EXHIBIT 99.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
DATED AS OF
AUGUST 15, 2005
AMONG
SKYWEST, INC.,
DELTA AIR LINES, INC.,
AND
ASA HOLDINGS, INC.,
RELATING TO THE PURCHASE AND SALE
OF
100% OF THE COMMON STOCK
OF
ATLANTIC SOUTHEAST AIRLINES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS....................................................5
SECTION 1.02. OTHER DEFINITIONAL AND INTERPRETATIVE PROVISIONS..............13
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE.............................................13
SECTION 2.02. CLOSING.......................................................14
SECTION 2.03. CLOSING WORKING CAPITAL; CLOSING CASH; CLOSING
INTERCOMPANY WORKING CAPITAL......................................15
SECTION 2.04. ADJUSTMENT OF PURCHASE PRICE..................................17
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
SECTION 3.01. CORPORATE EXISTENCE AND POWER.................................18
SECTION 3.02. CORPORATE AUTHORIZATION AND BINDING EFFECT....................18
SECTION 3.03. GOVERNMENTAL AUTHORIZATION....................................19
SECTION 3.04. NONCONTRAVENTION..............................................19
SECTION 3.05. CAPITALIZATION................................................20
SECTION 3.06. OWNERSHIP OF SHARES...........................................20
SECTION 3.07. PERMITS; COMPLIANCE...........................................20
SECTION 3.08. FINANCIAL STATEMENTS..........................................21
SECTION 3.09. BOOKS AND RECORDS.............................................21
SECTION 3.10. ABSENCE OF CERTAIN CHANGES....................................22
SECTION 3.11. NO UNDISCLOSED MATERIAL LIABILITIES...........................23
SECTION 3.12. INTERCOMPANY ACCOUNTS.........................................23
SECTION 3.13. LITIGATION....................................................23
SECTION 3.14. TAXES.........................................................24
SECTION 3.15. EMPLOYEE PLANS................................................25
SECTION 3.16. LABOR MATTERS.................................................27
SECTION 3.17. TRANSACTIONS WITH AFFILIATES..................................27
SECTION 3.18. CERTAIN BUSINESS PRACTICES....................................28
SECTION 3.19. FINDER'S FEES.................................................28
SECTION 3.20. ENVIRONMENTAL MATTERS.........................................28
SECTION 3.21. COMPLIANCE WITH LAWS AND COURT ORDERS.........................30
SECTION 3.22. EMPLOYEE MATTERS..............................................30
SECTION 3.23. TITLE TO ASSETS; LIENS........................................30
SECTION 3.24. REAL PROPERTY.................................................30
SECTION 3.25. MATERIAL CONTRACTS............................................31
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SECTION 3.26. INSURANCE.....................................................32
SECTION 3.27. INTELLECTUAL PROPERTY.........................................32
SECTION 3.28. U.S. CITIZEN; AIR CARRIER.....................................33
SECTION 3.29. AIRCRAFT......................................................33
SECTION 3.30. NO OTHER REPRESENTATIONS OR WARRANTIES........................33
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. CORPORATE EXISTENCE AND POWER.................................33
- --
SECTION 4.02. CORPORATE AUTHORIZATION.......................................33
SECTION 4.03. GOVERNMENTAL AUTHORIZATION....................................34
SECTION 4.04. NONCONTRAVENTION..............................................34
SECTION 4.05. FINDER'S FEES.................................................34
SECTION 4.06. FINANCING.....................................................35
SECTION 4.07. PURCHASE FOR INVESTMENT.......................................35
SECTION 4.08. LITIGATION....................................................35
SECTION 4.09. INSPECTIONS...................................................35
ARTICLE 5
COVENANTS OF THE SELLERS
SECTION 5.01. CONDUCT OF THE COMPANY........................................35
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY........................36
SECTION 5.03. MONTHLY FINANCIAL STATEMENTS..................................37
SECTION 5.04. AUDITED FINANCIAL STATEMENTS..................................38
SECTION 5.05. NOTICES OF CERTAIN EVENTS.....................................38
SECTION 5.06. RESIGNATIONS..................................................38
SECTION 5.07. EMPLOYEE STOCK OPTIONS........................................38
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. CONFIDENTIALITY...............................................39
SECTION 6.02. DELTA ACCESS; CONFIDENTIALITY.................................39
SECTION 6.03. TRADEMARKS; TRADENAMES........................................39
SECTION 6.04. EMPLOYEE STOCK OPTIONS........................................39
ARTICLE 7
COVENANTS OF BUYER AND THE SELLERS
SECTION 7.01. BEST EFFORTS; FURTHER ASSURANCES..............................40
SECTION 7.02. CERTAIN FILINGS...............................................40
SECTION 7.03. PUBLIC ANNOUNCEMENTS..........................................41
SECTION 7.04. LEASES........................................................41
SECTION 7.05. WORKERS' COMPENSATION; SURETY BONDS...........................41
SECTION 7.06. INSURANCE.....................................................41
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ARTICLE 8
TAX MATTERS
SECTION 8.01. SECTION 338(H)(10) ELECTION...................................41
SECTION 8.02. RETURNS DUE AFTER CLOSING AND REFUNDS.........................42
SECTION 8.03. TAX SHARING...................................................44
SECTION 8.04. COOPERATION ON TAX MATTERS....................................44
SECTION 8.05. TAX INDEMNIFICATION...........................................45
SECTION 8.06. PURCHASE PRICE ADJUSTMENT.....................................47
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. EMPLOYEE BENEFITS.............................................47
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF BUYER AND THE SELLERS...........48
SECTION 10.02. CONDITIONS TO OBLIGATION OF BUYER............................48
SECTION 10.03. CONDITIONS TO OBLIGATION OF THE SELLERS......................49
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. SURVIVAL.....................................................50
SECTION 11.02. INDEMNIFICATION..............................................50
SECTION 11.03. PROCEDURES...................................................51
SECTION 11.04. CALCULATION OF DAMAGES.......................................52
SECTION 11.05. EXCLUSIVITY..................................................52
SECTION 11.06. KNOWLEDGE....................................................53
ARTICLE 12
TERMINATION
SECTION 12.01. GROUNDS FOR TERMINATION......................................53
SECTION 12.02. EFFECT OF TERMINATION........................................53
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES......................................................54
SECTION 13.02. AMENDMENTS AND WAIVERS.......................................55
SECTION 13.03. EXPENSES.....................................................55
SECTION 13.04. SUCCESSORS AND ASSIGNS.......................................55
SECTION 13.05. GOVERNING LAW................................................56
SECTION 13.06. JURISDICTION.................................................56
SECTION 13.07. WAIVER OF JURY TRIAL.........................................56
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SECTION 13.08. SPECIFIC PERFORMANCE.........................................56
SECTION 13.09. COUNTERPARTS; EFFECTIVENESS; THIRD-PARTY BENEFICIARIES.......56
SECTION 13.10. ENTIRE AGREEMENT.............................................57
SECTION 13.11. SEVERABILITY.................................................57
SECTION 13.12. DISCLOSURE SCHEDULES.........................................57
SECTION 13.13. CONSTRUCTION.................................................57
Exhibit A - Form of ASA Delta Connection Agreement
Exhibit B - Form of SkyWest Delta Connection Agreement
Exhibit C-1 to C-2 - Forms of Guarantees
Exhibit D - Form of Master Services Agreement
Exhibit E - Form of Transition Administrative Services Agreement
iv
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is dated as of August
15, 2005, by and among SkyWest, Inc., a Utah corporation ("BUYER"), Delta Air
Lines, Inc., a Delaware corporation ("DELTA"), and ASA Holdings, Inc., a Georgia
corporation ("ASAH").
W I T N E S S E T H :
WHEREAS, Delta, through its subsidiary ASAH, is the beneficial owner of
the Shares (as defined herein) and desires to sell the Shares to Buyer, and
Buyer desires to purchase the Shares from ASAH, upon the terms and subject to
the conditions hereinafter set forth.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) The following terms, as used herein, have
the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with such
Person.
"AFFILIATED GROUP" means, with respect to federal income Taxes, any
affiliated group of corporations (as defined in Section 1504(a) of the Code) of
which the Company are members and, with respect to any state, local or foreign
income, franchise or similar income-based Tax, the consolidated, combined or
unitary group of which the Company is a member.
"ASA DELTA CONNECTION AGREEMENT" means the agreement substantially in
the form of EXHIBIT A amending and restating the Amended and Restated Delta
Connection Agreement between Delta and the Company dated January 1, 2003, as
amended.
"AUDITOR" means Deloitte & Touche LLP.
"BALANCE SHEET" means the unaudited balance sheet of the Company as of
the Balance Sheet Date.
"BALANCE SHEET DATE" means June 30, 2005.
"BASE CASH" means $50,000,000.
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"BASE INTERCOMPANY WORKING CAPITAL" means $(1,000,000).
"BASE WORKING CAPITAL" means $10,000,000 if the Closing Date occurs on
or prior to August 31, 2005 and $5,000,000 if the Closing Date occurs on or
after September 30, 2005 and for any date between August 31, 2005 and September
31, 2005, an amount that is pro rated for such date based on a linear
interpolation.
"BUSINESS" means the business and operations of the Company as such are
conducted by the Company as of the date hereof, including its airline
operations.
"BUSINESS DAY" means a day, other than Saturday, Sunday or other day on
which commercial banks in New York, New York are required by law to close.
"BUYER MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition or results of operations of Buyer and its subsidiaries taken
as a whole, except that an effect resulting from any of the following shall not
be considered when determining if a Buyer Material Adverse Effect has occurred:
(i) any change in national or international political, regulatory, economic,
business or market conditions generally or in the geographic markets served by
Buyer and its subsidiaries; or (ii) any change in conditions affecting the air
transportation industry generally or the commuter or regional air transportation
industry specifically, excluding in the case of each of the above clauses any
change which materially disproportionately affects Buyer and its subsidiaries,
taken as a whole.
"CLOSING CASH" means the amount of cash (including restricted cash
collateralizing letters of credit extended on behalf of the Company in respect
of workers' compensation insurance) held by the Company as of the close of
business on the Closing Date.
"CLOSING DATE" means the date of the Closing.
"CLOSING INTERCOMPANY WORKING CAPITAL" means the excess of Intercompany
Receivables over Intercompany Payables as of the close of business on the
Closing Date. As used in this definition of "Closing Intercompany Working
Capital," the accounting items identified by capitalized terms above shall
consist of only the accounting components set forth under each such term on
SCHEDULE 1.01, which correspond to the accounting components of the same name
included and identified within the applicable line items in the Balance Sheet.
"CLOSING WORKING CAPITAL" means the excess of Current Assets over
Current Liabilities as of the close of business on the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended and the
regulations promulgated thereunder.
"COMBINED TAX" means federal income Tax and any income, franchise or
similar income-based Tax payable to any state, local or foreign taxing
jurisdiction
6
with respect to which the Company has filed or will file a Tax Return with a
member of any Affiliated Group on an affiliated, consolidated, combined or
unitary basis.
"COMBINED TAX RETURN" means any Tax Return reporting Combined Taxes of
an Affiliated Group.
"COMMON STOCK" means the common stock, par value $0.10 per share, of the
Company.
"COMPANY" means Atlantic Southeast Airlines, Inc., a Georgia
corporation.
"COMPANY INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights owned by, or licensed to, the Company.
"COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition or results of operations of the Company, except that an
effect resulting from any of the following shall not be considered when
determining if a Company Material Adverse Effect has occurred: (i) any change in
national or international political, regulatory, economic, business or market
conditions generally or in the geographic markets served by the Company; or (ii)
any change in conditions affecting the air transportation industry generally or
the commuter or regional air transportation industry specifically, excluding in
the case of each of the above clauses any change which materially
disproportionately affects the Company.
"CURRENT ASSETS" means the sum of the Company's:
(x) Accounts Receivable, net of the Allowance for Doubtful Accounts,
(y) Spare Parts and Supplies; and
(z) Prepaid Expenses.
As used in this definition of "Current Assets," the accounting items identified
by capitalized terms above shall consist of only the accounting components set
forth under each such term on SCHEDULE 1.01, which correspond to the accounting
components of the same name included and identified within the applicable line
items in the Balance Sheet. For the avoidance of doubt, the parties agree that
"Current Assets" shall not include any amounts included in Closing Cash or
Closing Intercompany Working Capital.
"CURRENT LIABILITIES" means the sum of the Company's:
(w) Payables,
(x) Accrued Salaries and Vacation Pay,
7
(y) Accrued Liabilities, and
(z) Accrued Taxes.
As used in this definition of "Current Liabilities," the accounting items
identified by capitalized terms above shall consist of only the accounting
components set forth under each such term on SCHEDULE 1.01, which correspond to
the accounting components of the same name included and identified within the
applicable line items in the Balance Sheet. For the avoidance of doubt, (i)
"Accrued Taxes" shall not include Combined Taxes, separate state income Taxes
resulting from the Section 338(h)(10) Election or any reserve for deferred Taxes
established to reflect timing differences between book and Tax income and (ii)
"Current Liabilities" shall not include any amounts included in the Closing
Intercompany Working Capital.
"DELTA CONNECTION AGREEMENTS" means each of (i) the ASA Delta Connection
Agreement and (ii) the SkyWest Delta Connection Agreement, in each case to be
executed by the applicable parties on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means Delta and any other entity which would be
treated as a single employer with the Company under Section 414 of the Code.
"ESCROW AGREEMENT" means the escrow agreement to be entered into
pursuant to the provisions of SCHEDULE 2.01 of this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FINAL CASH" means Closing Cash as shown in Delta's calculation
delivered pursuant to Section 2.03(a), if no notice of disagreement with respect
thereto is duly delivered pursuant to Section 2.03(b); or, if such a notice of
disagreement is delivered, as agreed by Buyer and Delta pursuant to Section
2.03(c) or, in the absence of such agreement, as shown in the Independent Firm's
calculation delivered pursuant to Section 2.03(c); PROVIDED that, in no event
shall Final Cash be more than Delta's calculation of Closing Cash delivered
pursuant to Section 2.03(a) or less than Buyer's calculation of Closing Cash
delivered pursuant to Section 2.03(b).
"FINAL INTERCOMPANY WORKING CAPITAL" means Closing Intercompany Working
Capital as shown in Delta's calculation delivered pursuant to Section 2.03(a),
if no notice of disagreement with respect thereto is duly delivered pursuant to
Section 2.03(b); or, if such a notice of disagreement is delivered, as agreed by
Buyer and Delta pursuant to Section 2.03(c) or, in the absence of such
agreement, as shown in the Independent Firm's calculation delivered pursuant to
8
Section 2.03(c); PROVIDED that, in no event shall Closing Intercompany Working
Capital be more than Delta's calculation of Closing Intercompany Working Capital
delivered pursuant to Section 2.03(a) or less than Buyer's calculation of
Closing Intercompany Working Capital delivered pursuant to Section 2.03(b).
"FINAL WORKING CAPITAL" means Closing Working Capital as shown in
Delta's calculation delivered pursuant to Section 2.03(a), if no notice of
disagreement with respect thereto is duly delivered pursuant to Section 2.03(b);
or, if such a notice of disagreement is delivered, as agreed by Buyer and Delta
pursuant to Section 2.03(c) or, in the absence of such agreement, as shown in
the Independent Firm's calculation delivered pursuant to Section 2.03(c);
PROVIDED that, in no event shall Final Working Capital be more than Delta's
calculation of Closing Working Capital delivered pursuant to Section 2.03(a) or
less than Buyer's calculation of Closing Working Capital delivered pursuant to
Section 2.03(b).
"GAAP" means generally accepted accounting principles in the United
States.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, local or foreign
government or any subdivision, agency, instrumentality, authority, department,
commission, board or bureau thereof or any federal, state, local or foreign
court, tribunal or arbitrator.
"GUARANTEES" means collectively, (A) a guarantee substantially in the
form of EXHIBIT C-1 by Buyer guaranteeing the obligations of SkyWest under the
SkyWest Delta Connection Agreement and (B) a guarantee substantially in the form
of EXHIBIT C-2 by Buyer guaranteeing the obligations of the Company under the
ASA Delta Connection Agreement.
"HSR ACT" means the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right.
"KNOWLEDGE OF DELTA," "DELTA'S KNOWLEDGE" or any other similar knowledge
qualification in this Agreement means to the actual knowledge, without
investigation, of the individuals listed on SCHEDULE 1.02.
"LAWS" means any law, regulation, rule, order, judgment or decree of a
Governmental Authority.
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"LIEN" means, with respect to any property or asset, any and all liens,
encumbrances, charges, security interests, options, mortgages, easements or
pledges in respect of such property or asset.
"MASTER SERVICES AGREEMENT" means an agreement between Delta Technology,
Inc. and the Company, substantially in the form of EXHIBIT D, to be executed on
the Closing Date.
"PENSION PLAN" means any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA that is subject to Title IV of ERISA or Section
412 of the Code.
"PERMITTED LIENS" mean: (i) specific Liens reflected or reserved against
in the Balance Sheet or disclosed in the notes thereto; (ii) Taxes and general
and special assessments not in default and payable without penalty or interest
or being contested in good faith; (iii) mechanic's, materialman's, carrier's,
repairer's and other similar Liens arising or incurred in the ordinary course of
business or that are not yet due and payable or are being contested in good
faith; or (iv) Liens arising or incurred in the ordinary course of business
since the Balance Sheet Date, which individually or in the aggregate do not have
a Company Material Adverse Effect.
"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.
"POST-CLOSING TAX PERIOD" means any Tax period beginning after the
Closing Date; and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period beginning after
the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the
Closing Date and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period ending on the
Closing Date.
"REAL PROPERTY" means all real property that is owned or leased by the
Company (other than leases of "gates" and related airport facilities at United
States or foreign airports).
"RELATED AGREEMENTS" means, collectively, each of the Delta Connection
Agreements, the Escrow Agreement, the Guarantees, the Transition Administrative
Services Agreement and the Master Services Agreement.
"SEC" means the Securities and Exchange Commission.
10
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELLERS" means, collectively, Delta and ASAH.
"SHARES" means 1,000 shares of Common Stock.
"SKYWEST" means SkyWest Airlines, Inc., a Utah corporation.
"SKYWEST DELTA CONNECTION AGREEMENT" means the agreement substantially
in the form of EXHIBIT B amending and restating the Delta Connection Agreement
between Delta and SkyWest dated July 1, 1990, as amended.
"SUBSIDIARY" means, as of any time, any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at such
time directly or indirectly owned by the Company.
"TAX" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, and including any obligations to indemnify or otherwise
assume or succeed to the Tax liability of any other person.
"TAX ASSET" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could be carried forward or back to reduce Taxes (including
deductions and credits related to alternative minimum Taxes) and losses or
deductions deferred by the Code or other applicable law (including pursuant to
Section 163(e)(3) or Section 163(j) of the Code).
"TAX AUDIT" shall mean any notice of deficiency, proposed adjustment,
adjustment, assessment, audit, examination or other administrative or court
proceeding, suit, dispute or other claim regarding Taxes.
"TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TAXING AUTHORITY" means any governmental authority (domestic or
foreign) responsible for the imposition of any Tax.
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"TRANSITION ADMINISTRATIVE SERVICES AGREEMENT" means an agreement
between Delta and the Company, substantially in the form of EXHIBIT E, to be
executed on the Closing Date.
"TRANSPORTATION CODE" means 49 U.S.C. subtitle VII, as amended, and any
successor statute thereto and the Federal Aviation Regulations issued or
promulgated pursuant thereto.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
---- -------
Allocation Report.................................... 8.01
ASAH................................................. Preamble
Audited Financial Statements......................... 3.08
Buyer................................................ Preamble
CERCLA............................................... 3.20
Claim................................................ 11.03
Closing.............................................. 2.02
Closing Adjustment Statement......................... 2.03
Collective Bargaining Agreements..................... 3.16
Company Permits...................................... 3.07
Company Securities................................... 3.05
Contingent Additional Amount......................... 2.01
Confidentiality Agreement............................ 6.01
Damages.............................................. 11.02
Delta................................................ Preamble
Delta Equity Compensation............................ 5.07
Delta Plans.......................................... 3.15
DOT.................................................. 3.03
DOT Exemption........................................ 3.03
Employee Plans....................................... 3.15
Environmental Laws................................... 3.20
Environmental Permits................................ 3.20
Estimated Purchase Price............................. 2.01
Estimated Purchase Price Statement................... 2.01
FAA.................................................. 3.03
FAA Notice........................................... 3.03
Financial Statements................................. 3.08
Indemnified Party.................................... 11.03
Indemnifying Party................................... 11.03
Independent Firm..................................... 2.03
Insurance Policies................................... 3.26
Maintenance Schedule................................. 3.29
Material Contracts................................... 3.25
Materials of Environmental Concern................... 3.20
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TERM SECTION
---- -------
Non-Income Taxes..................................... 8.02
PBGC................................................. 3.15
PCBs................................................. 3.20
Purchase Price....................................... 2.01
Related Party........................................ 3.17
Schedules............................................ Article 3
Section 338(h)(10) Election.......................... 8.01
Tax Loss............................................. 8.05
Third Party Claim.................................... 11.03
Unaudited Financial Statements....................... 3.08
Warranty Breach...................................... 11.02
SECTION 1.02. OTHER DEFINITIONAL AND INTERPRETATIVE PROVISIONS. Unless
specified otherwise, in this Agreement the obligations of any party consisting
of more than one Person are joint and several. The words "hereof", "herein" and
"hereunder" and words of like import used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
captions herein are included for convenience of reference only and shall be
ignored in the construction or interpretation hereof. References to Articles,
Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and
Schedules of this Agreement unless otherwise specified. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any capitalized
terms used in any Exhibit or Schedule but not otherwise defined therein shall
have the meaning as defined in this Agreement. Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the
singular. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation," whether or not they are in fact followed by those words or words of
like import. "Writing," "written" and comparable terms refer to printing, typing
and other means of reproducing words (including electronic media) in a visible
form. References to any Person include the successors and permitted assigns of
that Person. References from or through any date mean, unless otherwise
specified, from and including or through and including, respectively.
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE. (a) Upon the terms and subject to the
conditions of this Agreement, ASAH agrees to sell to Buyer, Delta agrees to
cause ASAH to sell to Buyer, and Buyer agrees to purchase from ASAH, the Shares
at the Closing. The purchase price (the "PURCHASE PRICE") is $425 million of
which $330 million is payable at Closing and $95 million is payable as part of
the Contingent Additional Amount. The following amounts will be paid by Buyer
13
to ASAH or ASAH to Buyer, as applicable, under this Agreement: (1) $350 million
in immediately available funds at the Closing payable by Buyer to ASAH
(representing $330 million in Purchase Price and $20 million for certain
aircraft financing deposits), (2) $125 million (representing $95 million in
Purchase Price and $30 million for aircraft financing deposits) (the "CONTINGENT
ADDITIONAL AMOUNT") which shall be payable by Buyer to ASAH only upon the
satisfaction of the conditions, and in accordance with the terms, specified on
SCHEDULE 2.01 and terms specified in the Escrow Agreement and which Contingent
Additional Amount shall be subject to reduction in accordance with the terms of
this Agreement and the Escrow Agreement, (3) the excess of Closing Working
Capital over Base Working Capital (from Buyer to ASAH) or the excess of Base
Working Capital over Closing Working Capital (from ASAH to Buyer), as the case
may be, (4) the excess of Closing Cash over Base Cash (from Buyer to ASAH) or
the excess of Base Cash over Closing Cash (from ASAH to Buyer), as the case may
be and (5) the excess, if any, of Base Intercompany Working Capital over Closing
Intercompany Working Capital from ASAH to Buyer. The amounts payable hereunder
shall be paid as provided in Section 2.02 and adjusted as set forth in Section
2.04. The provisions set forth in SCHEDULE 2.01 are incorporated by reference in
this Section 2.01 as if fully set forth herein, and each party agrees to perform
and comply with each covenant and agreement applicable to it as set forth
therein.
(b)......No later than five Business Days prior to the Closing Date, and
no earlier than ten Business Days prior to the Closing Date, Delta shall deliver
to Buyer a statement setting forth its good faith estimate of (i) Closing
Working Capital, Closing Cash and Closing Intercompany Working Capital and (ii)
the corresponding amount of the Purchase Price based on such estimates (the
"ESTIMATED PURCHASE PRICE"), accompanied by a reasonably detailed computation of
such estimates, including supporting schedules and other relevant information
(such statement, the "ESTIMATED PURCHASE PRICE STATEMENT"). The Estimated
Purchase Price Statement shall (x) be prepared in accordance with GAAP applied
on a basis consistent with the accounting principles used in the preparation of
the Balance Sheet, (y) include line items entitled "Cash" and all of the line
items described in the definitions of "Current Assets", "Current Liabilities"
and "Closing Intercompany Working Capital" and (z) be prepared using the same
accounting methods, practices and procedures used in the preparation of the
Balance Sheet.
SECTION 2.02. CLOSING. The closing (the "CLOSING") of the purchase and
sale of the Shares hereunder shall take place at the offices of Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible, but in
no event later than five Business Days, after satisfaction or waiver of the
conditions set forth in Article 10 (other than those conditions which, by their
nature, will be satisfied at the Closing), or at such other time or place as
Buyer and ASAH may agree. At the Closing:
14
(a) Buyer shall deliver to ASAH (i) the Estimated Purchase Price plus
(ii) $20 million (representing certain aircraft financing deposits) minus (iii)
$95 million (representing the portion of the Purchase Price included in the
definition of Contingent Additional Amount) in immediately available funds by
wire transfer to an account of ASAH with a bank in New York City designated by
ASAH, by notice to Buyer, which notice shall be delivered not later than two
Business Days prior to the Closing Date (or if not so designated, then by
certified or official bank check payable in immediately available funds to the
order of ASAH in such amount). In addition, Buyer shall deposit $95 million in
the Escrow Account as required pursuant to SCHEDULE 2.01.
(b) ASAH shall, and Delta shall cause ASAH to, deliver to Buyer
certificates for the Shares duly endorsed or accompanied by stock powers duly
endorsed in blank, with any required transfer stamps affixed thereto.
(c) The Sellers and Buyer shall deliver the other certificates and
documents contemplated by Article 10.
SECTION 2.03. CLOSING WORKING CAPITAL; CLOSING CASH; CLOSING
INTERCOMPANY WORKING CAPITAL. As promptly as practicable, but no later than 60
days, after the Closing Date, Delta and ASAH will cause to be prepared and
delivered to Buyer a statement (the "CLOSING ADJUSTMENT STATEMENT") setting
forth Delta's calculation of Closing Working Capital, Closing Cash and Closing
Intercompany Working Capital. The Closing Adjustment Statement shall (x) be
prepared in accordance with GAAP applied on a basis consistent with the
accounting principles used in the preparation of the Balance Sheet, (y) include
line items entitled "Cash" and all of the line items described in the
definitions of "Current Assets", "Current Liabilities" and "Closing Intercompany
Working Capital" and (z) be prepared using the same accounting methods,
practices and procedures used in the preparation of the Balance Sheet and the
Estimated Purchase Price Statement. For the purposes of the purchase price
adjustment provisions of this Agreement, in the event of any conflict between
GAAP on the one hand and consistency of application of accounting principles
used in the preparation of the Balance Sheet on the other hand, consistency
shall override GAAP.
(b) If Buyer disagrees with Delta's calculation of Closing Working
Capital, Closing Cash or Closing Intercompany Working Capital, Buyer may, within
30 days after delivery of the Closing Adjustment Statement, deliver a notice to
Delta disagreeing with such calculations and setting forth Buyer's calculation
of such amounts. Any such notice of disagreement shall be in writing and shall
specify in reasonable detail those items or amounts as to which Buyer disagrees,
and Buyer shall be deemed to have agreed with all other items and amounts
contained in the Closing Adjustment Statement and the calculation of Closing
Working Capital, Closing Cash and Closing Intercompany Working Capital delivered
pursuant to Section 2.03(a).
15
(c) If a notice of disagreement shall be delivered pursuant to Section
2.03(b), Buyer and Delta shall, during the 30 days following such delivery, use
their best efforts to reach agreement on the disputed items or amounts in order
to determine, as may be required, the amount of Closing Working Capital, Closing
Cash and Closing Intercompany Working Capital, which amount of Closing Working
Capital, Closing Cash and Closing Intercompany Working Capital shall, in each
case, not be less than the amount thereof shown in Buyer's calculations
delivered pursuant to Section 2.03(b) nor more than the amount thereof shown in
Delta's calculation delivered pursuant to Section 2.03(a). If, during such
period, Buyer and Delta are unable to reach such agreement, they shall promptly,
and in no event more than thirty days, thereafter choose a mutually acceptable,
nationally recognized accounting firm with no material relationship with any
party hereto or its Affiliates (the "INDEPENDENT FIRM") and cause the
Independent Firm to review this Agreement and the disputed items or amounts for
the purpose of calculating Closing Working Capital, Closing Cash and Closing
Intercompany Working Capital. In making such calculation, the Independent Firm
shall consider only those items or amounts in the Closing Adjustment Statement
as to which Buyer has disagreed. The Independent Firm shall deliver to Buyer and
Delta, as promptly as practicable, a report setting forth such calculation. Such
report shall be final and binding upon Buyer and the Sellers. The cost of such
review and report shall be borne equally by Buyer and Delta.
(d) Buyer and Delta agree that they will, and will cause their
respective independent accountants and the Company and ASAH to, cooperate and
participate in the preparation of the Estimated Purchase Price Statement and the
Closing Adjustment Statement and the calculation of Closing Working Capital,
Closing Cash and Closing Intercompany Working Capital and Final Working Capital,
Final Cash and Final Intercompany Working Capital and in the conduct of the
reviews referred to in this Section 2.03, including allowing Buyer and its
representative independent accountants a reasonable opportunity to be present at
Delta's facility during such preparation and to request materials and
information relating to preparation of the foregoing and making available as
reasonably requested books, records, work papers and personnel, subject (in the
case of access to independent accountants' work papers) to the execution by the
party seeking such access of a customary release from liability and
indemnification of such independent accountants.
(e) Except for Intercompany Payables and Intercompany Receivables
included in the calculation of Closing Intercompany Working Capital in
accordance with SCHEDULE 1.01, all intercompany indebtedness and obligations
immediately prior to Closing between the Company on the one hand, and the
Sellers and their Affiliates, on the other hand, shall be cancelled and
terminated. Without limiting the foregoing, such cancellation and termination
includes the cancellation and termination of all obligations of the Company to
repay to Sellers or their Affiliates any aircraft deposits previously paid by
Sellers or their Affiliates on behalf of the Company.
16
SECTION 2.04. ADJUSTMENT OF PURCHASE PRICE. If Final Working Capital
exceeds Closing Working Capital as shown in the Estimated Purchase Price
Statement, Buyer shall pay to ASAH, in the manner and with interest as provided
in Section 2.04(d), the amount of such excess. If Closing Working Capital as
shown in the Estimated Purchase Price Statement exceeds Final Working Capital,
the Contingent Additional Amount shall be reduced, as an adjustment to the
Purchase Price, in the manner and with interest as provided in Section 2.04(e),
by the amount of such excess.
(b) If Final Cash exceeds Closing Cash as shown in the Estimated
Purchase Price Statement, Buyer shall pay to ASAH, as an adjustment to the
Purchase Price, in the manner and with interest as provided in Section 2.04(d),
the amount of such excess. If Closing Cash as shown in the Estimated Purchase
Price Statement exceeds Final Cash, the Contingent Additional Amount shall be
reduced, as an adjustment to the Purchase Price, in the manner and with interest
as provided in Section 2.04(e), by the amount of such excess.
(c) If Final Intercompany Working Capital exceeds Closing Intercompany
Working Capital as shown in the Estimated Purchase Price Statement, Buyer shall
pay to ASAH, as an adjustment to the Purchase Price, in the manner and with
interest as provided in Section 2.04(d), the amount of such excess not to exceed
the excess of Base Intercompany Working Capital over the Closing Intercompany
Working Capital. If Closing Intercompany Working Capital as shown in the
Estimated Purchase Price Statement exceeds Final Intercompany Working Capital,
the Contingent Additional Amount shall be reduced, as an adjustment to the
Purchase Price, in the manner and with interest as provided in Section 2.04(e),
by the lesser of (i) the excess of Closing Intercompany Working Capital over
Final Intercompany Working Capital and (ii) the excess of Base Intercompany
Working Capital over Final Intercompany Working Capital.
(d) Payments due to ASAH from Buyer pursuant to Section 2.04(a) or
Section 2.04(b) shall be made at a mutually convenient time and place within ten
days after Final Working Capital, Final Cash and Final Intercompany Working
Capital, as applicable, have been finally determined pursuant to Section 2.03
above by delivery by Buyer, as the case may be, of a certified or official bank
check payable in immediately available funds to ASAH or by causing such payments
to be credited to such account of ASAH as it may designate. The amount of any
payment to be made pursuant to this Section shall bear interest from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to the Prime Rate as published in the Wall Street Journal, Eastern
Edition in effect from time to time during the period from the Closing Date to
the date of payment. Such interest shall be payable at the same time as the
payment to which it relates and shall be calculated daily on the basis of a year
of 365 days and the actual number of days elapsed.
17
(e) Reductions in the Contingent Additional Amount pursuant to Section
2.04(a) or Section 2.04(b) shall be made as of the day following the date that
Final Working Capital, Final Cash and Final Intercompany Working Capital, as
applicable, have been finally determined pursuant to Section 2.03 above. The
amount of any reduction in the Contingent Additional Amount made pursuant to
this Section shall bear interest from and including the Closing Date to but
excluding the date of payment at a rate per annum equal to the Prime Rate as
published in the Wall Street Journal, Eastern Edition, in effect from time to
time during the period from the Closing Date to the date of payment. Such
interest shall also be reduced from the Contingent Additional Amount at the same
time as the reduction pursuant to Section 2.04(a) or Section 2.04(b) to which it
relates and shall be calculated daily on the basis of a year of 365 days and the
actual number of days elapsed. Notwithstanding anything to the contrary
contained herein, if the Contingent Additional Amount has been released to ASAH
pursuant to the provisions of SCHEDULE 2.01 and the Escrow Agreement and the
Withheld Amount (as defined in SCHEDULE 2.01) is insufficient to satisfy ASAH's
obligations to Buyer under Section 2.04(a) or Section 2.04(b), then such
obligations shall be settled in cash.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Subject to any exceptions set forth in the Disclosure Schedules to this
Agreement (collectively, the "SCHEDULES"), each of the Sellers makes the
following representations and warranties to Buyer with respect to itself and the
Company as of the date hereof (except to the extent expressly relating to a
specific date, in which event such representation or warranty shall be made as
of such date), which shall be unaffected by any investigation heretofore or
hereafter made by or on behalf of Buyer:
SECTION 3.01. CORPORATE EXISTENCE AND POWER. Each of the Sellers and the
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers required to carry on its business as now conducted. Each of the
Sellers and the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not have a Company Material Adverse Effect. Attached as
SCHEDULE 3.01 are true and correct copies of the articles of incorporation and
bylaws of the Company as in effect on the date hereof.
SECTION 3.02. CORPORATE AUTHORIZATION AND BINDING EFFECT. The execution,
delivery and performance by each Seller of this Agreement, and by each Seller
and the Company of the Related Agreement to which it is a party, and
18
the consummation by each of the Sellers and the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate and shareholder action by each of the Sellers and the Company. Each of
the Sellers and the Company has full power and authority to execute and deliver
this Agreement and each Related Agreement to which it is a party and to perform
its obligations hereunder and thereunder. This Agreement and each Related
Agreement to which it is a party has been duly executed and delivered by Sellers
and the Company and, assuming due and valid authorization, execution and
delivery thereof by Buyer, this Agreement and each Related Agreement is a valid
and binding obligation of each of the Sellers and the Company party thereto,
enforceable in accordance with its terms and conditions (subject to the laws of
bankruptcy, insolvency, moratorium and similar laws and general equitable
principles).
SECTION 3.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Sellers of this Agreement and the consummation by the Sellers
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any Governmental Authority other than (i) compliance with any
applicable requirements of the HSR Act, (ii) notice to the Federal Aviation
Administration ("FAA") pursuant to Title 14, Part 119, section 36 of the Code of
Federal Regulations (the "FAA NOTICE"), (iii) the grant by the Department of
Transportation ("DOT") of an exemption from or approval under the provisions of
Section 41105 of Title 49 of the United States Code (the "DOT EXEMPTION") and
(iv) any such action or filing as to which the failure to make or obtain would
not have a Company Material Adverse Effect.
SECTION 3.04. NONCONTRAVENTION. The execution, delivery and performance
by the Sellers of this Agreement and by each of the Sellers and the Company to
each Related Agreement and the consummation by the Sellers and the Company of
the transactions contemplated hereby and thereby do not and will not (i)
contravene or conflict with the certificates or articles of incorporation or
bylaws of any of the Sellers or the Company; assuming compliance with the
matters referred to in Section 3.03, contravene or conflict with or constitute a
violation of any provision of any Law binding upon or applicable to either of
the Sellers or the Company or any of their respective properties or assets;
result in a violation or a breach of, or constitute a default or require any
consent under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Company or to a loss of any
benefit to which the Company is entitled under any provision of any note, bond,
mortgage, indenture, lease, agreement, contract, obligation or other instrument
to which the Company is bound, or any license, franchise, permit or other
similar authorization held by the Company; or (iv) result in the creation or
imposition of any Lien on any asset of the Company, except for any Permitted
Liens, except in the case of clauses (ii) and (iii), for such matters as would
not have a Company Material Adverse Effect or materially impair or delay the
ability of either of the Sellers to consummate the transactions contemplated by
this Agreement.
19
SECTION 3.05. CAPITALIZATION. The authorized capital stock of the
Company consists of 100,000 shares of Common Stock. There are outstanding 1,000
shares of Common Stock. All outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid, nonassessable and free from
preemptive rights. Except as set forth in this Section 3.05, there are no
outstanding shares of capital stock or other voting securities of or other
ownership interests in the Company; ) securities of the Company convertible into
or exchangeable for shares of capital stock or voting securities of or other
ownership interests in the Company; or options or other rights to acquire from
the Company, or any obligation of the Company to issue, transfer or sell, any
capital stock or voting securities of or other ownership interests in the
Company or securities convertible into or exchangeable for capital stock or
voting securities of or other ownership interests in 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 to repurchase,
redeem or otherwise acquire any Company Securities. The Company does not have
any Subsidiaries.
SECTION 3.06. OWNERSHIP OF SHARES. ASAH is the record and beneficial
owner of the Shares, free and clear of any Lien, and will transfer and deliver
to Buyer at the Closing valid title to the Shares, free and clear of any Lien.
All of the capital stock and other voting securities of ASAH are beneficially
owned by Delta.
SECTION 3.07. PERMITS; COMPLIANCE. (a) Except as would not have a
Company Material Adverse Effect, the Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals, takeoff and landing authorizations (including
"slots" or "gates" at United States and foreign airports), clearances and orders
of any Governmental Authority necessary for the Company to operate its scheduled
air transportation business as currently conducted, to own, lease and operate
its properties and to carry on the Business (the "COMPANY PERMITS"). The use and
operation by the Company of its properties and the conduct of the Business
comply with the requirements and conditions of all Company Permits, including
all applicable operating certificates and authorities, common carrier
obligations and airworthiness directives, except where the failure to comply
would not have a Company Material Adverse Effect. SCHEDULE 3.07 sets forth a
list of jurisdictions outside the United States where the Company currently
holds operating permits and authorities to operate flights to and from the
listed foreign country.
(b) All of the Company Permits are valid and in full force and effect,
except where the failure to have, or the suspension or cancellation of, any of
the Company Permits would not have a Company Material Adverse Effect. To the
Knowledge of Delta, no suspension, cancellation or limitation of any of the
Company Permits is threatened, except where such suspension, cancellation or
20
limitation of any of the Company Permits would not have a Company Material
Adverse Effect.
(c) A certificate of airworthiness for each aircraft of the Company has
been duly issued pursuant to relevant federal aviation laws and is in full force
and effect (except for the period of time any aircraft may be out of service and
such certificate is suspended in connection therewith). Each aircraft owned by
the Company is duly registered in the name of the Company in accordance with
federal aviation laws and is not registered under the laws of any other country.
Each aircraft used by the Company but owned by a third party is duly registered
in the name of such third party in accordance with all applicable federal
aviation laws and the Company is authorized to use such aircraft under all
applicable federal aviation laws.
SECTION 3.08. FINANCIAL STATEMENTS. (a) The audited consolidated balance
sheets of the Company as of December 31, 2004, 2003 and 2002 and the related
audited consolidated statements of income, cash flows and stockholders equity
for each of the years ended December 31, 2004, 2003 and 2002 (collectively, the
"AUDITED FINANCIAL STATEMENTS") and the unaudited interim consolidated balance
sheets of the Company as of June 30, 2004 and the Balance Sheet Date, and the
related unaudited interim consolidated statements of income, cash flows and
stockholders equity for the six month periods ended on June 30, 2004 and the
Balance Sheet Date (the "UNAUDITED FINANCIAL STATEMENTS" and, together with the
Audited Financial Statements, the "FINANCIAL STATEMENTS"), in each case as
previously delivered to Buyer, fairly present, in conformity with GAAP applied
on a consistent basis (except as may be indicated in the notes thereto), the
financial position of the Company as of the dates thereof and their consolidated
results of operations, cash flows and stockholders equity for the periods then
ended (except that the Unaudited Financial Statements have not been audited by
an independent registered public accounting firm and do not contain all notes
required in audited financial statements prepared in accordance with GAAP and
may be subject to normal audit adjustments and normal annual adjustments).
(b) The Auditor has provided a letter to Delta's Audit Committee stating
that as of October 28, 2004, they are independent accountants with respect to
Delta and its subsidiaries within the meaning of the securities laws
administered by the Securities and Exchange Commission and Delta has no
Knowledge of any facts arising since such date that would result in the Auditor
being no longer considered independent with respect to Delta as aforesaid.
SECTION 3.09. BOOKS AND RECORDS. The books of account, minute books and
stock record books of the Company are complete and correct in all material
respects and have been maintained in accordance with reasonable and customary
business practices. The minute books of the Company contain records that are
complete and correct in all material respects of all meetings of, and corporate
action taken by (including all actions by unanimous written consent), the
shareholders and directors of the Company since January 1, 2000. True and
21
complete copies of all minute books and all stock record books of the Company
have heretofore been made available to Buyer.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
SCHEDULE 3.10, since the Balance Sheet Date, the Company has conducted its
business in the ordinary course consistent with past practices and there has not
been:
(a) any event, occurrence or development which has had a Company
Material Adverse Effect;
(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
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
the Company;
(c) any amendment of any material term of any outstanding security of
the Company;
(d) any incurrence, assumption, amendment or guarantee by the Company of
any indebtedness for borrowed money, or any foreign currency, hedging, financial
derivatives or similar transactions, other than in the ordinary course of
business and consistent with past practices;
(e) any creation or assumption by the Company of any Lien, other than
Permitted Liens, on any asset of the Company;
(f) (i) any making of any loan, advance or capital contribution to or
investment in any Person by the Company other than loans, advances, capital
contributions or investments made in the ordinary course of business consistent
with past practices or (ii) any amendment of the terms of any loan to executive
officers or directors;
(g) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or the Business (including
the acquisition or disposition of any assets), in either case, material to the
Company, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(h) any material change in any method of accounting or accounting
practice by the Company, except for any such change required by reason of a
concurrent change in GAAP or applicable law;
(i) any payment, discharge or satisfaction of any material claim,
liability or obligation, except in the ordinary course of business or pursuant
to the terms of any Material Contract;
22
(j) any material modification to a Material Contract;
(k) except as required under applicable law or pursuant to existing
agreements, any grant of any severance or termination pay to any director,
officer or employee of the Company, increase in compensation, bonus or other
benefits payable under any severance or retirement or termination pay policies
of the Company, entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or adoption of any new Employee
Plan or modification of any Employee Plan, in the case of each of clauses (i)
through (iv), other than in the ordinary course of business consistent with past
practices; or
(l) any disposal or lapse of any rights to the use of any Intellectual
Property Right, which would have a Company Material Adverse Effect.
SECTION 3.11. NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities or obligations of the Company of any kind, other than:
(a) liabilities or obligations disclosed or provided for in the Balance
Sheet or the notes thereto;
(b) liabilities or obligations incurred in the ordinary course of
business since the Balance Sheet Date;
(c) liabilities or obligations under this Agreement;
(d) liabilities or obligations set forth on SCHEDULE 3.11; and
(e) other liabilities or obligations which in the aggregate would not
have a Company Material Adverse Effect.
SECTION 3.12. INTERCOMPANY ACCOUNTS. SCHEDULE 3.12 contains a complete
list of all intercompany balances as of the Balance Sheet Date between Delta and
its Affiliates, on the one hand, and the Company, on the other hand. Except as
set forth in the Schedules, since the Balance Sheet Date there has not been any
accrual of liability by the Company to Delta or any of its Affiliates, any
waiver or release of any obligation or liability of Delta or its Affiliates to
the Company or other transaction between the Company and Delta or any of its
Affiliates, except in the ordinary course of business of the Company consistent
with past practices. All liabilities or obligations incurred by the Company to
Delta or its Affiliates since the Balance Sheet Date in excess of $5,000,000
individually are set forth in SCHEDULE 3.12.
SECTION 3.13. LITIGATION. As of the date of this Agreement, there is no
judicial or administrative action, suit or proceeding pending, or to the
Knowledge of Delta, threatened against ASAH or the Company or relating to the
Business,
23
any of the Company's properties or any of the officers or directors of such
companies before any court or arbitrator or before or by any Governmental
Authority that would, individually or in the aggregate, have a Company Material
Adverse Effect. Neither ASAH nor the Company is subject to any judgment, order
or decree that would result in a Company Material Adverse Effect.
SECTION 3.14. TAXES. (a) Each Affiliated Group has timely filed all
Combined Tax Returns that it was required to file for each taxable period during
which the Company was a member of the Affiliated Group. All such Combined Tax
Returns were correct and complete in all material respects, and prepared in
substantial compliance with all applicable laws and regulations. All income
Taxes shown or required to be shown on such Combined Tax Returns have been paid.
(b) The Company has also separately filed all material Tax Returns
(other than Combined Tax Returns) that it was required to file for each taxable
period. All such Tax Returns were timely filed, correct and complete in all
material respects and were prepared in substantial compliance with all
applicable laws and regulations. The Company has paid all material Taxes shown
or required to be shown on such separate Tax Returns.
(c) To the Knowledge of Delta, no claim has ever been made by an
authority in a jurisdiction where the Company does not file Tax Returns that the
Company is or may be subject to taxation by that jurisdiction. There are no
Liens for Taxes (other than Taxes not yet due and payable) upon any of the
assets of the Company.
(d) To the Knowledge of Delta, the Company has withheld and paid all
employment, sales, use and other Taxes required to have been withheld and paid
in connection with any amounts paid or owing to any employee, independent
contractor, creditor or other third party.
(e) There is no pending or, to the Knowledge of Delta, any threatened
dispute or claim concerning any material Tax liability of the Company for any
taxable period during which the Company was a member of the Seller's Affiliated
Group. Except as listed on SCHEDULE 3.14(E), neither the Company nor any
Affiliated Group has waived any statute of limitations in respect of any
material Taxes or agreed to any extension of time with respect to a material
income Tax assessment or deficiency.
(f) Delta has or will file a consolidated federal income Tax Return with
ASAH and the Company for the Company's taxable year immediately preceding the
taxable year of Closing, and Sellers are eligible to make a Section 338(h)(10)
Election with respect to the sale of the Shares. Except as listed on SCHEDULE
3.14(F), the Company has no liability for the Taxes of any other person (i)
under Treasury Regulation Section 1.1502-6 or other similar provision of state,
local, or foreign law, (ii) as a transferee or successor, (iii) by contract, or
(iv) otherwise.
24
SECTION 3.15. EMPLOYEE PLANS. SCHEDULE 3.15(A) contains a correct and
complete list identifying each "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 (written or oral) providing for
compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation (whether or not such
plan or arrangement is qualified under Section 401(a) of the Code), vacation
benefits, insurance coverage (including any self-insured arrangements), health
or medical benefits, employee assistance program, disability or sick leave
benefits, workers' compensation, supplemental unemployment benefits, severance
benefits and post-employment or retirement benefits (including pension, health,
medical or life insurance benefits) which (i) is maintained, administered or
contributed to by the Company or any ERISA Affiliate and (ii) covers any
employee or former employee of the Company, or with respect to which the Company
has any actual or potential liability. Current and complete copies of such plans
(and, if applicable, related trust or funding agreements or insurance policies
and the most recent summary plan description) and all amendments thereto and
written interpretations thereof have been made available to Buyer together with
the three most recent annual reports (Form 5500 including, if applicable,
Schedule B thereto) and tax returns (Form 990) prepared in connection with any
such plan or trust. Such plans are referred to collectively herein as the
"EMPLOYEE PLANS".
(b) The Company does not presently sponsor, maintain or contribute to,
and has not in the past sponsored, maintained or contributed to, or agreed to
sponsor, maintain or contribute to, any Pension Plan.
(c) Each Employee Plan (and all related trusts, insurance contracts and
funds): has been maintained, funded and administered in accordance with its
terms; and complies with all applicable provisions of ERISA, the Code, and all
other statutes, orders, laws, rules and regulations, except for instances in
which failure to meet the requirements of clauses (i) or (ii) of this Section
3.15(c) do not individually or in the aggregate have a Company Material Adverse
Effect. No events have occurred with respect to any Employee Plan that could
result in payment or assessment of any material excise taxes under the Code or
any material penalties or liability under Title I or Title IV of ERISA.
(d) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code or designated to qualify as tax exempt under Section
501(c)(9) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. Sellers have made
available to the Buyer copies of the most recent Internal Revenue Service
determination or tax exemption letters with respect to each such Employee Plan.
(e) Except as set forth on SCHEDULE 3.15(E), the consummation of the
transactions contemplated by this Agreement will not (either alone or together
25
with any other event) entitle any employee or director of the Company to
severance pay or accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, or increase the amount payable or trigger any other material
obligation pursuant to, any Employee Plan. There is no contract, agreement, plan
or arrangement covering any employee or former employee of the Company that,
individually or collectively, would give rise to the payment of any amount that
would not be deductible pursuant to the terms of Sections 162(m) or 280G of the
Code.
(f) Except as set forth on SCHEDULE 3.15(F), the Company does not have
any liability (accrued, absolute, contingent or otherwise) in respect of
post-retirement health, medical or life insurance benefits or other welfare
benefits for retired, former or current employees of the Company (or their
spouses or dependents) except as required to avoid excise Taxes under Section
4980B of the Code.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, any 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, 2004.
(h) There is no action, suit or proceeding pending, or to the Knowledge
of Delta, threatened (and, to the Knowledge of Delta, there is no investigation
pending or threatened) against or relating to any Employee Plan before any court
or arbitrator or before or by any governmental body, agency or official that
would have a Company Material Adverse Effect.
(i) Except for the Delta Air Lines, Inc. Delta Retirement Plan, Delta
Air Lines, Inc. Pilots Retirement Plan, Western Airlines, Inc. Pilots Defined
Benefit Pension Plan, Delta Pilot Defined Contribution Plan and Delta Airlines,
Inc. Money Purchase Pension Plan (collectively, the "DELTA PLANS"), no ERISA
Affiliate has sponsored, maintained, contributed to or incurred any obligation
or liability (whether accrued, absolute, contingent or otherwise) under any
Pension Plan. No Pension Plan maintained by an ERISA Affiliate or to which an
ERISA Affiliate has contributed or has any liability is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA. In the case of any Pension Plan
maintained or sponsored by an ERISA Affiliate or as to which any ERISA Affiliate
has any obligation to contribute or liability: (i) such Pension Plan has not
been completely or partially terminated or been the subject of a material
"reportable event" within the meaning of Section 4043 of ERISA; (ii) no
proceeding by the Pension Benefit Guaranty Corporation ("PBGC") to terminate
such Pension Plan is pending or to the Knowledge of Delta threatened; (iii) all
minimum funding contributions (including required quarterly installments)
required under Section 412 of the Code and Section 302(c) of ERISA for all plan
years have been paid when due, and
26
there is no waiver of the minimum funding standards in effect; (iv) no liens
have been imposed under Section 412(n) of the Code or Section 302(f) of ERISA
for any period in which the Company was a member of the ERISA Affiliate's
"controlled group" within the meaning of Code Section 412(n)(6)(B); and (v)
neither the Company nor any of its employees or officers have incurred any
liability to the PBGC or otherwise under Title IV of ERISA or the Code.
SECTION 3.16. LABOR MATTERS. (a) SCHEDULE 3.16 identifies all collective
bargaining agreements (including any side letters, supplemental agreement or
memorandum of understanding relating thereto) covering employees of the Company
(collectively, the "COLLECTIVE BARGAINING AGREEMENTS"). Delta has made available
to Buyer copies of all such Collective Bargaining Agreements.
(b) Except as disclosed in SCHEDULE 3.16(B), at the date of this
Agreement:
(i) there are no controversies pending or, to the Knowledge of
Delta, threatened between the Company and any of its employees that
would have a Company Material Adverse Effect;
(ii) the Company has not breached in any material respect or
otherwise failed to comply in any material respect with any provision of
any Collective Bargaining Agreement applicable to persons employed by
the Company, nor, to the Knowledge of Delta, has any such breach or
failure been alleged, and there are no material grievances outstanding
against the Company thereunder, in each case which would have a Company
Material Adverse Effect;
(iii) to the Knowledge of Delta, there is no petition pending
before the National Mediation Board seeking certification or any change
in certification of a labor representative with respect to any craft or
class of employees of the Company;
(iv) there is no strike, slowdown, work stoppage, labor action
or lockout or, to the Knowledge of Delta, threat thereof, by or with
respect to any employees of the Company; and
(v) there is no complaint for violation of the Railway Labor
Act, 45 U.S.C. ss. 8, as amended, against the Company pending before any
Governmental Authority.
SECTION 3.17. TRANSACTIONS WITH AFFILIATES. Except as disclosed in
SCHEDULE 3.17, no Related Party (as defined below) of the Company is presently,
or has been since January 1, 2004, a party to any transaction, contract,
agreement, instrument, commitment, understanding or other arrangement or
relationship with the Company (other than for services as an employee, officer
and director) in which the amount involved exceeds $60,000 and in which such
Related Party has,
27
or will have, a direct or indirect material interest, whether for the furnishing
of services to or by, providing for rental of real or personal property to or
from or otherwise requiring payments or consideration to or from any such
Related Party. No Related Party (except for any Related Party under clause (i)
of the definition below by virtue of ownership of the Company) has any direct or
indirect material ownership interest in any Person in which the Company has any
direct or indirect ownership interest. A "RELATED PARTY" is either of the
Sellers or any of their Affiliates other than the Company; (ii) any director or
executive officer of the Company or its Affiliates; (iii) any nominee for
election as a director of the Company or its Affiliates; or (iv) any member of
the "immediate family" of the foregoing persons (as defined in Item 404 of
Regulation S-K promulgated under the Exchange Act).
SECTION 3.18. CERTAIN BUSINESS PRACTICES. To the Knowledge of Delta,
neither the Company nor any of its directors, officers employees or any other
person authorized to act on behalf of the Company has used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment to any foreign or domestic
government official or employee from corporate funds.
SECTION 3.19. FINDER'S FEES. Except for Goldman, Sachs & Co., whose fees
shall be borne entirely by the Sellers, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of any of the Sellers or the Company who might be entitled to any fee
or commission from Buyer or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
SECTION 3.20. ENVIRONMENTAL MATTERS. (a) Except as to matters that would
not have a Company Material Adverse Effect:
(i) no communication (written or oral), demand, request for
information, citation, summons or order has been received, no complaint
has been filed, no penalty has been assessed, and no third-party
investigation, claim, suit, proceeding or review is pending or, to the
Knowledge of Delta, is threatened by any Governmental Authority or other
Person against the Company and, in each case, alleging or relating to
any violation by the Company of any Environmental Law;
(ii) the Company is in compliance with all Environmental Laws
and has obtained and is in compliance with all permits, licenses,
franchises, certificates, approvals and other similar authorizations of
any Governmental Authority (collectively, "ENVIRONMENTAL PERMITS")
required by Environmental Laws to conduct the Business;
28
(iii) there has been no environmental investigation, study or
audit conducted of which Delta has Knowledge and possession in relation
to the current or prior business of the Company or any property or
facility now or previously owned or leased by the Company which has not
been delivered or made available to Buyer prior to the date hereof;
(iv) to the Knowledge of Delta, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including the release, emission, discharge, presence or disposal of any
Materials of Environmental Concern, that could reasonably form the basis
of any environmental investigation, claim, suit or proceeding against
the Company, or against any Person whose liability for any environmental
investigation, claim, suit or proceeding the Company has retained or
assumed either contractually or by operation of law;
(v) without limiting the generality of the foregoing, to the
Knowledge of Delta, there is no asbestos contained in or forming a part
of any building, building component, structure or office space owned,
operated or controlled by the Company and, to the Knowledge of Delta, no
polychlorinated biphenyls ("PCBS") or PCB-containing items are used or
stored by the Company at any property owned, operated or controlled by
the Company; and
(vi) the Company has not received any notice identifying it as a
"potentially responsible party" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
or analogous state statutes and no property owned, leased or operated by
the Company nor any property to which the Company has transported or
arranged for the transportation of any Materials of Environmental
Concern is listed or, to Delta's Knowledge, proposed for listing on the
National Priorities List (as defined in CERCLA) or any similar state
list of sites requiring cleanup.
(b) Each Environmental Permit held by the Company as of the date hereof
is set forth on SCHEDULE 3.20(B).
(C) SCHEDULE 3.20(C) sets forth, to the Knowledge of Delta, (i) all
on-site and off-site locations to which the Company or ASAH has (previously or
currently) disposed, or arranged for the disposal, of Materials of Environmental
Concern; and (ii) all underground storage tanks, and the capacity and contents
of such underground tanks, located on any property owned, leased, operated or
controlled by the Company or ASAH for the use or benefit of the Company or ASAH.
(d) Except as set forth in this Section 3.20 no representations or
warranties are being made with respect to any matters relating to any
Environmental Laws.
29
(e) For purposes of this Section 3.20, the following terms shall have
the meanings set forth below:
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
laws, judicial decisions, regulations, rules, judgments, orders, decrees,
injunctions, permits, licenses and governmental restrictions or any agreement or
contract with any governmental authority, relating to human health as it relates
to hazardous materials, the environment or to the use, maintenance, release or
disposal of pollutants, contaminants, wastes or chemicals or any toxic,
radioactive, ignitable, corrosive or reactive or otherwise hazardous substances,
wastes or materials.
"MATERIALS OF ENVIRONMENTAL CONCERN" means toxic or hazardous
substances, materials and wastes defined in the Environmental Laws in effect on
or prior to the Closing Date, including, without limitation, chemicals,
pollutants, contaminants, petroleum, petroleum products, asbestos,
asbestos-containing materials, polychlorinated biphenyls, lead, lead-based
paints and materials, and radon.
SECTION 3.21. COMPLIANCE WITH LAWS AND COURT ORDERS. The Company is in
compliance with all, and to the Knowledge of Delta 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 Laws, except for failures to comply or
violations that have not had and would not reasonably be expected to have, a
Company Material Adverse Effect.
SECTION 3.22. EMPLOYEE MATTERS. The Company is in compliance in all
material respects with all applicable Laws respecting employment and employment
practices, terms, and conditions of employment, and wages and hours and is not
engaged in any unfair labor practice, except for failures to comply or
violations or practices that have not had and would not reasonably be expected
to have, a Company Material Adverse Effect.
SECTION 3.23. TITLE TO ASSETS; LIENS. Except for property and inventory
sold since the Balance Sheet Date, the Company has good title to all the
properties and assets reflected in the Balance Sheet and all assets purchased by
the Company since the Balance Sheet Date free and clear of all Liens (other than
Permitted Liens). At the time of the Closing, the assets of the Company, taken
together with the rights and benefits to Buyer arising under the Related
Agreements, shall be adequate in all material respects to allow Buyer at such
time to conduct the Business substantially as it is currently being conducted.
SECTION 3.24. REAL PROPERTY. SCHEDULE 3.24(A) sets forth a complete list
and the location of all Real Property. True and correct copies of all leases
affecting the Real Property have been made available to Buyer and are identified
on SCHEDULE 3.24(A). There are no proceedings, claims, disputes, or conditions
affecting any Real Property that would reasonably be expected to materially
30
interfere with the Company's use of such property, whether before or after the
Closing Date, for the conduct of the Business as currently being conducted.
Neither the whole nor any portion of the Real Property is subject to any
governmental decree or order to be sold or is being condemned, expropriated, or
otherwise taken by any public authority, nor to the Knowledge of Delta has any
such condemnation, expropriation, or taking been proposed. All Real Property is
leased free and clear of all Liens on such leasehold interests other than
Permitted Liens.
(b) To Delta's Knowledge, there is no structural defect in any of the
Real Property or the improvements thereon which would have a Company Material
Adverse Effect.
SECTION 3.25. MATERIAL CONTRACTS. (a) Except as disclosed in SCHEDULE
3.25, the Company is not a party to or bound by:
(i) any airport lease or lease of real property providing for
annual rentals of $50,000 or more;
(ii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets (other than pursuant to
purchase orders made in the ordinary course of business consistent with
past practice) providing for annual payments by the Company of $350,000
or more;
(iii) any capacity purchase, alliance or similar agreement with
another airline relating to the flying and operation of the Company's
aircraft for the benefit of such other airline that will not be
terminated on or prior to Closing;
(iv) any material partnership, joint venture or other similar
agreement or arrangement;
(v) any agreement relating to indebtedness for borrowed money or
the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset), except any such
agreement with an aggregate outstanding principal amount not exceeding
$5,000,000;
(vi) any agreement that limits in any material respect the
freedom of the Company to compete in any line of business, with any
Person or in any area for any length of time;
(vii) any material agreement with Delta or any of its Affiliates
or any director or officer of Delta or any of its Affiliates;
31
(viii) any contract or commitment requiring, after the date
hereof, the mortgage, pledge, sale, or disposal of assets with a value
in excess of $5,000,000 or release, grant, or transfer of Company rights
with a value in excess of $5,000,000; or
(ix) any agreement pursuant to which the Company is, or may
become, obligated to pay any amount in respect of indemnification Claims
in connection with any disposition of any material assets of the Company
that were sold prior to the date hereof.
(b) Each agreement, contract, plan, lease, arrangement or commitment
required to be disclosed pursuant to this Section (collectively, "MATERIAL
CONTRACTS") is a valid and binding agreement of the Company and is in full force
and effect, and none of the Company or, to the Knowledge of Delta, any other
party thereto is in default or breach in any respect under the terms of any such
agreement, contract, plan, lease, arrangement or commitment, except for any such
defaults or breaches that would not have a Company Material Adverse Effect.
SECTION 3.26. INSURANCE. Seller has made available to Buyer copies of
all material insurance policies providing coverage in favor of the Company or
any of its properties, including "all risk" and hull insurance policies
(collectively, the "INSURANCE Policies"). There are no material claims by the
Company pending under any of the Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or in
respect of which such underwriters have reserved their rights. As of the date
hereof, all Insurance Policies are in full force and effect, all premiums due
thereon have been paid and the Company is in compliance in all material respects
with the terms and provisions of the Insurance Policies. SCHEDULE 3.26 sets
forth the responsibilities of Sellers and Buyer under such policies for acts,
claims or losses occurring prior to or after the Closing.
SECTION 3.27. INTELLECTUAL PROPERTY. SCHEDULE 3.27(A) contains a list of
all registrations and applications for registration included in the Company
Intellectual Property Rights.
(b) No Company Intellectual Property Right is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use thereof by
the Company or restricting the licensing thereof by the Company to any Person,
except for any judgment, injunction, order, decree or agreement that would not
have a Company Material Adverse Effect.
(c) Except as expressly disclosed on SCHEDULE 3.27(C), the Company has
the sole and exclusive right to use the Company Intellectual Property Rights,
and no consent of any third party is required for the use thereof by the Company
following Closing. To the Knowledge of Delta, no claims have been asserted by
any person challenging the use of any Company Intellectual Property Rights, or
challenging or questioning the validity or effectiveness of any such license or
32
agreement. Except as would not cause a Company Material Adverse Effect, no
additional Intellectual Property Rights other than the Company Intellectual
Property Rights are necessary or material to the conduct of the Business.
SECTION 3.28. U.S. CITIZEN; AIR CARRIER. The Company is a "citizen of
the United States" as defined in the Transportation Code and is an "air carrier"
within the meaning thereof operating under certificates issued pursuant to
Sections 41101-41112 of the Transportation Code.
SECTION 3.29. AIRCRAFT. The Company has made available records relating
to the maintenance schedule of all aircraft operated by the Company and the
status of maintenance with respect to each such aircraft as of such date (the
"MAINTENANCE SCHEDULE"). The Company is operating and maintaining such aircraft
in the ordinary course of business consistent with past practices, and has not
deferred in any material respect any of its maintenance obligations (as such
obligations are set forth by the manufacturer or any lease agreements or any
other agreements affecting aircraft) or materially deviated from the Maintenance
Schedule with respect to such aircraft, except for deferrals and deviations that
have been cured prior to the date hereof. The Company's maintenance records
accurately reflect the conditions of the Company's aircraft in all material
respects.
SECTION 3.30. NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article 3 and in Article 8
hereof or as expressly set forth as representations or warranties in any Related
Agreement, neither the Sellers, the Company nor any other Person has made or
makes any other express or implied representation or warranty, either written or
oral, on behalf of the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to the
Sellers as of the date hereof (except to the extent expressly relating to a
specific date, in which event such representation or warranty shall be made as
of such date), which shall be unaffected by any investigation heretofore or
hereafter made.
SECTION 4.01. CORPORATE EXISTENCE AND POWER. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers required to carry on
its business as now conducted. Except as would not have a Buyer Material Adverse
Effect, Buyer has all governmental licenses, authorizations, consents, permits
and approvals required to carry on its business as now conducted.
SECTION 4.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement and each Related Agreement to which it
33
is a party and the consummation by Buyer of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate and shareholder
action by Buyer. Buyer has full power and authority to execute and deliver this
Agreement and each Related Agreement and to perform its obligations hereunder
and thereunder. This Agreement and each Related Agreement has been duly executed
and delivered by Buyer and, assuming due and valid authorization, execution and
delivery thereof by each Seller party thereto, this Agreement and each Related
Agreement is a valid and binding obligation of Buyer, enforceable in accordance
with its terms and conditions (subject to the laws of bankruptcy, insolvency,
moratorium and similar laws and general equitable principles).
SECTION 4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement and each Related Agreement and the
consummation by Buyer of the transactions contemplated hereby and thereby
require no action by or in respect of, or filing with, any Governmental
Authority other than: (i) compliance with any applicable requirements of the HSR
Act, (ii) the making of the FAA Notice, (iii) the grant by the DOT of the DOT
Exemption, (iv) compliance with any other applicable regulatory approvals
required for Buyer and (v) any such action or filing as to which the failure to
make or obtain would not have a Buyer Material Adverse Effect.
SECTION 4.04. NONCONTRAVENTION. The execution, delivery and performance
by Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
articles of incorporation or bylaws of Buyer, assuming compliance with the
matters referred to in Section 4.03, contravene or conflict with or constitute a
violation of any provision of any Law binding upon or applicable to Buyer,
result in a violation or a breach of, or constitute a default or require any
consent under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Buyer or to a loss of any benefit to
which Buyer is entitled under any provision of any note, bond, mortgage,
indenture, lease, agreement, contract, obligation or other instrument to which
Buyer is bound, or any license, permit or other similar authorization held by
Buyer or result in the creation or imposition of any Lien on any asset of Buyer,
except in the case of clauses (ii), (iii) and (iv), for such matters as would
not have a Buyer Material Adverse Effect or materially impair or delay the
ability of Buyer to consummate the transactions contemplated by this Agreement.
SECTION 4.05. FINDER'S FEES. Except for Merrill Lynch, whose fees shall
be borne entirely by Buyer, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from the Company or any
of its Affiliates upon consummation of the transactions contemplated by this
Agreement.
34
SECTION 4.06. FINANCING. Buyer has and will have at the Closing
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make payment of the Purchase Price and any other
amounts to be paid by it hereunder.
SECTION 4.07. PURCHASE FOR INVESTMENT. Buyer is purchasing the Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.
SECTION 4.08. LITIGATION. As of the date of this Agreement, there is no
judicial or administrative action, suit or proceeding pending, or to the
knowledge of Buyer, threatened against Buyer before any Governmental Authority
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement.
SECTION 4.09. INSPECTIONS. Buyer is an informed and sophisticated
purchaser and has engaged expert advisors, experienced in the evaluation and
purchase of companies such as the Company as contemplated hereunder. Buyer has
undertaken such investigation and has been provided with and has evaluated such
documents and information as it has deemed necessary to enable it to make an
informed decision with respect to the execution, delivery and performance of
this Agreement. Buyer will undertake prior to Closing such further investigation
and request such additional documents and information as it deems necessary.
Subject to the terms and conditions of this Agreement, Buyer agrees to accept
the Shares in the condition they are in on the Closing Date based upon its own
inspection, examination and determination with respect thereto and to the
Company as to all matters and without reliance upon any express or implied
representations or warranties of any nature made by or on behalf of or imputed
to the Sellers, except as expressly set forth in this Agreement or in any
Related Agreement.
ARTICLE 5
COVENANTS OF THE SELLERS
Each of the Sellers agrees that:
SECTION 5.01. CONDUCT OF THE COMPANY. Except as expressly contemplated
by this Agreement or as otherwise consented to by Buyer in writing, during the
period from the date hereof and continuing until the Closing, each of the
Sellers shall cause the Company to:
(a) conduct its business in the usual, regular and ordinary course
consistent with past practices;
35
(b) not take any action that would make any representation or warranty
of any Seller hereunder inaccurate in any material respect at the Closing Date
such that the closing condition set forth in Section 10.02(a) shall not be
satisfied as of such date;
(c) except as set forth on SCHEDULE 3.25, not mortgage, pledge, sell or
dispose of any assets with a value of $20,000,000 or more in the aggregate, and
not waive, release, grant, transfer or permit to lapse any Company rights of
value in excess of $20,000,000 in the aggregate;
(d) comply in all material respects with all provisions of any Material
Contracts to which the Company is a party;
(e) use its reasonable best efforts to keep all aircraft in such
condition as is necessary to enable the worthiness certification of such
aircraft under the Federal Aviation Act to be maintained in good standing at all
times;
(f) not take any action that would result in the representation set
forth in Section 3.10(k) being untrue;
(g) not enter into any new or amended contract, agreement, side letter
or memorandum of understanding with any unions representing employees of the
Company;
(h) not enter into any agreement or understanding with any other Person
outside of the ordinary course of business consistent with past practices
involving expenditures in excess of $2,000,000 in the aggregate or involving
terms of duration or commitments in excess of 12 months;
(i) not enter into any agreement or understanding with any other Person
containing any exclusivity, non-competition or similar provisions that would
materially restrict the ability of the Company to compete;
(j) not adopt or propose any change in its organizational documents
(including bylaws); and
(k) not merge or consolidate with any other Person.
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the date
hereof until the Closing Date, Delta will (i) cause ASAH and the Company,
respectively, to give Buyer and its counsel, financial advisors, auditors and
other authorized representatives reasonable access to the offices, properties
(including aircraft and engines but excluding any sampling of environmental
media or building materials), books and records of the Company and to the books
and records of ASAH relating to the Company (including log books and maintenance
records), (ii) cause ASAH and the Company to furnish to Buyer and its counsel,
financial advisors, auditors and other authorized representatives such financial
36
and operating data and other information relating to the Company as such Persons
may reasonably request and (iii) instruct the employees, counsel and financial
advisors of the Sellers or the Company to cooperate with Buyer in its
investigation of the Company. Any investigation pursuant to this Section 5.02
shall be conducted during normal business hours and in such manner as not to
interfere unreasonably with the conduct of the business of the Sellers or the
Company. Notwithstanding the foregoing, Buyer shall not have access to personnel
records of the Company relating to individual performance or evaluation records,
medical histories or other information which in Delta's good faith opinion is
sensitive or the disclosure of which could subject the Company to risk of
liability.
(b) After the Closing, Sellers and their Affiliates will hold, and will
use their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company, except to the extent that such information can be shown to have been
(i) previously known on a nonconfidential basis by either Seller, (ii) in the
public domain through no fault of Sellers or their Affiliates or (iii) later
lawfully acquired by any Seller from sources other than those related to its
prior ownership of the Company. The obligation of Sellers and their Affiliates
to hold any such information in confidence shall be satisfied if they exercise
the same care with respect to such information as they would take to preserve
the confidentiality of their own similar information.
(c) On and after the Closing Date, Delta will afford, and will cause
ASAH to afford, promptly to Buyer and its agents reasonable access to its books
of account, financial and other records (including accountant's work papers),
information, employees and auditors to the extent reasonably necessary for Buyer
in connection with any audit, investigation, dispute or litigation (other than
any dispute or litigation involving either of the Sellers) relating to the
Business (but excluding any confidential information regarding Delta's
contractual arrangements with the Company); PROVIDED that any such access by
Buyer shall be conducted during normal business hours and shall not unreasonably
interfere with the conduct of the business of the Sellers, Buyer shall bear all
of the out-of-pocket costs and expenses (including reasonable attorneys' fees,
but excluding reimbursement of Delta or ASAH for general overhead, salaries and
employee benefits) reasonably incurred in connection with the foregoing.
SECTION 5.03. MONTHLY FINANCIAL STATEMENTS. Until the Closing Date,
Delta shall, as promptly as practicable but in no event later than 20 days after
the end of each calendar month, prepare and deliver to Buyer an unaudited
balance sheet of the Company as of the last date of such calendar month and
unaudited statement of operations of the Company for the period commencing on
the first day of such calendar month and ending on the last day of such calendar
month, in each case in forms consistent with the practice of Delta as of the
date hereof.
37
Such unaudited statements shall be prepared on a basis consistent with the
preparation of the Unaudited Financial Statements.
SECTION 5.04. AUDITED FINANCIAL STATEMENTS. Sellers shall use their
respective commercially reasonable efforts in good faith to obtain the required
consents of the Auditor for the inclusion of its audit reports relating to the
Audited Financial Statements in any reports filed by Buyer pursuant to the
Exchange Act and any registration statements filed pursuant to the Securities
Act.
SECTION 5.05. NOTICES OF CERTAIN EVENTS. From the date hereof until the
Closing Date, Delta shall promptly notify Buyer 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) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings (i)
commenced against ASAH or the Company or (ii) in respect of which ASAH or the
Company has an indemnification obligation and as to which Delta has Knowledge
that, if pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.13;
(d) any material agreement or litigation, or consent or order of the FAA
or DOT, related to the Company (other than those that apply generally to air
carriers or companies in the airline industry); and
(e) any incidents or accidents occurring on or after the date hereof
involving any property owned or operated by the Company that has resulted or
would reasonably be expected to result in casualty damages or losses in excess
of $250,000.
SECTION 5.06. RESIGNATIONS. Delta will deliver to Buyer the
resignations of all officers and directors of the Company who will be officers,
directors or employees of Delta or any of its Affiliates after the Closing Date
from their positions with the Company at or prior to the Closing Date.
SECTION 5.07. EMPLOYEE STOCK OPTIONS. With respect to all employee
stock options, restricted shares and other equity-based compensation rights
exercisable or exchangeable for or otherwise based on Delta common stock held by
Company employees immediately prior to the Closing Date (the "DELTA EQUITY
COMPENSATION"), Delta will take such actions as are necessary to prevent Company
employees from forfeiting such Delta Equity Compensation as a result of the
transactions contemplated herein, and maintain such Company employees in the
same position with respect to their Delta Equity Compensation as if the
38
Company were still a Delta subsidiary for the period of such Company employees'
period of employment with the Company.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. CONFIDENTIALITY. Prior to the Closing Date and after any
termination of this Agreement, Buyer and its Affiliates will hold, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence
all confidential documents and information concerning the Company furnished to
Buyer or its Affiliates in connection with the transactions contemplated by this
Agreement as and to the extent provided in the Confidentiality Agreement dated
February 14, 2005, among Delta, the Company and Buyer (as it may be amended from
time to time, the "CONFIDENTIALITY AGREEMENT").
SECTION 6.02. DELTA ACCESS; CONFIDENTIALITY. Buyer will cause the
Company, on and after the Closing Date, to afford promptly to Delta and its
agents reasonable access to its properties, books, records, employees and
auditors to the extent necessary to permit Delta to determine any matter
relating to its rights and obligations hereunder or to any period ending on or
before the Closing Date; provided that, any such access by Delta be conducted
during normal business hours and shall not unreasonably interfere with the
conduct of the business of Buyer. In addition, with respect to each Company
employee who holds Delta Equity Compensation, Buyer will, no less frequently
than monthly, cause the Company to provide Delta with a list of all such Company
employees whose employment with the Company has terminated and indicate whether
such termination was due to death, retirement or permanent disability. The
Sellers shall bear all of the out-of-pocket costs and expenses (including
reasonable attorneys' fees, but excluding reimbursement of Buyer or the Company
for general overhead, salaries and employee benefits) reasonably incurred in
connection with the foregoing. Delta will hold, and will use its best efforts to
cause its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the Company provided to it
pursuant to this Section.
SECTION 6.03. TRADEMARKS; TRADENAMES. Except as permitted by the Delta
Connection Agreements, after the Closing, Buyer shall not permit the Company to
use any of the marks or names set forth on SCHEDULE 6.03.
SECTION 6.04. EMPLOYEE STOCK OPTIONS. Buyer shall promptly notify Delta
upon the termination of employment with the Company of any Company
39
employee who is entitled to Delta Equity Compensation. Delta shall provide to
Buyer prior to Closing a list of all such employees.
ARTICLE 7
COVENANTS OF BUYER AND THE SELLERS
Buyer and the Sellers agree that:
SECTION 7.01. BEST EFFORTS; FURTHER ASSURANCES. (a) Subject to the
terms and conditions of this Agreement, Buyer and the Sellers will use their
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary or desirable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement; PROVIDED that
nothing in this Agreement shall obligate Buyer or the Company or any of Buyer's
Affiliates to agree to dispose of, agree to cease operating or agree to hold
separate any business, properties or assets of the Company or of Buyer and its
subsidiaries, except to the extent such agreements would not have a material
adverse effect on the financial condition or results of operations of Buyer, its
subsidiaries and the Company taken as a whole and PROVIDED FURTHER that,
notwithstanding the immediately preceding proviso, if Buyer or the Company or
any of Buyer's Affiliates are obligated after Closing to hold separate the
business of the Company from that of Buyer or any of its Affiliates as a
condition to the receipt of the DOT Exemption, then Buyer or the Company or
Buyer's Affiliates, as applicable, shall agree to hold separate such businesses
to the extent necessary to obtain the DOT Exemption. Delta and Buyer shall, and
the Sellers shall cause the Company prior to the Closing, and Buyer shall cause
the Company after the Closing, to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by this Agreement.
(b) In furtherance and not in limitation of the foregoing, each of Buyer
and Delta shall make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act and an appropriate filing in respect of the DOT
Exemption, in each case with respect to the transactions contemplated hereby, as
promptly as practicable and in any event within ten Business Days following the
date hereof and to supply as promptly as practicable any additional information
and documentary material that may be requested pursuant to the HSR Act or the
applicable regulations of the DOT, as the case may be.
SECTION 7.02. CERTAIN FILINGS. The Sellers and Buyer shall cooperate
with one another (i) in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from any Person, in connection
with the consummation of the transactions contemplated by this Agreement and
(ii) in
40
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 7.03. PUBLIC ANNOUNCEMENTS. The parties agree to 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
for any press releases and public announcements the making of which may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
SECTION 7.04. LEASES. The Sellers and Buyer shall use their reasonable
best efforts to complete, to the extent reasonably practicable, the transactions
as set forth in Schedule 16(B)(4) attached to the ASA Delta Connection Agreement
as contemplated therein.
SECTION 7.05. WORKERS' COMPENSATION; SURETY BONDS. To the extent that
Delta currently provides coverage for the Company's workers' compensation
liabilities and surety bond obligations, the Company and Buyer shall, and Buyer
and Delta shall cause the Company, on and after the date hereof, to take
reasonable best efforts to assume full responsibility for such liabilities to be
effective on the Closing Date. In addition, Buyer and the Company shall fully
cooperate with Delta and shall take reasonable best efforts to ensure that any
Delta collateral pledged in support of the Company's workers' compensation
liabilities and surety bonds is released to Delta effective as of the Closing
Date.
SECTION 7.06. INSURANCE. The parties agree to allocate responsibility
for the Company's insurance obligations as specified on SCHEDULE 3.26 of this
Agreement.
ARTICLE 8
TAX MATTERS
SECTION 8.01. SECTION 338(H)(10) ELECTION. Except as otherwise provided
in this Section 8.01(a), Buyer and the Sellers agree to make a timely, effective
and irrevocable election under Section 338(h)(10) of the Code and under any
comparable statutes in any other jurisdiction with respect to the Company (the
"SECTION 338(H)(10) ELECTION"), and to file such election in accordance with
applicable regulations. The Sellers and Buyer will report the transfers under
this Agreement consistent with the Section 338(h)(10) Election under any
substantially similar state or local law, and shall take no position contrary
thereto unless required to do so by a contrary "determination" (as defined in
Section 1313 of the Code or similar provision of state and local laws).
Notwithstanding the foregoing, Buyer's obligation to make the Section 338(h)(10)
Election is contingent upon Sellers first paying to Buyer an amount equal to any
additional state and local income taxes to be incurred by the Company as a
result of the
41
Section 338(h)(10) Election, with the amount of any such payment to be
determined in the same manner as a tax indemnity payment to Buyer under Section
8.05 below. Buyer shall have no obligation to file IRS Form 8023 with respect to
the purchase transaction hereunder or otherwise make the Section 338(h)(10)
Election unless Sellers make the foregoing payment to Buyer with respect to
State and local income taxes within 240 days after the Closing Date.
(b) Within 90 days after the Closing Date, Buyer shall prepare at its
own expense and deliver to Delta a report (the "ALLOCATION REPORT") allocating
the "ADSP" (as such term is defined in Treasury Regulations Section 1.338-4) of
the assets of the Company in accordance with the Treasury regulations
promulgated under Section 338(h)(10). The Allocation Report shall be provided to
Delta not later than 90 days after Closing. Delta shall have 30 days after
receipt to review and comment upon the Allocation Report. Any disagreements
between the parties regarding the computations set forth in the Allocation
Report shall be promptly resolved by the Independent Firm. Once finalized
hereunder, Buyer and Delta agree, and will cause the Company, to act in
accordance with the Allocation Report in the preparation, filing and audit of
any Tax Return, unless otherwise required by a contrary final "determination" as
defined in Code Section 1313 or similar provision of state and local laws.
SECTION 8.02. RETURNS DUE AFTER CLOSING AND REFUNDS. (a) The Sellers
shall include the Company in the Seller's Combined Tax Returns filed for the
period that includes the Closing Date, which returns shall properly include and
reflect the taxable income of the Company for the Pre-Closing Tax Period that
ends on the Closing Date (including any deferred items triggered into income by
Treasury Regulation Section 1.1502-13, any excess loss account taken into income
under Treasury Regulation Section 1.1502-19 and any taxable income resulting
from a Section 338(h)(10) Election) and Sellers shall pay any income Taxes due
with respect to such Tax Returns. Buyer shall cause the Company to furnish
information to the Sellers as reasonably requested by the Sellers to allow the
Sellers to satisfy their obligations under this Section 8.02 in accordance with
past custom and practice. Buyer covenants that it will not cause or permit the
Company or any Affiliate of Buyer to: (i) take any action on the Closing Date
other than in the ordinary course of business, including, but not limited to,
the distribution of any dividend or the effectuation of any redemption that
could give rise to any Tax liability or reduce any Tax Asset of the Sellers'
Affiliated Group, (ii) make any election or deemed election under Section 338 of
the Code or any comparable provision under applicable law (other than the
Section 338(h)(10) Election) that will adversely affect the Sellers; or (iii)
change any prior Company Tax election in a manner that increases Tax liability
or reduces any Tax Asset of any Seller or the Sellers' Affiliated Group in
respect of any Pre-Closing Tax Period.
(b) Buyer shall prepare or cause to be prepared and timely file or cause
to be timely filed all separate Tax Returns for the Company (I.E., Tax Returns
other than Combined Tax Returns described in Section 8.02), if any, that are
first
42
due and required to be filed after the Closing Date with respect to the
operations of the Company for Pre-Closing Tax Periods and timely pay amounts
shown as due on such Returns. Sellers shall indemnify Buyer for all Taxes shown
on such Tax Return to the extent provided in Section 8.05. Any such Tax Return
shall be prepared in a manner consistent with past practice and without a change
of any election or any accounting method and shall be submitted by Buyer to each
Seller (together with schedules, statements and, to the extent requested by any
Seller, supporting documentation) at least 45 days prior to the due date
(including extensions) of such Tax Return. Sellers shall furnish Buyer access to
information, in a manner consistent with access provided pursuant to Section
5.02(c), as reasonably requested by Buyer to allow Buyer to satisfy its
obligations under this Section 8.02 in accordance with past custom and practice.
The Sellers shall have the right to review and comment with respect to such
Returns and all work papers and procedures used to prepare any such Tax Returns.
If any Seller, within ten business days after delivery of any such Tax Returns,
notifies Buyer in writing that it objects to any of the items in such Tax
Return, the parties shall attempt in good faith to resolve the dispute prior to
the due date for filing any such Tax Returns. If the parties cannot resolve any
such dispute, the dispute shall be resolved (within a reasonable time, taking
into account the deadline for filing such Tax Return) by the Independent Firm.
Upon resolution of all such items, the relevant Tax Return shall be adjusted to
reflect such resolution and shall be binding upon the parties without further
adjustment. The fees and expenses of the Independent Firm shall be borne equally
by Buyer, on the one hand, and the Sellers, on the other hand. Buyer shall also
cause the Company to prepare and file separate income Tax Returns for all
Post-Closing Tax Periods, or shall include the Company's taxable income from
Post-Closing Tax Periods in the Combined Tax Returns of Buyer or its Affiliates.
(c) For purposes of this Article 8, the taxable income of the Company
shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax
Period by closing the books of the Company as of the end of the Closing Date.
All income and gain resulting from the Section 338(h)(10) Election shall be
allocated to the Pre-Closing Period. For this purpose, the taxable year of any
partnership or other pass-through entity in which the Company owns an interest
shall be deemed to have ended at the end of the Closing Date. In the case of any
property Taxes or other periodic Taxes (excluding income and other income based
Taxes) ("NON-INCOME TAXES") imposed on the Company for a taxable period that
includes, but does not end on, the Closing Date, the amount of such any such
periodic Non-Income Taxes imposed for such period shall be allocated between the
Pre-Closing Tax Period and the Post-Closing Tax Period in the ratio that the
number of days in the Pre-Closing Tax Period bears to the number of days in the
Post-Closing Tax Period.
(d) Buyer shall promptly pay or cause to be paid to each Seller all (i)
refunds of Taxes received by Buyer, any Affiliate of Buyer or the Company of
Taxes paid by such Seller with respect to any Pre-Closing Tax Period (except any
43
such refunds receivable that are taken into account in the calculation of Final
Working Capital) and (ii) without duplication, amounts representing the excess
of any amounts taken into account as liabilities for Taxes in connection with
the determination of Closing Working Capital over the amount of such Taxes
actually paid by Buyer. If, in lieu of receiving any such refund, the Company
elects to reduce a Tax liability with respect to a Post-Closing Tax Period or
elects to increase a Tax Asset that can be carried forward to a Post-Closing Tax
Period, Buyer shall promptly pay or cause to be paid to the relevant Seller the
amount of such reduction in Tax liability or the amount of any benefit resulting
from such increase in Tax Assets, as the case may be. The Sellers agree to
indemnify Buyer for any Taxes resulting from a subsequent disallowance of such
refund or Tax benefit to the extent paid or credited to the Sellers, on audit or
otherwise.
(e) All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with transactions contemplated by this Agreement (including any real
property transfer Tax and any similar Tax, but excluding income Taxes) shall be
borne and paid equally by Buyer, on the one hand, and the Sellers, on the other
hand, and the parties will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such Taxes and fees, and, if
required by applicable law, the parties will, and will cause the Company to,
join in the execution of any such Tax Returns and other documentation.
SECTION 8.03. TAX SHARING. Any and all existing Tax sharing agreements
between the Company and any member of the Sellers' Affiliated Group shall be
terminated as of the Closing Date. After such date the Company shall not have
any further rights or liabilities thereunder. This Agreement shall be the sole
Tax sharing agreement relating to the Company for all Pre-Closing Tax Periods.
SECTION 8.04. COOPERATION ON TAX MATTERS. Buyer and the Sellers agree
to furnish or cause to be furnished to each other, upon request, as promptly as
practicable, such information (including access to books and records) and
assistance relating to the Company as is reasonably necessary for the filing of
any Tax Return (including any report required pursuant to Section 6043 of the
Code and all Treasury Regulations promulgated thereunder), for the preparation
for any audit, and for the prosecution or defense of any claim, suit or
proceeding relating to any proposed adjustment. Buyer and the Sellers agree to
retain or cause to be retained all books and records pertinent to the Company
until the applicable period for assessment under applicable law (giving effect
to any and all extensions or waivers) has expired, and to abide by or cause the
abidance with all record retention agreements entered into with any Taxing
Authority. Each party shall give the other party reasonable notice prior to
transferring, discarding or destroying any such books and records relating to
Tax matters and, if the other party so requests, shall allow the other party to
take possession of copies of such books and records. Buyer and the Sellers shall
cooperate with each other in the conduct of any audit or other proceedings
involving the Company for any Tax
44
purposes and each shall execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this subsection.
SECTION 8.05. TAX INDEMNIFICATION. (a) Each of the Sellers shall
indemnify the Company, Buyer and Buyer's Affiliates, and hold them harmless from
and against, any loss, claim, liability, expense or other damage, including
reasonable attorneys' fees and expenses and reasonable accountants' fees and
expenses (collectively a "TAX LOSS") resulting from or attributable to all Taxes
(or the non-payment thereof) of the Company for or allocable to all Pre-Closing
Tax Periods, except for any interest or penalties attributable to Buyer's
failure to perform its obligations pursuant to Section 8.02(b), all Taxes of any
Affiliated Group of which the Company (or any predecessor of any of the
foregoing) is or was a member on or prior to the Closing Date, including
pursuant to Treasury Regulation Section 1.1502-6 or any analogous or similar
state, local or foreign law or regulation, any and all Taxes of any person
(other than the Company) imposed on the Company as a transferee or successor, by
contract or under any law by reason of an event or transaction occurring before
the Closing, and (iv) any breach or misrepresentation of the Sellers'
representations, warranties and covenants under Section 3.14 and this Article 8;
PROVIDED, however, that in the case of clauses (i), (ii) and (iii)) above, the
Sellers shall be liable only to the extent that such Taxes exceed the amount of
liability, if any, for such Taxes included in the determination of Closing
Working Capital as a Current Liability.
(b) Buyer shall indemnify the Sellers and the Sellers' Affiliates, and
hold them harmless from and against, any Tax Loss resulting from or attributable
to (i) all Taxes (or the non-payment thereof) of the Company that are allocable
to Post-Closing Tax Periods, and (ii) any breach of Buyer's covenants under this
Article 8.
(c) The determination of the amount payable to or by any party under
Section 8.03 or this Section 8.05 shall be made in the first instance by the
party seeking payment who (i) shall furnish the other party with a notice
setting forth in reasonable detail the computations and methods used in
computing such amount and (ii) shall provide such information with respect
thereto as may reasonably be requested. Any such notice pursuant to this Section
8.05(c) shall (A) be signed by an officer, (B) state in reasonable detail the
basis upon which such amount or adjustment has been determined and (C) certify
that such amount or adjustment has been determined pursuant to and in compliance
with this Agreement. Disputes arising under Section 8.03 or Section 8.05 and not
resolved by mutual agreement within 30 days shall be resolved by the Independent
Firm. The Independent Firm shall resolve any disputed items as soon as
reasonably practicable (and the parties shall use their best commercial efforts
to cause such resolution to occur within 30 days) after having the item referred
to it, pursuant to such procedures as it may require. The costs, fees and
expenses of the Independent Firm shall be borne equally by Buyer, on the one
hand, and the Sellers, on the other hand. The determination of the Independent
Firm shall be conclusive and binding on the parties.
45
(d) If Buyer or its Affiliates (including the Company after Closing)
receive written notice from any Taxing Authority of a Tax Audit regarding
potential liability for or with respect to Taxes for which the Sellers may be
required to provide indemnity under Section 8.05 or which were taken into
account in the determination of Closing Working Capital as a Current Liability,
or receive any other written claim or demand for such Taxes from a Taxing
Authority for which the Sellers may be required to provide indemnity under
Section 8.05 or which were taken into account in the determination of Closing
Working Capital as a Current Liability, Buyer shall promptly notify each Seller
in writing of such Tax Audit, notice, demand or claim. The Sellers may
discharge, at any time, their indemnification obligation under this Section 8.05
with respect to such Tax Audit, demand or claim by paying to Buyer the amount
payable pursuant to Section 8.05, calculated on the date of such payment.
Alternatively, other than with respect to Buyer Combined Tax Returns, the
Sellers may, at their own expense, participate in and, upon notice to Buyer,
assume the defense of any such claim, suit, action, litigation or proceeding
(including any Tax Audit). If the Sellers assume such defense, the Sellers shall
have the sole discretion as to the conduct of such defense but, other than in
the case of any matter involving a Seller Combined Tax Return, shall consult
with Buyer and keep Buyer reasonably informed as to the status of the Tax
contest. Whether or not any Seller chooses to defend or prosecute any claim, all
of the parties hereto shall cooperate in the defense or prosecution thereof.
Except with respect to any Tax not in excess of the amount of liability for that
Tax included in the determination of Closing Working Capital as a Current
Liability, the Sellers shall not settle any Tax claim, other than in the case of
any matter involving a Seller Combined Tax Return, that they are defending
hereunder without obtaining the approval of Buyer, not to be unreasonably
withheld.
(e) If any Seller receives written notice from any Taxing Authority of a
Tax Audit regarding potential liability for or with respect to Taxes for which
Seller may be entitled to payment from Buyer pursuant to Section 8.02(d) or
Buyer may be required to provide indemnity under Section 8.05(b), or receives
any other written claim or demand for such Taxes from a Taxing Authority for
which Seller may be entitled to payment from Buyer pursuant to Section 8.02(d)
or Buyer may be required to provide indemnity under Section 8.05(b), such Seller
shall promptly notify Buyer in writing of such Tax Audit notice, demand or
claim. Buyer may discharge, at any time, its indemnification obligation under
this Section 8.05 with respect to such Tax Audit, demand or claim by paying to
the relevant Seller the amount payable pursuant to Section 8.05(b), calculated
on the date of such payment. Alternatively, other than with respect to Seller
Combined Tax Returns, Buyer may, at its own expense, participate in and, upon
notice to the relevant Seller, assume the defense of any such claim, suit,
action, litigation or proceeding (including any Tax Audit). If Buyer assumes
such defense, Buyer shall have the sole discretion as to the conduct of such
defense but shall, other than with respect to Buyer Combined Tax Returns,
consult with the relevant Seller and keep such Seller reasonably informed as to
the status of such Tax
46
contest. Whether or not Buyer chooses to defend or prosecute any claim, all of
the parties hereto shall cooperate in the defense or prosecution thereof. Buyer
shall not settle any Tax claim, other than with respect to Buyer Combined Tax
Returns, that it is defending hereunder without obtaining the approval of the
relevant Seller, not to be unreasonably withheld.
(f) Any Tax indemnity payment made pursuant to this Section 8.05 shall
be made within 30 days after final determination of the Tax Loss to be
indemnified.
SECTION 8.06. PURCHASE PRICE ADJUSTMENT. Any amount paid under Article
8 or Article 11 will be treated as an adjustment to the Purchase Price.
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. EMPLOYEE BENEFITS. (a) Except to the extent otherwise
prohibited by applicable law, during the period commencing on the Closing Date
and ending 90 days thereafter, Buyer shall cause the Company to provide to all
employees of the Company who continue to be employed by the Company or Buyer on
and after the Closing Date rates of compensation (including base wages or salary
and bonus opportunity, but excluding equity or long term incentives) no less
favorable than the rates of compensation provided by the Company to such
employees immediately prior to the Closing Date, and benefits no less favorable,
in the aggregate, than the benefits provided by the Company to such continuing
employees immediately prior to the Closing Date. Nothing herein shall be
construed, however, to require the Company or Buyer to continue after Closing
the employment of any Company employee or to otherwise interfere with the
Company's right to terminate any such employees at any time after Closing.
(b) Following the Closing Date, except to the extent otherwise
prohibited by applicable law, each employee of the Company shall receive service
credit for purposes of eligibility to participate and vesting (but not for
benefit accrual purposes) for all periods of employment with the Company and its
Affiliates and predecessors thereto prior to the Closing Date under any employee
benefit plan of Buyer or its Affiliates in which such employee is eligible to
participate after the Closing Date, to the extent such credit existed
immediately prior to the Closing Date under the corresponding Employee Plan
maintained by the Company. Buyer will cause each employee of the Company to
receive credit immediately following the Closing Date for such employee's
accrued and unpaid vacation and/or unpaid leave balance as of the Closing Date.
(c) Except to the extent otherwise prohibited by applicable law, Buyer
will cause to be waived all (i) pre-existing conditions and proof of
insurability provisions for all conditions that are covered by any employee
benefits plan of Buyer or its Affiliates in which any employee of the Company
participates and
47
that such employee or his or her covered dependents have as of the Closing Date,
and (ii) waiting periods under each plan that would otherwise be applicable to
newly hired employees, in each case with respect to any employee of the Company
to the same extent waived or satisfied under the corresponding Employee Plan;
provided the employee has no intervening separation of service from the Company
or Buyer after Closing of more than 63 days.
(d) Buyer will cause any eligible expenses incurred by an employee of
the Company and his or her covered dependents during the portion of the plan
year of any Employee Plan ending on the date such employee's participation in
such Employee Plan ended to be accounted for in the corresponding new or
existing employee benefit plan of Buyer or its Affiliates for purposes of
satisfying all deductible, coinsurance and maximum out-of-pocket requirements
applicable to such employee and/or his or her covered dependents for the
applicable plan year as if such amounts had been paid in accordance with such
new or existing employee benefit plan.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF BUYER AND THE SELLERS. The
obligations of Buyer and the Sellers to consummate the Closing are subject to
the satisfaction of the following conditions:
(a) any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated;
(b) no provision of any Law shall prohibit the consummation of the
Closing;
(c) the DOT Exemption shall have been granted by the DOT;
(d) there shall not be in effect any Law enacted, enforced, promulgated,
issued or deemed applicable to the transactions contemplated hereby of any
Governmental Authority that makes illegal or otherwise materially restrains or
prohibits the consummation of the transactions contemplated hereby; and
(e) the Escrow Agreement shall have been executed and delivered by the
parties thereto and Buyer shall have deposited on or prior to Closing, the
amounts required to be deposited by it in the Escrow Account (as defined in
Schedule 2.01) as of the Closing Date.
SECTION 10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
48
(a) the Sellers shall have performed or complied with in all material
respects all of the covenants and agreements required to be performed by it on
or prior to the Closing Date under this Agreement, and the representations and
warranties of the Sellers set forth in this Agreement shall be true at and as of
the Closing Date as if made at and as of such time (except as to any
representation or warranty which speaks as of a specific date, which must be
true as of such date), with only such exceptions as would not in the aggregate
have a Company Material Adverse Effect, and Buyer shall have received a
certificate signed by Delta's chief financial officer to the foregoing effect;
(b) there shall not have occurred any Company Material Adverse Effect
after the date hereof which is continuing on the Closing Date;
(c) each of Delta and the Company shall have executed and delivered each
Related Agreement to which it is a party and Delta Technology, Inc. shall have
executed and delivered to Buyer the Transitional Technology Services Agreement;
(d) Sellers shall have executed and delivered to Buyer all necessary
forms, including an IRS Form 8023 executed by Delta, in connection with the
Section 338(h)(10) Election;
(e) Buyer shall have received all documents it may reasonably request
relating to the existence of the Sellers and the authority of the Sellers for
this Agreement, all in form and substance reasonably satisfactory to Buyer; and
(f) (i) There shall have been no change in Law (including amendments to
statutes, issuance of proposed or final regulations, or other governmental
rulings or published interpretations) with respect to Section 412 of the Code or
Section 302 of ERISA that would result in the Company having a material
liability after Closing under the Delta Plans, and (ii) neither the Chief
Counsel nor any other more senior officer of the PBGC shall have asserted or
confirmed in writing to Sellers or the Company that the Company has or would
have such material liability after Closing, and Buyer determines in reasonable
good faith, upon advice of counsel, that such a claim by the PBGC would have a
reasonable probability of success; and (iii) neither Delta nor the PBGC shall
have terminated or instituted proceedings to terminate the Delta Plans.
SECTION 10.03. CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation
of the Sellers to consummate the Closing is subject to satisfaction of the
following further conditions:
(a) Buyer shall have performed or complied with in all material respects
all of the covenants and agreements required to be performed by it on or prior
to the Closing Date under this Agreement, and the representations and warranties
of Buyer set forth in this Agreement shall be true at and as of the Closing Date
as if made at and as of such time (except as to any representation or warranty
which
49
speaks as of a specific date, which must be true as of such date), with only
such exceptions as would not in the aggregate result in a Buyer Material Adverse
Effect, and the Sellers shall have received a certificate signed by Buyer's
chief financial officer to the foregoing effect;
(b) Each of Buyer and SkyWest shall have executed and delivered the
Delta Connection Agreements and each other Related Agreement to which it is a
party; and
(c) the Sellers shall have received all documents it may reasonably
request relating to the existence of Buyer and the authority of Buyer for this
Agreement, all in form and substance reasonably satisfactory to the Sellers.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. SURVIVAL. Except as specifically set forth below, the
representations and warranties of the parties hereto contained in this Agreement
or in any certificate or other writing delivered pursuant hereto or in
connection herewith shall survive the Closing until the first anniversary of the
Closing Date. The covenants and agreements of the parties hereto contained in
this Agreement or in any certificate or other writing delivered pursuant hereto
or in connection herewith shall survive the Closing indefinitely or for the
shorter period explicitly specified therein, except that for such covenants and
agreements that survive for such shorter period, breaches thereof shall survive
indefinitely or until the latest date permitted by law. Notwithstanding the
preceding sentences, any breach of representation, warranty, covenant or
agreement in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentences, if notice of the inaccuracy or breach thereof giving rise to such
right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.
SECTION 11.02. INDEMNIFICATION. Effective at and after the Closing, each
of the Sellers hereby indemnifies Buyer and its Affiliates against and agrees to
hold each of them harmless from any and all damage, loss and expense (including
reasonable expenses of investigation and reasonable attorneys' fees and expenses
and any fines or penalties imposed) ("DAMAGES", which shall not include amounts
subject to indemnification by the Sellers pursuant to Section 8.05) actually
suffered by Buyer or any of its Affiliates arising out of any misrepresentation
or breach of representation or warranty (each such misrepresentation and breach,
a "WARRANTY BREACH") or breach of covenant or agreement made or to be performed
by the Sellers pursuant to this Agreement (other than a covenant or agreement
made or to be performed pursuant to Article 8); PROVIDED that with respect to
indemnification by the Sellers for Warranty Breaches pursuant to this Section,
(i) with respect to any individual Warranty Breach, no such Warranty Breach
shall be deemed to have occurred unless the
50
amount of Damages with respect thereto exceeds $37,500, (ii) the Sellers shall
not be liable unless the aggregate amount of Damages with respect to Warranty
Breaches exceeds $5 million and then only to the extent of such excess and (iii)
the Sellers' maximum liability for all Warranty Breaches shall not exceed $100
million.
(b) Effective at and after the Closing, Buyer hereby indemnifies Delta
and its Affiliates against and agrees to hold each of them harmless from any and
all Damages actually suffered by Delta or any of its Affiliates arising out of
any Warranty Breach or breach of covenant or agreement made or to be performed
by Buyer pursuant to this Agreement (other than a representation, warranty,
covenant or agreement made or to be performed pursuant to Article 8); PROVIDED
that, with respect to indemnification by Buyer for Warranty Breaches pursuant to
this Section, (i) with respect to any individual Warranty Breach, no such
Warranty Breach shall be deemed to have occurred unless the amount of Damages
with respect thereto exceeds $37,500, (ii) Buyer shall not be liable unless the
aggregate amount of Damages with respect to Warranty Breaches exceeds $5 million
and then only to the extent of such excess and (iii) Buyer's maximum liability
for all Warranty Breaches shall not exceed $100 million.
SECTION 11.03. PROCEDURES. (a) The party seeking indemnification under
Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the
party against whom indemnity is sought (the "INDEMNIFYING PARTY") of the
assertion of any claim, or the commencement of any suit, action or proceeding
("CLAIM") in respect of which indemnity may be sought under such Section and
will provide the Indemnifying Party such information with respect thereto that
the Indemnifying Party may reasonably request. The failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent such failure shall have adversely affected the
Indemnifying Party.
(b) The Indemnifying Party shall be entitled to participate in the
defense of any Claim asserted by any third party ("THIRD PARTY CLAIM") and,
subject to the limitations set forth in this Section, shall be entitled to
assume the control of and appoint lead counsel for such defense, in each case at
its expense.
(c) If the Indemnifying Party shall assume the control of the defense of
any Third Party Claim in accordance with the provisions of this Section 11.03,
(i) the Indemnifying Party shall obtain the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld, delayed or
conditioned) before entering into any settlement of such Third Party Claim, but
only if the settlement does not release the Indemnified Party from all
liabilities and obligations with respect to such Third Party Claim or if the
settlement imposes injunctive or other equitable relief against the Indemnified
Party, and (ii) the Indemnified Party shall be entitled to participate in the
defense of such Third Party Claim and to employ separate counsel of its choice
for such purpose. The fees and expenses of such separate counsel shall be paid
by the Indemnified Party. The Indemnifying Party
51
shall have no indemnification obligations with respect to any Third Party Claim
that shall be settled by the Indemnified Party without the prior written consent
of the Indemnifying Party, which consent shall not be unreasonably withheld,
delayed or conditioned.
(d) Each party shall cooperate, and cause their respective Affiliates to
cooperate, in the defense or prosecution of any Third Party Claim and shall
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith. The Indemnified Party shall
keep the Indemnifying Party fully informed of the defense of any Third Party
Claim conducted by such Indemnified Party.
(e) Each Indemnified Party shall use reasonable efforts to collect any
amounts available under insurance coverage, or from any other Person alleged to
be responsible, for any Damages payable under Section 11.02.
SECTION 11.04. CALCULATION OF DAMAGES. (a) The amount of any Damages
payable under Section 11.02 by the Indemnifying Party shall be net of any (i)
amounts recovered or recoverable by the Indemnified Party under applicable
insurance policies or from any other Person alleged to be responsible therefor
and (ii) amounts relating to such Damages paid or payable by the Indemnifying
Party or any of its Affiliates to the Indemnified Party or any of its Affiliates
under either of the Delta Connection Agreements. If the Indemnified Party
receives any amounts under applicable insurance policies, or from any other
Person alleged to be responsible for any Damages, or pursuant to either of the
Delta Connection Agreements, subsequent to an indemnification payment by the
Indemnifying Party, then such Indemnified Party shall promptly reimburse the
Indemnifying Party for any payment made or expense incurred by such Indemnifying
Party in connection with providing such indemnification payment up to the amount
received by the Indemnified Party, net of any expenses incurred by such
Indemnified Party in collecting such amount.
(b) The Indemnifying Party shall not be liable under Section 11.02 for
any (i) Damages relating to any matter to the extent that there is included in
the Balance Sheet a specific liability or reserve relating to such matter, (ii)
consequential or punitive Damages or (iii) Damages for lost profits.
SECTION 11.05. EXCLUSIVITY. Except as specifically set forth in this
Agreement or in any Related Agreement, effective as of the Closing, Buyer and
the Company waive any rights and claims they may have against either of the
Sellers, whether in law or in equity, relating to the Company or the Shares or
the transactions contemplated hereby. The rights and claims waived by Buyer and
the Company include claims for contribution or other rights of recovery arising
out of or relating to any Environmental Law (whether now or hereinafter in
effect), claims for breach of contract, breach of representation or warranty,
negligent misrepresentation and all other claims for breach of duty. After the
52
Closing, Section 8.05 and Section 11.02 will provide the exclusive remedy for
any misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated hereby.
Except as specifically set forth in this Agreement or in any Related Agreement,
effective as of the Closing, the Sellers waive any rights and claims they may
have against Buyer and the Company relating to the transactions contemplated
hereby or thereby. The foregoing limitations shall not apply to any claims based
on fraud.
SECTION 11.06. KNOWLEDGE. Notwithstanding anything in this Agreement to
the contrary, the rights of the parties to indemnification based on the
representations and warranties set forth in this Agreement shall not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) about the accuracy or inaccuracy of or compliance
with, any such representation or warranty.
ARTICLE 12
TERMINATION
SECTION 12.01. GROUNDS FOR TERMINATION. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Delta and Buyer;
(b) unless otherwise agreed to by Buyer and Delta, automatically if the
Closing shall not have been consummated on or before October 31, 2005;
(c) by either Delta or Buyer if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any Governmental Authority having competent jurisdiction; or
(d) by Buyer if (i) Delta shall have filed a petition for relief under
the Bankruptcy Code prior to the Closing or (ii) an involuntary petition for
relief under the Bankruptcy Code is filed against Delta prior to the Closing by
any party other than (x) Buyer or its Affiliates or (y) any Person acting at the
direction of or in concert with Buyer or its Affiliates and such petition is not
dismissed prior to the Closing;
The party desiring to terminate this Agreement pursuant to clauses (b),
(c) or (d) of this Section 12.01 shall give notice of such termination to the
other party.
SECTION 12.02. EFFECT OF TERMINATION. If this Agreement is terminated
as permitted by Section 12.01, such termination shall be without liability of
any party (or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to any other party to this Agreement; provided
that if such termination shall result from either party's willful (i) failure to
fulfill a
53
condition to the performance of the obligations of the other party, (ii) failure
to perform a covenant set forth in this Agreement or (iii) breach of any
representation or warranty or agreement contained herein, such failing or
breaching party shall be fully liable for any and all Damages incurred or
suffered by the other party as a result of such failure or breach. The
provisions of Section 6.01, 13.03, 13.05, 13.06 and 13.07 shall survive any
termination hereof pursuant to Section 12.01.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES. All notices and other communications hereunder
shall be in writing (including facsimile transmission, with confirmation of
receipt) and shall be deemed to have been duly given (i) when delivered
personally or by facsimile, (ii) when received by the addressee, if sent by
Express Mail, Federal Express or other express delivery service (receipt
requested), or (iii) three business days after being sent by registered or
certified mail, return receipt requested, in each case to the other party at the
following addresses (or to such other address for a party as shall be specified
by like notice, provided that notices of a change of address shall be effective
only upon receipt thereof):
if to Buyer to:
SkyWest, Inc.
444 South River Road
St. George, Utah 84790-2086
Attention: Chief Financial Officer
Facsimile No.: (435) 634-3305
with a copy to:
Parr Waddoups Brown Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111-1537
Attention: Kent H. Collins
Facsimile No.: (801) 532-7750
if to either of the Sellers, to:
Delta Air Lines, Inc.
1030 Delta Boulevard
Hartsfield Atlanta International Airport
Atlanta, Georgia 30320-6001
Attention: EVP & CFO
Facsimile No.: (404) 715-4098
54
with a copy to:
Law Department (#981)
Delta Air Lines, Inc.
1030 Delta Boulevard
Hartsfield Atlanta International Airport
Atlanta, Georgia 30320-6001
Attention: SVP - General Counsel
Facsimile No.: (404) 715-2233
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Paul R. Kingsley
Facsimile No.: (212) 450 3800
; PROVIDED that any communication by facsimile shall be confirmed by a copy sent
via overnight mail to the physical address of the recipient set forth above. 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. in the
place of receipt and such day is a Business Day in the place of receipt.
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 13.02. AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived 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 the party against whom the waiver is
to be effective.
(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 13.03. EXPENSES. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense.
SECTION 13.04. 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
55
otherwise transfer any of its rights or obligations under this Agreement without
the consent of each other party hereto.
SECTION 13.05. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 13.06. JURISDICTION. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in the United States District Court for the
Southern District of New York or any New York State court sitting in New York,
New York, so long as one of such courts shall have subject matter jurisdiction
over such suit, action or proceeding, and that any cause of action arising out
of this Agreement shall be deemed to have arisen from a transaction of business
in the State of New York, and each of the parties hereby irrevocably consents to
the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 13.01
shall be deemed effective service of process on such party.
SECTION 13.07. 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 13.08. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof in
any federal court located in the State of New York or any New York state court
sitting in New York, New York, in addition to any other remedy to which they are
entitled at law or in equity.
SECTION 13.09. COUNTERPARTS; EFFECTIVENESS; THIRD-PARTY BENEFICIARIES.
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 a counterpart hereof signed by the other
56
party hereto. Until and unless each party has received a counterpart hereof
signed by the other party hereto, this Agreement shall have no effect and no
party shall have any right or obligation hereunder (whether by virtue of any
other oral or written agreement or other communication). 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.
SECTION 13.10. ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits hereto), the Confidentiality Agreement and the Related
Agreements constitute 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.
SECTION 13.11. 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 and 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 in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
SECTION 13.12. DISCLOSURE SCHEDULES. The parties acknowledge and agree
that (i) the Schedules to this Agreement may include certain items and
information solely for informational purposes for the convenience of Buyer, (ii)
the disclosure by the Sellers of any matter in the Schedules shall not be deemed
to constitute an acknowledgment by the Sellers that the matter is required to be
disclosed by the terms of this Agreement or that the matter is material and
(iii) matters disclosed on any Schedule to this Agreement shall be deemed
disclosed and incorporated in any other Schedule where it is reasonably apparent
that such information is relevant to such other Schedule.
SECTION 13.13. CONSTRUCTION. This Agreement shall be construed as
though all parties had drafted it.
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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.
SKYWEST, INC.
By: /s/ Bradford R. Rich
-----------------------------------------
Name: Bradford R. Rich
Title: Chief Financial Officer
DELTA AIR LINES, INC.
By: /s/ Edward H. Bastian
-----------------------------------------
Name: Edward H. Bastian
Title: VP and Chief Financial Officer
ASA HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
58