SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 19, 1998
Reno Air, Inc.
(Exact Name of Registrant as Specified in Charter)
Nevada 0-20360 88-0259913
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
220 Edison Way, Reno, Nevada
89502
(Address of principal executive offices)
Registrant's telephone number, including area code: (702) 954-5000
(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 48 Pages
(Exhibit on Page 5)
<PAGE>
Item 5. Other Events.
On November 19, 1998, Reno Air, Inc., a Nevada corporation (the
"Company"), announced that it had entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of November 19, 1998, by and among the
Company, American Airlines, Inc., a Delaware corporation ("American"), and
Bonanza Acquisitions, Inc., a Nevada corporation and a wholly-owned subsidiary
of American ("Purchaser"), pursuant to which American will acquire the Company
in a two-step transaction.
To implement the Merger Agreement, Purchaser will promptly commence a
cash tender offer to acquire all the issued and outstanding shares of common
stock, par value $.01 per share, of the Company (the "Common Stock") at a cash
price of $7.75 per share (the "Common Stock Offer") and a cash tender offer to
acquire all the issued and outstanding shares of Series A Cumulative Convertible
Exchangeable Preferred Stock, par value $.001 per share, of the Company (the
"Preferred Stock") at an initial cash price of $27.50 per share and thereafter
declining as provided in the Merger Agreement, plus accrued dividends (the
"Preferred Stock Offer"; and together with the Common Stock Offer, the
"Offers"). Purchaser's obligation to purchase shares of Common Stock tendered
pursuant to the Common Stock Offer will be subject to the satisfaction of
customary conditions, including the tender of at least a majority of the
outstanding shares of Common Stock and the expiration or termination of the
Hart-Scott-Rodino waiting period. Although Purchaser's obligation to complete
the Common Stock Offer is not conditioned upon the successful completion of the
Preferred Stock Offer, Purchaser's obligation to complete the Preferred Stock
Offer is conditioned on the successful completion of the Common Stock Offer. The
Merger Agreement may be terminated by either party if the Common Stock Offer is
not consummated on or prior to June 30, 1999.
If the Common Stock Offer is successfully completed, Purchaser will be
merged with and into the Company (the "Merger"), with the Company becoming a
wholly-owned subsidiary of American. Consummation of the Merger is subject to
the approval of the Company's stockholders. American and Purchaser have agreed
in the Merger Agreement to vote all shares of Common Stock and Preferred Stock
purchased in the Offers in favor of the Merger. In the Merger, the shares of
Common Stock not tendered in the Common Stock Offer will be converted into the
right to receive the cash amount payable in the Common Stock Offer. If the
holders of at least 66 2/3% of the outstanding shares of Preferred Stock
(including any shares purchased by Purchaser in the Preferred Stock Offer) vote
in favor of the Merger, then the shares of Preferred Stock not tendered in the
Preferred Stock Offer will be converted in the Merger into the right to receive
the cash amount payable in the Preferred Stock Offer (subject to reduction as
provided in the Merger Agreement); otherwise, the outstanding shares of
Preferred Stock will remain issued and outstanding shares of Preferred Stock of
the Company.
The Merger Agreement is attached hereto as Exhibit 2 and is
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibit No. Description
(2) Agreement and Plan of Merger, dated as of November 19, 1998,
by and among American Airlines, Inc., Bonanza Acquisitions,
Inc. and Reno Air, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
RENO AIR, INC.
Date: November 24, 1998 By:/s/ Steven A. Rossum
Name: Steven A. Rossum
Title: Senior Vice President, General Counsel,
and Corporate Secretary
<PAGE>
RENO AIR, INC.
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Exhibit
(2) Agreement and Plan of Merger, dated as of November 19,
1998, by and among American Airlines, Inc., Bonanza
Acquisitions Inc., and Reno Air, Inc.
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
AMERICAN AIRLINES, INC.
BONANZA ACQUISITIONS, INC.
and
RENO AIR, INC.
Dated as of November 19, 1998
<PAGE>
Table of Contents
Page
BACKGROUND STATEMENT.................................................12
STATEMENT OF THE AGREEMENT...........................................13
ARTICLE I THE OFFERS
SECTION 1.01. The Offers............................................13
SECTION 1.02. Company Action........................................14
ARTICLE II THE MERGER
SECTION 2.01. The Merger............................................16
SECTION 2.02. Effective Time; Closing...............................16
SECTION 2.03. Effect of the Merger..................................16
SECTION 2.04. Articles of Incorporation; By-laws....................16
SECTION 2.05. Directors and Officers................................16
SECTION 2.06. Conversion of Securities..............................16
SECTION 2.07. Employee Stock Options; Warrants......................17
SECTION 2.08. Dissenting Shares.....................................18
SECTION 2.09. Surrender of Shares; Stock Transfer Books.............18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification........................20
SECTION 3.02. Articles of Incorporation and By-laws.................20
SECTION 3.03. Capitalization........................................20
SECTION 3.04. Authority Relative to this Agreement..................21
SECTION 3.05. No Conflict; Required Filings and Consents............21
SECTION 3.06. Compliance............................................22
SECTION 3.07. SEC Filings; Financial Statements.....................22
SECTION 3.08. Absence of Certain Changes or Events..................23
SECTION 3.09. Absence of Litigation.................................23
SECTION 3.10. Employee Benefit Plans................................23
SECTION 3.11. Labor Matters........... .............................25
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement......25
SECTION 3.13. Real Property and Leases..............................25
SECTION 3.14. Trademarks, Patents and Copyrights....................26
SECTION 3.15. Taxes.................................................26
SECTION 3.16. Environmental Matters.................................27
SECTION 3.17. Aircraft..............................................27
SECTION 3.18. Slots.................................................27
SECTION 3.19. Brokers................. .............................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization................................28
SECTION 4.02. Authority Relative to this Agreement..................28
SECTION 4.03. No Conflict; Required Filings and Consents............28
SECTION 4.04. Offer Documents; Proxy Statement......................29
SECTION 4.05. Brokers...............................................29
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.30
ARTICLE VI ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting.................................33
SECTION 6.02. Proxy Statement.......................................33
SECTION 6.03. Company Board Representation; Section 14(f)...........33
SECTION 6.04. Access to Information; Confidentiality................34
SECTION 6.05. No Solicitation of Transactions.......................35
SECTION 6.06. Existing Contracts Between Parent and the Company.....35
SECTION 6.07. Directors' and Officers' Indemnification and
Insurance ............................................35
SECTION 6.08. Notification of Certain Matters.......................36
SECTION 6.09. Further Action; Reasonable Best Efforts.. ............37
SECTION 6.10. Redemption of Convertible Notes.......................37
SECTION 6.11. Preferred Stock.......................................37
SECTION 6.12. Public Announcements..................................37
ARTICLE VII CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger................... ..........38
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination...........................................39
SECTION 8.02. Effect of Termination.................................40
SECTION 8.03. Fees and Expenses; Commercial Arrangements............40
SECTION 8.04. Amendment.............................................41
SECTION 8.05. Waiver................................................41
ARTICLE IX GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements............................................42
SECTION 9.02. Notices...............................................42
SECTION 9.03. Certain Definitions...................................43
SECTION 9.04. Severability..........................................43
SECTION 9.05. Entire Agreement; Assignment..........................43
SECTION 9.06. Parties in Interest...................................44
SECTION 9.07. Specific Performance..................................44
SECTION 9.08. Governing Law.........................................44
SECTION 9.09. Headings..............................................44
SECTION 9.10. Counterparts..........................................44
ANNEX A Conditions to the Offers
ANNEX B Per Preferred Share Amount
<PAGE>
Glossary of Defined Terms
Defined Term Location of Definition
- --------------------------------------------------------------------------------
Acquiring Person............................................. ss 8.03(a)
affiliate.................................................... ss 9.03(a)
Agreement.................................................... Preamble
Alternative Merger........................................... Recitals
Articles of Merger........................................... ss 2.02
beneficial owner............................................. ss 9.03(b)
Blue Sky Laws................................................ ss 3.05(b)
Board........................................................ Recitals
business day................................................. ss.9.03(c)
Certificate of Designation................................... ss.2.04(a)
Certificates................................................. ss.2.09(b)
Code......................................................... ss.3.10(a)
Common Shares................................................ Recitals
Common Stock Offer........................................... Recitals
Common Stock Merger Consideration............................ ss 2.06(a)
Company...................................................... Preamble
Company Common Stock......................................... Recitals
Company Preferred Stock...................................... Recitals
Competing Proposal........................................... ss 8.03(a)(i)
Confidentiality Agreement.................................... ss 6.04(b)
control...................................................... ss 9.03(d)
Convertible Notes............................................ ss 3.03(d)
Disclosure Schedule.......................................... ss 3.01
Dissenting Shares............................................ ss 2.08(a)
Effective Time............................................... ss 2.02
Environmental Laws........................................... ss 3.16(a)
Environmental Permits........................................ ss 3.16(b)
ERISA........................................................ ss 3.10(a)
Exchange Act................................................. ss 1.02(b)
Expenses..................................................... ss 8.03(b)
Fee.......................................................... ss 8.03(a)
Hazardous Substances......................................... ss 3.16(a)
HSR Act...................................................... ss 3.05(b)
HSR Condition................................................ ss 1.01(a)
Independent Directors........................................ ss 6.03(c)
Indemnified Parties.......................................... ss 6.07(b)
IRS.......................................................... ss 3.10(a)
knowledge and best knowledge................................. ss 9.03(e)
Liens........................................................ ss 3.13(b)
<PAGE>
Glossary of Defined Terms
Defined Term Location of Definition
- --------------------------------------------------------------------------------
Material Adverse Effect...................................... ss 3.01(a)
Merger....................................................... Recitals
Merger Consideration......................................... ss 2.06(b)
Minimum Condition............................................ ss 1.01(a)
Multiemployer Plan........................................... ss 3.10(b)
Multiple Employer Plan....................................... ss 3.10(b)
1997 Balance Sheet........................................... ss 3.07(c)
Nevada Law................................................... Recitals
Offers....................................................... Recitals
Offer Documents.............................................. ss 1.01(b)
Offer to Purchase............................................ ss 1.01(b)
Operations Agreement......................................... ss 8.03(e)
Option....................................................... ss 2.07
Parent....................................................... Preamble
Paying Agent................................................. ss 2.09(a)
Per Common Share Amount...................................... Recitals
Per Preferred Share Amount................................... Recitals
Per Share Amounts............................................ Recitals
Permitted Liens.............................................. ss 3.13(b)
person....................................................... ss 9.03(f)
Plans........................................................ ss 3.10(a)
Preferred Shares............................................. Recitals
Preferred Stock Merger Consideration......................... ss 2.06(b)
Preferred Stock Offer........................................ Recitals
Primary Merger............................................... Recitals
Proxy Statement.............................................. ss 3.12
Purchaser.................................................... Preamble
Returns...................................................... ss 3.15
Schedule 14D-9............................................... ss 1.02(b)
Schedule 14D-1............................................... ss 1.01(b)
SEC.......................................................... ss 1.01(a)
SEC Reports.................................................. ss 3.07(a)
Securities Act............................................... ss 3.07(a)
Shares....................................................... Recitals
Slots........................................................ ss 3.18
<PAGE>
Stockholder's Meeting........................................ ss 6.01(a)
Stock Option Plans........................................... ss 2.07
subsidiary................................................... ss 9.03(g)
Surviving Corporation........................................ ss 2.01
Tax.......................................................... ss 3.15
Transactions................................................. ss 3.04
WARN......................................................... ss 3.10(f)
Warrant Agreement............................................ ss 3.03
Warrants..................................................... ss 3.03
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of this 19th day of November, 1998, by and among American Airlines, Inc., a
Delaware corporation ("Parent"), Bonanza Acquisitions, Inc., a Nevada
corporation and a wholly owned subsidiary of Parent ("Purchaser"), and Reno Air,
Inc., a Nevada corporation (the "Company").
BACKGROUND STATEMENT
The Board of Directors of the Company has determined that it is in
the best interests of the Company and its stockholders, and the Boards of
Directors of Parent and Purchaser have determined that it is in the best
interests of Parent and Purchaser, for Parent to acquire the Company. In
furtherance of such acquisition, it is proposed that Purchaser shall make a cash
tender offer (the "Common Stock Offer") to acquire all the issued and
outstanding shares of Common Stock, $0.01 par value per share, of the Company
("Company Common Stock"; shares of Company Common Stock being hereinafter
collectively referred to as "Common Shares") for $7.75 per Common Share (such
amount, or any greater amount per Common Share paid pursuant to the Common Stock
Offer, being hereinafter referred to as the "Per Common Share Amount"), net to
the seller in cash. In addition, Purchaser shall make a cash tender offer (the
"Preferred Stock Offer; and together with the Common Stock Offer, the "Offers"),
to acquire any and all of the issued and outstanding shares of Series A
Cumulative Convertible Exchangeable Preferred Stock, $0.001 par value per share,
of the Company ("Company Preferred Stock"; shares of Company Preferred Stock
being hereinafter collectively referred to as "Preferred Shares"; and together
with the Common Shares, the "Shares") for $27.50 per Preferred Share plus
accrued and unpaid dividends through the date Purchaser accepts for payment the
Preferred Shares (such amount, subject to reduction as described herein, or any
greater amount per Preferred Share paid pursuant to the Preferred Stock Offer,
being hereinafter referred to as the "Per Preferred Share Amount"; and together
with the Per Common Share Amount, the "Per Share Amounts")), net to the seller
in cash. The Board of Directors of the Company (the "Board") has unanimously
approved the making of the Offers and resolved and agreed to recommend that
holders tender their Common Shares and Preferred Shares pursuant to the Offers.
Also, in furtherance of such acquisition, the Boards of Directors of Parent,
Purchaser and the Company have each approved the merger of Purchaser with and
into the Company in accordance with the General Corporation Law of the State of
Nevada ("Nevada Law") and Article II hereof following the consummation of the
Offers pursuant to which the remaining Shares shall be converted into the right
to receive cash (the "Primary Merger") or the Common Shares will be converted
into the right to receive cash and the Preferred Shares shall remain issued and
outstanding (the "Alternative Merger"; the Primary Merger, together with the
Alternative Merger, being hereinafter collectively referred to as the "Merger").
<PAGE>
STATEMENT OF THE AGREEMENT
In consideration of the mutual promises, covenants,
representations, and warranties made herein and of the mutual benefits to be
derived here from, Parent, Purchaser, and the Company agree as follows:
ARTICLE I
THE OFFERS
SECTION 1.01. The Offers. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.01 and none of the events
set forth in Annex A hereto shall have occurred or be existing, Purchaser shall
commence the Offers as promptly as reasonably practicable after the date hereof,
but in no event later than five business days after the initial public
announcement of Purchaser's intention to commence the Offers. The obligation of
Purchaser to accept for payment and pay for Common Shares tendered pursuant to
the Common Stock Offer shall be subject to the condition (the "Minimum
Condition") that the number of Common Shares validly tendered and not withdrawn
prior to the expiration of the Common Stock Offer shall constitute at least a
majority of the then outstanding Common Shares on a fully diluted basis
(including, without limitation, all Common Shares issuable upon the conversion
of any convertible securities or upon the exercise of any options, warrants or
rights, but excluding Common Shares issuable upon the conversion of any
Preferred Shares to be accepted for payment and paid for by Purchaser pursuant
to the Preferred Stock Offer) and also shall be subject to the satisfaction of
the other conditions set forth in Annex A hereto. The obligation of Purchaser to
accept for payment and pay for Preferred Shares tendered pursuant to the
Preferred Stock Offer is subject to the condition that Purchaser has accepted
for payment and paid for the Common Shares tendered pursuant to the Common Stock
Offer. Purchaser expressly reserves the right to waive any such condition (other
than the Minimum Condition or the HSR Condition (as defined below)), to increase
the price per Common Share or Preferred Share payable in the Offers, and to make
any other changes in the terms and conditions of the Offers; provided, however,
that no change may be made which decreases the price per Share payable in the
Offers (other than as herein provided in respect of the Preferred Shares), which
changes the form of consideration to be paid in the Offers, or which reduces the
maximum number of Shares to be purchased in the Offers, or which extends the
expiration date of the Offers (which shall initially be twenty (20) business
days), or which imposes conditions to the Offers in addition to those set forth
in Annex A hereto; provided, further, however, that subject to the right of the
parties to terminate this Agreement pursuant to Section 8.01, the Common Stock
Offer (i) shall be extended (A) if, at the scheduled expiration of the Offers,
the condition to the Common Stock Offer relating to the expiration of the
required waiting periods under the HSR Act (the "HSR Condition") shall not be
satisfied, until such time as such condition is satisfied, and (B) for any
period required by any rule, regulation or interpretation of the Securities and
Exchange Commission (the "SEC") or the staff thereof applicable to the Common
Stock Offer and (ii) may be extended (A) if, at the scheduled expiration of the
Offers, any of the conditions to the Common Stock Offer set forth in Annex A
hereto shall not be satisfied or waived, until such time as such condition is
satisfied or waived, and (B) for a period of not more than ten (10) business
days if Purchaser determines in its sole discretion to so extend the Common
Stock Offer, provided that this Agreement may not be terminated pursuant to
Section 8.01(b), (c) or (d) during any extension pursuant to this clause
(ii)(B). Purchaser may extend the Preferred Stock Offer for a period of not more
than twenty (20) business days after the date upon which Purchaser accepts for
payment and pays for Common Shares pursuant to the Common Stock Offer, if the
number of Preferred Shares validly tendered and not withdrawn prior to such date
shall constitute less than 66_% of the then outstanding Preferred Shares. The
Preferred Share Amount shall be reduced to the amount set forth in Annex B
opposite the dividend payment date for the dividend most recently declared by
the Board which has or had a record date prior to the time Purchaser accepts
Preferred Shares for payment pursuant to the Preferred Stock Offer. The Per
Share Amounts shall, subject to applicable withholding of taxes, be net to the
seller in cash, upon the terms and subject to the conditions of the Offers.
Subject to the terms and conditions of the Offers, Purchaser shall pay, as
promptly as practicable after expiration of each Offer, for all Shares validly
tendered to and not withdrawn from such Offer.
<PAGE>
(b) As soon as reasonably practicable on the date of commencement
of the Offers, Purchaser shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offers, and take all steps necessary to
cause the Offer Documents (as defined below) to be disseminated to holders of
Common Shares and Preferred Shares as and to the extent required by applicable
federal securities laws. The Schedule 14D-1 shall contain or shall incorporate
by reference an offer to purchase (the "Offer to Purchase") and forms of the
related letter of transmittal and any related summary advertisement (the
Schedule 14D-1, the Offer to Purchase and such other documents, together with
all supplements and amendments thereto, being referred to herein collectively as
the "Offer Documents"). Parent, Purchaser and the Company agree to correct
promptly any information provided by any of them for use in the Offer Documents
which shall have become false or misleading, and Parent and Purchaser further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Common Shares and Preferred Shares, in each case as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given an opportunity to review and comment on the
Schedule 14D-1 and any amendments thereto prior to the filing thereof with the
SEC. Parent and Purchaser will provide the Company and its counsel with a copy
of any written comments or telephonic notification of any verbal comments Parent
or Purchaser may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt thereof and will provide the Company and
its counsel with a copy of any written responses and telephonic notification of
any verbal response of Parent, Purchaser or its counsel.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offers and represents that (i) the Board, at a meeting duly
called and held on November 18, 1998, unanimously has (A) determined that this
Agreement and the Transactions contemplated hereby, including each of the Offers
and the Merger, taken together, are fair to and in the best interests of the
holders of the Common Shares, (B) approved and adopted this Agreement, the
Offers and the transactions contemplated hereby and thereby (including, without
limitation, for purposes of Section 78.438 of the Nevada Law), (C) amended the
Company's By-Laws to provide that the provisions of Sections 78.378 through
78.3793 of the Nevada Law shall not apply to the Company and to permit the
stockholders of the Company to take action by written consent and (D)
recommended that the stockholders of the Company accept the Offers and approve
and adopt this Agreement and the transactions contemplated hereby, and (ii)
Salomon Smith Barney Inc. has delivered to the Board a written opinion that the
consideration to be received by the holders of the Common Shares pursuant to the
Common Stock Offer and the Merger, taken together, is fair to the holders of
such Shares from a financial point of view. Subject to the fiduciary duties of
the Board under applicable law as advised in writing by independent counsel, the
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Board described in the immediately preceding sentence. The
Company has been advised by each of its directors and executive officers that
they intend either to tender all the Shares beneficially owned by them to
Purchaser pursuant to the Offers or to vote the Shares beneficially owned by
them in favor of the approval and adoption by the stockholders of the Company of
this Agreement and the transactions contemplated hereby.
<PAGE>
(b) As soon as reasonably practicable on the date of commencement
of the Offers, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the fiduciary duties of
the Board under applicable law as advised in writing by independent counsel, the
recommendation of the Board described in Section 1.02(a) and shall disseminate
the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other
applicable federal securities laws. The Company, Parent and Purchaser agree to
correct promptly any information provided by any of them for use in the Schedule
14D-9 which shall have become false or misleading, and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to holders of the Shares, in each case
as and to the extent required by applicable federal securities laws. Parent,
Purchaser and their counsel shall be given an opportunity to review and comment
on the Schedule 14D-9 and any amendments thereto prior to the filing thereof
with the SEC. The Company will provide Parent and Purchaser and their counsel
with a copy of any written comments or telephonic notification of any verbal
comments the Company may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt thereof and will provide Parent and
Purchaser and their counsel with a copy of any written responses and telephonic
notification of any verbal response of the Company or its counsel.
(c) The Company shall promptly cause to be furnished to Purchaser
mailing labels containing the names and addresses of all record holders of the
Shares and with security position listings of the Shares held in stock
depositories, each as of a recent date, together with all other available
listings and computer files containing names, addresses and security position
listings of record holders and beneficial owners of the Shares. The Company
shall furnish Purchaser with such additional information, including, without
limitation, updated listings and computer files of stockholders, mailing labels
and security position listings, and such other assistance as Parent, Purchaser
or their agents may reasonably request. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offers and
the Merger, Parent and Purchaser shall hold in confidence the information
contained in such labels, listings and files, shall use such information only in
connection with the Offers and the Merger, and, if this Agreement shall be
terminated in accordance with Section 8.01, shall deliver to the Company all
copies of such information then in their possession.
<PAGE>
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with Nevada Law, at the Effective
Time (as hereinafter defined) Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 2.02. Effective Time; Closing. As promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Agreement or articles of merger (in either case, the "Articles of
Merger") with the Secretary of State of the State of Nevada, in such form as is
required by, and executed in accordance with the relevant provisions of, Nevada
Law (the date and time of such filing being the "Effective Time"). Prior to such
filing, a closing shall be held at the offices of American Airlines, Inc., 4333
Amon Carter Boulevard, Fort Worth, Texas 78155, or such other place as the
parties shall agree, for the purpose of confirming the satisfaction or waiver,
as the case may be, of the conditions set forth in Article VII.
SECTION 2.03.Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Nevada Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04. Articles of Incorporation; By-laws. (a) Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time (i) if the Primary Merger is effected, the Articles of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, until thereafter amended
as provided by law and such Articles of Incorporation, or (ii) if the
Alternative Merger is effected, the Articles of Incorporation of the Company,
including, without limitation, the Certificate of Designations of Series A
Cumulative Convertible Exchangeable Preferred Stock $.001 par value per share of
the Company (the "Certificate of Designations"), as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, (i) if the Primary Merger is effected, the By-laws
of Purchaser, as in effect immediately prior to the Effective Time, shall be the
By-laws of the Surviving Corporation until thereafter amended as provided by
law, the Articles of Incorporation of the Surviving Corporation and such By-laws
or (ii) if the Alternative Merger is effected, the By-laws of the Company, as in
effect immediately prior to the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as provided by law, the Articles
of Incorporation of the Surviving Corporation and such By-laws.
SECTION 2.05. Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective Time, by
virtue of the Primary Merger or the Alternative Merger and without any action on
the part of Purchaser, the Company or the holders of any of the following
securities:
<PAGE>
(a) Each Common Share issued and outstanding immediately prior to the
Effective Time (other than any Common Shares to be canceled pursuant to
Section 2.06(c) and any Dissenting Shares (as hereinafter defined)) shall,
pursuant to the Primary Merger, be canceled and shall be converted
automatically into the right to receive an amount equal to the Per Common
Share Amount in cash (the "Common Stock Merger Consideration") payable,
without interest, to the holder of such Common Share, upon surrender, in
the manner provided in Section 2.09, of the certificate that formerly
evidenced such Common Share;
(b) Each Preferred Share issued and outstanding immediately prior
to the effective Time (other than any Preferred Shares to be canceled
pursuant to Section 2.06(c) and any Dissenting Shares) shall, pursuant to
the Primary Merger, be canceled and converted automatically into the right
to receive an amount equal to the amount set forth in Annex B opposite
the dividend payment date for the dividend most recently declared by
the Board which has or had a record date prior to the Effective Time,
together with accrued and unpaid dividends through the Effective Time in
cash (the "Preferred Stock Merger Consideration"; and together with the
Common Stock Merger Consideration, the "Merger Consideration"), payable,
without interest, to the holder of such Preferred Share, upon surrender,
in the manner provided in Section 2.09, of the certificate that formerly
evidenced such Preferred Share, provided, however, that in the event that
less than 66 2/3% of the Preferred Shares have voted to approve this
Agreement and the Primary Merger, the Alternative Merger shall be effected
instead of the Primary Merger, and each Preferred Share shall remain
issued and outstanding as a share of the Series A Cumulative Convertible
Exchangeable Preferred Stock, $0.001 par value per share, of the Surviving
Corporation, subject to the terms and conditions of the Certificate of
Designations. Pursuant to Section 7(e) of the Certificate of Designation,
the holder of each Preferred Share shall have the right to convert each
such Preferred Share into the amount of cash equal to the Common
Stock Merger Consideration which would be payable as a result of the
Merger with respect to the number of Common Shares or fraction thereof
into which such Preferred Shares could have been converted immediately
prior to the Effective Time, and such holder shall be entitled pursuant
to Section 8 of the Certificate of Designations, to effect such conversion
at an adjusted conversion price equal to the Special Conversion Price (as
defined in the Certificate of Designation);
(c) Each Share held in the treasury of the Company and each Share
owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent immediately prior to the Effective Time shall be
canceled without any conversion thereof and no payment or distribution
shall be made with respect thereto, provided, however, that in the event
that the Alternative Merger is effected, each Preferred Share shall remain
issued and outstanding and shall remain subject to the terms and conditions
of the Certificate of Designations; and
(d) Each share of Common Stock, par value $.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
SECTION 2.07. Employee Stock Options; Warrants. (a) Immediately
prior to the Effective Time, each outstanding option to purchase Common Shares
(in each case, an "Option") granted under (i) the Company's 1992 Stock Option
Plan, (ii) the Company's Employee Stock Incentive Plan and (iii) the Company's
Directors Stock Option Plan (collectively, the "Stock Option Plans"), whether or
not then exercisable, shall be canceled by the Company, and each holder of a
canceled Option shall be entitled to receive from Purchaser at the same time as
payment for Common Shares is made by Purchaser in connection with the closing of
the Merger, in consideration for the cancellation of such Option, an amount in
cash equal to the product of (x) the number of Common Shares previously subject
to such Option and (y) the excess, if any, of the Per Common Share Amount over
the exercise price per Common Share previously subject to such Option. The
Company agrees to effectuate the cancellation of the Options pursuant to this
Section 2.07 by taking such action as may necessary under the Company's 1992
Stock Option Plan, as amended and restated in 1994, the Company's Employee Stock
Incentive Plan and the Director's Stock Option Plan.
<PAGE>
(b) From and after the Effective Time, pursuant to the Warrants, as
hereinafter defined) the holder of each outstanding Warrant shall, upon the
payment of the exercise price under such Warrant, have the right to exercise
each such Warrant for an amount of cash equal to the Common Stock Merger
Consideration which would be payable as a result of the Merger with respect to
the number of Common Shares, or fraction thereof, for which such Warrant could
have been exercised immediately prior to the Effective Time.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any provision of
this Agreement to the contrary, Common Shares and Preferred Shares that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such Common Shares and Preferred Shares in accordance with Nevada Law
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Common Stock Merger Consideration or Preferred Stock
Merger Consideration, as applicable. To the extent required under Nevada Law,
such stockholders shall be entitled to receive payment of the appraised value of
such Shares held by them in accordance with the provisions of such law, except
that all Dissenting Shares held by stockholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal of
such Shares under such law shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive the applicable Merger Consideration, without any interest thereon, upon
surrender, in the manner provided in Section 2.09, of the certificate or
certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Nevada Law and received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Nevada Law. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
SECTION 2.09.Surrender of Shares; Stock Transfer Books. a)Prior to the
Effective Time, Purchaser shall designate a bank or trust company reasonably
acceptable to the Company to act as agent (the "Paying Agent") for the holders
of Shares in connection with the Merger to receive the funds to which holders of
Shares shall become entitled pursuant to Section 2.06(a) and 2.06(b).
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each person who was, at the Effective Time, a holder
of record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.06(a) or 2.06(b), a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be canceled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
<PAGE>
(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Common Shares (including, without limitation, all
interest and other income received by the Paying Agent in respect of all funds
made available to it), and thereafter such holders shall be entitled to look to
the Surviving Corporation (subject to abandoned property, escheat and other
similar laws) only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither the Surviving Corporation nor the
Paying Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official pursuant
to any abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Common Shares or, provided that the
Primary Merger (and not the Alternative Merger) has been effected, the Preferred
Shares, on the records of the Company. From and after the Effective Time, the
holders of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable law.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser that:
SECTION 3.01. Organization and Qualification. The Company is
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect (as defined below). The Company is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. When used in connection with the Company, the term
"Material Adverse Effect" means any change or effect that, when taken together
with all other adverse changes and effects that are within the scope of the
representations and warranties made by the Company in this Agreement and which
are not individually or in the aggregate deemed to have a Material Adverse
Effect, is or is reasonably likely to be materially adverse to the business,
results of operations or financial condition of the Company, but excluding
changes or effects that (x) are directly caused by conditions affecting (A) the
United States economy as a whole or (B) the economy of the western region of the
United States as a whole or affecting the United States airline industry as a
whole, which conditions do not affect the Company in a disproportionate manner,
(y) are related to or result from any action or inaction on the part of Parent,
Purchaser or any affiliate thereof, including those in connection with the
currently existing commercial arrangements between such persons and the Company
or (z) are related to or result from the announcement of the Offers or the
Merger. Except as set forth in Section 3.01 of the Disclosure Schedule
previously delivered by the Company to Parent (the "Disclosure Schedule"), the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity.
SECTION 3.02. Articles of Incorporation and By-laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Articles of
Incorporation and the By-laws, each as amended to date, of the Company. Such
Articles of Incorporation and By-laws are in full force and effect. The Company
is not in violation of any provision of its Articles of Incorporation or
By-laws, except for such violations as would not have a Material Adverse Effect.
SECTION 3.03. Capitalization. The authorized capital stock of the
Company consists of 30,000,000 Common Shares and 10,000,000 Preferred Shares. As
of September 30, 1998, (i) 10,843,470 Common Shares were issued and outstanding,
all of which were validly issued, fully paid and nonassessable, (ii) 1,436,000
Preferred Shares were issued and outstanding, all of which were validly issued,
fully paid and nonassessable, (iii) no Common Shares were held in the treasury
of the Company, (iv) 3,757,070 Common Shares were reserved for future issuance
pursuant to Options granted pursuant to the Company's Stock Option Plans, (v)
4,164,400 Common Shares were reserved for issuance upon the conversion of
Preferred Shares, (vi) 65,431 Common Shares were reserved for issuance upon the
exercise of the warrants issued pursuant to the Placement Agreement (the
"Warrants") dated March 14, 1994 between the Company and Paradise Valley
Securities, Inc. (the "Warrant Agreement"), and (vii) 2,875,000 Common Shares
were reserved for issuance upon the conversion of the 9% Senior Convertible
Notes due September 30, 2002 issued by the Company pursuant to the Indenture
dated as of August 15, 1992 between the Company and Fleet National Bank
(formerly known as Shawmut Bank Connecticut, National Association) (the
"Convertible Notes").
<PAGE>
Except as disclosed in Section 3.03 of the Disclosure Schedule, since September
30, 1998 to the date of this Agreement, the Company has not issued any Shares
(other than pursuant to the exercise of Options described in the preceding
sentence), any warrants or other securities convertible into or exercisable for
Shares or granted any Options covering Shares. Except as set forth in this
Section 3.03 there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or other equity interests in, the Company. All
Common Shares subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any Shares or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in any other person.
SECTION 3.04. Authority Relative to this Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby (the "Transactions"). The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Transactions
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the holders of a majority of the then outstanding Common Shares and
(in the case of the Primary Merger) at least 66_% of the Preferred Shares, if
and to the extent required by applicable law, and the filing and recordation of
appropriate merger documents as required by Nevada Law). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Purchaser, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Articles of Incorporation or By-laws of the Company, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or by which any property or asset of the Company is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Company pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clause (iii) above, those events which, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws, the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act"), and
filing and recordation of appropriate merger documents as required by Nevada Law
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Offers or the Merger, or otherwise prevent the Company from
performing its obligations under this Agreement, and would not, individually or
in the aggregate, have a Material Adverse Effect.
<PAGE>
SECTION 3.06. Compliance. The Company is not in conflict with, nor in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or by which any property or asset of the
Company is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company or any
property or asset of the Company is bound or affected, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has
filed all forms, reports and documents required to be filed by it with the SEC
since December 31, 1995, and has heretofore delivered to Parent, in the form
filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years
ended December 31, 1995, 1996, and 1997, respectively, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31, 1998, June 30, 1998 and
September 30, 1998, (iii) its Current Reports on Form 8-K filed on February 4,
1998, March 4, 1998, April 23, 1998, May 7, 1998 and August 26, 1998 and (iv)
all proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since January 1, 1996 (other than preliminary proxy
materials) and (v) all other forms, reports and other registration statements
(other than Quarterly Reports on Form 10-Q not referred to in clause (ii) above)
filed by the Company with the SEC since December 31, 1995 (the forms, reports
and other documents referred to in clauses (i), (ii), (iii), (iv) and (v) above
being referred to herein, collectively, as the "SEC Reports"). The SEC Reports
(i) were prepared in all material respects in accordance with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, as the case may be, and the rules and regulations thereunder and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each case, any
notes thereto) contained in the SEC Reports was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented the financial position, results of operations
and changes in financial position of the Company as at the respective dates
thereof and for the respective periods indicated therein (subject, in the case
of unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a Material
Adverse Effect).
(c) Except as and to the extent set forth on the balance sheet of the
Company as at December 31, 1997, including the notes thereto (the "1997 Balance
Sheet"), the Company has no liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) which would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in accordance
with generally accepted accounting principles, except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 1997 which would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) The Company has heretofore furnished to Parent complete and
correct copies of all amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
<PAGE>
SECTION 3.08. Absence of Certain Changes or Events. Since December 31,
1997, except as contemplated by this Agreement or disclosed in any SEC Report
filed since December 31, 1997 and prior to the date of this Agreement or
described in any press release listed in Section 3.08 of the Disclosure
Schedule, the Company has conducted its business only in the ordinary course and
in a manner consistent with past practice and, since December 31, 1997, there
has not been (i) any change in the business, results of operations or financial
condition of the Company having, individually or in the aggregate, a Material
Adverse Effect, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset of the Company and having,
individually or in the aggregate, a Material Adverse Effect, (iii) any change by
the Company in its accounting methods, principles or practices (other than as
required by generally accepted accounting principles), (iv) any revaluation by
the Company of any asset (including, without limitation, any writing down of the
value of inventory or writing off of notes or accounts receivable), other than
in the ordinary course of business consistent with past practice, (v) any entry
by the Company into any commitment or transaction material to the Company, (vi)
any declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities other than regular quarterly dividends on
the Preferred Shares not in excess of $0.5625 per Preferred Share or (vii) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of the Company, except in the
ordinary course of business consistent with past practice.
SECTION 3.09. Absence of Litigation. Except as disclosed in Section
3.09 of the Disclosure Schedule or in the SEC Reports filed prior to the date of
this Agreement, there is no claim, action, proceeding or investigation pending
or, to the best knowledge of the Company, threatened against the Company, or any
property or asset of the Company, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, which (i) individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect or (ii) as of the date hereof, seeks to delay or
prevent the consummation of any Transaction. As of the date hereof, neither the
Company nor any property or asset of the Company is subject to any order, writ,
judgment, injunction, decree, determination or award having, individually or in
the aggregate, a Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. (a) Section 3.10 of the
Disclosure Schedule contains a true and complete list of all employee benefit
plans (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements to which the Company is a party, with respect to which
the Company has any obligation or which are maintained, contributed to or
sponsored by the Company for the benefit of any current or former employee,
officer or director of the Company (collectively, the "Plans"). Each Plan is in
writing and the Company has previously furnished Parent with a true and complete
copy of each Plan and a true and complete copy of each material document
prepared in connection with each such Plan, including, without limitation, (i) a
copy of each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, (iii) the most recently filed
Internal Revenue Service ("IRS") Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan. The
Company does not have any express or implied commitment (i) to create or incur
material liability with respect to or cause to exist any other employee benefit
plan, program or arrangement, (ii) to enter into any contract or agreement to
provide compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than (x) with respect to a modification, change or
termination required by ERISA or the Internal Revenue Code of 1986, as amended
(the "Code") or (y) a modification, change or termination which does not
materially increase benefit accruals or contributions required to be made by the
Company.
<PAGE>
(b) None of the Plans is a defined benefit pension plan subject to
Title IV of ERISA. None of the Plans is a multiemployer plan, within the meaning
of Section 3(37) of ERISA (a "Multiemployer Plan"), or other than as
specifically disclosed in Section 3.10 of the Disclosure Schedule, a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Company could incur liability under Section 4063 or 4064 of ERISA (a
"Multiple Employer Plan"). Other than as disclosed in Section 3.10 of the
Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any person, (ii)
obligates the Company to pay separation, severance, termination or other
benefits as a result of any Transaction or (iii) obligates the Company to make
any payment or provide any benefit that could be subject to a tax under Section
4999 of the Code as a result of any Transaction. Except as disclosed in Section
3.10 of the Disclosure Schedule, none of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company.
(c) Each Plan which is intended to be qualified under Section 401(a)of
the Code has received a favorable determination letter from the IRS that such
Plan is so qualified, and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that such trust is
so exempt. To the knowledge of the Company, no fact or event has occurred since
the date of any such determination letter from the IRS that could adversely
affect the qualified status of any such Plan or the exempt status of any such
trust. Each trust maintained or contributed to by the Company which is intended
to be qualified as a voluntary employees' beneficiary association exempt from
federal income taxation under Sections 501(a) and 501 (c)(9) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and so exempt, and, to the knowledge of the Company, no fact or event has
occurred since the date of such determination by the IRS that could adversely
affect such qualified or exempt status.
(d) To the knowledge of the Company, there has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Plan. The Company is not currently liable nor has it
previously incurred any material liability for any tax or penalty arising under
Section 4971, 4972, 4979, 4980 or 4980B of the Code or Section 502(c) of ERISA,
and, to the knowledge of the Company, no fact or event exists which could give
rise to any such liability. The Company has not incurred any liability under,
arising out of or by operation of Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee pension benefit plan subject to
Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple
Employer Plan, and, to the knowledge of the Company, no fact or event exists
which could give rise to any such liability. No complete or partial termination
has occurred within the five years preceding the date hereof with respect to any
Plan. No reportable event (within the meaning of Section 4043 of ERISA) has
occurred or is expected to occur with respect to any Plan subject to Title IV of
ERISA. No asset of the Company is the subject of any lien arising under Section
302(f) of ERISA or Section 4 12(n) of the Code; the Company has not been
required to post any security under Section 307 of ERISA or Section 401 (a)(29)
of the Code; and, to the knowledge of the Company, no fact or event exists which
could give rise to any such lien or requirement to post any such security.
(e) Each Plan is in compliance in all material respects in accordance
with the requirements of all applicable laws, including, without limitation,
ERISA and the Code, and the Company has performed all obligations required to be
performed by it under, is not in any respect in default under or in violation
of, and has no knowledge of any default or violation by any party to, any Plan.
No Plan has incurred an "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived. All
contributions, premiums or payments required to be made with respect to any Plan
are fully deductible for income tax purposes and no such deduction previously
claimed has been challenged by any government entity. The 1997 Balance Sheet
reflects an accrual of all amounts of employer contributions and premiums
accrued but unpaid with respect to the Plans.
<PAGE>
(f) Other than as specifically disclosed in Section 3.10 of the
Disclosure Schedule, the Company has not incurred any liability under, and has
complied in all respects with, the Worker Adjustment Retraining Notification Act
and the regulations promulgated thereunder ("WARN") and does not reasonably
expect to incur any such liability as a result of actions taken or not taken
prior to the Effective Time. The Company has previously provided in writing to
Parent true and complete lists of the following: (i) all the employees
terminated or laid off by the Company during the 90 days prior to the date
hereof and (ii) all the employees of the Company who have experienced a
reduction in hours of work of more than 50% during any month during the 90 days
prior to the date hereof and describes all notices given by the Company in
connection with WARN. The Company will, by written notice to Parent and
Purchaser, update such lists to include any such terminations, layoffs and
reductions in hours from the date hereof through the Effective Time and will
provide Parent and Purchaser with any related information which they may
reasonably request.
SECTION 3.11. Labor Matters. Except as set forth in Section 3.11 of
the Disclosure Schedule, (i) there are no controversies pending or, to the best
knowledge of the Company, threatened between the Company and any of its
employees, which controversies have or could have a Material Adverse Effect;
(ii) the Company is not a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company, nor, to the
best knowledge of the Company, are there any activities or proceedings of any
labor union to organize any such employees; (iii) the Company has not materially
breached or otherwise failed to comply in any material respect with any material
provision of any such agreement or contract and there are no grievances
outstanding against the Company under any such agreement or contract; (iv) there
are no unfair labor practice complaints pending against the Company before the
National Labor Relations Board or any current union representation questions
involving employees of the Company; and (v) there is no strike, slowdown, work
stoppage or lockout, or, to the best knowledge of the Company, threat thereof,
by or with respect to any employees of the Company. The consent of the labor
unions which are a party to the collective bargaining agreements listed in
Section 3.11 of the Disclosure Schedule is not required to consummate the
Transactions.
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement.
Neither the Schedule 14D-9 nor any information supplied by the Company for
inclusion in the Offer Documents shall, at the respective times the Schedule
14D-9, the Offer Documents, or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to stockholders of the
Company, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. Neither the proxy statement to be
sent to the stockholders of the Company in connection with the Stockholders'
Meeting (as hereinafter defined) or the information statement to be sent to such
stockholders, as appropriate (such proxy statement or information statement, as
amended or supplemented, being referred to herein as the "Proxy Statement"),
shall, at the date the Proxy Statement (or any amendment or supplement thereto)
is first mailed to stockholders of the Company, at the time of the Stockholders'
Meeting and at the Effective Time, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading in any material respect. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information supplied by
Parent or Purchaser or any of their respective representatives which is
contained in the Schedule 14D-9. The Schedule 14D-9 and the Proxy Statement
shall comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations thereunder.
SECTION 3.13. Real Property and Leases. (a) The Company has
sufficient title to, or leasehold interests in, all its properties and assets to
conduct its business as currently conducted or as contemplated to be conducted,
with only such exceptions as, individually or in the aggregate, would not have a
Material Adverse Effect.
<PAGE>
(b) Except as set forth in Section 3.13 of the Disclosure Schedule,
each parcel of real property owned or leased by the Company (i) is owned or
leased free and clear of all mortgages, pledges, liens, security interests,
conditional and installment sale agreements, encumbrances, charges or other
claims of third parties of any kind (collectively, "Liens"), other than (A)
Liens for current taxes and assessments not yet past due, (B) inchoate
mechanics' and materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Company consistent with past practice, and (D) all matters of
record, Liens and other imperfections of title and encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect
(collectively, "Permitted Liens"), and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the best knowledge of the Company, has any such condemnation,
expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of the
Company to which the Company is a party requiring annual rental payments in
excess of $500,000 during the period of the lease, and all amendments and
modifications thereto are in full force and effect and have not been modified or
amended, and there exists no default under any such lease by the Company, nor
any event which with notice or lapse of time or both would constitute a default
thereunder by the Company, except as, individually or in the aggregate, would
not have a Material Adverse Effect.
SECTION 3.14.Trademarks, Patents and Copyrights. To the best knowledge
of the Company, the Company owns or possesses adequate licenses or other valid
rights to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, servicemarks, trade secrets, applications
for trademarks and for servicemarks, know-how and other proprietary rights and
information used or held for use in connection with, and material to, the
business of the Company as currently conducted, and the Company is unaware of
any assertion or claim challenging the validity of any of the foregoing which,
individually or in the aggregate, could have a Material Adverse Effect. The
conduct of the business of the Company as currently conducted does not and will
not conflict in any way with any patent, patent right, license, trademark,
trademark right, trade name, trade name right, service mark, or copyright of any
third party that, individually or in the aggregate, could have a Material
Adverse Effect. To the best knowledge of the Company, there are no infringements
of any propriety rights owned by or licensed by or to the Company which,
individually or in the aggregate, could have a Material Adverse Effect. To the
best knowledge of the Company, the Company has not licensed or otherwise
permitted the use by any third party of any proprietary information on terms or
in a manner which, individually or in the aggregate, could have a Material
Adverse Effect.
SECTION 3.15. Taxes. The Company has filed all returns and
reports ("Returns"), which are required to be filed by it in respect of any
Taxes (as hereinafter defined), and which the failure to file would have a
Material Adverse Effect. As of the time of filing and in all material respects,
the Returns correctly reflected the facts regarding the Taxes payable, income,
expenses, business, assets, operations and status of the Company and any other
information required to be shown thereon. The Company has paid or made provision
for payment of all Taxes shown on such Returns. Neither the IRS nor any other
taxing authority or agency, domestic or foreign, is now asserting or, to the
best knowledge of the Company, threatening to assert against the Company any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. The Company has not granted any waiver of any statute of
limitations with respect to, or any extension of the period of assessment of,
any federal, state, county, municipal or foreign income tax. The Company has not
made an election under Section 341(1) of the Code. For purposes of this
Agreement, "Tax" means all taxes, including net income, capital gains, gross
income, gross receipts, sales, use, transfer, ad valorem, franchise, profits,
license, capital, withholding, payroll, employment, excise, goods and services,
severance, stamp, occupation, premium, property, windfall profits, customs
duties or taxes, fees or assessments, or other governmental charges of any kind
whatsoever, together with any interest, fines and any penalties, additions to
tax or additional amount incurred or accrued under applicable law or assessed,
charged or imposed by any governmental authority.
<PAGE>
SECTION 3.16. Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i) "Hazardous
Substances" means (A) those substances defined in or regulated under the
following federal statutes and their state counterparts, as each may be amended
from time to time, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum
and petroleum products including crude oil and any fractions thereof; (C)
natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) any other
contaminant; and (F) any substance with respect to which a federal, state or
local agency requires environmental investigation, monitoring, reporting or
remediation; and (ii) "Environmental Laws" means any federal, state or local law
relating to (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) otherwise relating to
pollution of the environment or the protection of human health.
(b) To the best knowledge of the Company, except as described in
Section 3.16 of the Disclosure Schedule: (i) the Company has not violated and is
not in violation of any Environmental Law; (ii) none of the properties owned or
leased by the Company (including, without limitation, soils and surface and
ground waters) are contaminated with any Hazardous Substance; (iii) the Company
is not actually or potentially nor, to the best knowledge of the Company,
allegedly liable for any off-site contamination; (iv) the Company is not
actually or potentially nor, to the best knowledge of the Company, allegedly
liable under any Environmental Law (including, without limitation, pending or
threatened liens); (v) the Company has all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits")
and (vi) the Company has always been and is in compliance with its Environmental
Permits.
SECTION 3.17. Aircraft. Set forth on Section 3.17 of the Disclosure
Schedule is a complete and accurate list of all aircraft operated by the Company
at the date hereof.
SECTION 3.18. Slots. Set forth on Section 3.18 of the Disclosure
Schedule is a complete and accurate list of all takeoff and landing slots and
other similar takeoff and landing rights ("Slots") used by the Company on the
date hereof at Slot controlled airports, including a list of all slot lease
agreements.
SECTION 3.19. Brokers. No broker, finder or investment banker (other
than Salomon Smith Barney Inc.) is entitled to any brokerage, finder's or other
fee or commission in connection with the Transactions based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Parent a complete and correct copy of all agreements between the Company and
Salomon Smith Barney Inc. pursuant to which such firm would be entitled to any
payment relating to the Transactions.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.01. Corporate Organization. Each of Parent and Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and Nevada, respectively, and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a material adverse effect on the business
or operations of Parent and Purchaser and their respective subsidiaries taken as
a whole.
SECTION 4.02. Authority Relative to this Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Nevada Law). This Agreement has been duly and validly
executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Purchaser, enforceable against each
of Parent and Purchaser in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation, Articles of Incorporation or
By-laws of either Parent or Purchaser, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Parent or Purchaser or
by which any property or asset of either of them is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of Parent
or Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Purchaser is a party or by which Parent or Purchaser or any
property or asset of either of them is bound or affected, except for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a material adverse effect on the business
or operations of Parent or Purchaser and their respective subsidiaries taken as
a whole.
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the Exchange Act,
Blue Sky Laws and state takeover laws, the HSR Act, and filing and recordation
of appropriate merger documents as required by Nevada Law and (ii) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Offers
or the Merger, or otherwise prevent Parent or Purchaser from performing their
respective obligations under this Agreement.
<PAGE>
SECTION 4.04. Offer Documents; Proxy Statement. The Offer Documents
will not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, at the time
of the Stockholders' Meeting and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading in any
material respect. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in any of the foregoing
documents or the Offer Documents. The Offer Documents shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 4.05. Brokers. No broker, finder or investment banker (other
than Morgan Stanley & Co., Incorporated) is entitled to any brokerage, finder's
or other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Parent or Purchaser.
<PAGE>
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.
(a) The Company covenants and agrees that, between the date of this Agreement
and the earlier of the time designees of Parent comprise a majority of the Board
of Directors of the Company or the Effective Time, unless Parent shall otherwise
agree in writing (which agreement shall not be unreasonably withheld or
delayed), it will do the following:
(i) conduct its business substantially as presently conducted in the
ordinary course of business consistent with past practice, and will use
all reasonable efforts to conduct its business in such a manner that on
the closing date of the Offers and at the Effective Time, the
representations and warranties of the Company will be true and correct in
all material respects as though made on each respective closing date;
(ii) continue to carry insurance with respect to its assets and to the
business substantially in the amounts and type carried by the Company on
the date of this Agreement;
(iii) continue to fund, in accordance with applicable requirements,
all employee benefit plans;
(iv) use all reasonable efforts to keep its business organization
intact, continue to operate in accordance with current industry practices,
preserve its labor force and make available to Parent its officers and
employees, and preserve for Parent the goodwill of suppliers and customers
of the Company and others having a business relationship with the Company;
(v) maintain all items of its tangible assets in their current
condition, ordinary wear and tear excepted, and make all ordinary and
necessary repairs;
(vi) continue to use and operate the Slots used and operated by the
Company as of the date hereof in a manner consistent with prior practice
and in accordance with all applicable laws, and shall not enter into any
contract nor otherwise act, nor suffer or permit any other person to act,
to restrict, interfere with or prevent the use of such Slots;
(vii) perform in all material respects its obligations under all
material contracts;
(viii) comply in all material respects with all applicable laws an
regulations, including, without limitation, laws and regulations
relating to the timely, complete, and correct filing of all reports and
maintenance of all records required by any governmental authority to be
filed or maintained;
(ix) notify Parent upon a replacement or exchange of any aircraft
or engine; and
(x) notify Parent of any incidents or accidents involving an aircraft
owned or operated by the Company that resulted or could reasonably be
expected to result in losses to the Company of in excess of $2,000,000.
(b) The Company covenants and agrees that, between the date of this
Agreement and the earlier of the time designees of Parent comprise a majority of
the Board of Directors of the Company or the Effective Time, unless Parent shall
otherwise agree in writing (which agreement shall not be unreasonably withheld
or delayed), it will not do any of the following:
<PAGE>
(i) amend or otherwise change its Articles of Incorporation or By-laws
or equivalent organizational documents;
(ii) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any
shares of capital stock of any class of the Company, or any options,
warrants convertible securities, or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company
(except for the issuance of a maximum of 3,757,070 Common Shares
issuable pursuant to Options outstanding on the date hereof, a maximum of
7,104,831 Common Shares issuable upon the exercise of Warrants or upon
the conversion of Preferred Shares or Convertible Notes, in each case
outstanding on the date hereof, and the issuance of a maximum of 100,000
Options issued on terms consistent with prior practice, and a maximum of
100,000 Common Shares issuable pursuant to such Options, issued after the
date hereof), or (ii) any assets of the Company, except for sales in the
ordinary course of business and in a manner consistent with past practice;
(iii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, other than regular quarterly
dividends payable on the Preferred Shares not to exceed $0.5625 per
Preferred Share or in connection with the adoption of a Shareholder
Rights Plan;
(iv) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(v) except as disclosed in Section 5.01(b)(v) of the Disclosure
Schedule, (A) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets; (B) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any person,
or make any loans or advances, except in the ordinary course of business
and consistent with past practice; (C) enter into any contract or
agreement other than in the ordinary course of business, consistent with
past practice; (D) authorize any single capital expenditure (other than
expenditures for maintenance) which is in excess of $500,000 or capital
expenditures which are, in the aggregate, in excess of $500,000; or
(E) enter into or amend any contract, agreement, commitment or arrangement
with respect to any matter set forth in this Section 5.01(b);
(vi) except as set forth in Section 5.01(b)(vi) of the Disclosure
Schedule, increase the compensation payable or to become payable to, or
the benefits provided to, its officers or key employees, except for
increase in accordance with past practices in salaries or wages of
employees of the Company who are not officers of the Company, or grant any
severance or termination pay to, or enter into any employment or
severance agreement with any director, officer or other key employee of the
Company, or establish, adopt, enter into or amend in any material respect
any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
<PAGE>
(vii) except as set forth in Section 5.01(b)(vii) of the Disclosure
Schedule, hire or retain any single employee or consultant at an annual
rate of compensation in excess of $125,000, or employees or consultants
with annual rates of compensation in excess of $250,000 in the aggregate;
(viii) except as set forth in Section 5.01(b)(viii) of the Disclosure
Schedule, take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection
of accounts receivable);
(ix) except as set forth in Section 5.01(b)(ix) of the Disclosure
Schedule, make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(x) except as set forth in Section 5.01(b)(x) of the Disclosure
Schedule, commence or settle any litigation, suit, claim, action,
proceeding, or investigation valued in excess of $300,000 either
individually or in the aggregate, provided, however, that upon prior notice
to Parent, the Company may commence actions relating to claims which are
within 30 days of becoming barred by the applicable statute of limitations
or which constitute mandatory counterclaims in any suit brought against the
Company by any third party; or
(xi) amend, modify, or consent to the termination of any material
contract, or amend, modify, or consent to the termination of the Company's
rights thereunder, in a manner materially adverse to the Company, other
than in the ordinary course of business consistent with past practice.
<PAGE>
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting. The Company, acting through the
Board, shall, if required by applicable law and the Company's Articles of
Incorporation and By-laws, (a) duly call, give notice of, convene and hold an
annual or special meeting of its stockholders as soon as practicable following
consummation of the Offers for the purpose of considering and taking action on
this Agreement and the transactions contemplated hereby (the "Stockholder's
Meeting") and (b) subject to its fiduciary duties under applicable law as
advised in writing by independent counsel, (i) include in the Proxy Statement
the unanimous recommendation of the Board that the stockholders of the Company
approve and adopt this Agreement and the transactions contemplated hereby and
(ii) use its best efforts to obtain such approval and adoption. At the
Stockholders' Meeting, Parent and Purchaser shall cause all Shares then owned by
them and their subsidiaries to be voted in favor of the approval and adoption of
this Agreement, the Merger and the transactions contemplated hereby.
SECTION 6.02. Proxy Statement. If required by applicable law, as
soon as practicable following consummation of the Offers, the Company shall file
the Proxy Statement with the SEC under the Exchange Act, and shall use its best
efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser and
the Company shall cooperate with each other in the preparation of the Proxy
Statement, and the Company shall notify Parent of the receipt of any comments of
the SEC with respect to the Proxy Statement and of any requests by the SEC for
any amendment or supplement thereto or for additional information and shall
provide to Parent promptly copies of all correspondence between the Company or
any representative of the Company and the SEC. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give Parent and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and Purchaser
agrees to use its reasonable best efforts, after consultation with the other
parties hereto, to respond promptly to all such comments of and requests by the
SEC and to cause the Proxy Statement and all required amendments and supplements
thereto to be mailed to the holders of Shares entitled to vote at the
Stockholders' Meeting at the earliest practicable time.
SECTION 6.03. Company Board Representation; Section 14(f). Subject to
compliance with applicable law and the Company's Articles of Incorporation,
promptly upon the purchase by Purchaser of Common Shares pursuant to the Offers,
and from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board as
shall give Purchaser representation on the Board equal to the product of the
total number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Common Shares beneficially owned by Purchaser or any affiliate of
Purchaser following such purchase bears to the total number of Common Shares
then outstanding, and the Company shall, at such time, promptly take all actions
necessary to cause Purchaser's designees to be elected as directors of the
Company, including increasing the size of the Board or securing the resignations
of incumbent directors or both. At such times, the Company shall use its best
efforts to cause persons designated by Purchaser to constitute the same
percentage as persons designated by Purchaser shall constitute of the Board of
each committee of the Board to the extent permitted by applicable law.
Notwithstanding the foregoing, until the earlier of (i) the time Purchaser
acquires a majority of the then outstanding Common Shares on a fully diluted
basis and (ii) the Effective Time, the Company shall use its best efforts to
ensure that all the members of the Board and each committee of the Board as of
the date hereof who are not employees of the Company shall remain members of the
Board and of each such committee.
<PAGE>
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-l.
(c) Following the election of designees of Purchaser pursuant to this
Section 6.03, prior to the Effective Time, any amendment of this Agreement or
the Articles of Incorporation or By-laws of the Company, any termination of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Purchaser or
waiver of any of the Company's rights hereunder shall require the concurrence of
a majority of the directors of the Company then in office who neither were
designated by Purchaser nor are employees of the Company (the "Independent
Directors"). If the number of Independent Directors shall be reduced below two
for any reason whatsoever, the remaining Independent Director shall designate a
person to fill such vacancy who shall be deemed to be an Independent Director
for purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company, or officers or affiliates of Parent or
any of its Subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. The Independent Directors shall have
the authority to retain such counsel and other advisors at the expense of the
Company as are reasonably appropriate to the exercise of their duties in
connection with this Agreement, subject to approval by the Company of the terms
of such retention, which approval shall not be unreasonably withheld. In
addition, the Independent Directors shall have the authority to institute any
action, on behalf of the Company, to enforce performance of this Agreement.
SECTION 6.04. Access to Information; Confidentiality.(a) From the date
hereof to the Effective Time, the Company shall, and shall cause the officers,
directors, employees, auditors and agents of the Company to, afford the
officers, employees and agents of Parent and Purchaser complete access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other facilities, books and records of the Company, and shall furnish Parent
and Purchaser with all financial, operating and other data and information as
Parent or Purchaser, through its officers, employees or agents, may reasonably
request.
(b) All information obtained by Parent or Purchaser pursuant to
this Section 6.04 shall be kept confidential in accordance with the
confidentiality agreement, dated June 12, 1998 (the "Confidentiality
Agreement"), between Parent and the Company.
(c) Pursuant to the requirements of the Confidentiality Agreement,
in the event of the termination of this Agreement in accordance with Section
8.01, Parent and Purchaser shall, and shall use their reasonable best efforts to
cause their respective affiliates and their respective officers, directors,
employees and agents to, (i) return promptly every document furnished to them by
the Company or any officer, director, employee, auditor or agent of the Company
in connection with the Transactions and containing Confidential Information and
all copies thereof in their possession, and cause any other parties to whom such
documents may have been furnished promptly to return such documents and all
copies thereof, other than such documents as may have been filed with the SEC or
otherwise be publicly available, and (ii) destroy promptly all documents created
by them from any Confidential Information and all copies thereof in their
possession, and cause any other parties to whom such documents may have been
furnished to destroy promptly such documents and any copies thereof.
(d) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
<PAGE>
SECTION 6.05. No Solicitation of Transactions. The Company shall
not, directly or indirectly, through any officer, director, agent or otherwise,
solicit, initiate or encourage the submission of any proposal or offer from any
person relating to any acquisition or purchase of all or (other than in the
ordinary course of business) any portion of the assets of, or any equity
interest in, the Company or any business combination with the Company or
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that nothing
contained in this Section 6.05 shall prohibit the Board from furnishing
information to, or entering into discussions or negotiations with, any person in
connection with an unsolicited (from the date of this Agreement) proposal in
writing by such person to acquire the Company pursuant to a merger,
consolidation, share exchange, share purchase, business combination or other
similar transaction or to acquire all or substantially all of the assets of the
Company, if, and only to the extent that, (i) the Board, after consultation with
independent legal counsel (which may include its regularly engaged independent
legal counsel), determines in good faith that such action is required for the
Board to comply with its fiduciary duties to stockholders imposed by Nevada Law
and (ii) prior to furnishing such information to, or entering into discussions
or negotiations with, such person, the Company uses its reasonable best efforts
to obtain from such person an executed confidentiality agreement on terms no
less favorable to the Company than those contained in the Confidentiality
Agreement. The Company immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing. The Company shall notify Parent promptly if any
such proposal or offer, or any inquiry or contact with any person with respect
thereto, is made and shall, in any such notice to Parent, indicate in reasonable
detail the identity of the person making such proposal, offer, inquiry or
contact and the terms and conditions of such proposal, offer, inquiry or
contact. The Company agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party.
SECTION 6.06. Existing Contracts Between Parent and the Company.
From the date hereof until the earlier of the Effective Time and the termination
of this Agreement in accordance with Section 8.01, Parent shall not terminate
(or take other adverse action against the Company in respect of) the currently
existing commercial contracts between Parent and the Company, provided, however,
that no provision of this Section 6.06 shall restrict or prohibit Parent from
exercising any rights of Parent in the event of a default by the Company under
any such contract. Parent shall also include the Company in Parent's west coast
promotions and advertisements for so long as there is a frequent flyer
arrangement between Parent and the Company. Additionally, the Company shall be
included in written frequent flyer promotional material (in-flight and
newsletter) on a level equal to Parent's other frequent flyer partners.
SECTION 6.07. Directors' and Officers' Indemnification and Insurance.
(a) The Articles of Incorporation and By-laws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in Article VIII of the Articles of Incorporation and Article VII of
the By-laws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
the Effective Time were directors, officers, employees, fiduciaries or agents of
the Company, unless such modification shall be required by law.
<PAGE>
(b) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee, fiduciary and
agent of the Company (collectively, the "Indemnified Parties") against all costs
and expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or investigative,
arising out of or pertaining to, in whole or in part any action or omission in
their capacity as an officer, director, employee, fiduciary or agent (including
in connection with this Agreement and the transactions contemplated hereby),
whether occurring before or after the Effective Time, for a six-year period
after the date hereof. In the event of any such claim, action, suit, proceeding
or investigation, (i) the Company or the Surviving Corporation, as the case may
be, shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company or the Surviving Corporation, promptly after statements therefor are
received and (ii) the Company and the Surviving Corporation shall cooperate in
the defense of any such matter; provided, however, that neither the Company nor
the Surviving Corporation shall be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld or
delayed); and provided further that neither the Company nor the Surviving
Corporation shall be obligated pursuant to this Section 6.07(b) to pay the fees
and expenses of more than one counsel for all Indemnified Parties in any single
action except to the extent that two or more of such Indemnified Parties shall
have conflicting interests in the outcome of such action; and provided further
that, in the event that any claim for indemnification is asserted or made within
such six-year period, all rights to indemnification in respect of such claim
shall continue until the final disposition of such claim.
(c) The Surviving Corporation shall use its best efforts to maintain
in effect for six years from the Effective Time and for so long thereafter as
any claim asserted prior to such date has not been fully adjudicated, if
available, the current directors' and officers' liability insurance policies
maintained by the Company or substitute therefor policies of at least the same
amounts and coverage containing terms and conditions which are not materially
less favorable to the insured parties with respect to matters occurring prior to
the Effective Time; provided, however, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section 6.07(c) more than an
amount per year equal to 150% of current annual premiums paid by the Company for
such insurance (which premiums the Company represents and warrants to be
approximately $175,000 in the aggregate).
(d) In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, or at Parent's option, Parent, shall
assume the obligations set forth in this Section 6.07.
SECTION 6.08. Notification of Certain Matters. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate and (ii) any
failure of the Company, Parent or Purchaser, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.08 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
<PAGE>
SECTION 6.09. Further Action; Reasonable Best Efforts. Upon the term
and subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using its reasonable best efforts
to obtain all licenses, permits (including, without limitation, Environmental
Permits), consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company as are
necessary for the consummation of the Transactions and to fulfill the conditions
to the Offers and the Merger. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such action.
SECTION 6.10. Redemption of Convertible Notes. Immediately after the
date on which the Purchaser shall have accepted for payment all Common Shares
validly tendered and not withdrawn prior to the expiration date with respect to
the Common Stock Offer, the Company shall call for the redemption of, and
thereafter redeem, all of the outstanding Convertible Notes in accordance with
their terms.
SECTION 6.11. Preferred Stock. The Company covenants and agrees as
follows:
(a) Pursuant to Section 8 of the Certificate of Designations, as soon
as practicable after the acceptance for payment of the Common Shares
pursuant to the Common Stock Offer, the Company shall provide the holders
of all Preferred Shares with a notice of "Ownership Change" (as defined in
the Certificate of Designations). Each holder of Preferred Shares,
upon the occurrence of the Ownership Change shall have the right, at the
holder's option, to convert all, but not less than all, of such holder's
Preferred Shares into Common Shares, at an adjusted conversion price per
Common Share equal to the Special Conversion Price (as defined in the
Certificate of Designations), subject to the option of the Company to
provide to each such holder, in lieu of Common Stock, cash equal to the
Market Value (as defined in the Certificate of Designations) of the Common
Shares multiplied by the number of Common Shares into which such Preferred
Shares would have been convertible at the Special Conversion Price.
(b) The Company shall exercise its option under Section 8 of the
Certificate of Designations to satisfy its obligations thereunder by
paying cash to the holders of Preferred Shares, in lieu of issuing to such
holders Common Stock upon the conversion of their Preferred Shares.
SECTION 6.12. Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any Transaction and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange to which Parent or the Company is a party.
<PAGE>
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger. The respective obligations
of each party to effect the Primary Merger or the Alternative Merger, as the
case may be, shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Primary Merger or
the Alternative Merger contemplated hereby shall have been approved and
adopted by the affirmative vote of the stockholders of the Company to the
extent required by Nevada Law and the Articles of Incorporation of the
Company;
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated;
(c) No Order. No foreign, United State or state governmental
authority or other agency or commission or foreign, United States or state
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making the acquisition of
Shares by Parent or Purchaser or any affiliate of either of them
illegal or otherwise restricting, preventing or prohibiting consummation
of the Transactions; and
(d) Offers. Purchaser shall have purchased all Common Shares validly
tendered and not withdrawn pursuant to the Common Stock Offer; provided,
however, that this condition shall not be applicable to the obligations of
Parent or Purchaser if, in breach of this Agreement or the terms of the
Common Stock Offer, Purchaser fails to purchase any Common Shares validly
tendered and not withdrawn pursuant to the Common Stock Offer.
<PAGE>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of the
Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company; or
(b) By either Parent, Purchaser or the Company if (i) Purchaser
shall not have purchased Common Shares pursuant to the Common Stock
Offer on or before June 30, 1999; provided, however, that (x) the right
to terminate this Agreement under this Section 8.01(b)(i) shall not be
available to any such party if such party's failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of such purchase to occur on or before such date and (y) if the
waiting period (and any extension thereof) applicable to the consummation
of the Transactions under the HSR Act shall expire or terminate less than
ten (10) business days prior to June 30, 1999, the right to terminate this
Agreement pursuant to this clause (i) shall not become effective until
the tenth business day following the date of such expiration or
termination, or (ii) any court of competent jurisdiction or other
governmental authority shall have issued an order, decree, ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become
final and nonappealable; or
(c) By Parent if due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in Annex A
hereto and provided that, in the case of the conditions set forth in
paragraph (e) or (f) thereof, Parent shall have provided five business days
prior written notice of such failure to the Company and such condition
shall have remained unsatisfied, Purchaser shall have (i) terminated the
Common Stock Offer without having accepted any Common Shares for payment
thereunder or (ii) failed to pay for Common Shares pursuant to the Common
Stock Offer prior to June 30, 1999, unless such failure to pay for Common
Shares shall have been caused by or resulted from the failure of Parent or
Purchaser to perform in any material respect any material covenant or
agreement of either of them contained in this Agreement or the material
breach by Parent or Purchaser of any material representation or warranty
of either of them contained in this Agreement; and
(d) By the Company, upon approval of the Board, if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any
condition set forth in Annex A hereto, Purchaser shall have (A) terminated
the Common Stock Offer without having accepted any Common Shares for
payment thereunder or (B) failed to pay for Common Shares pursuant to the
Common Stock Offer prior to June 30, 1999, unless such failure to pay for
Common Shares shall have been caused by or resulted from the failure of the
Company to perform in any material respect any material covenant or
agreement of it contained in this Agreement or the material breach by the
Company of any material representation or warranty of it contained in
this Agreement or (ii) prior to the purchase of Shares pursuant to the
Offers, the Board shall have withdrawn or modified in a manner adverse
to Purchaser or Parent its approval or recommendation of the Offers, this
Agreement or the Merger in order to approve the execution by the Company
of a definitive agreement providing for the acquisition of the Company or
its assets by merger or other business combination or in order to approve a
tender offer or exchange offer for Shares by a third party, in either case,
as determined by the Board in the exercise of its good faith judgment and
after consultation with its legal counsel and financial advisors, on terms
more favorable to the Company's stockholders than the Offers and the Merger
taken together, provided, however, that no termination pursuant to this
Section 8.01(d)(ii) shall be effective prior to the payment by the Company
of the Fee (as defined below) and the Expenses (as defined below).
<PAGE>
SECTION 8.02. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement
shall forthwith become void, and there shall be no liability on the part
of any party hereto, except (i) as set forth in Sections 8.03 and 9.01 and
(ii) nothing herein shall relieve any party from liability for any willful
breach hereof.
SECTION 8.03. Fees and Expenses; Commercial Arrangements. (a) In the
event that:
(i) any person (A) shall have become the beneficial owner of more than
30% of the then outstanding Common Shares (an "Acquiring Person") or (B)
shall have commenced, proposed or communicated to the Company a proposal
that is publicly disclosed for a tender or exchange offer for 30% or more
(or which, assuming the maximum amount of securities which could be
purchased, would result in any person beneficially owning 30% or more)
of the then outstanding Common Shares or otherwise for the direct or
indirect acquisition of the Company or all or substantially all of
its assets for per Common Share consideration having a value greater
than the Per Common Share Amount (a "Competing Proposal") and (w) the
Offers shall have remained open for at least 20 business days, (x) the
Minimum Condition shall not have been satisfied, (y) this Agreement shall
have been terminated pursuant to Section 8.01 and (z) such Competing
Proposal shall be consummated or a transaction of the type referred to in
clause (B) above shall be consummated with an Acquiring Person, in either
case within 18 months following the date of termination of this Agreement;
or
(ii) this Agreement is terminated by the Company pursuant to 8.01
(d)(ii);
then, in any such event, the Company shall pay Parent promptly (but in no event
later than one business day after the first of such events shall have occurred)
a fee of $3,000,000 (the "Fee"), which amount shall be payable in immediately
available funds, plus all Expenses (as hereinafter defined).
(b) If the Company is required to make any payment pursuant to Section
8.03(a), then the Company shall reimburse each of Parent and Purchaser (not
later than one business day after submission of statements therefor) for all
out-of-pocket expenses and fees up to $1,000,000 in the aggregate (including,
without limitation, fees and expenses payable to all banks, investment banking
firms, other financial institutions and other person and their respective agents
and counsel, for arranging, committing to provide or providing any financing for
the Transactions or structuring the Transactions and all fees of counsel,
accountants, experts and consultants to Parent and Purchaser, and all printing
and advertising expenses) actually incurred or accrued by either of them or on
their behalf in connection with the Transactions, including, without limitation,
the financing thereof, and actually incurred or accrued by banks, investment
banking firms, other financial institutions and other persons and assumed by
Parent or Purchaser in connection with the negotiation, preparation, execution
and performance of this Agreement, the structuring and financing of the
Transactions and any financing commitments or agreements relating thereto (all
the foregoing being referred to herein herein collectively as the "Expenses").
(c) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(d) In the event that the Company shall fail to pay the Fee or any
Expenses when due, the term "Expenses" shall be deemed to include the costs and
expenses actually incurred or accrued by Parent and Purchaser (including,
without limitation, fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 8.03, together with interest on
such unpaid Fee and Expenses, commencing on the date that the Fee or such
Expenses became due, at a rate equal to the rate of interest publicly announced
by Citibank, N.A., from time to time, in the City of New York, as such bank's
base rate plus 2.00%.
<PAGE>
(e) If Parent terminates this Agreement pursuant to Section 8.01(b) or
pursuant to Section 8.01(c) due to the failure to satisfy the conditions set
forth in paragraphs (a), (b), (e) or (f) of Annex A (other than termination by
Parent due to (i) a knowing or willful breach by the Company of any of the
representations, warranties, covenants or agreements referenced in paragraphs
(e) or (f) of Annex A or (ii) a material breach by the Company of the covenant
contained in Section 6.05 of this Agreement), then Parent and the Company shall
take the following actions:
(i) extend the Amended and Restated Advantage Participating
Carrier Agreement dated March 28, 1995 between Parent and the Company
through April 30, 2001 (after which date such agreement shall be
terminable pursuant to the current terms thereof);
(ii) extend the term of the Operations Agreement between
Parent and the Company dated October 18, 1994 (the "Operations
Agreement") with respect to 50% of the Slots covered thereby through
December 31, 1999 and with respect to the remaining 50% of the Slots
covered thereby through December 31, 2000 (which to the extent
practicable shall consist of the most restrictive class of Slots)
(after which date the Operations Agreement shall be terminable
pursuant to the current terms thereof) and the Company agrees to waive
any claims that it may have any proprietary interest in any Slots
covered by the Operations Agreement;
(iii)for so long as there is a frequent flyer arrangement between
Parent and the Company, Parent shall include the Company (A) in Parent's
west coast promotions and advertisements and (B) in written frequent
flyer promotional material (in-flight and newsletter) on a level equal
to Parent's other frequent flyer partners; and
(iv) Parent shall take the following actions:
(A) discuss in good faith with the Company the provision to the
Company of out-sourcing services in various fields, including
reservations, purchasing, sales and yield management, subject to
regulatory approval;
(B)review, on a case-by-case basis, exceptions to the exclusivity
provisions of the codeshare and frequent flyer agreements between
Parent and the Company, except that the consent of Parent shall not be
required for any such arrangements with any airline that, as of the
date hereof, (x) presently codeshares with Parent, or (y) is a member
of "oneworld" (i.e., British Airways, Canadian Airlines International,
Cathay Pacific Airways, Qantas Airways); and
(C) review the possibility of placing the Company's code on
certain of Parent's flights, as Parent and the Company both determine
to be mutually beneficial;
SECTION 8.04. Amendment. Subject to Section 6.03, this Agreement
may be amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after the approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company, no
amendment may be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger or the Alternative Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any
party hereto may (i) extend the time for the performance of any obligation or
other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Article II and Section 6.07 shall survive the Effective Time
indefinitely and those set forth in Sections 6.04(b), 6.04(c) and 8.03 shall
survive termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
if to Parent or Purchaser:
American Airlines, Inc.
4333 Amon Carter Boulevard
Ft. Worth, TX 76155
Attn: Corporate Secretary
Attn: Vice President - Corporate Development & Treasurer
Fax: (817) 967-4313
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn: John A. Marzulli, Jr., Esq,
Fax: (212) 848-7179
if to the Company:
Reno Air, Inc.
220 Edison Way
Reno, Nevada 89502
Attn: General Counsel
Fax:(702) 686-3875
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attn: Lawrence Lederman, Esq.
Robert Reder, Esq.
Fax: (212) 530-5219
<PAGE>
SECTION 9.03. Certain Definitions. For purposes of this Agreement,
the term:
(a) "affiliate" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any Common Shares means a
person who shall be deemed to be the beneficial owner of such Common
Shares (i) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or any
of its affiliates or associates has, directly or indirectly, (A) the right
to acquire (whether such right is exercisable immediately or subject only
to the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other persons with
whom such person or any of its affiliates or associates or person with
whom such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any Common Shares;
(c) "business day" means any day on which the principal offices
of the SEC in Washington, D.C. are open to accept filings, or, in the case
of determining a date when any payment is due, any day on which banks are
not required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "knowledge" and "best knowledge" mean, with respect to the
Company, the actual knowledge of the executive officers of the Company and
the persons who report directly to such executive officers;
(f) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of
a government; and
(g) "subsidiary" or "subsidiaries" of any person means an affiliate
controlled by such person, directly or indirectly, through one or more
intermediaries.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. Entire Agreement; Assignment. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersede, except as set forth in Sections 6.04(c), all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Purchaser may assign all
or any of their rights and obligations hereunder to any affiliate of Parent
provided that no such assignment shall relieve the assigning party of its
obligations hereunder if such assignee does not perform such obligations.
<PAGE>
SECTION 9.06. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.07 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. Governing Law. Except to the extent that Nevada Law
applies to the Merger on a mandatory basis, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in that State.
SECTION 9.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
AMERICAN AIRLINES, INC.
By /s/ Gerald J. Arpey
-------------------
Name: Gerald J. Arpey
Title: Sr. Vice president-Finance and Planning
BONANZA ACQUISITIONS, INC.
By /s/ Gerald J. Arpey
-------------------
Name: Gerald J. Arpey
Title: Sr. Vice president-Finance and Planning
RENO AIR, INC.
By /s/ Joseph R. O'Gorman
----------------------
Name: Joseph R. O'Gorman
Title: Chairman, CEO, and President
<PAGE>
ANNEX A
Conditions to the Offers
Notwithstanding any other provision of the Offers, subject to the
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act, Purchaser shall not be required to accept for payment or pay for
any Common Shares tendered pursuant to the Common Stock Offer, and may (except
as provided in the Merger Agreement) terminate or amend the Common Stock Offer
and may postpone the acceptance for payment of and payment for Common Shares
tendered, if (i) the Minimum Condition shall not have been satisfied, (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Common Stock Offer, or (iii) at any
time on or after the date of this Agreement, and prior to the acceptance for
payment of Common Shares, any of the following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding by any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, (i) challenging or seeking to
make illegal, materially delay or otherwise directly or indirectly
restrain or prohibit or make materially more costly the making of the
Offers, the acceptance for payment of, or payment for, any Shares by
Parent, Purchaser or any other affiliate of Parent or the consummation of
any other Transaction, or seeking to obtain material damages in connection
with any Transaction; (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, Parent or any of their subsidiaries
of all or any material portion of the business or assets of the Company,
Parent or any of their subsidiaries, or to compel the Company, Parent or
any of their subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of the Company, Parent or any of
their subsidiaries, as a result of the Transactions; (iii) seeking to
impose or confirm limitations on the ability of Parent, Purchaser or any
other affiliate of Parent to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by Purchaser pursuant to the Offers or
otherwise on all matters properly presented to the Company's stockholders,
including, without limitation, the approval and adoption of this Agreement
and the transactions contemplated hereby; (iv) seeking to require
divestiture by Parent, Purchaser or any other affiliate of Parent of any
Shares; or (v) which otherwise has a Material Adverse Effect or which
is reasonably likely to have an adverse effect on the business, results of
operations or financial condition of Parent that is material in
relation to the benefits sought to be achieved by Parent in the
Transactions;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate
of Parent or the Company or (ii) any Transaction, by any legislative body,
court, government or governmental, administrative or regulatory authority
or agency, domestic or foreign, other than the routine application of the
waiting period provisions of the HSR Act to the Offers or the Merger,
which is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in clauses (i) through (v) of paragraph
(a) above;
(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect;
<PAGE>
(d) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under
the Exchange Act) of 30% or more of the then outstanding Common Shares has
been acquired by any person, other than Parent or any of its affiliates or
(ii) (A) the Board or any committee thereof shall have withdrawn or
modified in a manner adverse to Parent or Purchaser the approval or
recommendation of the Offers, the Merger or the Merger Agreement or
approved or recommended any takeover proposal or any other acquisition of
Common Shares other than the Offers and the Merger or (B) the Board or any
committee thereof shall have resolved to do any of the foregoing;
(e) any representation or warranty of the Company in the Merger
Agreement (without regard to any materiality qualifiers contained
therein) shall not be true and correct, in each case as if such
representation or warranty was made as of such time on or after the date
of this Agreement, but only if the aggregate effect of any failures of
such representations and warranties to be true and correct would have a
Material Adverse Effect, and the Company shall not have delivered to
Parent a certificate of the Company to such effect signed by a duly
authorized officer thereof and dated as of the date on which Parent shall
first accept Common Shares for payment;
(f) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms; or
(h) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offers or postpone the acceptance for payment of or payment
for Shares thereunder.
Notwithstanding any other provisions of the Offers, Purchaser shall
not be required to accept for payment or pay for any Preferred Shares tendered
pursuant to the Preferred Stock Offer unless and until the Purchaser has
accepted for payment and paid for the Common Shares pursuant to the Common Stock
Offer.
The foregoing conditions are for the sole benefit of Purchaser and
Parent and may be asserted by Purchaser or Parent, subject to the terms of the
Merger Agreement, regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser or Parent in whole or in part at any
time and from time to time in their sole discretion. The failure by Parent or
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
<PAGE>
Annex B
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Dividend Payment Date Per Preferred Share Amount
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
December 15, 1998 110.00% $27.50
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
March 15, 1999 109.33% $27.33
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
June 15, 1999 108.68% $27.17
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
September 15, 1999 108.02% $27.01
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
December 15, 1999 107.34% $26.83
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
March 15, 2000 106.64% $26.66
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
June 15, 2000 105.95% $26.49
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
September 15, 2000 105.25% $26.31
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
December 15, 2000 104.53% $26.13
- -------------------------- ------------------------- --------------------------
- -------------------------- ------------------------- --------------------------
December 20, 2000 104.50% $26.13
- -------------------------- ------------------------- --------------------------
