EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
dated as of
November 13, 2002
among
INTERNATIONAL AIRCRAFT INVESTORS,
JETSCAPE AVIATION GROUP, INC.
and
JETSCAPE LEASING, INC.
TABLE OF CONTENTS
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PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions...................................................1
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger....................................................7
SECTION 2.02. Conversion of Shares..........................................8
SECTION 2.03. Dissenters' Rights............................................8
SECTION 2.04. Surrender and Payment.........................................8
SECTION 2.05. Stock Options.................................................9
SECTION 2.06. Adjustments..................................................10
SECTION 2.07. Withholding Rights...........................................10
SECTION 2.08. Lost Certificates............................................10
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Articles of Incorporation....................................11
SECTION 3.02. Bylaws.......................................................11
SECTION 3.03. Directors and Officers.......................................11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power................................11
SECTION 4.02. Corporate Authorization......................................11
SECTION 4.03. Governmental Authorization...................................12
SECTION 4.04. Non-contravention............................................12
SECTION 4.05. Capitalization...............................................13
SECTION 4.06. Subsidiaries.................................................13
SECTION 4.07. SEC Filings..................................................14
SECTION 4.08. Financial Statements.........................................15
SECTION 4.09. No Undisclosed Material Liabilities..........................15
SECTION 4.10. Disclosure Documents.........................................15
SECTION 4.11. Aircraft and Leases..........................................15
SECTION 4.12. Insurance Coverage...........................................17
SECTION 4.13. Title to Assets other than Aircraft..........................18
SECTION 4.14. Absence of Certain Changes...................................18
SECTION 4.15. Compliance with Laws and Court Orders........................19
SECTION 4.16. Litigation...................................................20
SECTION 4.17. Taxes........................................................20
SECTION 4.18. Employees and Employee Benefit Plans.........................22
SECTION 4.19. Environmental Matters........................................24
SECTION 4.20. Property and Leases..........................................24
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SECTION 4.21. Intellectual Property........................................24
SECTION 4.22. Material Contracts...........................................24
SECTION 4.23. Affiliate Transactions.......................................26
SECTION 4.24. Anti-takeover Statutes.......................................26
SECTION 4.25. Finders' Fees................................................26
SECTION 4.26. Opinion of Financial Advisor.................................26
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.01. Corporate Existence and Power................................27
SECTION 5.02. Corporate Authorization......................................27
SECTION 5.03. Governmental Authorization...................................27
SECTION 5.04. Non-contravention............................................27
SECTION 5.05. Disclosure Documents.........................................28
SECTION 5.06. Finders' Fees................................................28
SECTION 5.07. Financing....................................................28
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company.......................................28
SECTION 6.02. Shareholder Meeting; Proxy Material..........................29
SECTION 6.03. Access to Information........................................29
SECTION 6.04. No Solicitation..............................................30
SECTION 6.05. Notices of Certain Events....................................31
SECTION 6.06. Tax Matters..................................................31
ARTICLE 7
COVENANTS OF PARENT AND THE COMPANY
SECTION 7.01. Consents.....................................................32
SECTION 7.02. Certain Filings..............................................32
SECTION 7.03. Public Announcements.........................................32
SECTION 7.05. Further Assurances...........................................33
SECTION 7.05. Trading in Company Stock.....................................33
SECTION 7.06. Employment Agreements........................................33
SECTION 7.07 Director and Officer Liability...............................33
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to Obligations of Each Party......................34
SECTION 8.02. Conditions to the Obligations of Parent and Merger
Subsidiary.................................................34
SECTION 8.03. Conditions to the Obligations of the Company.................35
ARTICLE 9
TERMINATION
SECTION 9.01. Termination..................................................36
SECTION 9.02. Effect of Termination........................................37
SECTION 9.03. Fees and Expenses............................................37
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ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices......................................................38
SECTION 10.02. Survival of Representations and Warranties...................39
SECTION 10.03. Amendments; Waivers..........................................39
SECTION 10.04. Successors and Assigns.......................................39
SECTION 10.05. Governing Law................................................40
SECTION 10.06. WAIVER OF JURY TRIAL.........................................40
SECTION 10.07. Counterparts; Effectiveness..................................40
SECTION 10.08. Entire Agreement.............................................40
SECTION 10.09. Captions.....................................................40
SECTION 10.10. Severability.................................................40
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 13, 2002 among
INTERNATIONAL AIRCRAFT INVESTORS, a California corporation (the "COMPANY"),
JETSCAPE AVIATION GROUP., INC., a Florida corporation ("PARENT"), and JETSCAPE
LEASING, INC., a California corporation and a direct wholly-owned subsidiary
of Parent ("MERGER SUBSIDIARY").
WHEREAS, the Parent and the Company have agreed to merge the Merger Sub
with and into the Company, upon the terms and subject to the conditions set
forth herein (the "MERGER");
WHEREAS, the Boards of Directors of Merger Subsidiary and the Company
each have determined that the Merger is fair to and in the best interests of
their respective shareholders, declared the advisability of, and approved and
adopted, this Agreement and the transactions contemplated hereby;
WHEREAS, the Board of Directors of the Company has determined to
recommend the Merger to the Company's shareholders; and
WHEREAS, concurrently with the execution of this Agreement, certain
shareholders of the Company have executed a Voting Agreement (the "VOTING
AGREEMENT"), dated as of the date hereof, whereby they agree, among other
things, to vote the shares of common stock, par value $0.01 per share, of the
Company ("COMPANY STOCK") beneficially owned by them in favor of the approval of
the principal terms of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties to this Agreement (the "PARTIES") hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"ACQUISITION PROPOSAL" means, other than the transactions contemplated
by this Agreement, any offer or proposal for, any indication of interest in, or
any submission of inquiries from any Third Party relating to (A) any acquisition
or purchase, direct or indirect, of 50% or more of the consolidated assets of
the Company and its Subsidiaries or over 50% of any class of equity or voting
securities of the Company or any of its Subsidiaries whose assets, individually
or in the aggregate, constitute more than 50% of the consolidated assets of the
Company, (B) any tender offer or exchange offer that, if consummated, would
result in such Third Party's beneficially owning 50% or more of any class of
equity or voting securities of the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 50% of the
consolidated assets of the Company or (C) a merger, consolidation, share
exchange, business
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combination, sale of substantially all the assets, reorganization,
recapitalization, liquidation, dissolution or other similar transaction
involving the Company or any of its Subsidiaries whose assets, individually or
in the aggregate, constitute more than 50% of the consolidated assets of the
Company.
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"AIRCRAFT" means, either collectively or individually, as applicable,
the aircraft listed in the Company Disclosure Schedule, each with the make,
model and manufacturer's serial number as set forth in the Company Disclosure
Schedule, including: (i) the airframe; (ii) the Engines; (iii) all appliances,
parts (including spare parts), accessories, instruments, navigational and
communications equipment, furnishings, modules, components and other items of
equipment installed in or furnished with the Aircraft (the "PARTS"), except to
the extent that ownership of such Parts is vested in the Lessee under the terms
of the applicable Lease, and (iv) all log books, records, manuals and other
documentation pertaining to the airframe, Engines and Parts thereof.
"AIRCRAFT DOCUMENTS" means, with respect to each Aircraft, (i) the Lease
Documents relating to that Aircraft; (ii) any Financing Agreement relating to
that Aircraft and (iii) all other Contracts (including any side letters)
executed by any Person in connection with, or relating to, that Aircraft or any
such Lease or Financing Agreement (whether such Contract is between the Lessee
or a Lender, on the one hand, and any of the Company, a Subsidiary of the
Company, or a trustee for the benefit of the Company or a Subsidiary, on the
other hand, or otherwise), each as set forth in the Company Disclosure Schedule.
"BUSINESS DAY" means a day, other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CALIFORNIA CODE" means the General Corporation Law of the State of
California.
"CODE" means the Internal Revenue Code of 1986.
"COMPANY BALANCE SHEET" means the consolidated balance sheet of the
Company as of December 31, 2001 and the footnotes thereto set forth in the
Company 10-K.
"COMPANY BALANCE SHEET DATE" means December 31, 2001.
"COMPANY DISCLOSURE SCHEDULE" means the Disclosure Schedule of the
Company that is delivered with, and dated as of the date of, this Agreement.
"COMPANY 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended December 31, 2001.
"CONTRACT" means any and all contracts, agreements, leases, notes,
mortgages, bonds, indentures, loan or credit agreements, deeds, guarantees,
franchises, covenants, licenses, commitments, undertakings, obligations,
arrangements, registrations, authorizations or other instruments or
understandings, whether written or oral, express or
2
implied, to which such Person is a party or to which or by which such Person or
the property of such Person is subject or bound.
"EMPLOYEE PLAN" means any "employee benefit plan," as defined in Section
3(3) of ERISA, each employment, severance or similar contract, plan, arrangement
or policy and each other plan or arrangement (whether or not written) providing
for compensation, bonus, pension, profit-sharing, stock option, or other
stock-related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, worker's compensation,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits (including compensation, pension, health, medical or life
insurance or other benefits) that is maintained, administered or contributed to,
as the case may be, by the Company or any of its Affiliates and covers any
director, former director, employee or former employee of the Company or any
Subsidiary or with respect to which the Company or any of its Subsidiaries has
any liability.
"ENGINES" means, with respect to each Aircraft, each engine installed on
or relating to that Aircraft, as more particularly described by reference to
such engines' make, model and manufacturer's serial number in the Company
Disclosure Schedule.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any Governmental Authority or
other third party, relating to human health and safety, the environment or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of the Company or any Subsidiary as
currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"FINANCING AGREEMENT" means, with respect to each Aircraft, each loan,
credit and other agreement (including promissory notes, security agreements,
trust indentures, mortgages, deeds of trust, guarantees, installment purchase
agreements, finance leases, letters of credit) evidencing Indebtedness secured
by that Aircraft or interests in that Aircraft, together with all supplements or
amendments to any such loan, credit or other agreement.
"INDEBTEDNESS" means (i) all obligations for borrowed money, (ii) all
obligations evidenced by bonds, debentures, notes or similar instruments, (iii)
all obligations upon which interest charges are customarily paid, (iv) all
obligations under conditional sale or other title retention agreements relating
to property or assets purchased by the Company or any of its Subsidiaries, (v)
all obligations issued or assumed by the Company or any of its Subsidiaries as
the deferred purchase price of property or services, (vi) all
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Indebtedness of others secured by (or for which the holder of that Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by the Company or any of its Subsidiaries, whether or
not the obligations secured thereby have been assumed, (vii) all guarantees by
the Company or any of its Subsidiaries of Indebtedness of others (but excluding
guarantees by the Company or its Subsidiaries of Indebtedness of the Company or
any of its other Subsidiaries), (viii) all capital lease obligations, (ix) all
obligations to which the Company or any of its Subsidiaries is a party in
respect of interest rate protection agreements, foreign currency exchange
agreements, derivatives transactions or other hedging arrangements and (x) all
obligations as an account party in respect of letters of credit and bankers'
acceptances; provided that the Company's obligations in respect of security
deposits and aircraft maintenance reimbursement or cost sharing under any Lease
Documents shall not be considered Indebtedness.
"INTELLECTUAL PROPERTY" means (i) United States, non-United States, and
international patents, patent applications and statutory invention
registrations, (ii) United States, non-United States, and international
trademarks, service marks, trade dress, logos, trade names, corporate names and
other source identifiers, and registrations and applications for registration
thereof, (iii) United States, non-United States, and international copyrights
and registrations and applications for registration thereof, and (iv)
confidential and proprietary information, including trade secrets and know-how.
"KNOWLEDGE" of any Person that is not an individual means the best
knowledge of such Person's officers after reasonable inquiry.
"LEASE" means, with respect to each Aircraft, (i) the lease agreement
(including finance leases) currently in effect with respect to that Aircraft,
together with all supplements and amendments to that lease agreement, oral or
written, each as identified on the Company Disclosure Schedule, or (ii) any
lease agreement relating to that Aircraft entered into after the date of this
Agreement, together with all supplements and amendments to that lease agreement.
"LEASE DOCUMENTS" means, with respect to each Aircraft, the Lease of
that Aircraft and all other agreements (including any side letters, assignment
of warranties or option agreements) between the Lessee and the lessor of that
Aircraft delivered in connection with, or relating to, the Lease, each as set
out in the Company Disclosure Schedule.
"LENDER" means, with respect to each Aircraft, each commercial bank,
financial institution or other Person that has provided financing with respect
to that Aircraft pursuant to any Financing Agreement, as set out in the Company
Disclosure Schedule.
"LESSEE" means, with respect to each Aircraft, the lessee of that
Aircraft pursuant to a Lease, as identified on the Company Disclosure Schedule.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset that it
has acquired or holds subject to the interest
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of a vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, an event,
change, circumstance or effect that is or is reasonably likely (i) to be
materially adverse to the financial condition, business, assets or results of
operations of such Person and its Subsidiaries, taken as a whole or (ii) to
prevent or materially impair or delay the consummation of the transactions
contemplated by this Agreement; provided, however, that in no event shall any of
the following be deemed to constitute a Material Adverse Effect on the Company
pursuant to clause (i) above: (A) any change, other than the occurrence after
the date hereof of an "event of default" (however defined in the applicable
Lease Document) or event which with the giving of notice or passage of time or
both would become an "event of default" (as so defined) under any Lease, that
results from conditions generally affecting the U.S. economy, airline industry
or aircraft leasing industry (including laws and regulations applicable to such
industry), (B) a change that results from the announcement or pendency of the
transactions contemplated hereby or (C) a change that results from the taking of
any action required by this Agreement.
"MERGER CONSIDERATION" means (i) $1.45 if the Effective Time occurs on
or prior to December 31, 2002, or (ii) $1.10 if the Effective Time occurs on or
after January 1, 2003; provided, that if (A) the Company has obtained the
Shareholder Vote at the Company Shareholder Meeting and all of the other
conditions precedent set forth in Sections 8.01 and 8.02 to the obligations of
Parent and Merger Subsidiary to consummate the Merger, other than the condition
specified in Section 8.02(f), have been satisfied in full on or prior to
December 30, 2002 and (B) Parent and Merger Subsidiary nevertheless fail or
refuse to consummate the Merger on or before December 31, 2002, then the Merger
Consideration shall be $1.45.
"1933 ACT" means the Securities Act of 1933.
"1934 ACT" means the Securities Exchange Act of 1934.
"PERMITTED LIENS" means (i) with respect to any Aircraft, (A) the rights
conferred upon the Lessee by the Lease of that Aircraft; (B) any Liens for which
the applicable Lessee is responsible or for which it is to indemnify the lessor
under the terms of the relevant Lease; (C) any Liens which are "Permitted Liens"
under the applicable Lease other than Liens created by the Company or one of its
Subsidiaries (or a trustee for the benefit of the Company or a Subsidiary) or
(D) any Liens under the Financing Agreements relating to that Aircraft in favor
of a Lender and (ii) with respect to any property other than Aircraft, whether
real, personal, intangible, or mixed, (A) mechanics', carriers', workmen's,
repairmen's, warehousemen's, airport authority's or other like Liens arising
from or incurred in the ordinary course of business and securing obligations
which are not due or which are not in excess of $10,000 and are being contested
in good faith by the Company or one or more of its Subsidiaries, provided that
the Company has established adequate reserves for those obligations at the time
that it was required under GAAP to do so, (B) Liens for Taxes which are not due
and payable or which may thereafter be paid without penalty or which are not in
excess of $10,000 and are being contested in good faith by the Company or one or
more of its Subsidiaries, provided that the Company has established adequate
reserves for the payment of those Taxes which are being contested in good faith
at the time that it was required under GAAP to do so;
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(C) easements, covenants, rights-of-way and other encumbrances or restrictions
of record relating solely to real property owned or leased by the Company or any
of its Subsidiaries; (D) zoning, building and other similar restrictions,
provided that the same are not violated in any material respect by any
improvements by the Company or any of its Subsidiaries or by the use of the
subject property in the conduct of the Company's or any of its Subsidiaries'
business; (E) unrecorded easements, covenants, rights-of-way or other
encumbrances or restrictions, and other Liens that are not material in character
or amount, none of which unrecorded items or other Liens materially impairs the
use or value of the real property to which they relate in the business of the
Company and its Subsidiaries, taken as a whole, as presently or proposed to be
conducted; and (F) other Liens which do not materially impair the use or value
of the assets to which they relate in the business of the Company and its
Subsidiaries, taken as a whole, as presently or proposed to be conducted.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"SARBANES-OXLEY ACT" means the Sarbanes-Oxley Act of 2002.
"SEC" means the Securities and Exchange Commission.
"SUBSIDIARY" with respect to any Person, means any corporation or other
organization, whether incorporated or unincorporated, (i) of which such Person
or any other Subsidiary of such Person is a general partner or (ii) of which at
least 50% of the securities or other interests having by their terms ordinary
voting power to elect at least 50% of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person, by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
"THIRD PARTY" means any Person as defined in Section 13(d) of the 1934
Act, other than Parent or any of its Affiliates.
Unless otherwise expressly specified in this Agreement, any reference in
this Agreement to a statute shall be to such statute, as amended from time to
time, and to the rules and regulations promulgated thereunder.
Each of the following terms is defined in the Section set forth opposite
such term:
TERM SECTION
---- -------
Certificates.................................. 2.04
Company....................................... Preamble
Company Licensed Intellectual Property........ 4.21
Company Owned Intellectual Property........... 4.21
Company Proxy Statement....................... 4.10
Company SEC Documents......................... 4.07
Company Securities............................ 4.05
Company Shareholder Meeting................... 6.02
Company Stock Option.......................... 2.05
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TERM SECTION
---- -------
Company Subsidiary Securities................. 4.06
Confidentiality Agreement..................... 6.04
Effective Time................................ 2.01
Employment Agreements......................... Recitals
Employee Plans................................ 4.18
End Date...................................... 9.01
Indemnified Person............................ 7.07
Paying Agent.................................. 2.04
Exchange Ratio................................ 2.02(a)
GAAP.......................................... 4.08
Governmental Authority........................ 4.22
Material Contracts............................ 4.22
Merger........................................ 2.01
Merger Subsidiary............................. Preamble
Parent........................................ Preamble
Potential Reserve Claim Amount................ 4.11
Shareholder Vote.............................. 4.02
Superior Proposal............................. 6.04
Surviving Corporation......................... 2.01
Tax Return.................................... 4.17
Taxes......................................... 4.17
Taxing Authority.............................. 4.17
Termination Fee............................... 9.03
Title IV Plan................................. 4.18
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. (a) At the Effective Time, Merger Subsidiary
shall be merged with and into the Company in accordance with the California
Code, whereupon the separate existence of Merger Subsidiary shall cease, and the
Company shall be the surviving corporation (the "SURVIVING CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, the Company and
Merger Subsidiary will file an agreement of merger with the California Secretary
of State and make all other filings or recordings and pay all fees and taxes
required by the California Code in connection with the Merger. The Merger shall
become effective at such time (the "EFFECTIVE TIME") as the agreement of merger
is duly filed with, and accepted for recording by, the California Secretary of
State (or at such later time as may be specified in the agreement of merger).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under the California Code.
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SECTION 2.02. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any further action on the part of the holder of any
shares of capital stock of the Company, Parent or Merger Subsidiary:
(a) each share of Company Stock outstanding immediately prior to the
Effective Time, other than shares of Company Stock held by Persons who properly
exercise dissenters' rights in accordance with Chapter 13 of the California Code
("DISSENTING SHARES"), shall be converted into the right to receive in cash,
without interest, the Merger Consideration and all shares of Company Stock so
converted pursuant to this Section 2.02(a) shall no longer be outstanding and
shall be canceled and retired and in all respects shall cease to exist, and each
holder of Certificate(s) evidencing any such shares thereafter shall cease to
have any right or incidents of beneficial ownership or otherwise in respect of
such shares, except for the right to receive in respect of such shares, upon
surrender of such Certificate(s) in accordance with Section 2.04, the Merger
Consideration, without interest; and
(b) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
SECTION 2.03. Dissenters' Rights. If holders of Company Stock are
entitled to dissenters' rights in connection with the Merger under Chapter 13 of
the California Code, any Dissenting Shares shall not be converted into the right
to receive Merger Consideration but shall be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the California Code. The Company shall give Parent
prompt notice of any demand received by the Company to require the Company to
purchase shares of Company Stock, and Parent shall have the right to participate
in all negotiations and proceedings with respect to such demand. The Company
agrees that, except with the prior written consent of Parent, or as required
under the California Code, it will not voluntarily make any payment with respect
to, or settle or offer to settle, any such purchase demand. Each holder of
Dissenting Shares who, pursuant to the provisions of the California Code,
becomes entitled to payment of the value of shares of Company Stock (a
"DISSENTING SHAREHOLDER") shall receive payment therefor (but only after the
value therefor shall have been agreed upon or finally determined pursuant to
such provisions). If, after the Effective Time, any Dissenting Shareholder shall
have failed to make an effective purchase demand or shall have effectively
withdrawn or lost his rights as a Dissenting Shareholder, Parent shall cause the
Surviving Corporation to pay, upon surrender by such Dissenting Shareholder of
his Certificate or Certificates, the Merger Consideration to which such
Dissenting Shareholder is then entitled under this Agreement, without interest.
SECTION 2.04. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent reasonably satisfactory to the Company (the
"PAYING AGENT") for the purpose of exchanging certificates representing shares
of Company Stock (the "CERTIFICATES") for the Merger Consideration. Parent will
cause the Surviving Corporation to deposit with the Paying Agent the Merger
Consideration to be paid in respect of the shares of Company Stock. Promptly
after the Effective Time, Parent will cause the Paying Agent to send, to each
holder of shares of Company Stock at the
8
Effective Time a letter of transmittal and instructions (which shall specify
that the delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates to the Paying Agent) for use in such
exchange.
(b) Each holder of shares of Company Stock that have been converted into
the right to receive the Merger Consideration will be entitled to receive, upon
surrender to the Paying Agent of a Certificate, together with a properly
completed letter of transmittal, the Merger Consideration in respect of the
Company Stock represented by such Certificate, without interest. Until so
surrendered, each such Certificate shall represent after the Effective Time for
all purposes the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the Certificate is registered, it shall be a
condition to such payment that the Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the Person
requesting such payment shall pay to the Paying Agent any transfer or other
Taxes required as a result of such payment to a Person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation and the Paying Agent that such Tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of shares of Company Stock. If, after the Effective Time, Certificates
are presented to the Surviving Corporation, they shall be canceled and exchanged
for the Merger Consideration provided for, and in accordance with the procedures
set forth, in this Article.
(e) Any portion of the Merger Consideration deposited with the Paying
Agent pursuant to Section 2.04(a) that remains unclaimed by the holders of
shares of Company Stock one year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged the Certificates
for the Merger Consideration in accordance with this Section prior to that time
shall thereafter look only to Parent for payment of the Merger Consideration, in
respect of such shares without any interest thereon. Notwithstanding the
foregoing, Parent shall not be liable to any holder of shares of Company Stock
for any amounts paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Any amounts remaining unclaimed by holders of
shares of Company Stock immediately prior to such time when the amounts would
otherwise escheat to or become property of any governmental authority shall
become, to the extent permitted by applicable law, the property of Parent free
and clear of any claims or interest of any Person previously entitled thereto.
SECTION 2.05. Stock Options. (a) At or immediately before the Effective
Time, each option to purchase shares of Company Stock that is outstanding under
any stock option or compensation plan or arrangement of the Company, whether or
not vested or exercisable, shall be canceled, and Parent shall cause the
Surviving Corporation, in consideration of such cancellation, to pay to the
holders of such options an amount in respect thereof equal to the product of (i)
the excess, if any, of the Merger Consideration over the exercise price of each
such option, and (ii) the number of shares of Company Stock subject to such
option immediately prior to its cancellation (such payment to be net of
applicable withholding taxes). No consideration shall be payable in respect of
the
9
cancellation of any such option the exercise price of which is equal to or
greater than the Merger Consideration.
(b) Prior to the Effective Time, the Company shall (i) obtain from each
holder of options to purchase shares of Company Stock granted under the
Company's stock option or compensation plans or arrangements a consent to the
cancellation of such options in accordance with Section 2.05(a), and (ii) make
any amendments to the terms of such stock option or compensation plans or
arrangements that are necessary to give effect to the transactions contemplated
by this Section 2.05. Notwithstanding any other provision of this Section 2.05,
payment may be withheld in respect of any stock option until the consent
specified in clause (i) of the preceding sentence has been obtained.
(c) All other stock option or compensation plans or arrangements
providing for the issuance or grant of any interest in respect of the capital
stock of the Company or any of its Subsidiaries shall terminate as of the
Effective Time, and no participant in any such plans or arrangements shall have
any rights thereunder to acquire any equity securities of the Company, the
Surviving Corporation or any Subsidiary thereof.
SECTION 2.06. Adjustments. If, during the period between the date of
this Agreement and the Effective Time, the outstanding shares of capital stock
of Company shall have been changed into a different number of shares as a result
of any reclassification, recapitalization, stock split or combination, exchange
or readjustment of shares, or any stock dividend thereon with a record date
during such period, the Merger Consideration and any other amounts payable
pursuant to this Agreement shall be appropriately adjusted.
SECTION 2.07. Withholding Rights. Each of the Paying Agent, the
Surviving Corporation and Parent shall be entitled to deduct and withhold from
the consideration otherwise payable to any Person pursuant to this Article such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign tax law. If
the Paying Agent, the Surviving Corporation or Parent, as the case may be, so
withholds amounts, such amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Stock in
respect of which the Paying Agent, the Surviving Corporation or Parent, as the
case may be, made such deduction and withholding.
SECTION 2.08. Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Paying Agent will issue, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the shares of
Company Stock represented by such Certificate, as contemplated by this Article.
10
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Articles of Incorporation. The articles of incorporation
of the Company in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (ii) the individuals
named on Exhibit A hereto shall be the officers of the Surviving Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that:
SECTION 4.01. Corporate Existence and Power. (a) The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California and has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not
have, individually or in the aggregate, a Material Adverse Effect on the
Company. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification is
necessary, except for those jurisdictions where failure to be so qualified would
not have, individually or in the aggregate, a Material Adverse Effect on the
Company.
(b) The Company has heretofore delivered or made available to Parent (i)
true and complete copies of the articles of incorporation and bylaws of the
Company as currently in effect, and (ii) the minute books of the Company, which
minute books contain a complete summary of all meetings of the Company's
directors and shareholders since the time of incorporation and copies of all
written consents to actions in lieu of such meetings.
SECTION 4.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for the required approval of the Company's shareholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action on the part of the Company. The adoption of this
Agreement and the approval of the Merger by the affirmative vote of a majority
of the outstanding shares of Company Stock is the only vote (the "SHAREHOLDER
VOTE") of the holders of any of the Company's capital stock necessary in
connection with the consummation of the Merger. This
11
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except insofar as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditor's rights generally, or by principles governing the availability of
equitable remedies.
(b) The Board of Directors of the Company, at a meeting thereof duly
called and held on November 12, 2002, (A) determined that this Agreement and the
Merger are fair to and in the best interests of the Company and its
shareholders, (B) approved and declared the advisability of this Agreement and
the Merger and (C) resolved to recommend that the shareholders of the Company
approve the principal terms of this Agreement.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any governmental body, agency, official or authority, domestic,
foreign or supranational, other than (i) the filing of an agreement of merger
with respect to the Merger with the California Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (ii) any filings listed in Section 4.03 of
the Company Disclosure Statement, and (iii) compliance with any applicable
requirements of the Nasdaq Stock Market, the 1934 Act, and any other applicable
securities laws, whether state or foreign.
SECTION 4.04. Non-contravention. Except as set forth in the Company
Disclosure Schedule, the execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) contravene or result in any
violation or breach of any provision of the articles of incorporation or bylaws
of the Company, (ii) assuming compliance with the matters referred to in Section
4.03 and receipt of the Shareholder Vote, contravene, conflict with or result in
a violation or breach of any provision of any applicable law, statute,
ordinance, rule, regulation, judgment, injunction, order, or decree applicable
to the Company or any of its Subsidiaries, (iii) require any consent or other
action by any Person under, constitute a default, or an event that, with or
without notice or lapse of time or both, would constitute a default, under, or
cause or permit the termination, cancellation, acceleration or other change of
any right or obligation or the loss of any benefit to which the Company or any
of its Subsidiaries is entitled under any provision of any Contract binding upon
the Company or any of its Subsidiaries or any of their assets or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of the Company and
its Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, except in the case of clause
(ii) above, as would not have a Material Adverse Effect on the Company.
SECTION 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of 20,000,000 shares of Company Stock, of which 3,581,773
shares were outstanding as of the date of this Agreement, and 15,000,000 of
preferred stock, par value $0.01 per share, none of which is outstanding. As of
the date of this Agreement, there are outstanding stock options to purchase an
aggregate of 1,401,554 shares of Company Stock (all of which options will become
exercisable immediately prior to completion of the Merger). All outstanding
shares of capital stock of the Company have been, and all
12
shares that may be issued pursuant to awards granted under the 1997 Stock Option
and Award Plan, the 1997 Eligible Directors Stock Option Plan or any other stock
option agreement with the Company's officers or directors, will be, when issued
in accordance with the respective terms thereof, duly authorized and validly
issued and are fully paid and nonassessable. The Company has no shares of
Company Stock or other shares of capital stock held has treasury stock.
(b) Except as set forth in this Section 4.05, there are no outstanding
(i) shares of capital stock or voting securities of the Company, (ii) securities
of the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company or (iii) options or other rights to acquire
from the Company, or other obligation of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "COMPANY SECURITIES").
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any of the Company Securities. The
Company Disclosure Schedules contain a list of all such Company Securities,
including the exercise price and vesting schedule, or other similar terms,
thereof.
SECTION 4.06. Subsidiaries. (a) Each Subsidiary of the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Each such Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not have, individually or in the aggregate, a Material
Adverse Effect on such Subsidiary or the Company. All Subsidiaries of the
Company, their respective jurisdictions of incorporation and their respective
authorized and outstanding capital stock are identified on the Company
Disclosure Schedule.
(b) The Company has heretofore delivered or made available to Parent (i)
true and complete copies of the articles of incorporation and bylaws of each
Subsidiary as currently in effect, and (ii) the minute books of each Subsidiary,
which minute books contain a complete summary of all meetings of the
Subsidiary's directors and shareholders since the time of incorporation and
copies of all written consents to actions in lieu of such meetings.
(c) Except as set forth in the Company Disclosure Schedule, all of the
outstanding capital stock of, or other voting securities or ownership interests
in, each Subsidiary of the Company, is owned by the Company, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership
interests). There are no outstanding (i) securities of the Company or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary of the Company
or (ii) options or other rights to acquire from the Company or any of its
Subsidiaries, or other obligation of the Company or any of its Subsidiaries to
issue, any capital stock or other voting securities or ownership interests in,
or any securities convertible into or
13
exchangeable for any capital stock or other voting securities or ownership
interests in, any Subsidiary of the Company (the items in clauses (i) and (ii)
being referred to collectively as the "COMPANY SUBSIDIARY SECURITIES"). There
are no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any of the Company Subsidiary
Securities.
(d) Other than the Subsidiaries identified in the Company Disclosure
Schedule, the Company does not directly or indirectly own any capital stock or
share capital of, or other equity interest in, any corporation, partnership,
trust, joint venture or other Person.
SECTION 4.07. SEC Filings. (a) The Company has delivered to Parent (i)
the Company's annual reports on Form 10-K for its fiscal years ended December
31, 1999, 2000 and 2001, (ii) its quarterly reports on Form 10-Q for its fiscal
quarters ended March 31, 2002 and June 30, 2002, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
shareholders of the Company held since December 31, 1999, and (iv) all of its
other reports, statements, schedules and registration statements filed with the
SEC since January 1, 2001 (the documents referred to in this Section 4.07(a),
collectively, the "COMPANY SEC DOCUMENTS").
(b) As of its filing date, each Company SEC Document filed prior to the
date of this Agreement complied, and each such Company SEC Document filed
subsequent to the date of this Agreement will comply, as to form in all material
respects with the applicable requirements of the 1933 Act, the 1934 Act and the
Sarbanes-Oxley Act, as the case may be.
(c) As of its filing date (or, if amended or superceded by a filing
prior to the date of this Agreement, on the date of such filing), each Company
SEC Document filed prior to the date of this Agreement pursuant to the 1934 Act
did not, and each such Company SEC Document filed subsequent to the date of this
Agreement pursuant to the 1934 Act will 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.
(d) Each Company SEC Document that is a registration statement, as
amended or supplemented, if applicable, filed prior to the date of this
Agreement pursuant to the 1933 Act, as of the date such registration statement
or amendment became effective, did not, and each such Company SEC Document filed
subsequent to the date of this Agreement pursuant to the 1933 Act will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
SECTION 4.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents fairly present in all material
respects, in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject to normal year-end adjustments in the case
of any unaudited interim financial statements).
14
SECTION 4.09. No Undisclosed Material Liabilities. Except as set forth
in Section 4.09 of the Disclosure Schedule, there no liabilities or obligations
of the Company or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances that could
reasonably be expected to result in such a liability or obligation, other than
liabilities or obligations disclosed and provided for in the Company Balance
Sheet or in the notes thereto or in the financial statements contained in
Company SEC Documents filed subsequent to the Company Balance Sheet Date and
prior to the date of this Agreement and liabilities and obligations not
otherwise required to be disclosed in the Company Balance Sheet or the Company
SEC Documents and that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
SECTION 4.10. Disclosure Documents. The proxy or information statement
of the Company to be filed with the SEC in connection with the Merger (the
"COMPANY PROXY STATEMENT") and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the applicable
requirements of the 1934 Act. At the time the Company Proxy Statement or any
amendment or supplement thereto is first mailed to shareholders of the Company,
and at the time such shareholders vote on approval of the principal terms of
this Agreement, the Company Proxy Statement, as supplemented or amended, if
applicable, will 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 representations and warranties contained in this Section 4.10 will not apply
to statements or omissions included in the Company Proxy Statement based upon
information furnished to the Company in writing by Parent specifically for use
therein.
SECTION 4.11. Aircraft and Leases. (a) The Company Disclosure Schedule
sets forth with respect to each Aircraft:
(i) the manufacturer, make, model, serial number, date of
manufacture and registration mark of the airframe and the manufacturer,
make, model, serial number of each Engine;
(ii) the Lessee of the Aircraft and a summary of the terms of the
Lease for the Aircraft, including: the lease term (including a
description of any extension and early termination options); the amounts
(or the basis for determining such amounts) of rent and maintenance
reserves, however denominated, payable by the Lessee and the payment
terms thereof (including whether such amounts are payable in advance or
arrears, or otherwise); the amount of any cash security deposits and a
description of any letters of credit (including the identity of the
issuing and/or confirming banks, the beneficiary and the amount that is
available for drawings thereunder) in lieu of cash security deposits;
(iii) a description of (A) all cost-sharing, "top-up" or other
obligations of the Company or one of its Subsidiaries (or any trustee
for its benefit) to reimburse the Lessee or any other Person for or to
contribute to maintenance, overhauls, repairs or improvements to the
Aircraft, and (B) all pending claims by the Lessee for reimbursement of
maintenance reserves or by
15
the Lessee or any other Person for reimbursements for or contributions
to maintenance, overhauls, repairs or improvements to the Aircraft;
(iv) a summary of required levels of hull and liability (general
and war risk) insurance, deductibles or Lessee self-insurance, and
agreed or stipulated loss values;
(v) a list of known damage history (limited to damage or repairs
in excess of 5% of current net book value);
(vi) the Lender(s), and the principal, outstanding balance(s),
scheduled maturity date(s), interest rate(s) and monthly debt service
obligations arising under each Financing Agreement in respect of the
Aircraft; and
(vii) a true and complete list of all Aircraft Documents
(including summaries of all unwritten Contracts) relating to the
Aircraft.
The Company has provided or made available to the Parent true and complete
copies of each Aircraft Document.
(b) The Company or one of its Subsidiaries (or a trustee for its
benefit) is the sole legal and beneficial owner of, and has good and valid title
to, (i) each Aircraft and (ii) the lessor's interest under the applicable Lease,
which Aircraft and which Lease are free and clear of all Liens, other than
Permitted Liens.
(c) Each Aircraft Document is in full force and effect in accordance
with its respective terms. Except as set forth in the Company Disclosure
Schedule, (i) to the Company's knowledge, no "event of default" (however defined
in the applicable Lease Document) or event which with the giving of notice or
passage of time or both would become an "event of default" (as so defined) has
occurred and is continuing under any Lease and (ii) there have been no waivers
of the Company's rights in effect under any Lease in respect of any "event of
default" or event which with the giving of notice or passage of time or both
would become an "event of default." Except as set forth in the Company
Disclosure Schedule, (i) no "event of default" (however defined in the
applicable Aircraft Document) on the part of the Company or any Subsidiary or
event which with the giving of notice or passage of time or both would become an
"event of default" (as so defined) on the part of the Company or any Subsidiary
has occurred and is continuing under any Aircraft Document and (ii) there have
been no waivers by any Lender of its rights in effect under any Aircraft
Document in respect of any "event of default" on the part of the Company or any
Subsidiary or event which with the giving of notice or passage of time or both
would become an "event of default" on the part of the Company or any Subsidiary.
(d) The Company Disclosure Schedule includes a schedule setting forth as
of October 23, 2002 all outstanding amounts due from Lessees or other Persons
for rent, maintenance reserves, deposits or other amounts.
(e) Except as set forth on the Company Disclosure Schedule, (i) none of
the Aircraft Documents create any liability on the Company to the applicable
Lender or any Person claiming through or under that Lender to make any payment
or perform any covenant either expressly or implicitly contained therein, any
such liability being solely
16
limited to the Company Subsidiary that is a party to such Aircraft Documents;
and (ii) each Lender has agreed to look solely to the applicable Company
Subsidiary or any collateral held by that Lender for the recovery of any payment
or the performance of any obligation of that Company Subsidiary under any
Aircraft Document to which it is a party.
(f) Except for (i) claims for the return at the end of the lease term of
an Aircraft of security deposits paid by the Lessee under the Lease of that
Aircraft, or (ii) claims for reimbursement of maintenance reserves or other
amounts required to be reimbursed to or contributed for maintenance of an
Aircraft pursuant to the express terms of any Lease of that Aircraft, in each
case, as described on the Company Disclosure Schedule, there are no claims which
have been or can be asserted by any Lessee or any other Person against the
Company or any Aircraft arising out of the ownership, use, or operation of any
Aircraft prior to the date of this Agreement. The Company Disclosure Schedule
sets forth by Lessee and Aircraft, as of October 23, 2002, (i) the aggregate
amount of maintenance reserves paid by the Lessees under the Leases prior to the
date hereof less the aggregate amounts previously paid or reimbursed to the
Lessees in respect of maintenance reserves under the Leases ("POTENTIAL RESERVE
CLAIM AMOUNTS") and (ii) the amounts of cash and cash equivalents maintained by
the Company in respect of such Potential Reserve Claim Amounts.
(g) To the Company's knowledge, no unrepaired damage, destruction or
other casualty loss or partial loss, nor an event which with the passage of time
would result in unrepaired damage, destruction or casualty loss, has occurred in
respect of any Aircraft.
(h) Except as set forth on the Company Disclosure Schedule, there are
existing no options, commitments or agreements to purchase or sell any Aircraft.
SECTION 4.12. Insurance Coverage. The Company Disclosure Schedule lists
all insurance policies and fidelity and surety bonds of the Company and its
Subsidiaries. All policies of insurance and fidelity or surety bonds insuring
the Company or any of its Subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and effect and the Company
and its Subsidiaries are in compliance with the terms of those policies and
instruments in all material respects. There is no claim by the Company or any of
its Subsidiaries pending under any such insurance policy or bond as to which
coverage has been questioned, denied or disputed by the underwriters of that
policy or bond or in respect of which those underwriters have reserved their
rights. The Company does not know of any threatened termination of, material
premium increase with respect to, or material alteration of coverage under, any
of those policies or bonds.
SECTION 4.13. Title to Assets other than Aircraft. The Company or one of
its Subsidiaries has good and valid title to all tangible assets other than
Aircraft reflected on the Company Balance Sheet and all tangible assets it has
acquired after the Company Balance Sheet Date (except those tangible assets
other than Aircraft sold or otherwise disposed of after the Company Balance
Sheet Date for fair value in the ordinary course of business consistent with
past practice) free and clear of all Liens, other than Permitted Liens. All
personal property owned or leased by the Company or any of its Subsidiaries is
in good operating condition and repair, ordinary wear and tear excepted. All
material personal property leased by the Company or any of its Subsidiaries is
in the condition required of that property by the terms of the lease applicable
to that property.
17
SECTION 4.14. Absence of Certain Changes. Since the Company Balance
Sheet Date, the business of the Company and its Subsidiaries has been conducted
in the ordinary course consistent with past practices and, except as disclosed
to Parent in the Company Disclosure Schedule or as disclosed in the Company SEC
Documents filed prior to the date of this Agreement, there has not been:
(a) any event, occurrence, development or state of circumstances or
facts that has had, individually or in the aggregate, a Material Adverse Effect
on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
Subsidiary thereof (other than dividends from wholly-owned Subsidiaries of the
Company to the Company), or any repurchase, redemption or other acquisition by
the Company or any of its Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in, the Company or
any of its Subsidiaries;
(c) any amendment of any material term of any outstanding security of
the Company or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of its
Subsidiaries of any Indebtedness;
(e) any creation or other incurrence by the Company or any of its
Subsidiaries of any Lien on any Aircraft, or any creation or other incurrence by
the Company or any of its Subsidiaries of any Lien on any other asset, other
than in the ordinary course of business consistent with past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any of
its Subsidiaries that has had, individually or in the aggregate, a Material
Adverse Effect on the Company;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its Subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its Subsidiaries of any contract or
other right, in either case, material to the Company and its Subsidiaries, taken
as a whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(i) any change in any method of accounting, method of tax accounting or
accounting principles or practice by the Company or any of its Subsidiaries,
except for any such change required by reason of a concurrent change in GAAP or
Regulation S-X under the 1934 Act;
(j) any (i) grant of any severance or termination pay to (or amendment
to any existing arrangement with) any director, officer or employee of the
Company or any of its Subsidiaries, (ii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, (iii)
entering into any employment,
18
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company or any
of its Subsidiaries, (iv) entering into any management Contracts (excluding
Contracts for employment) or Contracts with other consultants, (v)
establishment, adoption or amendment (except as required by applicable law) of
any collective bargaining agreement, bonus, profit-sharing, thrift, pension,
retirement, deferred compensation, compensation, stock option, restricted stock
or other benefit plan or arrangement covering any director, officer or employee
of the Company or any of its Subsidiaries, (vi) grant of options to purchase, or
other security convertible into or exchangeable for, Company Stock or any
Company Security, or (vii) increase in compensation, bonus or other benefits
payable to any director, officer or employee of the Company or any of its
Subsidiaries;
(k) any Tax election made or changed, any annual tax accounting period
changed, any method of tax accounting adopted or changed, any amended Tax
Returns or claims for Tax refunds filed, any closing agreement entered into, any
Tax claim, audit or assessment settled, or any right to claim a Tax refund,
offset or other reduction in Tax liability surrendered; or
(l) any capital expenditure in an amount exceeding $50,000 individually
or $250,000 in the aggregate.
SECTION 4.15. Compliance with Laws and Court Orders. The Company and
each of its Subsidiaries is and has been in compliance with, and to the
knowledge of the Company is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law, statute, ordinance, rule, regulation, judgment, injunction,
order or decree.
SECTION 4.16. Litigation. Except as set forth in the Company Disclosure
Schedule, there is no action, suit, investigation or proceeding pending against,
or, to the knowledge of the Company, threatened against or affecting, the
Company, any of its Subsidiaries or any of their respective properties, any
Employee Plan, or any present or former officer, director or employee of the
Company or any of its Subsidiaries or other Person for whom the Company or any
Subsidiary may be liable before any court or arbitrator or before or by any
governmental body, agency or official, domestic, foreign or supranational.
SECTION 4.17. Taxes. (a) All Tax Returns required by applicable law to
be filed with any Taxing Authority by, or on behalf of, the Company have been
filed when due in accordance with all applicable laws or requests for extensions
to file such Tax Returns have been timely filed and granted and have not yet
expired, and all such Tax Returns are, or will be at the time of filing, true
and complete in all material respects.
(b) The Company has paid or has caused to be paid all material Taxes due
and owing by them (whether or not shown on any Tax Return and whether or not any
Tax Return was required) to the appropriate Taxing Authority. Where payment is
not yet due, the Company will establish or cause to be established in accordance
with GAAP on or before the Effective Time an adequate accrual for all Taxes
through the end of the last period for which the Company ordinarily record items
on their respective books. There are no Liens on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Tax, except for Permitted Liens.
19
(c) To the knowledge of the Company, no Taxing Authority plans to assess
any additional Taxes for any period for which Tax Returns have been filed. The
Company has delivered to Parent correct and complete copies of all federal
income Tax Returns, examination reports and statements of deficiencies assessed
against or agreed to by the Company since December 31, 2000.
(d) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) The Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code. The Company
is not a party to any Tax allocation or sharing agreement. The Company (i) has
not been a member of an Affiliated Group filing a consolidated federal income
Tax Return, other than the Affiliated Group of which the Company is the common
parent and (ii) has no liability for the Taxes of any Person under Treasury
regulation section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(f) The Tax Returns of Company through the Tax year ended December 31,
1996 have been examined and closed or are Tax Returns with respect to which the
applicable period for assessment under applicable law, after giving effect to
extensions or waivers, has expired. Except as set forth in the Company
Disclosure Schedule, no issue relating to Taxes has been raised in writing by a
Taxing Authority during any pending audit or examination, and no issue relating
to Taxes was raised in writing by a Taxing Authority in any completed audit or
examination, that reasonably can be expected to recur in a later taxable period.
(g) To the knowledge of the Company, there is no claim, audit, action,
suit, proceeding or investigation now pending or threatened against or with
respect to the Company in respect of any Tax or Tax matter.
(h) During the five-year period ending on the date of this Agreement,
the Company was not a distributing corporation or a controlled corporation in a
transaction intended to be governed by Section 355 of the Code. The Company has
not filed a consent under Section 341(f) of the Code concerning collapsible
corporations.
(i) The Company does not owns an interest in real property in any
jurisdiction in which a Tax is imposed, or the value of the interest is
reassessed, on the transfer of an interest in real property and which treats the
transfer of an interest in an entity that owns an interest in real property as a
transfer of the interest in real property. Nor has the Company been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(j) The Company Disclosure Schedule contains a list of all jurisdictions
(whether foreign or domestic) in which the Company currently files, or within
the last three Tax years has filed, Tax Returns. The Company has not received
notice from a jurisdiction in which it is not currently filing a Tax Return that
it should be filing a Tax Return in such jurisdiction.
20
(k) As of December 31, 2001, the aggregate amount of non-SRLY net
operating losses of the Company for federal income tax purposes was equal to
$44,884,029. Except as set forth in the Company Disclosure Schedule, the Company
has not undergone a change of ownership within the meaning of Section 382(g) of
the Code.
(l) The Company shall not be required to include in a taxable period
ending after the Effective Time taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
period as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of accounting, the
cash method of accounting or Section 481 of the Code or any comparable provision
of state, local or foreign Tax law.
(m) The Company is not a party to any joint venture, partnership or
other arrangement or contract that could be treated as a partnership for federal
income tax purposes.
(n) The Company has not entered into any sale leaseback or leveraged
lease transaction that fails to satisfy the requirements of Revenue Procedure
75-21 (or similar provisions of foreign law) or any safe harbor lease
transaction.
(o) The Company has never been an S corporation (within the meaning of
Section 1361 (a)(1) of the Code).
(p) All material elections with respect to Taxes affecting the Company
are disclosed or attached to a Tax Return of the Company.
(q) All private letter rulings issued by the Internal Revenue Service to
the Company (and any corresponding ruling or determination of any state, local
or foreign Taxing Authority) have been disclosed in the Company Disclosure
Schedule, and there are no pending requests for any such rulings (or
corresponding determinations).
(r) As used in this Section, "AFFILIATED GROUP" means any affiliated
group within the meaning of Section 1504(a) of the Code or any similar group
defined under a similar provision of state, local or foreign law; "COMPANY"
means the Company and/or any corporation that at any time has been a Subsidiary
of the Company; "TAX" means (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever (including, but not limited to,
withholding on amounts paid to or by any Person), together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "TAXING AUTHORITY") responsible for the imposition of any such tax
(domestic or foreign), and any liability for any of the foregoing as transferee,
(ii) in the case of the Company or any of its Subsidiaries, liability for the
payment of any amount of the type described in clause (i) as a result of being
or having been before the Effective Time a member of an affiliated,
consolidated, combined or unitary group, or a party to any agreement or
arrangement, as a result of which liability of the Company or any of its
Subsidiaries to a Taxing Authority is determined or taken into account with
reference to the activities of any other Person, and (iii) liability of the
Company or any of its Subsidiaries for the payment of any amount as a result of
being party to any Tax Sharing Agreement or with respect to the payment of any
amount imposed on any Person of the type described in (i) or (ii) as a result of
any existing express or implied agreement or arrangement (including, but not
limited to, an indemnification agreement or
21
arrangement). "TAX RETURN" shall mean any report, return, document, declaration
or other information or filing required to be supplied to any Taxing Authority
with respect to Taxes, including information returns, any documents with respect
to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
SECTION 4.18. Employees and Employee Benefit Plans. (a) The Company
Disclosure Schedules includes a list of the names, job titles and current annual
salary or wage rates of all of the employees of the Company and any Subsidiary,
together with a summary of all bonus, incentive compensation or other additional
compensation or similar benefits paid to such person for 2001 and paid to date
or hereafter payable for 2002. No bonuses, incentive compensation or other
similar compensation is or will become payable to any employee of the Company or
its Subsidiaries for services performed (whether prior to or after the date
hereof) based on the results of operations of the Company during calendar year
2002 or otherwise, and no targets have been set, pursuant to any employment
agreement or arrangement or otherwise, which if met during calendar year 2002 or
thereafter would entitle an employee of the Company or its Subsidiaries to any
bonus, incentive compensation or other additional compensation or similar
benefit for services performed (whether prior to or after the date hereof).
(b) Except as set forth in the Company Disclosure Schedule, neither the
Company nor any Subsidiary (i) retains the services of any individuals
performing services in the capacity of independent contractors, or (ii) has
entered into an agreement with a third-party organization under which employees
of such third party organization perform services for the Company.
(c) The Company Disclosure Schedule contains a correct and complete list
identifying each Employee Plan. Copies of such plans (and, if applicable,
related trust or funding agreements or insurance policies) and all amendments
thereto and written interpretations thereof have been furnished to Parent
together with the most recent annual report (Form 5500 including, if applicable,
Schedule B thereto) and tax return (Form 990) prepared in connection with any
such plan or trust.
(d) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof sponsors, maintains or contributes to, or has in the past sponsored,
maintained or contributed to, any Employee Plan subject to Title IV of ERISA.
(e) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof contributes to, or has in the past contributed to, any multiemployer
plan, as defined in Section 3(37) of ERISA.
(f) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof sponsors, maintains or contributes to or has in the past sponsored,
maintained or contributed to, any Employee Plan which is intended to be
qualified under Section 401(a) of the Code.
(g) Except as disclosed on the Company Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not (either
alone or together with any other event) entitle any employee or independent
contractor of the Company or any of its Subsidiaries to retirement, severance or
bonus pay or accelerate
22
the time of payment or vesting or trigger any payment of funding (through a
grantor trust or otherwise) of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any
Employee Plan. There is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of the Company or any of its
Subsidiaries that, individually or collectively, would entitle any employee or
former employee to any severance or other payment solely as a result of the
transactions contemplated hereby, or could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section 280G or
162(m) of the Code.
(h) Neither the Company nor any of its Subsidiaries has any liability in
respect of post-retirement health, medical or life insurance benefits for
retired, former or current employees of the Company or its Subsidiaries except
as required to avoid excise tax under Section 4980B of the Code.
(i) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, an Employee
Plan which would increase materially the expense of maintaining such Employee
Plan above the level of the expense incurred in respect thereof for the fiscal
year ended December 31, 2001.
(j) Neither the Company nor any of its Subsidiaries is a party to or
subject to, or is currently negotiating in connection with entering into, any
collective bargaining agreement or other contract or understanding with a labor
union or organization.
SECTION 4.19. Environmental Matters. The Company and its Subsidiaries
(i) are in compliance with all Environmental Laws applicable to them and their
respective properties, assets and businesses, except where the failure to comply
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company and (ii) have all Environmental Permits required to carry on their
respective businesses as now conducted.
SECTION 4.20. Property and Leases. Neither the Company nor any of its
Subsidiaries owns any real property. Each parcel of real property leased, used
or held for use or otherwise needed for the conduct of the business by the
Company or any of its Subsidiaries is listed in the Company Disclosure Schedule.
All such leases of real property to which the Company or any such Subsidiary is
a party, and all amendments and modifications thereto, are valid, binding and in
full force and effect and have not been modified or amended, and there exists no
default under any such lease by the Company or any Subsidiary or, to the
knowledge of the Company, by the landlord, nor any event which, with notice or
lapse of time or both, would constitute a default thereunder by the Company or
the Subsidiary or, to the knowledge of the Company, by the landlord, except as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. All leases for such leased real property have been made available
to Parent prior to the date of this Agreement.
SECTION 4.21. Intellectual Property. The Company has no material
Intellectual Property. The conduct of the business of the Company and its
Subsidiaries as currently conducted does not materially infringe upon or
misappropriate the Intellectual Property rights of any third party, and no claim
has been asserted to the Company in writing or orally, that the conduct of the
business of the Company and its Subsidiaries as currently
23
conducted materially infringes upon or may infringe upon or misappropriate the
Intellectual Property rights of any third party.
SECTION 4.22. Material Contracts. (a) The Company Disclosure Schedule
contains a list of the following types of Contracts to which the Company or any
of its Subsidiaries is a party (such Contracts, together with the Aircraft
Documents, being the "MATERIAL CONTRACTS"):
(i) all of the Indebtedness of the Company and its Subsidiaries;
(ii) each Contract which (A) is likely to involve consideration
of more than $25,000 per year or over the remaining term of such
Contract or (B) has a term longer than one year, and which cannot be
canceled by the Company or its Subsidiary party thereto without penalty
or further payment and without more than 60 days' notice;
(iii) all management Contracts (excluding Contracts for
employment) and Contracts with other consultants, including, but not
limited to, any Contracts involving the payment of royalties or other
amounts calculated based upon the revenues or income of the Company or
any of its Subsidiaries or income or revenues related to any product of
the Company or any of its Subsidiaries to which the Company or any
Subsidiary is a party and which is likely to involve consideration of
more than $25,000 per year or over the remaining term of such Contract;
(iv) all Contracts with any United States federal, state, county
or local or non-United States government, governmental, regulatory or
administrative authority, agency, instrumentality or commission or any
court, tribunal, or judicial or arbitral body (each a "GOVERNMENTAL
AUTHORITY") to which the Company or any of its Subsidiaries is a party;
(v) all Contracts that limit, or purport to limit, the ability of
the Company or any of its Subsidiaries, or, following the Effective
Time, Parent or any of Parent's Affiliates to compete in any line of
business or with any Person or in any geographic area or during any
period of time;
(vi) all Contracts providing for benefits under any Employee
Plan;
(vii) all material Contracts or arrangements that result in any
Person holding a power of attorney from the Company or any of its
Subsidiaries that relates to the Company, any of its Subsidiaries or
their respective businesses;
(viii) all Contracts for employment for any employee of the
Company or any of its Subsidiaries;
(ix) all Contracts and agreements between the Company and any of
its Subsidiaries on the one hand and any director, officer, employee,
shareholder or Affiliate (or any relative, spouse, beneficiary or
Affiliate of such Person) of the Company or any of its Subsidiaries on
the other hand;
24
(x) each operating lease and each capital lease (other than a
Lease) which (A) is likely to involve consideration of more than $25,000
per year or over the remaining term of such contract or (B) has a term
longer than one year; and
(xi) all other Contracts, whether or not made in the ordinary
course of business, which are material to the Company, any of its
Subsidiaries or the conduct of their respective businesses, or the
absence of which would, individually or in the aggregate, have a
Material Adverse Effect.
(b) Each Material Contract is in full force and effect and is a legal,
valid and binding agreement of the Company or any of its Subsidiaries which is a
party thereto, as the case may be, enforceable against the Company or that
Subsidiary in accordance with its terms and, to the best knowledge of the
Company, of each other party thereto. True and complete copies of each of the
Material Contracts have been delivered or otherwise made available to Parent.
None of the Company or any of its Subsidiaries, as the case may be, has
modified, amended or waived in any material respect any provision of the
Material Contracts. The Company and its Subsidiaries have performed and are
performing all material obligations required to be performed by each of them
under the Material Contracts and are not (with or without notice or lapse of
time or both) in breach or default in any material respect thereunder; and, to
the best knowledge of the Company, no other party to any of the Material
Contracts is (with or without notice or lapse of time or both) in breach or
default in any material respect under any of the Material Contracts.
(c) Neither the Company nor any of the Subsidiaries has received notice
from any Person that the Company or any such Subsidiary has taken any action or
failed to take any action that would result in any breach of or default (or give
rise to any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of the Material Contracts (including,
without limitation, any material agreement relating to Indebtedness of the
Company or any of its Subsidiaries) or other material obligation to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective properties or assets may be bound
(and the Company is not aware that any Person has asserted that such a breach or
default will so result) which, in any such case, would have a Material Adverse
Effect on the Company.
SECTION 4.23. Affiliate Transactions. Except as disclosed on the Company
Disclosure Schedule, (a) there are no liabilities between the Company or any of
its Subsidiaries on the one hand, and any director, officer, employee,
shareholder or Affiliate (or any relative, spouse, beneficiary or Affiliate of
any such Person) of the Company or any of its Subsidiaries on the other hand,
(b) no director, officer, employee, shareholder or Affiliate (or any relative,
spouse, beneficiary or Affiliate of any such Person) of the Company or any of
its Subsidiaries provides, or causes to be provided, any goods or services to
the Company or any of its Subsidiaries, and (c) neither the Company nor any of
its Subsidiaries provides or causes to be provided goods or services to any
director, officer, employee, shareholder or Affiliate (or any relative, spouse,
beneficiary or Affiliate of any such Person) of the Company or any of its
Subsidiaries. Since July 29, 2002, no extension of credit in the nature of a
personal loan has been made by the Company, directly or indirectly, to or for
the benefit of any Company director or executive officer.
25
SECTION 4.24. Anti-takeover Statutes. Other than obtaining the
Shareholder Vote referred to in Section 4.02(a), the Company has taken all
action necessary to exempt the Merger, this Agreement and the transactions
contemplated hereby from any anti-takeover or similar statute or regulation that
applies or purports to apply to any such transactions.
SECTION 4.25. Finders' Fees. Except for Houlihan Lokey Howard & Zukin
Financial Advisors, Inc., a copy of whose engagement agreement has been provided
to Parent, there is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of the Company or
any of its Subsidiaries who are entitled to any fee or commission from the
Company or any of its Affiliates in connection with the transactions
contemplated by this Agreement.
SECTION 4.26. Opinion of Financial Advisor. The Company has received the
written opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.,
financial advisor to the Company, to the effect that, as of the date of this
Agreement, the Merger Consideration is fair to the Company's public shareholders
from a financial point of view. A copy of such opinion shall promptly be
delivered to Parent.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
SECTION 5.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not have, individually or in the aggregate, a Material
Adverse Effect on Parent. Since the date of its incorporation, Merger Subsidiary
has not engaged in any activities other than in connection with or as
contemplated by this Agreement.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement has been
duly executed and delivered by Parent and Merger Subsidiary and constitutes a
valid and binding agreement of each of Parent and Merger Subsidiary, enforceable
against each in accordance with its terms, except insofar as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditor's rights generally, or by principles governing the
availability of equitable remedies.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or
26
authority, domestic, foreign or supranational, other than (i) the filing of an
agreement of merger with respect to the Merger with the California Secretary of
State and appropriate documents with the relevant authorities of other states in
which Parent is qualified to do business, and (ii) compliance with any
applicable requirements of the Nasdaq Stock Market, the 1934 Act and any other
securities laws, whether state or foreign.
SECTION 5.04. Non-contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby do not and will
not (i) contravene or result in any violation or breach of any provision of the
articles of incorporation or bylaws of Parent or Merger Subsidiary, (ii)
assuming compliance with the matters referred to in Section 5.03, contravene,
conflict with or result in a violation or breach of any provision of any law,
rule, regulation, judgment, injunction, order or decree applicable to Parent or
Merger Subsidiary, (iii) require any consent or other action by any Person
under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Parent or any of its Subsidiaries is entitled under
any provision of any agreement or other instrument binding upon Parent or any of
its Subsidiaries or any of their assets or any license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of the Parent and its Subsidiaries or (iv)
result in the creation or imposition of any Lien on any asset of the Parent or
any of its Subsidiaries.
SECTION 5.05. Disclosure Documents. None of the information specifically
provided in writing by Parent for inclusion in the Company Proxy Statement or
any amendment or supplement thereto, at the time the Company Proxy Statement or
any amendment or supplement thereto is first mailed to shareholders of the
Company and at the time the shareholders vote on approval of the principal terms
of this Agreement, will 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.
SECTION 5.06. Finders' Fees. There is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of Parent is entitled to any fee or commission from the Company or any
of its Affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 5.07. Financing. Parent has sufficient funds or committed
sources of funds to meet the obligations of Parent and Merger Subsidiary under
this Agreement.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Conduct of the Company. From the date of this Agreement
until the Effective Time, the Company and its Subsidiaries shall conduct their
business in the ordinary course consistent with past practice and shall use
their commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties
27
and to keep available the services of their present officers and employees.
Without limiting the generality of the foregoing, from the date of this
Agreement until the Effective Time, the Company will not, and will not permit
any of its Subsidiaries to, without the prior written consent of Parent:
(a) adopt or propose any change to its articles of incorporation or
bylaws;
(b) merge or consolidate with any other Person or acquire any stock or
assets of any other Person;
(c) sell, lease, license or otherwise dispose of any material Subsidiary
or any material amount of assets, securities or property except pursuant to
existing contracts or commitments that have been disclosed to Parent prior to
the date of this Agreement;
(d) (i) take any action that would make any representation and warranty
of the Company hereunder inaccurate in any respect at, or as of any time prior
to, the Effective Time or (ii) omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any respect at any such
time;
(e) agree or commit to do any of the foregoing.
SECTION 6.02. Shareholder Meeting; Proxy Material. The Company shall
cause a meeting of its shareholders (the "COMPANY SHAREHOLDER MEETING") to be
duly called and held as soon as reasonably practicable for the purpose of
obtaining the Shareholder Vote. Subject to Section 6.04(c), the Company Proxy
Statement shall indicate the approval and declaration of advisability by the
Board of Directors of this Agreement and the Merger and the recommendation of
the Board of Directors of the Company to the Company's shareholders that they
vote in favor of the approval of the principal terms of this Agreement. In
connection with such meeting, the Company will (i) promptly prepare and file
with the SEC, use its commercially reasonable efforts to have cleared by the SEC
and thereafter mail to its shareholders as promptly as practicable the Company
Proxy Statement and all other proxy materials for such meeting, (ii) solicit
from its shareholders proxies in favor of the approval of the principal terms of
this Agreement and use its commercially reasonable efforts to obtain the
Shareholder Vote and (iii) otherwise comply with all legal requirements
applicable to such meeting.
SECTION 6.03. Access to Information. From the date hereof until the
Effective Time and subject to applicable law and the confidentiality agreement
dated April 5, 2002 between the Company and Jetscape, Inc. (the "CONFIDENTIALITY
AGREEMENT"), the Company shall (i) give to the Parent, its counsel, financial
advisors, auditors and other authorized representatives reasonable access upon
prior notice to the offices, properties, books and records of the Company and
its Subsidiaries, (ii) furnish to the Parent, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such Persons may reasonably request and (iii) instruct
its employees, counsel, financial advisors, auditors and other authorized
representatives to cooperate with the Parent in its investigation. Any
investigation pursuant to this Section shall be conducted in such manner as not
to interfere unreasonably with the conduct of the business of the Company and
its Subsidiaries. Unless otherwise required by law, Parent will hold, and will
cause its respective officers, employees, counsel, financial advisors, auditors
and other authorized representatives to hold, any nonpublic information obtained
in any such investigation in confidence in
28
accordance with the Confidentiality Agreement. No information or knowledge
obtained in any investigation pursuant to this Section shall affect or be deemed
to modify any representation or warranty made by the Company hereunder.
SECTION 6.04. No Solicitation. (a) Neither the Company nor any of its
Subsidiaries shall, nor shall the Company or any of its Subsidiaries authorize
or permit any of its or their officers, directors, employees, investment
bankers, attorneys, accountants, consultants, representatives or other agents or
advisors to, directly or indirectly, (i) solicit, initiate or take any action to
facilitate or encourage the submission of any Acquisition Proposal, (ii) enter
into or participate in any discussions (other than to clarify the terms of the
Acquisition Proposal solely to determine if the Acquisition Proposal is a
Superior Proposal) or negotiations with, furnish any information relating to the
Company or any of its Subsidiaries or afford access to the business, properties,
assets, books or records of the Company or any of its Subsidiaries to, otherwise
cooperate in any way with, or knowingly assist, participate in, facilitate or
encourage any effort by any Third Party to make an Acquisition Proposal, or
(iii) grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Company or any of its
Subsidiaries. The Company will notify Parent as soon as practicable after
receipt by the Company (or any of its advisors) of any Acquisition Proposal, any
formal indication from any Person that it is considering making an Acquisition
Proposal or any request for nonpublic information relating to the Company or any
of its Subsidiaries or for access to the properties, books or records of the
Company or any of its Subsidiaries by any Person who makes, to the knowledge of
the Company may be considering making, or has made, an Acquisition Proposal. The
Company shall provide that notice orally and in writing and shall identify the
Person making, and the material terms and conditions of, any such Acquisition
Proposal, indication or request. The Company shall also notify Parent promptly
following any material change to the terms of, or other material development
with respect to, any such Acquisition Proposal, indication or request, including
the execution of any definitive agreement with respect to such Acquisition
Proposal (or a determination by the Board of Directors of the Company to enter
into such a definitive agreement), and shall provide promptly to Parent a copy
of any information provided to any Third Party pursuant to Section 6.04(b) which
has not previously been provided to Parent. The Company shall, and shall cause
its Subsidiaries and the directors, employees and other agents of the Company
and its Subsidiaries to, cease immediately and cause to be terminated all
activities, discussions and negotiations, if any, with any Persons conducted
before the date of this Agreement with respect to any Acquisition Proposal.
(b) Notwithstanding the foregoing, the Company may negotiate or
otherwise engage in substantive discussions with, and furnish nonpublic
information to, any Third Party who delivers a Superior Proposal if (i) the
Company has complied with the terms of this Section 6.04, including, without
limitation, the requirement in Section 6.04(a) that it notify Parent promptly
after its receipt of any Acquisition Proposal, (ii) the Board of Directors of
the Company determines in good faith by a majority vote, after consultation with
outside legal counsel to the Company, that it should, in its reasonable
judgment, take that action to comply with its fiduciary duties to the Company
under applicable law, (iii) the Person who delivers the Superior Proposal
executes a confidentiality agreement with terms no less favorable to the Company
than those contained in the Confidentiality Agreement, and (iv) the Company
shall have delivered to Parent a prior written notice advising Parent that it
intends to take that action.
29
(c) The Board of Directors of the Company shall be permitted to
withdraw, or modify in a manner adverse to Parent, its recommendation to holders
of shares of Company Stock, but only if (i) the Company has complied with the
terms of this Section 6.04, including, without limitation, the requirement in
Section 6.04(a) that it notify Parent promptly after its receipt of any
Acquisition Proposal, (ii) a Superior Proposal is pending at the time the Board
of Directors determines to take that action, (iii) the Board of Directors
determines in good faith by a majority vote, after consultation with outside
legal counsel to the Company, that it should, in its reasonable judgment, take
that action to comply with its fiduciary duties to the Company under applicable
law and (iv) the Company shall have delivered to Parent a prior written notice
advising Parent that it intends to take that action which notice shall identify
the Person making, and the materials terms and conditions of, that Superior
Proposal.
(d) Nothing contained in this Section 6.04 shall prohibit the Board of
Directors of the Company from complying with Rule 14e-2 promulgated under the
1934 Act with regard to a tender or exchange offer or making any disclosure
required under applicable law.
(e) For purposes hereof, "SUPERIOR PROPOSAL" means any bona fide,
unsolicited written Acquisition Proposal for all of the outstanding shares of
Company Stock on terms that the Board of Directors of the Company determines in
good faith by a majority vote, on the basis of the advice of its financial
advisor and taking into account the financial terms and conditions of the
Acquisition Proposal, are more favorable from a financial point of view to all
the Company's shareholders than as provided hereunder, for which financing, to
the extent required, is then fully committed or reasonably determined to be
available by the Board of Directors of the Company, and which is reasonably
capable of being consummated.
SECTION 6.05. Notices of Certain Events. The Company shall promptly
notify Parent of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause (i) any representation or
warranty of the Company contained in this Agreement to be untrue or inaccurate
or (ii) any covenant, condition or agreement contained herein not to be complied
with or satisfied;
(c) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement (including the Company Proxy Statement); and
(d) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting the Company or any of its Subsidiaries that, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Article IV or that relate to the consummation of the transactions contemplated
by this Agreement.
30
SECTION 6.06. Tax Matters. (a) Neither the Company nor any of its
Subsidiaries shall make or change any Tax election, change any annual tax
accounting period, adopt or change any method of tax accounting, file any
amended Tax Returns or claims for Tax refunds, enter into any closing agreement,
surrender any Tax claim, audit or assessment, surrender any right to claim a Tax
refund, offset or other reduction in Tax liability surrendered, consent to any
extension or waiver of the limitations period applicable to any Tax claim or
assessment or take or omit to take any other action, if any such action or
omission would have the effect of increasing the Tax liability or reducing any
Tax asset of the Company or any of its Subsidiaries.
(b) The Company and its Subsidiaries acknowledge that Parent intends to
cause the Company and each of its Subsidiaries to make an election under Section
338(g) of the Code (the "338 ELECTION") with respect to the Merger. The Company
and each of its Subsidiaries agrees to take any actions and execute any
documents necessary with respect to the 338 Election.
ARTICLE 7
COVENANTS OF PARENT AND THE COMPANY
The parties agree that:
SECTION 7.01. Consents. Subject to the terms and conditions of this
Agreement, the Company and Parent will use their commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
SECTION 7.02. Certain Filings. The Company and Parent shall cooperate
with one another (i) in connection with the preparation of the Company Proxy
Statement, (ii) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official, or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (iii) in taking such actions or
making any such filings, furnishing information required in connection therewith
or with the Company Proxy Statement and seeking timely to obtain any such
actions, consents, approvals or waivers.
SECTION 7.03. Public Announcements. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with the
Nasdaq Stock Market, neither party will issue any such press release or make any
such public statement prior to such consultation with the other.
31
SECTION 7.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 7.05. Trading in Company Stock. From the date of this Agreement
until the Effective Time, the Company will not directly or indirectly purchase
or sell (including short sales) any shares of Company Stock (or any put, call,
option or derivative security or the like relating thereto).
SECTION 7.06. Employment Agreements. The Surviving Corporation shall
honor in accordance with their terms, the employment agreements of the Company
with William Lindsey and Michael Grella; provided, that such employment
agreements shall be amended prior to the Effective Time to provide that the
terms thereof shall expire on November 4, 2004.
SECTION 7.07. Director and Officer Liability. (a) For six years after
the Effective Time, the Surviving Corporation shall indemnify and hold harmless
the present and former officers and directors of the Company (each an
"INDEMNIFIED PERSON") in respect of acts or omissions occurring at or prior to
the Effective Time to the fullest extent permitted by California Law or any
other applicable laws or provided under the Company's articles of incorporation
and bylaws in effect on the date hereof, provided that such indemnification
shall be subject to any limitation imposed from time to time under applicable
law.
(b) For two years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Indemnified
Person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date of this Agreement, provided
that, in satisfying its obligation under this Section 7.07(b), the Surviving
Corporation shall not be obligated to pay premiums in excess of the amount per
annum the Company paid in its last full fiscal year, which amount Company has
disclosed to Parent prior to the date of this Agreement.
(c) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
7.07.
(d) The rights of each Indemnified Person under this Section 7.07 shall
be in addition to any rights such Person may have under the articles of
incorporation or bylaws of the Company or any of its Subsidiaries, or under
California Law or any other applicable laws or under any agreement of any
Indemnified Person with the Company or
32
any of its Subsidiaries in effect as of the date hereof. These rights shall
survive consummation of the Merger and are intended to benefit, and shall be
enforceable by, each Indemnified Person.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) the principal terms of this Agreement shall have been approved by
the shareholders of the Company in accordance with the California Code;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger; and
(c) All other authorizations, consents, waivers, orders or approvals for
the Merger required to be obtained, and all other filings, notices or
declarations required to be made, by Parent, Merger Subsidiary, or the Company
prior to the consummation of the Merger and the transactions contemplated
hereby, shall have been obtained from and/or made with, any Governmental
Authorities and all third parties without the imposition of any condition that,
in the reasonable judgment of Parent, would have a Material Adverse Effect on
the Company or Parent, except for such authorizations, consents, waivers,
orders, approvals, filings, notices or declarations the failure to obtain or
make which would not, individually or in the aggregate have a Material Adverse
Effect on the Company or Parent.
SECTION 8.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) (i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) each of the representations and warranties of the Company
contained in this Agreement that is qualified as to materiality or Material
Adverse Effect shall be true and correct, and each of the representations and
warranties of the Company contained in this Agreement that is not so qualified
shall be true and correct in all material respects at and as of the Effective
Time as if made at and as of that time (except to the extent expressly made as
of an earlier date, in which case as of such date) and (iii) Parent shall have
received a certificate signed by the chief executive officer of the Company to
the foregoing effect;
(b) Parent shall have received as of the Effective Time all certificates
of officers of the Company and public officials that it might reasonably request
relating to the existence and good standing of the Company and any of its
Subsidiaries and the authorization, execution and delivery by the Company of
this Agreement, all in form and substance reasonably satisfactory to Parent;
33
(c) the Company shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with the
transactions contemplated hereby under any Contract, except for those consents
or approvals the failure to obtain which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company;
(d) each of the members of the Board of Directors of the Company shall
have resigned and all contractual rights, if any, of such persons to serve on
the Board of Directors of the Company (and to nominate replacement or substitute
directors or director nominees) shall have been terminated, with documentary
evidence thereof delivered and satisfactory to Parent;
(e) the Voting Agreement shall be in full force and effect;
(f) Parent, Merger Subsidiary, the Company and its Subsidiaries and
International Lease Finance Corporation ("ILFC") shall have entered into
definitive agreements, in form and substance satisfactory to Parent, to effect
the transactions contemplated by that certain letter agreement between ILFC and
Parent, a copy of which has been furnished to the Board of Directors of the
Company;
(g) Parent shall have received a certificate from an officer of ILFC
setting forth a true and complete list of all Aircraft Documents to which ILFC
is a party;
(h) Parent shall have received evidence to its reasonable satisfaction
that (i) each of the holders of options to purchase Company Stock granted under
the Company's stock option or compensation plans or arrangements shall have
consented to the cancellation of such options in accordance with Section
2.05(a), and (ii) the Company shall have amended the terms of the such stock
option or compensation plans or arrangements as necessary to give effect to the
transactions contemplated by Section 2.05;
(i) The holders of an aggregate amount in excess of 5% of the
outstanding shares of Company Stock shall not have exercised dissenters' rights
in accordance with Chapter 13 of the California Code; and
(j) Parent shall have received from each executive officer of the
Company written confirmation in form reasonably satisfactory to Parent to the
effect that after the Effective Time the Surviving Corporation will have no
obligation to issue such executive officer any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Surviving Corporation or any other entity, whether on account
of his employment agreement with the Company, his continued employment with the
Surviving Corporation or otherwise.
SECTION 8.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) (i) each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, (ii) each of the representations and
warranties of Parent contained in this Agreement that is qualified as to
materiality or Material Adverse Effect shall be
34
true and correct, and each of the representations and warranties of Parent and
Merger Subsidiary contained in this Agreement that is not so qualified shall be
true and correct in all material respects at and as of the date of the Effective
Time as if made at and as of that time, (except to the extent expressly made as
of an earlier date, in which case as of such date) and (iii) the Company shall
have received a certificate signed by a senior executive officer of Parent to
the foregoing effect; and
(b) the Company shall have received as of the Effective Time all
certificates of officers of Parent and Merger Subsidiary and public officials
that it might reasonably request relating to the existence and good standing of
Parent and Merger Subsidiary and the authorization, execution and delivery by
Parent and Merger Subsidiary of this Agreement, all in form and substance
reasonably satisfactory to the Company.
ARTICLE 9
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the shareholders of the
Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated at or before 5:00 p.m.,
Eastern time, on January 31, 2003 (the "END DATE"), provided that the
right to terminate this Agreement pursuant to this Section 9.01(b)(i)
shall not be available to any party whose breach of any provision of
this Agreement results in the failure of the Merger to be consummated by
that time; or
(ii) there shall be any law or regulation that makes consummation
of the Merger illegal or otherwise prohibited or there shall be entered
any judgment, injunction, order or decree of any court or governmental
body having competent jurisdiction enjoining or otherwise prohibiting
Company or Parent from consummating the Merger and such judgment,
injunction, judgment or order shall have become final and nonappealable;
or
(iii) the principal terms of this Agreement shall not have been
approved in accordance with the California Code by the Company's
shareholders at the Company Shareholder Meeting (or any adjournment
thereof).
(c) by Parent, if a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement shall have occurred that would cause the condition set forth in
Section 8.02(a) not to be satisfied, and such failure has not been permanently
cured within 10 Business Days following receipt of notice of such failure; or
(d) by the Company, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Parent or
Merger Subsidiary set forth
35
in this Agreement shall have occurred that would cause the condition set forth
in Section 8.03(a) not to be satisfied, and such failure has not been
permanently cured within 10 Business Days following receipt of notice of such
failure; or
(e) by the Company, if, prior to obtaining the Shareholder Vote, a
Superior Proposal has been received, the Company has complied with the terms of
Section 6.04 and the Company has paid Parent the Termination Fee; or
(f) by Parent, if (i) the Board of the Company shall have failed to make
or shall have withdrawn or modified in a manner adverse to Parent its
recommendation to the Company's shareholders referred to in Section 6.02, or
shall have recommended, or entered into, or publicly announced its intention to
enter into, an agreement or an agreement in principle with respect to an
Acquisition Proposal (or shall have resolved to do any of the foregoing); or
(ii) there shall have been a breach of Section 6.04, or (iii) the Company shall
have entered into a definitive agreement or an agreement in principle with a
Third Party regarding an Acquisition Proposal or any agreement, assignment or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement.
The party desiring to terminate this Agreement pursuant to this Section 9.01
(other than pursuant to Section 9.01(a)) shall give notice of such termination
to the other party.
SECTION 9.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.01, this Agreement shall, except for Section 9.03 and
Article 10, become void and of no effect without liability of any party (or any
shareholder, director, officer, employee, agent, consultant or representative of
such party) to the other party hereto, provided that, if such termination shall
result from the willful (i) failure of either party to fulfill a condition to
the performance of the obligations of the other party, (ii) failure of either
party to perform a covenant hereof, (iii) breach by any party of any
representation or warranty or agreement contained in this Agreement, such party
shall be fully liable for any and all liabilities and damages incurred or
suffered by the other party as a result of such failure.
SECTION 9.03. Fees and Expenses. (a) Except as otherwise provided in
this Section and in the proviso to Section 9.02, all costs and expenses incurred
in connection with this Agreement shall be paid by the party incurring that cost
or expense.
(b) If this Agreement is terminated by the Company pursuant to Section
9.01(e) or by Parent pursuant to any of the clauses of Section 9.01(f), then the
Company agrees to pay to Parent a fee (the "TERMINATION FEE") in immediately
available funds equal to $100,000. This Termination Fee shall be paid promptly,
but in no event later than the termination of this Agreement by the Company
pursuant to Section 9.01(e) or later than two Business Days after termination of
this Agreement by Parent pursuant to any of the clauses of Section 9.01(f).
(c) If this Agreement shall have been terminated by the Company pursuant
to Section 9.01(e) or by Parent pursuant to any of the clauses of Section
9.01(f), the Company agrees to promptly pay Parent in immediately available
funds an amount equal to the documented out-of-pocket costs and expenses
(including, but not limited to, all investment banking, legal, accounting and
consulting fees and expenses) incurred by or on behalf of Parent or Merger
Subsidiary in connection with the negotiation, execution,
36
delivery and performance of this Agreement and any consideration, investigation,
negotiation and structuring of the transactions contemplated by this Agreement;
provided that in no event shall the Company be liable under this Section for an
amount in excess of $400,000.
(d) If the Company fails promptly to pay any amount due to Parent
pursuant to this Section 9.03, it shall also pay any costs and expenses incurred
by Parent in connection with a legal action to enforce this Agreement that
results in a judgment against the Company obligated under this Section 9.03 for
that amount.
(e) The Company agrees that its legal, investment banking and/or
consulting fees (including, without limitation, the fees of Houlihan Lokey
Howard & Zukin Financial Advisors, Inc.) incurred and to be incurred by the
Company in connection with the transactions contemplated hereby shall in no
event exceed $225,000 in the aggregate.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Parent or Merger Jetcape Aviation Group, Inc.
Subsidiary, to: 408 S. Andrews Avenue, Suite 200
Fort Lauderdale, Florida 33301
Attention: John Evans, Chairman and
Chief Executive Officer
Fax: (954) 763-4757
with a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, FL 33131
Attention: Kenneth C. Hoffman, Esq.
Fax: (305) 579-0717
if to the Company, to: International Aircraft Investors
3655 Torrance Boulevard, Suite 410
Torrance, California 90503
Attention: William Lindsay, Chairman
Fax: (310)-316-8145
with a copy to: O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
Attention: Richard Boehmer, Esq.
Fax: (213) 430-6407
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m., and such day is a
Business Day, in the place of receipt.
37
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding Business Day in the place of receipt.
SECTION 10.02. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement, except for the agreements
set forth in Sections 7.06, 7.07, 9.02, 9.03, 10.02, 10.03, 10.04, 10.05 and
10.06.
SECTION 10.03. Amendments; Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement or, in the case of a waiver, by each party against
whom the waiver is to be effective, provided that, after the approval of the
principal terms of this Agreement by the shareholders of the Company and without
their further approval, no such amendment or waiver shall reduce the amount or
change the kind of consideration to be received in exchange for any shares of
capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Parent or Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to one
or more of their Affiliates, the right to enter into the transactions
contemplated by this Agreement, but any such transfer or assignment will not
relieve Parent or Merger Subsidiary of its obligations hereunder.
SECTION 10.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 10.06. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.07. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto. Except for the
provisions of Article 2 and Sections 7.06 and 7.07, no provision of this
Agreement is intended to confer any rights, benefits, remedies, obligations or
liabilities hereunder upon any Person other than the parties hereto and their
respective successors and assigns.
38
SECTION 10.08. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement; provided, however the Confidentiality Agreement shall remain valid
and in effect.
SECTION 10.09. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 10.10. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
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
a determination, the parties 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 so that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
INTERNATIONAL AIRCRAFT INVESTORS
By: /s/ WILLIAM E. LINDSEY
--------------------------------------
Name: William E. Lindsey
Title: Chairman
By: /s/ STUART M. WARREN
--------------------------------------
Name: Stuart M. Warren
Title: Secretary
JETSCAPE AVIATION GROUP, INC.
By: /s/ JOHN EVANS
--------------------------------------
John Evans
Chairman and Chief Executive Officer
By: /s/ BRADLEY M. WINOGRAD
--------------------------------------
Bradley M. Winograd
Vice President and Assistant Secretary
JETSCAPE LEASING, INC.
By: /s/ JOHN EVANS
--------------------------------------
John Evans
Chairman and Chief Executive Officer
By: /s/ BRADLEY M. WINOGRAD
--------------------------------------
Bradley M. Winograd
Vice President and Assistant Secretary
EXHIBIT A
TO
AGREEMENT AND PLAN OF MERGER
NAME OFFICER
- ---- -------
William E. Lindsey Chief Executive Officer
Michael P. Grella President and Chief Operating Officer
Richard Hammond Vice President Finance, Chief Financial Officer
Chris Vorderkunz Vice President Technical
Alan G. Stanford, Jr. Vice President Finance, Treasurer
Shirley Naito Vice President Contracts