<PAGE>
As filed with the Securities and Exchange Commission on September 20, 2000
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement [_]Confidential, For Use of the
[X]Definitive Proxy Statement Commission Only (as permitted by
[_]Definitive Additional Materials Rule 14a-6(e)(2))
[_]Soliciting Material Pursuant to
Rule 14a-12
US Airways Group, Inc.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[_]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ________
(2) Aggregate number of securities to which transaction applies: ___________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): _____________
_________________________________________________________________________
(4) Proposed maximum aggregate value of transaction: _______________________
(5) Total fee paid: ________________________________________________________
[X]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ________________________________________________
(2) Form, Schedule or Registration Statement No.: __________________________
(3) Filing Party: __________________________________________________________
(4) Date Filed: ____________________________________________________________
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<PAGE>
[LOGO OF US AIRWAYS GROUP]
US Airways Group, Inc.
Notice of Special Meeting of Stockholders
October 12, 2000
PROXY STATEMENT
Contains Important Information
About The Merger With UAL Corporation.
<PAGE>
[LOGO OF US AIRWAYS GROUP, INC.]
US AIRWAYS GROUP, INC.
2345 Crystal Drive
Arlington, Virginia 22227
September 20, 2000
Dear Stockholder:
We invite you to attend a special meeting of stockholders of US Airways
Group, Inc. ("US Airways") to be held at 9:30 a.m., local time, on October 12,
2000, at the Capital Hilton Hotel, 16th & K Streets, N.W., Washington, D.C.
At the special meeting, we will ask you to adopt the merger agreement that
we entered into on May 23, 2000 with UAL Corporation pursuant to which our
company will be merged with a wholly-owned subsidiary of UAL Corporation. If
we complete the merger, you will receive $60.00 in cash for each share of US
Airways common stock you own and US Airways will become a 100% owned
subsidiary of UAL Corporation. The $60.00 per share being paid in the merger
represents a premium of approximately 130% over the $26.31 closing price of US
Airways common stock on May 23, 2000, the last trading day before we announced
the signing of the merger agreement.
We cannot complete the merger unless the conditions to closing are
satisfied, including the adoption of the merger agreement by holders of a
majority of the outstanding shares of US Airways common stock and satisfying
various regulatory requirements. We believe that efforts sufficient to satisfy
the requisite regulatory requirements can be concluded on or before January 1,
2001 and, assuming the merger agreement is adopted by the holders of a
majority of the outstanding shares of US Airways common stock, the transaction
will be consummated promptly following satisfaction of such regulatory
requirements. However, we cannot assure you that such requirements will be
satisfied or, if satisfied, when they will be satisfied.
The Board of Directors carefully reviewed and considered the terms and
conditions of the proposed merger. Based on its review, the Board of Directors
has determined that the terms of the merger agreement and the merger are
advisable and are fair to and in the best interests of US Airways and its
stockholders. In making this determination, the Board of Directors considered,
among other things, an oral opinion (which was subsequently confirmed in
writing) dated May 23, 2000 of Salomon Smith Barney Inc., the company's
financial advisors, to the effect that, as of that date and on the basis of
and subject to the matters reviewed with the Board of Directors, the $60.00
per share to be received by you in the merger was fair to you from a financial
point of view.
The Board of Directors of US Airways, based on its determination that the
merger agreement and the merger are advisable and are fair to and in the best
interests of US Airways and its stockholders, has approved the merger
agreement and the merger. Accordingly, the Board recommends that you vote
"FOR" adoption of the merger agreement.
The attached notice of special meeting and proxy statement explain the
proposed merger and merger agreement and provide specific information
concerning the special meeting. Please read these materials (including the
appendices) carefully.
Your vote is important. Whether or not you plan to attend the special
meeting, you should complete, sign, date and promptly return the enclosed
proxy card to ensure that your shares will be represented at the meeting. If
you attend the special meeting and wish to vote in person, you may withdraw
your proxy and do so.
<PAGE>
If you have any questions regarding the proposed transaction, please call
D.F. King & Co. Inc., our proxy solicitors, toll-free at 1-800-359-5559 or our
investor relations department at (703) 872-7000.
Very truly yours,
/s/ Stephen M. Wolf
Stephen M. Wolf
Chairman
This proxy statement is dated September 20, 2000 and was first mailed to US
Airways stockholders on or about September 20, 2000.
2
<PAGE>
US AIRWAYS GROUP, INC.
2345 Crystal Drive
Arlington, Virginia 22227
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 12, 2000
----------------
To the Stockholders of US Airways Group, Inc.:
A special meeting of stockholders of US Airways Group, Inc. will be held at
9:30 a.m., local time, on October 12, 2000, at the Capital Hilton Hotel, 16th
& K Streets, N.W., Washington, D.C., for the purpose of considering and voting
upon a proposal to adopt an Agreement and Plan of Merger, dated as of May 23,
2000, among US Airways Group, Inc., UAL Corporation and Yellow Jacket
Acquisition Corp., as described in the attached proxy statement. No other
matters, except upon appropriate motion a stockholder vote to adjourn the
special meeting, may be brought before the special meeting.
The US Airways Board of Directors has fixed the close of business on August
21, 2000 as the record date for determining stockholders entitled to notice
of, and to vote at, the special meeting and any adjournment or postponement of
the meeting. A list of stockholders entitled to vote at the special meeting
will be available for examination at US Airways' principal executive offices,
during ordinary business hours, from October 1, 2000 until the meeting.
If you do not vote to adopt the merger agreement and you follow the
procedural requirements of the Delaware General Corporation Law, you may
receive the fair cash value of your shares as appraised by the Delaware Court
of Chancery. See "Special Factors--Appraisal Rights of Stockholders" in the
attached proxy statement.
You should not send any certificates representing common stock with your
proxy card.
Whether or not you plan to attend the special meeting, you should complete,
sign, date and promptly return the enclosed proxy card to ensure that your
shares will be represented at the meeting. If you attend the special meeting
and wish to vote in person, you may withdraw your proxy and vote in person.
By Order of the Board Directors
Jennifer C. McGarey
Secretary
Dated: September 20, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY TERM SHEET........................................................ 1
The Parties............................................................. 1
The Special Meeting of Stockholders..................................... 1
The Merger.............................................................. 3
INFORMATION CONCERNING THE SPECIAL MEETING................................ 7
Date, Time and Place of the Special Meeting............................. 7
Purpose of the Special Meeting.......................................... 7
Record Date; Quorum; Outstanding Common Stock Entitled to Vote.......... 7
Voting Rights........................................................... 7
Voting and Revocation of Proxies........................................ 7
Solicitation of Proxies................................................. 8
Other Matters........................................................... 8
SPECIAL FACTORS........................................................... 9
Background of the Merger................................................ 9
Purpose of the Merger; Certain Effects of the Merger.................... 13
Recommendations of the Board of Directors; Reasons for the Merger....... 13
Opinion of Financial Advisor............................................ 16
Certain Estimates Provided to UAL Corporation........................... 21
Interests of Certain Persons in the Merger.............................. 23
Merger Financing; Source of Funds....................................... 25
Certain United States Federal Income Tax Consequences................... 25
Accounting Treatment.................................................... 26
Appraisal Rights of Stockholders........................................ 26
THE MERGER AGREEMENT...................................................... 28
The Merger.............................................................. 28
Representations and Warranties.......................................... 29
Certain Covenants....................................................... 30
Other Agreements of US Airways, UAL Corporation and Yellow Jacket
Acquisition Corp. ..................................................... 32
No Solicitation of Transactions......................................... 33
Employee Benefit Matters................................................ 34
Conditions to the Merger................................................ 34
Termination of the Merger Agreement..................................... 35
Termination Fees........................................................ 36
Expenses................................................................ 36
Amendment; Waiver....................................................... 37
SUMMARY OF DC AIR......................................................... 38
Competitive Presence in Washington, D.C. ............................... 38
DC Air Asset Configuration and Transition Plan.......................... 38
REGULATORY MATTERS........................................................ 40
Antitrust Considerations................................................ 40
Department of Transportation............................................ 40
Federal Aviation Administration......................................... 41
European Communities Filing............................................. 41
Other Regulatory Matters................................................ 41
CERTAIN LITIGATION........................................................ 41
PARTIES TO THE MERGER..................................................... 42
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............. 43
PRICE RANGE OF COMMON STOCK AND DIVIDENDS.................................. 45
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................. 45
OTHER INFORMATION.......................................................... 46
Proposals by Stockholders of US Airways.................................. 46
Where You Can Find More Information...................................... 46
APPENDIX A: Agreement and Plan of Merger................................... A-1
APPENDIX B: Opinion of Salomon Smith Barney Inc. .......................... B-1
APPENDIX C: Appraisal Rights Under Delaware Law............................ C-1
</TABLE>
ii
<PAGE>
SUMMARY TERM SHEET
This summary term sheet does not contain all of the information that is
important to you. You should carefully read the entire proxy statement to
fully understand the merger agreement. The merger agreement is attached as
Appendix A to this proxy statement. We encourage you to read the merger
agreement, as it is the legal document that governs the merger.
The Parties
US Airways Group, Inc.
. We are incorporated under the laws of the State of Delaware. Our executive
offices are located at 2345 Crystal Drive, Arlington, Virginia 22227. Our
telephone number is (703) 872-7000.
. We are a holding company and our principal operating subsidiary is US
Airways, Inc., a Delaware corporation, which is wholly owned. US Airways,
Inc. accounted for approximately 88% of our operating revenues on a
consolidated basis in 1999. US Airways, Inc. is a certified air carrier
engaged primarily in the business of transporting passengers, property and
mail.
. Our common stock is traded on the New York Stock Exchange under the symbol
"U."
UAL Corporation
. UAL Corporation is incorporated under the laws of the State of Delaware.
The world headquarters of UAL Corporation are located at 1200 East
Algonquin Road, Elk Grove Township, Illinois 60007. UAL Corporation's
mailing address is P.O. Box 66919, Chicago, Illinois 60666. The telephone
number for UAL Corporation is (847) 700-4000.
. UAL Corporation is a holding company and its principal subsidiary is United
Air Lines, Inc., a Delaware corporation, which is wholly owned. United Air
Lines accounted for virtually all of UAL Corporation's revenues and
expenses in 1999. United Air Lines is a major commercial air transportation
company, engaged in the transportation of passengers, property and mail
throughout the United States and abroad.
. UAL Corporation's common stock is traded on the New York Stock Exchange
under the symbol "UAL."
Yellow Jacket Acquisition Corp.
. Yellow Jacket Acquisition Corp. was formed as a Delaware Corporation on May
17, 2000 by UAL Corporation for the purpose of entering into the merger
agreement. Yellow Jacket Acquisition Corp. has not engaged in any business
activity other than in connection with the merger and the related
transactions.
The Special Meeting of Stockholders
Date, Time and Place and Matters to be Considered (page 7)
. The special meeting will be held at 9:30 a.m., local time, on October 12,
2000, at the Capital Hilton Hotel, 16th & K Streets, N.W., Washington, D.C.
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the merger agreement, a copy of which is attached hereto
as Appendix A.
1
<PAGE>
Record Date for Voting (page 7)
. The close of business on August 21, 2000 is the record date for determining
holders of shares of our common stock entitled to vote at the special
meeting. Each share of common stock will be entitled to one vote. On the
record date, there were 67,062,027 shares entitled to vote at the special
meeting.
The Procedures Relating to Your Vote at the Meeting; Appraisal Rights (pages
7-8, 26-27):
. You should complete, date and sign your proxy card and mail it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting, even if you plan to attend the meeting
in person. Unless contrary instructions are indicated on your proxy, all of
your shares represented by valid proxies will be voted FOR the adoption of
the merger agreement.
. For those participants who hold shares in the US Airways, Inc. Employee
Stock Ownership Plan, the US Airways, Inc. Employee Savings Plan, the US
Airways, Inc. 401(k) Savings Plan or the Supplemental Retirement Plan of
Piedmont Aviation, Inc., you should fill in and sign your proxy card and
mail it in time to be received no later than October 10, 2000 in order to
be voted in a timely manner by the administrator of these plans. In
accordance with these plans, you may not vote these shares in person at the
special meeting.
. If your shares are held in "street name" by your broker, your broker will
vote your shares only if you provide instructions on how to vote. You
should follow the procedures provided by your broker regarding the voting
of your shares.
. You are entitled to exercise appraisal rights in connection with the
merger. If you elect to exercise appraisal rights, you must deliver to us,
before the stockholder vote to adopt the merger agreement is taken, written
notice of your intent to demand appraisal of your shares if the merger is
completed, and you must not vote to adopt the merger agreement. Neither a
failure to vote on the merger agreement, nor an abstention from voting on
the merger agreement, will be construed as a vote to adopt the merger
agreement. However, if you return your signed proxy left blank, your vote
will be counted in favor of the merger agreement, and you will waive your
appraisal right.
. In order for the merger to be consummated the merger agreement must be
adopted by the affirmative vote of the holders of a majority of the
outstanding shares of our common stock. If you do not send in your proxy or
do not instruct your broker to vote your shares or if you abstain from
voting, it will have the same effect as a vote against the merger.
. You can revoke your proxy and change your vote in any of the following
ways:
. deliver to our Secretary at our executive offices, 2345 Crystal Drive,
Arlington, Virginia 22227, on or before the business day prior to the
special meeting, a later-dated, signed proxy card or a written
revocation.
. deliver a later-dated, signed proxy card or a written revocation to us
at the special meeting.
. attend the special meeting and vote in person. Your attendance at the
meeting will not, by itself, revoke your proxy.
. if you have instructed a broker to vote your shares, you must follow the
directions received from your broker to change those instructions.
. if you hold your shares in the employee plans of our company or our
subsidiaries, instructions cannot be revoked after October 10, 2000.
. Please do not send us any of your stock certificates at this time. If the
merger is completed, we will send you written instructions for exchanging
your stock certificates for the merger consideration.
2
<PAGE>
The Merger
What You will Receive in the Merger
. You will receive $60.00 per share in cash in exchange for each share of our
common stock that you own. The merger price represents a 130% premium over
the $26.31 per share closing price of our common stock on May 23, 2000, the
last trading day before we announced the signing of the merger agreement.
Background of the Merger (pages 9-15)
. For a description of the events leading to the approval of the merger by
the Board and the reasons for such approval, you should refer to "Special
Factors--Background of the Merger" and "--Recommendations of the Board of
Directors; Reasons for the Merger."
Purpose of the Merger; Certain Effects of the Merger (page 13)
. The principal purpose of the merger is to enable UAL Corporation, the
parent corporation of United Air Lines, Inc., to own all of the equity
interests in our company and provide you the opportunity to receive a cash
price for your shares at a significant premium over the market prices at
which the common stock traded before announcement of the merger agreement.
. The merger will terminate all equity interests in our company held by
public stockholders, and UAL Corporation will be the sole beneficiary of
any earnings and growth of our company following the merger.
. Upon completion of the merger, our common stock will be delisted from the
New York Stock Exchange and will no longer be publicly traded.
Recommendations of the Board; Reasons for the Merger (pages 13-15)
. The Board has determined that the merger agreement and the merger are
advisable and are fair to you and in your and our best interests and
recommends that you vote "FOR" adoption of the merger agreement. In making
this determination, the Board took into account, among other things, the
oral opinion (which was subsequently confirmed in writing) dated May 23,
2000 of our financial advisor Salomon Smith Barney Inc. that, as of that
date and on the basis of and subject to the matters reviewed with the
Board, the $60.00 per share to be received by you in the merger was fair to
you from a financial point of view.
Opinions of Salomon Smith Barney Inc. (pages 16-21)
. Salomon Smith Barney Inc. delivered an oral opinion (which was subsequently
confirmed in writing) dated May 23, 2000 to the Board that, as of that date
and on the basis of and subject to the matters reviewed with the Board, the
consideration to be received by you in the merger was fair to you from a
financial point of view. We have attached a copy of the opinion as Appendix
B to this proxy statement.
. The opinion of Salomon Smith Barney Inc. is addressed to the Board, does
not address any other aspect of the merger and does not constitute a
recommendation as to how you should vote at the special meeting.
Interests of Certain Persons in the Merger (pages 23-25)
. In considering the recommendation of the Board of Directors with respect to
the merger, stockholders should be aware that the executive officers and
directors of the Company have some interests in the merger that may be
different from, or in addition to, the interests of stockholders generally.
Specifically, (1) each of our executive officers is party to an employment
or severance agreement with us which provides for certain benefits upon
certain terminations of employment following the date of our stockholders'
adoption of the
3
<PAGE>
merger agreement (the value of the severance potentially payable to all
executive officers in the aggregate being approximately $33.9 million), (2)
upon consummation of the merger, each executive officer will receive a cash
payment with respect to each three-year performance cycle then outstanding
under our Long Term Incentive Plan (the value of such payments to all
executive officers in the aggregate being approximately $13.8 million), (3)
the annual retirement benefit payable pursuant to supplemental pension
agreements we have entered into with certain of our executive officers will
increase if the merger is consummated (the increase in such benefits to all
executive officers in the aggregate being approximately $1 million), (4)
unvested stock options held by our executive officers will become vested
and exercisable upon our stockholders' adoption of the merger agreement
(the value of all such options in the aggregate (based upon a share price
of $60.00 less the applicable exercise price per share) being approximately
$15.3 million) and (5) certain shares of restricted stock held by executive
officers will vest at various times at or prior to consummation of the
merger (the aggregate value of all such shares held by all executive
officers (based upon a share price of $60.00) being approximately $56.3
million). The Board of Directors was aware of these interests and
considered them, among other matters, in making its recommendation. See
"Interests of Certain Persons in the Merger."
Merger Financing; Source of Funds (page 25)
. UAL Corporation has informed us that the aggregate merger consideration of
approximately $4.28 billion to be paid to our stockholders (assuming that
no stockholders perfect their appraisal rights under Delaware law) will be
financed through existing and new debt facilities and cash on hand. UAL
Corporation believes that it will be able to obtain any new debt facilities
needed to finance the merger.
Conditions to the Merger (pages 34-35)
. Each party's obligation to complete the merger is subject to a number of
conditions, including the following:
. adoption by our stockholders of the merger agreement;
. the absence of any law, order or injunction prohibiting the merger; and
. the expiration or termination of the waiting period under the Hart-
Scott-Rodino Act and the receipt of any other necessary approvals or
clearances under applicable competition, merger control, antitrust or
similar law or regulation.
. The obligations of UAL Corporation and Yellow Jacket Acquisition Corp. to
complete the merger are subject to certain additional conditions, including
the following:
. the absence of any legal restraint that has the effect of (i)
prohibiting or limiting in any material respect the ownership or
operation of a material portion of our or UAL Corporation's business,
(ii) prohibiting UAL Corporation from controlling in any material
respect a substantial portion of our business or operations or (iii)
imposing material limitations on UAL Corporation's ability to acquire,
hold or exercise full rights of ownership of shares of our common stock;
and
. we or UAL Corporation having obtained (i) all material consents,
approvals or authorizations of governmental entities legally required in
connection with the merger agreement or the transactions contemplated by
the merger agreement and (ii) all other governmental or third party
consents, approvals or authorizations required in connection with the
merger agreement, except, in the case of clause (ii), for those the
failure of which to be obtained would not be expected to have a material
adverse effect on us or prevent or materially impede or delay
consummation of the merger.
. The obligations of UAL Corporation and Yellow Jacket Acquisition Corp. to
complete the merger are not subject to a financing condition or any
additional corporate proceedings by UAL Corporation or Yellow Jacket
Acquisition Corp., including the approval of their stockholders.
4
<PAGE>
Regulatory Filings and Approvals (pages 40-41)
. We must make filings with and receive approvals of various federal and
foreign regulatory agencies before the merger can be completed. At the
federal level, filings must be made with, and approvals must be obtained
from, the Department of Transportation and the Federal Aviation
Administration and the waiting period under the Hart-Scott-Rodino Act must
have either expired or been terminated. The parties are also required to
obtain approval of the transaction from the European Commission.
. Both we and UAL Corporation have received inquiries from a number of state
antitrust authorities and are cooperating with their investigations. While
no formal state approvals are required, as is the case with other private
litigants, the state authorities have the capacity to seek judicial
injunctions under the federal antitrust laws.
. We believe that efforts sufficient to satisfy the requisite regulatory
requirements can be concluded on or before January 1, 2001 and, assuming
the merger agreement is adopted by the holders of a majority of our
outstanding shares of common stock, the transaction will be consummated
promptly following satisfaction of such regulatory requirements. However,
we cannot assure you that such requirements will be satisfied or, if
satisfied, the date by which they will be satisfied.
Termination of the Merger Agreement (pages 35-36)
. The merger agreement may be terminated, whether before or after receiving
stockholder approval, without completing the merger, under certain
circumstances, including the following:
. by mutual consent of the parties;
. by us or UAL Corporation if the merger is not consummated by December
31, 2000; provided, however, that either party may extend this deadline
to August 1, 2001 if, by December 31, 2000, all conditions to
consummation of the merger are fulfilled, except the adoption of the
merger agreement by our stockholders, the receipt of regulatory
approvals or consents or the absence of a legal restraint;
. by us or UAL Corporation if any law or court order prohibiting the
merger becomes final and cannot be appealed, so long as a breach by the
party seeking to terminate is not the principal reason for such event
having occurred;
. by us or UAL Corporation if our stockholders do not adopt the merger
agreement;
. by UAL Corporation if our Board withdraws or modifies, in a manner
adverse to UAL Corporation, the Board's recommendation or declaration of
the advisability of the merger agreement or the merger or recommends an
alternative transaction;
. by UAL Corporation if (A) any legal restraint shall have become final
and nonappealable that has the effect of (i) prohibiting or limiting in
any material respect the ownership or operation of a material portion of
the business of US Airways or UAL Corporation, (ii) prohibiting UAL
Corporation from controlling in any material respect a substantial
portion of the business or operations of US Airways or (iii) imposing
material limitations on UAL Corporation's ability to acquire, hold or
exercise full rights of ownership of shares of our common stock and (B)
a breach by UAL Corporation is not the primary reason that such event
occurred; or
. by us, at any time prior to obtaining stockholder approval, in response
to an unsolicited bona fide binding written offer made by a third party
to acquire more than 50% of our common stock or all or substantially all
our assets for consideration that our Board determines in its good faith
judgment to be superior for our stockholders, provided that we have
complied in all material respects with the no solicitation covenant of
the merger agreement and we have paid the applicable termination fee and
expense reimbursement amount to UAL Corporation and we concurrently
enter into an acquisition agreement with a third party.
5
<PAGE>
Termination Fee Payable to UAL Corporation (page 36)
. We are required to pay to UAL Corporation a termination fee of $150
million, plus up to a maximum of $10 million for reimbursement of UAL
Corporation's expenses, if:
. the merger agreement is terminated under circumstances where:
--the termination was due to (i) our stockholders failing to adopt the
merger or (ii) the merger agreement failing to be completed by the
applicable termination date;
--prior to such termination, a third party made a proposal to acquire
20% or more of our common stock or a business constituting 20% or more
of our total revenue, operating income, earnings before interest,
taxes, depreciation and amortization (EBITDA) or assets; and
--within 12 months of such termination, we consummate or enter into an
agreement with a third party providing for the acquisition of 40% or
more of our common stock or a business constituting 40% or more of our
total revenue, operating income, earnings before interest, taxes,
depreciation and amortization (EBITDA) or assets;
. the merger agreement is terminated by UAL Corporation because our Board
withdraws or modifies, in a manner adverse to UAL Corporation, its
recommendation or declaration of the advisability of the merger
agreement or the merger or recommends any alternative transaction; or
. the merger agreement is terminated by us in response to an unsolicited
bona fide binding written offer made by a third party to acquire more
than 50% of our common stock or all or substantially all our assets for
consideration that our Board determines in its good faith judgment to be
superior for our stockholders.
Termination Fee Payable to US Airways (page 36)
. UAL Corporation is required to pay us a termination fee of $50 million in
the event the merger agreement is terminated for any reason other than (i)
our Board's withdrawal or modification, in a manner adverse to UAL
Corporation, of its recommendation or declaration of the advisability of
the merger agreement or the merger or recommendation of an alternative
transaction, (ii) our material breach of our representations, warranties,
or covenants, or (iii) our termination in response to an unsolicited
binding written offer made by a third party for consideration that our
Board determines in its good faith judgment to be superior to our
stockholders. This fee will have to be repaid by us to UAL Corporation if
subsequent to such termination, UAL Corporation becomes entitled to receive
a termination fee as described above under "--Termination Fee Payable to
UAL Corporation."
Certain United States Federal Income Tax Consequences (pages 25-26)
. The receipt of cash for shares pursuant to the merger will be a taxable
transaction for United States federal income tax purposes and possibly for
state, local and foreign income tax purposes as well. In general, a
stockholder who receives cash in exchange for shares pursuant to the
proposed merger will recognize gain or loss for United States federal
income tax purposes equal to the difference, if any, between the amount of
cash received and the stockholder's adjusted tax basis in the shares
exchanged for cash pursuant to the merger. If the shares exchanged
constitute capital assets in the hands of the stockholder, such gain or
loss will be capital gain or loss. In general, capital gains recognized by
an individual will be subject to a maximum United States federal income tax
rate of 20% if the shares were held for more than one year, and if held for
one year or less they will be subject to tax at ordinary income tax rates.
You should consult your tax advisor as to the tax consequences to you of
the merger in your particular circumstances.
Additional Information
. If you have additional questions about the merger or would like additional
copies of the proxy statement, you should call our proxy solicitors, D.F.
King & Co. Inc., toll-free at (800) 359-5559 or our investor relations
department at (703) 872-7000.
6
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
Date, Time and Place of the Special Meeting
This proxy statement is furnished to you in connection with the solicitation
of proxies by our Board of Directors for the meeting of stockholders to be
held at 9:30 a.m., local time, on October 12, 2000, at the Capital Hilton
Hotel, 16th & K Streets, N.W., Washington, D.C. or any postponement or
adjournment of the meeting. This proxy statement, the Notice of Special
Meeting and the accompanying form of proxy card are first being mailed to
stockholders on or about September 20, 2000.
Purpose of the Special Meeting
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the merger agreement.
Record Date; Quorum; Outstanding Common Stock Entitled to Vote
All record holders of shares of our common stock at the close of business on
August 21, 2000 are entitled to notice of, and to vote at, the special
meeting. The presence, in person or by proxy, of holders of a majority of the
outstanding shares of common stock is required to constitute a quorum for the
transaction of business. A list of record holders will be available for
examination at our principal executive offices from October 1, 2000 until the
special meeting. At the close of business on August 21, 2000 there were
67,062,027 shares of US Airways common stock outstanding.
Voting Rights
You are entitled to one vote for each share of common stock that you held as
of the close of business on the record date. The affirmative vote of the
holders of a majority of the outstanding shares of our common stock is
required to adopt the merger agreement. Under Delaware law, in determining
whether adoption of the merger agreement has received the requisite number of
affirmative votes, abstentions and broker non-votes will have the same effect
as a vote against adoption of the merger agreement.
Voting and Revocation of Proxies
A form of proxy card for your use at the special meeting accompanies this
proxy statement. Subject to the following sentence, all properly executed
proxies that are received prior to or at the special meeting and not revoked
will be voted at the special meeting in the manner specified. If you hold
shares in the US Airways, Inc. Employee Stock Ownership Plan, the US Airways,
Inc. Employee Savings Plan, the US Airways, Inc. 401(k) Savings Plan or the
Supplemental Retirement Plan of Piedmont Aviation, Inc., your proxies must be
received no later than October 10, 2000, in order to be voted in a timely
manner by the administrator of these plans. If you execute and return a proxy
and do not specify otherwise, the shares represented by your proxy will be
voted "FOR" adoption of the merger agreement in accordance with the
recommendation of the Board. In that event, you will not have the right to
dissent from the merger and seek an appraisal of the fair value of your
shares.
If you have given a proxy pursuant to this solicitation, you may nonetheless
revoke it by attending the special meeting and voting in person. In addition,
you may revoke any proxy you give at any time before the special meeting by
delivering to our Secretary at our executive offices, on or before the
business day prior to the special meeting, or at the special meeting itself, a
written statement revoking it or a duly executed proxy bearing a later date.
If you hold your shares in the employee plans of our company or our
subsidiaries, you may not vote these shares in person at the special meeting.
In addition, if you hold your shares in these plans, after October 10, 2000,
your instructions with respect to these shares may not be revoked. If you have
executed and delivered a proxy to us, your attendance at the special meeting
will not in and of itself constitute a revocation of your proxy. If you vote
in favor of adopting the merger agreement, you will not have the right to
dissent and seek appraisal of the fair value of your shares. If you do not
send in your proxy or do not instruct your broker to vote your shares or if
you abstain from voting, it will have the same effect as a vote against the
adoption of the merger agreement.
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Solicitation of Proxies
We will bear the cost of the solicitation of proxies. We will solicit
proxies initially by mail. Further solicitation may be made by our directors,
officers and employees personally, by telephone or otherwise, but they will
not be specifically compensated for these services. Upon request, we will
reimburse brokers, dealers, banks or similar entities acting as nominees for
their reasonable expenses incurred in forwarding copies of the proxy materials
to the beneficial owners of the shares of common stock they hold of record. We
have retained D.F. King & Co. Inc. to coordinate the solicitation of proxies
for a fee of $17,500.
Other Matters
Except for the vote on the merger agreement, and upon appropriate motion, an
adjournment of the special meeting, no other matters may come before the
special meeting.
Your vote is important. Please return your marked proxy card promptly so
your shares can be represented at the meeting, even if you plan to attend the
meeting in person.
You should not send any certificates representing common stock with your
proxy card. If we complete the merger, the procedure for the exchange of
certificates representing common stock will be as described on page 28 of this
proxy statement.
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SPECIAL FACTORS
Background of the Merger
Representatives of US Airways have from time to time engaged in discussions
with representatives of other airlines, including UAL Corporation, regarding
possible strategic transactions. At a business meeting in the fall 1999, Mr.
James E. Goodwin, Chairman and Chief Executive Officer of UAL Corporation,
informed Mr. Stephen M. Wolf, our Chairman, that UAL Corporation might be
interested in commencing discussions regarding the possible acquisition of our
company by UAL Corporation. No further substantive communications occurred
until early February 2000, when Mr. Goodwin informed Mr. Wolf that UAL
Corporation was prepared to commence discussions regarding a potential
acquisition of our company. Mr. Goodwin also indicated an interest in engaging
in discussions with Tiger Management L.L.C., Tiger Performance L.L.C. and Mr.
Julian H. Robertson (collectively, "Tiger Management"), each of whom is a
stockholder of our company and collectively hold a substantial economic and
voting interest in our company.
On February 17, 2000, we entered into a confidentiality agreement with Tiger
Management. Following execution of the confidentiality agreement, our
representatives discussed with representatives of Tiger Management the content
of our preliminary discussions with representatives of UAL Corporation
regarding a potential acquisition of our company.
On March 3, 2000, we entered into a confidentiality agreement with UAL
Corporation which provided, among other things, that certain information
disclosed by either party would be held by the other party and its
representatives in strict confidence and that the parties would negotiate
exclusively with each other for a period of up to six weeks with respect to a
possible business combination transaction. The decision to engage in exclusive
negotiations with UAL Corporation was based on our view that UAL Corporation
was very interested in entering into a business combination transaction with
us, that UAL Corporation would not have engaged in negotiations with us on
other than an exclusive basis, that there were limited alternative prospects
and that, if a definitive agreement was reached, the definitive agreement
would provide that other interested parties would have an opportunity to make
a superior proposal for a business combination transaction. Tiger Management
agreed to be bound by the terms of the confidentiality agreement between us
and UAL Corporation.
On March 4, 2000, UAL Corporation delivered to us a transaction term sheet
that outlined the preliminary terms and structure of the transaction
contemplated by UAL Corporation. The term sheet contemplated, among other
things, a one-step all cash merger at a price per share that was not
identified and provisions with respect to the following:
. efforts to be taken by UAL Corporation to obtain antitrust clearance for
the merger, including the divestiture of certain of our assets located
at Reagan Washington National Airport;
. the grant of an option to UAL Corporation to acquire the US Airways
Shuttle business and certain unspecified slots in the event the merger
agreement was terminated under circumstances where UAL Corporation is
entitled to receive a termination fee and a takeover proposal relating
to our company made prior to the date that is 18 months after the
termination of the merger agreement is consummated;
. restrictions on our ability to solicit or negotiate with other potential
acquirors unless we receive a third party proposal reasonably likely to
lead to a proposal for the acquisition of our company for consideration
consisting of cash and/or securities that the Board determined to be of
higher value than the consideration to be paid in the merger;
. our right to terminate an acquisition agreement with UAL Corporation,
subject to certain restrictions, in order to enter into an acquisition
transaction with a third party that provided for consideration of higher
value than that payable in the merger;
. a termination fee of 3.5% of the equity value of our company and
expenses of up to $10,000,000 to be paid to UAL Corporation if (i) we
terminated the agreement to enter into an acquisition proposal providing
higher value, (ii) UAL Corporation terminated the agreement as a result
of our Board's
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failure to confirm its recommendation or (iii) following the making of a
third party acquisition proposal, the agreement was terminated for
failure to obtain stockholder approval or failure to close by September
30, 2001, and we entered into an agreement for, or consummated, an
acquisition proposal within 18 months of such termination;
. covenants with respect to the conduct of our business in the ordinary
course and restricting our ability to issue or repurchase securities,
make or exercise options with respect to new aircraft orders, acquire or
dispose of assets, incur or repay debt or make changes to executive
compensation;
. the right of the parties to terminate (i) on or after September 30, 2001
if the merger had not been consummated, (ii) if stockholder approval is
not obtained or (iii) if any permanent legal restraint prohibits the
merger; and
. conditions to each of the parties' obligations to proceed with the
merger including, among others, termination of antitrust waiting
periods, receipt of the approval of our stockholders and the absence of
a material adverse effect.
The term sheet also contemplated UAL Corporation entering into a stockholder
agreement with Tiger Management pursuant to which Tiger Management would vote
in favor of the proposed merger and agree to share with UAL Corporation its
profits resulting from any consideration received by Tiger Management in a
business combination transaction involving US Airways in excess of the
consideration to be paid in the merger with UAL Corporation described in this
proxy statement, including a transaction involving UAL Corporation at a higher
price. Concurrent with its discussions with us, representatives of UAL
Corporation also engaged in preliminary discussions with representatives of
Tiger Management about the proposed transaction and the possibility of
entering into a stockholder agreement with Tiger Management upon the terms
described above. In addition to the matters identified in the transaction term
sheet, UAL Corporation proposed a plan for integrating the pilot groups of
both companies.
In order to facilitate further discussions between the parties, beginning in
mid-March 2000, we began providing UAL Corporation and its legal counsel with
certain confidential information regarding our company for use in connection
with its due diligence review.
On March 30, 2000, UAL Corporation delivered drafts of the merger agreement,
a stockholder agreement with Tiger Management and the option agreements
involving the US Airways Shuttle and an unspecified group of slots. The merger
agreement delivered on March 30, 2000 contained terms which were consistent in
all material respects with the terms set forth in the transaction term sheet
delivered to us by UAL Corporation on March 4, 2000, the terms of which are
summarized on pages 9 and 10 above. In addition, the merger agreement
delivered on such date contained representations and warranties, covenants and
other provisions with respect to us and our subsidiaries similar to such
provisions which are often included in transactions of this type.
On March 31, 2000, we and UAL Corporation entered into an agreement to
extend the term of the exclusivity provision of the confidentiality agreement
from April 14, 2000, the scheduled termination date, through May 15, 2000.
During March and April 2000, we and UAL Corporation held a number of
meetings to discuss the terms of the proposed transaction documents and
exchanged various drafts and redrafts of the proposed merger agreement. The
negotiations during this period highlighted significant issues for both
parties. In particular, the following issues were among those discussed and,
in some cases, remained open up until a day or two before the merger agreement
was signed:
. the price per share that would be paid by UAL Corporation, which it was
understood would be at a premium to the then current market price of our
shares, but without reference to a specific amount;
. the composition of the assets that UAL Corporation would agree to divest
and the level of efforts that would have to be taken by UAL Corporation
to obtain regulatory approval for the transaction;
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. the grant of an option to UAL Corporation to purchase assets relating to
the US Airways Shuttle and certain unspecified slots if the merger is
not consummated under certain circumstances, which option was not
included in the final terms of the transaction documents;
. restrictions on our ability to solicit or entertain competing proposals
and the fiduciary exceptions applicable to such restrictions;
. the amount of a termination fee to be paid to UAL Corporation in the
event the transaction is not consummated under certain circumstances;
. the payment of a termination fee to us in the event that the transaction
is not consummated under certain circumstances;
. the pre-merger operating covenants applicable to us;
. the outside termination date after which either party may terminate the
merger agreement if the merger is not consummated;
. the integration of the pilot groups of both companies; and
. provisions relating to the treatment of our employees during the period
prior to, and following, the merger.
In addition, during this period the parties discussed various other matters,
including a public commitment by UAL Corporation that for a certain period
following the merger it would not increase United States point-to-point
structure fares (subject to certain exceptions) or reduce domestic standard
base travel agency commission rates.
Representatives of UAL Corporation also engaged in discussions with
representatives of Tiger Management during this period.
Our negotiations with UAL Corporation contemplated that UAL Corporation
would pay a price based upon the value of our entire business. It was
recognized that UAL Corporation would need to dispose of certain assets to
secure regulatory approval and that UAL Corporation, rather than our
stockholders, would receive any and all proceeds from such dispositions.
During discussions among our senior management regarding the disposition of
the assets contemplated to be divested by UAL Corporation upon consummation of
the merger, it was suggested that Mr. Robert Johnson, who is a successful
Washington business person, be approached to determine if he would be
interested in purchasing these assets. Mr. Johnson also is a member of our
Board. In mid-April 2000, Mr. Wolf inquired of Mr. Johnson as to whether he
would consider acquiring certain of our assets associated with our operations
at the Reagan Washington National Airport that would be divested by UAL
Corporation if the proposed acquisition of our company by UAL Corporation is
consummated. Mr. Johnson agreed to consider the acquisition and informed Mr.
Wolf that he would engage his advisors to review the feasibility of such an
acquisition. Shortly thereafter, we informed UAL Corporation of Mr. Johnson's
interest. Mr. Johnson was suggested as the purchaser of these assets because
we and UAL Corporation believed that he would be able to establish a
successful, independent operation using the assets to be divested as a result
of his standing in the Washington, D.C. community and his record as a business
person.
On April 24, 2000, a meeting of our Board of Directors was held at which the
Board was informed by management of the status of negotiations with UAL
Corporation and the open issues that remained to be resolved between the
parties and was apprised by its outside corporate counsel, Skadden, Arps,
Slate, Meagher & Flom LLP, of its fiduciary duties with respect to its review
of the proposed transaction. Previously, Mr. Wolf had held discussions
concerning the merger with directors who are members of the Executive
Committee of the Board.
Commencing in early May, 2000, drafts of a memorandum of understanding among
UAL Corporation, Mr. Johnson and us were provided that set forth the terms of
a proposed sale, to an entity to be established by Mr. Johnson, of certain
assets expected to be divested by UAL Corporation in connection with
consummation of the merger, including a description of certain related
matters. The parties engaged in extensive negotiations with respect to the
terms of the memorandum of understanding over the course of the following
weeks.
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Our representatives met with representatives of UAL Corporation on several
occasions in early May 2000, to try to resolve the remaining open issues
regarding the transaction documents. Also during this time, Mr. Wolf and other
representatives of our company engaged in discussions with representatives of
Tiger Management regarding the status of the stockholder agreement. Although
Tiger Management and UAL Corporation had agreed that the stockholder agreement
would not require Tiger Management to vote in favor of the proposed merger,
the parties continued to negotiate a number of issues, including the portion
of Tiger Management's profits resulting from any consideration received by
Tiger Management in a business combination transaction involving US Airways in
excess of the consideration to be paid in the merger by UAL Corporation that
it would have to share with UAL Corporation, and the payment of a fee to Tiger
Management by UAL Corporation in connection with the stockholder agreement.
The final negotiations were scheduled for the weekend of May 20, 2000, at
which time UAL Corporation was not able to reach an agreement with Tiger
Management regarding the terms of the stockholder agreement, including the
profit sharing provisions and the amount of the fee to be paid to Tiger
Management by UAL Corporation in connection with the stockholder agreement. As
a result, on May 22, 2000, UAL Corporation terminated discussions with Tiger
Management and determined to proceed with the transaction with us without
entering into a separate stockholder agreement with Tiger Management.
One of the issues resolved on May 22, 2000 was the price per share that
would be paid by UAL Corporation to our stockholders in connection with the
merger. Although there had been earlier discussions between the parties that
contemplated higher and lower per share prices to our stockholders, following
the failure of UAL Corporation to secure a stockholder agreement with Tiger
Management, the parties agreed to a per share transaction price of $60.00.
Also during the weekend of May 20, 2000, we, UAL Corporation, and Mr.
Johnson reached agreement on the terms of a memorandum of understanding with
respect to the acquisition by an entity to be established by Mr. Johnson of
certain assets located at Reagan Washington National Airport that are to be
divested by UAL Corporation upon consummation of the merger.
A meeting of our Board of Directors was held on Tuesday, May 23, 2000, to
review the terms of the proposed transaction. At the meeting, the Board
received presentations from management regarding the transaction and its
effects on us, our stockholders, our employees and the communities and
customers we serve, the advice of its legal counsel regarding the structure of
the transaction and the Board's fiduciary duties, and an oral opinion (which
was subsequently confirmed in writing) of Salomon Smith Barney Inc., our
financial advisor, that, as of that date and on the basis of and subject to
the matters reviewed with the Board, the $60.00 per share offer price was fair
from a financial point of view to our stockholders. The Board, with the
benefit of the foregoing presentations and advice, having deliberated
regarding the terms of the proposed transaction, unanimously (with Mr. Johnson
abstaining) determined that the merger agreement and the merger are advisable
and are fair to and in the best interest of us and our stockholders and
unanimously (with Mr. Johnson abstaining) approved the merger agreement, the
merger and the transactions contemplated thereby. The Board also unanimously
(with Mr. Johnson abstaining) approved the memorandum of understanding with
Mr. Johnson. Mr. Johnson, having an interest in the disposition of certain
assets at the Reagan Washington National Airport in connection with the merger
and related transactions, abstained from voting on the merger, the merger
agreement, the memorandum of understanding and related matters presented to
the Board.
On the evening of May 23, 2000, we and UAL Corporation executed the
agreement and plan of merger and we, UAL Corporation, and Mr. Johnson executed
the memorandum of understanding. We and UAL Corporation issued a press release
regarding the execution of the transaction documents on the morning of May 24,
2000 and conducted a joint press conference regarding the transaction on the
same morning.
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Subsequent Event
During the summer of 2000, we engaged in communications with unions
representing our employee groups concerning issues relating to the merger. In
connection with these communications, the groups representing our pilots,
flight attendants and passenger service workers asserted that UAL Corporation
is obligated to assume the collective bargaining agreements relating to each
of these unions as a condition in the merger agreement to the merger. UAL
Corporation has informed us that it will ensure that all of the obligations
under collective bargaining agreements will be complied with.
Purpose of the Merger; Certain Effects of the Merger
The principal purpose of the merger is to enable UAL Corporation to own all
of the equity interest in US Airways and afford our public stockholders the
opportunity to receive a cash price for their shares that represents a
significant premium over the market price at which the shares traded prior to
the announcement of the merger. This will be accomplished by a merger of
Yellow Jacket Acquisition Corp., a corporation formed by UAL Corporation,
parent company of United Air Lines, Inc., with and into US Airways, with US
Airways as the surviving corporation. In the merger, all of the shares of US
Airways common stock held by our stockholders (other than US Airways, UAL
Corporation and Yellow Jacket Acquisition Corp. and other than dissenting
stockholders who perfect their appraisal rights) will be converted into the
right to receive the cash merger consideration of $60.00 per share.
The merger will terminate all equity interests in US Airways held by
stockholders and UAL Corporation will be the sole beneficiary of any earnings
and growth of US Airways following the merger. Our common stock is currently
registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and is listed for trading on the New York Stock Exchange
under the symbol "U." Upon the completion of the merger, our common stock will
be delisted from the exchange and registration of our common stock under the
Exchange Act will be terminated.
Recommendations of the Board of Directors; Reasons for the Merger
Recommendations of the Board of Directors
On May 23, 2000, the Board determined that the terms of the merger agreement
and the merger are advisable and are fair to and in the best interests of us
and our stockholders and approved the merger agreement and the merger.
Accordingly, the Board recommends that our stockholders vote "FOR" the
adoption of the merger agreement.
Reasons for the Merger
In determining to approve and recommend the merger, and in reaching its
determination that the merger agreement and the merger are advisable and are
fair to and in the best interests of us and our stockholders, the Board of
Directors consulted with US Airways' executive officers and our financial and
legal advisors, and considered a number of favorable and unfavorable
characteristics associated with the merger agreement and the transactions
contemplated thereby. In reaching its decision, the Board of Directors
considered the following potentially positive factors:
. our knowledge of the current, and our beliefs about the prospective,
environment in which we operate, including domestic and global economic
conditions, volatility of and competition in the airline industries and
the impact of these factors on our opportunities as a stand-alone entity
and the uncertainty that we could achieve a greater value as an
independent entity;
. the strategic options available to us and the Board's assessment that
none of these options were reasonably likely to present superior
opportunities, or were reasonably likely to create greater value for our
stockholders, than the prospects presented by the merger;
. the fact that the merger consideration on a per share basis represented
a significant premium over recently prevailing market prices of our
common stock;
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. the oral opinion of Salomon Smith Barney Inc. given to the Board on May
23, 2000 (and subsequently confirmed in writing) that, as of that date
and on the basis of and subject to the matters reviewed with the Board,
the $60.00 per share merger consideration was fair from a financial
point of view to our stockholders;
. the terms of the merger and the merger agreement as negotiated,
including:
(1) the $60.00 per share cash merger consideration;
(2) the agreement by UAL Corporation to divest certain assets located
at Reagan Washington National Airport and to make certain efforts
to obtain antitrust approval, including all reasonable efforts to
take all actions that are necessary, proper or advisable to
consummate the merger;
(3) the absence of any option in favor of UAL Corporation to acquire
our shuttle business or any of our slots in the event the merger
agreement is terminated;
(4) the absence of a condition to the consummation of the merger
relating to the integration of the pilot groups of both
companies;
(5) our ability to entertain other potential acquisition proposals if
certain conditions are satisfied, including that the acquisition
proposal is unsolicited and involves consideration that the Board
determines in its good faith judgment to be superior from a
financial view to stockholders than the consideration to be paid
in the merger;
(6) our right to terminate the merger agreement prior to obtaining
stockholder approval in order to enter into an acquisition
transaction with a third party that provides for consideration
that the Board determines in its good faith judgment to be
superior from a financial view to stockholders than that payable
in the merger;
(7) the ability of the Board to change its recommendation if it
determines in good faith, based on such matters as it deems
appropriate, after consulting with legal counsel, that the
failure to take such action would be reasonably likely to result
in a breach of its fiduciary duties under applicable law;
(8) the $50,000,000 termination fee payable by UAL Corporation if the
merger agreement is terminated under certain circumstances more
fully described in the section entitled "Summary of the Merger
Agreement--Termination Fees" on page 36;
(9) the provisions concerning attraction and retention of employees
prior to the merger;
(10) the right of the parties to terminate the merger agreement (a) on
December 31, 2000 if the merger is not consummated, which
deadline may be extended to August 1, 2001 by either party if all
conditions other than the adoption of the merger agreement by our
stockholders, the receipt of regulatory approval or consents or
the absence of a legal restraint, have been fulfilled by December
31, 2000 or (b) if stockholder approval is not obtained or if any
legal restraint prohibiting the merger becomes final and cannot
be appealed;
(11) the conditions of each of the parties obligations to complete the
merger, including the expiration or termination of antitrust
waiting periods, the receipt of the approval of our stockholders
and the absence of a material adverse effect; and
(12) the agreement by UAL Corporation to offer continued employment to
all of our and our subsidiaries' employees (other than officers)
for two years following the merger, subject to certain
exceptions.
. the fact that a stockholder agreement was not entered into between Tiger
Management, our largest stockholder, and UAL Corporation creating a
greater opportunity for a third party to present a proposal which is
superior to our stockholders;
. the terms of the memorandum of understanding among us, Mr. Johnson and
UAL Corporation which the Board believes, based on the creation of a new
air carrier by Mr. Johnson in connection with the acquisition by an
entity to be formed by Mr. Johnson of certain assets located at Reagan
Washington
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National Airport that are to be divested by UAL Corporation upon the
consummation of the merger, would significantly enhance the probability
that the merger would receive regulatory approval;
. the decision by UAL Corporation to announce that it would not increase
United States point-to-point structure fares for two years following the
merger, with exceptions only for increases in fuel costs and consumer
price index, and that it would not reduce domestic standard base travel
agency commission rates for two years following the merger;
. the likelihood that the merger would be approved by requisite regulatory
authorities;
. future career opportunities that our employees may have with UAL
Corporation following the merger; and
. the potential impact of the transaction on the communities and customers
we serve, which the Board believed to be favorable.
The Board of Directors weighed these positive factors against the following
adverse considerations:
. the covenant in the merger agreement restricting our ability to solicit
or entertain other potential acquisition proposals unless certain
conditions are satisfied;
. the covenants in the merger agreement restricting the conduct of our
business prior to the consummation of the merger only to conduct which
is in the ordinary course consistent with past practice as well as
various other operational restrictions on us prior to the consummation
of the merger;
. the provision in the merger agreement requiring us to pay a $150,000,000
termination fee, plus up to a maximum of $10,000,000 for reimbursement
of expenses, if the merger agreement is terminated under certain
circumstances more fully described in the section entitled "Summary of
the Merger Agreement--Termination Fees" on page 36; and
. the risks and costs to us if the transaction does not close, which risks
and costs result from the extensive efforts that would be required to
attempt to complete the transaction, the significant distractions which
our employees will experience during the pendency of the transaction,
the payments in connection with employee benefit matters we would make
upon receipt of approval of the merger by our stockholders even if the
merger is not consummated and the possibility that our stock price could
decline below the pre-announcement level.
In addition, the Board considered the interests of certain directors and
executive officers that are different from, or in addition to, the interests
of our stockholders generally described under "Interests of Certain Persons in
the Merger" on page 23. The Board did not believe that these interests should
affect its decision to approve the merger in light of the fact that such
interests are primarily based on contractual arrangements which were in place
prior to the negotiation of the merger and the Board's assessment that the
judgment and performance of the directors and executive officers would not be
impaired by such interests.
The above discussion concerning the information and factors considered by
the Board is not intended to be exhaustive, but includes all of the material
factors considered by the Board in making its determination. In view of the
variety of factors considered in connection with its evaluation of the merger
agreement and the proposed merger, the Board did not quantify or otherwise
attempt to assign relative weights to the specific factors it considered in
reaching its determination. In addition, individual members of the Board may
have given different weight to different factors.
Mr. Robert Johnson, having an interest in the disposition of certain assets
at the Reagan Washington National Airport in connection with the merger and
related transactions, abstained from voting on the merger, the merger
agreement, the memorandum of understanding and related matters presented to
the Board.
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Opinion of Financial Advisor
On April 27, 2000, Salomon Smith Barney was retained by us to act as our
financial advisor in connection with the merger. In connection with this
engagement, we requested that Salomon Smith Barney evaluate the fairness, from
a financial point of view, of the merger consideration to be received by our
stockholders. At a meeting of our Board of Directors held on May 23, 2000 to
consider the merger, Salomon Smith Barney delivered to the Board its oral
opinion (which was subsequently confirmed in writing) that, as of that date
and based upon and subject to the matters reviewed with the Board, the merger
consideration to be received by our stockholders was fair from a financial
point of view to such stockholders.
The full text of the written opinion of Salomon Smith Barney dated May 23,
2000, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Appendix B to this proxy
statement. You should read the opinion carefully in its entirety. The opinion
of Salomon Smith Barney is directed to our Board of Directors and relates only
to the fairness of the merger consideration from a financial point of view.
The opinion does not address any other aspect of the merger and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote on the merger agreement. In addition, the opinion does not address
the underlying business decision by our Board of Directors to effect the
merger. The summary of the opinion of Salomon Smith Barney set forth in this
document is qualified in its entirety by reference to the full text of the
opinion.
In arriving at its opinion, Salomon Smith Barney:
. reviewed a draft dated May 23, 2000 of the merger agreement;
. held discussions with certain of our senior officers concerning the
business, operations, financial condition and prospects of our company;
. examined certain publicly available business and financial information
relating to, as well as certain financial forecasts and other
information and data for, our company which were provided to or
otherwise discussed with Salomon Smith Barney by our management;
. reviewed the financial terms of the merger as set forth in the merger
agreement in relation to, among other things: current and historical
market prices and trading volumes of our common stock; our historical
and projected earnings and other operating data; and our capitalization
and financial condition; and
. considered, to the extent publicly available, the financial terms of
other transactions recently effected which Salomon Smith Barney
considered relevant in evaluating the merger and analyzed certain
financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Salomon
Smith Barney considered relevant in evaluating the operations of our
company.
In addition to the foregoing, Salomon Smith Barney conducted such other
analyses, studies and examinations and considered such other financial,
economic and market criteria as Salomon Smith Barney deemed appropriate in
arriving at its opinion. Salomon Smith Barney noted that its opinion was
necessarily based upon information available to Salomon Smith Barney, and
financial, stock market and other conditions and circumstances as they
existed, had been disclosed to Salomon Smith Barney and could be evaluated as
of the date of its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. With respect to financial
forecasts provided to or otherwise reviewed by or discussed with Salomon Smith
Barney, our management advised Salomon Smith Barney that such forecasts were
reasonably prepared reflecting the best currently available estimates and
judgments of our management as to the future financial performance of our
company, and Salomon Smith Barney expressed no opinion as to such forecasts.
Salomon Smith Barney did not make and was not provided with an independent
evaluation or appraisal of our assets (including properties and facilities) or
liabilities (contingent or
16
<PAGE>
otherwise) nor did Salomon Smith Barney make any physical inspection of our
properties, facilities or assets. In connection with its engagement, Salomon
Smith Barney was not requested to, and did not, solicit third party
indications of interest in all or a part of our company. Salomon Smith Barney
was not requested to consider, and its opinion did not address, the relative
merits of the merger as compared to any alternative business strategies that
might exist for our company or the effect of any other transaction in which we
might engage.
In connection with its opinion, Salomon Smith Barney performed various
financial analyses which it presented to and discussed with our Board on May
23, 2000. All of the material analyses performed by Salomon Smith Barney in
connection with rendering its opinion are described below. These descriptions
of financial analyses include information presented in tabular format. In
order to fully understand the financial analyses performed by Salomon Smith
Barney, the tables must be read together with the text of each description.
The tables alone do not constitute a complete description of the financial
analyses. Considering the data in the tables without considering the full
narrative description of the financial analyses, including the methodologies
and assumptions underlying the analyses, could create a misleading or
incomplete view of the financial analyses performed by Salomon Smith Barney.
Comparable Companies Analysis on a Non-Control Basis
Using publicly available information, Salomon Smith Barney analyzed selected
financial data for each of nine publicly traded airline carriers that Salomon
Smith Barney considered comparable to our company (the "Selected Companies")
and compared the data with comparable data for us. In performing this
analysis, Salomon Smith Barney reviewed selected financial data for the
following Selected Companies:
. Alaska Air Group, Inc.;
. America West Holdings Corporation;
. AMR Corporation;
. Continental Airlines, Inc.;
. Delta Air Lines, Inc.;
. Northwest Airlines Corporation;
. Southwest Airlines Company;
. Trans World Airlines, Inc.; and
. UAL Corporation.
For each of the Selected Companies and for us, Salomon Smith Barney
calculated multiples of the following:
. Market Price on May 19, 2000 ($25.31) to:
. Earnings per share ("EPS") for fiscal year 1998;
. EPS for the latest twelve-month period ended March 31, 2000;
. Estimated EPS for fiscal year 2000;
. Estimated EPS for fiscal year 2001.
. Equity value (on a fully diluted basis at the current market price less
any option proceeds) plus debt, capitalized operating leases,
capitalized leases, minority interests, preferred stock and out of the
money convertible securities, less investments in unconsolidated
affiliates and cash ("Enterprise Value") to:
. Earnings before interest, taxes, depreciation, amortization and
total lease expense ("EBITDAR") for fiscal year 1998;
. EBITDAR for the latest twelve-month period ended March 31, 2000;
. Estimated EBITDAR for fiscal year 2000; and
. Estimated EBITDAR for fiscal year 2001.
17
<PAGE>
Salomon Smith Barney's analysis resulted in the following range of
multiples:
<TABLE>
<CAPTION>
1998 LTM 2000E 2001E
------------ ----------- ------------- ------------
EPS EBITDAR EPS EBITDAR EPS EBITDAR EPS EBITDAR
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US Airways--Management
Case................... 4.5x 4.6x NM 8.6x 14.5x 6.0x 5.3x 4.8x
US Airways--First Call
Case................... 4.5 4.6 NM 8.6 21.3 6.1 7.3 NA
UAL Corporation......... 8.9 6.4 6.0 5.2 6.4 5.2 6.2 5.1
Median Airline
Comparables............ 6.8 6.5 8.0 5.6 7.5 5.4 6.2 5.1
Mean Airline
Comparables............ 9.3 7.1 9.7 6.7 9.1 6.2 7.7 5.6
</TABLE>
Financial data used to calculate market price to EPS multiples for the
Selected Companies was based on consensus estimates published by First Call,
and financial data used to calculate Enterprise Value to EBITDAR multiples for
the Selected Companies was based on selected research reports. Financial data
used to calculate the multiples for the US Airways--Management Case described
in the first line of the preceding table was based on estimates prepared by
our management and provided to Salomon Smith Barney, and financial data used
to calculate the multiples for the US Airways--First Call Case described in
the second line of the preceding table was based on consensus estimates
published by First Call and selected research reports.
Salomon Smith Barney compared the multiples for the Selected Companies with
comparable data for us. Based on the analysis described above, Salomon Smith
Barney derived an equity value reference range per share of our common stock
of $22.00 to $36.00.
Comparable Companies Analysis on a Control Basis
Based upon publicly available information, Salomon Smith Barney analyzed
selected financial data relating to public company transactions involving an
enterprise value in excess of $10 billion that were consummated or announced
during the period from January 1, 1997 through May 19, 2000 (the "Historical
Transactions"). Salomon Smith Barney calculated that the average control
premium paid or proposed to be paid to the acquired companies in the
Historical Transactions was approximately 35%, based upon the closing stock
prices of the acquired companies thirty days prior to the public announcement
of each transaction.
Based upon this analysis, Salomon Smith Barney applied a 35% control premium
to the equity value reference range per share of our common stock derived in
its "Comparable Companies Analysis on a Non-Control Basis" and thereby derived
an equity value reference range per share of our common stock of $29.00 to
$49.00.
Discounted Cash Flow Analysis
Salomon Smith Barney performed a discounted cash flow analysis of our
projected after-tax unlevered free cash flows. After-tax unlevered free cash
flow is defined as operating earnings before depreciation, amortization and
interest expense, but after changes in working capital, net capital spending,
and taxes. This analysis was based on forecasts prepared by our management for
the period from March 31, 2000 through December 31, 2004.
Salomon Smith Barney calculated implied equity values per share of our
common stock by utilizing discount rates ranging from 9.0% to 10.0% and
terminal value multiples of estimated 2004 EBITDAR for us ranging from 5.4 to
5.8. Salomon Smith Barney arrived at these discount rates based on its
judgment of the weighted average cost of capital for the Selected Companies,
and arrived at these terminal value multiples based upon the current values of
the Selected Companies.
Based upon this analysis, Salomon Smith Barney derived an equity value
reference range per share of our common stock of $32.00 to $47.00.
18
<PAGE>
Precedent Transaction Analysis
Using publicly available information, Salomon Smith Barney considered
fourteen transactions within the airline industry that were announced and
consummated during the period from July 10, 1997 to May 19, 2000.
Of these transactions, twelve were partial acquisitions or minority
investments, or transactions between carriers, including regional or
international carriers, that Salomon Smith Barney did not consider comparable
to the merger. Salomon Smith Barney did, however, analyze the implied purchase
price multiples paid in the following two selected recent transactions that it
considered to have somewhat similar factors to the merger (together, the
"Selected Transactions"):
. Delta Air Lines, Inc.'s acquisition of Comair Holdings, Inc.; and
. Delta Air Lines, Inc.'s acquisition of ASA Holdings, Inc.
For each of the Selected Transactions, Salomon Smith Barney
. calculated a range of multiples of implied Enterprise Value to EBITDAR
for the twelve-month period immediately preceding the announcement of
the transaction, and
. applied a range of selected multiples related to the Selected
Transactions to estimated data derived for our company.
Based upon this analysis, Salomon Smith Barney derived an equity value
reference range per share of our common stock of $42.00 to $63.00. Salomon
Smith Barney advised our Board, however, that, in light of the small number of
transactions that it considered similar to the merger, this analysis was not a
reliable indicator of value.
Neither Selected Transaction was identical to the merger, nor are either of
the acquired companies in the Selected Transactions identical to us. Moreover,
an analysis of the results of such a comparison is not purely mathematical;
rather it involves complex considerations and judgments, based upon the
financial advisor's professional experience, concerning differences in the
historical and projected financial and operating characteristics of the
acquired companies and other factors that could affect the acquisition value
of such companies and us.
Market Price Analysis
Salomon Smith Barney reviewed selected information regarding the historical
stock price performance of our common stock as of May 19, 2000. The results of
this review are as follows:
<TABLE>
<CAPTION>
Average Closing Share Price During Last:
5
Years 1 Year 6 Months 1 Day
----- ------ -------- -----
<S> <C> <C> <C>
$35.15 $30.52 $25.62 $25.31
</TABLE>
<TABLE>
<CAPTION>
Low/High During Last:
5 Years 1 Year
-------------------------- -------------------------------------------------
<S> <C> <C> <C>
$8.00 $81.63 $17.63 $53.13
</TABLE>
Salomon Smith Barney also compared the historical stock price performance of
our common stock with the merger consideration. The results of this review are
as follows:
<TABLE>
<CAPTION>
Market Offer
(Dollars In Millions, $25.31 Price
Except Per Share Data) (as of May 19, 2000) $60.00
------------------------------------------------------------------------
<S> <C> <C> <C>
Market Price Premium (Discount) to Market
Market.................. $25.31 0.0% 137.0%
52-Week High (5/20/99).. 53.13 (52.4) 12.9
52-Week Low (3/7/00).... 17.63 43.6 240.4
12 Month Average........ 30.52 (17.1) 96.6
5 Year Average.......... 35.15 (28.0) 70.7
------------------------------------------------------------------------
Net Equity Value........ $ 1,715 $ 4,190
Enterprise Value........ 9,363 11,838
(Enterprise Value is
equal to equity value
less $1.368 billion of
cash plus $2.874 billion
of debt and $6.142
billion of capitalized
operating leases as of
March 31, 2000.)
</TABLE>
-------------------------------------------------------------------------------
19
<PAGE>
Synergies Analysis
Salomon Smith Barney analyzed potential synergies that could be achieved as
a result of the merger. Assuming that revenue synergies for the combined
company of 1% to 4% (based on estimated 2000 revenues) could be achieved as a
result of the merger, Salomon Smith Barney estimated that the combined company
could achieve an increase in annual revenues ranging from $290 million to
$1.16 billion, and that the combined company could achieve an increase in
annual pre-tax profits (relating to these revenues) ranging from $232 million
to $929 million. Assuming that cost-savings synergies for the combined company
of 1% to 4% (based on estimated 2000 operating costs) could be achieved as a
result of the merger, Salomon Smith Barney estimated that the combined company
could achieve annual cost savings ranging from $253 million to $1.01 billion.
Salomon Smith Barney's assumption regarding the range of possible synergies
(i.e., 1% to 4%) was based upon discussions with our management relating to
possible realizable synergies and reflects a reasonable range of estimates as
to the possible synergies that could be realized by the combined company
following consummation of the merger.
It is Salomon Smith Barney's view that, even if the combined company were to
realize all of the potential synergies described in the preceding paragraph
following consummation of the merger, this analysis would still support
Salomon Smith Barney's opinion regarding the fairness of the merger
consideration as described in the first paragraph of this section "Opinion of
Financial Advisor." Salomon Smith Barney's analysis was based on estimated
combined revenues for fiscal year 2000 of $29.03 billion and estimated
combined operating (non-depreciation and amortization) costs of $25.26
billion. For purposes of its analysis, Salomon Smith Barney assumed that 20%
of the synergies could be realized in first year of operations following the
merger, 60% of the synergies could be realized in the second year and 100% of
the synergies could be realized in the third year. Salomon Smith Barney also
assumed that the one-time costs associated with achieving these synergies
could be $250 million in the first year, $175 million in the second year and
$50 million in the third year. Salomon Smith Barney noted that the potential
synergies described above could be offset by costs associated with the
combination of the two companies.
Implied Valuation Multiples Analysis
Salomon Smith Barney calculated the following implied valuation multiples
for selected periods of time. The results of these calculations are as
follows:
<TABLE>
<CAPTION>
Dollars in
millions
(except per Market Offer Price Comparable Precedent
share data) $25.31 $60.00 Companies Transactions
-----------------------------------------------------------------------------
EBITDAR Enterprise Value /EBITDAR
<S> <C> <C> <C> <C> <C>
1998A $ 2,053 4.6x 5.8x 6.5x --
LTM 1,088 8.6 10.9 5.6 7.8x
2000E 1,571 6.0 7.5 5.4 --
2001E 1,965 4.8 6.0 5.1 --
<CAPTION>
Earnings per
Share (Diluted) Price/Earnings per Share
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998A $ 5.60 4.5x 10.7x 6.8x --
LTM (1.81) NM NM 8.0 15.5x
2000E 1.74 14.5 34.5 7.5 --
2001E 4.73 5.3 12.7 6.2 --
</TABLE>
Based upon a review of this analysis, Salomon Smith Barney observed that the
multiple of implied Enterprise Value (at an offer price of $60.00 per share)
to EBITDAR compared favorably to the multiple of implied Enterprise Value (at
a market price of $25.31 per share (our market price as of May 19, 2000)) to
EBITDAR and to the median multiple of implied Enterprise Value to EBITDAR of
the Comparable Companies (for each of LTM, 2000E and 2001E). Salomon Smith
Barney also observed that the multiple of offer price (at $60.00 per share) to
EPS compared favorably relative to the multiple of market price (at $25.31 per
share) to EPS and to the median multiple of price per share to EPS of the
Comparable Companies.
EBITDAR and EPS estimates used in this analysis were provided to Salomon
Smith Barney by our management. Data used in this analysis relating to
Comparable Companies and Precedent Transactions was
20
<PAGE>
derived from Comparable Companies Analysis on a Non-Control Basis and the
Precedent Transactions Analysis performed by Salomon Smith Barney and
described above.
Other
No company, transaction or business used in Salomon Smith Barney's analyses
as a comparison is identical to our company or the merger, nor is an
evaluation of the results of such analyses entirely mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect
the acquisition, public trading or other values of the companies, transactions
or business segments being analyzed. In its analyses, Salomon Smith Barney
made numerous assumptions with respect to our company, UAL Corporation,
industry performance, general business, economic, and financial market
conditions and other matters, many of which are beyond UAL Corporation and our
control. The estimates contained in Salomon Smith Barney's analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual value or predictive of future results or values, which
may be significantly more or less favorable than those suggested by such
analysis. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. The material
assumptions underlying the opinion of Salomon Smith Barney vary with each of
the valuation analyses performed by Salomon Smith Barney in rendering such
opinion and, in each case, are disclosed in the summary of the applicable
valuation analysis.
Salomon Smith Barney's opinion and analyses were only one of many factors
considered by our Board in its evaluation of the merger and should not be
viewed as determinative of the views of our Board or our management with
respect to the merger consideration or the merger.
Pursuant to the terms of Salomon Smith Barney's engagement, we have agreed
to pay Salomon Smith Barney a fee of $8,000,000 in consideration of its
services in connection with the merger. In addition, we may elect to pay
Salomon Smith Barney an additional fee in an amount not to exceed $2,000,000
upon consummation of the merger. This additional fee is not a contractual
obligation of ours and would only be paid if our Board of Directors determines
that Salomon Smith Barney performs services substantially in excess of the
services expected to be performed at the commencement of the engagement. We
have also agreed to reimburse Salomon Smith Barney for all reasonable expenses
incurred in performing its services in connection with the merger, including
the reasonable fees and expenses of its legal counsel, and have agreed to
indemnify Salomon Smith Barney and certain related persons against various
liabilities relating to or arising out of its engagement, including
liabilities under the federal securities laws.
Salomon Smith Barney has advised us that it and certain of its affiliates
beneficially own approximately 2,869,001 shares of our common stock. In
addition, Salomon Smith Barney has advised us that, in the ordinary course of
business, Salomon Smith Barney and its affiliates may actively trade or hold
our and UAL Corporation securities for their own account or for the accounts
of customers and, accordingly, may at any time hold a long or short position
in such securities. Salomon Smith Barney has in the past provided investment
banking services to us and UAL Corporation unrelated to the proposed merger,
for which services Salomon Smith Barney has received customary compensation.
In addition, Salomon Smith Barney and its affiliates (including Citigroup Inc.
and its affiliates) may maintain relationships with us, UAL Corporation, Inc.
and their respective affiliates in the ordinary course of their respective
businesses.
Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by us based on its experience, expertise and familiarity
with us and our business. Salomon Smith Barney regularly engages in the
valuations of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
Certain Estimates Provided to UAL Corporation
In the normal course of business, our management prepares internal budgets,
plans, estimates, forecasts or projections as to future revenues, earnings or
other financial information in order to be able to anticipate the
21
<PAGE>
financial performance of our company. Except in limited circumstances, we do
not, as a matter of course, publicly disclose these internal documents.
In connection with the negotiation of the terms of the merger, we prepared
and provided to UAL Corporation in late April 2000 certain nonpublic estimates
for the fiscal years ending December 31, 2000 through 2004. These estimates
were also provided to Salomon Smith Barney, our financial advisor for the
merger, in connection with their evaluation of the fairness, from a financial
point of view, of the merger consideration to be received by our stockholders.
These estimates were prepared on the basis that we continue as a stand-alone
entity. Accordingly, these estimates do not take into account the combination
of our operations with UAL Corporation's operations which would result from
the merger.
The financial estimates were prepared on the basis of limitations,
qualifications and assumptions, and involved judgments with respect to, among
other things, future economic, competitive, regulatory and financial and
market conditions and future business decisions which may not be realized and
are inherently subject to significant business, economic and competitive
uncertainties, all of which are difficult to predict and many of which are
beyond our control. These uncertainties are described under "Cautionary
Statement Regarding Forward-Looking Statements."
There can be no assurance that the estimates would be accurate, and actual
results could vary materially from those shown. In light of the uncertainties
inherent in forward-looking information of any kind, the inclusion of these
estimates should not be regarded as a representation by us or any other entity
or person that the anticipated results would be achieved and investors are
cautioned not to place undue reliance on such information.
The material assumptions underlying these estimates are that:
. we continue as a stand-alone carrier and do not participate as a member
of a global alliance;
. the current favorable economic conditions continue throughout the term
of the estimates;
. the competitive environment we currently experience will not change in
any material way;
. our flight attendants approve a new five year labor contract, which they
did on May 1, 2000;
. fuel prices (including taxes and service fees) per gallon are as
follows:
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
80.9c 76.3c 65.4c 65.4c 65.4c
</TABLE>
. we do not experience any significant operational disruptions during the
term of the estimates, including any of the types of significant
disruptions experienced by us in 1999 and 2000; and
. available seat miles (ASMs) for US Airways, Inc., our principal
operating subsidiary, would increase during the term of the estimates as
follows:
<TABLE>
<CAPTION>
ASM (Billions)
-----------------------------------------------------------------------------------------
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
67.4 74.0 77.5 79.2 81.0
</TABLE>
These estimates are summarized as follows:
<TABLE>
<CAPTION>
FORECAST
Fiscal year ended December 31,
--------------------------------------
2000 2001 2002 2003 2004
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total Operating Revenue*............. $9,401 $10,478 $11,195 $11,691 $12,106
Total Operating Expense*............. $9,006 $ 9,719 $10,140 $10,635 $11,045
Basic Earnings Per Share............. $ 1.77 $ 4.95 $ 7.90 $ 8.21 $ 8.61
Diluted Earnings Per Share........... $ 1.74 $ 4.73 $ 7.42 $ 7.60 $ 7.74
</TABLE>
--------
* Amounts in millions
22
<PAGE>
Interests of Certain Persons in the Merger
In considering the recommendation of our Board with respect to the merger,
stockholders should be aware that the executive officers and directors have
some interests in the merger that may be different from, or in addition to,
the interests of stockholders generally. The Board was aware of these
interests and considered them, among other matters, in making its
recommendation.
Severance and Employment Agreements
Each of our executive officers is party to an employment or severance
agreement with us which provides for certain benefits upon a termination of
employment by us without "cause" or by the executive officer for "good reason"
(each as defined in the executive officer's employment or severance agreement)
during the period beginning on the date of stockholder approval of the merger
and ending on the third anniversary of the date of consummation of the merger
(the fourth anniversary in the case of Mr. Stephen Wolf). In addition,
pursuant to the terms of the merger agreement, UAL Corporation has agreed that
(a) with respect to Messrs. Stephen Wolf, Rakesh Gangwal and Lawrence Nagin,
any termination of employment following the consummation of the merger and (b)
with respect to the other executive officers, any termination of employment
during the period commencing on the six-month anniversary of the date of
consummation of the merger and ending on the nine-month anniversary of such
date will, in each case, automatically be deemed to be a termination for "good
reason" giving rise to the payment of severance benefits.
Each agreement provides for (a) a severance payment equal to three times the
sum of (i) the executive officer's base salary and (ii) (A) in the case of
Messrs. Wolf and Gangwal, the highest of (1) the annual bonus paid in respect
of the immediately preceding year, (2) the annual bonus paid during the
immediately preceding year or (3) the current year's maximum bonus, or (B) in
the case of the other executive officers, the highest of (1) the annual bonus
paid in respect of the immediately preceding year, (2) the annual bonus paid
during the immediately preceding year or (3) the annual bonus that would have
been paid to the executive with respect to the last fiscal year if the
applicable targets had been achieved and the current year's bonus percentage
had been applied; (b) a pro rata bonus through the date of termination; and
(c) continued retirement, welfare and fringe benefits, including
transportation benefits, for three years (four years in the case of Mr. Wolf)
and that such executive officer is deemed to have retired from our company for
purposes of such plans at the end of such period; provided, however, the
executive officers receive transportation and certain welfare benefits for
life following such period. In addition, a "gross-up" payment to compensate
the executive officer for any "golden parachute" excise tax is also provided.
Assuming current salary and bonus information remain in effect, if the
merger is consummated on December 31, 2000 and the employment of each of the
executive officers is immediately terminated, the approximate value of the
severance payments due under the employment and severance agreements to each
of the executive officers, including amounts attributable to continued
retirement plan benefits but not including any payments that may be made with
respect to any excise tax, would be: Mr. Stephen M. Wolf (Chairman),
$7.6 million, Mr. Rakesh Gangwal (President and Chief Executive Officer), $8.3
million, Mr. Lawrence M. Nagin (Executive Vice President, Corporate Affairs
and General Counsel), $3.4 million, Mr. N. Bruce Ashby (Senior Vice President,
Corporate Development), $1.9 million, Mr. B. Ben Baldanza (Senior Vice
President, Marketing), $2.4 million, Ms. Michelle V. Bryan (Senior Vice
President, Human Resources), $2.0 million, Mr. Alan W. Crellin (Senior Vice
President, Customer Service), $1.6 million, Mr. Christopher Doan (Senior Vice
President, Maintenance), $1.7 million, Mr. Thomas A. Mutryn (Senior Vice
President, Finance and Chief Financial Officer), $2.9 million and Mr. Gregory
T. Taylor (Senior Vice President, Planning) $2.0 million. The foregoing
benefits are not dependent upon consummation of the merger. Accordingly, if
the stockholders adopt the merger agreement, we could become obligated to pay
as much as $33.8 million under the employment and severance agreements, even
if the merger is not consummated.
Long Term Incentive Awards
Pursuant to the terms of our Long Term Incentive Plan and awards thereunder,
upon consummation of the merger, each executive officer will receive a cash
payment with respect to each then-outstanding three-year
23
<PAGE>
performance cycle equal to the executive officer's target percentage
multiplied by the average rate of base salary in effect on the last day of
each of the three years in the performance cycle. In calculating the average,
the executive officer's rate of base salary upon consummation of the merger
will be utilized for any years in the performance cycle which have not yet
been completed. Based upon performance cycles currently outstanding under the
Long Term Incentive Plan and assuming current salary and bonus information
remain constant, the approximate value of the cash payments due under the Long
Term Incentive Plan to each of the executive officers upon consummation of the
merger would be: Mr. Wolf, $4.0 million, Mr. Gangwal, $4.5 million, Mr. Nagin,
$1.0 million, Mr. Ashby, $0.5 million, Mr. Baldanza, $0.8 million, Ms. Bryan,
$0.6 million, Mr. Crellin, $0.5 million, Mr. Doan, $0.6 million, Mr. Mutryn,
$0.9 million and Mr. Taylor, $0.6 million. The foregoing benefits are
dependent upon consummation of the merger. Accordingly, if the stockholders
adopt the merger agreement but the merger is not consummated, we will not be
obligated to pay the foregoing amounts under the Long Term Incentive Plan.
Supplemental Pension Agreements
Each of Messrs. Wolf, Gangwal, Nagin, Ashby, Baldanza, Mutryn and Taylor is
party to a supplemental pension agreement with us. Assuming the merger is
consummated on December 31, 2000 and that each such individual's employment is
immediately terminated, the annual retirement benefit commencing immediately
for each of Messrs. Wolf, Gangwal and Nagin would increase by approximately
$87,000, $649,000 and $126,000, respectively, and the annual retirement
benefit commencing upon attainment of age 55 for each of Messrs. Ashby,
Baldanza, Mutryn and Taylor would increase by approximately $40,000, $40,000,
$30,000 and $20,000, respectively. The foregoing benefits are dependent upon
stockholder adoption of the merger agreement. Accordingly, if the stockholders
adopt the merger agreement, we could become obligated to pay as much as an
additional $992,000 per year under the supplemental pension agreements, even
if the merger is not consummated.
Equity-Based Awards
Stock Options
Pursuant to the terms of our equity-based compensation plans and awards
thereunder, unvested stock options held by our executive officers will become
vested and exercisable upon stockholder adoption of the merger agreement.
Pursuant to the merger agreement, upon consummation of the merger, each
executive officer will receive, with respect to each stock option then held by
such executive officer, a cash payment equal to the amount by which $60.00
exceeds the exercise price of such stock option, multiplied by the number of
shares subject to the option. The number of unvested stock options with an
exercise price of less than $60.00 per share held by each of the executive
officers as of September 15, 2000 (and the approximate amount such person will
be entitled to receive in respect of those stock options upon consummation of
the merger) is as follows: Mr. Wolf, 240,000 ($3.1 million), Mr. Gangwal,
500,000 ($6.4 million), Mr. Nagin, 18,000 ($0.6 million), Mr. Ashby, 6,000
($0.2 million), Mr. Baldanza, 67,500 ($2.2 million), Ms. Bryan, 20,800 ($0.3
million), Mr. Crellin, 4,800 ($0.2 million), Mr. Doan, 20,000 ($0.7 million),
Mr. Mutryn, 66,666 ($0.9 million) and Mr. Taylor, 35,250 ($0.6 million). The
vesting of the stock options is not dependent upon consummation of the merger.
Accordingly, if the stockholders adopt the merger agreement, options to
acquire an aggregate of 979,016 shares will become exercisable, even if the
merger is not consummated. The value of such options will be dependent upon
the price of our stock.
Restricted Stock
Pursuant to the terms of our equity-based compensation plans and awards
thereunder, (a) certain shares of restricted stock held by executive officers
(the "Type A Restricted Stock") will vest upon the consummation of the merger,
(b) other shares of restricted stock held by executive officers (the "Type B
Restricted Stock") will vest upon consummation of the merger or, if earlier,
upon termination of the executive officer's employment resulting from a
"change in control," which is defined to include stockholder approval of a
transaction such as the merger and (c) other shares of restricted stock held
by executive officers (the "Type C Restricted Stock") will vest upon
stockholder adoption of the merger agreement. The executive officer will
receive a payment to
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compensate him or her for any income taxes payable with respect to the vesting
of Type C Restricted Stock. The number of shares of Types A, B and C
Restricted Stock and the aggregate value of that restricted stock based upon a
per share price of $60.00 held by each of the executive officers as of
September 15, 2000 is as follows: Messrs. Wolf (0, 100,000, 221,121 and $19.3
million), Mr. Gangwal (0, 125,000, 237,450 and $21.7 million), Mr. Nagin
(10,000, 17,500, 15,331 and $2.6 million), Mr. Ashby (10,000, 19,125, 0 and
$1.7 million), Mr. Baldanza (0, 30,000, 0, $1.8 million), Ms. Bryan (10,000,
18,750, 0 and $1.7 million), Mr. Crellin (10,000, 12,625, 0, and $1.4
million), Mr. Doan (3,000, 10,000, 0 and $0.8 million), Mr. Mutryn (10,000,
42,291, 0 and $3.1 million) and Mr. Taylor (10,000, 32,125, 0 and $2.5
million). Vesting with respect to Type A Restricted Stock is dependent upon
consummation of the merger. Accordingly, if the stockholders adopt the merger
agreement but the merger is not consummated, vesting will not occur with
respect to the 63,000 shares of Type A Restricted Stock. Vesting with respect
to the Type B and Type C Restricted Stock is not dependent upon consummation
of the merger. Accordingly, if the stockholders adopt the merger agreement, an
aggregate of 881,318 shares of Type B and Type C Restricted Stock could become
vested, even if the merger is not consummated. The value of such shares will
be dependent upon the price of our stock.
Director Equity-Based Awards
Pursuant to the terms of our equity-based compensation plans and awards
thereunder, the unvested stock options held by our non-employee directors will
become vested and exercisable upon consummation of the merger. In addition,
the unvested deferred stock units held by our non-employee directors will vest
upon consummation of the merger. As of September 15, 2000, each of the 10
current non-employee directors who is still in service as a director will hold
1,500 unvested stock options (with a value (based upon a share price of $60.00
less the applicable exercise price per share) of approximately $50,000) and
500 unvested deferred stock units (with a value (based upon a share price of
$60.00) of $30,000). The foregoing benefits are dependent upon consummation of
the merger. Accordingly, if the stockholders adopt the merger agreement but
the merger is not consummated, the vesting of the options and deferred stock
units will not be accelerated.
Director Travel Benefits
Pursuant to the terms of our travel policy for non-employee directors, each
director who terminates service after having completed at least 10 years of
service as a director is entitled to free, positive space, lifetime travel
privileges on US Airways or our successor, including United Airlines following
consummation of the merger, and an income tax gross up payment with respect
thereto. Following consummation of the merger, each non-employee director who
terminates service having completed less than 10 years of service as a
director will be entitled to free, positive space travel privileges on US
Airways or our successor, including United Airlines, for 7 years following
termination of service, with an income tax gross up payment with respect
thereto. The foregoing benefits are dependent upon consummation of the merger.
Accordingly, if the stockholders adopt the merger agreement but the merger is
not consummated, we will not be obligated to provide travel benefits to
directors with less than 10 years of service.
Merger Financing; Source of Funds
UAL Corporation has informed us that the aggregate merger consideration of
approximately $4.28 billion to be paid to our stockholders (assuming that no
stockholders perfect their appraisal rights under Delaware law) will be
financed through existing and new debt facilities and cash on hand. UAL
Corporation believes that it will be able to obtain any new debt facilities
needed to finance the merger.
Certain United States Federal Income Tax Consequences
The following is a summary of material United States federal income tax
consequences of the merger to stockholders of US Airways whose shares are
converted into the right to receive cash in the merger. The discussion does
not purport to consider all aspects of United States federal income taxation
that might be relevant to our stockholders. The discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing, proposed and temporary regulations promulgated thereunder and
administrative and judicial interpretations thereof, all of which are subject
to change, possibly with a retroactive effect. The discussion applies only to
stockholders in whose hands shares of our common stock are capital assets
within the
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meaning of Section 1221 of the Code and who do not own directly or though
attribution 50% or more of the stock of UAL Corporation. This discussion does
not apply to shares of common stock received pursuant to the exercise of
employee stock options or otherwise as compensation, or to certain types of
stockholders (such as insurance companies, tax-exempt organizations, financial
institutions and broker-dealers) who may be subject to special rules. This
discussion does not discuss the United States federal income tax consequences
to any stockholder who, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or
a foreign estate or trust, nor does it consider the effect of any foreign,
state or local tax laws.
Because individual circumstances may differ, each stockholder should consult
his or her own tax advisor to determine the applicability of the rules
discussed below and the particular tax effects of the merger, on a beneficial
holder of shares of our common stock, including the application and effect of
the alternative minimum tax, and any state, local and foreign tax laws and of
changes in such laws.
The exchange of shares of common stock for cash pursuant to the merger will
be a taxable transaction for United States federal income tax purposes and
possibly for state, local and foreign income tax purposes as well. In general,
a stockholder who receives cash in exchange for shares of common stock
pursuant to the merger will recognize gain or loss for United States federal
income tax purposes equal to the difference, if any, between the amount of
cash received and the stockholder's adjusted tax basis in the shares exchanged
for cash pursuant to the merger. Gain or loss will be determined separately
for each block of shares (i.e., shares acquired at the same cost in a single
transaction) exchanged for cash pursuant to the merger. Such gain or loss will
be long-term capital gain or loss provided that a stockholder's holding period
for such shares of common stock is more than one year at the time of
consummation of merger. Capital gain recognized by an individual upon a
disposition of a share of common stock that has been held for more than one
year generally will be subject to a maximum United States federal income tax
rate of 20% or, in the case of a share that has been held for one year or
less, will be subject to tax at ordinary income tax rates. Certain limitations
apply to the use of a stockholder's capital losses.
You may be subject to "backup withholding" at a rate of 31% on payments
received in connection with the merger unless you (1) provide a correct
taxpayer identification number (which, if you are an individual, is your
social security number) and any other required information to the paying
agent, or (2) are a corporation or come within certain exempt categories and,
when required, demonstrate this fact, and otherwise comply with applicable
requirements of the backup withholding rules. If you do not provide a correct
taxpayer identification number, you may be subject to penalties imposed by the
IRS. Any amount paid as backup withholding does not constitute an additional
tax and will be creditable against your United States federal income tax
liability. You should consult with your own tax advisor as to your
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. You may prevent backup withholding by completing a
Substitute W-9 and submitting it to the paying agent for the merger when you
submit your stock certificate(s) following the effective time of the merger.
You are urged to consult your tax advisor with respect to the tax
consequences of the merger, including the effects of applicable state, local,
foreign or other tax laws.
Accounting Treatment
The merger will be accounted for using the purchase method of accounting.
Under this method of accounting, the purchase price will be allocated to the
fair value of the net assets acquired. The excess purchase price over the fair
value of the assets acquired will be allocated to goodwill.
Appraisal Rights of Stockholders
You have the right to dissent from the merger and to demand and obtain cash
payment of the appraised value of your shares of our common stock under the
circumstances described below. The appraised value that you obtain for your
shares by dissenting may be less than, equal to or greater than the $60.00 per
share cash merger consideration provided for in the merger agreement. If you
fail to comply with the procedural requirements of Section 262 of the Delaware
General Corporation Law, you will lose your right to dissent and seek payment
of the appraised value of your shares. In accordance with Section 262, the
Company is obligated
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to mail to each holder of shares as of the record date notice that such
stockholder is entitled to appraisal rights for their shares. THIS PROXY
STATEMENT AND THE NOTICE OF SPECIAL MEETING OF STOCKHOLDERS THAT ACCOMPANIES
THIS PROXY STATEMENT, CONSTITUTE SUCH NOTICE.
The following is a summary of Section 262, which specifies the procedures
applicable to dissenting stockholders. This summary is not a complete
statement of the law regarding your right to dissent under Delaware law, and
if you are considering dissenting, we urge you to review the provisions of
Section 262 carefully. The text of Section 262 is attached to this Proxy
Statement as Appendix C, and we incorporate that text into this Proxy
Statement by reference. Among other matters, you should be aware of the
following:
. to be entitled to dissent and seek appraisal, you must hold shares of
our common stock on the date you make the demand required under Delaware
law, you must continuously hold those shares until the merger has been
completed, you must not vote in favor of the merger and you must
otherwise comply with the requirements of Section 262. Neither a failure
to vote on the merger agreement, nor an abstention from voting on the
merger agreement, will be construed as a vote in favor of the merger
agreement. However, if you return your signed proxy left blank, your
vote will be counted in favor of the merger agreement, and you will
waive your appraisal right.
. before the special meeting, you must deliver a written notice that
states your identity and your intent to demand appraisal to US Airways
Group, Inc., 2345 Crystal Drive, Arlington, Virginia, 22227, Attention:
General Counsel (you should be aware that simply voting against the
merger is not a demand for appraisal rights);
. within ten days after the effective time of the merger, the surviving
corporation will notify all of the dissenting stockholders who have
complied with Section 262 and who have not voted in favor of the merger;
. within 120 days after the effective time of the merger, the surviving
corporation or any stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Court of Chancery
demanding a determination of the value of the stock of the dissenting
stockholders;
. the Delaware Court of Chancery will determine which dissenting
stockholders complied with the requirements of Section 262 and are
entitled to appraisal rights;
. the Delaware Court of Chancery may require the stockholders who have
demanded an appraisal for their shares (and who hold stock represented
by certificates) to submit their stock certificates to the Register in
Chancery for notation; and the Delaware Court of Chancery may dismiss
the proceedings as to any stockholder that fails to comply with such
direction.
. the Delaware Court of Chancery will then appraise the shares,
determining their fair value exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with a
fair rate of interest, if any, to be paid on the appraised fair value;
the Delaware Court of Chancery will consider all relevant factors in
determining the fair value and the fair interest rate (if any);
. the Delaware Court of Chancery will then direct the surviving
corporation to pay the fair value of the dissenting shares, together
with any interest, to the stockholders entitled to payment; payment will
be made when the stockholder surrenders the certificates to the
surviving corporation;
. the costs of the proceeding for appraising the fair value may be
determined by the court and the court may require the parties to bear
the costs in any manner that the court believes to be equitable;
. if you dissent from the merger, you will not be entitled to vote your
shares of common stock for any purpose or to receive dividends or other
distributions (other than dividends or other distributions payable to
stockholders of record at a date prior to the effective time of the
merger) following the merger;
. you may withdraw your demand for appraisal and accept the $60.00 per
share cash merger consideration provided for in the merger agreement at
any time within 60 days after the effective date of the merger; and
. the exchange of shares for cash pursuant to the exercise of appraisal
rights will be a taxable transaction for United States federal income
tax purposes and possibly state, local and foreign income tax purposes
as well. See "Special Factors--Certain United States Federal Income Tax
Consequences."
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement. The following summary is qualified in its entirety by reference to
the merger agreement, which we have attached as Appendix A to this proxy
statement and which we incorporate by reference into this document. We
encourage you to read the merger agreement in its entirety.
The Merger
The merger agreement provides that, following the adoption of the merger
agreement by our stockholders and the satisfaction or waiver of the other
conditions to the merger, including obtaining the requisite regulatory
approvals, Yellow Jacket Acquisition Corp. will be merged with and into us,
and we will be the surviving corporation. With respect to obtaining regulatory
approvals, we believe that efforts sufficient to satisfy the requisite
regulatory requirements can be concluded on or before January 1, 2001. The
merger will become effective upon the filing of the certificate of merger with
the Secretary of State of the State of Delaware or at such later time agreed
to by the parties and specified in the certificate of merger.
When the merger becomes effective, our Amended and Restated Certificate of
Incorporation will be the Certificate of Incorporation of the surviving
corporation, until thereafter changed or amended as provided therein or by
applicable law. The by-laws of Yellow Jacket Acquisition Corp. in effect
immediately prior to the effective time of the merger will be the by-laws of
the surviving corporation until thereafter changed or amended as provided
therein or by applicable law.
Conversion of Capital Stock. At the effective time of the merger, pursuant
to the merger agreement and the Delaware General Corporation Law, each issued
and outstanding share of our common stock, other than any shares (1) owned by
us, UAL Corporation or Yellow Jacket Acquisition Corp., all of which will be
canceled without consideration, or (2) held by a dissenting stockholder
exercising and perfecting appraisal rights, will be converted into the right
to receive $60.00 in cash, without interest.
Exchange of Common Stock Certificates. At the effective time, each
certificate representing shares of our common stock then outstanding, other
than any shares owned by us, UAL Corporation, Yellow Jacket Acquisition Corp.
or held by a dissenting stockholder exercising appraisal rights, will
represent the right to receive the cash into which such issued and outstanding
shares may be converted. At the effective time, all such shares of our common
stock will be canceled and cease to exist, and each holder of a certificate
representing any such shares will cease to have any voting or other rights
with respect to such shares, except the right to receive upon the surrender of
such certificate the cash consideration payable under the merger agreement,
without interest.
We will designate a bank or trust company to act as exchange agent and, as
soon as possible after the effective time of the merger, mail a letter of
transmittal to you. The letter of transmittal will tell you how to surrender
your US Airways common stock certificates in exchange for the $60.00 per share
cash merger consideration. You should not send in your US Airways common stock
certificates until you receive a transmittal form. You should send them only
pursuant to instructions set forth in the letter of transmittal. In all cases,
the merger consideration will be provided only in accordance with the
procedures set forth in the merger agreement and such letters of transmittal.
We strongly recommend that certificates for common stock and letters of
transmittal be transmitted only by registered United States mail, return
receipt requested, appropriately insured. Holders of common stock whose
certificates are lost will be required to make an affidavit identifying such
certificate or certificates as lost, stolen or destroyed and, if required by
us, to post a bond in such amount as we may reasonably require to indemnify
against any claim that may be made against us with respect to such
certificate.
Any merger consideration payable in respect of certificates for our common
stock that have not been surrendered prior to two years after the effective
time of the merger (or immediately prior to such earlier date on
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which any merger consideration would otherwise escheat to or become the
property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of the surviving corporation, free and
clear of all claims or interest of any person previously entitled thereto. In
addition, the surviving corporation will not be liable to any person in
respect of any merger consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
Stock Options. We have agreed to take all actions necessary so that,
immediately prior to the completion of the merger, all options to acquire
shares of our common stock granted under any of our option plans become fully
vested and exercisable. At the effective time, outstanding options will be
canceled and will be converted into the right to receive a cash payment from
us equal to $60.00 minus the exercise price of the option, multiplied by the
number of shares subject to the option.
Representations and Warranties
The merger agreement contains representations and warranties with respect to
us and our subsidiaries relating to, among other things:
. organization, qualification, capitalization and similar corporate
matters;
. authorization, execution, delivery, performance and enforceability of,
and required consents, approvals and authorizations relating to, the
merger agreement and related matters;
. the absence of violation of organizational documents, laws or contracts
as a result of entering into the merger agreement;
. the accuracy of the information contained in the reports and financial
statements that we and our principal operating subsidiary file with the
Securities and Exchange Commission ("SEC") and other governmental
authorities;
. the absence of material adverse changes since December 31, 1999;
. the absence of material legal proceedings;
. contracts and the absence of any material default in these contracts;
. compliance with applicable laws, permits and agreements since January 1,
1997;
. the absence of changes in our benefit plans and employment agreements
since December 31, 1999;
. certain environmental, labor and employment, intellectual property,
employee welfare and benefit plans and tax matters;
. aircraft owned, leased or operated;
. takeoff and landing rights and foreign operating rights;
. the business combination provision in our charter;
. the Board's approval of the merger for purposes of Section 203 of the
Delaware General Corporation Law;
. the stockholder vote required to adopt the merger agreement;
. the absence of undisclosed broker's fees;
. the receipt by us of a fairness opinion from Salomon Smith Barney Inc.;
and
. the accuracy of certain information provided by us to UAL Corporation.
The merger agreement contains customary representations and warranties by
UAL Corporation and Yellow Jacket Acquisition Corp. relating to, among other
things:
. their organization and similar corporate matters;
. the absence of violation of organizational documents, laws or contracts
as a result of entering into the merger agreement;
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. their authorization, execution, delivery, performance and enforceability
of, and required consents, approvals and authorizations relating to, the
merger agreement and related matters;
. the creation of Yellow Jacket Acquisition Corp. solely for the purpose
of engaging in the transactions contemplated by the merger agreement;
. the sufficiency of capital resources available to UAL Corporation to pay
the merger consideration; and
. the absence of any ownership of our shares of common stock for purposes
of Section 203 of the Delaware General Corporation Law.
The foregoing representations and warranties are subject, in some cases, to
specified exceptions and qualifications. The representations and warranties of
each of the parties will expire upon completion of the merger.
Certain Covenants
Under the merger agreement, we have agreed that from the date of the merger
agreement until the effective time of the merger, we will (and we will require
our subsidiaries to) conduct business only in the ordinary course consistent
with past practice and that we will (and we will require our subsidiaries to)
use reasonable efforts to comply with all applicable laws, rules and
regulations and to preserve our assets and third party relationships. In
addition, we have agreed that we will not (and will not permit any of our
subsidiaries to) take any of the following actions, except for actions
specifically contemplated by the merger agreement or disclosed to UAL
Corporation prior to the signing of the merger agreement, without UAL
Corporation's prior written consent, which consent shall not be unreasonably
withheld by UAL Corporation:
. declare, set aside or pay any dividends on, or make any other
distributions in respect of, our capital stock, other than dividends by
one of our wholly-owned subsidiaries to its parent;
. purchase, redeem or otherwise acquire any shares of our capital stock or
of our subsidiaries capital stock;
. split, combine, or reclassify any of our capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of, or in substitution for our capital stock;
. issue, deliver, sell, pledge or otherwise encumber any shares of our
capital stock, any other equity or voting interests or any securities
convertible into, or exchangeable for, or rights to acquire shares of
our capital stock, except for the issuance of shares as a result of the
exercise of stock options existing when we entered into the merger
agreement;
. amend our certificate of incorporation or bylaws;
. acquire or agree to acquire (i) by merging or consolidating with or by
purchasing all or a substantial portion of the assets of any other
person or the assets constituting a business or a corporation, joint
venture or division thereof, other than the merger of any of our wholly
owned subsidiaries into us or into any of our other wholly owned
subsidiaries or (ii) any asset, other than (v) aircraft or engines in
accordance with our fleet plan which was disclosed to UAL Corporation
prior to the signing of the merger agreement, (w) assets acquired in the
ordinary course consistent with past practice for a purchase price equal
to or less than $1,000,000, (x) subject to certain restrictions, assets
acquired in response to unanticipated operational, competitive or
economic factors, (y) assets acquired reasonably in response to a
regulatory requirement or mandate or (z) assets acquired in accordance
with our capital budget;
. subject to certain exceptions, sell, lease, license or sell and lease
back, mortgage or otherwise encumber or subject to any lien or otherwise
dispose of any of our properties or assets or interests therein;
. repurchase or prepay or incur any indebtedness or guarantee any
indebtedness of another person except, (A) short-term borrowings
incurred in the ordinary course of business consistent with past
practice and (B) the incurrence of indebtedness in the ordinary course
consistent with past practice, in order to, among other things, (i)
finance the purchase or leasing of new aircraft or engines as disclosed
to
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UAL Corporation prior to the signing of the merger agreement, (ii)
refinance indebtedness incurred to finance the purchase or leasing of
aircraft on terms no less favorable to us than the terms of the
indebtedness to be refinanced or (iii) purchase aircraft currently
leased to us pursuant to the terms of the applicable lease agreement;
. make any loans, advances or capital contributions to or investments in
any person other than (i) in the ordinary course consistent with past
practice, (ii) to, or in, a direct or indirect wholly owned subsidiary
or (iii) to the employee stock ownership trust in an amount not to
exceed the amount of principal and interest then due and owing under the
ESOP loan;
. subject to certain exceptions, incur or commit to incur any capital
expenditures, obligations or liabilities (x) with respect to 2000, in
any manner materially inconsistent with our capital budget for 2000 and
(y) with respect to 2001, (i) that in the aggregate exceed the aggregate
amount of capital expenditures set forth in our capital budget for 2000
or (ii) that individually exceed $20,000,000;
. except as required by law, (i) pay, discharge or settle any claims,
liabilities or obligations other than the payment, discharge or
satisfaction in the ordinary course consistent with past practice or as
required by their terms or incurred since the date of the merger
agreement in the ordinary course consistent with past practice, (ii)
waive, release, grant or transfer any right of material value other than
in the ordinary course consistent with past practice or (iii) waive,
release, grant or transfer any material benefit under any material
confidentiality, standstill or similar agreement;
. enter into, modify, amend or terminate any portion, aspect or whole
collective bargaining agreement or other labor union contract, other
than immaterial modifications in the ordinary course, modifications
pursuant to "parity plus 1% review" or as required by a change in the
applicable law;
. enter into, modify, amend or terminate any benefit agreement or plan
providing for the payment of severance, compensation or benefits upon
the termination of employment, other than increases in cash
compensation, immaterial changes and termination arrangements for
employees (other than officers), each in the ordinary course consistent
with past practice, and other than actions taken by us to retain or
attract employees in key positions consistent with our retention plan
(under which, subject to certain limitations, (1) we may (a) grant
restricted stock up to amounts consistent with our past practices for
purposes of hiring, promotion and selected retention needs, (b) provide
a compensation package that is consistent with our past practice to
newly appointed officers and (c) pay cash retention bonuses to certain
non-officer employees up to an agreed upon amount and (2) UAL
Corporation will pay a severance benefit equal to six-months of base
salary to any non-union, non-officer employee who, within 6 months
following the merger, is asked to relocate and declines to do so);
. enter into, modify, amend or terminate any material contract to which we
or one of our subsidiaries is a party, other than modifications,
amendments or terminations in the ordinary course consistent with past
practice;
. except as required by law or any provision of a benefit agreement, plan
or other contract and subject to certain exceptions take any action to
(i) fund payment of compensation or benefits under any benefit
agreement, plan or other contract or (ii) to accelerate the vesting or
payment of any compensation or benefit under any benefit agreement, plan
or other contract;
. materially decrease any levels of employee training or costs incurred in
connection with such training;
. fail to keep in effect any governmental route authority used as of the
date of the merger agreement or make any material route changes, except
for such failures that occur or changes that are made in the ordinary
course of business consistent with past practice;
. fail to maintain insurance at levels, at least comparable to current
levels;
. establish any new pilot or flight attendant domicile cities;
. take action or fail to take action which would result in our loss of
slots with an aggregate value in excess of $7,500,000;
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. take any action that would be expected to result in our representations
and warranties becoming untrue in a material respect or any condition to
the merger not being satisfied; or
. settle any action relating to any material tax, make any material tax
election or, subject to certain exceptions, make any changes to our tax
accounting methods unless required by a change in generally accepted
accounting principles, SEC accounting regulations or guidelines or
applicable law.
For purposes hereof, the reasonableness of withholding consent shall be
determined from the point of view of UAL Corporation, taking into account the
relative burden to UAL Corporation and the benefit to us of granting such
consent and any other factors which UAL Corporation determines in good faith
to be, and which are, of reasonable consequence to it in connection with its
determination.
Other Agreements of US Airways, UAL Corporation and Yellow Jacket Acquisition
Corp.
In addition to our agreements regarding the conduct of our business, we and
UAL Corporation have also agreed to take several other actions:
. we have agreed to promptly notify UAL Corporation upon the earlier of
(x) receipt of notice of any action pending against us or any of our
subsidiaries in respect of any material tax and (y) upon any other
action in respect of taxes becoming material to us and our subsidiaries;
. we have agreed to confer with UAL Corporation on a regular basis
regarding operational and other material matters and to advise UAL
Corporation of any change or event for which we have knowledge which
would be expected to have a material adverse effect;
. we have agreed, along with UAL Corporation, subject to confidentiality
restrictions, to give each other copies of all filings with any
governmental entity in connection with the merger agreement and the
transactions contemplated by the merger agreement;
. we have agreed to use our reasonable best efforts to cause the
stockholders meeting to be held as promptly as practicable following the
date of the merger agreement;
. we have agreed to afford to UAL Corporation and its representatives
reasonable and prompt access to our information, assets and personnel
and to make available to UAL Corporation on a timely basis a copy of
each material document received by us pursuant to the requirements of
domestic or foreign laws and all other information concerning our
business, properties and personnel, subject to confidentiality or legal
restrictions;
. UAL Corporation has agreed, in order to complete the merger, to effect
the divestiture of the assets and the provision of assets, facilities
and services as described in Exhibit A to the merger agreement and we
have agreed, along with UAL Corporation, to use all reasonable efforts
to take all actions that are necessary, proper or advisable to
consummate the merger, including (i) taking all reasonable action to
cause the conditions precedent to the merger to be satisfied, (ii)
obtaining all necessary governmental consents, authorizations and
approvals, and (iii) obtaining all necessary third party consents and
approvals;
. we have agreed, along with UAL Corporation, to promptly make all
necessary filings, other submissions and registrations with governmental
entities, including under the Hart-Scott-Rodino Act;
. we have agreed, along with UAL Corporation, to give each other prompt
notice of any of our representations or warranties becoming materially
untrue or inaccurate;
. UAL Corporation and Yellow Jacket Acquisition Corp. have agreed to
arrangements regarding liability, indemnification and insurance matters
with respect to our officers and directors;
. we have agreed, along with UAL Corporation, to consult with each other
before issuing any press release or other public statements relating to
the merger; and
. UAL Corporation has agreed that for a period of two years, the surviving
corporation will offer continued employment to all of our employees
(other than officers), other than employees discharged
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for cause or performance related reasons or employees of a subsidiary
that is sold or transferred to a third party. Following the two year
period, UAL Corporation has agreed to provide all of our former non-
officer, non-union employees of us and our subsidiaries the same job
security protection, if any, as provided to similarly-situated employees
of UAL Corporation.
No Solicitation of Transactions
We have agreed that we will not (and will cause our subsidiaries not to)
solicit, initiate or encourage, or take any action knowingly to facilitate,
any inquiries or proposals relating to, or that is reasonably likely to lead
to, any direct or indirect acquisition, in one transaction or a series of
transactions, of assets or businesses that constitute or represent 20% or more
of our total revenue, operating income, EBITDA or assets, including our
subsidiaries' assets, taken as a whole, or 20% or more of the outstanding
shares of our capital stock or capital stock of, or other equity or voting
interests in, any of our subsidiaries directly or indirectly holding the
assets or businesses referred to above (any proposal or offer of this nature
will be referred to as a "Takeover Proposal").
We have also agreed that we will not (and will cause our subsidiaries not
to) enter into, continue or otherwise participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or cooperate in any way with, any Takeover Proposal, other than a Takeover
Proposal made by UAL Corporation. Notwithstanding the foregoing restriction,
the Board may, at any time prior to our stockholders adoption of the merger
agreement, in response to a bona fide written Takeover Proposal which was not
solicited in violation of the above restrictions and which the Board
determines in good faith is reasonably likely to result in the Board
determining to change its recommendation of the merger agreement or lead to a
Takeover Proposal that is superior from a financial view to you, furnish such
person with information with respect to us and our subsidiaries pursuant to a
customary confidentiality agreement and participate in discussions and
negotiations with such person regarding the Takeover Proposal.
We must promptly advise UAL Corporation of any Takeover Proposal or any
requests for information or inquiries we reasonably believe could lead to a
Takeover Proposal and the terms and conditions of such request, Takeover
Proposal or inquiry. We must keep UAL Corporation informed in all material
respects of the status and details of any such request, Takeover Proposal or
inquiry.
Neither the Board nor any committee of the Board may (i) withdraw (or modify
in a manner adverse to UAL Corporation) its recommendation of the merger or
recommend a Takeover Proposal, other than a Takeover Proposal made by UAL
Corporation, unless the Board or a committee of the Board determines in good
faith, based on such matters it deems appropriate, after consultation with
legal counsel, that failure to take such action would be reasonably likely to
result in a breach of its fiduciary duties, (ii) adopt or approve a Takeover
Proposal or withdraw its approval of the merger, (iii) cause or permit us to
enter into any agreement that constitutes or is reasonably likely to lead to a
Takeover Proposal or (iv) agree or resolve to do any of the foregoing.
Notwithstanding the foregoing, the Board shall not be prohibited from taking
or disclosing a position contemplated by Rule 14e-2(a) of the Exchange Act, or
making any disclosure to you if failure to do so, in the Board's good faith
judgment after consultation with counsel, would be inconsistent with
applicable law.
We may, at any time prior to obtaining stockholder approval, in response to
any unsolicited bona fide binding written offer made by a third party that if
consummated would result in such third party (or in the case of a direct
merger between such third party and us, the stockholders of such third party)
acquiring, directly or indirectly, more than 50% of the voting power in us or
all or substantially all of our assets and the assets of our subsidiaries,
taken as a whole, for consideration consisting of cash and/or securities that
our Board determines in its good faith judgment (after consultation with a
financial advisor of nationally recognized reputation) to be superior from a
financial view to you, taking into account, among other things, any changes to
the terms of the merger agreement proposed by UAL Corporation in response to
such superior proposal or otherwise (any such proposal will be referred to as
a "Superior Proposal"), terminate the merger agreement and concurrently enter
into an acquisition agreement constituting or related to, or which is intended
to or is reasonably likely to lead to,
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any Takeover Proposal; provided, however, that we can not terminate the
agreement unless we have complied in all material respects with the
restrictions on solicitation described above and paid the termination fee and
expenses owed to UAL Corporation; and provided further, that we can not
terminate the agreement without first giving UAL Corporation five business
day's notice that we have received a Superior Proposal, specifying the terms
and conditions thereof.
Employee Benefit Matters
With respect to our employees, or our subsidiaries' employees, that are
classified as regular permanent employees as of the date of the merger and who
are in jobs that will not be covered by collective bargaining or other labor
union contracts after the merger, UAL Corporation has agreed as follows:
. to give such employees full credit, for purposes of eligibility, vesting
and benefit accrual under any employee benefit plans or arrangements
maintained by UAL Corporation, the surviving corporation and their
respective affiliates, for such employees' service with us to the same
extent recognized by us immediately prior to the merger (except where it
would result in a duplication of benefits);
. to (i) waive all limitations as to preexisting conditions, exclusions
and waiting periods with respect to participation and coverage
requirements applicable to such employees under any welfare benefit
plans in which such employees may be eligible to participate after the
merger to the extent waived under the applicable plan immediately prior
to the merger and (ii) provide such employees with credit for any co-
payments and deductibles paid prior to the merger in satisfying any
applicable deductible or out-of-pocket requirements under any welfare
plans in which such employees are eligible to participate after the
merger; and
. to honor our benefit plans and benefit agreements in accordance with
their terms. For a period of one year immediately following the merger,
UAL Corporation agrees to provide to such employees employed by UAL
Corporation employee benefit plans and arrangements (excluding equity-
based compensation) not materially less favorable in the aggregate than
those provided to such employees immediately prior to the merger and
eligibility for stock option grants on the same basis as similarly
situated employees of UAL Corporation and its subsidiaries.
Conditions to the Merger
Each party's obligation to complete the merger is subject to a number of
conditions, including the following:
. adoption by our stockholders of the merger agreement;
. the expiration or termination of the waiting periods under the Hart-
Scott-Rodino Act and the receipt of any other necessary approvals or
clearances under applicable competition, merger control, antitrust or
similar law or regulation;
. the absence of any temporary restraining order, preliminary or permanent
injunction, or other order or decree by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
merger.
Our obligation to complete the merger is subject to additional conditions,
including the accuracy of the representations and warranties of UAL
Corporation and Yellow Jacket Acquisition Corp. that are qualified as to
materiality and the material accuracy of the representations and warranties of
UAL Corporation and Yellow Jacket Acquisition Corp. that are not qualified as
materiality, and the performance in all material respects of their obligations
under the merger agreement.
The obligations of UAL Corporation and Yellow Jacket Acquisition Corp. to
complete the merger are subject to additional conditions, including the
following:
. the accuracy of our representations and warranties that are qualified as
to materiality and the material accuracy of our representations and
warranties that are not qualified as materiality, and the performance in
all material respects of our obligations under the merger agreement; and
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. the absence of any legal restraint that has the effect of (i)
prohibiting or limiting in any material respect the ownership or
operation of a material portion of our or UAL Corporation's business,
(ii) prohibiting UAL Corporation from controlling in any material
respect a substantial portion of our business or operations and (iii)
imposing material limitations on UAL Corporation's ability to acquire,
hold or exercise full rights of ownership of shares of our common stock;
and
. we or UAL Corporation having obtained (i) all material consents,
approvals or authorizations of governmental entities legally required in
connection with the merger agreement or the transactions contemplated by
the merger agreement and (ii) all other governmental or third party
consents, approvals or authorizations required in connection with the
merger agreement, except, in the case of clause (ii), for those the
failure of which to be obtained would not be expected to result in a
material adverse effect on us or prevent or materially impede or delay
consummation of the merger.
The obligations of UAL Corporation and Yellow Jacket Acquisition Corp. to
complete the merger are not subject to a financing condition.
Termination of the Merger Agreement
The merger agreement may be terminated, whether before or after receiving
stockholder approval, without completing the merger, under the following
circumstances:
. Written Mutual Consent--by written mutual consent of the parties;
. Delay--by us or UAL Corporation if the merger is not consummated by
December 31, 2000; provided, however, that this deadline may be extended
to August 1, 2001 if all conditions to consummation of the merger, other
than the adoption of the merger agreement by our stockholders, the
receipt of regulatory approvals or consents or the absence of a legal
restraint, have been fulfilled by December 31, 2000;
. Legal Impediments
--by us or UAL Corporation if a law or court order prohibiting the
merger becomes final and cannot be appealed, so long as a breach by
the party seeking to terminate is not the principal reason for such
event having occurred; and
--by UAL Corporation if (A) any legal restraint that has the effect of
(i) prohibiting or limiting in any material respect the ownership or
operation of a material portion of the business of US Airways or UAL
Corporation, (ii) prohibiting UAL Corporation from controlling in any
material respect a substantial portion of the business or operations
of US Airways or (iii) imposing material limitations on UAL
Corporation's ability to acquire, hold or exercise full rights of
ownership of shares of US Airways common stock shall be in effect and
shall have become final and nonappealable and (B) a breach by UAL
Corporation is not the primary reason that such event occurred.
. Failure to Obtain Stockholder Approval--by us or UAL Corporation if our
stockholders do not adopt the merger agreement at a duly convened
stockholder meeting;
. Recommendation--by UAL Corporation if our Board, acting in accordance
with certain standards specified in the merger agreement relating to its
fiduciary duties, withdraws or modifies, in a manner adverse to UAL
Corporation, its recommendation or declaration of the advisability of
the merger agreement or the merger or recommends an alternative
transaction;
. Breach
--by UAL Corporation if (i) we materially breach our representations,
warranties or covenants under the merger agreement and are unable to
cure the breach after receiving written notice and an opportunity to
cure the breach and (ii) UAL Corporation has not previously been
deemed to have waived such breach;
--by us if UAL Corporation or Yellow Jacket Acquisition Corp.
materially breaches its representations, warranties or covenants under
the merger agreement and is unable to cure the breach after receiving
written notice and an opportunity to cure the breach; or
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. Fiduciary Termination--by us, in accordance with the provisions more
fully described in the fourth paragraph of the section entitled "Summary
of the Merger Agreement--No Solicitation of Transactions" on page 33,
which provides, at any time prior to obtaining stockholder approval, in
response to an unsolicited bona fide binding written offer made by a
third party to acquire more than 50% of our common stock or all or
substantially all our assets for consideration that our Board determines
in its good faith judgment to be superior from a financial view to our
stockholders, provided that we have complied in all material respects
with the no solicitation covenant of the merger agreement and we have
paid the applicable termination fee and expense reimbursement amount to
UAL Corporation and we concurrently enter into an acquisition agreement
with a third party.
In the event of termination of the merger agreement by either party under
the above events, the merger agreement shall become void and have no effect;
provided, however that this will not relieve a breaching party from liability
for a prior wilful breach of the merger agreement.
Termination Fees
We have agreed to pay to UAL Corporation a termination fee of $150 million,
plus up to a maximum of $10 million for reimbursement of UAL Corporation's
expenses, if:
. the merger agreement is terminated by UAL Corporation or us under
circumstances where:
--the termination was due to (i) our stockholders failing to approve
the merger or (ii) the merger failing to be completed by the
applicable termination date;
--prior to such termination, a third party made a proposal to acquire
20% or more of our common stock or a business that constitutes 20% or
more of our total revenue, operating income, EBITDA or assets; and
--within 12 months of such termination, we consummate or enter into an
agreement with a third party providing for the acquisition of 40% or
more of our common stock or a business that constitutes 40% or more of
our total revenue, operating income, EBITDA or assets.
. the merger agreement is terminated by UAL Corporation because our Board
withdraws or modifies, in a manner adverse to UAL Corporation, its
recommendation or declaration of the advisability of the merger
agreement or the merger or recommends any alternative transaction;
. The merger agreement is terminated by us in response to an unsolicited
bona fide binding written offer made by a third party to acquire more
than 50% of our common stock or all or substantially all our assets for
consideration that our Board determines in its good faith judgment to be
superior from a financial view to our stockholders and the Board
determines, after legal consultation, that failure to do so would likely
result in a breach of the Board's fiduciary duty and we concurrently
enter into an acquisition agreement with a third party.
UAL Corporation has agreed to pay us a termination fee of $50 million in the
event the merger agreement is terminated for any reason other than (i) our
Board's withdrawal or modification, in a manner adverse to UAL Corporation, of
its recommendation or declaration of the advisability of the merger agreement
or the merger, (ii) our material breach of our representations, warranties, or
covenants, or (iii) our termination in response to an unsolicited binding
written offer made by a third party for consideration that our Board
determines in its good faith judgment to be superior from a financial view to
stockholders. This fee will have to be repaid by us to UAL Corporation if
subsequent to such termination, UAL Corporation becomes entitled to the
payment of a termination fee as described in the immediately preceding
paragraph.
Expenses
Except as described above, all fees and expenses in connection with the
merger agreement and the merger will be paid by the party incurring such
expense.
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Amendment; Waiver
The merger agreement may be amended by the parties at any time; provided,
however, that after stockholder approval has been obtained, there shall be
made no amendment that by law requires further approval by stockholders of the
parties without the further approval of such stockholders. At any time prior
to the effective time of the merger, any party may extend the time for the
performance of any of the obligations or other acts of the other party, waive
any inaccuracies in the other party's representations and warranties or waive
the other party's compliance with any of the agreements or conditions
contained in the merger agreement; provided, however, that after stockholder
approval has been obtained, there shall be made no waiver that by law requires
further approval by stockholders of the parties without the further approval
of such stockholders.
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SUMMARY OF DC AIR
In connection with the agreement by UAL Corporation to divest certain of our
assets located principally at Reagan Washington National Airport (the
"Assets"), we and UAL Corporation have entered into a memorandum of
understanding with Mr. Robert L. Johnson, confirming the mutual understanding
of the parties with respect to the proposed acquisition by an entity to be
formed by Mr. Johnson of certain of our assets and the creation of a new
carrier to be called DC Air.
Competitive Presence in Washington, D.C.
DC Air will be based at Reagan Washington National Airport and will be
composed of the majority of our route structure currently served from Reagan
Washington National Airport. Initially offering jet, regional jet and
turboprop services, DC Air intends to transition itself to all jet service.
Initially serving 44 airports with approximately 222 daily departures (111
daily round trips from Reagan Washington National Airport), it is expected
that DC Air will carry approximately three million passengers in its first
year of operation.
DC Air Asset Configuration and Transition Plan
Pursuant to the terms of the memorandum of understanding, which is in the
process of being amended as follows, Potomac Air, Inc. ("Potomac"), one of our
wholly-owned subsidiaries, will be transferred to an entity controlled by Mr.
Johnson and will become DC Air upon consummation of the merger. Prior to such
transfer, Potomac will consist only of the existing leases on eight Dash-8-200
aircraft, Potomac's operating certificates, employees needed to operate the
eight Dash-8-200 aircraft and certain management employees necessary to
appropriately manage DC Air's operations. Additionally, DC Air will obtain the
availability of 19 regional jets operated by our Express affiliates pursuant
to contract rights that will be transferred to DC Air. Also, in order to
provide DC Air time to obtain its own jet aircraft operated by its own trained
crews, UAL Corporation or its subsidiaries will wet-lease ten 737-200 jet
aircraft to DC Air for up to four years, subject to DC Air's right to
terminate on four months' notice. A wet-lease is an arrangement where one
entity furnishes an aircraft, crew, aircraft maintenance, insurance, fuel and
other services related to the operation of the aircraft in revenue service to
another entity in exchange for rental payments. The wet-lease rates are to be
at market-rates as determined by a formula based on specified recent lease
transactions, labor rates derived from specified labor contracts, and UAL
Corporation's line maintenance costs. If needed, UAL Corporation will provide
DC Air with interim employees for up to six months at its cost while DC Air
hires and trains personnel to fill open positions.
DC Air will also obtain approximately 119 air carrier (jet) slots, 103
commuter slots at Reagan Washington National Airport that are currently held
by us. DC Air will assume leases on necessary airport facilities both at
Reagan Washington National Airport and at other served airports. Such
facilities include gates, ticket counters, ramps, ground handling equipment
and line maintenance infrastructure.
If requested by DC Air for periods ranging from five to seven years, UAL
Corporation will provide DC Air with various services at market rates. These
services include such items as fuel, station handling, occasional use gate
arrangements, access to club facilities, interline ticketing/baggage
arrangements. In addition, UAL Corporation has agreed to provide consulting
support for a period of two years.
We have agreed that the consummation of the transaction contemplated by the
memorandum of understanding will satisfy UAL Corporation's obligation,
pursuant to the first sentence of Section 5.03(a) of the merger agreement, to
divest the Assets, and provide the assets, facilities and services set forth
on Exhibit A to the merger agreement, but will not satisfy any other
obligation of UAL Corporation under Section 5.03(a) of the merger agreement.
Mr. Johnson will pay a purchase price of $141.2 million and will assume all
liabilities principally related to the operations of DC Air. He may not assign
his rights or obligations under the memorandum of understanding. Should he
within three years of startup sell a majority equity interest in DC Air (other
than through a public
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offering) or should he dispose of substantially all of its assets, any value
received above the purchase price must be paid over to UAL Corporation. There
will be no increase or decrease in the consideration paid by UAL Corporation
to our stockholders resulting from UAL Corporation's receiving more or less
than the price negotiated with Mr. Johnson, from any payment by Mr. Johnson to
UAL Corporation if DC Air is disposed of or from any other action required or
taken by UAL Corporation to complete the transaction. As a result, Salomon
Smith Barney, our financial advisors, was not asked to perform an independent
valuation analysis in connection with the DC Air transaction.
The purchase price to be paid by an entity to be established by Mr. Johnson,
which was agreed among the parties, was set at a level which compensated UAL
Corporation for the loss of the assets to be divested to DC Air. The DC Air
transaction is intended to provide DC Air with everything necessary to permit
the immediate and economically viable assumption by DC Air of most of US
Airways' existing operations at Reagan Washington National Airport. Other than
slots, most of the assets consist of DC Air's assumption of existing leases at
market rates. In arriving at the total purchase price, the parties took into
account the value of the slots to be transferred as reflected in recent
experiences in the purchase and sale of slots at Reagan Washington National
Airport, a third party slot appraisal previously prepared in connection with
unrelated financing transaction and the judgment of the parties.
The obligation of Mr. Johnson to consummate the transaction contemplated by
the memorandum of understanding is subject to a financing condition. The
execution of the definitive agreement relating to DC Air is conditioned upon
the receipt by Mr. Johnson of binding commitment letters relating to such
financing that are reasonably acceptable to UAL Corporation. The memorandum of
understanding terminates (i) on any termination of the merger agreement, (ii)
at the election of any of the three parties of the memorandum of understanding
if a definitive agreement is not achieved within 90 days and (iii) at any time
at the election of any two of the three parties.
The foregoing description is based on the terms of the memorandum of
understanding. However, the parties are in the process of preparing definitive
documentation and there is no assurance that the terms of the DC Air
transaction will not change prior to either finalization of the definitive
documentation or consummation of the DC Air transaction.
Consummation of the transactions contemplated by the memorandum of
understanding is subject to regulatory review and approval by various
regulatory authorities including, without limitation, the Department of
Transportation, which will conduct a review of the financial, managerial,
compliance and citizenship status of DC Air prior to its granting the
requisite economic authority to DC Air, and the Federal Aviation
Administration, which will conduct a safety fitness analysis on DC Air prior
to the issuance of certain operating certificates to DC Air. The Federal
Aviation Administration must also provide written confirmation of the transfer
of slots at Reagan Washington National Airport to DC Air. In addition, the
transfer of assets (including the slots) to DC Air is subject to the Hart-
Scott-Rodino Act, which provides that such transactions may not be completed
until certain information has been submitted to the Department of Justice and
the Federal Trade Commission and specified waiting period requirements have
been satisfied. We believe that the regulatory process can be completed by
January 1, 2001.
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REGULATORY MATTERS
Set forth below is a summary of the regulatory requirements affecting
completion of the merger.
Antitrust Considerations
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
provides that transactions such as the merger may not be completed until
certain information has been submitted to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and specified waiting
period requirements have been satisfied. We and UAL Corporation have made our
respective pre-merger notification filings pursuant to the Hart-Scott-Rodino
Act, and the waiting period was scheduled to expire on July 14, 2000, subject
to possible extension by the Antitrust Division or the Federal Trade
Commission. Prior to the expiration of the initial waiting period, the
Department of Justice on July 14, 2000 issued separate Request(s) for
Additional Information and Documentary Material to UAL Corporation and to us.
Issuance of such requests extends the waiting period until twenty days
following the filing by the last responding party of a certificate of
substantial compliance. Compliance with the requests requires extensive
document productions and information submissions. On September 1, 2000, we
made our document production and information submission to the Department of
Justice, and delivered a certificate of substantial compliance formally
certifying our compliance with the additional request made to us by the
Department of Justice. We understand that UAL Corporation is in the process of
preparing their document production and information submission in response to
the additional request made to them by the Department of Justice.
Both we and UAL Corporation have received inquiries from a number of state
antitrust authorities and are cooperating with their investigations. While no
formal state approvals are required, as is the case with other private
litigants, the state authorities have the capacity to seek judicial
injunctions under the federal antitrust laws.
The expiration or earlier termination of the Hart-Scott-Rodino Act waiting
period would not preclude the Antitrust Division, the Federal Trade Commission
or state authorities from challenging the merger on federal antitrust grounds.
We and UAL Corporation believe that the merger, after giving effect to the
transactions contemplated by the merger agreement and the memorandum of
understanding with Mr. Johnson, will not violate federal antitrust laws. If we
do not complete the merger within 12 months after the expiration or earlier
termination of the Hart-Scott-Rodino Act waiting period, we and UAL
Corporation would be required to submit new information to the Antitrust
Division of the Department of Justice and the Federal Trade Commission , and a
new waiting period would have to expire or be terminated before we could
complete the merger.
We and UAL Corporation anticipate that the Antitrust Division will seek the
disposition of certain assets at Reagan Washington National Airport. We
believe that the transaction with DC Air (as described above on page 38 under
the section entitled "Summary of DC Air") should satisfy any such
requirements. The regulatory process may, however, impose certain
modifications and/or additions to our and UAL Corporation's current proposals.
We and UAL Corporation are committed to completing the transaction. We believe
that efforts sufficient to satisfy such regulatory requirement can be
concluded by January 1, 2001 and that the merger will be completed promptly
following satisfaction of such requirement. However, we cannot assure you that
such requirements will be satisfied or, if satisfied, the date by which they
will be satisfied.
Department of Transportation
As the regulatory agency with transportation expertise, we anticipate that
the Department of Transportation will conduct its own independent analysis of
the merger and, as it has done in the past with respect to other airline
mergers, provide the Antitrust Division with its views on the transaction and
any other information that it deems relevant. Both we and UAL Corporation have
received requests from the Department of Transportation to cooperate with it
in providing certain information in order to enable it to perform its review
of the merger and anticipate responding to such requests on a timely basis. In
response to the Department of Transportation's request we, on July 27, 2000,
provided the Department of Transportation a copy of the Hart-Scott-Rodino pre-
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merger notification filing that had previously been submitted to the
Department of Justice. We anticipate responding to any additional Department
of Transportation requests on a timely basis. The Department of
Transportation's approval must be obtained regarding economic authority for DC
Air and the transfer of our international route and economic authorities to
UAL Corporation or one of its subsidiaries. The carriers must also notify the
Department of Transportation and provide certain information about any
substantial change in operations, management, or ownership. We believe that
the Department of Transportation's review of the merger and the transactions
contemplated thereby can be completed by January 1, 2001. However, we cannot
assure you of the date by which such review will be completed.
Federal Aviation Administration
In addition to matters described above with respect to DC Air, the Federal
Aviation Administration must also provide written confirmation of slot
transfers. "Slot transfers" occur when slots (the operational authority to
conduct a IFR (instrument flight rules) landing or take-off operation at one
of the airports designated as a high density traffic airport pursuant to
subpart K, Part 93, Title 14 of the Code of Federal Regulations) are bought,
sold, leased, or traded and thereby transferred from the transferor to the
recipient. We believe that written confirmation from the Federal Aviation
Administration can be received by January 1, 2001. However, we cannot assure
you of the date by which such written confirmation will be received. The
Federal Aviation Administration must also be notified of the acquisition of us
and our FAA operating authorities.
European Communities Filing
Under Council Regulation (EEC) No. 4064/89, as amended, certain mergers,
including the present merger, may not be completed until the Commission of the
European Communities has granted its approval or such approval has been deemed
to have been granted. We believe that efforts sufficient to satisfy the
Commission's requirements can be completed and that the Commission's approval
can be obtained by January 1, 2001. However, we cannot assure you that such
requirements can be satisfied or, if satisfied, the date by which they will be
satisfied.
Other Regulatory Matters
We and our subsidiaries have obtained from various regulatory authorities
franchises, permits and licenses which may need to be renewed, replaced or
transferred as a result of the merger. Approvals, consents or notifications
may be required in connection with such renewals, replacements or transfers.
We are not aware of any material governmental or regulatory approvals or
actions that may be required for completion of the merger other than as
described above. If any other governmental or regulatory approval or action is
or becomes required, we currently contemplate that we would seek that
additional approval or action.
CERTAIN LITIGATION
Commencing on May 24, 2000, we, along with several of our officers and
directors and, in all suits other than one, UAL Corporation, have been named
as defendants in eight putative class actions filed in the Court of Chancery
of the State of Delaware in and for the New Castle County (the "Court"). The
plaintiffs allege that they have been and will be damaged by the agreement
reached between us, UAL Corporation, and Mr. Johnson with respect to the
acquisition by an entity to be established by Mr. Johnson of certain assets
located at Reagan Washington National Airport that are to be divested by UAL
Corporation upon consummation of the merger. The plaintiffs allege, among
other things, that the individual defendants have breached their duty of
loyalty and their fiduciary duties in entering into the agreement with Mr.
Johnson. Plaintiffs seek, among other things, declaratory and injunctive
relief, unspecified compensatory damages and attorney's fees.
We were also named as a nominal defendant in a derivative action filed in
the Court of Chancery based upon the same allegations. The derivative
plaintiff brought causes of action for (i) breach of fiduciary duty; (ii)
gross mismanagement; and (iii) corporate waste of assets. The plaintiff in the
derivative action seeks, among other things, declaratory and equitable relief,
unspecified compensatory damages and attorney's fees.
We believe these actions are without merit and intend to conduct a vigorous
defense.
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PARTIES TO THE MERGER
US Airways Group, Inc. We are incorporated under the laws of the State of
Delaware on February 16, 1982. Our executive offices are located at 2345
Crystal Drive, Arlington, Virginia 22227. Our telephone number is (703) 872-
7000.
We are a holding company and our principal operating subsidiary is US
Airways, Inc., a Delaware corporation, which is wholly owned. US Airways, Inc.
accounted for approximately 88% of our operating revenues on a consolidated
basis in 1999. US Airways, Inc. is a certified air carrier engaged primarily
in the business of transporting passengers, property and mail.
UAL Corporation. UAL Corporation was incorporated under the laws of the
State of Delaware on December 30, 1968. The world headquarters of UAL
Corporation are located at 1200 East Algonquin Road, Elk Grove Township,
Illinois 60007. UAL Corporation's mailing address is P.O. Box 66919, Chicago,
Illinois 60666. The telephone number for UAL Corporation is (847) 700-4000.
UAL Corporation is a holding company and its principal subsidiary is United
Air Lines, Inc., a Delaware corporation, which is wholly owned. United Air
Lines accounted for virtually all of UAL Corporation's revenues and expenses
in 1999. United Air Lines is a major commercial air transportation company,
engaged in the transportation of persons, property and mail throughout the
United States and abroad.
Yellow Jacket Acquisition Corp. Yellow Jacket Acquisition Corp. was formed
as a Delaware Corporation on May 17, 2000 by UAL Corporation for the purpose
of entering into the merger agreement. Yellow Jacket Acquisition Corp. has not
engaged in any business activity other than in connection with the merger and
the related transactions.
42
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following information pertains to common stock beneficially owned by all
directors and executive officers of US Airways (or its principal operating
subsidiary) as of September 1, 2000. Unless indicated otherwise by footnote,
the owner exercises sole voting and investment power over the securities
(other than unissued securities, the ownership of which has been imputed to
such owner).
<TABLE>
<CAPTION>
Percentage
of
Owner Number of Shares Class(1)
----- ---------------- ----------
<S> <C> <C>
Directors
Mathias J. DeVito............................ 8,000(2) *
Rakesh Gangwal............................... 1,525,462(3) 2.3%
Peter M. George.............................. 2,265(4) *
Robert L. Johnson............................ 4,413(5) *
Robert LeBuhn................................ 25,756(2)(6) *
John G. Medlin, Jr........................... 11,000(2) *
Hanne M. Merriman............................ 7,500(2) *
Thomas H. O'Brien............................ 2,944(4) *
Hilda Ochoa-Brillembourg..................... 16,445(4)(7) *
Richard B. Priory............................ 2,167(4) *
Raymond W. Smith............................. 9,609(2) *
Stephen M. Wolf.............................. 2,216,986(8) 3.3%
Executive Officers
Lawrence M. Nagin............................ 351,500(9) *
B. Ben Baldanza.............................. 62,500(10) *
Thomas A. Mutryn............................. 90,433(11) *
20 directors and executive officers of the
Company as a group............................ 4,650,713(12) 6.9%
</TABLE>
--------
* Less than 1%.
(1) Percentages are shown only where they exceed one percent of the number
of shares outstanding and are based on shares of common stock
outstanding on September 1, 2000.
(2) These holdings include 6,000 shares of common stock issuable within 60
days of September 1, 2000 upon exercise of stock options.
(3) Mr. Gangwal's holdings include 362,450 shares of common stock which are
subject to certain restrictions ("Restricted Stock") and 900,000 shares
of common stock issuable within 60 days of September 1, 2000 upon
exercise of stock options.
(4) These holdings include 1,500 shares of common stock issuable within 60
days of September 1, 2000 upon exercise of stock options.
(5) These holdings include 3,000 shares of common stock issuable within 60
days of September 1, 2000 upon exercise of stock options.
(6) These holdings include 10,000 shares of common stock held in trust.
(7) These holdings include 14,000 shares of common stock held jointly by Ms.
Ochoa-Brillembourg and her spouse.
(8) Mr. Wolf's holdings include 321,121 shares of Restricted Stock and
1,510,000 shares of common stock issuable within 60 days of September 1,
2000 upon exercise of stock options.
(9) Mr. Nagin's holdings include 42,831 shares of Restricted Stock and
264,000 shares of common stock issuable within 60 days of September 1,
2000 upon exercise of stock options.
(10) Mr. Baldanza's holdings include 40,000 shares of Restricted Stock and
22,500 shares of common stock issuable within 60 days of September 1,
2000.
(11) Mr. Mutryn's holdings include 52,291 shares of Restricted Stock and
33,334 shares of common stock issuable within 60 days of September 1,
2000 upon exercise of stock options.
(12) All directors' and executive officers' holdings include 954,318 shares
of Restricted Stock and 2,919,484 shares of common stock issuable within
60 days of September 1, 2000 upon exercise of stock options.
43
<PAGE>
The only persons known to us (from our records and reports on Schedules 13D
and 13G filed with the Securities and Exchange Commission (the "SEC")) who
owned, as of August 21, 2000, unless otherwise indicated, more than 5% of our
common stock are listed below:
<TABLE>
<CAPTION>
Name and address Amount and nature Percent
Title of Class of beneficial owner of beneficial ownership of Class(1)
---------------------------------- ----------------------- -----------
<S> <C> <C>
Common Stock................................ 3,415,741(2)(3) 5.09%
Salomon Smith Barney Holdings Inc.
Citigroup Inc.
388 Greenwich Street
New York, New York 10013
Common Stock................................ 4,249,480(4) 6.34%
Morgan Stanley Dean Witter & Co.
1585 Broadway
New York, New York 10036
Common Stock................................ 16,512,700(5) 24.62%
Tiger Management LLC
Tiger Performance LLC
101 Park Avenue
New York, New York 10178
</TABLE>
--------
(1) Represents percentage of shares of common stock outstanding on August 21,
2000.
(2) As set forth in a Schedule 13G, dated April 20, 2000, as of April 7,
2000.
(3) 546,740 of these shares are held by Salomon Smith Barney for the accounts
of its customers.
(4) As set forth in a Schedule 13G, dated February 1, 2000, as of December
31, 1999.
(5) As set forth in a Schedule 13D, dated July 30, 1999, as of July 30, 1999.
44
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed on the New York Stock Exchange under the symbol
"U". The following table sets forth, for the fiscal quarters indicated, the
high and low trading prices per share of our common stock as quoted on the New
York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
High Low
---- ---
$ $
<S> <C> <C>
1998:
First Quarter.......................................... 76 7/8 56 9/16
Second Quarter......................................... 82 1/8 63 5/8
Third Quarter.......................................... 83 1/4 47
Fourth Quarter......................................... 58 9/16 34 3/4
1999:
First Quarter.......................................... 64 43 3/16
Second Quarter......................................... 59 5/8 43
Third Quarter.......................................... 47 1/16 24 1/8
Fourth Quarter......................................... 33 5/8 25 1/16
2000:
First Quarter.......................................... 33 3/16 17 7/16
Second Quarter......................................... 51 1/2 24
Third Quarter (through September 18, 2000)............. 39 7/8 32 5/8
</TABLE>
We have not paid dividends on our common stock since the second quarter of
1990 and the Board has not authorized the resumption of dividends on our
common stock as of the date of the printing of this proxy statement.
On May 23, 2000, the last full trading day prior to the public announcement
of the signing of the merger agreement, the closing sale price of our common
stock reported on the New York Stock Exchange was $26.31 per share and the
high and low trading prices per share of our common stock as quoted on the New
York Stock Exchange Composite Tape were $26.31 and $25.50, respectively. On
September 18, 2000, the most recent practicable date prior to the printing of
this proxy statement, the closing price of our common stock reported on the
New York Stock Exchange was $34.75. You are urged to obtain current market
quotations for our common stock prior to making any decision with respect to
the proposed merger.
As of the record date, there were approximately 23,606 holders of record of
our common stock, as shown on the records of our transfer agent.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained herein should be considered "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 which is subject to a number of risks and uncertainties. The
preparation of forward-looking statements requires the use of estimates of
future revenues, expenses, activity levels and economic and market conditions,
many of which are outside our control. Specific factors that could cause
actual results to differ materially from those set forth in the forward-
looking statements include: economic conditions, labor costs; aviation fuel
costs; competitive pressures on pricing (particularly from lower-cost
competitors); weather conditions; government legislation; consumer perceptions
of our products; demand for air transportation in the markets served by our
airline subsidiaries; and other operational matters and risks and
uncertainties listed from time to time in our reports to the SEC. Other
factors and assumptions not identified above are also involved in the
preparation of forward-looking statements, and the failure of such other
factors and assumptions to be realized may also cause actual results to differ
materially from those discussed. We assume no obligation to update such
estimates to reflect actual results, changes in assumptions or changes in
other factors affecting such estimates.
45
<PAGE>
OTHER INFORMATION
Proposals by Stockholders of US Airways
If we complete the merger, we will no longer have public stockholders or any
public participation in our stockholder meetings. If we do not complete the
merger, we intend to hold our next annual stockholder meeting in 2001. In that
case, if you are still a stockholder as of the record date of such meeting,
you would continue to be entitled to attend and participate in our stockholder
meetings.
Our by-laws require stockholders who intend to nominate directors or propose
new business at any annual meeting to provide advance notice of such intended
action as well as certain additional information. This by-laws provision
requires stockholders to provide us with notice of their intent to nominate
directors or propose new business at an annual meeting not less than 30 days
nor more than 60 days prior to such annual meeting; provided, however, that in
the event less than 40 days prior written notice or prior public disclosure of
the date of the meeting is given or made to the stockholder, such notices by
the stockholder must be received by us not later than close of business on the
10th day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made.
In accordance with federal securities laws, proposals to be submitted by
stockholders for consideration at our next annual meeting and inclusion in our
2001 Proxy Statement must be received by us at our executive offices in
Arlington, Virginia, not later than December 15, 2000. SEC rules establish
standards as to which stockholder proposals are required to be included in a
proxy statement for an annual meeting. We will only consider proposals for
inclusion in our proxy statement for an annual meeting that satisfy the
requirements of applicable SEC rules.
Where You Can Find More Information
As required by law, we file reports, proxy statements and other information
with the SEC. You may read and copy this information at the following offices
of the SEC:
Public Reference Room New York Regional Office Chicago Regional
450 Fifth Street, N.W. 7 World Trade Center Office
Room 1024 Suite 1300 500 West Madison
Washington, D.C. 20549 New York, New York 10048 Street
Suite 1400
Chicago, Illinois
60661
For further information concerning the SEC's public reference rooms, you may
call the SEC at 1-800-SEC-0330. You may obtain copies of this information by
mail from the public reference section of the SEC, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at prescribed rates. You may also access
some of this information via the World Wide Web through the SEC's Internet
address at http://www.sec.gov. Our common stock is listed on the New York
Stock Exchange, and materials may be inspected at the New York Stock
Exchange's offices at 20 Broad Street, New York, New York 10005.
46
<PAGE>
APPENDIX A
EXECUTION COPY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
UAL CORPORATION,
YELLOW JACKET ACQUISITION CORP.
and
US AIRWAYS GROUP, INC.
Dated as of May 23, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
The Merger
<TABLE>
<C> <S> <C>
Section 1.01 The Merger....... 1
Section 1.02 Closing.......... 1
Section 1.03 Effective Time... 1
Effects of the
Section 1.04 Merger........... 1
Certificate of
Incorporation and
Section 1.05 By-laws.......... 2
Section 1.06 Directors........ 2
Section 1.07 Officers......... 2
ARTICLE II
Conversion of Securities
Conversion of
Section 2.01 Capital Stock.... 2
Exchange of
Section 2.02 Certificates..... 3
ARTICLE III
Representations and Warranties
Representations
and Warranties of
Section 3.01 the Company...... 4
Representations
and Warranties of
Section 3.02 Parent and Sub... 17
ARTICLE IV
Covenants Relating to Conduct of Business
Conduct of
Section 4.01 Business......... 18
Section 4.02 No Solicitation.. 21
ARTICLE V
Additional Agreements
Preparation of
the Proxy
Statement;
Stockholders
Section 5.01 Meeting.......... 23
Access to
Information;
Section 5.02 Confidentiality.. 23
Efforts;
Section 5.03 Notification..... 24
Company Stock
Section 5.04 Options.......... 25
Indemnification,
Exculpation and
Section 5.05 Insurance........ 25
Fees and
Section 5.06 Expenses......... 26
Information
Section 5.07 Supplied......... 27
Benefits
Section 5.08 Matters.......... 27
Public
Section 5.09 Announcements.... 28
Future
Section 5.10 Employment....... 28
ARTICLE VI
Conditions Precedent
Conditions to
Each Party's
Obligation to
Effect the
Section 6.01 Merger........... 28
Conditions to
Obligations of
Section 6.02 Parent and Sub... 29
Conditions to
Obligation of the
Section 6.03 Company.......... 29
Frustration of
Closing
Section 6.04 Conditions....... 30
</TABLE>
i
<PAGE>
ARTICLE VII
Termination, Amendment and Waiver
<TABLE>
<C> <S> <C>
Section 7.01 Termination.................................................. 30
Section 7.02 Effect of Termination........................................ 31
Section 7.03 Amendment.................................................... 31
Section 7.04 Extension; Waiver............................................ 31
ARTICLE VIII
General Provisions
Section 8.01 Nonsurvival of Representations and Warranties................ 32
Section 8.02 Notices...................................................... 32
Section 8.03 ............................................................. 32
Section 8.04 Interpretation............................................... 33
Section 8.05 Counterparts................................................. 33
Section 8.06 Entire Agreement; No Third-Party Beneficiaries............... 33
Section 8.07 Governing Law................................................ 33
Section 8.08 Assignment................................................... 33
Section 8.09 Enforcement.................................................. 33
</TABLE>
ii
<PAGE>
Agreement and Plan of Merger dated as of May 23, 2000, by and among UAL
Corporation, a Delaware corporation ("Parent"), Yellow Jacket Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"),
and US Airways Group, Inc., a Delaware corporation (the "Company").
Whereas the Board of Directors of each of the Company and Sub has approved
and declared advisable, and the Board of Directors of Parent has approved,
this Agreement and the merger of Sub with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of common stock, par value $1.00 per
share, of the Company (the "Company Common Stock") not owned by Parent, Sub or
the Company, other than the Appraisal Shares (as defined in Section 2.01(d)),
will be converted into the right to receive $60.00 in cash;
Whereas Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
Now, Therefore, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, the parties hereto
agree as follows:
ARTICLE I
The Merger
Section 1.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 1.03). At the Effective Time, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed
to and assume all the rights and obligations of Sub in accordance with the
DGCL.
Section 1.02 Closing. Upon the terms and subject to the conditions set forth
in this Agreement, the closing of the Merger (the "Closing") shall take place
at 11:00 a.m., New York time, on the second business day after the
satisfaction or (to the extent permitted by applicable law) waiver of the
conditions set forth in Article VI (other than those that by their terms
cannot be satisfied until the time of the Closing), at the offices of Cravath,
Swaine & Moore, 825 Eighth Avenue, New York, New York 10019, or at such other
time, date or place agreed to in writing by Parent and the Company; provided,
however, that if all the conditions set forth in Article VI shall not have
been satisfied or (to the extent permitted by applicable law) waived on such
second business day, then the Closing shall take place on the first business
day on which all such conditions shall have been satisfied or (to the extent
permitted by applicable law) waived. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date".
Section 1.03 Effective Time. Upon the terms and subject to the conditions
set forth in this Agreement, as soon as practicable on or after the Closing
Date, a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") shall be duly prepared, executed and
acknowledged by the parties in accordance with the relevant provisions of the
DGCL and filed with the Secretary of State of the State of Delaware. The
Merger shall become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware or at such subsequent
time or date as Parent and the Company shall agree and specify in the
Certificate of Merger. The time at which the Merger becomes effective is
referred to in this Agreement as the "Effective Time".
Section 1.04 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
A-1
<PAGE>
Section 1.05 Certificate of Incorporation and By-laws. (a) The Restated
Certificate of Incorporation of the Company, as amended to the date of this
Agreement, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The By-laws of Sub as in effect immediately prior to the Effective Time
shall be the By-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
Section 1.06 Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
Section 1.07 Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
Conversion of Securities
Section 2.01 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares
of capital stock of the Company, Parent or Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of common
stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock that is owned by the Company as treasury stock, or by
Parent or Sub, immediately prior to the Effective Time shall automatically
be canceled and retired and shall cease to exist and no consideration shall
be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with Section 2.01(b) and the
Appraisal Shares) shall be converted into the right to receive $60.00 in
cash, without interest (the "Merger Consideration"). At the Effective Time
all such shares shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented any such shares (a
"Certificate") shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, shares (the "Appraisal Shares") of Company Common Stock issued
and outstanding immediately prior to the Effective Time that are held by
any holder who is entitled to demand and properly demands appraisal of such
shares pursuant to, and who complies in all respects with, the provisions
of Section 262 of the DGCL ("Section 262") shall not be converted into the
right to receive the Merger Consideration as provided in Section 2.01(c),
but instead such holder shall be entitled to payment of the fair value of
such shares in accordance with the provisions of Section 262. At the
Effective Time, all Appraisal Shares shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder
of Appraisal Shares shall cease to have any rights with respect thereto,
except the right to receive the fair value of such shares in accordance
with the provisions of Section 262. Notwithstanding the foregoing, if any
such holder shall fail to perfect or otherwise shall waive, withdraw or
lose the right to appraisal under Section 262 or a court of competent
jurisdiction shall determine that such holder is not entitled to the relief
provided by Section 262, then the right of such holder to be paid the fair
value of such holder's Appraisal Shares under Section 262 shall cease and
such Appraisal Shares shall be deemed to have been converted at the
Effective Time into, and shall have become, the right to receive the Merger
Consideration as provided in Section 2.01(c). The Company shall serve
prompt notice to Parent of any demands for appraisal of any shares of
Company
A-2
<PAGE>
Common Stock, and Parent shall have the right to participate in and direct
all negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any
such demands, or agree to do any of the foregoing.
Section 2.02 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as agent for the payment of the Merger
Consideration upon surrender of Certificates (the "Paying Agent"), and, from
time to time after the Effective Time, Parent shall provide, or cause the
Surviving Corporation to provide, to the Paying Agent funds in amounts and at
the times necessary for the payment of the Merger Consideration pursuant to
Section 2.01(c) upon surrender of Certificates, it being understood that any
and all interest or income earned on funds made available to the Paying Agent
pursuant to this Agreement shall be turned over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
held by such person shall pass, only upon proper delivery of the Certificates
to the Paying Agent and shall be in customary form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancelation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly completed and validly executed, and such
other documents as may reasonably be required by the Paying Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the shares formerly represented by such Certificate
shall have been converted pursuant to Section 2.01(c) into the right to
receive, and the Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Company Common Stock that is not
registered in the stock transfer books of the Company, the proper amount of
cash may be paid in exchange therefor to a person other than the person in
whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required
by reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that such tax has been
paid or is not applicable. No interest shall be paid or shall accrue on the
cash payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash paid upon
the surrender of a Certificate in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock formerly represented by such
Certificate. At the close of business on the day on which the Effective Time
occurs the stock transfer books of the Company shall be closed, and there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for transfer or any other reason, they shall be canceled and exchanged
as provided in this Article II.
(d) No Liability. None of Parent, Sub, the Company or the Paying Agent shall
be liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
certificates shall not have been surrendered prior to two years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or became the property of any
Governmental Entity (as defined in Section 3.01(d)), any such Merger
Consideration in respect thereof shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(e) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving
A-3
<PAGE>
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent shall pay in respect of
such lost, stolen or destroyed Certificate the Merger Consideration.
(f) Withholding Rights. Parent, the Surviving Corporation or the Paying
Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock such amounts as Parent, the Surviving Corporation or the
Paying Agent is required to deduct and withhold with respect to the making of
such payment under the Code or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority by Parent, the Surviving Corporation or the
Paying Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent,
the Surviving Corporation or the Paying Agent.
ARTICLE III
Representations and Warranties
Section 3.01 Representations and Warranties of the Company. Except as set
forth on the disclosure schedule, with specific reference to the Section or
Subsection of this Agreement to which the information stated in such
disclosure relates (the "Company Disclosure Schedule") (provided that any
subsection under Section 3.01 of the Company Disclosure Schedule or any
subsections thereof shall each be deemed to include (i) all disclosures set
forth in other sections and subsections of the Company Disclosure Schedule
(including Sections 4.01(a) and 4.01(b)) and (ii) all disclosures set forth in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (the "Company's 1999 10-K"), US Airways, Inc.'s (the "Principal
Operating Sub") Annual Report on Form 10-K for the fiscal year ended December
31, 1999, or any other report or other document filed by the Company or the
Principal Operating Sub with the Securities and Exchange Commission (the
"SEC") and publicly available subsequent to December 31, 1999, and prior to
the date of this Agreement, including the financial statements (and notes
thereto) filed therewith (collectively, the "Filed SEC Documents"), in each of
clauses (i) and (ii) as and to the extent the context of such disclosures
makes it reasonably clear, if read in the context of such other section or
subsection, that such disclosures are applicable to such other sections or
subsections), the Company represents and warrants to Parent and Sub as
follows:
(a) Organization, Standing and Power. Each of the Company and its
subsidiaries (as defined in Section 8.03) (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has all requisite corporate, company or partnership
power and authority to carry on its business as now being conducted and
(iii) is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, other than (except in the case of clause (i) above
with respect to the Company) where the failure to be so organized,
existing, qualified or licensed or in good standing individually or in the
aggregate would not be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect (as defined in Section
8.03). The Company has delivered to Parent true and complete copies of its
Restated Certificate of Incorporation and By-laws and the certificate of
incorporation and by-laws (or similar organizational documents) of each of
its subsidiaries, in each case as amended to the date of this Agreement.
Except as identified in writing by the Company to Parent prior to the date
of this Agreement, the Company has made available to Parent and its
representatives true and complete copies of the minutes of all meetings of
the stockholders, the Board of Directors of the Company and each committee
of the Board of Directors of the Company and each of its subsidiaries held
since January 1, 1997, that have been requested by Parent.
(b) Subsidiaries. All the outstanding shares of capital stock or other
equity or voting interests of each such subsidiary are owned by the
Company, by another wholly owned subsidiary of the Company or by the
Company and another wholly owned subsidiary of the Company, free and clear
of all pledges, claims, liens, charges, encumbrances and security interests
of any kind or nature whatsoever (collectively, "Liens"), and
A-4
<PAGE>
are duly authorized, validly issued, fully paid and nonassessable. Except
for the capital stock of, or other equity or voting interests in, its
subsidiaries, the Company does not own, directly or indirectly, any capital
stock of, or other equity or voting interests in, any corporation,
partnership, joint venture, association or other entity.
(c) Capital Structure. (i) The authorized capital stock of the Company
consists of 150,000,000 shares of Company Common Stock, 3,000,000 shares of
senior preferred stock, without nominal or par value (the "Company Senior
Preferred Stock"), and 5,000,000 shares of preferred stock, without nominal
or par value (the "Company Preferred Stock"). As of the close of business
on May 19, 2000, (A) 67,029,029 shares of Company Common Stock (excluding
shares held by the Company as treasury shares) were issued and outstanding,
(B) 34,142,767 shares of Company Common Stock were held by the Company as
treasury shares, (C) 20,486,116 shares of Company Common Stock were
reserved for issuance pursuant to the Nonemployee Directors Stock Purchase
Plan, the 1984 Stock Option and Stock Appreciation Rights Plan, the 1992
Stock Option Plan, the Nonemployee Director Deferred Stock Unit Plan, the
Nonemployee Director Stock Incentive Plan, the 1996 Stock Incentive Plan,
the 1997 Stock Incentive Plan and the 1998 Pilot Stock Option Plan (such
plans, collectively, the "Company Stock Plans"), of which 11,495,500 shares
were subject to outstanding Company Stock Options (as defined below), (D)
no shares of Company Senior Preferred Stock were issued and outstanding or
were held by the Company as treasury shares and (E) no shares of Company
Preferred Stock were issued and outstanding or were held by the Company as
treasury shares. There are no outstanding stock appreciation rights or
other rights that are linked to the price of Company Common Stock granted
under any Company Stock Plan that were not granted in tandem with a related
Company Stock Option. No shares of Company Common Stock are owned by any
subsidiary of the Company. The Company has delivered to Parent a true and
complete list, as of the close of business on May 19, 2000, of all
outstanding stock options to purchase Company Common Stock granted under
the Company Stock Plans (collectively, the "Company Stock Options") and all
other rights to purchase or receive Company Common Stock (collectively, the
"Company Stock Issuance Rights") granted under the Company Stock Plans, the
number of shares subject to each such Company Stock Option or Company Stock
Issuance Right, the grant dates and exercise prices of each such Company
Stock Option or, as applicable, Company Stock Issuance Right and the names
of the holder thereof. Except as set forth above, as of the close of
business on May 19, 2000, no shares of capital stock of, or other equity or
voting interests in, the Company, or, to the extent issued or granted by
the Company, options, warrants or other rights to acquire any such stock or
securities were issued, reserved for issuance or outstanding. During the
period from May 19, 2000 to the date of this Agreement, (x) there have been
no issuances by the Company of shares of capital stock of, or other equity
or voting interests in, the Company other than issuances of shares of
Company Common Stock pursuant to the exercise of Company Stock Options
outstanding on such date as required by their terms as in effect on the
date of this Agreement and (y) there have been no issuances by the Company
of options, warrants or other rights to acquire shares of capital stock or
other equity or voting interests from the Company. All outstanding shares
of capital stock of the Company are, and all shares that may be issued
pursuant to the Company Stock Plans will be, when issued in accordance with
the terms thereof, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company or any of its
subsidiaries, and, except as set forth above, no securities or other
instruments or obligations of the Company or any of its subsidiaries the
value of which is in any way based upon or derived from any capital or
voting stock of the Company, having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company or any of its subsidiaries may vote.
Except as set forth above and except as specifically permitted under
Section 4.01(a), there are no Contracts (as defined in Section 3.01(d)) of
any kind to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of, or
other equity or voting interests in, or securities convertible into, or
exchangeable or exercisable for, shares of capital stock of, or other
equity or voting interests in, the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend
or enter into any such security, option, warrant,
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call, right or Contract. There are not any outstanding contractual
obligations of the Company or any of its subsidiaries to (I) repurchase,
redeem or otherwise acquire any shares of capital stock of, or other equity
or voting interests in, the Company or any of its subsidiaries or (II) vote
or dispose of any shares of the capital stock of, or other equity or voting
interests in, any of its subsidiaries. To the knowledge of the Company as
of the date of this Agreement, there are no irrevocable proxies and no
voting agreements to which the Company is a party with respect to any
shares of the capital stock or other voting securities of the Company or
any of its subsidiaries.
(ii) As of the date of the Agreement, the number of outstanding shares of
Company Common Stock held by the trustee (the "Trustee") under the
Company's Employee Stock Ownership Plan (the "ESOP") is 2,081,873, of which
900,156 shares are allocated to participants and beneficiaries under the
ESOP and 1,181,717 shares are unallocated. As of the date of this
Agreement, the outstanding and unpaid principal amount of the note
evidencing the agreement to repay the loan (the "ESOP Loan") from the
Company to the Trustee, dated August 11, 1989, the proceeds of which were
used by the Trustee on behalf of the ESOP to purchase from the Company on
such date 2,200,000 shares of Company Common Stock, is $72,241,786. The
unallocated shares of Company Common Stock held in the ESOP's suspense
account have been pledged as collateral for the ESOP Loan.
(d) Authority; Noncontravention. The Company has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to approve this
Agreement or to consummate the transactions contemplated hereby, subject,
in the case of the consummation of the Merger, to obtaining the Stockholder
Approval (as defined in Section 3.01(t)). This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms. The Board of Directors of the Company, at a meeting duly
called and held at which all directors of the Company were present, duly
and unanimously adopted resolutions (i) approving and declaring advisable
the Merger, this Agreement and the transactions contemplated hereby, (ii)
declaring that it is in the best interests of the Company's stockholders
that the Company enter into this Agreement and consummate the Merger on the
terms and subject to the conditions set forth in this Agreement, (iii)
declaring that the consideration to be paid to the Company's stockholders
in the Merger is fair to such stockholders, (iv) directing that this
Agreement be submitted to a vote at a meeting of the Company's stockholders
and (v) recommending that the Company's stockholders adopt this Agreement.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof
do not and will not conflict with, or result in any violation or breach of,
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of, or result in, termination, cancelation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any Lien in or upon any of the properties or
assets of the Company or any of its subsidiaries under, or give rise to any
increased, additional, accelerated or guaranteed rights or entitlements
under, any provision of (i) the Restated Certificate of Incorporation or
By-laws of the Company or the certificate of incorporation or by-laws (or
similar organizational documents) of any of its subsidiaries, (ii) any loan
or credit agreement, bond, debenture, note, mortgage, indenture, guarantee,
lease or other contract, commitment, agreement, instrument, arrangement,
understanding, obligation, undertaking, permit, concession, franchise or
license, whether oral or written (each, including all amendments thereto, a
"Contract"), to which the Company or any of its subsidiaries is a party or
any of their respective properties or assets is subject or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree, in each case applicable to the Company or any of
its subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations,
breaches, defaults, rights, losses, Liens or entitlements that individually
or in the aggregate would not be expected to result in (taking into account
the likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect. No consent, approval,
order or authorization of,
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or registration, declaration or filing with, any domestic or foreign
(whether national, federal, state, provincial, local or otherwise)
government or any court, administrative agency or commission or other
governmental or regulatory authority or agency, domestic, foreign or
supranational (a "Governmental Entity"), is required by or with respect to
the Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby or compliance with the
provisions hereof, except for (1) the filing of a premerger notification
and report form by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") or any other
applicable competition, merger control, antitrust or similar law or
regulation, (2) any consent, approval, order, authorization, registration,
declaration or filing required to be received from or made with any foreign
regulatory authorities, (3) any filings required under Title 49 of the
United States Code and the rules and regulations of the Federal Aviation
Administration (the "FAA"), (4) any filings required under the rules and
regulations of the Department of Transportation (the "DOT"), (5) the filing
with the SEC of a proxy statement relating to the adoption by the Company's
stockholders of this Agreement (as amended or supplemented from time to
time, the "Proxy Statement") and such reports under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement, the Merger and the other transactions
contemplated hereby, (6) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which the Company or any of its
subsidiaries is qualified to do business, (7) any filings required under
the rules and regulations of the New York Stock Exchange ("NYSE"), (8) any
consent, approval, order, authorization, registration, declaration or
filing required to be received from or made with any Governmental Entity
that generally regulates aspects of airline operations, including, but not
limited to, noise, environmental, aircraft communications, agricultural,
export/import and customs and (9) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to be obtained or made individually or in the aggregate would not be
expected to result in (taking into account the likelihood of such result
occurring and the expected magnitude of such event if it were to occur) a
material adverse effect.
(e) SEC Documents. Each of the Company and the Principal Operating Sub
has filed with the SEC, and has heretofore made available to Parent true
and complete copies of, all forms, reports, schedules, statements and other
documents required to be filed with the SEC by it since January 1, 1997
(together with all information incorporated therein by reference, the "SEC
Documents"). No subsidiary of the Company, other than the Principal
Operating Sub, is required to file any form, report, schedule, statement or
other document with the SEC. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act") or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
at the time they were filed contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements (including the related notes) included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto in effect at the time of filing, have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects
(x) in the case of the SEC Documents filed by the Company, the consolidated
financial position of the Company and its consolidated subsidiaries as of
the dates thereof and their consolidated results of operations and cash
flows for the periods then ended, and (y) in the case of the SEC Documents
filed by the Principal Operating Sub, the consolidated financial position
of the Principal Operating Sub and its consolidated subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject, in the case of unaudited statements,
to normal and recurring year-end audit adjustments). Except for contingent
liabilities referenced or reflected (without regard to potential amount) in
the Filed SEC Documents, as of December 31, 1999, the Company and its
subsidiaries had no contingent liabilities, other than contingent
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liabilities that individually would not be expected to result in (taking
into account the likelihood of such result occurring and the expected
magnitude of such event if it were to occur) a material adverse effect.
(f) Absence of Certain Changes or Events. Since December 31, 1999, the
Company and its subsidiaries have conducted their respective businesses
only in the ordinary course consistent with past practice, and there has
not been (i) any state of facts, change, development, effect, condition or
occurrence that individually or in the aggregate constitutes, has had, or
would be expected to result in (taking into account the likelihood of such
result occurring and the expected magnitude of such event if it were to
occur) a material adverse effect, (ii) prior to the date of this Agreement,
any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of the
Company's or any of its subsidiaries' capital stock, except for dividends
by a wholly owned subsidiary of the Company to its parent, (iii) prior to
the date of this Agreement, any purchase, redemption or other acquisition
of any shares of capital stock or any other securities of the Company or
any of its subsidiaries or any options, warrants, calls or rights to
acquire such shares or other securities, (iv) prior to the date of this
Agreement, any split, combination or reclassification of any of the
Company's or any of its subsidiaries' capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock or other securities
of the Company or any of its subsidiaries, (v) (x) any granting by the
Company or any of its subsidiaries to any current or former director,
officer, employee or consultant of any increase in compensation, bonus or
other benefits or any such granting of any type of compensation or benefits
to any current or former director, officer, employee or consultant not
previously receiving or entitled to receive such type of compensation or
benefit, except for (A) increases of cash compensation and other immaterial
changes in benefits (except for changes in benefits provided to officers
other than as the result of immaterial changes made to Company Benefit
Plans that are generally applicable to the employees of the Company or any
of its subsidiaries, which changes are not specifically directed at or do
not disproportionately affect such officers) in each case (1) in the
ordinary course of business consistent with past practice or (2) required
under any agreement or benefit plan in effect as of December 31, 1999, or
(B) those actions taken by the Company to retain or attract employees in
key positions as and to the extent consistent with the Employee
Retention/Attraction Plan set forth as Exhibit N to the Company Disclosure
Schedule (the "Retention Plan"), (y) any granting to any current or former
director, officer, employee or consultant of the right to receive any
severance or termination pay, or increases therein, other than (A)
termination arrangements for employees (other than officers) entered into
in the ordinary course of business consistent with past practice and (B)
those actions taken by the Company to retain or attract employees in key
positions as and to the extent consistent with the Retention Plan or (z)
any entry by the Company or any of its subsidiaries into, or any amendment
of, any Company Benefit Agreement (as defined in Section 3.01(j)), (vi) any
payment of any benefit or the grant or amendment of any award (including in
respect of stock options, stock appreciation rights, performance units,
restricted stock or other stock-based or stock-related awards or the
removal or modification of any restrictions in any Company Benefit
Agreement or Company Benefit Plan or awards made thereunder) except as
required to comply with any applicable law or any Company Benefit Agreement
or Company Benefit Plan existing on such date and except for those actions
taken by the Company to retain or attract employees in key positions as and
to the extent consistent with the Retention Plan, (vii) any damage or
destruction, whether or not covered by insurance, that individually or in
the aggregate would be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect, (viii) any material
change in financial accounting methods, principles or practices by the
Company or any of its subsidiaries, except insofar as may have been
required by a change in GAAP or SEC accounting regulations or guidelines or
applicable law, (ix) on or prior to the date of this Agreement, any
material election with respect to taxes by the Company or any of its
subsidiaries or any settlement or compromise of any material tax liability
or refund of the Company or any of its subsidiaries, (x) on or prior to the
date of this Agreement, any material change in tax accounting methods,
principles or practices by the Company or any of its subsidiaries, except
insofar as may have been required by a change in GAAP or SEC accounting
regulations or guidelines or applicable law or (xi) any revaluation by the
Company or any of its subsidiaries of any of the material assets of the
Company or any of its subsidiaries.
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(g) Litigation. There is no suit, claim, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries or any of their
respective assets that individually or in the aggregate would be expected
to result in (taking into account the likelihood of such result occurring
and the expected magnitude of such event if it were to occur) a material
adverse effect, nor is there any statute, law, ordinance, rule, regulation,
judgment, order or decree, of any Governmental Entity or arbitrator
outstanding against, or, to the knowledge of the Company, investigation,
proceeding, notice of violation, order of forfeiture or complaint by any
Governmental Entity involving, the Company or any of its subsidiaries that
individually or in the aggregate would be expected to result in (taking
into account the likelihood of such result occurring and the expected
magnitude of such event if it were to occur) a material adverse effect.
(h) Contracts. Except for Contracts filed as exhibits to the Filed SEC
Documents, as of the date hereof there are no Contracts that are required
to be filed as an exhibit to any Filed SEC Document under the Exchange Act
and the rules and regulations promulgated thereunder. Except for Contracts
filed in unredacted form as exhibits to the Filed SEC Documents, Section
3.01(h) of the Company Disclosure Schedule sets forth a true and complete
list of:
(i) all Contracts to which the Company or any of its subsidiaries is
a party, or that purports to be binding upon the Company, any of its
subsidiaries or any of its affiliates, that contain a covenant (a
"Restrictive Covenant") materially restricting the ability of the
Company or any of its subsidiaries (or which, following the
consummation of the Merger, could materially restrict the ability of
Parent or any of its subsidiaries, including the Company and its
subsidiaries) to compete in any business that is material to the
Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, or with any person or in any geographic
area, except for any such Contract (x) that would not be expected to
result in the Company incurring costs or receiving revenues in excess
of $5,000,000 per year, (y) that may be canceled without penalty by the
Company or any of its subsidiaries upon notice of 60 days or less or
(z) the terms and scope (including with respect to any Restrictive
Covenants) are customary in the airline industry for Contracts of that
type;
(ii) all material joint venture, partnership, business alliance
(excluding information technology contracts), code sharing and frequent
flyer agreements (including all material amendments to each of the
foregoing agreements);
(iii) all maintenance agreements for repair and overhaul that would
be expected to result in the Company incurring costs in excess of
$10,000,000 per year (including all material amendments to each of the
foregoing agreements); and
(iv) as of the date hereof, all loan agreements, credit agreements,
notes, debentures, bonds, mortgages, indentures and other Contracts
pursuant to which any indebtedness (which term shall include capital
leases and operating leases) of the Company or any of its subsidiaries
is outstanding or may be incurred and all guarantees of or by the
Company or any of its subsidiaries of any indebtedness of any other
person (except for such indebtedness or guarantees of indebtedness the
aggregate principal amount of which does not exceed $10,000,000),
including the respective aggregate principal amounts outstanding as of
the date of this Agreement. The Company has previously disclosed to
Parent in writing, based upon the assumptions in such writing, the
aggregate amount of indebtedness (which shall be deemed solely for
purposes of this sentence to consist of capital leases, aircraft
operating leases and indebtedness for borrowed money) of the Company
and its subsidiaries (including all guarantees of indebtedness to third
parties) as of the date of this Agreement.
None of the Company or any of its subsidiaries is in violation of or
default (with or without notice or lapse of time or both) under, or has
waived or failed to enforce any rights or benefits under, any Contract to
which it is a party or by which it or any of its properties or assets is
bound, and, to the knowledge of the Company or such subsidiary, no other
party to any of its Contracts is in violation or default (with or without
notice or lapse of time or both) under, or has waived or failed to enforce
any rights or benefits under, and there has occurred no event giving to
others any right of termination, amendment or cancelation of, with or
without
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notice or lapse of time or both, any such Contract except, in each case,
for violations, defaults, waivers or failures to enforce benefits that
individually or in the aggregate would not be expected to result in (taking
into account the likelihood of such result occurring and the expected
magnitude of such event if it were to occur) a material adverse effect.
Except as identified in writing by the Company to Parent prior to the date
of this Agreement, the Company has delivered or made available to Parent or
its representatives true and complete copies of all Contracts listed on
Section 3.01(h) of the Company Disclosure Schedule.
(i) Compliance with Laws. Except with respect to Environmental Laws (as
defined in Section 3.01(l)(vi)) and taxes, which are the subject of
Sections 3.01(l) and 3.01(n), respectively, and except as otherwise set
forth in any documents filed by the Company or the Principal Operating Sub
with the SEC and publicly available prior to December 31, 1999, the Company
and its subsidiaries and their relevant personnel and operations are, and
since January 1, 1997 have been, in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, orders and decrees of any
Governmental Entity applicable to their businesses or operations, including
all applicable operating certificates, Airworthiness Directives ("ADs"),
Federal Aviation Regulations ("FARs"), DOT regulations, common carrier
obligations and other applicable licensing agreements, except for any such
noncompliance which would not individually or in the aggregate be expected
to result in (taking into account the likelihood of such result occurring
and the expected magnitude of such event if it were to occur) a material
adverse effect. Except as otherwise set forth in any documents filed by the
Company or the Principal Operating Sub with the SEC and publicly available
prior to December 31, 1999, none of the Company or any of its subsidiaries
has received, since January 1, 1997, a notice or other written
communication alleging or identifying a possible material violation of any
statute, law, ordinance, rule, regulation, judgment, order or decree of any
Governmental Entity applicable to its businesses or operations. Except as
otherwise set forth in any documents filed by the Company or the Principal
Operating Sub with the SEC and publicly available prior to December 31,
1999, the Company and its subsidiaries have in effect all permits,
licenses, variances, exemptions, authorizations, operating certificates,
Slots (as defined in Section 3.01(p)), air service designations,
franchises, orders and approvals of all Governmental Entities, including
the FAA and the DOT (collectively, "Permits"), necessary or reasonably
advisable for them to own, lease or operate their properties and assets and
to carry on their businesses as now conducted, and there has occurred no
violation of, default (with or without notice or lapse of time or both)
under, or event giving to others any right of termination, amendment or
cancelation of, with or without notice or lapse of time or both, any such
Permit, except where the failure to have in effect such Permits or such
violation, default or event would not individually or in the aggregate be
expected to result in (taking into account the likelihood of such result
occurring and the expected magnitude of such event if it were to occur) a
material adverse effect. The Company does not believe that the Merger, in
and of itself, would be expected to cause (taking into account the
likelihood of such result occurring) the revocation or cancelation of any
such Permit.
(j) Absence of Changes in Company Benefit Plans; Employment
Agreements. Since December 31, 1999, none of the Company or any of its
subsidiaries has (i) terminated, adopted, amended or agreed to amend in any
material respect any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock
appreciation, restricted stock, stock option, phantom stock, performance,
retirement, thrift, savings, stock bonus, cafeteria, paid time-off,
perquisite, fringe benefit, vacation, severance, disability, death benefit,
hospitalization, medical, welfare benefit or other plan, program, policy,
arrangement or understanding (whether or not legally binding) providing
benefits to any of the current or former directors, officers, employees or
consultants of the Company or any of its subsidiaries (collectively,
"Company Benefit Plans") (other than any such actions taken with respect to
Non-Significant Benefit Plans (as defined below) in the ordinary course of
business), (ii) made any material change in any actuarial or other
assumption used to calculate funding obligations with respect to any
Company Pension Plan (as defined in Section 3.01(m)) or (iii) made any
material change in the manner in which contributions to any Company Pension
Plan are made or the basis on which such contributions are determined.
There exist no employment, consulting, deferred compensation, severance,
termination or indemnification agreements or arrangements between the
Company or any of its subsidiaries, on the one hand, and any current or
former director, officer, employee or consultant of the Company or any of
its subsidiaries, on the
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other hand (collectively, "Company Benefit Agreements") (other than Non-
Significant Benefit Agreements (as defined below)), and no Company Benefit
Agreement (other than Non-Significant Benefit Agreements) or Company
Benefit Plan (other than Non-Significant Benefit Plans) provides benefits
that are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or its subsidiaries of
the nature contemplated by this Agreement. "Non-Significant Benefit Plans"
means all immaterial Company Benefit Plans which do not provide benefits to
any officers or directors of the Company or the Principal Operating Sub.
"Non-Significant Benefit Agreements" means all immaterial Company Benefit
Agreements which are not between the Company or the Principal Operating
Sub, on the one hand, and any current officer or director of the Company or
the Principal Operating Sub, on the other hand.
(k) Labor and Employment Matters. As of the date hereof, Section 3.01(k)
of the Company Disclosure Schedule sets forth a true and complete list of
all collective bargaining or other labor union contracts (including all
amendments thereto) applicable to any employees of the Company or any of
its subsidiaries. There is no labor dispute, strike, work stoppage or
lockout, or, to the knowledge of the Company, threat thereof, by or with
respect to any employee of the Company or any of its subsidiaries, except
where such dispute, strike, work stoppage or lockout individually or in the
aggregate would not be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect. None of the Company
or any of its subsidiaries has breached or otherwise failed to comply with
any provision of any collective bargaining or other labor union contract
applicable to any employees of the Company or any of its subsidiaries and
there are no grievances or complaints outstanding or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries
under any such Contract except for any breaches, failures to comply,
grievances or complaints that individually or in the aggregate would not be
expected to result in (taking into account the likelihood of such result
occurring and the expected magnitude of such event if it were to occur) a
material adverse effect. The Company has made available to Parent and its
representatives true and complete copies of all Contracts listed on Section
3.01(k) of the Company Disclosure Schedule.
(l) Environmental Matters. (i) Permits and Authorizations. Each of the
Company and its subsidiaries possesses all material Environmental Permits
(as defined below) necessary to conduct its businesses and operations as
currently conducted.
(ii) Compliance. Each of the Company and its subsidiaries is in
compliance in all material respects with all applicable Environmental Laws
(as defined below) and all Environmental Permits, and none of the Company
or its subsidiaries has received any (A) communication from any
Governmental Entity or other person that alleges that the Company or any of
its subsidiaries has violated or is liable under any Environmental Law
other than communications with respect to violations or liabilities that
would not be expected to result in (taking into account the likelihood of
such result occurring and the expected magnitude of such event if it were
to occur) a material adverse effect or (B) written request for material
information pursuant to Section 104(e) of the U.S. Comprehensive
Environmental Response, Compensation and Liability Act or similar state
statute concerning the disposal of Hazardous Materials (as defined below).
(iii) Environmental Claims. There are no Environmental Claims (as defined
below) (A) pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or (B) to the knowledge of the
Company, pending or threatened against any person whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed, either contractually or by operation of law, in each case other
than Environmental Claims that would not be expected to result in (taking
into account the likelihood of such result occurring and the expected
magnitude of such event if it were to occur) a material adverse effect.
None of the Company or its subsidiaries has contractually retained or
assumed any liabilities or obligations that would be expected to provide
the basis for any Environmental Claim that would be expected to result in
(taking into account the likelihood of such result occurring and the
expected magnitude of such event if it were to occur) a material adverse
effect.
(iv) Stage III Requirements. (A) None of the Company or any of its
subsidiaries will be required to make material expenditures to comply with
the Stage III noise reduction requirements promulgated by the
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FAA (the "Stage III Requirements") or other applicable noise reduction
requirements and (B) the retirement or other discontinuation of use by the
Company or any of its subsidiaries of any aircraft that will not be in
compliance with the Stage III Requirements or other applicable noise
reduction requirements would not individually or in the aggregate be
expected to result in (taking into account the likelihood of such result
occurring and the expected magnitude of such event if it were to occur) a
material adverse effect.
(v) Releases. To the knowledge of the Company, there have been no
Releases (as defined in Section 3.01(l)(vi)(D)) of any Hazardous Materials
that could reasonably be expected to form the basis of any material
Environmental Claim.
(vi) Definitions. (A) "Environmental Claims" means any and all
administrative, regulatory or judicial actions, orders, decrees, suits,
demands, demand letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation by any Governmental
Entity or other person alleging potential responsibility or liability
(including potential responsibility or liability for costs of enforcement,
investigation, cleanup, governmental response, removal or remediation, for
natural resources damages, property damage, personal injuries or penalties
or for contribution, indemnification, cost recovery, compensation or
injunctive relief) arising out of, based on or related to (x) the presence,
Release or threatened Release of, or exposure to, any Hazardous Materials
at any location, whether or not owned, operated, leased or managed by the
Company or any of its subsidiaries, or (y) circumstances forming the basis
of any violation or alleged violation of any Environmental Law or
Environmental Permit.
(B) "Environmental Laws" means all domestic or foreign (whether national,
federal, state, provincial or otherwise) laws, rules, regulations, orders,
decrees, common law, judgments or binding agreements issued, promulgated or
entered into by or with any Governmental Entity relating to pollution or
protection of the environment (including ambient air, surface water,
groundwater, soils or subsurface strata) or protection of human health as
it relates to the environment, including laws and regulations relating to
Releases or threatened Releases of Hazardous Materials or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, transport, handling of or exposure to Hazardous
Materials.
(C) "Environmental Permits" means all permits, licenses, registrations
and other authorizations required under applicable Environmental Laws.
(D) "Hazardous Materials" means all hazardous, toxic, explosive or
radioactive substances, wastes or other pollutants, including petroleum or
petroleum distillates, asbestos or asbestos-containing material,
polychlorinated biphenyls ("PCBs") or PCB-containing materials or
equipment, radon gas, infectious or medical wastes and all other substances
or wastes of any nature regulated pursuant to any Environmental Law.
(E) "Release" means any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.
(m) ERISA Compliance. (i) Section 3.01(m)(i) of the Company Disclosure
Schedule contains a true and complete list, as of the date hereof, of all
"employee welfare benefit plans" (as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
"employee pension benefit plans" (as defined in Section 3(2) of ERISA)
("Company Pension Plans") and all other Company Benefit Plans maintained or
contributed to by the Company or any of its subsidiaries or any person or
entity that, together with the Company or any of its subsidiaries, is
treated as a single employer (a "Commonly Controlled Entity") under Section
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended
(the "Code"), for the benefit of any current or former directors, officers,
employees or consultants of the Company or any of its subsidiaries, other
than, in each case, any Non-Significant Benefit Plans. The Company has
provided or made available to Parent, to the extent requested by Parent,
true and complete copies of (1) each Company Benefit Plan (or, in the case
of any unwritten Company Benefit Plans, descriptions thereof), (2) the most
recent annual report on Form 5500 required to be filed with the Internal
Revenue Service (the "IRS") with respect to each Company Benefit Plan (if
any such report was required),
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(3) the most recent summary plan description for each Company Benefit Plan
for which such summary plan description is required and (4) each trust
agreement and group annuity contract relating to any Company Benefit Plan,
other than, in each case, any Non-Significant Benefit Plans. Each Company
Benefit Plan has been administered in accordance with its terms, except
where the failure so to be administered individually or in the aggregate
would not be expected to result in (taking into account the likelihood of
such result occurring and the expected magnitude of such event if it were
to occur) a material adverse effect. The Company and its subsidiaries and
all the Company Benefit Plans are in compliance with all applicable
provisions of ERISA and the Code, except for instances of possible
noncompliance that individually or in the aggregate would not be expected
to result in (taking into account the likelihood of such result occurring
and the expected magnitude of such event if it were to occur) a material
adverse effect.
(ii) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed to or been obligated to contribute to any Company
Benefit Plan that is subject to Title IV of ERISA with respect to which the
Company or any Commonly Controlled Entity has liabilities or obligations
(whether accrued, absolute, contingent or otherwise).
(iii) With respect to any Company Benefit Plan (other than any Non-
Significant Benefit Plan) that is an employee welfare benefit plan, there
are no understandings, agreements or undertakings, written or oral, that
would prevent any such plan (including any such plan covering retirees or
other former employees) from being amended or terminated without material
liability to the Company or any of its subsidiaries on or at any time after
the Effective Time.
(iv) No current or former director, officer employee or consultant of the
Company or any of its subsidiaries are party to any agreement or
arrangement with the Company or any of its subsidiaries, nor are there any
corporate policies in place, the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving the Company of the nature contemplated by this Agreement. Prior
to the date of this Agreement, the Company has delivered to Parent a report
that sets forth the Company's good faith estimate, as of the date of such
report, of (x) the amount to be paid (subject to the exceptions described
in such report and based upon the assumptions described in such report) to
the current officers of the Company and the Principal Operating Sub and the
president of each of the Company's three commuter subsidiaries under all
Company Benefit Agreements and Company Benefit Plans (or the amount by
which any of their benefits may be accelerated or increased) as a result of
(i) the execution of this Agreement, (ii) the obtaining of the Stockholder
Approval, (iii) the consummation of the Merger or the other transaction
contemplated by this Agreement or (iv) the termination or constructive
termination of the employment of such officers following one of the events
set forth in clauses (i) through (iii) above and (y) the ramifications of
such payments Sections 280G and 4999 of the Code.
(v) The deduction of any amount payable pursuant to the terms of the
Company Benefit Plans or any other employment contracts or arrangements
will not be subject to disallowance under Section 162(m) of the Code.
(vi) The Company has no liability or obligations, including under or on
account of a Company Benefit Plan or Company Benefit Agreement, arising out
of the Company's hiring of persons to provide services to the Company and
treating such persons as consultants or independent contractors and not as
employees of the Company, except where such liability or obligation would
not be expected to result in (taking into account the likelihood of such
result occurring and the expected magnitude of such event if it were to
occur) a material adverse effect.
(n) Taxes. (i) Each of the Company and its subsidiaries has filed all tax
returns required to be filed by it or requests for extensions to file such
returns have been timely filed, granted and have not expired, and all such
returns are true and complete, except for such failures to file or to have
extensions granted that remain and such inaccuracies that individually or
in the aggregate would not be expected to result in (taking into account
the likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect. Each of the Company
and its subsidiaries has paid (or the Company has paid on its behalf) all
taxes shown as due on such returns and all material taxes otherwise due
(including withholding taxes pursuant to Sections 1441, 1442, 3121 and 3402
of the Code or similar provisions under
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any foreign federal laws or any state or local laws, domestic or foreign),
except for such failures to pay that individually or in the aggregate would
not be expected to result in (taking into account the likelihood of such
result occurring and the expected magnitude of such event if it were to
occur) a material adverse effect, and the most recent financial statements
contained in the Filed SEC Documents adequately provide for all taxes
payable by the Company and its subsidiaries (in addition to any reserve for
deferred taxes established to reflect timing differences between book and
tax income) for all taxable periods and portions thereof accrued through
the date of such financial statements, except where the failure to have
such an adequate provision would not be expected to result in (taking into
account the likelihood of such result occurring and the expected magnitude
of such event if it were to occur) a material adverse effect.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not
adequately reflected in the most recent financial statements contained in
the Filed SEC Documents, except for deficiencies that individually or in
the aggregate would not be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect, and no requests for
waivers of the time to assess any such taxes have been granted or are
pending. The United States Federal income tax returns of the Company and
each of its subsidiaries consolidated in such returns have been either
examined by and settled with the IRS or closed by virtue of the applicable
statute of limitations. There is no audit, examination, deficiency or
refund litigation pending with respect to taxes and during the past three
years no taxing authority has given written notice of the intent to
commence any such examination, audit or refund litigation and which such
examination, audit or refund litigation has not yet ended. None of the
assets or properties of the Company or any of its subsidiaries is subject
to any material tax lien, other than any such liens for taxes which are not
due and payable, which may thereafter be paid without penalty or the
validity of which are being contested in good faith by appropriate
proceedings and for which adequate provisions are being maintained in
accordance with GAAP.
(iii) None of the Company or any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock outside of the affiliated group of which the Company
is the common parent qualifying or intended to qualify for tax-free
treatment under Section 355(a) of the Code (A) in the two years prior to
the date of this Agreement or (B) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
(iv) As used in this Agreement, "taxes" shall include all (x) domestic
and foreign (whether national, federal, state, provincial, local or
otherwise) income, franchise, property, sales, excise, employment, payroll,
social security, value-added, ad valorem, transfer, withholding and other
taxes, including taxes based on or measured by gross receipts, profits,
sales, use or occupation, tariffs, levies, impositions, assessments or
governmental charges of any nature whatsoever, including any interest
penalties or additions with respect thereto, (y) liability for the payment
of any amounts of the type described in clause (x) as a result of being a
member of an affiliated, consolidated, combined or unitary group, and (z)
liability for the payment of any amounts as a result of being party to any
tax sharing agreement or as a result of any express or implied obligation
to indemnify any other person with respect to the payment of any amounts of
the types described in clause (x) or (y).
(o) Aircraft. (i) Section 3.01(o)(i) of the Company Disclosure Schedule
sets forth a true and complete list of all aircraft owned, leased or
operated by the Company or any of its subsidiaries as of April 30, 2000.
All aircraft owned, leased or operated by the Company or any of its
subsidiaries (other than the Non-Operating Aircraft (as defined below) and
the Excluded Leased Aircraft (as defined below)) are in airworthy condition
and are being maintained according to applicable FAA regulatory standards
and the FAA-approved maintenance program of the Company and its
subsidiaries. The Company and its subsidiaries have implemented plans with
respect to their respective aircraft (other than the Non-Operating Aircraft
and Excluded Leased Aircraft) and engines that, if complied with, would
result in the satisfaction of all requirements under all applicable ADs and
FARs required to be complied with in accordance with the FAA-approved
maintenance program of the Company and its subsidiaries, and the Company
and its subsidiaries
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are in compliance with such plans in all material respects and currently
have no reason to believe that they will not satisfy any component of such
plan on or prior to the dates specified in such plan. No Non-Operating
Aircraft is currently included in, or is currently contemplated by the
Company to be included in, the active fleet of the Company or any of its
subsidiaries. All lease agreements relating to the lease of an Excluded
Leased Aircraft by the Company or any of its subsidiaries to a third party
lessee contain a customary undertaking by the third party lessee with
respect to maintaining such Excluded Leased Aircraft in accordance with FAA
regulatory standards and requirements under applicable ADs and FARs. The
term "Non-Operating Aircraft" means each aircraft of the Company or any of
its subsidiaries identified on Section 3.01(o)(i) of the Company Disclosure
Schedule as not being in operation. The term "Excluded Leased Aircraft"
means each aircraft owned or leased by the Company that has been leased to
a third party lessee and with respect to which neither the Company nor any
of its subsidiaries has retained any maintenance obligations.
(ii) Except as identified in writing by the Company to Parent prior to
the date of this Agreement, Section 3.01(o)(ii) of the Company Disclosure
Schedule sets forth a true and complete list, as of the date hereof,
containing all Contracts (other than existing aircraft leases) pursuant to
which the Company or any of its subsidiaries may purchase or lease
aircraft, including the manufacturer and model of all aircraft subject to
each Contract, the nature of the purchase or lease obligation (i.e., firm
commitment, subject to reconfirmation or option), the anticipated delivery
date of each aircraft and the other material terms of each Contract. Except
as identified in writing by the Company to Parent prior to the date of this
Agreement, the Company has delivered or made available to Parent true and
complete copies of all Contracts listed on Section 3.01(o)(ii) of the
Company Disclosure Schedule, including all amendments thereto. The Company
has also delivered to Parent a true and complete copy of the fleet plan for
the Principal Operating Sub for the period ending December 31, 2004.
(p) Slots; Operating Rights. (i) Section 3.01(p)(i) of the Company
Disclosure Schedule sets forth a true and complete list of all takeoff and
landing slots and other similar takeoff and landing rights (collectively,
the "Slots") used or held by the Company or any of its subsidiaries on the
date of this Agreement at Slot-controlled airports, including a true and
complete list of all Slot lease agreements. The Slots have been used 80% of
each full and partial reporting period (as described in 14 CFR
(S) 93.227(i)) since December 31, 1999, except to the extent less usage was
permitted as provided under 14 CFR (S) 93.227. The Slots have not been
designated for the provision of essential air service under the regulations
of the FAA.
(ii) Section 3.01(p)(ii) of the Company Disclosure Schedule sets forth a
true and complete list of all foreign operating rights and all foreign
takeoff and landing authorizations and other similar takeoff and landing
rights used by the Company or any of its subsidiaries on the date of this
Agreement.
(q) Intellectual Property. (i) Each of the Company and its subsidiaries
owns, or is validly licensed or otherwise has the right to use, all
patents, patent rights, trademarks, trade secrets, trade names, service
marks, copyrights and other proprietary intellectual property rights and
computer programs (the "Intellectual Property Rights") used in its
business, except for such Intellectual Property Rights the failure of which
to own, license or otherwise have the right to use individually or in the
aggregate would not be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect.
(ii) None of the Company or any of its subsidiaries has infringed upon,
misappropriated or otherwise violated any Intellectual Property Rights or
other proprietary information of any other person, except for any such
infringement, misappropriation or other violation that individually or in
the aggregate would not be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect. None of the Company
or any of its subsidiaries has received any written charge, complaint,
claim, demand or notice alleging any such infringement, misappropriation or
other violation (including any claim that the Company or any of its
subsidiaries must license or refrain from using any Intellectual Property
Rights or other proprietary information of any other person) that has not
been settled or otherwise fully resolved, except for any such
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infringement, misappropriation or other violation that individually or in
the aggregate would not be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect. To the Company's
knowledge, no other person has infringed upon, misappropriated or otherwise
violated any Intellectual Property Rights of the Company or any of its
subsidiaries, except for any such infringement, misappropriation or other
violation that individually or in the aggregate would not be expected to
result in (taking into account the likelihood of such result occurring and
the expected magnitude of such event if it were to occur) a material
adverse effect.
(r) Business Combination Charter Provision. The approval of this
Agreement by the Board of Directors of the Company referred to in Section
3.01(d) represents the only action necessary to ensure that ARTICLE SIXTH
of the Restated Certificate of Incorporation of the Company does not and
will not apply to the execution or delivery of this Agreement or the
consummation of the Merger.
(s) State Takeover Statutes. The approval of the Merger by the Board of
Directors of the Company referred to in Section 3.01(d) constitutes
approval of the Merger for purposes of Section 203 of the DGCL and
represents the only action necessary to ensure that Section 203 of the DGCL
does not and will not apply to the execution or delivery of this Agreement
or the consummation of the Merger and the other transactions contemplated
hereby. No other state takeover or similar statute or regulation is
applicable to this Agreement, the Merger or the other transactions
contemplated hereby.
(t) Voting Requirements. The affirmative vote at the Stockholders Meeting
(as defined in Section 5.01(b)) or any adjournment or postponement thereof
of the holders of a majority of the outstanding shares of Company Common
Stock in favor of adopting this Agreement (the "Stockholder Approval") is
the only vote of the holders of any class or series of the Company's
capital stock necessary to approve or adopt this Agreement or the Merger.
The affirmative vote of the holders of the Company Common Stock is not
necessary to approve any transaction contemplated by this Agreement (other
than the consummation of the Merger).
(u) Brokers. No broker, investment banker, financial advisor or other
person, other than Salomon Smith Barney Inc., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has delivered to Parent
true and complete copies of all agreements under which any such fees or
expenses are payable and all indemnification and other agreements related
to the engagement of the persons to whom such fees are payable.
(v) Opinion of Financial Advisor. The Company has received the written
opinion of Salomon Smith Barney Inc., in customary form, to the effect
that, as of the date of this Agreement, the consideration to be received in
the Merger by the Company's stockholders is fair to the Company's
stockholders from a financial point of view, a copy of which opinion has
been delivered to Parent.
(w) Other Matters. The information (other than forecasts) furnished by
the Company to Parent relating to the items (the "Specified Matters")
identified in a letter specifically referencing this Section of the
Agreement delivered by Parent to the Company on or prior to the date of
this Agreement is accurate in all material respects and, taking into
account the limited nature of the information disclosed, does not omit to
state any fact necessary in order to make such information not misleading.
There are no facts or terms with respect to the Specified Matters which
have not been disclosed to Parent which would be expected to result in
(taking into account the likelihood of such result occurring and the
expected magnitude of such event if it were to occur) a material adverse
effect. The forecasts dated April 25, 2000 delivered by or on behalf of the
Company to Parent relating to the Specified Matters were prepared on the
basis of assumptions the Company believes in good faith as of the date of
this Agreement to be reasonable and the Company has no knowledge as of the
date of this Agreement of any fact or information that would lead it to
believe that such assumptions are incorrect or misleading in any material
respect.
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Section 3.02 Representations and Warranties of Parent and Sub. Parent and
Sub represent and warrant to the Company as follows:
(a) Organization. Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has all requisite corporate power and
authority to carry on its business as now being conducted.
(b) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and Sub and the consummation by Parent and Sub
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Sub and no other
corporate proceedings on the part of Parent or Sub, including the approval
of their respective stockholders, are necessary to approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and Sub, as applicable, and
constitutes a valid and binding obligation of Parent and Sub, as
applicable, enforceable against Parent and Sub, as applicable, in
accordance with its terms. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby and compliance
with the provisions of this Agreement do not and will not conflict with, or
result in any violation or breach of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of, or result in,
termination, cancelation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of
the properties or assets of Parent under, or give rise to any increased,
additional, accelerated or guaranteed rights or entitlements under, any
provision of (i) the Restated Certificate of Incorporation or By-laws of
Parent or the certificate of incorporation or by-laws (or similar
organizational documents) of any of its subsidiaries (including Sub), (ii)
any Contract applicable to Parent or Sub or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any (A) statute, law, ordinance,
rule or regulation or (B) judgment, order or decree, in each case
applicable to Parent or Sub or their respective properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not prevent or materially impede or delay (taking into
account the likelihood of such result occurring and the expected magnitude
of such event if it were to occur) the consummation of the Merger or the
other transactions contemplated hereby. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent and
Sub or the consummation by Parent and Sub of the transactions contemplated
hereby or the compliance with the provisions of this Agreement, except for
(1) the filing of a premerger notification and report form under the HSR
Act or any other applicable competition, merger control, antitrust or
similar law or regulation, (2) any consent, approval, order, authorization,
registration, declaration or filing required to be received from or made
with any foreign regulatory authorities, (3) any filings required under the
rules and regulations of the FAA, (4) any filings required under the rules
and regulations of the DOT, (5) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the
Company is qualified to do business, (6) any consent, approval, order,
authorization, registration, declaration or filing required to be received
from or made with any Governmental Entity that generally regulates aspects
of airline operations, including, but not limited to, noise, environmental,
aircraft communications, agricultural, export/import and customs and (7)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made
individually or in the aggregate would not impair in any material respect
the ability of Parent or Sub to perform its obligations under this
Agreement or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(c) Interim Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby and has engaged in no
business other than in connection with the transactions contemplated by
this Agreement.
(d) Capital Resources. Parent has or, on or prior to the Closing Date,
will have, sufficient cash to pay the Merger Consideration.
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(e) No Capital Ownership. As of the date hereof, neither Parent nor Sub
own any shares of capital stock of the Company for purposes of Section 203
of the DGCL.
ARTICLE IV
Covenants Relating to Conduct of Business
Section 4.01 Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective
Time, except as consented to in writing by Parent or as specifically
contemplated by this Agreement (including the Company Disclosure Schedule),
the Company shall, and shall cause its subsidiaries to, carry on their
respective businesses in the ordinary course consistent with past practice and
use their reasonable efforts to comply with all applicable laws, rules and
regulations and, to the extent consistent therewith, use their reasonable
efforts to preserve their assets and preserve their relationships with
customers, suppliers, employees, licensors, licensees, distributors and others
having business dealings with them. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, except as consented to in writing by Parent or as specifically
contemplated by this Agreement (including the Company Disclosure Schedule),
the Company shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
its capital stock, provided that Parent's consent shall not be required for
dividends by a direct or indirect wholly owned subsidiary of the Company to
its parent, (y) purchase, redeem or otherwise acquire any shares of its
capital stock or any other securities of the Company or its subsidiaries or
any options, warrants, calls or rights to acquire any such shares or other
securities or (z) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or any of its
other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other equity or voting interests or any securities
convertible into, or exchangeable for, or any options, warrants, calls or
rights to acquire, any such shares, voting securities or convertible
securities or any stock appreciation rights or other rights that are linked
to the price of Company Common Stock, provided that Parent's consent shall
not be required for the issuance of shares of Company Common Stock upon the
exercise of Company Stock Options in accordance with the terms of such
options as in effect on the date of this Agreement;
(iii) amend its certificate of incorporation or by-laws (or similar
organizational documents);
(iv) directly or indirectly acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing all or a substantial portion of the
assets of, or by any other manner, any assets constituting a business or
any corporation, partnership, joint venture or association or other entity
or division thereof, or any direct or indirect interest in any of the
foregoing, provided that the restrictions set forth in this Section
4.01(a)(iv)(A) shall not apply to the merger of any direct or indirect
wholly owned subsidiary of the Company with or into the Company or any
other direct or indirect wholly owned subsidiary of the Company, or (B) any
asset, provided that the restrictions set forth in this Section
4.01(a)(iv)(B) shall not apply to the acquisition or the agreement to
acquire (1) assets which are not aircraft or engines (w) acquired in the
ordinary course of business consistent with past practice with an
individual purchase price equal to or less than $1,000,000, (x) acquired in
response to unanticipated operational, competitive or economic factors if
(I) such action is consistent with past practice, (II) the Company
determines, based upon its reasonable judgment, that such action is an
appropriate response to such factor and (III) Parent determines, based upon
its reasonable judgment, that such action would not have a significant and
adverse effect on Parent and its subsidiaries (which, for purposes of this
clause (III), shall include the Company and its subsidiaries), (y) acquired
reasonably in response to a regulatory requirement or mandate or (z)
acquired in accordance with Section 4.01(a)(vii) and (2) new or used
aircraft and engines pursuant to the transactions set forth in Section
4.01(a)(iv) (the "Acquired Aircraft/Engines Schedule") of the Company
Disclosure Schedule;
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(v) directly or indirectly sell, lease, license, sell and leaseback
(other than, with respect to assets other than aircraft and engines, a sale
and leaseback transaction disclosed in the Company Capital Budget),
mortgage or otherwise encumber or subject to any Lien or otherwise dispose
of any of its properties or assets or any interest therein, provided that
the restrictions set forth in this Section 4.01(a)(v) shall not apply to
(A) sales of assets in the ordinary course of business consistent with past
practice with individual sale prices equal to or less than $1,000,000 or
(B) transactions contemplated by clause (vi)(x)(B) below;
(vi) (x) repurchase, prepay or incur any indebtedness or guarantee any
indebtedness of another person or issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, provided
that the restrictions set forth in this Section 4.01(a)(vi)(x) shall not
apply to (A) short-term borrowings incurred in the ordinary course of
business consistent with past practice and (B) the incurrence of
indebtedness to (I) finance the purchase or leasing of new aircraft and
engines as set forth in the Acquired Aircraft/Engines Schedule, (II)
refinance indebtedness that was incurred to finance the purchase or leasing
of aircraft on terms no less favorable to the Company than the terms of the
indebtedness to be refinanced or (III) purchase aircraft currently leased
by a third party to the Company pursuant to the terms of the applicable
lease agreement as in effect on the date of this Agreement, which
financing, refinancing and purchases shall be effected either (1) in the
ordinary course of business consistent with past practice or (2) as
otherwise described in the Acquired Aircraft/Engines Schedule, or (y) make
any loans, advances or capital contributions to, or investments in, any
other person, provided that the restrictions set forth in this Section
4.01(a)(vi)(y) shall not apply to loans, advances or capital contributions
to, or investments in, any other person (A) to the extent made in the
ordinary course of business consistent with past practice and to the extent
not otherwise prohibited by this Agreement, (B) to the extent made to, or
in, the Company or any direct or indirect wholly owned subsidiary of the
Company and (C) to the extent any such capital contributions are made to
the Employee Stock Ownership Trust in an amount not to exceed the amount of
principal and interest then due and owing under the ESOP Loan;
(vii) incur or commit to incur any capital expenditures, or any
obligations or liabilities in connection therewith, (x) with respect to
2000, in any manner materially inconsistent with the Company's current
capital budget for 2000, a true and complete copy of which has been
provided to Parent prior to the date of this Agreement (the "Company
Capital Budget"), and (y) with respect to 2001, (A) that in the aggregate
exceed the aggregate amount of capital expenditures set forth in the
Company Capital Budget or (B) that individually exceed $20,000,000,
provided that the restrictions set forth in this Section 4.01(a)(vii) shall
not apply to (1) cost variances experienced in the ordinary course of
business consistent with past practice, (2) other expenditures made in
response to unanticipated operational, competitive or economic factors if
(I) such action is consistent with past practice, (II) the Company
determines, based upon its reasonable judgment, that such action is an
appropriate response to such factor and (III) Parent determines, based upon
its reasonable judgment, that such action would not have a significant and
adverse effect on Parent and its subsidiaries (which, for purposes of this
clause (III), shall include the Company and its subsidiaries), (3)
expenditures reasonably made in response to a regulatory requirement or
mandate, (4) expenditures to acquire assets in the ordinary course of
business consistent with past practice with individual purchase prices not
to exceed $1,000,000 and (5) for each of 2000 and 2001, other expenditures
in the ordinary course of business consistent with past practice in an
aggregate amount not to exceed $20,000,000;
(viii) except as required by law, (x) pay, discharge, settle or satisfy
any material claims (including claims of stockholders), liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent
or otherwise), provided that the restrictions set forth in this Section
4.01(a)(viii)(x) shall not apply to the payment, discharge or satisfaction
of claims, liabilities or obligations (A) in the ordinary course of
business consistent with past practice, (B) as required by their terms as
in effect on the date of this Agreement or (C) incurred since the date of
this Agreement in the ordinary course of business consistent with past
practice, or (y) waive, release, grant or transfer any right of material
value, provided that the restrictions set forth in this Section
4.01(a)(viii)(y) shall not apply to any waiver, release, grant or transfer
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made in the ordinary course of business consistent with past practice, or
(z) waive any material benefits of, or agree to modify in any materially
adverse respect, or fail to enforce, or consent to any matter with respect
to which its consent is required under, any material confidentiality,
standstill or similar agreement to which the Company or any of its
subsidiaries is a party;
(ix) enter into, modify, amend or terminate (A) any collective bargaining
or other labor union contract applicable to the employees of the Company or
any of its subsidiaries, provided that the restrictions set forth in this
Section 4.01(a)(ix)(A) shall not apply to (1) immaterial modifications,
amendments or terminations of such contracts made in the ordinary course of
business consistent with past practice, (2) any modifications to such
existing contracts pursuant to a "parity plus 1% review" (as such term is
defined in the applicable contract) or (3) any modification, amendment or
termination of any collective bargaining agreement to the extent required
by a change in applicable law, (B) any Company Benefit Agreement or Company
Benefit Plan providing for the payment of severance, compensation or
benefits to any current or former director, officer, employee or consultant
of the Company or any of its subsidiaries upon the termination of
employment, provided that the restrictions set forth in this Section
4.01(a)(ix)(B) shall not apply to (I) any increase in cash compensation,
(II) other immaterial changes in benefits (except for changes in benefits
provided to officers other than as the result of immaterial changes made to
Company Benefit Plans that are generally applicable to the employees of the
Company or any of its subsidiaries that are not specifically directed at or
do not disproportionately affect such officers) and (III) termination
arrangements for employees (other than officers), which increases, changes
or arrangements described above in clauses (I) through (III) are made in
the ordinary course of business consistent with past practice and (IV)
those actions taken by the Company to retain or attract employees in key
positions as and to the extent consistent with the Retention Plan, or (C)
any other material Contract to which the Company or any of its subsidiaries
is a party, provided that the restrictions set forth in this Section
4.01(a)(ix)(C) shall not apply to any modifications, amendments or
terminations of any such Contract to the extent made in the ordinary course
of business consistent with past practice;
(x) except as required to comply with applicable law or any provision of
any Company Benefit Agreement, Company Benefit Plan or other Contract as in
effect on the date of this Agreement, (A) take any action to fund or in any
other way secure the payment of compensation or benefits under any Company
Benefit Agreement, Company Benefit Plan or other Contract or (B) take any
action to accelerate the vesting or payment of any compensation or benefit
under any Company Benefit Agreement, Company Benefit Plan or other
Contract;
(xi) (A) decrease or defer in any material respect the level of training
provided to their employees or the level of costs expended in connection
therewith, (B) fail to keep in effect any governmental route authority in
effect and used by the Principal Operating Sub or any other subsidiary of
the Company as of the date of this Agreement, provided that the
restrictions set forth in this Section 4.01(a)(xi)(B) shall not apply to
any such failure if such failure occurs in the ordinary course of business
consistent with past practice, (C) make any material route changes, other
than changes in the ordinary course of business consistent with past
practice, (D) fail to maintain insurance at levels at least comparable to
current levels or otherwise in a manner inconsistent with past practice,
(E) establish any new pilot or flight attendant domicile cities or (F) take
any action, or fail to take action, which action or failure could result in
the loss of Slots of the Company or any of its subsidiaries with an
aggregate value in excess of $7,500,000;
(xii) take any action which would result in the Company's representation
and warranty set forth in the fifth sentence of Section 3.01(d) not being
accurate at any time after the date of this Agreement, disregarding solely
for purposes of this clause (xii) the exception in such representation and
warranty relating to matters which would not be expected to result in
(taking into account the likelihood of such result occurring and the
expected magnitude of such event if it were to occur) a material adverse
effect;
(xiii) take any action that would be expected to result in (A) any
representation and warranty of the Company set forth in this Agreement that
is qualified as to materiality becoming untrue, (B) any such representation
and warranty that is not so qualified becoming untrue in any material
respect or (C) any condition to the Merger set forth in Article VI not
being satisfied; or
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(xiv) authorize any of, or commit, resolve or agree to take any of, the
foregoing actions to the extent prohibited by the terms of this Agreement.
(b) Certain Tax Matters. During the period from the date of this
Agreement to the Effective Time, except as specifically contemplated by
this Agreement (including anything set forth in the Company Disclosure
Schedule as of the date of this Agreement), the Company shall, and shall
cause each of its subsidiaries to (i)(A) promptly notify Parent upon the
earlier of (x) receipt of notice of any suit, claim, action, investigation,
proceeding or audit (collectively, "Actions") pending against or with
respect to the Company or any of its subsidiaries in respect of any
material tax (which is material at the time of receipt of such notice) and
(y) any such Action becoming material to the Company and its subsidiaries
and (B) not settle or compromise any such Action without Parent's consent;
(ii) not make any material tax election without Parent's consent; and (iii)
not make any material change in tax accounting methods, principles or
practices except insofar as may have been required by a change in GAAP or
SEC accounting regulations or guidelines or applicable law.
(c) Advice of Changes; Filings. The Company and Parent shall confer on a
regular basis regarding operational and other material matters. The Company
shall promptly advise Parent in writing of any change or event of which it
has knowledge that would be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect. The Company and
Parent shall each promptly provide the other copies of all filings made by
such party with any Governmental Entity in connection with this Agreement
and the transactions contemplated hereby, other than the portions of such
filings that include confidential information.
(d) Consents. Parent shall not unreasonably withhold any consent
contemplated by Section 4.01(a) or (b) above. The reasonableness of
withholding any such consent shall be determined from Parent's point of
view, taking into account the relative burden to Parent and benefit to the
Company of granting such consent and any other factors which Parent
determines in good faith to be, and which are, of reasonable consequence to
it in connection with its determination.
Section 4.02 No Solicitation. (a) The Company shall not, nor shall it permit
any of its subsidiaries to, or authorize or permit any director, officer or
employee of the Company or any of its subsidiaries or any investment banker,
attorney, accountant or other advisor or representative of the Company or any
of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage, or take any other action knowingly to facilitate, any Takeover
Proposal (as defined below) or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way
with, any Takeover Proposal, in each case other than a Takeover Proposal made
by Parent; provided, however, that at any time prior to obtaining the
Stockholder Approval, the Board of Directors of the Company may, in response
to a bona fide written Takeover Proposal that such Board of Directors
determines in good faith is reasonably likely to result in an Adverse
Recommendation Change (as defined below) or constitutes or is reasonably
likely to lead to a Superior Proposal (as defined below), and which Takeover
Proposal was unsolicited and did not otherwise result from a breach of this
Section 4.02, and subject to compliance with Section 4.02(c) and (d), (x)
furnish information with respect to the Company and its subsidiaries to the
person making such Takeover Proposal (and its representatives) pursuant to a
customary confidentiality agreement, provided that all such information is
provided on a prior or substantially concurrent basis to Parent, and (y)
participate in discussions or negotiations with the person making such
Takeover Proposal (and its representatives) regarding such Takeover Proposal.
The term "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to, or that is reasonably likely to lead to, any direct or
indirect acquisition, in one transaction or a series of transactions,
including any merger, consolidation, tender offer, exchange offer, binding
share exchange, business combination, recapitalization, liquidation,
dissolution, joint venture or similar transaction, of (A) assets or businesses
that constitute or represent 20% or more of the total revenue, operating
income, EBITDA or assets of the Company and its subsidiaries, taken as a
whole, or (B) 20% or more of the outstanding shares of Company Common Stock or
capital stock of, or other equity or voting interests in, any of the Company's
subsidiaries directly or indirectly holding the assets or businesses referred
to in clause (A) above.
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(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw (or modify in a manner adverse to Parent or Sub) or propose
publicly to withdraw (or modify in a manner adverse to Parent or Sub) the
recommendation or declaration of advisability by such Board of Directors or
any such committee of this Agreement or the Merger, or recommend, or propose
publicly to recommend, the approval or adoption of any Takeover Proposal
(other than a Takeover Proposal made by Parent), unless the Board of Directors
or a committee thereof determines in good faith, based on such matters as it
deems appropriate, after consulting with legal counsel, that the failure to
take such action would be reasonably likely to result in a breach of its
fiduciary duties under applicable law (each such action being referred to
herein as an "Adverse Recommendation Change"), (ii) adopt or approve, or
propose publicly to adopt or approve, any Takeover Proposal, or withdraw its
approval of the Merger, or propose publicly to withdraw its approval of the
Merger, (iii) cause or permit the Company to enter into any letter of intent,
memorandum of understanding, agreement in principle, acquisition agreement,
merger agreement, option agreement, joint venture agreement, partnership
agreement or other agreement (each, an "Acquisition Agreement") constituting
or related to, or which is intended to or is reasonably likely to lead to, any
Takeover Proposal (other than a confidentiality agreement referred to in
Section 4.02(a)) or (iv) agree or resolve to take any of the actions
prohibited by clauses (i), (ii) or (iii) of this sentence. Notwithstanding
anything in this Section 4.02 to the contrary, at any time prior to obtaining
the Stockholder Approval, the Board of Directors of the Company may, in
response to a Superior Proposal that was unsolicited and that did not
otherwise result from a breach of Section 4.02(a), cause the Company to
terminate this Agreement pursuant to Section 7.01(f) and concurrently enter
into an Acquisition Agreement; provided, however, that the Company shall not
terminate this Agreement pursuant to Section 7.01(f), and any purported
termination pursuant to Section 7.01(f) shall be void and of no force or
effect, unless the Company shall have complied in all material respects with
the provisions of this Section 4.02, including the notification provisions in
this Section 4.02, and in all material respects with the applicable
requirements of Sections 5.06(b) and (c) (including the payment of the Parent
Termination Fee (as defined in Section 5.06(b)) prior to or concurrently with
such termination); and provided further, however, that the Company shall not
exercise its right to terminate this Agreement pursuant to Section 7.01(f)
until after the fifth business day following Parent's receipt of written
notice (a "Notice of Superior Proposal") from the Company advising Parent that
the Board of Directors of the Company has received a Superior Proposal and
specifying the terms and conditions of the Superior Proposal and identifying
the person making such Superior Proposal (it being understood and agreed that
any amendment to the price or any other material term of a Superior Proposal
shall require a new Notice of Superior Proposal and a new five business day
period). It is understood and agreed that the termination of this Agreement in
accordance with the previous sentence shall not constitute a breach of any
provision of this Agreement.
The term "Superior Proposal" means any bona fide binding written offer not
solicited by or on behalf of the Company or any of its subsidiaries made by a
third party that if consummated would result in such third party (or in the
case of a direct merger between such third party and the Company, the
stockholders of such third party) acquiring, directly or indirectly, more than
50% of the voting power of the Company Common Stock or all or substantially
all the assets of the Company and its subsidiaries, taken as a whole, for
consideration consisting of cash and/or securities that the Board of Directors
of the Company determines in its good faith judgment (after consultation with
a financial advisor of nationally recognized reputation) to be superior from a
financial view to the stockholders of the Company, taking into account, among
other things, any changes to the terms of this Agreement proposed by Parent in
response to such Superior Proposal or otherwise.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.02, the Company promptly shall advise Parent in
writing of any request for information that the Company reasonably believes
could lead to or contemplates a Takeover Proposal or of any Takeover Proposal,
or any inquiry the Company reasonably believes could lead to any Takeover
Proposal, the terms and conditions of such request, Takeover Proposal or
inquiry (including any subsequent material amendment or modification to such
terms and conditions) and the identity of the person making any such request,
Takeover Proposal or inquiry. The Company shall keep Parent informed in all
material respects of the status and details (including material amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry.
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(d) Nothing contained in this Section 4.02 or elsewhere in this Agreement
shall prohibit the Company from (i) taking and disclosing to its stockholders
a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
(ii) making any disclosure to the Company's stockholders if, in the good faith
judgment of the Board of Directors of the Company, after consultation with
outside counsel, failure so to disclose would be inconsistent with applicable
law; provided, however, that in no event shall the Company or its Board of
Directors or any committee thereof take, agree or resolve to take any action
prohibited by Section 4.02(b)(i) or 4.02(b)(ii).
ARTICLE V
Additional Agreements
Section 5.01 Preparation of the Proxy Statement; Stockholders
Meeting. (a) As promptly as practicable following the date of this Agreement,
the Company and Parent shall prepare and file with the SEC the Proxy Statement
and the Company shall use its reasonable efforts to respond as promptly as
practicable to any comments of the SEC with respect thereto and to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable following the date of this Agreement. The Company shall promptly
notify Parent upon the receipt of any comments from the SEC or its staff or
any request from the SEC or its staff for amendments or supplements to the
Proxy Statement and shall provide Parent with copies of all correspondence
between the Company and its representatives, on the one hand, and the SEC and
its staff, on the other hand. Notwithstanding the foregoing, prior to filing
or mailing the Proxy Statement (or any amendment or supplement thereto) or
responding to any comments of the SEC with respect thereto, the Company (i)
shall provide Parent an opportunity to review and comment on such document or
response, (ii) shall include in such document or response all comments
reasonably proposed by Parent and (iii) shall not file or mail such document
or respond to the SEC prior to receiving Parent's approval, which approval
shall not be unreasonably withheld or delayed.
(b) The Company shall, as promptly as practicable following the date of this
Agreement, establish a record date (which will be as promptly as reasonably
practicable following the date of this Agreement) for, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Stockholders
Meeting") for the purpose of obtaining the Stockholder Approval, regardless of
whether an Adverse Recommendation Change has occurred at any time after the
date of this Agreement. The Company shall use its reasonable best efforts to
cause the Stockholders Meeting to be held as promptly as practicable following
the date of this Agreement. The Company shall, through its Board of Directors,
recommend to its stockholders that they adopt this Agreement, and shall
include such recommendation in the Proxy Statement, in each case subject to
its rights under Section 4.02(b)(i). Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to this Section
5.01(b) shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company or any other person of any Takeover
Proposal.
Section 5.02 Access to Information; Confidentiality. The Company shall, and
shall cause each of its subsidiaries to, afford to Parent, and to Parent's
officers, employees, investment bankers, attorneys, accountants and other
advisors and representatives, reasonable and prompt access during normal
business hours during the period prior to the Effective Time or the
termination of this Agreement to their respective properties, assets, books,
contracts, commitments, directors, officers, employees, attorneys,
accountants, auditors, other advisors and representatives and records and,
during such period, the Company shall, and shall cause each of its
subsidiaries to, make available to Parent on a timely basis (a) a copy of each
material report, schedule, form, statement and other document received by it
during such period pursuant to the requirements of domestic or foreign
(whether national, federal, state, provincial, local or otherwise) laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request, in each case subject to any confidentiality
restrictions or legal restrictions that prohibit the Company's ability to
provide any such information to Parent. The Company shall, and shall cause
each of its subsidiaries to, (i) use their respective reasonable best efforts
to cause any confidentiality provision in any Contract to which the Company or
any of its subsidiaries becomes a party to be inapplicable to Parent, its
subsidiaries and their respective advisors or
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representatives and (ii) in the event such reasonable best efforts are
unsuccessful, provide notice to Parent at least five business days prior to
entering into such contract that the Company or such subsidiary intends to
enter into a Contract that contains confidentiality provisions that would
prohibit Parent, its subsidiaries or their respective advisors or
representatives from reviewing such Contract. Parent will hold, and will
direct its officers, employees, investment bankers, attorneys, accountants and
other advisors and representatives to hold, any and all information received
from the Company, directly or indirectly, in confidence as and to the extent
provided in the Confidentiality Agreement dated March 3, 2000, between Parent
and the Company (as it may be amended from time to time, the "Confidentiality
Agreement"). The parties hereby agree that the term of the Confidentiality
Agreement is hereby amended such that it shall remain in full force and effect
until the one year anniversary of the date of termination of this Agreement.
Section 5.03 Efforts; Notification. (a) Upon the terms and subject to the
conditions set forth in this Agreement, in order to consummate and make
effective the Merger and the other transactions contemplated by this
Agreement, Parent shall effect the divestiture of the assets and the provision
of assets, facilities and services as described in Exhibit A hereto to a
person or persons reasonably acceptable to the Company upon the terms and
subject to the conditions set forth in Exhibit A, it being understood that
taking any or all of the actions described in this sentence shall in no way
limit Parent's obligations under the next following sentence. In addition,
each of the parties agrees to use all reasonable efforts to take, or cause to
be taken, all the other actions that are necessary, proper or advisable to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement, including using all reasonable efforts to
accomplish the following: (i) causing the conditions precedent set forth in
Article VI to be satisfied, (ii) obtaining all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and the making of all necessary registrations,
declarations and filings and (iii) obtaining all necessary consents, approvals
or waivers from third parties. The parties shall promptly after the date of
this Agreement make all necessary filings and registrations with the
Governmental Entities, including filings under the HSR Act and submissions of
information requested by Governmental Entities. In connection with and without
limiting the foregoing, the Company and its Board of Directors shall, if any
state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the Merger or any of the other transactions
contemplated hereby, use its reasonable efforts to ensure that the Merger and
the other transactions contemplated by this Agreement are consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on this
Agreement, the Merger and the other transactions contemplated hereby. The
Company and Parent will provide such assistance, information and cooperation
to each other as is reasonably required to obtain any such waivers, consents,
approvals, orders, and authorizations referred to above and, in connection
therewith, will notify the other person promptly following the receipt of any
comments from any Governmental Entity and of any request by any Governmental
Entity for amendments, supplements or additional information in respect of any
registration, declaration or filing with such Governmental Entity and will
supply the other person with copies of all correspondence between such person
and any of its representatives, on the one hand, and any Governmental Entity
on the other hand.
(b) The Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate
such that the condition set forth in Section 6.02(a) would not be satisfied (a
"Failed Section 6.02(a) Condition"); provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement except that, as to any such notice of a Failed Section
6.02(a) Condition with respect to which Parent has not within 25 days (i)
disagreed, in a notice delivered to the Company, with the Company's conclusion
that the condition set forth in Section 6.02 would not be satisfied as a
result of the circumstance described in such notice by the Company, (ii)
expressed the view, in a notice delivered to the Company, that (A) it was in
good faith considering waiving such Failed Section 6.02(a) Condition (and
would continue to comply with its obligations under Section 5.03) or (B) it
believed in good faith that it did not yet have adequate information to form a
reasonably complete view as to the facts and circumstances with respect to the
matter described in such notice from the Company (which may include the
magnitude of the harm resulting from such circumstances), in which case such
notice from Parent shall identify for the Company the aspects of such
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information that Parent is lacking, or (iii) terminated this Agreement
pursuant to Section 7.01(d)(i) hereof, then the Failed Section 6.02(a)
Condition shall be deemed waived insofar as arising out of the circumstances
set forth in such notice. In the case of clause (ii) above, Parent shall give
notice to the Company promptly after (x) in the case of clause (ii)(A) it no
longer is in good faith considering waiving a Failed Section 6.02(a) Condition
and (y) in the case of clause (ii)(B), it believed in good faith that it had
adequate information to form a reasonably complete view as to the relevant
facts and circumstances, and, in either such case, absent termination of this
Agreement by Parent within 20 days of such notice, such Failed Section 6.02(a)
Condition shall be deemed waived at the end of such 20 day period.
(c) Parent shall give prompt notice to the Company of any representation or
warranty made by it or Sub contained in this Agreement becoming untrue or
inaccurate such that the condition set forth in Section 6.03(a) would not be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
Section 5.04 Company Stock Options. (a) As soon as practicable following the
date of this Agreement, the Board of Directors of the Company (or, if
appropriate, any committee administering the Company Stock Plans) shall adopt
such resolutions or take such other actions (if any) as may be required to
provide that each Company Stock Option outstanding immediately prior to the
Effective Time, together with each outstanding stock appreciation right
granted in tandem with such Company Stock Option, shall be canceled in
exchange for a lump sum cash payment equal to (1) the product of (x) the
number of shares of Company Common Stock subject to such Company Stock Option
and (y) the Merger Consideration, minus (2) the product of (x) the number of
shares of Company Common Stock subject to such Company Stock Option and (y)
the per share exercise price of such Company Stock Option. Such payment shall
be made promptly following the Effective Time.
(b) The Company shall take all steps as may be required to cause the
transactions contemplated by this Section 5.04 and any other dispositions of
Company equity securities (including derivative securities) in connection with
this Agreement by each individual who is a director or officer of the Company
to be exempt under Rule 16b-3 promulgated under the Exchange Act, such steps
to be taken in accordance with the Interpretive Letter dated January 12, 1999,
issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
Section 5.05 Indemnification, Exculpation and Insurance. (a) Parent and Sub
agree that all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors or officers of the Company and its
subsidiaries as provided in their respective certificates of incorporation or
by-laws (or similar organizational documents) shall be assumed by the
Surviving Corporation in the Merger, without further action, at the Effective
Time and shall survive the Merger and shall continue in full force and effect
in accordance with their terms.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers or conveys all or substantially all its properties and
assets to any person, then, and in each such case, Parent shall cause proper
provision to be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 5.05.
(c) For six years after the Effective Time, Parent shall maintain in effect
the Company's current directors' and officers' liability insurance covering
each person currently covered by the Company's directors' and officers'
liability insurance policy for acts or omissions occurring prior to the
Effective Time on terms with respect to such coverage and amounts no less
favorable in any material respect to such directors and officers than those of
such policy as in effect on the date of this Agreement; provided that Parent
may substitute therefor policies of a reputable insurance company the material
terms of which, including coverage and amount, are no less favorable in any
material respect to such directors and officers than the insurance coverage
otherwise required under this Section 5.05(c); provided however, that in no
event shall Parent be required to pay aggregate premiums for insurance under
this Section 5.05(c) in excess of 250% of the amount of the aggregate premiums
paid by the
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Company for 1999 for such purpose (which 1999 premiums are hereby represented
and warranted by the Company to be equal to the amount identified in writing
by the Company to Parent prior to the date of this Agreement), provided that
Parent shall nevertheless be obligated to provide such coverage as may be
obtained for such 250% amount.
(d) From and after the Effective Time, Parent shall unconditionally
guarantee the timely payment of all funds owed by, and the timely performance
of all other obligations of, the Surviving Corporation under this Section
5.05. Parent agrees that its payment obligations hereunder are unconditional,
irrespective of the validity or enforceability of this Agreement against the
Surviving Company or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor (other than the
defenses of statute of limitations, which are not waived). Parent hereby
acknowledges that its obligations under this Section 5.05 constitute a
guaranty of payment and not merely of collectability and Parent hereby waives
(i) promptness, diligence, presentment, demand of payment, protest and order
in connection with this guarantee and (ii) any requirement that any party
enforcing the guarantee exhaust any right to take any action against the
Surviving Company or any other person prior to or contemporaneously with
proceeding to exercise any right against Parent hereunder.
(e) The provisions of this Section 5.05 are intended to be for the benefit
of, and will be enforceable by, each indemnified party, his or her heirs and
his or her representatives.
Section 5.06 Fees and Expenses. (a) Except as set forth in Section 5.06(c),
all fees and expenses incurred in connection with this Agreement, the Merger
and the other transactions contemplated by this Agreement shall be paid by the
party incurring such fees or expenses, whether or not the Merger is
consummated.
(b) In the event that (i) (A) a Takeover Proposal has been made to the
Company or its stockholders or any person has announced an intention (whether
or not conditional and whether or not withdrawn) to make a Takeover Proposal,
(B) thereafter this Agreement is terminated by either Parent or the Company
pursuant to Section 7.01(b)(i) (but only if the Stockholders Meeting has not
been held by the date that is five business days prior to the date of such
termination) or 7.01(b)(iii) and (C) within 12 months after such termination,
the Company or any of its subsidiaries enters into any Acquisition Agreement
with respect to, or consummates, any Takeover Proposal (solely for purposes of
this Section 5.06(b)(i)(C), the term "Takeover Proposal" shall have the
meaning set forth in the definition of Takeover Proposal contained in Section
4.02(a) except that all references to 20% shall be deemed references to 40%),
(ii) this Agreement is terminated by the Company pursuant to Section 7.01(f)
or (iii) this Agreement is terminated by Parent pursuant to Section 7.01(c),
then the Company shall pay Parent a fee equal to $150,000,000 (the "Parent
Termination Fee") by wire transfer of same day funds to an account designated
by Parent (x) in the case of a termination by the Company pursuant to Section
7.01(f), concurrently with such termination, (y) in the case of a termination
by Parent pursuant to Section 7.01(c), within two business days after such
termination and (z) in the case of a payment as a result of any event referred
to in Section 5.06(b)(i)(C), upon the first to occur of such events.
(c) If a Parent Termination Fee becomes payable to Parent in accordance with
Section 5.06(b), the Company shall reimburse Parent and Sub for all their
expenses incurred in connection with this Agreement concurrently with the
payment of such Parent Termination Fee to Parent; provided, however, that the
aggregate amount of such reimbursement shall not exceed $10,000,000. All
payments made pursuant to this Section 5.06(c) shall be made by wire transfer
of same day funds to an account designated by Parent.
(d) In the event that this Agreement is terminated for any reason other than
pursuant to Sections 7.01(c), 7.01(d)(i) or 7.01(f), then Parent shall, within
two business days after such termination, pay to the Company $50,000,000 (the
"Company Termination Fee"). In the case where this Agreement is terminated
pursuant to Section 7.01(b)(i) or 7.01(b)(iii) and Parent, subsequent to such
termina-tion, becomes entitled to payment of the Parent Termination Fee
pursuant to Section 5.06(b), the Company shall refund to Parent the full
amount of the Company Termination Fee, if any, paid by Parent pursuant to this
Section 5.06(d) concurrently with the payment of such Parent Termination Fee.
All payments made to the Company pursuant to this Section 5.06(d) shall be
made by wire transfer of same day funds to an account designated by the
Company.
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Section 5.07 Information Supplied. (a) The Company agrees that none of the
information included or incorporated by reference in the Proxy Statement will,
at the date it is filed with the SEC or mailed to the Company's stockholders
or at the time of the Stockholders Meeting, or at the time of any amendment or
supplement thereof, 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 therein, in light of the circumstances under which they
are made, not misleading, except that no covenant is made by the Company with
respect to statements made in the Proxy Statement based on information
supplied by Parent or Sub specifically for inclusion or incorporation by
reference therein. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
(b) Parent and Sub agree that none of the information supplied or to be
supplied by Parent or Sub specifically for inclusion in the Proxy Statement
will (except to the extent revised or superseded by amendments or supplements
contemplated hereby), at the date the Proxy Statement is filed with the SEC or
mailed to the Company's stockholders or at the time of the Stockholders
Meeting, 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 therein, in light of the circumstances under which they are made,
not misleading.
Section 5.08 Benefits Matters. (a) For purposes of this Agreement, "Affected
Employees" shall mean those individuals who are classified as regular
permanent employees of the Company and its subsidiaries (including those so
classified employees who are on vacation, leave of absence, disability or
maternity leave) as of the Effective Time who are in jobs that will not be
covered by collective bargaining or other labor union contracts applicable to
employees of Parent or the Company or any of their subsidiaries after giving
effect to the Merger.
(b) Parent shall, and shall cause the Surviving Corporation to, give the
Affected Employees full credit, for purposes of eligibility, vesting and
benefit accrual under any employee benefit plans or arrangements maintained by
Parent, the Surviving Corporation and their respective subsidiaries, for the
Affected Employees' service with the Company and its subsidiaries to the same
extent recognized by the Company and its subsidiaries immediately prior to the
Effective Time, except where such crediting would result in a duplication of
benefits. In addition, Parent shall, and shall cause the Surviving Corporation
to, give to each Affected Employee who (i) is a current officer of the Company
or the Principal Operating Sub or is one of the three current director-level
employees of the Principal Operating Sub who satisfy the requirements of
clauses (ii) and (iii) of this sentence, (ii) was formerly employed by Parent
and its subsidiaries and (iii) who became employed by the Company and its
subsidiaries within three months of terminating employment with Parent and its
subsidiaries, full credit (as if there has been no break in service) for
purposes of eligibility, vesting and benefit accrual under any employee
benefit plans or arrangements maintained by Parent, the Surviving Corporation
and their respective subsidiaries, for such Affected Employee's service with
Parent and its subsidiaries prior to the Effective Time to the same extent
recognized by Parent and its subsidiaries immediately prior to such Affected
Employee's termination of employment with Parent and its subsidiaries, except
where such crediting would result in a duplication of benefits. The foregoing
provisions of this Section 5.08(b) shall not limit or impair Parent's ability
to offset under its plans, programs and arrangements any benefits provided or
accrued under the Company's benefit plans, programs, or arrangements for the
same period of service.
(c) Parent shall, and shall cause the Surviving Corporation to, (i) waive
all limitations as to preexisting conditions exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Affected Employees under any welfare benefit plans in which such employees may
be eligible to participate after the Effective Time to the extent waived under
the applicable Company plan immediately prior to the Effective Time and (ii)
provide each Affected Employee with credit for any co-payments and deductibles
paid prior to the Effective Time in the calendar year in which the Effective
Time occurs in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans in which the Affected Employees are
eligible to participate after the Effective Time.
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(d) Parent agrees to honor, and shall cause the Surviving Corporation to
honor, the Company Benefit Plans and Company Benefit Agreements in accordance
with their terms subject to any power to amend or terminate such Company
Benefit Plans and Company Benefit Agreements contained therein. For a period
of one year immediately following the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, provide to the Affected Employees while
employed by the Surviving Corporation or its subsidiaries employee benefit
plans and arrangements not materially less favorable in the aggregate to those
provided to the Affected Employees immediately prior to the Effective Time
excluding, for this purpose, equity-based compensation plans and arrangements;
provided, however, Parent will provide eligibility for option grants during
such one-year period to Affected Employees on the same basis as provided to
similarly situated employees of Parent and its subsidiaries. If an Affected
Employee becomes employed by Parent, such Affected Employee shall be provided
employee benefit plans and arrangements that are in the aggregate not
materially less favorable than the benefit plans and arrangements provided to
similarly situated employees of Parent.
(e) Parent acknowledges that (i) except as disclosed in the Company
Disclosure Schedule, the consummation of the Merger (or, if otherwise provided
under the applicable Company Benefit Plan or Company Benefit Agreement, the
approval of the Merger by the Company's stockholders) shall constitute a
"Change in Control" or a "Change of Control" for purposes of each Company
Benefit Plan and Company Benefit Agreement listed on Section 3.01(m)(iv) of
the Company Disclosure Schedule in which such concept is relevant and (ii)(A)
any termination of employment by or of any individual identified on Section
5.08(e)(ii)(A) of the Company Disclosure Schedule following the Effective Time
and (B) any termination of employment by or of any individual identified on
Section 5.08(e)(ii)(B) of the Company Disclosure Schedule during the period
commencing six months following the Effective Time and ending nine months
following the Effective Time, shall be deemed to be for "Good Reason" for
purposes of any employment agreement or other Company Benefit Agreement listed
on Section 3.01(m)(iv) of the Company Disclosure Schedule, and any Company
Benefit Plan in which such individual participates.
Section 5.09 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, shall, to the extent reasonably practicable,
consult with each other before issuing, and give each other a reasonable
opportunity to review and comment upon, any press release or other public
statements with respect to this Agreement, the Merger and the other
transactions contemplated by this Agreement. The parties agree that the
initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by
the parties.
Section 5.10 Future Employment. For a period of two years following the
Closing Date, Parent shall, and shall cause the Surviving Corporation to,
offer continued employment to all non-officer employees of the Company or any
of its subsidiaries who are employed by the Company or any of its subsidiaries
at the Effective Time; provided, however, that this Section 5.10 shall not
apply to any employees of the Company or any of its subsidiaries (i) who are
discharged for cause or performance related reasons or (ii) who are employees
of a subsidiary of the Company which is sold or transferred to a third party
at or after the Effective Time. Following the two year period specified in the
prior sentence, Parent shall, and shall cause the Surviving Corporation to,
provide all former non-officer, non-union employees of the Company and its
subsidiaries the same job security protection, if any, as provided to
similarly-situated employees of Parent and its subsidiaries.
ARTICLE VI
Conditions Precedent
Section 6.01 Conditions to Each Party's Obligation to Effect the Merger. The
obligation of each party to effect the Merger is subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
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(b) Antitrust. Any waiting period (and any extension thereof) applicable
to the Merger under the HSR Act or any other applicable competition, merger
control, antitrust or similar law or regulation shall have been terminated
or shall have expired.
(c) No Injunctions or Legal Restraints. No temporary restraining order,
preliminary or permanent injunction or other order or decree issued by any
court of competent jurisdiction or other legal restraint or prohibition
(collectively, "Legal Restraints") that has the effect of preventing the
consummation of the Merger shall be in effect.
Section 6.02 Conditions to Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained herein that are qualified as to materiality shall be
true and correct, and the representations and warranties of the Company
contained herein that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of
the Closing Date with the same effect as though made as of the Closing
Date, except that the accuracy of representations and warranties that by
their terms speak as of a specified date will be determined as of such
date. Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer or the chief financial officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to
such effect.
(c) Legal Restraint. No Legal Restraint that has the effect of (i)
prohibiting or limiting in any material respect the ownership or operation
by the Company, Parent or any of their respective affiliates of a material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or Parent and its subsidiaries, taken as a whole, or to
require any such person to dispose of or hold separate any material portion
of the business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, as a result of the
Merger; (ii) prohibiting Parent or any of its affiliates from effectively
controlling in any material respect a substantial portion of the business
or operations of the Company or its subsidiaries; or (iii) imposing
material limitations on the ability of Parent or any of its affiliates to
acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock, including the right to vote the Company Common Stock
on all matters properly presented to the stockholders of the Company shall
be in effect.
(d) Consents. Parent shall have received evidence, in form and substance
reasonably satisfactory to it, that Parent or the Company shall have
obtained (i) all material consents, approvals, authorizations,
qualifications and orders of all Governmental Entities legally required in
connection with this Agreement and the transactions contemplated by this
Agreement and (ii) all other consents, approvals, authorizations,
qualifications and orders of Governmental Entities or third parties
required in connection with this Agreement and the transactions
contemplated by this Agreement, except, in the case of this clause (ii),
for those the failure of which to be obtained individually or in the
aggregate would not be expected to result in (taking into account the
likelihood of such result occurring and the expected magnitude of such
event if it were to occur) a material adverse effect.
Section 6.03 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to the satisfaction or waiver
on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub contained herein that are qualified as to materiality shall
be true and correct, and the representations and warranties of Parent
contained herein that are not so qualified shall be true and correct in all
material respects, in each
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case as of the date of this Agreement and as of the Closing Date with the
same effect as though made as of the Closing Date, except that the accuracy
of representations and warranties that by their terms speak as of a
specified date will be determined as of such date. The Company shall have
received a certificate signed on behalf of Parent by the chief executive
officer or the chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
the chief executive officer or the chief financial officer of Parent to
such effect.
Section 6.04 Frustration of Closing Conditions. None of the Company, Parent
or Sub may rely on the failure of any condition set forth in Section 6.01,
6.02 or 6.03, as the case may be, to be satisfied if such party's breach of
this Agreement has been a principal reason that such condition has not been
satisfied.
ARTICLE VII
Termination, Amendment and Waiver
Section 7.01 Termination. This Agreement may be terminated, and the Merger
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether before or after the Stockholder Approval has been obtained:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by December 31,
2000 (the "Initial Termination Date", and as such may be extended
pursuant to this paragraph, the "Termination Date"); provided, however,
that if on the Initial Termination Date the conditions to the Closing
set forth in Sections 6.01(a), 6.01(b), 6.01(c), 6.02(c) and 6.02(d)
shall not have been fulfilled, but all other conditions to the Closing
shall be fulfilled on such date or shall be capable of being fulfilled,
then, if a written notice requesting an extension of the Termination
Date has been delivered by Parent or the Company to the other at any
time during the 45 day period ending on the Initial Termination Date,
the Termination Date shall be extended to August 1, 2001; provided,
however, that the right to terminate this Agreement pursuant to this
Section 7.01(b)(i) shall not be available to any party whose breach of
this Agreement has been a principal reason the Merger has not been
consummated by such date;
(ii) if any Legal Restraint set forth in Section 6.01(c) shall be in
effect and shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement pursuant to this
Section 7.01(b)(ii) shall not be available to any party whose breach of
this Agreement has been a principal reason that such event has
occurred; or
(iii) if the Stockholder Approval shall not have been obtained at the
Stockholders Meeting duly convened therefor or any adjournment or
postponement thereof;
(c) by Parent in the event an Adverse Recommendation Change has occurred
in accordance with Section 4.02(b)(i);
(d) by Parent (i) if the Company shall have breached any of its
representations, warranties or covenants contained in this Agreement, which
breach (A) would give rise to the failure of a condition set forth in
Section 6.02(a) or 6.02(b), and (B) has not been or is incapable of being
cured by the Company within twenty business days after its receipt of
written notice thereof from Parent; or (ii) if any Legal Restraint set
forth in Section 6.02(c) shall be in effect and shall have become final and
nonappealable; provided, however, that the right to terminate this
Agreement pursuant to this Section 7.01(d)(ii) shall not be available to
Parent if any breach by Parent of this Agreement has been a principal
reason that such event occurred;
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(e) by the Company if Parent shall have breached any of its
representations, warranties or covenants contained in this Agreement, which
breach (i) would give rise to the failure of a condition set forth in
Section 6.03(a) or 6.03(b), and (ii) has not been or is incapable of being
cured by Parent within twenty business days after its receipt of written
notice thereof from the Company; or
(f) by the Company in accordance with the terms and subject to the
conditions of Section 4.02(b).
Section 7.02 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Sub or the Company, other than
the provisions of Section 3.01(u), the last two sentences of Section 5.02,
Section 5.06, this Section 7.02 and Article VIII; provided, however, that no
such termination shall relieve any party hereto from any liability or damages
resulting from a wilful breach by a party of any of its representations,
warranties or covenants set forth in this Agreement.
Section 7.03 Amendment. This Agreement may be amended by the parties hereto
at any time, whether before or after the Stockholder Approval has been
obtained; provided, however, that after the Stockholder Approval has been
obtained, there shall be made no amendment that by law requires further
approval by stockholders of the parties without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 7.04 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after the Stockholder
Approval has been obtained, there shall be made no waiver that by law requires
further approval by stockholders of the parties without the further approval
of such stockholders. Except as provided in Section 5.03(b), any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure
or delay by any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights nor shall
any single or partial exercise by any party to this Agreement of any of its
rights under this Agreement preclude any other or further exercise of such
rights or any other rights under this Agreement.
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ARTICLE VIII
General Provisions
Section 8.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
Section 8.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
if to Parent or Sub, to:
UAL Corporation
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attention: General Counsel
with a copy to: Chief Financial Officer
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Allen Finkelson, Esq.
Scott A. Barshay, Esq.
if to the Company, to:
US Airways Group, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Attention: Executive Vice President--
Corporate Affairs and General Counsel
Senior Vice President--
Finance and Chief Financial Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Attention: Peter Allan Atkins, Esq.
Eric L. Cochran, Esq.
Section 8.03 Section 8.03 poses of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "material adverse effect" means any state of facts, change, development,
effect, condition or occurrence that is material and adverse to the business,
assets, properties, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, or to
prevent or materially impede or delay the consummation of the Merger or the
other material transactions contemplated by this Agreement, except for any
state of facts, change, development, effect, condition or occurrence (i)
relating to the economy in general or
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(ii) affecting the airline industry generally where such airline industry
state of facts, change, development, effect, condition or occurrence does not
arise out of the actions, failures to act or businesses of the Company or any
of its subsidiaries;
(c) "person" means an individual, corporation, partnership, joint venture,
association, trust, limited liability company, Governmental Entity,
unincorporated organization or other entity;
(d) a "subsidiary" of any person means another person of which 50% or more
of any class of capital stock, voting securities or other equity interests are
owned or controlled, directly or indirectly, by such first person.
Section 8.04 Interpretation. When a reference is made in this Agreement to
a Section, Subsection or Schedule, such reference shall be to a Section or
Subsection of, or a Schedule to, this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
The term "or" is not exclusive. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms. Any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as
from time to time amended, modified or supplemented. References to a person
are also to its permitted successors and assigns.
Section 8.05 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 8.06 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(a) constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, except for the Confidentiality Agreement and
any agreement entered into by the parties on the date of this Agreement, and
(b) except for the provisions of Section 5.05, are not intended to confer upon
any person other than the parties hereto (and their respective successors and
assigns) any rights or remedies.
Section 8.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws of such state; provided, however, that the term "best efforts" as used
in Section 5.01(b) shall have the meaning ascribed to such term under the laws
of the State of New York, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws of such state.
Section 8.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part
(except by operation of law, by any of the parties hereto without the prior
written consent of the other parties hereto, except that Sub may assign, in
its sole discretion, any of or all its rights, interests and obligations under
this Agreement to Parent or to any direct or indirect wholly owned subsidiary
of Parent, but no such assignment shall relieve Parent of any of its
obligations hereunder. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by, the parties
hereto and their respective successors and assigns.
Section 8.09 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the partes shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (a) consents to
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<PAGE>
submit itself to the personal jurisdiction of any court of the United States
located in the State of Delaware or of any Delaware state court in the event
any dispute arises out of this Agreement or the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
the transactions contemplated by this Agreement in any court other than a
court of the United States located in the State of Delaware or a Delaware
state court.
In Witness Whereof, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
UAL Corporation,
/s/ Frederic F. Brace
by __________________________________
Name:Frederic F. Brace
Title:Senior Vice President,
Finance
Yellow Jacket Acquisition Corp.,
/s/ Frederic F. Brace
by __________________________________
Name:Frederic F. Brace
Title:Vice President and Tresurer
US Airways Group, Inc.,
/s/ Lawrence M. Nagin
by __________________________________
Name:Lawrence M. Nagin
Title: Executive Vice President--
Corporate Affairs and
General Counsel
A-34
<PAGE>
EXHIBIT A
Capital Air Divestiture Plan
Capitol Air Assets: Capitol Air will be comprised of the following
assets:
(A) Aircraft: If requested by the buyer, a
number and type of aircraft identified by
Tar Heel that are necessary and reasonably
suited to operate Capitol Air.
(B) Slots: If requested by the buyer, a number
of jet and commuter slots at Reagan-National
Airport that are necessary to operate
Capitol Air, which number shall not exceed
106 jet slots and 116 commuter slots. The
timing and identification numbers of such
slots to be reasonably agreed upon.
(C) Gates: If requested by the buyer, up to
eight gates at Reagan-National Airport at
locations to be reasonably agreed upon that
are necessary and reasonably suited to
operate Capitol Air. All leases relating to
such facilities will be assumed by the
buyer.
(D) Airport Facilities: If requested by the
buyer, ticket counter and similar airport
facilities to be reasonably agreed upon that
are necessary and reasonably suited for the
buyer to operate Capitol Air. All leases
relating to such facilities will be assumed
by the buyer.
(E) Maintenance Facility: If requested by the
buyer, Yellow Jacket's line maintenance
facility at Reagan-National Airport. The
lease relating to such facility will be
assumed by the buyer.
(F) Other: If requested by the buyer, ground
handling equipment, spare parts and other
items to be reasonably agreed upon that are
necessary for the buyer to operate Capitol
Air.
The Capitol Air assets will not include any
assets not necessary to operate Capitol Air or
any cash. Capitol Air will continue the
operations of Yellow Jacket at Reagan-National
Airport (other than the Shuttle Business and
certain flights to and from Charlotte, Pittsburgh
and Philadelphia).
"Shuttle Business" means all the assets primarily
used by Yellow Jacket in the operation of the
Yellow Jacket shuttle on the following routes:
(1) Boston--La Guardia Airport, (2) Boston--
Reagan-National Airport and (3) La Guardia--
Reagan-National Airport.
Capitol Air Liabilities: The buyer of Capitol Air will assume all
liabilities primarily related to Capitol Air.
Hub-to-Hub Routes: The assets used to operate the Hub-to-Hub Routes
will be comprised of the following:
(A) Aircraft: If requested by the buyer, Tar
Heel or its subsidiaries will wet-lease a
number and type of aircraft identified by
Tar Heel that are necessary and reasonably
suited to operate the Hub-to-Hub Routes
during a transition period on market terms
to be reasonably agreed upon.
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<PAGE>
(B) Gates: If requested by the buyer, Tar Heel
will provide the Buyer with access to gates
that are necessary and reasonably suited to
operate the Hub-to-Hub Routes at each
airport that is part of the Hub-to-Hub
Routes on market terms to be reasonably
agreed upon.
(C) Other: If requested by the buyer, ground
handling equipment necessary and reasonably
suited for the buyer to operate the Hub-to-
Hub Routes.
On points behind each of the hubs on the Hub-to-
Hub Routes, Tar Heel will code share with the
buyer by permitting the buyer to put its code on
Tar Heel's flights. Tar Heel will enter into a
ten year pro-rate agreement with the buyer on
terms to be reasonably agreed upon and reasonably
favorable to the buyer in order to make the buyer
a viable competitor on the Hub-to-Hub Routes.
"Hub-to-Hub Routes" consist of the following
routes: (1) Philadelphia to Denver, Los Angeles
and San Francisco, (2) Charlotte to Chicago,
Denver, Los Angeles and San Francisco and (3)
Pittsburgh to Denver, Los Angeles and San
Francisco.
Hub-to-Hub Routes Liabilities:
The buyer of the Hub-to-Hub Routes will assume
all liabilities primarily related to the assets
used to operate the Hub-to-Hub Routes.
Employees: If requested by the buyer, Tar Heel will provide
to the buyer on an interim basis, subject to
receipt of any necessary labor approvals, the
employees needed to operate Capitol Air or the
Hub-to-Hub Routes, as the case may be, on market
terms to be reasonably agreed upon.
Additional Support: Tar Heel will provide frequent flyer program
support on market terms to be agreed upon. In
addition, Tar Heel will, if requested by the
buyer and if reasonably practicable, provide to
such buyer revenue accounting services,
maintenance services, training services, fuel
purchasing services and other services necessary
for such buyer to operate Capitol Air or the Hub-
to-Hub Routes, as the case may be, upon market
terms to be agreed upon.
Additional Assets: If requested by the buyer of Capitol Air, [P]
Airline, Inc. ("Commuter Air") will be included
in Capitol Air.
In this event, at the option of Tar Heel, either
(i) the buyer of Capitol Air will provide
commuter feed to Tar Heel and Yellow Jacket, on a
code share basis at market terms to be agreed
upon, from points behind Yellow Jacket hubs (the
"Commuter Feed Points") currently served by
Commuter Air or (ii) Tar Heel will retain the
assets of Commuter Air that are used to provide
service to the Commuter Feed Points.
If the buyer of Capitol Air is not an existing
mainline carrier, such buyer will, if requested
by Tar Heel, reasonably and in good faith explore
partnering opportunities with existing mainline
carriers.
Other Terms: The divestiture agreement with each buyer will be
negotiated by such buyer and Tar Heel and will
contain customary terms for transactions of this
type; provided, however, that Tar Heel's
obligation to indemnify
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<PAGE>
any buyer shall be limited to (x) in the case of
losses relating to any breach of a representation
or warranty, 40% of the purchase price paid to
Tar Heel by such buyer, and (y) in the case of
all losses, the purchase price paid by such
buyer. The terms of the divestiture agreement
must be reasonably acceptable to both Tar Heel
and Yellow Jacket taking into account as a
primary objective obtaining antitrust clearance
for the merger.
Closing: The obligation to effect the Capitol Air
divestiture and the Hub-to-Hub Route divestiture
will be contingent upon the satisfaction of all
conditions precedent to the closing of the Tar
Heel/Yellow Jacket merger (assuming such
divestiture is effected). The obligation to
effect the Capitol Air divestiture and the Hub-
to-Hub Route divestiture will also be continent
upon receipt of all consents required to permit
the buyers to operate Capitol Air and the Hub-to-
Hub Routes as contemplated herein. At the closing
of each transaction, the buyer will pay to Yellow
Jacket the cash purchase price agreed to by such
buyer. Tar Heel shall not be entitled to refrain
from selling Capitol Air or the assets relating
to the Hub-to-Hub Routes on the terms contained
herein on the basis that the cash purchase price
to which the potential buyer has agreed is
inadequate value for such assets.
A-37
<PAGE>
[LOGO OF SALOMON SMITH BARNEY]
APPENDIX B
May 23, 2000
Board of Directors
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $1.00 per share ("Company
Common Stock"), of US Airways Group, Inc. (the "Company"), of the
consideration to be received by such holders pursuant to the Agreement and
Plan of Merger dated as of May 23, 2000 (the "Merger Agreement") among UAL
Corporation ("Parent"), Yellow Jacket Acquisition Corporation, a wholly owned
subsidiary of Parent ("Sub"), and the Company. As more fully described in the
Merger Agreement, upon the effectiveness of the proposed merger (the "Merger")
of Sub with and into the Company, each issued and outstanding share of Company
Common Stock (other than shares owned by Parent, Sub or the Company and any
shares subject to appraisal rights) will be converted into the right to
receive $60.00 in cash.
In arriving at our opinion, we reviewed a draft dated May 23, 2000 of the
Merger Agreement and held discussions with certain senior officers of the
Company concerning the business, operations, financial condition and prospects
of the Company. We examined certain publicly available business and financial
information relating to, as well as certain financial forecasts and other
information and data for, the Company which were provided to or otherwise
discussed with us by the management of the Company. We reviewed the financial
terms of the Merger as set forth in the Merger Agreement in relation to, among
other things: current and historical market prices and trading volumes of
Company Common Stock; historical and projected earnings and other operating
data of the Company; and the capitalization and financial condition of the
Company. We considered, to the extent publicly available, the financial terms
of other transactions recently effected which we considered relevant in
evaluating the Merger and analyzed certain financial, stock market and other
publicly available information relating to the businesses of other companies
whose operations we considered relevant in evaluating those of the Company. In
addition to the foregoing, we conducted such other analyses, studies and
examinations and considered such other financial, economic and market criteria
as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts provided to or
otherwise reviewed by or discussed with us, we have been advised by the
management of the Company that such forecasts were reasonably prepared
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the
Company and we express no opinion as to such forecasts. We have not made or
been provided with an independent evaluation or appraisal of the assets
(including properties and facilities) or liabilities (contingent or otherwise)
of the Company nor have we made any physical inspection of the properties,
facilities or assets of the Company. In connection with our engagement, we
were not requested to,
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<PAGE>
and we did not, solicit third party indications of interest in all or a part
of the Company. We were not requested to consider, and our opinion does not
address, the relative merits of the Merger as compared to any alternative
business strategies that might exist for the Company or the effect of any
other transaction in which the Company might engage. Our opinion is
necessarily based upon information available to us and financial, stock market
and other conditions and circumstances as they exist, have been disclosed to
us and can be evaluated on the date hereof.
Salomon Smith Barney Inc. has been engaged to render financial advisory
services to the Company in connection with the Merger and will receive a fee
for such services, a significant portion of which is contingent upon
consummation of the Merger. As you are aware, we and certain of our affiliates
beneficially own approximately 2,869,001 shares of Company Common Stock. In
addition, in the ordinary course of our business, we and our affiliates may
actively trade or hold the securities of the Company and Parent for our own
account or for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities. We have in the past provided
investment banking services to the Company and Parent unrelated to the Merger,
for which services we have received customary compensation. In addition, we
and our affiliates (including Citigroup Inc. and its affiliates) may maintain
relationships with the Company, Parent and their respective affiliates in the
ordinary course of their respective businesses.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of the Company in its evaluation solely
of the Merger, and our opinion is not intended to be and does not constitute a
recommendation to any shareholder as to how such shareholder should vote in
connection with the Merger. In addition, our opinion does not address the
Company's underlying business decision to effect the Merger.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the consideration to be received in the Merger by the holders
of Company Common Stock is fair from a financial point of view to such
holders.
Very truly yours,
SALOMON SMITH BARNEY INC.
/s/ Salomon Smith Barney Inc.
B-2
<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
Sec. 262 Appraisal Rights.--(a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to sec.228 of this title shall be
entitled to an appraisal by the Court of Chancery of the fair value of the
stockholder's shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word "stockholder"
means a holder of record of stock in a stock corporation and also a member of
record of a nonstock corporation; the words "stock" and "share" mean and
include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (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. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either 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. or held of record by more than 2,000 holders;
c. cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of the section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation
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of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 339 L.
'98, eff. 7-1-98.)
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[LOGO OF US AIRWAYS GROUP]
<PAGE>
US AIRWAYS GROUP,INC.
2345 Crystal Drive
Arlington, Virginia 22227
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 12, 2000
The undersigned hereby appoints Jennifer C. McGarey and Lawrence M. Nagin,
and each of them, proxies (each with power of substitution) of the undersigned
to attend the above special meeting of stockholders of US Airways Group, Inc. at
9:30 a.m., local time, on October 12, 2000 and any adjournment or postponement
thereof (the "Special Meeting"), and thereat to vote all shares of stock held by
the undersigned, as specified on the reverse side, and on any other matters that
may properly come before said meeting.
For those participants who may hold shares in the US Airways, Inc. Employee
Stock Ownership Plan, the US Airways, Inc. Employee Savings Plan, the US
Airways, Inc. 401(k) Savings Plan or the Supplemental Retirement Plan of
Piedmont Aviation, Inc. (collectively, the "Plans"), please fill in and sign
this card and mail it in time to be received no later than October 10, 2000, in
order to be voted in a timely manner by the administrator of the Plans, Fidelity
Management Trust Company (the "Administrator"). After October 10, 2000, the
instructions cannot be revoked and, in accordance with the Plans, you may not
vote these shares in person at the Special Meeting. The Administrator is
authorized to vote the Plan shares for which instructions have been given upon
any other matters that may properly come before the meeting. The Bank of New
York will tally the vote on behalf of the Administrator.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. In addition, upon appropriate motion,
this proxy, when properly executed, will be voted in favor of any adjournment of
the Special Meeting for the purpose of soliciting additional proxies in order to
approve the Agreement and Plan of Merger, dated as of May 23, 2000, among US
Airways Group, Inc., UAL Corporation and Yellow Jacket Acquisition Corp. If no
direction is given, this proxy will be voted for the adoption of the Agreement
and Plan of Merger in accordance with the recommendation of the Board of
Directors of US Airways Group, Inc. The proxies cannot vote your shares unless
you sign and return this card.
US AIRWAYS GROUP, INC.
P.O. BOX 11043
NEW YORK, N.Y. 10203-0043
(PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.)
<PAGE>
Detach Proxy Card Here
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THE BOARD OF DIRECTORS OF US AIRWAYS GROUP, INC.
RECOMMENDS A VOTE FOR PROPOSAL 1.
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1. To adopt the Agreement and Plan of Merger, dated as of May 23, 2000, among
US Airways Group, Inc., UAL Corporation and Yellow Jacket Acquisition Corp.,
as described in the accompanying proxy statement.
FOR AGAINST ABSTAIN
Please sign and date this proxy and return it in the enclosed return
envelope, whether or not you expect to attend the Special Meeting. You may
also vote in person if you do attend.
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
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NOTE: Please sign exactly as name appears hereon. If shares are held as joint
tenants, both joint tenants should sign. Attorneys-in-fact, executors,
administrators, trustees, guardians, corporate officers or others signing in a
representative capacity should indicate the capacity in which they are signing.
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Signature
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Signature
Dated: , 2000
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(Please sign, date and return this proxy card in the enclosed envelope.)
Votes MUST be indicated
(x) in black or blue ink. X
3411
