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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
AMTRAN, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
-----------------------
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
________________________________________________________________________________
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[AMTRAN Logo]
AMTRAN, INC.
7337 West Washington Street
Indianapolis, Indiana 46231
September 5, 2001
Dear Shareholder:
This Notice of Adjourned Annual Meeting and amended and restated proxy
statement dated September 5, 2001 is being distributed to you in connection with
the adjourned annual meeting which will be reconvened at 8:00 a.m. on
October 10, 2001 and replaces entirely the previously mailed Notice of Annual
Meeting of Shareholders and proxy statement dated April 16, 2001, for our annual
meeting of shareholders on Tuesday, May 29, 2001. The May 29, 2001 meeting was
convened as planned and adjourned to a later date, which has been set by the
board of directors as stated above.
As described in the attached proxy statement, at the annual meeting you will
be asked to consider and vote upon the merger of INDUS Acquisition Company
('INDUS'), an Indiana corporation owned by J. George Mikelsons ('Mikelsons'),
with and into Amtran, Inc. ('Amtran'), pursuant to a plan of merger, attached as
Exhibit A to the Agreement and Plan of Merger dated as of June 18, 2001, which
is attached as Annex A to the accompanying proxy statement. Upon consummation of
the merger, each outstanding share of our common stock, without par value, other
than shares owned by us, Mikelsons, INDUS or any affiliate of Mikelsons who is
not deemed to be an affiliate of Mikelsons by reason of their position as an
officer or director of Amtran (the 'Mikelsons Affiliates'), will be converted
into the right to receive $23 in cash, without interest, upon valid surrender of
the certificate formerly representing that share. In connection with the merger,
holders of shares of our common stock and Series B preferred stock, without par
value, voting as separate classes, will be asked to approve a proposal to amend
and restate Article XII of our Articles of Incorporation to modify the terms of
our Series B preferred stock (the 'ILFC Amendment') pursuant to the Purchase and
Voting Agreement dated as of May 16, 2001 (the 'ILFC Agreement'), between
International Lease Finance Corporation ('ILFC') and us. The ILFC Agreement is
attached as Annex B to the accompanying proxy statement. Approval of the ILFC
Amendment is a condition to the merger.
YOUR BOARD OF DIRECTORS, ACTING ON THE RECOMMENDATION OF THE SINGLE MEMBER
SPECIAL INDEPENDENT DIRECTOR COMMITTEE OF AMTRAN, HAS DETERMINED THAT THE MERGER
IS FAIR TO AND IN THE BEST INTERESTS OF AMTRAN AND THE HOLDERS OF SHARES OF OUR
COMMON STOCK OTHER THAN MIKELSONS AND ANY MIKELSONS AFFILIATE. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE 'FOR' APPROVAL OF THE MERGER, THE
PLAN OF MERGER, THE MERGER AGREEMENT AND THE ILFC AMENDMENT.
Among the factors considered by a single member special independent director
committee in evaluating the merger was the opinion dated June 18, 2001, of
Dresdner Kleinwort Wasserstein, Inc. ('DrKW'), the financial advisor to the
single member special independent director committee, which states that as of
such date, the $23.00 per share cash consideration to be received by the holders
of shares of our common stock other than Mikelsons and any Mikelsons Affiliate
pursuant to the merger is fair to such shareholders from a financial point of
view. The written opinion of DrKW is attached as Annex C to the accompanying
proxy statement, and you should read it carefully and in its entirety.
Completion of the merger is subject to certain conditions, including
approval of the merger, the plan of merger and the merger agreement by the
affirmative vote of the holders of a majority of the outstanding shares of our
common stock entitled to vote at the annual meeting, including the affirmative
vote of the holders of a majority of the outstanding shares voting thereon not
owned by Mikelsons or any Mikelsons Affiliate and the approval of the ILFC
Amendment by the affirmative vote of the holders of a majority of the
outstanding shares of our common stock and our Series B preferred stock, voting
as separate classes.
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Your board of directors has specified August 20, 2001 as the new record date
for the purposes of determining the shareholders who are entitled to receive
notice of and to vote at the annual meeting. IN ORDER TO VOTE BY PROXY AT THE
ANNUAL MEETING, YOU MUST USE THE ENCLOSED YELLOW PROXY CARD TO VOTE AT THE
ANNUAL MEETING EVEN IF YOU PREVIOUSLY SUBMITTED A BLUE PROXY CARD FOR THE ANNUAL
MEETING SCHEDULED FOR MAY 29, 2001. PLEASE DISREGARD ANY BLUE PROXY CARDS WE
HAVE PREVIOUSLY SENT YOU. As of September 5, 2001, Mikelsons was the record
owner of 8,271,200 shares of common stock (or approximately 72% of the
outstanding shares of our common stock on that date). In addition, other
directors and executive officers of Amtran (none of whom is a Mikelsons
Affiliate) beneficially owned 1,300,467 shares of common stock consisting of
84,762 shares of common stock (which represented on that date less than 1% of
the outstanding shares and approximately 2.6% of the outstanding shares not
owned by Mikelsons or any Mikelsons Affiliate), presently exercisable options to
purchase 1,214,689 shares of common stock and 1,010 shares of our common stock
allocated to such directors and executive officers under the American Trans Air,
Inc. Employees' Salary Savings Plan. To our knowledge, these directors and
officers intend to vote the 85,772 shares of our common stock which they have
the power to direct the voting of in favor of all items presented at the annual
meeting.
You will also be asked to vote upon the election of a board of directors for
the ensuing year and until their successors are elected and qualified and upon
the ratification of the selection of Ernst & Young, LLP as independent
accountants for the fiscal year ending December 31, 2001.
On the following pages, you will find a Notice of the Adjourned Annual
Meeting and an amended and restated proxy statement, which provide you with
detailed information concerning the merger and other matters to be voted upon.
We urge you to read these materials carefully and request that you promptly
complete and return the enclosed YELLOW proxy card. If you attend the annual
meeting, you may vote in person even if you have previously returned your proxy
card. Your vote is important regardless of the number of shares of our common
stock you own.
Sincerely,
Board of Directors of Amtran, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS: APPROVED OR DISAPPROVED OF THE MERGER; PASSED UPON THE MERITS OR
FAIRNESS OF THE MERGER; OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE
DISCLOSURE IN THE ACCOMPANYING AMENDED AND RESTATED PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS AMENDED AND RESTATED PROXY STATEMENT IS DATED SEPTEMBER 5, 2001, AND IS
BEING FIRST MAILED TO AMTRAN SHAREHOLDERS ON OR ABOUT SEPTEMBER 7, 2001.
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[AMTRAN Logo]
AMTRAN, INC.
7337 West Washington Street
Indianapolis, Indiana 46231
NOTICE OF ADJOURNED ANNUAL MEETING OF SHAREHOLDERS
To Holders of shares of common stock and
Series B preferred stock of Amtran, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of AMTRAN,
INC. ('Amtran'), an Indiana corporation, that was adjourned on May 29, 2001,
will be reconvened and held at our headquarters at 7337 West Washington Street,
Indianapolis, Indiana, on October 10, 2001, at 8:00 a.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the merger, the plan
of merger attached to the merger agreement, the Agreement and Plan of Merger
dated as of June 18, 2001, between INDUS Acquisition Company ('INDUS'), an
Indiana corporation, and Amtran, and the other transactions contemplated by
the merger agreement. The merger agreement provides, among other things,
that in accordance with the relevant provisions of the Indiana Business
Corporation Law (the 'IBCL'), INDUS will be merged with and into Amtran.
Following the effective time of the merger, Amtran will continue as the
surviving corporation. Each share of Amtran's common stock, without par
value, other than shares owned by Amtran or one of its subsidiaries, INDUS,
Mikelsons, or any affiliate of Mikelsons who is not deemed to be an
affiliate of Mikelsons by reason of being an officer or director of Amtran
will be converted automatically into the right to receive $23 in cash,
without interest, upon valid surrender of the certificate formerly
representing that share.
2. To consider and vote upon a proposal to approve the amendment and
restatement of Article XII of our Articles of Incorporation (the 'ILFC
Amendment') pursuant to the Purchase and Voting Agreement dated as of
May 16, 2001, between Amtran and International Lease Finance Corporation
('ILFC'). Holders of shares of Amtran's common stock and Series B preferred
stock, without par value, voting as separate classes, are entitled to vote
on the ILFC Amendment, which would change the terms of the Series B
preferred stock, all of which is held by ILFC. Shareholder approval of the
ILFC Amendment is a condition to the consummation of the merger under the
merger agreement.
3. To elect six directors: J. George Mikelsons, John P. Tague, Kenneth
K. Wolff, James W. Hlavacek, Robert A. Abel and Andrejs P. Stipnieks, each
to serve until the next annual meeting of shareholders.
4. To ratify the selection of Ernst & Young, LLP as independent
accountants for Amtran for the fiscal year ending December 31, 2001.
5. To transact such other business as may properly come before the
annual meeting or any adjournments thereof.
The board of directors has specified August 20, 2001 as the new record date
for the purpose of determining the shareholders who are entitled to receive
notice of and to vote at the annual meeting. Only holders of record of shares of
our common stock and Series B preferred stock at the close of business on that
date will be entitled to notice of and to vote at the annual meeting or any
adjournments thereof.
Shareholders will not be entitled to dissenters' rights under the IBCL.
By order of the Board of Directors,
BRIAN T. HUNT
Secretary
Dated: September 5, 2001
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AMENDED AND RESTATED PROXY STATEMENT
SUMMARY TERM SHEET
This summary term sheet highlights the material terms of the proposed merger
and the related transactions described in this proxy statement but may not
contain all information that is important to you. We encourage you to read this
entire document carefully and the documents which are referred to in this
document. All references in this proxy statement to the 'annual meeting' mean
the adjourned annual meeting to be held as described in this proxy statement.
THE PARTIES
AMTRAN
Amtran, Inc., an Indiana corporation, owns American Trans Air, Inc., an
Indiana corporation which we will refer to as ATA, the eleventh largest
passenger airline in the United States (based on passenger revenue miles) and a
leading provider of airline services in selected markets. ATA is also the
largest commercial charter airline in the United States and the largest provider
of passenger airline services to the United States military, in each case based
on 2000 revenues. For the year ended December 31, 2000, the revenues of ATA
consisted of 58.3% scheduled service, 19.1% commercial charter service and 14.6%
military charter service, with the balance derived from related services. Amtran
expects to increase substantially the portion of its revenues that is derived
from scheduled service and reduce its emphasis on commercial charter services.
See 'The Parties' (page 44).
INDUS
INDUS Acquisition Company, an Indiana corporation, was organized to merge
with us and has not conducted any unrelated activities since its organization
and will cease to exist after the merger. INDUS is wholly owned by J. George
Mikelsons, Amtran's founder and majority shareholder. See 'The Parties'
(page 45).
MIKELSONS
Mikelsons is the founder and majority shareholder of Amtran. His principal
occupation is as the Chairman of Amtran. He is also the sole shareholder of
INDUS, the sole member of the board of directors of INDUS and the sole officer
(Chairman and President) of INDUS. See 'The Parties' (page 45) and 'Election of
Directors -- Nominees' (page 57).
TAGUE, WOLFF AND HLAVACEK
John P. Tague is the Chief Executive Officer of Amtran, Kenneth K. Wolff is
the Executive Vice President and Chief Financial Officer of Amtran and James W.
Hlavacek is the Executive Vice President and Chief Operating Officer of Amtran.
Each of these officers are also members of the board of directors of Amtran. The
options to purchase shares of our common stock held by each of these officers
will remain outstanding following the merger. We use the term filing persons in
this proxy statement to refer to these three officers, Mikelsons and INDUS,
collectively. See 'The Parties' (page 46) and 'Election of
Directors -- Nominees' (page 57).
THE ANNUAL MEETING
DATE, PLACE AND TIME
The annual meeting will be reconvened at 8:00 a.m., local time, on
October 10, 2001, at our headquarters, at 7337 West Washington Street,
Indianapolis, Indiana. See 'The Annual Meeting' (page 4).
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PURPOSE OF THE ANNUAL MEETING
At the annual meeting, you will be asked to:
approve the merger between INDUS and us, the plan of merger and the merger
agreement;
approve the amendment and restatement of Article XII of our Articles of
Incorporation, which modifies the terms of our Series B preferred stock,
pursuant to the Purchase and Voting Agreement dated as of May 16, 2001,
between us and International Lease Finance Corporation ('ILFC'), which we
will refer to as the ILFC amendment;
vote for the election of directors of Amtran to serve until the next annual
meeting of shareholders; and
ratify the selection of Ernst & Young, LLP as independent accountants for
the fiscal year ending December 31, 2001.
See 'The Annual Meeting' (page 4).
Approval of the ILFC amendment by holders of shares of our common stock and
Series B preferred stock, voting as separate classes, is a condition to the
merger.
RECORD DATE
Your board of directors has fixed the close of business on August 20, 2001,
as the new record date for the determination of holders of shares of our common
stock and Series B preferred stock entitled to notice of the annual meeting and
entitled to vote at the annual meeting. On the record date, there were
11,501,079 shares of our common stock and 300 shares of Series B preferred stock
outstanding and entitled to vote at the annual meeting. See 'The Annual Meeting'
(page 4).
VOTE REQUIRED
Under the Indiana Business Corporation Law or the merger agreement, the
following votes are required to approve the matters submitted to the annual
meeting:
APPROVAL OF THE MERGER AND RELATED MATTERS
the affirmative vote of the holders of a majority of the outstanding shares
of our common stock entitled to vote at the annual meeting to approve the
merger, the plan of merger and the merger agreement; failures to vote and
abstentions will count as votes against these items;
the affirmative vote of the holders of a majority of the shares of our
common stock not owned by Mikelsons or any Mikelsons Affiliate voting at
the annual meeting to approve the merger, the plan of merger and the merger
agreement; in this proxy statement we use the term 'Mikelsons Affiliate' to
mean any affiliate of Mikelsons who is not deemed to be an affiliate of
Mikelsons by reason of being an officer or director of Amtran (the only
person or entity who may be a Mikelsons Affiliate and who owns or has the
right to acquire shares of Amtran common stock is INDUS); failures to vote
and abstentions will have no effect on whether this approval is obtained;
the affirmative vote of the holders of a majority of the outstanding shares
of our common stock entitled to vote at the annual meeting to approve the
ILFC amendment; failures to vote and abstentions will count as votes
against these items; and
the affirmative vote of the holders of a majority of the outstanding shares
of our Series B preferred stock, voting as a separate class, to approve the
ILFC amendment; a failure to vote or an abstention by ILFC (the sole holder
of our Series B preferred stock) would count as a vote against the ILFC
amendment; ILFC has agreed to vote all its shares in favor of the ILFC
amendment and has granted an irrevocable proxy to Kenneth K. Wolff and
James W. Hlavacek to vote its shares of our Series B preferred stock with
respect to the ILFC amendment.
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ELECTION OF DIRECTORS
a plurality of the votes cast by holders of shares of common stock entitled
to vote to elect new directors to serve until the next annual meeting of
shareholders; failures to vote and abstentions will have no effect on the
election of directors; Mikelsons, as the owner of approximately 72% of the
outstanding shares of our common stock, has sufficient voting power to
ensure the election of the nominees for director.
RATIFICATION OF THE SELECTION OF ERNST & YOUNG
more votes are cast in favor than are cast against the ratification of the
selection of Ernst & Young, LLP as independent accountants for the fiscal
year ending December 31, 2001; failures to vote and abstentions will have
no effect on the ratification of the selection of Ernst & Young; Mikelsons,
as the owner of approximately 72% of the outstanding shares of our common
stock, has sufficient voting power to ensure the ratification of the
selection of Ernst & Young.
See 'The Annual Meeting -- Voting Rights; Vote Required' (page 4).
PROXIES
A new form of proxy card for your use at the annual meeting accompanies this
proxy statement. IN ORDER TO VOTE BY PROXY AT THE ANNUAL MEETING, YOU MUST USE
THE YELLOW PROXY CARD ENCLOSED WITH THIS PROXY STATEMENT EVEN IF YOU PREVIOUSLY
SUBMITTED A BLUE PROXY CARD. Please do not use the blue proxy card we sent to
you previously. All properly executed YELLOW proxy cards that are received prior
to or at the annual meeting and not revoked will be voted at the annual meeting
in the manner specified. Whether or not you plan to attend in person, you are
requested to vote, sign, date and promptly return the enclosed YELLOW proxy card
in the envelope provided.
You may revoke your proxy at any time before it is voted by:
delivering a written notice of revocation of proxy prior to the annual
meeting to Brian T. Hunt, Secretary, Amtran, Inc., 7337 West Washington
Street, Indianapolis, Indiana 46231;
delivering to us a duly executed proxy card bearing a later date prior to
the annual meeting; or
attending the annual meeting and voting in person.
If you own your shares of our common stock in 'street name', you should
follow your broker's instructions concerning how to change your vote. See 'The
Annual Meeting -- Proxies' (page 5).
SPECIAL FACTORS
PURPOSE AND STRUCTURE OF THE MERGER
The purpose of the merger is for Mikelsons to own all the common stock of
Amtran immediately following completion of the merger (other than shares of our
common stock which may be issued in the future upon the exercise of stock
options or the conversion of shares of our Series B preferred stock). As further
described in 'Special Factors -- Purpose and Structure of the Merger', Amtran
and the filing persons believe that taking Amtran private at this time will
allow management to focus on the implementation of long-term strategic
initiatives. Amtran, INDUS and Mikelsons structured this transaction as a cash
merger between Amtran and INDUS in order to achieve this result in a single
transaction. While Mikelsons consulted with the other filing persons regarding
various matters, all decisions relating to the price to be paid and the other
principal features of the merger were made by Mikelsons. See 'Special
Factors -- Purpose and Structure of the Merger' (page 16).
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RECOMMENDATIONS OF THE SINGLE MEMBER SPECIAL INDEPENDENT DIRECTOR COMMITTEE AND
THE BOARD OF DIRECTORS
On June 18, 2001, a special independent director committee, consisting of
the sole independent member of your board of directors for the purpose of
evaluating this transaction, determined that the merger is fair to and in the
best interests of Amtran and the holders of shares of our common stock (other
than Mikelsons and any Mikelsons Affiliate).
Your board of directors, based on, among other things, the recommendation of
the single member special independent director committee, unanimously approved
the merger, the merger agreement, the ILFC agreement and the ILFC amendment and
adopted the plan of merger, determined that the merger is fair to and in the
best interests of Amtran and the holders of shares of our common stock (other
than Mikelsons and any Mikelsons Affiliate) and recommended that holders of
shares of our common stock (including a majority of shares voting at the annual
meeting not owned by Mikelsons or any Mikelsons Affiliates) approve the merger,
the plan of merger, the merger agreement and the ILFC amendment. See 'Special
Factors -- Recommendations of the Single Member Special Independent Director
Committee and the Board of Directors' (page 17).
FAIRNESS OF THE MERGER
For the reasons set forth in 'Special Factors -- Fairness of the Merger',
the single member special independent director committee and your board of
directors concluded that the merger is fair to and in the best interests of
Amtran and the holders of shares of our common stock (other than Mikelsons and
any Mikelsons Affiliate). See 'Special Factors -- Fairness of the Merger'
(page 18).
OPINION OF FINANCIAL ADVISOR TO THE SINGLE MEMBER SPECIAL INDEPENDENT DIRECTOR
COMMITTEE
This summary is not a complete description of the analysis performed by
Dresdner Kleinwort Wasserstein, Inc., which we will refer to as DrKW, and is
qualified by reference to the written opinion of DrKW set forth in Annex C to
this proxy statement.
DrKW, which served as financial advisor to the single member special
independent director committee, has delivered a written opinion, dated June 18,
2001, to the single member special independent director committee that, as of
the date of the opinion and subject to the matters, assumptions and limitations
set forth in the opinion, the $23 per share cash consideration to be received by
the holders of shares of Amtran common stock other than Mikelsons and his
affiliates, pursuant to the merger, was fair to such holders from a financial
point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF DRKW DATED JUNE 18, 2001, WHICH SETS
FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX C TO THIS PROXY
STATEMENT. THE OPINION OF DRKW, DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW
YOU SHOULD VOTE WITH RESPECT TO THE MERGER, THE PLAN OF MERGER AND THE MERGER
AGREEMENT. YOU SHOULD READ THE OPINION IN ITS ENTIRETY. See 'Special
Factors -- Opinion of Financial Advisor to the Single Member Special Independent
Director Committee' (page 23).
CERTAIN PROJECTED FINANCIAL INFORMATION
Amtran provided Mikelsons and his advisors and the single member special
independent director committee and its advisors with certain projected financial
information for Amtran for the period from 2001 through 2005. See 'Special
Factors -- Projections' (page 33).
POSITION OF THE FILING PERSONS REGARDING FAIRNESS OF THE MERGER
For the reasons set forth in 'Special Factors -- Position of the Filing
Persons Regarding Fairness of the Merger', the filing persons believe that the
merger is fair to and in the best interests of the
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holders of shares of our common stock (other than the filing persons). See
'Special Factors -- Position of the Filing Persons Regarding Fairness of the
Merger' (page 31).
PLANS FOR AMTRAN AFTER THE MERGER
Mikelsons presently intends to continue to own all the common stock of
Amtran after the merger (other than shares of our common stock which may be
issued in the future upon the exercise of stock options or the conversion of
shares of our Series B preferred stock) and for Amtran to continue to operate as
a holding company for its operating subsidiaries. See 'Special Factors -- Plans
for Amtran after the Merger' (page 36).
CERTAIN EFFECTS OF THE MERGER
Upon consummation of the merger, each share of our common stock (other than
shares owned by us, Mikelsons or any Mikelsons Affiliate) will be canceled and
converted into the right to receive $23 in cash, without interest. Each share of
the common stock of INDUS, all of which are owned by Mikelsons, will be
converted in the merger into a share of the common stock of Amtran, as the
surviving corporation. As a result, Mikelsons will own all the common stock of
Amtran immediately after the merger. Holders of shares of our common stock
(other than Mikelsons) will cease to have an ownership interest in Amtran upon
completion of the merger. Shareholders other than Mikelsons will no longer
benefit from any increases in our value or bear the risks of any decreases in
our value. At the time the merger is completed, shares of our common stock will
be removed from quotation on the Nasdaq Stock Market and will be removed from
registration under the Securities Exchange Act of 1934, as amended. We refer to
the Securities Exchange Act of 1934, as amended, as the Exchange Act in this
proxy statement. See 'Special Factors -- Certain Effects of the Merger'
(page 36).
SOURCE AND AMOUNT OF FUNDS
The total amount of funds we require to consummate the merger, cash out
stock options and to pay related fees and expenses is approximately $87 million.
Receipt of financing sufficient to cover these expenses is a condition to the
merger. Amtran and ATA have entered into a commitment letter dated June 18, 2001
with Citicorp USA, Inc. and Salomon Smith Barney Inc. with respect to a $175
million secured credit facility, subject to the conditions specified therein.
Bank One, NA has committed to accept a participation of $87.5 million in the
syndication of this credit facility and to act as administrative agent under
this credit facility. We expect that the structure of the secured credit
facility will include both a term loan and a revolving credit facility. We are
in the process of negotiating the definitive documentation for the secured
credit facility with the lenders. In addition, Amtran will issue a senior
unsecured note with an aggregate principal amount of approximately $2.2 million
to ILFC to repurchase a portion of their shares of Series B preferred stock
(assuming we elect to repurchase the minimum 5% of those shares required by the
ILFC Agreement). See 'Special Factors -- Source and Amount of Funds' (page 38).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain of our directors and executive officers have interests in the merger
which may differ from the interests of holders of Amtran common stock generally.
In particular:
on June 18, 2001, Mikelsons and INDUS entered into a stock subscription
agreement, pursuant to which Mikelsons will subscribe for and purchase, and
INDUS will issue to Mikelsons, 8,271,200 shares of the common stock,
without par value, of INDUS, in consideration of the contribution by
Mikelsons to INDUS of the 8,271,200 shares of our common stock owned by
him, subject to the conditions specified therein. See 'Special
Factors -- Interests of Certain Persons in the Merger -- Mikelsons and
INDUS Ownership of Common Stock' (page 41).
as of September 5, 2001, our executive officers and directors (other than
Mikelsons) beneficially owned an aggregate of 1,300,467 shares of our
common stock consisting of 84,762 shares of common stock (which represented
on that date less than 1% of the
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outstanding shares and approximately 2.6% of the outstanding shares not
owned by Mikelsons or any Mikelsons Affiliate), presently exercisable
options to purchase 1,214,689 shares of common stock with an average
exercise price of $11.20 per share and 1,010 shares of our common stock
allocated to such directors and executive officers under the ATA Employees'
Salary Savings Plan. To our knowledge, all of our executive officers and
directors intend to vote the 85,772 shares of our common stock which they
have the power to direct the voting of in favor of all items presented at
the annual meeting. See 'Special Factors -- Interests of Certain Persons in
the Merger -- Ownership of Common Stock by Our Officers and Directors'
(page 41).
as of September 5, 2001, Mr. Tague beneficially owned 460,980 shares of our
common stock (including options to purchase 450,758 shares with an average
exercise price of $12.52), Mr. Wolff beneficially owned 350,094 shares of
our common stock (including options to purchase 338,000 shares with an
average exercise price of $13.48) and Mr. Hlavacek beneficially owned
362,393 shares of our common stock (including options to purchase 309,431
shares with an average exercise price of $13.86); Messrs. Tague, Wolff and
Hlavacek intend to vote all shares of our common stock which they have the
power to direct the voting of in favor of all items at the annual meeting.
See 'Special Factors -- Interests of Certain Persons in the
Merger -- Ownership of Common Stock by Our Officers and Directors'
(page 41).
the restriction period for each restricted share, whether vested or
unvested, granted under any of our stock plans will expire immediately
prior to the closing of the merger, unless it expired sooner under the
terms of the stock plan. See 'Special Factors -- Interests of Certain
Persons in the Merger -- Treatment of Restricted Stock' (page 41).
all unvested stock options issued to our officers and certain stock options
issued to non-officers automatically vested upon the approval of the merger
by your board of directors. See 'Special Factors -- Interests of Certain
Persons in the Merger -- Treatment of Stock Options' (page 42).
your board of directors and the compensation committee of your board of
directors have adopted resolutions providing that all stock options (other
than those held by the 19 officers whose options will remain outstanding
following the merger) that are outstanding immediately prior to the closing
of the merger will be canceled in exchange for a cash payment equal to the
excess, if any, of $23 over the exercise price of those options multiplied
by the number of shares of our common stock covered by those options, and
that all outstanding stock options with an exercise price in excess of $23
per share will be canceled without any cash payment. In the aggregate, our
employees (other than the 19 officers described in the following paragraph)
held as of September 4, 2001 options to purchase 520,015 shares of our
common stock with an average exercise price of $11.87 per share. See
'Special Factors -- Interests of Certain Persons in the Merger -- Treatment
of Stock Options' (page 42).
we have entered into option modification agreements with 19 of our officers
(including Messrs. Tague, Wolff and Hlavacek) providing that these officers
will not exercise their options prior to the merger and that their stock
options will remain outstanding following the merger. Under these
agreements, these officers have agreed not to exercise their options except
during certain limited exercise periods, and then only if certain
additional conditions are satisfied. The first exercise period is scheduled
to begin in June 2002. These officers would also have the right,
exercisable during limited periods for five years following an option
exercise, to sell the shares of our common stock received upon that option
exercise to us at a price per share determined by an independent appraiser.
In addition, we expect to increase the compensation of a portion of these
officers following completion of the merger by an amount sufficient to
compensate them for any decrease in overall compensation resulting from the
merger and the rollover of their options. See 'Special Factors -- Interests
of Certain Persons in the Merger -- Treatment of Stock Options' (page 42).
vi
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under the merger agreement, we, as the surviving corporation in the merger,
have agreed to honor all of our obligations to indemnify our current and
former directors and officers for acts or omissions occurring prior to the
effective time of the merger whether pursuant to our charter, bylaws, in
individual indemnity agreements or otherwise. In addition, we, as the
surviving corporation in the merger, have agreed to maintain directors' and
officers' liability insurance on behalf of those directors and officers
that are currently covered by our existing directors' and officers'
liability insurance policies for a period of six years. Mikelsons and INDUS
have agreed to indemnify Messrs. Tague, Wolff and Hlavacek against certain
liabilities under the Exchange Act arising by reason of their status as
filing persons of the Schedule 13E-3 filed with respect to the merger. See
'Special Factors -- Interests of Certain Persons in the
Merger -- Indemnification of Officers and Directors' (page 42).
ILFC has agreed to vote its shares of our Series B preferred stock in favor
of the ILFC amendment and to modifications to the terms of the Series B
preferred stock making it convertible into shares of our common stock
following the merger, and we have agreed to purchase between 5% and 10%
(with Amtran to determine the amount to be purchased) of their shares of
Series B preferred stock at a price reflecting the merger consideration
paid to holders of shares of our common stock. We currently expect to
purchase 5% of the outstanding shares of Series B preferred stock. Assuming
that we purchase 5% of its shares of Series B preferred stock and that ILFC
converts all its remaining shares of Series B preferred stock following the
merger, ILFC would own approximately 1,818,762 shares of our common stock.
The ILFC amendment also modifies the redemption and termination of
convertibility provisions to include a premium equal to the spread between
$23 and the conversion price and increases the dividend rate on the Series
B preferred stock upon the completion of the merger. See 'Special
Factors -- Interests of Certain Persons in the Merger -- Proposed ILFC
Amendment' (page 43).
as part of our purchase and voting agreement with ILFC, we have also agreed
to lease an additional Boeing 737-800 aircraft from ILFC beginning in 2004
and to pay ILFC an annual fleet consulting fee of $100,000 for four years
following completion of the merger. See 'Special Factors -- Interests of
Certain Persons in the Merger -- Proposed ILFC Amendment' (page 43).
under the terms of the plan of merger and the merger agreement, our current
directors (other than William P. Rogers, Jr., who is not standing for
re-election at the annual meeting) and officers will also be the directors
and officers of the surviving corporation. See 'Special
Factors -- Interests of Certain Persons in the Merger -- Interests of
Certain Directors' (page 44).
Robert A. Abel, the sole member of the special independent director
committee, is a partner in Blue & Co., LLC, an accounting firm which has
provided tax and accounting services to us, Betaco, Inc. and Mikelsons in
2000. Blue & Co. billed Amtran $28,310 for tax and accounting services in
2000. Mikelsons is the sole owner of Betaco. Blue & Co. billed Betaco
$20,835 for tax and accounting services provided to Betaco and Mikelsons in
2000. Mikelsons has advised us that he currently expects that Blue & Co.
will continue to provide certain tax and accounting services to Amtran,
Betaco and Mikelsons following the merger. See 'Special
Factors -- Interests of Certain Persons in the Merger -- Interests of
Certain Directors' (page 44).
William P. Rogers, Jr., a director of Amtran, is a partner in Cravath,
Swaine & Moore, which is acting as Mikelsons' legal advisor in this
transaction. Cravath has provided legal services to us regularly and is
expected to continue to do so. Cravath billed Amtran approximately $641,399
in fees and expenses for legal services rendered to Amtran in 2000. See
'Special Factors -- Interests of Certain Persons in the Merger -- Interests
of Certain Directors' (page 44).
at Mikelsons' request, Amtran engaged Salomon Smith Barney to act as
financial advisor to Mikelsons and INDUS. In connection with this
engagement, Amtran entered into an indemnity letter agreement with Salomon
Smith Barney. See 'Special Factors -- Interests of Certain Persons in the
Merger -- Amtran's Engagement of Salomon Smith Barney' (page 44).
vii
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
If the merger is consummated, the exchange of shares of common stock by a
holder for the merger consideration will be a taxable transaction under the
Internal Revenue Code of 1986, as amended. The merger will not be a taxable
transaction for Amtran, INDUS or Mikelsons for United States federal income tax
purposes. The merger will be a taxable transaction for Messrs. Tague, Wolff and
Hlavacek. Because of the complexities of the tax laws, you are advised to
consult your own tax advisors concerning the applicable federal, state, local,
foreign and other tax consequences resulting from the merger. See 'Special
Factors -- Certain Federal Income Tax Consequences' (page 39).
SHAREHOLDER LITIGATION RELATING TO THE MERGER
We, along with our directors, have been named in three putative class
actions, two filed in the state courts of Indiana and one in federal district
court in Indiana. The plaintiffs in these lawsuits allege that we and our
directors have breached and are breaching their fiduciary duties to the public
shareholders of Amtran common stock. These plaintiffs seek, among other things,
declaratory and injunctive relief. The defendants in these lawsuits have entered
into a memorandum of understanding with each of the plaintiffs, subject to
certain conditions, including court approval, providing for the settlement of
the lawsuits described above. See 'Special Factors -- Shareholder Litigation
Relating to the Merger' (page 40).
METHOD OF ACCOUNTING
The merger will be accounted for as a purchase of INDUS by Amtran. See
'Special Factors -- Method of Accounting' (page 40).
REGULATORY AND OTHER APPROVALS
The only U.S. federal or state regulatory requirements applicable to the
merger and the ILFC amendment are the giving of notice of the merger to the U.S.
Department of Transportation and the filing of articles of merger and articles
of amendment with the Secretary of State of Indiana. On August 7, 2001, we
provided notice of the merger to the U.S. Department of Transportation. See
'Special Factors -- Regulatory and Other Approvals' (page 40).
THE MERGER AGREEMENT
THE MERGER
Under the merger agreement, INDUS will be merged with and into Amtran, with
Amtran as the surviving corporation. As a result of the merger, Mikelsons will
own all the outstanding shares of our common stock and each share of our common
stock outstanding at the time the merger is completed, other than shares held by
us and our subsidiaries, Mikelsons or any Mikelsons Affiliate, will be converted
automatically into the right to receive $23 per share in cash, without interest.
See 'The Merger Agreement -- The Merger' (page 46).
SURRENDER OF CERTIFICATES
We, as the surviving corporation in the merger, will deposit with the paying
agent, National City Bank, an amount of cash sufficient to pay our former
shareholders $23 per share of our common stock upon valid surrenders of share
certificates. After completion of the merger, National City Bank will send to
each shareholder of record at the time of the merger a letter of transmittal and
detailed instructions specifying the procedures for surrendering share
certificates. YOU SHOULD NOT SEND YOUR SHARE CERTIFICATES TO AMTRAN. YOU SHOULD
NOT SEND SHARE CERTIFICATES TO NATIONAL CITY BANK UNTIL YOU RECEIVE A LETTER OF
TRANSMITTAL. Upon the valid surrender of a share certificate, National City Bank
will issue to the surrendering holder a check representing an amount of cash
equal to $23 per share of our common stock formerly represented by the share
certificates surrendered to National City Bank. See 'The Merger
Agreement -- Payment for Shares; Procedures for Surrender of Certificates'
(page 47).
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CONDITIONS TO THE MERGER
Consummation of the merger is subject to the following conditions:
approval of the merger, the plan of merger, the merger agreement and the
ILFC amendment by the holders of a majority of the shares of common stock
outstanding and entitled to vote at the annual meeting;
approval of the merger, the plan of merger and the merger agreement by the
holders of a majority of the outstanding shares of common stock voting at
the annual meeting not owned by Mikelsons or any Mikelsons Affiliate;
approval of the ILFC amendment by the holders of a majority of the shares
of Series B preferred stock outstanding and entitled to vote at the annual
meeting;
that there is no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
merger; prior to asserting this condition the parties must have used all
reasonable best efforts to prevent the entry of that injunction or other
order and to appeal as promptly as possible any such injunction or other
order that may be entered;
the absence of any pending suit, action or proceeding by any governmental
entity, which has a substantial likelihood of success, (i) challenging the
acquisition by INDUS or Mikelsons of any shares of our common stock,
seeking to restrain or prohibit the consummation of the merger or any other
transaction contemplated under the merger agreement or seeking to obtain
from us, INDUS or Mikelsons any damages that are material in relation to
Amtran and its subsidiaries taken as a whole, (ii) seeking to prohibit or
limit the ownership or operation by us or any of our subsidiaries of any
material portion of our business or assets or to compel us or any of our
subsidiaries to dispose of or hold separate any material portion of our
business or assets as a result of the merger or any other transaction
contemplated under the merger agreement, (iii) seeking to impose material
limitations on the ability of INDUS or Mikelsons to acquire or hold, or
exercise full rights of ownership of, any shares of our common stock,
including the right to vote their shares of our common stock on all matters
properly presented to our shareholders or (iv) seeking to prohibit
Mikelsons from effectively controlling in any material respect the business
or operations of Amtran and its subsidiaries;
the absence of any event since the date of the merger agreement which would
have a material adverse effect on Amtran and its subsidiaries, taken as a
whole;
ATA receiving the financing contemplated by the commitment letter on
substantially the terms and conditions contemplated by the commitment
letter;
the correctness of all representations and warranties of Amtran and INDUS
which are qualified as to materiality (and the correctness in all material
respects of representations and warranties of Amtran and INDUS which are
not qualified as to materiality) as of the date of the merger agreement and
the date of the closing of the merger; and
the compliance in all material respects with their obligations under the
merger agreement by Amtran and INDUS.
See 'The Merger Agreement -- Conditions to the Closing of the Merger'
(page 51).
TERMINATION
The merger agreement may be terminated, among other things:
by either party if the merger is not completed by October 31, 2001, and the
party seeking to terminate is not in material breach (excluding any breach
by us without the consent of the single member special independent director
committee);
by either party, for a breach of representations and warranties or the
failure to perform in all material respects by the other party, which
breach is not or cannot be cured within 30
ix
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days after notice by the non-breaching party (excluding certain breaches by
Amtran which are inconsistent with or contrary to the direction of the
single member special independent director committee or taken at the
direction of Mikelsons or any Mikelsons Affiliate);
by INDUS, if the single member special independent director committee or
the Amtran board of directors withdraws or modifies, or proposes to
withdraw or modify, its recommendation; or
by either party, if the required shareholder approval is not obtained.
Amtran may only teminate the merger agreement at the direction of the single
member special independent director committee.
See 'The Merger Agreement -- Termination' (page 52).
DISSENTERS' RIGHTS
Under Indiana law, because shares of our common stock are quoted on the
Nasdaq Stock Market, shareholders are not entitled to dissenters' rights in
connection with the merger. See 'Dissenters' Rights' (page 54).
RECENT MARKET PRICE INFORMATION
Shares of our common stock are quoted on the Nasdaq Stock Market under the
ticker symbol 'AMTR'. On May 16, 2001, the last trading day before the public
announcement of the delivery of Mikelsons' proposal to the board of directors,
the reported closing price for shares of our common stock was $12.60 per share.
On June 18, 2001, the last trading day before the public announcement of the
execution of the merger agreement, the reported closing price for shares of our
common stock was $18.09 per share. On September 5, 2001, the date of this proxy
statement, the reported closing price for shares of our common stock was $22.50
per share. See 'Market Price and Dividend Information' (page 56).
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AMENDED AND RESTATED PROXY STATEMENT
TABLE OF CONTENTS
<Table>
AMENDED AND RESTATED PROXY STATEMENT SUMMARY TERM SHEET..... i
The Parties............................................. i
The Annual Meeting...................................... i
Special Factors......................................... iii
The Merger Agreement.................................... viii
Recent Market Price Information......................... x
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION............................................... 3
THE ANNUAL MEETING.......................................... 4
Date, Place and Time.................................... 4
Purpose of the Annual Meeting........................... 4
Record Date; Quorum..................................... 4
Voting Rights; Vote Required............................ 4
Proxies................................................. 5
Solicitation of Proxies................................. 5
SPECIAL FACTORS............................................. 6
Background of the Merger................................ 6
Purpose and Structure of the Merger..................... 16
The Single Member Special Independent Director
Committee.............................................. 17
Recommendations of the Single Member Special Independent
Director Committee and Board of Directors.............. 17
Fairness of the Merger.................................. 18
Opinion of Financial Advisor to the Single Member
Special Independent Director Committee................. 23
Position of the Filing Persons Regarding Fairness of the
Merger................................................. 31
Projections............................................. 33
Plans for Amtran after the Merger....................... 36
Certain Effects of the Merger........................... 36
Source and Amount of Funds.............................. 38
Certain Federal Income Tax Consequences................. 39
Shareholder Litigation Relating to the Merger........... 40
Method of Accounting.................................... 40
Regulatory and Other Approvals.......................... 40
Interests of Certain Persons in the Merger.............. 41
THE PARTIES................................................. 44
Amtran.................................................. 44
INDUS................................................... 45
Mikelsons............................................... 45
Tague, Wolff and Hlavacek............................... 46
THE MERGER AGREEMENT........................................ 46
The Merger.............................................. 46
What You Will Receive in the Merger..................... 46
Effective Time of the Merger............................ 47
Payment for Shares; Procedures for Surrender of
Certificates........................................... 47
Treatment of Stock Options.............................. 48
Representations and Warranties.......................... 48
Interim Operations Pending Completion of the Merger..... 49
Withdrawal or Modification of Recommendation............ 50
Expenses................................................ 50
Additional Covenants.................................... 50
Conditions to the Closing of the Merger................. 51
</Table>
xi
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<Table>
Termination............................................. 52
Amendment; Waiver....................................... 53
Provisions for Unaffiliated Security Holders............ 54
DISSENTERS' RIGHTS.......................................... 54
SUMMARY FINANCIAL DATA...................................... 55
MARKET PRICE AND DIVIDEND INFORMATION....................... 56
PRIOR STOCK PURCHASES....................................... 56
ESTIMATED FEES AND EXPENSES OF THE MERGER................... 56
ELECTION OF DIRECTORS....................................... 57
General................................................. 57
Nominees................................................ 57
Information Concerning the Board of Directors........... 58
Compensation of Directors............................... 59
Section 16(a) Beneficial Ownership Reporting
Compliance............................................. 59
Certain Relationships and Related Party Transactions in
2000................................................... 59
EXECUTIVE COMPENSATION AND STOCK OPTIONS.................... 60
Report of Compensation Committee on Executive
Compensation........................................... 60
Summary of Cash and Certain Other Compensation.......... 62
RATIFICATION OF THE SELECTION OF ERNST & YOUNG, LLP AS
INDEPENDENT ACCOUNTANTS................................... 66
General................................................. 66
Audit Fees.............................................. 66
Financial Information Systems Design and Implementation
Fees................................................... 66
Other Fees.............................................. 66
Other Matters........................................... 66
Report of the Audit Committee........................... 66
STOCK OWNERSHIP............................................. 68
Security Ownership of Certain Beneficial Owners and
Management............................................. 68
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING............... 69
OTHER MATTERS............................................... 69
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 69
WHERE YOU CAN FIND MORE INFORMATION......................... 70
Annex A
Agreement and Plan of Merger............................ A-1
Annex B
ILFC Agreement.......................................... B-1
Annex C
Form of Opinion of Dresdner Kleinwort Wasserstein,
Inc.................................................... C-1
Annex D
Audit Committee Charter................................. D-1
</Table>
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QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address briefly some
commonly asked questions regarding the merger. These questions and answers may
not address all questions that may be important to you as an Amtran shareholder.
Please refer to the more detailed information contained elsewhere in this proxy
statement, the appendices to this proxy statement and the documents referred to
or incorporated by reference in this proxy statement.
Q: WHAT IS THE PROPOSED TRANSACTION?
A: J. George Mikelsons, founder, Chairman and 72% shareholder of Amtran, is
proposing to acquire all the common stock of Amtran that he does not
currently own through a merger between INDUS and Amtran. If the merger is
completed, you will be entitled to receive $23 in cash, without interest, for
each share of our common stock that you own on the date of the merger. As a
result of the merger, Mikelsons will become the sole common shareholder of
Amtran. As of September 5, 2001, Mikelsons owned 8,271,200 shares of our
common stock, which represented approximately 72% of the outstanding shares
of our common stock on that date.
Q: WHAT IS MY BOARD OF DIRECTORS' VIEW REGARDING THE MERGER?
A: Your board of directors, acting on the recommendation of a single member
special independent director committee of your board of directors, has
determined that the merger is fair to and in the best interests of Amtran and
the holders of shares of our common stock (other than Mikelsons and any
Mikelsons Affiliate). Your board of directors unanimously recommends that you
vote for approval of the merger, the plan of merger, the merger agreement and
the ILFC amendment.
Q: WHY ARE THE SINGLE MEMBER SPECIAL INDEPENDENT DIRECTOR COMMITTEE AND MY BOARD
OF DIRECTORS RECOMMENDING THE MERGER, THE PLAN OF MERGER, THE MERGER
AGREEMENT AND THE ILFC AMENDMENT?
A: The single member special independent director committee and board of
directors believe that the merger is fair to and in the best interests of
Amtran and the holders of shares of our common stock (other than Mikelsons
and any Mikelsons Affiliate). The single member special independent director
committee received an opinion from Dresdner Kleinwort Wasserstein, Inc. that,
as of June 18, 2001, based on and subject to the limitations set forth in its
opinion, the $23 in cash per share to be received by holders of shares of
Amtran common stock (other than Mikelsons and any Mikelsons Affiliate) was
fair to those holders from a financial point of view. The single member
special independent director committee's reasons for recommending the merger
to your board of directors and your board of directors' reasons for
recommending approval of the merger, the plan of merger, the merger agreement
and the ILFC amendment are contained on pages 17 through 23 of this proxy
statement.
Q: IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE FOR MY SHARES OF AMTRAN
COMMON STOCK?
A: You will receive $23 in cash, without interest, for each share of our common
stock you own at the time of the merger, upon valid surrender of your share
certificates.
Q: WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A: Assuming that ATA is able to obtain the financing to pay the merger
consideration and the other conditions to the merger are met at that time, we
expect to close the transaction during the second week of October 2001.
Q: FOLLOWING THE TRANSACTION, WILL AMTRAN CONTINUE AS A PUBLIC COMPANY?
A: No. After the merger takes place, Mikelsons will own all the common stock of
Amtran. Shares of our common stock will no longer be eligible to be quoted on
the Nasdaq Stock Market; however, Amtran will continue to make certain
filings with the Securities and Exchange Commission as required under its
indentures. Holders of our Series A1 preferred stock, Boeing Capital
Corporation, and Series B preferred stock, ILFC, will continue to hold their
interests in Amtran. In addition, Amtran and its subsidiaries will continue
to have certain classes of debt securities that are publicly held.
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Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement, please vote your shares of Amtran common stock as soon as
possible. You may vote your shares (1) by returning the enclosed YELLOW proxy
card or (2) by voting in person at the annual meeting of shareholders. Even
if you previously submitted a blue proxy card, you will need to submit the
enclosed YELLOW proxy card to vote by proxy at the annual meeting.
Q. WHAT SHOULD I DO WITH THE BLUE PROXY CARD YOU SENT ME PREVIOUSLY?
A. Please discard the blue proxy card we sent you previously. You may not use
blue proxy cards to vote at the annual meeting.
Q. IF MY SHARES OF AMTRAN COMMON STOCK ARE HELD FOR ME BY MY BROKER, WILL MY
BROKER VOTE THOSE SHARES FOR ME?
A. Your broker will vote your shares only if you provide instructions to your
broker on how to vote. You should instruct your broker on how to vote your
Amtran shares, using the instructions provided by your broker.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A. Yes. You can change your vote at any time before your proxy is voted at the
annual meeting. You may revoke your proxy by notifying the Secretary of
Amtran in writing or by submitting a new YELLOW proxy card, in either case,
dated after the date of the proxy being revoked. In addition, you may revoke
your proxy by attending the annual meeting and voting in person. However,
simply attending the annual meeting without voting will not revoke your
proxy. If you have instructed a broker to vote your shares, you must follow
the instructions received from your broker to change your vote.
Q. DO I NEED TO ATTEND THE ANNUAL MEETING IN PERSON?
A. No. It is not necessary for you to attend the annual meeting in order to vote
your Amtran shares.
Q. SHOULD I SEND IN MY AMTRAN SHARE CERTIFICATES NOW?
A. No. After the merger is completed, National City Bank will send you written
instructions for exchanging your Amtran share certificates for the merger
consideration, which will include procedures for the electronic delivery of
shares.
Q. WILL I OWE TAXES AS A RESULT OF THE MERGER?
A. The merger will be a taxable transaction for holders of shares of Amtran
common stock. As a result, the cash you receive in the merger for your shares
of Amtran common stock will be subject to United States federal income tax
and also may be taxed under applicable state, local, and other tax laws. In
general, you will recognize gain or loss equal to the difference between
(1) the amount of cash you receive and (2) the tax basis of your shares of
Amtran common stock. Refer to the section entitled 'Special
Factors -- Certain Federal Income Tax Consequences' on page 39 of this proxy
statement for a more detailed explanation of the tax consequences of the
merger. You should consult your tax advisor on how specific tax consequences
of the merger apply to you.
Q. WHAT OTHER MATTERS WILL BE VOTED ON AT THE ANNUAL MEETING?
A. You also will be asked to vote on the election of six directors and the
ratification of selection of Ernst & Young, LLP as independent accountants
for the fiscal year ending December 31, 2001.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT AMTRAN?
A. Amtran files periodic reports and other information with the Securities and
Exchange Commission (the 'SEC'). Amtran's SEC File Number is 000-21642. You
may read and copy this information at the SEC's public reference facilities.
Please call the SEC at (800) SEC-0330 for information about these facilities.
This information is also available at the offices of Nasdaq and at the
Internet site maintained by the SEC at http://www.sec.gov. For a more
detailed description of the information available, please see pages 69
and 70 of this proxy statement.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have questions about the merger after reading this proxy statement or
need assistance in voting your shares, you should contact our proxy
solicitor, Georgeson Shareholder Communications Inc. at 17 State Street, New
York, NY 10004, (800) 223-2064.
2
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This proxy statement, including through the incorporation by reference of
certain documents filed, and other statements made, from time to time by Amtran
and the filing persons, or their respective affiliates or representatives,
contains certain forward-looking statements. These statements are based on
Amtran management's current expectations and are naturally subject to
uncertainty and changes in circumstances. Actual results may vary materially
from the expectations contained herein. The forward-looking statements contained
herein include statements about the proposed transaction. The following factors,
among others, could cause actual results to differ materially from those
described herein: the inability to obtain financing to pay the proposed
transaction consideration; the costs related to the proposed transaction;
litigation challenging the proposed transaction; and other economic, business,
competitive and/or regulatory factors affecting Amtran's businesses generally.
More detailed information about those factors is set forth in filings made by
Amtran with the SEC. Except to the extent required under the federal securities
laws, Amtran and the filing persons are not under any obligation to (and
expressly disclaim any such obligation to) update or alter their forward-looking
statements whether as a result of new information, future events or otherwise.
3
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THE ANNUAL MEETING
DATE, PLACE AND TIME
The annual meeting of shareholders of Amtran which was previously adjourned
on May 29, 2001, is scheduled to be reconvened as follows:
October 10, 2001
7337 West Washington Street
Indianapolis, Indiana
8:00 a.m., local time
PURPOSE OF THE ANNUAL MEETING
At the annual meeting our shareholders will consider and vote on the
following matters:
the merger between INDUS and Amtran, the plan of merger, attached as
Exhibit A to the merger agreement, the Agreement and Plan of Merger dated
as of June 18, 2001 between INDUS Acquisition Company ('INDUS') and Amtran;
an amendment and restatement of Article XII of our Articles of
Incorporation to modify the terms of Amtran's Series B preferred stock (the
'ILFC Amendment') held by ILFC pursuant to a Purchase and Voting Agreement
dated as of May 16, 2001 between Amtran and ILFC (the 'ILFC Agreement');
the election of six directors to the Amtran board of directors to serve
until the next annual meeting; and
the ratification of the selection of Ernst & Young, LLP as independent
accountants for the fiscal year ending December 31, 2001 and to transact
any other business that is properly brought before the annual meeting or
any adjournment thereof.
RECORD DATE; QUORUM
Your board of directors has set the close of business on August 20, 2001 as
the new record date (the 'Record Date') for determining shareholders entitled to
notice of and to vote at the annual meeting. The presence, in person or by
proxy, of a majority of the outstanding shares of our common stock at the annual
meeting is required to constitute a quorum for transaction of business at the
annual meeting. At the close of business on the Record Date, there were
11,501,079 shares of our common stock outstanding held by approximately 248
holders of record and 1,710,658 treasury shares and there were 300 shares of our
Series B preferred stock outstanding held by ILFC, the sole holder of record.
VOTING RIGHTS; VOTE REQUIRED
Holders of shares of our common stock are entitled to one vote for each
share of our common stock that they owned on the Record Date.
Under the Indiana Business Corporation Law (the 'IBCL') or the merger
agreement, the following votes will be required to approve matters submitted to
the annual meeting:
Approval of the merger and related matters
the affirmative vote of the holders of a majority of the outstanding shares
of our common stock entitled to vote at the annual meeting to approve the
merger, the plan of merger and the merger agreement; failures to vote and
abstentions will count as votes against these items;
the affirmative vote of the holders of a majority of the shares of our
common stock not owned by Mikelsons or any Mikelsons Affiliate voting at
the annual meeting to approve the merger, the plan of merger and the merger
agreement; failures to vote and abstentions will have no effect on whether
this approval is obtained;
the affirmative vote of the holders of a majority of the outstanding shares
of our common stock entitled to vote at the annual meeting to approve the
ILFC Amendment; failures to vote and abstentions will count as votes
against these items; and
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the affirmative vote of the holders of a majority of the outstanding shares
of our Series B preferred stock, voting as a separate class, to approve the
ILFC Amendment; a failure to vote or an abstention by ILFC (as the sole
holder of our Series B preferred stock) would count as a vote against the
ILFC Amendment; ILFC has agreed to vote in favor of the ILFC Amendment and
has granted an irrevocable proxy to Kenneth K. Wolff and James W. Hlavacek
to vote its shares of Series B preferred stock with respect to the ILFC
Amendment.
Election of directors
a plurality of the votes cast by holders of shares of common stock entitled
to vote at the annual meeting to elect new directors to serve until the
next annual meeting of shareholders; failures to vote and abstentions will
have no effect on the election of directors; Mikelsons, as the owner of
approximately 72% of the outstanding shares of our common stock, has
sufficient voting power to ensure the election of the six nominees for
director.
Ratification of the selection of Ernst & Young
more votes are cast in favor than are cast against the ratification of the
selection of Ernst & Young as independent accountants for the fiscal year
ending December 31, 2001; failures to vote and abstentions will have no
effect on the ratification of the selection of Ernst & Young; Mikelsons, as
the owner of approximately 72% of the outstanding shares of our common
stock, has sufficient voting power to ensure the ratification of the
selection of Ernst & Young.
PROXIES
A new form of proxy card for your use at the annual meeting accompanies this
proxy statement. In order to vote by proxy at the annual meeting, you must use
the YELLOW proxy card enclosed with this proxy statement, even if you previously
submitted a blue proxy card. Please discard any blue proxy card we sent you
previously. You may not use blue proxy cards to vote at the annual meeting. All
properly executed YELLOW proxy cards that are received prior to or at the annual
meeting and not revoked will be voted at the annual meeting in the manner
specified. Whether or not you plan to attend in person, you are requested to
vote, sign, date and promptly return the enclosed proxy card in the envelope
provided.
You may revoke your proxy at any time before it is voted by:
delivering a written notice of revocation of proxy prior to the annual
meeting to Brian T. Hunt, Secretary, Amtran, Inc., 7337 West Washington
Street, Indianapolis, Indiana 46231;
delivering to us a duly executed YELLOW proxy card bearing a later date
prior to the annual meeting; or
attending the annual meeting and voting in person.
However, simply attending the annual meeting without voting will not revoke
your proxy.
If you own your shares of our common stock in 'street name', you should
follow your broker's instructions concerning how to change your vote.
YOU SHOULD NOT SEND ANY SHARE CERTIFICATES WITH YOUR PROXY CARD. A LETTER OF
TRANSMITTAL WITH INSTRUCTIONS FOR THE SURRENDER OF YOUR SHARE CERTIFICATES WILL
BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER COMPLETION OF THE MERGER.
SOLICITATION OF PROXIES
We will bear the cost of the solicitation of proxies. In addition to
solicitation by mail, our directors, officers and employees may solicit proxies
from shareholders by telephone, facsimile, telegram or in person. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of shares of our common stock held of record by these persons, and we will
reimburse these custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses upon request. We have retained Georgeson Shareholder
Communications Inc. to coordinate the solicitation of proxies for a fee of
$7,500, plus reimbursable expenses and custodial charges.
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SPECIAL FACTORS
BACKGROUND OF THE MERGER
Amtran offered shares of its common stock to the public in 1993 at a price
of $16 per share. From time to time since its public offering, Mikelsons and
Amtran have considered possible strategic alternatives to remaining a public
company with Mikelsons as the majority shareholder.
During 1998, Amtran engaged Salomon Smith Barney to assist Amtran in a
review of its strategic alternatives. As part of this process, a number of
members of the airline industry were contacted with respect to their interest in
a possible strategic transaction with Amtran. This process led another airline
company (the 'industry buyer') to initiate discussions beginning in December
1998 with respect to a possible acquisition of Amtran. Those discussions
continued intermittently through the first three fiscal quarters of 1999. In
April 1999, Amtran and the industry buyer entered into a confidentiality
agreement (including a 2-year standstill) and the industry buyer, together with
its financial advisors, engaged in a due diligence review of Amtran throughout
the summer of 1999. The discussions with the industry buyer involved a possible
acquisition of Amtran for stock or a mix of cash and stock. In the third quarter
of 1999, the industry buyer withdrew from discussions as a result of the decline
in airline industry conditions, as well as a decline in the financial prospects
of the industry buyer and Amtran and the trading prices of the industry buyer's
common stock.
While the discussions with the industry buyer were taking place and after
obtaining the consent of the Amtran board of directors, Messrs. Tague, Wolff and
Hlavacek engaged a second financial advisor to identify potential financial
sponsors to participate with management in a leveraged buy-out of Amtran. As a
result of this process, Amtran senior management began preliminary discussions
with Apollo Management, L.P., a private equity fund ('Apollo'), in the spring of
1999. On May 28, 1999, Amtran entered into a confidentiality agreement
(including a 2-year standstill) with Apollo. During the second and third
quarters of 1999, Apollo made several indicative proposals, each of which was
subject to numerous conditions, for leveraged recapitalization transactions
involving Amtran. In the fall of 1999, discussions between Amtran and Apollo
ended.
After discussions with Apollo commenced, the Amtran board of directors
formed a single member special independent director committee (composed of
Robert A. Abel) to consider possible strategic alternatives available to Amtran,
including possible transactions with the industry buyer and Apollo.
In February 2000, discussions with Apollo restarted when a representative of
Apollo contacted Mr. Tague. Thereafter, members of Amtran senior management
worked with Apollo to prepare a revised leveraged recapitalization proposal. In
March 2000, Apollo submitted an indicative proposal for a leveraged
recapitalization in which all holders of shares of Amtran common stock would
have received $25 per share in cash for 96% of their shares and would retain 4%
of their shares of common stock as a continuing interest in Amtran. This
indicative proposal was subject to numerous substantive conditions, including
satisfactory completion of a due diligence review of Amtran's business. Over the
next several months, Amtran senior management, representatives of Salomon Smith
Barney and Cravath, Swaine & Moore engaged in extensive discussions with
representatives of Apollo regarding the terms and structure of this proposal.
In response to the proposal from Apollo, at the direction of Mikelsons, a
representative of Salomon Smith Barney contacted several other airlines
regarding their possible interest in a transaction with Amtran. Discussions with
the industry buyer were reinitiated during this period but were terminated
shortly thereafter. On May 27, 2000, Mikelsons discussed a possible transaction
with Amtran with executives of another airline. None of these inquiries resulted
in proposals.
On May 30, 2000, Amtran entered into an exclusivity agreement with Apollo
providing for a one-month exclusivity period, subject to extension by the
parties. During the exclusivity period, Apollo engaged in extensive due
diligence on Amtran and met regularly with members of Amtran senior management.
In July 2000, representatives of Apollo and Amtran senior management
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presented the March 2000 proposal to the credit rating agencies. In response to
concerns raised by the rating agencies, Apollo made a revised indicative
proposal, subject to a number of substantive conditions, in which all holders of
shares of Amtran common stock would have received $21 per share in cash and $3
in principal amount of subordinated notes for 96% of their shares of Amtran
common stock and would have retained 4% of their shares of Amtran common stock.
After negotiations regarding this proposal, Apollo further revised its
indicative proposal to $21 per share in cash and preferred stock with a
liquidation amount of $3 per share for 96% of the outstanding shares of Amtran
common stock. After considering this revised proposal from Apollo, in September
2000, Mikelsons informed Apollo that he was not interested in participating in
the proposed recapitalization transaction. Following this decision, Amtran and
that single member special independent director committee ended discussions with
Apollo.
After the negotiations with Apollo ended, Amtran increased market
repurchases of shares of Amtran common stock. Beginning in late December 2000,
Messrs. Mikelsons and Tague discussed the possibility of a transaction in which
Amtran would be taken private. On January 8, 2001, Mr. Tague contacted a
representative of Salomon Smith Barney to request a meeting to discuss a
possible transaction to take Amtran private. On January 12, 2001, Messrs.
Mikelsons, Tague and Wolff met with representatives of Salomon Smith Barney and
Citicorp USA, Inc. to discuss whether such a transaction would be feasible given
industry conditions. During the several weeks following this meeting, Messrs.
Mikelsons, Tague and Wolff communicated with representatives of Salomon Smith
Barney and Citicorp regarding the possible structure and financing of this type
of transaction. Due to the possibility of a going-private transaction, Amtran
senior management suspended stock repurchases on January 8, 2001.
On January 25, 2001, William P. Rogers, Jr., a partner at Cravath, and a
director of Amtran, was contacted by senior officers of Amtran regarding a
possible going-private transaction. Representatives of Salomon Smith Barney and
Cravath (including Mr. Rogers) also discussed with Messrs. Tague and Wolff the
possible structures for and the timing of such a transaction. On January 26,
2001, Mr. Rogers contacted Benjamin F. Stapleton of Sullivan & Cromwell ('S&C'),
who had represented the previously formed single member special independent
director committee, to inform him that another special independent director
committee might be needed.
During the following month, Messrs. Mikelsons, Tague and Wolff participated
in a number of conference calls and meetings with Mr. Rogers and other attorneys
at Cravath regarding possible structures for a transaction, the limitations on
restricted payments contained in Amtran's indentures and the impact of the
proposed transaction on the outstanding shares of Series B preferred stock,
which are convertible into shares of Amtran common stock, held by ILFC. Messrs.
Tague and Wolff also discussed with Mr. Rogers and other attorneys at Cravath
the effect of the proposed transaction on Amtran's stock options and discussed
possible structures in which stock options held by Amtran's senior officers
could remain outstanding instead of being cashed out. During the same period,
members of Amtran's strategic planning department discussed with representatives
of Salomon Smith Barney and Citicorp a draft of a 5-year business plan that
Amtran's senior officers had produced and the financial model underlying that
plan. During February and early March, 2001, Messrs. Tague and Wolff began
negotiations (via telephone conference and in person) with Salomon Smith Barney
and Citicorp regarding the financing terms for a possible transaction.
In early February 2001, Mr. Wolff contacted another financial institution
(the 'alternative financial advisor') about providing financing and advisory
services with respect to the possible transaction. On several occasions during
March 2001, the alternative financial advisor discussed the financing and
structure of the possible transaction with representatives of Cravath (including
Mr. Rogers) and Amtran senior management. Representatives of the alternative
financial advisor also discussed possible financing terms with Mr. Wolff and
representatives of Cravath (including Mr. Rogers) throughout March and April
2001. Mikelsons also continued to pursue negotiations with representatives of
Salomon Smith Barney and Citicorp regarding the terms and conditions of a
commitment letter.
Beginning in the last week of March 2001, a representative of Apollo placed
telephone calls to Messrs. Mikelsons and Tague and representatives of Salomon
Smith Barney. On April 2, 2001, a
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representative of Apollo sent a letter to Mikelsons, with a copy to Salomon
Smith Barney, expressing continued interest in a transaction involving Amtran.
This letter was discussed at a meeting on April 3, 2001, among Messrs. Tague and
Wolff and representatives of Salomon Smith Barney and Cravath (including
Mr. Rogers). Negotiations over the terms of Salomon Smith Barney and Citicorp's
commitment letter also continued throughout this week.
On April 5, 2001, at the request of Mikelsons, representatives of Salomon
Smith Barney contacted a representative of Apollo to respond to the April 2
letter. In this conversation, the representative of Apollo stated that it
remained interested in a transaction with Amtran but was prevented from making a
proposal by the standstill provision contained in the confidentiality agreement
which it had previously entered into with Amtran. The representative of Apollo
stated that he had heard rumors that Mikelsons was considering a possible
transaction to take Amtran private and that Apollo would be interested in
participating as a minority partner in such a transaction.
On April 6, 2001, following telephone conversations among Messrs. Mikelsons,
Tague and Rogers and representatives of Salomon Smith Barney, Mr. Tague and
representatives of Salomon Smith Barney then placed a telephone call to
representatives of Apollo. At the request of Mikelsons, a representative of
Salomon Smith Barney informed the representatives of Apollo that Mikelsons was
not interested in selling his stake in Amtran to Apollo or participating in a
transaction with Apollo, but that Amtran would waive the standstill provision to
permit Apollo to communicate a proposal to the Amtran board of directors if it
wished to do so. In response, a representative of Apollo indicated that it would
be interested in making such a proposal and requested updated non-public
information with respect to Amtran. Based on their understanding of Mikelsons'
lack of interest in selling his shares of Amtran common stock, members of Amtran
management rejected this request. On April 11, 2001, Apollo sent a letter to
Messrs. Mikelsons and Tague and a representative of Salomon Smith Barney
proposing to purchase all the outstanding shares of Amtran common stock for $20
per share in cash, subject to satisfactory completion of additional due
diligence; the letter stated that Apollo might be prepared to offer a price in
excess of $20 per share based on the results of a due diligence update. Apollo
also indicated that it would be interested in participating, in a minority role,
in a transaction in which Amtran was taken private.
In early April 2001, Mr. Rogers discussed with Mr. Abel the possibility of
Mikelsons proposing to take Amtran private and the need to constitute another
special independent director committee to consider any proposal that Mikelsons
might make. Mr. Abel indicated that he would be willing to serve in that
capacity again. Mr. Abel subsequently retained S&C to act as independent legal
advisor to the single member special independent director committee. Messrs.
Abel and Stapleton discussed the process of retaining a financial advisor for
the single member special independent director committee and several investment
banks were contacted. By unanimous written consent dated April 18, 2001, the
Amtran board of directors formed a single member special independent director
committee composed of Mr. Abel.
During the week beginning April 16, 2001, Mr. Abel, together with
representatives of S&C, received presentations from three investment banks being
considered to represent the single member special independent director
committee, including DrKW.
During that same week, Messrs. Tague and Wolff, with the assistance of
representatives of Salomon Smith Barney and Cravath (including Mr. Rogers),
prepared a draft term sheet to be presented to ILFC regarding the proposed
modification of the terms of their shares of Amtran Series B preferred stock.
Mr. Wolff sent this term sheet to ILFC, following the execution of a
confidentiality agreement by ILFC on April 24, 2001. This draft term sheet
proposed changes to the conversion and antidilution provisions of the Series B
preferred stock to provide for periodic appraisals to reflect the absence of a
public market for shares of Amtran's common stock upon completion of a
transaction in which Amtran was taken private and that ILFC agrees not to
convert its shares of Series B preferred stock prior to completion of the
proposed transaction.
In mid-April 2001, Messrs. Tague and Wolff met with representatives of Bank
One, NA to discuss Bank One NA's interest in participating in the financing of a
possible transaction.
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On April 24, 2001, a representative of Apollo placed a telephone call to
Mr. Tague. After discussing this telephone call with Mr. Rogers, Mr. Tague
returned the telephone call to the representative of Apollo, and informed the
representative of Apollo that Mikelsons was not interested in participating in a
transaction with Apollo.
Between April 24, 2001 and May 3, 2001, Messrs. Tague and Wolff, together
with representatives of Cravath, further negotiated the draft commitment letter
from Salomon Smith Barney and Citicorp and the draft commitment letter from the
alternative financial advisor commitment letter. On May 3, 2001, Salomon Smith
Barney and Citicorp delivered a final form of commitment letter to Amtran.
Discussions with the alternative financial advisor ceased at this time.
On April 26, 2001, a representative of ILFC called Mr. Wolff regarding
ILFC's view that additional modifications to the terms of the Series B preferred
stock would be appropriate in connection with a transaction in which Amtran
would be taken private. The additional modifications suggested by ILFC included
an increase in the dividend rate on the Series B preferred stock, an increase in
the redemption premium to reflect the going-private transaction, the repurchase
of a portion of ILFC's shares of Series B preferred stock, increased voting and
governance rights, and commitments by Amtran to enter into operating lease
agreements with ILFC with respect to additional aircraft. A representative of
ILFC delivered a term sheet containing those proposals to Amtran on April 30.
Messrs. Tague and Wolff reviewed ILFC's term sheet with representatives of
Salomon Smith Barney and Cravath (including Mr. Rogers) on May 2, 2001.
On April 27, 2001, Mr. Rogers called Mr. Stapleton to inform him that an
agreement in principle had been reached with Salomon Smith Barney and Citicorp
with respect to the financing of a possible transaction and to discuss the
possible timing of a proposal by Mikelsons.
On May 3, 2001, Messrs. Mikelsons, Tague and Wolff met with representatives
of William M. Mercer and Cravath (including Mr. Rogers) to provide advice to
Mikelsons on compensation issues, including the proposal for senior officers to
roll their options forward.
Later on May 3, Messrs. Mikelsons, Tague and Wolff met with representatives
of Salomon Smith Barney, Citicorp and Cravath (including Mr. Rogers) to review
ILFC's proposed terms and to discuss the overall timing of a possible
transaction. On May 4, 2001, following these discussions, Mr. Wolff sent revised
term sheets to representatives of ILFC. These revised term sheets contained two
alternative responses to ILFC's proposed modifications to the terms of the
Series B preferred stock. The first alternative contemplated that the Series B
preferred stock would continue to be convertible into shares of Amtran common
stock but the redemption premiums would be increased to reflect the transaction
price. The second response modified the terms of the Series B preferred stock to
eliminate the conversion feature and provided that the dividend rate on shares
of Series B preferred stock be increased to a rate comparable to the rate on the
Series A1 preferred stock. On May 7, 2001, Messrs. Tague and Wolff, together
with a representative of Salomon Smith Barney, met with representatives of ILFC
to negotiate the terms of the modifications to the Series B preferred stock. On
May 9, 2001, representatives of Cravath sent draft agreements to representatives
of ILFC.
On May 8, 2001, the single member special independent director committee
decided to retain DrKW as its financial advisor based on DrKW's experience in
representing special committees, the fact that DrKW had not worked with Amtran
in the past and DrKW's fee structure.
On May 11, 2001, Mr. Wolff and Charles Fuller, Director of Strategic
Planning of Amtran, met with representatives of General Electric Capital
Aviation Services, one of Amtran's main sources of aircraft financing, and
disclosed that Mikelsons was considering taking Amtran private. At this meeting,
General Electric Capital Aviation Services entered into a confidentiality
agreement with respect to this information. On May 14, 2001, Messrs. Wolff and
Fuller held a similar meeting over dinner with representatives of Boeing Capital
Corporation. At this meeting, Boeing Capital Corporation entered into a
confidentiality agreement with respect to this information.
In addition, on May 14, representatives of S&C sent Mr. Rogers a due
diligence request prepared by DrKW.
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On May 15, 2001, following consultation with his financial and legal
advisors, Mikelsons determined to submit a proposal to take Amtran private at
$21 per share in cash.
On May 15, 2001, representatives of Cravath and counsel for ILFC finalized
the agreements modifying the terms of the Series B preferred stock. These
agreements were executed and delivered by the parties on the afternoon of
May 16, 2001.
Following the close of the stock markets on May 16, copies of Mikelsons'
letter proposing to take Amtran private for $21 per share in cash and the
Salomon Smith Barney and Citicorp commitment letter were sent to the members of
the Amtran board of directors and S&C. Later that afternoon, the Amtran board of
directors met telephonically to review Mikelsons' proposal and related matters.
Among the matters considered at this meeting was a request by Mikelsons that
Amtran enter into an engagement letter with Salomon Smith Barney on his behalf.
After discussing these matters, the members of the Amtran board of
directors, other than Messrs. Mikelsons and Rogers, who each abstained, voted to
refer Mikelsons' proposal and related matters to the single member special
independent director committee for consideration and to authorize Amtran to
enter into an engagement letter with Salomon Smith Barney. That evening Amtran
issued a press release announcing receipt of Mikelsons' proposal and that the
Amtran board of directors had referred that proposal to the single member
special independent director committee. Mr. Tague also executed the engagement
letter with Salomon Smith Barney on behalf of Amtran that evening.
On May 17, 2001, Messrs. Tague and Wolff and representatives of Salomon
Smith Barney and Cravath (including Mr. Rogers) had a conference call with
representatives of S&C and DrKW regarding the process that the single member
special independent director committee was planning to undertake (including due
diligence to be conducted by DrKW and S&C). Representatives of Cravath also sent
DrKW due diligence materials provided to Cravath by Amtran. These due diligence
materials were supplemented by additional materials on May 18 (including the
5-year plans prepared by Amtran management dated April 19, 2001 and May 16,
2001).
Also, on May 17, Amtran and the seven members of its board of directors were
named as defendants in two putative class action lawsuits filed in the Marion
County Court in Indianapolis. Amtran was served with copies of these complaints
by certified mail on May 21, 2001.
On May 21, 2001, representatives of S&C visited a data room at the offices
of Cravath containing due diligence materials provided by Amtran and were
provided with copies of the data room materials which they requested.
On May 22, 2001, representatives of Cravath sent a draft form of merger
agreement to representatives of S&C.
On May 23, 2001, DrKW provided Mr. Rogers with a list of topics which the
single member special independent director committee and DrKW would be
interested in discussing with Mikelsons. The topics covered included Mikelsons'
reasons for taking Amtran private, Mikelsons' basis for concluding his $21 per
share offer was fair, Mikelsons' intentions with respect to a sale of his shares
following the proposed transaction, prior discussions involving Apollo and the
industry buyer and whether other investors would be participating with Mikelsons
in the transaction. In the morning of May 24, 2001, representatives of Cravath
(including Mr. Rogers) discussed with Mikelsons the questions posed by DrKW.
Also present on this telephone call were Messrs. Tague and Wolff and
representatives of Salomon Smith Barney.
In the evening of May 24, Messrs. Tague, Wolff, Rogers and Abel attended a
dinner meeting with representatives of DrKW, S&C and Salomon Smith Barney in
Chicago, Illinois. At dinner, Messrs. Tague and Wolff discussed recent airline
industry trends, Amtran's business and prospects and reviewed the specific
business segments in which Amtran operates (namely, scheduled service,
commercial charter and military charter). During that discussion, Messrs. Tague
and Wolff expressed the view that in light of an industry-wide deterioration in
financial performance and Amtran's year-to-date performance, Amtran's business
prospects for the remainder of 2001 would be worse than they had projected
originally.
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In the morning of May 25, the meeting reconvened at Salomon Smith Barney's
Chicago offices. During these meetings, Messrs. Tague and Wolff reviewed at
length the 5-year plans prepared by Amtran management. In particular, these
discussions covered the risks inherent in Amtran's shift away from commercial
charter service and toward predominantly scheduled service, Amtran's transition
to a new fleet type, one of the youngest fleets in the airline industry, from an
older fleet type in a short period of time (including the risks posed by that
transition and the temporary reduction in maintenance costs resulting from that
transition) and the risks posed by the labor situation in the airline industry
generally and high fuel costs. At this meeting, representatives of DrKW
requested that Amtran management include additional cases in its 5-year plan
reflecting various scenarios, including, a scenario in which Amtran's fuel costs
remained constant throughout the 5-year period, a scenario in which rival
airlines increased direct competition on Amtran's routes in an effort to reduce
Amtran's market share on those routes, a scenario in which there was a recession
during the 5-year period and a scenario reflecting all of these adjustments.
DrKW also requested that Amtran management prepare a case which adjusted the
maintenance expenses throughout the period covered by the projections to reflect
the fact that maintenance costs will be abnormally low during the period from
2002 to 2005 due to the rapid transition to a younger fleet. At this meeting,
Mr. Abel and representatives of DrKW and S&C asked questions of Amtran
management.
Later in the morning, Mikelsons joined the meeting. DrKW asked Mikelsons
questions covering the topics outlined in the questions provided to Mr. Rogers
on May 23. In response to these questions, Mikelsons discussed the fact that
taking Amtran private at the present time would permit management to focus on
the implementation of long-term strategic goals without having to undergo the
scrutiny of the public equity markets, which are unlikely to reflect the
potential benefits of these initiatives at any time in the near future.
Mikelsons also stated that he believed $21 per share was a fair price given,
among other things, the difference between the offer price and the recent market
price of shares of Amtran common stock. During this discussion, Mikelsons made
clear that he does not intend to sell his shares of Amtran common stock either
in connection with the proposed transaction or following the transaction.
Mikelsons, together with Messrs. Tague and Wolff, reviewed for the
representatives of DrKW the history of the prior discussions involving Apollo
and the industry buyer. Mikelsons also confirmed to the representatives of DrKW
and Mr. Abel that there were no other investors that would be participating with
Mikelsons in the transaction. At the request of DrKW, Mikelsons also gave a
brief overview of the history of the airline since its founding in 1973. There
was also further discussion between Mr. Rogers and representatives of DrKW and
S&C regarding the structure of the transaction. At the conclusion of the
meeting, the group also discussed the April 11, 2001 proposal received from
Apollo and Mr. Mikelsons' statements that he was not interested in selling his
shares of common stock. The advisors to the single member special independent
director committee then advised Mr. Mikelsons and the members of Amtran
management that they wished to contact Apollo to discuss the proposal and asked
whether Mikelsons or Amtran's management would object to the advisors doing so.
Mikelsons and Amtran's management indicated that they had no objection.
After the Chicago meetings concluded, Amtran management arranged to have
delivered to DrKW additional due diligence materials regarding matters discussed
in those meetings and for DrKW to visit Amtran's Chicago and Indianapolis
operations.
On May 29, 2001, representatives of DrKW and S&C contacted a representative
of Apollo to discuss the April 11, 2001 proposal. The representative of Apollo
confirmed that it was willing to acquire all of the outstanding shares of Amtran
common stock for $20 per share and that, if it was provided with updated
non-public information regarding Amtran, it might be prepared to offer more than
$20 per share. The representatives of DrKW and S&C then informed Apollo that
they understood Mikelsons was not interested in selling his interest in Amtran
and that they had no authority to offer Amtran for sale. The representative of
Apollo informed the single member special independent director committee's
advisors that it could be interested in acquiring the minority shareholders'
interest in Amtran at the same price, using the proposed financing that
Mikelsons had arranged, and then participating in a minority role with what
Apollo characterized
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as 'customary minority protections'. In response to a request by representatives
of DrKW for more information regarding what Apollo meant by 'customary minority
protections', a representative of Apollo stated that they would be 'extensive'
and 'complicated'. No further detail was provided. The representatives of DrKW
and S&C then inquired whether Apollo would be interested in simply acquiring the
minority interest and holding it without any special minority protections. The
representative of Apollo indicated that it would not be interested in a minority
position in Amtran without appropriate minority rights and power sharing
arrangements.
Once this telephone call was completed, representatives of DrKW and S&C
contacted representatives of Salomon Smith Barney to discuss Apollo's continuing
interest in Amtran. During this conversation, a representative of DrKW indicated
that DrKW's preliminary valuation work and the prior proposals from Apollo were
leading DrKW to conclude that an appropriate price was above $21 per share in
cash. That afternoon, representatives of Salomon Smith Barney and Mr. Rogers had
several conversations with Messrs. Tague and Wolff regarding this conversation.
Mr. Wolff also spoke with representatives of Salomon Smith Barney and Cravath
regarding an error which was found in Amtran's model used to prepare its
May 16, 2001 5-year plan.
Also, on May 29, 2001, the annual meeting of Amtran shareholders was
adjourned.
On May 30, 2001, representatives of DrKW met with additional members of
Amtran management, including Messrs. Hlavacek and McKnight, and performed due
diligence on additional aspects of Amtran's operations in Chicago and
Indianapolis with representatives of Salomon Smith Barney and Cravath present.
Later on May 30, Messrs. Tague and Wolff met with representatives of DrKW,
Salomon Smith Barney and Cravath and began discussing the 5-year plans produced
by Amtran management, the error in the model which had been identified the day
before and the alternative scenarios that DrKW requested at the May 25 meeting.
That afternoon, a representative of DrKW repeated to Messrs. Tague and Wolff and
representatives of Salomon Smith Barney and Cravath that DrKW's view was that an
appropriate price for Amtran was above $21 per share. On May 31, 2001, Amtran
provided representatives of DrKW with copies of the corrected 5-year base plan
and supplemental 5-year plans covering the alternative scenarios requested to be
prepared by DrKW.
Amtran and the seven members of its board of directors were named as
defendants in a third putative class action lawsuit, which was filed in federal
district court in Indianapolis on May 30, 2001. Amtran and all the members of
the board of directors were served with copies of this complaint by certified
mail at Amtran's offices on June 6, 2001.
On May 31, 2001, representatives of S&C sent a mark-up of the draft merger
agreement to representatives of Cravath. In the afternoon of June 1, 2001,
representatives of Cravath (including Mr. Rogers) and S&C negotiated the
non-financial terms of the draft merger agreement.
In the morning of June 1, 2001, representatives of DrKW conducted additional
due diligence via conference call with additional members of Amtran management.
Representatives of S&C, Salomon Smith Barney and Cravath also listened to this
conference call.
On June 1 and June 2, 2001, at the direction of Mikelsons, representatives
of Salomon Smith Barney had several conversations with representatives of DrKW
regarding Mikelsons' offer, the need for adjustments to the discounted cash flow
analysis to reflect the temporary decline in maintenance costs resulting from
the transition to a new fleet, the prior proposals received by Amtran from
Apollo and the decline in Amtran's financial prospects since those proposals
were made, the use of comparable company and precedent transaction analyses, the
fact that Amtran's indentures contain limitations on restricted payments which
would limit the amount that could be paid as merger consideration while still
allowing Amtran to satisfy its obligations to pay dividends on its shares of
preferred stock, the accuracy of Amtran management's prior projections and
budgets and the decline in Amtran's cash flow between 2004 and 2005 contained in
the 5-year plan. Representatives of Salomon Smith Barney and DrKW continued to
discuss these topics on an ongoing basis over the following two-week period.
During the period from May 16 to June 5, 2001, Mr. Abel had frequent
telephonic conversations with representatives of DrKW, S&C and Sommer & Barnard,
Indiana counsel to the
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single member special independent director committee, to discuss the status of
the financial and legal due diligence process.
In the morning of June 5, 2001, the single member special independent
director committee met at the New York offices of S&C with representatives of
S&C, DrKW and Sommer & Barnard. A representative of Sommer & Barnard reviewed
the single member special independent director committee's legal duties under
Indiana law. Representatives of DrKW reviewed with the single member special
independent director committee the results of their financial and business due
diligence and analysis of Amtran. DrKW later confirmed and updated these
preliminary results and analysis in DrKW's final report, dated June 18, 2001, to
the single member special independent director committee. The final report,
which was substantially similar to DrKW's June 5, 2001 preliminary report, is
described later in this proxy statement under the caption ' -- Opinion of
Financial Adviser to the Single Member Special Independent Director Committee.'
Copies of both reports have been filed as Exhibits to the Schedule 13E-3 filed
with the SEC by Amtran and the filing persons. At the conclusion of the meeting,
the single member special independent director committee decided to continue to
negotiate in order to attain a price per share above the $21 per share initial
offer and that DrKW should advise Salomon Smith Barney that Mr. Mikelsons would
need to offer $26 per share in order for the single member special independent
director committee to recommend his proposal.
In the morning of June 5, 2001, Cravath provided S&C with a revised draft of
the merger agreement, reflecting certain of the changes requested by S&C in the
negotiation on June 1. In the afternoon of June 5, representatives of Salomon
Smith Barney, Cravath (including Mr. Rogers), DrKW, S&C and Sommer & Barnard
met. At this meeting, representatives of DrKW made a presentation regarding
their preliminary valuation work on Amtran based on the 5-year plan and
alternative scenarios prepared by Amtran management. As part of this
presentation, representatives of DrKW questioned the fact that the 5-year plan
prepared by Amtran showed a decline in cash flow between 2004 and 2005. There
was also discussion of DrKW's conversations with Apollo and the relevance of
Apollo's proposals in 2000 to a determination of the value of Amtran in June
2001.
In response to this presentation, representatives of Salomon Smith Barney
questioned certain portions of DrKW's financial analysis, including, in
particular, DrKW's reliance on its discounted cash flow analysis and DrKW's
stated belief that it was unable to draw any conclusions from its comparable
company analysis. After listening to these responses, a representative of DrKW
stated that he believed that the single member special independent director
committee's preliminary view was that it would likely be able to recommend a
price of $26 per share. However, he invited Salomon Smith Barney to discuss
further the financial analysis presented at the meeting and to make available
additional information regarding Amtran to the extent useful in refining the
financial analysis. The relevance and valuation of the proposals by Apollo was
also discussed at this meeting. The discussion of the valuation of Apollo's
proposals focused on the need to value each component of these proposals by
taking into account the relevant market conditions that existed at the time the
proposal was made, thereby resulting in the market value of the non-cash
components of each proposal being discounted relative to the face value of such
non-cash components.
Beginning in the morning of June 6, 2001 and continuing through June 8,
2001, representatives of DrKW and Salomon Smith Barney had a number of telephone
calls regarding the valuation work done by DrKW through that time. The topics
discussed included DrKW's valuation analysis based on comparable companies, the
appropriate methodology for determining the enterprise value of Amtran, the
reasons underlying the decline in cash flow between 2004 and 2005 in Amtran's
5-year plan, the relative weightings of the 5-year plan scenarios and the
variances between Amtran's forecasts and actual historical results.
On June 11, 2001, representatives of Salomon Smith Barney and Cravath had a
conference call with Mr. Wolff regarding the variances over the last three years
in Amtran's forcasts versus its actual historical results. Thereafter,
representatives of Salomon Smith Barney provided representatives of DrKW with a
comparison of Amtran management's budgets (prepared two
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months prior to the beginning of each year) with actual performance in 1998,
1999 and 2000 based on the information provided to DrKW by Amtran's management.
Representatives of Salomon Smith Barney thereafter had several telephone
conversations with representatives of DrKW regarding DrKW's discounted cash flow
analysis of Amtran.
Also on June 11, representatives of S&C and Cravath had additional
negotiations on the non-financial terms of the draft merger agreement. A revised
draft of the merger agreement was distributed to representatives of S&C on
June 12.
In the morning of June 12, 2001, representatives of DrKW and S&C contacted
representatives of Cravath to indicate that the single member special
independent director committee had determined that it would not recommend
Mikelsons' offer of $21 per share. They also indicated that the single member
special independent director committee's views on valuation had not changed
since the June 5 presentation. Following receipt of this determination, Messrs.
Mikelsons, Tague and Wolff participated in a conference call with
representatives of Salomon Smith Barney and Cravath (including Mr. Rogers).
Mikelsons indicated that he was not prepared to increase his offer at that time
and expressed his view that industry conditions had deteriorated since he made
his proposal on May 16, 2001, and were continuing to deteriorate. Also, on
June 12, representatives of Salomon Smith Barney provided to representatives of
DrKW a comparison between Amtran's forecasts in July 2000 and the current 5-year
plan.
In the morning of June 13, 2001, at Mikelsons' request, representatives of
Salomon Smith Barney sent information regarding the recent performance of Amtran
and the airline industry generally to representatives of DrKW and, later that
day, discussed the information via a conference call with representatives of
DrKW, Messrs. Tague and Wolff and representatives of Cravath and S&C. During
this conference call, a representative of DrKW reiterated his view that the
single member special independent director committee would not conclude an offer
of $21 per share was fair. There was also discussion of the limitations on
restricted payments contained in Amtran's indentures. Messrs. Wolff and Tague
undertook to provide to representatives of Salomon Smith Barney and DrKW with an
updated calculation of those limitations by the end of that day.
After this conference call, there was, at the request of a representative of
DrKW, a telephone call between representatives of DrKW and Salomon Smith Barney
on which a representative of DrKW indicated that he believed, based on the
updated valuation work done since the June 5 meeting to account for changes in
the number of outstanding Amtran shares and options, that the single member
special independent director committee might be willing to consider an offer of
$24 per share in cash. During this telephone call, a representative of Salomon
Smith Barney indicated that he believed Mikelsons might be willing to increase
his offer by $1 to $2 per share.
In the late afternoon of June 13, Amtran provided a calculation of amounts
available under the restricted payments limitation to representatives of Salomon
Smith Barney and Cravath. On June 13, representatives of S&C and Cravath also
held further negotiations on the non-financial terms of the draft merger
agreement.
During the day on June 14, 2001, Amtran provided calculations of the
restricted payment limitation to Mikelsons and representatives of Salomon Smith
Barney and Cravath. In the afternoon of June 14, Messrs. Mikelsons, Tague and
Wolff had a telephone conference call with representatives of Salomon Smith
Barney and Cravath (including Mr. Rogers) to discuss the calculations prepared
by Amtran. At the conclusion of this telephone call, representatives of Salomon
Smith Barney were instructed by Mikelsons to attempt to come to an understanding
with DrKW on price. Following this discussion, the calculations of the
restricted payments limitation were provided to representatives of DrKW and
representatives of Salomon Smith Barney contacted representatives of DrKW to
discuss the calculations.
Also on June 14, representatives of Cravath continued negotiations with
representatives of S&C with respect to the non-financial terms of the draft
merger agreement and distributed a further revised draft of the merger agreement
to representatives of S&C.
In the morning of June 15, 2001, representatives of Salomon Smith Barney and
DrKW had a number of telephone conversations to review Amtran's calculation of
the restricted payments
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limitation. These representatives also discussed the proper valuation
methodology for the September 2000 proposal by Apollo, focusing in particular on
the valuation of the non-cash components of the September 2000 proposal and the
likelihood that Apollo would propose to include $21 per share in cash in a
similar proposal in light of the decline in Amtran's projections since
September 2000.
In the early afternoon of June 15, 2001, at Mikelsons' request,
representatives of Salomon Smith Barney contacted representatives of DrKW by
telephone to indicate that Mikelsons was willing to offer a price of $22.50 per
share in cash. In the afternoon of June 15, 2001, the single member special
independent director committee held a telephonic meeting with representatives of
S&C and DrKW, at which time DrKW advised the single member special independent
director committee that Mikelsons had raised his offer price from $21.00 to
$22.50. DrKW discussed this new offer with the single member special independent
director committee in light of Amtran's restricted payments calculation provided
to the single member special independent director committee on June 15, which
calculation indicated a smaller amount of availability under the restricted
payments limitation than the calculations prepared by DrKW. These calculations
indicated that Amtran might risk being unable to make restricted payments under
its indentures if the offer price were at or above $23.00 per share. The single
member special independent director committee instructed DrKW to counter
Mikelsons' revised proposal with a proposal of $23.50 per share. Following the
single member special independent director committee meeting, representatives of
DrKW contacted representatives of Salomon Smith Barney to respond to Mikelsons'
proposal of $22.50 per share with a proposed price of $23.50 per share in cash.
After speaking with Mikelsons, representatives of Salomon Smith Barney contacted
representatives of DrKW to indicate that Mikelsons had directed them to indicate
that he was willing to offer $23 per share in cash. Upon receipt of this offer,
the representatives of DrKW indicated that they thought, subject to completion
of negotiations on the draft merger agreement, that they would be prepared to
favorably recommend that offer to the single member special independent director
committee. At the time, Mikelsons was aware that the plaintiffs had stated that
they would be willing to settle their claims, subject to court approval, if the
consideration paid in the proposed transaction was at least $23 per share.
In the evening of June 15, representatives of Cravath and S&C negotiated the
remaining open issues on the draft merger agreement. In the early morning of
June 16, representatives of Cravath distributed a substantially final draft of
the merger agreement to representatives of S&C. There were two further
discussions between representatives of S&C and Cravath on June 16 and June 17
regarding additional minor changes to the agreed form of merger agreement.
Throughout the period from June 11 through the evening of June 17,
representatives of Cravath negotiated with the attorneys representing the
plaintiffs in the two lawsuits brought in Indiana state court challenging the
proposed transaction about the terms on which those lawsuits could be settled.
In the morning of June 18, 2001, a memorandum of understanding regarding the
settlement of these lawsuits, and the lawsuit brought in federal court, with the
attorneys for the plaintiffs was finalized. Under the memorandum of
understanding, the parties agreed, among other things, to attempt, in good
faith, to agree upon and execute as soon as practicable an appropriate
stipulation of settlement, dismissing on the merits and with prejudice all
claims asserted in the complaints filed in the state court actions, and to
obtain final state court approval of the settlement and the release and
dismissal of the state court actions with prejudice and to voluntarily dismiss
the federal court action. The settlement is subject to confirmatory discovery.
In the memorandum of understanding, the defendants acknowledged that the
existence of these lawsuits was a factor in Mikelsons' decision to increase the
consideration per share he would pay and Mikelsons agreed that he took into
account the desirability of satisfactorily addressing the claims asserted in
these lawsuits in agreeing to increase the consideration he would pay.
Additionally, Amtran agreed to pay an aggregate of $285,000 in attorneys' fees.
Following the closing of the stock markets on June 18, 2001, the single
member special independent director committee met. On the afternoon of June 18,
2001, the single member special independent director committee held a telephonic
meeting with representatives of S&C,
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representatives of DrKW and a representative of Sommer & Barnard to discuss the
$23 per share proposal by Mikelsons. After reviewing DrKW's financial analysis,
DrKW advised the single member special independent director committee that
subject to certain assumptions and limitations which were described to the
single member special independent director committee, in its opinion, the $23
per share cash consideration to be received by the holders of shares of Amtran's
common stock (other than Mikelsons and his affiliates) was fair to such
shareholders from a financial point of view. S&C then reviewed the terms of the
proposed merger agreement with the single member special independent director
committee. The single member special independent director committee then
resolved to recommend the revised proposal to the board of directors of Amtran.
Upon the conclusion of the single member special independent director
committee meeting, the full board of directors of Amtran met to receive the
single member special independent director committee's recommendation and to
consider taking action on Mikelsons' revised proposal and related matters. After
receiving the favorable recommendation of the single member special independent
director committee and reviewing the terms of the merger agreement and related
documents (including the commitment letters for the financing arrangements and
the ILFC agreement) and the proposed terms of the settlement of the shareholder
litigation, the board of directors of Amtran unanimously voted to approve the
merger proposed by Mikelsons and related matters. Immediately after this board
meeting, the merger agreement was executed and delivered, and Amtran issued a
press release announcing that an agreement had been reached with Mikelsons and
INDUS. Amtran and ATA also executed and delivered the commitment letters for the
financing arrangements during the evening of June 18.
PURPOSE AND STRUCTURE OF THE MERGER
The purpose of the merger is for Mikelsons to own all the common stock of
Amtran immediately following completion of the merger. In the future, 19 of our
officers may acquire shares of our common stock upon the exercise of stock
options which remain outstanding following the merger (as described under
' -- Interests of Certain Persons in the Merger') and under any stock options
that we may grant in the future. ILFC may also acquire shares of our common
stock in the future through the conversion of all or a portion of its shares of
our Series B preferred stock into shares of our common stock.
Amtran and the filing persons believe that taking Amtran private at this
time will allow management to focus on the implementation of long-term strategic
goals. In particular, Amtran and the filing persons believe that Amtran's
management should be focusing primarily on implementing Amtran's refleeting
initiative, the implementation of which began with the delivery of the first new
aircraft in June 2001, and the concurrent expansion of Amtran's operations at
Midway Airport in Chicago, Illinois. Amtran and the filing persons believe that
these two initiatives could result in substantial benefits if they are
successfully implemented. However, Amtran and the filing persons recognize that
the implementation of these initiatives involves substantial execution risk, of
which numerous factors that will determine the success of the initiatives are
beyond the control of Amtran and its management, and believe that it will be
several years before the success of these initiatives can be determined. Because
of this substantial uncertainty and time horizon, Amtran and the filing persons
believe that the public equity markets are unlikely to reflect the potential
benefits of these initiatives at any time in the near future.
Amtran and the filing persons also believe that Amtran is bearing the costs
of being a publicly traded company without enjoying the full benefits usually
associated with being publicly traded. Although Amtran will be required under
its indentures to continue to file periodic reports with the SEC, Amtran's
management estimates that ceasing to have publicly traded equity will reduce its
costs by approximately $125,000 per year through a reduction in costs relating
to investor relations, management resources devoted to equity conferences and
equity research analysts and costs relating to the quotation of its common stock
on the Nasdaq Stock Market. In addition, Amtran and the filing persons believe
that Amtran's stock has historically traded at a discount to its peers based in
part on its limited public float and limited equity analyst coverage.
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As described in ' -- Background of the Merger' above, Amtran, INDUS and
Mikelsons considered alternative means of accomplishing the stated purposes for
the merger. As described above under ' -- Background of the Merger', Messrs.
Tague, Wolff and Hlavacek also participated to varying degrees in the
consideration of alternative means of accomplishing the stated purposes for the
merger. However, these alternatives were ultimately not pursued for the reasons
set forth in ' -- Background of the Merger'.
THE SINGLE MEMBER SPECIAL INDEPENDENT DIRECTOR COMMITTEE
The Amtran board of directors appointed a special independent director
committee consisting of a single member, Robert A. Abel, to evaluate the
proposed merger. For the purpose of evaluating this going-private transaction,
Mr. Abel is the sole independent member of the Amtran board of directors. All of
the Amtran shares held by Mr. Abel will be cashed out in the same manner as
those held by the Amtran shareholders whose shares are being converted into
cash. All of the stock options held by Mr. Abel will be canceled and exchanged
for cash in the same manner as all other Amtran stock options (other than the
options held by the 19 officers whose options will remain outstanding following
the merger, as described under ' -- Interests of Certain Persons in the
Merger'). Mr. Abel will receive separate compensation in the amount of $50,000
for his service on the single member special independent director committee. In
addition, Mr. Abel will continue as a director of Amtran after the merger and
also will be entitled to certain indemnification rights and to directors' and
officers' liability insurance that will be continued by Amtran following the
merger as described below under ' -- Interests of Certain Persons in the
Merger'. Mr. Abel is a partner in Blue & Co., LLC ('Blue & Co.'), an accounting
firm which has provided tax and accounting services to Amtran, Betaco, Inc.
('Betaco') and Mikelsons in 2000. Blue & Co. billed Amtran $28,310 for tax and
accounting services in 2000. Mikelsons is the sole owner of Betaco. Blue & Co.
billed Betaco $20,835 for tax and accounting services provided to Betaco and
Mikelsons in 2000. Mikelsons has advised us that he currently expects that Blue
& Co. will continue to provide certain tax and accounting services to Amtran,
Betaco and Mikelsons following the merger. Each member of the Amtran board of
directors and the single member special independent director committee believes
that the foregoing arrangements do not affect the single member special
independent director committee's independence or impartiality because (i) the
total amounts received by Blue & Co. from Amtran and Betaco were less than 1% of
Blue & Co.'s total revenues in 2000 and (ii) the total amounts received from
Blue & Co. by Mr. Abel which are attributable to Blue & Co. billings from Amtran
and Betaco were less than 1% of Mr. Abel's income in 2000.
RECOMMENDATIONS OF THE SINGLE MEMBER SPECIAL INDEPENDENT DIRECTOR COMMITTEE AND
BOARD OF DIRECTORS
On June 18, 2001, the single member special independent director committee,
consisting of the sole independent member of your board of directors for the
purpose of evaluating this transaction, determined that the merger is fair to
and in the best interests of Amtran and the holders of its common stock (other
than Mikelsons and any Mikelsons Affiliate) and recommended that your board of
directors adopt the plan of merger and approve the merger, the merger agreement
and the other transactions contemplated thereby. In making this recommendation,
the single member special independent director committee also considered the
ILFC Agreement and the ILFC Amendment, the Commitment Letter (as defined below)
and the proposed option modification agreements between Amtran and 19 of its
officers.
At a meeting on June 18, 2001, your board of directors, based on, among
other things, the recommendation of the single member special independent
director committee, unanimously adopted resolutions:
approving the merger, the merger agreement, the ILFC Agreement and the ILFC
Amendment;
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determining that the merger is fair to and in the best interests of Amtran
and its shareholders, other than Mikelsons and any Mikelsons Affiliate;
recommending that holders of shares of our common stock, including a
majority of shares voting at the annual meeting not owned by Mikelsons or
any Mikelsons Affiliate, approve the merger, the plan of merger and the
merger agreement; and
adopting the plan of merger.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE 'FOR' APPROVAL OF THE
MERGER, THE PLAN OF MERGER AND THE MERGER AGREEMENT.
FAIRNESS OF THE MERGER
On June 18, 2001, the single member special independent director committee
recommended that the board of directors approve the merger, the merger agreement
and the other transactions contemplated thereby and adopt the plan of merger. On
June 18, 2001, the board of directors, by unanimous vote of all directors
present and voting, based upon, among other things, the recommendation and
approval of the single member special independent director committee, adopted
the plan of merger, approved the merger, the merger agreement and the ILFC
Amendment and determined that the merger is fair to and in the best interests of
Amtran and the holders of its shares of common stock (other than Mikelsons and
any Mikelsons Affiliate) and recommended that the shareholders of Amtran approve
the merger, the plan of merger, the merger agreement and the ILFC Amendment.
Single Member Special Independent Director Committee
In reaching its determinations referred to above, the single member special
independent director committee considered the following factors, each of which,
in the view of the single member special independent director committee,
supported such determinations:
(i) the opinion of DrKW that, based upon and subject to the various
assumptions and limitations set forth therein, as of June 18, 2001,
the $23.00 per share to be received by holders of shares of Amtran
common shares other than Mikelsons and his affiliates (the 'Public
Shareholders') pursuant to the merger agreement was fair to such
Public Shareholders from a financial point of view, and the report and
analyses presented to the single member special independent director
committee in connection therewith (See ' -- Opinion of Financial
Advisor to the Single Member Special Independent Director Committee');
a copy of DrKW's opinion is attached hereto as Annex C. Shareholders
are urged to read this opinion in its entirety. The single member
special independent director committee adopted the analysis and
conclusions of DrKW;
(ii) the course of the negotiations between the single member special
independent director committee and its representatives and INDUS and
its representatives, including (a) that the negotiations resulted in
an increase in the merger consideration to be received by holders of
shares of common stock (other than Mikelsons and any Mikelsons
Affiliate) from $21.00 to $23.00 per share, (b) the single member
special independent director committee's belief that $23.00 per share
was the highest price which could be obtained from INDUS and (c) the
single member special independent director committee's belief that
further negotiations with INDUS could cause INDUS to abandon the
merger, with the resulting significant possibility that the market
price for the shares could fall substantially below $23.00;
(iii) the terms and conditions of the merger agreement, including (a) that
the recommendation of the single member special independent director
committee may be withdrawn, modified or amended to the extent the
single member special independent director committee believes it
necessary to do so in the exercise of its fiduciary duties; (b) the
requirement that the merger not be consummated unless at least a
majority of the shares voted by the Public Shareholders vote to
approve the merger, (c) the
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condition that Amtran and INDUS use their reasonable best efforts to
obtain the financing to pay the merger consideration; and (d) the
limited nature of other conditions to the merger;
(iv) that the commitment letter that Amtran and ATA had obtained provided
for the availability of financing to consummate the merger, subject to
the terms and conditions in such commitment letter;
(v) the historical market prices and recent trading activity of Amtran
common stock, including that the merger price of $23.00 per share
represents: (x) a premium of approximately 82.5% over the $12.60 per
share closing price on May 16, 2001, the last trading day prior to the
announcement of Mikelsons' proposal; (y) a premium of approximately
139% over the $9.63 per share closing price 60 days prior to the
announcement of Mikelsons' proposal; and (z) a premium of approximately
39.4% over the $16.50 closing price 1 year prior to the announcement of
Mikelsons' proposal.
(vi) the fact that the merger price of $23.00 per share was at or near the
maximum level which Amtran could pay and remain in compliance with the
restricted payments covenants of its indentures;
(vii) the possibility that, because of (x) a possible downturn in the
airline industry generally, (y) risks arising from Amtran's business
on a going-forward basis, including risks related to the rapid
integration of new aircraft and the subsequent disposition of a
portion of its current fleet, and Amtran management's stated belief
that based on its knowledge of and experience in the airline industry
no past airline had successfully moved from the charter service
business to a predominantly scheduled service business, or (z) a
decline in the trading price of the shares or the stock market in
general, the consideration the Public Shareholders would receive
pursuant to the merger would be more advantageous than the future
trading price or the consideration the Public Shareholders could
obtain in a future transaction;
(viii) the fact that Amtran common stock has historically traded at a
discount to the stocks of other domestic airlines due to Amtran's
limited public float; and
(ix) the fact that Mikelsons, as sole shareholder of INDUS, has sufficient
stock ownership to control a disposition of Amtran and that Mikelsons
indicated that he was not interested in selling control of Amtran to a
third party or taking on a significant minority partner and that the
single member special independent director committee and DrKW were not
authorized to, and did not, solicit third-party indications of
interest for the acquisition of all or any part of Amtran or its
assets.
The single member special independent director committee also considered the
following adverse factors associated with the merger:
(i) DrKW's analyses based on some of the projections provided to DrKW by
Amtran's management had produced implied per share valuations ranging
from $9.51 up to $94.69 per share;
(ii) that because Mikelsons had publicly stated his intention to oppose any
alternative transaction with a third party, Public Shareholders were
not afforded an opportunity to participate in any control premium that
might have been generated by the sale of the entire company to a third
party;
(iii) that the merger will be a taxable transaction for Amtran shareholders
whose shares are being converted into cash in the merger;
(iv) that the cash merger structure of the transaction would take longer to
complete than a transaction involving a cash tender offer by INDUS for
the shares of the Public Shareholders followed by a merger of INDUS
with and into Amtran; and
(v) that the Public Shareholders of Amtran would have no ongoing equity
participation in the surviving corporation following the merger, meaning
that the Public Shareholders would
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cease to participate in Amtran's future earnings or growth, if any, or
to benefit from increases, if any, in the value of their common stock in
Amtran.
In view of the variety of factors considered by the single member special
independent director committee, the single member special independent director
committee did not find it practicable to, and did not, quantify or otherwise
attempt to assign specific or relative weights to the factors it considered in
reaching its determination. The single member special independent director
committee evaluated the $23 per share offer merger consideration against recent
and historic market prices for the shares of Amtran common stock. The single
member special independent director committee also considered the opinion of
DrKW that, based upon and subject to the various assumptions and limitations set
forth therein, as of June 18, 2001, the $23 per share to be received by the
Public Shareholders pursuant to the merger was fair to such Public Shareholders
from a financial point of view, and the report and analyses presented to the
single member special independent director committee in connection therewith.
The single member special independent director committee adopted DrKW's analysis
of the $23 per share offer against the going concern value of Amtran presented
in the report prepared by DrKW and presented to the single member special
independent director committee in connection with the delivery of its opinion.
See ' -- Opinion of Financial Advisor to the Single Member Special Independent
Director Committee'. Other than as described above, the single member special
independent director committee did not consider any factors regarding the
fairness of the merger to the shareholders of Amtran, other than Mikelsons and
any Mikelsons Affiliate, and believes that the factors it considered provided a
reasonable basis to form its belief. Specifically, the single member special
independent director committee did not independently consider with respect to
such fairness:
net book value, which the single member special independent director
committee did not believe had any systematic connection with the economic
value of Amtran;
liquidation value, which the single member special independent director
committee did not view as relevant since it believed that substantial value
was tied to Amtran as a going concern and that liquidation would destroy
this value; or
purchase prices paid by Amtran for past purchases of shares of Amtran
common stock, which, in recent years, involved too few shares to be used as
a reliable basis for valuation.
The single member special independent director committee also considered the
conditional proposals made by Apollo, including the September 2000 proposal and
the April 2001 proposal, in light of the declines in Amtran's projections since
the September 2000 proposal, the fact that even after extensive due diligence
and negotiations during 2000, Apollo was unable to present a proposal that was
acceptable to Mikelsons and that Mikelsons believed could be consummated in a
reasonable period of time. Thus, for the foregoing reasons, to the extent that
any of the Apollo proposals constituted firm offers to acquire all of, or a
controlling interest in, Amtran, the single member special independent director
committee concluded that such proposals were not feasible. See ' -- Background
of the Merger' for a discussion of certain conditional proposals made by Apollo.
The single member special independent director committee considered the
advantages and disadvantages of the only apparently available alternative to the
acquisition of the public shareholder interest in Amtran by Mikelsons, which was
Amtran continuing as a publicly held company with Mikelsons maintaining his 72%
equity interest in Amtran. In the view of the single member special independent
director committee, the principal advantage of Amtran continuing as a publicly
traded company was that it would allow the Public Shareholders to continue to
participate in any growth in the value of Amtran equity. The disadvantages of
Amtran continuing as a publicly traded company that were considered by the
single member special independent director committee included the exposure to
the risks and uncertainties attendant to continuing as a publicly traded company
in light of risks to Amtran's business from rising fuel prices, rising labor
costs, the rapid integration of new aircraft and the subsequent disposition of a
portion of its current fleet and Amtran management's stated belief that based on
its knowledge of and experience in the airline industry no past airline had
successfully moved from a charter service business to a predominantly scheduled
service business. In addition, the single member special
20
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independent director committee considered the fact that Amtran common stock has
historically traded at a discount to the stocks of other domestic airlines due
to Amtran's limited public float and the fact that Amtran has a controlling
shareholder. The single member special independent director committee concluded
that under all of the relevant circumstances, and in light of the $23 per share
price in cash, the disadvantages of Amtran continuing as a publicly traded
company significantly outweighed the advantages, and accordingly that
alternative was rejected.
After consulting with its financial and legal advisors with respect to the
merger, including, without limitation, the factors discussed above, the single
member special independent director committee concluded that the merger was
advisable, fair to and in the best interests of Amtran and the holders of shares
of Amtran common stock (other than Mikelsons and any Mikelsons Affiliate).
At the June 18, 2001 meeting of the Amtran board of directors, the single
member special independent director committee, with its legal advisors
participating, reported to the other members of the Amtran board of directors on
its review of the merger agreement and the factors taken into account by the
single member special independent director committee in reaching its
determination that the proposed merger is advisable, fair to and in the best
interests of Amtran and the holders of shares of Amtran common stock (other than
Mikelsons and any Mikelsons Affiliate).
Board of Directors
In reaching its determinations referred to above, the board of directors
considered the following factors, each of which, in the view of the board of
directors, supported its determinations:
the conclusions and recommendation of the single member special independent
director committee;
the factors referred to above as having been taken into account by the
single member special independent director committee, including the receipt
by the single member special independent director committee of the opinion
of DrKW that, based upon and subject to the assumptions and limitations
stated in the opinion, as of the date of the opinion, the consideration to
be received by the holders of shares of our common stock (other than
Mikelsons and his affiliates) in the merger is fair to such holders from a
financial point of view, and the analyses presented by DrKW to the single
member special independent director committee, which the board of directors
hereby adopts; and
the fact that the terms and conditions of the merger agreement were the
result of a process that the board of directors believes simulated a
third-party transaction, which is a transaction in which negotiations are
conducted at arm's-length and there is no compulsion to reach an agreement,
between the single member special independent director committee and
Mikelsons and their respective advisors.
The members of your board of directors, including the sole member of the
special independent director committee, evaluated the merger in light of their
knowledge of the business, financial condition and prospects of Amtran, and
considered the advice of financial and legal advisors.
Your board of directors, including the sole member of the special
independent director committee, believes that the merger is procedurally fair
because, among other things:
the single member special independent director committee consisted of a
director who is not an employee of Amtran or otherwise an affiliate of
Mikelsons and who was appointed to represent the interests of the public
holders of shares of Amtran common stock;
the single member special independent director committee retained and was
advised by S&C, its independent legal counsel;
the single member special independent director committee retained and was
advised by Sommer & Barnard, its independent Indiana legal counsel;
21
<Page>
the single member special independent director committee retained and was
advised by DrKW, its independent financial advisor, to assist it in
evaluating Mikelsons' proposal;
the nature of the deliberations pursuant to which the single member special
independent director committee evaluated the merger and alternative of
rejecting Mikelsons' proposal;
the per share price to be paid to public holders of shares of Amtran common
stock resulted from a process that the board of directors believes
simulated a third-party transaction, which is a transaction in which
negotiations are conducted at arm's-length and there is no compulsion to
reach an agreement, between the single member special independent director
committee and its financial advisor, on the one hand, and Mikelsons and his
financial advisor, on the other hand; and
the merger is structured to require the approval of the holders of a
majority of the shares of Amtran common stock voting at the annual meeting,
other than shares held by Mikelsons and any Mikelsons Affiliate,
notwithstanding the fact that under the IBCL the vote of a majority of the
outstanding shares of Amtran common stock is sufficient to approve the
merger.
In reaching its determination, the board of directors also took into account
the adverse factors considered by the single member special independent director
committee.
In view of the variety of factors considered by the board of directors, the
board of directors did not find it practicable to, and did not, quantify or
otherwise attempt to assign specific or relative weights to the factors it
considered in reaching its determination. The board of directors evaluated the
$23 per share offer merger consideration against recent and historic market
prices for the share of Amtran common stock. The board of directors also took
account of the opinion of DrKW to the single member special independent director
committee that, based upon and subject to the various assumptions and
limitations set forth therein, as of June 18, 2001, the $23 per share to be
received by the Public Shareholders pursuant to the merger was fair to such
Public Shareholders from a financial point of view, and the report and analyses
presented to the single member special independent director committee in
connection therewith. The board of directors adopted DrKW's analysis of the $23
per share offer against the going concern value of Amtran presented in the
report prepared by DrKW and presented to the single member special independent
director committee in connection with the delivery of its opinion. See
' -- Opinion of Financial Advisor to the Single Member Special Independent
Director Committee'. Other than as described above, the board of directors did
not consider any factors regarding the fairness of the merger to the
shareholders of Amtran, other than Mikelsons and any Mikelsons Affiliate. The
board of directors believes that the factors it considered provided a reasonable
basis to form its belief. Specifically, the board of directors did not
independently consider with respect to such fairness:
net book value, which the board of directors did not believe had any
systematic connection with the economic value of Amtran;
liquidation value, which the board of directors did not view as relevant
since it believed that substantial value was tied to Amtran as a going
concern and that liquidation would destroy this value; or
purchase prices paid by Amtran for past purchases of shares of Amtran
common stock, which, in recent years, involved too few shares to be used as
a reliable basis for valuation.
The board of directors also considered the conditional proposals made by
Apollo, including the September 2000 proposal and the April 2001 proposal, in
light of the declines in Amtran's projections since the September 2000 proposal,
the fact that even after extensive due diligence and negotiations during 2000,
Apollo was unable to present a proposal that was acceptable to Mikelsons and
that Mikelsons believed could be consummated in a reasonable period of time.
Thus, for the foregoing reasons, to the extent that any of the Apollo proposals
constituted firm offers to acquire all of, or a controlling interest in, Amtran,
the board of directors concluded that such proposals were not feasible. See
' -- Background of the Merger' for a discussion of certain conditional proposals
made by Apollo.
22
<Page>
The board of directors considered the advantages and disadvantages of the
only apparently available alternative to the acquisition of the public
shareholder interest in Amtran by Mikelsons, which was Amtran continuing as a
publicly held company with Mikelsons maintaining his 72% equity interest in
Amtran. In the view of the board of directors, the principal advantage of Amtran
continuing as a publicly traded company was that it would allow the Public
Shareholders to continue to participate in any growth in the value of Amtran
equity. The disadvantages of Amtran continuing as a publicly traded company that
were considered by the board of directors included the exposure to the risks and
uncertainties attendant to continuing as a publicly traded company in light of
risks to Amtran's business from rising fuel prices, rising labor costs, the
rapid integration of new aircraft and the subsequent disposition of a portion of
its current fleet, and Amtran management's stated belief that based on its
knowledge of and experience in the airline industry no past airline had
successfully moved from a charter service business to a predominantly scheduled
service business. In addition, the board of directors considered the fact that
Amtran common stock has historically traded at a discount to the stocks of other
domestic airlines due to Amtran's limited public float and the fact that Amtran
has a controlling shareholder. The board of directors concluded that under all
of the relevant circumstances, and in light of the $23 per share price in cash,
the disadvantages of Amtran continuing as a publicly traded company
significantly outweighed the advantages, and accordingly that alternative was
rejected.
The foregoing discussion of the information and factors considered and given
weight by the single member special independent director committee and the board
of directors is not intended to be exhaustive but is believed to include all
material factors considered by the single member special independent director
committee and your board of directors.
ON JUNE 18, 2001, YOUR BOARD OF DIRECTORS, BASED ON, AMONG OTHER THINGS, THE
RECOMMENDATION OF THE SINGLE MEMBER SPECIAL INDEPENDENT DIRECTOR COMMITTEE,
UNANIMOUSLY APPROVED THE MERGER, THE MERGER AGREEMENT, THE ILFC AGREEMENT AND
THE ILFC AMENDMENT AND ADOPTED THE PLAN OF MERGER. ON JUNE 18, 2001, THE SINGLE
MEMBER SPECIAL INDEPENDENT DIRECTOR COMMITTEE AND THE BOARD OF DIRECTORS
(a) DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF AMTRAN
AND ITS SHAREHOLDERS (OTHER THAN MIKELSONS AND ANY MIKELSONS AFFILIATE) AND
(b) RECOMMENDED THAT HOLDERS OF SHARES OF OUR COMMON STOCK (INCLUDING A MAJORITY
OF SHARES VOTING AT THE ANNUAL MEETING NOT OWNED BY MIKELSONS OR ANY MIKELSONS
AFFILIATE) APPROVE THE MERGER, THE PLAN OF MERGER AND THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO THE SINGLE MEMBER SPECIAL INDEPENDENT DIRECTOR
COMMITTEE
The single member special independent director committee retained DrKW to
act as its financial advisor in connection with the merger. DrKW has delivered a
written opinion to the single member special independent director committee,
dated June 18, 2001, to the effect that, based on and subject to the various
assumptions and limitations set forth therein, as of the date thereof, the
$23.00 per share cash consideration to be received by the Public Shareholders
(as defined therein) pursuant to the merger was fair to such Public Shareholders
from a financial point of view. DrKW was engaged and acted solely as an advisor
to the single member special independent director committee and not as an
advisor to or agent of any other person, including Amtran.
THE FULL TEXT OF THE WRITTEN OPINION OF DRKW, DATED JUNE 18, 2001, WHICH
SETS FORTH AMONG OTHER THINGS THE OPINIONS EXPRESSED, THE ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN
IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS ANNEX C AND SHAREHOLDERS
ARE URGED TO READ IT IN ITS ENTIRETY. DRKW'S OPINION DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH HOLDER SHOULD VOTE OR OTHERWISE
ACT IN RESPECT OF THE MERGER AGREEMENT OR THE OTHER TRANSACTIONS CONTEMPLATED
THEREBY AND SHOULD NOT BE RELIED UPON BY ANY SHAREHOLDER IN RESPECT OF SUCH
MATTERS. THE SUMMARY OF THE OPINION OF DRKW SET FORTH HEREIN, WHICH SETS FORTH
ALL THE MATERIAL ANALYSES
23
<Page>
PERFORMED BY DRKW, IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION ATTACHED HERETO AS ANNEX C.
Although DrKW is under no obligation under its engagement letter to update
its fairness opinion, we believe that DrKW would update its fairness opinion if
requested to do so by the single member special independent director committee.
In connection with rendering its opinion, DrKW, among other things, (i)
reviewed a draft of the merger agreement, (ii) reviewed and analyzed certain
publicly available business and financial information relating to Amtran for
recent years and interim periods to date, as well as certain internal financial
and operating information, including financial forecasts, analyses and
projections prepared by or on behalf of Amtran and provided to DrKW for purposes
of its analysis, (iii) met with management of Amtran to review and discuss such
information and, among other matters, Amtran's business, operations, assets,
financial condition and future prospects, (iv) reviewed and considered certain
financial and stock market data relating to Amtran, and compared that data with
similar data for certain other companies, the securities of which are publicly
traded, that DrKW believed may be relevant or comparable in certain respects to
Amtran or one or more of its businesses or assets, (v) reviewed and considered
the financial terms of certain recent acquisitions and business combination
transactions in the airline industry specifically, and in other industries
generally, that DrKW believed to be reasonably comparable to the merger or
otherwise relevant to its inquiry and (vi) performed such other financial
studies, analyses, and investigations and reviewed such other information as
DrKW considered appropriate.
In its review and analysis and in formulating its opinion, DrKW assumed and
relied upon the accuracy and completeness of all of the historical financial and
other information provided to or discussed with it or publicly available, and
DrKW did not assume any responsibility for independent verification of any of
such information. DrKW also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to it,
and DrKW assumed that such projections, forecasts and analyses were reasonably
prepared in good faith and on bases reflecting the best currently available
judgments and estimates of Amtran management. DrKW expressed no opinion with
respect to such projections, forecasts and analyses or the assumptions upon
which they are based. The Amtran board of directors reviewed the historical
financial information, and the financial projections, forecasts and analyses
provided to DrKW and found DrKW's reliance on such materials to be reasonable.
In addition, DrKW did not review any of the books and records of Amtran, or
assume any responsibility for conducting a physical inspection of the properties
or facilities of Amtran, or for making or obtaining an independent valuation or
appraisal of the assets or liabilities of Amtran, and no such independent
valuation or appraisal was provided to DrKW. DrKW also assumed that the
transactions described in the merger agreement would be consummated without
waiver or modification of any of the material terms or conditions contained
therein by any party thereto. DrKW's opinion was necessarily based on economic
and market conditions and other circumstances as they existed and could be
evaluated by it as of the date of such opinion.
In the context of its engagement, DrKW was not authorized to and did not
solicit third-party indications of interest in acquiring all or any part of
Amtran or its assets, or pursue any alternative transactions which may be
available to Amtran. DrKW expressed no opinion with respect to the values which
may have been obtained for Amtran in a sale to a third party following an
auction process.
The following is a summary of the report presented by DrKW to the single
member special independent director committee in connection with the delivery of
its opinion on June 18, 2001. Copies of the reports presented by DrKW to the
single member special independent director committee on June 5 and June 18, 2001
have been filed as Exhibits (c)(2) and (c)(3), respectively, to the
Schedule 13E-3 filed with the SEC by Amtran and the filing persons. The summary
set forth below describes all material analyses included in DrKW's reports. The
financial analyses summarized below include information presented in tabular
format. In order to understand the financial analyses fully, the tables must be
read together with the text of each summary.
24
<Page>
DISCOUNTED CASH FLOW ANALYSIS. DrKW performed discounted cash flow ('DCF')
analyses of Amtran based on a base case and five alternative financial forecasts
provided to DrKW by the management of Amtran. The base case considered by DrKW
(the 'Base Case') was predicated on the forecasts for 2001 through 2005 that
were developed by Amtran management in May 2001. The Base Case assumed that
Amtran would succeed in implementing its business plan through 2005, including
most importantly that Amtran would be able to modernize its fleet successfully
by adding 49 new aircraft and replacing a number of older aircraft while growing
its scheduled service business. DrKW also considered five alternative cases that
Amtran management prepared at DrKW's request: (i) a maintenance adjustment case
(the 'Maintenance Case') which adjusted the Base Case to account for, on a
straight line basis, certain deferred maintenance expenses related to newly
acquired aircraft which Amtran projects that it would be required to pay for in
the period from 2001 through 2010, (ii) a fuel adjustment case (the 'Fuel
Adjustment Case') which adjusted the Base Case to reflect an assumption that jet
fuel costs would remain at the 2001 level of $0.989 per gallon instead of
declining to $0.891 per gallon by 2003, (iii) an increased competition case (the
'Enhanced Competition Case') which adjusted the Base Case to reflect an
assumption that competition with its direct competitors in Midway Airport would
cause fares to fall by 5% in those markets where Amtran and those competitors
directly compete, other than Los Angeles, where fares were assumed to decline by
10%, (iv) a recession case (the 'Recession Case') which adjusted the Base Case
to reflect an assumption that the average revenue per seat mile for Amtran
scheduled service business would remain at the year 2000 level of 7.44 cents
rather than increasing at a compounded growth rate of 2.0% and (v) a downside
case (the 'Downside Case') which adjusted the Base Case to reflect the
simultaneous occurrence of the Recession Case, the Enhanced Competition Case and
the Fuel Adjustment Case.
In performing the DCF analyses, DrKW, using the forecasts as described
above, discounted Amtran's unlevered free cash flows, which is net income before
interest, taxes and losses incurred on the sale of aircraft (tax-effected), plus
depreciation and amortization, plus cash proceeds from the sale of aircraft,
less increases in working capital, less capital expenditures over the specified
forecast period using a range of risk adjusted discount rates between 11.0% and
13.0%. The sum of the present values of such free cash flows for Amtran was then
added to the present value of the terminal value of Amtran's earnings before
interest, taxes, depreciation and amortization ('EBITDA') for 2005 computed
using a forward multiple range of EBITDA of 4.0x to 5.5x. Based on this
analysis, DrKW calculated the following implied price per share ranges.
<Table>
<Caption>
EBITDA TERMINAL VALUE MULTIPLE
-------------------------------------------------------------------------
CASE 4.0X 4.5X 5.0X 5.5X
---- ---- ---- ---- ----
Base.................... $22.13 to $25.08 $25.06 to $28.26 $27.99 to $31.43 $30.92 to $34.60
Maintenance............. $17.71 to $20.60 $20.60 to $23.51 $23.28 to $26.42 $25.96 to $29.33
Fuel Adjustment......... $11.81 to $14.35 $14.26 to $17.01 $16.71 to $19.66 $19.17 to $22.06
Enhanced Competition.... $15.17 to $17.95 $17.88 to $20.76 $20.49 to $23.39 $22.92 to $26.02
</Table>
The Recession Case and the Downside Case both resulted in negative discounted
cash flow ranges at each of the discount rates.
In reviewing the DCF analyses for the purposes of its determination of
fairness, DrKW took into consideration the fact that certain analyses for the
Base Case, Maintenance Case and Enhanced Competition Case resulted in implied
per share DCF value ranges greater than $23.00 per share of Amtran common stock.
As discussed below, DrKW believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering the
analyses taken as a whole, would create an incomplete view of the process
underlying the analyses performed in reaching its opinion. In addition, DrKW
considered the results of all such analyses and did not assign relative weights
to any of the analyses, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be DrKW's view of the
actual value of Amtran.
COMPARABLE COMPANIES TRADING ANALYSIS. DrKW reviewed and compared certain
financial information of Amtran to corresponding financial information for the
following six publicly traded major domestic airlines (the 'Major Domestic
Airlines'):
25
<Page>
American Airlines, Inc.
Continental Airlines, Inc.
Delta Air Lines, Inc.
Northwest Airlines Corporation
Southwest Airlines Co.
UAL Corporation
DrKW also reviewed and compared certain financial information of Amtran to
corresponding financial information for the following four publicly traded
regional and discount domestic airlines (the 'Regional and Discount Domestic
Airlines):
AirTran Holdings, Inc.
Alaska Air Group, Inc.
America West Holdings Corporation
Frontier Airlines, Inc.
DrKW calculated and compared various financial multiples and ratios. The
multiples and ratios were calculated using the closing price for the common
stock of Amtran and each of the selected companies on June 15, 2001 and were
based on the most recent publicly available information. The estimated year 2001
and 2002 financial results for Amtran were from the Base Case described above in
' -- Discounted Cash Flow Analysis'. DrKW calculated the following multiples:
market equity value as a multiple of net income for (i) the latest 12
months, (ii) estimated year 2001 and (iii) estimated year 2002;
market equity value as a multiple of book value for (i) the latest 12
months, (ii) estimated year 2001 and (iii) estimated year 2002;
adjusted market value, which is market value plus debt less cash, as a
multiple of sales for (i) the latest 12 months, (ii) estimated year 2001
and (iii) estimated year 2002;
adjusted market value as a multiple of EBITDA for (i) the latest 12 months,
(ii) estimated year 2001 and (iii) estimated year 2002;
adjusted market value as a multiple of EBITDA, as adjusted for engine
overhaul costs for (i) the latest 12 months, (ii) estimated year 2001 and
(iii) estimated year 2002;
lease-adjusted market value (defined as adjusted market value plus the
capitalized value of aircraft leases) as a multiple of earnings before
interest, taxes, depreciation and amortization and rent ('EBITDAR') for (i)
the latest 12 months, (ii) estimated year 2001 and (iii) estimated year
2002;
adjusted market value as a multiple of earnings before interest and taxes
('EBIT') for (i) the latest 12 months, (ii) estimated year 2001 and
(iii) estimated year 2002; Such analyses for the Major Domestic Airlines
are summarized below:
<Table>
<Caption>
MAJOR DOMESTIC AIRLINES
------------------------------------
PERCENTAGE/MULTIPLE RANGE MEDIAN MEAN AMTRAN
------------------- ----- ------ ---- ------
Market equity value as a multiple of net income for
the latest 12 months............................ 7.3x-20.5x 8.4x 4.0x NM
Market equity value as a multiple of Book value for
the latest 12 Months............................ 0.8x-20.4x 1.6x 4.8x 1.8x
Adjusted market value as a Multiple of sales for
the latest 12 Months............................ 0.5x-2.3x 0.6x 0.8x 0.5x
Adjusted market value as a Multiple of EBITDA for
the latest 12 months............................ 4.2x-9.9x 4.9x 6.2x 5.2x
Adjusted market value as a Multiple of Adjusted
EBITDA for the latest 12 months................. 4.2x-8.8x 4.8x 5.7x 8.8x
</Table>
(table continued on next page)
26
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(table continued from previous page)
<Table>
<Caption>
MAJOR DOMESTIC AIRLINES
------------------------------------
PERCENTAGE/MULTIPLE RANGE MEDIAN MEAN AMTRAN
------------------- ----- ------ ---- ------
Lease-Adjusted market value as a Multiple of
EBITDAR for the Latest 12 months................ 5.1x-9.7x 6.0x 6.7x 6.2x
Adjusted market value as a Multiple of EBIT for
the latest 12 months............................ 8.2x-12.6x 9.0x 9.6x NM
Market equity value as a multiple of Estimated net
income for 2001................................. 6.6x-18.5x 15.7x 13.6x NM
Market equity value as a multiple of Estimated
book value for 2001............................. 0.8x-22.1x 1.3x 4.9x 1.8x
Adjusted market value as a Multiple of estimated
sales for 2001.................................. 0.5x-2.2x 0.5x 0.8x 0.5x
Adjusted market value as a Multiple of estimated
EBITDA for 2001................................. 4.8x-10.5x 6.9x 7.2x 4.1x
Adjusted market value as a Multiple of estimated
Adjusted EBITDA for 2001........................ 4.8x-10.5x 5.8x 6.7x 7.1x
Lease-Adjusted market value as a Multiple of
estimated EBITDAR For 2001...................... 5.7x-9.6x 7.1x 7.4x 4.5x
Adjusted market value as a Multiple of estimated
EBIT for 2001................................... 7.7x-30.8x 13.3x 17.2x 21.8x
Market equity value as a multiple of Estimated net
income for 2002................................. 6.5x-32.4x 9.6x 13.5x NM
Market equity value as a multiple of Estimated
book value for 2002............................. 0.7x-6.2x 1.1x 2.1x 1.9x
Adjusted market value as a Multiple of estimated
sales for 2002.................................. 0.5x-1.9x 0.5x 0.7x 0.4x
Adjusted market value as a Multiple of estimated
EBITDA for 2002................................. 4.2x-7.2x 4.7x 5.2x 3.6x
Adjusted market value as a Multiple of estimated
Adjusted EBITDA for 2002........................ 4.2x-6.5x 4.5x 4.9x 4.8x
Lease-Adjusted market value as a Multiple of
estimated EBITDAR for 2002...................... 4.8x-7.2x 5.5x 5.9x 3.1x
Adjusted market value as a Multiple of estimated
EBIT for 2002................................... 7.7x-22.6x 8.8x 10.9x 13.7x
</Table>
Such analyses for the Regional and Discount Domestic Airlines are summarized
below:
<Table>
<Caption>
MAJOR DOMESTIC AIRLINES
------------------------------------
PERCENTAGE/MULTIPLE RANGE MEDIAN MEAN AMTRAN
------------------- ----- ------ ---- ------
Market equity value as a multiple of Net income for
the latest 12 Months............................ 6.3x-16.4x 11.4x 11.4x NM
Market equity value as a multiple of Book value for
the latest 12 Months............................ 0.5x-36.2x 1.6x 10.0x 1.8x
Adjusted market value as a Multiple of sales for
the latest 12 Months............................ 0.2x-1.7x 0.5x 0.7x 0.5x
Adjusted market value as a Multiple of EBITDA for
the latest 12 months............................ 2.7x-11.5x 9.1x 8.1x 5.2x
Adjusted market value as a Multiple of Adjusted
EBITDA for the latest 12 months................. 2.7x-9.5x 6.1x 6.1x 8.8x
Lease-Adjusted market value as a Multiple of
EBITDAR for the Latest 12 months................ 2.7x-9.3x 8.6x 7.3x 6.2x
Adjusted market value as a Multiple of EBIT for the
latest 12 months................................ 2.9x-12.7x 7.8x 7.8x NM
Market equity value as a multiple of Estimated net
income for 2001................................. 6.3x-11.0x 11.0x 12.5x NM
</Table>
(table continued on next page)
27
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(table continued from previous page)
<Table>
<Caption>
REGIONAL AND DISCOUNT DOMESTIC AIRLINES
----------------------------------------
PERCENTAGE/MULTIPLE RANGE MEDIAN MEAN AMTRAN
------------------- ----- ------ ---- ------
Market equity value as a multiple of Estimated
book value for 2001............................. 0.5x-8.4x 1.3x 2.9x 1.8x
Adjusted market value as a Multiple of estimated
sales for 2001.................................. 0.2x-1.4x 0.5x 0.6x 0.5x
Adjusted market value as a Multiple of estimated
EBITDA for 2001................................. 2.7x-8.6x 5.5x 5.6x 4.1x
Adjusted market value as a Multiple of estimated
Adjusted EBITDA for 2001........................ 2.7x-7.5x 5.1x 5.1x 7.1x
Lease-Adjusted market value as a Multiple of
estimated EBITDAR For 2001...................... 2.7x-8.7x 6.7x 6.2x 4.5x
Adjusted market value as a Multiple of estimated
EBIT for 2001................................... 2.9x-12.8x 9.7x 8.5x 21.8x
Market equity value as a multiple of Estimated net
income for 2002................................. 5.8x-11.7x 8.6x 8.7x NM
Market equity value as a multiple of Estimated
book value for 2002............................. 0.4x-4.2x 1.1x 1.7x 1.9x
Adjusted market value as a Multiple of estimated
sales for 2002.................................. 0.2x-1.2x 0.4x 0.5x 0.4x
Adjusted market value as a Multiple of estimated
EBITDA for 2002................................. 2.6x-6.1x 3.5x 3.9x 3.6x
Adjusted market value as a Multiple of estimated
Adjusted EBITDA for 2002........................ 2.8x-6.1x 4.4x 4.4x 4.8x
Lease-Adjusted market value as a Multiple of
estimated EBITDAR for 2002...................... 1.5x-6.1x 5.6x 4.7x 3.1x
Adjusted market value as a Multiple of estimated
EBIT for 2002................................... 2.6x-9.2x 6.8x 6.3x 13.7x
</Table>
DrKW used these comparable company multiples, excluding certain multiples
which DrKW determined were not meaningful, to calculate implied values for the
shares based on the medians of multiples derived from such transactions. The
analysis produced an implied per share price, based on the mean of the Major
Domestic Airlines' multiples, of,
(i) for the latest twelve months, $16.41 based on book value, $24.79 based
on sales, $16.19 based on EBITDA, and $14.64 based on EBITDAR,
(ii) for the estimated year 2001, $13.70 based on book value, $25.22 based
on sales, $54.59 based on EBITDA, $8.25 based on Adjusted EBITDA and $70.98
based on EBITDAR, and
(iii) for the estimated year 2002, $11.25 based on book value, $35.24 based
on sales, $33.88 based on EBITDA, $14.71 based on Adjusted EBITDA and
$91.90 based on EBITDAR.
The analysis also produced an implied per share price, based on the mean of
the Regional and Discount Domestic Airlines' multiples, of,
(i) for the latest twelve months, $16.68 based on book value, $15.55 based
on sales, $59.66 based on EBITDA, $1.63 based on Adjusted EBITDA and $57.50
based on EBITDAR,
(ii) for the estimated year 2001, $13.41 based on book value, $15.96 based
on sales, $36.99 based on EBITDA, $2.67 based on Adjusted EBITDA and $62.16
based on EBITDAR, and
(iii) for the estimated year 2002, $10.56 based on book value, $18.21 based
on sales, $16.04 based on EBITDA, $13.59 based on Adjusted EBITDA and
$94.69 based on EBITDAR.
In reviewing the comparable companies trading analysis for the purposes of
its determination of fairness, DrKW took into consideration the fact that
certain of the analyses produced implied per share values greater than $23.00
per share. DrKW believes that the wide range of implied share values resulting
from the comparable companies trading analysis are the result of differences in
fleet composition, fleet size, leverage, competitive factors and cost structures
among different airlines. As discussed below, DrKW believes that its analyses
must be considered as a whole and
28
<Page>
that selecting portions of its analyses, without considering the analyses taken
as a whole, would create an incomplete view of the process underlying the
analyses performed in reaching its opinion. In addition, DrKW considered the
results of all such analyses and did not assign relative weights to any of the
analyses, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be DrKW's view of the actual
value of Amtran.
COMPARABLE TRANSACTIONS ANALYSIS. DrKW reviewed transactions in the airline
industry from March 20, 1997 until March 9, 2001. For each transaction, DrKW
calculated the multiple of the adjusted purchase price, which is the purchase
price attributable to the equity interest of the target company plus the target
company's debt less cash, paid in each transaction as a multiple of the target's
(i) latest 12 months' sales, (ii) latest 12 months' EBITDA and (iii) latest 12
months' EBIT, and the purchase price attributable to the equity interest of the
target company to the target's (iv) latest 12 months' net income, and (v) book
value.
The analysis of these transactions, excluding certain multiples which DrKW
determined were not meaningful, yielded a range of multiples of adjusted
purchase price to (i) latest 12 months' sales of 0.1x to 3.0x, (ii) latest 12
months' EBITDA of 2.5x to 22.9x, and (iii) latest 12 months' EBIT of 3.3x to
12.9x, and a range of multiples of purchase price to (iv) latest 12 months' net
income of 3.3x to 33.0x, and (v) book value of 0.6x to 4.1x. DrKW used these
comparable transaction multiples to calculate implied values for the shares
based on the ranges of multiples derived from such transactions. The per share
value, based on the median of these values, ranged from $20.73 to $46.08.
In reviewing the comparable transactions analysis for the purposes of its
determination of fairness, DrKW took into consideration the fact that certain of
the analyses produced implied per share values greater than $23.00 per share. As
discussed below, DrKW believes that its analyses must be considered as a whole
and that selecting portions of its analyses, without considering the analyses
taken as a whole, would create an incomplete view of the process underlying the
analyses performed in reaching its opinion. In addition, DrKW considered the
results of all such analyses and did not assign relative weights to any of the
analyses, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be DrKW's view of the actual
value of Amtran.
PRESENT VALUE OF HYPOTHETICAL FUTURE STOCK PRICE ANALYSIS. DrKW performed a
present value of hypothetical future stock price analysis using the Base Case
and the Maintenance Case in order to derive an implied equity value reference
range for Amtran. The future stock price range was determined by applying a P/E
multiple range of 8.0x-12.0x. These P/E multiples were chosen because they were
within the range of historic P/E trading multiples for the shares of Amtran and
the comparable companies. This hypothetical future stock price was then
discounted at a levered cost of equity ranging from 15%-20%. These discount
rates were chosen to reflect market risks, the premiums associated with
micro-cap stocks, the presence of a controlling shareholder and the high degree
of uncertainty surrounding the implementation of Amtran's long-term strategic
goals. The per share value implied by this analysis for the Base Case ranged
from $17.07 to $39.02 with a mean of $23.64 and a median of $22.49. The per
share value implied by this analysis for the Maintenance Case ranged from $9.51
to $31.26 with a mean of $17.33 and a median of $15.18.
LEVERAGED RECAPITALIZATION ANALYSIS. DrKW also performed an analysis of
Amtran's ability to finance, by incurring additional debt, the repurchase of
approximately 3.1 million shares, representing the shares held by the Public
Shareholders, and the cash out of options at various repurchase prices. This
analysis implied that Amtran could reasonably incur additional debt to finance
the purchase of approximately 3.1 million shares and cash out certain options at
a purchase price of $23.00 per share as contemplated by the terms of the merger.
However, DrKW's opinion did not address the solvency of Amtran following
consummation of the merger, or at any time, nor did DrKW address issues
regarding fraudulent conveyance or fraudulent transfer, and DrKW has been
advised that Amtran has arranged to receive an opinion with respect to all of
such matters from Houlihan, Lokey, Howard and Zukin.
STOCK PRICE AND PREMIUM ANALYSIS. DrKW reviewed 32 acquisition transactions
by majority shareholders of publicly held minority interests with values ranging
from $73 million to $2.7 billion
29
<Page>
to derive a range of premiums paid over the public trading prices per share one
day, one week and four weeks prior to the announcement of such transactions
since January 1, 1997. In connection therewith, DrKW noted, among other things,
that (i) the reasons for, and circumstances surrounding, each of the
transactions analyzed were diverse, (ii) the characteristics of the companies
and parties involved were not necessarily comparable to those of Amtran and
INDUS and (iii) premiums fluctuate based on perceived growth, synergies,
strategic value, the type of consideration utilized in the transaction,
information in the securities markets and other factors.
The results of these analyses are summarized below:
<Table>
<Caption>
MEDIAN PREMIUMS IMPLIED PER SHARE AMTRAN PREMIUM
DAYS PRIOR TO THE PAID IN SELECTED VALUE USING AMTRAN BASED ON $23.00
ANNOUNCEMENT TRANSACTIONS STOCK PRICE OFFER PRICE
------------ ------------ ----------- -----------
One Day..................................... 24.5% $15.69 82.5%
30 days..................................... 31.5% $12.66 139.0%
60 days..................................... 28.2% $15.06 95.7%
90 days..................................... 26.5% $18.02 61.4%
</Table>
The $23.00 price also represents a premium of 39.4% over the $16.50 closing
price of the shares one year prior to the announcement date, a time when the
shares of airline stocks in general were trading at higher levels than they are
currently trading.
CERTAIN GENERAL MATTERS. No company or transaction used in the foregoing
analyses was substantially comparable to Amtran or the merger. In addition,
those analyses and the discounted cash flow analyses are based and are heavily
dependent upon, among other factors, assumptions as to future performance and
other factors, and are therefore subject to the limitations described in DrKW's
opinion. Accordingly, an analysis of the results of the foregoing is not
entirely mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the acquisition value or the
public trading value of the companies to which they are being compared and
Amtran.
A fairness analysis is a complex process and is not necessarily susceptible
to a partial analysis or summary description. DrKW believes that its analyses
must be considered as a whole and that selecting portions of its analyses,
without considering the analyses taken as a whole, would create an incomplete
view of the process underlying the analyses performed in reaching its opinion.
In addition, DrKW considered the results of all such analyses and did not assign
relative weights to any of the analyses, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to be
DrKW's view of the actual value of Amtran. There were no specific factors in
DrKW's analysis which did not support its fairness opinion.
The analyses performed by DrKW are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of DrKW's engagement by the
single member special independent director committee. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold.
The single member special independent director committee retained DrKW based
upon its experience and expertise. DrKW is an internationally recognized
investment banking and advisory firm. DrKW, as part of its investment banking
business, is continuously engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
course of its market-making and other trading activities, DrKW and its
affiliates may, from time to time, have a long or short position in, and may buy
and sell, securities of Amtran.
Other than receiving instructions from Mr. Abel in his capacity as the sole
member of the special independent director committee, DrKW did not receive any
instructions from Amtran, Mikelsons, INDUS or any other affiliate of Mikelsons.
30
<Page>
DRKW ENGAGEMENT AGREEMENT. Pursuant to the terms of a letter agreement,
dated May 8, 2001, between DrKW and Amtran (the 'DrKW Letter Agreement'), the
single member special independent director committee retained DrKW to serve as
its financial advisor with respect to any transaction considered by the single
member special independent director committee pursuant to which Mikelsons or any
affiliate acquires all of the outstanding capital stock of Amtran held by the
Public Shareholders (the 'Proposal'). The DrKW Letter Agreement provides that
Amtran will pay DrKW $100,000 upon the execution of the DrKW Letter Agreement
and $800,000 at such time as DrKW rendered an opinion to the single member
special independent director committee with respect to the adequacy or fairness
from a financial point of view of the consideration to be paid pursuant to the
proposal, or at such time as DrKW advises the single member special independent
director committee that it is unable to render such an opinion. In addition,
pursuant to the terms of an indemnification agreement, dated May 8, 2001, Amtran
is obligated to indemnify DrKW (and its affiliates, their respective directors,
officers, agents, employees and controlling persons) against certain liabilities
arising out of or in connection with DrKW's engagement, including liabilities
under the federal securities laws.
This summary is not a complete description of the analysis performed by DrKW
and is qualified by reference to the written opinion of DrKW set forth in
Annex C to this proxy statement and to DrKW's report to the single member
special independent director committee included as Exhibit (c)(2) to the
Schedule 13E-3 filed with the SEC on June 29, 2001, and as subsequently amended,
by Amtran and the filing persons, of which this proxy statement constitutes a
part. Copies of DrKW's reports to the single member special independent director
committee on June 5 and June 18, 2001 will be made available for inspection and
copying at our principal executive offices during our regular business hours by
any interested holder of shares of our common stock or representative of any
such holder (who has been so designated in writing). We will also furnish by
mail copies of DrKW's reports to the single member special independent director
committee to any interested holder of shares of our common stock or
representative of any such holder (who has been so designated in writing) upon
written request and at the expense of the requesting holder of shares of our
common stock.
POSITION OF THE FILING PERSONS REGARDING FAIRNESS OF THE MERGER
The filing persons believe that the merger is fair to and in the best
interests of the holders of shares of our common stock (other than the filing
persons). The filing persons base their belief on the following factors, each of
which, in their view, supported that conclusion:
the conclusions and recommendation of the single member special independent
director committee and its analysis of which the filing persons hereby
expressly adopt;
the factors referred to above as having been taken into account by the
single member special independent director committee and the board of
directors, including that the single member special independent director
committee received an opinion from DrKW that, as of the date of that
opinion and subject to the assumptions and limitations discussed in that
opinion, the consideration of $23 in cash per share of common stock to be
received by the holders of shares of our common stock (other than Mikelsons
and any Mikelsons Affiliate) in the merger is fair to such holders from a
financial point of view, which the filing persons hereby expressly adopt;
the merger price represents a premium of (a) 82.5% to the closing price of
Amtran common stock on May 16, 2001, the last trading day prior to
announcement of Mikelsons' proposal, (b) 122.4% to the closing price of
Amtran common stock on May 9, 2001, one week prior to the announcement of
Mikelsons' proposal and (c) 130.9% to the closing price of Amtran common
stock on April 16, 2001, four weeks prior to the announcement of Mikelsons'
proposal, which, in each case, exceeds the median premiums paid in other
minority buy-out transactions; as contained in DrKW's presentation to the
single member special independent director committee, the median premiums
paid in other minority buy-out transactions are: (a) 26% for one day prior
to announcement, (b) 29% for one week prior to announcement and (c) 31% for
four weeks prior to announcement;
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<Page>
the difficulty of forecasting Amtran's performance over a 5-year period in
light of the degree of variability and uncertainty inherent in the airline
industry;
$23 per share exceeds the average price per share paid by Amtran for shares
of its common stock during the past two years and, in particular, the price
per share paid by Amtran in purchases of shares of its common stock since
the third quarter of 1999; see 'Prior Stock Purchases' for information
concerning prior stock purchases by Amtran; and
declines in revenues and operating performance of Amtran and other domestic
airlines during the first two fiscal quarters of 2001.
In reaching their determinations that the merger is fair, the filing persons
also recognized and considered the adverse factors considered by the single
member special independent director committee. Additionally, the filing persons
considered Mikelsons' lack of interest in selling his shares of Amtran common
stock and that, as a result, the minority shareholders of Amtran would not have
an opportunity to receive a control premium with respect to their shares of
Amtran common stock.
In view of the variety of factors considered by the filing persons, they did
not find it practicable to, and did not, quantify or otherwise attempt to assign
specific or relative weights to the factors considered in reaching their
determinations. The filing persons evaluated the $23 per share merger
consideration against recent and historic market prices for the shares of Amtran
common stock. The filing persons also took account of the opinion of DrKW to the
single member special independent director committee that, based upon and
subject to the various assumptions and limitations set forth therein, as of June
18, 2001, the $23 per share to be received by the Public Shareholders pursuant
to the merger was fair to such Public Shareholders from a financial point of
view, and the report and analyses presented to the single member special
independent director committee in connection therewith. The filing persons
adopted DrKW's analysis of the $23 per share offer against the going concern
value of Amtran presented in the report prepared by DrKW and presented to the
single member special independent director committee in connection with the
delivery of its opinion. See ' -- Opinion of Financial Advisor to the Single
Member Special Independent Director Committee'. Other than as described above,
the filing persons did not consider any factors regarding the fairness of the
merger to the shareholders of Amtran, other than the filing persons. The filing
persons believe that the factors they considered provided a reasonable basis to
form their belief. Specifically, the filing persons did not independently
consider with respect to such fairness:
net book value, which the filing persons did not believe had any systematic
connection with the economic value of Amtran; or
liquidation value, which the filing persons did not view as relevant since
they believed that substantial value was tied to Amtran as a going concern
and that liquidation would destroy this value.
The filing persons also considered the conditional proposals made by Apollo,
including the September 2000 proposal and the April 2001 proposal, in light of
the declines in Amtran's projections since the September 2000 proposal, the fact
that even after extensive due diligence and negotiations during 2000, Apollo was
unable to present a proposal that was acceptable to Mikelsons and that Mikelsons
believed could be consummated in a reasonable period of time. Thus, for the
foregoing reasons, to the extent that any of the Apollo proposals constituted
firm offers to acquire all of, or a controlling interest in, Amtran, the filing
persons concluded that such proposals were not feasible. See ' -- Background of
the Merger' for a discussion of certain conditional proposals made by Apollo.
The filing persons considered the advantages and disadvantages of the
alternative to the acquisition of the public shareholder interest in Amtran by
Mikelsons, which was Amtran continuing as a publicly held company with Mikelsons
maintaining his 72% equity interest in Amtran. In the view of the filing
persons, the principal advantage of Amtran continuing as a publicly traded
company was that it would allow public shareholders to continue to participate
in any growth in the value of Amtran equity. The disadvantages to public
shareholders of Amtran
32
<Page>
continuing as a publicly traded company that were considered by the filing
persons included the exposure to the risks and uncertainties attendant to
continuing as a publicly traded company in light of risks to Amtran's business
from rising fuel prices, rising labor costs, the rapid integration of new
aircraft and the subsequent disposition of a portion of its current fleet, and
Mikelsons' and Amtran management's stated belief that based on their knowledge
of and experience in the airline industry no past airline had successfully moved
from a charter service business to a predominantly scheduled service business.
In addition, the filing persons considered the fact that Amtran common stock has
historically traded at a discount to the stocks of other domestic airlines due
to Amtran's limited public float and the fact that Amtran has a controlling
shareholder.
As described in ' -- Background of the Merger', Mikelsons and INDUS
considered alternative means of accomplishing the stated purposes for the
merger. As described above under ' -- Background of the Merger', Messrs. Tague,
Wolff and Hlavacek also participated to varying degrees in the consideration of
alternative means of accomplishing the stated purposes for the merger. However,
these alternatives were ultimately not pursued for the reasons set forth in ' --
Background of the Merger'. The filing persons believe that taking Amtran private
at this time will allow management to focus on the implementation of long-term
strategic goals. In particular, the filing persons believe that Amtran's
management should be focusing primarily on implementing Amtran's refleeting
initiative, the implementation of which began with the delivery of the first new
aircraft in June 2001, and the concurrent expansion of Amtran's operations at
Midway Airport in Chicago, Illinois. The filing persons believe that these two
initiatives could result in substantial benefits if they are successfully
implemented. However, the filing persons recognize that the implementation of
these initiatives involves substantial execution risk, and that a number of
factors that will determine the success of the initiatives are beyond the
control of Amtran and its management. The filing persons also believe that it
will be several years before the success of these initiatives can be determined.
Because of this substantial uncertainty and time horizon, the filing persons
believe that the public equity markets are unlikely to reflect the potential
benefits of these initiatives at any time in the near future.
After consulting with Mikelsons' financial and legal advisors with respect
to the merger, including, without limitation, the factors discussed above, the
filing persons concluded that the merger was fair to and in the best interests
of the holders of shares of Amtran common stock (other than the filing persons).
Although Salomon Smith Barney provided financial advisory services to
Mikelsons in connection with the merger, Salomon Smith Barney was not requested
to, and did not, evaluate or render an opinion or report as to the fairness,
from a financial point of view, of the consideration per share to be paid in the
merger. Salomon Smith Barney's role in the merger consisted primarily of
advising Mikelsons and INDUS on the general strategy for accomplishing the
transaction, including the financing of the transaction and restructuring of the
ILFC Series B preferred stock, reviewing DrKW's and Amtran's financial analyses,
reviewing historical and projected financial information prepared by Amtran's
management and participating in negotiations.
The filing persons believe that the merger is procedurally fair to and in
the best interests of the holders of shares of Amtran common stock (other than
the filing persons) for the reasons set forth above under ' -- Fairness of the
Merger -- Board of Directors', which the filing persons hereby expressly adopt.
This discussion of the information and factors considered and given weight
by the filing persons is not intended to be exhaustive but is believed to
include all material factors considered by the filing persons.
PROJECTIONS
Amtran management produces 5-year plans as part of its ongoing strategic
planning process. These 5-year plans are periodically updated by Amtran's
management. On May 18, 2001, Amtran management provided a version of this 5-year
plan dated May 16, 2001, to DrKW, the single
33
<Page>
member special independent director committee, Salomon Smith Barney, Citicorp
and Bank One, NA. Prior drafts and versions of this plan were supplied to the
same parties.
On May 25, 2001, representatives of DrKW requested that Amtran management
prepare additional 5-year plans containing various scenarios different from
those contained in management's base case. During the preparation of those
alternative cases on May 29, 2001, Amtran management discovered a calculation
error in the model used in the preparation of the May 16 plan. Copies of this
plan, which is identical to the May 16 plan other than changes resulting from of
the correction of the calculation error, were made available to Salomon Smith
Barney, Citicorp, DrKW and the single member special independent director
committee on May 31, 2001. The base case contained in the May 31 plan contained
the following estimates of Amtran's future (i) operating revenues,
(ii) earnings before interest, taxes, depreciation, amortization and rents,
(iii) earnings before interest, taxes, depreciation and amortization and
(iv) net income:
<Table>
<Caption>
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
Operating revenues......................... $1,385.0 $1,666.7 $1,941.7 $2,107.1 $2,182.8
Earnings before interest, taxes,
depreciation, amortization and rents..... 297.3 424.5 525.8 533.0 491.0
Earnings before interest, taxes,
depreciation and amortization............ $ 165.2 197.3 243.0 226.5 168.1
Net income (loss).......................... 3.6 2.4 44.0 65.6 46.8
</Table>
On May 31, 2001, Amtran management also provided copies of the 5-year plans
reflecting the various scenarios to Salomon Smith Barney, DrKW and the single
member special independent director committee. The alternative scenarios
presented by Amtran management included:
Maintenance adjustment. This plan reflects the adjustment of the maintenance
expenses throughout the period covered to reflect the fact that maintenance
costs will be abnormally low during the period from 2002 to 2005 due to the
rapid transition to a younger fleet. The maintenance adjusted plan contains the
following estimates of Amtran's future (i) operating revenues, (ii) earnings
before interest, taxes, depreciation, amortization and rents, (iii) earnings
before interest, taxes, depreciation and amortization and (iv) net income:
<Table>
<Caption>
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
Operating revenues......................... $1,385.0 $1,666.7 $1,941.7 $2,107.1 $2,182.8
Earnings before interest, taxes,
depreciation, amortization and rents..... 294.3 405.4 498.7 513.4 479.0
Earnings before interest, taxes,
depreciation and amortization............ 162.1 172.2 215.9 207.0 156.0
Net income (loss).......................... 1.2 (9.6) 27.1 53.4 39.3
</Table>
Fuel adjustment: This plan assumes that fuel costs remain at constant levels
throughout the five-year period covered (rather than the assumption that fuel
costs will decline during that period which is the assumption contained in the
base case). The fuel adjusted plan contains the following estimates of Amtran's
future (i) operating revenues, (ii) earnings before interest, taxes,
depreciation, amortization and rents, (iii) earnings before interest, taxes,
depreciation and amortization and (iv) net income:
<Table>
<Caption>
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
Operating revenues......................... $1,385.0 $1,666.7 $1,941.7 $2,107.1 $2,182.8
Earnings before interest, taxes,
depreciation, amortization and rents..... 297.3 396.9 490.3 495.2 451.5
Earnings before interest, taxes,
depreciation and amortization............ 165.2 163.7 207.4 188.8 128.6
Net income (loss).......................... 3.6 (15.0) 21.8 41.9 22.0
</Table>
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<Page>
Enhanced competition adjustment: This plan assumes that in response to
Amtran's expansion at Midway Airport and refleeting, Amtran's competitors
increase their level of direct competition with Amtran (as reflected by 5-10%
reductions in Amtran's fare levels from the base case beginning in 2002 on
routes on which it competes directly with its largest competitors at Midway).
The enhanced competition scenario contains the following estimates of Amtran's
future (i) revenues, (ii) earnings before interest, taxes, depreciation,
amortization and rents, (iii) earnings before interest, taxes, depreciation and
amortization and (iv) net income:
<Table>
<Caption>
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
Operating revenues......................... $1,385.0 $1,642.1 $1,916.5 $2,080.8 $2,155.4
Earnings before interest, taxes,
depreciation, amortization and rents..... 297.3 401.7 501.9 507.2 463.6
Earnings before interest, taxes,
depreciation and amortization............ 165.2 168.5 219.1 200.8 140.7
Net income................................. 3.6 (12.0) 29.1 49.5 29.6
</Table>
Recession adjustment: This plan assumes that there is a recession during the
5-year period (as reflected by assuming that revenue per available seat mile
would remain at the year-2000 level in 2001 and 2002). The recession adjusted
plan contains the following estimates of Amtran's future (i) operating revenues,
(ii) earnings before interest, taxes, depreciation, amortization and rents,
(iii) earnings before interest, taxes, depreciation and amortization and
(iv) net income:
<Table>
<Caption>
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
Operating revenues......................... $1,346.4 $1,602.0 $1,857.9 $2,011.0 $2,081.3
Earnings before interest, taxes,
depreciation, amortization and rents..... 258.4 358.4 439.5 431.3 381.2
Earnings before interest, taxes,
depreciation and amortization............ 126.2 125.1 156.7 124.9 58.3
Net income................................. (19.8) (39.1) (10.1) 1.8 (22.0)
</Table>
Downside case: This plan reflects the impact of all of the adjustments
contained in the fuel adjusted case, the enhanced competition adjusted case and
the recession case. The downside case contains the following estimates of
Amtran's future (i) operating revenues, (ii) earnings before interest, taxes,
depreciation, amortization, and rents, (iii) earnings before interest, taxes,
depreciation and amortization and (iv) net income:
<Table>
<Caption>
PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
Operating revenues......................... $1,346.4 $1,578.9 $1,834.4 $1,986.3 $2,055.7
Earnings before interest, taxes,
depreciation, amortization and rents..... 258.4 309.8 381.7 369.7 316.2
Earnings before interest, taxes,
depreciation and amortization............ 126.2 76.6 98.9 63.3 (6.8)
Net income (19.8) (69.6) (46.3) (36.8) (62.8)
</Table>
Certain information concerning the projections. Amtran does not as a matter
of course make public its projections as to future performance or earnings. The
projections referred to above were not prepared with a view to public
disclosure, and are included in this proxy statement because such information
was not otherwise publicly available and was provided to Mikelsons, Salomon
Smith Barney, Citicorp, Bank One, NA, the alternative financial advisor, DrKW
and the single member special independent director committee. The projections
were not prepared with a view to compliance with published guidelines of the
SEC, the guidelines established by the American Institute of Certified Public
Accountants regarding projections or forecasts, or generally accepted accounting
principles. Neither the independent auditors of Amtran, nor any other
independent accountants, have compiled, examined or performed any procedures
with respect to the projections.
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The projections were not prepared with the approval of the Amtran board of
directors or the single member special independent director committee.
The projections are forward-looking statements that are subject to certain
risks and uncertainties and should be read with caution. See 'Cautionary
Statement Concerning Forward-Looking Information' in this proxy statement. The
projections are subjective in many respects and thus susceptible to
interpretation and periodic revision based on actual experience and recent
developments. While presented with numeric specificity, the projections reflect
numerous assumptions made by Amtran's management with respect to its refleeting
initiative, the expansion of its operations at Midway Airport, fuel prices,
industry performance and competition, general business, economic, market and
financial conditions and other matters, including assumed interest rates and
effective tax rates consistent with historical levels for Amtran, all of which
are difficult to predict, many of which are beyond Amtran's control.
Accordingly, it is highly likely that Amtran's actual performance will vary from
the assumptions made in preparing the projections and that the variations will
be both substantial and material to the forecasted results. As a result, actual
results may be materially greater or less than those contained in the
projections.
For these reasons, the inclusion of the projections in this document should
not be regarded as an indication that Amtran, any recipient of the projections
or their respective affiliates or representatives, considered or consider the
projections to be a reliable prediction of future events, and the projections
should not be relied upon as such. None of Mikelsons, INDUS or Messrs. Tague,
Wolff and Hlavacek or any of their respective affiliates or representatives has
made, or makes, any representation to any person regarding the information
contained in the projections. Except to the extent required under the federal
securities laws, Amtran does not intend to make publicly available any update or
other revisions to the projections to reflect circumstances existing after the
date of the preparation of the projections or the occurrence of future events
even in the event that any or all of the assumptions are shown to be in error.
PLANS FOR AMTRAN AFTER THE MERGER
Mikelsons presently intends to continue to own all the common stock of
Amtran after the merger (other than shares of our common stock which may be
issued in the future upon the exercise of stock options or the conversion of
shares of Series B preferred stock) and for Amtran to continue to operate as a
holding company for its operating subsidiaries.
Except as otherwise described in this proxy statement, none of Amtran, to
Amtran's knowledge, any of its directors or executive officers or the filing
persons has any current plans or proposals or negotiations which relate to or
would result in:
other than the merger pursuant to the merger agreement, any extraordinary
transaction, such as a merger, reorganization or liquidation involving
Amtran or its subsidiaries;
any purchase, sale or transfer of a material amount of assets of Amtran or
its subsidiaries;
any change in the management of Amtran or any change in any material term
of the employment contract of any executive officer; or
any other material change in the corporate structure or business of Amtran.
Nevertheless, Amtran may initiate from time to time reviews of its assets,
corporate structure, capitalization, operations, properties, management and
personnel to determine what changes, if any, would be desirable following the
merger. Amtran expressly reserves the right to make any changes that it deems
necessary or appropriate in light of its review or in light of future
developments.
CERTAIN EFFECTS OF THE MERGER
As a result of the merger, Mikelsons will own all the common stock of the
surviving corporation (other than shares of our common stock which may be issued
in the future upon the exercise of stock options or the conversion of Series B
preferred stock). The outstanding preferred stock of Amtran, which consists of
the Series A1 preferred stock, without par value, and the Series B preferred
stock, will remain outstanding. As of September 5, 2001, there were outstanding
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500 shares of Series A1 preferred stock, all held by Boeing Capital Corporation
and 300 shares of Series B preferred stock, all held by ILFC. Following the
merger, holders of shares of Amtran common stock other than Mikelsons, officers
of Amtran (who may acquire shares of our common stock in the future upon the
exercise of stock options) and ILFC (who may acquire shares of our common stock
in the future upon conversion of shares of Series B preferred stock) will no
longer benefit from any increases in the value of the surviving corporation and
will no longer bear the risk of any decreases in the value of the surviving
corporation. In addition, following the merger, the interest of Mikelsons in the
net book value and net income or loss of the surviving corporation will increase
to 100% from a current level of approximately 72%. Following the merger, in
dollar terms, Mikelsons' interest in Amtran's net book value as of the end of
the quarter ended June 30, 2001 will increase to $125.5 million from $91.0
million and his interest in Amtran's 2000 fiscal year net loss will increase to
$15.7 million from $10.9 million. Following the merger, the interests of Messrs.
Tague, Wolff and Hlavacek in the net book value and net income or loss of the
surviving corporation will decrease to 0% from current levels of approximately
0.099%, 0.1% and 0.5%, respectively. Following the merger, in dollar terms, the
interests of Messrs. Tague, Wolff and Hlavacek in Amtran's book value as of the
end of the quarter ended June 30, 2001 will decrease to $0 from approximately
$113,000, $125,000 and $627,000, respectively, and their interests in Amtran's
2000 fiscal year net loss will decrease to $0 from approximately $14,000,
$16,000 and $79,000, respectively. These three officers may acquire interests in
the surviving corporation's net book value and net income or loss in the future
upon the exercise of their stock options which will remain outstanding following
the merger. See ' -- Interests of Certain Persons in the Merger -- Treatment of
Stock Options' in this proxy statement.
As a result of the merger, all outstanding options to acquire shares of our
common stock other than those held by 19 officers of Amtran will be canceled.
All unvested stock options issued to our officers and certain stock options
issued to non-officers automatically vested upon the approval of the merger by
your board of directors. The compensation committee of your board of directors
has adopted a resolution providing that all stock options (other than those held
by the 19 officers whose options will remain outstanding following the merger)
that are outstanding immediately prior to the closing of the merger will be
canceled in exchange for a cash payment equal to the excess, if any, of $23 over
the exercise price of those options multiplied by the number of shares of our
common stock covered by those options, and that all outstanding stock options
with an exercise price in excess of $23 per share will be canceled without any
cash payment. In the aggregate, our employees (other than the 19 officers
described in the following paragraph) held as of September 4, 2001 options to
purchase 520,015 shares of Amtran common stock with an average exercise price of
$11.87 per share.
We have agreed in the merger agreement to enter into option modification
agreements with 19 of our officers (including Messrs. Tague, Wolff and Hlavacek)
providing that these officers will not exercise their options prior to the
merger and that their stock options will remain outstanding following the
merger. In the aggregate, these 19 officers hold options to purchase 1,749,464
shares of Amtran common stock with an average exercise price of $11.31. The
terms of the modifications to the stock options of these 19 Amtran officers are
fully described in this proxy statement under the heading ' -- Interests of
Certain Persons in the Merger'.
Following the merger, Mikelsons, the remaining optionholders and ILFC (upon
conversion of their shares of Series B preferred stock) will benefit from any
increases in the value of Amtran and also bear the risk of any decreases in the
value of Amtran.
Shares of our common stock will cease to be authorized to be quoted on the
Nasdaq following the merger and will, therefore, be removed from quotation on
the Nasdaq. The common stock is currently registered under Section 12(g) of the
Exchange Act. Registration under the Exchange Act may be terminated upon
application of Amtran to the SEC if such securities are not listed on a national
securities exchange or quoted on Nasdaq and there are fewer than 300 record
holders of such securities. Termination of registration of our common stock
under the Exchange Act would mean certain provisions of the Exchange Act, such
as the short-swing trading provisions of Section 16(b), the requirement to file
periodic reports, the requirement of furnishing
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a proxy statement in connection with shareholders' meetings pursuant to
Section 14(a) and the requirements of Rule 13e-3 under the Exchange Act with
respect to 'going private' transactions, would no longer be applicable to
Amtran. In addition, 'affiliates' of Amtran and persons holding 'restricted
securities' of Amtran might as a result be deprived of the ability to dispose of
such securities pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended. It is the present intention of Mikelsons to seek to cause
Amtran to make an application for the termination of the registration of our
common stock under the Exchange Act as soon as practicable after the effective
time of the merger.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required to pay the merger consideration, make
cash payments for canceled options and pay related fees and expenses is
approximately $87 million. The fees and expenses expected to be incurred in
connection with the merger are described in greater detail in 'Estimated Fees
and Expenses of the Merger'. In addition, we will purchase between 5 and 10% of
ILFC's shares of Series B preferred stock pursuant to the ILFC Agreement in
exchange for a note due January 15, 2002 with an annual interest rate of 7.38%.
Assuming that we purchase 5% of ILFC's shares of Series B preferred stock, the
aggregate principal amount of this note will be approximately $2.2 million.
ATA has received a letter dated June 18, 2001 (the 'Commitment Letter'),
from Salomon Smith Barney and Citicorp with respect to a $175 million 3-year
reducing revolving credit facility (the 'Secured Credit Facility'). In this
letter, Citicorp committed to provide the Secured Credit Facility, subject to
terms and conditions set forth therein, including Citicorp's right to syndicate
the Secured Credit Facility. Salomon Smith Barney and Citicorp are affiliates of
each other. On June 18, 2001, Bank One, NA agreed to commit $87.5 million of the
$175 million Secured Credit Facility, act as administrative agent and take an
active role, through its affiliate, Banc One Capital Markets, Inc., in the
syndication of the Secured Credit Facility. We expect that the structure of the
Secured Credit Facility will include both a term loan and a revolving credit
facility. We are in the process of negotiating the definitive documentation for
the Secured Credit Facility with the lenders.
The Secured Credit Facility will be used to finance the acquisition of all
the outstanding public shares of our common stock other than those owned by
Mikelsons and INDUS, to pay related transaction fees and expenses, to purchase
rotables and to provide for the ongoing working capital needs and general
corporate purposes of Amtran and its subsidiaries. The amount available for the
acquisition of shares of our common stock shall not exceed $82.0 million in the
aggregate.
The commitment under the Commitment Letter is conditioned upon, among other
things, (i) Citicorp not discovering or otherwise becoming aware of information
about Amtran that Citicorp reasonably believes to be materially inconsistent
with its understanding as of June 18, 2001 of Amtran and its business, (ii) the
preparation, execution and delivery of mutually acceptable loan documentation,
(iii) the absence of (a) any material adverse change in the business, condition
(financial or otherwise), operations or properties of Amtran and its
subsidiaries, taken as a whole, since December 31, 2000 and (b) any change in
market conditions that would impair the syndication of the Secured Credit
Facility, (iv) the accuracy and completeness in all material respects of
Amtran's representations and warranties in the Commitment Letter and of all
information furnished by Amtran to Citicorp and Salomon Smith Barney and
(v) the payment in full of all fees, expenses and other amounts payable under
the Commitment Letter.
The execution of the Secured Credit Facility is conditioned upon, among
other things, customary conditions for facilities of this nature, including
(i) the preparation, execution and delivery of mutually acceptable loan
documentation, (ii) creation and perfection of liens granted over the collateral
for the Secured Credit Facility, (iii) the roll-over of equity options being
acceptable to Salomon Smith Barney, (iv) the completion of legal due diligence
in connection with the transactions, and due diligence with respect to the
collateral, (v) legal opinions from special New York counsel for each of ATA and
Amtran and a solvency opinion from an independent solvency evaluator
satisfactory to Salomon Smith Barney, (vi) the absence of a material adverse
change since December 31, 2000 in the business, financial condition or results
of operations of
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Amtran and its subsidiaries, taken as a whole, (vii) evidence that as of the
closing date the funded lease-adjusted debt of Amtran and its subsidiaries is no
more than $955 million, (viii) evidence that as of closing date, Amtran's
minimum cash (or cash equivalents) on hand is no less than $85 million and
(ix) payment of accrued fees and expenses. Each advance under the Secured Credit
Facility is conditioned upon, among other things, the non-occurrence and
non-continuation of any unmatured event of default, the representations and
warranties contained in the loan agreement for the Secured Credit Facility being
true and correct in all material respects with the same effect as though such
representations and warranties had been made on the date of each advance, except
to the extent such representation and warranty relates to an earlier date (in
which case on and as of such earlier date) and compliance with the borrowing
base.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain United States federal income tax
consequences of the merger. The discussion is based upon the Internal Revenue
Code of 1986, as amended (the 'Code'), existing and proposed treasury
regulations, rulings, administrative pronouncements and judicial decisions,
changes to which could materially affect the tax consequences described in this
proxy statement and could be made on a retroactive basis. This discussion does
not address all aspects of federal income taxation that may be important to you
based on your particular circumstances and does not address any aspect of state,
local or foreign tax laws. This summary assumes that shares of our common stock
are held as capital assets (generally, assets held for investment) at the time
of the merger and may not apply to holders who acquired shares of common stock
pursuant to the exercise of employee stock options or other compensation
arrangements with Amtran, holders that are subject to special tax treatment,
holders that hold shares of our common stock as part of a 'straddle', 'hedge',
or 'conversion transaction', holders the functional currency of which is not the
U.S. dollar or holders that are nonresident alien individuals or foreign
corporations, partnerships, trusts or estates. Holders that may be subject to
special tax treatment include broker-dealers, persons liable for alternative
minimum tax, traders that elect to use a marked-to-market method of accounting
for their securities holdings, insurance companies, tax-exempt organizations,
retirement plans, financial institutions and regulated investment companies.
Consequences to Holders of Common Stock. A holder of shares of our common
stock will recognize gain or loss equal to the difference between the amount of
cash received in the merger and the holder's adjusted tax basis in the shares of
common stock surrendered. Such gain or loss will generally be capital gain or
loss and will be long-term capital gain or loss if at the effective time of the
merger the holder has a holding period for the common stock of more than one
year.
Backup Withholding and Information Reporting. Payments of cash to a holder
surrendering shares of our common stock will be subject to information reporting
and 'backup' withholding on the cash payable to the holder, unless the holder
furnishes its social security or other taxpayer identification number and meets
certain other conditions. Corporations generally are exempt from backup
withholding. Any amounts withheld from payments to a holder under the backup
withholding rules generally will be allowed as a credit against the holder's
United States federal income tax liability, which may entitle such holder to a
refund provided the required information is furnished to the Internal Revenue
Service.
The preceding discussion does not purport to be a complete analysis or
discussion of all potential tax effects relevant to the merger. Thus,
shareholders are urged to consult their own tax advisors as to the specific tax
consequences to them of the merger, including tax return reporting requirements,
the applicability and effect of federal, state, local, foreign and other
applicable tax laws and the effect of any proposed changes in the tax laws. The
merger will not result in any United States federal income tax consequences for
Amtran, Mikelsons or INDUS. The merger will be a taxable transaction for Messrs.
Tague, Wolff and Hlavacek and will result in the same United States federal
income tax consequences as described above for other holders of shares of our
common stock.
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SHAREHOLDER LITIGATION RELATING TO THE MERGER
Commencing on May 17, 2001, we, along with several of our officers and
directors have been named as defendants in two putative class actions filed in
the Superior Court of the State of Indiana in and for the County of Marion. The
plaintiffs allege that Mikelsons and the individual defendants have breached and
are breaching their fiduciary duties to the public shareholders of Amtran common
stock. The plaintiffs seek, among other things, declaratory and injunctive
relief, including: directing the individual defendants to exercise their duty of
care by giving consideration to any proposed business combination that would
maximize Amtran's shareholder value; directing the individual defendants to
adequately ensure that no conflicts of interest exist between the individual
defendants and their fiduciary obligation to maximize shareholder value or, if
such conflicts exist, to ensure that all conflicts are resolved in the best
interests of Amtran's public shareholders and awarding plaintiffs the costs and
disbursements of the action, including reasonable attorneys' and experts' fees.
We, along with several of our officers and directors have also been named as
defendants in one putative class action filed in U.S. District Court in the
Southern District of Indiana, Indianapolis Division, based on a diversity claim.
The plaintiffs allege, among other things, that Mikelsons and each of the
individual defendants have violated the fiduciary duties they owe to the
shareholders of Amtran. The plaintiffs seek judgment, among other things, as
follows: declaring that defendants have breached their fiduciary duties to the
public shareholders of Amtran and aided and abetted such breaches; enjoining the
proposed sale to Mr. Mikelsons and, if the proposed sale is consummated,
rescinding it; awarding plaintiff and the class compensatory and/or rescissory
damages as allowed by law; and awarding interest, attorney's fees, expert fees
and other costs, in an amount to be determined.
We have entered into a Memorandum of Understanding with each of the
plaintiffs (the 'Memorandum'), subject to the conditions therein and to court
approval, providing for the settlement of the lawsuits described above. We,
along with the named officers and directors, vigorously deny any liability
whatsoever in connection with the claims asserted in the actions. We, along with
the named officers and directors, entered into the Memorandum because it will
halt the substantial expense, inconvenience and distraction of continued
litigation of the plaintiffs' claims, and put to rest any and all the
plaintiffs' claims relating to the merger. The parties to the Memorandum agreed,
among other things, to attempt, in good faith, to agree upon and execute as soon
as practicable an appropriate stipulation of settlement, dismissing on the
merits and with prejudice all claims asserted in the complaints filed in the
state court actions, and to obtain final state court approval of the settlement,
and the release and dismissal of the state court actions with prejudice and to
voluntarily dismiss the federal court action. On July 25, 2001, the federal
court action was dismissed without prejudice. The settlement is subject to
confirmatory discovery. In the Memorandum, the defendants acknowledged that the
existence of these lawsuits was a factor in Mikelsons' decision to increase the
consideration he would pay per share and Mikelsons agreed that he took into
account the desirability of satisfactorily addressing the claims asserted in
these lawsuits in agreeing to increase the consideration he would pay. At the
time, Mikelsons was aware that the plaintiffs had stated they would be willing
to settle their claims, subject to court approval, if the consideration paid in
the proposed transaction was at least $23 per share. Amtran has agreed to pay an
aggregate of $285,000 in attorneys' fees, a portion of which has been requested
by Amtran to be paid under its directors' and officers' liability insurance
policy.
METHOD OF ACCOUNTING
The merger will be accounted for under the purchase method of accounting as
a purchase of INDUS by Amtran. The merger will not result in a change in the
recorded basis of the assets held by Amtran immediately prior to the merger.
REGULATORY AND OTHER APPROVALS
The only U.S. federal or state regulatory requirements applicable to the
merger and the ILFC amendment are the giving of notice of the merger to the U.S.
Department of Transportation and
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the filing of articles of merger and articles of amendment with the Secretary of
State of Indiana. On August 7, 2001, we provided notice of the merger to the
U.S. Department of Transportation.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Mikelsons and INDUS Ownership of Common Stock
As of September 5, 2001, Mikelsons owned 8,271,200 shares of our common
stock (or approximately 72% of the outstanding shares of our common stock on
that date). Mikelsons acquired his shares in Amtran in 1984, in exchange for his
contribution of, among other things, all the outstanding shares of the common
stock of ATA. On June 18, 2001, Mikelsons and INDUS entered into a stock
subscription agreement (the 'Stock Subscription Agreement'), pursuant to which
Mikelsons will subscribe for and purchase, and INDUS will issue to Mikelsons,
8,271,200 shares of the common stock, without par value, of INDUS, in
consideration of the contribution by Mikelsons to INDUS of the 8,271,200 shares
of our common stock owned by him, subject to certain conditions. Satisfaction of
the shareholder approval condition to the merger is a condition to the
transactions contemplated by the Stock Subscription Agreement. Upon completion
of the merger, each issued and outstanding share of common stock of INDUS shall
be converted into and become one fully paid and nonassessable share of common
stock, without par value, of Amtran, the surviving corporation.
Ownership of Common Stock by Our Officers and Directors
As of September 5, 2001, our executive officers and directors (other than
Mikelsons) beneficially owned an aggregate of 1,300,467 shares of our common
stock consisting of 84,762 shares of our common stock (which represented on that
date less than 1% of the outstanding shares and approximately 2.6% of the
outstanding shares not owned by Mikelsons or any Mikelsons Affiliate), presently
exercisable options to purchase 1,214,689 shares of our common stock (or
approximately 9.6% of the outstanding shares on such date assuming the exercise
of all such options) with an average exercise price of $11.20 per share and
1,010 shares of our common stock allocated to such directors and executive
officers under the ATA Employees' Salary Savings Plan. To our knowledge, all of
our executive officers and directors intend to vote the 85,772 shares of our
common stock which they have the power to direct the voting of in favor of the
merger.
As of September 5, 2001, Mr. Tague beneficially owned 460,980 shares of our
common stock, including options to purchase 450,758 shares with an average
exercise price of $12.52 (which represented on that date approximately 3.9% of
the outstanding shares assuming the exercise of all such options). As of the
same date, Mr. Wolff beneficially owned 350,094 shares of our common stock,
including options to purchase 338,000 shares with an average exercise price of
$13.48 (which represented on that date approximately 3.1% of the outstanding
shares assuming the exercise of all such options). As of the same date, Mr.
Hlavacek beneficially owned 362,393 shares of our common stock, including
options to purchase 309,431 shares with an average exercise price of $13.86
(which represented on that date approximately 3.0% of the outstanding shares
assuming the exercise of all such options). Messrs. Tague, Wolff and Hlavacek
intend to vote all shares of our common stock which they have the power to
direct the voting of in favor of all items at the annual meeting.
Treatment of Restricted Stock
Under the merger agreement, the restriction period for each restricted
share, whether vested or unvested, granted under any of our stock plans shall be
deemed to expire immediately prior to the closing of the merger, unless it
expired sooner in accordance with the restriction period set forth under the
terms of the stock plan, in which case, the restriction period shall expire in
accordance with the terms of the applicable stock plan.
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Treatment of Stock Options
All unvested stock options issued to our officers and certain stock options
issued to non-officers automatically vested upon the approval of the merger by
your board of directors. Your board of directors and the compensation committee
of your board of directors have adopted resolutions providing that all stock
options (other than those held by the 19 officers whose options will remain
outstanding following the merger as described below) that remain outstanding
immediately prior to the closing of the merger will be canceled in exchange for
a cash payment equal to the excess, if any, of $23 over the exercise price of
those options multiplied by the number of shares of our common stock covered by
those options, and that all outstanding stock options with an exercise price in
excess of $23 per share will be canceled without any cash payment. In the
aggregate, our employees (other than the 19 officers described in the following
paragraph) held as of September 4, 2001 options to purchase 520,015 shares of
our common stock with an average exercise price of $11.87 per share.
We have entered into option modification agreements with 19 of our officers
(including Messrs. Tague, Wolff and Hlavacek) providing that these officers will
not exercise their options prior to the merger and that their stock options will
remain outstanding following the merger. Under these agreements, these officers
have agreed, among other things, to the modification of the terms of their
options as follows:
not to exercise their options prior to (a) completion of the merger or (b)
termination of the merger agreement in accordance with its terms;
that their options will remain outstanding following the merger and be
exercisable during annual 60-day exercise periods which begin on June 1 of
each year;
have the right to put shares acquired upon exercise of their options during
an annual 60-day put period beginning 6 months after their exercise date in
each year for five years beginning December 15, 2002; and
the price per share at which officers will have the right to put shares
will be determined by an annual valuation of Amtran by a third-party
appraiser selected by the Amtran board of directors.
The exercise prices of each of these options will remain the same following
the completion of the merger. These officers will not be permitted to exercise
their options unless certain conditions are met. The average exercise price of
these options is $11.31. These agreements also set forth procedures for the
treatment of these officers' options and shares upon resignation, termination of
employment and death. These modifications were made, in part, to provide
liquidity for these officers' options and shares so long as we are a private
company. If our common stock ever becomes publicly traded again, these exercise
limitations and put rights would expire. In the aggregate, these 19 officers
hold options covering 1,749,464 shares of common stock.
In addition, we expect to increase the base salaries of the officers rolling
over their options, other than Messrs. Tague, Wolff, Hlavacek and McKnight, by
approximately 10% following completion of the merger. However, this increase
remains subject to approval by Mikelsons and the compensation committee of the
board of directors. This increase is intended to compensate for any decrease in
overall compensation for these officers resulting from the merger and the
rollover of their options. In the aggregate, this increase in base salary would
result in increased compensation expense of less than $300,000 per annum.
Indemnification of Officers and Directors
The surviving corporation shall honor all of Amtran's obligations to
indemnify (including any obligations to advance funds for expenses) the current
or former directors and officers of Amtran for acts or omissions by such
directors or officers occurring prior to the effective time of the merger to the
extent that the obligations exist as of the date of the merger agreement,
whether pursuant to Amtran's charter, bylaws, individual indemnity agreements or
otherwise. Such
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obligations shall survive the merger and shall continue in full force and effect
in accordance with their terms.
The merger agreement further requires that, for a period of six years after
completion of the merger, the surviving corporation will maintain in effect the
current policies of directors' and officers' liability insurance on behalf of
our directors and officers that are currently covered by our existing directors'
and officers' liability insurance maintained by Amtran or policies of at least
the same coverage, with respect to claims arising from or related to facts or
events which occurred at or before the effective time of the merger, except that
the surviving corporation is not required to pay annual premium payments in
excess of 150% of the annual premiums paid as of the date of the merger
agreement.
On August 31, 2001, Mikelsons and INDUS entered into agreements with each of
Messrs. Tague, Wolff and Hlavacek pursuant to which Mikelsons and INDUS will
indemnify Messrs. Tague, Wolff and Hlavacek against certain liabilities under
the Exchange Act arising by reason of the status of Messrs. Tague, Wolff and
Hlavacek as filing persons of the Schedule 13E-3 filed with respect to the
merger.
Proposed ILFC Amendment
The discussion in this proxy statement of the principal terms of the ILFC
Amendment, which is attached as Exhibit A to the ILFC Agreement, and the ILFC
Agreement is qualified in its entirety by reference to the ILFC Agreement, a
copy of which is attached as Annex B to this proxy statement, and which is
incorporated in this proxy statement by reference. The following description
summarizes the material provisions of the ILFC Agreement. We urge you to read
the ILFC Agreement and the ILFC Amendment carefully.
ILFC currently owns all 300 outstanding shares of our Series B preferred
stock, the original terms of which are set forth in the Purchase and Investor
Rights Agreement dated as of September 19, 2000, between ILFC and us, which is
filed as an exhibit to our annual report on Form 10-K/A for the fiscal year
ended December 31, 2000. On May 16, 2001, we entered into the ILFC Agreement
with ILFC to modify the terms of the Series B preferred stock in connection with
the merger. Under the ILFC Agreement, we have agreed to amend and restate
Article XII of our articles of incorporation as set forth in the ILFC Amendment
immediately before the merger becomes effective to modify the terms of the
Series B preferred stock to reflect the fact that following the merger, Amtran
will be a private company. As a result of the ILFC Amendment, ILFC's shares of
Series B preferred stock will become convertible at the conversion price of
$15.67 into shares of the common stock of the surviving corporation (rather than
being convertible into the right to receive $23 per share of common at the
conversion price of $15.67). Therefore, ILFC will, to the extent that it elects
to convert its shares of Series B preferred stock into shares of common stock of
the surviving corporation: (a) continue to benefit from increases in the value
of Amtran and (b) bear the risks of decreases in the value of Amtran.
As part of the agreement, ILFC agreed not to convert its existing shares of
Series B preferred stock into common shares prior to the merger and to vote its
shares of Series B preferred stock in favor of the ILFC Amendment. We have
agreed to repurchase between 5 and 10% (with the amount to be determined by
Amtran) of ILFC's shares of Series B preferred stock at a price reflecting
merger consideration paid to holders of shares of our common stock. Assuming
that we purchase 5% of its shares of Series B preferred stock and that ILFC
converts all its remaining shares of Series B preferred stock following the
merger, ILFC would own approximately 1,818,762 shares of our common stock. Under
the ILFC Agreement, the conversion price of the Series B preferred stock into
the common stock remains unchanged. However, upon redemption or termination of
conversion rights, ILFC will receive an additional premium equal to the
difference between $23 and the conversion price, as it may be adjusted from time
to time. The dividend rate on the Series B preferred stock will also increase
upon the completion of the merger from an annual rate of 5.0% of the liquidation
amount to an annual rate of 5.66% of the liquidation amount on the date the
merger is completed. On the fourth anniversary of the completion date of
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the merger, the dividend rate will increase to 6.5% per annum, provided that
from and after the date that a public offering is consummated, the dividend rate
will decrease to 5.0% per annum.
The ILFC Agreement also provides that we will lease an additional Boeing
737-800 aircraft from ILFC beginning in 2004 upon completion of the merger. We
will also pay ILFC an annual fleet consulting fee of $100,000, for a period of 4
years, in exchange for ILFC's assistance in the management of our
buyer-furnished-equipment and advice with respect to fleet retirement and other
fleet management issues.
Approval of the ILFC Amendment is a condition to the merger agreement and
merger. The ILFC Amendment, which is subject to the approval of the holders of
Series B preferred stock, was approved by your board of directors on June 18,
2001. ILFC, as the sole holder of shares of our Series B preferred stock, has
agreed to vote in favor of the ILFC Amendment and has granted an irrevocable
proxy to Kenneth K. Wolff and James W. Hlavacek to vote its shares of our
Series B preferred stock with regard to the ILFC Amendment.
Interests of Certain Directors
Under the terms of the plan of merger and the merger agreement, the
directors and officers of Amtran at the time of the merger will be the directors
and officers of the surviving corporation. Therefore, all directors elected at
the annual meeting will continue as directors of the surviving corporation
following the merger. There are, however, no employment contracts or agreements
with our officers or directors currently in place or expected to be put in place
in connection with the merger.
Mr. Abel, Chairman of the compensation committee, is a partner in the
accounting firm of Blue & Co., LLC, which has provided tax and accounting
services to Amtran, Betaco and Mikelsons since 1973. Blue & Co. billed Amtran
$28,310 for tax and accounting services provided to Betaco and Mikelsons in
2000. Mikelsons is the sole owner of Betaco. Blue & Co. billed Betaco $20,835
for tax and accounting services in 2000. Mikelsons has advised us that he
currently expects that Blue & Co. will continue to provide certain tax and
accounting services to Amtran, Betaco and Mikelsons following the merger.
Mr. Rogers, Chairman of the audit committee, is a partner in the law firm of
Cravath, Swaine & Moore, which is acting as Mikelsons' legal advisor in this
transaction and has regularly provided legal services to Amtran in connection
with securities offerings since its initial public offering in 1993. Cravath is
expected to continue to represent Amtran in those offerings on a continuing
basis, including prior to the completion of the merger. Cravath billed Amtran
approximately $641,399 in fees and expenses for legal services rendered to
Amtran in 2000.
Amtran's Engagement of Salomon Smith Barney
At Mikelsons' request, Amtran engaged Salomon Smith Barney to act as
financial advisor to Mikelsons and INDUS. Under the engagement letter between
Amtran and Salomon Smith Barney, Amtran will be obligated to pay an advisory fee
and expenses to Salomon Smith Barney only upon completion of the merger. In
connection with this engagement, Amtran entered into an indemnity letter
agreement with Salomon Smith Barney. Amtran is obligated to indemnify Salomon
Smith Barney in connection with its engagement as financial advisor regardless
of whether the merger is completed. Amtran's engagement of Salomon Smith Barney
was considered by the single member special independent director committee in
its evaluation of the merger.
THE PARTIES
AMTRAN
We are a corporation formed under the laws of the State of Indiana. We were
incorporated in 1984 as a holding company for ATA. We own ATA, the eleventh
largest passenger airline in the United States (based on passenger revenue
miles) and a leading provider of scheduled airline services in selected markets.
We, through our subsidiaries, are also the largest commercial charter
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airline in the United States and the largest provider of passenger airline
services to the U.S. military, in each case based on 2000 revenues. For the year
ended December 31, 2000, the revenues of ATA consisted of 58.3% scheduled
service, 19.1% commercial charter service and 14.6% military charter service,
with the balance derived from related services. We expect to increase
substantially the portion of its revenues that is derived from scheduled service
and reduce its emphasis on commercial charter services.
Amtran has not, and to Amtran's knowledge, none of its directors or
executive officers have, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of which they were or are subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or state securities laws or finding
any violation with respect to such laws.
Willie G. McKnight, Jr., has been the Executive Vice President for Marketing
and Sales of Amtran since January 2000. Prior to that time he was a Vice
President with A.T. Kearney, management consultants. Mr. McKnight's principal
business address is Amtran's executive offices. Mr. McKnight is a citizen of the
United States of America.
William P. Rogers, Jr., is a director of Amtran and a partner of Cravath,
Swaine & Moore. Mr. Rogers' principal business address is Citypoint, One
Ropemaker Street, London EC2Y 9HR, England. The telephone number at this office
is 011-44-207-453-1000. Mr. Rogers is a citizen of the United States of America.
Information concerning Mikelsons' background is set forth below under
' -- Mikelsons'. Information concerning the background of the other directors
and executive officers of Amtran is set forth below under 'Election of
Directors -- Nominees'.
Our principal executive offices are located at: 7337 West Washington Street,
Indianapolis, Indiana 46231. Our telephone number at those offices is (317)
247-4000.
INDUS
INDUS, a corporation formed under the laws of the State of Indiana on
June 15, 2001, is wholly owned by Mikelsons. On June 18, 2001, Mikelsons and
INDUS entered into a Stock Subscription Agreement, pursuant to which Mikelsons
will subscribe for and purchase, and INDUS will issue to Mikelsons, 8,271,200
shares of the common stock, without par value, of INDUS, in consideration of the
contribution by Mikelsons to INDUS of the 8,271,200 shares of our common stock
owned by him, subject to certain conditions. Upon completion of the merger, each
issued and outstanding share of capital stock of INDUS will be converted into
and become one fully paid and nonassessable share of common stock, without par
value, of Amtran, the surviving corporation. INDUS was organized to merge with
us in the merger and has not conducted any unrelated activities since its
organization. INDUS will cease to exist after the merger.
INDUS has not, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of which they were or are subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or state securities laws or finding any
violation with respect to such laws.
The principal executive office of INDUS is located at: 7337 West Washington
Street, Indianapolis, Indiana 46231. INDUS' telephone number at those offices is
(317) 247-4000.
MIKELSONS
Mikelsons is the founder and majority shareholder of Amtran. His principal
occupation is as the Chairman of Amtran. Mikelsons is also the sole shareholder
of INDUS, the sole member of the board of directors of INDUS and the sole
officer (Chairman and President) of INDUS. Mikelsons is a citizen of the United
States of America. For more information regarding Mikelsons' business experience
and background, see 'Election of Directors -- Nominees'.
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Mikelsons has not, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of which they were or are subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or state securities laws or finding any
violation with respect to such laws.
Mikelsons' principal business address is 7337 West Washington Street,
Indianapolis, Indiana 46231. His telephone number is (317) 240-7000.
TAGUE, WOLFF AND HLAVACEK
John P. Tague is the Chief Executive Officer of Amtran and a member of the
Board of Directors of Amtran. Kenneth K. Wolff is the Executive Vice President
and Chief Financial Officer of Amtran and a member of the Board of Directors of
Amtran. James W. Hlavacek is Executive Vice President and Chief Operating
Officer of Amtran and a member of the Board of Directors of Amtran. Additional
information concerning the backgrounds of these officers is set forth below
under 'Election of Directors -- Nominees'.
None of Messrs. Tague, Wolff and Hlavacek have, during the last five years,
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of which they were
or are subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, Federal or state
securities laws or finding any violation with respect to such laws.
The principal business address of each of Messrs. Tague, Wolff and Hlavacek
is 7337 West Washington Street, Indianapolis, Indiana 46231. Their telephone
number at those offices is (317) 240-7000.
THE MERGER AGREEMENT
The discussion in this proxy statement of the merger and the principal terms
of the merger agreement is qualified in its entirety by reference to the merger
agreement, a copy of which is attached as Annex A to this proxy statement, and
which is incorporated in this proxy statement by reference. The following
description summarizes the material provisions of the merger agreement. We urge
you to read the merger agreement carefully because it is the legal document that
governs the merger.
THE MERGER
The merger agreement provides that, on the terms and subject to the
conditions set forth in the merger agreement, INDUS will be merged with and into
Amtran in accordance with the applicable provisions of the IBCL. Following the
merger, the separate corporate existence of INDUS will cease, and Amtran will
continue as the surviving corporation. INDUS may assign its rights and
obligations under the merger agreement to any company directly or indirectly
wholly owned by Mikelsons.
WHAT YOU WILL RECEIVE IN THE MERGER
When the merger is completed, by virtue of the merger and without any action
on the part of the holder of any shares of our capital stock, or any shares of
common stock of INDUS:
(i) each share of our common stock owned by Amtran, Mikelsons, INDUS or
any other affiliate of Mikelsons (other than persons deemed to be affiliates
of Mikelsons by reason of their positions as officers or directors of Amtran
(the 'Excluded Affiliates')) will no longer be outstanding and will be
canceled and retired and no consideration will be delivered or deliverable
in exchange for those shares;
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(ii) each share of our common stock owned by one of our subsidiaries
will be converted into one fully paid and nonassessable share of common
stock, without par value, of Amtran as the surviving corporation in the
merger;
(iii) each issued and outstanding share of capital stock of INDUS will
be converted into one fully paid and nonassessable share of common stock,
without par value, of Amtran, as the surviving corporation in the merger;
(iv) each issued and outstanding share of our common stock, other than
the shares described under (i), (ii) and (iii) above, will be converted into
the right to receive, upon valid surrender of a share certificate which
formerly represented that share of our common stock, $23 per share in cash,
without interest; and
(v) each issued and outstanding share of our Series A1 preferred stock
and our Series B preferred stock will remain outstanding as preferred stock
of Amtran, as the surviving corporation.
EFFECTIVE TIME OF THE MERGER
The merger will become effective on the date on which articles of merger
(including a plan of merger approved by holders of shares of our common stock)
are duly filed with the office of the Secretary of State of the State of
Indiana, or a later date as agreed to by INDUS and Amtran in those articles of
merger.
PAYMENT FOR SHARES; PROCEDURES FOR SURRENDER OF CERTIFICATES
Before the merger is completed, INDUS will appoint a bank or trust company
to act as paying agent for the payment of the merger consideration. Promptly
following completion of the merger, we will deposit with the paying agent funds
necessary to pay the merger consideration.
After the completion of the merger, the paying agent will mail a letter of
transmittal, which will include instructions for the delivery of certificates
formerly representing shares of our common stock to the paying agent, to all
record holders of shares of our common stock as of the time of the completion of
the merger. The letter of transmittal will also describe the procedures for
electronic delivery of share certificates. Holders of shares of our common stock
at the time of the merger should use this letter of transmittal to send
certificates formerly representing shares of our common stock to the paying
agent. After surrendering certificates formerly representing shares of our
common stock to the paying agent for cancelation, together with a properly
completed letter of transmittal, holders of those surrendered certificates will
be entitled to receive a cash payment from us in an amount equal to the number
of shares formerly represented by the surrendered certificates multiplied by the
merger consideration of $23. Each surrendered certificate will be canceled.
PLEASE DO NOT SEND ANY AMTRAN SHARE CERTIFICATES WITH YOUR YELLOW PROXY
CARD. YOU WILL RECEIVE A LETTER OF TRANSMITTAL TO SURRENDER YOUR SHARE
CERTIFICATES.
If a transfer of ownership of shares of our common stock is not registered
in our stock transfer books, payment of merger consideration of $23 per share
may be made to a person other than the person in whose name the surrendered
certificate is registered if
the share certificate is properly endorsed or otherwise in proper form for
transfer, and
the person requesting payment pays any transfer or other taxes resulting
from the payment of merger consideration to a person other than the
registered holder of that certificate or establishes to our satisfaction
that any such taxes have been paid or are not applicable.
All cash paid upon the surrender of certificates formerly representing
shares of our common stock in accordance with the merger agreement will be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares of our common stock so surrendered. After the completion of the merger,
no transfers of shares of our common stock that were outstanding at the time of
the merger will be made on our stock transfer books.
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If your Amtran share certificates have been lost, stolen or destroyed, you
will be entitled to obtain payment only by signing an affidavit to that effect
and, to the extent required by us posting a bond in an amount sufficient to
protect us against claims by any other party related to your share certificates.
TREATMENT OF STOCK OPTIONS
Except for stock options held by our officers who enter into option
modification agreements purchase common stock of the surviving corporation in
the merger (described above under 'Special Factors -- Interests of Certain
Persons in the Merger -- Treatment of Stock Options'), (a) each option to
purchase shares of our common stock outstanding immediately prior to the
completion of the merger, whether vested or unvested, will be converted into the
right to receive the excess, if any, of $23 over the exercise price per share of
the stock option multiplied by the number of shares of our common stock subject
to the stock option, (b) all other rights to purchase shares of our common
stock, whether vested or unvested, will be converted into the right to receive
an amount of cash equal to the number of shares of common stock subject to the
stock right outstanding immediately prior to the completion of the merger
multiplied by $23 and (c) all options with an exercise price in excess of $23
per share will be canceled by action of our board of directors or the
compensation committee of our board. All amounts payable are subject to
applicable withholding taxes.
REPRESENTATIONS AND WARRANTIES
We have made various representations and warranties in the merger agreement,
with respect to Amtran and its subsidiaries, which are customary in transactions
of this type, including, among others, representations as to
due organization and existence,
capital structure,
corporate authorization of the merger, the merger agreement, the plan of
merger, the ILFC Agreement and the ILFC Amendment, the execution, delivery
and enforceability of the merger agreement and the ILFC Agreement and the
recommendations of the board of directors and the single member special
independent director committee,
the classes of our stock entitled to vote on the merger, the plan of
merger, the merger agreement and the ILFC Amendment,
the absence of any violation of, or conflict with, organizational
documents, contracts and judgments, orders, laws and regulations resulting
from the merger agreement, the ILFC Agreement and the transactions
contemplated by those agreements, other than in the case of contracts,
judgments, orders, laws and regulations, violations or conflicts which have
not had and could not reasonably be expected to have a material adverse
effect on Amtran and its subsidiaries, taken as a whole, or our ability to
perform our obligations under the merger agreement,
the consents we are required to obtain and the filings we are required to
make in connection with the merger agreement, the ILFC Agreement and the
transactions contemplated by those agreements,
the accuracy of our public filings with the SEC since January 1, 1999,
including the financial statements contained in those filings, and the
absence of undisclosed liabilities,
the absence of undisclosed broker's fees and
the fairness opinion delivered to the single member special independent
director committee.
INDUS has made various representations and warranties in the merger
agreement, which are customary in transactions of this type, including, among
others, representations as to
due organization and existence,
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the absence of operations by it other than in connection with the merger
agreement and matters related thereto,
capital structure,
corporate authorization of the merger, the merger agreement and the plan of
merger and the execution, delivery and enforceability of the merger
agreement,
the absence of any violation of, or conflict with, organizational
documents, contracts and judgments, orders, laws and regulations resulting
from the merger agreement, the ILFC Agreement and the transactions
contemplated by those agreements other than in the case of contracts,
judgments, orders, laws and regulations, violations or conflicts which have
not had and could not reasonably be expected to have a material adverse
effect on INDUS or its ability to perform its obligations under the merger
agreement,
the consents it is required to obtain and the filings it is required to
make in connection with the merger agreement, the ILFC Agreement and the
transactions contemplated by those agreements,
the absence of undisclosed broker's fees and
the financing to be obtained by ATA, our principal subsidiary, to pay the
merger consideration.
INTERIM OPERATIONS PENDING COMPLETION OF THE MERGER
Except for matters expressly permitted or contemplated by the merger
agreement or the ILFC Agreement, we have agreed that from the date of the merger
agreement until the completion of the merger, we will, and will cause each of
our subsidiaries to
conduct business in the usual, regular and ordinary course consistent with
past practice, and
use all reasonable efforts to preserve intact our respective current
business organizations, keep available the services of our respective
current officers and employees and keep our respective relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with us to the end that our goodwill and ongoing business
are unimpaired at the effective time of the merger.
In addition, except for matters expressly contemplated by the merger
agreement or the ILFC Agreement, from the date of the merger agreement until the
completion of the merger, we will not, and will not permit any of our
subsidiaries to, do any of the following without the prior written consent of
the single member special independent director committee and INDUS
declare, set aside or pay any dividends on, or make any other distributions
in respect of, any capital stock or other equity interests, other than
dividends and distributions by our wholly owned subsidiaries to us and
regular cash dividends with respect to shares of our Series A1 preferred
stock and Series B preferred stock, split, combine or reclassify any
capital stock or other equity interests or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of capital stock or other equity interests or purchase, redeem or
otherwise acquire any shares of capital stock of or any other securities of
Amtran or any of our subsidiaries or any rights, warrants or options to
acquire any such shares or other securities,
except for (x) the issuance of shares of our common stock upon the exercise
of outstanding options granted under the stock options outstanding on the
date of the merger agreement, (y) the grant of up to an additional 100,000
stock options to acquire shares of our common stock under the stock option
plans identified in the merger agreement and (z) the issuance of shares of
our common stock upon the exercise of those new options in accordance with
their terms, issue, deliver, sell or grant:
(i) any shares of capital stock or other equity interests,
(ii) any bonds, debentures, notes or other indebtedness having the
right to vote, or convertible into, or exchangeable for,
securities having the right to vote, on
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matters on which the holders of shares of our common stock have
the right to vote or other voting securities,
(iii) any securities convertible into, or exchangeable for, or any
options, warrants or rights to acquire, any of the securities
described under (ii) above, voting securities or convertible or
exchangeable securities or
(iv) any 'phantom' stock, 'phantom' stock rights, stock appreciation
rights or stock-based performance units,
amend our respective articles of incorporation, bylaws or other
organizational documents or
authorize any of, or commit or agree to take any of, the actions described
above.
We and INDUS have agreed not to take any action that would, or could
reasonably be expected to, result in a breach of representations and warranties
or any condition to the merger not being satisfied. INDUS has also agreed not to
take any action that could reasonably be expected to result in any condition
contained in the Commitment Letter not being satisfied and to notify us if at
any time there is a reasonable likelihood the financing contemplated by the
Commitment Letter will not be available.
WITHDRAWAL OR MODIFICATION OF RECOMMENDATION
In the merger agreement, we have agreed that neither our board of directors
nor the single member special independent director committee will withdraw or
modify, or publicly propose to withdraw or modify, in a manner adverse to INDUS,
its favorable recommendation of the merger, the plan of merger, the merger
agreement and the ILFC Amendment unless it determines in good faith, after
consulting with and based on the advice of outside legal counsel, that its
favorable recommendation would be inconsistent with its fiduciary duties to the
holders of shares of our common stock (other than Mikelsons and INDUS) under
applicable law.
EXPENSES
All fees and expenses incurred in connection with the merger agreement and
the transactions contemplated by it will be paid by us, other than any fees and
expenses incurred as a result of a material breach of the merger agreement by
INDUS.
ADDITIONAL COVENANTS
We and INDUS have also agreed as follows:
to use our reasonable best efforts to cause the shareholders meeting to be
held as promptly as practicable following the date of the merger agreement
and to hold the shareholders meeting even if our board of directors or the
single member special independent director committee withdraws or modifies
its recommendation;
to use our respective reasonable best efforts to consummate the merger and
the other transactions contemplated by the merger agreement, including,
among other things, obtaining the financing contemplated in the Commitment
Letter;
we have agreed to afford INDUS and its representatives reasonable and
prompt access to our information, assets and personnel and to make
available to it on a timely basis a copy of each material document received
by us pursuant to the requirements of domestic or foreign laws and all
other information concerning our business, properties and personnel,
subject to confidentiality or legal restrictions;
to give each other prompt notice of any of our representations or
warranties becoming materially untrue or inaccurate;
to consult with each other before issuing any press release or other public
statements relating to the merger;
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to give INDUS the opportunity to participate in the defense or settlement
of any litigation with respect to the merger and the other transactions
contemplated by the merger agreement and the ILFC Agreement; and
to cause the proxy statement and the Schedule 13E-3 to comply with
applicable Exchange Act requirements.
In addition, INDUS has agreed to cause Mikelsons and his affiliates (other
than us, our subsidiaries and the Excluded Affiliates) to comply with our
obligations under the merger agreement.
CONDITIONS TO THE CLOSING OF THE MERGER
Our obligation and the obligation of INDUS to complete the merger is subject
to the satisfaction or waiver of the following conditions on or prior to the
closing date of the merger
a majority of the outstanding shares of our common stock voting to approve
the merger, the plan of merger, the merger agreement and the ILFC
Amendment,
a majority of the shares of our common stock voted at the annual meeting
(other than shares owned by Mikelsons, INDUS or any other affiliate of
Mikelsons (other than the Excluded Affiliates)) voting to approve the
merger, the plan of merger and the merger agreement,
a majority of the outstanding shares of our Series B preferred stock voting
to approve the ILFC Amendment,
no temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction preventing the
consummation of the merger or the other transactions contemplated by the
merger agreement is in effect. Each of the parties to the merger agreement
has agreed to use its reasonable best efforts to prevent the entry of any
such injunction or other order and to appeal as promptly as possible any
such judgment that may be entered and
the absence of any pending suit, action or proceeding by any governmental
entity, in each case that has a substantial likelihood of success,
(i) challenging the acquisition by INDUS or Mikelsons of any shares of our
common stock, seeking to restrain or prohibit the consummation of the
merger or any other transaction contemplated under the merger agreement or
seeking to obtain from us, INDUS or Mikelsons any damages that are material
in relation to Amtran and its subsidiaries taken as a whole, (ii) seeking
to prohibit or limit the ownership or operation by us or any of our
subsidiaries of any material portion of our business or assets or to compel
us or any of our subsidiaries to dispose of or hold separate any material
portion of our business or assets or to compel us or any of our
subsidiaries to dispose of or hold separate any material portion of our
business or assets as a result of the merger or any other transaction
contemplated under the merger agreement, (iii) seeking to impose material
limitations on the ability of INDUS or Mikelsons to acquire or hold, or
exercise full rights of ownership of, any shares of our common stock,
including the right to vote their shares of our common stock on all matters
properly presented to our shareholders or (iv) seeking to prohibit
Mikelsons from effectively controlling in any material respect the business
or operations of Amtran and its subsidiaries.
In addition, the obligation of INDUS to complete the merger is subject to
the satisfaction or waiver of the following conditions on or prior to the
closing date of the merger
our representations and warranties in the merger agreement being true and
correct in all material respects, and our representations and warranties
which are qualified as to materiality being true and correct, as of the
date of the merger agreement and the date on which the merger closes (other
than representations and warranties which expressly relate to an earlier
date, in which case our representations and warranties being true and
correct as of such date) and the receipt by INDUS of a certificate of a
duly authorized officer of Amtran certifying the truthfulness of our
representations and warranties,
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our compliance in all material respects with our obligations under the
merger agreement and the receipt by INDUS of a certificate of a duly
authorized officer of Amtran certifying our compliance,
the ILFC Agreement being in full force and effect and ILFC has performed
its obligations under that agreement in all material respects,
since the date of the merger agreement, no event has occurred which had a
material adverse effect on us, and our subsidiaries, taken as a whole,
other than any event which is the direct result of:
(i) any action or negligent or willful failure to take an action by
INDUS,
(ii) any action or negligent or willful failure to take an action by
us which is contrary to, or materially inconsistent with, the
recommendation or direction of the single member special
independent director committee,
(iii) any action with respect to which the recommendation or
direction of the single member special independent director
committee is required under the merger agreement which is taken
by us without the required recommendation or direction or
(iv) any action or failure to take an action by us taken at the
direction of Mikelsons or any of his affiliates (other than our
subsidiaries and the Excluded Affiliates), and
ATA receiving the financing contemplated by the Commitment Letter on
substantially the terms specified therein or on such other terms or
involving such other financing sources as are acceptable to ATA; provided
that this condition shall be deemed satisfied if the failure to obtain that
financing is the result of any action or failure to take an action by us or
ATA at the direction of Mikelsons or his affiliates (other than the
Excluded Affiliates).
In addition, our obligation to complete the merger is subject to the
satisfaction or waiver of the following conditions on or prior to the closing
date of the merger:
the representations and warranties of INDUS in the merger agreement being
true and correct in all material respects, and its representations and
warranties which are qualified as to materiality being true and correct, as
of the date of the merger agreement and the date on which the merger closes
(other than representations and warranties which expressly relate to an
earlier date, in which case its representations and warranties being true
and correct as of such date) and the receipt by us of a certificate of the
President of INDUS certifying the truthfulness of its representations and
warranties,
compliance in all material respects by INDUS with its obligations under the
merger agreement and the receipt by us of a certificate of the President of
INDUS certifying its compliance and
if ATA is required under the terms of its financing to obtain a solvency
letter from a third-party appraiser, the delivery by ATA of a copy of that
solvency letter to our board of directors.
Subject to applicable law, all conditions to the merger may be waived by
Amtran with the approval of the single member special independent director
committee.
TERMINATION
The merger agreement may be terminated at any time prior to the effective
time of the merger:
by mutual written consent of INDUS and Amtran (as agreed to by the single
member special independent director committee);
by either INDUS or Amtran (acting at the direction of the single member
special independent director committee)
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(i) if the merger has not been completed by October 31, 2001, unless
the merger has not been completed as a result of a breach of the
merger agreement by the party seeking to terminate the merger
agreement (excluding any breach by us without the consent of the
single member special independent director committee),
(ii) if any governmental entity issues an order, decree or ruling or
takes any other action permanently enjoining, restraining or
otherwise prohibiting the merger and such order, decree, ruling
or other action shall have become final and nonappealable or
(iii) if the approval of shareholders described under ' -- Conditions
to the Closing of the Merger' above is not obtained;
by INDUS if any representation or warranty made by us in the merger
agreement is not true and correct in all material respects, or any of our
representations and warranties in the merger agreement which is qualified
as to materiality is not true and correct, as of the date of the merger
agreement and the date on which the merger closes (other than
representations and warranties which expressly relate to an earlier date,
in which case the representations or warranties were not true and correct
as of such date) or we have failed to perform in any material respect any
of our obligations contained in the merger agreement, which breach cannot
be or has not been cured by us within 30 days of notice to us of the breach
(provided that INDUS is not then in material breach of any representation,
warranty or covenant contained in the merger agreement); excluding,
however, breaches and failures to perform by us relating to matters for
which the consent or recommendation of the single member special
independent director committee is required under the merger agreement and
(i) which is contrary to or materially inconsistent with the recommendation
or direction of the single member special independent director committee or
(ii) for which the required recommendation or direction has not been
obtained;
by us (acting at the direction of the single member special independent
director committee) if any representation or warranty made by INDUS in the
merger agreement is not true and correct in all material respects, or any
of its representations and warranties in the merger agreement which is
qualified as to materiality is not true and correct, as of the date of the
merger agreement and the date on which the merger closes (other than
representations and warranties which expressly relate to an earlier date,
in which case the representations or warranties were not true and correct
as of such date) or it has failed to perform in any material respect any of
its obligations contained in the merger agreement, which breach cannot be
or has not been cured by it within 30 days of notice to it of the breach
(provided that we are not then in material breach of any representation,
warranty or covenant contained in the merger agreement); and
by INDUS, if our board of directors or the single member special
independent director committee withdraws or modifies, or publicly proposes
to withdraw or modify, in a manner adverse to INDUS, their respective
approvals or recommendations of the merger, the plan of merger, the merger
agreement and the ILFC Amendment.
In the event of a termination, except as specifically provided in the merger
agreement, the merger agreement will become void and will have no effect,
without any liability or obligation on our part or on the part of INDUS, except
to the extent that the termination results from the material breach by a party
of any representation, warranty or covenant contained in the merger agreement.
AMENDMENT; WAIVER
The merger agreement may be amended by the parties, but only with the
approval of the single member special independent director committee, at any
time before or after receipt of the approval of the plan of merger by our
shareholders; provided that an amendment may not be
53
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made after the approval of the plan of merger by our shareholders without the
further approval of our shareholders, if such amendment requires further
shareholders' approval under applicable law.
In addition, at any time prior to completion of the merger, we and INDUS may
extend the time for the performance of any of the obligations or other acts
of the other parties,
waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered pursuant to the merger
agreement and
subject to the requirements of applicable law and the provisions of the
preceding paragraph, waive compliance with any of the agreements or
conditions contained in the merger agreement.
Any extension or waiver by us will require the approval of the single member
special independent director committee and, if required by applicable law,
shareholder approval.
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS
The merger agreement does not grant unaffiliated security holders access to
the corporate files of Amtran or INDUS or the right to obtain counsel or
appraisal services at the expense of Amtran or the filing persons.
DISSENTERS' RIGHTS
Section 23-1-44-8(b) of the IBCL provides that shareholders of an Indiana
corporation are not entitled to dissenters' rights in connection with a
transaction where, on the record date used in determining the shareholders of
the corporation entitled to receive notice of and vote to approve that
transaction, the class of shares held by those holders were:
registered on a United States securities exchange registered under the
Exchange Act or
traded on the National Association of Securities Dealers, Inc. Automated
Quotations System Over-the-Counter Markets -- National Market Issues or a
similar market.
On August 20, 2001, the record date for determining the holders of shares of
common stock entitled to receive notice of, and vote on the merger agreement at,
the annual meeting, shares of our common stock were traded on the Nasdaq Stock
Market.
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SUMMARY FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data for Amtran. The financial information for Amtran as of and for each of the
five fiscal years ended December 31, 1996, 1997, 1998, 1999 and 2000 has been
derived from, and should be read in conjunction with, the audited financial
statements of Amtran (including the notes thereto) for such periods contained in
Amtran's Annual Reports on Form 10-K for the years ended December 31, 1996,
1997, 1998, 1999 and 2000, respectively. The financial information as of and for
the six months ended June 30, 2000 and June 30, 2001 has been derived from, and
should be read in conjunction with, the unaudited financial statements of Amtran
(including the notes thereto) for such periods contained in Amtran's Quarterly
Reports on Form 10-Q for the quarters ended June 30, 2000 and June 30, 2001,
respectively. These documents are incorporated by reference into this proxy
statement. See 'Where You Can Find More Information'.
<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------ -------------------------
2000 1999 1998 1997 1996 2001 2000
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
(Dollars in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Operating revenues............ $1,291,553 $1,122,366 $919,369 $783,193 $750,851 $706,380 $654,900
Income (loss) from continuing
operations................... (15,324) 47,342 40,081 1,572 (26,674) 2,147 3,915
Preferred dividends........... 375 -- -- -- -- 2,708 --
Net income (loss) available to
common shareholders.......... (15,699) 47,342 40,081 1,572 (26,674) (561) 3,915
Basic earnings (loss) per
common share................. (1.31) 3.86 3.41 0.14 (2.31) (0.05) 0.32
Diluted earnings (loss) per
common share................. $ (1.31) $ 3.51 $ 3.07 $ 0.13 $ (2.31) $ (0.05) $ 0.30
BALANCE SHEET DATA:
Current assets................ $ 260,208 $ 231,894 $243,028 $162,842 $136,192 $235,544 $246,422
Noncurrent assets............. 772,222 583,387 351,521 288,015 233,409 870,925 616,711
Current liabilities........... 346,687 242,000 183,844 168,352 158,654 416,911 269,621
Noncurrent liabilities........ 481,089 421,905 307,954 225,515 156,203 484,082 440,632
Redeemable preferred stock.... 80,000 -- -- -- -- 80,000 --
Total shareholders' equity.... $ 124,654 $ 151,376 $102,751 $ 56,990 $ 54,744 $125,476 $152,880
STATISTICAL DATA:
Average common shares
outstanding.................. 11,956,532 12,269,474 11,739,106 11,577,727 11,535,425 11,403,503 12,097,765
Book value per common
share(1)..................... $ 10.43 $ 12.34 $ 8.75 $ 4.92 $ 4.75 $ 11.00 $ 12.64
Ratio of earnings to fixed
charges(2)................... n/a 2.65 3.03 1.19 n/a n/a 1.28
Deficiency of earnings to
cover fixed charges(2)....... $ (23,485) n/a n/a n/a (40,931) $ (4,485) n/a
</Table>
- ---------
(1) The 'book value per common share' represents total shareholders' equity
divided by average common shares outstanding.
(2) The 'ratio of earnings to fixed charges' represents earnings divided by
fixed charges as defined in the following paragraph. The 'deficiency'
represents the amount of fixed charges in excess of earnings.
For purposes of these computations, earnings consist of income (loss) before
income taxes, plus fixed charges, adjusted to exclude the amount of any
interest capitalized during the period. Fixed charges include the total of:
(a) interest, whether expensed or capitalized; (b) amortization of debt
expense relating to any indebtedness, whether expensed or capitalized; and
(c) such portion of rental expense as can be demonstrated to be
representative of the interest factor.
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MARKET PRICE AND DIVIDEND INFORMATION
Shares of our common stock are quoted on the Nasdaq Stock Market under the
ticker symbol 'AMTR'. The following table sets forth the high and low sale
prices through the Nasdaq Stock Market for the periods indicated.
<Table>
<Caption>
HIGH LOW
---- ---
1999
First Quarter........................................... $28.13 $18.50
Second Quarter.......................................... 25.00 17.25
Third Quarter........................................... 27.50 18.50
Fourth Quarter.......................................... 22.00 16.50
2000
First Quarter........................................... 19.50 13.63
Second Quarter.......................................... 18.44 8.63
Third Quarter........................................... 13.88 10.00
Fourth Quarter.......................................... 15.00 9.00
2001
First Quarter........................................... 14.75 9.44
Second Quarter.......................................... 22.20 9.00
Third Quarter (through September 5, 2001)............... 22.75 21.75
</Table>
Amtran has not paid dividends on shares of its common stock in the past two
years.
PRIOR STOCK PURCHASES
The following table, sets forth information, by fiscal quarter, regarding
purchases by us of shares of our common stock since the second quarter of 1999.
<Table>
<Caption>
AVERAGE
PURCHASE
PERIOD NO. OF SHARES PRICE RANGE PRICE
------ ------------- ----------- -----
2nd Quarter 1999................................... 150,000 $19.375 - $24.00 $22.3275
3rd Quarter 1999................................... 174,500 $18.875 - $20.6875 $20.25
4th Quarter 1999................................... 93,500 $16.8309 - $20.875 $18.41
1st Quarter 2000................................... 222,500 $15.375 - $19.25 $17.47
2nd Quarter 2000................................... 803 $17.47 $17.47
3rd Quarter 2000................................... 9,000 $10.31 - $10.50 $10.42
4th Quarter 2000................................... 852,000 $10.15 - $14.875 $11.82
1st Quarter 2001(1)................................ 13,500 $14.50 $14.50
2nd Quarter 2001................................... -- -- --
3rd Quarter 2001 (through September 5, 2001)....... -- -- --
</Table>
- ---------
(1) Amtran purchased 10,000 shares of its common stock on January 2, 2001 at a
price of $14.50 per share and 3,500 shares of its common stock on January
8, 2001 at a price of $14.50 per share.
On each of February 19, 1999 and August 17, 1999, Mr. Tague acquired 12,121
shares of our common stock at a price per share of $8.25 pursuant to the
exercise of employee stock options. On May 8, 2000, Mr. Tague acquired 10,000
shares of our common stock at a price per share of $8.25 pursuant to the
exercise of employee stock options.
ESTIMATED FEES AND EXPENSES OF THE MERGER
The fees and expenses estimated to be incurred by Amtran in connection with
the merger (including the fees of Mikelsons' advisors, namely Cravath, Swaine &
Moore and Salomon Smith Barney, which would be paid only upon completion of a
going-private transaction in which Mikelsons retains a majority interest) are as
follows:
<Table>
Financial advisory and arrangement fees..................... $2.65 million
Financing fees and expenses................................. $3.50 million
Legal, accounting, filing and printing fees and expenses.... $1.75 million
Miscellaneous and other expenses............................ $0.10 million
-----------
Total................................................... $8.00 million
</Table>
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ELECTION OF DIRECTORS
GENERAL
Nominees for re-election this year are J. George Mikelsons, John P. Tague,
Kenneth K. Wolff, James W. Hlavacek, Robert A. Abel and Andrejs P. Stipnieks.
William P. Rogers, Jr., who served as a director of Amtran last year, will not
be standing for re-election this year, as he relocated to London, England in
August 2001. All directors are elected to serve one-year terms. Each of these
nominees has consented to being named in the proxy statement and has agreed to
serve if elected.
Our bylaws provide that the nominees for director receiving a plurality of
the votes cast at the Annual Meeting, up to the number of directors to be
elected at the Annual Meeting, will be elected. Your board of directors
recommends a vote 'FOR' these nominees. Abstentions and broker non-votes are not
included in the tabulation of votes cast and, therefore, do not have the effect
of votes in opposition to a nominee.
NOMINEES
J. GEORGE MIKELSONS Director since 1993
J. George Mikelsons, age 64, is the founder, Chairman of the Board and, prior to
Amtran's initial public offering in May 1993, was the sole shareholder of
Amtran. Mr. Mikelsons founded ATA and Ambassadair Travel Club, Inc. in 1973. Mr.
Mikelsons currently serves on several boards of directors, including The
Indianapolis Zoo; the Indianapolis Convention and Visitors Association, where he
is a member of the Executive Committee; and IWC Resources Corporation (formerly
the Indianapolis Water Company). Mr. Mikelsons has been an airline Captain since
1966 and remains current on several jet aircraft.
Director 1993-95
JOHN P. TAGUE Director July 1997-present
John P. Tague, age 39, was named President and Chief Executive Officer of Amtran
in July 1997. He previously served as Amtran's President and Chief Operating
Officer from October 1993 before resigning to form his own aviation consulting
company in 1995. Prior to his tenure as Amtran's President and Chief Operating
Officer, he was Executive Vice President from June 1993 to October 1993. Prior
to that time, he was Senior Vice President, Marketing and Sales, of Amtran. From
May 1991 to November 1991, he was Vice President of Marketing and Sales for
Amtran. Mr. Tague was employed at Midway Airlines from 1985 to 1991. Prior to
joining Midway Airlines in 1985, Mr. Tague was a transportation consultant and
held various positions at a regional airline. Mr. Tague serves on the board of
directors of the Air Transport Association. Mr. Tague's principal business
address is Amtran's executive offices. Mr. Tague is a citizen of the United
States of America.
JAMES W. HLAVACEK Director since 1993
James W. Hlavacek, age 65, was appointed Chief Operating Officer of Amtran in
1995. He continues to serve as Executive Vice President of Amtran and President
of ATA Training Corporation. From 1986 to 1989, he was Amtran's Vice President
of Operations. Mr. Hlavacek has been a commercial airline pilot for 35 years and
has held the rank of Captain for over 30 years. He was ATA's Chief Pilot from
1985 to 1986. Mr. Hlavacek is the former Chairman of the board of directors of
the National Air Carrier Association. Mr. Hlavacek is a graduate of the
University of Illinois. Mr. Hlavacek's principal business address is Amtran's
executive offices. Mr. Hlavacek is a citizen of the United States of America.
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KENNETH K. WOLFF Director since 1993
Kenneth K. Wolff, age 55, was appointed Executive Vice President and the Chief
Financial Officer of Amtran in 1991. From 1990 to 1991, he was Amtran's Senior
Vice President and Chief Financial Officer. From 1989 to 1990, he was President
and Chief Executive Officer of First of America Bank -- Indianapolis. From 1988
to 1989, he was President and Chief Operating Officer of this bank. Prior to his
appointment as President of that bank, he held various positions at the bank
since 1968. Mr. Wolff is a graduate of Purdue University and also holds a
Masters in Business Administration from Indiana University and was a member of
the faculty there for five years. Mr. Wolff's principal business address is
Amtran's executive offices. Mr. Wolff is a citizen of the United States of
America.
ROBERT A. ABEL Director since 1993
Robert A. Abel, age 48, is a director in the public accounting firm of Blue &
Co., LLC. Mr. Abel is a magna cum laude graduate of Indiana State University
with a B.S. Degree in Accounting. He is a certified public accountant with over
20 years of public accounting experience in the areas of auditing and corporate
tax. He has been involved with aviation accounting and finance since 1976. Blue
& Co. provides tax and accounting services to Amtran in connection with selected
matters. Mr. Abel is also a director of Meridian Investment Advisors, Inc., a
registered investment company. Mr. Abel's principal business address is 1460 N.
Meridian Street, Carmel, Indiana, 46032. Mr. Abel is a citizen of the United
States of America.
ANDREJS P. STIPNIEKS Director since 1993
Andrejs P. Stipnieks, age 61, is an international aviation consultant. He
graduated from the University of Adelaide, South Australia, and is a Barrister
and Solicitor of the Supreme Courts of South Australia, the Australian Capital
Territory and of the High Court of Australia. Until 1998, Mr. Stipnieks was a
Senior Government Solicitor in the Australian Attorney General's Department,
specializing in aviation and surface transport law and practice. He has
represented Australia on the Legal Committee of the International Civil Aviation
Organization at Montreal. Mr. Stipnieks' principal business address is 6933
Andre Drive, Indianapolis, Indiana, 46278. Mr. Stipnieks is a citizen of
Australia.
Information Concerning the Board of Directors
During 2000, the board of directors held four (4) meetings. All directors
attended each board meeting and each meeting of those committees on which he
served. As described below, the board of directors has audit and compensation
committees.
<Table>
<Caption>
NAME OF
COMMITTEE MEETINGS
AND MEMBERS FUNCTIONS OF COMMITTEE IN 2000
----------- ---------------------- -------
AUDIT meets with the independent accountants of Amtran 2
William P. Rogers, Jr. reviews the audit plan for Amtran
Robert A. Abel reviews the annual audit of Amtran with the independent
Kenneth K. Wolff(1) accountants
Andrejs P. recommends whether the independent accountants should be
Stipnieks(1) continued as auditors for Amtran
reviews Amtran's internal controls
COMPENSATION establishes compensation policies and compensation for 2
Robert A. Abel Amtran's officers
Andrejs P. Stipnieks
</Table>
- ---------
(1) To insure timely compliance with the new Nasdaq rules governing audit
committee composition, the board accepted the resignation of Kenneth K.
Wolff from the audit committee on February 27, 2001, and appointed Andrejs
P. Stipnieks to the committee.
-------------------
The audit committee is governed by a written charter approved by the board
of directors. A copy of this charter is included in Annex D. Mr. Rogers, Mr.
Abel and Mr. Stipnieks of the audit
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committee are 'independent directors' as defined by Rule 4200(a)(14) of the
National Association of Securities Dealers' listing standards, as applicable and
as may be modified. Additional information about the audit committee is set
forth in the 'Report of the Audit Committee' included in this proxy statement.
We do not have a standing nominating committee.
Compensation of Directors
We do not pay directors who are also officers of Amtran additional
compensation for their service as directors. In 2000, non-employee directors
received the following:
An annual retainer of $18,000 for serving on the Board
An annual fee of $2,500 for serving as Chairman of a committee
A fee of $2,000 for each board of directors meeting attended in person
A fee of $1,000 for each committee meeting attended in person. (Amtran also
pays its non-employee directors if they participate in board and committee
meetings by telephone.)
Options to purchase shares of Amtran's common stock pursuant to the Amtran,
Inc. Stock Option Plan for Non-Employee Directors (a one-time grant of an
option to purchase 2,000 shares following his election or appointment to
the board of directors, and for as long as he remains an Eligible Director,
an annual grant of an option to purchase 500 shares on the 30th day
following each annual meeting of shareholders.)
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who own more than ten percent of Amtran's shares to file
with the SEC and Nasdaq reports on their ownership of shares of Amtran
(so-called 16(a) forms). Except as set forth below, we believe, based solely on
our review of copies of such reports, that our directors and officers complied
with all such filing requirements.
On January 24, 2000, Willie G. McKnight, Jr. became the Executive Vice
President for Marketing and Sales of Amtran. The Form 3 filed with the SEC
reporting this event, which was required to be filed by February 3, 2000, was
filed late on February 22, 2000.
During February 2000, John Tague sold shares of Amtran common stock in 4
transactions. The Form 4 filed with the SEC reporting these events, which was
required to be filed by March 10, 2000, was filed late on April 18, 2000.
In 2000, Messrs. Tague, Wolff, Hlavacek, McKnight, Abel, Rogers and
Stipnieks each voluntarily reported the receipt of option grants on Form 4s
which, in each case, were filed with the SEC after the due date for the
reporting of such transactions on Form 4 but prior to the due date for reporting
these exempt transactions on Form 5. Accordingly, Amtran does not regard these
filings on Form 4 as late.
Certain Relationships and Related Party Transactions in 2000
Mr. Mikelsons is the sole owner of Betaco, Inc., a Delaware corporation
('Betaco'). Betaco currently owns two airplanes (a Cessna Citation II and a Lear
Jet) and three helicopters (a Bell 206B Jet Ranger III, an Aerospatiale 355F2
Twin Star and a Bell 206L-3 LongRanger). The two airplanes and the Twin Star and
Jet Ranger III helicopters are leased or subleased to ATA. The LongRanger
helicopter is leased to American Trans Air ExecuJet, Inc. ('ExecuJet'). We
believe that the current terms of the leases and subleases with Betaco for this
equipment are no less favorable to us than those that could be obtained from
third parties.
The sublease for the Cessna Citation currently requires a monthly payment of
$37,500 for a term beginning July 25, 1999 and ending July 24, 2004. The
sublease for the Lear Jet requires a monthly payment of $42,000 for a term
beginning December 24, 1999 and ending December 23, 2001. The lease for the
JetRanger III currently requires a monthly payment of $7,000 for a term
beginning June 15, 1993 and ending June 14, 2004. The sublease for the
Aerospatiale 355F2 Twin
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Star requires a monthly payment of $12,000 for a term beginning January 1, 2000
and ending December 31, 2001, and the lease for the LongRanger requires a
monthly payment of $11,200 for a term beginning December 11, 1999 and ending
December 10, 2001.
Betaco and Mr. Hlavacek own 100% of the interest in Delta Aviation LLC, an
Indiana limited liability corporation. Delta Aviation owns a Beech A36 Bonanza
aircraft. The aircraft is leased to ExecuJet and subleased to ATA for $75.00 per
flight hour for a term beginning December 11, 1998 and ending December 10, 2002.
No minimum monthly payment is required.
Mr. Rogers, Chairman of the audit committee, is a partner in the law firm of
Cravath, Swaine & Moore, which provided legal services to Amtran in 2000. Mr.
Abel, Chairman of the compensation committee, is a partner in the accounting
firm of Blue & Co., which provided tax and accounting services to Amtran in
2000. See 'Special Factors -- Interests of Certain Persons in the
Merger -- Interests of Certain Directors'.
As part of our compensation package to Willie McKnight, our executive Vice
President, Marketing and Sales, on January 24, 2000, we provided Mr. McKnight
with an interest-free loan of $230,000. The loan is evidenced by a Demand
Promissory Note signed by Mr. McKnight. However, 50% of the loan was forgiven on
January 24, 2001, and the remainder of the principal balance shall be forgiven
if Mr. McKnight is still employed by us on January 24, 2002. As of June 18,
2001, Mr. Mikelsons has outstanding indebtedness to Amtran with an aggregate
principal balance of $378,406. Amtran does not charge Mikelsons interest on this
indebtedness. In addition, we loaned Mr. Tague $175,000 on February 1, 2001. The
loan is evidenced by a Promissory Note, bears interest at an annual rate of 8%
and must be repaid by no later than January 31, 2002.
EXECUTIVE COMPENSATION AND STOCK OPTIONS
Report of Compensation Committee on Executive Compensation
WHAT IS OUR COMPENSATION PHILOSOPHY?
The objectives of our executive compensation programs are to: (i) attract
and retain talented and experienced executives with compensation that is
competitive with other U.S. airlines of a size comparable to ATA and (ii) reward
outstanding performance and provide incentives based on individual and corporate
performance. In addition, during the time that our stock has been publicly
traded we have used restricted stock and stock options to align the interests of
management with those of the shareholders.
The compensation committee is responsible for administering our compensation
policies and programs, including its officer incentive compensation programs.
The compensation committee currently consists of two independent non-employee
directors, Robert A. Abel and Andrejs P. Stipnieks. Mr. Abel, Chairman of the
compensation committee, is a director in the accounting firm of Blue & Co., LLC.
Mr. Abel's firm provided tax and accounting service to us in 2000. See 'Special
Factors -- Interests of Certain Persons in the Merger -- Interests of Certain
Directors'.
As discussed below, the elements of compensation used by us include salaries
and short-term and long-term incentive programs, including the award of cash
bonuses and stock, while we have been a public company, options.
If the merger is completed so that our common stock is no longer publicly
traded, we will re-evaluate the components of compensation.
HOW DO WE DETERMINE BASE PAY?
The base pay for Mr. Mikelsons and Mr. Tague reflects Amtran's objective to
maintain salary levels that are competitive with those offered by U.S. airlines
of a size comparable to ATA for comparable positions, taking into consideration
a number of factors, as described below.
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MR. MIKELSONS' 2000 BASE PAY
In establishing a base salary for Mr. Mikelsons, the compensation committee
considered:
a compensation analysis prepared by an independent consultant.
the fact that Mr. Mikelsons would not participate in any equity-based
incentive compensation plan or incentive cash bonus of Amtran and the fact
that no increase in base salary over 1997 was being proposed.
his age, experience and responsibilities.
Each of these listed factors was evaluated by the compensation committee on
a subjective basis, and no particular weighting was given to any particular
factor. The compensation committee also sought to maintain the same relative
relationship between the salary levels of different officers as exists for
comparable positions at other U.S. airlines. After considering the above
factors, the compensation committee approved a base salary for the Chairman for
2000 of $688,194. Based on a compensation analysis available to the compensation
committee, such base salary is higher than the base salaries paid by other
airlines to executives holding comparable positions but, given the absence of
any stock-based compensation or incentive cash bonus, total compensation was
between the median and the 75th percentile of total annual cash compensation
paid by the other airlines included in the analysis.
MR. TAGUE'S 2000 BASE PAY
In establishing a base salary for Mr. Tague, the compensation committee
considered:
a compensation analysis prepared by an independent consultant.
his age, experience and responsibilities.
Each of these listed factors was evaluated by the compensation committee on
a subjective basis, and no particular weighting was given to any particular
factor. The compensation committee also sought to maintain the same relative
relationship between the salary levels of different officers as exists for
comparable positions at other U.S. airlines. After considering the above
factors, the compensation committee approved an annual base salary for 2000 for
Mr. Tague of $525,000. Based on a compensation analysis available to the
compensation committee, such base salary is between the median and the 75th
percentile of the base salary paid by most other airlines to executives holding
comparable positions. Mr. Tague's total compensation, including bonus and long-
term incentive compensation, is below the median of the annual compensation paid
by the other airlines included in the analysis.
HOW ARE ANNUAL BONUSES DETERMINED?
Annual bonuses are paid in cash in the year following performance, based on
achievement of predetermined corporate goals. As in prior years, Mr. Mikelsons
was not eligible for a bonus payment in 2000. Because we did not achieve our
corporate goals in 2000, Mr. Tague did not receive a bonus for 2000.
Compensation Committee
Robert A. Abel, Chairman
Andrejs P. Stipnieks
61
<Page>
Summary of Cash and Certain Other Compensation
SUMMARY COMPENSATION TABLE
This table shows the compensation paid or accrued to the Chairman of the
Board, President and three executive officers for services rendered during the
last three fiscal years.
<Table>
<Caption>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
NAME AND --------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS (#) COMPENSATION($)
------------------ ---- --------- -------- ----------- ---------------
J. George Mikelsons, ............. 2000 688,194 None None 3,535(1)
Chairman of the Board 1999 688,194 None None 4,320(2)
1998 688,194 None None 3,840(3)
John P. Tague, ................... 2000 525,000 None 75,000(4) 5,250(1)
President and Chief 1999 519,231 460,000 75,000(5) 4,320(2)
Executive Officer 1998 496,153 800,000 75,000(6) 2,308(3)
James W. Hlavacek ................ 2000 350,000 None 50,000(7) 3,506(1)
Executive Vice President and 1999 337,500 224,250 50,000(8) 4,320(2)
Chief Operating Officer 1998 323,942 390,000 50,000(9) 3,840(3)
Kenneth K. Wolff ................. 2000 350,000 None 50,000(7) 3,393(1)
Executive Vice President and 1999 337,500 224,250 50,000(8) 4,320(2)
Chief Financial Officer 1998 323,942 390,000 50,000(9) 3,840(3)
Willie G. McKnight(10) ........... 2000 323,077 210,000 100,000(11) None
Executive Vice President,
Marketing and Sales
</Table>
- ---------
(1) Represents the amount of our matching contribution to our 401(k) Plan in
2000.
(2) Represents the amount of our matching contribution to our 401(k) Plan in
1999.
(3) Represents the amount of our matching contribution to our 401(k) Plan in
1998.
(4) Pursuant to the 2000 Incentive Stock Plan for Key Employees of Amtran,
Inc., the grant of options to Mr. Tague to purchase 75,000 shares of our
stock were scheduled to become exercisable as to the following aggregate
number of shares on and after each of the following dates: January 28,
2001 -- 25,000 shares; January 28, 2002 -- 25,000 shares; and January 28,
2003 -- 25,000 shares. These options became exercisable upon the board's
approval of the merger.
(5) Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran,
Inc., the grant of options to Mr. Tague to purchase 75,000 shares of our
stock were scheduled to become exercisable as to the following aggregate
number of shares on and after each of the following dates: January 5,
2000 -- 25,000 shares; January 5, 2001 -- 25,000 shares; and January 5,
2002 -- 25,000 shares. These options became exercisable upon the board's
approval of the merger.
(6) Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran,
Inc., the grant of options to Mr. Tague to purchase 75,000 shares of our
stock were scheduled to become exercisable as to the following aggregate
number of shares on and after each of the following dates: January 10,
1999 -- 25,000 shares; January 10, 2000 -- 25,000 shares; and January 10,
2001 -- 25,000 shares. These options became exercisable upon the board's
approval of the merger.
(7) Pursuant to the 2000 Incentive Stock Plan for Key Employees of Amtran,
Inc., the grant of options to Messrs. Hlavacek and Wolff to purchase 50,000
shares each of our stock were scheduled to become exercisable as to the
following aggregate number of shares on and after each of the following
dates: January 28, 2001 -- 16,667 shares; January 28, 2002 -- 16,667
shares; and January 28, 2003 -- 16,666 shares. These options became
exercisable upon the board's approval of the merger.
(8) Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran,
Inc., the grant of options to Messrs. Hlavacek and Wolff to purchase 50,000
shares each of our stock were scheduled to become exercisable as to the
following aggregate number of shares on and after
(footnotes continued on next page)
62
<Page>
(footnotes continued from previous page)
each of the following dates: January 5, 2000 -- 16,667 shares; January 5,
2001 -- 16,667 shares; and January 5, 2002 -- 16,666 shares. These options
became exercisable upon the board's approval of the merger.
(9) Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran,
Inc., the grant of options to Messrs. Hlavacek and Wolff to purchase 50,000
shares each of our stock were scheduled to become exercisable as to the
following aggregate number of shares on and after each of the following
dates: January 10, 1999 -- 16,667 shares; January 10, 2000 -- 16,667
shares; and January 10, 2001 -- 16,666 shares. These options became
exercisable upon the board's approval of the merger.
(10) Mr. McKnight was hired on January 24, 2000.
(11) Pursuant to the 2000 Incentive Stock Plan for Key Employees of Amtran,
Inc., the grant of options to Mr. McKnight to purchase 100,000 shares each
of our stock were scheduled to become exercisable as to the following
aggregate number of shares on and after each of the following dates:
February 4, 2001 -- 33,334 shares; February 4, 2002 -- 33,333 shares; and
February 4, 2003 -- 33,334 shares. These options became exercisable upon
the board's approval of the merger.
63
<Page>
OPTION GRANTS TABLE
This table shows the option grants in 2000 to the individuals named in the
Summary Compensation Table.
<Table>
<Caption>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES PRICE/SHARE EXPIRATION ---------------------
NAME GRANTED IN FISCAL YEAR ($) DATE 5%($) 10%($)
---- ------- -------------- --- ---- ----- ------
J. George Mikelsons...... -0- -0- -- -- -- --
John P. Tague............ 75,000(2) 12% 15.75 1/28/2010 742,882 1,882,608
James W. Hlavacek........ 50,000(3) 8% 15.75 1/28/2010 495,255 1,255,072
Kenneth K. Wolff......... 50,000(3) 8% 15.75 1/28/2010 495,255 1,255,072
Willie G. McKnight....... 100,000(4) 16% 16.06 2/4/2010 1,010,162 2,559,949
</Table>
- ---------
(1) The values are the result of calculations at the 5% and 10% rates set by the
SEC. Our per-share stock price would be $25.66 and $40.85 if increased by 5%
and 10%, respectively, compounded annually over a ten-year option term on an
exercise price of $15.75. The per-share price would be $26.16 and $41.66 if
increased by 5% and 10%, respectively, compounded annually over a ten-year
option term on an exercise price of $16.06.
(2) See Footnote 4 to Summary Compensation Table on vesting of Options.
(3) See Footnote 7 to Summary Compensation Table on vesting of Options.
(4) See Footnote 11 to Summary Compensation Table on vesting of Options.
OPTION EXERCISES AND
YEAR-END OPTION VALUES
This table shows the number and value of stock options (exercised and
unexercised) for the named individuals during 2000.
<Table>
<Caption>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT FISCAL
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END YEAR-END
ON EXERCISE REALIZED -------------------------- EXERCISABLE (E)/
NAME (#) ($) EXERCISABLE UNEXERCISABLE UNEXERCISABLE (U)
---- --- --- ----------- ------------- -----------------
J. George Mikelsons.......... -0- -0- -0- -0- -0-
John P. Tague................ 10,000 79,375 300,758 150,000 $1,735,987(E)
162,500(U)
James W. Hlavacek............ -0- -0- 209,432 100,000 815,750(E)
108,329(U)
Kenneth K. Wolff............. -0- -0- 238,000 100,000 962,281(E)
108,329(U)
Willie G. McKnight........... -0- -0- -0- 100,000 -0-(E)
-0-(U)
</Table>
PENSION PLANS
We have no pension plans.
401(k) PLAN
Under the American Trans Air, Inc. Employees' Salary Savings Plan (the
'401(k) Plan'), adopted on October 1, 1985, eligible employees could elect to
defer up to 15% of their salary into
64
<Page>
the 401(k) Plan, not to exceed statutory limits. Generally, all employees
meeting a minimum-hours requirement are eligible to participate in the 401(k)
Plan. We have the discretion to make matching contributions to the 401(k) Plan
on behalf of participants who have made salary reduction contributions under the
Plan. In 2000, we contributed $.50 for each dollar contributed to the Plan by
eligible participants, up to 6% of their compensation. An employee stock
ownership feature was added to the 401(k) Plan in May 1993; however, this
feature will be eliminated upon completion of the merger. The ATA Employee Stock
Ownership Plan ('ESOP') has been a mechanism for us to award shares of our stock
for years in which profits have occurred. Addition of this benefit has permitted
eligible employees to become shareholders of Amtran and share in its potential
future growth and profitability. Generally, the eligibility requirements for the
ESOP have been identical to those of the 401(k) Plan, except an employee may
have been eligible for an ESOP contribution of Company stock even if the
employee did not elect pre-tax 401(k) Plan contributions.
In those years in which we have experienced profits and chosen to make an
ESOP contribution, the 401(k) Plan accounts of eligible employees have been
credited with full and/or fractional shares of Company stock. Shares were
allocated based on compensation. In 2000, no shares of Amtran stock were
allocated to 401(k) Plan participant accounts.
Stock Performance Graph
This performance graph compares the 2000 total shareholder return on
Amtran's common stock with the Nasdaq Stock Market-U.S. Index and Amtran's peer
group. The peer group selected by Amtran consists of the following companies:
Alaska Air Group, Inc., America West Holdings Corporation, AMR Corp. (American
Airlines), Amtran, Inc., Continental Airlines, Inc., Delta Air Lines, Inc., HAL,
Inc. (Hawaiian Airlines), Northwest Airlines, Inc., Southwest Airlines Co., US
Airways Group, Inc. and UAL Corp. (United Airlines).
COMPARISON OF 5-YEAR CUMULATIVE
TOTAL RETURN AMONG AMTRAN,
NASDAQ MARKET-U.S. INDEX AND A PEER GROUP
[PERFORMANCE GRAPH]
65
<Page>
RATIFICATION OF THE SELECTION OF ERNST & YOUNG, LLP
AS INDEPENDENT ACCOUNTANTS
General
Ernst & Young, LLP has been our independent public accountants for the past
eight years. The audit committee and the board believe that Ernst & Young's
long-term knowledge of Amtran is invaluable. Representatives of Ernst & Young
have direct access to members of the audit committee and regularly attend their
meetings. Representatives of Ernst & Young will attend the annual meeting to
answer any shareholder questions and to make a statement if they desire to do
so.
Audit Fees
The aggregate fees billed by Ernst & Young for professional services
rendered for the audit of Amtran's annual financial statements for the year
ended December 31, 2000, and the reviews of the financial statements included in
Amtran's quarterly reports on Form 10-Q during the year 2000 were $273,500.
Financial Information Systems Design and Implementation Fees
Ernst & Young performed no services for Amtran in 2000 related to financial
information systems design and implementation.
Other Fees
The aggregate fees billed by Ernst & Young for services they rendered in the
year 2000 other than services included under the heading 'Audit Fees' were
$282,790.
In 2000, the audit committee: (1) reviewed all services provided by Ernst &
Young to insure that they were within the scope previously approved by the
Committee; and (2) concluded that the non-audit services performed by Ernst &
Young for Amtran and its subsidiaries did not impair its independence as
Amtran's accountants. The Report of the Audit Committee contained in this proxy
statement contains additional information on Ernst & Young's services for
Amtran.
We need a majority of the votes cast in person or by proxy and entitled to
vote at the annual meeting in order to ratify the selection of Ernst & Young as
independent accountants for 2001. The audit committee and the board of directors
recommend a vote 'FOR' Ernst & Young as independent accountants for 2001.
Abstentions and broker non-votes are not included in the tabulation of votes
cast and, therefore, do not have the effect of votes in opposition to the
ratification of the selection of Ernst & Young as auditors.
Other Matters
The Board of Directors does not anticipate that any other matters will be
properly brought before the Annual Meeting. However, if any other matters are
properly brought before the Annual Meeting, the persons named on the enclosed
proxy card will have discretionary authority to vote on those matters according
to their best judgment.
Report of the Audit Committee
The audit committee has reviewed and discussed Amtran's audited financial
statements for the fiscal year 2000 with management and has received the written
disclosures and the letter from Ernst & Young, Amtran's independent auditors,
required by Independence Standards Board Standard No. 1 (Independent Discussions
with Audit Committee). The audit committee has also discussed with Ernst & Young
Amtran's audited financial statements for the fiscal year 2000, including, among
other things, the quality of Amtran's accounting principles, the methodologies
and accounting principles applied to significant transactions, the underlying
processes and estimates used
66
<Page>
by management in its financial statements and the basis for the auditor's
conclusions regarding the reasonableness of those estimates, and the auditor's
independence, as well as the other matters required by Statement on Auditing
Standards No. 61 of the Auditing Standards Board of the American Institute of
Certified Public Accountants.
Based on the review and discussions referred to above, the audit committee
recommended inclusion of the audited financial statements in Amtran's annual
report on Form 10-K to the board of directors.
Audit Committee
William P. Rogers, Jr., Chairman
Robert A. Abel
Andrejs P. Stipnieks
67
<Page>
STOCK OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the date of this
proxy statement with respect to the beneficial ownership of the outstanding
shares of our common stock by (i) all persons owning of record, or beneficially
to our knowledge, more than five percent of the outstanding shares, (ii) each
director and executive officer of Amtran, individually, and (iii) all directors
and officers of Amtran as a group. Unless otherwise indicated, the mailing
address of each of the persons shown is c/o Amtran, Inc., 7337 West Washington
Street, Indianapolis, Indiana 46231.
<Table>
<Caption>
NAME AND ADDRESS OF NUMBER OF SHARES RIGHT TO PERCENT OF
INDIVIDUAL/GROUP OWNED(1) ACQUIRE(2) OUTSTANDING SHARES(3)
---------------- -------- ---------- ---------------------
J. George Mikelsons........................... 8,271,200(4) 0 72
John P. Tague................................. 10,222 450,758 --
James W. Hlavacek............................. 52,962 309,431 --
Kenneth K. Wolff.............................. 12,094 338,000 --
Robert A. Abel................................ 4,000 5,500 --
William P. Rogers, Jr......................... 5,000 5,500
Andrejs P. Stipnieks.......................... 1,500 5,500 --
Willie G. McKnight............................ 0 100,000 --
INDUS Acquisition Company
7337 West Washington Street
Indianapolis, Indiana 46231................. 8,271,200(4) 0 72
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401...................... 1,041,500(5) 0 9
All directors and executive officers as a
group(6) (excluding J. George Mikelsons).... 84,768 1,214,689 11
</Table>
- ---------
(1) Includes shares for which the named person has shared voting and investment
power with a spouse.
(2) Shares that can be acquired through presently exercisable stock options.
(3) If more than 1%.
(4) These shares of our common stock are owned of record by Mikelsons as of the
date of this proxy statement. INDUS and Mikelsons have entered into a Stock
Subscription Agreement providing for the acquisition of these shares by
INDUS. Therefore, INDUS may be deemed to be the beneficial owner of these
shares.
(5) Dimensional Fund Advisors Inc. ('Dimensional'), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts. (These
investment companies and investment vehicles are the 'Portfolios'.) In its
role as investment advisor and investment manager, Dimensional possesses
both voting and investment power over the securities of Amtran that are
owned by the Portfolios. Such securities are owned by the Portfolios, and
Dimensional disclaims beneficial ownership of such securities.
(6) Group consists of seven persons (Messrs. Tague, Hlavacek, Wolff, Abel,
Rogers, Stipnieks and McKnight).
68
<Page>
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Upon the consummation of the merger, all of the outstanding shares of our
common stock will be held and voted by Mikelsons. As a result, we will not
solicit proxies in connection with the next annual meeting of shareholders. If
the merger is not consummated, then, according to the rules of the SEC, all
proposals of shareholders to be presented at the annual meeting would be
required to be received by the Secretary of Amtran a reasonable time before we
begin to print and mail our proxy materials. These proposals would also need to
comply with the rules of the SEC governing the form and content of proposals in
order to be included in our proxy statement and form of proxy.
Shareholder proposals and related notices should be sent to Brian T. Hunt,
Secretary, 7337 West Washington Street, Indianapolis, Indiana 46231.
OTHER MATTERS
We know of no other business to be presented at the annual meeting. If other
matters do properly come before the annual meeting, or any adjournment or
postponement thereof, it is the intention of the persons named in the proxy to
vote on such matters according to their best judgment unless the authority to do
so is withheld in such proxy.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by us (File No. 000-21642) with the
SEC are incorporated by reference in this proxy statement:
our Annual Report on Form 10-K for the fiscal year ended December 31, 2000,
previously filed with the SEC on March 16, 2001;
our Amended Annual Report on Form 10-K/A for the fiscal year ended December
31, 2000, previously filed with the SEC on May 23, 2001;
our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001,
previously filed with the SEC on May 15, 2001;
our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001,
previously filed with the SEC on August 3, 2001; and
our Current Reports on Form 8-K, previously filed with the SEC on May 17,
2001, May 25, 2001 and June 19, 2001.
All documents filed by us with the SEC pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and prior to the date of the
annual meeting shall be deemed to be incorporated by reference herein and shall
be a part hereof from the date of filing of such documents. Any statements
contained in a document incorporated by reference herein or contained in this
proxy statement shall be deemed to be modified or superseded for purposes hereof
to the extent that a statement contained herein (or in any other subsequently
filed document which also is incorporated by reference herein) modified or
superseded such statement. Any statement so modified or superseded shall not be
deemed to constitute a part hereof except as so modified or superseded.
Because forward-looking statements made in connection with a going-private
transaction are not entitled to the safe-harbor protections of the Private
Securities Litigation Reform Act of 1995, any reference in filings incorporated
by reference into this proxy statement to these safe-harbor protections are not
incorporated by reference.
This proxy statement incorporates documents by reference that are not
presented in or delivered with this proxy statement. These documents are
available upon request from Brian T. Hunt, Secretary, Amtran, Inc., 7337 West
Washington Street, Indianapolis, Indiana 46231. In order to ensure timely
delivery, any request should be made by October 1, 2001.
69
<Page>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the Public Reference Section of the SEC located at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the following
regional offices of the SEC: 7 World Trade Center, 13th Floor, Suite 1300, New
York, New York 10004; and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661. You may obtain copies of all or any portion of the
material by mail from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Please call the SEC at
(800) SEC-0330 for further information on the public reference rooms. Our
filings are also available to the public at the web site maintained by the SEC
at http://www.sec.gov.
70
<Page>
CONFORMED COPY
ANNEX A
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 18, 2001
BETWEEN
INDUS ACQUISITION COMPANY
AND
AMTRAN, INC.
________________________________________________________________________________
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.................................................. A-1
SECTION 1.02. Closing..................................................... A-1
SECTION 1.03. Effective Time.............................................. A-1
SECTION 1.04. Effects..................................................... A-2
SECTION 1.05. Articles of Incorporation and Bylaws........................ A-2
SECTION 1.06. Directors................................................... A-2
SECTION 1.07. Officers.................................................... A-2
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock..................................... A-2
SECTION 2.02. Exchange of Certificates.................................... A-2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization, Standing and Power............................ A-4
SECTION 3.02. Capital Structure........................................... A-4
SECTION 3.03. Authority; Execution and Delivery; Enforceability........... A-5
SECTION 3.04. No Conflicts; Consents...................................... A-5
SECTION 3.05. SEC Documents; Undisclosed Liabilities...................... A-6
SECTION 3.06. Brokers; Schedule of Fees and Expenses...................... A-7
SECTION 3.07. Opinion of Financial Advisor................................ A-7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUB
SECTION 4.01. Organization, Standing and Power............................ A-7
SECTION 4.02. Sub......................................................... A-7
SECTION 4.03. Authority; Execution and Delivery; Enforceability........... A-7
SECTION 4.04. No Conflicts; Consents...................................... A-7
SECTION 4.05. Brokers..................................................... A-8
SECTION 4.06. Financing................................................... A-8
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business......................................... A-8
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Preparation of Proxy Statement; Shareholders Meeting........ A-9
SECTION 6.02. Access to Information; Confidentiality...................... A-10
SECTION 6.03. Reasonable Best Efforts; Notification....................... A-10
SECTION 6.04. Stock Options............................................... A-11
SECTION 6.05. Indemnification............................................. A-12
SECTION 6.06. Fees and Expenses........................................... A-12
SECTION 6.07. Public Announcements........................................ A-12
SECTION 6.08. Transfer Taxes.............................................. A-12
SECTION 6.09. Shareholder Litigation...................................... A-12
SECTION 6.10. Information Supplied........................................ A-12
</Table>
ii
<Page>
<Table>
<Caption>
PAGE
----
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation to Effect the
Merger.................................................... A-13
SECTION 7.02. Conditions to Obligations of Sub............................ A-13
SECTION 7.03. Conditions to Obligations of the Company.................... A-14
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination................................................. A-15
SECTION 8.02. Effect of Termination....................................... A-15
SECTION 8.03. Amendment................................................... A-16
SECTION 8.04. Extension; Waiver........................................... A-16
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver... A-16
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Nonsurvival of Representations and Warranties............... A-16
SECTION 9.02. Notices..................................................... A-16
SECTION 9.03. Definitions................................................. A-17
SECTION 9.04. Interpretation.............................................. A-17
SECTION 9.05. Severability................................................ A-17
SECTION 9.06. Counterparts................................................ A-18
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries.............. A-18
SECTION 9.08. Governing Law............................................... A-18
SECTION 9.09. Assignment.................................................. A-18
SECTION 9.10. Enforcement................................................. A-18
SECTION 9.11. Obligations of JGM.......................................... A-18
EXHIBIT A -- Plan of Merger
</Table>
iii
<Page>
AGREEMENT AND PLAN OF MERGER dated as of June 18, 2001, between INDUS
ACQUISITION COMPANY, an Indiana corporation ('SUB'), and AMTRAN, INC., an
Indiana corporation (the 'COMPANY').
WHEREAS, as of the date hereof, J. George Mikelsons ('JGM') owns 8,271,200
shares of the common stock, without par value, of the Company (the 'COMPANY
COMMON STOCK');
WHEREAS the respective Boards of Directors of Sub and the Company have
approved the merger (the 'MERGER') of Sub into the Company, on the terms and
subject to the conditions set forth in this Agreement, whereby (a) each issued
share of Company Common Stock not owned by JGM, Sub or the Company, shall be
converted into the right to receive from the Surviving Corporation $23.00 in
cash, without interest, and (b) each issued share of Series A1 Preferred Stock,
without par value, of the Company (the 'SERIES A1 PREFERRED STOCK') and Series B
Preferred Stock, without par value, of the Company (the 'SERIES B PREFERRED
STOCK' and, together with the Series A1 Preferred Stock, the 'COMPANY PREFERRED
STOCK', and the Company Preferred Stock, together with the Company Common Stock,
the 'COMPANY CAPITAL STOCK'), shall remain outstanding;
WHEREAS the Company has entered into a Purchase and Voting Agreement dated
as of May 16, 2001 (the 'ILFC AGREEMENT' and, together with this Agreement, the
'TRANSACTION AGREEMENTS'), with International Lease Finance Corporation, a
California corporation ('ILFC'), and which was approved by the Board of
Directors of the Company (the 'COMPANY BOARD') on the date hereof pursuant to
which (i) the Company will amend Article XII (the 'ILFC AMENDMENT') of the
Company Charter (as defined in Section 3.02), subject to receipt of the
requisite shareholder approval, immediately prior to the Effective Time (as
defined in Section 1.03) to modify certain terms of the Series B Preferred Stock
to reflect the fact that following the Merger the Company will be private, (ii)
ILFC has agreed to vote its shares of Series B Preferred Stock in favor of the
ILFC Amendment and (iii) the Company has agreed to repurchase between 5 and 10%
of ILFC's shares of Series B Preferred Stock, with the amount to be repurchased
to be determined by the Company; and
WHEREAS Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Indiana Business Corporation
Law (the 'IBCL'), Sub shall be merged with and into the Company at the Effective
Time (as defined in Section 1.03). At the Effective Time, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the 'SURVIVING CORPORATION').
SECTION 1.02. Closing. The closing (the 'CLOSING') of the Merger shall take
place at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York,
New York 10019 at 10:00 a.m. on the second business day following the
satisfaction (or, to the extent permitted by Law (as defined in Section
3.04(a)), waiver by all parties) of the conditions set forth in Section 7.01,
or, if on such day any condition set forth in Section 7.02 or 7.03 has not been
satisfied (or, to the extent permitted by Law, waived by the party or parties
entitled to the benefits thereof), as soon as practicable after all the
conditions set forth in Article VII have been satisfied (or, to the extent
permitted by Law, waived by the parties entitled to the benefits thereof), or at
such other place, time and date as shall be agreed in writing between Sub and
the Company. The date on which the Closing occurs is referred to in this
Agreement as the 'CLOSING DATE'.
SECTION 1.03. Effective Time. Prior to the Closing, the Company shall
prepare, and on the Closing Date or as soon as practicable thereafter the
Company shall file with the office of the Secretary of State of the State of
Indiana, articles of merger, including the plan of merger contained in
Exhibit A (the 'PLAN OF MERGER'), or other appropriate documents (in any such
case, the 'ARTICLES OF MERGER') executed in accordance with the relevant
provisions of the IBCL and shall make all other filings or
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recordings required under the IBCL. The Merger shall become effective at such
time as the Articles of Merger are duly filed with such Secretary of State, or
at such other time as Sub and the Company shall agree and specify in the
Articles of Merger (the time the Merger becomes effective being the 'EFFECTIVE
TIME').
SECTION 1.04. Effects. The Merger shall have the effects set forth in
Section 40-6 of the IBCL.
SECTION 1.05. Articles of Incorporation and Bylaws. (a) The Articles of
Incorporation of the Company as in effect immediately prior to Effective Time,
as amended by the ILFC Amendment, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable Law.
(b) The Bylaws of the Company as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable Law.
SECTION 1.06. Directors. The directors of the Company immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected or appointed and qualified, as the case may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Capital Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, without par value, of the Surviving
Corporation.
(b) Cancelation of Treasury, JGM-Owned and Sub-Owned Stock. Each share
of Company Common Stock that is owned by the Company, JGM, Sub or any other
affiliate of JGM (other than any person who is deemed to be an affiliate of
JGM by reason of such person's position as an officer or director of the
Company (collectively, the 'EXCLUDED AFFILIATES')) shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered or deliverable in exchange
therefor. Each share of Company Common Stock that is owned by any subsidiary
of the Company shall automatically be converted into one fully paid and
nonassessable share of common stock, without par value, of the Surviving
Corporation.
(c) Conversion of Company Capital Stock. (1) Subject to
Section 2.01(b), each issued share of Company Common Stock shall be
converted into the right to receive from the Surviving Corporation $23.00 in
cash, without interest.
(2) Each issued share of Company Preferred Stock shall remain
outstanding.
(3) The cash payable upon the conversion of shares of Company Common
Stock pursuant to this Section 2.01(c) is referred to collectively as the
'MERGER CONSIDERATION'. At the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate that immediately prior to the Effective Time represented any
such shares of Company Common Stock (each, a 'CERTIFICATE') shall cease to
have any rights with respect thereto, except the right to receive Merger
Consideration upon surrender of a Certificate in accordance with
Section 2.02, without interest.
SECTION 2.02. Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, Sub shall designate a bank or trust company to act as paying
agent (the 'PAYING AGENT') for the payment of the
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Merger Consideration upon surrender of Certificates. Promptly following the
Effective Time, the Surviving Corporation shall provide to the Paying Agent cash
in an amount sufficient to pay for the shares of Company Common Stock converted
into the right to receive cash pursuant to Section 2.01(c) (such cash being
hereinafter referred to as the 'EXCHANGE FUND'). All of the fees and expenses of
the Paying Agent shall be borne by the Surviving Corporation.
(b) Exchange Procedure. The Surviving Corporation shall cause the Paying
Agent to mail promptly after the Effective Time (but, in any event, within five
days after the Effective Time) to each holder of record of Certificates, (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to Certificates shall pass, only upon
delivery of Certificates to the Paying Agent and shall be in such form and have
such other provisions as the Surviving Corporation may reasonably specify) and
(ii) instructions for use in effecting the surrender of Certificates in exchange
for Merger Consideration. Upon surrender of a Certificate for cancelation to the
Paying Agent, together with such letter of transmittal, duly completed and
validly executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the shares of Company Common
Stock theretofore represented by such Certificate shall have been converted
pursuant to Section 2.01(c), and the Certificate so surrendered shall forthwith
be canceled; the Surviving Corporation shall enter into a paying agency
agreement with the Paying Agent which provides that the Paying Agent shall
promptly following any such surrender of Certificates (but, in any event, within
three business days after the Paying Agent receives such Certificates) dispatch
by mail payment of such amount to such holder. In the event of a transfer of
ownership of Company Common Stock that is not registered in the transfer records
of the Company, payment may be made to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of such Certificate
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate have been converted pursuant to
Section 2.01(c). No interest shall be paid or shall accrue on the cash payable
upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid upon surrender of a Certificate in accordance with the terms
of this Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock formerly represented by
such Certificate, and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged for the amount of cash into which the shares of
Company Common Stock theretofore represented by such Certificates shall have
been converted as provided in this Article II.
(d) No Liability. None of Sub, the Company or the Paying Agent shall be
liable to any person in respect of any cash from the Exchange Fund that is
required under applicable Law to be delivered to a public official pursuant to
any applicable abandoned property, escheat or similar Law.
(e) Investment of Exchange Fund. The Surviving Corporation shall direct the
Paying Agent to invest any cash included in the Exchange Fund, as directed by
the Surviving Corporation, on a daily basis. Any interest and other income
resulting from such investments shall be paid to the Surviving Corporation.
(f) Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold, as required by applicable Law, any applicable taxes from
the consideration otherwise payable to any holder of Company Common Stock
pursuant to this Agreement.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, the holder of such lost, stolen or
destroyed Certificate shall execute an affidavit of that fact upon request. The
holder of any such lost, stolen or destroyed Certificate shall also deliver a
reasonable
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indemnity against any claim that may be made against the Surviving Corporation
or the Paying Agent with respect to the Certificate alleged to have been lost,
stolen or destroyed. The affidavit and any indemnity which may be required
hereunder shall be delivered to the Paying Agent, who shall be responsible for
making payment for such lost, stolen or destroyed Certificate pursuant to the
terms hereof.
(h) Adjustment to Prevent Dilution. In the event that following the date
hereof and prior to the Effective Time the Company changes the number of shares
of Company Common Stock or securities convertible or exchangeable into or
exercisable for shares of Company Common Stock, as the case may be, issued and
outstanding by way of a reclassification, stock split (including a reverse stock
split), stock dividend or distribution, recapitalization, subdivision or other
similar transaction, the amount of Merger Consideration payable with respect to
a share of Company Common Stock shall be adjusted appropriately to provide to
holders of shares of Company Common Stock the same economic effect contemplated
by this Agreement prior to such change.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Sub as follows:
SECTION 3.01. Organization, Standing and Power. Each of the Company and each
of its subsidiaries (the 'COMPANY SUBSIDIARIES') is duly organized and validly
existing under the laws of the jurisdiction in which it is organized and has
full corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to own,
lease or otherwise hold its properties and assets and to conduct its businesses
as presently conducted, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, has not had and could not reasonably be expected to have (i) a
material adverse effect on the business, assets, financial condition or results
of operations of the Company and the Company Subsidiaries, taken as a whole;
provided, however, that any such effect resulting from (x) changes in United
States or global economic or financial market conditions or (y) changes in
United States generally accepted accounting principles, shall not be considered
a Company Material Adverse Effect or (ii) a material adverse effect on the
ability of the Company to perform its obligations under this Agreement,
including the consummation of Merger and the other Transactions (a 'COMPANY
MATERIAL ADVERSE EFFECT'). The Company and each Company Subsidiary is duly
qualified to do business in each jurisdiction where the nature of its business
or their ownership or leasing of its properties make such qualification
necessary or the failure so to qualify has had or could reasonably be expected
to have a Company Material Adverse Effect.
SECTION 3.02. Capital Structure. The authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock, 10,000,000 shares of
preferred stock, without par value, of which 500 shares have been designated as
Series A1 Preferred Stock and 300 shares have been designated as Series B
Preferred Stock. At the close of business on June 14, 2001, (i) 11,438,059
shares of Company Common Stock (including 2,500 shares of Company Common Stock
issued as shares of restricted stock under the Company Stock Plans (as defined
in Section 6.04)), 500 shares of Series A1 Preferred Stock and 300 shares of
Series B Preferred Stock were issued and outstanding, (ii) 1,710,658 shares of
Company Common Stock were held by the Company in its treasury and
(iii) 2,880,251 shares of Company Common Stock were subject to outstanding
Company Employee Stock Options (as defined in Section 6.04) and 6,950,000 shares
of Company Common Stock were originally reserved for issuance pursuant to the
Company Stock Plans. Except as set forth above and except for 1,914,486 shares
of Company Common Stock reserved for issuance upon conversion of the outstanding
shares of Series B Preferred Stock, at the close of business on June 14, 2001,
no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. All outstanding shares of Company
Capital Stock are, and all such shares that may be issued prior to the Effective
Time will be when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right under any provision of the IBCL, the Articles of Incorporation of
the Company, as amended to the date of this Agreement (the 'COMPANY CHARTER'),
the bylaws of the Company, as
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amended to the date of this Agreement (the 'COMPANY BYLAWS'), or any Contract
(as defined in Section 3.04) to which the Company is a party or otherwise bound.
There are not any bonds, debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which holders of Company Capital
Stock may vote ('VOTING COMPANY DEBT'). Except as set forth above and as
provided in this Agreement, as of the date of this Agreement, there are not any
options, warrants, rights, convertible or exchangeable securities, 'phantom'
stock rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to which the
Company or any Company Subsidiary is a party or by which any of them is bound
(i) obligating the Company or any Company Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, the Company
or of any Company Subsidiary or any Voting Company Debt, (ii) obligating the
Company or any Company Subsidiary to issue, grant, extend or enter into any such
option, warrant, call, right, security, commitment, Contract, arrangement or
undertaking or (iii) that give any person the right to receive any economic
benefit or right similar to or derived from the economic benefits and rights
accruing to holders of Company Capital Stock. As of the date of this Agreement,
there are not any outstanding contractual obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Company Subsidiary (other than the ILFC
Agreement and this Agreement).
SECTION 3.03. Authority; Execution and Delivery; Enforceability. (a) The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the Merger and the other transactions
contemplated by the Transaction Agreements (the 'TRANSACTIONS'). The execution
and delivery by the Company of the Transaction Agreements and the consummation
by the Company of the Transactions have been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the Plan
of Merger, this Agreement, the Merger and the ILFC Amendment by the holders of
the requisite number of outstanding shares of Company Common Stock and the
approval of the ILFC Amendment by the holders of a majority of the outstanding
shares of Series B Preferred Stock. The Company has duly executed and delivered
each Transaction Agreement, and each Transaction Agreement constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
(b) The Company Board, at a meeting duly called and held, acting on the
recommendation of a special committee of the Company Board (the 'SPECIAL
COMMITTEE'), duly and unanimously adopted resolutions (i) approving this
Agreement, the Merger, the ILFC Agreement, the ILFC Amendment and the other
Transactions, (ii) determining that the terms of the Merger and the other
Transactions are fair to and in the best interests of the Company and the
holders of shares of the Company Common Stock (other than Sub and JGM), (iii)
recommending that the Company's shareholders approve the Plan of Merger, this
Agreement, the Merger and the ILFC Amendment and (iv) adopting the Plan of
Merger. On June 15, 2001, the Company Board unanimously adopted a resolution
approving the acquisition by Sub of beneficial ownership of 8,271,200 shares of
Company Common Stock. Such resolutions are sufficient to render inapplicable to
JGM, Sub, this Agreement, the Merger and the other Transactions the restrictions
on business combinations contained in Section 43-18 of the IBCL. To the
Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Company with respect to this
Agreement, the Merger or any other Transaction.
(c) The only class or series of Company Capital Stock that is entitled to
vote to approve the Plan of Merger, this Agreement and the Merger is the Company
Common Stock. The affirmative vote of a majority of the outstanding shares of
the Company Common Stock and a majority of the outstanding shares of Series B
Preferred Stock, voting as separate classes, is necessary to approve the ILFC
Amendment.
SECTION 3.04. No Conflicts; Consents. (a) Except as set forth in the letter,
dated as of the date of this Agreement, from the Company to Sub (the 'COMPANY
DISCLOSURE LETTER'), the execution and delivery by the Company of each
Transaction Agreement do not, and the consummation of the Merger and the other
Transactions and compliance with the terms hereof and thereof will not, conflict
with, or
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result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any pledges, liens, charges, mortgages, encumbrances and
security interests of any kind or nature whatsoever (collectively, 'LIENS') upon
any of the properties or assets of the Company or any Company Subsidiary under,
any provision of (i) the Company Charter, the Company Bylaws or the comparable
charter or organizational documents of any Company Subsidiary, (ii) any
contract, lease, license, indenture, note, bond, agreement, permit, concession,
franchise or other instrument (a 'CONTRACT') to which the Company or any Company
Subsidiary is a party or by which any of their respective properties or assets
is bound or (iii) subject to the filings and other matters referred to in
Section 3.04(b), any judgment, order or decree ('JUDGMENT') or statute, law
(including common law), ordinance, rule or regulation ('LAW') applicable to the
Company or any Company Subsidiary or their respective properties or assets,
other than, in the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Company Material Adverse Effect.
(b) No consent, approval, license, permit, order, authorization or waiver
('CONSENT') of, or registration, declaration or filing with, or permit from, any
Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a 'GOVERNMENTAL ENTITY') is
required to be obtained or made by or with respect to the Company or any Company
Subsidiary in connection with the execution, delivery and performance of any
Transaction Agreement or the consummation of the Merger and the other
Transactions, other than (i) the filing with the Securities and Exchange
Commission (the 'SEC') of a Transaction Statement on Schedule 13E-3 (as amended
from time to time, the 'SCHEDULE 13E-3'), (B) a proxy statement relating to the
approval of the Plan of Merger, this Agreement, the Merger and the ILFC
Amendment by the holders of shares of Company Common Stock (as amended from time
to time, the 'PROXY STATEMENT') and (C) such reports under Sections 13 and 16 of
the Securities Exchange Act of 1934, as amended (the 'EXCHANGE ACT'), as may be
required in connection with any Transaction Agreement, the Merger and the other
Transactions, (ii) the filing of the Articles of Merger and the ILFC Amendment
with the office of the Secretary of State of the State of Indiana and
appropriate documents with the relevant authorities of the other jurisdictions
in which the Company is qualified to do business, (iii) any filings required
under the rules and regulations of the Department of Transportation (the 'DOT'),
(iv) compliance with and such filings as may be required under applicable
environmental Laws, (v) such filings as may be required in connection with the
taxes described in Section 6.08, (vi) filings under any applicable state
takeover Law and (vii) such other items that, individually or in the aggregate,
have not had and could not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.05. SEC Documents; Undisclosed Liabilities. The Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by the Company with the SEC since January 1, 1999 (the 'COMPANY SEC
DOCUMENTS'). As of its respective date, each Company SEC Document complied as to
form in all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the 'SECURITIES ACT'), as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Document, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in the Company SEC Documents comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ('GAAP')
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the Company SEC Documents
filed and publicly available prior to the date hereof (the 'FILED COMPANY SEC
DOCUMENTS'), neither the Company nor any Company Subsidiary has any liabilities
or obligations of
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any nature (whether accrued, absolute, contingent or otherwise) required by GAAP
to be set forth on a consolidated balance sheet of the Company and its
consolidated subsidiaries or in the notes thereto and that, individually or in
the aggregate, could reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.06. Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Dresdner Kleinwort
Wasserstein, Inc., the fees of which will be paid by the Company, is entitled,
prior to the Effective Time, to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the Merger and the other
Transactions based upon arrangements made by or on behalf of the Company. At the
Effective Time, Salomon Smith Barney Inc. will become entitled to receive fees
and expense reimbursement in connection with the Merger in consideration of its
activities on behalf of JGM and Sub. The Company has furnished to Sub a true and
complete copy of all agreements between the Company and Dresdner Kleinwort
Wasserstein, Inc., relating to the Merger and the other Transactions.
SECTION 3.07. Opinion of Financial Advisor. The Special Committee has
received the opinion of Dresdner Kleinwort Wasserstein, Inc., dated the date of
this Agreement, to the effect that, as of such date, the consideration to be
received in the Merger by the holders of Company Common Stock (other than Sub
and JGM) is fair from a financial point of view, a signed copy of which opinion
has been delivered to Sub.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUB
Sub represents and warrants to the Company as follows:
SECTION 4.01. Organization, Standing and Power. Sub is duly organized and
validly existing under the laws of the jurisdiction in which it is organized and
has full corporate power and authority to conduct its businesses as presently
conducted.
SECTION 4.02. Sub. (a) Since the date of its incorporation, Sub has not
carried on any business or conducted any operations other than the execution of
this Agreement, the performance of its obligations hereunder and matters
ancillary thereto.
(b) The authorized capital stock of Sub consists of 30,000,000 shares of
common stock, without par value ('SUB COMMON STOCK'). JGM, pursuant to a
Subscription Agreement dated the date hereof, subscribed for 100 shares of Sub
Common Stock. On the date hereof, JGM and Sub entered into an additional
Subscription Agreement dated the date hereof, pursuant to which JGM will
contribute his 8,271,200 shares of Company Common Stock to Sub in exchange for
8,271,200 shares of Sub Common Stock upon the satisfaction of the condition set
forth in Section 7.01(a).
SECTION 4.03. Authority; Execution and Delivery; Enforceability. Sub has all
requisite corporate power and authority to execute and deliver each Transaction
Agreement to which it is a party and to consummate the Merger and the other
Transactions. The execution and delivery by Sub of each Transaction Agreement to
which it is a party and the consummation by it of the Transactions to which it
is a party have been duly authorized by all necessary corporate action on the
part of Sub. JGM, as the sole shareholder of Sub, has approved the Plan of
Merger and the Merger. Sub has duly executed and delivered each Transaction
Agreement to which it is a party, and each such Transaction Agreement
constitutes a legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 4.04. No Conflicts; Consents. (a) The execution and delivery by Sub
of each Transaction Agreement to which it is a party do not, and consummation of
the Merger and the other Transactions to which it is a party and compliance with
the terms hereof and thereof will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancelation or acceleration of any obligation or
to loss of a material benefit under, or result in the creation of any Liens upon
any of the properties or assets of Sub under, any provision of (i) its articles
of incorporation or bylaws, (ii) any Contract to which Sub is a party or by
which any of its properties or assets is bound or (iii) subject to the filings
and other matters referred to in Section 4.04(b), any Judgment or Law applicable
to Sub or its properties or assets, other than, in the
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case of clauses (ii) and (iii) above, any such items that, individually or in
the aggregate, have not had and could not reasonably be expected to have (i) a
material adverse effect on the business, assets, financial condition or results
of operations of Sub or (ii) a material adverse effect on the ability of Sub to
perform its obligations under this Agreement, including the consummation of the
Merger and the other Transactions to which it is a party (a 'SUB MATERIAL
ADVERSE EFFECT').
(b) No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to JGM
or Sub in connection with the execution, delivery and performance of any
Transaction Agreement to which it is a party or the consummation of the
Transactions, other than (i) the filing with the SEC of (A) the Schedule 13E-3
and (B) such reports under Sections 13 and 16 of the Exchange Act, as may be
required in connection with this Agreement, the Merger and the other
Transactions, (ii) the filing of the Articles of Merger with the office of the
Secretary of State of the State of Indiana, (iii) any filings required under the
rules and regulations of the DOT, (iv) compliance with and such filings as may
be required under applicable environmental Laws, (v) such filings as may be
required in connection with the taxes described in Section 6.08 and
(vi) filings under any applicable state takeover Law.
SECTION 4.05. Brokers. Other than as set forth in Section 3.06, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Merger and the other Transactions based upon arrangements
made by or on behalf of Sub.
SECTION 4.06. Financing. American Trans Air, Inc., an Indiana corporation
('ATA'), has received a commitment letter dated June 18, 2001 (the 'COMMITMENT
LETTER'), from Salomon Smith Barney Inc. and Citicorp USA, Inc. (the 'LENDERS')
relating to the commitment of the Lenders to provide the financing required to
consummate the Merger and the other Transactions and to pay related fees and
expenses. The financing required to consummate the Merger and the other
Transactions and to pay related fees and expenses is collectively referred to in
this Agreement as the 'FINANCING'. A complete and correct copy of the Commitment
Letter has been provided to the Special Committee. As of the date of this
Agreement, Sub has no reason to believe that (i) any of the conditions to the
financing contemplated by the Commitment Letter will not be satisfied, (ii) the
funds for the financing contemplated by the Commitment Letter will not be
available on a timely basis for the Merger and the other Transactions or (iii)
the financing contemplated by the Commitment Letter will not be sufficient to
consummate the Merger and the other Transactions and to pay related fees and
expenses.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business. (a) Conduct of Business by the Company.
Except for matters set forth in the Company Disclosure Letter or otherwise
expressly permitted by this Agreement or the ILFC Agreement, from the date of
this Agreement to the Effective Time the Company shall, and shall cause each
Company Subsidiary to, conduct its business in the usual, regular and ordinary
course in substantially the same manner as previously conducted or proposed to
be conducted and use all reasonable efforts to preserve intact its current
business organization, keep available the services of its current officers and
employees and keep its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them to the end
that its goodwill and ongoing business shall be unimpaired at the Effective
Time. In addition, and without limiting the generality of the foregoing, except
for matters set forth in the Company Disclosure Letter or otherwise expressly
permitted or contemplated by this Agreement or the ILFC Agreement, from the date
of this Agreement to the Effective Time, the Company shall not, and shall not
permit any Company Subsidiary to, do any of the following without the prior
written consent of Sub and the Special Committee:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned subsidiary of the
Company to its parent and regular dividends on the shares of Series A1
Preferred Stock and Series B Preferred Stock, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in
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substitution for shares of its capital stock, or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any Company
Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) issue, deliver, sell or grant (A) any shares of its capital stock,
(B) any Voting Company Debt or other voting securities, (C) any securities
convertible into or exchangeable for, or any options, warrants or rights to
acquire, any such shares, Voting Company Debt, voting securities or
convertible or exchangeable securities or (D) any 'phantom' stock, 'phantom'
stock rights, stock appreciation rights or stock-based performance units,
other than (1) the issuance of Company Common Stock upon the exercise of
Company Employee Stock Options outstanding on the date of this Agreement and
in accordance with their present terms and (2) the issuance of up to an
additional 100,000 Company Employee Stock Options pursuant to the Company
Stock Plans in accordance with their present terms and the issuance of
Company Common Stock upon the exercise of such Company Employee Stock
Options;
(iii) amend its articles of incorporation, bylaws or other comparable
charter or organizational documents; or
(iv) authorize any of, or commit or agree to take any of, the foregoing
actions.
(b) Other Actions. Neither the Company (without the direction of Special
Committee) nor Sub shall, or shall permit any of their respective subsidiaries
to, take any action that would, or that could reasonably be expected to, result
in (i) any of the representations and warranties of such party set forth in this
Agreement that is qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that is not so qualified becoming untrue in any
material respect or (iii) any condition to the Merger set forth in Article VII,
not being satisfied. Sub shall not take any action that could reasonably be
expected to result in any condition to the financing contemplated by the
Commitment Letter not being satisfied. Sub shall promptly notify the Company if
at any time there is a reasonable likelihood that the financing contemplated by
the Commitment Letter will not be available.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Preparation of Proxy Statement; Shareholders Meeting. (a) Each
of the Company, Sub and JGM shall as soon as practicable following the date
hereof prepare and file with the SEC the Schedule 13E-3 and the Company shall as
soon as practicable following the date hereof prepare and file with the SEC the
Proxy Statement in preliminary form, and each of the Company and Sub shall use
its reasonable efforts to respond as promptly as practicable to any comments of
the SEC with respect thereto. Each of the Company, Sub and JGM shall notify the
others promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the
Schedule 13E-3 and the Proxy Statement or for additional information and shall
supply the others with copies of all correspondence between it or him, as the
case may be, or any of its or his, as the case may be, representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Schedule 13E-3 and the Proxy Statement, as applicable. If at any time prior to
receipt of the Company Shareholder Approval there shall occur any event that
should be set forth in an amendment or supplement to the Proxy Statement, the
Company shall promptly prepare and mail to its shareholders such an amendment or
supplement. The Company shall not mail any Proxy Statement, or any amendment or
supplement thereto, to which Sub reasonably objects. The Company shall use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's shareholders as promptly as practicable after filing with the SEC.
(b) The Company shall as soon as practicable following the date hereof, duly
call, give notice of, convene and hold a meeting of its shareholders (the
'COMPANY SHAREHOLDERS MEETING') for the purpose of seeking the approval by the
holders of Company Common Stock of the Plan of Merger, this Agreement, the
Merger and the ILFC Amendment. For the avoidance of doubt, (i) the Company may
satisfy its obligations under this Section 6.01(b) by presenting the Plan of
Merger, this Agreement, the Merger and the ILFC Amendment to the requisite
holders of shares of Company Capital Stock at an annual meeting which was
previously adjourned and (ii) the Company may present such matters as a
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single proposal or as proposals which are conditioned on each other. The Proxy
Statement shall include a description of the recommendations referred to in
Section 3.03(b), and neither the Company Board nor any committee thereof shall
withdraw or modify, or propose to withdraw or modify such recommendations or
related approval; provided, however, that the Company Board or the Special
Committee may determine not to make such recommendations or to withdraw or
modify such recommendations if the Special Committee determines in good faith,
after consulting with and based on the advice of outside legal counsel, that
such recommendations would be inconsistent with its fiduciary duties to the
holders of shares of Company Common Stock (other than Sub and JGM) under
applicable law. Without limiting the generality of the foregoing, the Company
agrees that its obligations pursuant to the first sentence of this Section
6.01(b) shall not be affected by the withdrawal or modification by either the
Company Board or the Special Committee of its approval or recommendation of the
Plan of Merger, this Agreement, the Merger or the ILFC Amendment.
(c) Sub shall cause all shares of Company Common Stock owned by it and all
of its affiliates (other than the Company, the Company Subsidiaries and the
Excluded Affiliates) to be voted in favor of the approval of the Plan of Merger,
this Agreement, the Merger and the ILFC Amendment.
SECTION 6.02. Access to Information; Confidentiality. The Company shall, and
shall cause each of its subsidiaries to, afford to Sub, and to Sub's officers,
employees, accountants, counsel, financial advisors and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its subsidiaries to, furnish promptly to Sub (a) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of Federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as Sub may reasonably request.
SECTION 6.03. Reasonable Best Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties shall
use its reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
Transactions, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement, the Merger or the consummation of the Transactions,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, (iv) the execution and
delivery of any additional instruments necessary to consummate the Transactions
and to fully carry out the purposes of each Transaction Agreement and (v) to
arrange for the financing contemplated by the Commitment Letter to be provided
on substantially the terms and conditions specified in the Commitment Letter. In
connection with and without limiting the foregoing, the Company and the Company
Board shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Merger
or any other Transaction or any Transaction Agreement, (ii) if any state
takeover statute or similar statute or regulation becomes applicable to any
Transaction Agreement, take all action necessary to ensure that the Merger and
the other Transactions may be consummated as promptly as practicable on the
terms contemplated by each Transaction Agreement and otherwise to minimize the
effect of such statute or regulation on the Merger and the other Transactions
and (iii) cooperate with the arrangements for obtaining the Financing. Nothing
in this Agreement shall be deemed to require any party to waive any substantial
rights or agree to any substantial limitation on its operations or to dispose of
any significant asset or collection of assets.
(b) The Company shall give prompt notice to Sub, and Sub shall give prompt
notice to the Company, of (i) any representation or warranty made by it
contained in any Transaction Agreement to which it is a party that is qualified
as to materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material
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respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under any Transaction Agreement; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under each
Transaction Agreement.
SECTION 6.04. Stock Options. (a) As soon as practicable following the date
of this Agreement, the Company Board (or, if appropriate, any committee thereof
with responsibility for the administration of the Company Stock Plans) shall
adopt such resolutions or take such other actions as are required (with respect
to the adjustment of the terms of all outstanding Company Employee Stock Options
heretofore granted under any Company Stock Plan) to provide that each Company
Employee Stock Option, other than Company Employee Stock options held by the
persons listed on Schedule 6.04(a) of the Company Disclosure Letter (the
'ROLLOVER INDIVIDUALS'), whether vested or unvested, outstanding at the
Effective Time shall be converted into the right to receive from the Surviving
Corporation an amount equal to (i) the excess, if any, of (x) the Merger
Consideration over (y) the exercise price per share of Company Common Stock
subject to such Company Employee Stock Option, multiplied by (ii) the number of
shares of Company Common Stock for which such Company Employee Stock Option
shall not theretofore have been exercised.
(b) As soon as practicable following the date of this Agreement, the Company
Board (or, if appropriate, any committee thereof with responsibility for the
administration of the Company Stock Plans) shall adopt such resolutions or take
such other actions as are required (with respect to the adjustment of the terms
of all outstanding Company Restricted Shares heretofore granted under any
Company Stock Plan) to provide that the Restriction Period with respect to each
Company Restricted Share, whether vested or unvested, shall be deemed to expire
immediately prior to the Effective Time, unless any such Restriction Period
would otherwise expire sooner in accordance with the terms of the applicable
Company Stock Plan, in which case, such Restriction Period shall expire in
accordance with the terms of the applicable Company Stock Plan.
(c) All amounts payable pursuant to this Section 6.04 shall be subject to
any required withholding of taxes required by applicable Law and shall be paid
without interest. The Company shall use its reasonable best efforts to obtain
the consent of all holders of Company Employee Stock Options as shall be
necessary to effectuate the foregoing. Notwithstanding anything to the contrary
contained in this Agreement, payment as to a particular holder shall, at Sub's
request, be withheld in respect of any Company Employee Stock Option until all
necessary consents are obtained from such holder.
(d) The Company Stock Plans shall terminate as of the Effective Time, and
the provisions in any other benefit plan providing for the issuance, transfer or
grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company shall be deleted as of the Effective Time, and the
Company shall ensure that following the Effective Time, except for the Rollover
Individuals, no holder of a Company Employee Stock Option or any participant in
any Company Stock Plan shall have any right thereunder to acquire any capital
stock of the Company or the Surviving Corporation.
(e) The Company shall enter into option modification agreements as of the
Effective Time with each of the Rollover Individuals in the form attached hereto
as Exhibit B. As soon as practicable after the date of this Agreement, the
Company Board (or, if appropriate, a committee thereof with responsibility for
the administration of the Company Stock Plans) shall adopt resolutions or take
such other actions as are necessary in connection with such option modification
agreements.
(f) The Company shall ensure that (i) as of the date of this Agreement, all
payroll deductions under the Company's Employee Stock Purchase Plan (the 'ESPP')
shall cease; and (ii) all payroll deductions under the ESPP which related to any
offering periods which have not terminated prior to the date of this Agreement
shall be returned to the employees who made such deductions, without interest or
other benefit, as soon as practicable after the date of this Agreement.
(g) In this Agreement:
'COMPANY EMPLOYEE STOCK OPTION' means any option to purchase Company
Common Stock granted under any Company Stock Plan.
'COMPANY RESTRICTED SHARE' means any share of restricted Company Common
Stock granted under any Company Stock Plan.
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'COMPANY STOCK PLANS' means the 1993 Incentive Stock Plan for Key
Employees of the Company and its Subsidiaries, the 1996 Incentive Stock Plan
for Key Employees of the Company and its Subsidiaries, the 2000 Incentive
Stock Plan for Key Employees of the Company and its Subsidiaries, the Stock
Option Plan for Non-Employee Directors and the ESPP.
'RESTRICTION PERIOD' means the period during which restrictions are in
effect under the applicable Company Stock Plan with respect to a Company
Restricted Share.
SECTION 6.05. Indemnification. (a) The Surviving Corporation shall, to the
fullest extent permitted by Law, honor all the Company's obligations to
indemnify (including any obligations to advance funds for expenses) the current
or former directors or officers of the Company for acts or omissions by such
directors and officers occurring prior to the Effective Time to the extent that
such obligations of the Company exist on the date of this Agreement, whether
pursuant to the Company Charter, the Company Bylaws, individual indemnity
agreements or otherwise, and such obligations shall survive the Merger and shall
continue in full force and effect in accordance with the terms of the Company
Charter, the Company Bylaws and such individual indemnity agreements from the
Effective Time until the expiration of the applicable statute of limitations
with respect to any claims against such directors or officers arising out of
such acts or omissions.
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall maintain in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that the
Surviving Corporation may substitute therefor policies with reputable and
financially sound carriers of at least the same coverage and amounts containing
terms and conditions which are no less advantageous) with respect to claims
arising from or related to facts or events which occurred at or before the
Effective Time; provided, however, that the Surviving Corporation shall not be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the annual premiums paid as of the date hereof by the
Company for such insurance (such 150% amount, the 'MAXIMUM PREMIUM'). If such
insurance coverage cannot be obtained at all, or can only be obtained at an
annual premium in excess of the Maximum Premium, the Surviving Corporation shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Premium.
SECTION 6.06. Fees and Expenses. All fees and expenses incurred in
connection with the Merger and the other Transactions shall be paid by the
Company other than any such fees or expenses incurred as a result of a material
breach of this Agreement by Sub.
SECTION 6.07. Public Announcements. Sub and the Company shall consult with
each other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
Merger and the other Transactions and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 6.08. Transfer Taxes. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar taxes (including interest,
penalties and additions to any such taxes) ('TRANSFER TAXES') incurred in
connection with the Transactions shall be paid by the Surviving Corporation, and
the Company shall cooperate with Sub in preparing, executing and filing any tax
returns with respect to such Transfer Taxes.
SECTION 6.09. Shareholder Litigation. The Company shall give Sub the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors relating to any Transaction;
provided, however, that no such settlement shall be agreed to without Sub'
consent, which consent shall not unreasonably be withheld.
SECTION 6.10. Information Supplied. The Company, the Special Committee and
Sub will cause each of (i) the Proxy Statement and any amendment or supplement
thereto and (ii) the Schedule 13E-3 and any amendment or supplement thereto,
when filed, to comply as to form in all material respects with the applicable
requirements of the Exchange Act. Each of the Company, the Special Committee and
Sub agrees that none of the information supplied by it for inclusion in the
Proxy Statement or any amendment or supplement thereto or in the Schedule 13E-3
or any amendment or supplement thereto
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will, at the time the Proxy Statement or any amendment or supplement thereto is
first mailed to Company's shareholders and at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading. If
at any time prior to the date of the Company Shareholders Meeting any
information relating to the Company, the Special Committee or Sub or their
respective officers or directors is discovered by the Company, the Special
Committee or Sub which should be set forth in an amendment or supplement to the
Proxy Statement or the Schedule 13E-3, as the case may be, so that such document
would not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, the party
discovering such information shall promptly notify each other party and, to the
extent required by applicable Law, an appropriate amendment or supplement
describing such information shall be filed promptly with the SEC and, to the
extent required by applicable Law, disseminated to the Company's shareholders.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Shareholder Approval. A majority of the outstanding shares
of Company Common Stock shall have voted to approve the Plan of Merger, this
Agreement, the Merger and the ILFC Amendment and a majority of the shares of
Company Common Stock voted at the Company Shareholder Meeting (other than
shares owned by JGM, Sub or any other affiliate of JGM (other than the
Excluded Affiliates)) shall have been voted in favor of the approval of the
Plan of Merger, this Agreement and the Merger. Holders of a majority of the
outstanding shares of Series B Preferred Stock shall have voted in favor of
the approval of the ILFC Amendment.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
prior to asserting this condition each of the parties shall have used all
reasonable best efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as possible any such injunction or other
order that may be entered.
(c) No Governmental Litigation. There shall not be pending any suit,
action or proceeding by any Governmental Entity, in each case that has a
substantial likelihood of success, (i) challenging the acquisition by Sub or
JGM of any Company Common Stock, seeking to restrain or prohibit the
consummation of the Merger or any other Transaction or seeking to obtain
from the Company, Sub or JGM any damages that are material in relation to
the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit
or limit the ownership or operation by the Company or any Company
Subsidiaries of any material portion of the business or assets of the
Company or to compel the Company or any Company Subsidiaries to dispose of
or hold separate any material portion of the business or assets of the
Company as a result of the Merger or any other Transaction, (iii) seeking to
impose material limitations on the ability of Sub or JGM to acquire or hold,
or exercise full rights of ownership of, any shares of Company Common Stock,
including the right to vote the Company Common Stock purchased by it on all
matters properly presented to the shareholders of the Company or
(iv) seeking to prohibit JGM from effectively controlling in any material
respect the business or operations of the Company and the Company
Subsidiaries.
SECTION 7.02. Conditions to Obligations of Sub. The obligations of Sub to
effect the Merger are further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company in this Agreement that are qualified as to materiality shall
be true and correct and those not so qualified shall be true and correct in
all material respects, as of the date of this Agreement and as of the
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Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materiality shall
be true and correct, and those not so qualified shall be true and correct in
all material respects, on and as of such earlier date). Sub shall have
received a certificate signed on behalf of the Company by a duly authorized
officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Sub shall
have received a certificate signed on behalf of the Company by a duly
authorized officer of the Company to such effect.
(c) ILFC Agreement. The ILFC Agreement shall be in full force and effect
and ILFC shall have performed in all material respects all obligations
required to be performed by it under the ILFC Agreement prior to the
Effective Time.
(d) Material Adverse Effect. There shall have been no event since the
date of this Agreement which has had a Company Material Adverse Effect;
excluding, however, any such event which is the direct result of (i) any
action or negligent or willful failure to take an action on the part of Sub,
(ii) any action or negligent or willful failure to take an action on the
part of the Company which is contrary to, or materially inconsistent with,
the recommendation or direction, as case may be, of the Special Committee,
(iii) any action with respect to which the recommendation or direction, as
the case may be, of the Special Committee is required hereunder which is
taken by the Company without such recommendation or direction, as the case
may be, or (iv) any action or failure to take an action on the part of the
Company taken at the direction of JGM or any of his affiliates (other than
the Company Subsidiaries and the Excluded Affiliates).
(e) Financing. The financing contemplated by the Commitment Letter shall
have been provided on substantially the terms and conditions specified in
the Commitment Letter or on such other terms and conditions or involving
such other financing sources, as are acceptable to ATA and are not
materially more onerous in the aggregate to ATA than those specified in the
Commitment Letter; provided, however, that this condition shall be deemed
satisfied if the failure of this condition is due to any action or failure
to take an action on the part of the Company or ATA taken at the direction
of JGM or any of his affiliates (other than the Company Subsidiaries (other
than ATA) and the Excluded Affiliates).
SECTION 7.03. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of Sub in this Agreement that are qualified as to materiality shall be true
and correct and those not so qualified shall be true and correct in all
material respects, as of the date of this Agreement and as of the Closing
Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materiality shall
be true and correct, and those not so qualified shall be true and correct in
all material respects, on and as of such earlier date). The Company shall
have received a certificate signed on behalf of Sub by the President of Sub
to such effect.
(b) Performance of Obligations of Sub. Sub shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of the Company by the President of
Sub to such effect.
(c) Solvency Letter. If ATA is required pursuant to the Financing to
engage an appraiser (the 'APPRAISER') to deliver to the Lenders a solvency
letter or certificate (the 'SOLVENCY LETTER'), ATA shall have delivered or
caused the Appraiser to deliver a copy of the Solvency Letter to the
Company's Board of Directors.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after satisfaction of the
condition set forth in Section 7.01(a):
(a) by mutual written consent of Sub and the Company Board on behalf of
the Company (as agreed to by the Special Committee);
(b) by either Sub or the Company (acting at the direction of the Special
Committee):
(i) if the Merger is not consummated on or before October 31, 2001
(the 'OUTSIDE DATE'), unless the failure to consummate the Merger is the
result of a breach of this Agreement by the party seeking to terminate
this Agreement (it being understood that any breach of this Agreement by
the Company without the consent of the Special Committee shall not
constitute a breach for purposes of this Section 8.01(b)(i)); provided,
however, that the passage of such period shall be tolled for any part
thereof during which any party shall be subject to a nonfinal order,
decree, ruling or action restraining, enjoining or otherwise prohibiting
the consummation of the Merger; or
(ii) if any Governmental Entity issues an order, decree or ruling or
takes any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable.
(c) by Sub, if the Company breaches or fails to perform in any material
respect any of its representations, warranties or covenants contained in
this Agreement, which breach or failure to perform (i) would give rise to
the failure of a condition set forth in Section 7.02(a) or 7.02(b), and
(ii) cannot be or has not been cured within 30 days after the giving of
written notice to the Company of such breach (provided that Sub is not then
in material breach of any representation, warranty or covenant contained in
this Agreement); excluding, however, any such breach or failure to perform
by the Company that involves a matter for which the consent or
recommendation, as the case may be, of the Special Committee is required
hereunder for which (i) such breach or failure to perform by the Company is
contrary to, or materially inconsistent with, the recommendation or
direction, as the case may be, of the Special Committee or (ii) such
recommendation or direction, as the case may be, has not been obtained.
(d) by the Company (acting at the direction of the Special Committee),
if Sub breaches or fails to perform in any material respect any of its
representations, warranties or covenants contained in this Agreement, which
breach or failure to perform (i) would give rise to the failure of a
condition set forth in Section 7.03(a) or 7.03(b), and (ii) cannot be or has
not been cured within 30 days after the giving of written notice to Sub of
such breach (provided that the Company is not then in material breach of any
representation, warranty or covenant contained in this Agreement).
(e) by Sub, if the Company Board or the Special Committee withdraws or
modifies, or publicly proposes to withdraw or modify, in a manner adverse to
Sub its approval or recommendation of the Plan of Merger, this Agreement,
the Merger or the ILFC Amendment or fails to recommend to the Company's
shareholders that they vote to approve the Plan of Merger, this Agreement,
the Merger and the ILFC Amendment.
(f) by either Sub or the Company (acting at the direction of the Special
Committee), if at the Company Shareholders Meeting a majority of the
outstanding shares of Company Common Stock shall not have voted in favor of
the Plan of Merger, this Agreement, the Merger and the ILFC Amendment and a
majority of the shares of Company Common Stock voted at the Company
Shareholder Meeting (other than shares owned by JGM, Sub or any other
affiliate of JGM (other than the Excluded Affiliates)) shall not have voted
in favor of approval of the Plan of Merger, this Agreement and the Merger.
SECTION 8.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Sub as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Sub or the Company, other than Section 3.06,
Section 4.05, Section 6.07, this Section 8.02 and Article IX, which provisions
shall survive such
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termination, and except to the extent that such termination results from the
material breach by a party of any representation, warranty or covenant set forth
in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the parties at any
time before or after receipt of the approval of the Company's shareholders at
the Company Shareholder Meeting; provided, however, that any amendment pursuant
to this Section 8.03 shall require the approval of the Special Committee;
provided further, however, that after receipt of such approval, there shall be
made no amendment that by Law requires further approval by the shareholders of
the Company without the further approval of such shareholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.03, waive compliance with any of the agreements or conditions
contained in this Agreement; provided, however, that any extension or waiver by
the Company pursuant to this Section 8.04 shall require the approval of the
Special Committee. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.03 or an extension or waiver pursuant to
Section 8.04 shall, in order to be effective, require (i) in the case of Sub,
action by its Board of Directors, and (ii) in the case of the Company, the
direction or approval of the Special Committee, as applicable, or, in either
case, to the extent permitted by law, its duly authorized designee.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Sub, to
INDUS Acquisition Company
7337 West Washington Street
Indianapolis, IN 46251
Facsimile: (317) 240-7091
Attention: J. George Mikelsons
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 474-3700
Attention: William P. Rogers, Jr., Esq.
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(b) if to the Company, to
Amtran, Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
Facsimile: (317) 240-7211
Attention: John P. Tague
and
Blue and Co. LLC
11460 N. Meridian Street
Carmel, IN 46032
Facsimile: (317) 573-2458
Attention: Robert A. Abel
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Facsimile: (212) 558-3588
Attention: Benjamin F. Stapleton, Esq.
John Evangelakos, Esq.
SECTION 9.03. Definitions. For purposes of this Agreement:
An 'AFFILIATE' of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
A 'PERSON' means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
A 'SUBSIDIARY' of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.04. Interpretation. When a reference is made in this Agreement to
a Section or Schedule, such reference shall be to a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words 'INCLUDE', 'INCLUDES' or 'INCLUDING' are used in this Agreement, they
shall be deemed to be followed by the words 'WITHOUT LIMITATION'. The words
'HEREOF', 'HEREIN' and 'HEREUNDER' and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The term 'OR' is not exclusive. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms. Any agreement or instrument defined or referred to herein
or in any agreement or instrument that is referred to herein means such
agreement or instrument as from time to time amended, modified or supplemented.
References to a person are also to its permitted successors and assigns.
SECTION 9.05. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule or Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
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SECTION 9.06. Counterparts. This Agreement may be executed in one or more
separate counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement, taken together with the Company Disclosure Letter, (a) constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the Transactions and
(b) except for the provisions of Article II and Section 6.05, are not intended
to confer upon any person other than the parties any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except to the extent the IBCL is mandatorily applicable to the
Merger.
SECTION 9.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations under this
Agreement to any company directly or indirectly wholly owned by JGM, but no such
assignment shall relieve the assigning party of any of its obligations under
this Agreement. Any purported assignment without such consent shall be void.
Subject to the preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 9.10. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 9.11. Obligations of JGM. Sub agrees to cause JGM and any of his
affiliates (other than the Company, the Company Subsidiaries and the Excluded
Affiliates) to comply with their respective obligations under this Agreement,
including their respective obligations under Section 6.01.
IN WITNESS WHEREOF, Sub and the Company have duly executed this Agreement,
all as of the date first written above.
INDUS ACQUISITION COMPANY,
by /s/ J. GEORGE MIKELSONS
...................................
NAME: J. GEORGE MIKELSONS
TITLE: CHAIRMAN AND PRESIDENT
AMTRAN, INC.,
by /s/ JOHN P. TAGUE
...................................
NAME: JOHN P. TAGUE
TITLE: CHIEF EXECUTIVE OFFICER
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EXHIBIT A
PLAN OF MERGER
Amtran, Inc., an Indiana corporation (the 'COMPANY') or, as of the Effective
Time (as defined in Section 1 below), the 'SURVIVING CORPORATION'), and INDUS
Acquisition Company, an Indiana corporation ('SUB'), hereby adopt the following
Plan of Merger for purposes of Section 40-1 of the Indiana Business Corporation
Law (the 'IBCL'):
1. Articles of Merger. In accordance with the requirements of the IBCL,
Articles of Merger shall be prepared, executed and submitted for filing with the
office of the Secretary of State of the State of Indiana as soon as practicable
following the closing of the Merger (as defined in Section 2 below). The date of
such filing is referred to as the 'EFFECTIVE TIME'.
2. Merger; Articles; Bylaws. At the Effective Time, (i) Sub shall merge with
and into the Company (the 'MERGER') and as a result thereof, the separate
existence of Sub shall cease, (ii) the Articles of Incorporation of the Company,
as in effect immediately prior to the Effective Time, shall constitute the
Articles of Incorporation of the Surviving Corporation (the 'ARTICLES') and
(iii) the Bylaws of the Company, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation (the 'BYLAWS').
3. Effects of the Merger. At the Effective Time: (a) title to all real
estate and other property owned by Sub and the Company shall be vested in the
Surviving Corporation without reversion or impairment; (b) the Surviving
Corporation shall have all liabilities of Sub and the Company; (c) a proceeding
pending against Sub or the Company may be continued as if the Merger did not
occur or the Surviving Corporation may be substituted in the proceeding for Sub;
and (d) the shares of capital stock of Sub and shares of common stock, without
par value, of the Company ('COMPANY COMMON STOCK') shall be converted as
provided in Section 6 hereof.
4. Directors. The directors of the Company immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
5. Officers. The officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected or appointed and qualified, as the case may be.
6. Effect on the Capital Stock of the Constituent Corporations; Exchange of
Certificates. The following provisions of this Plan of Merger shall govern the
manner and basis of converting the shares of Company Common Stock and shares of
capital stock of Sub into shares, obligations, or other securities of the
Surviving Corporation.
6.1. Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of capital stock
of the Company or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, without par value, of the Surviving
Corporation.
(b) Cancelation of Treasury, JGM-Owned and Sub-Owned Stock. Each share
of Company Common Stock that is owned by the Company, J. George Mikelsons
('JGM'), Sub or any other affiliate of JGM (other than any person who is
deemed to be an affiliate of JGM by reason of such person's position as an
officer or director of the Company) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor. Each
share of Company Common Stock that is owned by any subsidiary of the Company
shall automatically be converted into one fully paid and nonassessable share
of common stock, without par value, of the Surviving Corporation.
(c) Conversion of Company Capital Stock. (1) Subject to Section 6.1(b),
each issued share of Company Common Stock shall be converted into the right
to receive from the Surviving Corporation $23.00 in cash, without interest.
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(2) Each issued share of Preferred Stock of the Company shall remain
outstanding.
(3) The cash payable upon the conversion of shares of Company Common
Stock pursuant to this Section 6.1(c) is referred to collectively as the
'MERGER CONSIDERATION'. At the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate that immediately prior to the Effective Time represented any
such shares of Company Common Stock (each, a 'CERTIFICATE') shall cease to
have any rights with respect thereto, except the right to receive Merger
Consideration upon surrender of a Certificate in accordance with
Section 6.2, without interest.
SECTION 6.2. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Sub shall designate a
bank or trust company to act as paying agent (the 'PAYING AGENT') for the
payment of the Merger Consideration upon surrender of Certificates. Promptly
following the Effective Time, the Surviving Corporation shall provide to the
Paying Agent cash in an amount sufficient to pay for the shares of Company
Common Stock converted into the right to receive cash pursuant to
Section 6.1(c) (such cash being hereinafter referred to as the 'EXCHANGE
FUND'). All of the fees and expenses of the Paying Agent shall be borne by
the Surviving Corporation.
(b) Exchange Procedure. The Surviving Corporation shall cause the Paying
Agent to mail promptly after the Effective Time (but, in any event, within
five days after the Effective Time) to each holder of record of
Certificates, (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to Certificates shall
pass, only upon delivery of Certificates to the Paying Agent and shall be in
such form and have such other provisions as the Surviving Corporation may
reasonably specify) and (ii) instructions for use in effecting the surrender
of Certificates in exchange for Merger Consideration. Upon surrender of a
Certificate for cancelation to the Paying Agent, together with such letter
of transmittal, duly completed and validly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the shares of Company Common Stock theretofore
represented by such Certificate shall have been converted pursuant to
Section 6.1(c) and the Certificate so surrendered shall forthwith be
canceled; the Surviving Corporation shall enter into a paying agency
agreement with the Paying Agent which provides that the Paying Agent shall
promptly following any such surrender of Certificates (but, in any event,
within three business days after the Paying Agent receives such
Certificates) dispatch by mail payment of such amount to such holder. In the
event of a transfer of ownership of Company Common Stock that is not
registered in the transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be
in proper form for transfer and the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person
other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 6.2, each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the amount of cash,
without interest, into which the shares of Company Common Stock theretofore
represented by such Certificate have been converted pursuant to
Section 6.1(c). No interest shall be paid or shall accrue on the cash
payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid upon surrender of a Certificate in accordance with the
terms of this Plan of Merger shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
formerly represented by such Certificate, and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any Certificates are presented to the Surviving Corporation or the
Paying Agent for any reason, they shall be canceled and exchanged for the
amount of cash into which the shares of Company Common Stock theretofore
represented by such Certificates shall have been converted as provided in
this Plan of Merger.
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(d) No Liability. None of Sub, the Company or the Paying Agent shall be
liable to any person in respect of any cash from the Exchange Fund that is
required under applicable Law to be delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(e) Investment of Exchange Fund. The Surviving Corporation shall direct
the Paying Agent to invest any cash included in the Exchange Fund, as
directed by the Surviving Corporation, on a daily basis. Any interest and
other income resulting from such investments shall be paid to the Surviving
Corporation.
(f) Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold, as required by applicable Law, any applicable taxes
from the consideration otherwise payable to any holder of Company Common
Stock pursuant to this Agreement.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, the holder of such lost, stolen
or destroyed Certificate shall execute an affidavit of that fact upon
request. The holder of any such lost, stolen or destroyed Certificate shall
also deliver a reasonable indemnity against any claim that may be made
against the Surviving Corporation or the Paying Agent with respect to the
Certificate alleged to have been lost, stolen or destroyed. The affidavit
and any indemnity which may be required hereunder shall be delivered to the
Paying Agent, who shall be responsible for making payment for such lost,
stolen or destroyed Certificate pursuant to the terms hereof.
(h) Adjustment to Prevent Dilution. In the event that following the date
hereof and prior to the Effective Time the Company changes the number of
shares of Company Common Stock or securities convertible or exchangeable
into or exercisable for shares of Company Common Stock, as the case may be,
issued and outstanding by way of a reclassification, stock split (including
a reverse stock split), stock dividend or distribution, recapitalization,
subdivision, or other similar transaction, the amount of Merger
Consideration payable with respect to a share of Company Common Stock shall
be adjusted appropriately to provide holders of shares of Company Common
Stock the same economic effect contemplated by this Plan of Merger prior to
such change.
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EXHIBIT B
June , 2001
Re: Amendment of Stock Option Terms
Dear [Name of Officer]:
As you know, INDUS Acquisition Company ('SUB') and Amtran, Inc. ('AMTRAN')
have entered into an Agreement and Plan of Merger dated as of June 18, 2001 (the
'MERGER AGREEMENT'), pursuant to which Sub will be merged into Amtran (the
'MERGER'). Under the Merger Agreement, Amtran has agreed to enter into option
modification agreements by the time the Merger becomes effective with certain
officers with respect to their options to purchase shares of Amtran common stock
(the 'OFFICER OPTIONS') remaining outstanding following the consummation of the
Merger. The purpose of this letter agreement is to amend your option agreements
to set forth the terms on which your Officer Options would remain outstanding
following the consummation of the Merger. Except as provided in Section 2
hereof, this agreement will become effective only upon completion of a
transaction that is approved by the Board of Directors and the shareholders of
Amtran involving the acquisition, directly or indirectly, by Mikelsons of the
outstanding shares of Amtran common stock he does not currently own (a
'TRANSACTION').
Amtran and you each agree as follows:
1. The terms of each of your outstanding and unexercised Officer Options
granted pursuant to the 1993 Incentive Stock Plan for Key Employees of Amtran
and its Subsidiaries, the 1996 Incentive Stock Plan for Key Employees of Amtran
and its Subsidiaries and/or the 2000 Incentive Stock Plan for Key Employees of
Amtran and its Subsidiaries (collectively, the 'OPTION PLANS') and the stock
option agreements thereunder, which Officer Options are set forth on Schedule 1
hereto, shall be modified effective as of the consummation of a Transaction as
set forth in the 'DESCRIPTION OF OPTION ROLLOVER PROPOSAL' attached as Annex A
('ANNEX A').
2. Effective as of the date hereof, you agree, notwithstanding the terms of
the Option Plans and the agreements thereunder, not to exercise your Officer
Options from the date hereof until the earlier to occur of: (i) the consummation
of a Transaction or (ii) the termination of the Merger Agreement in accordance
with its terms.
3. By entering into this Agreement, you agree and acknowledge that you have
received and read the tax disclosure contained in Annex A. You acknowledge that
you have had the opportunity to consult with your own tax advisor as to the
specific tax consequences of the proposed modifications to your Officer Options.
4. By entering into this Agreement, you acknowledge that the issuance of
shares of Amtran common stock received upon exercise of such options will be a
private placement which will not be registered under the Securities Act and that
such shares will be 'RESTRICTED SECURITIES' as defined in Rule 144 under the
Securities Act of 1933, as amended.
5. Amtran is permitted to cause any wholly owned subsidiary to perform, in
whole or in part, any of Amtran's obligations under this Agreement, including,
without limitation, those set forth on Annex A, provided that any such action by
Amtran shall not release it from its obligations hereunder.
6. The interpretation, performance and enforcement of this agreement shall
be governed by the laws of the state of Indiana without regard to principles of
conflicts of law.
7. This agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
Except as specifically provided herein, the terms and conditions of your
Officer Options as set forth in the Option Plans and stock option agreements
thereunder will continue to apply and remain in full
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force and effect. You acknowledge that your agreement to the terms and
conditions of this letter agreement is an inducement to Mikelsons' willingness
to consummate a Transaction.
Very truly yours,
AMTRAN, INC.,
By: .................................
NAME:
TITLE:
Agreed and Accepted:
.....................................
[Name of Officer]
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SCHEDULE 1
[NAME OF OFFICER]
<Table>
<Caption>
NON-
DATE OF PLAN UNDER INCENTIVE QUALIFIED
STOCK OPTION WHICH STOCK OPTION STOCK STOCK
GRANT WAS GRANTED OPTIONS OPTIONS EXERCISE PRICE EXPIRATION DATE
----- ----------- ------- ------- -------------- ---------------
</Table>
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ANNEX A
AMTRAN, INC.
DESCRIPTION OF OPTION ROLLOVER
BACKGROUND
As the Company announced on May 16, 2001, J. George Mikelsons has proposed
taking the Company private in a transaction in which all the outstanding
shares would be exchanged for a cash payment. On June 18, 2001, the Company
entered into a merger agreement with respect to that proposal.
Approval of the proposed transaction by the Board of Directors resulted in
the acceleration of vesting of all outstanding stock options held by
officers (i.e., all options held by officers have become immediately
exercisable).
Under the proposal, all in-the-money options held by non-officers would be
cashed out at the closing of the proposed transaction. All out-of-the-money
options held by non-officers would be canceled without payment, in exchange
for the acceleration of vesting of options that would not otherwise vest.
OVERVIEW OF THE PROPOSAL TO OFFICERS
The merger agreement for the proposed transaction provides that the Company
will enter into option modification agreements with the members of the
officer group under which they would agree to continue to hold their
options with certain modifications as described below.
Officers would agree to defer exercise of their options. In 2002 and
thereafter, options would be exercisable not less frequently than annually
until the expiration of options in accordance with their terms (i.e.,
maturity dates would not be extended).
In order to provide liquidity so long as the Company is private, officers
would have the right to put shares acquired upon exercise of their options
annually for three put periods following exercise. These put rights would
expire if the Company's common stock ever becomes publicly traded again.
Except for the modifications described in this summary, the terms of the
existing option agreements with respect to the officer group would not be
modified.
Exhibit A to this summary contains certain timetables illustrating the
exercise and put mechanics.
EXERCISE MECHANICS
The terms of the options held by officers would be modified to provide that
options are only exercisable during a 60-day period each year beginning on
June 1. The first regularly scheduled exercise period would start on
June 1, 2002. In no event would an option be permitted to be exercised
beyond its existing expiration date.
Exercises of options during an exercise period would be subject to two
conditions on the date of exercise:
-- the Company must have the ability under the terms of its
outstanding debt (including the Company's existing indentures, the
secured credit facility to be entered into in connection with the
proposed transaction and future indentures and credit facilities) to
make the corresponding put payment (discussed below) on the exercise
date; and
-- after making the corresponding put payments, the Company must be
able to satisfy a minimum cash test of either (x) $125 million in cash
and cash equivalents or (y) $200 million in cash, cash equivalents and
availability under the new secured credit facility.
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If on any day during an exercise period some but not all option exercises
would be permitted under these two conditions, then officers exercising on
that day would be permitted to exercise only in part (allocated among those
exercising pro rata (based on the number of options requested to be
exercised)).
The Company would loan on a full-recourse basis at a market rate of
interest to current officers the exercise price of their options (other
than incentive stock options, or 'ISOS') and withholding taxes resulting
from option exercises. These loans would be required to be repaid at the
time the shares received upon exercise are put or, if earlier, at the end
of the third put period following the exercise date. Interest would be
payable annually on these loans either in the form of cash or in the form
of an additional note.
Holders of ISOs would not automatically be entitled to receive such a loan
but could apply for a loan from the Company to the extent that such a loan
would not disqualify the ISOs. The terms of this loan would differ from the
terms of the loans made available to holders of nonqualified stock options
to the extent necessary to comply with the IRS rules relating to ISOs.
PUT RIGHT
In order to provide liquidity to optionholders once the Company is private
(since there would be no public market for the Company's shares), officers
would have the right to put their shares to the Company during a 60-day
period beginning on December 15 of each year; provided, that no officer
will be permitted to put his or her shares to the Company prior to the
expiration of 6 months following the date on which such shares were
acquired pursuant to the exercise of an option. The first put period would
start on December 15, 2002.
In order for the Company to obtain favorable accounting treatment with
respect to the put right, officers would be required to hold their shares
for a minimum of 6 months following the date of option exercise. For this
reason, put notices would become effective no earlier than 6 months after
the end of the immediately preceding exercise period. An exception is made
to this requirement in the case of the death of an officer.
Officers would have the right to put shares at a price per share to be
determined by an independent third-party appraiser shortly prior to each
year's exercise period. The valuation methodology for the put right would
be the same method used for valuations under the preferred stock held by
ILFC. Until the first valuation is completed (presently anticipated to be
in the first quarter of 2002), the put price would be the price per share
paid in the proposed transaction.
If a holder exercises his or her options but decides not to put his or her
shares until a put period that occurs after a new valuation, the put price
would be the new valuation price, which could be higher or lower than the
price per share paid in the proposed transaction.
A put would become effective 30 days after the officer delivers a put
notice.
Except as described below, the put right with respect to particular shares
would expire at the end of the fifth put period after the date of option
exercise with respect to such shares.
TREATMENT OF OPTIONS AND SHARES UPON RETIREMENT OR DISABILITY
The options held by an officer who retires at or after age 60 or leaves
employment because of a Disability (as defined in the existing option plans
and agreements) would be exercisable through the end of the first exercise
period ending after the date of retirement or Disability, unless the option
would otherwise expire sooner under its existing terms. For example, an
officer who retires in January of a year with unexercised options would be
required to exercise his or her options on or before July 30 of that year.
To the extent that a regularly scheduled exercise period would not occur
prior to expiration of an option, the retired or Disabled officer would be
permitted to deliver an exercise notice during a special individual
exercise period beginning 5 days prior to the date on which that option
would expire and ending on the date the option would expire (i.e., the
former officer would be permitted to exercise during the last five days the
option is outstanding). An exercise notice
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would become effective immediately unless the conditions to exercise set
forth under 'EXERCISE MECHANICS' would not be satisfied on the date of
delivery, in which case the exercise notice would become effective on the
first date on which those conditions would be satisfied. The exercise price
would be paid on the date an exercise notice becomes effective.
A former officer would have the put rights described above, except that the
former officer's put rights would expire at the end of the first put period
after the date of exercise during which the former officer is permitted to
put his or her shares.
The Company would have a call (which would become exercisable upon the
expiration of the former officer's put rights) over the officer's shares at
the then-current valuation price.
The Company would make a loan available to former officers after retirement
or termination of employment for Disability to the extent set forth above
under the heading 'EXERCISE MECHANICS'.
TREATMENT OF OPTIONS AND SHARES UPON RESIGNATION OR TERMINATION OF EMPLOYMENT
The options held by an officer who voluntarily leaves the Company prior to
age 60 (other than due to death or Disability), is terminated by the
Company at any time other than for Cause (as defined in the existing option
plans and agreements) or becomes a part-time employee would continue to be
exercisable during exercise periods in accordance with their existing
terms.
To the extent that a regularly scheduled exercise period would not occur
during such 90-day period, the former officer would be permitted to deliver
an exercise notice during a special individual exercise period beginning 5
days prior to the date on which the options would expire and ending on the
last day of the 90-day period (i.e., the former officer would be permitted
to exercise during the last five days the option is outstanding). An
exercise notice would become effective immediately unless the conditions to
exercise set forth under 'EXERCISE MECHANICS' would not be satisfied on the
date of delivery, in which case the exercise notice would become effective
on the first date on which those conditions would be satisfied.
A former officer would be required to wait a minimum of six months after
the date of exercise before being permitted to put shares received on that
exercise. As a result, a former officer could be required to wait until the
put period in the year following option exercise before being able to put
shares. For example, an officer who leaves on July 1, 2002 would only be
able to exercise his or her options from September 23-28, 2002. This former
officer would not be permitted to deliver a put notice until at least 5
months after the date of exercise (i.e., not earlier than February 23,
2003) which is after the end of the period for delivery of put notices.
Therefore, the officer would not be permitted to deliver a put notice until
November 15, 2003.
This put right would expire at the end of the first put period following
termination of employment during which the former officer is permitted to
put his or her shares.
The options and put rights of any officer who is terminated for Cause would
terminate immediately upon termination.
The Company would offer loans to former officers who resign or are
terminated other than for Cause on terms consistent with those set forth
above under the heading 'EXERCISE MECHANICS', except that in the case of
former officers that resign, the maximum amount of the loan will equal the
exercise price of the options being exercised (i.e., it would not cover
taxes).
The Company would have a call right (which would become exercisable upon
the former officer's termination of full-time employment) over the former
officer's shares at the then-current valuation price and the officer's
options at a price equal to the spread.
TREATMENT OF OPTIONS AND SHARES UPON DEATH
Upon the death of an officer, the officer's estate would have the right to
immediately exercise all the officer's options subject to satisfaction of
the conditions to exercise set forth above under 'EXERCISE MECHANICS'. As
provided in the existing option plans and agreements, the estate of a
former officer who dies after termination of employment would have the
exercise period
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specified with respect to such termination (e.g., 90 days to exercise
following termination other than for Cause).
Upon the death of an officer or a former officer, the estate would have the
right to put the officer's shares immediately at the then-current valuation
price. This put right would expire on the first anniversary of the date of
death. A put notice in the case of the death of an officer would become
effective 5 business days after the date the notice is delivered by the
officer's estate.
The Company would have an immediately exercisable call over the officer's
shares at the then-current valuation price and the officer's options at a
price equal to the spread.
FUTURE PUBLIC OFFERING OF THE COMPANY
If there is ever a future public offering of common stock, the exercise
limitations and put rights would expire immediately prior to its completion
(because there would then be a public market for the shares of the
Company's stock).
CERTAIN TAX CONSIDERATIONS
The following is a general summary of the material federal income tax
consequences to optionholders under current law. This summary deals with the
general tax principles that apply and is provided only for general information.
Some kinds of taxes, such as foreign, state and local income taxes, are not
discussed. Tax laws are complex and subject to change and may vary depending on
individual circumstances and from locality to locality. This summary does not
discuss all aspects of income taxation that may be relevant to an optionholder
in light of his or her personal investment circumstances. This summarized tax
information is not tax advice.
OPTIONHOLDERS ARE ADVISED TO CONSULT THEIR OWN ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE PROPOSED MODIFICATIONS.
INCENTIVE STOCK OPTIONS:
The grant or exercise of an option which is an ISO does not result in
taxable income to the optionholder or a deduction to the Company. However,
the excess of the fair market value on the date of exercise of the shares
acquired over the option exercise price will generally be included in
alternative minimum taxable income. Whether an optionholder is subject to
the alternative minimum tax will depend on such the optionholder's other
taxable income.
If an optionholder does not dispose of shares acquired pursuant to an ISO
before the later of two years from the date of grant of such option and one
year after the date of exercise of an ISO, any gain or loss realized on a
subsequent disposition of such shares will be treated as a long-term
capital gain or loss. If, however, an optionholder disposes of shares
acquired pursuant to an ISO before the expiration of the one-year and
two-year periods described above (a 'DISQUALIFYING DISPOSITION'), an amount
equal to the excess of the fair market value of the shares at the time of
the option's exercise (or the proceeds of the disposition, if less) over
the option price will, in the year of disposition, be taxable to the
optionholder as ordinary income and deductible by the Company. If the
shares are disposed of at a loss, the loss will be a capital loss.
An optionholder's basis for capital gains purposes in shares acquired
pursuant the exercise of an ISO will be the amount paid by the optionholder
upon exercise of the option. However, in the event of a disqualifying
disposition, the optionholder's basis in the shares is increased by an
amount equal to the amount taxable to the optionholder as ordinary income.
NONQUALIFIED STOCK OPTIONS:
Upon exercise of an option which does not qualify as an ISO (a
'NONQUALIFIED STOCK OPTION'), an amount equal to the excess of the fair
market value of the shares acquired on the date of exercise of such option
over the option exercise price is taxable to the optionholder as ordinary
income (which would be subject to withholding) and deductible to the
Company. The optionholder's
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basis for capital gains purposes in the shares acquired is equal to the sum
of the exercise price and the amount taxable as ordinary income. Gain or
loss on a subsequent disposition of shares acquired pursuant to a
nonqualified stock option will be treated as capital gain or loss, and will
be long-term capital gain or loss if such shares were held for more than
one year after the date of exercise.
EXERCISE OF OPTIONS WITH PREVIOUSLY ACQUIRED SHARES:
If an optionholder uses previously acquired shares to pay all or a portion
of the option price on the exercise of an option (whether or not an ISO),
no gain or loss would be recognized with respect to the previously acquired
shares. The shares received upon exercise of the option, to the extent of
the number of previously acquired shares exchanged therefor, will have the
same basis and holding period for capital gain purposes as the previously
acquired shares.
If the option is a nonqualified stock option, the additional shares
received have a basis equal to the sum of the cash paid on exercise and the
ordinary income taxable to the optionholder as a result of the exercise. If
the option is an ISO, the additional shares have a basis equal to the cash
paid on exercise (plus, if the one-year and two-year periods discussed
above have not been met with respect to shares acquired upon the previous
exercise of an ISO, the amount includable in income.)
The use of shares previously acquired by exercising an ISO in satisfaction
of all or part of the exercise price for another option (whether or not an
ISO) is a disposition of the previously acquired shares for purposes of
determining whether it is a disqualifying disposition (i.e., whether the
holding periods described above have been complied with). All shares
acquired upon the exercise of an ISO, including the previously acquired
shares, are considered to have been acquired upon the date of exercise for
purposes of these holding periods.
PROPOSED MODIFICATIONS:
Although not free from doubt, the provision of the put rights described
above should not cause options intended to qualify as ISOs to fail to be so
qualified. If the IRS were to conclude that the options no longer qualify
as ISOs, the options would be subject to the treatment applicable to
nonqualified stock options.
If the aggregate fair market value of the shares underlying ISOs
(determined as of the date of grant) that are exercisable for the first
time during any calendar year exceeds $100,000, options covering shares
equal to that excess will be treated as nonqualified stock options. Thus,
the acceleration of vesting and exercisability upon the approval of the
proposed transaction may cause some options that currently qualify as ISOs
to be treated as nonqualified stock options.
The deductibility of interest paid under the employee loan would be
determined based on the facts and circumstances of the particular
optionholder. OPTIONHOLDERS SHOULD CONSULT THEIR OWN ADVISOR AS TO THE
SPECIFIC RULES GOVERNING THE DEDUCTIBILITY OF THIS INTEREST IN LIGHT OF
THEIR OWN PARTICULAR TAX SITUATION.
Cancelation of options in exchange for a cash payment would result in the
optionholder's realization of ordinary income (which would be subject to
withholding) in an amount equal to the cash payment received.
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EXHIBIT A
ILLUSTRATIVE TIMELINES
<Table>
STANDARD YEAR
Valuation completed and published March 15-April 15
Exercise period June 1-July 30
Period for the delivery of put notices November 15-February 14
Period during which notices become effective
(30 days after delivery) December 15-March 3
DEATH
Estate gets immediately exercisable put Date of death
Put becomes effective 5 business days after delivery of notice
Right to deliver a put notice expires First anniversary of date of death
RETIREMENT OR DISABILITY
Exercise period June 1-July 30
Period for delivery of put notices November 15-February 14
Period during which notices become effective
(30 days after delivery) December 15-March 3
Right to deliver a put notice expires February 15
RESIGNATION OR TERMINATION OTHER THAN FOR CAUSE
Exercise period ends No later than 90 days after resignation of
termination
Period for delivery of put notice starts First day in a put period that is at least 5
months after the exercise date
Period for delivery of put notices ends Last day of first put period in which a put
notice may be delivered
Right to deliver a put notice expires Day after the last day of first put period in
which a put notice may be delivered
</Table>
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ANNEX B
CONFORMED COPY
PURCHASE AND VOTING AGREEMENT dated as of May 16, 2001, between AMTRAN,
INC., an Indiana corporation (the 'COMPANY'), and INTERNATIONAL LEASE FINANCE
CORPORATION, a California corporation ('ILFC').
WHEREAS, in connection with a possible merger (the 'MERGER') of the Company
with a corporation owned, directly or indirectly, by J. George Mikelsons
pursuant to which shares of the common stock, without par value, of the Company
('COMMON STOCK'), other than shares of Common Stock owned, directly or
indirectly, by J. George Mikelsons, would be converted into the right to receive
cash at a price per share of Common Stock (the 'TRANSACTION PRICE') to be
specified in an Agreement and Plan of Merger which may be entered into by the
Company with respect to the Merger (the 'MERGER AGREEMENT'), the Company and
ILFC wish to set forth the terms and conditions relating to (i) certain
modifications to the terms of the shares of Series B Preferred Stock, without
par value, of the Company ('SERIES B PREFERRED STOCK') to be effected
immediately prior to the Merger, (ii) the Company's agreement to purchase, and
ILFC's agreement to sell, shares of Series B Preferred Stock concurrently with
consummation of the Merger and (iii) certain other matters with respect to the
continuing business relationship between the Company and ILFC; and
WHEREAS ILFC owns 300 shares of Series B Preferred Stock (together with any
other shares of capital stock of the Company acquired by ILFC after the date
hereof and during the term of this Agreement, being collectively referred to
herein as the 'SUBJECT SHARES').
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of ILFC. ILFC hereby represents
and warrants to the Company as of the date hereof as follows:
(a) Authority; Execution and Delivery; Enforceability. ILFC has all
requisite corporate power and authority to execute this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
ILFC of this Agreement and consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of ILFC.
ILFC has duly executed and delivered this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of ILFC, enforceable against
ILFC in accordance with its terms. The execution and delivery by ILFC of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien (as defined below) upon any of the properties or assets of ILFC
under, any provision of any contract to which ILFC is a party or by which any
properties or assets of ILFC are bound or, subject to the filings and other
matters referred to in the next sentence, any provision of any judgment or law
applicable to ILFC or the properties or assets of ILFC. No consent of, or
registration, declaration or filing with, any governmental entity is required to
be obtained or made by or with respect to ILFC in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, other than (i) the filing with the office of
the Secretary of State of the State of Indiana of Articles of Amendment to the
Articles of Incorporation of the Company (the 'AMENDMENT'), substantially in the
form of Exhibit A and (ii) such reports under Sections 13(d) and 16 of the
Securities Exchange Act of 1934, as amended (the 'EXCHANGE ACT'), as may be
required in connection with this Agreement and the transactions contemplated
hereby.
(b) The Subject Shares. ILFC is the record and beneficial owner of and has
good and marketable title to, the Subject Shares, free and clear of any pledges,
liens, charges, mortgages, encumbrances and security interests of any kind or
nature whatsoever (collectively, 'LIENS'). ILFC has the sole right to vote the
Subject Shares, and none of the Subject Shares is subject to any voting trust or
other agreement, arrangement or restriction with respect to the voting of the
Subject Shares, other than the Purchase and Investor Rights Agreement dated as
of September 19, 2000, between the Company and ILFC (the 'EXISTING AGREEMENT')
and as contemplated by this Agreement.
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SECTION 2. Representations and Warranties of the Company. The Company hereby
represents and warrants to ILFC as of the date hereof as follows:
(a) Authority; Execution and Delivery; Enforceability. The Company has all
requisite corporate power and authority to execute this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
the Company of this Agreement and consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, except for Board Approval (as defined below) and receipt of the
Amendment Shareholder Approval (as defined in Section 3(a)). The Company has
duly executed and delivered this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The execution and delivery by the Company
of this Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancelation or acceleration
of any obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company under,
any provision of any contract to which the Company is a party or by which any
properties or assets of the Company are bound or, subject to the filings and
other matters referred to in the next sentence, any provision of any judgment or
law applicable to the Company or the properties or assets of the Company. No
consent of, or registration, declaration or filing with, any governmental entity
is required to be obtained or made by or with respect to the Company in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, other than (i) the filing
with the office of Secretary of State of the State of Indiana of the Amendment,
(ii) such reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby and (iii) such other
consents, registrations, declarations and filings as may be required in
connection with the Merger.
(b) Resolutions. This Agreement is subject to the approval of the Board of
Directors of the Company (the 'BOARD APPROVAL'). At such time as the Board
Approval is obtained, the Board of Directors of the Company will also adopt
resolutions recommending that the holders of the outstanding shares of Common
Stock and the holders of the outstanding shares of Series B Preferred Stock vote
to approve the Amendment (the 'BOARD RECOMMENDATION').
SECTION 3. Covenants of ILFC. ILFC covenants and agrees as follows:
(a) (1) At any meeting of the shareholders of the Company called to seek the
approval of the Amendment by the requisite number of shareholders of the Company
entitled to vote thereon (the 'AMENDMENT SHAREHOLDER APPROVAL') or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Amendment is sought, ILFC shall, including by
executing an irrevocable written consent if requested by the Company, vote (or
cause to be voted) the Subject Shares in favor of granting the Amendment
Shareholder Approval.
(2) Irrevocable Proxy. ILFC hereby irrevocably grants to, and appoints, each
of the Company, Kenneth K. Wolff and James W. Hlavacek, or any of them, and any
individual designated in writing by any of them, and each of them individually,
as ILFC's proxy and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of ILFC, to vote the Subject Shares, or grant a
consent or approval in respect of the Subject Shares in a manner consistent with
this Section 3. ILFC understands and acknowledges that the Company will enter
into the Merger Agreement in reliance upon ILFC's execution and delivery of this
Agreement. ILFC hereby affirms that the irrevocable proxy set forth in this
Section 3(a)(2) is given in connection with the agreement of the Company to
purchase the Purchase Shares (as defined in Section 5(a)) pursuant to this
Agreement. ILFC hereby further affirms that this irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. ILFC hereby ratifies
and confirms all that such irrevocable proxy may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with Section 30-3 of the Indiana Business Corporation
Law. The irrevocable proxy granted hereunder shall automatically terminate upon
the termination of this Section 3.
(b) Other than this Agreement, ILFC shall not (i) sell, transfer, pledge,
assign or otherwise dispose of (including by gift) (collectively, 'TRANSFER'),
or enter into any contract, option or other arrangement
B-2
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(including any profit sharing arrangement) with respect to the Transfer of, any
Subject Shares to any person other than pursuant to this Agreement, (ii) enter
into any voting arrangement, whether by proxy, voting agreement or otherwise,
with respect to any Subject Shares and shall not commit or agree to take any of
the foregoing actions or (iii) convert any Subject Shares into shares of Common
Stock.
(c) ILFC shall use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
Company in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement. ILFC shall not issue any press release or make
any other public statement with respect to this Agreement without the prior
consent of the Company, except as may be required by applicable law.
SECTION 4. Certain Covenants of the Company. (a) Subject to receipt of the
Amendment Shareholder Approval and the satisfaction or waiver of all conditions
to the Merger on or prior to the closing date of the Merger, the Company agrees
to file with the office of the Secretary of State of the State of Indiana,
immediately prior to the effective time of the Merger, the Amendment.
(b) The Company agrees that the Merger Agreement shall provide that shares
of Series B Preferred Stock shall remain outstanding at the effective time of
the Merger, subject to the purchase of shares of Series B Preferred Stock
provided for in Section 5 hereof.
(c) The Company agrees that it shall include in the proxy statement and
related materials prepared by the Company in connection with the Merger all
information required to be therein with respect to the Amendment, including the
Board Recommendation, and that it shall submit the Amendment to a vote of the
holders of the outstanding shares of the Common Stock and the holders of the
outstanding shares of Series B Preferred Stock, voting as separate classes, at
the meeting of shareholders at which the Merger and the Merger Agreement are to
be voted upon.
SECTION 5. Purchase of Shares. (a) ILFC shall sell, transfer and assign to
the Company, and the Company shall purchase from ILFC, such number of shares of
Series B Preferred Stock as the Company shall designate to ILFC in writing not
less than 2 days prior to the date on which such shares are to be purchased by
the Company, which number of shares shall be not less than 5% nor more than 10%
of the shares of Series B Preferred Stock owned by ILFC (such shares being
hereinafter referred to as the 'PURCHASE SHARES'), at the ILFC Purchase Closing
(as defined below) for aggregate consideration consisting of a senior unsecured
note of the Company due January 15, 2002 (the 'ILFC NOTE'), in an aggregate
principal amount equal to the ILFC Purchase Price (as defined below) and bearing
interest on such aggregate principal amount at a rate equal to 7.38% per annum.
The 'ILFC PURCHASE PRICE' shall equal the product of (i) the number of shares of
Common Stock into which the Purchase Shares would be convertible at the
Conversion Price in effect at the time of the ILFC Purchase Closing (as
determined in accordance with the Amendment but disregarding Section 6(c)
thereof) and (ii) the Transaction Spread (as defined in the Amendment).
(b) The closing of the purchase of the Purchase Shares (the 'ILFC PURCHASE
CLOSING') shall take place at the offices of Cravath, Swaine & Moore, 825 Eighth
Avenue, New York, New York 10019 concurrently with the closing of the Merger. At
the ILFC Purchase Closing, ILFC shall deliver to the Company a certificate
representing the Purchase Shares and Amtran shall deliver to ILFC the ILFC Note.
(c) The obligations of each party with respect to the purchase and sale of
the Purchase Shares shall be subject to receipt of the Amendment Shareholder
Approval and to the satisfaction or waiver of all conditions to the Merger on or
prior to the date of the ILFC Purchase Closing.
SECTION 6. Termination. Other than the provisions of Section 7 (which will
terminate in accordance with the terms thereof), this Agreement shall terminate
on the earlier of (i) the effective time of the Merger and (ii) October 31, 2001
or such later date on which the Merger Agreement is terminated.
SECTION 7. Additional Matters. (a) The Company agrees that, at the time the
Merger and the transactions contemplated by this Agreement are consummated, it
will enter into a lease agreement with ILFC with respect to a Boeing 737-800
aircraft substantially in the form attached as Exhibit B hereto.
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(b) The Company agrees that, if the Merger and the transactions contemplated
by this Agreement are consummated, it will pay to ILFC an annual fleet
consulting fee of $100,000, payable in advance, for a period of 4 years
commencing on the date on which the Merger is consummated. In exchange for such
fee, ILFC will assist the Company in the management of its
buyer-furnished-equipment and advise the Company with respect to fleet
retirement and other fleet management issues.
(c) The parties hereby waive the application of Section 5 of the Existing
Agreement to the purchase of shares of Series B Preferred Stock contemplated by
Section 5. The parties agree that except as provided in the preceding sentence,
the Existing Agreement shall remain in full force and effect and shall not be
amended or superseded by this Agreement.
(d) Each of the Company and ILFC shall, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as the other party may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
SECTION 8. General Provisions.
(a) Amendments. This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered in accordance with Section 9 of
the Existing Agreement.
(c) Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section to this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Wherever the words 'include', 'includes' or 'including' are used in
this Agreement, they shall be deemed to be followed by the words 'without
limitation'.
(d) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule or law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
(f) Entire Agreement; No Third-Party Beneficiaries. This Agreement and the
Existing Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. This Agreement is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
(g) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof,
except to extent the Indiana Business Corporation Law is mandatorily applicable
to the irrevocable proxy granted herein.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by the Company without the prior written consent
of ILFC or by ILFC without the prior written consent of the Company, and any
purported assignment without such consent shall be void. Subject to the
preceding sentences, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
(i) Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
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injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any New York state court or any
Federal court located in the State of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit itself to the personal jurisdiction
of any New York state court or any Federal court located in the State of New
York in the event any dispute arises out of this Agreement or any transaction
contemplated by this Agreement, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that it will not bring any action relating to this
Agreement or any Transaction contemplated by this Agreement in any court other
than a New York state court or any Federal court sitting in the State of New
York and (iv) waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any transaction
contemplated hereby.
IN WITNESS WHEREOF, each party has duly executed this Agreement, all as of
the date first written above.
AMTRAN, INC.,
by /s/ KENNETH K. WOLFF
................................
NAME: KENNETH K. WOLFF
TITLE: EXEC. VP AND CHIEF
FINANCIAL OFFICER
INTERNATIONAL LEASE FINANCE CORPORATION,
by /s/ ALAN H. LUND
................................
NAME: ALAN H. LUND
TITLE: CHIEF FINANCIAL OFFICER
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EXHIBIT A
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
AMTRAN, INC.
DATE OF INCORPORATION: OCTOBER 23, 1984
AMTRAN, INC. (hereinafter referred to as the 'CORPORATION'), an Indiana
corporation existing pursuant to the provisions of the Indiana Business
Corporation Law, as amended (hereinafter referred to as the 'ACT'), desiring to
give notice of corporate action effectuating amendment of its Articles of
Incorporation, as previously restated (the 'ARTICLES OF INCORPORATION'),
certifies the following facts:
ARTICLE I
THE AMENDMENT
1. Name. The name of the Corporation following this amendment continues to
be Amtran, Inc.
2. Amendment and Restatement of Article XII. Upon effectiveness of these
Articles of Amendment, Article XII of the Corporation's Articles of
Incorporation shall be amended and restated in its entirety to read exactly as
follows:
ARTICLE XII
DESIGNATIONS, RIGHTS AND PREFERENCES OF SERIES B PREFERRED STOCK
The designations, rights, preferences, limitations and restrictions of the
shares of Preferred Stock, without par value, to be designated as 'Series B
Preferred Stock' (in addition to those set forth elsewhere in the Corporation's
Articles of Incorporation) are hereby fixed as follows:
1. Number of Shares. The number of shares of Series B Preferred Stock shall
initially be 300 shares, which number from time to time may be increased or
decreased (but not decreased below the number of shares of the series then
outstanding) in accordance with the provisions of the Act, subject to the rights
of holders of the Series B Preferred Stock under Section 8 hereof. Shares of
Series B Preferred Stock redeemed or purchased by the Corporation, or converted
into Common Stock of the Corporation in accordance with the provisions hereof,
shall be canceled and shall revert to authorized but unissued shares of
Preferred Stock undesignated as to series.
2. Definitions and Construction. As used in this Article XII,
(a) 'BUSINESS DAY' means each day that is not a Saturday, Sunday or other
day on which banking institutions in the City of New York are authorized or
required by law or executive order to be closed;
(b) 'COMMON STOCK' means the common stock of the Corporation, without par
value;
(c) 'HEREIN', 'HEREOF', 'HEREUNDER' and other like words mean or refer to
this Article XII;
(d) 'JUNIOR STOCK' means the Common Stock and any other class or series of
stock of the Corporation hereafter authorized (other than the Series A1
Preferred Stock), the terms of which do not expressly provide that such class or
series ranks senior to or on a parity with the Series B Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding up or
dissolution of the Corporation;
(e) 'OUTSTANDING', when used with reference to shares of stock, means issued
shares, excluding shares held by the Corporation or a subsidiary;
(f) 'PARITY STOCK' means the Series A1 Preferred Stock and any class or
series of stock of the Corporation authorized, the terms of which expressly
provide that such class or series will rank on a parity with the Series B
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding up or dissolution of the Corporation;
(g) 'PERSON' means any corporation, partnership, trust, organization,
association or other entity or individual;
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(h) 'PUBLIC OFFERING' means an offering of shares of Common Stock registered
under the Securities Act of 1933, as amended, by the Corporation or one or more
of its shareholders of at least 15% of the then-outstanding shares of Common
Stock following which offering shares of Common Stock are listed on any national
securities exchange or authorized for quotation on the Nasdaq National Market
(or any successor market thereto).
(i) 'SERIES A PREFERRED STOCK' means, collectively, all series of preferred
stock designated as Series A1, Series A2, Series A3 or any other series
designated by the words 'Series A' in which the A is immediately followed by any
number;
(j) 'TRANSACTION' means a transaction effected through a merger of a
corporation owned, directly or indirectly, by J. George Mikelsons in which the
shares of Common Stock (other than shares of Common Stock owned, directly or
indirectly, by J. George Mikelsons) are converted into the right to receive
cash.
(k) 'TRANSACTION PRICE' means the amount of cash receivable pursuant to the
Transaction by a holder of one share of Common Stock at the time the Transaction
becomes effective.
(l) 'TRANSACTION SPREAD' means the difference between (1) the Transaction
Price and (2) the Conversion Price (as defined in Section 6(d)) in effect on the
Transaction Effective Date (as defined in Section 3). The Transaction Spread
shall be appropriately adjusted to reflect any stock splits, combinations or
recapitalizations.
(m) headings are for convenience of reference only and shall not define,
limit or affect any of the provisions hereof; and
(n) references to Sections are to Sections of this Article XII.
3. Dividends. The holders of Series B Preferred Stock shall be entitled to
receive, when and if declared by the Board of Directors, but only out of funds
legally available therefor, cumulative cash dividends at the annual rate of 5.0%
of the Liquidation Amount (as defined below) (the 'DIVIDEND RATE') per share,
and no more, payable quarterly in equal amounts of 1.25% of the Liquidation
Amount on the 15th day of December, March, June and September, respectively, in
each year (or if any such date is not a business day, on the next succeeding
business day) commencing on December 15, 2000, with respect to the quarterly
dividend period (or portion thereof) ending on the day preceding such respective
dividend payment date, to holders of record on the respective date, not more
than 60 nor less than ten days preceding such dividend payment date, fixed for
such purpose by the Board of Directors in advance of payment of each particular
dividend. The Dividend Rate shall increase to 5.66% per annum effective on the
date the Transaction is consummated (the 'TRANSACTION EFFECTIVE DATE') and shall
further increase to 6.5% per annum on the date which is the fourth anniversary
of the Transaction Effective Date; provided, however, that from and after the
date on which a Public Offering is consummated the Dividend Rate shall be 5.0%
per annum. If the Corporation fails to pay any quarterly dividend and such
failure is not cured within ten days of the date on which the dividend was
payable, whether or not the funds are legally available therefor, the Dividend
Rate shall increase as follows: (i) if the Corporation has issued on or prior to
December 31, 2000, any series of Series A Preferred Stock, the Dividend Rate
shall increase to the highest rate of interest per annum payable on any such
series of Series A Preferred Stock issued and outstanding on such date, and
(ii) if the Corporation has not issued on or before December 31, 2000, any
series of Series A Preferred Stock, the Dividend Rate shall increase to 9.8% per
annum. Following the payment of all accrued and unpaid dividends that have
become due and payable, the Dividend Rate will revert to the Dividend Rate that
otherwise would have been in effect on such date. Dividends shall accrue daily
and shall be payable on the Series B Preferred Stock for any period shorter than
a full quarterly period shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends on shares of Series B Preferred
Stock shall be cumulative from the last dividend payment date, or if no
dividends have been paid on the outstanding shares of Series B Preferred Stock,
from the date of issuance, whether or not the Corporation has the funds legally
available therefor. Accumulations of dividends on outstanding shares of
Series B Preferred Stock shall bear interest at the rate of 9.5% per annum.
So long as any shares of Series B Preferred Stock remain outstanding, the
Corporation may not pay or declare any dividend, nor make any distribution on
any Junior Stock, other than a dividend payable
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solely in Junior Stock, and shall not purchase, redeem or otherwise acquire for
consideration, directly or indirectly (other than as a result of a
reclassification of Junior Stock into Junior Stock, or the exchange or
conversion of one share of Junior Stock for or into another share of Junior
Stock, and other than through the use of the proceeds of a substantially
contemporaneous sale of other shares of Junior Stock), unless (i) all accrued
and unpaid dividends (including any interest thereon) on all outstanding shares
of Series B Preferred Stock have been paid in full and the full dividend thereon
for the then current quarterly dividend period shall have been paid or declared
and set apart for payment and (ii) all prior redemption requirements with
respect to Series B Preferred Stock shall have been complied with. When
dividends are not paid in full upon the Series B Preferred Stock and any Parity
Stock, all dividends declared upon shares of Series B Preferred Stock and all
Parity Stock shall be declared pro rata so that the amount of dividends declared
per share on the Series B Preferred Stock and all such Parity Stock shall in all
cases bear to each other the same ratio that accrued dividends per share on the
shares of Series B Preferred Stock and all such Parity Stock bear to each other.
Subject to the foregoing, and not otherwise, such dividends (payable in cash,
stock or otherwise) as may be determined by the Board of Directors may be
declared and paid on any Junior Stock from time to time out of any funds legally
available therefor, and the Series B Preferred Stock shall not be entitled to
participate therein.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (any such event being a
'LIQUIDATION TRANSACTION') the Series B Preferred Stock shall rank prior to any
shares of Junior Stock, so that in the event of any Liquidation Transaction,
whether voluntary or involuntary, the holders of Series B Preferred Stock shall
be entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of Junior Stock, an amount per share
equal to $100,000 per share (the 'LIQUIDATION AMOUNT') for each outstanding
share of Series B Preferred Stock, plus an amount equal to all accrued and
unpaid dividends (including any interest thereon) (such sum being referred to as
the 'LIQUIDATION PREFERENCE' for the Series B Preferred Stock).
(b) If, upon any Liquidation Transaction, the assets of the Corporation, or
proceeds thereof, shall be insufficient to pay the full Liquidation Preference
to all holders of the Series B Preferred Stock, then such assets, or the
proceeds thereof, shall be divided and distributed pro rata among the holders of
the Series B Preferred Stock and the holders of any Parity Stock in accordance
with the aggregate respective liquidation preferences of the Series B Preferred
Stock and all such Parity Stock.
(c) After payment shall have been made in full to all holders of Series B
Preferred Stock, as provided in this Section 4, the holders of the Junior Stock
shall, subject to the respective terms and provisions applying thereto, be
entitled to receive any and all assets remaining to be paid or distributed, and
the holders of the shares of Series B Preferred Stock shall not be entitled to
share therein.
5. Redemption and Repurchase.
(a) Change of Control.
(i) Optional Redemption by the Corporation. If, on or before the third
anniversary of the initial issuance of the Series B Preferred Stock, any person
(other than J. George Mikelsons or any person or entity controlled by him)
acquires or enters into an agreement with the Corporation to acquire capital
stock of the Corporation representing a majority of the voting power represented
by all outstanding capital stock of the Corporation (such event being referred
to as a 'CHANGE OF CONTROL'), the Corporation may redeem for cash, in whole at
any time, all shares of Series B Preferred Stock at the time outstanding, upon
notice given as hereinafter specified within 30 days following a Change of
Control, at a redemption price per share equal to the sum of (i) the Liquidation
Amount, (ii) all accrued and unpaid dividends (including any interest thereon)
to the date of redemption, (iii) a premium equal to 9.5% per annum of the
Liquidation Amount calculated from the date of issuance of the shares of
Series B Preferred Stock to the date of redemption and (iv) an additional
premium equal to the product of (x) the number of shares into which the
outstanding shares of Series B Preferred Stock are convertible at the Conversion
Price in effect on the date of such repurchase and (y) the Transaction Spread.
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(ii) Mandatory Repurchase at the Option of the Holder. If a Change of
Control occurs on or before the third anniversary of the initial issuance of the
Series B Preferred Stock, all but not less than all of the holders of Series B
Preferred Stock may require the Corporation to repurchase for cash, in whole at
any time, all shares of Series B Preferred Stock at the time outstanding, upon
notice given as hereinafter specified within 45 days following a Change of
Control, at a purchase price ('REPURCHASE PRICE') per share equal to the sum of
(i) the Liquidation Amount, (ii) all accrued and unpaid dividends (including any
interest thereon) to the date of repurchase, (iii) a premium equal to the
difference between (x) the amount obtained when the highest dividend rate per
annum payable on any series of Series A Preferred Stock issued and outstanding
on the date of repurchase is multiplied by the Liquidation Amount calculated
from the date of issuance of the shares of Series B Preferred Stock to the date
of repurchase and (y) 5% per annum of the Liquidation Amount calculated from the
date of issuance of the shares of Series B Preferred Stock to the date of
repurchase and (iv) an additional premium equal to the product of (x) the number
of shares into which the outstanding shares of Series B Preferred Stock are
convertible at the Conversion Price in effect on the date of such repurchase and
(y) the Transaction Spread. A notice of mandatory repurchase under this Section
5(a)(ii) (a 'REPURCHASE NOTICE') may be given to the Corporation at any time
within the 45 days following a Change of Control, by all but not less than all
of the holders of Series B Preferred Stock. To be valid, a Repurchase Notice
must (i) specify a date of repurchase (the 'REPURCHASE DATE') that is a business
day not earlier than 45 days following the date of receipt by the Corporation of
the Repurchase Notice, (ii) be signed by all registered holders of Series B
Preferred Stock and (iii) be delivered to the Corporation at its corporate
headquarters to the attention of its Corporate Secretary by first class mail,
overnight courier or by hand. Once given, a Repurchase Notice will be
irrevocable. On and after the Repurchase Date, the sole right of the holders of
Series B Preferred Stock shall be to receive the Repurchase Price without
interest against delivery of certificates representing Series B Preferred Stock.
(b) Optional Redemption. On or after the third anniversary of the initial
issuance of the Series B Preferred Stock, the Corporation may redeem for cash,
in whole at any time, or in part from time to time, the shares of Series B
Preferred Stock at the time outstanding, upon notice given as hereinafter
specified, at the redemption price in effect at the redemption date as provided
in this Section 5. If redeemed during the 12-month period commencing on the
anniversary date of the initial issuance of Series B Preferred Stock in the
years set forth below the redemption price shall be the Liquidation Amount plus
all accrued and unpaid dividends (including any interest thereon) to the date of
redemption plus (i) a premium (expressed as a percentage of the Liquidation
Amount) as follows:
<Table>
2003........................................................ 3.60%
2004........................................................ 3.30%
2005........................................................ 3.00%
2006........................................................ 2.70%
2007........................................................ 2.40%
2008........................................................ 2.10%
2009........................................................ 1.80%
2010........................................................ 1.50%
2011........................................................ 1.20%
2012........................................................ .90%
2013........................................................ .60%
2014........................................................ .30%
2015 and thereafter no redemption premium, and
</Table>
(ii) an additional premium equal to the product of (x) the number of shares
into which the outstanding shares of Series B Preferred Stock to be redeemed are
convertible at the Conversion Price in effect on the date of such optional
redemption date and (y) the Transaction Spread.
(c) Mandatory Redemption. The Corporation shall redeem any outstanding
shares of Series B Preferred Stock on the anniversary of the initial issuance of
the Series B Preferred Stock in 2015 for an amount in cash equal to the
Liquidation Amount plus all accrued and unpaid dividends (including any interest
thereon).
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(d) Notice of Redemption. So long as the Series B Preferred Stock is not
registered under the Securities Act of 1933, as amended (the 'SECURITIES ACT'),
notice of every redemption of Series B Preferred Stock shall be mailed by first
class mail, postage prepaid, addressed to the holders of record of the shares to
be redeemed at their respective last addresses as they appear on the books of
the Corporation. If the Corporation registers the outstanding shares of
Series B Preferred Stock under the Securities Act, then such notice shall be
made by mail as described in the preceding sentence and, the Corporation shall
also publish any notice of redemption by means of the Dow Jones News Service or
such other similar news wire service or newspaper. Such mailing and any such
publication shall be at least ten days and not more than 45 days prior to the
date fixed for redemption. Any notice that is mailed or published, as the case
may be, in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the shareholder receives such notice.
Furthermore, the validity of the proceedings for the redemption of any shares of
Series B Preferred Stock of any shareholder shall not be affected by any defect
in any notice given to any other shareholder. Such notice shall set forth
(A) the time and date for the redemption;
(B) the number of shares to be redeemed and if less than all shares of
Series B Preferred Stock held by a holder are to be redeemed, the number of such
holder's shares to be redeemed;
(C) the redemption price;
(D) the place or places where certificates for the shares are to be
surrendered for redemption;
(E) that dividends on the shares to be redeemed will cease to accrue on the
redemption date (unless the Corporation shall default in redeeming the shares on
the redemption date); and
(F) that the right to convert such shares shall terminate at the close of
business on the redemption date.
(e) Redemptions in Part. In case of any redemption of only a part of the
shares of Series B Preferred Stock at the time outstanding, the redemption may
be pro rata, by lot or by any other method as may be determined by the Board of
Directors in its sole discretion to be equitable as set forth in a certificate
of the Secretary or Assistant Secretary of the Corporation filed with the
transfer agent or agents for the Series B Preferred Stock. The Board of
Directors shall have full power and authority, subject to the provisions herein
contained, to prescribe the terms and conditions upon which Series B Preferred
Stock shall be redeemed from time to time.
(f) Effect of Redemption. If notice of redemption shall have been duly
given, and if on or before the redemption date specified therein all funds
necessary for such redemptions shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares called for redemption, so as to be and continue to be
available therefor, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancelation, on and
after such redemption date, all shares so called for redemption shall no longer
be deemed outstanding and all rights with respect to such shares shall forthwith
on such redemption date cease and terminate, except only the right of the
holders thereof to receive the amount payable on redemption thereof, without
interest. Any funds so deposited and unclaimed at the end of two years from such
redemption date shall, to the extent permitted by law, be released or repaid to
the Corporation, after which time the holders of the shares so called for
redemption shall look only to the Corporation for payment thereof. A holder of
shares of Series B Preferred Stock called for redemption shall be entitled to
convert such shares in accordance with the provisions of Section 6 up until the
close of business on the redemption date.
Any funds so deposited or set aside by the Corporation which shall not be
required for such redemption because of the exercise of any right of conversion
set forth in Section 6 below subsequent to the date of such deposit shall be
released or repaid to the Corporation forthwith.
6. Conversion. The holders of the Series B Preferred Stock shall have
conversion rights as follows:
(a) Right to Convert. On the terms and subject to the conditions of this
Section 6, the holder of a share of Series B Preferred Stock shall have the
right, at its option, at any time to convert such share into that number of
shares of fully paid and non-assessable Common Stock (calculated as to each
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conversion to the nearest 1/100th of a share) obtained by dividing the
Liquidation Amount, by the Conversion Price (as defined in Section 6(d)) and by
surrender of such share pursuant to Section 6(b). The shares of Common Stock
issuable upon such conversion are hereinafter referred to as the 'CONVERSION
SHARES'. No payment or adjustment shall be made upon any conversion on account
of any dividends accrued on the shares of Series B Preferred Stock surrendered
for conversion or on account of any dividends on the Common Stock issued upon
conversion for which the record date is on or prior to the conversion date.
Holders of shares of Series B Preferred Stock at the close of business on a
record date for any payment of declared dividends shall be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date
notwithstanding the optional conversion of such shares following such record
date and prior to the corresponding dividend payment date.
(b) Conversion Procedures. In order to exercise the conversion privilege,
the holder of any shares of the Series B Preferred Stock shall surrender the
certificate representing such shares at the principal office of the Corporation,
with a written notice stating that such holder elects to convert all or a
specified whole number of such shares pursuant to this Section 6 and specifying
the name or names in which such holder wishes the certificate or certificates
for Conversion Shares to be issued. Unless the Conversion Shares are to be
issued in the same name as the name in which such shares of Series B Preferred
Stock are registered, the certificate representing the shares surrendered for
conversion shall be accompanied by instruments of transfer, in form satisfactory
to the Corporation, duly executed by the holder or its duly authorized attorney.
As promptly as practicable after such surrender of a certificate for shares of
the Series B Preferred Stock to be converted, and in any event within five
business days thereafter, the Corporation shall issue and deliver at such office
to such holder, or on such holder's written order, (i) a certificate or
certificates for the applicable number of full Conversion Shares, (ii) if less
than the full number of shares of Series B Preferred Stock evidenced by the
surrendered certificate is being converted, a new certificate, of like tenor,
for the number of shares of Series B Preferred Stock evidenced by such
surrendered certificate less the number of shares being converted and (iii) the
cash payment in settlement of any fractional Conversion Share as provided in
Section 6(c). Upon conversion of any shares of Series B Preferred Stock, the
holder thereof shall be entitled to receive an amount equal to all declared and
unpaid dividends on such shares.
In the case of the exercise of the conversion privilege under Section 6(a),
each conversion shall be deemed to have been effected immediately after the
close of business on the date on which the certificate for shares of Series B
Preferred Stock to be converted is surrendered and such notice is received by
the Corporation as aforesaid, and the person or persons in whose name or names
any certificate or certificates for Conversion Shares are issuable shall be
deemed to have become the holder or holders of record of such Conversion Shares
at such time on such date and such conversion shall be at the applicable
Conversion Price in effect at such time on such date, unless the stock transfer
books of the Corporation are closed on that date, in which event such person or
persons shall be deemed to have become such holder or holders of record at the
close of business on the next day on which such stock transfer books are open
(provided that if such books shall remain closed for five days, such fifth day
shall be the date any such person shall become such a holder), but such
conversion shall be at the Conversion Price in effect on the date on which such
certificate was surrendered and such notice was received. Upon delivery, all
Conversion Shares shall be duly authorized, validly issued, fully paid, non-
assessable, free of all liens and charges and not subject to any preemptive or
subscription rights.
(c) Settlement of Fractional Conversion Shares. No fractional Conversion
Shares or scrip representing fractions of Conversion Shares shall be issued upon
conversion of shares of the Series B Preferred Stock. Instead of any fractional
Conversion Share otherwise deliverable, the Corporation shall pay to the holder
of the converted shares an amount in cash equal to the Current Market Price (as
defined below) or, if shares of Common Stock are not authorized for quotation on
the Nasdaq National Market System (the 'NASDAQ') and no Current Market Price can
be determined on such date pursuant to the methods specified in Section 6(e),
the Valuation Price (as defined in Section 9) of such fractional Conversion
Share on the date of conversion. If more than one share is surrendered for
conversion at one time by the same holder, the number of full Conversion Shares
shall be computed on the basis of the aggregate number of shares so surrendered.
The 'CURRENT MARKET PRICE' per share of
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Common Stock on any day is the average of the high and low sales prices of the
Corporation's Common Stock on the NASDAQ for the 10 consecutive trading days
preceding such day rounded up to the nearest whole cent. A 'TRADING DAY' is a
day on which the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business
or, if the Common Stock is not then listed or admitted to trading on any
national securities exchange, any day other than Saturday, Sunday or a federal
holiday.
(d) The 'CONVERSION PRICE' shall be $15.67 and may be adjusted from time to
time pursuant to this Section 6(d). The Conversion Price shall be adjusted from
time to time as follows:
(i) If, after the date of initial issuance of the Series B Preferred Stock,
the Corporation (A) pays a dividend or makes a distribution on the Common Stock
in shares of Common Stock, (B) subdivides or combines its outstanding shares of
Common Stock into a greater or smaller number of shares or (C) issues by
reclassification of the Common Stock any shares of capital stock of the
Corporation, the Conversion Price in effect immediately prior to such action
shall be adjusted so that the holder of any share of Series B Preferred Stock
thereafter surrendered for conversion shall be entitled to receive, at the time
of such conversion, the number of shares of Common Stock or other capital stock
of the Corporation that it would have owned or been entitled to receive
immediately following such action had such share been converted immediately
prior to such action or the record date therefor, whichever is earlier. Such
adjustment shall become effective immediately after the record date, in the case
of a dividend or distribution, or immediately after the effective date, in the
case of a subdivision, combination or reclassification.
(ii) If, after the date of initial issuance of the Series B Preferred Stock,
the Corporation issues any Additional Shares (as defined below) for a
consideration per share below (x) the closing price as of 4:30 pm on the
principal market on which the Common Stock is traded on the trading day
immediately prior to the date on which the Corporation shall have agreed to such
issuance or (y) if shares of Common Stock are not traded on any national
securities exchange or authorized for quotation on the Nasdaq Stock Market, the
Valuation Price on the trading day immediately prior to the date on which the
Corporation shall have agreed to such issuance (with the price determined under
clause (x) or (y), as applicable, being referred to as the 'CLOSING PRICE'),
then in each case the Conversion Price shall be adjusted by multiplying the
Conversion Price in effect immediately prior to such issuance by a fraction,
(A) the numerator of which shall be the number of shares of Common Stock and
Share Equivalents (as defined below) outstanding immediately prior to the
issuance of such Additional Shares plus the number of shares of Common Stock
that the aggregate consideration for such Additional Shares would purchase at a
consideration per share equal to such Closing Price, and
(B) the denominator of which shall be the number of shares of Common Stock
and Share Equivalents outstanding immediately prior to the issuance of such
Additional Shares plus the number of Additional Shares so issued.
Such adjustment for the Series B Preferred Stock shall become effective
immediately after the issuance of such Additional Shares.
'ADDITIONAL SHARES' shall mean any shares of Common Stock of the Corporation
issued by the Corporation after the date of issuance of the Series B Preferred
Stock excluding Permitted Issuances. 'SHARE EQUIVALENTS' shall mean the Common
Stock deliverable upon conversion or exercise of all outstanding Series B
Preferred Stock, convertible securities, options, warrants and rights of the
Corporation as of the date such computation is made and as of the time such
computation is effective as specified herein.
'PERMITTED ISSUANCES' shall mean:
(A) any stock options which have been granted and remain unexercised as of
the date of issuance of the Series B Preferred Stock, which shall include any
such stock options the terms of which have been modified in connection with the
Transaction;
(B) stock options granted and shares issued to employees, directors and
consultants after the issuance of the Series B Preferred Stock in the aggregate
amount of 500,000 shares (which number shall be appropriately adjusted to
reflect any stock splits, combinations or recapitalizations) of Common
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Stock per annum (commencing with the year 2000) pursuant to the Corporation's
stock plans, provided that if the aggregate number of stock options granted per
annum pursuant to the Corporation's stock plans is less than 500,000, 'Permitted
Issuances' shall include that number of stock options equal to the difference
between 500,000 and the actual number of stock options granted per annum
pursuant to the Corporation's stock plans, which stock options of Common Stock
may be granted in subsequent years;
(C) additional options granted and shares issued in an amount equal to
options granted and shares issued pursuant to the foregoing clauses (A) and (B)
to the extent such shares are returned to the Corporation's stock plans upon the
lapse of unexercised stock options or the repurchase (at original purchase
price) of unvested shares;
(D) any shares issued upon exercise of options granted pursuant to the
foregoing clauses (A)-(C) including as a result of the operation of anti
dilution adjustments provided for therein;
(E) any shares issued pursuant to employee stock purchase, savings or
ownership plans, including all shares issued to a trust formed in respect
thereof;
(F) any shares issued upon conversion of the Series B Preferred Stock
(including adjustments to the conversion ratio), any stock options granted and
shares issued upon the exercise thereof approved by the holders of a majority of
the Series B Preferred Stock, and any shares issued to the holders of the Series
B Preferred Stock in connection with any contractual rights related to such
approved shares or options; and
(G) any shares issued pursuant to the exercise, conversion or exchange of
other securities.
(iii) If after the date of initial issuance of the Series B Preferred Stock
the Corporation issues any warrants, options or other rights entitling the
holders thereof to subscribe for or purchase either any Additional Shares or
evidences of debt, shares of capital stock or other securities that are
convertible into or exchangeable for, with or without payment of additional
consideration, Additional Shares (such warrants, options or other rights being
called 'RIGHTS' and such convertible or exchangeable evidences of debt, shares
of capital stock or other securities being called 'CONVERTIBLE SECURITIES'), and
the consideration per share for which Additional Shares may at any time
thereafter be issuable pursuant to such Rights or Convertible Securities (when
added to the consideration per share of Common Stock, if any, received for such
Rights or Convertible Securities) is less than the Conversion Price then in
effect, the Conversion Price shall be adjusted as provided in Section 6(d)(ii)
on the basis that,
(A) the maximum number of Additional Shares issuable pursuant to all such
Rights or necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued, and
(B) the aggregate consideration (plus the consideration, if any, received
for such Rights and Convertible Securities) for such maximum number of
Additional Shares shall be deemed to be the consideration received and
receivable by the Corporation for the issuance of such Additional Shares
pursuant to such Rights or Convertible Securities.
No adjustment of the Conversion Price shall be made under this Section
6(d)(iii) upon (x) the issuance of any Convertible Securities issued pursuant to
the exercise of any Rights, to the extent that such adjustment was previously
made upon the issuance of such Rights pursuant to Section 6(d)(iii) or (y) the
granting of any stock options that qualify as Permitted Issuances under clause
(B) or (C) of the definition thereof.
(iv) For purposes of Section 6(d)(iii), the relevant Conversion Price shall
be the Conversion Price in effect immediately prior to the earlier of (A) the
record date for the holders of Common Stock entitled to receive the Rights or
Convertible Securities and (B) the initial issuance of the Rights or Convertible
Securities, and the adjustment provided for in either such Section shall become
effective immediately after the earlier of the times specified in clauses (A)
and (B).
(v) No adjustment of the Conversion Price shall be made under Section
6(d)(ii) upon the issuance of any Additional Shares pursuant to the exercise of
any Rights or any conversion or exchange rights pursuant to any Convertible
Securities, if such adjustment was previously made in connection with the
issuance of such Rights or Convertible Securities (or in connection with the
issuance of any Rights therefor) pursuant to Section 6(d)(iii).
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(vi) If any Rights or Convertible Securities (or any portions thereof) that
gave rise to an adjustment pursuant to Section 6(d)(iii) expire or terminate
without the exercise thereof and/or if by reason of the provisions of such
Rights or Convertible Securities there has been any increase, with the passage
of time or otherwise, in the consideration payable upon the exercise thereof,
the Conversion Price shall be readjusted (but to no greater extent than
originally adjusted) on the basis of,
(A) eliminating from the computation Additional Shares corresponding to such
expired or terminated Rights or conversion or exchange rights,
(B) treating the Additional Shares, if any, actually issued or issuable
pursuant to the previous exercise of such Rights or conversion or exchange
rights as having been issued for the consideration actually received and
receivable therefor, and
(C) treating any such Rights or conversion or exchange rights that remain
outstanding as being subject to exercise on the basis of the consideration
payable upon the exercise or conversion thereof as is in effect at such time,
provided, however, that any consideration actually received by the Corporation
in connection with the issuance of such Rights shall form part of the
readjustment computation even though such Rights expired without being
exercised. The Conversion Price shall be adjusted as provided in Section
6(d)(ii) and any applicable provisions of Section 6(d)(iii) as a result of any
increase in the number of Additional Shares issuable, or any decrease in the
consideration payable upon any issuance of Additional Shares, pursuant to any
anti dilution provisions of any Rights or Convertible Securities.
(vii) (A) If any Additional Shares, Convertible Securities or Rights are
issued for cash, the consideration received therefor shall be deemed to be the
amount of cash received.
(B) If any Additional Shares, Convertible Securities or Rights are offered
by the Corporation for subscription, the consideration received therefor shall
be deemed to be the subscription price.
(C) If any Additional Shares, Convertible Securities or Rights are sold to
underwriters or dealers for public offering without a subscription offering, the
consideration received therefor shall be deemed to be the public offering price.
(D) In any case covered by Section 6(d)(vii) (A), (B) or (C), in determining
the amount of any consideration received by the Corporation in whole or in part
other than in cash, the amount of such consideration shall be deemed to be the
fair market value of such consideration as determined in good faith by the Board
of Directors, and evidence of such determination shall be filed with the minutes
of the Corporation. If Additional Shares are issued as part of a unit with
Rights, the consideration received for the Rights shall be deemed to be the
portion of the consideration received for such unit determined in good faith at
the time of issuance by the Board of Directors, and evidence of such
determination shall be filed with the minutes of the Corporation. If the Board
of Directors does not make any such determination, the consideration received
for the Rights shall be deemed to be zero. In either event, the consideration
received for the Additional Shares shall be deemed to be the consideration
received for such unit less the consideration deemed to have been received for
the Rights.
(E) In any case covered by Section 6(d)(vii) (A), (B), (C) or (D), in
determining the amount of consideration received by the Corporation, (I) any
amounts received or receivable for accrued interest or accrued dividends shall
be excluded and (II) any compensation, underwriting commissions or concessions
or expenses paid or incurred in connection therewith shall not be deducted.
(F) In any case covered by Section 6(d)(vii) (A), (B), (C) or (D), there
shall be added to the consideration received by the Corporation at the time of
issuance or sale (I) the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of Rights that relate to
Convertible Securities and (II) the minimum aggregate amount of consideration
payable upon the conversion or exchange thereof.
(G) If any Additional Shares, Convertible Securities or Rights are issued in
connection with any merger, consolidation or other reorganization in which the
Corporation is the surviving corporation, the amount of consideration received
therefor shall be deemed to be the fair market value, as determined in good
faith by the Board, of such portion of the assets and business of the
non-surviving person or persons as the Board of Directors determines in good
faith to be attributable to such Additional Shares,
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Convertible Securities or Rights, and evidence of such determination shall be
filed with the minutes of the Corporation.
(viii) If the Corporation effects any merger, consolidation or other
reorganization to which the Corporation is a party (other than (x) a merger or
consolidation in which the Company is the surviving or continuing corporation
and in which each share of Common Stock outstanding immediately prior to the
merger or consolidation remains unchanged in all material respects and (y) the
Transaction), any sale or conveyance to another person of all or substantially
all the assets of the Corporation or any statutory exchange of securities with
another person (including any exchange effected in connection with a merger of a
third person into the Corporation), then effective provision shall be made in
such transaction so that the holder of each share of Series B Preferred Stock
then outstanding shall have the right thereafter to convert such share into the
kind and amount of consideration receivable pursuant to such transaction by a
holder of the number of shares of Common Stock into which such share of Series B
Preferred Stock might have been converted immediately prior to such transaction,
assuming such holder of Common Stock failed to exercise its rights of election,
if any, as to the kind or amount of consideration receivable upon such
transaction (provided that if the kind or amount of consideration receivable
pursuant to such transaction is not the same for each share of Common Stock in
respect of which such rights of election shall not have been exercised
('NON-ELECTING SHARE'), then, for purposes of this Section 6(d)(viii), the kind
and amount of consideration receivable pursuant to such transaction for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Thereafter, the holders of
shares of Series B Preferred Stock shall be entitled to appropriate adjustments
with respect to their conversion rights to the end that the provisions set forth
in this Section 6 shall correspondingly be made applicable, as nearly as may
reasonably be, to any consideration thereafter deliverable on conversion of
shares of the Series B Preferred Stock. Notwithstanding the foregoing, this
Section 6(d)(viii) shall not apply with regard to the Series B Preferred Stock
to an event which is treated as a liquidation, dissolution or winding-up of the
Corporation with respect to such series pursuant to Section 4.
(ix) If the Corporation distributes generally to holders of its outstanding
shares of Common Stock, evidences of its debt, securities or other assets
(excluding any cash dividends if the annualized per share amount thereof does
not exceed 9.0% of the Current Market Price or, if shares of Common Stock are
not traded on the NASDAQ and no Current Market Price can be determined on such
date pursuant to the methods specified in Section 6(e), the Valuation Price as
of the trading day immediately preceding the date of declaration of such
dividend and excluding any dividends or distributions payable in Rights or
Convertible Securities for which adjustment is otherwise made pursuant to this
Section 6(d)), the Conversion Price shall be adjusted by multiplying such
Conversion Price in effect immediately prior to the record date for the dividend
or distribution by a fraction of which (x) the numerator shall be the Current
Market Price or, if shares of Common Stock are not traded on the NASDAQ and no
Current Market Price can be determined on such date pursuant to the methods
specified in Section 6(e), the Valuation Price on such record date less the then
fair market value, as determined in good faith by the Board, of the portion of
the evidences of debt, securities or other assets so distributed or applicable
to the holder of one share of Common Stock and (y) the denominator shall be the
Current Market Price or, if shares of Common Stock are not traded on the NASDAQ
and no Current Market Price can be determined on such date pursuant to the
methods specified in Section 6(e), the Valuation Price on such record date. Such
adjustment shall become effective immediately after the record date for such
dividend or distribution.
(x) No adjustment in the Conversion Price shall be required to be made
unless it would require an increase or decrease of at least one cent, but any
adjustments not made because of this Section 6(d)(x) shall be carried forward
and taken into account in any subsequent adjustment otherwise required. All
calculations under this Section 6(d) shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. All adjustments with respect to
a transaction or event shall apply to subsequent such transactions and events.
Anything in this Section 6(d) to the contrary notwithstanding, the Board of
Directors shall be entitled (but shall not be obligated) to make such
irrevocable reduction in the Conversion Price, in addition to the adjustments
required by this Section 6(d), as in its discretion it shall determine to be
advisable in order to avoid or diminish any income deemed to be received for
United States Federal income tax purposes by any holder of shares of Common
Stock or Series B
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Preferred Stock resulting from any event or occurrence giving rise to an
adjustment pursuant to this Section 6(d) or from any similar event or
occurrence, and evidence of the Board of Director's determination of such
adjustment shall be filed with the minutes of the Corporation.
(xi) Whenever the Conversion Price is adjusted pursuant to this Section
6(d),
(A) the Corporation shall promptly file with the minutes of the Corporation
a certificate of the Corporation's chief accounting officer setting forth such
Conversion Price (and any change in the kind or amount of consideration to be
received by the holders of shares of the Series B Preferred Stock upon
conversion) after such adjustment and setting forth a brief statement of the
facts requiring such adjustment and the manner of computing the same, and
(B) a notice stating that such Conversion Price has been adjusted, stating
the effective date of such adjustment and enclosing such certificate shall
forthwith be mailed by the Corporation to the holders of shares of the Series B
Preferred Stock at their addresses as shown on the stock books of the
corporation.
(xii) If as a result of any adjustment pursuant to this Section 6(d), the
holder of any share of Series B Preferred Stock surrendered for conversion
becomes entitled to receive any consideration other than Common Stock,
(A) the Conversion Price with respect to such other consideration shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in this Section 6(d), and
(B) in the case such consideration shall consist of shares of Common Stock
and some other kind of consideration or of two or more kinds of consideration,
the Board shall determine in good faith the fair allocation of the adjusted
Conversion Price between or among such types of consideration, and evidence of
such determination shall be filed with the minutes of the corporation.
(e) Alternate Sources for Common Stock Share Prices. If for any reason the
Common Stock is no longer reported on NASDAQ or a national securities exchange
then the high and low price of a share of Common Stock on the relevant day for
purposes of calculating the Current Market Price shall be determined on the
basis of the last reported sale price, regular way, of the Common Stock as
reported on the composite tape, or similar reporting system, for issues listed
or admitted to trading on the principal national securities exchange on which
the Common Stock is then listed or admitted to trading or, if there is no such
reported sale on the day in question, on the basis of the average of the high
and low bid and asked quotations as so reported or, if the Common Stock is not
then listed or admitted to trading on any national securities exchange or on
NASDAQ, on the basis of the average of the high bid and low asked quotations on
the day in question in the over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotation System, or, if not so
quoted, as reported by National Quotation Bureau, Incorporated, or a similar
organization.
(f) Specified Events. For purposes of this Section 6(f), a 'SPECIFIED EVENT'
shall occur if (i) the Corporation authorizes the granting to the holders of the
Common Stock of any Rights or of any other rights, (ii) there is any capital
stock reorganization or reclassification of the Common Stock (other than (x) a
subdivision or combination of the outstanding Common Stock and other than a
change in the par value of the Common Stock and (y) the Transaction), or any
merger, consolidation or other reorganization to which the Corporation is a
party, or any statutory exchange of securities with another person and for which
approval of any stockholders of the Corporation is required, or any sale or
transfer of all or substantially all the assets of the Corporation or
(iii) there is a voluntary liquidation, dissolution or winding up of the
Corporation. If a Specified Event occurs, the Corporation shall cause to be
filed with the minutes of the Corporation, and shall cause to be mailed to the
holders of shares of the Series B Preferred Stock at their addresses as shown on
the stock books of the Corporation, at least 10 days prior to the applicable
date specified below, a notice stating,
(A) the date on which a record is to be taken for the purpose of any
distribution or Rights relating to such Specified Event or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to be
entitled to such distribution or Rights are to be determined, or
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(B) the date on which the reorganization, reclassification, consolidation,
merger, statutory exchange, sale, transfer, dissolution, liquidation or
winding-up relating to such Specified Event is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such Specified Event.
(g) Reservation of Common Stock. The Corporation shall at all times reserve
and keep available, free from preemptive and subscription rights, out of its
authorized but unissued shares of Common Stock, for the purpose of effecting
conversions of the Series B Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all outstanding shares of Series B
Preferred Stock not theretofore converted. For this purpose, the number of
shares of Common Stock deliverable upon the conversion of all outstanding shares
of Series B Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
(h) Listing. With respect to any securities required to be delivered upon
conversion of the Series B Preferred Stock, the Corporation shall use all
commercially reasonable efforts to list or have approved for quotation such
securities prior to such delivery upon each securities exchange or automated
quotation system, if any, on which any securities of such class are already
listed or approved for quotation.
(i) Taxes. The Corporation shall pay all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of securities on
conversion of the Series B Preferred Stock; provided, however, that (i) the
Corporation shall not be required to pay any tax payable in respect of any
transfer involved in the issue or delivery of securities in a name other than
that of the holder of the shares of Series B Preferred Stock, to be converted
and (ii) no such issue or delivery shall be made unless and until such holder
has paid to the Corporation the amount of any such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid or provided
for.
(j) Termination of Conversion Rights. (i) (A) If shares of Common Stock are
traded on the NASDAQ or a Current Market Price can be determined pursuant to the
methods specified in Section 6(e) and if within any period of 30 consecutive
trading days for a period of at least 20 trading days (which 20 days must
include the last day of the 30 consecutive trading day period), the average of
the high and low sales prices of the Corporation's Common Stock on the principal
market on which such shares trade for such 20 trading days rounded up to the
nearest whole cent (the 'AVERAGE DAILY TRADING PRICE') exceeds 120% of the
Conversion Price then in effect or (B) if shares of Common Stock are not traded
on the NASDAQ and no Current Market Price can be determined on such date
pursuant to the methods specified in Section 6(e), the Valuation Price exceeds
105% of the Transaction Price, at its option and in its sole discretion upon
notice given as set forth below, the Corporation may terminate the conversion
rights set forth in this Section 6; provided, however, that the Corporation
shall not be permitted to exercise its right to terminate the conversion rights
of the Series B Preferred Stock for a period of 12 months following the
Transaction Effective Date. Beginning on the 10th day following receipt from the
Corporation of the notice setting forth its intention to terminate the
conversion rights and ending on the 45th day after receipt thereof, the
Corporation shall be required to redeem any shares of Series B Preferred Stock
at a redemption price equal to (i) if shares of Common Stock are traded on the
NASDAQ or a Current Market Price on such date can be determined pursuant to the
methods specified in Section 6(e), (x) if prior to the third anniversary of the
initial issuance of the Series B Preferred Stock, the Liquidation Amount plus
all accrued and unpaid dividends or (y) if on or after the third anniversary of
the initial issuance of the Series B Preferred Stock, the Redemption Price then
in effect as set forth in Section 5(b), or (ii) if shares of Common Stock are
not traded on the NASDAQ and no Current Market Price can be determined on such
date pursuant to the methods specified in Section 6(e), the Liquidation Amount
plus the product of (A) the difference between (x) the Valuation Price and
(y) the Conversion Price and (B) the number of shares of Common Stock that would
have been issuable upon conversion of the outstanding shares of Series B
Preferred Stock, of any holder that so requests, which request must be received
by the Corporation on or prior to the 45th day after such holder receives the
notice of the conversion termination. In order to exercise this right, such
holder must submit its request to the Corporation in the manner set forth in the
notice of conversion termination, the certificates for the shares to be so
redeemed and the number of shares to be
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redeemed if less than the number represented by the certificate and the name in
which to issue any such shares not so redeemed, if different from the holder.
Following the 45th day after the holders receive the conversion termination
notice, the conversion rights for all outstanding shares of Series B Preferred
Stock shall terminate with no further action by the Corporation. For purposes of
this paragraph, a holder shall be deemed to have received notice, if such notice
is sent by facsimile to a facsimile number provided by such party for such
purpose, on the day it is so sent. If sent by first class mail, postage prepaid,
addressed to such holder at the last address for such holder that appears on the
books of the Corporation, notice shall be deemed to have been received on the
third business day after such notice has been mailed. If notice is also required
to be published as set forth in paragraph (ii) below, notice shall be deemed to
have been received on the day that it is so published.
(ii) So long as the Series B Preferred Stock is not registered under the
Securities Act, notice of the termination of conversion rights shall be mailed
by first class mail, postage prepaid, addressed to the holders of record of the
Series B Preferred Stock at their respective last addresses as they appear on
the books of the Corporation and may be provided by facsimile to any number
provided by the holder for that purpose. If the Corporation registers the
outstanding shares of Series B Preferred Stock under the Securities Act, then
such notice shall be given by mail as described in the preceding sentence and
the Corporation shall also publish any such notice as set forth in Section 5(c)
hereof. The notice shall set forth:
(A) the Average Daily Trading Price for the 20 trading days in question or
the applicable Valuation Price, as applicable, the dates for which such amounts
are presented, the Conversion Price then in effect for each such time period and
the percentage by which the Current Market Price, if applicable, exceeds such
Conversion Price;
(B) the redemption price then in effect;
(C) the place or places where certificates for the shares are to be
surrendered for redemption; and
(D) that dividends on the shares to be redeemed will cease to accrue on the
date the holder delivers any shares to the Corporation for redemption (unless
the Corporation shall default in redeeming the shares on the redemption date).
7. Status of Shares. Upon any redemption, repurchase, conversion, exchange
or other acquisition by the Corporation of shares of Series B Preferred Stock,
the shares of Series B Preferred Stock, so redeemed, repurchased, converted,
exchanged or acquired shall be retired and canceled and shall not be available
for reissuance.
8. Voting Rights. (a) The holders of shares of the Series B Preferred Stock
shall not have the right to vote on or consent to any matter as shareholders of
the Corporation, except as required by applicable law or as otherwise provided
below. All matters on which the holders of the Series B Preferred Stock have the
right to vote may be approved at an annual or special meeting by holders of the
minimum number of shares of Series B Preferred Stock that would be required to
approve a matter if all shares were present and voting at a meeting called to
consider such matter or may be approved by one or more written consents signed
by all of the holders of shares of Series B Preferred Stock.
(b) The consent of holders of at least a majority of the outstanding shares
of Series B Preferred Stock (voting separately as a class but excluding from any
calculation any shares of Series B Preferred Stock held by the Corporation or
any subsidiary thereof) shall be necessary to amend, alter or repeal any of the
provisions of this Article XII of the Articles of Incorporation of the
Corporation which would adversely affect the powers, preferences or rights of
the holders of shares of Series B Preferred Stock then outstanding.
(c) If at any time the equivalent of six quarterly dividends payable on the
outstanding shares of Series B Preferred Stock are accrued and unpaid, whether
or not consecutive and whether or not declared, the holders of all outstanding
shares of Series B Preferred Stock, voting as a single class, together with the
holders entitled to vote of each series of Series A Preferred Stock and the
holders entitled to vote of all other series of Preferred Stock of the
Corporation that rank pari passu with or senior to the Series B Preferred Stock
and have similar voting rights, shall be entitled to elect at the next annual
meeting of shareholders of the Corporation 25% of the directors to the
Corporation's Board of Directors, but no less than two directors (or such
greater number as shall be provided in any
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other series of Preferred Stock that shall at the time be entitled to vote with
the Series B Preferred Stock to elect directors). The proportion of the total
vote of all holders of Preferred Stock entitled to vote for such directors
attributable to the holders of the Series B Preferred Stock shall be based on
the percentage the aggregate Liquidation Amount for all outstanding shares of
Series B Preferred Stock bears to the aggregate liquidation amounts of all other
shares of Preferred Stock entitled to vote. Such directors shall serve until all
accumulated and unpaid dividends have been paid or declared and funds sufficient
for their payment have been set aside therefor.
(d) For the avoidance of doubt, except as otherwise set forth in this
Section 8 or as required by law, the holders of the Series B Preferred Stock
shall not have the right to vote or consent with respect to (i) the increase or
decrease in the amount of authorized capital stock of any class or series, other
than increases or decreases in Series B Preferred Stock (to the extent specified
elsewhere herein), (ii) the authorization, creation (by way of reclassification
or otherwise) or issuance by the Board of Directors of any series of Preferred
Stock, other than any series that will rank senior to the Series B Preferred
Stock as to dividend distributions and distributions upon the liquidation,
winding up or dissolution of the Corporation or any obligation or security
convertible into or exercisable for or exchangeable into or evidencing a right
to purchase, shares of any series of Preferred Stock or the issuance by the
Board of Directors of any previously authorized class of capital stock of the
Corporation, or (iii) any merger, acquisition, disposition or share exchange
involving the Corporation where no shareholder vote is otherwise required or
pursuant to which the holders of the Series B Preferred Stock receive cash at
least equal to the Liquidation Amount.
(e) The consent of the holders of at least a majority of the outstanding
shares of Series B Preferred Stock (voting separately as a class, but excluding
from any calculation any shares of Series B Preferred Stock held by the
Corporation or any subsidiary thereof) shall be necessary to increase the
authorized number of shares of Series B Preferred Stock and to authorize, create
or issue any series of Preferred Stock that will rank senior to the Series B
Preferred Stock as to dividend distributions, and distributions upon the
liquidation, winding up or dissolution of the Corporation.
9. Valuation Procedures. (a) From time to time as a majority of the Board of
Directors of the Corporation shall determine, in good faith, which determination
shall be set forth in written resolutions, and in any event, not less than once
a year, the Corporation shall select in good faith and engage, at its own
expense, an independent, nationally recognized appraiser, investment bank,
accounting firm or consulting firm (the 'APPRAISER') to undertake a valuation of
the Corporation as of the date of the most recently ended fiscal quarter (a
'VALUATION'). The Corporation shall permit the Appraiser, upon reasonable
request, access to its properties and facilities to allow the Appraiser the
opportunity to make an inspection thereof. The Corporation shall make available
to the Appraiser all such financial information, documents and records of the
Corporation as the Appraiser may reasonably request for the purpose of
conducting a Valuation. The Corporation shall request that the Appraiser use its
reasonable efforts to complete a Valuation within 30 days following the date on
which it was engaged to undertake such Valuation. The Corporation shall also
instruct the Appraiser that it is to produce a report setting forth in
reasonable detail a Valuation and the methodology by which the Appraiser arrived
at such Valuation. The Corporation shall provide a copy of such report to each
holder of shares of Series B Preferred Stock.
(b) The Corporation shall instruct the Appraiser to take into account the
following factors, among others, in arriving at a Valuation:
(i) a Valuation shall be a valuation of the Corporation as an entirety and,
unless the Corporation shall have informed the Appraiser of plans to the
contrary, shall assume that the Corporation will continue to operate as a going
concern for the foreseeable future;
(ii) the Appraiser shall consider the most recent budgets and projections
prepared by the Company's management;
(iii) a Valuation shall not reflect any discount for minority interests or
disparate voting rights among classes of the Corporation's Capital Stock; and
(iv) the Appraiser shall consider, to the extent it deems appropriate,
market valuations of comparable airlines.
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(c) The Appraiser shall derive a price per share of Common Stock from each
Valuation, which shall be based on the number of shares of Common Stock
outstanding on the date of such Valuation. Such price per share, as in effect
from time to time, is referred to herein as the 'VALUATION PRICE'.
(d) Notwithstanding the foregoing, the Company shall be required to obtain a
Valuation as of the date its most recently ended fiscal quarter for purposes of
determining the Valuation Price applicable to Sections 6(d)(ii), 6(d)(ix) and
6(j) hereof.
ARTICLE II
The foregoing amendment was adopted on [ ], 2001.
ARTICLE III
MANNER OF ADOPTION AND VOTE
As of [ ], 2001,(1) there were [ ] shares of Common
Stock, without par value, outstanding entitled to cast [ ] votes and
[ ] such votes were represented at the meeting at which the foregoing
amendment was voted upon. Holders of shares of Common Stock cast [ ] votes
in favor of the foregoing amendment and [ ] votes against the foregoing
amendment.
As of [ ], 2001, there were 300 shares of Series B Preferred
Stock, without par value, outstanding entitled to cast 300 votes and 300 such
votes were represented at the meeting at which the foregoing amendment was voted
upon. Holders of shares of Series B Preferred Stock cast 300 votes in favor of
the foregoing amendment and 0 votes against the foregoing amendment.
ARTICLE IV
COMPLIANCE WITH LEGAL REQUIREMENTS
The manner of the adoption of the Articles of Amendment and the vote by
which they were adopted constitute full legal compliance with the provisions of
the Act, the Articles of Incorporation, and the Bylaws of the Corporation.
IN WITNESS WHEREOF, the undersigned Corporation has caused these Articles of
Amendment to be signed and verified by a duly authorized officer, acting for and
on behalf of such Corporation; and the undersigned verifies subject to the
penalties of perjury that the facts contained herein are true this [ ]th day of
[ ], 2001.
AMTRAN, INC.,
BY
..................................
NAME:
TITLE:
- ---------
(1) The date of the Special Meeting.
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ANNEX C
[LOGO OF DRESDNER KLEINWORT WASSERSTEIN]
June 18, 2001
The Special Committee of the Board of Directors
Amtran, Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
The Special Committee:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the shareholders of Amtran, Inc. (the 'Company')
other than J. George Mikelsons and his affiliates (J. George Mikelsons and such
affiliates are referred to herein as 'JGM' and such shareholders other than JGM
are collectively referred to herein as the 'Public Shareholders') of the
consideration to be received by such Public Shareholders pursuant to the terms
of the Agreement and Plan of Merger, dated as of June 18, 2001 (the 'Merger
Agreement'), by and between the Company and INDUS Acquisition Company ('Sub').
The Merger Agreement provides for, among other things, the merger of Sub with
and into the Company (the 'Merger') pursuant to which each outstanding share of
common stock, without par value (the 'Shares'), of the Company held by the
Public Shareholders (other than any such shares owned by the Company, Sub or any
other affiliate of JGM other than persons who are deemed to be affiliates of
Mikelsons by reason of their position as an officer or director of Amtran) will
be converted into the right to receive $23.00 per Share, net to the seller in
cash. The terms and conditions of the Merger are set forth in more detail in the
Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement, and for purposes hereof, we have assumed that the final form
of the Merger Agreement will not differ in any material respect from the draft
provided to us. We have also reviewed and analyzed certain publicly available
business and financial information relating to the Company for recent years and
interim periods to date, as well as certain internal financial and operating
information, including financial forecasts, analyses and projections prepared by
or on behalf of the Company and provided to us for purposes of our analysis, and
we have met with management of the Company to review and discuss such
information and, among other matters, the Company's business, operations,
assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the airline industry specifically, and in other industries
generally, that we believe to be reasonably comparable to the Merger or
otherwise relevant to our inquiry. We have also performed such other financial
studies, analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the historical financial
and other information provided to or discussed with us or publicly available,
and we have not assumed any responsibility for independent verification of any
of such information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and
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we have assumed that such projections, forecasts and analyses were reasonably
prepared in good faith and on bases reflecting the best currently available
judgments and estimates of the Company's management. We express no opinion with
respect to such projections, forecasts and analyses or the assumptions upon
which they are based. In addition, we have not reviewed any of the books and
records of the Company, or assumed any responsibility for conducting a physical
inspection of the properties or facilities of the Company, or for making or
obtaining an independent valuation or appraisal of the assets or liabilities of
the Company, and no such independent valuation or appraisal was provided to us.
We also have assumed that the transactions described in the Merger Agreement
will be consummated without waiver or modification of any of the material terms
or conditions contained therein by any party thereto. Our opinion is necessarily
based on economic and market conditions and other circumstances as they exist
and can be evaluated by us as of the date hereof.
JGM owns a majority of the outstanding Shares, and you have advised us that
representatives of JGM have informed you, and we have assumed for purposes
hereof, that JGM is not prepared to consider offers for or to sell its Shares.
Accordingly, in the context of our engagement, we were not authorized to and did
not solicit third party indications of interest in acquiring all or any part of
the Company or its assets, or pursued any alternative transactions which may be
available to the Company. We express no opinion with respect to the values which
may have been obtained for the Company in a sale to a third party following an
auction process.
We are acting as financial advisor to the Special Committee of the Board of
Directors of the Company (the 'Special Committee') in connection with the
proposed Merger and will receive a fee for rendering this opinion.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities in accordance with our normal compliance procedures.
Our opinion addresses only the fairness from a financial point of view to
the shareholders of the $23.00 per Share cash consideration to be received by
the Public Shareholders pursuant to the Merger, and we do not express any views
on any other terms of the Merger. Specifically, our opinion does not address the
Company's underlying business decision to effect the transactions contemplated
by the Merger Agreement. In addition, our opinion does not address the solvency
of the Company following consummation of the Merger, or at any time, nor do we
address issues regarding fraudulent conveyance or fraudulent transfer, and you
have advised us that the Company has arranged to receive an opinion with respect
to all of such matters from Houlihan, Lokey, Howard and Zukin.
It is understood that this letter is for the benefit and use of the Special
Committee in its consideration of the Merger, and except for its inclusion in
its entirety, and its description, in any proxy statement required to be
circulated to shareholders of the Company relating to the Merger, may not be
used for any other purpose or reproduced, disseminated, quoted or referred to at
any time, in any manner or for any purpose without our prior written consent.
This opinion does not constitute a recommendation to any shareholder or as to
how such holder should vote with respect to the Merger, and should not be relied
upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the $23.00 per Share cash consideration to be received by the Public
Shareholders pursuant to the Merger is fair to such Public Shareholders from a
financial point of view.
Very truly yours,
/s/ Dresdner Kleinwort Wasserstein,
Inc.
C-2
<Page>
ANNEX D
AUDIT COMMITTEE CHARTER
APPROVED -- 5/9/2000
D-1
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MISSION STATEMENT:
The Amtran, Inc. Audit Committee will assist the Board of Directors in
fulfilling its corporate oversight responsibilities. To fulfill this mission,
the Audit Committee will review the Amtran, Inc. financial reporting process,
the system of internal controls, the internal and external audit process and
Amtran, Inc.'s process for monitoring compliance with laws and regulations as
well as compliance with the company's corporate code of ethics. In performing
its duties, the committee will maintain effective working relationships with the
Board of Directors, management, the internal auditors and external auditors. In
order for individual Audit Committee members to effectively perform his or her
role, each Audit Committee member will obtain an understanding of
responsibilities of Audit Committee membership as well as a functional
understanding of Amtran, Inc.'s business, operations, and risks.
COMMITTEE ORGANIZATION:
Audit Committee members shall meet the requirements of the NASD. On and
after the effective date of new rules regarding audit committees, the Audit
Committee shall be comprised of three or more directors as determined by the
Board each of whom shall be independent directors as defined by the NASD. All
members of the Committee shall have a basic understanding of finance and
accounting and be able to read and understand fundamental financial statements,
and at least one member of the Committee shall have accounting or related
financial management expertise.
Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least two times annually, or as circumstances
dictate. The Audit Committee Chair shall prepare and/or approve an agenda in
advance of each meeting. The Committee should meet privately in executive
session at least annually with management, the director of the Internal Auditing
Department, the independent auditors, and as a committee to discuss any matters
that the Committee or each of these groups believe should be discussed. In
addition, the Committee, or at least its Chair, should communicate with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors limited
review procedures.
ROLES AND RESPONSIBILITIES:
INTERNAL CONTROL:
Evaluate whether Amtran, Inc. management is setting the appropriate 'tone
at the top' by communicating the importance of internal control and
ensuring that all individuals possess an understanding of their roles and
responsibilities;
Focus on the extent to which the internal and external auditors review key
and critical computer systems and applications, the security of such
systems and applications and the contingency plan for processing financial
and operational information in the event of a systems breakdown;
Gain an understanding of whether internal control recommendations made by
the internal and external auditors have been implemented by Amtran, Inc.
management; and
Ensure that the internal and external auditors keep the Audit Committee
informed as to any known occurrences of fraud, illegal acts, deficiencies
in internal control, and other matters that may impact the discharge of the
Committee's responsibilities.
FINANCIAL REPORTING:
General
Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their impact on
Amtran, Inc.'s financial statements;
D-2
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Ask Amtran, Inc. management and the internal and external auditors about
significant risks and exposures effecting the financial reporting processes
and the plans to minimize such risks.
Annual Financial Statements
Review the annual financial statements of Amtran, Inc. and determine
whether they are complete and consistent with the information known to
Committee members, and assess whether the financial statements reflect
appropriate accounting principles;
Pay particular attention to complex and/or unusual transactions such as
restructuring charges and derivative disclosures;
Focus on judgmental areas such as those involving valuation of assets and
liabilities, including, for example, the accounting for and disclosure of
obsolete or slow moving inventory; loan losses; warranty, product, and
environmental liability; litigation reserves; and other commitments and
contingencies;
Meet with Amtran, Inc. management and the external auditors to review the
financial statements and results of the audit;
Consider management's handling of proposed audit adjustments identified by
the external auditors;
Review the MD&A and other sections of the Amtran, Inc. annual report before
its release and consider whether the information is adequate and consistent
with the Audit Committee's knowledge about the company and its operations;
and
Interim Financial Statements
Be briefed on how management develops and summarizes quarterly financial
information, the extent of internal audit involvement, the extent to which
the external auditors review quarterly financial information, and whether
that review is performed on a pre- or post-issuance basis;
Meet with management and, if a pre-issuance review was completed, with the
external auditors, either telephonically or in person, to review the
interim financial statements and the results of the review. (This type of
meeting may be done by the Audit Committee Chairperson or the entire
committee);
In order to gain insights into the fairness of the interim financial
statements and disclosures, obtain explanations from management and the
internal and external auditors on whether:
Actual financial results for the quarter or interim period varied
significantly from budgeted or projected results;
Changes in financial ratios and relationships in the interim financial
statements are consistent with changes in Amtran, Inc.'s operations and
financial practices;
Generally accepted accounting principles have been consistently applied;
There are any actual or proposed changes in accounting or financial
reporting practices;
There are any significant or unusual events or transactions;
A financial and operating controls are functioning effectively;
The company has complied with the terms of loan agreements or security
indentures; and
The interim financial statements contain adequate and appropriate
disclosures.
Ensure that the external auditors communicate certain required matters to
the committee.
COMPLIANCE WITH LAWS AND REGULATIONS:
Review the effectiveness of Amtran, Inc.'s system for monitoring compliance
with laws and regulations and the results of management's investigation and
follow-up (including disciplinary actions) on any fraudulent acts or
accounting irregularities;
D-3
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Periodically obtain updates from management, general counsel, and tax
director regarding compliance issues;
Be satisfied that all regulatory compliance matters have been considered in
the preparation of the financial statements; and
Review the findings of any examinations by regulatory agencies such as the
Securities and Exchange Commission.
COMPLIANCE WITH AMTRAN, INC.'S CORPORATE CODE OF ETHICS:
Ensure that a code of ethics is formalized in writing and that all
employees are aware of its existence;
Evaluate whether management is setting the appropriate 'tone at the top' by
communicating the importance of the code of ethics and the guidelines for
acceptable business practices;
Review Amtran, Inc.'s program for monitoring compliance with the code of
ethics; and
Periodically obtaining updates from management and the general counsel
regarding compliance matters.
INTERNAL AUDIT:
Review the internal audit plans, activities and objectives of the internal
audit function;
Review the qualifications of personnel performing internal audit work
at/for Amtran, Inc.; and
Review the effectiveness of the internal audit process in terms of risk
monitoring, internal control review and evaluation and enhancement of
organizational effectiveness.
EXTERNAL AUDIT:
Review the external auditors' proposed scope and approach;
Review the performance of the external auditors and recommend to the
Amtran, Inc. board of directors the appointment or discharge of the
external auditors; and
Review and confirm the independence of the external auditors by reviewing
the non-audit services provided and the auditors' assertion of their
independence in accordance with professional standards.
OTHER RESPONSIBILITIES:
Meet with the internal auditors, external auditors, and Amtran, Inc.
management in separate executive sessions to discuss any matters that the
Committee or these groups believe should be discussed privately;
Ensure that significant findings and recommendations made by the internal
and external auditors are received and discussed on a timely basis;
Review with Amtran, Inc.'s counsel any legal matters that could have a
significant impact on the company's financial statements;
Review the policies and procedures in effect for considering officers'
expenses and perquisites;
If necessary, institute special investigations and, if appropriate, hire
special counsel or experts to assist;
Perform other oversight functions as requested by the full Amtran, Inc.
Board; and
Review and update the Audit Committee Charter, provide oversight and update
recommendations regarding the internal audit charter and receive approval
of periodic changes from the full Amtran, Inc. Board.
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REPORTING RESPONSIBILITIES:
Regularly update the Amtran, Inc. Board of Directors regarding Audit
Committee activities and make appropriate recommendations.
Annually prepare a report to shareholders, as required by the Securities
and Exchange Commission, to be included in Amtran Inc.'s annual proxy
statement.
D-5
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P
R
O
X
Y
AMTRAN, INC.
7337 WEST WASHINGTON STREET, INDIANAPOLIS, INDIANA 46231
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ADJOURNED ANNUAL MEETING, OCTOBER 10, 2001.
The undersigned hereby appoints Kenneth K. Wolff and James W. Hlavacek,
with power of substitution in each, proxies of the undersigned, to vote at
the Annual Meeting of Shareholders of Amtran, Inc. (the 'Corporation')
which was previously adjourned on May 29, 2001, and which will be
reconvened on the 10th day of October 2001, and at any and all
postponements or adjournments of said meeting, all of the shares of stock
of the Corporation which the undersigned may be entitled to vote with all
the powers the undersigned would possess, if then and there personally
present, and especially (but without limiting the general authority and
power hereby given) to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSALS 1,
2, 3 AND 4.
1. Approval of the Agreement and Plan of Merger dated as of June 18, 2001,
between INDUS Acquisition Company and the Corporation, the Plan of Merger
attached thereto as Exhibit A and the consummation of the merger and the
other transactions contemplated by said agreement and said Plan of Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
--------------------------------------------------------------------------
2. Approval of the amendment and restatement of Article XII of the
Corporation's Articles of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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<Table>
3. Election of Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
J. George Mikelsons, John P. Tague, Kenneth K. Wolff, James W. Hlavacek,
Robert A. Abel and Andrejs P. Stipnieks
</Table>
INSTRUCTION: (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
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4. Appointment of Ernst & Young, LLP as the Corporation's Auditors for
2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the Notice of Adjourned
Annual Meeting of Shareholders and Amended and Restated Proxy Statement.
(Continued, and to be signed, on the other side)
P
<Page>
AMTRAN, INC.
(Continued from the other side)
This proxy may be revoked at any time prior to said meeting, and the
undersigned reserves the right to attend such meeting and vote said
proxies in person.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such shares and hereby ratifies and
confirms all that said proxies, their substitutes or any of them may
lawfully do by virtue hereof.
UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS PROXY SHALL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4. THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE INSTRUCTIONS OF THE PROXIES NAMED ABOVE WITH RESPECT TO ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENTS
OR ADJOURNMENTS THEREOF.
Dated................., 2001
............................
Signature
............................
Signature if held jointly
Please sign this proxy
exactly as your name appears
hereon. If the stock is held
in the name of two or more
persons, each should sign.
Executors, administrators,
trustees, guardians,
attorneys and corporate
offices should add their
titles. If a corporation,
sign in full corporate name
by president or other
authorized officer. If a
partnership, sign in
partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.