SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CONTINENTAL AIRLINES, INC.
(Name of Issuer)
CLASS A COMMON STOCK, $0.01 PAR VALUE
(Title of Class of Securities)
210795209
(CUSIP Number)
Douglas M. Steenland
Senior Vice President, General Counsel and Secretary
Northwest Airlines Corporation
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Telephone: (612) 727-6500
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
January 25, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d- 1(b)(3) or (4), check the following box [ ]
Note: Six copies of this Statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
(Continued on following pages)
Exhibit Index appears on Page A-4. Page 1 of 16 pages
--
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CUSIP No. 210795209
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1. Name of Reporting Persons
S.S. or I.R.S. Identification No. of Above Person
Northwest Airlines Corporation (IRS Identification No. 95-4205287)
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2. Check the Appropriate Box if a Member of a Group
(a)
(b)
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3. SEC Use Only
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4. Source of Funds
OO; WC (See Item 3)
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
[ ]
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6. Citizenship or Place of Organization
State of Delaware
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7. Sole Voting Power
NUMBER
-0-
OF SHARES
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BENEFICIALLY 8. Shared Voting Power
OWNED BY 8,535,868 shares (1)
EACH ------------------------------------------------------------
9. Sole Dispositive Power
REPORTING
-0-
PERSON WITH
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10. Shared Dispositive Power
8,535,868 shares (1)
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
8,535,868 shares (1)
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
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13. Percent of Class Represented by Amount in Row (11)
Class A - 74.8% (1)(2) (See Item 5)
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14 Type of Reporting Person
CO
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(1) Includes 3,039,468 shares of Issuer Class A Common Stock that may be
acquired upon the exercise of warrants held by Air Partners, L.P.
(2) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Securities Exchange Act
of 1934, that there are 11,418,932 shares of Issuer Class A Common Stock
outstanding, which includes the shares issuable upon exercise of the
warrants to purchase shares of Issuer Class A Common Stock held by Air
Partners, L.P.
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Item 1. Security and Issuer.
The class of equity securities to which this statement relates is the
Class A Common Stock, $0.01 par value ("Issuer Class A Common Stock"), of
Continental Airlines, Inc., a Delaware corporation (the "Issuer"). The Issuer
also has outstanding Class B Common Stock, $0.01 par value ("Issuer Class B
Common Stock" and, together with the Issuer Class A Common Stock, the "Issuer
Common Stock"). The Issuer Class A Common Stock has ten votes per share and
votes on all matters with the Issuer Class B Common Stock, which has one vote
per share. The principal executive offices of the Issuer are located at 2929
Allen Parkway, Houston, Texas 77019.
Item 2. Identity and Background.
This statement is being filed by Northwest Airlines Corporation, a
Delaware corporation ("Northwest"), in connection with an Investment
Agreement dated January 25, 1998 (the "Investment Agreement"), among
Northwest, Newbridge Parent Corporation, a Delaware corporation
("Newbridge"), Air Partners, L.P., a Texas limited partnership (the
"Partnership"), the partners of the Partnership signatories thereto (the
"Partners"), Bonderman Family Limited Partnership, a Texas limited
partnership ("Transferor I"), 1992 Air, Inc., a Texas corporation
("Transferor II"), and Air Saipan, Inc., a corporation organized under the
laws of the Commonwealth of the Northern Marianas Islands ("Transferor III"
and, collectively with "Transferor I" and "Transferor II", the
"Transferors"), which Investment Agreement contains certain provisions
regarding the voting and disposition of the securities of the Issuer owned by
the Partnership and the Transferors and which is further described in Item 6.
The address of the principal business and principal executive offices of
Northwest is 2700 Lone Oak Parkway, Eagan, Minnesota 55121. The name,
business address, present principal occupation or employment, and citizenship
of each director and executive officer of Northwest is set forth on
Attachment A.
Through its principal wholly-owned indirect subsidiary, Northwest
Airlines, Inc., Northwest operates one of the world's largest airlines and is
engaged principally in the commercial transportation of passengers and cargo.
None of Northwest, or, to the best of Northwest's knowledge, any of
the persons named in Attachment A attached hereto or in the response to Item
5, paragraph (b), has during the last five years: (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors);
or (ii) been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
In exchange for the partnership interests and shares of Issuer
Class A Common Stock to be acquired by Northwest and Newbridge pursuant to
the Investment Agreement, as
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more fully described in Item 6, the Partners and the Transferors will receive
cash and newly-issued shares of Class A Common Stock, par value $0.01 per
share, of Newbridge ("Newbridge Class A Common Stock") on the terms described
in Item 6. The cash is expected to be funded from Northwest's general
working capital and from the proceeds of unsecured borrowings in the public
capital markets.
Item 4. Purpose of Transaction.
Northwest initially entered into negotiations with the Partnership
to acquire the Partnership or the shares of Issuer Class A Common Stock owned
by the Partnership for the purpose of acquiring over 50% of the outstanding
voting power of the Issuer Common Stock and thereby obtaining control of the
Issuer, including the power to elect a majority of the Issuer's Board of
Directors (the "Board") and the power to vote a majority of the outstanding
voting power of the Issuer Common Stock with respect to mergers or other
business combination proposals involving the Issuer. At the same time, it
was Northwest's intention to enter into negotiations with the Issuer to form
a global strategic operating alliance with the Issuer (the "Operating
Alliance") which, when fully implemented, would connect the networks of the
Issuer and Northwest Airlines, Inc. and would include code-sharing, frequent
flyer program reciprocity and other cooperative activities. In the course of
its negotiations with the Issuer regarding the Operating Alliance, which
Northwest Airlines, Inc. and the Issuer entered into on January 25, 1998,
Northwest agreed to enter into the Governance Agreement, the principal terms
of which are described in Item 6 and which significantly limits for a
six-year period Northwest's ability to control the Issuer. The Governance
Agreement contains restrictions on Northwest's ability to acquire additional
shares of Issuer Common Stock, to vote the shares of Issuer Common Stock
owned by it and to affect the composition and conduct of the Issuer's Board
of Directors.
Northwest and the Issuer have both stated that they have no
intention to merge their operations and that they will retain separate
boards, managements and headquarters. Northwest has no intention to acquire
additional shares of Issuer Common Stock except as described in Item 6 under
"Investment Agreement --Acquisition of Additional Shares of Issuer Common
Stock" and except to the extent otherwise necessary to achieve and maintain
an ownership level equal to 50.1% of the fully diluted voting power of the
Issuer Common Stock. Except as described in Item 6 under "Governance
Agreement -- Issuer Board of Directors", Northwest has no plans to make any
change in the composition of the Board. Except as described in Item 6 under
"Governance Agreement", including under "--Adoption of Stockholder Rights
Plan" and "-- Additional Agreements", Northwest has no plans relating to
changes in the Issuer's charter or by-laws or other actions which may impede
the acquisition of control of the Issuer by any person.
Except as described above, Northwest has no plans or proposals
which relate to or would result in:
(a) the acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
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(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Issuer
or of any of its subsidiaries;
(d) any change in the present board of directors or management of
the Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the Board;
(e) any material change in the present capitalization or dividend
policy of the Issuer;
(f) any other material change in the Issuer's business or corporate
structure;
(g) changes in the Issuer's charter, by-laws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person;
(h) causing a class of securities of the Issuer to be delisted from
a national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association;
(i) a class of equity securities of the Issuer becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the
Securities Act of 1933; or
(j) any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) Upon entering into the Investment Agreement and as a result of
the agreements described in Item 6 under the heading "Investment Agreement
- --Restrictions on the Partnership", Northwest may be deemed to have become
the beneficial owner of 8,535,868 shares of Issuer Class A Common Stock,
representing approximately 74.8% of the outstanding Issuer Class A Common
Stock, approximately 13.8% of the outstanding Issuer Common Stock and
approximately 51.8% of the outstanding voting power of the Issuer Common
Stock (based on the number of shares of Issuer Common Stock outstanding on
December 31, 1997). Upon the consummation of the Exchange described in Item
6, Northwest and Newbridge will own, directly and indirectly, the shares of
Issuer Class A Common Stock described in the preceding sentence. Except as
set forth in this Item 5, none of Northwest or, to the best of its knowledge,
any of the persons named on Attachment A attached hereto beneficially owns or
has the right to acquire any Issuer Class A Common Stock.
(b) Northwest does not have the sole power to vote or direct the
vote of or to dispose or direct the disposition of any shares of Issuer Class
A Common Stock. As a
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result of the agreements described in Item 6 under the heading "Investment
Agreement -- Restrictions on the Partnership", Northwest may be deemed to
have acquired shared power to vote or direct the vote of and to dispose or
direct the disposition of the 8,535,868 shares of Issuer Class A Common Stock
presently held by the Partnership and the Transferors. Upon consummation of
the Exchange described in Item 6, Northwest will have shared power to vote or
to direct the vote of and to dispose or to direct the disposition of all such
shares of Issuer Class A Common Stock on the terms set forth in the Governance
Agreement, as more fully described in Item 6.
The following describes certain information regarding the
Partnership, the Partners and the Transferors, with whom Northwest, until the
consummation of the Exchange described in Item 6, may be deemed to share the
power to vote or to direct the vote and to dispose or to direct the
disposition with respect to the shares of Issuer Class A Common Stock
described in the preceding paragraph. The following information is taken from
public filings of the Partnership and the other persons named below and
Northwest makes no representations as to its accuracy.
The Partnership
The Partnership is a Texas limited partnership the principal
business of which is to acquire, hold, trade, invest in and deal with
securities of the Issuer. The principal business address of the Partnership,
which also serves as its principal office, is 201 Main Street, Suite 2420,
Fort Worth, Texas 76102. As of the date of the Investment Agreement, the
Partnership and the Transferors beneficially own 8,535,868 shares of Issuer
Class A Common Stock, which amount includes 3,039,468 shares that may be
acquired upon the exercise of warrants held by the Partnership.
1992 Air GP
1992 Air GP ("1992 Air GP") is a Texas general partnership the
principal business of which is to serve as a general partner of the
Partnership. The principal business address of 1992 Air GP, which also serves
as its principal office, is 201 Main Street, Suite 2420, Fort Worth, Texas
76102. In its capacity as one of two general partners of the Partnership,
and acting through its majority general partner, 1992 Air GP has the shared
power to vote or to direct the vote and to dispose or to direct the
disposition of 5,263,188 shares of Issuer Class A Common Stock.
Air II
Air II General, Inc. ("Air II") is a Texas corporation the
principal business of which is to serve as a general partner of the
Partnership. The principal business address of Air II, which also serves as
its principal office, is 201 Main Street, Suite 2420, Fort Worth, Texas
76102. In its capacity as one of two general partners of the Partnership,
and acting through its controlling shareholder, Air II has the shared power
to vote or to direct the vote and to dispose or to direct the disposition of
5,263,188 shares of Issuer Class A Common Stock.
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Transferor I
Transferor I is a Texas limited partnership, the principal business
of which is buying, selling, exchanging or otherwise acquiring, holding and
investing in securities or entering into any other type of investment. The
principal business address of Transferor I, which also serves as its
principal office, is 201 Main Street, Suite 2420, Fort Worth, Texas 76102.
Acting through its sole general partner, Transferor I has the shared power to
vote or to direct the vote and to dispose or to direct the disposition of
16,400 shares of Issuer Class A Common Stock. Additionally, because of its
ownership of a limited partnership interest in the Partnership, and on the
basis of certain provisions of the Partnership Agreement, Transferor I may be
deemed to have shared power to vote or to direct the vote and to dispose or
to direct the disposition of 88,979 shares of Issuer Class A Common Stock
attributable to such limited partnership interest in the Partnership.
Transferor II
Transferor II is a Texas corporation, the principal business of
which is to serve as a general partner of 1992 Air GP. The principal
business address of Transferor II, which also serves as its principal office,
is 201 Main Street, Suite 2420, Fort Worth, Texas 76102. In its capacity as
the majority general partner of 1992 Air GP, and acting through its
controlling shareholder, Transferor II has the shared power to vote or to
direct the vote and to dispose or to direct the disposition of 5,263,188
shares of Issuer Class A Common Stock. Transferor II, in its capacity as
such, has the shared power to vote or to direct the vote and to dispose or to
direct the disposition of 213,110 shares of Issuer Class A Common Stock.
Transferor III
Transferor III is a corporation organized under the laws of the
Commonwealth of the Northern Marianas Islands, the principal business of
which is to serve as a general partner of 1992 Air GP. The principal
business address and principal office of Transferor III is One Post Street,
Suite 2450, San Francisco, California, 94104. Transferor III, in its
capacity as such, has the shared power to vote or to direct the vote and to
dispose or to direct the disposition of 3,702 shares of Issuer Class A Common
Stock.
David Bonderman
David Bonderman ("Bonderman") is a citizen of the United States of
America whose principal occupation is serving as President and Director of
TPG Advisors, Inc., a Delaware corporation. Bonderman's principal business
address, which also serves as his principal office, is 201 Main Street, Suite
2420, Fort Worth, Texas 76102. In his capacity as the controlling
shareholder of each of Air II and Transferor II, Bonderman has the shared
power to vote or to direct the vote and to dispose or to direct the
disposition of 5,263,188 shares of Issuer Class A Common Stock. In his
capacity as the controlling shareholder of Transferor II, Bonderman has the
shared power to vote or to direct the vote and to dispose or to direct the
disposition of an additional 213,110 shares of Issuer Class A Common Stock.
In his capacity as sole general partner of Transferor I, Bonderman has the
shared power to vote
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or to direct the vote and to dispose or to direct the disposition of 16,400
shares of Issuer Class A Common Stock. Additionally, because of Bonderman's
direct and indirect ownership of limited partnership interests in the
Partnership, and on the basis of certain provisions of the Partnership
Agreement, Bonderman may be deemed to have shared power to vote or to direct
the vote and to dispose or to direct the disposition of shares of Issuer
Class A Common Stock beneficially owned by the Partnership attributable to
such limited partnership interests in the Partnership.
Bondo Air
Bondo Air Limited Partnership ("Bondo Air") is a Texas limited
partnership, the principal business of which is to own a limited partnership
interest in the Partnership. The principal business address of Bondo Air,
which also serves as its principal office, is 201 Main Street, Suite 2420,
Fort Worth, Texas 76102. In its capacity as a limited partner of the
Partnership, and on the basis of certain provisions of the Partnership
Agreement, Bondo Air may be deemed to have shared power to vote or to direct
the vote and to dispose or to direct the disposition of 889,805 shares of
Issuer Class A Common Stock attributable to such limited partnership interest
in the Partnership.
Brener
Alfredo Brener ("Brener") is a citizen of Mexico and his principal
business address is Five Post Oak Park, #2560, Houston, Texas 77020. Because
of his ownership, through a limited partnership whose corporate general
partner he controls, of warrants to purchase a 98.5% limited partnership
interest in Bondo Air, and on the basis of certain provisions of the limited
partnership agreement of Bondo Air and the Partnership Agreement, Brener may
be deemed to have shared power to vote or to direct the vote and to dispose
or to direct the disposition of 876,458 shares of Issuer Class A Common Stock.
(c) Since December 1, 1997, no transactions were effected in
Issuer Class A Common Stock by Northwest or, to the best of its knowledge,
any person listed in Attachment A attached hereto.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Investment Agreement
On January 25, 1998, Northwest, Newbridge, the Partnership, the
Partners and the Transferors entered into the Investment Agreement. Pursuant
to the Investment Agreement and subject to the terms and conditions set forth
therein, Northwest and
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Newbridge will acquire from the Partners the outstanding partnership
interests in the Partnership and from the Transferors the shares of Issuer
Class A Common Stock owned by them in exchange for shares of Newbridge Class
A Common Stock and cash at a ratio of 1.2079 shares of Newbridge Class A
Common Stock or $60.82 in cash per share of Issuer Class A Common Stock the
beneficial ownership of which will be acquired by Northwest and Newbridge
(the "Exchange").
The Partnership and the Transferors beneficially own 8,535,868
shares of Issuer Class A Common Stock, which represents approximately 74.8%
of the outstanding Issuer Class A Common Stock, approximately 13.8% of the
outstanding Issuer Common Stock and approximately 51.8% percent of the
outstanding voting power of the Issuer Common Stock. The aggregate
consideration to be paid in the transaction is valued at approximately $519
million, expected to consist of approximately $311 million in cash and
approximately 4.1 million shares of newly issued Newbridge Class A Common
Stock.
Restrictions on the Partnership
Pursuant to the Investment Agreement, the Partnership, the Partners
and the Transferors agreed (i) that the Partnership will, prior to the
closing of the Exchange (the "Closing"), exercise all the warrants owned by
it to purchase shares of Issuer Class A Common Stock subject to the
Partnership's receipt of a loan from Northwest in an amount equal to the
aggregate exercise price of the warrants ($28,356,015), which loan will be
secured by a pledge of the shares of Issuer Class A Common Stock acquired by
the Partnership upon exercise of the warrants, (ii) until the first
anniversary of the Closing, not to solicit, initiate or encourage any
inquiries, offers, proposals or any indications of interest regarding any
merger, reorganization, consolidation, business combination, liquidation,
dissolution or other fundamental corporate transaction that is intended to or
could reasonably be expected to prevent, delay or interfere with the
consummation of the transactions contemplated by the Investment Agreement or
the entry by the Issuer and Northwest into the Operating Alliance, (iii) not
to sell, transfer, tender, pledge, encumber, assign or otherwise dispose of
any shares of Issuer Class A Common Stock or warrants except as contemplated
by the Investment Agreement, (iv) not to convert any shares of Issuer Class A
Common Stock into shares of Issuer Class B Common Stock and (v) to vote or
cause to be voted all shares of Issuer Class A Common Stock owned by them
against, among other things, any business combination (other than a business
combination with Northwest or any of its affiliates) involving the Issuer,
any change in the majority of the Board of Directors of the Issuer or any
material change in the Issuer's corporate structure or business. In
addition, the Partnership and the Transferors granted to Robert L. Friedman,
as the designee of Northwest, an irrevocable proxy to vote their shares of
Issuer Class A Common Stock in a manner consistent with the voting agreements
set forth in the Investment Agreement. Northwest also agreed that during the
five-year period following the Closing it would grant to Transferor II a
right of first offer on any proposed sale, transfer or other disposition by
it of the shares of Issuer Class A Common Stock acquired at the Closing.
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Acquisition of Additional Shares of Issuer Common Stock
In the Investment Agreement, Northwest also agreed to use its best
efforts to acquire prior to the Closing such number of shares of Issuer
Common Stock as is necessary so that the fully diluted voting power of the
shares of Issuer Common Stock beneficially owned by Northwest upon the
Closing will equal at least 50.1%.
Governance Agreement
In connection with the transactions contemplated by the Investment
Agreement and the Operating Alliance, Northwest and Newbridge entered into a
Governance Agreement (the "Governance Agreement") with the Issuer, dated as
of January 25, 1998. The Governance Agreement contains certain agreements
between Northwest, Newbridge and the Issuer regarding the control and
management of the Issuer following the Closing, including restrictions on
Northwest's and Newbridge's ability to acquire additional shares of Issuer
Common Stock and to vote the shares of Issuer Common Stock owned by them and
restrictions on their ability to affect the composition and conduct of the
Board.
Termination
The Governance Agreement will terminate upon the earlier of (i) the
six-year anniversary of the Closing and (ii) such time as Northwest and
Newbridge cease to beneficially own 10% or more of the fully diluted voting
power of the Issuer Common Stock; provided, however, that in the event of a
termination pursuant to clause (i), certain provisions regarding the
requirement to maintain a certain number of independent directors on the
Board and the requirement that the independent directors approve transactions
between the Issuer and Northwest will survive such termination until such
time as Northwest ceases to own 10% or more of the fully diluted voting power
of the Issuer Common Stock.
Issuer Board of Directors
Pursuant to the Governance Agreement, Northwest will
have the right to designate one individual to be elected to the Board, which
individual shall be reasonably acceptable to the Issuer and shall have been
neither an employee nor a director of Northwest, the Issuer
or any of their respective affiliates for the three years preceding such
designation. Further, during the six-year term of the Governance Agreement,
independent directors will constitute at least a majority of the Board. Any
subsequent vacancies in the seats of independent directors during that period
will be determined by a majority vote of the Board, including a majority of
the independent directors.
Voting of Issuer Common Stock
The Governance Agreement further provides that all shares of Issuer
Common Stock held by Northwest will be deposited into a voting trust and will
be voted, at the option of Northwest, either as recommended by the Board or
in the same proportion as votes cast by other holders of the Issuer Common
Stock; provided, however, that (a) Northwest may direct
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the vote of such shares in respect of (i) any vote on a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Issuer, any sale of all or substantially all of the Issuer's assets or
any issuance of Issuer Common Stock that would represent in excess of 20% of
the voting power of the Issuer Common Stock prior to such issuance or (ii)
any amendment to the Issuer's amended and restated certificate of
incorporation or by-laws that would materially and adversely affect Northwest
and (b) in the election of directors, such shares will be voted for the
election of independent directors nominated by the Board, except that if any
person other than the Issuer is soliciting proxies in connection with such an
election, such shares will be voted, at the option of Northwest, either as
recommended by the Board or in the same proportion as votes cast by other
holders of the Issuer Common Stock.
Limitations on Ownership by Northwest
Northwest has agreed not to beneficially own shares of Issuer
Common Stock representing more than 50.1% of the fully diluted voting power
of the Issuer Common Stock, and not to acquire additional shares of Issuer
Common Stock other than to maintain its ownership at such 50.1% level, except
that in the event that (i) a bona fide third party acquires 15% or more of
the total combined voting power of all the Issuer Common Stock then
outstanding ("Total Voting Power"), (ii) a bona fide tender or exchange offer
is made to acquire shares representing 15% or more of the Total Voting Power
and such offer is not withdrawn or terminated prior to Northwest acquiring
additional shares or (iii) the Board approves the acquisition by any person
of shares of Issuer Common Stock which acquisition would trigger any
stockholder rights plan of the Issuer, Northwest may acquire additional
shares of Issuer Common Stock in any manner or amount.
The Governance Agreement provides that Northwest will have
pre-emptive rights to acquire additional shares of Issuer Common Stock to
maintain its ownership percentage (i) in the event that the Issuer issues
additional shares of Issuer Class A Common Stock and (ii) in the event that
the Issuer issues additional shares of Issuer Class B Common Stock, subject,
in the case of clause (ii), to certain limited exceptions.
Transfer Restrictions
Pursuant to the Governance Agreement, Northwest has agreed not to
transfer its shares of Issuer Common Stock except for (i) transfers in
respect of tender or exchange offers to acquire Issuer Common Stock approved
by the Board (which approval shall not be withdrawn prior to such transfer),
(ii) transfers to Newbridge, provided such securities are immediately
transferred to the public stockholders of Newbridge in a pro rata
distribution and as a result no transferee holds more than 10% of the Total
Voting Power, (iii) transfers to controlled affiliates, provided that the
transferee agrees to be bound by the Governance Agreement and that such
transfer does not result in any transferee holding more than 10% of the Total
Voting Power, (iv) transfers to Newbridge from the voting trust upon the
dissolution of the voting trust, (v) transfers permitted under the Investment
Agreement or as described below under "Termination of the Operating Alliance"
or (vi) transfers by Newbridge to any
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transferee that would not result in such transferee holding more than 10% of
the Total Voting Power.
Termination of Operating Alliance
The Governance Agreement provides that if the Operating Alliance is
terminated on account of a failure to attain certain agreed objectives for
full implementation within three years after the Closing, the Issuer may
require Northwest to either (i) sell all of its shares of Issuer Common Stock
or (ii) enter into an agreement providing for a merger between the Issuer and
Northwest. If Northwest elects to seek a merger, it will have six months in
which to negotiate an agreement with a special committee of independent
directors of the Issuer. If after such negotiation period Northwest and the
Issuer are unable to reach an agreement, Northwest and the Issuer will submit
to an agreed valuation process. If the Issuer does not accept the valuation
price, Northwest may continue to hold its shares or sell them free of any
restrictions and the Governance Agreement will be terminated, except for the
provisions described in the proviso under "Termination" above. If Northwest
does not accept the valuation price, it must sell its shares of Issuer Common
Stock within 18 months (a) in one or more block sales of at least 15% of the
Total Voting Power, subject to a one-time approval right by the Issuer as to
each block, such right to be exercised only upon a good faith determination
by the Board that the proposed transferee would be injurious to the
stockholders of the Issuer, or (b) in any other manner determined by Northwest.
If Northwest initially elects to sell its shares of Issuer Common Stock rather
than seek a merger, it will have two years to sell such shares in the manner
described in the preceding sentence.
Stockholder Rights Plan
Northwest and the Issuer have agreed that the Issuer will adopt a
stockholders rights plan that will except Northwest from the definition of
"Acquiring Person", and that so long as Northwest owns at least 15% of the
fully diluted voting power of the Issuer Common Stock, the Issuer will not
amend such plan in a manner or adopt a rights plan that does not so except
Northwest. Any such plan of the Issuer will permit Northwest to take any
action that would be permitted in accordance with the terms of the Governance
Agreement without triggering the rights thereunder.
Additional Agreements
Under the Governance Agreement, Northwest has further agreed that
for the six-year term of such Governance Agreement it will not, among other
things, (i) act, alone or in concert with others, to seek to influence the
control or management of the Issuer, (ii) enter into voting trusts or other
similar agreements except as described above under "Voting of Issuer Common
Stock", (iii) encourage, initiate, participate in or engage in proxy contests
or (iv) form groups for the purpose of holding, acquiring, voting or selling
the Issuer's shares, subject to certain limited exceptions and except as
otherwise permitted by the Governance Agreement.
The Issuer has also agreed that the Board will not pass any
resolution, nor will it seek a vote of the Issuer's stockholders, approving
any charter or by-law amendment that
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would, without the consent of Northwest, (a) adversely affect the rights of
the holders of Issuer Class A Common Stock, including the right to convert
such shares into shares of Class D Common Stock, par value $0.01 per share,
of the Issuer ("Issuer Class D Common Stock") or the rights of the holders of
Issuer Class D Common Stock or (b) opt into Section 203 of the Delaware
General Corporation Law or adopt an "interested stockholders provision".
The Issuer has agreed that until the Closing it and its
representatives will not, directly or indirectly, take any action to solicit,
initiate or encourage any proposal for a business combination involving the
Issuer or engage in negotiations with, or disclose any non-public information
relating to the Issuer or afford access to the Issuer's properties, books and
records to, any person that may be considering such a proposal unless the
Issuer determines, taking into account the advice of outside counsel, that
such action is necessary for the Board to comply with its fiduciary duties
under applicable law.
The Issuer has agreed that until the Closing, without the prior
consent of Northwest, it will not (a) change its principal line of business,
(b) change the fundamental nature of its business or (c) dispose of any
substantial portion of its assets.
The Closing is subject to a number of customary conditions,
including approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and satisfactory review by the Department of
Transportation. The Investment Agreement may be terminated by the
Partnership or Northwest if the closing has not occurred by January 25, 1999.
The summary contained in this Schedule 13D of certain provisions of
the Investment Agreement and the Governance Agreement is qualified in its
entirety by reference to the Investment Agreement and the Governance
Agreement attached as Exhibits 1 and 2 hereto, respectively, and incorporated
herein by reference.
Except for the Investment Agreement and the Governance Agreement
and as otherwise referred to or described in this Schedule 13D, to the best
knowledge of Northwest, there are no other contracts, arrangements,
understandings or relationships (legal or otherwise) between Northwest, the
Partnership, the Partners, the Transferors and the Issuer or between such
persons or any person with respect to any securities of the Issuer, including
but not limited to transfer or voting of any of such securities, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees
of profits, division of profits or loss or the giving or withholding of
proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Investment Agreement among Northwest Airlines Corporation,
Newbridge Parent Corporation, Air Partners, L.P., the
Partners of Air Partners identified on the signature pages
thereto, Bonderman Family Limited Partnership, 1992 Air,
Inc. and Air Saipan, Inc., dated as of January 25, 1998.
(without exhibits or schedules)
15
Exhibit 2 Governance Agreement among Northwest Airlines Corporation,
Newbridge Parent Corporation and Continental Airlines, Inc.,
dated as of January 25, 1998.
16
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: February 4, 1998
NORTHWEST AIRLINES CORPORATION
By: /s/ Douglas M. Steenland
--------------------------------------
Douglas M. Steenland
Senior Vice President, General
Counsel and Secretary
Attachment A
Executive Officers and Directors of Northwest Airlines Corporation
The names and titles of the executive officers and the names of the
directors of Northwest and each of their business addresses and principal
occupations are set forth below. If no address is given, the director's or
executive officer's business address is that of Northwest. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
such individual's position at Northwest and each individual is a United
States citizen.
Executive Officers Position; Present Principal Occupation
- ------------------ --------------------------------------
John H. Dasburg Director, President and Chief Executive
Officer
James A. Lawrence Executive Vice President and Chief Financial
Officer
Michael E. Levine Executive Vice President - Marketing and
International
Raymond J. Vecci Executive Vice President - Customer Service
Donald A. Washburn Executive Vice President - Flight Operations
and President of Northwest Cargo
Richard H. Anderson Senior Vice President - Technical Operations
and Airport Affairs
Christopher E. Clouser Senior Vice President - Administration
Joseph E. Francht, Jr. Senior Vice President - Finance and Treasurer
Richard B. Hirst Senior Vice President - Corporate Affairs
Douglas M. Steenland Senior Vice President, General Counsel and
Secretary
Rolf S. Andresen Vice President and Controller
William D. Slattery Chairman - Cargo
Directors Present Principal Occupation
- --------- ----------------------------
Richard C. Blum Chairman and President
Richard C. Blum & Associates, Inc.
909 Montgomery Street #400
San Francisco, CA 94133
Alfred A. Checchi Director of Northwest Airlines Corporation
and Private Investor
Doris Kearns Goodwin Historian and Author
Marvin L. Griswold Retired International Director
Teamsters Airline Division
International Brotherhood of Teamsters
Dennis Hightower Professor
Harvard Business School
Baker Library 186
Boston, MA 02163
Thomas L. Kempner Chairman and Chief Executive Officer
Loeb Partners Corporation
61 Broadway
24th Floor
New York, NY 10021
George J. Kourpias Retired President
International Association of Machinists and
Aerospace Workers
Frederic V. Malek Chairman
Thayer Capital Partners
1455 Pennsylvania Avenue, N.W.
Suite 350
Washington, D.C. 20004
Walter F. Mondale Partner
Dorsey & Whitney
Pillsbury Center South
220 South Sixth Street
19th Floor
Minneapolis, MN 55402
V.A. Ravindran President
Paracor Finance Inc.
660 Madison Avenue
18th Floor
New York, NY 10022
Leo M. van Wijk President and Chief Executive Officer
(Citizen of The Netherlands) KLM Royal Dutch Airlines
Amsterdamseweg 55
1182 G P Amstelveen
The Netherlands
George J. Vojta Vice Chairman
Bankers Trust New York Corporation
1 BT Plaza
130 Liberty Street
New York, NY 10006
A-2
Gary L. Wilson Chairman of the Board of Northwest
Airlines Corporation
Duane E. Woerth First Vice President
Air Line Pilots Association
1625 Massachusetts Avenue, N.W.
Washington, D.C. 20036
A-3
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- ----
Exhibit 1 Investment Agreement among Northwest Airlines Corporation,
Newbridge Parent Corporation, Air Partners, L.P., the
Partners of Air Partners identified on the signature pages
thereto, Bonderman Family Limited Partnership, 1992 Air,
Inc. and Air Saipan, Inc., dated as of January 25, 1998.
(without exhibits or schedules)
Exhibit 2 Governance Agreement among Northwest Airlines Corporation,
Newbridge Parent Corporation and Continental Airlines, Inc.,
dated as of January 25, 1998.
A-4
EXHIBIT 2.1
EXECUTION COPY
____________________________________
INVESTMENT AGREEMENT
DATED AS OF JANUARY 25, 1998
AMONG
NORTHWEST AIRLINES CORPORATION
NEWBRIDGE PARENT CORPORATION
AIR PARTNERS, L.P.,
THE PARTNERS OF AIR PARTNERS, L.P.,
SIGNATORY HERETO,
BONDERMAN FAMILY LIMITED PARTNERSHIP
1992 AIR, INC.
AND
AIR SAIPAN, INC.
____________________________________
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . 3
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
EXCHANGE OF PARTNERSHIP INTERESTS; TRANSFER OF SHARES. . . . . . . .5
2.1 Exchange of Partnership Interests; Transfer of Shares . . . . . . . 5
2.2 Cash Election Share Price; Exchange Ratio . . . . . . . . . . . . . 6
2.3 Adjustments to Cash Election Share Price and Exchange Ratio . . . . 6
2.4 Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Interest Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . .9
3.1 Representations and Warranties of Parent and Holdco Sub . . . . . . 9
3.2 Representations and Warranties of the Partnership and the
Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Representations and Warranties of the Partners and the
Transferors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Representations and Warranties of the Transferors . . . . . . . . . 18
ARTICLE IV
COVENANTS. . . . . . . . . . . . . . . . . . 18
4.1 Covenants of Parent and Holdco Sub. . . . . . . . . . . . . . . . . 18
4.2 Covenants of the Partnership, the Partners and the
Transferors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . 27
4.4 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V
CONDITIONS TO CLOSING. . . . . . . . . . . . . . . 29
5.1 Conditions to Obligation of Parent, Holdco Sub and the Partners
to Effect the Transactions. . . . . . . . . . . . . . . . . . . . . 29
5.2 Conditions to Obligation of Parent and Holdco Sub . . . . . . . . . 29
5.3 Conditions to Obligation of the Partners and the Transferors. . . . 31
i
PAGE
ARTICLE VI
INDEMNIFICATION . . . . . . . . . . . . . . . . 32
6.1 Indemnification by Parent and Holdco Sub. . . . . . . . . . . . . . 32
6.2 Indemnification by each of the Partners and Transferors . . . . . . 33
6.3 Losses Net of Insurance, etc. . . . . . . . . . . . . . . . . . . . 34
6.4 Termination of Indemnification. . . . . . . . . . . . . . . . . . . 34
6.5 Procedures Relating to Indemnification under Article VI . . . . . . 34
6.6 Other Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII
GENERAL PROVISIONS . . . . . . . . . . . . . . . 37
7.1 Termination or Abandonment of Agreement . . . . . . . . . . . . . . 37
7.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.6 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.7 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 39
7.8 Entire Agreement; No Oral Waiver; Construction. . . . . . . . . . . 40
7.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.10 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . 40
7.11 Submission To Jurisdiction. . . . . . . . . . . . . . . . . . . . . 40
7.12 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.13 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 41
7.14 Survival of Representations.. . . . . . . . . . . . . . . . . . . . 41
7.15 No Restrictions on Directors of the Company.. . . . . . . . . . . . 42
EXHIBITS
Exhibit A Form of Agreement and Plan of Merger
Exhibit B Form of Second Amended and Restated Limited Partnership Agreement of
Air Partners, L.P.
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Standstill Agreement
Exhibit E Form of Note
Exhibit F Form of Pledge
ii
SCHEDULES
Schedule 2.2(a) Cash Electing Partners
Schedule 2.2(b) Share Electing Partners
Schedule 3.2(c) Capitalization of Air Partners, L.P.
iii
INVESTMENT AGREEMENT, dated as of January 25, 1998, among NORTHWEST
AIRLINES CORPORATION, a Delaware corporation ("PARENT"), NEWBRIDGE PARENT
CORPORATION, a Delaware corporation and, as of the date of this Agreement, a
wholly owned subsidiary of Parent ("HOLDCO SUB"), AIR PARTNERS, L.P., a Texas
limited partnership (the "PARTNERSHIP"), the partners of the Partnership
identified on the signature pages hereof (the "PARTNERS"), BONDERMAN FAMILY
LIMITED PARTNERSHIP, a Texas limited partnership ("TRANSFEROR I"), 1992 AIR,
INC., a Texas corporation ("TRANSFEROR II"), and AIR SAIPAN, INC., a CNMI
corporation ("TRANSFEROR III" and, collectively with Transferor I and Transferor
II, the "TRANSFERORS").
W I T N E S S E T H :
WHEREAS, the Partners own, of record and beneficially, 100% of the
general and limited partnership interests (the "PARTNERSHIP INTERESTS") in the
Partnership;
WHEREAS, the Partnership owns, of record and beneficially, (i)
5,263,188 shares of Class A Common Stock, par value $.01 per share (the "COMPANY
CLASS A COMMON STOCK"), of Continental Airlines, Inc. (the "COMPANY"), (ii) a
warrant to purchase 2,298,134 shares of Company Class A Common Stock at a price
of $7.50 per share (the "$7.50 WARRANT") and (iii) a warrant to purchase 741,334
shares of Company Class A Common Stock at a price of $15.00 per share (the
"$15.00 WARRANT" and, collectively with the $7.50 Warrant, the "WARRANTS");
WHEREAS, the Partners, Parent and Holdco Sub wish to exchange the
Partnership Interests for Holdco Sub Class A Common Stock (as hereinafter
defined) and cash upon the terms and subject to the conditions set forth herein;
WHEREAS, the Transferors own, of record and beneficially, 233,212
shares of Company Class A Common Stock, which the Transferors, Parent and Holdco
Sub wish to exchange for shares of Holdco Sub Class A Common Stock and cash upon
the terms and subject to the conditions set forth herein;
WHEREAS, Parent has (i) formed Holdco Sub, the certificate of
incorporation, by-laws and equity capital structure of which are substantially
identical in all material respects to those of Parent and (ii) formed a newly
created, wholly owned subsidiary of Holdco Sub named Merger Sub ("MERGER SUB"),
which shall merge (the "MERGER") with and into Parent on the Closing Date (as
hereinafter defined) in a transaction in which the outstanding capital stock of
Parent shall be converted into equivalent capital stock of Holdco Sub having the
same rights and preferences and Parent shall become a wholly owned subsidiary of
Holdco Sub;
WHEREAS, concurrently with the consummation of the Merger, Holdco Sub
shall issue shares of its Class A Common Stock, par value $.01 per share (the
"HOLDCO SUB CLASS A COMMON STOCK"), to (x) the Share Electing Partners (as
hereinafter defined) in respect of each share of Company Class A Common Stock
allocable to the Share Electing Partners on the Closing Date, and (y) Transferor
I and Transferor II (the "SHARE ELECTING TRANSFERORS") in respect of each share
of Company Class A Common Stock owned by such Transferors;
2
WHEREAS, it is intended that the collective exchange of (i) shares of
capital stock of Parent for shares of capital stock of Holdco Sub in connection
with the Merger, (ii) the Share Electing Partners' interests in the Partnership
in exchange for shares of Holdco Sub Class A Common Stock and (iii) shares of
Company Class A Common Stock owned by the Share Electing Transferors in exchange
for shares of Holdco Sub Class A Common Stock (collectively, the "EXCHANGE")
shall be a tax-free exchange described in Section 351(a) and/or a reorganization
described in Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "CODE");
WHEREAS, the Merger shall be consummated without the vote of the
stockholders of Parent pursuant to the provisions of Section 251(g) of the
Delaware General Corporation Law (the "DGCL");
WHEREAS, concurrently with the closing of the transactions
contemplated hereby (the "CLOSING"), Holdco Sub, the Share Electing Partners and
the Share Electing Transferors will enter into the Standstill Agreement (as
hereinafter defined), to establish certain restrictions with respect to the
shares of Holdco Sub Class A Common Stock to be owned by the Share Electing
Partners and the Share Electing Transferors following the Closing, as well as
certain restrictions in respect of the capital stock of Holdco Sub, corporate
governance and other related corporate matters;
WHEREAS, concurrently with the Closing, the Share Electing Partners,
the Share Electing Transferors, the Holders' Representative (as hereinafter
defined) and Holdco Sub will enter into the Registration Rights Agreement (as
hereinafter defined), to provide the Share Electing Partners and the Share
Electing Transferors with certain rights to sell their shares of Holdco Sub
Class A Common Stock in transactions registered under the Securities Act of
1933, as amended (the "SECURITIES ACT"); and
WHEREAS, concurrently with the Closing, the Partners, Parent and
Holdco Sub will enter into the Partnership Agreement Amendment (as hereinafter
defined), (a) to provide for the admission to the Partnership of Holdco Sub and
Parent, (b) to reflect the withdrawal from the Partnership of the Cash Electing
Partners (as hereinafter defined) and the Share Electing Partners and (c) to
substitute Holdco Sub for Transferor I as managing general partner;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. Terms not otherwise defined herein shall have the
following meanings:
"AFFILIATE" means, when used with respect to another Person, any
Person who is, whether directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
such Person.
3
"AGREEMENT" means this Investment Agreement, as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
"BENEFICIALLY OWN" has the meaning given such term in Rule 13d-3 under
the Exchange Act, as in effect on the date hereof. As used herein, the
phrases "BENEFICIAL OWNERSHIP" and "BENEFICIAL OWNER" have correlative
meanings.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which banks are required or authorized by law to be closed in New
York, New York or in Minneapolis, Minnesota.
"CREDIT AGREEMENT" means the Amended and Restated Credit Agreement
dated as of October 16, 1996, among Northwest Airlines Corporation, NWA
Inc., Northwest Airlines, Inc., ABN AMRO Bank N.V., Bankers Trust Company,
Chase Securities Inc., Citibank, N.A., National Westminster Bank PLC, First
Bank National Association and various lending institutions.
"DOLLARS" and "$" mean lawful currency of the United States of
America.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FULLY DILUTED VOTING POWER" of any Person shall be calculated by
dividing (i) the sum of (A) ten times the aggregate number of shares of
Company Class A Common Stock beneficially owned by such Person (assuming
exercise of the Warrants, in the case of the Partnership, and exercise of
any other outstanding securities held by such Person that are convertible
into or exercisable or exchangeable for shares of Company Class A Common
Stock) and (B) the number of shares of Company Class B Common Stock
beneficially owned by such Person (assuming exercise of any outstanding
securities held by such Person that are convertible into or exercisable or
exchangeable for shares of Company Class B Common Stock) by (ii) the sum of
(A) ten times the aggregate number of outstanding shares of Company Class A
Common Stock (assuming the exercise of all outstanding securities
convertible into or exercisable or exchangeable for shares of Company Class
A Common Stock) and (B) the aggregate number of outstanding shares of
Company Class B Common Stock (assuming the exercise of all outstanding
securities convertible into or exercisable or exchangeable for shares of
Company Class B Common Stock).
"GOVERNMENTAL AUTHORITY" means any foreign, federal, state or local
government or any court, administrative agency or commission or other
governmental agency or authority, whether domestic or foreign.
"HOLDERS' REPRESENTATIVE" means Transferor II.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
4
arrangement, encumbrance, lien (statutory or other), other charge or
security interest; or any preference, priority or other arrangement or
preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"MATERIAL ADVERSE EFFECT" with respect to any Person means a material
adverse effect (i) on the financial condition, business, liabilities,
properties, assets or results of operations of such Person and its
subsidiaries, taken as a whole, or (ii) on the ability of such Person to
perform its obligations under or to consummate the transactions
contemplated by this Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger dated as of
the date hereof in the form of Exhibit A among Parent, Holdco Sub and
Merger Sub.
"PARTNERSHIP AGREEMENT" means the Amended and Restated Limited
Partnership Agreement of Air Partners, L.P., dated as of November 9, 1992,
as amended by the First Amendment, dated as of July 25, 1995, the Second
Amendment, dated as of August 7, 1996, and the Third Amendment, dated as of
May 22, 1997.
"PARTNERS' REPRESENTATIVE" means Transferor II.
"PERSON" means an individual, partnership, limited liability company,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in the form of Exhibit C to be executed by Holdco Sub, the
Holders' Representative, the Share Electing Transferors and the Share
Electing Partners on the Closing Date.
"RESTATED PARTNERSHIP AGREEMENT" means the Second Amended and Restated
Limited Partnership Agreement of Air Partners, L.P., in the form of
Exhibit B to be executed by the Partners, Parent and Holdco Sub.
"RESTRICTIONS" means, when used with respect to any specified
security, any stockholders or other trust agreement, option, warrant,
escrow, proxy, buy-sell agreement, power of attorney or other contract,
agreement or arrangement which (i) grants to any Person the right to sell
or otherwise dispose of or vote such specified security or any interest
therein or (ii) restricts the transfer of, or the exercise of any rights or
the enjoyment of any benefits by reason of, the ownership of such specified
security.
"STANDSTILL AGREEMENT" means the Standstill Agreement in the form of
Exhibit D to be entered into by Parent, each of the Share Electing Partners
and each of the Share Electing Transferors on the Closing Date.
"SUBSIDIARY" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its board of
directors or other governing body (or, if there are
5
no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first Person; PROVIDED, HOWEVER, that
after the Closing the term "subsidiary" when used with respect to Parent or
Holdco Sub shall not include the Company.
"TRANSACTIONS" means the transactions described in Section 2.4(b).
"VOTING POWER" of any Person shall be calculated by dividing (i) the
sum of (A) ten times the aggregate number of outstanding shares of Company
Class A Common Stock beneficially owned by such Person (assuming, in the
case of the Partnership, exercise of the Warrants) and (B) the number of
outstanding shares of Company Class B Common Stock beneficially owned by
such Person by (ii) the sum of (A) ten times the aggregate number of
outstanding shares of Company Class A Common Stock (assuming exercise of
the Warrants) and (B) the aggregate number of outstanding shares of Company
Class B Common Stock.
ARTICLE II
EXCHANGE OF PARTNERSHIP INTERESTS; TRANSFER OF SHARES
2.1 EXCHANGE OF PARTNERSHIP INTERESTS; TRANSFER OF SHARES. Upon the
terms and subject to the conditions of this Agreement, each of Parent and Holdco
Sub agrees to exchange, and each Partner agrees to exchange, each of such
Partner's Partnership Interests free and clear of any Lien or Restriction
created by any Partner or the Partnership or otherwise binding upon such
Partnership Interest (other than any Lien or Restriction imposed pursuant to the
terms of this Agreement) for shares of Holdco Sub Class A Common Stock and cash,
as more fully set forth in this Article II. Upon the terms and subject to the
conditions of this Agreement, each of Parent and Holdco Sub agrees to exchange,
and each Transferor agrees to exchange, each of such Transferor's shares of
Company Class A Common Stock free and clear of any Lien or Restriction created
by such Transferor or otherwise binding upon any such shares (other than any
Lien or Restriction imposed pursuant to the terms of this Agreement) for shares
of Holdco Sub Class A Common Stock and cash, as more fully set forth in this
Article II. Parent may assign to Holdco Sub its right to purchase any portion
or all of the Partnership Interests of the Cash Electing Partners; PROVIDED,
HOWEVER, that no such assignment shall relieve Parent of its obligations under
this Agreement.
2.2 CASH ELECTION SHARE PRICE; EXCHANGE RATIO. (a) Subject to
adjustment in accordance with Section 2.3, Parent or Holdco Sub shall pay to
each Partner set forth on Schedule 2.2(a) (each a "CASH ELECTING PARTNER") in
exchange for all of such Partner's Partnership Interests and to each Transferor
that elects to receive cash in exchange for all the shares of Company Class A
Common Stock owned by such Transferor, as set forth on Schedule 2.2(a), $60.82
(the "CASH ELECTION SHARE PRICE") in respect of each share of Company Class A
Common Stock owned by the Partnership on the Closing Date and allocable to such
Cash Electing Partner in accordance with the Partnership Agreement (each an
"ALLOCABLE COMPANY CLASS A SHARE") and each share of Company Class A Common
Stock owned by such a Transferor, as the case may be.
6
(b) Subject to adjustment in accordance with Section 2.3, Holdco Sub
shall issue to each Partner set forth on Schedule 2.2(b) (each a "SHARE ELECTING
PARTNER") in exchange for all of such Partner's Partnership Interests and to
each Transferor that elects to receive shares in exchange for all the shares of
Company Class A Common Stock owned by such Transferor in respect of each
Allocable Company Class A Share of such Share Electing Partner and each share of
Company Class A Common Stock owned by a Transferor, as set forth on Schedule
2.2(b), 1.2079 shares (the "SHARE EXCHANGE RATIO") of fully paid and non-
assessable Holdco Sub Class A Common Stock. In the event that the aggregate
number of shares of Holdco Sub Class A Common Stock to be issued to any Share
Electing Partner or Transferor after giving effect to the calculation set forth
in Section 2.3(a) would result in the issuance by Holdco Sub of a fractional
share of Holdco Sub Class A Common Stock to such Share Electing Partner or
Transferor, such fractional share shall be rounded to the nearest whole share.
The shares of Holdco Sub Class A Common Stock to be issued to the Share Electing
Partners and the Transferors hereunder are referred to herein as the "EXCHANGE
SHARES".
(c) It is understood and agreed by the parties that Schedules 2.2(a)
and 2.2(b) may be modified by the Partners at any time on or prior to February
2, 1998; PROVIDED that no more than 40% of the total exchange consideration,
valuing the Share Exchange Ratio at $60.82, received by the Partners and the
Transferors will consist of shares of Holdco Sub Class A Common Stock.
2.3 ADJUSTMENTS TO CASH ELECTION SHARE PRICE AND EXCHANGE RATIO.
(a) EXERCISE OF WARRANTS. In the event the Closing shall not have
occurred prior to April 27, 1998 (or such later date on which the Warrants are
to expire) (the "WARRANT EXERCISE DATE"), the Partnership shall exercise the
Warrants in full prior to the close of business, New York City time, on such
date. In the event the Closing shall occur prior to the Warrant Exercise Date,
the Partnership shall exercise the Warrants in full immediately prior to the
Closing. The Partnership shall not be required to exercise the Warrants in
accordance with this Section 2.3(a) unless on or prior to the Warrant Exercise
Date or the Closing Date, as the case may be, it shall have received from Parent
or Holdco Sub immediately available funds in an amount equal to $28,356,015,
which is equal to the aggregate exercise price for the Warrants (the "AGGREGATE
EXERCISE PRICE"), or until immediately available funds in an amount equal to the
Aggregate Exercise Price have been transferred to the Company by Parent on
behalf of the Partnership. The obligation of the Partnership to repay such
advance shall be evidenced by a note in the form of Exhibit E (the "NOTE"),
which note shall be secured by a pledge of the shares of Company Class A Common
Stock issued upon exercise of the Warrants in the form of Exhibit F (the
"PLEDGE"). The Partnership shall pay to Parent interest on the Aggregate
Exercise Price from (and including) the date on which the Aggregate Exercise
Price is advanced to (or on behalf of) the Partnership to (but excluding) the
date the Note (and such interest) is repaid. Such interest, if any, and the
Aggregate Exercise Price shall be payable by the Partnership to Parent, without
offset, at the earlier to occur of (i) the Closing and (ii) the date this
Agreement is terminated in accordance with its terms (the "TERMINATION DATE").
Such interest shall accrue (A) for any period ending on or prior to July 25,
1998, at a rate equal to the sum of the "Applicable Eurodollar Margin" and the
"Eurodollar Rate" at the time in effect under the Credit Agreement, assuming a
30-day Interest Period (as defined in the Credit Agreement) (such interest rate
from time to time in effect, the "REVOLVING INTEREST RATE"; PROVIDED, HOWEVER,
that no amendment to the Credit Agreement shall have the effect of modifying the
Revolving Interest Rate hereunder) and (B) for
7
any period from and including July 25, 1998, at a rate of 10% per annum. If the
Closing occurs, the aggregate Cash Election Share Price payable and/or the
aggregate number of Exchange Shares to be delivered by Parent and Holdco Sub at
the Closing shall be reduced by the amount of principal and interest payable by
the Partnership under the Note (the "PAYOFF AMOUNT") in respect of each Partner
in proportion to each Partner's allocable share of the Payoff Amount, the
determination of the portion of the Payoff Amount allocable to the Cash Electing
Partners and the Share Electing Partners to be made by the Partnership and
notified to Parent in writing at least three Business Days in advance of the
Closing. Any reduction in the Exchange Shares to be issued shall be based on
the average closing price for Parent Class A Common Stock as of the close of
business for each of the ten trading days ending on and including the third
Business Day preceding the Closing Date.
(b) STOCK SPLITS, DIVIDENDS, ETC. In the event that, between the date
of this Agreement and the Closing, the outstanding shares of Parent Class A
Common Stock or Holdco Sub Class A Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Share Exchange Ratio shall be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
2.4 CLOSING DATE. (a) Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1(a) and subject to the satisfaction or waiver of the
conditions set forth in Article V, the closing (the "CLOSING") of the
transactions contemplated by Sections 2.1 and 2.2 will take place on the second
Business Day following satisfaction or waiver of the conditions set forth in
Article V, or at such other date and time as the parties shall otherwise
mutually agree, at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York 10017 at 10:00 a.m., New York City time (the date on
which the Closing occurs (the "CLOSING DATE")).
(b) At the Closing, the following actions shall occur:
(i) Parent or Holdco Sub shall pay or cause to be paid the
aggregate Cash Election Share Price to or for the account of the Cash
Electing Partners and Transferor III by wire transfer to such bank account
(the "DESIGNATED BANK ACCOUNT") as the Partners' Representative shall
designate in writing no later than two Business Days prior to the Closing
Date;
(ii) At the effective time of the Merger, Holdco Sub shall issue
shares of Holdco Sub Class A Common Stock to the Share Electing Partners
and the Share Electing Transferors as directed by the Partners'
Representative in writing no later than two Business Days prior to the
Closing Date;
(iii) The parties shall execute and deliver, as applicable, (A)
the Restated Partnership Agreement, (B) the Standstill Agreement and (C)
the Registration Rights Agreement;
(iv) Each of the Partners and the Transferors shall deliver to
Parent and Holdco Sub or their designee such documents as Parent and Holdco
Sub may reasonably
8
request, including certificates for all shares of Company Class A Common
Stock owned by the Partnership, to evidence the transfer to Parent and
Holdco Sub or their designee of good and marketable title in and to all of
the Partnership Interests being conveyed pursuant to this Agreement and the
absence of any Liens or Restrictions on such shares of Company Class A
Common Stock (other than any Lien or Restriction imposed pursuant to the
terms of this Agreement), and all the shares of Company Class A Common
Stock owned by the Transferors free and clear of any Lien or Restriction
(other than any Lien or Restriction imposed pursuant to the terms of this
Agreement); and
(v) Each party shall take such other actions, and shall execute
and deliver such other instruments or documents, as shall be required under
Article V.
2.5 INTEREST PAYMENT. In the event the Closing does not occur on or
prior to May 25, 1998 (the "INTEREST ACCRUAL DATE"), Parent shall pay to the
Partners and the Transferors at the Closing by wire transfer to the Designated
Bank Account a lump-sum cash amount equal to the interest accrued (a) at the
Revolving Interest Rate from (and including) the Interest Accrual Date to (but
excluding) the six month anniversary of the Interest Accrual Date and (b) at a
rate of 10% per annum from and including such six month anniversary to (but
excluding) the Closing Date, in each case on the aggregate cash (or cash
equivalent) value of the purchase price payable by Parent and Holdco Sub
hereunder (assuming for purpose of such calculation that all the Partners and
the Transferors are Cash Electing Partners). Such interest shall be payable
only if the Closing occurs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF PARENT AND HOLDCO SUB. Each of
Parent and Holdco Sub represents and warrants to the Partnership, the Partners
and the Transferors as of the date hereof and as of the Closing Date as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Parent and
Holdco Sub is duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent
and Holdco Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to
be so qualified or licensed (individually or in the aggregate) could not
reasonably be expected to have a material adverse effect with respect to
Parent or Holdco Sub.
(b) CORPORATE AUTHORIZATION. The execution, delivery and performance
by Parent and Holdco Sub of this Agreement and the Registration Rights
Agreement and the consummation by Parent and Holdco Sub of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action, including by resolution of the respective Boards of
Directors of Parent and Holdco Sub. Each of this Agreement and the
Registration Rights Agreement has been, or in the case of the
9
Registration Rights Agreement, will be duly executed and delivered by each
of Parent and Holdco Sub and constitutes or will constitute a valid and
binding agreement of each of Parent and Holdco Sub, enforceable against
Parent or Holdco Sub, as applicable, in accordance with its terms (subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of equity,
including concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether in a proceeding at equity or at law). The
shares of Holdco Sub Class A Common Stock issued to the Share Electing
Partners and the Transferors pursuant to Section 2.2(b), when issued in
accordance with the terms hereof, will be duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights, and will
be free and clear of any Lien or Restriction (other than any Lien or
Restriction imposed pursuant to the terms of this Agreement).
(c) INVESTMENT INTENTION. Each of Parent and Holdco Sub is acquiring
the Partnership Interests for its own account as principal for investment
and not with a view to resale or distribution or with any present intention
of distributing or selling the same. Each of Parent and Holdco Sub is
fully aware that such Partnership Interests have not been registered under
the Securities Act or under any applicable state securities laws, and are
being offered and sold in reliance on exemptions from the registration
requirements of the Securities Act and all such laws. Parent is and at the
Closing Holdco Sub will be an "accredited investor" as such term is defined
in Regulation D promulgated under the Securities Act. Parent is and at the
Closing Holdco Sub will be able to bear the economic risk of the investment
in such Partnership Interests and has such knowledge and experience in
financial and business matters, and knowledge of the business of the
Partnership, as to be capable of evaluating the merits and risks of a
prospective investment.
(d) PARENT CAPITALIZATION. As of the date hereof, the authorized
capital stock of Parent consists of (i) 45,020,000 shares of preferred
stock, par value $.01 per share ("PARENT PREFERRED STOCK"), of which (w)
10,000 shares have been designated Series A Preferred Stock, par value $.01
per share ("PARENT SERIES A PREFERRED STOCK"), (x) 10,000 shares have been
designated Series B Preferred Stock, par value $.01 per share ("PARENT
SERIES B PREFERRED STOCK"), (y) 25,000,000 shares have been designated
Series C Preferred Stock, par value $.01 per share ("PARENT SERIES C
PREFERRED STOCK"), and (z) 3,000,000 shares have been designated Series D
Junior Participating Preferred Stock, par value $.01 per share ("PARENT
SERIES D PREFERRED STOCK") and (ii) (x) 250,000,000 shares of Class A
Common Stock, par value $.01 per share ("PARENT CLASS A COMMON STOCK"), and
(y) 65,000,000 shares of Class B Common Stock, par value $.01 per share
("PARENT CLASS B COMMON STOCK" and together with Parent Class A Common
Stock, "PARENT COMMON STOCK"). It is understood and agreed by the Parties
that on or prior to the Closing Date the certificate of incorporation of
Parent may be amended to convert all outstanding shares of Parent Class B
Common Stock into shares of Parent Class A Common Stock and to eliminate
the Parent Class A Common Stock. As of the close of business on December
31, 1997, there were (i) no shares of Parent Series A Preferred Stock, no
shares of Parent Series B Preferred Stock, 6,628,566 shares of Parent
Series C Preferred Stock and no shares of Parent Series D Preferred Stock
issued and outstanding; (ii) 95,587,010 shares of Parent Class A Common
Stock and 1,393,867 shares of Parent
10
Class B Common Stock issued and outstanding; (iii) 6,800,000 shares of
Class A Common Stock held in the treasury of Parent; (iv) 5,391,311 shares
of Parent Class A Common Stock reserved for issuance upon exercise of stock
options of Parent outstanding or which may be granted pursuant to employee
stock option and similar plans; and (v) 10,435,231 shares of Parent Class A
Common Stock reserved for issuance upon the conversion of Parent Class B
Common Stock and Parent Series C Preferred Stock. Except as described in
the immediately preceding sentence and except for the preferred share
purchase rights relating to the Parent Series D Preferred Stock, there are
no securities of Parent or Holdco Sub (or their affiliates) currently
outstanding that are convertible into or exercisable or exchangeable for
shares of Parent Class A Common Stock. On the Closing Date, all outstanding
shares of Parent's capital stock will be duly authorized, validly issued,
fully paid and non-assessable.
(e) HOLDCO SUB CAPITALIZATION. As of the date hereof, the authorized
capital stock of Holdco Sub consists of 1,000 shares of Holdco Sub Class A
Common Stock. As of the close of business on January 23, 1998, there were
1,000 shares of Holdco Sub Class A Common stock issued and outstanding.
Parent owns and, immediately prior to the Closing, Parent will own, of
record and beneficially, 100% of the outstanding shares of Holdco Sub's
capital stock, free and clear of all Liens and Restrictions other than
those set forth in this Agreement and in the Merger Agreement. As of the
date hereof there are, and immediately prior to the Closing there will be,
no warrants, options, rights, convertible securities or any other
agreements, arrangements or commitments (other than this Agreement and the
Merger Agreement) which obligate Parent or Holdco Sub to issue, sell or
exchange any shares of Holdco Sub's capital stock to any Person (it being
understood that at the effective time of the Merger, certain securities
convertible into or exercisable or exchangeable for shares of Parent Common
Stock will become convertible into shares of Holdco Sub Common Stock),
other than shares of Parent Class A Common Stock, which are convertible
into shares of Parent Class B Common Stock at any time on a one-for-one
basis, and shares of Parent Class B Common Stock, which are convertible
into shares of Parent Class A Common Stock at any time on a one-for-one
basis. The certificate of incorporation, by-laws and equity capital
structure of Holdco Sub are, and at the Closing will be, identical in all
material respects to those of Parent except as required by Section 251(g)
of the DGCL. The parties acknowledge that the capitalization of Holdco Sub
will be modified in connection with the Merger as described in the Merger
Agreement. On the Closing Date, all outstanding shares of Holdco Sub's
capital stock will be duly authorized, validly issued, fully paid and
nonassessable.
(f) NO CONFLICT. Other than (i) the filing of a Form 3 and a Report
on Schedule 13D under the Exchange Act, (ii) compliance with any applicable
requirements of the HSR Act, (iii) compliance with any applicable
requirements of the United States Department of Transportation (the "DOT")
and the European Commission, (iv) listing the Exchange Shares for quotation
on the NASDAQ National Market and (v) the filing of a certificate of merger
with respect to the Merger with the Secretary of State of the State of
Delaware and appropriate documents in other states where Parent is
qualified to do business, no filing with, and no permit, authorization,
consent or approval of, any Governmental Authority is necessary for the
execution of this Agreement or the Registration Rights Agreement by Parent
or Holdco Sub and the consummation by Parent and Holdco Sub of the
transactions contemplated hereby and thereby, except for such
11
filings the failure of which to be made, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on
Parent, Holdco Sub and their subsidiaries, taken as a whole, or to prevent
or materially delay the consummation of the transactions contemplated
hereby and thereby. Neither the execution and delivery of this Agreement
or the Registration Rights Agreement by Parent or Holdco Sub nor the
consummation by Parent or Holdco Sub of the transactions contemplated
hereby or thereby, nor compliance by Parent or Holdco Sub with any of the
provisions hereof or thereof (i) conflicts with or results in any breach of
the charter or bylaws of Parent or Holdco Sub, (ii) contravenes, conflicts
with or would constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon Parent or
Holdco Sub, or (iii) constitutes a default under or gives rise to any right
of termination, cancellation or acceleration of any right or obligation of
Parent or Holdco Sub or any of their respective subsidiaries or to a loss
of any benefit to which Parent or Holdco Sub or any of their respective
subsidiaries is entitled under any provision of any agreement, contract or
other instrument binding on Parent or Holdco Sub or any of their respective
subsidiaries or any license, franchise, permit or other similar
authorization held by Parent or Holdco Sub or any of their respective
subsidiaries, except, in the case of clauses (ii) and (iii), for any such
contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that would not have a material adverse effect on
Parent or Holdco Sub and their respective subsidiaries taken as a whole.
The Merger will be consummated without the vote of the stockholders of
Parent, pursuant to the provisions of Section 251(g) of the DGCL.
(g) SEC FILINGS.
(i) Parent has timely filed all reports, schedules, forms,
statements and other documents required by the Exchange Act to be
filed with the Securities and Exchange Commission (the "SEC") since
December 31, 1995 (the "PARENT SEC DOCUMENTS").
(ii) As of its filing date, each Parent SEC Document did not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, except to the extent that such statements have been
modified or superseded by a later filed Parent SEC Document.
(h) FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of
Parent included in Parent's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "PARENT 10-K") and its Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1997 have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations and
cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
12
(i) NO BUSINESS ACTIVITIES. (i) Holdco Sub has not conducted any
activities other than in connection with the organization of Holdco Sub and
Merger Sub, the negotiation and execution of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby.
(ii) As of the date of this Agreement Holdco Sub has, and as of
immediately prior to the Closing Holdco Sub will have, no liabilities or
obligations of any nature whatsoever, whether fixed, accrued, contingent,
determined, determinable or otherwise and whether pursuant to contracts or
otherwise (collectively, "LIABILITIES"), except those arising under or in
connection with this Agreement, the Merger Agreement, the Standstill
Agreement and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby.
(j) NO REQUIRED VOTE. No vote of the holders of any class of the
outstanding capital stock of Parent is necessary to approve this Agreement,
the Merger or the Transactions.
(k) NO BROKER. No investment banker, broker, finder, consultant or
intermediary is entitled to be paid any investment banking, brokerage,
finder's or similar fee or commission by Parent or Holdco Sub in connection
with this Agreement or the Transactions.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP AND THE
PARTNERS. The Partnership and each Partner, severally and not jointly,
represents and warrants to Parent and Holdco Sub as of the date hereof and as of
the Closing Date as follows:
(a) ORGANIZATION, STANDING AND POWER OF THE PARTNERSHIP. The
Partnership is duly organized, validly existing and in good standing under
the laws of the State of Texas and has the requisite partnership power and
authority to carry on its business as now being conducted. The Partnership
is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) could not reasonably be
expected to have a material adverse effect with respect to the Partnership.
The Partnership has delivered to Parent complete and correct copies of its
certificate of limited partnership and the Partnership Agreement, in each
case as amended to the date of this Agreement.
(b) PARTNERSHIP AUTHORIZATION. The execution, delivery and
performance by the Partnership of this Agreement and the consummation by
the Partnership of the transactions contemplated hereby have been duly
authorized by all necessary partnership action, and by all necessary action
on the part of each Partner. This Agreement has been duly executed and
delivered by the Partnership and constitutes a valid and binding agreement
of the Partnership, enforceable against the Partnership in accordance with
its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including concepts of materiality,
13
reasonableness, good faith and fair dealing, regardless of whether in a
proceeding at equity or at law).
(c) PARTNERSHIP CAPITALIZATION. The authorized and issued equity
capital of the Partnership consists solely of the general partnership
interests and limited partnership interests described on Schedule 3.2(c).
The Partners own, and at the Closing Date the Partners will own, of record
and beneficially, collectively 100% of the general and limited partnership
interests of the Partnership, free and clear of all Liens and Restrictions
(other than any Liens or Restrictions imposed pursuant to the terms of this
Agreement or disclosed on Schedule 3.2(c)). Immediately following the
transactions contemplated by this Agreement, no Person (other than Holdco
Sub and Parent) will own any interest in the Partnership. There are no
warrants, options, rights, convertible securities or other agreements,
arrangements or commitments which obligate the Partnership to admit any
Person to the Partnership or to issue or dispose of any equity interest in
the Partnership except for this Agreement.
(d) OWNERSHIP OF SHARES OF COMPANY COMMON STOCK; NO OTHER OPERATIONS.
The Partnership is the direct and record owner of (i) 5,263,188 shares of
Company Class A Common Stock, (ii) no shares of Class B Common Stock, par
value $.01 per share, of the Company ("COMPANY CLASS B COMMON STOCK" and,
together with the Company Class A Common Stock, the "COMPANY COMMON
STOCK"), (iii) the $7.50 Warrant, which may be exercised as to 2,298,134
shares of Company Class A Common Stock at a price of $7.50 per share and
the $15.00 Warrant, which may be exercised as to 741,334 shares of Company
Class A Common Stock at a price of $15.00 per share and which Warrants
expire on April 27, 1998 (it being understood that at Closing, instead of
the Warrants, the Partnership shall own all the shares of Company Class A
Common Stock issued upon exercise of the Warrants), and (iv) no warrants to
purchase shares of Company Class B Common Stock. Except as set forth in
the immediately preceding sentence, (i) the Partnership does not own or
have the right to acquire, whether presently exercisable or at any time in
the future, any shares of Company Common Stock or any securities
convertible into or exercisable or exchangeable for shares of Company
Common Stock or any other equity securities of the Company and (ii) the
Partnership does not own any other assets or conduct any other business.
No Person has the right to acquire, and neither the Partnership nor any of
the Partners is a party to any contract, understanding, commitment,
arrangement or other agreement to sell, transfer or otherwise dispose of,
any shares of Company Common Stock owned by or issuable to the Partnership.
To the best knowledge of the Partnership and the Partners, based solely on
inquiry of appropriate officers of the Company, as of December 31, 1997,
the shares of Company Class A Common Stock described in the first sentence
of this Section 3.2(d), assuming exercise of the Warrants, constituted
13.9% of the outstanding shares of Company Common Stock and 50.4% of the
Voting Power represented by the outstanding shares of Company Common Stock.
To the best knowledge of the Partnership and the Partners, based solely on
inquiry of appropriate officers of the Company, after giving effect to the
issuance of shares of Company Common Stock pursuant to all securities
described in the second sentence of Section 3.3(h), such shares would have
constituted 9.6% of the outstanding shares of Company Common Stock and
43.9% of the Fully Diluted Voting Power at December 31, 1997. The
Partnership has, and at the Closing will have, good and valid title to the
shares of Company Class A Common Stock described in the first sentence of
14
this Section 3.2(d) and the shares of Company Class A Common Stock issuable
upon exercise of the Warrants, free and clear of any Liens or Restrictions,
except those arising under this Agreement. The Partnership has the sole
voting power, and sole power of disposition, with respect to all of such
shares of Company Class A Common Stock and the Warrants, and there are no
restrictions on the Partnership's ability to transfer such shares or the
Warrants.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. At the Closing, the
Partnership will have no Liabilities, except those arising out of the
Transactions.
(f) NO CONFLICT. Other than (i) the filing of an amendment to its
Report on Schedule 13D under the Exchange Act and (ii) compliance with any
applicable requirements of the HSR Act, no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority is
necessary for the execution of this Agreement by the Partnership or the
consummation by the Partnership or any Partner of the transactions
contemplated hereby, except for such filings the failure of which to be
made, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the Partnership or any Partner or to
prevent or materially delay the consummation of the transactions
contemplated hereby. Neither the execution and delivery of this Agreement
by the Partnership nor the consummation by the Partnership of the
transactions contemplated hereby nor compliance by the Partnership with any
of the provisions hereof conflicts with or results in any breach of any
applicable trust or other organizational documents applicable to the
Partnership, including the Partnership Agreement.
3.3 REPRESENTATIONS AND WARRANTIES OF THE PARTNERS AND THE
TRANSFERORS. Each Partner (which term shall for purposes of this Section 3.3
include the Transferors) severally, and not jointly, represents and warrants to
Parent and Holdco Sub as to itself, in the case of Sections 3.3(a) through (f),
as of the date hereof and as of the Closing Date as follows:
(a) ORGANIZATION, STANDING AND POWER OF EACH OF THE PARTNERS. Such
Partner has the legal capacity (in the case of individual Partners) or, as
the case may be, the corporate or partnership power and authority to enter
into and perform all of such Partner's obligations under this Agreement and
the Standstill Agreement. Neither the execution and delivery of this
Agreement or the Standstill Agreement by such Partner nor the consummation
by such Partner of the transactions contemplated hereby nor compliance by
such Partner with the provisions hereof or of the Standstill Agreement
conflicts with or results in any breach of any applicable trust or other
organizational documents applicable to such Partner or of the Partnership
Agreement or constitutes a dissolution event under the Partnership
Agreement or otherwise. There is no beneficiary or holder of voting trust
certificates or other interest of any trust of which such Partner is
trustee whose consent is required for the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. If
such Partner is married and such Partner's Partnership Interest or
Allocable Company Class A Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, such Partner's spouse,
enforceable against such Person in accordance with its terms.
15
(b) PARTNER AUTHORIZATION. The execution, delivery and performance of
this Agreement and the Standstill Agreement and the consummation by such
Partner of the transactions contemplated hereby and thereby have been duly
authorized by such Partner (and if necessary, by any stockholders or
partners of such Partner). This Agreement has been and the Standstill
Agreement will be as of the Closing Date duly and validly executed and
delivered by such Partner and constitutes or will constitute a valid and
binding agreement of such Partner, enforceable against such Partner in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws
affecting creditors' rights generally from time to time in effect and to
general principles of equity, including concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether in a
proceeding at equity or at law).
(c) TITLE TO PARTNERSHIP INTERESTS. Such Partner is the legal and
valid owner and, in the case of the Transferors, the direct and record
owner of, and, except as set forth on Schedule 3.2(c), has good and valid
title, free and clear of any Liens or Restrictions to, its Partnership
Interest or, in the case of the Transferors, the shares of Company Class A
Common Stock owned by it and set forth on Schedule 2.2(b). Such Partner's
allocable interest in the total number of shares of Company Class A Common
Stock and the Warrants owned by the Partnership is set forth on Schedule
2.2(a) in the case of Cash Electing Partners (which term shall for purposes
of this Section 3.3 include Transferor III) and Schedule 2.2(b) in the case
of Share Electing Partners (which term shall for purposes of this Section
3.3 include Transferor I and Transferor II).
(d) INVESTMENT INTENTION. Such Partner, if it is a Share Electing
Partner, is acquiring the Exchange Shares to be acquired by it for its own
account as principal for investment and not with a view to resale or
distribution or with any present intention of distributing or selling the
same. Such Share Electing Partner is fully aware that such Exchange Shares
have not been registered under the Securities Act or under any applicable
state securities laws, and are being offered and sold in reliance on
exemptions from the registration requirements of the Securities Act and all
such laws. Such Share Electing Partner is an "accredited investor" as such
term is defined in Regulation D promulgated under the Securities Act. Such
Share Electing Partner is able to bear the economic risk of the investment
in such Exchange Shares and has such knowledge and experience in financial
and business matters, and knowledge of the business of Parent (and after
the Merger, Holdco Sub), as to be capable of evaluating the merits and
risks of a prospective investment.
(e) LIMITATIONS ON TRANSFERABILITY. Such Partner, if it is a Share
Electing Partner, acknowledges that it may not transfer any of the Exchange
Shares received by it pursuant hereto unless and until the same are
registered under the Securities Act and any applicable state securities
laws, or unless an exemption from such registration is available and that
it may transfer such Exchange Shares only in accordance with the terms of
this Agreement and the Standstill Agreement.
(f) LEGEND. In furtherance of the agreements contained in Sections
3.3(d) and (e), each of the Share Electing Partners agrees that the
certificate or certificates representing the Exchange Shares beneficially
owned by it shall bear the following legend:
16
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF
THE INVESTMENT AGREEMENT, DATED AS OF JANUARY 25, 1998, AMONG NORTHWEST
AIRLINES CORPORATION, NEWBRIDGE PARENT CORPORATION, AIR PARTNERS, L.P., THE
PARTNERS OF AIR PARTNERS, L.P. IDENTIFIED ON THE SIGNATURE PAGES THEREOF,
BONDERMAN FAMILY LIMITED PARTNERSHIP, 1992 AIR, INC. AND AIR SAIPAN, INC.
AND THE STANDSTILL AGREEMENT, DATED AS OF __________ __, 1998, BETWEEN
NORTHWEST AIRLINES CORPORATION AND THE HOLDERS IDENTIFIED ON THE SIGNATURE
PAGES THEREOF (COLLECTIVELY, THE "AGREEMENTS"), WHICH PROVIDE THAT (A) THE
HOLDER IS PROHIBITED FROM TRANSFERRING THESE SHARES AS PROVIDED IN THE
AGREEMENTS AND (B) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO
AN EXEMPTION FROM, THE REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
Holdco Sub will exchange certificates without the foregoing legend upon the
request of a Share Electing Partner at such time as the holder thereof may
sell such shares without registration of such sale under the Securities
Act, as evidenced (if requested by Holdco Sub) by an opinion of counsel to
such holder.
(g) NO BROKER. No investment banker, broker, finder, consultant or
intermediary is entitled to be paid any investment banking, brokerage,
finder's or similar fee or commission by the Partnership, any Partner or
any Transferor in connection with this Agreement or the Transactions for
which any of the Partnership, Parent or Holdco Sub would be liable
following the Closing.
(h) COMPANY CAPITALIZATION. To the best knowledge of the Partners,
based solely on inquiry of appropriate officers of the Company, the
authorized capital stock of the Company consists of (i) 10,000,000 shares
of Preferred Stock, par value $.01 per share ("COMPANY PREFERRED STOCK"),
and (ii) (x) 50,000,000 shares of Company Class A Common Stock, (y)
200,000,000 shares of Company Class B Common Stock and (z) 50,000,000
shares of Class D Common Stock, par value $.01 per share (the "COMPANY
CLASS D COMMON STOCK"). To the best knowledge of the Partners, based
solely on inquiry of appropriate officers of the Company, as of the close
of business on December 31, 1997, there were (i) no shares of Company
Preferred Stock, 8,379,464 shares of Company Class A Common Stock,
50,512,010 shares of Company Class B Common Stock and no shares of Company
Class D Common Stock issued and outstanding; (ii) no shares of capital
stock held in the treasury of the Company; (iii) 5,991,472 shares of
Company Class B Common Stock reserved for issuance upon exercise of
authorized but unissued stock options of the Company pursuant to the
Company's employee stock option and similar plans; (iv) 7,617,155 shares of
Company Class B Common Stock reserved for issuance upon the conversion of
the Company's outstanding 6-3/4% Convertible Subordinated Notes due 2006;
(v) 10,311,208 shares of Company Class B Common Stock reserved for issuance
upon the conversion of the Company's outstanding 8-1/2%
17
Convertible Subordinated Deferrable Interest Debentures due 2020; (vi)
3,039,468 shares of Company Class A Common Stock issuable upon exercise of
the Warrants; and (vii) 308,343 shares of Company Class B Common Stock
issuable upon exercise of the Warrants. To the best knowledge of the
Partners, based solely on inquiry of appropriate officers of the Company,
except as described in the immediately preceding sentence, there are no
securities of the Company (or any of its affiliates) currently outstanding
that are convertible into or exercisable or exchangeable for shares of
Company Common Stock other than (a) options to purchase shares of Company
Class B Common Stock granted in accordance with past practices pursuant to
stock option and similar plans, (b) options to purchase shares of Company
Class B Common Stock granted pursuant to the Company's 1997 Employee Stock
Purchase Plan, (c) shares of Company Class A Common Stock, which are
convertible into shares of Company Class B Common Stock or Company Class D
Common Stock on a one-for-one basis and (d) commitments to issue not in
excess of 25,000 shares of Company Class B Common Stock to correct
recordkeeping errors in connection with the Company's 1994 Employee Stock
Purchase Plan. To the best knowledge of the Partners, based solely on
inquiry of appropriate officers of the Company, on the Closing Date, all
outstanding shares of the Company's capital stock will be duly authorized,
validly issued, fully paid and non-assessable.
3.4 REPRESENTATIONS AND WARRANTIES OF THE TRANSFERORS. Transferor I,
Transferor II and Transferor III are the direct and record owners of 16,400,
213,110 and 3,702 shares, respectively, of Company Class A Common Stock. Except
as set forth in the immediately preceding sentence and except in accordance with
their rights as Partners in the Partnership, no Transferor owns or has the right
to acquire, whether presently exercisable or at any time in the future, any
shares of Company Class A Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Company Class A Common Stock. No
person has the right to acquire, and no Transferor is a party to any contract,
understanding, commitment, arrangement or other agreement to sell, transfer or
otherwise dispose of, any shares of Company Class A Common Stock owned by or
issuable to such Transferor. To the best knowledge of the Transferors, based
solely on inquiry of appropriate officers of the Company, the shares of Company
Class A Common Stock described in the first sentence of this Section 3.4
constituted 0.4% of the outstanding shares of Company Common Stock and 1.74%% of
the Voting Power represented by the outstanding shares of Company Common Stock
as of December 31, 1997. To the best knowledge of the Transferors, based solely
on inquiry of appropriate officers of the Company, after giving effect to the
issuance of shares of Company Common Stock pursuant to all securities described
in the second sentence of Section 3.3(h), such shares would have constituted
0.27% of the outstanding shares of Company Common Stock and 1.23% of the Fully
Diluted Voting Power as of December 31, 1997. The Transferors have, and at the
Closing will have, good and valid title to the shares of Company Class A Common
Stock described in the first sentence of this Section 3.4, free and clear of any
Liens or Restrictions, except those arising under this Agreement. Each
Transferor has the sole voting power, and sole power of disposition, with
respect to all of such shares of Company Class A Common Stock and there are no
restrictions on such Transferor's ability to transfer such shares.
18
ARTICLE IV
COVENANTS
4.1 COVENANTS OF PARENT AND HOLDCO SUB. (a) NASDAQ NATIONAL MARKET.
Parent and Holdco Sub shall use their reasonable best efforts to cause the
shares of Holdco Sub Class A Common Stock to be issued to the Share Electing
Partners and the Transferors pursuant to Section 2.2(b) to be approved for
quotation on the NASDAQ National Market, subject to official notice of issuance.
(b) HOLDCO SUB BOARD OF DIRECTORS. (i) As promptly as practicable
following the Closing, the Board of Directors of Holdco Sub shall take such
corporate actions as are necessary to cause an individual designated by
Transferor II and reasonably acceptable to the Board of Directors of Holdco Sub
to be elected or appointed to the Board of Directors of Holdco Sub, to serve
until the next annual meeting of the Holdco Sub stockholders; PROVIDED, HOWEVER,
that it is hereby acknowledged that David Bonderman and William S. Price have
been deemed to be acceptable by the Board of Directors of Holdco Sub for
purposes of this Section 4.1(b)(i) and Section 4.1(b)(ii).
(ii) Commencing with the first annual or special meeting of
stockholders of Holdco Sub called for the election of directors to the Board of
Directors of Holdco Sub held following the Closing and at each annual or special
meeting of stockholders of Holdco Sub thereafter called for the election of
directors to the Board of Directors of Holdco Sub so long as, at the time of
such meeting, (A) the Share Electing Partners and the Share Electing Transferors
beneficially own in the aggregate at least 66-2/3% of the Exchange Shares issued
to them at the Closing or (B) the Offeree under Section 4.1(d) shall not have
acquired more than 50% of the shares of Company Common Stock beneficially
acquired by Parent and Holdco Sub in the Transactions (unless in the event of
such acquisition an Operating Alliance or Alliance Agreement shall be in effect
and no notice shall have been given by either party to an Alliance Agreement of
its intention to terminate such Alliance Agreement or the related Operating
Alliance), Transferor II shall be entitled to designate one person who shall be
reasonably acceptable to the Holdco Sub Board of Directors (the "TRANSFEROR II
DESIGNEE") for election to the Board of Directors of Holdco Sub and Holdco Sub
shall nominate and recommend the Transferor II Designee for election to the
Board of Directors of Holdco Sub and shall use its best efforts to ensure that
the Transferor II Designee is elected to such Board. In the event that any
Transferor II Designee shall cease to serve as a director for any reason, the
vacancy resulting thereby shall be filled by a Person designated by Transferor
II and reasonably acceptable to the Board of Directors of Holdco Sub.
(iii) If at any time (A) the Share Electing Partners and the Share
Electing Transferors beneficially own in the aggregate less than 66-2/3% of the
Exchange Shares issued to them at the Closing or (B) the Offeree under Section
4.1(d) acquires more than 50% of the shares of Company Common Stock beneficially
acquired by Parent and Holdco Sub in the Transactions, and there shall not be in
effect an Operating Alliance or an Alliance Agreement or notice shall have been
given by either party to an Alliance Agreement of its intention to terminate
such Alliance Agreement or the related Operating Alliance, (1) Transferor II
shall as promptly as practicable cause the Transferor II Designee to resign from
the Board of Directors of Holdco Sub and (2) the right set forth in Section
4.1(b)(ii) shall not be reinstated notwithstanding any
19
increase in the number of shares of Holdco Sub Class A Common Stock held by the
Share Electing Partners or the Share Electing Transferors that would cause such
percentage ownership to equal or exceed 66-2/3%.
(iv) Transferor II hereby agrees that all Transferor II Designees
shall be "Citizens of the United States" as such term is defined in the Federal
Aviation Act of 1958, as amended.
(c) CORPORATE STRUCTURE. Parent and Holdco Sub agree that, for a
period of at least two years following the Closing Date, they shall not take any
action which would cause or permit the liquidation of Holdco Sub or the merger
of Holdco Sub with or into Parent.
(d) RIGHTS OF OFFER AND RE-OFFER. (i) In the event that prior to the
fifth anniversary of the Closing, if Holdco Sub, Parent or the Partnership (each
a "TRANSFERRING STOCKHOLDER") at any time intends to sell, transfer or otherwise
dispose of ("TRANSFER") any shares of Company Class A Common Stock held by
Parent, Holdco Sub or the Partnership as of the Closing Date to a third person,
Holdco Sub shall ensure that the Transferring Stockholder shall give written
notice (a "TRANSFEROR'S NOTICE") to Transferor II (the "OFFEREE") stating the
Transferring Stockholder's intention to make such Transfer and the number of
shares of Company Class A Common Stock proposed to be transferred (the "OFFERED
SECURITIES").
(ii) Upon receipt of the Transferor's Notice, the Offeree may elect
to, and if the Offeree so elects the Transferring Stockholder shall, negotiate
in good faith, for a period of up to 30 days (such 30 day period, the "OFFER
PERIOD") from the date of the receipt by the Offeree of the Transferor's Notice,
the terms of a transaction in which the Offeree will acquire all of the Offered
Securities. The Transferring Stockholder shall be under no obligation to accept
any offer made by the Offeree. An offer made by the Offeree or the Transferring
Stockholder shall not be considered to be an offer for purposes of the remainder
of this Section 4.1(d) unless it is a bona fide offer made in good faith and
subject only to such conditions as are customary for offers of such type and, in
the good faith judgment of Parent or Holdco Sub, reasonably capable of being
satisfied within 60 days of the date of such offer.
(iii) If the Offeree does not reach a definitive agreement with the
Transferring Stockholder to purchase all of the Offered Securities or if the
Offeree offers to purchase less than all of the Offered Securities, the
Transferring Stockholder shall have the right, for a period of 75 days from the
earlier of (A) the expiration of the Offer Period and (B) the date on which such
Transferring Stockholder shall have received written notice from the Offeree
stating that the Offeree does not intend to exercise its right to offer to
purchase all of the Offered Securities, to enter into an agreement to Transfer
all or any portion of the Offered Securities to any third person at a price
equal to or greater than the price offered by the Offeree in its last offer (the
"LAST OFFER"), if any, for the Offered Securities (the "LAST OFFER PRICE");
PROVIDED, HOWEVER, that in the event the Transferring Stockholder notifies the
Offeree that it intends to publicly offer the Offered Securities or sell the
Offered Securities in the open market, unless the Offeree agrees to pay the
Transferring Stockholder a price per share for all the Offered Securities at
least equal to 100% of the closing price on the New York Stock Exchange
Composite Transactions Tape on the trading day immediately preceding the date of
the Transferor's Notice), the Transferring Stockholder shall, for a period of
six months following such notification, be free to sell the Offered Securities
in such an offering or open market transaction at a price no less than 95% of
the market price at the time of any such sale without regard to this Section
4.1(d) other than this
20
Section 4.1(d)(iii). If any portion of the Last Offer Price is proposed to be
paid in a form other than cash, the third person may pay such consideration in
the form proposed or in an amount of cash equal to the fair market value of such
non-cash consideration, as determined by an independent appraiser jointly
selected by the Transferring Stockholder and the Offeree (the "INDEPENDENT
APPRAISER").
(iv) If (A) the proposed purchase price of a third party transferee
for the Offered Securities is less than the Last Offer Price or (B) such third
person offers to buy fewer Offered Securities than the Offeree had been offered
(but not if such latter offer is at a higher price than the Last Offer Price),
the Transferring Stockholder shall not Transfer any of the Offered Securities
unless the Transferring Stockholder shall first reoffer the Offered Securities
at such lesser price or such lesser amount to the Offeree (the "REOFFER") by
giving written notice (the "REOFFER NOTICE") to the Offeree of the Transferring
Stockholder's intention to make such Transfer at such lower price or in such
lesser amount (the "REOFFER PRICE") and the material terms and conditions of
such proposed Transfer. The Offeree shall then have an irrevocable option
(provided notice of intent to exercise such option is given within ten days of
receipt of the Reoffer Notice by the Offeree (the "OPTION PERIOD")), subject to
Section 4.1(d)(vi), to purchase all or such number of the Offered Securities as
is set forth in the Reoffer Notice at the Reoffer Price and on the other terms
and conditions set forth therein; PROVIDED, HOWEVER, that if any portion of the
Reoffer Price is to be paid in a form other than cash, the Offeree shall have
the option to pay such consideration in an amount of cash equal to the fair
market value of such non-cash consideration as determined by an Independent
Appraiser, so long as such payment would not cause the Transferring Stockholder
to incur incremental tax liability from the terms set forth in the Reoffer
Notice, and otherwise in a form of non-cash consideration determined by an
Independent Appraiser to provide reasonably equivalent economic value (taking
into account tax and credit considerations, as well as such other considerations
as the Independent Appraiser considers appropriate). If the Offeree does not
elect to purchase all of the Offered Securities at the Reoffer Price or elects
(if permissible because the Transferring Stockholder shall have consented to the
purchase by a third party of less than all of the Offered Securities) to
purchase less than all of the Offered Securities, the Transferring Stockholder
shall have the right to enter into an agreement to Transfer the Offered
Securities to such third person or any other third person, on terms at least as
favorable to the Transferring Stockholder as those specified in the Reoffer
Notice, for a period of 75 days following the earlier of (A) the expiration of
the Option Period with respect to the Reoffer or (B) the date on which the
Transferring Stockholder shall have received written notice from the Offeree
stating that it does not intend to exercise its option to purchase all of the
Offered Securities specified on the terms in the Reoffer Notice.
(v) If the Offeree exercises its right of Reoffer, the closing of the
purchase of the Offered Securities with respect to which such right has been
exercised shall take place on the 15th day after the later of (A) the date the
Offeree gives notice of such exercise and (B) the expiration of such time as the
parties may reasonably require in order to comply with applicable United States
federal and state laws and regulations, which in no event shall be more than 60
days after the date specified in clause (A) (or such longer period as may be
necessary to obtain all required governmental consents or approvals identified
in Section 5.1); PROVIDED, HOWEVER, that in the event that the Transferor's
Notice is received by the Offeree prior to the date that is six months following
the Closing (the "INITIAL PERIOD"), no such purchase (nor any negotiated
purchase pursuant to Section 4.1(d)(i)) shall be required to close prior to the
date which is three days following the last day of the Initial Period. Upon
exercise by the Offeree of its right of
21
Reoffer under this Section 4.1(d), the Offeree and the Transferring Stockholders
shall be legally obligated to consummate the purchase contemplated thereby and
shall use their best efforts to make all necessary filings and to secure any
approvals required and to comply as soon as practicable with all applicable
United States federal and state laws and regulations in connection therewith.
(vi) The Transferring Stockholder may determine at any time prior to
the earlier of the execution of a definitive agreement and the termination of
the Option Period not to Transfer the Offered Securities, in which case all of
the provisions of this Section 4.1(d) shall again become applicable to any
Transfers of shares of Company Class A Common Stock by the Transferring
Stockholders.
(vii) The parties agree that all communications from Parent, Holdco
Sub or the Partnership in connection with the matters set forth in this Section
4.1(d) constitute material and confidential inside information and shall not be
disclosed by the Offeree to its affiliates or to any other person without the
prior written consent of Holdco Sub, except as may be required by law in the
written opinion of counsel of the Offeree.
(viii) If the Offeree and the Transferring Stockholder do not reach an
agreement to Transfer the Offered Securities to the Offeree in accordance with
the provisions of this Section 4.1(d) and the Transferring Stockholder shall not
have entered into an agreement to Transfer the Offered Securities to a third
Person in accordance with the provisions of this Section 4.1(d), the right of
first offer under this Section 4.1(d) shall again apply in connection with any
subsequent Transfer of such Offered Securities.
(e) PURCHASES OF COMPANY COMMON STOCK PRIOR TO THE CLOSING. Parent
agrees to use its best efforts to purchase or otherwise acquire, concurrently
with or prior to the Closing, such number of shares of Company Common Stock (the
"ACQUIRED SHARES"), whether through open market purchases, in negotiated
transactions or otherwise, as is necessary so that the Voting Power of the
Acquired Shares, together with the Voting Power of the shares of Company Common
Stock beneficially owned by the Partnership and the Transferors, shall at the
Closing constitute at least 50.1% of the Fully Diluted Voting Power of all
holders of Company Common Stock.
4.2 COVENANTS OF THE PARTNERSHIP, THE PARTNERS AND THE TRANSFERORS.
(a) NO SOLICITATION.
(i) From the date of this Agreement until the earlier of (i) the
termination of this Agreement and (ii) the first anniversary of the
Closing, none of the Partnership (so long as the Partnership is owned and
controlled by the Partners and/or the Transferors) or any of the Partners
(which term shall for purposes of this Section 4.2(a) include the
Transferors) shall, directly or indirectly, through any partner, officer,
director, employee, representative or agent of the Partnership or any of
the Partners or any of their affiliates or otherwise, solicit, initiate or
encourage any inquiries, offers or proposals, or any indications of
interest, regarding (A) any merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company (together with the
transactions described in clauses
22
(B)(1), (D) and (E) of this Section 4.2(a)(i), a "BUSINESS COMBINATION") or
the Partnership, (B) any purchase or sale of all or any significant portion
of the assets of (1) the Company or (2) the Partnership (it being
understood that in the case of the Partnership any sale of any Company
Class A Common Stock or any portion of the Warrants or the shares of
Company Class A Common Stock issuable upon exercise thereof shall be deemed
a significant portion), (C) any issuance or other sale or transfer of
equity interests in the Partnership, (D) any issuance or other sale by the
Company of any shares of Company Class A Common Stock or (E) any issuance
or other sale by the Company of 5% or more (in any transaction or series of
transactions) of any other class of equity securities of the Company or any
of its subsidiaries (any of the foregoing inquiries, offers or proposals
enumerated in clauses (A) through (E) being referred to herein as an
"ACQUISITION PROPOSAL"), or participate in negotiations or discussions
with, or provide any nonpublic information to, any Person (including the
Company) relating to any Acquisition Proposal. Without limiting the
foregoing, neither the Partnership nor the Partners shall take any action
that, in any such case, is intended to or could reasonably be expected to
(w) prevent, (x) delay or postpone, (y) impede, frustrate or interfere with
(in the case of this clause (y) in a manner that could reasonably be
expected to substantially deprive Parent and Holdco Sub of the benefits of)
the Transactions or the entry by the Company and Northwest Airlines, Inc.
into a strategic worldwide operating alliance between them (an "OPERATING
ALLIANCE") or the execution by the Company and Parent of any agreement
contemplating the establishment of an Operating Alliance (an "ALLIANCE
AGREEMENT") or (z) cause the Fully Diluted Voting Power represented by the
shares of Company Class A Common Stock held by the Partnership and the
Transferors to be less than that percentage of the Fully Diluted Voting
Power of the Company represented by such shares on the date of this
Agreement.
(ii) The Partnership and the Partners shall notify Parent and
Holdco Sub as promptly as practicable if any Acquisition Proposal is made
and shall in such notice indicate in reasonable detail the identity of the
Person making such Acquisition Proposal and the terms and conditions of
such Acquisition Proposal.
(iii) The Partnership and each of the Partners shall immediately
cease any existing discussions or negotiations with any Persons (other than
Parent and Holdco Sub) with which the Partnership or any Partner may have
conducted discussions or negotiations heretofore with respect to any
Acquisition Proposal. The Partnership and each of the Partners agree not
to release (by waiver or otherwise) any third party from the provisions of
any confidentiality or standstill agreement to which the Partnership or any
Partner is a party. The Partners represent and warrant to Parent that, as
of the time of execution, of this Agreement neither the Partnership nor any
Partner is involved in any discussions or negotiations with any Person
(other than Parent and Holdco Sub) relating to or that could reasonably be
expected to lead to any Acquisition Proposal.
(iv) The Partnership and each of the Partners shall ensure that
the partners, officers, directors and employees of the Partnership and each
Partner and their respective subsidiaries and any investment banker or
other advisor or representative retained by the Partnership or any Partner
are aware of the restrictions described in this Section 4.2(a).
23
(b) RESTRICTION ON TRANSFER OF COMPANY SHARES, PROXIES AND NON-
INTERFERENCE; RESTRICTION ON WITHDRAWAL. Neither the Partnership nor any
Partner or Transferor shall, directly or indirectly, without the prior written
consent of Parent: (i) except pursuant to or as expressly contemplated hereby,
offer for sale, sell (including short sales), transfer, tender, pledge,
encumber, assign or otherwise dispose of (including by gift), or enter into any
contract, option or other arrangement or understanding (including any
profit-sharing arrangement) with respect to or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, assignment or other disposition of,
(A) any or all of the shares of Company Class A Common Stock owned by it (or, in
the case of any Partner, allocable to it) or the Warrants (or, in the case of
any Partner, its allocable interest therein and in the shares of Company Class A
Common Stock issuable upon the exercise thereof) or (B) in the case of any
Partner, all or any portion of its Partnership Interest, or any interest in any
thereof; (ii) except as expressly contemplated hereby, grant any proxies or
powers of attorney (other than to a Partner or Transferor), deposit any shares
of Company Class A Common Stock into a voting trust or enter into any other
voting arrangement with respect to any shares of Company Class A Common Stock;
(iii) take any action that would make any representation or warranty of the
Partnership or any Partner or Transferor contained herein untrue or incorrect or
have the effect of preventing or disabling the Partnership or any Partner or
Transferor from performing its obligations under this Agreement; or (iv) in the
case of the Partners, withdraw any of its Allocable Company Class A Shares (or
its allocable portion of the Warrants) from the Partnership or elect to have any
of its Allocable Company Class A Shares distributed to it; or commit or agree to
take any of the foregoing actions; PROVIDED, HOWEVER, that in the event that (i)
a third party commences a bona fide tender offer for shares of Company Class A
Common Stock, (ii) neither the Partnership nor any Partner or Transferor is in
breach in any material respect of its representations and warranties or its
obligations (including its obligation to effect the Closing) under this
Agreement and (iii) all of the other conditions to Parent's and Holdco Sub's
obligations to close the Transactions set forth in Sections 5.1 and 5.2 have
been satisfied, unless Parent and Holdco Sub cause the Closing to occur within
five Business Days following receipt of written notice from the Partnership or
any of the Transferors of their intention to tender their shares, the
Partnership and the Transferors will be permitted to tender their shares of
Company Class A Common Stock in such tender offer, unless such Closing shall not
have occurred as a result of facts or occurrences not within the control of
Parent and Holdco Sub (including the failure of any of the conditions set forth
in Section 5.1 or Section 5.3 to be satisfied).
(c) VOTING. The Partnership, each Transferor and each Partner (with
respect to its right to direct the vote of the shares of Company Class A Common
Stock owned by the Partnership in accordance with the terms of the Partnership
Agreement) hereby agree that, during the time this Agreement is in effect, at
any meeting of the stockholders of the Company (or at any adjournments or
postponements thereof), however called, or in any other circumstances upon which
the Partnership's or such Transferor's vote, consent or other approval is sought
or otherwise eligible to be given, the Partnership, each Transferor and such
Partners shall vote (or cause to be voted) the shares of Company Class A Common
Stock owned by the Partnership or such Transferor, as the case may be, (i)
against any action or agreement that would result in a breach in any material
respect of any covenant, representation or warranty or any other obligation or
agreement of the Partnership or the Partners or such Transferor under this
Agreement; and (ii) except as otherwise agreed to in writing in advance by
Parent, against the following actions: (A) any Business Combination (other than
a Business Combination with Parent or its affiliates); and (B) (1) any change in
the majority of the board of directors of the Company; (2) any material
24
change in the present capitalization of the Company or any amendment of the
Company's Certificate of Incorporation or By-laws; (3) any other material change
in the Company's corporate structure or business; (4) any other action which is
intended, or could reasonably be expected, to (x) prevent, (y) delay or postpone
or (z) impede, frustrate or interfere with (in the case of this clause (z), in a
manner that could reasonably be expected to substantially deprive Parent and
Holdco Sub of the material benefits of any of) the Transactions or the entry by
the Company and Northwest Airlines, Inc. into an Operating Alliance or their
execution of an Alliance Agreement, or (5) any action that would cause the Fully
Diluted Voting Power represented by the shares of Company Class A Common Stock
held by the Partnership and the Transferors to be less than that percentage of
the Fully Diluted Voting Power of the Company represented by such shares on the
date of this Agreement other than grants by the Company to its employees in
accordance with its past practices of options and other stock-based
compensation. Neither the Partnership nor any Partner or Transferor shall enter
into any agreement or understanding with any Person or entity prior to the
termination of this Agreement to vote or give instructions after such
termination in a manner inconsistent with clauses (i) or (ii) of the preceding
sentence.
(d) PROXY. The Partnership (and, to the extent provided by the
Partnership Agreement, the Partners) and each Transferor hereby grant to, and
appoint, Robert L. Friedman and any other designee of Parent, individually, its
irrevocable proxy and attorney-in-fact (with full power of substitution) to vote
the shares of Company Class A Common Stock owned by the Partnership or such
Transferor as indicated in, and solely for the purposes of, Section 4.2(c). The
Partnership (and the Partners) and each Transferor intend this proxy to be
irrevocable and coupled with an interest and will take such further action and
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revoke any proxy previously granted by it with respect to
the matters set forth in Section 4.2(c) with respect to the shares of Company
Class A Common Stock owned by the Partnership. Notwithstanding the foregoing,
Parent agrees that the proxy granted by this Section 4.2(d) shall be deemed to
be revoked upon the termination of this Agreement in accordance with its terms.
(e) TAX REPRESENTATIONS LETTER. Each of the Share Electing Partners
and the Transferors agrees that it will provide to Simpson Thacher & Bartlett
and to Kelly, Hart & Hallman such representations and warranties as may be
required for the delivery of the tax opinions referred to in Sections 5.2(e) and
5.3(c).
(f) NO CONVERSIONS. The Partnership and each Transferor agree not to
convert any shares of Company Class A Common Stock into shares of Company Class
B Common Stock.
(g)BINDING OBLIGATIONS. Notwithstanding, and without in any way
limiting, any other provision of this Agreement, the Partnership, each of the
Partners and each Transferor acknowledges that, subject to the satisfaction (or
waiver by them) of the conditions set forth in Sections 5.1 and 5.3, their
obligations to consummate the Transactions, including the exchange of the
Partnership Interests and the transfer of beneficial ownership of the Company
Class A Common Stock owned by the Partnership, and the exchange of the shares of
Company Class A Common Stock owned by the Transferors, are absolute and
unconditional and shall not terminate except in accordance with Section 7.1,
irrespective of, without limitation, any receipt by the Company of an
Acquisition Proposal or any resolution by the Board of Directors of the Company
25
to approve a Business Combination or otherwise.
(h) TRANSFER OF SHARES OF HOLDCO SUB CLASS A COMMON STOCK. Each of
the Share Electing Partners and the Transferors agrees that it shall not,
directly or indirectly, offer, sell, transfer, tender, pledge or encumber,
assign or otherwise dispose of any Exchange Shares until the date that is two
years from the Closing Date, other than in connection with bona fide pledges of
such Exchange Shares to secure bona fide borrowings or in connection with bona
fide hedging transactions executed by registered broker-dealers; PROVIDED,
HOWEVER, that the Share Electing Partners and the Transferors shall be permitted
to offer, sell, transfer, tender, pledge or encumber, assign or otherwise
dispose of, during such two-year period (i) in the aggregate, such percentage of
the aggregate number of Exchange Shares issued to the Share Electing Partners
and the Transferors at the Closing as is equal to the percentage of the
aggregate shares of Holdco Sub Class A Common Stock beneficially owned by Alfred
Checchi, Gary Wilson and Richard Blum on the Closing Date that are sold,
transferred, assigned or otherwise actually disposed of by Alfred Checchi, Gary
Wilson and Richard Blum in the aggregate during such two-year period; (ii) in
the event that the Offeree acquires Offered Securities under Section 4.1(d), in
the aggregate, such percentage of the aggregate number of Exchange Shares issued
to the Share Electing Partners and the Transferors at the Closing as is
represented by the percentage such Offered Securities acquired by the Offeree
bears to the total number of shares of Company Class A Common Stock the
beneficial ownership of which is acquired by Parent and Holdco Sub at the
Closing and (iii) Exchange Shares to one or more of its affiliates that is
directly or indirectly controlled by it.
(i) NO AMENDMENTS. The Partnership and the Partners shall not agree
to amend, supplement or otherwise modify or terminate in any manner or waive any
provision of the Partnership Agreement, the Warrants, the Subscription and
Stockholders' Agreement, dated as of April 27, 1993, among the Partnership, Air
Canada and the Company, as amended through the date of this Agreement, or the
Amended and Restated Registration Rights Agreement, dated as of April 19, 1996,
among the Partnership, Air Canada and the Company or enter into any other
agreement with the Company relating to the Warrants or the shares of Company
Class A Common Stock beneficially owned by the Partnership, without the prior
written consent of Parent.
(j) RELEASE OF PARTNERSHIP FROM CERTAIN OBLIGATIONS. In the event
that the Company receives a bona fide proposal (i) to undertake a transaction
described in clause (A) of the definition of Business Combination set forth in
Section 4.2(a)(i) (including a tender offer to acquire shares of Company Common
Stock that would represent at least 20% of the Voting Power of all holders of
Company Common Stock), (ii) to acquire all or substantially all of the Company's
assets or (iii) to acquire from the Company newly issued shares of Company
Common Stock that would represent at least 20% of the Voting Power of all
holders of Company Common Stock before giving effect to such issuance, Parent
shall have the right for a period of ten Business Days after such proposal is
publicly announced to deliver a notice (the "RELEASE NOTICE") to the Partners'
Representative and the Transferors stating its intention to release the
Partnership, each Transferor and each Partner from its obligations under
Sections 4.2(b) and (c); PROVIDED, HOWEVER, that Parent shall not be permitted
to exercise such right unless an independent committee of the Board of Directors
of the Company shall determine, taking into account the opinion of a nationally
recognized investment banking firm, that such proposal is superior, from a
financial point of view, to the stockholders of the Company, to the transactions
26
contemplated hereby, it being understood that if such committee fails to make
such a determination, Parent shall have the opportunity to engage a nationally
recognized investment banking firm mutually selected by Parent and the Holders'
Representative, and if such firm makes such a determination, Parent shall be
permitted to exercise such right. The Release Notice shall become effective
upon the delivery thereof to the Partners' Representative and the Transferors in
accordance with the terms of this Agreement.
4.3 REASONABLE BEST EFFORTS. (a) Subject to the terms and conditions
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement. In furtherance and not in
limitation of the foregoing, each of Parent and the Partnership agrees, and the
Partnership and each of the Partners and the Transferors agrees to use its
reasonable best efforts to cause the Company, to file a Notification and Report
Form pursuant to the HSR Act and any other required regulatory filings with
foreign antitrust authorities, the DOT and any other entity as promptly as
practicable following the execution of this Agreement and in any event no more
than ten Business Days thereafter and to supply as promptly as practicable any
additional information and documentary material that may be requested pursuant
to the HSR Act or by any Governmental Authority and to take all other actions
necessary to cause the expiration or termination of the applicable waiting
periods under the HSR Act as soon as practicable. Such filings shall seek
approval for the transactions contemplated by this Agreement on the basis as if
Parent was acquiring more than 50% of the outstanding capital stock of the
Company (the "COMPANY ACQUISITION CASE").
(b) Each of the parties hereto shall, in connection with the efforts
referenced in Section 4.3(a) to obtain all requisite approvals and
authorizations for the transactions contemplated hereby, including the Company
Acquisition Case, under the HSR Act or any other Antitrust Law (as defined
below), use its reasonable best efforts to (i) cooperate in all respects with
each other in connection with any filing or submission and in connection with
any investigation or other inquiry, including any proceeding initiated by a
private party; (ii) keep the other parties informed in all material respects of
any material communication received by such party from, or given by such parties
to, the Federal Trade Commission (the "FTC"), the Antitrust Division of the
Department of Justice (the "DOJ"), the DOT, the European Commission or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding the
transactions contemplated hereby, including the Company Acquisition Case; and
(iii) permit the other parties to review any material communication given by it
to, and consult with each other in advance of any meeting or conference with,
the FTC, the DOJ, the DOT, the European Commission or any such other
Governmental Authority or, in connection with any proceeding by a private party,
with any other Person, and to the extent permitted by the FTC, the DOJ, the DOT,
the European Commission or such other applicable Governmental Authority or other
Person, give the other parties the opportunity to attend and participate in such
meetings and conferences. For purposes of this Agreement, "ANTITRUST LAW" means
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, applicable DOT regulations, and all
other federal, state and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition.
27
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 4.3(a) and (b), each of the parties hereto shall
use its reasonable best efforts to resolve such objections, if any, as may be
asserted with respect to the Transactions, including the Company Acquisition
Case, under any Antitrust Law, including taking all reasonable actions to obtain
clearance, or if such clearance cannot be obtained, to reach an agreement,
settlement, consent providing for divestiture, a "hold separate" agreement or
any other relief with the Governmental Authorities investigating the
Transactions; PROVIDED, HOWEVER, that the foregoing shall not require Parent to
agree to any asset divestiture or restriction on its or its subsidiaries' or the
Company's or its subsidiaries' business operations that would have a material
adverse effect on Parent or the Company. In connection with the foregoing, if
any administrative or judicial action or proceeding, including any proceeding by
a private party, is instituted (or threatened to be instituted) challenging any
of the Transactions, including the Company Acquisition Case, as violative of any
Antitrust Law, each of the parties hereto shall cooperate in all respects with
each other and use its respective reasonable best efforts to contest and resist
any such action or proceeding and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated hereby, including the
Company Acquisition Case. Notwithstanding the foregoing or any other provision
of this Agreement, nothing in this Section 4.3 shall limit a party's right to
terminate this Agreement pursuant to 7.1(a)(iii) so long as such party has up to
then complied in all material respects with its obligations under this Section
4.3.
(d) Each party hereby agrees, while this Agreement is in effect, and
except as contemplated hereby, not to intentionally and knowingly take any
action with the intention and knowledge that such action would make any of its
representations or warranties contained herein untrue or incorrect in any
material respect or have the effect of preventing or disabling it from
performing any of its obligations under this Agreement.
4.4 PUBLIC ANNOUNCEMENTS. Parent and Holdco Sub, on the one hand, and
the Partnership, the Partners and the Transferors, on the other hand, will
consult with each other before issuing any press release or making any SEC
filing or other public statement (including holding press conferences or analyst
calls) with respect to this Agreement or the transactions contemplated hereby
and, except as may be required by applicable law, court process or any listing
agreement with any national securities exchange, shall not issue any press
release, make any such SEC filing or other public statement prior to such
consultation and providing the Partnership, the Partners and the Transferors, on
the one hand, and Parent and Holdco Sub, on the other hand, as the case may be,
with a reasonable opportunity to comment thereon.
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS TO OBLIGATION OF PARENT, HOLDCO SUB AND THE PARTNERS TO
EFFECT THE TRANSACTIONS. The respective obligations of Parent, Holdco Sub and
the Partners to effect the Transactions are subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
28
(a) HSR ACT. The waiting period (and any extension thereof)
applicable to the Transactions under the HSR Act shall have been terminated
or shall have expired.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other Governmental Authority or other legal
restraint or prohibition enjoining or preventing the consummation of the
Transactions shall be in effect.
(c) DOT APPROVALS. The DOT shall have granted any necessary approvals
for the Transactions.
(d) FOREIGN ANTITRUST APPROVALS. The European Commission shall have
given any necessary approvals for the Transactions.
5.2 CONDITIONS TO OBLIGATION OF PARENT AND HOLDCO SUB. The
obligations of Parent and Holdco Sub to effect the Transactions are further
subject to the satisfaction (or waiver by Parent and Holdco Sub) of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Partnership, the Partners and the Transferors set forth
in this Agreement qualified as to materiality shall be true and correct and
those not so qualified shall be true and correct in all material respects,
in each case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except for those representations
and warranties which address matters only as of a particular date (which
shall have been true and correct in all material respects as of such date).
Parent and Holdco Sub shall have received a certificate signed by the
Partners' Representative to the effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF THE PARTNERSHIP, THE PARTNERS AND
THE TRANSFERORS. Each of the Partnership, the Partners and the Transferors
shall have performed in all material respects all of the covenants and the
obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and Parent and Holdco Sub shall have received a
certificate signed by the Partners' Representative to the effect set forth
in this paragraph.
(c) OWNERSHIP OF COMPANY STOCK HELD BY THE PARTNERSHIP. The Fully
Diluted Voting Power represented by the shares of Company Class A Common
Stock held by the Partnership and the Transferors, together with the Fully
Diluted Voting Power represented by all other shares of Company Common
Stock held by Parent and Holdco Sub immediately prior to the Closing, shall
be no less than 50.1% of the aggregate Fully Diluted Voting Power of all
holders of Company Common Stock, and Parent shall have received evidence
reasonably satisfactory to it and its counsel to such effect.
(d) TAX OPINION. Parent and Holdco Sub shall have received the
opinion of Simpson Thacher & Bartlett, in form and substance reasonably
satisfactory to Parent and Holdco Sub, dated the Closing Date, based on
appropriate representations and warranties of the parties to the Agreement
and certain stockholders of such parties, to the effect that
29
the Merger and the exchange of shares of the capital stock of Parent for
shares of the capital stock of Holdco Sub shall be a transaction described
in Section 351(a) and/or Section 368(a) of the Code and that no income or
gain will be recognized by Parent or Holdco Sub or by their stockholders as
a result of the Merger or the Exchange.
(e) STANDSTILL AGREEMENT. The Share Electing Partners and the Share
Electing Transferors shall have executed and delivered to Parent signed
counterparts of the Standstill Agreement.
(f) NO STOCKHOLDER RIGHTS PLAN. The Company shall not have adopted a
stockholder rights plan, "poison pill" or other agreement or arrangement
having a similar effect, whether or not such effect is intended, except as
contemplated by the Governance Agreement dated as of the date hereof among
the Company, Parent and Holdco Sub.
(g) APPROVAL OF BUSINESS COMBINATION. The Company's Board of
Directors shall not have adopted a resolution approving a Business
Combination (other than one with Parent, Holdco Sub or their subsidiaries)
or recommending such a Business Combination to the Company's stockholders.
(h) NO FRUSTRATION OF TRANSACTIONS BY THE COMPANY. The Company shall
not have taken any other action that will (i) (A) prevent, (B) delay or
postpone for a period in excess of 45 days from the date the conditions set
forth in this Article V would otherwise be satisfied or (C) impede,
frustrate or interfere with (in the case of this clause (C), in a manner
that will substantially deprive Parent and Holdco Sub of the benefits of)
(1) any of the Transactions or (2) the entry by Northwest Airlines, Inc.
and the Company into an Operating Alliance or their execution of an
Alliance Agreement, or (ii) cause the Fully Diluted Voting Power
represented by the shares of Company Class A Common Stock held by the
Partnership and the Transferors, together with the Fully Diluted Voting
Power represented by all other shares of Company Common Stock held by
Parent and Holdco Sub at the Closing, to be less than 50.1% of the
aggregate Fully Diluted Voting Power of all holders of Company Common
Stock, other than in connection with grants by the Company to its employees
in accordance with its past practices of options and other stock-based
compensation.
(i) NO FRUSTRATION OF TRANSACTIONS BY THE PARTNERSHIP AND THE
PARTNERS. The Partnership and the Partners shall not have taken any action
that will (i) prevent, (ii) delay or postpone for a period in excess of 45
days from the date the conditions set forth in this Article V would
otherwise be satisfied or (iii) impede, frustrate or interfere with (in the
case of this clause (iii), in a manner that will substantially deprive
Parent and Holdco Sub of the benefits of) (A) any of the Transactions or
(B) the entry by Northwest Airlines, Inc. and the Company into an Operating
Alliance or their execution of an Alliance Agreement.
5.3 CONDITIONS TO OBLIGATION OF THE PARTNERS AND THE TRANSFERORS. The
obligations of the Partners and the Transferors to effect the Transactions are
further subject to the satisfaction (or waiver by the Partners holding a
majority in Partnership Interests) of the following conditions:
30
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Holdco Sub set forth in this Agreement qualified
as to materiality shall be true and correct and those not so qualified
shall be true and correct in all material respects, in each case as of the
date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, except for those representations and warranties which
address matters only as of a particular date (which shall have been true
and correct in all material respects as of such date), and the Partners'
Representative shall have received a certificate signed on behalf of Parent
and Holdco Sub to the effect set forth in this paragraph.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND HOLDCO SUB. Each of
Parent and Holdco Sub shall have performed in all material respects all of
the covenants and obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and the Partners' Representative
shall have received a certificate signed on behalf of Parent and Holdco Sub
to the effect set forth in this paragraph.
(c) TAX OPINION. The Share Electing Partners shall have received the
opinion of Kelly, Hart & Hallman, in form and substance reasonably
satisfactory to the Partner's Representative, dated the Closing Date, based
on appropriate representations and warranties of the parties to the
Agreement, to the effect that the exchange of Partnership Interests for
shares of Holdco Sub Class A Common Stock pursuant to Section 2.2(b) shall
be a transfer described in Section 351(a) of the Code.
(d) REGISTRATION RIGHTS AGREEMENT. Holdco Sub shall have executed and
delivered to the Partners' Representative a signed counterpart of the
Registration Rights Agreement.
(e) CONSUMMATION OF THE MERGER. No provision of the Merger Agreement
shall have been waived, modified or amended by the parties thereto, and the
Merger shall have been consummated in accordance with the terms of the
Merger Agreement.
(f) NASDAQ NATIONAL MARKET LISTING. The shares of Holdco Sub Class A
Common Stock to be issued to the Share Electing Partners and the
Transferors pursuant to Section 2.2(b) shall have been approved for
quotation on the NASDAQ National Market, subject to official notice of
issuance.
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ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY PARENT AND HOLDCO SUB. From and after the
Closing (except in the case of Section 6.1(b)(ii), which shall be from and after
the date of this Agreement whether or not the Transactions are consummated),
Parent and Holdco Sub shall, jointly and severally (and shall cause their
respective subsidiaries to) indemnify each Partner (which term shall for
purposes of this Article VI include the Transferors) and their respective
affiliates, directors, officers, employees, partners, stockholders, agents and
representatives (including attorneys and accountants) (collectively, the
"REPRESENTATIVES") against and hold them harmless from any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses) ("LOSS")
suffered or incurred by any such indemnified party (a) directly caused by any
breach of representation or warranty (without regard to any materiality
qualification therein) in Section 3.1 on the part of Parent or Holdco Sub; or
(b) arising from or relating to (i) any failure by Parent or Holdco Sub to
perform any agreement or obligation hereunder or (ii) the Transactions (whether
pertaining to any acts or omissions occurring or existing prior to, at or
following the date of this Agreement), other than taxes and Losses arising under
Section 16 of the Exchange Act; PROVIDED, HOWEVER, that:
(w) such indemnity will not cover actions taken or failed to be taken
by any Partner or the Partnership which constitute a breach of Sections
4.2(a)(i), 4.2(b) or 4.2(c) of this Agreement;
(x) neither Parent nor Holdco Sub shall have any liability under
clauses (a) and (b)(i) unless the aggregate of all Losses relating thereto
(other than in connection with the last sentence of Section 3.1(b), Section
3.1(e) and Section 3.1(i)) for which Parent and Holdco would, but for this
proviso, be liable exceeds on a cumulative basis $3,000,000 and then only to the
extent of such excess;
(y) Parent and Holdco Sub shall not have any liability in respect of
any individual item under clauses (a) and (b)(i) (other than in connection with
the last sentence of Section 3.1(b), Section 3.1(e) and Section 3.1(i)) where
the Loss is less than $100,000 and such items shall not be aggregated for
purposes of clause (x); and
(z) Parent's and Holdco Sub's liability in respect of Losses under
clauses (a) and (b)(i) (other than in connection with the last sentence of
Section 3.1(b), Section 3.1(e) and Section 3.1(i)) shall in no event exceed
$15,000,000.
Each Partner acknowledges and agrees that, should the Closing occur, its sole
and exclusive remedy with respect to any and all claims relating to this
Agreement and the transactions contemplated hereby (other than claims of, or
causes of action arising from, fraud, which shall not be subject to this Article
VI) shall be pursuant to the indemnification provisions set forth in this
Article VI.
6.2 INDEMNIFICATION BY EACH OF THE PARTNERS AND TRANSFERORS. From and
after the Closing, each Partner shall, severally and not jointly, indemnify
Parent and Holdco Sub and their respective affiliates and their respective
Representatives against and hold them harmless from
32
any Loss suffered or incurred by any such indemnified party (a) directly caused
by any breach of representation or warranty in Sections 3.2, 3.3 and 3.4 (other
than the fourth and fifth sentences of Section 3.2(d), Section 3.3(h) and the
fourth and fifth sentences of Section 3.4) (without regard to any materiality
qualification in any of such sections) on the part of the Partnership or such
Partner; or (b) arising from, relating to or otherwise in respect of (i) any
failure by the Partnership or any Partner to perform any agreement or obligation
hereunder or (ii) any Liabilities of the Partnership incurred prior to the
Closing (other than Liabilities arising out of the Transactions other than taxes
and losses arising under Section 16 of the Exchange Act) and not disclosed on
Schedule 3.2(e); PROVIDED, HOWEVER, that:
(w) notwithstanding the several but not joint nature of the
indemnification provided under this Section 6.2, each Partner shall be liable in
respect of any claim under this Article VI for up to 130% of such Partner's pro
rata share, calculated by reference to the number of shares of Company Class A
Common Stock (including shares issuable upon the exercise of the Warrants)
allocable to or owned by such Partner (the "PRO RATA SHARE"), of the aggregate
Losses in respect of such claim;
(x) no Partner shall have any liability under clauses (a) and (b)(i)
of this Section 6.2 unless the aggregate of all Losses relating thereto (other
than in connection with the second sentence of Section 3.2(b), Section 3.2(c),
Section 3.2(d) (other than the fourth and fifth sentences thereof), Section
3.2(e), the second sentence of Section 3.3(b), Section 3.3(c) and Section 3.4
(other than the fourth and fifth sentences thereof)) for which the Partners
would, but for this proviso, be liable exceeds on a cumulative basis $3,000,000
and then only to the extent of such excess;
(y) no Partner shall have any liability in respect of any individual
item under clauses (a) and (b)(i) of this Section 6.2 (other than in connection
with the second sentence of Section 3.2(b), Section 3.2(c), Section 3.2(d)
(other than the fourth and fifth sentences thereof), Section 3.2(e), the second
sentence of Section 3.3(b), Section 3.3(c) and Section 3.4 (other than the
fourth and fifth sentences thereof)) where the Loss is less than $100,000 and
such items shall not be aggregated for purposes of clause (x); and
(z) the aggregate liability of the Partners in respect of Losses under
clauses (a) and (b)(i) of this Section 6.2 (other than in connection with the
second sentence of Section 3.2(b), Section 3.2(c), Section 3.2(d) (other than
the fourth and fifth sentences thereof, Section 3.2(e), the second sentence of
Section 3.3(b), Section 3.3(c) and Section 3.4 (other that the fourth and fifth
sentences thereof)) shall in no event exceed $15,000,000.
Each of Parent and Holdco Sub acknowledges and agrees that, should the Closing
occur, its sole and exclusive remedy with respect to any and all claims relating
to this Agreement and the transactions contemplated hereby (other than claims
of, or causes of action arising from, fraud, which shall not be subject to this
Article VI) shall be pursuant to the indemnification provisions set forth in
this Article VI. Recovery by Parent and Holdco Sub from any Partner of amounts
in excess of a Partner's Pro Rata Share of any Loss shall be conditioned on
Parent and Holdco Sub having used reasonable efforts to obtain indemnification
from each of the Partners in accordance with their respective Pro Rata Shares,
including by pursuing appropriate legal proceedings against each of the
Partners.
33
6.3 LOSSES NET OF INSURANCE, ETC. The amount of any Loss for which
indemnification is provided under this Article VI shall be net of any amounts
actually recovered by the party entitled to indemnification (the "INDEMNIFIED
PARTY") under insurance policies and, in the case of the Partners, under the
indemnification policies of the Company that are available to such indemnified
party with respect to such Loss (net of the cost of obtaining such recovery).
Any Partner entitled to indemnification under insurance policies or under the
indemnification policies of the Company shall, at the request of Parent or
Holdco Sub, use its reasonable best efforts to obtain such indemnification under
such insurance policies or from the Company before seeking indemnification from
Parent or Holdco Sub, and any expenses incurred in connection therewith shall be
advanced by the party obligated to provide such indemnification (the
"INDEMNIFYING PARTY"). It is understood that the indemnification obligation of
Parent and Holdco Sub is secondary and supplemental to any indemnification by
the Company or under any insurance policy maintained for the benefit of the
indemnified party. The indemnifying party shall not be relieved of its
obligation to advance fees and expenses to the indemnified party in accordance
with Section 6.5 (or to indemnify any indemnified person under this Article VI)
by reason of any claim under any insurance policy or under the indemnification
policies of the Company, but shall be entitled to receive, and the indemnified
party does hereby assign to the indemnifying party the right to receive, direct
payment of any recovery under any such claim.
6.4 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless a party hereto (a) pursuant to Sections 6.1(a) and 6.2(a) shall
terminate when the applicable representation or warranty terminates pursuant to
Section 7.14 and (b) pursuant to the other clauses of Sections 6.1 and 6.2 shall
not terminate, except that the obligations of Parent and Holdco Sub pursuant to
Section 6.1(b)(ii) shall terminate upon a termination by either party pursuant
to Section 7.1(a), but only with respect to actions or omissions from and after
the time of such termination; PROVIDED, HOWEVER, that as to clause (a) above
such obligations to indemnify and hold harmless shall not terminate with respect
to any item as to which the Person to be indemnified or the related party
thereto shall have, before the expiration of the applicable period, previously
made a claim by delivering a notice of such claim (stating in reasonable detail
the basis of such claim) to the indemnifying party.
6.5 PROCEDURES RELATING TO INDEMNIFICATION UNDER ARTICLE VI.
(a) An indemnified party entitled to any indemnification in respect
of, arising out of or involving a claim or demand made by any Person against the
indemnified party (a "THIRD PARTY CLAIM") shall notify the indemnifying party in
writing, and in reasonable detail, of the Third Party Claim within 10 Business
Days after receipt by such indemnified party of written notice of the Third
Party Claim; PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually and materially prejudiced as a
result of such failure (it being understood that the indemnifying party shall
not be liable for any expenses incurred during the period in which the
indemnified party failed to give notice).
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and unconditionally acknowledges its obligation to indemnify
the indemnified party with respect to such Third Party Claim, to assume the
defense thereof with counsel selected by the indemnifying party and not
reasonably objected to by the indemnified party. Should the indemnifying party
so
34
elect to assume the defense of a Third Party Claim, the indemnified party shall
have the right to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the indemnifying party
(except that, for any period following receipt of notice of any Third Party
Claim during which the indemnifying party has failed to assume the defense of
such claim, the indemnifying party shall pay such fees and expenses as
incurred), it being understood that the indemnifying party shall control such
defense; PROVIDED, that the indemnifying party shall not take any action in the
conduct of such defense that would materially adversely affect the indemnified
party without the consent of the indemnified party. The indemnified party shall
also have the right to employ no more than one separate counsel for all
indemnified parties (and no more than one local counsel in any jurisdiction
where it is reasonably necessary) not reasonably objected to by the indemnifying
party, at the expense of the indemnifying party, but only if: (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party or
parties would present such counsel with a conflict of interest, (ii) the actual
or potential defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or are in addition to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall in writing authorize the
indemnified party to employ separate counsel at the expense of the indemnifying
party.
(c) If the indemnifying party elects to assume the defense of any
Third Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation
shall include (upon the indemnifying party's reasonable request) the provision
to the indemnifying party of existing records and information which are
reasonably relevant to such Third Party Claim, and making themselves (in the
case of individuals) and using reasonable best efforts to make their employees
and their Representatives, if any, available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder, and to attend depositions, give testimony or otherwise appear at any
trial or hearing to the extent reasonably requested by the indemnifying party.
Whether or not the indemnifying party shall have assumed the defense of a Third
Party Claim, the indemnifying party shall not admit any liability with respect
to, or settle, compromise or discharge, such Third Party Claim without the
indemnified party's prior written consent (which consent shall not be
unreasonably withheld). If the indemnifying party shall have assumed the
defense of a Third Party Claim, the indemnified party shall agree to any
settlement, compromise or discharge of a Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim, and which would not otherwise adversely
affect the indemnified party.
(d) Notwithstanding the foregoing, the indemnifying party shall not be
entitled to assume the defense of any Third Party Claim (but shall be liable for
the reasonable fees and expenses of counsel incurred by the indemnified party in
defending such Third Party Claim, which fees and expenses the indemnifying party
shall pay as incurred in advance of the final disposition of such Third Party
Claim) if the Third Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the indemnified party
which
35
the indemnified party reasonably determines, after conferring with its outside
counsel, cannot be separated from any related claim for money damages; PROVIDED,
HOWEVER, that the foregoing shall not apply to any Third Party Claim prior to
the Closing seeking to enjoin or otherwise prevent, prohibit or impede the
consummation of the Transactions, which Third Party Claim prior to the Closing
shall be defended jointly by the indemnifying party and the indemnified party,
it being understood and agreed that (i) only one counsel (plus only one local
counsel in any jurisdiction where it is reasonably necessary) shall be permitted
for all of the indemnified parties and (ii) if the parties cannot in good faith
agree on a particular matter, such dispute shall be resolved in good faith by
the indemnifying party, with a good faith effort to balance the interests of
both the indemnified parties and the indemnifying party. If such equitable
relief or other relief portion of the Third Party Claim can be so separated from
that for money damages, the indemnifying party shall be entitled to assume the
defense of the portion relating to money damages. In the event that the
indemnifying party is not permitted to assume the defense of any Third Party
Claim pursuant to this Section 6.5(d), the indemnified party shall not agree to
any settlement, compromise or discharge of such Third Party Claim which by its
terms obligates the indemnifying party to pay any monetary damages or otherwise
imposes any obligation on the indemnifying party without the prior written
consent of the indemnifying party.
(e) In the event that the indemnified party is entitled to retain
counsel at the indemnifying party's expense in accordance with Section 6.5(b) or
Section 6.5(d), the indemnifying party shall reimburse the indemnified party for
the reasonable fees, costs and expenses of such counsel upon presentation of
invoices detailing with reasonable specificity the nature of the services
provided and the basis of the fees, costs and expenses incurred.
6.6 OTHER CLAIMS. In the event any indemnified party should have a
claim against any indemnifying party under Section 6.1 (other than Section
6.1(b)(ii)) or 6.2 that does not involve a Third Party Claim, the indemnified
party shall deliver notice of such claim (stating with reasonable specificity
the basis and amount of the claim) with reasonable promptness to the
indemnifying party.
6.7 ARBITRATION. In the event that any parties are unable to resolve
any dispute as to whether an indemnified party is entitled to indemnification
hereunder and/or the amount of the related claim, the exclusive method for
resolving such dispute shall be binding, nonappealable arbitration in New York,
New York initiated by a party by a written notice to the other party demanding
arbitration and specifying the claim to be arbitrated. Such arbitration shall
be conducted pursuant to the Expedited Procedures of the Commercial Arbitration
Rules ("RULES") of the American Arbitration Association ("AAA"), with the
following modifications. The party initiating arbitration (the "CLAIMANT")
shall appoint its arbitrator in its request for arbitration (the "REQUEST").
The other party (the "RESPONDENT") shall appoint its arbitrator within 15
Business Days of receipt of the Request and shall notify the Claimant of such
appointment in writing. If the Respondent fails to appoint an arbitrator within
such 15 Business Day period, the arbitrator named in the Request shall decide
the controversy or claim as a sole arbitrator. Otherwise, the two arbitrators
appointed by the parties shall appoint a third arbitrator within 15 Business
Days after the Respondent has notified Claimant of the appointment of the
Respondent's arbitrator. When the third arbitrator has accepted the
appointment, the two party-appointed arbitrators shall promptly notify the
parties of such appointment. If the two arbitrators appointed by the parties
fail or are unable to so appoint a third arbitrator, then the appointment of the
third arbitrator shall be made by the AAA, which shall promptly notify the
parties of the appointment. The third
36
arbitrator shall act as chairperson of the panel. Upon appointment of the third
arbitrator, the arbitrators shall proceed to commence and conduct all
proceedings promptly and in accordance with the Rules. The arbitral award shall
be in writing and shall be final and binding on the parties to the arbitration.
The arbitrator shall be instructed to award costs, including reasonable
attorneys' fees and disbursements, which shall be paid by the party against whom
the award is entered. Judgment upon the award may be entered by any court
having jurisdiction thereof or having jurisdiction over the parties or their
assets, without review of the merits of the award, in accordance with Section
7.11.
ARTICLE VII
GENERAL PROVISIONS
7.1 TERMINATION OR ABANDONMENT OF AGREEMENT. (a) This Agreement may
be terminated and abandoned at any time prior to the Closing:
(i) by mutual consent of Parent and the Partnership in writing;
(ii) by either Parent or the Partnership if the Closing shall not
have occurred prior to the first anniversary of the date of this Agreement
(other than due to the failure of the party seeking to terminate this
Agreement to perform its obligations under this Agreement required to be
performed at or prior to such first anniversary);
(iii) by either Parent or the Partnership if any Governmental
Authority within the United States or any country or other jurisdiction in
which Parent or the Partnership, directly or indirectly, has material
assets or operations shall have issued an order, decree or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
Transactions, and such order, decree, ruling or other action shall have
become final and nonappealable;
(iv) by Parent, if after the date of this Agreement the Company
issues (A) any shares of Company Common Stock (other than upon the
conversion, exercise or exchange of securities outstanding on the date of
this Agreement that are convertible into or exercisable or exchangeable for
shares of Company Common Stock) or (B) any securities convertible into or
exercisable or exchangeable for shares of Company Common Stock which result
in the Voting Power held by the Partnership and the Transferors, together
with the Voting Power represented by all other shares of Company Common
Stock held by Parent and Holdco Sub, falling below 50.1% of the aggregate
Voting Power of all holders of Company Common Stock (assuming the
conversion, exercise or exchange of all securities referred to in clause
(B));
(v) by Parent, in the event that Parent exercises its right to
release the Partnership from certain obligations in accordance with Section
4.2(j); or
(vi) by the Partnership, in the event that Parent exercises its
right to release the Partnership from certain obligations in accordance
with Section 4.2(j).
37
(b) In the event of termination of this Agreement by either Parent or
the Partnership as provided in Section 7.1(a), this Agreement shall forthwith
become void and have no effect, without any liability or obligation on the part
of Parent, Holdco Sub, the Partnership, the Partners, the Transferors and the
Company, other than Article VI and Article VII. Nothing contained in this
Section shall relieve any party for any willful breach of the representations,
warranties, covenants or agreements set forth in this Agreement.
7.2 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, all fees, commissions and other expenses incurred by any party
hereto in connection with the negotiation of this Agreement and the other
transactions contemplated hereby, including any fees and expenses of their
respective counsel, shall be borne by the party incurring such fee or expense.
7.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other parties.
7.4 NOTICES. All notices, requests, demands or other communications
provided herein shall be made in writing and shall be deemed to have been duly
given if delivered as follows:
If to Parent or Holdco Sub:
Northwest Airlines Corporation
5101 Northwest Drive
St. Paul, Minnesota 55111-3034
Attention: General Counsel
Fax: (612) 726-7123
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Robert L. Friedman, Esq.
Fax: (212) 455-2502
If to the Partnership, the Partners or the Transferors:
1992 Air, Inc.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: James J. O'Brien
Fax: (817) 871-4010
with a copy to:
38
Kelly, Hart & Hallman
201 Main Street, Suite 2500
Fort Worth, Texas 76102
Attention: Clive D. Bode, Esq.
F. Richard Bernasek, Esq.
Fax: (817) 878-9280
or to such other address as any party shall have specified by notice in writing
to the other parties. All such notices, requests, demands and communications
shall be deemed to have been received on (i) the date of delivery if sent by
messenger, (ii) on the Business Day following the Business Day on which
delivered to a recognized courier service if sent by overnight courier or (iii)
on the date received, if sent by fax.
7.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS
ENTERED INTO AND TO BE PERFORMED IN NEW YORK AND WITHOUT REGARD TO THE
APPLICATION OF PRINCIPLES OF CONFLICT OF LAWS.
7.6 INTERPRETATION. When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference shall be to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
7.7 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in
this Agreement, neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Parent, prior to or after the
consummation of the transactions contemplated by Sections 2.1 and 2.2, may
assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any wholly owned subsidiary of Parent or any
partnership of which Parent is the general partner, but no such assignment shall
relieve Parent of any of its obligations under this Agreement. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors, assigns
and heirs. It is understood and agreed by the parties that in the event of the
dissolution of any Partner after the date of this Agreement, such Partner's
obligations hereunder shall be borne by the general partner of such Partner, and
thereafter by the general partner of such general partner, and so forth.
7.8 ENTIRE AGREEMENT; NO ORAL WAIVER; CONSTRUCTION. This Agreement
and the agreements, certificates and other documents contemplated hereby and
thereby constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,
understandings and representations, whether oral or written, of the parties in
connection therewith. No covenant or condition or representation not expressed
in this Agreement shall affect or be effective to interpret, change or restrict
this Agreement. No prior drafts of this Agreement and no words or phrases from
any such prior drafts shall be
39
admissible into evidence in any action, suit or other proceeding involving this
Agreement or the transactions contemplated hereby. This Agreement may not be
amended, changed or terminated orally, nor shall any amendment, change,
termination or attempted waiver of any of the provisions of this Agreement be
binding on any party unless in writing signed by the parties hereto. No
modification, waiver, termination, rescission, discharge or cancellation of this
Agreement and no waiver of any provision of or default under this Agreement
shall affect the right of any party thereafter to enforce any other provision or
to exercise any right or remedy in the event of any other default, whether or
not similar. This Agreement has been negotiated by the parties hereto and their
respective legal counsel, and legal or equitable principles that might require
the construction of this Agreement against the party drafting this Agreement
will not apply in any construction or interpretation of this Agreement.
7.9 SEVERABILITY. If any provision of this Agreement (or any portion
thereof) shall be declared by any court of competent jurisdiction to be illegal,
void or unenforceable, all other provisions of this Agreement (and portions
thereof) shall not be affected and shall remain in full force and effect.
7.10 NO THIRD-PARTY RIGHTS. Nothing in this Agreement, expressed or
implied, shall or is intended to confer upon any Person other than the parties
hereto or their respective successors or assigns, any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement.
7.11 SUBMISSION TO JURISDICTION. Each of the parties hereto hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to or arising from this Agreement, or for recognition
and enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the United States of America sitting
in the Southern District of New York or, in the absence of Federal
jurisdiction, the Commercial Part of the Supreme Court of the State of New
York for New York County;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
address for notices to it set forth in Section 7.4; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other appropriate jurisdiction.
7.12 REMEDIES. Each of the parties hereto acknowledges and agrees
that (i) the provisions of this Agreement are reasonable and necessary to
protect the proper and legitimate
40
interests of the other parties hereto, and (ii) the other parties hereto would
be irreparably damaged in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties hereto shall be entitled to
preliminary and permanent injunctive relief to prevent breaches of the
provisions of this Agreement by the other parties hereto without the necessity
of proving irreparable injury or actual damages or of posting any bond, and to
enforce specifically the terms and provisions hereof and thereof, which rights
shall be cumulative and in addition to any other remedy to which the parties
hereto may be entitled hereunder or at law or equity.
7.13 FURTHER ASSURANCES. From time to time, at the reasonable request
of any other party hereto and without further consideration, each party hereto
shall execute and deliver such additional documents and take all such further
action as may be necessary to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
7.14 SURVIVAL OF REPRESENTATIONS. The representations and warranties
in this Agreement and in any certificate delivered pursuant hereto shall survive
the Closing solely for purposes of Article VI and (a) shall terminate at the
Closing with respect to Sections 3.1(g) and (h), the fourth and fifth sentences
of Section 3.2(d), Section 3.3(h) and the fourth and fifth sentences of Section
3.4, (b) shall terminate at the close of business on the first anniversary of
the Closing Date with respect to Section 3.1 (other than Sections 3.1(b), (d),
(g), (h) and (i)), Section 3.2 (other than Sections 3.2(b), (c), (d) and (e))
and Section 3.3 (other than Sections 3.3(b), (c) and (h)), (c) shall terminate
at the close of business on the fourth anniversary of the Closing Date with
respect to Section 3.1(i) and Section 3.2(e) and
(d) shall not terminate with respect to Sections 3.1(b) and (d), Sections 3.2(b)
and (c) and, other than the fourth and fifth sentences, Section 3.2(d), Sections
3.3 (b) and (c) and, other than the fourth and fifth sentences, Section 3.4.
7.15 NO RESTRICTIONS ON DIRECTORS OF THE COMPANY. Notwithstanding
anything to the contrary in this Agreement or the Standstill Agreement, it is
understood and agreed that no provision of this Agreement or the Standstill
Agreement and the transactions contemplated hereby and thereby shall in any way
limit or restrict the actions of any Person to the extent such Person is acting
in such Person's capacity as a director on the Board of Directors of the
Company, and nothing in this Agreement or the Standstill Agreement is intended
to, or shall be deemed to, restrict the exercise of fiduciary duties by any such
Person in such capacity.
IN WITNESS WHEREOF, the parties have executed, delivered and entered
into this Agreement as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By: /s/ Douglas M. Steenland
Name: Douglas M. Steenland
Title: Senior Vice President, General
Counsel and Secretary
NEWBRIDGE PARENT CORPORATION
By: /s/ Douglas M. Steenland
Name: Douglas M. Steenland
Title: Vice President, Secretary and
Assistant Treasurer
AIR PARTNERS, L.P.
1992 AIR GP, a Texas general partnership
By: 1992 Air, Inc., a Texas corporation,
managing partner
By: /s/ David Bonderman
Name: David Bonderman
Title:
THE PARTNERS:
GENERAL PARTNERS:
1992 AIR GP, a Texas general partnership
By: 1992 Air, Inc., a Texas corporation,
general partner
By: /s/ David Bonderman
Name: David Bonderman
Title:
AIR II GENERAL, INC., a Texas corporation
By: /s/ David Bonderman
Name: David Bonderman
Title:
LIMITED PARTNERS:
DAVID BONDERMAN
BONDERMAN FAMILY LIMITED
PARTNERSHIP
ESTATE OF LARRY LEE HILLBLOM
By: Russel K. Snow, Jr.
Managing Executor
Bank of Saipan, Executor
DHL MANAGEMENT SERVICES, INC.
LECTAIR PARTNERS
By: Planden Corp., G.P.
SUNAMERICA INC. (Formerly Broad, Inc.)
ELI BROAD
AMERICAN GENERAL CORPORATION
DONALD STURM
CONAIR LIMITED PARTNERS, L.P.
BONDO AIR LIMITED PARTNERSHIP
By: 1992 Air, Inc.
By: 1992 AIR GP, as attorney-in-fact for the
foregoing
By: 1992 Air, Inc., a Texas
corporation, general partner
By: /s/ David Bonderman
Name: David Bonderman
Title:
AIR SAIPAN, INC., a CNMI corporation
By: /s/ David Bonderman
Name: David Bonderman
Title:
BONDERMAN FAMILY LIMITED
PARTNERSHIP
By: /s/ David Bonderman
Name: David Bonderman
Title:
1992 AIR, INC., a Texas corporation
By: /s/ David Bonderman
Name: David Bonderman
Title:
EXHIBIT 2.2
GOVERNANCE AGREEMENT
Agreement dated as of January 25, 1998, among Continental Airlines,
Inc., a Delaware corporation (the "Company"), Newbridge Parent Corporation, a
Delaware corporation (the "Stockholder"), and Northwest Airlines Corporation, a
Delaware corporation that is the holder of all of the outstanding stock of the
Stockholder ("Parent").
WHEREAS, the Parent, the Stockholder and Air Partners, L.P., a Texas
limited partnership ("AP"), propose to enter into an Investment Agreement (the
"Investment Agreement") dated as of the date hereof, to which the Company is not
a party and, pursuant to which, among other things, and subject to the terms and
conditions to be contained in the Investment Agreement, the Stockholder would
acquire the outstanding interests in AP and the shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), held by certain affiliates of
AP resulting in its Beneficial Ownership of 8,535,868 shares of Class A Common
Stock of the Company (the "Stock Purchase"), and
WHEREAS, Northwest Airlines, Inc., an indirect wholly owned subsidiary
of Parent, and the Company have negotiated a Master Alliance Agreement (the
"Alliance Agreement") dated as of the date hereof and the Company has
conditioned its entering into the Alliance Agreement on the Parent and the
Stockholder entering into this Agreement with the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the Company, the Parent and the Stockholder hereby agree as follows:
SECTION 1
STANDSTILL AND VOTING
Section 1.01. ACQUISITION OF VOTING SECURITIES.
(a) Until the Standstill Termination Date, the Parent and the
Stockholder each covenant and agree that they and their respective Affiliates
will not Beneficially Own any Voting Securities in excess of the Permitted
Percentage; PROVIDED that if any of the following events shall occur: (A) it is
publicly disclosed that Voting Securities representing 15% or more of the Total
Voting Power have been acquired subsequent to the date hereof by any Person or
13D Group (other than (1) any Subsidiary of the Company, any employee benefit
plan of the Company or of any of its Subsidiaries or any Person holding Voting
Securities for or pursuant to the terms of any such employee benefit plan) or
(2) the Parent or the Stockholder, or an Affiliate of, or any Person acting in
concert with, the Parent or the Stockholder, or any Person that has been
induced, in whole or in part, directly or indirectly, by the Parent, the
Stockholder or the Voting Trust to make such acquisition), or (B) a bona fide
tender or exchange offer is made by any Person (other than the Company, the
Parent, the Stockholder, or an Affiliate of, or any Person acting in concert
with, or induced by, directly or indirectly, any of them) to purchase
outstanding shares of Voting Securities representing 15% or more of the Total
Voting Power and such offer is not withdrawn or terminated prior to the
Stockholder acquiring additional Voting Securities, or (C) the Board of
Directors shall approve the acquisition by any Person or 13D
Group of Voting Securities that would otherwise trigger the adverse consequences
of any stockholder rights plan of the Company that may at the time be in effect,
then in any event referred to in clauses (A), (B) or (C) above, notwithstanding
the foregoing provisions of this Section 1.01(a) or any other provisions of this
Agreement, the Parent, the Stockholder and their Affiliates may acquire
additional Voting Securities in any manner, whether in market purchases,
privately negotiated transactions, a tender or exchange offer on any terms or in
any other manner, and the Parent or the Stockholder may submit a competing
proposal or a proposal for a merger or any other type of business combination.
(b) Notwithstanding the provisions of Section 1.01(a), following the
Closing and until the Standstill Termination Date, the Stockholder may purchase
shares of Voting Securities in any manner in order to maintain at the Permitted
Percentage its percentage of the Fully Diluted Voting Power.
(c) Except as expressly provided herein, the Parent and the
Stockholder shall not permit any Affiliate to Beneficially Own any Voting
Securities in excess of the Permitted Percentage.
(d) Except as set forth in the next sentence, if at any time the
Parent or the Stockholder becomes aware that it and its Affiliates Beneficially
Own more than the Permitted Percentage, then the Parent shall promptly notify
the Company, and the Parent and the Stockholder, as appropriate, shall promptly
take all action necessary to reduce the amount of Voting Securities Beneficially
Owned by such Persons to an amount not greater than the Permitted Percentage.
If Voting Securities Beneficially Owned by the Stockholder and its Affiliates
exceed the Permitted Percentage (i) solely by reason of repurchases of Voting
Securities by the Companyor (ii) as a result of the transactions otherwise
permitted by the terms of this Agreement, then the Stockholder shall not be
required to reduce the amount of Voting Securities Beneficially Owned by such
Persons and the percentage of the Fully Diluted Voting Power represented by the
Voting Securities Beneficially Owned by such Persons shall become the Permitted
Percentage.
Section 1.02. RESTRICTIONS ON TRANSFER. Prior to the Standstill
Termination Date, neither the Stockholder nor the Parent will Transfer or permit
any of their respective Affiliates to Transfer any Voting Securities except for:
(i) Transfers of Voting Securities pursuant to any tender or exchange offer to
acquire Voting Securities approved and recommended by the Company's Board of
Directors (which recommendation has not been withdrawn); (ii) Transfers of
Voting Securities to the Stockholder provided that such Voting Securities are
immediately transferred to the public stockholders of the Stockholder by means
of a PRO RATA dividend or other PRO RATA distribution; (iii) Transfers of Voting
Securities by the Stockholder to any of its controlled Affiliates, provided that
such Affiliate agrees to be bound by the provisions of this Agreement applicable
to the Stockholder; (iv) Transfers of the Shares by the Voting Trust to the
Stockholder upon termination of the Voting Trust; (v) Transfers of Voting
Securities by the Stockholder pursuant to Section 4.1(d) of the Investment
Agreement or Section 5 of this Agreement; and (vi) Transfers of Voting
Securities by the Stockholder to any transferee who, together with its
Affiliates and Associates, would not, to the knowledge of Parent or the
Stockholder, Beneficially Own in excess of 10% of the Voting Power as a result
of such
2
Transfer; PROVIDED that no such Transfers under clauses (i) or (iii) of this
Section 1.02 may be made to any Person (including such Person's Affiliates and
any Person or entities which are part of any 13D Group which includes such
transferee or any of its Affiliates) that, after giving effect to such Transfer,
would to the knowledge of Parent or the Stockholder Beneficially Own Voting
Securities representing more than 10% of the Total Voting Power.
Section 1.03. VOTING TRUST. Immediately following the Closing, the
Stockholder and the Parent shall cause AP to deposit the Shares, and the
Stockholder and the Parent shall deposit any other shares of Voting Securities
Beneficially Owned by either of them or any of their Affiliates, into a voting
trust (the "Voting Trust") to be established pursuant to a voting trust
agreement (the "Voting Trust Agreement") with an independent voting trustee in a
form reasonably satisfactory to Parent and the Company and which shall include
the following provisions for the voting of the shares of Voting Securities
deposited therein: until the Standstill Termination Date, all such shares shall
(a) be voted or consented on all matters submitted to a vote of the Company's
stockholders, other than the election of directors, at the option of the
Stockholder, either (i) as recommended by the Board of Directors or (ii) (A) in
the case of votes at a stockholders meeting, in the same proportion as the votes
cast by other holders of Voting Securities, and (B) in the case of consents, so
that the percentage of Stockholder Voting Power consented to on any matter
equals the percentage of all other outstanding Voting Securities so consented;
PROVIDED, that with respect to (x) any vote on a merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, any sale of all or
substantially all of the Company's assets or any issuance of Voting Securities
that would represent in excess of 20% of the Voting Power prior to such
issuance, including any of the foregoing involving the Stockholder or the
Parent, or (y) any amendment to the Company's amended and restated certificate
of incorporation or by-laws that would materially and adversely affect the
Stockholder (including through its effect on the Alliance Agreement and the
rights of the Voting Securities Beneficially Owned by the Stockholder), such
shares may be voted as directed by the Stockholder and (b) in the election of
directors, for the election of the Independent Directors nominated by the Board
of Directors of the Company determined by a Majority Vote; PROVIDED, that with
respect to any election of directors in respect of which any Person other than
the Company is soliciting proxies, the Stockholder and the Parent shall cause
all such shares to be voted, at the option of the Stockholder, either (i) as
recommended by the Board of Directors or (ii) in the same proportion as the
votes cast by the other holders of Voting Securities. The Voting Trust
Agreement shall also provide that the Voting Trust shall not issue voting trust
certificates or any interest in the Voting Trust to a Person other than the
Stockholder or any of its Affiliates.
Section 1.04. FURTHER RESTRICTIONS ON CONDUCT. The Parent and the
Stockholder, as applicable, covenant and agree that until the Standstill
Termination Date:
(a) except by virtue of the Stockholder's representation on the Board
of Directors of the Company, if any, in connection with the performance of the
Alliance Agreement and the subsequent negotiations and agreements contemplated
thereby, neither the Parent, the Stockholder nor any of their respective
Affiliates will otherwise act, alone or in concert with others, to seek to
affect or influence the Board of Directors or the control of the management of
the Company or the businesses, operations, affairs, financial matters or
policies of the Company
3
(it being agreed that this paragraph shall not prohibit the Parent and its
Subsidiaries, and their respective employees from engaging in ordinary course
business activities with the Company);
(b) other than in connection with the deposit of the Shares and other
Voting Securities into the Voting Trust as required by Section 1.03, the
Stockholder shall not deposit any Voting Securities into any voting trust or
subject any Voting Securities to any proxy (other than any revocable proxy to
vote the Shares in a manner consistent with Sections 1.03 and 2.01 hereof),
arrangement or agreement with respect to the voting or consenting with respect
to such Voting Securities or other agreement having similar effect;
(c) neither the Parent, the Stockholder nor any of their respective
Affiliates shall initiate or propose any stockholder proposal or action or make,
or in any way participate in or encourage, directly or indirectly, any
"solicitation" of "proxies" to vote or written consents, or seek to influence
any Person with respect to the voting of or consenting with respect to, any
Voting Securities, or become a "participant" in a "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act, as in effect on the date
hereof) in any election contest with respect to the election or removal of the
Independent Directors or in opposition to the recommendation of the majority of
the directors of the Company with respect to any other matter;
(d) other than as is contemplated by this Agreement, neither the
Parent, the Stockholder, the Voting Trust nor any of their respective Affiliates
shall join a partnership, limited partnership, syndicate or other group, or
otherwise act in concert with any other Person, for the purpose of acquiring,
holding, voting or disposing of Voting Securities, or, otherwise become a
"person" within the meaning of Section 13(d)(3) of the Exchange Act;
(e) neither the Parent nor the Stockholder shall transfer its
partnership interests in AP, nor cause or permit AP to admit new partners;
(f) each of the Parent and the Stockholder shall, and shall cause its
Affiliates to, deposit into the Voting Trust such additional shares of Voting
Securities as they may acquire after the Closing; and
(g) neither the Parent nor the Stockholder nor any of their
respective Affiliates shall take any action inconsistent with the foregoing;
PROVIDED that the restrictions set forth in Sections 1.04 (a), (b), (c) and (d)
of this Agreement shall not apply to (i) any vote by the Parent or the
Stockholder described in clauses (x), (y) or (z) of Section 1.03 of this
Agreement, (ii) any Stockholder Designee acting in his or her capacity as a
director of the Company, (iii) Northwest Airlines, Inc. acting as an alliance
partner pursuant to the Alliance Agreement, (iv) the Parent or the Stockholder
seeking a merger with the Company following the Company's delivery of a
Termination Notice pursuant to Section 21 of the Alliance Agreement or (v) any
action taken as permitted by Section 1.01(a).
Section 1.05 REPORTS. During the term of this Agreement, the
Stockholder shall deliver to the Company, promptly after any Transfer of Voting
Securities by the Stockholder, the Voting Trust or their respective Affiliates,
an accurate written report specifying the amount and
4
class of Voting Securities so Transferred and the amount of each class of Voting
Securities owned by them after giving effect to such Transfer; PROVIDED,
HOWEVER, that such reporting obligation may be satisfied with respect to any
such Transfer that is reported in a statement on Schedule 13D pursuant to the
Exchange Act and the rules thereunder by delivering promptly to the Company a
copy of such Schedule 13D statement. The Company shall be entitled to rely on
such reports and statements on Schedule 13D for all purposes of this Agreement.
SECTION 2
BOARD OF DIRECTORS AND RELATED MATTERS
Section 2.01. COMPOSITION OF BOARD OF DIRECTORS.
(a) Immediately after the consummation of the Stock Purchase (the
"Closing"), the Board of Directors shall take such corporate actions as are
necessary to cause an individual designated by the Stockholder and reasonably
acceptable to the Board of Directors, which designee shall not be an officer or
an employee of the Parent, the Stockholder or the Company or any of their
respective Affiliates, or any person who shall have served in any such capacity
within the three-year period immediately preceding the date such determination
is made (the "Stockholder Designee"), to be appointed to the Board of Directors.
The directors comprising the Board of Directors immediately after the Closing
shall be otherwise unchanged from those as of the date of this Agreement, and
the individuals listed on Exhibit 2.01 hereto shall, for the purposes of this
Agreement, constitute the Independent Directors at such time.
(b) Following the Closing and until the Standstill Termination Date,
the Company, the Parent, the Stockholder and their respective Affiliates shall
take all such actions as are required under applicable law to cause Independent
Directors to constitute at all times at least a majority of the Board of
Directors. At each annual meeting of stockholders of the Company following the
Closing, or at any time that a vacancy in a seat previously occupied by an
Independent Director on the Board of Directors is to be filled, the identity of
the Independent Director or Directors to stand for election to the Board of
Directors or to fill the vacancy, as the case may be, shall be determined by a
Majority Vote.
(c) Following the Closing and until the Standstill Termination Date,
upon the death, resignation or disability of any Stockholder Designee, the
Company shall take all such corporate actions as are necessary to cause a
successor individual designated by the Stockholder and reasonably acceptable to
the Board of Directors of the Company by a Majority Vote, which designee shall
not be an officer or an employee of the Parent, the Stockholder or the Company
or any of their respective Affiliates, or any person who shall have served in
any such capacity within the three-year period immediately preceding the date
such determination is made, to be appointed to the Board of Directors.
(d) Without the prior written consent of the Parent, the Company
shall not amend, alter or repeal its amended and restated certificate of
incorporation or by-laws so as to eliminate or diminish the ability of
stockholders of the Company to act by written consent or Section 1.10 of the
Company's by-laws.
5
Section 2.02. TRANSACTIONS INVOLVING THE STOCKHOLDER. The parties
agree that any material transaction between the Company and the Parent, the
Stockholder or any of their respective Affiliates, or relating to this Agreement
or the Alliance Agreement, including without limitation, any amendment,
modification or waiver of any provision hereof or thereof, shall not be taken
without the prior approval thereof by a Majority Vote.
Section 2.03. SIGNIFICANT ACTIONS. Promptly following the Closing,
the Company shall amend its by-laws to provide that no action described in
Exhibit 2.03 hereto may be taken without prior approval thereof by a Majority
Vote.
Section 2.04. MANAGEMENT OF THE BUSINESS. Following the Closing and
until the Standstill Termination Date, except as indicated in Section 2.02
above, management of the Company will continue to have full authority to operate
the day-to-day business affairs of the Company to the same extent as prior to
the Closing. In this regard, the Chief Executive Officer of the Company shall
continue to be in charge of all matters within his authority on the date hereof,
subject, as required by Delaware law, to the requirement that the business and
affairs of the Company shall be managed by or under the direction of the Board
of Directors.
Section 2.05. EXECUTIVE COMMITTEE. Prior to the Closing, the Company
shall cause the authority of the Executive Committee of the Company's Board of
Directors to be modified to the reasonable satisfaction of the Parent, to permit
such committee to approve only ordinary course transactions in which the Company
engages from time to time, but which nonetheless require approval by the Board
of Directors.
SECTION 3
COVENANTS
Section 3.01. LEGENDS. The Company shall cooperate and instruct its
transfer agent and registrar to place legends on all shares of Class A Common
Stock (and the Warrants) held by AP or any of its Affiliates to reflect that
such shares are subject to the restrictions on voting and transfer set forth in
the Investment Agreement and in this Agreement.
Section 3.02. ISSUANCE OF CLASS A COMMON STOCK. The Company shall
not issue any additional shares of Class A Common Stock (except upon exercise of
the Warrants outstanding as of the date hereof) or securities convertible into
or exercisable or exchangeable for shares of Class A Common Stock or enter into
any agreement or arrangement to do the same without giving the Stockholder pre-
emptive rights which shall permit the Stockholder to acquire shares of Class A
Common Stock concurrently with any such issuance.
Section 3.03. ISSUANCE OF CLASS B COMMON STOCK. The Company shall
not, without giving the Stockholder pre-emptive rights, issue shares of Class B
Common Stock, par value $.01 per share, of the Company (the "Class B Common
Stock"), or securities convertible into or exercisable or exchangeable for
shares of Class B Common Stock except to the extent that such shares (including
underlying shares, in the case of securities convertible into or exercisable or
exchangeable for shares of Class B Common Stock) (a) in the case of such shares
or convertible securities issued for the purpose of fulfillment of the Company's
obligations under
6
any present or future stock option plan, do not exceed the number of shares
issued under such plans consistent with past practices, (b) in the case of such
shares or convertible securities issued for any other purpose, do not exceed in
the aggregate 5% of the outstanding shares of Class B Common Stock on the date
of the Investment Agreement or (c) are issued pursuant to options, warrants or
convertible securities issued and outstanding on, or commitments to issue such
shares that are in effect on, the date hereof and which are disclosed in Section
4.01(b).
Section 3.04. CONVERSION; INTERESTED STOCKHOLDERS. The Company shall
not seek a vote of its stockholders, approving any amendment to the Company's
amended and restated certificate of incorporation or by-laws, nor shall it take
any other action, that would, without the consent of the Parent, (a) eliminate
AP's right in Section 2(e) of the Company's amended and restated certificate of
incorporation to convert shares of Class A Common Stock into shares of Class D
Common Stock, par value $.01 per share, (b) cause Section 203 of the Delaware
General Corporation laws to be applicable to the Company or (c) adopt an
"interested stockholders" provision.
Section 3.05. TRANSFER OF VOTING TRUST CERTIFICATES. Prior to the
Standstill Termination Date, the Stockholder shall not Transfer the voting trust
certificates issued to it by the Voting Trust or any interest in the Voting
Trust represented thereby.
Section 3.06. CONDUCT. Each of the Company, the Parent and the
Stockholder agrees that from the date hereof until the Closing, except as
otherwise contemplated by this Agreement or with the prior written consent of
the other, it and its subsidiaries shall not (a) change its principal line of
business, (b) change the fundamental nature of its business or (c) dispose of
any substantial portion of its assets.
Section 3.07. NO SOLICITATION.
(a) From the date hereof until the Closing, the Company and its
subsidiaries, and the officers, directors, financial or legal advisors of the
Company and its subsidiaries will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Acquisition Proposal or (ii) engage
in negotiations with, or disclose any nonpublic information relating to the
Company or any of its subsidiaries or afford access to the properties, books or
records of the Company or any of its subsidiaries to, any person that may be
considering making, or has made, an Acquisition Proposal; PROVIDED that, the
Company may, in response to an unsolicited written proposal from a third party
regarding an Acquisition Proposal engage in the activities specified in clause
(ii), if the Board of Directors of the Company determines in good faith, after
obtaining and taking into account the advice of outside counsel, that such
action is required for the Board of Directors of the Company to comply with its
fiduciary duties under applicable law. The Company will promptly (and in no
event later than 24 hours after having received the relevant Acquisition
Proposal) notify the Parent (which notice shall be provided orally and in
writing and shall identify the person making the Acquisition Proposal and set
forth the material terms thereof) after having received any Acquisition
Proposal, or request for nonpublic information relating to the Company or any of
its subsidiaries or for access to the properties, books or records of the
Company or any of its subsidiaries by any person who is considering making or
has made an Acquisition Proposal. The Company will, to the extent consistent
with the fiduciary duties of
7
the Company's Board of Directors under applicable law, keep the Parent fully
informed of the status and details of any such Acquisition Proposal or request.
The Company shall, and shall cause its subsidiaries, and shall instruct the
directors, officers and financial and legal advisors of the Company and its
subsidiaries to, cease immediately and cause to be terminated all activities,
discussions or negotiations, if any, with any persons conducted heretofore with
respect to any Acquisition Proposal. Notwithstanding any provision of this
Section, nothing in this Section shall prohibit the Company or its Board of
Directors from taking and disclosing to the Company's stockholders a position
with respect to an Acquisition Proposal by a third party to the extent required
under the Exchange Act or from making such disclosure to the Company's
stockholders which, in the judgment of the Board of Directors, taking into
account the advice of outside counsel, is required under applicable law;
PROVIDED that nothing in this sentence shall affect the obligations of the
Company and its Board of Directors under any other provision of this Agreement.
(b) From the date hereof until the Closing, the Parent and its
subsidiaries, and the officers, directors, financial or legal advisors of the
Parent and its subsidiaries will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Acquisition Proposal or (ii) engage
in negotiations with, or disclose any nonpublic information relating to the
Parent or any of its subsidiaries or afford access to the properties, books or
records of the Parent or any of its subsidiaries to, any person that may be
considering making, or has made, an Acquisition Proposal; PROVIDED that, the
Parent may, in response to an unsolicited written proposal from a third party
regarding an Acquisition Proposal engage in the activities specified in clause
(ii), if the Board of Directors of the Parent determines in good faith, after
obtaining and taking into account the advice of outside counsel, that such
action is required for the Board of Directors of the Parent to comply with its
fiduciary duties under applicable law. The Parent will promptly (and in no
event later than 24 hours after having received the relevant Acquisition
Proposal) notify the Company (which notice shall be provided orally and in
writing and shall identify the person making the Acquisition Proposal and set
forth the material terms thereof) after having received any Acquisition
Proposal, or request for nonpublic information relating to the Parent or any of
its subsidiaries or for access to the properties, books or records of the Parent
or any of its subsidiaries by any person who is considering making or has made
an Acquisition Proposal. The Parent will, to the extent consistent with the
fiduciary duties of the Parent's Board of Directors under applicable law, keep
the Company fully informed of the status and details of any such Acquisition
Proposal or request. The Parent shall, and shall cause its subsidiaries, and
shall instruct the directors, officers and financial and legal advisors of the
Parent and its subsidiaries to, cease immediately and cause to be terminated all
activities, discussions or negotiations, if any, with any persons conducted
heretofore with respect to any Acquisition Proposal. Notwithstanding any
provision of this Section, nothing in this Section shall prohibit the Parent or
its Board of Directors from taking and disclosing to the Parent's stockholders a
position with respect to an Acquisition Proposal by a third party to the extent
required under the Exchange Act or from making such disclosure to the Parent's
stockholders which, in the judgment of the Board of Directors, taking into
account the advice of outside counsel, is required under applicable law;
PROVIDED that nothing in this sentence shall affect the obligations of the
Parent and its Board of Directors under any other provision of this Agreement.
8
SECTION 4
REPRESENTATIONS AND WARRANTIES
Section 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. (a)
The Company represents and warrants to the Parent and the Stockholder that (i)
the Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, (ii) the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transactions contemplated
hereby, and (iii) this Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company, and is
enforceable against the Company in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including concepts of
materiality, reasonableness, good faith and fair dealing, regardless of whether
in a proceeding at equity or at law).
(b) COMPANY CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 10,000,000 shares of Preferred Stock, par value $.01 per
share ("COMPANY PREFERRED STOCK"), and (ii) (x) 50,000,000 shares of Class A
Common Stock, (y) 200,000,000 shares of Class B Common Stock and (z) 50,000,000
shares of Class D Common Stock. As of the close of business on December 31,
1997, there were (i) no shares of Company Preferred Stock, 8,379,464 shares of
Class A Common Stock, 50,512,010 shares of Class B Common Stock and no shares of
Class D Common Stock issued and outstanding; (ii) no shares of capital stock of
the Company held in the treasury of the Company; (iii) 5,991,472 shares of
Class B Common Stock reserved for issuance upon exercise of outstanding stock
options of the Company pursuant to the Company's employee stock option and
similar plans; (iv) 7,617,155 shares of Class B Common Stock reserved for
issuance upon the conversion of the Company's outstanding 6-3/4% Convertible
Subordinated Notes due 2006; (v) 10,311,208 shares of Class B Common Stock
reserved for issuance upon the conversion of the Company's outstanding 8-1/2%
Convertible Subordinated Deferrable Interest Debentures due 2020; (vi) 3,039,468
shares of Class A Common Stock issuable upon exercise of the Warrants; and
(vii) 308,343 shares of Class B Common Stock issuable upon exercise of the
Warrants. Except as described in the immediately preceding sentence, there are
no securities of the Company (or any of its affiliates) currently outstanding
that are convertible into or exercisable or exchangeable for shares of Company
Common Stock other than (a) options to purchase shares of Class B Common Stock
granted in accordance with past practice pursuant to stock option and similar
plans, (b) options to purchase shares of Class B Common Stock granted pursuant
to the Company's 1997 Employee Stock Purchase Plan, (c) shares of Class A Common
Stock, which are convertible into shares of Class B Common Stock or Class D
Common Stock on a one-for-one basis and (d) commitments to issue not in excess
of 25,000 shares of Class B Common Stock to correct record-keeping errors in
connection with the Company's 1994 Employee Stock Purchase Plan. All
outstanding shares of the Company's capital stock are duly authorized, validly
issued, fully paid and non-assessable.
9
Section 4.02. REPRESENTATIONS AND WARRANTIES OF THE PARENT. The
Parent represents and warrants to the Company that (a) it and the Stockholder
are corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and each has the power and authority to enter into
this Agreement and to carry out its respective obligations hereunder, (b) the
execution and delivery of this Agreement by the Parent and the Stockholder and
the consummation thereby of the transactions contemplated hereby have been duly
authorized by all necessary action on their parts and no other proceedings on
their parts are necessary to authorize this Agreement or any of the transactions
contemplated hereby, and (c) this Agreement has been duly executed and delivered
by the Parent and the Stockholder and constitutes a valid and binding obligation
of each of them, and is enforceable against each of them in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including
concepts of materiality, reasonableness, good faith and fair dealing, regardless
of whether in a proceeding at equity or at law).
SECTION 5
TERMINATION OF ALLIANCE AGREEMENT
Section 5.01. STOCKHOLDER'S ELECTION. Within thirty (30) days
following the delivery by the Company of a Termination Notice pursuant to
Section 21(a) of the Alliance Agreement, the Parent shall make an election (an
"Election") of either the merger procedures specified in Section 5.02 (the
"Merger Procedures") or the stock sale procedure specified in Section 5.03 (the
"Stock Sale Procedure") by delivering to the Company a Notice of Election. If
the Stockholder initially elects the Merger Procedure (a "Merger Election"), it
may at any time prior to the execution by the Parent and the Company of a
definitive agreement for a merger transaction, upon written notice to the
Company, irrevocably elect to abandon the Merger Procedure and elect the Stock
Sale Procedure, in which latter event the Parent shall have 18 months following
its election of the Stock Sale Procedure to consummate the sale of its shares.
If the Stockholder initially elects the Stock Sale Procedure (the "Stock Sale
Election"), it may not, at any time thereafter, make a Merger Election. If the
Stockholder fails timely to make an Election, it shall be deemed to have made a
Stock Sale Election.
Section 5.02. MERGER PROCEDURE. (a) If the Stockholder makes a
Merger Election, it shall within 30 days after doing so submit a notice to the
Company setting forth the material terms and conditions upon which it would
propose to acquire the Voting Securities not Beneficially Owned by it and its
Affiliates (the "Merger Proposal"). After the Merger Election, the Company
shall promptly establish a committee of the Board of Directors (the "Special
Committee") composed of only, and at least three (3), Independent Directors as
determined by a Majority Vote, which shall have the authority to consider,
review, and negotiate the terms of, and to make a recommendation to the full
Board of Directors regarding, the Merger Proposal, and to retain, at the
Company's expense, counsel, financial advisors and other advisors, and to take
such other actions customarily delegated to a committee of independent directors
in similar circumstances. If the Stockholder submits a Merger Proposal, the
Stockholder and the Special Committee shall negotiate in good faith and use
their best efforts to agree upon the terms of a merger at the earliest
practicable date consistent with the Special Committee's fiduciary duties.
10
(b) (i) If the Stockholder and the Company do not enter into a
definitive merger agreement within six (6) months of the establishment of the
Special Committee, on the third day after the six month anniversary of the
establishment of the Special Committee (the "Initiation Date"), the Company will
designate an investment banking firm of recognized national standing (the
"Company's Appraiser") and the Stockholder will designate an investment banking
firm of recognized national standing (the "Parent's Appraiser"), in each case to
determine the "Merger Value". The Stockholder acknowledges and agrees that the
consideration that would constitute the Merger Value is the price per share of
Voting Securities that an unrelated third party would pay if it were to acquire
all outstanding shares of Voting Securities (other than the shares held by the
Stockholder and its Affiliates) in one or more arm's-length transactions,
assuming that the Shares were being sold in a manner designed to attract all
possible participants. Each of the investment banking firms referred to herein
will be instructed to determine the Merger Value in this manner.
(ii) Within thirty (30) days after the Initiation Date, the Company's
Appraiser and the Parent's Appraiser will each determine its initial view as to
the Merger Value and consult with one another with respect thereto. By the 45th
day after the Initiation Date, the Company's Appraiser and the Parent's
Appraiser will each have determined its final view as to the Merger Value. At
that point, if the Higher Appraised Amount (as defined below) is not more than
110% of the Lower Appraised Amount (as defined below), the Merger Value will be
the average of those two views. Otherwise, the Company's Appraiser and the
Parent's Appraiser will agree upon and jointly designate a third investment
banking firm of recognized national standing (the "Mutually Designated
Appraiser") to determine its view of the Merger Value. The Mutually Designated
Appraiser will not be permitted to see or otherwise have access to, or be
informed of, the results of the appraisals of Merger Value by the Company's
Appraiser and the Parent's Appraiser, or any component of either appraiser's
analysis which led to its conclusions, and each of the Parent and the Company
agree to comply with the foregoing provision. The Mutually Designated appraiser
will, no later than the 65th day after the Initiation Date, determine the Merger
Value (the "Mutually Appraised Amount"). The Merger Value will be (x) the
Mutually Appraised Amount, if such amount falls within the range of values that
is between the Lower Appraised Amount and the Higher Appraised Amount, (y) the
Lower Appraised Amount if such amount is below the Lower Appraised Amount, and
(z) the Higher Appraised Amount if such amount is above the Higher Appraised
Amount.
As used herein, "Lower Appraised Amount" means the lower of the
respective final views of the Company's Appraiser and the Parent's Appraiser as
to the Merger Value and "Higher Appraised Amount" means the higher of such
respective final views.
The Company and the Parent shall be responsible for the payment of
fees and expenses to the respective investment banking firms designated by them,
and shall each be responsible for 50% of the fees and expenses payable to the
Mutually Designated Appraiser.
(iii) If, within fifteen (15) days of the determination of the
Merger Value as provided above (such fifteenth day being referred to as the
"Trigger Date"), (A) the Stockholder is unwilling to enter into a definitive
merger agreement at the Merger Value, then the Stockholder shall be required to
dispose of the shares of Voting Securities Beneficially Owned
11
by it and its Affiliates pursuant to the Stock Sale Procedure within eighteen
(18) months of the Trigger Date or (B) the Company's Board of Directors and the
Special Committee are unwilling to approve and recommend a definitive merger
agreement at the Merger Value, then the provisions of this Agreement (other than
Section 7) shall terminate in all respects.
5.03. STOCK ELECTION PROCEDURE. (a) If the Stockholder makes a Stock
Sale Election, then it shall, within twenty-four (24) months of the delivery of
the Termination Notice, sell the shares of Voting Securities Beneficially Owned
by it and its Affiliates (the "Selling Stockholders"), at its option, either
(i) in one or a series of privately negotiated sales of 15% or more of Voting
Securities Beneficially Owned by the Selling Stockholders (each, a "Private
Sale" and together, "Private Sales") or (ii) in any other manner that the
Selling Stockholders elect in their sole discretion.
(b) Each Selling Stockholder shall give the Company fifteen (15)
days' prior written notice of its intention to effect a Private Sale, which
notice (a "Sales Notice") shall include the material terms and conditions of the
Private Sale, the date that the sale is expected to close, and the proposed
purchaser or purchasers. A Sales Notice given with respect to a Private Sale
shall also include a certification by such Stockholder that the Private Sale
described therein is to a BONA FIDE purchaser who such Stockholder reasonably
believes has the financial resources to complete the sale and would not be
prohibited by law or regulation from doing so.
(c) The Company may, by action of its Board of Directors upon a
Majority Vote, by notice to such Stockholder given not more than twenty (20)
days after the Sales Notice, reject a Private Sale (or a series of
contemporaneous Private Sales) based upon its good faith determination that the
sale or sales to such prospective purchaser (or purchasers) would be injurious
to the interests of the Company and the holders of the Company's Voting
Securities (other than such Stockholder and its Affiliates) by virtue of the
prior business practices of such prospective purchaser or purchasers, it being
understood in that regard that the fact that such purchaser is an airline or is
affiliated with an airline shall not be the basis for any such determination nor
shall the fact that the Board of Directors concludes that wide dispersal of the
ownership of Voting Securities is in the best interests of the Company's
stockholders. Upon receiving notice of such determination, the Stockholder and
its Affiliates shall terminate discussions with such prospective purchaser or
purchasers. The Company's right to reject a purchaser (or purchasers) under
this Section shall be exercised only once and, upon its exercise, the Company
shall have no such further rights.
SECTION 6
MISCELLANEOUS
Section 6.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy)
and shall be given,
if to the Company, to:
Continental Airlines, Inc.
2929 Allen Parkway
12
Houston, Texas 77019
Fax: (713) 834-2687
Attention: General Counsel
with a copy to:
Morris, Nichols, Arsht & Tunnell
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
Fax: (302) 658-3989
Attention: A. Gilchrist Sparks, III
if to the Parent, to:
Northwest Airlines Corporation
5101 Northwest Drive
St. Paul, Minnesota 55111
Fax: (612) 726-7123
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Robert L. Friedman, Esq.
Fax: (212) 455-2502
if to the Stockholder, to:
Newbridge Parent Corporation
5101 Northwest Drive
St. Paul, Minnesota 55111
Attention: General Counsel
Fax: (612) 726-7123
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Fax: (212) 455-2502
Attention: Robert L. Friedman, Esq.
or such address or telecopy number as such party may hereafter specify for the
purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective
13
when delivered personally, telegraphed, or telecopies, or, if mailed, five
business days after the date of the mailing.
Section 6.02. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver has been approved pursuant to Section 2.02 and
is in writing and signed, in the case of an amendment, by the parties hereto, 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 6.03. 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 permitted assigns.
Section 6.04. GOVERNING LAW; CONSENT TO JURISDICTION. (a) This
Agreement shall be construed in accordance with and governed by the internal
laws of the State of Delaware.
(b) 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 may be brought in any federal court
located in the State of Delaware or any Delaware state court, and each of the
parties hereby consents to the exclusive 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
which 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 which is being brought in any such court has been brought in an
inconvenient form. 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 6.01 shall be deemed
effective service of process on such party.
Section 6.05. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts thereof signed by the other party hereto.
Section 6.06. SPECIFIC PERFORMANCE. The parties hereto each
acknowledge and agree that the parties' respective remedies at law for a breach
or threatened breach of any of the provisions of this Agreement would be
inadequate and, in recognition of that fact, agrees that, in the event of a
breach or threatened breach by any of them of the provisions of this Agreement,
in addition to any remedies at law, the aggrieved party, without posting any
bond and without any
14
showing of irreparable injury shall be entitled to obtain equitable relief in
the form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be available.
Section 6.07. TERMINATION.
(a) If, prior to the Closing, the Investment Agreement shall have
been terminated or abandoned pursuant to Section 7.1 of the Investment
Agreement, this Agreement shall terminate.
(b) If, after Closing, the Stockholder and its Affiliates cease to
Beneficially Own Voting Securities representing at least 10% of the Fully
Diluted Voting Power, this Agreement shall terminate.
(c) If the sixth anniversary of the Closing shall have occurred and
this Agreement shall not have already been terminated pursuant to (a) or (b)
above, the parties' obligations under this Agreement shall terminate except the
obligations of the Stockholder and the Parent pursuant to Section 7.
Section 6.08. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction 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, provided that
the parties hereto shall negotiate in good faith to attempt to place the parties
in the same position as they would have been in had such provision not been held
to be invalid, void or unenforceable.
Section 6.09. NON-EXCLUSIVITY. No action or transaction taken in
accordance with the express provisions of, and as expressly permitted by, any
provision of this Agreement shall be treated as a breach of any other provision
of this Agreement, notwithstanding that such action or transaction shall not
have been expressly excepted from such latter provision.
SECTION 7
POST-STANDSTILL TERMINATION DATE
BOARD COMPOSITION
Section 7.01. BOARD OF DIRECTORS COMPOSITION. From and after the
earlier of (i) the sixth anniversary of the Closing, and (ii) the date on which
all provisions of this Agreement terminate pursuant to Section 5, the
Stockholder shall take, and shall cause to be taken, such actions as are
necessary to cause the Board of Directors to include at least five directors who
are independent of and otherwise unaffiliated with the Parent or the Company and
shall not be an officer or an employee, consultant or advisor (financial, legal
or other) of the Parent or the Company or any of their respective Affiliates, or
any person who shall have served in such capacity within the three-year period
immediately preceding the date such determination is made.
Section 7.02. BOARD OF DIRECTORS POWER. Any material transaction
between the Company and the Parent, the Stockholder or any of their respective
Affiliates, or relating to this
15
Agreement or the Alliance Agreement, including without limitation, any
amendment, modification or waiver of any provision hereof or thereof, shall not
be taken without prior approval thereof by a majority vote of the Independent
Directors.
SECTION 8
CLOSING EVENTS
Section 8.01. AGREEMENTS. At Closing: (a) the Company shall enter
into an amendment to the Registration Rights Agreement with AP, which amendment
shall extend the benefits of such agreement, including "demand" registration
rights, to the Stockholder in respect of all shares of Voting Securities owned
directly or indirectly by the Stockholder and all shares of Company Class A
Common Stock and any other Voting Securities held by AP or distributed to the
partners of AP;
(b) The Parent and the Stockholder shall enter into the Voting Trust
Agreement; and
(c) The Company shall have adopted an "Eligible Rights Plan" and the
rights issued thereunder shall have been distributed to the holders of Voting
Securities. For purposes of this Section 8.01, an "Eligible Rights Plan" shall
mean a shareholder rights plan, with reasonably customary terms and conditions,
with an "acquiring person" threshold of 15%; PROVIDED that the definition of
acquiring person shall exclude the Stockholder and the Parent (a) prior to the
termination of the Parent's and the Stockholder's obligations hereunder (other
than their obligations pursuant to Section 7), if and to the extent they take
any action permitted by and in compliance with the terms of this Agreement and
(b) after the termination of the Parent's and the Stockholder's obligations
hereunder (other than their obligations pursuant to Section 7) with respect to
any and all transfers of Voting Securities owned by them in any manner. The
Company covenants and agrees that, so long as the Parent Beneficially Owns no
less than 15% of the Voting Securities, it shall not (a) amend an existing
Eligible Rights Plan so as to cause such plan not to constitute an Eligible
Rights Plan or (b) adopt a shareholder rights plan that is not an Eligible
Rights Plan.
SECTION 9
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, a merger, consolidation or other business combination
involving a Person or any of its subsidiaries or the acquisition of any equity
interest in, or a substantial portion of the assets of, a Person or any of its
subsidiaries, other than the transactions contemplated by this Agreement.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement).
"Alliance Agreement" shall have the meaning set forth in the recitals
hereto.
16
"Associate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement).
"Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing.
"Board of Directors" shall mean the board of directors of the Company.
Without limiting the foregoing, any Securities owned by the Voting Trust shall
be deemed to be Beneficially Owned by the Stockholder and the Parent.
"Closing" shall have the meaning specified in Section 2.01 of this
Agreement.
"Company Common Stock" shall mean Class A Common Stock, Class B Common
Stock or Class D Common Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Fully Diluted Voting Power" of any Person shall be calculated by
dividing (i) the sum of (A) ten times the aggregate number of shares of Company
Class A Common Stock beneficially owned by such Person (assuming exercise of the
Warrants, in the case of the Partnership, and exercise of any other outstanding
securities held by such Person that are convertible into or exercisable or
exchangeable for shares of Company Class A Common Stock) and (B) the number of
shares of Company Class B Common Stock beneficially owned by such Person
(assuming exercise of any outstanding securities held by such Person that are
convertible into or exercisable or exchangeable for shares of Company Class B
Common Stock) by (ii) the sum of (A) ten times the aggregate number of
outstanding shares of Company Class A Common Stock (assuming the exercise of all
outstanding securities convertible into or exercisable or exchangeable for
shares of Company Class A Common Stock) and (B) the aggregate number of
outstanding shares of Company Class B Common Stock (assuming the exercise of all
outstanding securities convertible into or exercisable or exchangeable for
shares of Company Class B Common Stock).
"Independent Director" shall mean any person listed on Exhibit 2.01 to
this Agreement, (ii) and any other person selected as an Independent Director in
accordance with Section 2.01(b) of this Agreement and (iii) any other person,
who is elected to the Board of Directors in an election of directors in respect
of which any Person other than the Company is soliciting proxies; PROVIDED that
any such other person so selected shall be independent of and otherwise
unaffiliated with the Parent or the Company (other than as an Independent
Director), and shall not be an officer or an employee, consultant or advisor
(financial, legal or other) of the Parent or the Company or any of their
respective Affiliates, or any person who shall have served in any such capacity
within the three-year period immediately preceding the date such determination
is made.
"Investment Agreement" shall have the meaning set forth in the
recitals hereto.
17
"Majority Vote" shall mean the affirmative vote of a majority of the
Board of Directors, including the affirmative vote of a majority of the
Independent Directors.
"Permitted Percentage" shall mean 50.1% of the Fully Diluted Voting
Power or such percentage as shall hereafter become the Permitted Percentage in
accordance with Section 1.01(d).
"Person" shall mean any individual partnership (limited or general),
joint venture, limited liability company, corporation, trust, business trust,
unincorporated organization, government or department or agency of a government.
"Standstill Termination Date" shall mean the earlier of (i) the sixth
anniversary of the Closing and (ii) the date on which the Stockholder and its
Affiliates cease to Beneficially Own Voting Securities representing at least 10%
of the Fully Diluted Voting Power.
"Stockholder Voting Power" at any time shall mean the aggregate voting
power in the general election of directors of all Voting Securities then
Beneficially Owned by the Stockholder and its Affiliates.
"Stock Purchase" shall have the meaning set forth in the recitals for
this Agreement.
"Subsidiary" shall mean, as to any Person, any Person at least a
majority of the shares of stock or other equity interests of which having
general voting power under ordinary circumstances to elect a majority of the
board of directors (or comparable governing body) thereof (irrespective of
whether or not at the time stock or equity of any other class or classes shall
have or might have voting power by reason of the happening of any contingency)
is, at the time as of which the determination is being made, owned by such
Person, or one or more of its Subsidiaries or by such Person and one or more of
its Subsidiaries.
"13D Group" shall mean any group of Persons acquiring, holding, voting
or disposing of Voting Securities which would be required under Section 13(d) of
the Exchange Act and the rules and regulations thereunder (as in effect, and
based on legal interpretations thereof existing, on the date hereof) to file a
statement on Schedule 13D with the Securities and Exchange Commission as a
"person" within the meaning of Section 13(d)(3) of the Exchange Act if such
group beneficially owned Voting Securities representing more than 5% of any
class of Voting Securities then outstanding.
"Total Voting Power" at any time shall mean the total combined voting
power in the general election of directors of all the Voting Securities then
outstanding.
"Transfer" shall mean any sale, exchange, transfer, pledge,
encumbrance or other disposition, and "to Transfer" shall mean to sell,
exchange, transfer, pledge, encumber or otherwise dispose of.
18
"Voting Securities" shall mean at any time shares of any class of
capital stock of the Company which are then entitled to vote generally in the
election of directors including, without limitation, the Class A Common Stock
and the Class B Common Stock.
"Voting Trust" shall have the meaning set forth in Section 1.03.
"Warrants" shall have the meaning set forth in the Investment
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first referred to above.
NORTHWEST AIRLINES CORPORATION
By: /s/ Douglas M. Steenland
-------------------------
Name: Douglas M. Steenland
Title: Senior Vice President, General
Counsel and Secretary
NEWBRIDGE PARENT CORPORATION
By: /s/ Douglas M. Steenland
-------------------------
Name: Douglas M. Steenland
Title: Vice President, Secretary
and Assistant Treasurer
CONTINENTAL AIRLINES, INC.
By: /s/ Lawrence W. Kellner
-------------------------
Name: Lawrence W. Kellner
Title: Executive Vice President
EXHIBIT 2.01 TO GOVERNANCE AGREEMENT
Lloyd M. Bentsen, Jr.
Douglas H. McCorkindale
George G.C. Parker
Richard W. Pogue
Karen Hastie Williams
Charles A. Yamarone
Donald L. Sturm
Patrick Foley
EXHIBIT 2.03 TO GOVERNANCE AGREEMENT
(Significant Actions)
1. Any amendment to the certificate of incorporation or by-laws of
the Company.
2. Any reclassification, combination, split, subdivision,
redemption, purchase or other acquisition, directly or indirectly, of any debt
or equity security of the Company or any Subsidiary of the Company (other than
pursuant to existing stock option plans or agreements or by or on behalf of any
existing employee benefit plan of the Company).
3. Any sale, lease, transfer or other disposition (other than in the
ordinary course of business consistent with past practice), in one or more
related transactions, of the assets of the Company or any Subsidiary, the book
value of which assets exceeds 5% of the consolidated assets of the Company and
its Subsidiaries.
4. Any merger, consolidation, liquidation or dissolution of the
Company or any Subsidiary of the Company, other than any such merger or
consolidation of any Subsidiary of the Company with and into the Company or
another wholly-owned Subsidiary of the Company.
5. Any acquisition of any other business which would constitute a
"Significant Subsidiary" (as defined in Section 1.02 of Regulation S-X under the
Exchange Act) of the Company.
6. Any acquisition by the Company or any Subsidiary of the Company
of assets (not in the ordinary course of business consistent with past practice)
in one or more related transactions which assets have a value which exceeds 5%
of the consolidated assets of the Company and its Subsidiaries.
7. Any issuance or sale of any capital stock of the Company or any
Subsidiary of the Company, other than issuance of capital stock of the Company
authorized for issuance pursuant to stock plans or agreements in effect, or
securities issued and outstanding, at the date of Closing.
8. Any declaration or payment of any dividend or distribution with
respect to shares of the capital stock of the Company or any Subsidiary (other
than wholly-owned Subsidiaries of the Company).
9. Any incurrence, assumption or issuance by the Company or its
Subsidiaries of any indebtedness for money borrowed, not in the ordinary course
of business consistent with past practice, if, immediately after giving effect
thereto and the application of proceeds therefrom, the aggregate amount of such
indebtedness of the Company and its Subsidiaries would exceed $500 million.
10. Establishment of, or continued existence of, any committee of the
Board of Directors with the power to approve any of the foregoing.
11. The termination or election or appointment of executive officers
of the Company.
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