<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1997
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------------- ---------------------
Commission file number 0-26914
---------------------------------------------------------
VALUJET, INC.
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 58-2189551
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1800 Phoenix Boulevard
Suite 126
Atlanta, Georgia 30349
--------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(770) 907-2580
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ---------
As of August 1, 1997, there were 54,993,880 shares of Common Stock of the
Registrant outstanding.
<PAGE>
VALUJET, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------- ---------------------
Consolidated Balance Sheets - December 31, 1996 and
June 30, 1997 (Unaudited) 3
Consolidated Statements of Operations - Three months ended
June 30, 1996 and 1997 (Unaudited);
Six months ended June 30, 1996 and 1997 (Unaudited) 5
Consolidated Statements of Cash Flows - Six months ended
June 30, 1996 and 1997 (Unaudited) 7
Condensed Notes to Unaudited Consolidated Interim Financial
Statements 8
Item 2. Management's Discussion and Analysis of Financial
- ------ -------------------------------------------------
Condition and Results of Operations 11
-----------------------------------
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
- ------- --------------------------------
SIGNATURES
EXHIBITS
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
VALUJET, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS (Note) (Unaudited)
Current assets:
Cash and cash equivalents $150,012,695 $149,724,768
Accounts receivable, less allowance
of $838,000 and $1,141,000 at December 31,
1996 and June 30, 1997, respectively 7,014,702 6,583,785
Inventories of parts 6,607,307 6,159,038
Prepaid expenses 8,066,792 2,481,642
Income taxes receivable 36,440,653 13,711,144
Assets held for disposition 42,060,242 0
Other current assets 839,040 1,118,194
------------ ------------
Total current assets 251,041,431 179,778,571
Property and equipment, at cost
Flight equipment 126,829,882 166,292,124
Other property and equipment 65,662,504 70,779,835
Deposits on flight equipment
purchase contracts 14,534,895 15,352,895
------------ ------------
207,027,281 252,424,854
Less allowance for depreciation (44,455,397) (58,375,017)
------------ ------------
162,571,884 194,049,837
Debt issuance costs 3,573,561 3,179,811
------------ ------------
Total assets $417,186,876 $377,008,219
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. See condensed notes to
financial statements.
3
<PAGE>
VALUJET, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1996 1997
------------- -------------
(Note) (Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 3,221,542 $ 3,305,939
Accrued liabilities 22,718,555 24,311,893
Air traffic liability 3,813,583 10,638,312
Deferred tax liability 1,298,400 485,400
Current maturities of long-term debt 33,246,302 9,039,986
Debt on assets held for sale 18,188,222 0
------------ ------------
Total current liabilities 82,486,604 47,781,530
Long-term debt less current maturities 193,271,800 226,620,758
Deferred income taxes payable 18,028,835 6,721,835
Stockholders' equity:
Common stock, $.001 par value: 54,876 54,964
1,000,000,000 shares authorized: issued
and outstanding - 54,875,610 at December 31,
1996 and 54,963,330 at June 30, 1997
Additional paid-in capital 77,236,447 77,453,497
Retained earnings 46,108,314 18,375,635
------------ ------------
Total stockholders' equity 123,399,637 95,884,096
------------ ------------
Total liabilities and stockholders' equity $417,186,876 $377,008,219
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. See condensed notes to
financial statements.
4
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
June 30, June 30,
1996 1997
------------- -------------
<S> <C> <C>
Operating revenues:
Passenger $ 77,961,574 $ 45,192,019
Cargo 1,261,818 677,831
Other 1,993,898 1,889,317
------------ ------------
Total operating revenues 81,217,290 47,759,167
Operating expenses and other, net:
Flight operations 5,414,622 4,801,014
Aircraft fuel 17,061,473 10,716,157
Maintenance 15,807,217 10,534,328
Station operations 14,748,674 12,132,375
Passenger services 3,631,749 2,122,077
Marketing and advertising 2,223,363 2,875,368
Sales and reservations 6,547,058 3,723,027
General and administrative 4,271,741 3,346,538
Employee bonus (550,000) 0
Depreciation 6,694,708 7,362,025
Arrangement fee for aircraft transfers (11,861,294) 0
Gain from insurance recovery (2,814,785) 0
Shutdown and other nonrecurring expenses 31,623,410 0
------------ ------------
Total operating expenses and other, net 92,797,936 57,612,909
------------ ------------
Operating loss (11,580,646) (9,853,742)
Interest expense (income):
Interest expense 6,221,023 6,513,064
Interest income (2,677,785) (1,702,111)
------------ ------------
Total interest expense, net 3,543,238 4,810,953
------------ ------------
Loss before income taxes (15,123,884) (14,664,695)
Provision for income taxes (5,550,000) (5,439,000)
------------ ------------
Net loss ($9,573,884) ($9,225,695)
============ ============
Net loss per share ($0.18) ($0.17)
============ ============
Weighted average shares outstanding 54,663,481 54,906,000
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------
June 30, June 30,
1996 1997
------------- -------------
<S> <C> <C>
Operating revenues:
Passenger $183,530,818 $ 80,307,366
Cargo 2,707,764 1,127,081
Other 4,973,715 3,252,931
------------ -------------
Total operating revenues 191,212,297 84,687,378
Operating expenses:
Flight operations 12,932,717 8,904,203
Aircraft fuel 39,137,578 19,851,908
Maintenance 31,418,618 24,639,815
Station operations 32,641,303 22,485,239
Passenger services 7,623,789 3,817,164
Marketing and advertising 6,506,737 5,227,059
Sales and reservations 15,442,045 6,800,726
General and administrative 8,161,420 6,142,929
Employee bonus 1,245,000 0
Depreciation 13,211,088 12,247,322
Arrangement fee for aircraft transfers (11,861,294) 0
Gain from insurance recovery (2,814,785) 0
Gain on sale of assets 0 (49,600)
Shutdown and other nonrecurring expenses 31,623,410 9,338,000
------------ -------------
Total operating expenses 185,267,626 119,404,765
------------ -------------
Operating income (loss) 5,944,671 (34,717,387)
Interest expense (income):
Interest expense 8,624,015 12,722,772
Interest income (4,524,234) (3,268,480)
------------ -------------
Total interest expense, net 4,099,781 9,454,292
------------ -------------
Income (loss) before income taxes 1,844,890 (44,171,679)
Provision for income taxes 752,000 (16,439,000)
------------ -------------
Net income (loss) $ 1,092,890 ($27,732,679)
============ =============
Net income (loss) per share $0.02 ($0.51)
============ =============
Weighted average shares outstanding 59,587,450 54,892,000
============ =============
</TABLE>
See accompanying notes.
6
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
June 30, June 30,
1996 1997
-------------- --------------
<S> <C> <C>
Operating revenues:
Net income (loss) $ 1,092,890 ($27,732,679)
Adjustments to reconcile net income
to cash provided by (used in) operating activities:
Depreciation 14,690,386 14,634,446
Provision for uncollectible accounts 2,420,482 749,515
Gain from disposal of assets (2,814,785) (49,600)
Deferred income taxes 0 (11,307,000)
Changes in operating assets and liabilities:
Accounts receivable 7,910,190 (318,598)
Other current assets (256,477) 5,754,265
Accounts payable and accrued liabilities (13,803,802) 3,467,059
Air traffic liability (18,393,981) 6,824,729
Income taxes payable 309,945 21,431,109
------------- -------------
Net cash provided by (used in) operating activities (8,845,152) 13,453,246
Investing activities:
Proceeds from disposal of equipment 4,000,000 949,974
Purchases of property and equipment (116,706,995) (5,862,705)
------------- -------------
Net cash used in investing activities (112,706,995) (4,912,731)
Financing activities:
Issuance of long-term debt 216,529,498 0
Proceeds from sale of common stock 2,244,351 217,138
Payment of long-term debt (17,191,703) (9,045,580)
------------- -------------
Net cash provided by (used in) financing activities 201,582,146 (8,828,442)
------------- -------------
Net increase (decrease) in cash and cash equivalents 80,029,999 (287,927)
Cash and cash equivalents at beginning of period 127,947,096 150,012,695
------------- -------------
Cash and cash equivalents at end of period $ 207,977,095 $ 149,724,768
============= =============
</TABLE>
See accompanying notes.
7
<PAGE>
VALUJET, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
----------------------------------------------------------------------
A. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated interim
financial statements contain all adjustments necessary to present fairly the
Company's financial position as of June 30, 1997 and December 31, 1996, the
results of operations for the three and six month periods ended June 30, 1997
and June 30, 1996, and cash flows for the six month periods ended June 30, 1997
and June 30, 1996. The adjustments made are of a normal recurring nature.
Certain information and footnote disclosures normally included in the annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission for Form 10-Q. It is suggested that
these unaudited interim financial statements be read in conjunction with the
audited financial statements and the notes thereto included in the Annual Report
on Form 10-K filed by the Company with the Securities and Exchange Commission on
March 31, 1997, and amendments thereto.
The results of operations for the three and six month periods ended June 30,
1997 and 1996 are not necessarily indicative of the results to be expected for
the full fiscal year.
B. NET INCOME PER COMMON SHARE
Net income per share is based on the weighted average number of common shares
outstanding and common stock equivalents during the periods. Common stock
equivalents include shares issuable upon the assumed exercise of stock options
using the treasury stock method when dilutive. See Note G.
<TABLE>
<CAPTION>
C. LONG-TERM DEBT
December 31, June 30,
1996 1997
-------------- ------------
(Unaudited)
<S> <C> <C>
Senior notes due 2001................... $150,000,000 $150,000,000
Promissory notes due 1998 through 2006.. 94,706,324 85,660,744
Less current maturities................. 33,246,302 9,039,986
Less debt on assets held for sale....... 18,188,222 0
------------ ------------
$193,271,800 $226,620,758
============ ============
</TABLE>
Interest on the Company's $150 million senior notes is payable semi-annually
on April 15 and October 15 at 10 1/4% per annum. Certain debt bears interest at
fixed rates ranging from 8.0% to 9.78% per annum and is repayable in consecutive
monthly or quarterly installments over a two- to four-year period. Certain
other notes have a variable rate of interest based on the London interbank
offered rate (LIBOR) plus 2.26% to 2.75%.
A substantial portion of the secured notes require prepayment if specific
financial ratios (concerning debt to equity, net worth, fixed charge coverage
and current ratio) are not maintained. Although the Company was in violation of
the fixed charge coverage ratio as of December 31, 1996, the Company
subsequently entered into agreements with six of the seven affected lenders for
a waiver or reset of this financial test for each quarter in 1997. In August,
1997, the Company completed the private placement of $80 million of 10 1/2%
senior secured notes due April 15, 2001. All of the secured debt with financial
maintenance covenants was repaid with a portion of the proceeds of this
offering. As a result, such debt has been classified as long-term debt in the
accompanying balance sheet. Certain aircraft, together with the installed
engines related thereto, three spare engines and four hush kits after their
purchase by ValuJet Airlines serve as collateral for the senior secured notes.
D. COMMITMENTS AND CONTINGENCIES
On May 11, 1996, the Company suffered a tragic loss involving Flight 592. The
accident resulted in extensive media coverage calling into question the safety
of low-fare airlines in general and the Company in particular, despite the fact
that the cause of the accident is still under investigation by the National
Transportation Safety Board. In response to the accident, the Federal Aviation
Administration (FAA) conducted an extraordinary review of the Company's
8
<PAGE>
operations. As a result, on June 17, 1996 the Company entered into a consent
order with the FAA under which the Company agreed to several matters including
the suspension of operations until such time as the Company was able to satisfy
the FAA as to various regulatory compliance concerns and the payment of
$2,000,000 to the FAA to compensate it for the cost of the special inspections.
The Company satisfied the FAA's requirements and received FAA clearance during
August 1996. The Company received its determination of fitness from the
Department of Transportation on September 25, 1996 and restarted operations on
September 30, 1996. See Note H regarding charges associated with the accident
and related shutdown of operations.
As a result of the above mentioned events, several class action suits have
been filed by shareholders against the Company and various officers alleging,
among other things, misrepresentations regarding the Company's safety. The
plaintiffs seek unspecified damages based upon the decrease in market value of
shares of the Company's stock. Management intends to defend these actions
vigorously and believes that the suits are without merit. While any litigation
contains elements of uncertainty, management presently believes, based on the
information available to it and discussions with outside counsel, that the
outcome of each such proceeding or claim which is pending or known to be
threatened, or all of them combined, will not have a material adverse effect on
the results of operations or the financial position of the Company.
Numerous lawsuits have also been filed against the Company seeking damages
attributable to the deaths of those on Flight 592, and additional lawsuits are
expected. The Company's insurance carrier has assumed defense of these lawsuits
under a reservation of rights and is providing the defense of such claims. As
all claims are handled independently by the Company's insurance carrier, the
Company cannot reasonably estimate the amount of liability which might finally
exist. As a result, no accruals for losses and the related claim for recovery
from the Company's insurance carrier have been reflected in the Company's
financial statements. The Company maintains $750 million of liability
insurance, per occurrence, with a major group of independent insurers that
provide facilities for all forms of aviation insurance for many major airlines.
Although the Company believes, based on the information currently available to
it, that such coverage is sufficient to cover claims arising out of the loss of
Flight 592 and that the insurers have sufficient financial strength to pay
claims, there can be no assurance that the total amount of judgments and
settlements will not exceed the amount of insurance available therefor or that
all damages awarded will be covered by insurance.
On August 30, 1996, Metropolitan Nashville Airport Authority filed suit
against the Company in State Court in Tennessee for breach of contract and a
declaratory judgment for an anticipatory breach. The Nashville Airport
Authority seeks damages of approximately $2.6 million. The dispute involves
whether the Company was entitled to exercise a termination right contained in
its lease agreement. Management believes the ultimate resolution will not have
a materially adverse effect on the Company's financial position or results of
operations.
From time to time, the Company is engaged in litigation arising in the
ordinary course of business. The Company does not believe that any such pending
litigation will have a material adverse effect on its results of operations or
financial condition.
E. PROPOSED MERGER
On July 10, 1997, the Company entered into a merger agreement with Airways
Corporation ("Airways"). Under the merger agreement (which remains subject to,
among other things, shareholder approval by both companies), the Company will
acquire Airways through a merger of Airways with and into the Company (the
"Merger"). The purchase price to be paid by the Company in the Merger will
consist of approximately 9.1 million shares of Common Stock of the Company.
Upon completion of the Merger, the Company intends to change its name to AirTran
Holdings, Inc., and to change the name of ValuJet Airlines to AirTran Airlines,
while Airways' operating subsidiary, AirTran Airways, Inc. ("AirTran") will
continue to operate under its current name.
F. ASSETS HELD FOR DISPOSITION
During 1996, as a result of the loss of Flight 592 and the consent order with
the FAA which required the Company to reestablish operations with up to 15
aircraft and subjected further expansion of the Company's operations to FAA and
DOT approval, the Company's management decided to sell or lease certain of its
aircraft. Those aircraft which the Company decided to sell were removed from
operations and were classified in the balance sheet as assets held for
disposition and were stated at the lower of carrying amount or fair value less
cost to sell. Such aircraft were
9
<PAGE>
available for sale and an active sales program was initiated. The fair value,
as estimated by the current market value of these aircraft, less cost to sell
exceeded the carrying amount of such aircraft.
At June 30, 1997, as a result of the pending merger with Airways and the
resulting opportunities for the Company to expand its services, the Company's
management has decided to make the remaining aircraft classified as assets held
for disposition available for a return to its operating specifications. Each of
ValuJet Airlines and AirTran has the necessary authority to conduct flight
operations, including a Certificate of Public Convenience and Necessity from the
DOT and an operating certificate from the FAA. All remaining aircraft classified
as assets held for disposition were reclassified to flight equipment at their
carrying amount at June 30, 1997 and will continue to be depreciated over their
remaining depreciable lives.
G. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997 the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, "Earnings per Share", which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
and year ending December 31, 1997, and, upon adoption, all prior-period earnings
per share data presented shall be restated to conform with the provisions of the
new pronouncement. Application earlier than the Company's quarter ending
December 31, 1997 is not permitted.
Pro forma basic and diluted earnings per share for the three months and six
months ended June 30, 1996 and 1997 calculated under the provisions of SFAS No.
128 are as follows:
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
1996 1997 1996 1997
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Basic earnings per share $(0.18) $(0.17) $0.02 $(0.51)
Diluted earnings per share (0.18) (0.17) $0.02 (0.51)
</TABLE>
H. SHUTDOWN AND OTHER NONRECURRING EXPENSES
Costs associated with the loss of Flight 592 and excess operating costs
related to the reduced schedule and grounded aircraft for the six months ended
June 30, 1997 are shown in the statement of operations as shutdown and other
nonrecurring expenses. Such costs consist of expenses directly related to the
accident and the ensuing extensive FAA review of the Company's operations
including legal fees, payments to the FAA, inspection related costs and unusual
maintenance costs in excess of normal recurring maintenance. In addition,
depreciation on grounded aircraft, rental of abandoned or idled facilities and
costs of personnel idled as a result of the reduced and suspended operations
during May and June of 1996 are included in shutdown and other nonrecurring
expenses. No such costs were incurred in the three months ended June 30, 1997.
A summary of such costs is as follows:
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
1996 1997 1996 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Maintenance $7,855,000 $ 0 $ 7,855,000 $7,300,000
Depreciation 1,480,000 0 1,480,000 2,038,000
Legal/consulting 6,317,000 0 6,317,000 0
Facilities rental 4,109,000 0 4,109,000 0
Wages/Salaries 3,916,000 0 3,916,000 0
FAA payment 2,000,000 0 2,000,000 0
Other 5,946,000 0 5,946,000 0
----------- ----------- ----------- ----------
$31,623,000 0 $31,623,000 $9,338,000
=========== ========== =========== ==========
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
The following chart indicates the service offered by the Company as of various
dates between January 1, 1996 and June 30, 1997:
<TABLE>
<CAPTION>
Number
Total Number Number of Peak of Cities
As of of Aircraft Day Flights Served
---------- ----------- --------------- --------------------------------------
<S> <C> <C> <C>
January 1, 1996 42 268 26
March 31, 1996 47 286 28
June 30, 1996 51 0 Service suspended to all markets as of
June 17, 1996
September 30, 1996 46* 16 Service resumed on September 30, 1996 to
Atlanta, Fort Lauderdale, Orlando, Tampa,
Washington, D.C.
December 31, 1996 43** 124 18
March 31, 1997 42*** 148 21
June 30, 1997 42**** 184 24
</TABLE>
* Of which 4 had been approved for service by the FAA
** Of which 15 had been approved for service by the FAA
*** Of which 24 had been approved for service by the FAA
**** Of which 30 had been approved for service by the FAA
On May 11, 1996, ValuJet tragically lost its Flight 592 en route from
Miami to Atlanta. There were no survivors. The accident resulted in extensive
media coverage calling into question the safety of low-fare airlines in general
and the Company in particular. In response to the accident, the FAA conducted
an extraordinary review of the Company's operations. On June 17, 1996, the
Company entered into a consent order with the FAA under which the Company agreed
to suspend operations until such time as the Company was able to satisfy the FAA
as to various regulatory compliance concerns identified by the FAA as a result
of its intensive inspections of the Company's operations. On August 29, 1996,
the FAA returned the Company's operating certificate and the Department of
Transportation ("DOT") issued a "show cause" order regarding the Company's
fitness as an air carrier. The DOT gave its final approval on September 26,
1996, and the Company resumed operations with service between Atlanta and four
other cities on September 30, 1996.
As a result of the accident, the ensuing extraordinary review of the Company's
operations by the FAA, the suspension of operations in June 1996 and the current
and prospective FAA imposed limitation on the number of aircraft that may be
operated by the Company, the Company's results for periods prior to May 11, 1996
are not necessarily indicative of the results to be expected in future periods.
The Company's operations for the first and second quarters 1997 may not be
indicative of future operations as a result of the reduced level of service, the
Company's ownership of more aircraft than may be used and additional
infrastructure to support larger operations during the first and second quarters
of 1997. The following is a description of the costs incurred by category for
the three months ended June 30, 1997 compared to the three months ended June 30,
1996 and the six months ended June 30, 1997 compared to the six months ended
June 30, 1996.
11
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------
June 30, 1996 June 30, 1997
-------------------------------- ------------------------
Percent of Per Percent of Per
Amount Revenues ASM Amount Revenues ASM
--------- ----------- ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
(000) (000)
Total operating revenues $ 81,217 100.0% 8.28c $47,759 100.0% 6.82c
======== ===== ===== ======= ===== ====
Expense Category:
- -----------------
Flight operations $ 5,415 6.7% 0.55c 4,801 10.1% 0.69c
Aircraft fuel 17,061 21.0 1.74 10,716 22.4 1.53
Maintenance 15,807 19.4 1.61 10,534 22.1 1.50
Station operations 14,749 18.2 1.51 12,132 25.4 1.73
Passenger services 3,632 4.5 0.37 2,122 4.4 0.30
Marketing and advertising 2,223 2.7 0.23 2,875 6.0 0.41
Sales and reservations 6,547 8.1 0.67 3,723 7.8 0.53
General and administrative 4,272 5.3 0.44 3,347 7.0 0.48
Employee bonuses (550) (0.7) (0.06) 0 0.0 0.00
Depreciation 6,695 8.2 0.68 7,362 15.4 1.05
Nonrecurring expenses 31,623 38.9 3.23 0 0.0 0.00
Other expenses, net (11,133) (13.7) (1.14) 4,811 10.1 0.69
-------- ----- ----- ------- ----- -----
Total expenses $ 96,341 118.6% 9.83c $62,423 130.7% 8.91c
======== ===== ===== ======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------------------------------
June 30, 1996 June 30, 1997
-------------------------------- ------------------------
Percent of Per Percent of Per
Amount Revenues ASM Amount Revenues ASM
--------- ----------- ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
(000) (000)
Total operating revenues $191,212 100.0% 8.25c $ 84,687 100.0% 6.98c
======== ===== ===== ======== ===== =====
Expense Category:
- -----------------
Flight operations $ 12,933 6.8% 0.56c 8,904 10.5% 0.73c
Aircraft fuel 39,137 20.4 1.69 19,852 23.4 1.64
Maintenance 31,419 16.4 1.35 24,640 29.1 2.03
Station operations 32,641 17.1 1.41 22,485 26.6 1.85
Passenger services 7,624 4.0 0.33 3,817 4.5 0.31
Marketing and advertising 6,507 3.4 0.28 5,227 6.2 0.43
Sales and reservations 15,442 8.1 0.67 6,801 8.0 0.56
General and administrative 8,161 4.3 0.35 6,143 7.2 0.51
Employee bonuses 1,245 .7 0.05 0 0.0 0.00
Depreciation 13,211 6.9 0.57 12,247 14.5 1.01
Nonrecurring expenses 31,623 16.5 1.36 9,338 11.0 0.77
Other expenses, net (10,576) (5.5) (0.46) 9,405 11.2 0.78
-------- ----- ----- -------- ----- -----
Total expenses $189,367 99.1% 8.16c $128,859 152.2% 10.62c
======== ===== ===== ======== ===== =====
</TABLE>
12
<PAGE>
Quarter over quarter comparison
- -------------------------------
OPERATING REVENUES
- ------------------
Total operating revenues for the quarter ended June 30, 1997 were
approximately $47.8 million as compared to $81.2 million for the quarter ended
June 30, 1996. The decrease from 1996 to 1997 is a result of the Company's
reduced service level during the second quarter of 1997. The Company flew 701
million ASMs during the second quarter of 1997 as compared to 980 million ASMs
during the second quarter of 1996. The Company's load factors for the three
month periods ending June 30, 1997 and 1996 were 54.9% and 55.7%, respectively.
The Company believes that the lower load factor in 1997 is due in part to
publicity related to the accident and increased competition. The Company's
average fare was $58.92 for the three months ending June 30, 1997 and $73.79 for
the three months ending June 30, 1996 due to the Company offering numerous sales
during 1997.
EXPENSES
- --------
Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft fuel, maintenance expenses and
passenger services expenses. Expenses for hull insurance and compensation of
pilots are included in flight operations. Flight operations expenses were
higher, on a per ASM basis, for the quarter ended June 30, 1997 than the quarter
ended June 30, 1996 due to the higher cost of hull insurance since October 1,
1996.
Aircraft fuel expenses include both the direct cost of the fuel as well as the
costs of delivering fuel into the aircraft. Fuel expense, on a per ASM basis,
was lower for the second quarter 1997 than the second quarter 1996 due to a
decrease in the average price of fuel. The average price of fuel decreased from
$0.72 per gallon for the second quarter 1996 to $0.67 per gallon for the second
quarter 1997. This approximate 7% decrease in the price per gallon of fuel as
well as a decrease in fuel burn per block hour from 858 gallons to 837 gallons
over the same period accounts for the 12% decrease in fuel cost per ASM.
Maintenance expenses include all administrative costs of the maintenance
department as well as normal recurring maintenance performed during the year.
Expenses for engine overhaul and certain scheduled heavy maintenance procedures
are included in this cost. Most non-routine maintenance costs performed on
idled aircraft are included in the nonrecurring expense line item. Maintenance
expenses for the quarter ended June 30, 1997 were lower, on a per ASM basis,
than the quarter ended June 30, 1996 due to the reduced level of service during
the second quarter 1997 and the timing of certain heavy maintenance procedures.
The Company also incurred substantial expenses during the second quarter 1996
related to the FAA increased inspections.
Station operations expense includes all expenses incurred at the airports, as
well as station operations administration and liability insurance. Station
operations expenses were higher, on a per ASM basis, for the second quarter 1997
than the second quarter 1996 due largely to the inefficiencies generated from
restarting operations on a limited basis. Many of the station facilities were
not fully utilized during the second quarter 1997 due to the limited operation.
Another factor which contributed to a higher 1997 station operations expense was
an increase in insurance costs as of October 1, 1996.
Passenger services expenses include flight attendant wages and benefits and
catering expenses. Also included are the costs for flight attendant training
and flight attendant overnight expenses. Passenger services expenses remained
flat as a percentage of revenue from second quarter 1996 to second quarter 1997
and decreased on a per ASM basis over the same period as a result of the timing
and amount of purchase of catering supplies.
Marketing and advertising expenses include all advertising expenses and wages
and benefits for the marketing department. Marketing and advertising expenses
for the second quarter 1997, as a percentage of revenue, were higher than the
second quarter 1996 due to the additional advertising costs incurred at the
resumption of operations into various markets being spread over a reduced
revenue base caused by lower service levels and load factors.
Sales and reservations expenses include all of the costs related to recording
a sale or reservation. These expenses include wages and benefits for
reservationists, rent, telecommunication charges, credit card fees and travel
agency commissions. Sales and reservations expenses for the quarter ended June
30, 1997 were 7.8% of revenue as compared to 8.1 % for the quarter ended June
30, 1996.
13
<PAGE>
General and administrative expenses include the wages and benefits for the
Company's executive officers and various other administrative personnel. Also
included are costs for office supplies, legal expenses, bad debts, accounting
and other miscellaneous expenses. General and administrative costs for the
second quarter 1997 were higher, on a per ASM basis, than the second quarter
1996 due to the shift in compensation structure to one based to a larger extent
on base salaries and also due to increased legal fees and the reduced level of
ASMs over which to spread these costs.
There was no expense recorded in the second quarter 1997 related to bonuses as
the Company did not have income. The actual amount to be paid and the form of
such payout are at the sole discretion of the Company's Board of Directors.
Depreciation expense includes depreciation on aircraft and ground equipment,
but does not include any amortization of start-up and route development costs as
all of these costs are expensed as incurred. Depreciation expense for the
quarter ended June 30, 1997 was higher than the quarter ended June 30, 1996 due
to the return of aircraft to operating specifications and to depreciation on
non-performing assets being recorded in the shutdown and other nonrecurring
expenses line item for the second quarter 1996.
During the quarter ended June 30, 1997, interest expense exceeded interest
income by approximately $4,811,000 due to increasing debt levels attributable to
the completion in April 1996 of the issuance of $150 million 10 1/4 % senior
notes due 2001.
Year-to-date over year-to-date comparison
- -----------------------------------------
OPERATING REVENUES
- ------------------
Total operating revenues decreased approximately 56% ($106,525,000) from the
six months ended June 30, 1996 to the six months ended June 30, 1997. This
decrease was due to several factors. The average number of flights decreased
from 222 flights per day to 127 flights per day during the same period due to
reduced service levels attributable to the suspension of operations and FAA
approval process for aircraft and markets. Total available seat miles (ASMs)
decreased 48% from the six months ending June 30, 1996 to the six months ending
June 30, 1997 and revenue passenger miles (RPMs) decreased 50% during the same
period. The decreases in ASMs and RPMs were attributable to reduced service
levels subsequent to the accident.
EXPENSES
- --------
Expenses for flight operations per ASM increased from approximately .56c per
ASM for the six months ended June 30, 1996 to .73c per ASM for the six months
ended June 30, 1997 due to the Company's higher training costs during the first
quarter of 1997 and the Company's increased cost for hull insurance during the
six month period ending June 30, 1997.
Aircraft fuel cost decreased approximately 3% an a per ASM basis from the
first six months of 1996 to the first six months of 1997 primarily due to a
decrease in the fuel burn per block hour. The Company's average fuel cost
increased from approximately $.70 per gallon for the six months ended June 30,
1996 to approximately $.71 per gallon for the six months ended June 30, 1997
while fuel burn per block hour decreased from 846 gallons to 837 gallons over
the same period. Fuel expenses were also impacted by additional ferrying and
positioning flights made necessary as a result of the FAA intensive
investigations during the second quarter of 1996.
Maintenance expenses were higher on a per ASM basis from the first six months
of 1996 to the first six months of 1997. Maintenance expenses in prior periods
were lower as a result of aircraft recently acquired by the Company entering
service immediately following a scheduled maintenance check, therefore, no
scheduled maintenance was required during the first several months of each
aircraft's operations. Due to the Company's use of a continuous overhaul
program, the Company's aircraft are generally scheduled for some level of
overhaul procedures within twelve months of the purchase date. The Company's
maintenance expenses were also negatively impacted by the number of aircraft
which were put into heavy maintenance during the first quarter of 1997 in
anticipation of their return to service.
Station operations expenses increased on a per ASM basis from the six months
ended June 30, 1996 to the six months ended June 30, 1997, primarily due to
inefficiencies in the use of the Company's station assets, primarily related to
airport gate usage. The second quarter 1997 costs were also higher, on a per
ASM basis, due to a substantial increase in liability insurance costs as of
October 1, 1996.
14
<PAGE>
Passenger services expenses decreased from .33 cents per ASM to .31 cents per
ASM from the first six months of 1996 to the first six months of 1997.
Marketing and advertising expenses, as a percentage of revenues, increased
from 3.4% in the first six months of 1996 to 6.2% in the first six months of
1997 due to the Company halting all advertising as of May 11, 1996 and a lower
revenue base during the first six months of 1997 over which to spread these
costs.
Sales and reservations expenses remained flat from the six month period ending
June 30, 1996 to the six month period ending June 30, 1997, decreasing from 8.1%
of revenue to 8.0% of revenue.
General and administrative costs for the six months ending June 30, 1997 were
higher, on a per ASM basis, than the six months ending June 30, 1996 due to the
shift in compensation structure to one based to a larger extent on base salaries
and also due to increased legal fees and the reduced level of ASMs over which to
spread these costs.
Depreciation expense for the six months ended June 30, 1997 was higher than
the six months ended June 30, 1996 due to the return of aircraft to operating
specifications and to depreciation on non-performing assets being recorded in
the shutdown and other nonrecurring expenses line item for the second quarter
1996.
During the six months ended June 30, 1997 interest expense exceeded interest
income by approximately $9,500,000 due to increasing debt levels attributable to
the issuance during April 1996 of $150 million of 10 1/4% Senior Notes due 2001.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of June 30, 1997, the Company had cash and cash equivalents of
approximately $149.7 million and working capital of approximately $132.0
million.
The Company has contracted with McDonnell Douglas for the purchase of 50 MD-95
aircraft, at a cost of approximately $1.0 billion (subject to adjustments for
inflation), for delivery in 1999 to 2002. Approximately $7.6 million and $31.7
million of cash and notes payable will be paid in progress payments during 1997
and 1998, respectively. The balance of the purchase price after all progress
payments is required to be paid or financed upon delivery of each aircraft. If
the Company exercises its option to acquire up to an additional 50 MD-95
aircraft, additional payments will be required. The Company may finance up to
90% of the cost or appraised value of each of these aircraft. Although
McDonnell Douglas has agreed to provide assistance with respect to the financing
of aircraft to be acquired, the Company will be required to obtain the financing
from other sources. The Company believes that with the assistance to be
provided by McDonnell Douglas, aircraft related debt financing should be
available when needed. However, there is no assurance that the Company will be
able to obtain sufficient financing on attractive terms. If it is unable to do
so, the Company could be required to modify its aircraft acquisition plans or to
incur higher than anticipated financing costs, which could have a material
adverse effect on the Company's results of operations and cash flows.
The Company's compliance with Stage 3 noise requirements will require
substantial additional capital expenditures over the next several years. By
December 31, 1999, all of the Company's aircraft must be brought into compliance
with Stage 3 requirements. The Company intends to meet its Stage 3 noise
requirement obligations by installing hush kits on Stage 2 aircraft and
acquiring Stage 3 aircraft. The Company expects that FAA certified hush kits
will cost approximately $2.3 million per aircraft or approximately $55.0 million
for a fleet of 24 non-hushed DC-9-30 aircraft as of June 30, 1997. Any
disposition of Stage 2 aircraft would reduce this obligation. Approximately $7.3
million of the proceeds from the Company's sale of 10 1/2% senior secured notes
("10 1/2% Secured Notes") will be used to finance 80% of the cost of four hush
kits. The Company may be able to finance a portion of the cost of the remaining
hush kits to be acquired and plans to make the balance of payments on these hush
kits out of its working capital. The Company expects to pay the debt service on
such loans out of cash flow generated from operations during the term of the
financing. The phase-in period for full compliance with Stage 3 (through
December 31, 1999) and the expected terms of financing, if available, should
allow the Company to spread the payments for Stage 3 compliance over a number of
years.
Prior to the filing date of this report, the Company completed the issuance of
$80 million of its 10 1/2% Secured Notes due April 15, 2001. Approximately $68.5
million of the proceeds of this new debt issuance was used to prepay and replace
secured debt, including debt to seven bank lenders whose secured aircraft loans
contained
15
<PAGE>
various financial maintenance covenants. As a result of this new financing, the
Company no longer has any debt outstanding with financial maintenance covenants.
As of June 30, 1997, the Company's debt related to asset financing totaled
approximately $85.7 million with respect to which the Company's aircraft and
certain other equipment are pledged as security. The Company has purchased all
of its aircraft and, consequently, has no lease commitments relating to its
aircraft fleet. In addition, the Company has $150 million of 10 1/4 % senior
unsecured notes ("10 1/4% Senior Notes") outstanding. The principal balance of
the 10 1/4% Senior Notes is due in 2001 and interest is payable semi-annually.
The Company's debt (other than the 10 1/4% Senior Notes and debt refinanced with
the proceeds of the 10 1/2% Secured Notes due 2001) has final maturities ranging
from 1998 to 2001, with scheduled debt amortization (calculated without giving
effect to any prepayment that may be required as a result of asset sales) as
follows: remainder of 1997--$4.7 million, 1998--$6.6 million, 1999--$3.0
million, 2000--$1.4 million, 2001--$400,000.
Certain of the Company's secured debt, excluding the 10 1/2% Secured Notes,
bears interest at fixed rates ranging from 8.0% to 9.78% per annum and is
repayable in consecutive monthly or quarterly installments over a two- to four-
year period. Certain other notes have a variable rate of interest based on the
London interbank offered rate (LIBOR) plus 2.26% to 2.75%.
Although the Company has sufficient cash assets to pay its recurring
obligations and debt service for an extended period of time, the Company's
failure to resume profitable operations may result in defaults under the
Company's secured debt and the acceleration of the Company's debt. In such
event, there can be no assurance that the Company would be able to satisfy all
of its obligations on a timely basis.
As a result of the accident and suspension of operations, several class action
suits have been filed by stockholders against the Company and various officers
and directors alleging, among other things, misrepresentations under applicable
securities laws. The plaintiffs seek unspecified damages based upon the
decrease in market value of shares of the Company's stock. Although management
of the Company intends to defend these actions vigorously and believes that the
suits are without merit, any litigation contains elements of uncertainty and
there can be no assurance that the Company will not sustain material liability
under such or related lawsuits.
Numerous lawsuits have also been filed against the Company seeking damages
attributable to the deaths of those on Flight 592, and additional lawsuits are
expected. The Company's insurance carrier has assumed defense of these lawsuits
under a reservation of rights. As all claims are handled independently by the
Company's insurance carrier, the Company cannot reasonably estimate the amount
of liability which might finally exist. As a result, no accruals for losses and
the related claim for recovery from the Company's insurance carrier have been
reflected in the Company's financial statements. The Company maintains $750
million of liability insurance per occurrence with a major group of independent
insurers that provides facilities for all forms of aviation insurance for many
major airlines. Although the Company believes, based on the information
currently available to it, that such coverage is sufficient to cover claims
associated with this accident and that the insurers have sufficient financial
strength to pay claims, there can be no assurance that the total amount of
judgments and settlements will not exceed the amount of insurance available
therefor or that all damages awarded will be covered by insurance.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
Several stockholder class action suits have been filed against ValuJet and
certain of its executive officers ("Defendants"). The consolidated lawsuits
discussed below seek class certification for all purchasers of stock in ValuJet
during periods beginning on or after June 1995 and ending on or before June 18,
1996, and are based on allegedly misleading public statements made by ValuJet or
omission to disclose material facts in violation of federal securities laws. A
total of 14 stockholder lawsuits have been filed against and served upon ValuJet
between May 30, 1996 and July 26, 1996. Of these suits, 11 have been filed in
the United States District Court for the Northern District of Georgia and these
suits have been consolidated into a single action (In re ValuJet, Inc.).
-------------------
Another lawsuit filed in the United States District Court for the Middle
District of Florida has been transferred to the Northern District of Georgia and
has been consolidated into In re ValuJet, Inc. One additional class action
-------------------
stockholder lawsuit (Davis v. ValuJet Airlines, Inc., et al.) has been filed and
---------------------------------------
served upon the Defendants. Regarding Davis, the Defendants filed a "Notice of
-----
Newly-Filed Case Opposition to Joiner of Michael Acks and Alternative Motion to
Dismiss" on the same grounds that Defendants have moved to dismiss Plaintiffs'
existing Complaint. All of the Defendants filed a joint Motion to Dismiss the
Consolidated Amended Complaint on December 23, 1996, to which the Plaintiffs
have responded. The Defendants have until July 14, 1997, to file their reply.
On November 25, 1996, Plaintiffs filed their Motion for Class Certification. On
January 14, 1997, Defendants filed a "Notice of Stay of Discovery and Other
Proceedings," in which Defendants state that the filing of their Motion to
Dismiss has stayed the issue of class certification pursuant to the Private
Securities Litigation Reform Act. By consent of the parties, Defendants are not
currently obligated to respond to Plaintiffs' Motion for Class Certification,
and if the Court decides that the issue of class certification is not stayed by
the Private Securities Litigation Reform Act, the Defendants have 30 days from
the date of such decision to respond to Plaintiffs' Motion for Class
Certification. Two suits (Cohen et al. v. ValuJet, Inc., et al. and Hepler et
------------------------------------- ---------
al. v. ValuJet, Inc. et al.) have been filed in the State Court of Fulton
- ---------------------------
County, Georgia. On December 23, 1996, all Defendants in both actions, other
than SabreTech, answered the Complaint and filed a Motion to Dismiss the
Complaint. Additionally, Defendant Timothy Flynn filed a Motion to Dismiss for
lack of personal jurisdiction. On May 8, 1997, Plaintiffs responded to this
motion. Defendants are currently working on a response with respect to which no
deadline has been established. On May 2, 1997, the Court ordered the
consolidation of these two state court actions and now refers to them as Cohen,
------
et al. v. ValuJet Airlines, Inc. Although ValuJet denies that it has violated
- --------------------------------
any of its obligations under the federal securities laws and believes that
meritorious defenses exist in the lawsuits, there can be no assurance that
ValuJet will not sustain material liability under such or related lawsuits.
Numerous lawsuits have been filed against ValuJet seeking damages attributable
to the deaths of those on Flight 592, and additional lawsuits are expected.
Thus far, approximately 52 such lawsuits have been filed against ValuJet
Airlines, Inc. prior to May 31, 1997. Most of the cases were initially removed
to the federal court. That court, however, remanded the majority of the actions
to the state courts from which they originated and retained jurisdiction over
only seven cases. As a consequence, most of the cases will proceed in state
courts in Florida and Georgia. In approximately 40 of these lawsuits,
SabreTech, has been named as a co-defendant as a result of the role that it
played in the accident. ValuJet's insurance carrier has assumed defense of all
of these suits under a reservation of rights against third parties and ValuJet
and has settled and paid approximately 30 claims as of May 31, 1997, and is
pursuing settlements in the balance of the claims. ValuJet maintains a $750
million policy of liability insurance per occurrence. ValuJet believes that the
coverage will be sufficient to cover all claims arising from the accident.
In one of the wrongful death suits pending in the State Court of Fulton
County, Georgia, ValuJet petitioned the Court in April 1997 to allow ValuJet to
file a third party complaint against SabreTech, seeking to hold SabreTech
responsible for the accident involving Flight 592. SabreTech is the maintenance
contractor who delivered oxygen generators without safety caps and in a
mislabeled box for shipment aboard Flight 592. The oxygen generators are
currently believed to have caused or contributed to the fire which resulted in
the accident. The third party complaint seeks indemnification against losses
attributable to the lawsuits referred to above and other damages that ValuJet
suffered as a result of the accident. In June 1997, the judge denied ValuJet's
motion to file the third party complaint. ValuJet has appealed this denial.
In May 1997, SabreTech filed a Complaint for declaratory judgment and other
relief against ValuJet. The action seeks a determination that SabreTech is not
liable to ValuJet for the accident involving Flight 592 as a result of language
contained in certain of the contracts between the parties and that ValuJet is
liable to SabreTech for damages that it has suffered. ValuJet intends to
vigorously defend this lawsuit and to assert all claims it has against
SabreTech.
On August 30, 1996, Metropolitan Nashville Airport Authority filed suit
against ValuJet in State Court in Tennessee for breach of contract and a
declaratory judgment for an anticipatory breach. The Nashville Airport
Authority seeks
17
<PAGE>
damages of approximately $2.6 million. The dispute involves whether ValuJet was
entitled to exercise a termination right contained in its lease agreement.
In May 1997, the State of Florida filed suit against ValuJet and its insurers
in the United States District Court for the Southern District of Florida seeking
recovery of costs incurred relating to the accident involving Flight 592.
ValuJet does not believe that it is obligated for such amounts and has filed a
motion to dismiss this lawsuit.
On October 21, 1995, the Association of Flight Attendants ("AFA") filed suit
in federal court alleging that ValuJet had violated the Railway Labor Act by
terminating between 20 and 40 flight attendants for engaging in protected union
activities associated with the AFA's organizing drive. ValuJet believes that it
has not wrongfully terminated any of these flight attendants. By order dated
January 30, 1996, the court struck AFA's demands for jury trial, punitive
damages and attorneys' fees. During the course of discovery, the number of
plaintiffs in the case has been reduced to the AFA and five individuals.
In November 1995, ValuJet filed suit against Delta and TWA in federal district
court alleging violations of the antitrust laws and, regarding TWA, breaches of
contract, arising from ValuJet's attempt to obtain slots to conduct flight
operations at New York's LaGuardia Airport. Preliminary injunctive relief was
denied, and the parties have since been involved in discovery. The court
granted TWA's motion for summary judgment on contract and conspiracy claims, but
has not entered such judgment, and TWA has remained a party. Trial is currently
set for fall 1997.
From time to time, ValuJet is engaged in litigation arising in the ordinary
course of its business. ValuJet does not believe that any such pending
litigation will have a material adverse effect on its results of operations or
financial condition.
Several governmental inquiries and investigations have been launched in
connection with the loss of Flight 592, including investigations by the DOT, the
NTSB, the U.S. Attorney's Office in Atlanta, Georgia and Miami, Florida and
certain state agencies in Florida. Although ValuJet does not believe, based on
information currently available to it, that such investigations and inquiries
will result in any finding of criminal wrongdoing on its part, the
investigations have not yet been concluded and the possibility of such a finding
cannot be ruled out. ValuJet may also be assessed civil penalties in connection
with the accident and/or the results of ensuing investigations. Any such
findings or penalties could be material. In addition, it is possible that
ValuJet could be indirectly affected by negative publicity related to charges of
wrongdoing, if any, against others acting on behalf of ValuJet at the time of
the accident.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) The following exhibits are filed as part of this report. The exhibit
numbers refer to Item 601 of Regulation S-K.
2.1 - Plan of Reorganization and Agreement of Merger dated as of July 10,
1997, between the Company and Airways Corporation.
2.2 - Plan of Merger dated as of July 10, 1997, between the Company and
Airways Corporation.
11 - Statement Re: Computation of Earnings Per Share
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended June 30, 1997. A Form 8-K dated as of July 10, 1997, was
filed with the Commission to report that the Company entered into a Merger
Agreement with Airways Corporation under which Airways Corporation will,
subject to the satisfaction or waiver of the conditions thereto, merge with
and into the Company.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALUJET, INC.
Date: August 14, 1997 /s/ ROBERT L. PRIDDY
------------------------------------------------
Robert L. Priddy
Chairman of the Board and Chief Executive Officer
Date: August 14, 1997 /s/ MICHAEL D. ACKS
------------------------------------------------
Michael D. Acks
Controller and Chief Accounting Officer
19
<PAGE>
EXHIBIT 2.1
PLAN OF REORGANIZATION
AND
AGREEMENT OF MERGER
BETWEEN
VALUJET, INC.
AND
AIRWAYS CORPORATION
THIS PLAN OF REORGANIZATION AND AGREEMENT OF MERGER (hereinafter called the
"Agreement") is dated as of the 10th day of July, 1997 by and between VALUJET,
INC. , a Nevada corporation ("VJET"), and AIRWAYS CORPORATION, a Delaware
corporation ("Airways").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of VJET and Airways, respectively, deem it
advisable and in the best interests of VJET and Airways and their respective
stockholders that Airways merge with and into VJET pursuant to this Agreement, a
Plan of Merger between Airways and VJET substantially in the form of Exhibit "A"
attached hereto (the "Plan of Merger"), and applicable provisions of the laws of
the States of Nevada and Delaware (such transaction being hereinafter called the
"Merger"); and
WHEREAS, the parties propose to enter into the Plan of Merger which
provides, among other things, for the conversion of each share of Airways common
stock, no par value ("Airways Common Stock"), issued and outstanding immediately
prior to the "Effective Date of the Merger" (as herein defined), into the
"Merger Price" as determined in accordance with Section 6.01 of this Agreement,
all as more fully described in the Plan of Merger; and
WHEREAS, the Boards of Directors of VJET and Airways, respectively, have
approved and adopted this Agreement and the Plan of Merger as a plan of merger
under the provisions of Section 78.451 of the Nevada Revised Statutes and
Section 252 of the Delaware General Corporation Law; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a tax free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto hereby
agree as follows:
<PAGE>
ARTICLE I
The Merger
----------
1.01 The Merger, Effective Time and Conversion Ratio. Subject to
-----------------------------------------------
Article V of this Agreement, the Plan of Merger shall be executed and
acknowledged by each of VJET and Airways and delivered to the Secretary of State
of the States of Nevada and Delaware for filing as provided in Section 78.458 of
the Nevada Revised Statutes and Section 252 of the Delaware General Corporation
Law as of the "Closing Date" (as herein defined). The effective date of the
Merger shall be the date the Articles of Merger or a Certificate of Merger shall
have been duly filed with the Secretary of State of the States of Nevada and
Delaware and the Merger shall have become effective under Nevada and Delaware
law (the "Effective Date of the Merger"). On the Effective Date of the Merger,
the separate existence of Airways shall cease and Airways shall be merged with
and into VJET. VJET agrees on the Effective Date of the Merger to pay the Merger
Price as determined in accordance with Section 6.01 of this Agreement and
pursuant to the terms of the Plan of Merger.
1.02 Closing. Subject to the terms and conditions hereof, Airways and
-------
VJET shall communicate and consult with each other with respect to the
fulfillment of the various conditions to their obligations under this Agreement.
The exchange of the certificates, opinions and other documents contemplated in
connection with the consummation of the Merger (the "Closing") shall take place
at the offices of Ellis, Funk, Goldberg, Labovitz & Dokson, P.C., 3490 Piedmont
Road, Suite 400, Atlanta, Georgia 30305, on the twenty-eighth (28th) day
following the effective date of the Registration Statement described in Section
4.07 of this Agreement or such earlier or later date as may be agreed upon by
Airways and VJET. Such date and time is herein sometime referred to as the
"Closing" or "Closing Date." In the event that at the Closing no party exercises
any right it may have to terminate this Agreement and no condition to the
obligations of the parties exists that has not been satisfied or waived, the
parties shall (i) deliver to each other the certificates, opinions and other
documents required to be delivered under this Agreement including, the Articles
of Merger and (ii) at the Closing or as soon thereafter as possible, consummate
the Merger by filing the Articles or Certificate of Merger with the Secretary of
State of the States of Delaware and Nevada.
ARTICLE II
Representations and Warranties of Airways
-----------------------------------------
Airways does hereby represent and warrant to VJET as follows:
2.01 Organization. Airways is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware. Each
Subsidiary of Airways has been duly organized and is validly existing and in
good standing under the laws of its state of its organization. Airways and each
of its Subsidiaries has the corporate power to own its property and to carry on
its business as now being conducted; Airways has the corporate power and
authority to execute and deliver this Agreement, subject to stockholder
approval, the Plan of Merger and to consummate the transactions contemplated
hereby.
-2-
<PAGE>
2.02 Authorization, Execution and Delivery of Agreement. The execution
--------------------------------------------------
and delivery and, subject to the stockholder approval of Airways, the
performance of this Agreement and the Plan of Merger by Airways have been duly
and validly authorized and approved by the Board of Directors of Airways, and
Airways has taken, or will use reasonable efforts to take prior to the Effective
Date of the Merger, all other action required by law on the part of Airways, its
Articles of Incorporation and bylaws or otherwise to effect the transactions
contemplated by this Agreement and the Plan of Merger.
2.03 Capital Stock of Airways; Subsidiaries.
--------------------------------------
(a) As of the date of this Agreement, the authorized capital
stock of Airways consists of 1,000,000 shares of Preferred Stock, $.01 par value
per share, none of which is outstanding and 19,000,000 shares of Common Stock,
$.01 par value per share, of which 9,067,937 shares were outstanding as of June
27, 1997. No additional shares of stock have been issued between June 27, 1997
and the date of this Agreement. As of the date of this Agreement, 1,150,000
shares of Airways Common Stock were reserved for issuance under Airways' 1995
Stock Option Plans and 150,000 shares of Airways Common Stock were reserved for
issuance under Airways' 1995 Directors Stock Option Plan (such plans being
hereinafter collectively referred to as the "Airways Plans"). Schedule 2.03(a)
----------------
to the Airways' Disclosure Statement delivered to VJET contemporaneously with
the execution and delivery of this Agreement ("Airways' Disclosure Statement")
is a complete list of all outstanding options and warrants granted by Airways,
including for each option and warrant, the optionee, exercise price and vesting
provisions. Other than the options and warrants described in this Section 2.03,
there are no outstanding options, warrants or rights to subscribe for or
purchase from Airways any capital stock of Airways or securities convertible
into or exchangeable for capital stock of Airways.
(b) Schedule 2.03(b) to Airways' Disclosure Statement lists each
----------------
Subsidiary of Airways. All the outstanding shares of capital stock of each such
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned by Airways, by another Subsidiary of Airways or by Airways and another
such Subsidiary, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever. Except
for the capital shares of its Subsidiaries, Airways does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture or other entity. There are no outstanding options,
warrants or rights to subscribe for or purchase from Airways or any Airways
Subsidiary any capital stock of any Airways Subsidiary or securities convertible
into or exchangeable for capital stock of any Airways Subsidiary.
2.04 Financial.
---------
(a) Airways has previously furnished VJET true and complete
copies of the following documents which have been filed by Airways with the
Securities and Exchange Commission ("SEC") pursuant to Sections 13(a), 14(a),
(b) or (c) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
(such documents are hereinafter collectively called the "Airways SEC Filings"):
(i) its Annual Report on Form 10-K for the year ended March 31, 1997, which
report includes, among other things, Consolidated Balance Sheets as at March 31,
1996 and
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<PAGE>
March 31, 1997 and Consolidated Statements of Operations, Consolidated
Statements of Stockholders' Equity and Group Equity and Consolidated Statements
of Cash Flows of Airways for the periods ended March 31, 1997, March 31, 1996
and March 31, 1995, examined and reported upon by Airways' independent certified
public accountants,(ii) quarterly reports on Form 10-Q for the quarters ended
June 30, 1996, September 30, 1996 and December 31, 1996, which reports include
Consolidated Balance Sheets, Consolidated Statements of Operations and
Consolidated Statements of Cash Flows of Airways at and for the respective
fiscal periods then ended and at and for the corresponding date and fiscal
periods for the prior year, (iii) all reports on Form 8-K filed by Airways with
the SEC during the period from and after April 1, 1996, and (iv) Airways' Proxy
Statement dated July 27, 1996. The Airways SEC Filings constitute all reports
Airways was required to file under Sections 13(a), 14(a), (b) or (c) and 15(d)
of the Exchange Act since April 1, 1996. At the time of filing with the SEC, the
Airways SEC Filings (i) were prepared in all material respects in accordance
with the applicable requirements of the Exchange Act, and the rules and
regulations thereunder, (ii) did not contain any untrue statement of a material
fact, and (iii) did not omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent information contained in any Airways SEC
Filing has been revised or superseded by a later-filed Airways SEC Filing, the
audited and unaudited financial statements contained in the Airways SEC Filings
are true and correct in all material respects and present fairly the
consolidated financial condition and results of operations and changes in
stockholders' equity and group equity and cash flows as of the dates and for the
periods indicated, except as may otherwise be stated in such financial
statements. For purposes of this Agreement, all financial statements of Airways
shall be deemed to include any notes to such financial statements. The financial
statements described in this Section 2.04 are hereinafter referred to as the
"Airways Financial Statements".
(b) Except as publicly disclosed by Airways or disclosed to VJET
in Schedule 2.04(b) or any other Schedule to Airways' Disclosure Statement (in
----------------
either case, which disclosure is made prior to the execution of this Agreement),
Airways has not experienced or suffered any Material Adverse Effect between
March 31, 1997 and the date of this Agreement.
2.05 No Breach of Statute or Contract, Governmental Authorizations.
-------------------------------------------------------------
Except as set forth in Schedule 2.05 to Airways' Disclosure Statement, neither
-------------
the execution and delivery of this Agreement by Airways, nor compliance with the
terms and provisions of this Agreement by Airways will violate any law, statute,
rule or regulation of any governmental authority, domestic or foreign, or will
on the Effective Date of the Merger conflict with or result in a breach of any
of the terms, conditions or provisions of any judgment, order, injunction,
decree or ruling of any court or governmental agency or authority, domestic or
foreign, to which Airways or any Subsidiary is subject or of any agreement or
instrument to which Airways or any Subsidiary is a party or by which it is
bound, or constitute a default thereunder, or result in the creation of any
lien, charge or encumbrance upon any property or assets of Airways or any
Subsidiary or cause any acceleration of maturity of any obligation or loan, or
give to others any interest or rights, including rights of termination or
cancellation, in or with respect to any of the material properties, assets,
agreements, contracts or business of Airways or any Subsidiary. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Airways or any
Subsidiary in connection with the execution and delivery of this Agreement by
-4-
<PAGE>
Airways or the consummation by Airways of the transactions contemplated hereby,
except for (i) the filing required by the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended ("HSR" Act"), (ii) the filing with the SEC
of (A) a proxy statement relating to the adoption of this Agreement by Airways'
shareholders (the "Merger Proxy Statement") and (B) such reports and schedules
under the Exchange Act as may be required in connection with this Agreement and
the transactions contemplated hereby, (iii) the filing of the Articles of Merger
with the Secretary of the State of Delaware and appropriate documents with the
relevant authorities of other states in which Airways is qualified to do
business; and (iv) any required filings with and any approvals required by the
DOT and the FAA.
2.06 No Litigation or Adverse Events. Except as set forth in the
-------------------------------
Airways SEC Filings or in Schedule 2.06 to Airways' Disclosure Statement, there
-------------
is no suit, action or legal, administrative, arbitration or other proceeding or
governmental investigation pending, or to the best of the knowledge of Airways
threatened, which if adversely determined, would be a Material Adverse Effect.
2.07 Employee Benefit Plans. Schedule 2.07 to Airways' Disclosure
---------------------- -------------
Statement contains a list of all employment contracts (including agreements with
any union), severance agreements, and all employee policy manuals, all deferred
compensation, non-competition, bonus, stock option, profit sharing, pension,
retirement, consultation after retirement, payment upon retirement, incentive,
extraordinary vacation accrual, material consulting contracts, education payment
or benefit, disability insurance (including medical, travel, group life or other
similar insurance plans), agreements, arrangements or plans, or any other fringe
benefit arrangements of, or applicable to, employees of Airways or any Airways
Subsidiary. Each employee plan is in full compliance with all applicable
government laws, rules and regulations, except for any noncompliance which is
not a Material Adverse Effect. No such plan which is subject to Part 3 of
Subtitle B of Title 1 of the Employment Retirement Income Security Act of 1974
and the rules and regulations thereunder ("ERISA") ("Airways' ERISA Plan") has
incurred any "accumulated funding deficiency" within the meaning of Section 302
of ERISA or Section 412 of the Code and neither Airways nor any Airways
Subsidiary has incurred any liability on account of such an "accumulated funding
deficiency" with respect to any Airways' ERISA Plan. No liability to the Pension
Benefit Guaranty Corporation established under ERISA has been incurred with
respect to any Airways' ERISA Plan and to the best knowledge of Airways, neither
Airways nor any Airways Subsidiary has incurred any liability for any tax
imposed by Section 4975 of the Code. Neither Airways nor any Subsidiary has
suffered or otherwise caused a "complete withdrawal" or a "partial withdrawal",
as such terms are defined in Section 4203 and Section 4205, respectively, of
ERISA, since the effective date of such Sections 4203 and 4205 with respect to
any Multi-employer Pension Plan.
2.08 Governmental Approvals. The business of Airways and the Airways
----------------------
Subsidiaries as presently conducted does not require any approval of any
governmental body, whether federal, state, local or foreign, which has not been
obtained or applied for, except as would not result in a Material Adverse
Effect. Except as set forth in Schedule 2.08 to Airways' Disclosure Statement,
-------------
Airways and the Airways Subsidiaries have, as of the date hereof, and will have
as of the Closing Date, such permits, licenses, authorities, operating
certificates, "slot" assignments, essential air service designations, and other
certificates or approvals required by the Federal Aviation Administration
-5-
<PAGE>
("FAA") or the U.S. Department of Transportation ("DOT"). Except as may be
expressly permitted by the terms of this Agreement or otherwise disclosed in
this Agreement or any Schedule hereto, the business of Airways and any Airways
Subsidiary as presently conducted in any jurisdiction meets all known applicable
legal requirements of such jurisdiction and all known requisite governmental
approvals have been duly obtained or applied for and are in full force and
effect, except for any failure of legal requirements or any lack of governmental
approvals which is not a Material Adverse Effect; and to the best of Airways'
knowledge there is no basis for any governmental body to deny or rescind any
approval for the conduct of the business of Airways or of any Airways
Subsidiary.
2.09 Accuracy of Books and Records. The books and records, financial
-----------------------------
and otherwise, of Airways and of the Airways Subsidiaries present fairly the
financial position of Airways and of the Airways Subsidiaries in all material
respects and all transactions of Airways and of the Airways Subsidiaries have
been recorded in such books and records in a manner consistent with generally
accepted accounting principles ("GAAP").
2.10 Aircraft and Other Property. Except as disclosed in Schedule
--------------------------- --------
2.10, to Airways' Disclosure Statement all aircraft owned, leased or in the
- ----
possession and control of Airways or of any Airways Subsidiary are, and on the
Closing Date will be, in an airworthy condition, and are being maintained
according to FAA regulatory standards and Airways' FAA-authorized maintenance
program. A list of all aircraft now owned, leased or in the possession and
control of Airways or of any Airways Subsidiary is attached hereto as said
Schedule 2.10. Except as set forth in said Schedule 2.10, all other operating
- ------------- -------------
properties, leasehold improvements and equipment of Airways and of the Airways
Subsidiaries are in normal operating condition, free from any known defects,
except such minor defects as do not materially interfere with the continued use
thereof in the conduct of normal operations.
2.11 Material Contracts. Schedule 2.11 to Airways' Disclosure
------------------ -------------
Statement is a list of all contracts of Airways or of any Airways Subsidiary
involving aggregate payments by Airways or any Airways Subsidiary or to Airways
or to any Airways Subsidiary of more than $200,000, or extending for a term
beyond twenty-four (24) months or providing for severance benefits upon a
termination of employment after the consummation of the Merger. Said Schedule
--------
2.11 also contains a list showing all policies of insurance in force as of the
- ----
date hereof.
2.12 Taxes. Airways and the Airways Subsidiaries have filed or secured
-----
extensions for filing all tax returns required to be filed by the United States
Government, by any of the states of the United States and by any other
governmental authority; all taxes, assessments and other governmental charges
known by the officers of Airways to be due from Airways or from any Airways
Subsidiary or with respect to any of their income, property or assets have been
duly paid and no extensions for the time of payment have been requested, except
as disclosed in Schedule 2.12 to Airways' Disclosure Statement. There are no
-------------
pending or, to the best of Airways' knowledge, threatened additional assessments
of taxes by any governmental authority known to any of the officers of Airways,
except as disclosed in said Schedule 2.12. No unexpired waivers of the statute
-------------
of limitations executed by Airways or by any Airways Subsidiary with respect to
federal or state income taxes are in effect on the date hereof, except as
disclosed in said Schedule 2.12. Except as set forth in Schedule 2.12, the
------------- -------------
accruals and reserves made for tax liabilities of Airways in the March
-6-
<PAGE>
31, 1997, Consolidated Balance Sheet of Airways are adequate for the payment of
all of Airways and Airways Subsidiaries' federal, state and local tax
liabilities for all periods ending on or before March 31, 1997. Airways and
each of its Subsidiaries has withheld all required amounts from its employees
for all periods in full and complete compliance with the tax withholding
provisions of applicable laws, all required returns with respect to income tax
withholding, social security and unemployment and other taxes have been filed by
Airways and the Airways Subsidiaries for all periods for which returns were due
and the amounts shown on such returns to be due and payable have been paid in
full, except for any such failure to do any of the foregoing which is not a
Material Adverse Effect.
2.13 Title to Properties. Except as disclosed in Schedule 2.13 to
-------------------
Airways' Disclosure Statement, Airways and the Airways Subsidiaries have good
and (in the case of owned real property) marketable title, free and clear of any
mortgage, pledge, lien, charge or other encumbrance, to all of their real or
personal property and other assets reflected on Airways' Consolidated Balance
Sheet as of March 31, 1997, or acquired by Airways or the Airways Subsidiaries
subsequent to the date thereof except for (i) liens or encumbrances on such
property or assets described in the Consolidated Balance Sheet as of March 31,
1997, (ii) liens for current taxes not yet due and payable, and (iii) such
imperfections of title and encumbrances, if any, as are not material in
character, amount or extent, and do not detract from the value or interfere with
the present or presently contemplated future use of the properties subject
thereto or affected thereby or those arising by operation of law for which
payment is not yet delinquent, and (iv) dispositions in the ordinary course of
business. Airways and the Airways Subsidiaries enjoy peaceable and undisturbed
possession under all material leases under which they are operating and all of
their equipment and premises which are leased are in good condition and repair
(ordinary wear and tear excepted) and are suitable for the purposes for which
such equipment and premises are being utilized. Except as disclosed in said
Schedule 2.13, neither Airways nor any of the Airways Subsidiaries is in default
- -------------
under or has received any notice of default under any lease agreement. Except as
disclosed in said Schedule 2.13, neither Airways nor any of the Airways
-------------
Subsidiaries has received any notice of violation of any applicable zoning
ordinance or other law, order, regulation or requirement relating to their
operations or to their owned or leased properties. To the best of its knowledge,
each parcel of real property owned, leased or operated by Airways or by any
Airways Subsidiary is reasonably free of any and all hazardous wastes, hazardous
emissions, toxic substances or other types of contamination or matters of
environmental concern, and neither Airways nor any Airways Subsidiary is subject
to any material liability (under the Comprehensive Environmental Response,
Compensation and Liability Act or otherwise) resulting from or related to any
such wastes, emissions, substances, contaminants or matters of environmental
concern in connection with any such property.
2.14 Disclosure. No representation or warranty by Airways contained in
----------
this Agreement and no statement contained in any certificate, exhibit, schedule
or other instrument furnished or to be furnished to VJET pursuant hereto,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
therein not misleading. The information contained in the Prospectus/Proxy
Statement to be furnished to the stockholders of the parties pursuant to the
Merger (other than information included in reliance upon and in conformity with
information furnished by VJET in writing expressly for use therein) will not
-7-
<PAGE>
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
2.15 Broker's or Finder's Fees. Except as provided in Schedule 2.15 to
------------------------- -------------
Airways' Disclosure Statement, no agent, broker, person or firm acting on behalf
of Airways or any of its subsidiaries or under the authority of any of them is
or will be entitled to any commission or broker's or finder's fee from any of
the parties hereto in connection with any of the transactions contemplated
herein.
2.16 No Antitakeover Provisions. Except as disclosed in Schedule 2.16
-------------------------- -------------
to Airways' Disclosure Statement, there are no antitakeover provisions or other
provisions of similar effect applicable to Airways under the terms of Airways'
Articles of Incorporation or By-laws or under Delaware or other law applicable
to Airways that must be complied with prior to the consummation of the Merger.
2.17 Intellectual Property.
---------------------
(a) Schedule 2.17 to Airways' Disclosure Statement contains a
-------------
correct and complete list of all of intellectual property of Airways and its
Subsidiaries ("Airways' Intellectual Property"). Neither Airways nor any of its
Subsidiaries has violated, infringed upon or unlawfully or wrongfully used the
Intellectual Property of others and none of Airways' Intellectual Property or
any related rights as used in its business or in the other businesses now or
heretofore conducted by Airways infringes upon or otherwise violates the rights
of others, nor has any person asserted a claim of such infringement or misuse.
Airways has taken all reasonable measures (other than registration) to enforce,
maintain and protect its interests and to the extent applicable, the rights of
third parties, in and to Airways' Intellectual Property. Airways has, and upon
consummation of the transactions co ntemplated by this Agreement, VJET will
have, all right, title and interest in the Intellectual Property identified on
said Schedule 2.17. The consummation of the transactions contemplated by this
-------------
Agreement will not alter or impair any Intellectual Property rights of Airways
or result in a default under any contract of Airways. Except as set forth in
said Schedule 2.17, Airways is not obligated nor has Airways incurred any
-------------
liability to make any payments for royalties, fees or otherwise to any person in
connection with any of Airways' Intellectual Property. All patents, trademarks,
trade names, service marks, assumed names and copyrights and all registrations
thereof included in or related to Airways' Intellectual Property are valid,
subsisting and in full force and effect.
(b) No present or former officer, director, partner or employee
of Airways owns or has any proprietary, financial or other interest, direct or
indirect, in any of Airways' Intellectual Property, except as described on said
Schedule 2.17. No officer, director, partner or employee of Airways has entered
- -------------
into any contract that requires such officer, director, partner or employee to
assign any interest in any Airways Intellectual Property.
2.18 Labor Matters. Airways has made available to VJET copies of all
-------------
collective bargaining agreements, contracts or other agreements or
understandings with a labor union or labor organization to which Airways or any
of its Subsidiaries is a party or by which any of them is
-8-
<PAGE>
bound. Except as and to the extent set forth in Schedule 2.18 to Airways'
-------------
Disclosure Statement, (i) Airways or any of its Subsidiaries is not a party to
any union agreement or collective bargaining agreement or work rules or
practices agreed to with any labor organization or employee association
applicable to any employees of Airways or any of its Subsidiaries and no attempt
to organize any of the employees of Airways' business is currently proposed or
threatened, (ii) Airways or any of its Subsidiaries has not had any Equal
Employment Opportunity Commission charges or other claims of employment
discrimination made against it which, if resolved adversely to Airways or its
Subsidiaries, would result in a Material Adverse Effect to Airways or its
Subsidiaries, (iii) no Wage and Hour Department investigations have been made of
Airways or any of its Subsidiaries which, if resolved adversely to Airways or
its Subsidiaries, would result in a Material Adverse Effect to Airways or its
Subsidiaries, (iv) no labor strike, dispute, stoppage or lockout is pending or
threatened against or affecting Airways or any of its Subsidiaries, the assets
or the business of Airways or any of its Subsidiaries, and (v) no unfair labor
practice charge or complaint against Airways or any of its Subsidiaries is
pending or threatened before the National Labor Relations Board or any similar
governmental authority. Since the enactment of the Worker Adjustment and
Retraining Notification Act (the "WARN Act"), Airways and any of its
Subsidiaries has not effectuated (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of Airways or any of its
Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of Airways or any of its Subsidiaries, nor has
Airways or any of its Subsidiaries been affected by any transaction or engaged
in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local law. Except as set forth in said
Schedule 2.18, none of Airways' or any of its Subsidiaries' employees suffered
- -------------
an "employment loss" (as defined in the WARN Act) within the six (6) month
period prior to the date hereof.
ARTICLE III
Representations and Warranties of VJET
--------------------------------------
VJET represents and warrants to Airways as follows:
3.01 Organization, etc. VJET is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of the State of Nevada. Each
Subsidiary of VJET has been duly organized and is validly existing and in good
standing under the laws of the state of its organization. VJET and each of its
Subsidiaries has the corporate power to own its property and to carry on its
business as now being conducted; VJET has the corporate power and authority to
execute and deliver this Agreement and the Plan of Merger and, subject to the
stockholder approval referenced in Section 5.02(a)(i) hereof, to consummate the
transactions contemplated hereby.
3.02 Authorization, Execution and Delivery of Agreement. The execution
--------------------------------------------------
and delivery and, subject to the stockholder approval of VJET, the performance
of this Agreement and the Plan of Merger by VJET have been duly and validly
authorized and approved by the Board of Directors of VJET, and VJET has taken,
or will use reasonable efforts to take prior to the Effective Date of the
Merger, all other action required by law on the part of VJET, its respective
Articles of
-9-
<PAGE>
Incorporation and bylaws or otherwise to effect the transactions contemplated by
this Agreement and the Plan of Merger.
3.03 Capital Stock of VJET.
---------------------
(a) As of the date of this Agreement, the authorized capital
stock of VJET consists of 5,000,000 shares of Preferred Stock, $.01 par value,
none of which is outstanding and 1,000,000,000 shares of Common Stock, $.001 par
value, of which 54,969,238 shares were outstanding as of June 30, 1997. No
additional shares of stock have been issued between June 30, 1997, and the date
of execution of this Agreement. As of the date of this Agreement, 3,420,000
shares of VJET Common Stock were reserved for issuance under VJET's 1993
Incentive Stock Option Plan, 3,640,790 shares of VJET Common Stock were reserved
for issuance under VJET's Stock Option Plan, 5,000,000 shares of VJET Common
Stock were reserved for issuance under VJET's 1996 Stock Option Plan and
3,979,864 shares of VJET Common Stock were reserved for issuance under VJET's
Employee Stock Purchase Plan (such plans being hereinafter collectively referred
to as the "VJET Plans"). Other than the options described in this Section 3.03,
there are no outstanding options, warrants or rights to subscribe for or
purchase from VJET any capital stock of VJET or securities convertible into or
exchangeable for capital stock of VJET.
(b) Schedule 3.03(b) to VJET's Disclosure Statement delivered to
----------------
Airways contemporaneously with the execution and delivery of this Agreement
("VJET's Disclosure Statement") lists each Subsidiary of VJET. All the
outstanding shares of capital stock of each such Subsidiary have been validly
issued and are fully paid and nonassessable and are owned by VJET, by another
Subsidiary of VJET or by VJET and another such Subsidiary, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever. Except for the capital shares of its Subsidiaries, VJET
does not own, directly or indirectly, any capital stock or other ownership
interest in any corporation, partnership, joint venture or other entity. There
are no outstanding options, warrants or rights to subscribe for or purchase from
VJET or any VJET Subsidiary any capital stock of any VJET Subsidiary or
securities convertible into or exchangeable for capital stock of any VJET
Subsidiary.
3.04 Financial.
---------
(a) VJET has previously furnished Airways true and complete
copies of the following documents which have been filed by VJET with the SEC
pursuant to Sections 13(a), 14(a), (b) or (c) or 15(d) of the Exchange Act (such
documents are hereinafter collectively called the "VJET SEC Filings"): (i) its
Annual Report on Form 10-K for the year ended December 31, 1996, which report
includes, among other things, Consolidated Balance Sheets as at December 31,
1995 and December 31, 1996 and Consolidated Statements of Operations,
Consolidated Statements of Stockholders' Equity and Consolidated Statements of
Cash Flows of VJET for the periods ended December 31, 1996, December 31, 1995
and December 31, 1994, examined and reported upon by Ernst & Young, LLP,
independent certified public accountants, (ii) quarterly reports on Form 10-Q
for the quarter ended March 31, 1997, which reports include Consolidated Balance
Sheets, Consolidated Statements of Operations and Consolidated Statements of
Cash Flows of VJET at and for the respective fiscal periods then ended and at
and for the corresponding date and fiscal periods
-10-
<PAGE>
for the prior year, (iii) all reports on Form 8-K filed by VJET with the SEC
during the period from and after January 1, 1997, (iv) VJET's Proxy Statement
dated April 10, 1997, and (v) VJET's S-4 Registration Statement declared
effective as of October 11, 1996. The VJET SEC Filings constitute all reports
VJET was required to file under Sections 13(a), 14(a), (b) or (c) and 15(d) of
the Exchange Act since January 1, 1997. At the time of filing with the SEC, the
VJET SEC Filings (i) were prepared in all material respects in accordance with
the applicable requirements of the Exchange Act, and the rules and regulations
thereunder, (ii) did not contain any untrue statement of a material fact, and
(iii) did not omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent information contained in any VJET SEC Filing
has been revised or superseded by a later filed VJET SEC Filing, the audited and
unaudited financial statements contained in the VJET SEC Filings are true and
correct in all material respects and present fairly the consolidated financial
condition and results of operations and changes in stockholders' equity and cash
flows as of the dates and for the periods indicated, except as may otherwise be
stated in such financial statements. For purposes of this Agreement, all
financial statements of VJET shall be deemed to include any notes to such
financial statements. The financial statements described in this Section 3.04
are hereinafter referred to as the "VJET Financial Statements".
(b) Except as publicly disclosed by VJET or disclosed to Airways in
Schedule 3.04(b) or any other Schedule to VJET's Disclosure Statement (in either
- ----------------
case, which disclosure is made prior to the execution of this Agreement), VJET
has not experienced or suffered any Material Adverse Effect between March 31,
1997 and the date of this Agreement.
3.05 Status of VJET Common Stock. All shares of VJET Common Stock, when
---------------------------
issued to the stockholders of Airways pursuant to this Agreement and the Plan of
Merger, will be duly and validly authorized and issued, fully paid and
nonassessable.
3.06 No Breach of Statute or Contract, Governmental Authorizations. Except
-------------------------------------------------------------
as set forth in Schedule 3.06 to VJET's Disclosure Statement, neither the
-------------
execution and delivery of this Agreement by VJET, nor compliance with the terms
and provisions of this Agreement by VJET, will violate any law, statute, rule or
regulation of any governmental authority, domestic or foreign, or will on the
Effective Date of the Merger conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree or
ruling of any court or governmental agency or authority, domestic or foreign, to
which VJET or any Subsidiary is subject or of any agreement or instrument to
which VJET or any Subsidiary is a party or by which it is bound, or constitute a
default thereunder, or result in the creation of any lien, charge or encumbrance
upon any property or assets of VJET or any Subsidiary or cause any acceleration
of maturity of any obligation or loan, or give to others any interest or rights,
including rights of termination or cancellation, in or with respect to any of
the material properties, assets, agreements, contracts or business of VJET or
any Subsidiary. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to VJET or any subsidiary or in connection with the execution
and delivery of this Agreement by VJET or the consummation by VJET of the
transactions contemplated hereby, except for (i) the filings required by the HSR
Act, (ii) the filing with the SEC of (A) the Registration Statement required by
Section 4.07, (B) a proxy statement relating to the VJET shareholders meeting to
be held prior to
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<PAGE>
Closing to approve the Merger and to amend VJET's Articles of Incorporation and
Bylaws and (C) such reports and schedules under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby and (iii) the filing of the Articles or Certificate of Merger with the
Secretary of State of Nevada and appropriate documents with the relevant
authorities of other states in which VJET is qualified to do business, and (iv)
any required filings with and any approvals required by the DOT and the FAA.
3.07 No Litigation or Adverse Events. Except as set forth in the VJET SEC
-------------------------------
Filings or in Schedule 3.07 to VJET's Disclosure Statement, there is no suit,
-------------
action or legal, administrative, arbitration or other proceeding or governmental
investigation pending, or to the best of the knowledge of VJET threatened,
which, if adversely determined, would be a Material Adverse Effect.
3.08 Employee Benefit Plans. Schedule 3.08 to VJET's Disclosure Statement
---------------------- -------------
hereto contains a list of all employment contracts (including agreements with
any union), severance agreements, and all employee policy manuals, all deferred
compensation, non-competition, bonus, stock option, profit sharing, pension,
retirement, consultation after retirement, payment upon retirement, incentive,
extraordinary vacation accrual, material consulting contracts, education payment
or benefit, disability insurance (including medical, travel, group life or other
similar insurance plans), agreements, arrangements or plans, or any other fringe
benefit arrangements of, or applicable to, employees of VJET or any VJET
Subsidiary. Each employee plan is in full compliance with all applicable
government laws, rules and regulations, except for any noncompliance which is
not a Material Adverse Effect. No such plan which is subject to ERISA ("VJET
ERISA Plan") has incurred any "accumulated funding deficiency" within the
meaning of Section 302 of ERISA or Section 412 of the Code and neither VJET nor
any Subsidiary has incurred any liability on account of such an "accumulated
funding deficiency" with respect to any VJET ERISA Plan. No liability to the
Pension Benefit Guaranty Corporation established under ERISA has been incurred
with respect to any VJET ERISA Plan and to the best knowledge of VJET, neither
VJET nor any VJET Subsidiary has incurred any liability for any tax imposed by
Section 4975 of the Code. Neither VJET nor any VJET Subsidiary has suffered or
otherwise caused a "complete withdrawal" or a "partial withdrawal", as such
terms are defined in Section 4203 and Section 4205, respectively, of ERISA,
since the effective date of such Sections 4203 and 4205 with respect to any
Multi-employer Pension Plan.
3.09 Governmental Approvals. The business of VJET and the VJET Subsidiaries
----------------------
as presently conducted does not require any approval of any governmental body,
whether federal, state, local or foreign, which has not been obtained or applied
for, except as would not result in a Material Adverse Effect. Except as set
forth in Schedule 3.09 to VJET's Disclosure Statement, VJET and the VJET
-------------
Subsidiaries have, as of the date hereof, and will have as of the Closing Date,
such permits, licenses, authorities, operating certificates, "slot" assignments,
essential air service designations, and other certificates or approvals required
by the FAA or the DOT. Except as may be expressly permitted by the terms of this
Agreement or otherwise disclosed in this Agreement or any Schedule hereto, the
business of VJET and any VJET Subsidiary as presently conducted in any
jurisdiction meets all known applicable legal requirements of such jurisdiction
and all known requisite governmental approvals have been duly obtained or
applied for and are in full force and
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<PAGE>
effect, except for any failure of legal requirements or any lack of governmental
approvals which is not a Material Adverse Effect; and to the best of its
knowledge there is no basis for any governmental body to deny or rescind any
approval for the conduct of the business of VJET or of any VJET Subsidiary.
3.10 Accuracy of Books and Records. The books and records, financial and
-----------------------------
otherwise, of VJET present fairly the financial position of VJET in all material
respects and all transactions of VJET have been recorded in such books and
records in a manner consistent with GAAP.
3.11 Surviving Corporation After Merger. Immediately after the Closing Date
----------------------------------
and after giving effect to any changes in the assets and liabilities of VJET as
a result of the Merger, VJET will not (i) be insolvent (either because its
financial condition is such that the sum of its debts is greater than the fair
value of its assets or because the fair saleable value of its assets is less
than the amount required to pay its probable liability on its existing debts as
they mature), (ii) have unreasonably small capital with which to engage in its
business, or (iii) have incurred debts beyond its ability to pay the same as
they become due.
3.12 Aircraft and Other Property. Except as disclosed in Schedule 3.12 to
--------------------------- -------------
VJET's Disclosure Statement, all aircraft owned, leased or in the possession and
control of VJET or of any VJET Subsidiary are, and on the Closing Date will be,
in an airworthy condition, and are being maintained according to FAA regulatory
standards and VJET's FAA-authorized maintenance program. A list of all aircraft
now owned, leased or in the possession and control of VJET or of any VJET
Subsidiary is attached hereto as Schedule 3.12. Except as set forth in said
-------------
Schedule 3.12, all other operating properties, leasehold improvements and
- -------------
equipment of VJET and of the VJET Subsidiaries are in normal operating
condition, free from any known defects, except such minor defects as do not
materially interfere with the continued use thereof in the conduct of normal
operations.
3.13 Material Contracts. Attached hereto as Schedule 3.13 to VJET's
------------------ -------------
Disclosure Statement is a list of all contracts of VJET or of any VJET
Subsidiary involving aggregate payments by VJET or any VJET Subsidiary or to
VJET or to any VJET Subsidiary of more than $200,000, or extending for a term
beyond twenty-four (24) months and a list showing all policies of insurance in
force as of the date hereof.
3.14 Taxes. VJET and the VJET Subsidiaries have filed or secured extensions
-----
for filing all tax returns required to be filed by the United States Government,
by any of the states of the United States and by any other governmental
authority; all taxes, assessments and other governmental charges known by the
officers of VJET to be due from VJET or from any VJET Subsidiary or with respect
to any of their income, property or assets have been duly paid and no extensions
for the time of payment have been requested, except as disclosed in Schedule
--------
3.14 to VJET's Disclosure Statement. There are no pending or, to the best of
- ----
VJET's knowledge, threatened additional assessments of taxes by any governmental
authority known to any of the officers of VJET, except as disclosed in said
Schedule 3.14. No unexpired waivers of the statute of limitations executed by
- -------------
VJET or by any VJET Subsidiary with respect to federal or state income taxes are
in effect on the date hereof, except as disclosed in said Schedule 3.14. Except
-------------
as set forth
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<PAGE>
in said Schedule 3.14, the accruals and reserves made for tax liabilities of
-------------
VJET in the March 31, 1997, Consolidated Balance Sheet of VJET are adequate for
the payment of all of VJET and VJET Subsidiaries' federal, state and local tax
liabilities for all periods ending on or before March 31, 1997. VJET and each
of its Subsidiaries has withheld all required amounts from its employees for all
periods in full and complete compliance with the tax withholding provisions of
applicable laws, all required returns with respect to income tax withholding,
social security and unemployment and other taxes have been filed by VJET and the
VJET Subsidiaries for all periods for which returns were due and the amounts
shown on such returns to be due and payable have been paid in full, except for
any such failure to do the foregoing which is not a Material Adverse Effect.
3.15 Title to Properties. Except as disclosed in Schedule 3.15 to VJET's
------------------- -------------
Disclosure Statement, VJET and the VJET Subsidiaries have good and, (in the case
of owned real property) marketable title, free and clear of any mortgage,
pledge, lien, charge or other encumbrance, to all of their real or personal
property and other assets reflected on VJET's Consolidated Balance Sheet as of
March 31, 1997, or acquired by VJET or the VJET Subsidiaries subsequent to the
date thereof except for (i) liens or encumbrances on such property or assets
described in the Consolidated Balance Sheet as of March 31, 1997, (ii) liens for
current taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, as are not material in character, amount or extent, and do
not detract from the value or interfere with the present or presently
contemplated future use of the properties subject thereto or affected thereby or
those arising by operation of law for which payment is not yet delinquent, and
(iv) dispositions in the ordinary course of business. VJET and the VJET
Subsidiaries enjoy peaceable and undisturbed possession under all material
leases under which they are operating and all of their equipment and premises
which are leased are in good condition and repair (ordinary wear and tear
excepted) and are suitable for the purposes for which such equipment and
premises are being utilized. Except as disclosed in said Schedule 3.15, neither
-------------
VJET nor any of the VJET Subsidiaries is in default under or has received any
notice of default under any lease agreement. Except as disclosed in said
Schedule 3.15, neither VJET nor any of the VJET Subsidiaries has received any
- -------------
notice of violation of any applicable zoning ordinance or other law, order,
regulation or requirement relating to their operations or to their owned or
leased properties. To the best of its knowledge, each parcel of real property
owned, leased or operated by VJET or by any VJET Subsidiary is reasonably free
of any and all hazardous wastes, hazardous emissions, toxic substances or other
types of contamination or matters of environmental concern, and neither VJET nor
any VJET Subsidiary is subject to any material liability (under the
Comprehensive Environmental Response, Compensation and Liability Act or
otherwise) resulting from or related to any such wastes, emissions, substances,
contaminants or matters of environmental concern in connection with any such
property.
3.16 Disclosure. No representation or warranty by VJET contained in this
----------
Agreement and no statement contained in any certificate, exhibit or other
instrument furnished or to be furnished to Airways pursuant hereto, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained therein not
misleading. The information contained in the Prospectus/Proxy Statement to be
furnished to stockholders of the parties pursuant to the Merger (other than
information included in reliance upon and in conformity with information
furnished by Airways in writing expressly for use therein) will
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<PAGE>
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
3.17 Broker's or Finder's Fees. Except as provided in Schedule 3.17 to
------------------------- -------------
VJET's Disclosure Statement, no agent, broker, person or firm acting on behalf
of VJET or any of its Subsidiaries or under the authority of any of them is or
=
will be entitled to any commission or broker's or finder's fee from any of the
parties hereto in connection with any of the transactions contemplated herein.
3.18 No Antitakeover Provisions. Except as disclosed in Schedule 3.18 to
-------------------------- -------------
VJET's Disclosure Statement, there are no antitakeover provisions or other
provisions of similar effect applicable to VJET under the terms of VJET's
Articles of Incorporation or By-laws or under Nevada or other law applicable to
VJET that must be complied with prior to the consummation of the Merger.
3.19 Intellectual Property.
---------------------
(a) Schedule 3.19 to VJET's Disclosure Statement contains a correct
-------------
and complete list of all of intellectual property of VJET and its Subsidiaries
("VJET's Intellectual Property"). Neither VJET nor any of its Subsidiaries has
violated, infringed upon or unlawfully or wrongfully used the Intellectual
Property of others and none of VJET's Intellectual Property or any related
rights as used in its business or in the other businesses now or heretofore
conducted by VJET infringes upon or otherwise violates the rights of others, nor
has any person asserted a claim of such infringement or misuse. VJET has taken
all reasonable measures (other than registration) to enforce, maintain and
protect its interests and to the extent applicable, the rights of third parties,
in and to VJET's Intellectual Property. VJET has, and upon consummation of the
transactions contemplated by this Agreement, VJET will have, all right, title
and interest in the Intellectual Property identified on said Schedule 3.19. The
-------------
consummation of the transactions contemplated by this Agreement will not alter
or impair any Intellectual Property rights of VJET or result in a default under
any contract of VJET. Except as set forth in said Schedule 3.19, VJET is not
-------------
obligated nor has VJET incurred any liability to make any payments for
royalties, fees or otherwise to any person in connection with any of VJET's
Intellectual Property. All patents, trademarks, trade names, service marks,
assumed names and copyrights and all registrations thereof included in or
related to VJET's Intellectual Property are valid, subsisting and in full force
and effect.
(b) No present or former officer, director, partner or employee of
VJET owns or has any proprietary, financial or other interest, direct or
indirect, in any of VJET's Intellectual Property, except as described on said
Schedule 3.19. No officer, director, partner or employee of VJET has entered
- -------------
into any contract that requires such officer, director, partner or employee to
assign any interest in any VJET Intellectual Property.
3.20 Labor Matters. VJET has made available to Airways copies of all
-------------
collective bargaining agreements, contracts or other agreements or
understandings with a labor union or labor organization to which VJET or any of
its Subsidiaries is a party or by which any of them is bound. Except as and to
the extent set forth in Schedule 3.20 to VJET's Disclosure Statement, (i) VJET
-------------
or
-15-
<PAGE>
any of its Subsidiaries is not a party to any union agreement or collective
bargaining agreement or work rules or practices agreed to with any labor
organization or employee association applicable to any employees of VJET or any
of its Subsidiaries and no attempt to organize any of the employees of VJET's
business is currently proposed or threatened, (ii) VJET or any of its
Subsidiaries has not had any Equal Employment Opportunity Commission charges or
other claims of employment discrimination made against it which, if resolved
adversely to VJET or its Subsidiaries, would result in a Material Adverse Effect
to VJET or its Subsidiaries, (iii) no Wage and Hour Department investigations
have been made of VJET or any of its Subsidiaries which, if resolved adversely
to VJET or its Subsidiaries, would result in a Material Adverse Effect to VJET
or its Subsidiaries, (iv) no labor strike, dispute, stoppage or lockout is
pending or threatened against or affecting VJET or any of its Subsidiaries, the
assets or the business of VJET or any of its Subsidiaries, and (v) no unfair
labor practice charge or complaint against VJET or any of its Subsidiaries is
pending or threatened before the National Labor Relations Board or any similar
governmental authority. Since the enactment of the Worker Adjustment and
Retraining Notification Act (the "WARN Act"), VJET and any of its Subsidiaries
has not effectuated (i) a "plant closing" (as defined in the WARN Act) affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of VJET or any of its Subsidiaries, or (ii) a
"mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of VJET or any of its Subsidiaries, nor has VJET or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth in said Schedule 3.20, none of
-------------
VJET's or any of its Subsidiaries' employees suffered an "employment loss" (as
defined in the WARN Act) within the six (6) month period prior to the date
hereof.
3.21 Offering Memorandum. The draft of the Offering Memorandum set forth in
-------------------
Schedule 3.21 to VJET's Disclosure Statement is true and correct in all material
- -------------
respects.
ARTICLE IV
Covenants and Transactions Prior to the Closing Date
----------------------------------------------------
4.01. Investigations; Operation of Business of Airways. Between the date
------------------------------------------------
of this Agreement and the Effective Date of the Merger:
(a) Airways agrees to give to VJET full access to all the premises
and books and records of it and its Subsidiaries, and to cause its and its
Subsidiaries' officers to furnish VJET with such financial and operating data
and other information with respect to the business and properties of it and its
Subsidiaries as VJET shall from time to time request; provided, however, that
any such investigation shall not affect any of the representations, warranties
or covenants of Airways hereunder; and provided further, that any such
investigation shall be conducted in such manner as not to interfere unreasonably
with the operation of the respective businesses of Airways and its Subsidiaries.
In the event of termination of this Agreement, VJET will return to Airways or
destroy any and all financial statements, agreements, documents, memoranda or
other repositories of information relating to Airways that VJET has obtained or
prepared in connection with its review of
-16-
<PAGE>
Airways and its operations and VJET agrees that any information relating to
Airways, its financial condition, business, operations and prospects is strictly
confidential and shall not be disclosed to any third party or used by VJET for
its benefit or the benefit of any other person. VJET shall have the right to
have a representative present at all meetings of the Board of Directors of
Airways (the "VJET Observation Rights") and there shall be no meeting of the
Board of Directors of Airways unless (i) a representative of VJET shall be
present in person or by conference telephone call, or (ii) VJET shall have been
given notice in accordance with the by-laws of Airways with respect to such
meeting; provided, however, that failure of Airways to comply with the terms of
this Paragraph shall not affect the validity of action taken by Airways' Board
of Directors. In addition, VJET shall have the right to review any consent
resolutions of the Airways Board of Directors prior to signing. Exercise of the
VJET Observation Rights shall not be, and shall not be construed as being,
participation by VJET on the Board of Directors of Airways. Notwithstanding the
foregoing, the VJET representative shall not be entitled to be present during
discussion of any Acquisition Proposal or of any matters directly relating to
VJET and shall not have the right to review in advance any consent resolutions
relating to any Acquisition Proposal or VJET.
(b) Airways will, to the extent required for continued operation of
its business without impairment, use its best efforts to preserve substantially
intact the business organization of Airways and its Subsidiaries, to keep
available the services of the present officers and employees of Airways and its
Subsidiaries, and to preserve the present relationships of Airways and its
Subsidiaries with persons having significant business relations therewith such
as suppliers, customers, tour operators, brokers, agents or otherwise.
(c) Airways and its Subsidiaries will conduct their respective
businesses in a manner consistent with the current operation of their business
and only in the ordinary course and, by way of amplification and not limitation,
neither Airways nor its Subsidiaries will without the prior written consent of
VJET which consent shall not be unreasonably withheld (i) except with respect to
Airways Common Stock issued upon exercise of the warrants outstanding on the
date hereof and of options vested prior to the Closing Date, issue any capital
stock, or (ii) declare, set aside or pay any dividend or distribution with
respect to the capital stock of Airways or any of its Subsidiaries (other than
the payment of a dividend by a subsidiary of Airways to Airways or to another
subsidiary of Airways), or (iii) directly or indirectly redeem, purchase or
otherwise acquire any capital stock of Airways or any of its Subsidiaries, or
(iv) effect a split or reclassification of any capital stock of Airways or a
recapitalization of Airways, or (v) change the charter or bylaws of Airways, or
(vi) grant any increase in the compensation payable or to become payable by
Airways or its Subsidiaries to officers or salaried employees of Airways or its
Subsidiaries whose 1996 remuneration exceeded $50,000 or grant any increase
regardless of amount, in any bonus, insurance, pension or other benefit plan,
program, payment or arrangement made to, for or with any officers or employees,
or (vii) adopt any employee benefit plans including but not limited to stock
option plans, or (viii) borrow or agree to borrow any funds in excess of
$200,000 or guarantee or agree to guarantee the obligations of others (excluding
any refinancing of Airways' Subsidiary's hangar in an amount ranging from $6.5
million to $8.5 million secured by the hangar and Airways' Subsidiary's accounts
receivable, provided that the terms of such refinancing do not preclude
prepayment on reasonable terms; credit terms extended by creditors, lessors and
vendors in the ordinary course of business; and debt incurred for expenses of
this transaction), or (ix) make any
-17-
<PAGE>
capital improvement, purchase of equipment or furnishings or lease of any
aircraft (excluding the purchase, lease or repair of aircraft parts and
components required in the ordinary course of maintenance of aircraft) involving
an aggregate expenditure in excess of $200,000, or (x) transfer, pledge,
hypothecate or otherwise dispose of any assets having a book or market value,
whichever is greater, in excess of $200,000, or (xi) acquire direct or indirect
ownership or control of voting shares of any other corporation, or of any
interest in any partnership, joint venture, association or similar organization,
other than shares acquired in satisfaction of a security interest or of a debt
previously contracted for in a fiduciary or custodial capacity, or (xii) waive
any rights of substantial value, or (xiii) enter into any material agreement,
contract or commitment calling for aggregate payments in excess of $200,000 over
the life of the contract or extending for more than twelve months other than
contracts entered into for the maintenance or repair of aircraft or those
disclosed on Schedule 4.01(c) to Airways' Disclosure Statement, or (xiv) acquire
----------------
a fee interest in any real property.
(d) Subject to Section 4.04 hereof, without the prior written
consent of VJET, neither Airways nor any of its Subsidiaries will undertake or
enter into any sale, disposition, surrender, acquisition, agreement or
transaction, between the date of this Agreement and the Closing Date, relating
to any of their assets except in the ordinary course of business or as
contemplated by this Agreement or disclosed in the Airways SEC Filings.
(e) Airways will pay and discharge all taxes, assessments and
governmental charges lawfully imposed upon it, upon any Airways Subsidiary or
upon any of their property, or upon the income and profits thereof to the extent
such taxes, assessments and governmental charges are due and payable on or
before the Closing Date except for deferrals of taxes arranged by Airways with
the respective taxing authorities as indicated on Schedule 4.01(e) to Airways'
----------------
Disclosure Statement; provided, however, that nothing herein contained shall
require Airways or any Airways Subsidiary to pay or discharge any tax assessment
or governmental charge, so long as the validity thereof shall be contested in
good faith and by appropriate proceedings unless property essential to the
conduct of Airways or of any Airways Subsidiary's business will be lost,
forfeited or materially endangered.
(f) Airways will maintain its existence and the existence of the
Subsidiaries as corporations in good standing under the laws of the State of
Delaware, other states in which Airways and the Airways Subsidiaries operate and
the United States and comply and cause the Airways Subsidiaries to comply in all
material respects with all laws, governmental regulations, rules and ordinances,
and judicial orders, judgments and decrees applicable to their business or their
properties, except while contesting the validity of any of the foregoing in good
faith and by appropriate proceedings.
(g) Airways will notify VJET in writing within five (5) days of the
commencement of any material litigation against Airways, or against any Airways
Subsidiary, or of the existence of any adverse business conditions threatening
the continued, normal business operations of Airways or of any Airways
Subsidiary, or of any agreement, consent or order of the FAA or DOT involving
Airways or any Airways Subsidiary.
-18-
<PAGE>
(h) Airways shall at all times maintain, preserve and keep its
properties and the properties of its Subsidiaries in good repair, working order
and condition in all material respects so that the business carried on in
connection therewith may be properly and advantageously conducted, except for
those items that have been designated as obsolete or damaged beyond economic
repair.
(i) Airways will make every reasonable effort to fulfill its
contractual obligations and the contractual obligations of its Subsidiaries, and
to maintain in effect its insurance and the insurance of its Subsidiaries.
(j) Airways will not enter into, institute or permit any Airways
Subsidiary to enter into or institute, any employment contract, employee policy
manual (other than Airways' Subsidiary's current employee manual which is
undergoing revision), deferred compensation, non-competition, bonus, stock
option, profit-sharing, pension, retirement, consultation after retirement,
payments upon retirement, incentive, extraordinary vacation accrual, education
payment or benefit, disability insurance (including medical, travel, group life
or other similar insurance plans) agreement, plan or arrangement or any other
similar arrangement or plan, or, except as required by applicable law or
regulation, renew, amend, modify or terminate any such arrangement or plan now
in existence.
(k) Airways will not enter into, or permit any Subsidiary to enter
into, any agreement, understanding or commitment, written or oral, with any
other person which would be a breach of the obligations of Airways arising under
this Agreement.
(l) Airways will not make, or permit any Subsidiary to make any
loan, advance or commitment to extend credit to any of the directors, officers
or any affiliated or related persons of the directors or officers of Airways or
of any Airways Subsidiary; renew, or permit any Airways Subsidiary to renew, any
outstanding loan or any outstanding commitment to extend credit to any
directors, officers or any affiliated or related persons of the directors or
officers of Airways or of any Airways Subsidiary; increase, or permit any
Airways Subsidiary to increase, any outstanding loan to any of the directors,
officers of any affiliated or related persons of the directors or officers of
Airways or of any Airways Subsidiary; or enter into any agreement, understanding
or commitment, written or oral, which obligates Airways, any of the Airways
Subsidiaries or their successors or assigns to make any loan or advance or
payment to any of the directors or officers or to any affiliated or related
persons of any of the directors or officers of Airways or of any Airways
Subsidiary.
4.02. Investigation of VJET. Between the date of this Agreement and the
---------------------
Effective Date of the Merger:
(a) VJET agrees to give to Airways full access to all the premises
and books and records of it and its Subsidiaries, and to furnish Airways with
such financial and operating data and other information with respect to the
business and properties of it and its Subsidiaries as Airways shall from time to
time request; provided, however, that any such investigation shall not affect
any of the representations, warranties or covenants of VJET hereunder; and
provided further, that any such investigation shall be conducted in such manner
as not to interfere unreasonably with the
-19-
<PAGE>
operation of the respective businesses of VJET and its Subsidiaries. In the
event of termination of this Agreement, Airways will return to VJET or destroy
any and all financial statements, agreements, documents, memoranda or other
repositories of information relating to VJET or its Subsidiaries that Airways
has obtained or prepared in connection with its review of VJET and its
operations and Airways agrees that any information relating to VJET, its
Subsidiaries and their financial condition, business, operations and prospects
is strictly confidential and shall not be disclosed to any third party, or used
by Airways for its benefit or the benefit of any other person. Airways shall
have the right to have a representative present at all meetings of the Board of
Directors of VJET (the "Airways Observation Rights") and there shall be no
meeting of the Board of Directors of VJET unless (i) a representative of Airways
shall be present in person or by conference telephone call, or (ii) Airways
shall have been given notice in accordance with the by-laws of VJET with respect
to such meeting; provided, however, that failure of VJET to comply with the
terms of this Paragraph shall not affect the validity of action taken by VJET's
Board of Directors. In addition, Airways shall have the right to review any
consent resolutions of the VJET Board of Directors prior to signing. Exercise
of the Airways Observation Rights shall not be, and shall not be construed as
being, participation by Airways on the Board of Directors of VJET.
Notwithstanding the foregoing, the Airways representative shall not be entitled
to be present during discussions of any matters directly relating to Airways and
shall not have the right to review in advance any consent resolutions relating
to Airways.
(b) VJET and its Subsidiaries will conduct their respective
businesses in a manner consistent with the current operation of their business
and only in the ordinary course and, by way of amplification and not limitation,
neither VJET nor its Subsidiaries will without the prior written consent of
Airways which consent shall not be unreasonably withheld (i) except with respect
to VJET Common Stock issued upon exercise of options vested prior to the Closing
Date, issue any capital stock, or (ii) declare, set aside or pay any dividend or
distribution with respect to the capital stock of VJET or any of its
Subsidiaries (other than the payment of a dividend by a subsidiary of VJET to
VJET or to another subsidiary of VJET), or (iii) directly or indirectly redeem,
purchase or otherwise acquire any capital stock of VJET or any of its
Subsidiaries, or (iv) effect a split or reclassification of any capital stock of
VJET or a recapitalization of VJET, or (v) change the charter or bylaws of VJET,
or (vi) grant any increase in the compensation payable or to become payable by
VJET or its Subsidiaries to officers or salaried employees of VJET or its
Subsidiaries whose 1996 remuneration exceeded $50,000 or grant any increase
regardless of amount, in any bonus, insurance, pension or other benefit plan,
program, payment or arrangement made to, for or with any officers or employees,
or (vii) adopt any employee benefit plans including but not limited to stock
option plans, or (viii) acquire direct or indirect ownership or control of
voting shares of any other corporation, or of any interest in any partnership,
joint venture, association or similar organization, other than shares acquired
in satisfaction of a security interest or of a debt previously contracted for in
a fiduciary or custodial capacity, or (ix) waive any rights of substantial
value, or (x) enter into any material agreement, contract or commitment calling
for aggregate payments in excess of $200,000 over the life of the contract or
extending for more than twelve months other than (a) financing or refinancing
agreements and fees and expenses paid in connection therewith, (b) fees paid to
lenders to secure consents to this transaction and to VJET's debt refinancing,
and (c) contracts entered into for the maintenance, repairs or refurbishment of
aircraft or those disclosed on Schedule 4.02(c) to VJET's Disclosure Statement
----------------
or (xi) acquire a fee interest in any real property.
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(c) Without the prior written consent of Airways, neither VJET nor
any of its Subsidiaries will undertake or enter into any sale, disposition,
surrender, acquisition, agreement or transaction, between the date of this
Agreement and the Closing Date, relating to any of their assets except in the
ordinary course of business or as contemplated by this Agreement or as disclosed
in the VJET SEC Filings.
(d) VJET will pay and discharge all taxes, assessments and
governmental charges lawfully imposed upon it, upon any VJET Subsidiary or upon
any of their property, or upon the income and profits thereof to the extent such
taxes, assessments and governmental charges are due and payable on or before the
Closing Date; provided, however, that nothing herein contained shall require
VJET or any VJET Subsidiary to pay or discharge any tax assessment or
governmental charge, so long as the validity thereof shall be contested in good
faith and by appropriate proceedings unless property essential to the conduct of
VJET or of any VJET Subsidiary's business will be lost, forfeited or materially
endangered.
(e) VJET will maintain its existence and the existence of the
Subsidiaries as corporations in good standing under the laws of the State of
Nevada, other states in which VJET and the VJET Subsidiaries operate and the
United States and comply and cause the VJET Subsidiaries to comply in all
material respects with all laws, governmental regulations, rules and ordinances,
and judicial orders, judgments and decrees applicable to their business or their
properties, except while contesting the validity of any of the foregoing in good
faith and by appropriate proceedings.
(f) VJET will notify Airways in writing within five (5) days of the
commencement of any material litigation against VJET or any of its Subsidiaries
or of the existence of any adverse business conditions threatening the
continued, normal business operations of VJET or any of its Subsidiaries, or of
any agreement, consent or order of the FAA or DOT involving VJET or any of its
Subsidiaries.
(g) VJET shall at all times maintain, preserve and keep its
properties and the properties of its Subsidiaries in good repair, working order
and condition in all material respects so that the business carried on in
connection therewith may be properly and advantageously conducted, except for
those items that have been designated as obsolete or damaged beyond economic
repair.
(h) VJET will make every reasonable effort to fulfill its contractual
obligations and the contractual obligations of its Subsidiaries, and to maintain
in effect its insurance and the insurance of its Subsidiaries.
(i) VJET will not enter into, institute or permit any VJET Subsidiary
to enter into or institute, any employment contract, employee policy manual,
deferred compensation, non-competition, bonus, stock option, profit-sharing,
pension, retirement, consultation after retirement, payments upon retirement,
incentive, extraordinary vacation accrual, education payment or benefit,
disability insurance (including medical, travel, group life or other similar
insurance plans) agreement, plan or arrangement or any other similar arrangement
or plan, or, except as required by applicable law or regulation, renew, amend,
modify or terminate any such arrangement or plan now in existence.
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(j) VJET will not enter into, or permit any Subsidiary to enter into,
any agreement, understanding or commitment, written or oral, with any other
person which would be a breach of the obligations of VJET arising under this
Agreement.
(k) VJET will not make, or permit any Subsidiary to make any loan,
advance or commitment to extend credit to any of the directors, officers or any
affiliated or related persons of the directors or officers of VJET or of any
VJET Subsidiary; renew, or permit any VJET Subsidiary to renew, any outstanding
loan or any outstanding commitment to extend credit to any directors, officers
or any affiliated or related persons of the directors or officers of VJET or of
any VJET Subsidiary; increase, or permit any VJET Subsidiary to increase, any
outstanding loan to any of the directors, officers of any affiliated or related
persons of the directors or officers of VJET or of any VJET Subsidiary; or enter
into any agreement, understanding or commitment, written or oral, which
obligates VJET, any of the VJET Subsidiaries or their successors or assigns to
make any loan or advance or payment to any of the directors or officers or to
any affiliated or related persons of any of the directors or officers of VJET or
of any VJET Subsidiary.
(l) VJET agrees to provide to the law firm or accounting firm
providing the tax opinion referred to in Section 5.02(n) hereof, those customary
representations (to the extent true) which would be required by the Internal
Revenue Service under Revenue Procedure 86-42 to obtain a favorable ruling that
the Merger qualifies as a tax-deferred reorganization under Internal Revenue
Code Section 368(a).
4.03 Airways Stockholder Approval. Subject to Section 4.04 hereof, Airways
----------------------------
agrees to submit this Agreement and the Plan of Merger to its stockholders for
approval, all as provided by law and its Articles of Incorporation, at a meeting
(the "Airways Special Meeting") which shall be held prior to the Closing Date.
The Board of Directors of Airways will, subject to Section 4.04 hereof,
recommend that the stockholders of Airways vote to adopt and approve the Merger
and use its best efforts to solicit from stockholders proxies in favor of such
adoption and approval. By separate agreement, Robert D. Swenson, Lowell T.
Swenson and Carl R. Pohlad (collectively, the "Insiders") have agreed that they
will not dispose of their shares of Airways Common Stock and will vote in favor
of the Merger; provided, however, that the Insiders' obligations under said
Agreement will be suspended if the Board of Directors of Airways determines in
the exercise of its fiduciary duties to entertain, negotiate or participate in
any other Acquisition Proposal for so long as it is so entertaining, negotiating
or participating in any such other Acquisition Proposal (and shall terminate if
Airways accepts a Superior Proposal) and pays the termination fee set forth in
Section 5.04(c).
4.04 No Solicitation. From and after the date hereof, Airways will not,
---------------
and shall use its reasonable best efforts not to permit, any of its officers,
directors, employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries to, directly or indirectly,
solicit, initiate or knowingly encourage (including by way of furnishing
information) any Acquisition Proposal from any person, or engage in or continue
discussions or negotiations relating thereto; provided, however, that Airways
may engage in discussions or negotiations with, and furnish information
concerning Airways and its Subsidiaries, businesses, properties or assets to,
any third party which makes an Acquisition Proposal if the Board of Directors of
Airways concludes in good faith after consultation with its outside counsel (who
may be Airways' engaged outside counsel) that
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the failure to take such action would present a reasonable possibility of
violating the obligations of such Board to Airways or to Airways' stockholders
under applicable law. Airways will promptly (but in no case later than 48 hours)
notify VJET of the receipt of any Acquisition Proposal, including the material
terms and conditions thereof and the identify of the person or group making such
Acquisition Proposal, and will promptly (but in no case later than 48 hours)
notify VJET of any determination by Airways' Board of Directors that a Superior
Proposal (as hereinafter defined) has been made. As used in this Agreement, (i)
"Acquisition Proposal" shall mean any proposal or offer, or any expression of
interest by any third party relating to Airways' willingness or ability to
receive or discuss a proposal or offer, in each case made prior to the
stockholder vote at the Airways Special Meeting, other than a proposal or offer
by VJET or any of its Subsidiaries, for a merger, consolidation or other
business combination involving, or any purchase of, all or substantially all of
the assets of Airways or Airways' Subsidiary or 100% of the voting securities of
Airways, and (ii) "Superior Proposal" shall mean a bona fide Acquisition
Proposal made by a third party on terms that a majority of the members of the
Board of Directors of Airways determines in their good faith reasonable judgment
(based on the advice of an independent financial advisor) may be more favorable
to Airways and to its stockholders than the transactions contemplated hereby and
for which any required financing is committed or which, in the good faith
reasonable judgment of a majority of such members (after consultation with any
independent financial advisor), is then available to such third party.
4.05 VJET Stockholder Approval. VJET agrees to submit to its stockholders
-------------------------
a proposal to amend its Articles of Incorporation and Bylaws as set forth in
Exhibit B annexed hereto and made a part hereof and, if required under Nevada
- ---------
law or by NASDAQ, VJET agrees to submit this Agreement and the Plan of Merger to
its stockholders for approval, all as provided by law and its Articles of
Incorporation, at a meeting (the "VJET Meeting") which shall be held prior to
the Closing Date. The Board of Directors of VJET will recommend that the
stockholders of VJET vote to adopt and approve the amendment to its Articles of
Incorporation, Bylaws and the Merger, and use their best efforts to solicit from
stockholders proxies in favor of such adoption and approval. By separate
agreement, at least three of the following persons (Timothy P. Flynn, Maurice J.
Gallagher, Jr., Lewis H. Jordan and Robert L. Priddy) shall agree that they will
vote in favor of the amendment to VJET's Articles of Incorporation and By-laws
and in favor of the Merger.
4.06 No Granting of Options.
----------------------
(a) Prior to the Closing Date, neither Airways nor any of its
Subsidiaries will, without the prior written consent of VJET, grant any options,
warrants or other rights to purchase or otherwise acquire any shares of its
capital stock or issue any securities convertible into shares of its capital
stock or to accelerate the vesting of any such option, warrant or right.
(b) Prior to the Closing Date, neither VJET nor any of its
Subsidiaries will, without the prior written consent of Airways, grant any
options, warrants or other rights to purchase or otherwise acquire any shares of
its capital stock or issue any securities convertible into shares of its capital
stock or to accelerate the vesting of any such option, warrant or right except
that options may be granted to newly hired executive officers in amounts
consistent with prior practice.
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<PAGE>
4.07 VJET Registration Statement. Prior to the Effective Date of the
---------------------------
Merger, VJET shall have prepared and filed with the SEC, a registration
statement on Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act") , and under the blue sky laws of such
states as may be required by law, for the purpose of registering the shares of
VJET Common Stock into which the shares of Airways Common Stock will be
converted pursuant to Article V of the Plan of Merger, which Registration
Statement is intended to permit Airways' stockholders (other than Airways
Affiliates who would be subject to Rule 144 limitations) to freely trade their
shares. VJET will use reasonable efforts to cause such Registration Statement
to become effective as soon as reasonably practicable.
4.08 Information for Registration Statement and Proxy Statement. Airways
----------------------------------------------------------
and VJET will each furnish to the other such data and information relating to it
as the other may reasonably request for the purpose of including such data and
information in any proxy statement or registration statement which the other may
use in connection with the special meetings of stockholders to be held to
consider and take action with respect to the approval and adoption of this
Agreement and the Plan of Merger.
4.09 Restricted VJET Common Stock. Airways will deliver to VJET not later
----------------------------
than three business days before the Effective Date of the Merger a schedule
listing all Airways Affiliates and the amounts of shares held by each, for the
purpose of permitting VJET to imprint appropriate legends on the certificates
representing the shares of VJET Common Stock to be issued pursuant to the Merger
to Airways Affiliates. For the purposes of this Agreement, "Airways Affiliates"
means each director of Airways and each person who, should such person resell,
transfer or distribute VJET Common Stock acquired by him in connection with the
Merger, would be subject to the requirements of paragraphs (c) and (d) of Rule
145, as amended, under the Securities Act, or who would otherwise be considered
to be an Airways Affiliate under the applicable rules and regulations of the SEC
and the Securities Act.
4.10 Consents. Airways and VJET shall each use its best efforts to obtain
--------
the consent or approval of each person whose consent or approval shall be
required in order to permit the respective party to consummate the Merger
without acceleration of indebtedness of such party or without breaching any
contract to which such party is subject. Airways may not, without VJET's prior
written consent, pay or agree to pay more than a mutually agreed amount to
obtain any such consent.
4.11 Best Efforts. Upon the terms and subject to the conditions of this
------------
Agreement, each of VJET and Airways agrees to use its respective best efforts to
take, or cause to be taken, and to assist and cooperate with the other party
hereto in doing, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
and the Plan of Merger, including, without limitation, using such best efforts
to obtain any necessary actions, waivers, consents and approvals from the DOT,
the FAA and other governmental agencies and make all necessary registrations and
filings (including, without limitation, joint filings with the DOT, the United
States Federal Trade Commission and other governmental agencies).
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<PAGE>
4.12 Indemnification and Insurance.
-----------------------------
(a) VJET agrees that all rights to exculpation and indemnification
for acts or omissions occurring prior to the Effective Date of the Merger now
existing in favor of the current or former directors or officers (the
"Indemnified Parties") of Airways as provided in its charter, by-laws, in any
agreement or any statute or other law shall survive the Merger and shall
continue in full force and effect in accordance with their terms. For six years
from the Effective Date of the Merger, VJET shall indemnify the Indemnified
Parties to the same extent as such Indemnified Parties are entitled to
indemnification pursuant to the preceding sentence.
(b) For six years and one month from the Effective Date of the
Merger, VJET shall maintain in effect directors' and officers' liability
insurance covering those persons who are currently covered by Airways'
directors' and officers' liability insurance policy with respect to all acts
occurring prior to the Effective Date of the Merger. Such continuing liability
insurance shall be maintained with limits not less than $25,000,000 so long as
it is commercially reasonable to do so, but in no event less than the coverage
limits applicable to the then current officers and directors of VJET.
4.13 Governmental Reports.
--------------------
(a) Between the date of this Agreement and the Closing Date, Airways
shall furnish or make available to VJET any and all reports, not heretofore
delivered to VJET under this Agreement or which are filed subsequent to the date
of this Agreement, to any state or federal government, agency or department,
including but not limited to, the FAA, DOT, IRS, EPA, FTC and PBGC.
(b) Between the date of this Agreement and the Closing Date, VJET
shall furnish or make available to Airways any and all reports, not heretofore
delivered to Airways under this Agreement or which are filed subsequent to the
date of this Agreement, to any state or federal government, agency or
department, including but not limited to, the FAA, DOT, IRS, EPA, FTC and PBGC.
4.14 SEC Filings. Each party shall provide the other party with all
-----------
reports and other filings it makes with the SEC under the Securities Act or
under the Exchange Act from the date of this Agreement to the Closing Date.
4.15 Listing of VJET Common Stock. VJET shall use reasonable efforts to
----------------------------
obtain, prior to the Closing Date, approval for listing on the NASDAQ Stock
Market ("NASDAQ"), upon official notice of issuance, the shares of VJET Common
Stock constituting the Merger Price.
4.16 Hart-Scott-Rodino Filing. VJET shall assume the responsibility for
------------------------
completing and filing the Notification and Report Form required by the HSR Act.
Airways shall furnish VJET with all information needed from Airways to complete
the Hart-Scott-Rodino Notification and Report Form, and shall otherwise fully
cooperate with VJET in the completion and filing of the Notification and Report
Form.
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4.17 Fees and Expenses. Except to the extent set forth in Section 5.04(d),
-----------------
all fees and expenses incurred in connection with the Merger and the other
transactions contemplated hereby shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated.
ARTICLE V
Conditions of Merger; Abandonment of Merger
-------------------------------------------
5.01 Conditions of Obligations of VJET. The obligations of VJET to effect
---------------------------------
the Merger shall be subject to the following conditions:
(a) Airways Stockholder and Board of Directors Approvals. Airways
----------------------------------------------------
shall have furnished VJET with (i) evidence that the stockholders of Airways
shall have approved the Merger, (ii) certified copies of resolutions duly
adopted by the Board of Directors of Airways authorizing all necessary and
proper corporate action to enable Airways to comply with the terms of this
Agreement and the Plan of Merger and approving the execution and delivery to
VJET of this Agreement and the execution and delivery of the Plan of Merger to
VJET; and (iii) an Incumbency Certificate for the appropriate officers of
Airways.
(b) Representations and Warranties of Airways to be True. Except
----------------------------------------------------
to the extent waived hereunder, (i) the representations and warranties of
Airways herein contained shall be true on the Closing Date with the same effect
as though made at such time as if none of such representations and warranties
contained any qualifications as to materiality or the absence of a Material
Adverse Effect; provided, however, that notwithstanding the foregoing, this
-------- -------
condition shall be deemed to be satisfied if all breaches of such
representations and warranties, do not cumulatively constitute a Material
Adverse Effect; and (ii) Airways shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it prior to the Effective Date of the Merger. Airways shall
also have delivered to VJET a certificate of Airways, dated the Effective Date
of the Merger and signed by its Chairman of the Board or Presi dent to both of
the aforementioned effects. Notwithstanding the foregoing, VJET shall not rely
on this Section 5.01(b) to excuse its performance hereunder unless: (i) VJET
shall have given Airways written notice of any breach of covenants and Airways
fails to cure such breach within a reasonable time (but not more than ten days)
after receipt of such notice, and (ii) the breach of representations, warranties
or covenants will constitute a Material Adverse Effect with respect to Airways.
(c) Third Party Consents. Airways shall have obtained consents to
--------------------
the transactions contemplated by this Agreement to the extent required from its
bank lender group, from other persons which are parties to material contracts
with Airways or its Subsidiaries (except Comair, Inc. and Delta Air Lines, Inc.)
and from all federal, state or local governmental agencies except to the extent
the failure to obtain one or more consents would not materially affect the
continuing business of the Airways' Subsidiary. There shall have been completed
all Hart-Scott-Rodino and other like governmental filings, and there shall have
been obtained Hart-Scott-Rodino approval or expiration of the applicable waiting
period.
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<PAGE>
(d) Registration of VJET Stock. The Registration Statement shall
--------------------------
have become effective under the Securities Act and no stop order suspending the
effectiveness shall have been issued and no proceedings for that purpose shall
have been instituted, pending or contemplated under such Act, and the shares to
be issued to Airways' stockholders pursuant hereto shall have been duly
registered under the Securities Act.
(e) No Material Adverse Effect. Airways shall not have suffered or
--------------------------
incurred any Material Adverse Effect since March 31, 1997, other than as
disclosed by Airways to VJET (whether by public filings or separate disclosure)
prior to the execution of this Agreement.
(f) VJET Bond Holder Consent. VJET shall have secured the consent
------------------------
to the transactions contemplated hereby by the requisite proportion of the
holders of the VJET 10 1/4% Senior Notes due 2001. VJET agrees to use good faith
efforts to obtain such bondholder consent on or before the earlier of the date
the Registration Statement is declared effective by the SEC or the date that is
sixty (60) days after the date of this Agreement.
(g) Performance of Agreement. There shall not have been issued and
------------------------
be in effect any order of any court or tribunal of competent jurisdiction or
governmental agency which in effect prohibits the performance of this Agreement
or the Merger and the transactions contemplated hereby, or would impose
limitations on the ability of VJET effectively to exercise and possess all the
rights, privileges, immunities and franchises of Airways or of any Airways
Subsidiary as of the Closing Date.
(h) Statutory Requirements; Litigation. All statutory requirements
----------------------------------
for the valid consummation by VJET and Airways of the transactions contemplated
by Agreement and the Plan of Merger shall have been fulfilled; all
authorizations, consents and approvals of all federal, state or local
governmental agencies and authorities required to be obtained in order to permit
con summation by VJET and Airways of the transactions contemplated by this
Agreement and the Plan of Merger and to permit the business presently carried on
by Airways and its Subsidiaries to continue unimpaired immediately following the
Effective Date of the Merger shall have been obtained; the FAA and DOT shall
have approved the transaction in such a manner that Airways and its Subsidiaries
shall not after the Merger become subject to any restrictions currently
applicable to VJET or its Subsidiaries or subject to any restrictions not
currently applicable to Airways and its Subsidiaries; between the date of this
Agreement and the Effective Date of the Merger, no governmental agency, whether
federal, state or local, shall have instituted (or threatened to institute
either orally or in a writing directed to Airways, any of its Subsidiaries, VJET
or any of its Subsidiaries) an investigation which is pending on the Effective
Date of the Merger relating to the Merger and between the date of this Agreement
and the Effective Date of the Merger no action or proceeding shall have been
instituted or, to the knowledge of VJET, shall have been threatened before a
court or other governmental body or by any public authority to restrain or
prohibit the transaction contemplated by this Agreement or the Plan of Merger or
to obtain damages in respect thereof.
(i) Opinion of Counsel of Airways. VJET shall have received from
-----------------------------
Briggs & Morgan, counsel to Airways, an opinion, dated the Closing
Date, in form and substance satisfactory
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to VJET's counsel, Ellis, Funk, Goldberg, Labovitz & Dokson, P.C., to the effect
that (i) each of Airways and its Subsidiaries is a corporation duly organized
and validly existing and in good standing under the laws of the jurisdiction of
its respective incorporation, (ii) each of Airways and its Subsidiaries is duly
qualified or licensed, as may be required, as a foreign corporation, and in good
standing in each jurisdiction where the failure to do so would constitute a
Material Adverse Effect, (iii) each of Airways and its Subsidiaries has the
corporate power to carry on its business as now being conducted, (iv) the
authorized capital stock of Airways is as set forth in Section 2.03 hereof, and
stating the number of such shares which have been issued, and that such issued
shares have been duly authorized, are validly issued and outstanding, and are
fully paid and nonassessable, (v) all of the outstanding shares of capital stock
of the Airways Subsidiaries are directly or indirectly owned free and clear of
all liens, charges or encumbrances, all of such shares have been duly
authorized, are validly issued and outstanding, and are fully paid and
nonassessable, and neither Airways nor its Subsidiaries is a party to or bound
by any outstanding option or agreement to sell, issue or otherwise dispose of
any capital stock of Airways or its Subsidiaries except the Airways options and
warrants referred to in Section 2.03 hereof, and (vi) this Agreement and the
Plan of Merger each has been duly executed and delivered by Airways and is the
valid, binding and enforceable obligation of Airways (subject to equity
principles of general application and to applicable bankruptcy, reorganization,
insolvency and moratorium laws and other laws from time to time in effect
affecting the enforcement of creditor's rights generally and no opinion shall be
required with respect to the enforceability of any liquidated damage provision
contained herein), and all corporate action by the Board of Directors and
stockholders of Airways required to authorize the Merger has been taken, and
Airways has the corporate power to effect the Merger provided for in this
Agreement and the Plan of Merger. In rendering such opinion such counsel may
rely, to the extent such counsel deems such reliance necessary or appropriate,
on opinions of local counsel as to matters involving the law other than that of
the United States or the State of Delaware and, as to matters of fact, upon
certificates of state officials and of corporate officers of Airways, provided
the extent of such reliance is specified in such opinion.
(j) VJET Stockholder Approval. The holders of a majority of the
-------------------------
outstanding shares of VJET Common Stock shall have approved the amendment to
VJET's Articles of Incorporation, the amendment to the By-laws set forth in
Exhibit "B" attached hereto and the Merger at a meeting of stockholders duly
called for such purpose.
(k) Plan of Merger. Airways shall have delivered to VJET a duly
--------------
executed copy of the Plan of Merger and Articles of Merger.
(l) Listing of VJET Common Stock. The shares of VJET Common Stock to
----------------------------
be delivered to Airways stockholders in payment of the Merger Price shall have
been approved for listing on NASDAQ, upon official notice of issuance.
(m) Fairness Opinion. The Board of Directors of VJET shall have
----------------
received a written opinion from The Robinson-Humphrey Company, Inc. dated as of
the date of the Proxy Statement relating to VJET's stockholder meeting
contemplated by Section 5.01(j), in customary form, stating that the terms of
the Merger are fair to the stockholders of VJET from a financial point of view;
provided, however, that this condition shall be deemed to have been waived if
(i) VJET
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<PAGE>
does not receive such fairness opinion on or before the date of such Proxy
Statement, and (ii) VJET does not terminate this Agreement as provided in
Section 5.03(g). VJET agrees to use its good faith efforts to obtain such
- ---------------
fairness opinion within such time period.
(n) Minute Books and Stock Ledgers. Airways shall have delivered to
------------------------------
VJET the minute books and stock ledgers for Airways and each of its
Subsidiaries.
(o) Tax Opinion. VJET shall have received a tax opinion from Ernst &
-----------
Young LLP to the effect that the Merger will be treated for federal income tax
purposes as a tax free reorganization within the meaning of Internal Revenue
Code Section 368(a); provided, however, that if Ernst & Young LLP does not
provide such opinion, then Airways shall have the right to have such opinion
provided by Airways' counsel or independent public accountants.
5.02 Conditions of Obligation of Airways. The obligation of Airways to
-----------------------------------
effect the Merger shall be subject to the following conditions:
(a) VJET Stockholders and Board of Director Approvals. VJET shall
-------------------------------------------------
have furnished Airways with (i) evidence that the stockholders of VJET shall
have approved the amendment to its Articles of Incorporation and Bylaws set
forth in Exhibit A and, if required by NASDAQ, the Merger (ii) certified copies
of resolutions duly adopted by its Board of Directors authorizing all necessary
and proper corporate action to enable VJET to comply with the terms of this
Agreement and the Plan of Merger and approving the execution and delivery to
Airways of this Agreement and the Plan of Merger; and (iii) Incumbency
Certificates for the officers of VJET.
(b) Representations and Warranties of VJET to be True. Except to the
-------------------------------------------------
extent waived hereunder, (i) the representations and warranties of VJET herein
contained shall be true on the Closing Date with the same effect as though made
at such time as if none of such representations and warranties contained any
qualifications as to materiality or the absence of a Material Adverse Effect;
provided, however, notwithstanding the foregoing this condition shall be deemed
- -------- -------
to be satisfied if all breaches of such representations and warranties do not
cumulatively constitute a Material Adverse Effect; and (ii) VJET shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it prior to the Effective Date of
the Merger. VJET shall also have delivered to Airways a certificate of VJET,
dated the Effective Date of the Merger and signed by its Chairman of the Board
or President as to both of the aforementioned effects. Notwithstanding the
foregoing, Airways shall not rely on this Section 5.02(b) to excuse its
performance hereunder unless: (i) Airways shall have given VJET written notice
of any breach of covenants and VJET fails to cure such breach within a
reasonable time (but not more than ten days) after receipt of such notice, and
(ii) the breach of representations, warranties or covenants will constitute a
Material Adverse Effect with respect to VJET or has or is likely to materially
adversely affect VJET's stock price.
(c) Third Party Consents. VJET shall have obtained consents to the
--------------------
transactions contemplated by this Agreement to the extent required from all
federal, state or local governmental agencies except to the extent the failure
to obtain one or more consents would not materially affect VJET's continuing
business. There shall have been completed all Hart-Scott-Rodino and other like
-29-
<PAGE>
governmental filings, and there shall have been obtained Hart-Scott-Rodino
approval or expiration of the applicable waiting period.
(d) VJET Bondholder Consent. VJET shall have secured the consent of
-----------------------
the requisite proportion of the holders of the VJET 10 1/4% Senior
Notes due 2001 to the transactions contemplated hereby.
(e) Registration of VJET Stock. The Registration Statement shall
--------------------------
have become effective under the Securities Act and all other applicable statutes
and no stop order suspending the effectiveness shall have been issued and no
proceedings for that purpose shall have been instituted, pending or contemplated
under such Act, and the shares to be issued to Airways' stockholders pursuant
hereto shall have been duly registered under the Securities Act.
(f) No Material Adverse Effect. VJET shall not have suffered or
---------------------------
incurred any Material Adverse Effect since March 31, 1997, other than as
disclosed by VJET to Airways (whether by public filings or separate disclosure)
prior to the execution of this Agreement.
(g) Statutory Requirements; Litigation. All statutory requirements
----------------------------------
for the valid consummation by VJET and Airways of the transaction contemplated
by this Agreement and the Plan of Merger shall have been fulfilled; all
authorizations, consents and approvals of all federal, state or local
governmental agencies and authorities required to be obtained in order to permit
consummation by VJET and Airways of the transactions contemplated by this
Agreement and the Plan of Merger and to permit the business presently carried on
by VJET to continue unimpaired immediately following the Effective Date of the
Merger shall have been obtained; the FAA and DOT shall have approved the
transaction in such a manner that Airways and its Subsidiaries will not after
the Merger become subject to any restrictions currently applicable to VJET or
its Subsidiaries or subject to any restrictions not currently applicable to
Airways and its Subsidiaries; between the date of this Agreement and the
Effective Date of the Merger no governmental agency, whether federal, state or
local, shall have instituted (or threatened to institute either orally or in a
writing directed to Airways, any of its Subsidiaries, VJET or its Subsidiaries)
an investigation which is pending on the Effective Date of the Merger relating
to the Merger and between the date of this Agreement and the Effective Date of
the Merger no action or proceeding shall have been instituted or, to the
knowledge of Airways, shall have been threatened before a court or other
governmental body or by any public authority to restrain or prohibit the
transaction contemplated by this Agreement or the Plan of Merger or to obtain
damages in respect thereof.
(h) Performance of Agreement. There shall not have been issued and
------------------------
be in effect any order of any court or tribunal of competent jurisdiction or
governmental agency which in effect prohibits the performance of this Agreement
or the Merger and the transactions contemplated hereby.
-30-
<PAGE>
(i) Opinion of Counsel of VJET. Airways shall have received from
--------------------------
Ellis, Funk, Goldberg, Labovitz & Dokson, P.C., counsel to VJET, an opinion,
dated the Closing Date, in form and substance satisfactory to Airways' counsel,
Briggs & Morgan to the effect that (i) VJET is a corporation duly organized and
validly existing and in good standing under the laws of the State of Nevada,
(ii) VJET has the corporate power to carry on its business as now being
conducted, (iii) the authorized capital stock of VJET is as set forth in Section
3.03 hereof, and stating the number of shares of such authorized capital stock
which are issued, that such issued shares have been duly authorized, are validly
issued and outstanding, and are fully paid and nonassessable, (iv) the shares of
VJET Common Stock for which the shares of Airways Common Stock are to be
exchanged pursuant to the Plan of Merger have been duly authorized and,
immediately after the Effective Date of the Merger, will be duly and validly
issued and will be fully paid and nonassessable, (v) this Agreement and the Plan
of Merger have been duly executed and delivered by VJET and this Agreement is
the valid, binding and enforceable (subject to equity principles of general
application and to bankruptcy, reorganization, insolvency and moratorium laws
and other laws from time to time in effect affecting the enforcement of
creditors' rights generally and no opinion shall be required with respect to the
enforceability of any liquidated damage provision contained herein) obligation
of VJET, the Plan of Merger is the valid and binding obligation of VJET, all
corporate action by the Board of Directors of VJET and the stockholders of VJET
required to authorize the Merger has been taken, and VJET has the corporate
power to effect the Merger provided for in this Agreement and the Plan of
Merger, and (vi) the Registration Statement shall have been declared effective
by the SEC. In rendering such opinion such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, on opinions of local
counsel as to matters involving the law other than that of the United States or
the State of Nevada and, as to matters of fact, upon certificates of state
officials and of corporate officers of VJET, provided the extent of such
reliance is specified in such opinion.
(j) Airways Stockholder Approval. The holders of a majority of
----------------------------
the outstanding shares of Airways Common Stock shall have approved the Merger at
a meeting of stockholders duly called and held for such purpose.
(k) Plan of Merger. VJET shall have delivered to Airways a duly
--------------
executed copy of the Plan of Merger and Articles of Merger containing the Plan
of Merger.
(l) Listing of VJET Common Stock. The shares of VJET Common Stock to
----------------------------
be delivered to Airways stockholders in payment of the Merger Price shall have
been approved for listing on NASDAQ, upon official notice of issuance.
(m) Fairness Opinion. The Board of Directors of Airways shall have
----------------
received a written opinion from Paine Webber Incorporated dated as of the date
of the Proxy Statement relating to Airways' stockholders meeting contemplated by
Section 5.02(j), in customary form, stating that the terms of the Merger are
fair to the stockholders of Airways from a financial point of view; provided,
however, that this condition shall be deemed to have been waived if (i) Airways
does not receive such fairness opinion on or before the date of said Proxy
Statement, and (ii) Airways does not terminate this Agreement as provided in
Section 5.03(h). Airways agrees to use its good faith efforts to obtain such
fairness opinion within such time period.
-31-
<PAGE>
(n) Tax Opinion. Airways shall have received a tax opinion from
-----------
Briggs & Morgan to the effect that the Merger will be treated for federal income
tax purposes as a tax free reorganization within the meaning of Internal Revenue
Code Section 368(a) and that the tax treatment to be accorded Airways'
stockholders in connection with the spin-off of Airways which occurred in
September 1995, shall not be adversely affected by the consummation of the
transactions contemplated hereby; provided, however, that if Briggs & Morgan
does not provide such opinion, then VJET shall have the right to have such
opinion provided by VJET's counsel or independent public accountants. For
purposes of this subparagraph (n), the law firm or accounting firm may assume
that the Airways' stockholders will maintain their respective interests in VJET
after the Merger to the extent necessary to support the rendering of such
favorable opinion.
(o) No Event of Default on VJET Secured Debt. There shall not be then
----------------------------------------
in existence any event of default under any of VJET's secured debt.
5.03 Termination of Agreement and Abandonment of Merger. Anything herein to
--------------------------------------------------
the contrary notwithstanding, this Agreement and the Merger contemplated hereby
may be terminated at any time before the Effective Date of the Merger, whether
before or after approval of this Agreement by the respective stockholders of
VJET and Airways, as follows, and in no other manner:
(a) Mutual Consent. By mutual consent of the Boards of Directors of
--------------
VJET and Airways.
(b) Conditions of Airways Not Met. By the Board of Directors of VJET
-----------------------------
if, by November 30, 1997 or such later date as may be determined by mutual
agreement of VJET and Airways, the conditions set forth in Section 5.01 of this
Article V shall not have been met (or waived as provided in Article VIII of this
Agreement).
(c) Conditions of VJET Not Met. By the Board of Directors of Airways
--------------------------
if, by November 30, 1997 or such later date as may be determined by mutual
agreement of VJET and Airways, the conditions set forth in Section 5.02 of this
Article V shall not have been met (or waived as provided in Article VIII of this
Agreement).
(d) Expiration Date. By the Board of Directors of either VJET or
---------------
Airways if the Merger shall not have become effective by November 30, 1997,
which date may be extended by mutual agreement of the Board of Directors of VJET
and Airways.
(e) Superior Proposal. By Airways if Airways receives a Superior
-----------------
Proposal and pays the termination fee set forth in Section 5.06(a).
(f) Acquisition Proposal. By VJET if Airways receives an Acquisition
--------------------
Proposal which Airways continues to entertain or negotiate for a period of 21
days after its receipt.
(g) VJET Fairness Opinion. By VJET if it does not receive the
fairness opinion referred to in Section 5.01(m) within the time period provided
therein; provided, however, that this
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<PAGE>
right to terminate may not be exercised later than ten (10) days after the date
the Registration Statement is declared effective by the SEC.
(h) Airways Fairness Opinion. By Airways if it does not receive the
------------------------
fairness opinion referred to in Section 5.02(m) within the time period provided
therein; provided, however, that this right to terminate may not be exercised
later than ten (10) days after the date the Registration Statement is declared
effective by the SEC.
5.04 Liquidated Damages to VJET.
--------------------------
(a) In the event VJET is ready, willing and able to consummate the
Merger, but Airways shall fail to consummate the Merger after all of the
conditions to Airways' performance as set forth in Section 5.02 hereof shall
have been satisfied or shall have been waived by Airways, then Airways shall pay
to VJET upon its demand therefor, in immediately available funds, Five Million
Dollars ($5,000,000) as liquidated damages and not as a penalty.
(b) In the event VJET shall elect not to consummate the Merger as a
result of Airways' failure to comply in all material respects with all material
covenants required to be performed by Airways prior to the Effective Date of
Merger as provided in Sections 4.01 and 4.06 of this Agreement, then Airways
shall pay to VJET upon its demand therefor, in immediately available funds, Five
Million Dollars ($5,000,000) as liquidated damages and not as a penalty.
(c) In the event the Merger is not consummated for the reasons set
forth in this Section 5.04, VJET will suffer substantial damage to its
reputation and public image, in addition to the costs and expenses incurred by
it in the pursuit of this transaction. Airways acknowledges and agrees that the
actual losses to be suffered by VJET in the event the Merger is not consummated
for the reasons set forth in this Section 5.04 will be difficult to ascertain
and that these liquidated damages have been arrived at after a good faith effort
to estimate such losses and are reasonable.
5.05 Liquidated Damages to Airways.
-----------------------------
(a) In the event Airways is ready, willing and able to consummate the
Merger, but VJET shall fail to consummate the Merger after all of the conditions
to VJET's performance as set forth in Section 5.01 of this Agreement shall have
been satisfied or shall have been waived by VJET, then VJET shall pay to Airways
upon its demand therefor, in immediately available funds, Five Million Dollars
($5,000,000) as liquidated damages and not as a penalty.
(b) In the event Airways shall elect not to consummate the Merger as
a result of VJET's failure to comply in all material respects with all material
covenants required to be performed by VJET prior to the Effective Date of Merger
as provided in Sections 4.02 and 4.06 of this Agreement, then VJET shall pay to
Airways upon its demand therefor, in immediately available funds, Five Million
Dollars ($5,000,000) as liquidated damages and not as a penalty.
(c) In the event the Merger is not consummated for the reasons set
forth in this Section 5.05, Airways will suffer substantial damage to its
reputation and public image, in addition
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<PAGE>
to the costs and expenses incurred by it in the pursuit of this transaction.
VJET acknowledges and agrees that the actual losses to be suffered by Airways in
the event the Merger is not consummated for the reasons set forth in this
Section 5.05 will be difficult to ascertain and that these liquidated damages
have been arrived at after a good faith effort to estimate such losses and are
reasonable.
5.06 Certain Termination Payments.
----------------------------
(a) In the event Airways terminates this Agreement pursuant to
Section 5.03(e), then Airways shall pay to VJET, upon VJET's demand, a
termination fee equal to the sum of Three Million Dollars ($3,000,000) in
immediately available funds.
(b) In the event VJET terminates this Agreement pursuant to Section
5.03(f), then Airways shall pay to VJET, upon VJET's demand all of VJET's out-
of-pocket costs incurred to third parties in connection with this Agreement and
the transactions contemplated hereby.
ARTICLE VI
Determination of the Merger Price
---------------------------------
6.01 The Merger Price. Upon the Effective Date of the Merger, holders of
----------------
Airways Common Stock shall be entitled to receive the portion of the Merger
Price to which each is entitled pursuant to the Plan of Merger. The Merger
Price shall be paid in the form of VJET Common Stock. The total number of
shares of VJET Common Stock to be issued to the stockholders of Airways in the
Merger (the "Merger Price") shall be equal to the number of shares of Airways
Common Stock issued and outstanding on the Closing Date.
ARTICLE VII
Other Agreements After Closing
------------------------------
7.01 Corporate Governance After Merger. VJET shall expand its Board of
---------------------------------
Directors to seven (7) members effective as of the Closing Date. Four (4) of
the members of the Board of Directors will be selected by VJET prior to the
Closing and three (3) of the members of the Board of Directors will be selected
by Airways prior to the Closing. Said Directors will be elected for a term
expiring upon VJET's 1999 annual stockholders' meeting.
7.02 Press Releases. Each party shall consult with the other party hereto
--------------
before publishing, releasing or otherwise disseminating to the public any
information, publicity or statements concerning this Agreement, the Plan of
Merger or any of the transactions herein contemplated; provided, however, that
this section shall not be construed to prohibit any of the
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<PAGE>
parties hereto from making announcements to the press with respect to other
factual business or financial developments concerning its operations or making
any such releases as are time-critical under applicable law or regulations.
7.03 Other Agreements.
----------------
(a) Promptly after the Effective Date of the Merger, VJET shall issue
lifetime passes to all persons who were members of Airways' Board of Directors
immediately prior to the Effective Date of the Merger, which passes shall
provide the same level of authority as the passes granted to Robert L. Priddy
and Lewis H. Jordan and may be used by each such person, his spouse and
dependents.
(b) VJET will enter into a consulting agreement with each of Robert
L. Priddy and Lewis H. Jordan providing for: (i) a five (5) year term, (ii)
compensation of $100,000 per year, (iii) their respective option agreements with
VJET will be amended such that such options will remain exercisable until the
expiration date thereof notwithstanding his termination of employment, (iv)
lifetime pass benefits for himself, his spouse and dependents, and (v) lifetime
eligibility for coverage in VJET's health insurance plan in effect from time to
time. In consideration therefor, each of them agrees to devote such time during
such five year period as may be necessary to supervise on behalf of VJET in
connection with its defense to litigation in process prior to the Closing Date.
7.04 Tax Treatment. Each of VJET and Airways will use its best efforts to
-------------
cause the Merger to qualify as a reorganization under the provisions of Section
368(a) of the Code. Neither party nor any affiliate shall take any action that
would cause the Merger not to qualify as a reorganization under Section 368(a)
except to the extent that such action is specifically contemplated by this
Agreement.
ARTICLE VIII
Termination of Obligations and Waiver of Conditions
---------------------------------------------------
8.01 Termination. In the event that this Agreement shall be terminated
-----------
pursuant to Section 5.03 of Article V hereof, all further obligations of the
parties hereto under this Agreement shall terminate without further liability of
any party to another and each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel. The foregoing shall not apply to the extent
certain provisions survive the termination of this Agreement as provided in
Section 9.06.
8.02 Waiver. If any of the conditions specified in Section 5.01 of Article
------
V hereof has not been satisfied, VJET may nevertheless, at the election of VJET,
proceed with the transactions contemplated hereby and, if any of the conditions
specified in Section 5.02 of Article V hereof has
-35-
<PAGE>
not been satisfied, Airways may nevertheless, at its election, proceed with the
transactions contemplated hereby. Any such election to proceed shall be
evidenced by a certificate executed on behalf of the electing party by its
Chairman of the Board or President.
8.03 Confidentiality. In the event of the termination of the transactions
---------------
contemplated by this Agreement, all information acquired by either VJET or
Airways, shall be held in the strictest of confidence if not public information,
and neither party shall use such information to the disadvantage of the other.
ARTICLE IX
General
-------
9.01 Amendments. This Agreement and the form of any exhibit attached hereto
----------
may be amended in writing by the parties hereto before and after the meeting of
stockholders referred to in Sections 4.03 and 4.04 hereof at any time prior to
the Effective Date of the Merger.
9.02 "Subsidiaries". A "Subsidiary" with respect to any corporation
--------------
referred to in this Agreement shall mean a corporation (or equivalent legal
entity under foreign law) of which Airways, VJET or any other corporation
referred to in this Agreement, as the case may be, owns directly or indirectly
50% or more of the stock the holders of which are ordinarily and generally, in
the absence of contingencies, entitled to vote for the election of a majority of
the directors.
9.03 "Knowledge". Wherever in this Agreement any representation or warranty
-----------
is expressed in the terms of "knowledge" or "to the best of its knowledge" of
Airways or VJET, such knowledge shall be deemed to refer to matters which the
respective officers and directors of Airways or VJET, as the case may be, knew
or should have known after diligent inquiry.
9.04 "Material Adverse Effect". With respect to any person or entity shall
-------------------------
mean any event, condition, development or effect which, individually or in the
aggregate, shall have had, or insofar as can reasonably be foreseen will have, a
material adverse effect on the business, operations, assets, liabilities or
condition (financial or otherwise) or prospects of a person and its subsidiaries
(if applicable) taken as a whole. For purposes of this Agreement, the
termination or expiration without renewal of Airways' code sharing agreement
with Comair, Inc. or the termination of Airways' lease of gate space from Delta
Air Lines, Inc. at the Orlando airport shall not be a Material Adverse Effect.
9.05 Schedules. Each Disclosure Statement described in this Agreement has
---------
been delivered simultaneously with the execution and pursuant to the terms of
this Agreement. Any information supplied to either party in writing between the
date hereof and the Closing Date if accepted by either party shall be made a
part of the Schedules hereto and be deemed to have been disclosed to the other
party for all purposes of this Agreement.
-36-
<PAGE>
9.06 No Survival of Representations and Warranties. The respective
---------------------------------------------
covenants, representations and warranties of Airways and VJET shall expire and
be terminated and extinguished on the Effective Date of the Merger, except for
Section 4.12 relating to indemnification and D&O liability insurance and those
covenants contained in Article VII hereof. Except for the provisions of
Sections 5.04, 5.05, 7.01, and 7.03, the confidentiality provisions of Sections
4.01(a) and 4.02(a) and 8.03, the respective covenants, representations and
warranties of Airways and VJET shall expire and be terminated and extinguished
in the event of the termination and abandonment of this Agreement as provided in
Article VIII hereof. No party to this Agreement shall have any liability to any
other party to this Agreement after the Effective Date of the Merger as a result
of any breach of any covenant, representation or warranty contained in this
Agreement.
9.07 Governing Law. This Agreement and the legal relations between the
-------------
parties shall be governed by and construed in accordance with the laws of the
State of Nevada with respect to the Merger and governed by and construed in
accordance with the laws of the State of Georgia in all other respects.
9.08 Notices. All notices hereunder shall be deemed given if in writing and
-------
delivered personally or sent by telecopy (with written evidence of receipt),
telegram, registered mail or certified mail (return receipt requested) to the
parties at the following addresses (or at such other addresses as shall be
specified by like notice):
(a) If to VJET, to: ValuJet, Inc.
1800 Phoenix Blvd.
Suite 126
Atlanta, Georgia 30349
Attn: D. Joseph Corr
Fax: (770) 907-2586
With a copy to: Ellis, Funk, Goldberg, Labovitz &
Dokson, P.C.
3490 Piedmont Road
Suite 400
Atlanta, Georgia 30305
Attn: Robert B. Goldberg
Fax: (404) 233-2188
(b) If to Airways, to Airways Corporation
6280 Hazeltine National Drive
Orlando, Florida 32822
Attn: Robert D. Swenson
Fax: (407) 888-9693
-37-
<PAGE>
With a copy to: Briggs & Morgan
2400 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402
Attn: R. L. Sorenson, Esq.
Fax: (612) 334-8650
Any such notice or communication shall be deemed to have been given as of three
days after posting, one day after next day delivery service or upon personal
delivery or confirmed telecopy.
9.09 No Assignment. This Agreement may not be assigned by operation of law
-------------
or otherwise without the express written consent of the other parties.
9.10 Headings. The descriptive headings of the several Articles, Sections
--------
and paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
9.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties hereto.
9.12 Entire Agreement. This Agreement and the exhibits hereto and other
----------------
documents delivered or to be delivered pursuant hereto or incorporated by
reference herein, taken together contain the entire agreement between the
parties hereto concerning the transactions contemplated hereby and supersede all
prior agreements or understandings, written or oral, between the parties hereto
relating to the subject matter hereof. No oral representation, agreement or
understanding made by any party hereto shall be valid or binding upon such party
or any other party hereto.
9.13 Severability. The parties intend for this Agreement to be severable.
------------
It is mutually agreed that in the event any paragraph, subparagraph, section,
subsection, sentence, clause or phrase hereof shall be construed as illegal,
invalid or unenforceable for any reason, such determination shall in no manner
affect the other paragraphs, subparagraphs, sections, subsections, sentences,
clauses or phrases hereof which shall remain in full force and effect, as if the
said paragraph, subparagraph, section, subsection, sentence, clause or phrase so
construed as illegal, invalid or unenforceable were not originally a part
hereof, and the enforceability hereof as a whole will not be affected. The
parties hereby declare that they would have agreed to the remaining parts hereof
if they had known that such parts hereof would be construed as illegal, invalid
or unenforceable.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
VALUJET, INC.
By: /s/ Robert L. Priddy
--------------------
AIRWAYS CORPORATION
By: /s/ Robert D. Swenson
---------------------
-39-
<PAGE>
DEFINED TERMS
-------------
<TABLE>
<CAPTION>
Defined Term Section Reference
- ------------ -----------------
<S> <C>
Acquisition Proposal Section 4.05
Airways Introductory Paragraph
Airways Affiliates Section 4.09
Airways Common Stock Recitals
Airways Financial Statements Section 2.04(a)
Airways' Intellectual Property Section 2.17(a)
Airways Plans Section 2.03
Airways SEC Filings Section 2.04(a)
Airways Special Meeting Section 4.03
Closing Date or Closing Section 1.02
Dissenting Stockholder Section 6.02
DOT Section 2.08
Effective Date of the Merger Section 1.01
Exchange Act Section 2.04(a)
FAA Section 2.08
GAAP Section 2.09
HSR Act Section 2.05
Insiders Section 4.03
Material Adverse Effect Section 9.04
Merger Recitals
Merger Price Section 6.01
NASDAQ Section 4.15
Plan of Merger Recitals
Proxy Statement Section 5.01(j)
Registration Statement Section 4.07
SEC Section 2.04(a)
Securities Act Section 4.07
Subsidiaries Section 9.02
Superior Proposal Section 4.04
VJET Introductory Paragraph
VJET Financial Statement Section 3.04(a)
VJET Meeting Section 4.04
VJET Plans Section 3.03
VJET SEC Filings Section 3.04(a)
VJET's Intellectual Property Section 3.19(a)
</TABLE>
-40-
<PAGE>
EXHIBIT "B"
TO
PLAN OF REORGANIZATION
AND AGREEMENT OF MERGER
BETWEEN
VALUJET, INC.
AND
AIRWAYS CORPORATION
The last sentence of Section 4.2 of the By-Laws of ValuJet, Inc. shall be
amended to read as follows:
"The Directors shall be elected at an annual or special
meeting of the Shareholders and shall serve for a term of
one (1) year or until their successors are elected and
qualified; provided, however, that the Board of Directors in
place as of the effective date of the merger of Airways
Corporation with and into the corporation shall serve for a
term that will expire upon the election of Directors at the
corporation's 1999 annual meeting of Shareholders or until
their successors are elected and qualified."
<PAGE>
EXHIBIT 11
VALUJET, INC.
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-----------------------------------------------------------------
1996 1997 1996 1997
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average common and common
equivalent shares outstanding during the period 54,663,481 54,905,963 54,625,265 54,891,558
Net effect of dilutive stock options and stock
warrants - based on the treasury stock method - - 4,962,185 -
-----------------------------------------------------------------
Total common and common equivalent shares 54,663,481 54,905,963 59,587,450 54,891,558
=================================================================
Net income (loss) $ (9,573,884) $ (9,225,695) $ 1,092,890 $ (27,732,679)
=================================================================
Net income per share $ (0.18) $ (0.17) $ 0.02 $ (.51)
=================================================================
FULLY DILUTED:
Weighted average common and common
equivalent shares outstanding during the period 54,663,481 54,905,963 54,625,265 54,891,558
Net effect of dilutive stock options and stock
warrants - based on the treasury stock method - - 5,004,314 -
-----------------------------------------------------------------
Total common and common equivalent shares 54,663,481 54,905,963 59,629,579 54,891,558
=================================================================
Net income $ (9,573,884) $ (9,225,695) $ 1,092,890 $ (27,732,679)
=================================================================
Net income per share $ (0.18) $ (0.17) $ 0.02 $ (.51)
=================================================================
</TABLE>
<PAGE>
EXHIBIT 2.2
PLAN OF MERGER
PLAN OF MERGER, dated July 10, 1997, by and between Airways Corporation, a
Delaware corporation ("Airways"), and ValuJet, Inc., a Nevada corporation
("VJET"), herein sometimes referred to as the "Surviving Corporation", said
corporations being hereinafter collectively referred to as the "Constituent
Corporations".
W I T N E S S E T H:
WHEREAS, Airways is a corporation organized and existing under and by
virtue of the laws of the State of Delaware and having an authorized
capitalization of 1,000,000 shares of preferred stock, $.01 par value per share,
no shares of which are issued or outstanding and 19,000,000 shares of common
stock, $.01 par value per share ("Airways Common Stock"), of which 9,067,937
shares are issued and outstanding as of the date of this Plan of Merger; and
WHEREAS, VJET is a corporation organized and existing under and by virtue
of the laws of the State of Nevada and having an authorized capitalization of
5,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"), no shares of which are issued or outstanding and 1,000,000,000 shares
of Common Stock, par value $.001 per share ("VJET Common Stock") of which
54,969,238 shares are issued and outstanding as of the date of this Plan of
Merger; and
WHEREAS, Airways and VJET have entered into a Plan of Reorganization and
Agreement of Merger, dated as of July 10, 1997 (the "Merger Agreement"),
providing, among other things, for the execution and acknowledgment of this Plan
of Merger, the execution, acknowledgment and filing of Articles or Certificates
of Merger and the merger of Airways with and into VJET upon the terms set forth
in the Merger Agreement and this Plan of Merger; and
WHEREAS, the respective Boards of Directors of each of the Constituent
Corporations deem it advisable and in the best interest of each of such
corporations and their respective stockholders that Airways be merged with and
into VJET in the manner contemplated herein and in the Merger Agreement and have
adopted resolutions approving this Agreement and the Merger Agreement and have
recommended that the merger of Airways with and into VJET (the
<PAGE>
"Merger") be approved, and that this Plan of Merger and the Merger Agreement be
approved and adopted by the stockholders of VJET and by the stockholders of
Airways;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, and subject to the conditions herein set forth, and
for the purpose of stating the terms and conditions of the Merger, the mode of
carrying the same into effect, the manner of exchanging the shares of VJET
Common Stock issued and outstanding immediately prior to the effective date of
the Merger for the Merger Price in accordance with Article V hereof, and such
other details and provisions as are deemed desirable all as contemplated by
Section 78.451 of the Nevada Revised Statutes and Section 252 of the Delaware
General Corporation Law, the parties hereto have agreed, and do hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
ARTICLE I.
The Constituent Corporations shall be merged into a single corporation by
Airways merging into and with VJET, the Surviving Corporation, which shall
survive the Merger, pursuant to the provisions of the Nevada Revised Statutes
and the Delaware General Corporation Law. Upon such Merger, the separate
corporate existence of Airways shall cease and the Surviving Corporation shall
become the owner, without transfer, of all rights and property of the
Constituent Corporations, and the Surviving Corporation shall become subject to
all the debt and liabilities of the Constituent Corporations in the same manner
as if the Surviving Corporation had itself incurred them.
ARTICLE II.
The name of the Surviving Corporation (heretofore "ValuJet, Inc.") shall be
changed to AirTran Holdings, Inc.
ARTICLE III.
A. On the effective date of the merger, which shall be the day the
Articles or Certificates of Merger shall have been accepted for filing and filed
with the Secretary of the State of the States of Nevada and Delaware (the
"Effective Date of the Merger"), the Articles of Incorporation of VJET shall be
the Articles of Incorporation of the Surviving Corporation, provided they shall
be amended as set forth in ARTICLE II above.
<PAGE>
B. On the Effective Date of the Merger, the bylaws of VJET, as in effect
on the Effective Date of the Merger, shall remain the bylaws of the Surviving
Corporation. Subsequent to the Effective Date of the Merger, such bylaws shall
be the bylaws of the Surviving Corporation until they shall thereafter be duly
amended, except that such Bylaws shall be amended as set forth in Exhibit B in
the Merger Agreement.
ARTICLE IV.
A. On the Effective Date of the Merger the members of the board of
directors of the Surviving Corporation shall be as follows: [FOUR PERSONS TO BE
SELECTED BY VJET PRIOR TO THE CLOSING AND THREE PERSONS TO BE SELECTED BY
AIRWAYS PRIOR TO THE CLOSING] all of whom shall continue to hold their positions
as directors until the 1999 shareholders meeting and thereafter until the
election and qualification of their respective successors or until they shall
resign, die or otherwise cease to hold such directorships in accordance with the
bylaws of the Surviving Corporation.
B. The Chairman of the Board immediately after the Effective Date of the
Merger shall be Robert D. Swenson, a non-employee Director to be designated by
Airways.
C. As of the Effective Date of the Merger, D. Joseph Corr shall become
President and Chief Executive Officer of the Surviving Corporation. All other
officers of the Surviving Corporation shall be selected by the Chief Executive
Officer, subject to the approval of the Board of Directors.
ARTICLE V.
A. On the Effective Date of the Merger, each of the then issued and
outstanding shares of VJET Common Stock shall continue to be an issued and
outstanding share of Common Stock of the Surviving Corporation.
B. On the Effective Date of the Merger, each of the then issued and
outstanding shares of Airways Common Stock shall be converted into the right to
receive the "Merger Price" which shall be one (1) share of Common Stock of the
Surviving Corporation for each share of Airways Common Stock.
C. The manner of exchanging the shares of Airways Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger for the Merger
Price to be distributed to the
<PAGE>
Airways stockholders in accordance with paragraph (1) below, shall be as
follows:
(1) On the Effective Date of the Merger, each share of Airways Common
Stock issued and outstanding immediately prior to the Effective Date of the
Merger shall, by virtue of the Merger and without any action on the part of the
holder thereof, automatically be cancelled and converted into the Merger Price,
as allocated below, and each share of treasury stock of Airways shall be
cancelled.
(2) On the Effective Date of the Merger:
(i) Each record holder of a certificate theretofore evidencing
Airways Common Stock who has surrendered the same to VJET, duly endorsed with
the signatures appropriately guaranteed and accompanied by any evidence required
by VJET, shall be entitled to receive therefor one (1) share of VJET Common
Stock for each share of Airways Common Stock surrendered. The exchange agent for
VJET, First Union National Bank, Charlotte, North Carolina, will send a notice
and a transmittal form to each holder of an outstanding certificate or
certificates of Airways Common Stock who on the Effective Date of the Merger has
not so surrendered his certificate or certificates, advising such stockholder of
the terms of the conversion effected by the Merger, the method of selling any
fractional share interest (when applicable) as described in Section (2)(iii) of
this Article V, and the procedure for surrendering to the Exchange Agent such
certificate or certificates in exchange for the Merger Price allocated therefor.
Until so surrendered, each such outstanding certificate which prior to the
Effective Date of the Merger represented shares of Airways Common Stock shall
be deemed for all corporate purposes (subject to the further provisions of this
Section (2)) to evidence ownership of one (1) share of VJET Common Stock. After
the Effective Date of the Merger, the stock transfer book of Airways shall be
closed and no transfer of Airways Common Stock shall thereafter be made. If,
after the Effective Date of the Merger, certificates representing shares of
Airways Common Stock are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates representing VJET Common Stock.
(ii) If any certificate of VJET Common stock is to be issued to
a person other than the person in whose name the Airways Common Stock
certificate is surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
<PAGE>
requesting such transfer pay to Airways and VJET or the Exchange Agent, as the
case may be, any transfer or other taxes required by reason of the issuance of
VJET Common Stock in any name other than that of the registered holder of the
Airways stock certificate surrendered or establish to the satisfaction of VJET
or the Exchange Agent, as the case may be, that such tax has been paid or is not
applicable.
(iii) Neither certificates nor scrip for fractional shares of
VJET Common Stock will be issued but each holder of Airways Common Stock who
otherwise would be entitled to receive a fractional share of VJET Common Stock
will be entitled in lieu thereof to an amount of cash, without interest,
determined by multiplying such fraction times the closing price of VJET's Common
Stock as reported for the NASDAQ Stock Exchange in The Wall Street Journal,
-----------------------
Southeast Edition, on the Effective Date of the Merger. After the expiration of
sixty (60) days after the Effective Date of the Merger, the Exchange Agent will
sell to VJET, for the account of the holders of such fractional share interests
who have not surrendered stock certificates, shares of VJET Common Stock
equivalent to the aggregate of such fractional share interests then outstanding.
The Exchange Agent will thereafter, subject to any applicable abandoned property
or similar law, until one (1) year after the Effective Date of the Merger pay to
such holders upon surrender of their certificates representing Airways Common
Stock their pro rata proceeds of any such sale, without interest. Any balance of
such proceeds and any amounts paid to the Exchange Agent in respect of VJET
Common Stock issued in the Merger, certificates for which shall not have been
surrendered by the expiration of such one (1) year period, will, together with
any interest thereon, be paid over to VJET as soon as practicable after the
expiration of such period subject to any applicable abandoned property or
similar law. The fee of the Exchange Agent and any expenses of the Exchange
Agent incidental to the sale of fractional share interests shall be borne by the
Surviving Corporation.
D. Prior to the Effective Date of the Merger, the Board of Directors of
VJET will adopt Airways' stock option plans and assume Airway's obligations
under all outstanding warrants and to take such other action as may be required
such that on the Effective Date of Merger, any option or warrant to acquire
Airways Common Stock granted or issued pursuant to any stock option plan or
otherwise that have not been exercised and have not lapsed, shall, by operation
of the Merger, be converted into and become, without any action on the part of
the holder thereof, an option or right to acquire shares of VJET Common Stock
equal to the number of shares of Airways Common Stock subject to such options or
warrants prior
<PAGE>
to the Merger. The exercise price for such options or warrants to purchase
shares of VJET Common Stock after the Merger shall be the same as the exercise
price under such stock options or warrants applicable prior to the Merger. All
of the other terms and conditions applicable to the options and warrants to
purchase Airways stock prior to the Merger shall continue to apply after the
Merger.
E. If between the date of this Plan of Merger and the Effective Date of
the Merger the outstanding shares of VJET Common Stock shall have been changed
into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within said period, the conversion ratio set forth in Sections VB and VD above,
shall be correspondingly adjusted.
ARTICLE VI.
This Plan of Merger shall be submitted to the stockholders of the
Constituent Corporations for their approval in the manner provided to the extent
required by the applicable laws of the States of Nevada and Delaware, at
meetings to be held on such date(s) as the respective Boards of Directors of the
Constituent Corporations shall agree. After approval by the vote of the holders
representing a majority of the issued and outstanding shares of VJET and by
Airways, Articles or Certificates of Merger shall be filed as required by the
laws of the States of Nevada and Delaware; the Merger being effective when the
Articles or Certificates of Merger, as provided by the laws of the States of
Nevada and Delaware, are accepted for filing and filed in the office of the
Secretary of State of the States of Nevada and Delaware.
ARTICLE VII.
The Merger may be abandoned at any time (before or after this Plan of
Merger shall have been approved by the stockholders of VJET or Airways) prior to
the Effective Date of the Merger as provided in, and subject to the conditions
set forth in Section 5.03 of the Merger Agreement.
ARTICLE VIII.
The Surviving Corporation hereby agrees that it may be served with process
in the State of Delaware in any proceeding for enforcement of any obligation of
Airways, as well as for
<PAGE>
enforcement of any obligation of the Surviving Corporation arising from the
Merger, including any suit or other proceeding to enforce the rights of any
stockholders as determined in appraisal proceedings pursuant to Section 262 of
the Delaware General Corporation Law, and hereby irrevocably appoints the
Secretary of State of the State of Delaware as its agent to accept service of
procession any such suit or proceedings. The address to which a copy of such
process shall be mailed by the Secretary of State is as follows:
Robert B. Goldberg
Ellis, Funk, Goldberg, Labovitz & Dokson
3490 Piedmont Road, Suite 400
Atlanta, Georgia 30305
ARTICLE IX.
For the convenience of the parties hereto and to facilitate the filing and
recording of this Plan of Merger, any number of counterparts hereof may be
executed, and each such counterpart shall be deemed to be an original
instrument.
IN WITNESS WHEREOF, each of the Constituent Corporations have caused this
Plan of Merger to be executed by its respective duly authorized officers and its
respective corporate seal to be impressed thereon, as of the 10th day of July,
1997.
VALUJET, INC.
By /s/ Robert L. Priddy
Robert L. Priddy
Its Chairman of the Board and
Chief Executive Officer
AIRWAYS CORPORATION
By /s/ Robert D. Swenson
Robert D. Swenson
Its President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-01-1997
<CASH> 149,724,768 149,724,768
<SECURITIES> 0 0
<RECEIVABLES> 7,724,785 7,724,785
<ALLOWANCES> 1,141,000 1,141,000
<INVENTORY> 6,159,038 6,159,038
<CURRENT-ASSETS> 179,778,571 179,778,571
<PP&E> 252,424,854 252,424,854
<DEPRECIATION> 58,375,017 58,375,017
<TOTAL-ASSETS> 377,008,219 377,008,219
<CURRENT-LIABILITIES> 47,781,530 47,781,530
<BONDS> 226,620,758 226,620,758
0 0
0 0
<COMMON> 54,964 54,964
<OTHER-SE> 95,829,132 95,829,132
<TOTAL-LIABILITY-AND-EQUITY> 377,008,219 377,008,219
<SALES> 47,759,167 84,687,378
<TOTAL-REVENUES> 47,759,167 84,687,378
<CGS> 57,612,909 119,404,765
<TOTAL-COSTS> 57,612,909 119,404,765
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,810,953 9,454,292
<INCOME-PRETAX> (14,664,695) (44,171,679)
<INCOME-TAX> (5,439,000) (16,439,000)
<INCOME-CONTINUING> (9,225,695) (27,732,679)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,225,695) (27,732,679)
<EPS-PRIMARY> (.17) (.51)
<EPS-DILUTED> (.17) (.51)
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