature Program, or by any other "eligible guarantor institution,"
as such term is defined in Rule l7Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended (each of the foregoing being referred to as an
"Eligible Institution") unless (i) this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered hereby
and such holder(s) has (have) completed neither the box entitled "Special
Payment Instructions" nor the box entitled "Special Delivery Instructions" on
the reverse hereof or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer as well as a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the reverse hereof prior to the Common Offer Expiration
Date (as defined in "Section 1. Terms of the Offer, Expiration Date" of the
Offer to Purchase). If Share Certificates are forwarded to the Depositary in
multiple deliveries, a properly completed and duly executed Letter of
Transmittal must accompany each such delivery. Stockholders whose Share
Certificates are not immediately available, who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Common Offer Expiration Date or who cannot complete the procedure for delivery
by book-entry transfer on a timely basis may tender their Shares pursuant to the
guaranteed delivery procedure described in "Section 3. Procedures for Accepting
the Offer and Tendering Shares" of the Offer to Purchase. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Common Offer Expiration Date; and (iii) the Share
Certificates evidencing all physically delivered Shares in proper form for
transfer by delivery, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer, in each case together with a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message (as defined in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase)), and any other documents required
by this Letter of Transmittal, must be received by the Depositary within three
Nasdaq National Market ("NASDAQ") trading days after the date of execution of
such Notice of Guaranteed Delivery, all as described in "Section 3. Procedure
for Accepting the Offer and Tendering Shares" of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at its
addresses or telephone numbers set forth below. Additional copies of the Offer
to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be obtained from the Information Agent or the Dealer Manager.
<PAGE>
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalty of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
(OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE) AND SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%. In addition,
if a stockholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for making such statement, a $500
penalty may also be imposed by the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement (Internal Revenue Service
Form W-8), signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Depositary. See
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions. A stockholder should consult
his or her tax advisor as to such stockholder's qualification for exemption from
backup withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN), and (b) (i)
such stockholder has not been notified by the Internal Revenue Service that he
is subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the Internal Revenue Service has notified such stockholder
that such stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<C> <S> <C>
-----------------------------------------------------------------------------------------
SUBSTITUTE PART 1--Taxpayer Identification
FORM W-9 Number--For all accounts, enter Social Security Number
your taxpayer identification OR
number in the box at right. (For Employer Identification
most individuals, this is your Number
social security number. If you do (If awaiting TIN write
not have a number, see Obtaining a "Applied For")
Number in the enclosed
GUIDELINES.) Certify by signing
and dating below. Note: If the
account is in more than one name,
see the chart in the enclosed
GUIDELINES to determine which
number to give the payer.
------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER PART II--For Payees Exempt from Backup Withholding, see the
IDENTIFICATION NUMBER (TIN) enclosed GUIDELINES and complete as instructed therein.
-----------------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I
am waiting for a number to be issued to me),
and
(2) I am not subject to backup withholding either because I have not been notified by
the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a
result of failure to report all interest or dividends, or the IRS has notified me that I
am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from the IRS that you are
no longer subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed GUIDELINES.)
-----------------------------------------------------------------------------------------
SIGNATURE DATE , 199
---------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or Dealer Manager. A stockholder may also contact brokers,
dealers, commercial banks or trust companies for assistance concerning the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free: 1-800-347-4750
or
Call Collect: (212) 269-5550
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
(212) 761-4638
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF
SERIES A CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
RENO AIR, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 24, 1998
OF
BONANZA ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN AIRLINES, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMR CORPORATION
---------------------------------------------------------------
THE OFFERS AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON TUESDAY, DECEMBER 22, 1998, UNLESS EITHER OR BOTH OF THE OFFERS ARE EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Attn: Corporate Actions Attn: Corporate Actions Attn: Corporate Actions
Suite 4660 Suite 4680 c/o Securities Transfer and
P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services, Inc.
Jersey City, New Jersey New York, New York 10005 100 William Street, Galleria
07303-2569 New York, New York 10038
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the book-entry transfer procedure described in
"Section 3. Procedures for Accepting the Offer and Tendering Shares" of the
Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares ("Share Certificates") are not immediately available, or who cannot
deliver his Share Certificates and all other documents required hereby to the
Depositary prior to the Preferred Offer Expiration Date (as defined in "Section
1. Terms of the Offer, Expiration Date" of the Offer to Purchase) or who cannot
comply with the procedure for delivery by book-entry transfer on a timely basis,
may tender such Shares by following the procedure for guaranteed delivery set
forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of
the Offer to Purchase. See Instruction 2.
<PAGE>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket No. (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivery is by book-entry transfer, give the following:
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DESCRIPTION OF SERIES A CUMULATIVE CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK SHARES TENDERED
- ----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Need not be completed by stockholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
<CAPTION>
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Bonanza Acquisitions, Inc., a Nevada
corporation ("Purchaser") and a wholly owned subsidiary of American Airlines,
Inc., a Delaware corporation ("Parent"), the above-described shares of Series A
Cumulative Convertible Exchangeable Preferred Stock, $0.001 par value per share,
of Reno Air, Inc., a Nevada corporation (the "Company") (all shares of such
Preferred Stock from time to time outstanding being, collectively, the "Shares")
pursuant to Purchaser's offer to purchase any and all Shares, at $27.50 per
Share plus accrued and unpaid dividends, subject to reduction as provided in
Purchaser's Offer to Purchase dated November 24, 1998 (the "Offer to Purchase"),
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"), including terms relating to the
reduction of such price. The undersigned understands that Purchaser reserves the
right to transfer or assign, in whole or from time to time in part, to one or
more of its affiliates, the right to purchase all or any portion of the Shares
tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after November 19, 1998, other than regular
quarterly dividends payable on the Shares in an amount not to exceed $0.5625
(collectively, "Distributions") and irrevocably appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares and all Distributions, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver Share Certificates evidencing such Shares and all Distributions, or
transfer ownership of such Shares and all Distributions on the account books
maintained by the Book-Entry Transfer Facility, together, in either case, with
all accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Gerard J. Arpey, Jeffrey C.
Campbell and Charles D. MarLett and each of them, as the attorneys and proxies
of the undersigned, each with full power of substitution, to vote in such manner
as each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of shareholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with other
terms of the Offer. Such acceptance for payment shall revoke all other proxies
and powers of attorney granted by the undersigned at any time with respect to
such Shares (and all Shares and other securities issued in Distributions in
respect of such Shares), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the undersigned with respect thereto. The undersigned understands
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's acceptance of such Shares for payment, Purchaser must be able to
exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's stockholders then
scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment by
Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restriction,
charges and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned, upon request, shall execute and
deliver all additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions. In addition, the undersigned shall
remit and transfer promptly to the Depositary for the account of Purchaser all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and pending such remittance and transfer
or appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by Purchaser in
its sole discretion.
<PAGE>
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" in the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. The undersigned recognizes that Purchaser has no
obligation, pursuant to the Special Payment Instructions, to transfer any Shares
from the name of the registered holder(s) thereof if Purchaser does not purchase
any of the Shares tendered hereby.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or
Share Certificates evidencing Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Issue / / Check / / Share Certificate(s) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9
ON REVERSE SIDE)
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
__________________________________________________________________________
__________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated: ___________, 199_
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates or on a security position listing by a person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, please provide the following
information and see Instruction 5).
Name(s): ___________________________________________________________________
PLEASE PRINT
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
INCLUDE ZIP CODE
Area Code and Telephone No.: _______________________________________________
Taxpayer Identification or Social Security No.: ____________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTION ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION
GUARANTEE IN SPACE BELOW.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Security Transfer Agent
Medallion Signature Program, or by any other "eligible guarantor institution,"
as such term is defined in Rule l7Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended (each of the foregoing being referred to as an
"Eligible Institution") unless (i) this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered hereby
and such holder(s) has (have) completed neither the box entitled "Special
Payment Instructions" nor the box entitled "Special Delivery Instructions" on
the reverse hereof or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer as well as a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the reverse hereof prior to the Preferred Offer
Expiration Date (as defined in "Section 1. Terms of the Offer, Expiration Date"
of the Offer to Purchase). If Share Certificates are forwarded to the Depositary
in multiple deliveries, a properly completed and duly executed Letter of
Transmittal must accompany each such delivery. Stockholders whose Share
Certificates are not immediately available, who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Preferred Offer Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in "Section 3.
Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase. Pursuant to such procedure: (i) such tender must be made by or through
an Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by Purchaser, must
be received by the Depositary prior to the Preferred Offer Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined in "Section 3. Procedures for Accepting the Offer
and Tendering Shares" of the Offer to Purchase)), and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three Nasdaq National Market ("NASDAQ") trading days after the date of
execution of such Notice of Guaranteed Delivery, all as described in "Section 3.
Procedure for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at its
addresses or telephone numbers set forth below. Additional copies of the Offer
to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be obtained from the Information Agent or the Dealer Manager.
<PAGE>
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalty of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
(OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE) AND SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%. In addition,
if a stockholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for making such statement, a $500
penalty may also be imposed by the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement (Internal Revenue Service
Form W-8), signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Depositary. See
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions. A stockholder should consult
his or her tax advisor as to such stockholder's qualification for exemption from
backup withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN), and (b) (i)
such stockholder has not been notified by the Internal Revenue Service that he
is subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the Internal Revenue Service has notified such stockholder
that such stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<C> <S> <C>
-----------------------------------------------------------------------------------------
SUBSTITUTE PART 1--Taxpayer Identification
FORM W-9 Number--For all accounts, enter Social Security Number
your taxpayer identification number OR
in the box at right. (For most Employer Identification
individuals, this is your social Number
security number. If you do not have (If awaiting TIN write
a number, see Obtaining a Number in "Applied For")
the enclosed GUIDELINES.) Certify
by signing and dating below. Note:
If the account is in more than one
name, see the chart in the enclosed
GUIDELINES to determine which
number to give the payer.
------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER PART II--For Payees Exempt from Backup Withholding, see the
IDENTIFICATION NUMBER (TIN) enclosed GUIDELINES and complete as instructed therein.
-----------------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me),
and
(2) I am not subject to backup withholding either because I have not been notified by
the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a
result of failure to report all interest or dividends, or the IRS has notified me that
I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from the IRS that you are
no longer subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed GUIDELINES.)
-----------------------------------------------------------------------------------------
SIGNATURE DATE , 199
---------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or Dealer Manager. A stockholder may also contact brokers,
dealers, commercial banks or trust companies for assistance concerning the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free: 1-800-347-4750
or
Call Collect: (212) 269-5550
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
(212) 761-4638
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
RENO AIR, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates ("Share
Certificates") evidencing shares of Common Stock, $0.01 par value per share (the
"Shares"), of Reno Air, Inc., a Nevada corporation (the "Company"), are not
immediately available, (ii) if Share Certificates and all other required
documents cannot be delivered to First Chicago Trust Company of New York, as
Depositary (the "Depositary"), prior to the Common Offer Expiration Date (as
defined in "Section 1. Terms of the Offer, Expiration Date" of the Offer to
Purchase) or (iii) if the procedure for delivery by book-entry transfer cannot
be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or mail or transmitted by telegram, telex or facsimile
transmission to the Depositary. See "Section 3. Procedures for Accepting the
Offer and Tendering Shares" of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Attn: Corporate Actions Attn: Corporate Actions Attn: Corporate Actions
Suite 4660 Suite 4680 c/o Securities Transfer and
P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services, Inc.
Jersey City, New Jersey New York, New York 10005 100 William Street, Galleria
07303-2569 New York, New York 10028
BY FACSIMILE:
(201) 222-4720
or
(201) 222-4721
CONFIRM RECEIPT OF FACSIMILE
ONLY BY TELEPHONE:
(201) 222-4707
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to Bonanza Acquisitions, Inc., a Nevada
corporation and a wholly owned subsidiary of American Airlines, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated November 24, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendment or supplements
thereto, collectively constitute the "Offer"), receipt of each of which is
hereby acknowledged, the number of Shares specified below pursuant to the
guaranteed delivery procedure described in "Section 3. Procedures for Accepting
the Offering and Tendering Shares" of the Offer to Purchase.
<PAGE>
- -------------------------------------------
Number of Shares: __________________________________________________________
Certificate Nos. (If Available): ___________________________________________
Check box if Shares will be delivered by book-entry transfer:
/ / The Depository Trust Company
Account No. ________________________________________________________________
- -------------------------------------------
- -------------------------------------------
____________________________________________________________________________
____________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated: _______________________________________________________________, 199_
Name(s) of Holders:
____________________________________________________________________________
____________________________________________________________________________
PLEASE TYPE OR PRINT
____________________________________________________________________________
ADDRESS
____________________________________________________________________________
ZIP CODE
____________________________________________________________________________
AREA CODE AND TELEPHONE NO.
- ------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of the Security Transfer Agent
Medallion Signature Program or is an "eligible guarantor institution," as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees to delivery to the Depositary, Share Certificates evidencing
the Shares tendered hereby, in proper form for transfer, or confirmation of
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company, with delivery of a Letter of Transmittal (or facsimile
thereof) properly completed and duly executed, and any other required documents,
all within three Nasdaq National Market trading days of the date hereof.
<TABLE>
<S> <C>
NAME OF FIRM TITLE
AUTHORIZED SIGNATURE ADDRESS ZIP CODE
Name:
PLEASE TYPE OR PRINT AREA CODE AND TELEPHONE NO.
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
Dated: ___________, 199_
2
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
RENO AIR, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates ("Share
Certificates") evidencing shares of Series A Cumulative Convertible Exchangeable
Preferred Stock, $0.001 par value per share (the "Shares"), of Reno Air, Inc., a
Nevada corporation (the "Company"), are not immediately available, (ii) if Share
Certificates and all other required documents cannot be delivered to First
Chicago Trust Company of New York, as Depositary (the "Depositary"), prior to
the Preferred Offer Expiration Date (as defined in "Section 1. Terms of the
Offer, Expiration Date" of the Offer to Purchase) or (iii) if the procedure for
delivery by book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by
telegram, telex or facsimile transmission to the Depositary. See "Section 3.
Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Attn: Corporate Actions Attn: Corporate Actions Attn: Corporate Actions
Suite 4660 Suite 4680 c/o Securities Transfer and
P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services, Inc.
Jersey City, New Jersey New York, New York 10005 100 William Street, Galleria
07303-2569 New York, New York 10028
BY FACSIMILE:
(201) 222-4720
or
(201) 222-4721
CONFIRM RECEIPT OF FACSIMILE
ONLY BY TELEPHONE:
(201) 222-4707
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to Bonanza Acquisitions, Inc., a Nevada
corporation and a wholly owned subsidiary of American Airlines, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated November 24, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendment or supplements
thereto, collectively constitute the "Offer"), receipt of each of which is
hereby acknowledged, the number of Shares specified below pursuant to the
guaranteed delivery procedure described in "Section 3. Procedures for Accepting
the Offering and Tendering Shares" of the Offer to Purchase.
<PAGE>
- -------------------------------------------
Number of Shares: __________________________________________________________
Certificate Nos. (If Available): ___________________________________________
Check box if Shares will be delivered by book-entry transfer:
/ / The Depository Trust Company
Account No. ________________________________________________________________
- -------------------------------------------
- -------------------------------------------
____________________________________________________________________________
____________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated: _______________________________________________________________, 199_
Name(s) of Holders:
____________________________________________________________________________
____________________________________________________________________________
PLEASE TYPE OR PRINT
____________________________________________________________________________
ADDRESS
____________________________________________________________________________
ZIP CODE
____________________________________________________________________________
AREA CODE AND TELEPHONE NO.
- ------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of the Security Transfer Agent
Medallion Signature Program or is an "eligible guarantor institution," as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees to delivery to the Depositary, Share Certificates evidencing
the Shares tendered hereby, in proper form for transfer, or confirmation of
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company, with delivery of a Letter of Transmittal (or facsimile
thereof) properly completed and duly executed, and any other required documents,
all within three Nasdaq National Market trading days of the date hereof.
<TABLE>
<S> <C>
NAME OF FIRM TITLE
AUTHORIZED SIGNATURE ADDRESS ZIP CODE
Name:
PLEASE TYPE OR PRINT AREA CODE AND TELEPHONE NO.
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
Dated: ___________, 199_
2
<PAGE>
OFFERS TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ANY AND ALL OUTSTANDING SHARES OF SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
RENO AIR, INC.
AT
$7.75 NET PER SHARE OF COMMON STOCK
AND
$27.50 NET PER SHARE OF SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
(SUBJECT TO REDUCTION AS PROVIDED IN THE OFFER TO PURCHASE)
BY
BONANZA ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN AIRLINES, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMR CORPORATION
THE OFFERS AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON TUESDAY, DECEMBER 22, 1998, UNLESS EITHER OR BOTH OF THE OFFERS ARE EXTENDED.
November 24, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Bonanza Acquisitions, Inc., a Nevada corporation ("Purchaser"), and a wholly
owned subsidiary of American Airlines, Inc., a Delaware corporation ("Parent"),
has offered to purchase all outstanding shares of Common Stock, $0.01 par value
per share (the "Common Shares") and any and all outstanding shares of Series A
Cumulative Convertible Exchangeable Preferred Stock, $0.001 par value per share
(the "Preferred Shares"; and together with the Common Shares, "Shares"), of Reno
Air, Inc., a Nevada corporation (the "Company"), at a price of $7.75 per Common
Share and $27.50 per Preferred Share plus accrued and unpaid dividends, subject
to reduction as provided in Purchaser's Offer to Purchase, dated November 24,
1998 (the "Offer to Purchase") in each case net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer") enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
THE COMMON STOCK OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE
BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE COMMON
STOCK OFFER AT LEAST A MAJORITY OF THE COMMON SHARES THEN OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION") (INCLUDING, WITHOUT LIMITATION, ALL
COMMON
<PAGE>
SHARES ISSUABLE UPON THE CONVERSION OF ANY CONVERTIBLE SECURITIES OR UPON THE
EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS, BUT EXCLUDING, FOR PURPOSES OF SUCH
CALCULATION, 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 (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, APPLICABLE TO THE PURCHASE OF THE COMMON
SHARES PURSUANT TO THE COMMON STOCK OFFER HAVING EXPIRED OR BEEN TERMINATED (THE
"HSR CONDITION"). THE PREFERRED STOCK OFFER IS CONDITIONED UPON THE PURCHASER
HAVING ACCEPTED FOR PAYMENT AND PAID FOR THE COMMON SHARES PURSUANT TO THE
COMMON STOCK OFFER.
Enclosed for your information and use are copies of the following documents:
1. Offer to Purchase, dated November 24, 1998;
2. Letters of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to First Chicago Trust Company of New York (the
"Depositary") by the Expiration Date (as defined in the Offer to Purchase)
or if the procedure for book-entry transfer cannot be completed by the
Expiration Date;
4. A letter to stockholders of the Company from Joseph R. O'Gorman,
Chairman of the Board, Chief Executive Officer, and President of the
Company, together with a Solicitation/Recommendation Statement on Schedule
14D-9 filed with the Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFERS AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 22, 1998, UNLESS EITHER OR BOTH OF THE OFFERS ARE
EXTENDED.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company pursuant to the procedure set forth in "Section 3. Procedures for
Accepting the Offer and Tendering Shares" of the Offer to Purchase, (ii) the
Letter of Transmittal (or facsimile thereof) properly completed and duly
executed, with any required signature guarantees (or in the case of a book-entry
transfer, an Agent's message) and (iii) any other documents required under the
Letter of Transmittal.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in "Section 3.
Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the Information
Agent as described in the Offer) in connection with the solicitation of tenders
of Shares pursuant to the Offer. However, Purchaser will reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. Purchaser will pay or cause to be paid any
stock transfer taxes payable with respect to the transfer of Shares to it,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
2
<PAGE>
Any inquiries you may have with respect to the Offer should be addressed to
Morgan Stanley & Co. Incorporated, the Dealer Manager, or D. F. King & Co., Inc.
(the "Information Agent") at their address and telephone numbers set forth on
the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
VERY TRULY YOURS,
BONANZA ACQUISITIONS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFERS TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ANY AND ALL OUTSTANDING SHARES OF SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
RENO AIR, INC.
AT
$7.75 NET PER SHARE OF COMMON STOCK
AND
$27.50 NET PER SHARE OF SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
(SUBJECT TO REDUCTION AS PROVIDED IN THE OFFER TO PURCHASE)
BY
BONANZA ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN AIRLINES, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMR CORPORATION
---------------------------------------------------------------
THE OFFERS AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON TUESDAY, DECEMBER 22, 1998, UNLESS EITHER OR BOTH OF THE OFFERS ARE EXTENDED.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated November 24,
1998 (the "Offer to Purchase"), and a related Letter of Transmittal in
connection with the offer by Bonanza Acquisitions, Inc., a Nevada corporation
("Purchaser") and a wholly owned subsidiary of American Airlines, Inc., a
Delaware corporation ("Parent"), to purchase all outstanding shares of Common
Stock, $0.01 par value per share (the "Common Shares") and any and all
outstanding shares of Series A Cumulative Convertible Exchangeable Preferred
Stock, $0.001 par value per share (the "Preferred Shares"; and together with the
Common Shares, "Shares"), of Reno Air, Inc., a Nevada corporation (the
"Company"), at a price of $7.75 per Common Share and $27.50 per Preferred Share
plus accrued and unpaid dividends, subject to reduction as provided in the Offer
to Purchase, in each case net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, and in the related Letter
of Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
<PAGE>
Your attention is invited to the following:
1. The tender price is $7.75 per Common Share and $27.50 per Preferred
Share plus accrued and unpaid dividends, subject to reduction as provided in
the Offer to Purchase, in each case net to the seller in cash, without
interest.
2. The Offer is being made for all outstanding Common Shares and any and
all outstanding Preferred Shares.
3. The Board of Directors of the Company unanimously has determined that
the Merger Agreement (as defined in the Offer to Purchase) and the
transactions contemplated thereby, including the Offers and the Merger (each
as defined in the Offer to Purchase), taken together, are fair to, and in
the best interests of, the holders of the Common Stock and has approved and
adopted the Merger Agreement, the Offers and the transactions contemplated
thereby, and recommends that the Common Stockholders accept and tender their
Shares pursuant to the Common Stock Offer and that Preferred Stockholders
accept and tender their Shares pursuant to the Preferred Stock Offer.
4. The Offers and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, December 22, 1998, unless either or both of the
Offers are extended.
5. The Common Stock Offer is conditioned upon, among other things, (i)
there being validly tendered and not withdrawn prior to the expiration of
the Common Stock Offer at least a majority of the Common Shares then
outstanding 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, for
purposes of such calculation, 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 (ii) any waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable
to the purchase of the Common Shares pursuant to the Common Stock Offer
having expired or been terminated. The Preferred Stock Offer is conditioned
upon the Purchaser having accepted for payment and paid for the Common
Shares pursuant to the Common Stock Offer.
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, stock transfer taxes with respect to the sale and transfer
of any Shares by Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal, and is being made to all holders of Shares. Purchaser is not aware
of any jurisdiction where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFERS TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND ANY AND ALL OUTSTANDING SHARES OF SERIES A
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF RENO AIR, INC.
BY BONANZA ACQUISITIONS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated November 24, 1998, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by Bonanza
Acquisitions, Inc., a Nevada corporation and a wholly owned subsidiary of
American Airlines, Inc., a Delaware corporation, to purchase all outstanding
shares of Common Stock, $0.01 par value per share (the "Common Shares") and any
and all outstanding shares of Series A Cumulative Convertible Exchangeable
Preferred Stock, $0.001 par value per share (the "Preferred Shares"; and
together with the Common Shares, the "Shares"), of Reno Air, Inc., a Nevada
corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
<TABLE>
<S> <C>
DATED: , 199 SIGN HERE
Number of Shares
to be Tendered: SIGNATURE(S)
Common Shares*
Preferred Shares* PLEASE TYPE OR PRINT NAME(S)
PLEASE TYPE OR PRINT ADDRESS
AREA CODE AND TELEPHONE NUMBER
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
</TABLE>
- ------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------- -------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
SECURITY NUMBER OF- IDENTIFICATION
NUMBER OF-
- -------------------------------------------- --------------------------------------------
1. An individual's account The individual 8. Sole proprietorship The owner(4)
2. Two or more individuals The actual owner of the 9. A valid trust, estate, The legal entity (Do not
(joint account) account or, if combined or pension trust furnish the identifying
funds, the first individual number of the personal
on the account(1) representative or trustee
unless the legal entity
itself is not designated in
the account title.)(5)
3. Husband and wife The actual owner of the 10. Corporate account The corporation
account or, if joint funds,
either person(1)
4. Custodian account of a The minor(2) 11. Religious, charitable, The organization
minor (Uniform Gift to or educational organization
Minors Act) account
5. Adult and minor (joint The adult or, if the minor 12. Partnership account The partnership
account) is the only contributor,
the minor(1)
6. Account in the name of The ward, minor, or 13. Association, club, or The organization
guardian or committee incompetent person(3) other tax-exempt
for a designated ward, organization
minor or incompetent
person
7. a. The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust (grantor nominee
is also trustee)
b. So-called trust account The actual owner(1) 15. Account with the The public entity
that is not a legal or Department of
valid trust under state Agriculture in the name
law. of a public entity
(such as a state or
local government,
school district, or
prison) that receives
agricultural program
payments
- ------------------------------------------------------- -------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisors Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation
(other than certain hospitals described in Regulations section 1.6041-3(c)) that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (1) through (5) are exempt from backup
withholding for barter exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries, Inc.,
Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A, 6045
and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
2
<PAGE>
Exhibit 99(a)(9)
================================================================================
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES (AS DEFINED BELOW). THE OFFER (AS DEFINED BELOW) IS MADE SOLELY
BY THE OFFER TO PURCHASE DATED NOVEMBER 24, 1998 AND THE RELATED LETTER OF
TRANSMITTAL AND IS BEING MADE TO ALL HOLDERS OF SHARES. PURCHASER IS NOT
AWARE OF ANY JURISDICTION WHERE THE MAKING OF THE OFFER IS PROHIBITED
BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY VALID STATE
STATUTE. IF PURCHASER BECOMES AWARE OF ANY VALID STATE STATUTE
PROHIBITING THE MAKING OF THE OFFER OR THE ACCEPTANCE OF SHARES
PURSUANT THERETO, PURCHASER WILL MAKE A GOOD FAITH EFFORT TO
COMPLY WITH SUCH STATE STATUTE. IF, AFTER SUCH GOOD FAITH
EFFORT, PURCHASER CANNOT COMPLY WITH SUCH STATE STATUTE,
THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH STATE.
IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR
OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED
BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE
MADE ON BEHALF OF PURCHASER BY ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED
UNDER THE LAWS OF SUCH JURISDICTION.
NOTICE OF OFFERS TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ANY AND ALL OUTSTANDING SHARES OF SERIES A CUMULATIVE
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OF
RENO AIR, INC.
AT
$7.75 NET PER SHARE OF COMMON STOCK
AND
$27.50 NET PER SHARE OF SERIES A CUMULATIVE
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
(SUBJECT TO REDUCTION AS PROVIDED IN THE OFFER TO PURCHASE)
BY
BONANZA ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN AIRLINES, INC.
A WHOLLY OWNED SUBSIDIARY OF
AMR CORPORATION
Bonanza Acquisitions, Inc., a Nevada corporation ("Purchaser") and a wholly
owned subsidiary of American Airlines, Inc., a Delaware corporation ("Parent"),
a wholly owned subsidiary of AMR Corporation, a Delaware corporation, is (i)
offering to purchase (the "Common Stock Offer") all of the issued and
outstanding shares of Common Stock, $0.01 par value per share (the "Common
Shares") and (ii) offering to purchase (the "Preferred Stock Offer") any and all
of the issued and outstanding shares of Series A Cumulative Convertible
Exchangeable Preferred Stock, $0.001 par value per share (the "Preferred
Shares"; and together with the Common Shares, "Shares"), of Reno Air, Inc., a
Nevada corporation (the "Company"), at a price of $7.75 per Common Share or any
higher amount paid per Common Share pursuant to the Common Stock Offer, and
$27.50 per Preferred Share or any higher amount paid per Preferred Share
pursuant to the Preferred Stock Offer (plus accrued and unpaid dividends), in
each case net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated November 24, 1998 (the
"Offer to Purchase"), and in the related Letters of Transmittal (which, together
with the Preferred Stock Offer and the Common Stock Offer, collectively
constitute the "Offer"). The price offered by Purchaser to purchase Preferred
Shares shall be reduced from $27.50 (plus accrued and unpaid dividends) to
$27.33 (plus accrued and unpaid dividends) in the event the holders of Preferred
Shares become entitled to the regular quarterly dividend for the first quarter
of 1999, which the Company is expected to pay on March 15. The price offered by
Purchaser to purchase Preferred Shares is subject to further reduction in the
event that holders of Preferred Shares become entitled to subsequent quarterly
dividends. Following the Offer, Purchaser intends to effect the Merger described
below.
- --------------------------------------------------------------------------------
THE OFFERS AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 22, 1998, UNLESS EITHER OR BOTH OF THE OFFERS ARE
EXTENDED.
- --------------------------------------------------------------------------------
The Common Stock Offer is conditioned upon, among other things, (i) there
being validly tendered and not withdrawn prior to the expiration of the Common
Stock Offer at least a majority of the Common Shares then outstanding on a fully
diluted basis (the "Minimum Condition") (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, for purposes of
such calculation, 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 (ii) any waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, applicable to the purchase of
the Common Shares pursuant to the Common Stock Offer having expired or been
terminated (the "HSR Condition"). The Preferred Stock Offer is conditioned upon
Purchaser having accepted for payment and paid for the Common Shares pursuant to
the Common Stock Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 19, 1998 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, that after the
purchase of Shares pursuant to the Offer, the approval of the Merger by the
stockholders of the Company and the satisfaction of the other conditions set
forth in the Merger Agreement and in accordance with the relevant provisions of
the laws of the State of Nevada applicable to corporations ("Nevada Law"),
Purchaser will be merged with and into the Company, and the Shares will be
converted into the right to receive cash (the "Primary Merger") or, under the
circumstances described below, 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 collectively referred to as the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a subsidiary of
Parent. At the effective time of the Merger (the "Effective Time"), (a) each
Common Share issued and outstanding immediately prior to the Effective Time
(other than any Common Shares held in the treasury of the Company or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent,
and other than Common Shares held by stockholders who shall have demanded and
perfected appraisal rights, if any, under Nevada Law) will be canceled and
converted automatically into the right to receive an amount of cash equal to the
amount paid per Common Share pursuant to the Common Stock Offer, and (b) each
Preferred Share issued and outstanding immediately prior to the Effective Time
(other than any Preferred Shares held in the treasury of the Company or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent,
and other than Preferred Shares held by stockholders who shall have demanded and
perfected appraisal rights, if any, under Nevada Law) will, pursuant to the
Primary Merger, be canceled and converted automatically into the right to
receive an amount of cash which will initially be equal to the amount paid per
Preferred Share pursuant to the Preferred Stock Offer. However, such amount will
be reduced based upon the number of regular quarterly Preferred Stock dividends
to which the holders of Preferred Shares become entitled prior to the Effective
Time. Unless holders of at least 662/3% of the Preferred Shares shall have voted
to approve the Merger Agreement and the Primary Merger, the Alternative Merger
shall be effected instead of the Primary Merger, and each Preferred Share shall
instead 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 of Series A Cumulative Convertible Exchangeable Preferred Stock,
$0.001 par value per share of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFERS
AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
HOLDERS OF THE COMMON STOCK AND HAS APPROVED AND ADOPTED THE MERGER AGREEMENT,
THE OFFERS AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT THE
COMMON STOCKHOLDERS ACCEPT, AND TENDER THEIR SHARES PURSUANT TO, THE COMMON
STOCK OFFER, AND THAT PREFERRED STOCKHOLDERS ACCEPT, AND TENDER THEIR SHARES
PURSUANT TO, THE PREFERRED STOCK OFFER.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives written notice to First Chicago Trust
Company of New York (the "Depositary") of Purchaser's acceptance for payment of
such Shares pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Shares accepted for payment pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payments from Purchaser and transmitting such payments to tendering stockholders
whose Shares have been accepted for payment. Under no circumstances will
interest on the purchase price for Shares be paid, regardless of any delay in
making such payment. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) the certificates evidencing such Shares (the "Share
Certificates") or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in "Section 2. Acceptance for Payment
and Payment for Shares" of the Offer to Purchase) pursuant to the procedure set
forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of
the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in Section 3 of the Offer to Purchase) in
connection with the book-entry transfer and (iii) any other documents required
under the Letter of Transmittal.
Subject to the applicable regulations of the Securities and Exchange
Commission, Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), at any time and
from time to time, (i) to delay acceptance for payment of, or, regardless of
whether such Shares were theretofore accepted for payment, payment for, any
Shares pending receipt of any regulatory approval specified in "Section 15.
Certain Legal Matters and Regulatory Approvals" of the Offer to Purchase, (ii)
to terminate the Offer and not accept for payment any Shares upon the occurrence
of any of the conditions specified in "Section 14. Certain Conditions of the
Offer" of the Offer to Purchase and (iii) to waive any condition (other than the
HSR Condition) or otherwise amend the Offer in any respect, by giving written
notice of such extension, delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof. Any such extension,
delay, termination, waiver or amendment will be followed as promptly as
practicable by public announcement thereof, such announcement to be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date of the Offer. During any such extension,
all Shares previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares.
Tenders of Shares made pursuant to an Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on Tuesday, December 22, 1998 (or the latest time and date at which the
Offer, if extended by Purchaser, shall expire), and, unless theretofore accepted
for payment by Purchaser pursuant to such Offer, may also be withdrawn at any
time after January 22, 1999. For the withdrawal to be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth on the back cover
page of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in "Section 3.
Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase), unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in "Section 3. Procedures for Accepting the
Offer and Tendering Shares" of the Offer to Purchase, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility (as defined in the Offer to Purchase) to be credited with the withdrawn
Shares. All questions as to the form and validity (including the time of
receipt) of any notice of withdrawal will be determined by Purchaser, in its
sole discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letters of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTERS OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letters of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as set
forth below, and copies will be furnished promptly at Purchaser's expense. No
fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent and the Dealer Manager) for soliciting tenders of
Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free: 1-800-347-4750
or
Call Collect: (212) 269-5550
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-4638
November 24, 1998
================================================================================
<PAGE>
Exhibit 99(a)(10)
TODAY'S NEWS
AMERICAN AIRLINES TO STRENGTHEN ITS NETWORK WITH ACQUISITION OF RENO AIR
- -------
WEBSITE
- -------
Fort Worth, Texas, Nov. 19 / PRNewswire/ -- In order to enhance its overall
airline network and strengthen its presence in the Western United States,
American Airlines, a subsidiary of AMR Corporation (NYSE: AMR), said today it
has signed a definitive merger agreement with Reno Air (Nasdaq: RENO) to acquire
Reno Air for a total cash consideration of $124 million.
The merger agreement provides for a cash tender offer which would commence
no later than Wednesday, Nov. 25, 1998 to acquire all of the outstanding common
shares of Reno Air at $7.75 per share. In addition, American will also tender
for any and all of Reno's outstanding 9% Series A Cumulative Convertible
Exchangeable Preferred Stock at $27.50 per share.
The board of directors of Reno Air has recommended that stockholders tender
their shares pursuant to the offer.
The tender offer for Reno Air common shares shall be conditional upon the
valid tender of shares representing a majority of the fully diluted voting power
of Reno Air, the expiration or termination of the waiting period under the
Hart-Scott-Rodino Act relating to such mergers, and other customary conditions.
The parties hope to close the transaction in the first quarter of 1999. All
common and preferred shares not purchased will be converted into the right to
receive equivalent amounts in a second step merger following the tender offer,
except that if fewer than two-thirds of the preferred shares support the merger,
such shares shall remain outstanding as identical preferred shares of the
surviving corporation of the merger.
American, which has had a marketing partnership with Reno Air since 1993,
said there is virtually no overlap on the routes served by the two carriers.
"Acquiring Reno will give our customers the benefits of a more
comprehensive travel network throughout the U.S. and around the globe," said Don
Carty, chairman and CEO of AMR and American Airlines. "Reno's West Coast route
system will enhance both the AA network and the networks of our oneworld
partners."
Upon approval of the transaction, American will integrate Reno Air into its
operations after all the details of employee and fleet integration are decided.
"Our customers have told us they want the AA brand more accessible in the
West, where we already have a strong east-west presence. This acquisition will
offer more service options for our customers and those of our global airline
partners, most notably those connecting to and from Cathay Pacific, Qantas and
Canadian Airlines," said Carty.
"As importantly, this linkage will benefit the employees fo both carriers
as AA grows stronger, creating more and better job opportunities," he added.
Carty indicated that American was forced to withdraw from the West Coast in
the early 1990s, eventually closing its San Jose, Calif., hub and entering into
an AAdvantage frequent flyer partnership with Reno Air to maintain a West Coast
presence. "Since then, we have vastly strengthened our overall domestic and
international route network and have entered into alliances with a number of
carriers, all of which will make us a much more vigorous competitor in the
west," Carty said.
The company said specific integration and operating plans will not be
discussed publicly pending regulatory approval.
Current AMR Corp. news releases can be accessed via the internet.
The address is HTTP://WWW.AMRCORP.COM/CORPCOMM.HTM
<PAGE>
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
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
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
<PAGE>
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
<PAGE>
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
</TABLE>
ANNEX A Conditions to the Offers
ANNEX B Per Preferred Share Amount
NYDOCS03/427679 15
iii
<PAGE>
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
- --------------------------------------------------------------------------------------------------------------
<S> <C>
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)
</TABLE>
<PAGE>
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
- --------------------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>
<PAGE>
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
- --------------------------------------------------------------------------------------------------------------
<S> <C>
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
</TABLE>
iii
<PAGE>
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").
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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., 4333 Amon Carter Boulevard, Fort Worth, Texas 78155, 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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 Hart-Scott-Rodino 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
name, trade name right, service mark, 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
<PAGE>
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
<PAGE>
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
<PAGE>
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 Morgan Stanley & 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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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.
4333 Amon Carter Boulevard
Ft. Worth, TX 76155
Attn: Corporate Secretary
Attn: Vice President - Corporate Development & Treasurer
Fax: (817) 967-4313
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn: John A. Marzulli, Jr., Esq,
Fax: (212) 848-7179
37
<PAGE>
if to the Company:
Reno Air, Inc.
220 Edison Way
Reno, Nevada 89502
Attn: General Counsel
Fax: (702) 954-5000
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attn: Lawrence Lederman, Esq.
Robert Reder, Esq.
Fax: (212) 530-5219
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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;
<PAGE>
(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
<PAGE>
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
<PAGE>
Annex B
<TABLE>
<CAPTION>
Dividend Payment Date Per Preferred Share Amount
--------------------- --------------------------
<S> <C> <C>
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
</TABLE>
<PAGE>
Exhibit 99(c)(2)
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated as of November 19, 1998 by
and among Reno Air, Inc., a Nevada corporation (the "Company"), American
Airlines, Inc., a Delaware corporation ("American"), and Vicki W. Bretthauer
(the "Executive").
The Executive, the Company, and American agree as follows:
1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings assigned to them in Appendix
l entitled "Employment Agreement Definitions."
2. Employment. American agrees to employ the Executive and the Executive
agrees to be employed by American on the terms and conditions
hereinafter set forth during the Employment Period.
3. Compensation and Benefits. The compensation and benefits payable to
Executive for all services rendered by the Executive under this
Agreement shall be as follows:
(a) Salary. During the Employment Period, the Executive shall receive a
minimum base salary at the rate of $125,000 per year. Such salary shall
be (i) payable no less frequently than on a monthly basis in accordance
with American's standard payroll practices (and pro-rated for any
partial pay period), and (ii) subject to review and increase (but not
decrease) at any time at the discretion of the Board.
(b) Incentive Compensation. During the Employment Period, the Executive
shall be entitled to receive benefits (including but not limited to the
target level award) commensurate for level 8 employees provided for
under American's incentive compensation plan. If this Agreement is in
effect at the time payments under American's 1999 incentive
compensation plan are made, then the Executive's benefits under the
plan will be calculated as if the Executive had been a participant in
the Plan since January 1, 1999.
(c) Performance Share Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Performance Share Program with terms and conditions
similar to those of other level 8 participants in the program. The
number of shares granted will be the same as the yearly number of
shares awarded to other level 8 employees. The Executive agrees that
she shall only be eligible to participate in AMR Corporation's 1999
Performance Share Program to the extent provided in Section 3(n).
1
<PAGE>
(d) Career Equity Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Career Equity Program with terms and conditions similar
to those of other level 8 participants in the program. The number of
shares granted will be the same as the yearly number of shares awarded
to other level 8 employees. The Executive agrees that she shall only be
eligible to participate in AMR Corporation's 1999 Career Equity Program
to the extent provided in Section 3(n).
(e) Business Expenses. During the Employment Period, American shall
reimburse the Executive promptly for all reasonable travel and other
business expenses incurred by her in the performance of her duties and
responsibilities, subject to American's policies with respect to
substantiation and documentation.
(f) Company Stock Options. Prior to or contemporaneously with the Effective
Time of the Merger, the Executive shall be entitled to exercise any
stock options granted under the Prior Agreement. All unexercised
options will be canceled at the Effective Time of the Merger.
(g) American Stock Options. During the Employment Period, American shall
grant to the Executive the same yearly number of options which are
usually granted to a level 8 employee on the same or similar terms and
conditions. The Executive agrees that she shall only receive stock
options in 1999 to the extent provided in Section 3(n).
(h) Airline Travel. During the Employment Period, American shall provide or
cause to provide to the Executive, the Executive's Spouse, the
Executive's Parents and the Executive's Eligible Children the same
travel privileges accorded to American's level 8 employees (the
"Airline Travel Benefits").
(i) Other Benefits. During the Employment Period, the Executive and, to
the extent applicable, the Executive's family, dependents and
beneficiaries, shall each participate in all benefits, plans and
programs, including improvements or modifications of the same, which
are now, or may hereafter be, available to level 8 employees of
American. Such benefits, plans and programs may include, without
limitation, profit sharing plans, thrift plans, health insurance or
health care plans, life insurance, disability insurance, pension and
other retirement plans, pass privileges, interline travel benefits, and
the like.
(j) Vacation. During the Employment Period, the Executive may take up to 4
weeks of paid vacation a year.
(k) Company Car. During the Employment Period, American shall provide the
2
<PAGE>
Executive with a company car, or, at its option, American may
substitute a cash allowance therefor.
(l) Indemnification. American shall provide or cause to be provided to the
Executive indemnification against all expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement in connection
with any threatened, pending, or completed action, claim, suit or
proceeding, whether civil, criminal, administrative, or investigative
(including an action by or in the right of the Company) by reason of
the Executive's having served as a director, officer or employee of the
Company or any affiliate of the Company. American shall advance fees
(including attorneys' fees) incurred by the Executive in the defense of
any such action, claim, suit, or proceeding, and American shall
maintain customary directors and officers liability insurance coverage.
These provisions supplement and are not in lieu of any rights granted
to the Company's officers and directors under the Company's articles of
incorporation, bylaws, any corporate document (including insurance
policies), or applicable law. American shall pay, or promptly reimburse
on an as-incurred basis to the Executive, the reasonable fees and
expenses of the Executive's legal counsel for its services rendered in
connection with, the Executive's enforcement of this Agreement;
provided, that if the Executive institutes any proceeding to enforce
this Agreement and the judge, arbitrator or other individual presiding
over the proceeding affirmatively finds that the Executive instituted
the proceeding in bad faith, the Executive shall pay all costs and
expenses, including attorneys' fees, of the Executive and American.
(m) Relocation Assistance. In the event that this Agreement: (i) is
terminated by American (other than for Cause), (ii) is terminated by
the Executive with Good Reason, or (iii) expires upon the occurrence of
the Non-Renewal Event and the Executive relocates from the Reno area
within 12 months after the date of termination or the Non-Renewal
Event, American will reimburse or pay the Executive for basic and
customary closing costs and the reasonable costs of packing and moving
to a location in the continental United States selected by the
Executive up to a maximum amount of $35,000, substantiated by actual
receipts.
(n) Merger Bonus and 1999 Equity Grants. Upon the Effective Time of Merger,
Executive shall receive (i) a payment equal to 150% of the Executive's
annual base salary as set forth in Section 3(a); (ii) 2,500 stock
options, with an exercise price equal to the fair market value of AMR
common stock on the day of grant, subject to terms and conditions
similar to those of other level 8 participants; (iii) 1,000 shares of
deferred stock, subject to terms and conditions similar to those
of other level 8 participants in AMR Corporation's Performance Share
Program and (iv) 1,000 shares of deferred stock, subject to terms and
conditions similar to those of other level 8 participants in AMR
Corporation's Career Equity
3
<PAGE>
Program.
(o) American Service Credit. During the Employment Period, American shall
calculate any years of service credit as if the Executive had been an
employee of American as of the date of the Prior Agreement.
4. Termination and Termination Benefits
(a) Termination by American for Cause. American may terminate the
Executive's employment for Cause. If the Chief Executive Officer of
American determines in good faith that the Executive should be
terminated for Cause, American shall send written notice to the
Executive setting forth in reasonable detail the nature of the Cause.
If terminated for Cause, the Executive will be entitled to no
additional compensation other than salary accrued prior to the
effective date of termination.
(b) Termination by American without Cause. The Executive's employment may
be terminated by American without Cause provided that the Executive is
afforded at least 30 days' prior written notice of such termination.
(c) Termination by the Executive. The Executive may terminate her
employment with or without Good Reason by giving American not less than
30 days' prior written notice of termination of her employment, and she
shall not be required to render any services to American after the date
set forth in the notice of termination. In the event of a termination
by the Executive without Good Reason, the Executive shall be entitled
to no additional compensation other than salary accrued prior to the
effective date of termination.
(d) Benefits Upon Termination Without Cause or for Good Reason. If this
Agreement is terminated by American without Cause, or this Agreement is
terminated by the Executive with Good Reason: (i) American shall pay to
the Executive 2 times the Executive's annual base salary as set forth
in Section 3(a); (ii) the Executive shall be entitled to receive
medical, dental, life insurance, vision and similar benefits as well as
Airlin Travel Benefits up until the 30-month anniversary of the
Effective Time of the Merger as if the Executive continued to be a full
time level 8 employee, and (iii) the Executive shall be entitled to
exercise any stock options that were vested on the date of termination.
The amount that would be due and payable under sub-clause (i) of this
Section 4(d) shall be paid to the Executive in three equal installments
on each of the 30th, 60th, and 90th day after the date of termination
(or the immediately succeeding business day if any such day is not a
business day). The Executive acknowledges that payments and benefits
received pursuant to this Section 4(d) are in lieu of any other amounts
to which the employee may be entitled upon
4
<PAGE>
termination.
(e) Benefits Upon Expiration of the Employment Period. If upon expiration
of the Employment Period, the Executive is not offered or does not
accept a position with American (the "Non-Renewal Event"), the
Executive shall be entitled to receive the same payments and benefits
as if she had been terminated by American without Cause. The Executive
acknowledges that payments and benefits received pursuant to this
Section 4(e) are in lieu of any other amounts to which the employee may
be entitled upon termination.
(f) Continued Employment with American. If upon expiration of the
Employment Period, the Executive is offered and accepts a position with
American, the Executive will receive a payment equal to 2 times her
annual base salary as set forth in Section 3(a). Thereafter, the
Executive's ongoing salary and benefits (including any travel
privileges) shall be commensurate with the level of the position
accepted by the Executive; provided, however, that the Executive shall
be entitled to the Airline Travel Benefits accorded to American's level
8 employees up until the 30-month anniversary of the Effective Time of
the Merger.
(g) No Duty to Mitigate/No Non-Compete. The Executive has no duty or
obligation to mitigate the expenditures for salaries, bonuses, benefits
or otherwise after termination of this Agreement and/or cessation of
employment with American. Nothing in this Agreement is intended to
serve as a "noncompete" or other limitation on the future employment
opportunities for the Executive after termination of this Agreement.
5. Confidential Information. The Executive shall maintain a fiduciary
duty to the Company and American for all confidential information,
knowledge or data relating to the Company, American or any of their
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company or American or any of their affiliates until such confidential
information, knowledge or data become a matter of public record through
disclosure by a person or persons other than the Executive or her
representatives and which does not involve communication or disclosure,
directly or indirectly, by the Executive or her representatives. The
Executive shall not communicate or disclose any such information,
knowledge, or data to anyone other than the Company, American and those
designated by the Company or American. After termination of the
Executive's employment with American, the Executive shall return all
confidential and proprietary information in her possession or under her
control and shall not, without the prior written consent of American,
communicate or disclose any such information, knowledge or data to
anyone other than American and those designated by American. Willful
violation of this paragraph 5 shall void this Employment Agreement.
5
<PAGE>
6. Successors and Assigns. This Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees.
This Agreement is personal to the Executive and without the prior
written consent of American shall not be assignable by the Executive
other than by will or the laws of descent and distribution.
7. General Contract Provisions.
(a) Governing Law/Headings/Amendments/Entire Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified other than by a written agreement executed by the parties
hereto or their respective successors and legal representatives. This
Agreement contains the entire understanding of the Company, American,
and the Executive with respect to the subject matter hereof and
supersedes any and all other agreements (other than the Prior
Agreement), either oral or written, between the Company and the
Executive or American and the Executive with respect to the subject
matter hereof effective immediately. All provisions of the Prior
Agreement relating to the obligations of the Company or any successor
to the QQ Business (as that term is defined in the Prior Agreement) (i)
upon a Change in Control (as that term is defined in the Prior
Agreement), (ii) as to post-Employment Period Airline Travel and Club
Benefits (as that term is defined in the Prior Agreement) and (iii)
lifetime medical coverage are superceded in their entirety by this
Agreement effective immediately. All other provisions of the Prior
Agreement shall be superseded in their entirety by this Agreement as of
the Effective Time of the Merger.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows: if to the Executive: to her address as
set forth in the personnel records of the Company, if to the Company:
to Reno Air, Inc., 220 Edison Way, Reno, Nevada 89502, Attention: Chief
Executive Officer, with a copy to the attention of the Company's
Corporate Secretary, if to American: American Airlines, Inc., 4333 Amon
Carter Boulevard, MD 5675 HDQ, Fort Worth, Texas 76155, Attention:
Corporate Secretary; or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices
and communications shall be effective when actually received by the
addressee.
(c) Enforceability Issues. If any benefits to which the Executive shall
otherwise be
6
<PAGE>
entitled hereunder are not permitted to be provided to the Executive
under any governing plan document or applicable law governing the
payment or provision of such benefits, the Company shall pay or provide
equivalent benefits to the Executive (or her representatives in the
case of death). The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement. To the extent the provisions of
Section 3(l) are inconsistent with the terms regarding subrogation in
any officers' and directors' liability coverage, the terms of such
insurance coverage shall prevail. A party's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a
waiver of such provision thereof.
(d) Withholdings. American may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) Release. The Executive agrees, on behalf of herself and all of her
heirs or personal representatives, to release the Company, American,
its parent company, AMR Corporation, all subsidiaries of either, and
all of their present or former officers, directors, agents, employees,
employee benefit plans and the trustees, administrators, fiduciaries
and insurers of such plans from any and all claims for relief of any
kind, whether known to the Executive or unknown, which in any way arise
out of or relate to the Executive's employment at the Company,
concerning events occurring at any time up to the date set forth in the
introductory paragraph; provided that by accepting the Merger Bonus
described in Section 3(n), the Executive shall be deemed to have
restated this release to include all claims with respect to all events
occurring at any time up to the Effective Time of the Merger.
7
<PAGE>
IN WITNESS WHEREOF, the Executive, the Company and American have executed this
Employment Agreement as of the date first above written.
Reno Air, Inc. (the "Company")
By: /s/ Joseph R. O'Gorman
------------------------------------------
Name: Joseph R. O'Gorman
------------------------------------
Title: Chairman, Chief Executive
------------------------------------
Officer and President
------------------------------------
American Airlines, Inc. ("American")
By: /s/ Gerard J. Arpey
------------------------------------------
Name: Gerard J. Arpey
------------------------------------------
Title: Senior Vice President -
------------------------------------
Finance and Planning
------------------------------------
/s/ Vicki W. Bretthauer
- ---------------------------------------------------
Executive
8
<PAGE>
Appendix l
Employment Agreement Definitions
"Airline Travel Benefits" is defined in Section 3(h).
"American" shall mean American Airlines, Inc.
"Board" shall mean the Board of Directors of American.
"Cause" shall mean (i) an act or acts of personal dishonesty taken by the
Executive and intended to result in substantial personal enrichment of the
Executive at the expense of American, (ii) repeated violations by the Executive
of the Executive's obligations under this Agreement which are demonstrably
willful and deliberate on the Executive's part and which are not remedied in a
reasonable period of time after receipt of written notice from American or,
(iii) the conviction of the Executive of a felony.
"Company" shall mean the Company as defined above.
"Eligible Child" shall mean the Executive's "dependent children" as defined
under American's non-revenue travel policies.
"Employment Period" shall mean the 24 month period commencing as of the
Effective Time of the Merger.
"Executive's Parents" shall mean those family members defined as "Parents" under
American's non-revenue travel policies.
"Executive's Spouse" shall mean that family member defined as "Spouse" under
American's non-revenue travel policies.
"Effective Time of the Merger" shall have the meaning set forth in the Merger
Agreement between the Company and American, dated as of November 19, 1998.
"Good Reason" shall mean any one or more of the following: (i) any failure by
American to comply with its obligations under this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by American promptly after receipt of notice thereof given by
the Executive, (ii) American's requiring the Executive to be based at any office
or location other than within 35 miles of the Reno/Lake Tahoe International
Airport, except for travel reasonably required in the performance of the
Executive's responsibilities, or (iii) the assignment to the Executive of duties
inconsistent with a reasonable level of management responsibilities commensurate
with the Executive's level of experience, excluding for this purpose an
9
<PAGE>
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by American promptly after receipt of notice thereof given by the
Executive.
"Non-Renewal Event" is defined in Section 4(e).
"Prior Agreement" shall mean that Employment Agreement, dated March 26, 1998
between Company and Executive.
10
<PAGE>
Exhibit 99(c)(3)
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated as of November 19, 1998 by
and among Reno Air, Inc., a Nevada corporation (the "Company"), American
Airlines, Inc., a Delaware corporation ("American"), and Beverley Grear (the
"Executive").
The Executive, the Company, and American agree as follows:
1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings assigned to them in Appendix
l entitled "Employment Agreement Definitions."
2. Employment. American agrees to employ the Executive and the Executive
agrees to be employed by American on the terms and conditions
hereinafter set forth during the Employment Period.
3. Compensation and Benefits. The compensation and benefits payable to
Executive for all services rendered by the Executive under this
Agreement shall be as follows:
(a) Salary. During the Employment Period, the Executive shall receive a
minimum base salary at the rate of $175,000 per year. Such salary shall
be (i) payable no less frequently than on a monthly basis in accordance
with American's standard payroll practices (and pro-rated for any
partial pay period), and (ii) subject to review and increase (but not
decrease) at any time at the discretion of the Board.
(b) Incentive Compensation. During the Employment Period, the Executive
shall be entitled to receive benefits (including but not limited to the
target level award) commensurate for level 8 employees provided for
under American's incentive compensation plan. If this Agreement is in
effect at the time payments under American's 1999 incentive
compensation plan are made, then the Executive's benefits under the
plan will be calculated as if the Executive had been a participant in
the Plan since January 1, 1999.
(c) Performance Share Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Performance Share Program with terms and conditions
similar to those of other level 8 participants in the program. The
number of shares granted will be the same as the yearly number of
shares awarded to other level 8 employees. The Executive agrees that
she shall only be eligible to participate in AMR Corporation's 1999
Performance Share Program to the extent provided in Section 3(n).
1
<PAGE>
(d) Career Equity Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Career Equity Program with terms and conditions similar
to those of other level 8 participants in the program. The number of
shares granted will be the same as the yearly number of shares awarded
to other level 8 employees. The Executive agrees that she shall only be
eligible to participate in AMR Corporation's 1999 Career Equity Program
to the extent provided in Section 3(n).
(e) Business Expenses. During the Employment Period, American shall
reimburse the Executive promptly for all reasonable travel and other
business expenses incurred by her in the performance of her duties and
responsibilities, subject to American's policies with respect to
substantiation and documentation.
(f) Company Stock Options. Prior to or contemporaneously with the Effective
Time of the Merger, the Executive shall be entitled to exercise any
stock options granted under the Prior Agreement. All unexercised
options will be canceled at the Effective Time of the Merger.
(g) American Stock Options. During the Employment Period, American shall
grant to the Executive the same yearly number of options which are
usually granted to a level 8 employee on the same or similar terms and
conditions. The Executive agrees that she shall only receive stock
options in 1999 to the extent provided in Section 3(n).
(h) Airline Travel. During the Employment Period, American shall provide or
cause to provide to the Executive, the Executive's Spouse, the
Executive's Parents and the Executive's Eligible Children the same
travel privileges accorded to American's level 8 employees (the
"Airline Travel Benefits").
(i) Other Benefits. During the Employment Period, the Executive and, to
the extent applicable, the Executive's family, dependents and
beneficiaries, shall each participate in all benefits, plans and
programs, including improvements or modifications of the same, which
are now, or may hereafter be, available to level 8 employees of
American. Such benefits, plans and programs may include, without
limitation, profit sharing plans, thrift plans, health insurance or
health care plans, life insurance, disability insurance, pension and
other retirement plans, pass privileges, interline travel benefits, and
the like.
(j) Vacation. During the Employment Period, the Executive may take up to 4
weeks of paid vacation a year.
(k) Company Car. During the Employment Period, American shall provide the
2
<PAGE>
Executive with a company car, or, at its option, American may
substitute a cash allowance therefor.
(l) Indemnification. American shall provide or cause to be provided to the
Executive indemnification against all expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement in connection
with any threatened, pending, or completed action, claim, suit or
proceeding, whether civil, criminal, administrative, or investigative
(including an action by or in the right of the Company) by reason of
the Executive's having served as a director, officer or employee of the
Company or any affiliate of the Company. American shall advance fees
(including attorneys' fees) incurred by the Executive in the defense of
any such action, claim, suit, or proceeding, and American shall
maintain customary directors and officers liability insurance coverage.
These provisions supplement and are not in lieu of any rights granted
to the Company's officers and directors under the Company's articles of
incorporation, bylaws, any corporate document (including insurance
policies), or applicable law. American shall pay, or promptly reimburse
on an as-incurred basis to the Executive, the reasonable fees and
expenses of the Executive's legal counsel for its services rendered in
connection with, the Executive's enforcement of this Agreement;
provided, that if the Executive institutes any proceeding to enforce
this Agreement and the judge, arbitrator or other individual presiding
over the proceeding affirmatively finds that the Executive instituted
the proceeding in bad faith, the Executive shall pay all costs and
expenses, including attorneys' fees, of the Executive and American.
(m) Relocation Assistance. In the event that this Agreement: (i) is
terminated by American (other than for Cause), (ii) is terminated by
the Executive with Good Reason, or (iii) expires upon the occurrence of
the Non-Renewal Event and the Executive relocates from the Reno area
within 12 months after the date of termination or the Non-Renewal
Event, American will reimburse or pay the Executive for basic and
customary closing costs and the reasonable costs of packing and moving
to a location in the continental United States selected by the
Executive up to a maximum amount of $35,000, substantiated by actual
receipts.
(n) Merger Bonus and 1999 Equity Grants. Upon the Effective Time of Merger,
Executive shall receive (i) a payment equal to 150% of the Executive's
annual base salary as set forth in Section 3(a); (ii) 2,500 stock
options, with an exercise price equal to the fair market value of AMR
common stock on the day of grant, subject to terms and conditions
similar to those of other level 8 participants; (iii) 1,000 shares of
deferred stock, subject to terms and conditions similar to those of
other level 8 participants in AMR Corporation's Performance Share
Program and (iv) 1,000 shares of deferred stock, subject to terms and
conditions similar to those of other level 8 participants in AMR
Corporation's Career Equity
3
<PAGE>
Program.
(o) American Service Credit. During the Employment Period, American shall
calculate any years of service credit as if the Executive had been an
employee of American as of the date of the Prior Agreement.
4. Termination and Termination Benefits
(a) Termination by American for Cause. American may terminate the
Executive's employment for Cause. If the Chief Executive Officer of
American determines in good faith that the Executive should be
terminated for Cause, American shall send written notice to the
Executive setting forth in reasonable detail the nature of the Cause.
If terminated for Cause, the Executive will be entitled to no
additional compensation other than salary accrued prior to the
effective date of termination.
(b) Termination by American without Cause. The Executive's employment may
be terminated by American without Cause provided that the Executive is
afforded at least 30 days' prior written notice of such termination.
(c) Termination by the Executive. The Executive may terminate her
employment with or without Good Reason by giving American not less than
30 days' prior written notice of termination of her employment, and she
shall not be required to render any services to American after the date
set forth in the notice of termination. In the event of a termination
by the Executive without Good Reason, the Executive shall be entitled
to no additional compensation other than salary accrued prior to the
effective date of termination.
(d) Benefits Upon Termination Without Cause or for Good Reason. If this
Agreement is terminated by American without Cause, or this Agreement is
terminated by the Executive with Good Reason: (i) American shall pay to
the Executive 2 times the Executive's annual base salary as set forth
in Section 3(a); (ii) the Executive shall be entitled to receive
medical, dental, life insurance, vision and similar benefits as well as
Airline Travel Benefits up until the 30-month anniversary of the
Effective Time of the Merger as if the Executive continued to be a full
time level 8 employee, and (iii) the Executive shall be entitled to
exercise any stock options that were vested on the date of termination.
The amount that would be due and payable under sub-clause (i) of this
Section 4(d) shall be paid to the Executive in three equal installments
on each of the 30th, 60th, and 90th day after the date of termination
(or the immediately succeeding business day if any such day is not a
business day). The Executive acknowledges that payments and benefits
received pursuant to this Section 4(d) are in lieu of any other amounts
to which the employee may be entitled upon
4
<PAGE>
termination.
(e) Benefits Upon Expiration of the Employment Period. If upon expiration
of the Employment Period, the Executive is not offered or does not
accept a position with American (the "Non-Renewal Event"), the
Executive shall be entitled to receive the same payments and benefits
as if she had been terminated by American without Cause. The Executive
acknowledges that payments and benefits received pursuant to this
Section 4(e) are in lieu of any other amounts to which the employee may
be entitled upon termination.
(f) Continued Employment with American. If upon expiration of the
Employment Period, the Executive is offered and accepts a position with
American, the Executive will receive a payment equal to 2 times her
annual base salary as set forth in Section 3(a). Thereafter, the
Executive's ongoing salary and benefits (including any travel
privileges) shall be commensurate with the level of the position
accepted by the Executive; provided, however, that the Executive shall
be entitled to the Airline Travel Benefits accorded to American's level
8 employees up until the 30-month anniversary of the Effective Time of
the Merger.
(g) No Duty to Mitigate/No Non-Compete. The Executive has no duty or
obligation to mitigate the expenditures for salaries, bonuses, benefits
or otherwise after termination of this Agreement and/or cessation of
employment with American. Nothing in this Agreement is intended to
serve as a "noncompete" or other limitation on the future employment
opportunities for the Executive after termination of this Agreement.
5. Confidential Information. The Executive shall maintain a fiduciary
duty to the Company and American for all confidential information,
knowledge or data relating to the Company, American or any of their
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company or American or any of their affiliates until such confidential
information, knowledge or data become a matter of public record through
disclosure by a person or persons other than the Executive or her
representatives and which does not involve communication or disclosure,
directly or indirectly, by the Executive or her representatives. The
Executive shall not communicate or disclose any such information,
knowledge, or data to anyone other than the Company, American and those
designated by the Company or American. After termination of the
Executive's employment with American, the Executive shall return all
confidential and proprietary information in her possession or under her
control and shall not, without the prior written consent of American,
communicate or disclose any such information, knowledge or data to
anyone other than American and those designated by American. Willful
violation of this paragraph 5 shall void this Employment Agreement.
5
<PAGE>
6. Successors and Assigns. This Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees.
This Agreement is personal to the Executive and without the prior
written consent of American shall not be assignable by the Executive
other than by will or the laws of descent and distribution.
7. General Contract Provisions.
(a) Governing Law/Headings/Amendments/Entire Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified other than by a written agreement executed by the parties
hereto or their respective successors and legal representatives. This
Agreement contains the entire understanding of the Company, American,
and the Executive with respect to the subject matter hereof and
supersedes any and all other agreements (other than the Prior
Agreement), either oral or written, between the Company and the
Executive or American and the Executive with respect to the subject
matter hereof effective immediately. All provisions of the Prior
Agreement relating to the obligations of the Company or any successor
to the QQ Business (as that term is defined in the Prior Agreement) (i)
upon a Change in Control (as that term is defined in the Prior
Agreement), (ii) as to post-Employment Period Airline Travel and Club
Benefits (as that term is defined in the Prior Agreement) and (iii)
lifetime medical coverage are superceded in their entirety by this
Agreement effective immediately. All other provisions of the Prior
Agreement shall be superseded in their entirety by this Agreement as of
the Effective Time of the Merger.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows: if to the Executive: to her address as
set forth in the personnel records of the Company, if to the Company:
to Reno Air, Inc., 220 Edison Way, Reno, Nevada 89502, Attention: Chief
Executive Officer, with a copy to the attention of the Company's
Corporate Secretary, if to American: American Airlines, Inc., 4333 Amon
Carter Boulevard, MD 5675 HDQ, Fort Worth, Texas 76155, Attention:
Corporate Secretary; or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices
and communications shall be effective when actually received by the
addressee.
(c) Enforceability Issues. If any benefits to which the Executive shall
otherwise be
6
<PAGE>
entitled hereunder are not permitted to be provided to the Executive
under any governing plan document or applicable law governing the
payment or provision of such benefits, the Company shall pay or provide
equivalent benefits to the Executive (or her representatives in the
case of death). The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement. To the extent the provisions of
Section 3(l) are inconsistent with the terms regarding subrogation in
any officers' and directors' liability coverage, the terms of such
insurance coverage shall prevail. A party's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a
waiver of such provision thereof.
(d) Withholdings. American may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) Release. The Executive agrees, on behalf of herself and all of her
heirs or personal representatives, to release the Company, American,
its parent company, AMR Corporation, all subsidiaries of either, and
all of their present or former officers, directors, agents, employees,
employee benefit plans and the trustees, administrators, fiduciaries
and insurers of such plans from any and all claims for relief of any
kind, whether known to the Executive or unknown, which in any way arise
out of or relate to the Executive's employment at the Company,
concerning events occurring at any time up to the date set forth in the
introductory paragraph; provided that by accepting the Merger Bonus
described in Section 3(n), the Executive shall be deemed to have
restated this release to include all claims with respect to all events
occurring at any time up to the Effective Time of the Merger.
7
<PAGE>
IN WITNESS WHEREOF, the Executive, the Company and American have executed this
Employment Agreement as of the date first above written.
Reno Air, Inc. (the "Company")
By: /s/ Joseph R. O'Gorman
----------------------------------------------
Name: Joseph R. O'Gorman
-----------------------------------------
Title: Chairman, Chief Executive
----------------------------------------
Officer and President
----------------------------------------
American Airlines, Inc. ("American")
By: /s/ Gerard J. Arpey
----------------------------------------------
Name: Gerard J. Arpey
-----------------------------------------
Title: Senior Vice President -
----------------------------------------
Finance and Planning
----------------------------------------
/s/ Beverley Grear
- -------------------------------------------------------
Executive
8
<PAGE>
Appendix l
Employment Agreement Definitions
"Airline Travel Benefits" is defined in Section 3(h).
"American" shall mean American Airlines, Inc.
"Board" shall mean the Board of Directors of American.
"Cause" shall mean (i) an act or acts of personal dishonesty taken by the
Executive and intended to result in substantial personal enrichment of the
Executive at the expense of American, (ii) repeated violations by the Executive
of the Executive's obligations under this Agreement which are demonstrably
willful and deliberate on the Executive's part and which are not remedied in a
reasonable period of time after receipt of written notice from American or,
(iii) the conviction of the Executive of a felony.
"Company" shall mean the Company as defined above.
"Eligible Child" shall mean the Executive's "dependent children" as defined
under American's non-revenue travel policies.
"Employment Period" shall mean the 24 month period commencing as of the
Effective Time of the Merger.
"Executive's Parents" shall mean those family members defined as "Parents" under
American's non-revenue travel policies.
"Executive's Spouse" shall mean that family member defined as "Spouse" under
American's non-revenue travel policies.
"Effective Time of the Merger" shall have the meaning set forth in the Merger
Agreement between the Company and American, dated as of November 19, 1998.
"Good Reason" shall mean any one or more of the following: (i) any failure by
American to comply with its obligations under this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by American promptly after receipt of notice thereof given by
the Executive, (ii) American's requiring the Executive to be based at any office
or location other than within 35 miles of the Reno/Lake Tahoe International
Airport, except for travel reasonably required in the performance of the
Executive's responsibilities, or (iii) the assignment to the Executive of duties
inconsistent with a reasonable level of management responsibilities commensurate
with the Executive's level of experience, excluding for this purpose an
9
<PAGE>
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by American promptly after receipt of notice thereof given by the
Executive.
"Non-Renewal Event" is defined in Section 4(e).
"Prior Agreement" shall mean that Employment Agreement, dated March 27, 1998
between Company and Executive.
10
<PAGE>
Exhibit 99(c)(4)
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated as of November 19, 1998 by
and among Reno Air, Inc., a Nevada corporation (the "Company"), American
Airlines, Inc., a Delaware corporation ("American"), and W. Stephen Jackson (the
"Executive").
The Executive, the Company, and American agree as follows:
1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings assigned to them in Appendix
l entitled "Employment Agreement Definitions."
2. Employment. American agrees to employ the Executive and the Executive
agrees to be employed by American on the terms and conditions
hereinafter set forth during the Employment Period.
3. Compensation and Benefits. The compensation and benefits payable to
Executive for all services rendered by the Executive under this
Agreement shall be as follows:
(a) Salary. During the Employment Period, the Executive shall receive a
minimum base salary at the rate of $175,000 per year. Such salary shall
be (i) payable no less frequently than on a monthly basis in accordance
with American's standard payroll practices (and pro-rated for any
partial pay period), and (ii) subject to review and increase (but not
decrease) at any time at the discretion of the Board.
(b) Incentive Compensation. During the Employment Period, the Executive
shall be entitled to receive benefits (including but not limited to the
target level award) commensurate for level 8 employees provided for
under American's incentive compensation plan. If this Agreement is in
effect at the time payments under American's 1999 incentive
compensation plan are made, then the Executive's benefits under the
plan will be calculated as if the Executive had been a participant in
the Plan since January 1, 1999.
(c) Performance Share Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Performance Share Program with terms and conditions
similar to those of other level 8 participants in the program. The
number of shares granted will be the same as the yearly number of
shares awarded to other level 8 employees. The Executive agrees that he
shall only be eligible to participate in AMR Corporation's 1999
Performance Share Program to the extent provided in Section 3(n).
1
<PAGE>
(d) Career Equity Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Career Equity Program with terms and conditions similar
to those of other level 8 participants in the program. The number of
shares granted will be the same as the yearly number of shares awarded
to other level 8 employees. The Executive agrees that he shall only be
eligible to participate in AMR Corporation's 1999 Career Equity Program
to the extent provided in Section 3(n).
(e) Business Expenses. During the Employment Period, American shall
reimburse the Executive promptly for all reasonable travel and other
business expenses incurred by him in the performance of his duties and
responsibilities, subject to American's policies with respect to
substantiation and documentation.
(f) Company Stock Options. Prior to or contemporaneously with the Effective
Time of the Merger, the Executive shall be entitled to exercise any
stock options granted under the Prior Agreement. All unexercised
options will be canceled at the Effective Time of the Merger.
(g) American Stock Options. During the Employment Period, American shall
grant to the Executive the same yearly number of options which are
usually granted to a level 8 employee on the same or similar terms and
conditions. The Executive agrees that he shall only receive stock
options in 1999 to the extent provided in Section 3(n).
(h) Airline Travel. During the Employment Period, American shall provide or
cause to provide to the Executive, the Executive's Spouse, the
Executive's Parents and the Executive's Eligible Children the same
travel privileges accorded to American's level 8 employees (the
"Airline Travel Benefits").
(i) Other Benefits. During the Employment Period, the Executive and, to
the extent applicable, the Executive's family, dependents and
beneficiaries, shall each participate in all benefits, plans and
programs, including improvements or modifications of the same, which
are now, or may hereafter be, available to level 8 employees of
American. Such benefits, plans and programs may include, without
limitation, profit sharing plans, thrift plans, health insurance or
health care plans, life insurance, disability insurance, pension and
other retirement plans, pass privileges, interline travel benefits, and
the like.
(j) Vacation. During the Employment Period, the Executive may take up to 4
weeks of paid vacation a year.
(k) Company Car. During the Employment Period, American shall provide the
2
<PAGE>
Executive with a company car, or, at its option, American may
substitute a cash allowance therefor.
(l) Indemnification. American shall provide or cause to be provided to the
Executive indemnification against all expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement in connection
with any threatened, pending, or completed action, claim, suit or
proceeding, whether civil, criminal, administrative, or investigative
(including an action by or in the right of the Company) by reason of
the Executive's having served as a director, officer or employee of the
Company or any affiliate of the Company. American shall advance fees
(including attorneys' fees) incurred by the Executive in the defense of
any such action, claim, suit, or proceeding, and American shall
maintain customary directors and officers liability insurance coverage.
These provisions supplement and are not in lieu of any rights granted
to the Company's officers and directors under the Company's articles of
incorporation, bylaws, any corporate document (including insurance
policies), or applicable law. American shall pay, or promptly reimburse
on an as-incurred basis to the Executive, the reasonable fees and
expenses of the Executive's legal counsel for its services rendered in
connection with, the Executive's enforcement of this Agreement;
provided, that if the Executive institutes any proceeding to enforce
this Agreement and the judge, arbitrator or other individual presiding
over the proceeding affirmatively finds that the Executive instituted
the proceeding in bad faith, the Executive shall pay all costs and
expenses, including attorneys' fees, of the Executive and American.
(m) Relocation Assistance. In the event that this Agreement: (i) is
terminated by American (other than for Cause), (ii) is terminated by
the Executive with Good Reason, or (iii) expires upon the occurrence of
the Non-Renewal Event and the Executive relocates from the Reno area
within 12 months after the date of termination or the Non-Renewal
Event, American will reimburse or pay the Executive for basic and
customary closing costs and the reasonable costs of packing and moving
to a location in the continental United States selected by the
Executive up to a maximum amount of $35,000, substantiated by actual
receipts.
(n) Merger Bonus and 1999 Equity Grants. Upon the Effective Time of Merger,
Executive shall receive (i) a payment equal to 150% of the Executive's
annual base salary as set forth in Section 3(a); (ii) 2,500 stock
options, with an exercise price equal to the fair market value of AMR
common stock on the day of grant, subject to terms and conditions
similar to those of other level 8 participants; (iii) 1,000 shares of
deferred stock, subject to terms and conditions similar to those of
other level 8 participants in AMR Corporation's Performance Share
Program and (iv) 1,000 shares of deferred stock, subject to terms and
conditions similar to those of other level 8 participants in AMR
Corporation's Career Equity
3
<PAGE>
Program.
(o) American Service Credit. During the Employment Period, American shall
calculate any years of service credit as if the Executive had been an
employee of American as of the date of the Prior Agreement.
4. Termination and Termination Benefits
(a) Termination by American for Cause. American may terminate the
Executive's employment for Cause. If the Chief Executive Officer of
American determines in good faith that the Executive should be
terminated for Cause, American shall send written notice to the
Executive setting forth in reasonable detail the nature of the Cause.
If terminated for Cause, the Executive will be entitled to no
additional compensation other than salary accrued prior to the
effective date of termination.
(b) Termination by American without Cause. The Executive's employment may
be terminated by American without Cause provided that the Executive is
afforded at least 30 days' prior written notice of such termination.
(c) Termination by the Executive. The Executive may terminate his
employment with or without Good Reason by giving American not less than
30 days' prior written notice of termination of his employment, and he
shall not be required to render any services to American after the date
set forth in the notice of termination. In the event of a termination
by the Executive without Good Reason, the Executive shall be entitled
to no additional compensation other than salary accrued prior to the
effective date of termination.
(d) Benefits Upon Termination Without Cause or for Good Reason. If this
Agreement is terminated by American without Cause, or this Agreement is
terminated by the Executive with Good Reason: (i) American shall pay to
the Executive 2 times the Executive's annual base salary as set forth
in Section 3(a); (ii) the Executive shall be entitled to receive
medical, dental, life insurance, vision and similar benefits as well as
Airline Travel Benefits up until the 30-month anniversary of the
Effective Time of the Merger as if the Executive continued to be a full
time level 8 employee, and (iii) the Executive shall be entitled to
exercise any stock options that were vested on the date of termination.
The amount that would be due and payable under sub-clause (i) of this
Section 4(d) shall be paid to the Executive in three equal installments
on each of the 30th, 60th, and 90th day after the date of termination
(or the immediately succeeding business day if any such day is not a
business day). The Executive acknowledges that payments and benefits
received pursuant to this Section 4(d) are in lieu of any other amounts
to which the employee may be entitled upon
4
<PAGE>
termination.
(e) Benefits Upon Expiration of the Employment Period. If upon expiration
of the Employment Period, the Executive is not offered or does not
accept a position with American (the "Non-Renewal Event"), the
Executive shall be entitled to receive the same payments and benefits
as if he had been terminated by American without Cause. The Executive
acknowledges that payments and benefits received pursuant to this
Section 4(e) are in lieu of any other amounts to which the employee may
be entitled upon termination.
(f) Continued Employment with American. If upon expiration of the
Employment Period, the Executive is offered and accepts a position with
American, the Executive will receive a payment equal to 2 times his
annual base salary as set forth in Section 3(a). Thereafter, the
Executive's ongoing salary and benefits (including any travel
privileges) shall be commensurate with the level of the position
accepted by the Executive; provided, however, that the Executive shall
be entitled to the Airline Travel Benefits accorded to American's level
8 employees up until the 30-month anniversary of the Effective Time of
the Merger.
(g) No Duty to Mitigate/No Non-Compete. The Executive has no duty or
obligation to mitigate the expenditures for salaries, bonuses, benefits
or otherwise after termination of this Agreement and/or cessation of
employment with American. Nothing in this Agreement is intended to
serve as a "noncompete" or other limitation on the future employment
opportunities for the Executive after termination of this Agreement.
5. Confidential Information. The Executive shall maintain a fiduciary
duty to the Company and American for all confidential information,
knowledge or data relating to the Company, American or any of their
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company or American or any of their affiliates until such confidential
information, knowledge or data become a matter of public record through
disclosure by a person or persons other than the Executive or his
representatives and which does not involve communication or disclosure,
directly or indirectly, by the Executive or his representatives. The
Executive shall not communicate or disclose any such information,
knowledge, or data to anyone other than the Company, American and those
designated by the Company or American. After termination of the
Executive's employment with American, the Executive shall return all
confidential and proprietary information in his possession or under his
control and shall not, without the prior written consent of American,
communicate or disclose any such information, knowledge or data to
anyone other than American and those designated by American. Willful
violation of this paragraph 5 shall void this Employment Agreement.
5
<PAGE>
6. Successors and Assigns. This Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees.
This Agreement is personal to the Executive and without the prior
written consent of American shall not be assignable by the Executive
other than by will or the laws of descent and distribution.
7. General Contract Provisions.
(a) Governing Law/Headings/Amendments/Entire Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified other than by a written agreement executed by the parties
hereto or their respective successors and legal representatives. This
Agreement contains the entire understanding of the Company, American,
and the Executive with respect to the subject matter hereof and
supersedes any and all other agreements (other than the Prior
Agreement), either oral or written, between the Company and the
Executive or American and the Executive with respect to the subject
matter hereof effective immediately. All provisions of the Prior
Agreement relating to the obligations of the Company or any successor
to the QQ Business (as that term is defined in the Prior Agreement) (i)
upon a Change in Control (as that term is defined in the Prior
Agreement), (ii) as to post-Employment Period Airline Travel and Club
Benefits (as that term is defined in the Prior Agreement) and (iii)
lifetime medical coverage are superceded in their entirety by this
Agreement effective immediately. All other provisions of the Prior
Agreement shall be superseded in their entirety by this Agreement as of
the Effective Time of the Merger.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows: if to the Executive: to his address as
set forth in the personnel records of the Company, if to the Company:
to Reno Air, Inc., 220 Edison Way, Reno, Nevada 89502, Attention: Chief
Executive Officer, with a copy to the attention of the Company's
Corporate Secretary, if to American: American Airlines, Inc., 4333 Amon
Carter Boulevard, MD 5675 HDQ, Fort Worth, Texas 76155, Attention:
Corporate Secretary; or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices
and communications shall be effective when actually received by the
addressee.
(c) Enforceability Issues. If any benefits to which the Executive shall
otherwise be
6
<PAGE>
entitled hereunder are not permitted to be provided to the Executive
under any governing plan document or applicable law governing the
payment or provision of such benefits, the Company shall pay or provide
equivalent benefits to the Executive (or his representatives in the
case of death). The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement. To the extent the provisions of
Section 3(l) are inconsistent with the terms regarding subrogation in
any officers' and directors' liability coverage, the terms of such
insurance coverage shall prevail. A party's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a
waiver of such provision thereof.
(d) Withholdings. American may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) Release. The Executive agrees, on behalf of himself and all of his
heirs or personal representatives, to release the Company, American,
its parent company, AMR Corporation, all subsidiaries of either, and
all of their present or former officers, directors, agents, employees,
employee benefit plans and the trustees, administrators, fiduciaries
and insurers of such plans from any and all claims for relief of any
kind, whether known to the Executive or unknown, which in any way arise
out of or relate to the Executive's employment at the Company,
concerning events occurring at any time up to the date set forth in the
introductory paragraph; provided that by accepting the Merger Bonus
described in Section 3(n), the Executive shall be deemed to have
restated this release to include all claims with respect to all events
occurring at any time up to the Effective Time of the Merger.
7
<PAGE>
IN WITNESS WHEREOF, the Executive, the Company and American have executed this
Employment Agreement as of the date first above written.
Reno Air, Inc. (the "Company")
By: /s/ Joseph R. O'Gorman
------------------------------------------
Name: Joseph R. O'Gorman
-------------------------------------
Title: Chairman, Chief Executive
------------------------------------
Officer and President
------------------------------------
American Airlines, Inc. ("American")
By: /s/ Gerard J. Arpey
------------------------------------------
Name: Gerard J. Arpey
-------------------------------------
Title: Senior Vice President -
------------------------------------
Finance and Planning
------------------------------------
/s/ W. Stephen Jackson
- ---------------------------------------------------
Executive
8
<PAGE>
Appendix l
Employment Agreement Definitions
"Airline Travel Benefits" is defined in Section 3(h).
"American" shall mean American Airlines, Inc.
"Board" shall mean the Board of Directors of American.
"Cause" shall mean (i) an act or acts of personal dishonesty taken by the
Executive and intended to result in substantial personal enrichment of the
Executive at the expense of American, (ii) repeated violations by the Executive
of the Executive's obligations under this Agreement which are demonstrably
willful and deliberate on the Executive's part and which are not remedied in a
reasonable period of time after receipt of written notice from American or,
(iii) the conviction of the Executive of a felony.
"Company" shall mean the Company as defined above.
"Eligible Child" shall mean the Executive's "dependent children" as defined
under American's non-revenue travel policies.
"Employment Period" shall mean the 24 month period commencing as of the
Effective Time of the Merger.
"Executive's Parents" shall mean those family members defined as "Parents" under
American's non-revenue travel policies.
"Executive's Spouse" shall mean that family member defined as "Spouse" under
American's non-revenue travel policies.
"Effective Time of the Merger" shall have the meaning set forth in the Merger
Agreement between the Company and American, dated as of November 19, 1998.
"Good Reason" shall mean any one or more of the following: (i) any failure by
American to comply with its obligations under this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by American promptly after receipt of notice thereof given by
the Executive, (ii) American's requiring the Executive to be based at any office
or location other than within 35 miles of the Reno/Lake Tahoe International
Airport, except for travel reasonably required in the performance of the
Executive's responsibilities, or (iii) the assignment to the Executive of duties
inconsistent with a reasonable level of management responsibilities commensurate
with the Executive's level of experience, excluding for this purpose an
9
<PAGE>
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by American promptly after receipt of notice thereof given by the
Executive.
"Non-Renewal Event" is defined in Section 4(e).
"Prior Agreement" shall mean that Employment Agreement, dated June 3, 1998
between Company and Executive.
10
<PAGE>
Exhibit 99(c)(5)
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated as of November 19, 1998 by
and among Reno Air, Inc., a Nevada corporation (the "Company"), American
Airlines, Inc., a Delaware corporation ("American"), and Joanne Dowty Smith (the
"Executive").
The Executive, the Company, and American agree as follows:
1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings assigned to them in Appendix
l entitled "Employment Agreement Definitions."
2. Employment. American agrees to employ the Executive and the Executive
agrees to be employed by American on the terms and conditions
hereinafter set forth during the Employment Period.
3. Compensation and Benefits. The compensation and benefits payable to
Executive for all services rendered by the Executive under this
Agreement shall be as follows:
(a) Salary. During the Employment Period, the Executive shall receive a
minimum base salary at the rate of $175,000 per year. Such salary shall
be (i) payable no less frequently than on a monthly basis in accordance
with American's standard payroll practices (and pro-rated for any
partial pay period), and (ii) subject to review and increase (but not
decrease) at any time at the discretion of the Board.
(b) Incentive Compensation. During the Employment Period, the Executive
shall be entitled to receive benefits (including but not limited to the
target level award) commensurate for level 8 employees provided for
under American's incentive compensation plan. If this Agreement is in
effect at the time payments under American's 1999 incentive
compensation plan are made, then the Executive's benefits under the
plan will be calculated as if the Executive had been a participant in
the Plan since January 1, 1999.
(c) Performance Share Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Performance Share Program with terms and conditions
similar to those of other level 8 participants in the program. The
number of shares granted will be the same as the yearly number of
shares awarded to other level 8 employees. The
Executive agrees that she shall only be eligible to participate in AMR
Corporation's 1999 Performance Share Program to the extent provided in
Section 3(n).
1
<PAGE>
(d) Career Equity Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Career Equity Program with terms and conditions similar
to those of other level 8 participants in the program. The number of
shares granted will be the same as the yearly number of shares awarded
to other level 8 employees. The Executive agrees that she shall only be
eligible to participate in AMR Corporation's 1999 Career Equity Program
to the extent provided in Section 3(n).
(e) Business Expenses. During the Employment Period, American shall
reimburse the Executive promptly for all reasonable travel and other
business expenses incurred by her in the performance of her duties and
responsibilities, subject to American's policies with respect to
substantiation and documentation.
(f) Company Stock Options. Prior to or contemporaneously with the Effective
Time of the Merger, the Executive shall be entitled to exercise any
stock options granted under the Prior Agreement. All unexercised
options will be canceled at the Effective Time of the Merger.
(g) American Stock Options. During the Employment Period, American shall
grant to the Executive the same yearly number of options which are
usually granted to a level 8 employee on the same or similar terms and
conditions. The Executive agrees that she shall only receive stock
options in 1999 to the extent provided in Section 3(n).
(h) Airline Travel. During the Employment Period, American shall provide or
cause to provide to the Executive, the Executive's Spouse, the
Executive's Parents and the Executive's Eligible Children the same
travel privileges accorded to American's level 8 employees (the
"Airline Travel Benefits").
(i) Other Benefits. During the Employment Period, the Executive and, to
the extent applicable, the Executive's family, dependents and
beneficiaries, shall each participate in all benefits, plans and
programs, including improvements or modifications of the same, which
are now, or may hereafter be, available to level 8 employees of
American. Such benefits, plans and programs may include, without
limitation, profit sharing plans, thrift plans, health insurance or
health care plans, life insurance, disability insurance, pension and
other retirement plans, pass privileges, interline travel benefits, and
the like.
(j) Vacation. During the Employment Period, the Executive may take up to 4
weeks of paid vacation a year.
(k) Company Car. During the Employment Period, American shall provide the
2
<PAGE>
Executive with a company car, or, at its option, American may
substitute a cash allowance therefor.
(l) Indemnification. American shall provide or cause to be provided to the
Executive indemnification against all expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement in connection
with any threatened, pending, or completed action, claim, suit or
proceeding, whether civil, criminal, administrative, or investigative
(including an action by or in the right of the Company) by reason of
the Executive's having served as a director, officer or employee of the
Company or any affiliate of the Company. American shall advance fees
(including attorneys' fees) incurred by the Executive in the defense of
any such action, claim, suit, or proceeding, and American shall
maintain customary directors and officers liability insurance coverage.
These provisions supplement and are not in lieu of any rights granted
to the Company's officers and directors under the Company's articles of
incorporation, bylaws, any corporate document (including insurance
policies), or applicable law. American shall pay, or promptly reimburse
on an as-incurred basis to the Executive, the reasonable fees and
expenses of the Executive's legal counsel for its services rendered in
connection with, the Executive's enforcement of this Agreement;
provided, that if the Executive institutes any proceeding to enforce
this Agreement and the judge, arbitrator or other individual presiding
over the proceeding affirmatively finds that the Executive instituted
the proceeding in bad faith, the Executive shall pay all costs and
expenses, including attorneys' fees, of the Executive and American.
(m) Relocation Assistance. In the event that this Agreement: (i) is
terminated by American (other than for Cause), (ii) is terminated by
the Executive with Good Reason, or (iii) expires upon the occurrence of
the Non-Renewal Event and the Executive relocates from the Reno area
within 12 months after the date of termination or the Non-Renewal
Event, American will reimburse or pay the Executive for basic and
customary closing costs and the reasonable costs of packing and moving
to a location in the continental United States selected by the
Executive up to a maximum amount of $35,000, substantiated by actual
receipts.
(n) Merger Bonus and 1999 Equity Grants. Upon the Effective Time of Merger,
Executive shall receive (i) a payment equal to 150% of the Executive's
annual base salary as set forth in Section 3(a); (ii) 2,500 stock
options, with an exercise price equal to the fair market value of AMR
common stock on the day of grant, subject to terms and conditions
similar to those of other level 8 participants; (iii) 1,000 shares of
deferred stock, subject to terms and conditions similar to those
of other level 8 participants in AMR Corporation's Performance Share
Program and (iv) 1,000 shares of deferred stock, subject to terms and
conditions similar to those of other level 8 participants in AMR
Corporation's Career Equity
3
<PAGE>
Program.
(o) American Service Credit. During the Employment Period, American shall
calculate any years of service credit as if the Executive had been an
employee of American as of the date of the Prior Agreement.
4. Termination and Termination Benefits
(a) Termination by American for Cause. American may terminate the
Executive's employment for Cause. If the Chief Executive Officer of
American determines in good faith that the Executive should be
terminated for Cause, American shall send written notice to the
Executive setting forth in reasonable detail the nature of the Cause.
If terminated for Cause, the Executive will be entitled to no
additional compensation other than salary accrued prior to the
effective date of termination.
(b) Termination by American without Cause. The Executive's employment may
be terminated by American without Cause provided that the Executive is
afforded at least 30 days' prior written notice of such termination.
(c) Termination by the Executive. The Executive may terminate her
employment with or without Good Reason by giving American not less than
30 days' prior written notice of termination of her employment, and she
shall not be required to render any services to American after the date
set forth in the notice of termination. In the event of a termination
by the Executive without Good Reason, the Executive shall be entitled
to no additional compensation other than salary accrued prior to the
effective date of termination.
(d) Benefits Upon Termination Without Cause or for Good Reason. If this
Agreement is terminated by American without Cause, or this Agreement is
terminated by the Executive with Good Reason: (i) American shall pay to
the Executive 2 times the Executive's annual base salary as set forth
in Section 3(a); (ii) the Executive shall be entitled to receive
medical, dental, life insurance, vision and similar benefits as well as
Airline Travel Benefits up until the 30-month anniversary of the
Effective Time of the Merger as if the Executive continued to be a full
time level 8 employee, and (iii) the Executive shall be entitled to
exercise any stock options that were vested on the date of termination.
The amount that would be due and payable under sub-clause (i) of this
Section 4(d) shall be paid to the Executive in three equal installments
on each of the 30th, 60th, and 90th day after the date of termination
(or the immediately succeeding business day if any such day is not a
business day). The Executive acknowledges that payments and benefits
received pursuant to this Section 4(d) are in lieu of any other amounts
to which the employee may be entitled upon
4
<PAGE>
termination.
(e) Benefits Upon Expiration of the Employment Period. If upon expiration
of the Employment Period, the Executive is not offered or does not
accept a position with American (the "Non-Renewal Event"), the
Executive shall be entitled to receive the same payments and benefits
as if she had been terminated by American without Cause. The Executive
acknowledges that payments and benefits received pursuant to this
Section 4(e) are in lieu of any other amounts to which the employee may
be entitled upon termination.
(f) Continued Employment with American. If upon expiration of the
Employment Period, the Executive is offered and accepts a position with
American, the Executive will receive a payment equal to 2 times her
annual base salary as set forth in Section 3(a). Thereafter, the
Executive's ongoing salary and benefits (including any travel
privileges) shall be commensurate with the level of the position
accepted by the Executive; provided, however, that the Executive shall
be entitled to the Airline Travel Benefits accorded to American's level
8 employees up until the 30-month anniversary of the Effective Time of
the Merger.
(g) No Duty to Mitigate/No Non-Compete. The Executive has no duty or
obligation to mitigate the expenditures for salaries, bonuses, benefits
or otherwise after termination of this Agreement and/or cessation of
employment with American. Nothing in this Agreement is intended to
serve as a "noncompete" or other limitation on the future employment
opportunities for the Executive after termination of this Agreement.
5. Confidential Information. The Executive shall maintain a fiduciary
duty to the Company and American for all confidential information,
knowledge or data relating to the Company, American or any of their
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company or American or any of their affiliates until such confidential
information, knowledge or data become a matter of public record through
disclosure by a person or persons other than the Executive or her
representatives and which does not involve communication or disclosure,
directly or indirectly, by the Executive or her representatives. The
Executive shall not communicate or disclose any such information,
knowledge, or data to anyone other than the Company, American and those
designated by the Company or American. After termination of the
Executive's employment with American, the Executive shall return all
confidential and proprietary information in her possession or under her
control and shall not, without the prior written consent of American,
communicate or disclose any such information, knowledge or data to
anyone other than American and those designated by American. Willful
violation of this paragraph 5 shall void this Employment Agreement.
5
<PAGE>
6. Successors and Assigns. This Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees.
This Agreement is personal to the Executive and without the prior
written consent of American shall not be assignable by the Executive
other than by will or the laws of descent and distribution.
7. General Contract Provisions.
(a) Governing Law/Headings/Amendments/Entire Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified other than by a written agreement executed by the parties
hereto or their respective successors and legal representatives. This
Agreement contains the entire understanding of the Company, American,
and the Executive with respect to the subject matter hereof and
supersedes any and all other agreements (other than the Prior
Agreement), either oral or written, between the Company and the
Executive or American and the Executive with respect to the subject
matter hereof effective immediately. All provisions of the Prior
Agreement relating to the obligations of the Company or any successor
to the QQ Business (as that term is defined in the Prior Agreement) (i)
upon a Change in Control (as that term is defined in the Prior
Agreement), (ii) as to post-Employment Period Airline Travel and Club
Benefits (as that term is defined in the Prior Agreement) and (iii)
lifetime medical coverage are superceded in their entirety by this
Agreement effective immediately. All other provisions of the Prior
Agreement shall be superseded in their entirety by this Agreement as of
the Effective Time of the Merger.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows: if to the Executive: to her address as
set forth in the personnel records of the Company, if to the Company:
to Reno Air, Inc., 220 Edison Way, Reno, Nevada 89502, Attention: Chief
Executive Officer, with a copy to the attention of the Company's
Corporate Secretary, if to American: American Airlines, Inc., 4333 Amon
Carter Boulevard, MD 5675 HDQ, Fort Worth, Texas 76155, Attention:
Corporate Secretary; or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices
and communications shall be effective when actually received by the
addressee.
(c) Enforceability Issues. If any benefits to which the Executive shall
otherwise be
6
<PAGE>
entitled hereunder are not permitted to be provided to the Executive
under any governing plan document or applicable law governing the
payment or provision of such benefits, the Company shall pay or provide
equivalent benefits to the Executive (or her representatives in the
case of death). The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement. To the extent the provisions of
Section 3(l) are inconsistent with the terms regarding subrogation in
any officers' and directors' liability coverage, the terms of such
insurance coverage shall prevail. A party's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a
waiver of such provision thereof.
(d) Withholdings. American may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) Release. The Executive agrees, on behalf of herself and all of her
heirs or personal representatives, to release the Company, American,
its parent company, AMR Corporation, all subsidiaries of either, and
all of their present or former officers, directors, agents, employees,
employee benefit plans and the trustees, administrators, fiduciaries
and insurers of such plans from any and all claims for relief of any
kind, whether known to the Executive or unknown, which in any way arise
out of or relate to the Executive's employment at the Company,
concerning events occurring at any time up to the date set forth in the
introductory paragraph; provided that by accepting the Merger Bonus
described in Section 3(n), the Executive shall be deemed to have
restated this release to include all claims with respect to all events
occurring at any time up to the Effective Time of the Merger.
7
<PAGE>
IN WITNESS WHEREOF, the Executive, the Company and American have executed this
Employment Agreement as of the date first above written.
Reno Air, Inc. (the "Company")
By: /s/ Joseph R. O'Gorman
-------------------------------------------
Name: Joseph R. O'Gorman
-------------------------------------
Title: Chairman, Chief Executive
-------------------------------------
Officer and President
-------------------------------------
American Airlines, Inc. ("American")
By: /s/ Gerard J. Arpey
-------------------------------------------
Name: Gerard J. Arpey
-------------------------------------
Title: Senior Vice President -
-------------------------------------
Finance and Planning
-------------------------------------
/s/ Joanne Dowty Smith
- --------------------------------------------------
Executive
8
<PAGE>
Appendix l
Employment Agreement Definitions
"Airline Travel Benefits" is defined in Section 3(h).
"American" shall mean American Airlines, Inc.
"Board" shall mean the Board of Directors of American.
"Cause" shall mean (i) an act or acts of personal dishonesty taken by the
Executive and intended to result in substantial personal enrichment of the
Executive at the expense of American, (ii) repeated violations by the Executive
of the Executive's obligations under this Agreement which are demonstrably
willful and deliberate on the Executive's part and which are not remedied in a
reasonable period of time after receipt of written notice from American or,
(iii) the conviction of the Executive of a felony.
"Company" shall mean the Company as defined above.
"Eligible Child" shall mean the Executive's "dependent children" as defined
under American's non-revenue travel policies.
"Employment Period" shall mean the 24 month period commencing as of the
Effective Time of the Merger.
"Executive's Parents" shall mean those family members defined as "Parents" under
American's non-revenue travel policies.
"Executive's Spouse" shall mean that family member defined as "Spouse" under
American's non-revenue travel policies.
"Effective Time of the Merger" shall have the meaning set forth in the Merger
Agreement between the Company and American, dated as of November 19, 1998.
"Good Reason" shall mean any one or more of the following: (i) any failure by
American to comply with its obligations under this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by American promptly after receipt of notice thereof given by
the Executive, (ii) American's requiring the Executive to be based at any office
or location other than within 35 miles of the Reno/Lake Tahoe International
Airport, except for travel reasonably required in the performance of the
Executive's responsibilities, or (iii) the assignment to the Executive of duties
inconsistent with a reasonable level of management responsibilities commensurate
with the Executive's level of experience, excluding for this purpose an
9
<PAGE>
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by American promptly after receipt of notice thereof given by the
Executive.
"Non-Renewal Event" is defined in Section 4(e).
"Prior Agreement" shall mean that Employment Agreement, dated April 6, 1998
between Company and Executive.
10
<PAGE>
Exhibit 99(c)(6)
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated as of November 19, 1998 by
and among Reno Air, Inc., a Nevada corporation (the "Company"), American
Airlines, Inc., a Delaware corporation ("American"), and Steven A. Rossum (the
"Executive").
The Executive, the Company, and American agree as follows:
1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings assigned to them in Appendix
l entitled "Employment Agreement Definitions."
2. Employment. American agrees to employ the Executive and the Executive
agrees to be employed by American on the terms and conditions
hereinafter set forth during the Employment Period.
3. Compensation and Benefits. The compensation and benefits payable to
Executive for all services rendered by the Executive under this
Agreement shall be as follows:
(a) Salary. During the Employment Period, the Executive shall receive a
minimum base salary at the rate of $180,000 per year. Such salary shall
be (i) payable no less frequently than on a monthly basis in accordance
with American's standard payroll practices (and pro-rated for any
partial pay period), and (ii) subject to review and increase (but not
decrease) at any time at the discretion of the Board.
(b) Incentive Compensation. During the Employment Period, the Executive
shall be entitled to receive benefits (including but not limited to the
target level award) commensurate for level 8 employees provided for
under American's incentive compensation plan. If this Agreement is in
effect at the time payments under American's 1999 incentive
compensation plan are made, then the Executive's benefits under the
plan will be calculated as if the Executive had been a participant in
the Plan since January 1, 1999.
(c) Performance Share Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Performance Share Program with terms and conditions
similar to those of other level 8 participants in the program. The
number of shares granted will be the same as the yearly number of
shares awarded to other level 8 employees. The Executive agrees that he
shall only be eligible to participate in AMR Corporation's 1999
Performance Share Program to the extent provided in Section 3(n).
1
<PAGE>
(d) Career Equity Awards. During the Employment Period, the Executive
shall be entitled to receive awards of deferred stock pursuant to AMR
Corporation's Career Equity Program with terms and conditions similar
to those of other level 8 participants in the program. The number of
shares granted will be the same as the yearly number of shares awarded
to other level 8 employees. The Executive agrees that he shall only be
eligible to participate in AMR Corporation's 1999 Career Equity Program
to the extent provided in Section 3(n).
(e) Business Expenses. During the Employment Period, American shall
reimburse the Executive promptly for all reasonable travel and other
business expenses incurred by him in the performance of his duties and
responsibilities, subject to American's policies with respect to
substantiation and documentation.
(f) Company Stock Options. Prior to or contemporaneously with the Effective
Time of the Merger, the Executive shall be entitled to exercise any
stock options granted under the Prior Agreement. All unexercised
options will be canceled at the Effective Time of the Merger.
(g) American Stock Options. During the Employment Period, American shall
grant to the Executive the same yearly number of options which are
usually granted to a level 8 employee on the same or similar terms and
conditions. The Executive agrees that he shall only receive stock
options in 1999 to the extent provided in Section 3(n).
(h) Airline Travel. During the Employment Period, American shall provide or
cause to provide to the Executive, the Executive's Spouse, the
Executive's Parents and the Executive's Eligible Children the same
travel privileges accorded to American's level 8 employees (the
"Airline Travel Benefits").
(i) Other Benefits. During the Employment Period, the Executive and, to
the extent applicable, the Executive's family, dependents and
beneficiaries, shall each participate in all benefits, plans and
programs, including improvements or modifications of the same, which
are now, or may hereafter be, available to level 8 employees of
American. Such benefits, plans and programs may include, without
limitation, profit sharing plans, thrift plans, health insurance or
health care plans, life insurance, disability insurance, pension and
other retirement plans, pass privileges, interline travel benefits, and
the like.
(j) Vacation. During the Employment Period, the Executive may take up to 4
weeks of paid vacation a year.
(k) Company Car. During the Employment Period, American shall provide the
2
<PAGE>
Executive with a company car, or, at its option, American may
substitute a cash allowance therefor.
(l) Indemnification. American shall provide or cause to be provided to the
Executive indemnification against all expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement in connection
with any threatened, pending, or completed action, claim, suit or
proceeding, whether civil, criminal, administrative, or investigative
(including an action by or in the right of the Company) by reason of
the Executive's having served as a director, officer or employee of the
Company or any affiliate of the Company. American shall advance fees
(including attorneys' fees) incurred by the Executive in the defense of
any such action, claim, suit, or proceeding, and American shall
maintain customary directors and officers liability insurance coverage.
These provisions supplement and are not in lieu of any rights granted
to the Company's officers and directors under the Company's articles of
incorporation, bylaws, any corporate document (including insurance
policies), or applicable law. American shall pay, or promptly reimburse
on an as-incurred basis to the Executive, the reasonable fees and
expenses of the Executive's legal counsel for its services rendered in
connection with, the Executive's enforcement of this Agreement;
provided, that if the Executive institutes any proceeding to enforce
this Agreement and the judge, arbitrator or other individual presiding
over the proceeding affirmatively finds that the Executive instituted
the proceeding in bad faith, the Executive shall pay all costs and
expenses, including attorneys' fees, of the Executive and American.
(m) Relocation Assistance. In the event that this Agreement: (i) is
terminated by American (other than for Cause), (ii) is terminated by
the Executive with Good Reason, or (iii) expires upon the occurrence of
the Non-Renewal Event and the Executive relocates from the Reno area
within 12 months after the date of termination or the Non-Renewal
Event, American will reimburse or pay the Executive for basic and
customary closing costs and the reasonable costs of packing and moving
to a location in the continental United States selected by the
Executive up to a maximum amount of $35,000, substantiated by actual
receipts.
(n) Merger Bonus and 1999 Equity Grants. Upon the Effective Time of Merger,
Executive shall receive (i) a payment equal to 150% of the Executive's
annual base salary as set forth in Section 3(a); (ii) 2,500 stock
options, with an exercise price equal to the fair market value of AMR
common stock on the day of grant, subject to terms and conditions
similar to those of other level 8 participants; (iii) 1,000 shares of
deferred stock, subject to terms and conditions similar to those of
other level 8 participants in AMR Corporation's Performance Share
Program and (iv) 1,000 shares of deferred stock, subject to terms and
conditions similar to those of other level 8 participants in AMR
Corporation's Career Equity
3
<PAGE>
Program.
(o) American Service Credit. During the Employment Period, American shall
calculate any years of service credit as if the Executive had been an
employee of American as of the date of the Prior Agreement.
4. Termination and Termination Benefits
(a) Termination by American for Cause. American may terminate the
Executive's employment for Cause. If the Chief Executive Officer of
American determines in good faith that the Executive should be
terminated for Cause, American shall send written notice to the
Executive setting forth in reasonable detail the nature of the Cause.
If terminated for Cause, the Executive will be entitled to no
additional compensation other than salary accrued prior to the
effective date of termination.
(b) Termination by American without Cause. The Executive's employment may
be terminated by American without Cause provided that the Executive is
afforded at least 30 days' prior written notice of such termination.
(c) Termination by the Executive. The Executive may terminate his
employment with or without Good Reason by giving American not less than
30 days' prior written notice of termination of his employment, and he
shall not be required to render any services to American after the date
set forth in the notice of termination. In the event of a termination
by the Executive without Good Reason, the Executive shall be entitled
to no additional compensation other than salary accrued prior to the
effective date of termination.
(d) Benefits Upon Termination Without Cause or for Good Reason. If this
Agreement is terminated by American without Cause, or this Agreement is
terminated by the Executive with Good Reason: (i) American shall pay to
the Executive 2 times the Executive's annual base salary as set forth
in Section 3(a); (ii) the Executive shall be entitled to receive
medical, dental, life insurance, vision and similar benefits as well as
Airline Travel Benefits up until the 30-month anniversary of the
Effective Time of the Merger as if the Executive continued to be a full
time level 8 employee, and (iii) the Executive shall be entitled to
exercise any stock options that were vested on the date of termination.
The amount that would be due and payable under sub-clause (i) of this
Section 4(d) shall be paid to the Executive in three equal installments
on each of the 30th, 60th, and 90th day after the date of termination
(or the immediately succeeding business day if any such day is not a
business day). The Executive acknowledges that payments and benefits
received pursuant to this Section 4(d) are in lieu of any other amounts
to which the employee may be entitled upon
4
<PAGE>
termination.
(e) Benefits Upon Expiration of the Employment Period. If upon expiration
of the Employment Period, the Executive is not offered or does not
accept a position with American (the "Non-Renewal Event"), the
Executive shall be entitled to receive the same payments and benefits
as if he had been terminated by American without Cause. The Executive
acknowledges that payments and benefits received pursuant to this
Section 4(e) are in lieu of any other amounts to which the employee may
be entitled upon termination.
(f) Continued Employment with American. If upon expiration of the
Employment Period, the Executive is offered and accepts a position with
American, the Executive will receive a payment equal to 2 times his
annual base salary as set forth in Section 3(a). Thereafter, the
Executive's ongoing salary and benefits (including any travel
privileges) shall be commensurate with the level of the position
accepted by the Executive; provided, however, that the Executive shall
be entitled to the Airline Travel Benefits accorded to American's level
8 employees up until the 30-month anniversary of the Effective Time of
the Merger.
(g) No Duty to Mitigate/No Non-Compete. The Executive has no duty or
obligation to mitigate the expenditures for salaries, bonuses, benefits
or otherwise after termination of this Agreement and/or cessation of
employment with American. Nothing in this Agreement is intended to
serve as a "noncompete" or other limitation on the future employment
opportunities for the Executive after termination of this Agreement.
5. Confidential Information. The Executive shall maintain a fiduciary
duty to the Company and American for all confidential information,
knowledge or data relating to the Company, American or any of their
affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the
Company or American or any of their affiliates until such confidential
information, knowledge or data become a matter of public record through
disclosure by a person or persons other than the Executive or his
representatives and which does not involve communication or disclosure,
directly or indirectly, by the Executive or his representatives. The
Executive shall not communicate or disclose any such information,
knowledge, or data to anyone other than the Company, American and those
designated by the Company or American. After termination of the
Executive's employment with American, the Executive shall return all
confidential and proprietary information in his possession or under his
control and shall not, without the prior written consent of American,
communicate or disclose any such information, knowledge or data to
anyone other than American and those designated by American. Willful
violation of this paragraph 5 shall void this Employment Agreement.
5
<PAGE>
6. Successors and Assigns. This Agreement and all rights of Executive
hereunder shall inure to the benefit of, and be enforceable by, the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees.
This Agreement is personal to the Executive and without the prior
written consent of American shall not be assignable by the Executive
other than by will or the laws of descent and distribution.
7. General Contract Provisions.
(a) Governing Law/Headings/Amendments/Entire Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified other than by a written agreement executed by the parties
hereto or their respective successors and legal representatives. This
Agreement contains the entire understanding of the Company, American,
and the Executive with respect to the subject matter hereof and
supersedes any and all other agreements (other than the Prior
Agreement), either oral or written, between the Company and the
Executive or American and the Executive with respect to the subject
matter hereof effective immediately. All provisions of the Prior
Agreement relating to the obligations of the Company or any successor
to the QQ Business (as that term is defined in the Prior Agreement) (i)
upon a Change in Control (as that term is defined in the Prior
Agreement), (ii) as to post-Employment Period Airline Travel and Club
Benefits (as that term is defined in the Prior Agreement) and (iii)
lifetime medical coverage are superceded in their entirety by this
Agreement effective immediately. All other provisions of the Prior
Agreement shall be superseded in their entirety by this Agreement as of
the Effective Time of the Merger.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows: if to the Executive: to his address as
set forth in the personnel records of the Company, if to the Company:
to Reno Air, Inc., 220 Edison Way, Reno, Nevada 89502, Attention: Chief
Executive Officer, with a copy to the attention of the Company's
Corporate Secretary, if to American: American Airlines, Inc., 4333 Amon
Carter Boulevard, MD 5675 HDQ, Fort Worth, Texas 76155, Attention:
Corporate Secretary; or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices
and communications shall be effective when actually received by the
addressee.
(c) Enforceability Issues. If any benefits to which the Executive shall
otherwise be
6
<PAGE>
entitled hereunder are not permitted to be provided to the Executive
under any governing plan document or applicable law governing the
payment or provision of such benefits, the Company shall pay or provide
equivalent benefits to the Executive (or his representatives in the
case of death). The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement. To the extent the provisions of
Section 3(l) are inconsistent with the terms regarding subrogation in
any officers' and directors' liability coverage, the terms of such
insurance coverage shall prevail. A party's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a
waiver of such provision thereof.
(d) Withholdings. American may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) Release. The Executive agrees, on behalf of himself and all of his
heirs or personal representatives, to release the Company, American,
its parent company, AMR Corporation, all subsidiaries of either, and
all of their present or former officers, directors, agents, employees,
employee benefit plans and the trustees, administrators, fiduciaries
and insurers of such plans from any and all claims for relief of any
kind, whether known to the Executive or unknown, which in any way arise
out of or relate to the Executive's employment at the Company,
concerning events occurring at any time up to the date set forth in the
introductory paragraph; provided that by accepting the Merger Bonus
described in Section 3(n), the Executive shall be deemed to have
restated this release to include all claims with respect to all events
occurring at any time up to the Effective Time of the Merger.
7
<PAGE>
IN WITNESS WHEREOF, the Executive, the Company and American have executed this
Employment Agreement as of the date first above written.
Reno Air, Inc. (the "Company")
By: /s/ Joseph R. O'Gorman
----------------------------------------------
Name: Joseph R. O'Gorman
-----------------------------------------
Title: Chairman, Chief Executive
----------------------------------------
Officer and President
----------------------------------------
American Airlines, Inc. ("American")
By: /s/ Gerard J. Arpey
----------------------------------------------
Name: Gerard J. Arpey
-----------------------------------------
Title: Senior Vice President -
----------------------------------------
Finance and Planning
----------------------------------------
/s/ Steven A. Rossum
- -------------------------------------------------------
Executive
8
<PAGE>
Appendix l
Employment Agreement Definitions
"Airline Travel Benefits" is defined in Section 3(h).
"American" shall mean American Airlines, Inc.
"Board" shall mean the Board of Directors of American.
"Cause" shall mean (i) an act or acts of personal dishonesty taken by the
Executive and intended to result in substantial personal enrichment of the
Executive at the expense of American, (ii) repeated violations by the Executive
of the Executive's obligations under this Agreement which are demonstrably
willful and deliberate on the Executive's part and which are not remedied in a
reasonable period of time after receipt of written notice from American or,
(iii) the conviction of the Executive of a felony.
"Company" shall mean the Company as defined above.
"Eligible Child" shall mean the Executive's "dependent children" as defined
under American's non-revenue travel policies.
"Employment Period" shall mean the 24 month period commencing as of the
Effective Time of the Merger.
"Executive's Parents" shall mean those family members defined as "Parents" under
American's non-revenue travel policies.
"Executive's Spouse" shall mean that family member defined as "Spouse" under
American's non-revenue travel policies.
"Effective Time of the Merger" shall have the meaning set forth in the Merger
Agreement between the Company and American, dated as of November 19, 1998.
"Good Reason" shall mean any one or more of the following: (i) any failure by
American to comply with its obligations under this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by American promptly after receipt of notice thereof given by
the Executive, (ii) American's requiring the Executive to be based at any office
or location other than within 35 miles of the Reno/Lake Tahoe International
Airport, except for travel reasonably required in the performance of the
Executive's responsibilities, or (iii) the assignment to the Executive of duties
inconsistent with a reasonable level of management responsibilities commensurate
with the Executive's level of experience, excluding for this purpose an
9
<PAGE>
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by American promptly after receipt of notice thereof given by the
Executive.
"Non-Renewal Event" is defined in Section 4(e).
"Prior Agreement" shall mean that Employment Agreement, dated April 17, 1998
between Company and Executive.
10
<PAGE>
Exhibit 99(c)(7)
[Confidentiality Agreement]
June 12, 1998
AMR Corporation
4333 Amon Carter Boulevard
Ft. Worth, Texas 76155
Attention: Senior Vice President and General Counsel
Ladies and Gentlemen:
In connection with your consideration of a possible negotiated transaction with
Reno Air, Inc. (the "Company"), you have requested information regarding the
Company.
1. As a condition to your being furnished with such information, you agree
(and agree to cause your affiliates and associates) to treat any
information concerning the Company which is furnished to you by or on
behalf of the Company, from and after June 11, 1998 and regardless of the
manner in which it is or was furnished, together with analyses,
compilations, studies or other documents or records prepared by you or any
of your directors, officers, employees, agents or advisors (including,
without limitation, attorneys, accountants, consultants, bankers, financial
advisors and any representatives of your advisors) (collectively,
"Representatives") to the extent that such analyses, compilations, studies,
documents or records contain or otherwise reflect or are generated from
such information (hereinafter collectively referred to as the "Evaluation
Material"), in accordance with provisions of this agreement. The term
"Evaluation Material" does not include information which (i) was or becomes
generally available to the public other than as a result of a disclosure by
you or your Representatives, (ii) was or becomes available to you on a
non-confidential basis from a source other than the Company or its advisors
provided that such source is not known to you to be bound by a
confidentiality agreement with the Company, or otherwise prohibited from
transmitting the information to you by a contractual, legal or fiduciary
obligation, or (iii) was within your possession prior to having been
furnished to you by or on behalf of the Company, provided that the source
of such information was not bound by a confidentiality agreement with the
Company or otherwise prohibited from transmitting the information to you by
a contractual, legal, or fiduciary obligation.
2. You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible negotiated transaction between the Company
and you, and that such information will be kept confidential by you and
your Representatives;
<PAGE>
provided, however, that (a) any of such information may be disclosed to
your Representatives who need to know such information for the purpose of
evaluating any such possible transaction between the Company and you (it
being understood that such Representatives shall have been advised of this
agreement and shall have agreed to be bound by the provisions hereof), and
(b) any disclosure of such information may be made to which the Company
consents in writing. In any event, you shall be responsible for any breach
of this agreement by any of your Representatives and you agree, at your
sole expense, to take all reasonable measures (including but not limited to
court proceedings) to restrain your Representatives from prohibited or
unauthorized disclosure or use of the Evaluation Material.
3. In addition, both you and the Company agree that, without the prior written
consent of the other, each will not, and will direct its Representatives
not to, disclose to any person (i) that the Evaluation Material has been
made available to you or your Representatives, (ii) that discussions or
negotiations are taking place concerning a possible transaction between the
Company and you or (iii) any terms, conditions or other facts with respect
to any such possible transaction, including the status thereof. Both you
and the Company agree however, that, if in the reasonable opinion of
counsel for either party, disclosure of the type described in sub-clauses
(i), (ii), or (iii) of the immediately preceding sentence is required by
applicable law, prior to making any such disclosure, the party required to
so disclose will notify the other party in writing as soon as reasonably
practicable. Such notice will set forth with the proposed text of the
disclosure, the date and time when it is expected that the disclosure will
be made, and the legal requirement and rationale for the disclosure.
4. In the event that you are requested or required (by interrogatories,
requests for information or documents, subpoena, civil investigative demand
or similar processes) to disclose any Evaluation Material, it is agreed
that you will provide the Company with prompt notice of any such request or
requirement (written or practical) so that the Company may seek an
appropriate protective order or waive your compliance with the provisions
of this agreement. If, failing the entry of a protective order or the
receipt of a waiver hereunder, you are, in the opinion of your counsel,
compelled to disclose Evaluation Material, you may disclose that portion of
the Evaluation Material, which your counsel advises that you are compelled
to disclose and you will exercise reasonable efforts to obtain assurance
that confidential treatment will be accorded to that portion of the
Evaluation Material which is being disclosed. In any event, you will not
oppose any action by the
<PAGE>
Company to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Evaluation
Material.
5. It is understood that Steven A. Rossum- the Company's General Counsel - or
his designee will arrange for appropriate contacts for due diligence
purposes. All (i) communications regarding this transaction, (ii) requests
for additional information, and (iii) discussions or questions regarding
the Company's business or operations, will be confidentially submitted or
directed to Mr. Rossum or to such other person or entity as he may
designate in writing for such purpose during the period in which there are
discussions conducted pursuant hereto.
6. You understand and acknowledge that any and all information contained in
the Evaluation Material is being provided without any representation or
warranty, express or implied, as to the accuracy or completeness of the
Evaluation Material, on the part of the Company. You agree that neither the
Company nor any of its representatives shall have any liability to you or
any of your Representatives with respect thereto. It is understood that the
scope of any representations and warranties to be given by the Company will
be negotiated along with other terms and conditions in arriving at a
mutually acceptable form of definitive agreement should discussions between
you and the Company progress to such a point.
7. Each of us hereby acknowledges that it is aware and that it will advise its
Representatives that the federal and state securities laws prohibit any
person who has material, non-public information about a company from
purchasing or selling securities of such a company or from communicating
such information to any other person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities.
8. All Evaluation Material disclosed by the Company shall be and shall remain
the property of the Company. In the event that the parties do not proceed
with the transaction that is the subject of this letter within a reasonable
time or within five days after being so requested by the Company, you shall
return or destroy all documents constituting Evaluation Material furnished
to you by the Company. Except to the extent a party is advised in writing
by counsel that any such destruction is prohibited by law, you will also
destroy all written material, memoranda, notes, copies, excerpts and other
writings or recordings whatsoever prepared by you or your Representatives
based upon, containing or otherwise reflecting any Evaluation Material. Any
destruction of materials shall be verified by you in writing and signed by
one of your officers. Any Evaluation Material that is not
<PAGE>
returned or destroyed, including without limitation, any oral Evaluation
Material shall remain subject to the confidentiality obligations set forth
in this agreement.
9. You agree that unless and until a definitive agreement regarding a
transaction between the Company and you has been executed, neither the
Company nor you will be under any legal obligation of any kind whatsoever
with respect to such a transaction by virtue of this agreement except for
the matters specifically agreed to herein. You further acknowledge and
agree that the Company and you reserve the right, in its sole discretion,
to reject any and all proposals made by the other or any of its
Representatives with regard to a transaction between the Company and you,
and to terminate discussions and negotiations at any time.
10. It is understood and agreed that damages would not be a sufficient remedy
for any breach of this agreement and that the Company and you shall be
entitled to specific performance and injunctive or other equitable relief
as a remedy for any such breach by the other. Such remedy shall not be
deemed to be the exclusive remedy for breach of this agreement but shall be
in addition to all other remedies available at law or equity.
11. In the event of litigation relating to this agreement, the unsuccessful
party determined by a court of competent jurisdiction in a final,
non-appealable order shall be liable and pay to the prevailing party the
reasonable legal fees such prevailing party has incurred in connection with
such litigation, including any appeal therefrom.
12. This agreement is for the benefit of each of the parties and its successors
and shall be governed and construed in accordance with the laws of the
State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof. All obligations under
this agreement shall expire one year from the date hereof, except as
otherwise explicitly stated above. In case, any provision of this agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of the agreement shall not in
any way be affected or impaired thereby.
13. This agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one
and the same agreement. Faxed executed counterparts will be enforceable.
Please confirm that the foregoing is in accordance with your understanding
of our agreement by signing and returning to a copy of this letter to the
Company's General Counsel.
<PAGE>
Very truly yours,
Reno Air, Inc.
By:/s/ Steven A. Rossum
Its: Senior Vice President, General Counsel, and Corporate Secretary
Confirmed and Agreed:
AMR Corporation
By:/s/ Charles D. MarLett
Its:Corporate Secretary
