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EXHIBIT 10.2
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AGREEMENT FOR
SALE AND PURCHASE
OF AIA 727 FLEET
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1.0 DATE AND PARTIES
1.1 Date. THIS AGREEMENT IS EFFECTIVE JULY 31, 1997.
1.2 Parties. THE PARTIES TO THIS AGREEMENT ARE:
A. American International Airways, Inc. ("AIA"), attention:
Xxxxxx Xxxxxxx, 0000 X. X-00 Xxxxxxx Xxxxx, Xxxxxxxxx, XX
00000, fax: 000-000-0000.
B. Kalitta Flying Services, Inc. ("KFS"), attention:
Xxx Xxxxxxxxx, Willow Run Airport, X.X. Xxx 000, Xxxxxxxxx,
XX 00000, fax: 000-000-0000.
X. Xxxxxx Kalitta ("Kalitta"), 0000 X. X-00 Xxxxxxx Xxxxx,
Xxxxxxxxx, XX 00000, fax: 000-000-0000.
D. Kitty Hawk Aircargo, Inc., ("Aircargo"), attention:
Xxxxxxx X. Xxxxxxxxx, Xx., P.O. Box 612787, 0000 Xxxx 00xx,
XXX Xxxxxxx, XX 00000, fax: 000-000-0000.
E. Kitty Hawk, Inc. ("Kitty Hawk"), attention: M. Xxx
Xxxxxxxxxxx, P.O. Box 612787, 0000 Xxxx 00xx, XXX Xxxxxxx,
XX 00000, fax: 000-000-0000.
2.0 RECITATIONS
2.1 LETTER OF INTENT. AIA, KFS and Kalitta have entered into a preliminary
and non-binding letter of intent (the "letter of intent") with Kitty Hawk
concerning the principal terms of a possible business combination or merger of
AIA, KFS and other corporate entities owned by Kalitta that engage in the
operation, maintenance and servicing of aircraft (collectively, the "Kalitta
companies") with Kitty Hawk or one or more of its subsidiaries, and that
provides the basis for further evaluation and negotiation toward a possible
definitive, binding merger agreement (a "definitive agreement").
2.2 PRE-CLOSING ACCOMMODATION. Under P. 3.14 of the letter of intent,
which is a non-binding provision, the parties to the letter of intent
contemplate that closing under a definitive agreement would occur as soon as
practicable, with a target closing date of not later than early October 1997;
and further contemplate that under a definitive agreement Kitty Hawk would
offer pre-closing advance purchase of appropriate operating segments of the
Kalitta companies for cash or cash equivalents of up to $50 million, to provide
working capital and assistance with servicing existing debt of the Kalitta
companies before closing under a definitive agreement, on the conditions that
any such pre-closing accommodation would not diminish the ultimate combined
results to Kalitta, and that Kalitta or the Kalitta companies would be entitled
to repurchase such operating segment under appropriate conditions if closing of
the entire transaction does not occur for any reason other than a breach by a
Kalitta company or Kalitta.
2.3 SALE AND PURCHASE OF AIA BOEING 727 FLEET. The operating segment of
the Kalitta companies that the parties to the letter of intent have selected
for advance purchase before closing under a definitive agreement is AIA's
entire operating Boeing 727 fleet as described in Exhibit A (the "AIA 727
fleet"). This agreement is a binding agreement intended to provide the
contractual basis for the advance purchase referred to in P. 3.14 of the letter
of intent. Under this agreement, and subject to its terms and conditions, AIA
agrees to sell the AIA 727 fleet to Aircargo, a wholly-owned subsidiary of
Kitty Hawk, and Aircargo agrees to purchase the AIA 727 fleet from AIA.
3.0 REPRESENTATIONS AND WARRANTIES
3.1 AIA AND KFS. AIA and KFS jointly and severally represent and warrant
to Aircargo and Kitty Hawk that:
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A. Exhibit A to this agreement is a correct listing of all of the
Boeing 727 airframes, engines and appliances that comprise the
aircraft of the AIA 727 fleet, with U.S. airframe registration
numbers; manufacturer's model and serial numbers, cycles and
hours to date, and cycles and hours to next major maintenance of
airframes, engines, landing gear, and auxiliary power units
under AIA's maintenance program (the "AIA maintenance program")
approved by the U.S. Federal Aviation Administration (the
"FAA"); scheduled values of each aircraft for purposes of P.
4.11(A)(1) and P. 4.18; hushkit status for each aircraft; and
other descriptive data.
B. The AIA 727 fleet, and the aircraft and engine records of the
AIA 727 fleet, have in all material respects been maintained and
kept in compliance with the AIA maintenance program,
manufacturer's recommendations, and FAA requirements.
C. In the opinion of AIA, the purchase price under this agreement
is the reasonably equivalent value at the date of this agreement
of the AIA 727 fleet and rights under the customer contracts
attributable to periods after closing; and the fair value of
AIA's assets exceeds the sum of its liabilities.
D. Exhibit B to this agreement is a correct listing of all leases
and operating agreements under which AIA uses or is obligated to
use any part of the AIA 727 fleet to provide air transport
services to customers (collectively, "customer contracts").
There are no material claims against AIA and no material uncured
defaults under any of the customer contracts. Each of the
customer contracts is enforceable in accordance with its terms.
E. Exhibit C to this agreement is a correct listing of all
operating schedules, and internal ACMI rates and other
aircraft-use charges, for current or planned aircraft operations
by AIA (collectively, the "ACMI support operations") in using
any part of the AIA 727 fleet to serve AIA's AIF, AIC and other
freight operations.
F. AIA and KFS are Michigan corporations. Each is duly formed and
in good standing. The execution, delivery and performance of
this agreement by each of them have been duly authorized, and
each of them has full power and authority to execute, deliver
and comply with the terms of this agreement.
G. AIA has operated the AIA 727 fleet complying in all material
respects with the requirements of the FAA and the U.S.
Department of Transportation (the "DOT"); is not currently under
investigation by the FAA or any other governmental agency with
respect to any potential or asserted failure to comply in any
respect with FAA or any other governmental requirements; and has
filed all required federal and state income and excise tax
returns and paid all taxes that are due.
H. No part of the AIA 727 fleet is subject to any lien or charge
for unpaid taxes or other governmental charges, or to any
materialmens' or artisan's lien.
I. Neither AIA nor KFS knows of any circumstance or claim that
might prevent or delay AIA's performing its obligations under
this agreement, except satisfaction of the conditions of closing
under P. 4.6(A).
X. Xxxxxx Kalitta is president of AIA and is duly authorized to
execute and deliver this agreement and all closing documents
under it on behalf of AIA. Xxx Xxxxxxxxx is president of KFS and
is duly authorized to execute and deliver this agreement and all
closing documents under it on behalf of KFS.
K. This agreement constitutes the legal, valid and binding
obligation of AIA, KFS and Kalitta, enforceable against each of
them in accordance with its terms. This agreement does not
breach any obligation of AIA, KFS or Kalitta under any contract
to which any of them is a party. No consent of any person or
entity is required to enable AIA's performance of its closing
obligations under this agreement except those that are
conditions of AIA's closing obligations under P. 4.6(A).
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3.2 KALITTA. Kalitta represents and warrants to Aircargo and Kitty Hawk
that he has no knowledge of any untruth of any representation or warranty by
AIA or KFS in P. 3.1.
3.3 AIRCARGO AND KITTY HAWK. Aircargo and Kitty Hawk jointly and
severally represent and warrant to AIA, KFS and Kalitta that:
A. Aircargo is a Texas corporation and Kitty Hawk is a Delaware
corporation. Each is duly formed and in good standing. The
execution, delivery and performance of this agreement by each of
them have been duly authorized, and each of them has full power
and authority to execute, deliver and comply with the terms of
this agreement.
X. Xxxxxxxxxxx is chairman of the board of directors and chief
executive officer of Aircargo and Kitty Hawk, and is duly
authorized to execute and deliver this agreement and all closing
documents under it on behalf of Aircargo and Kitty Hawk.
C. Neither Aircargo nor Kitty Hawk knows of any circumstance or
claim that might prevent or delay Aircargo's performing its
closing obligations under this agreement except satisfaction of
the conditions of closing under P. 4.6(B).
D. This agreement constitutes the legal, valid and binding
obligation of Aircargo and Kitty Hawk, enforceable against each
of them in accordance with its terms. This agreement does not
breach any obligation of Aircargo or Kitty Hawk under any
contract to which either of them is a party. No consent of any
person or entity is required to enable Aircargo's performance of
its closing obligations under this agreement except those that
are conditions of Aircargo's closing obligations under P.
4.6(B).
4.0 PURCHASE PRICE, PAYMENT, CLOSING AND RELATED COVENANTS AND CONDITIONS
4.1 PURCHASE AND SALE. Subject to and under the terms and conditions of
this agreement AIA will sell and convey to Aircargo, and Aircargo will purchase
from AIA, the AIA 727 fleet as described in Exhibit A, and AIA will assign to
Aircargo its rights under the customer contracts identified in Exhibit B that
are attributable to periods following closing.
4.2 PURCHASE PRICE. The purchase price for the AIA 727 fleet and for the
assignment of the customer contracts is $51,000,000.
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4.3 INSPECTIONS AND REVIEWS.
A. AIA will extend to Aircargo the continuing opportunity after
execution of and before closing under this agreement to inspect
each airframe and engine of the AIA 727 fleet and their
respective ownership and maintenance records, and to perform
conformity checks on installation of cargo doors on each
airframe of the AIA 727 fleet; except that (i) no borescope test
may be performed on any engine, (ii) no intrusive inspection may
be performed beyond removal of inspection plates except for
conformity checks on cargo-door installations, which may involve
intrusive inspection with prompt return to pre-inspection
condition at Aircargo's expense, and (iii) no inspection may be
scheduled or performed under conditions that prevent use of the
aircraft that is being inspected in its regular scheduled or
charter operations.
B. AIA will promptly deliver to Aircargo true and complete copies
of all of the customer contracts identified in Exhibit B, and
will extend to Aircargo the opportunity to review and inspect
AIA's related accounting records and correspondence files
demonstrating the course of performance under the customer
contracts.
4.4 OTHER ACTIONS BEFORE CLOSING. Until the earlier of closing or
termination of these obligations under P.4.6(C):
A. AIA will exert its best efforts at AIA's expense to obtain from
Deloitte & Touche, L.L.P. ("D&T") and deliver to Aircargo at or
before closing such audited and unaudited statements, if any, of
AIA's revenues and direct expenses attributable to the AIA 727
fleet as Kitty Hawk may be required to file under regulations of
the U.S. Securities and Exchange Commission (the "SEC") to
report acquisition of the AIA 727 fleet and to permit Kitty Hawk
to have declared effective by the SEC any subsequent
registration statement filed under the Securities Act of 1933,
and (iv) D&T's written undertaking to Kitty Hawk to grant future
consents to Xxxxx Xxxx'x use of the D&T opinions accompanying
such audited statements in reporting the acquisition and in any
subsequent registration statements unless D&T after delivering
the undertaking discovers circumstances that under SEC rules or
AICPA standards prevent its granting such consents.
B. AIA may not, without Aircargo's prior written consent, dispose
of any airframe or engine that is a part of the AIA 727 fleet,
or make any material change in any customer contract.
C. No party may take any intentional action that would cause any of
its representations or warranties in section 3.0 to become
untrue; and each party will exert its reasonable efforts to
prevent any of its representations or warranties in section 3.0
from becoming untrue.
D. Each party must promptly notify the others of any event or
notice before closing that the notifying party believes in good
faith to have a potential material adverse effect on the value,
condition or serviceability of any material part of the AIA 727
fleet, or to that party's ability to perform any of its
obligations under this agreement; or that renders untrue any
representation or warranty by that party under this agreement.
E. All parties will comply with their reporting and other
obligations under HSR, and will diligently pursue obtaining all
required consents by the DOJ and FTC to close under this
agreement. AIA and Kitty Hawk will contribute equally to fund
all required HSR filing fees required before closing.
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4.5 PRE-CLOSING USE, OPERATION AND MAINTENANCE OF THE AIA 727 FLEET.
A. AIA promises to use, operate, maintain and preserve the AIA 727
fleet in a condition at least as good as its present condition
and in compliance with the AIA maintenance program and FAA
requirements until closing under this agreement. AIA must not
without Aircargo's prior written consent:
1. operate or permit operation of any of the AIA 727 fleet
except by AIA in the ordinary course of business and in
accordance with current use;
2. remove or exchange any avionics, appliances or other
component parts of the AIA 727 fleet except to substitute
equivalent items as a result of regular maintenance before
closing; or
3. perform any major modification, maintenance or repair of
any part of the AIA 727 fleet except as required under the
AIA maintenance program and FAA requirements or to repair
casualty damage, all of which maintenance and repair, if
any, will be at AIA's expense.
B. Aircargo will have no rights before closing under this agreement
to operate, use, control or exercise dominion over any part of
the AIA 727 fleet, except as it may receive express written
authority and designation to act as AIA's agent.
4.6 CLOSING CONDITIONS.
A. AIA's closing obligations under this agreement are conditioned
on:
1. AIA having obtained the consent of holders to release all
security interests in the AIA 727 fleet, which AIA promises
to exert its reasonable efforts to obtain; and
2. AIA having obtained the consent of certain lenders whose
financing agreements prohibit AIA's sale of aircraft other
than in the ordinary course of business, which AIA promises
to exert its reasonable efforts to obtain;
3. AIA having obtained the consent of customers to the
assignment of the customer contracts to the extent
required, which AIA promises to exert its reasonable
efforts to obtain;
4. the representations and warranties by Aircargo and Kitty
Hawk under P. 3.3 being true at and as of closing; and
5. closing being permissible under HSR.
B. Aircargo's closing obligations under this agreement are
conditioned on:
1. Aircargo having obtained financing for the cash portion of
the purchase price on terms and conditions reasonably
acceptable to Aircargo, which Aircargo promises to exert
its good-faith efforts without material cost or
disadvantage to obtain;
2. Aircargo having obtained the consent of a lender whose
financing agreement prohibits Aircargo's incurring material
debt without the lender's consent, which Aircargo promises
to exert its good-faith efforts without material cost or
disadvantage to obtain;
3. Aircargo having obtained the commitment of Federal Aviation
Title and Guaranty Company of Oklahoma City, Oklahoma
("FATC"), to issue an owner's title policy insuring
Aircargo's good and unencumbered title to the AIA 727 fleet
upon consummation of closing;
4. the representations and warranties by AIA, KFS and Kalitta
under P. 3.1 and P. 3.2 being true at and as of closing;
5. Aircargo having not discovered any condition of any
aircraft or engine of the AIA 727 fleet or of any aircraft
or engine records during its inspections under P. 4.3(A) or
otherwise that in Aircargo's reasonable opinion materially
diminishes the value, condition or serviceability of any
material part of the AIA 727 fleet;
6. no aircraft or engine of the AIA 727 fleet having been
destroyed or constructively lost; and no event having
occurred that is reasonably likely
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to have a material adverse effect on the value, condition
or serviceability of any material part of the AIA 727
fleet, or on AIA's ability to perform any of its material
obligations under this agreement or under the letter of
intent identified in P. 2.1;
7. Aircargo having not discovered any aspect of the customer
contracts during its review under P. 4.3(B) or otherwise
that in Aircargo's reasonable opinion is unacceptable
8. the terms of all customer consents to be delivered under
P. 4.8(D) being reasonably acceptable to Aircargo;
9. Aircargo having received the audited and unaudited
financial statements and undertaking described in P.
4.4(A), if any, in form and substance that in Aircargo's
reasonable opinion will enable Kitty Hawk to fulfill its
obligations under SEC regulations to file audited and
unaudited statements of the acquired business of the AIA
727 fleet to report the acquisition and to obtain from the
SEC effectiveness of its future registration statements ;
and
10. closing being permissible under HSR.
C. If any party to this agreement reasonably concludes before
closing that any condition under P. 4.6 to its closing
obligations cannot be satisfied, it must give prompt notice (a
"termination notice") to the other parties to this agreement. If
any party gives a termination notice, no party will have further
obligations under P. 4.1, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9,
4.11, 4.13, 4.14, 4.15 and 4.18; but if a party improperly gives
a termination notice, knowingly makes an untrue representation
or warranty under this agreement, or breaches any obligation
under P. 4.1, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.11, 4.13,
4.14, 4.15 or 4.18 that causes the failure of a closing
condition, that party may be liable in damages to any other
party injured by such action or breach. No termination notice
will diminish the obligations of a party under P. 4.16, 4.17 or
4.19.
4.7 CLOSING AND CLOSING DATE. Closing will be accomplished by escrow
through FATC on the second business day after closing becomes permissible under
HSR.
4.8 AIA'S CLOSING OBLIGATIONS. At closing, AIA will:
A. execute and deliver to Aircargo a warranty xxxx of sale in the
form of Exhibit D, by which AIA will convey to Aircargo the AIA
727 fleet, with all avionics, auxiliary power units, and
appliances now comprising the AIA 727 fleet (or with equivalent
items substituted as a result of regular maintenance before
closing), and all aircraft and engine records, warranting good
title free and clear of all liens, security interests, lease or
possessory rights, and any other adverse claims and
encumbrances; and by which AIA will assign to
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Aircargo all of AIA's interests in existing assignable
warranties, service life policies and patent indemnities, if
any, of manufacturers and former owners with respect to any part
of the AIA 727 fleet and all of AIA's maintenance, condition and
warranty rights under agreements and bills of sale by which AIA
acquired any part of the AIA 727 fleet;
B. execute and deliver to Aircargo such other documents evidencing
the conveyance of the aircraft to Aircargo as may reasonably be
required for filing and registration of the conveyance with the
FAA;
C. execute and deliver to Aircargo an assignment in the form of
Exhibit E assigning to Aircargo all of AIA's rights in and under
the customer contracts attributable to periods following
closing, and warranting good title to the assigned rights, free
and clear of any security interest or adverse claim;
D. deliver to Aircargo all required customer consents to AIA's
assignment under P. 4.8(C);
E. execute and deliver with Aircargo customary ACMI aircraft
operating agreements for the ACMI support operation; and
F. deliver to Aircargo one or more certificates of insurance, in
form reasonably acceptable to Aircargo, evidencing the insurance
coverage that AIA is obligated to provide under P. 4.11(B) and
(C).
4.9 AIRCARGO'S CLOSING OBLIGATIONS. At closing, Aircargo will:
A. pay the purchase price by delivering to AIA $51,000,000 in
immediately-available cash funds;
B. assume and agree to operate and perform without interruption
AIA's obligations that initially arise following closing under
the customer contracts identified in Exhibit B; and agree to
perform without interruption the ACMI support operations
identified in Exhibit C at reasonable market rates for one year,
renewable at AIA's option for two additional years;
C. execute and deliver with Aircargo customary ACMI aircraft
operating agreements for the ACMI support operation; and
D. deliver to AIA one or more certificates of insurance, in form
reasonably acceptable to AIA, evidencing the insurance coverage
that Aircargo is obligated to provide under P. 4.11(A) and (C).
4.10 DELIVERY. At consummation of closing, AIA will deliver to Aircargo
the AIA 727 fleet and all records concerning the AIA 727 fleet, at such
location or locations in the continental United States as Aircargo requests.
All risk of loss of the AIA 727 fleet will be upon Aircargo upon consummation
of closing and delivery.
4.11 INSURANCE.
A. AIRCARGO.
1. Aircargo must at its expense at closing and until the first
anniversary of closing maintain in effect with insurers of
recognized reputation and responsibility, all-risk aircraft
hull damage and all-risk property damage insurance covering
the AIA 727 fleet (including, except with respect to
all-risk property damage insurance, aircraft war risk and
governmental confiscation and expropriation (except by the
U.S. government) and hijacking insurance, if and to the
extent an aircraft that is a part of the AIA 727 fleet is
operated on routes where the custom in the commercial
airline industry is for air carriers to carry such
insurance); which insurance must at all times be for an
amount not less than the aggregate purchase price of the
AIA 727 fleet, and as to each aircraft in an amount not
less than the insurance amount shown in Exhibit A, with
deductibles not greater than those Aircargo customarily
accepts for other Boeing 727 freighter aircraft in its
fleet.
2. Aircargo must at its expense at closing and until the
fourth anniversary of closing maintain in effect
comprehensive airline liability (including passenger,
contractual, bodily injury, cargo and property damage
liability) insurance with insurers of recognized reputation
and responsibility (i) in an amount not less than
$200,000,000 per occurrence combined single limit and (ii)
of the type and coverage as from time to time are
applicable to similar aircraft owned or leased by Aircargo.
Such insurance must extend to AIA, its shareholders,
directors, officers, employees, representatives and
affiliates as additional insureds, and must cover
Aircargo's indemnities under P. 4.16 against tort claims.
B. AIA. AIA must at its expense at closing and until the fourth
anniversary of closing maintain in effect comprehensive airline
liability (including passenger, contractual, bodily injury,
cargo and property damage liability) insurance with insurers of
recognized reputation and responsibility (i) in an amount not
less than $200,000,000 per occurrence combined single limit and
(ii) of the type and coverage as that maintained by AIA before
closing. Such insurance must extend to Aircargo, its
shareholders, directors, officers, employees, representatives
and affiliates as additional, and must cover AIA's indemnities
under P. 4.16(A).
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C. POLICY TERMS. Each insurance policy under P. 4.11(A)(2) and P.
4.11(B) must (i) require 30 days' advance notice (except no more
than 7 days with respect to war risk coverages in accordance
with standard industry practice) to the additional insureds
before the insurer cancels such insurance for any reason, or
before the insurance lapses for non-payment or premium, or
before any material change is made in the insurance that
adversely affects the interest of any additional insured,
cancellation or change, (ii) provide that the coverage of each
additional insured will not be invalidated by any action or
inaction of the primary insured, regardless of any breach or
violation of any warranty, declaration or condition, (iii) be
primary without any right of contribution from any other
insurance which is carried by any additional insured, (iii)
provide that all of the provisions except the limits of
liability will operate as if there were a separate policy
covering each additional insured, and (iv) waive any right of
the insurer to subrogation against an additional insured, and to
set-off, counterclaim and any other deduction in respect of any
liability of any additional insured.
4.12 LIMITATION OF WARRANTIES AND DAMAGES.
A. EXCEPT FOR EXPRESS WARRANTIES INP. 3.1 AND EXPRESS WARRANTIES OF
GOOD AND UNENCUMBERED TITLE CONTAINED IN THIS AGREEMENT AND TO
BE CONTAINED IN AIA'S XXXX OF SALE, AND THE DESCRIPTION OF THE
AIA 727 FLEET IN EXHIBIT A, THE AIA 727 FLEET IS SOLD "AS IS,
WHERE IS," WITHOUT ANY EXPRESS OR IMPLIED WARRANTY BY AIA, KFS
OR KALITTA OF CHARACTER, CONDITION, OR MERCHANTABILITY OR
FITNESS FOR ANY USE, AND WITHOUT ANY IMPLIED WARRANTY ARISING
FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE OF
TRADE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AIA,
KFS AND KALITTA DISCLAIM ALL IMPLIED WARRANTIES (I) AS TO THE
AIRWORTHINESS, CONDITION OR DESIGN OF ANY PART OF THE AIA 727
FLEET, (II) OF FREEDOM OF THE AIA 727 FLEET FROM ANY RIGHTFUL
CLAIM BY WAY OF PATENT INFRINGEMENT OR THE LIKE, (III) OF THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCERNIBLE,
AND (IV) OF THE SUITABILITY OF THE AIA 727 FLEET FOR ANY USE OR
APPLICATION BY AIRCARGO.
B. EXCEPT FOR BREACH OF A REPRESENTATION, WARRANTY OR COVENANT
UNDER 4.19, TO WHICH THIS EXCLUSION DOES NOT APPLY, NO PARTY
WILL BE OBLIGATED UNDER THIS AGREEMENT FOR ANY INCIDENTAL,
SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES,
4.13 TAXES. AIA will be solely responsible for and will timely pay any
sales, use and excise taxes lawfully imposed upon AIA or Aircargo as a result
of the sale, conveyance or delivery of the AIA 727 fleet under this agreement,
or as a result of any repurchase of any part of the AIA 727 fleet under P.
4.18; and AIA will indemnify Aircargo and hold it harmless from and against
liability, loss and cost of defense upon all such taxes.
4.14 ACTIONS AFTER CLOSING; TRANSITIONAL OPERATIONS.
A. All aircraft in the AIA 727 fleet will remain on the AIA
operation specifications at closing and thereafter until they
are transitioned to the Aircargo operation specifications under
the schedule in Exhibit F, which is Aircargo's best current
estimate of the time and transition rate required for efficient
and prompt transitioning of all of the aircraft to Aircargo's
operation specifications in accordance with FAA requirements and
sound practices, but Exhibit F is subject to amendment from time
to time by reasonable advance notice from Aircargo to AIA as
Aircargo's estimates are modified through experience in the
transitioning, except that no amendment may shorten the
transition schedule in a way that imposes a materially greater
burden on AIA to provide transition assistance.
B. AIA will at its cost diligently after closing perform all
transitional maintenance required to transition the AIA 727
fleet to Aircargo's maintenance program, or at Aircargo's
option, will permit Aircargo to use and have full access to
AIA's maintenance program so long as Aircargo retains any part
of the AIA 727 fleet. AIA will assist Aircargo in transitioning
the AIA 727 fleet to Aircargo's operation specifications in
accordance with Exhibit F, as it may be amended from time to
time. During the transition period AIA will provide qualified,
certified and rested flight crews timely to perform all flight
operations required by Aircargo for any aircraft included within
the AIA 727 fleet that has not yet been transitioned to
Aircargo's operation specifications.
C. AIA will have no rights of ownership, control or operation of
any aircraft of the AIA 727 fleet after closing, except as
required under FAA regulations while providing flight crews and
performing operations for Aircargo using aircraft of the AIA 727
fleet that have not yet been transitioned to Aircargo's
operation specifications. After closing, Aircargo will otherwise
at all times retain and exercise all rights of operation and
movement of the aircraft.
D. After closing and until all of the aircraft of the AIA 727
fleet have been transitioned to Aircargo's operation
specifications, AIA will perform at an AIA maintenance facility
all maintenance requested by Aircargo on any aircraft or engine
of the AIA 727 fleet that has not been transitioned to
Aircargo's operations specifications, at costs and rates not
exceeding reasonable market rates and upon schedules that give
equal priority to such aircraft and engine maintenance as AIA
would assign to aircraft and engines owned by AIA.
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E. AIA will after closing assist AIA in the enforcement of all
claims that AIA assigns to Aircargo in the xxxx of sale
delivered by AIA at closing, including without limitation but at
Aircargo's expense, pursuing any assigned claim in AIA's name
but for the benefit of Aircargo.
F. So long as the call option under P. 4.18(A) can be exercised,
Aircargo may not dispose of any part of the AIA 727 fleet, and
will operate and maintain the AIA 727 fleet in compliance with
the AIA or Aircargo maintenance program and in compliance with
all FAA requirements.
G. Aircargo may operate the AIA 727 fleet in AIA livery until the
second anniversary of closing.
4.15 LIMITATIONS ON ACQUISITION OF BOEING 727 AIRCRAFT. AIA, KFS and
Kalitta promise Aircargo and Kitty Hawk that none of them will acquire Boeing
727 aircraft before the second anniversary of closing under this agreement
unless (i) an option under P. 4.18 has been exercised and closed, or (ii) they
first offer to buy such aircraft from Aircargo at fair market values for cash.
4.16 GENERAL INDEMNITIES.
A. AIA, KFS AND KALITTA WILL JOINTLY AND SEVERALLY INDEMNIFY
AIRCARGO, KITTY HAWK AND THEIR RESPECTIVE SHAREHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES AND AFFILIATES,
AND HOLD THEM HARMLESS, FROM AND AGAINST LIABILITY, LOSS AND
COST OF DEFENSE UPON ALL CLAIMS:
1. FOR INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO OR
DESTRUCTION OF ANY PROPERTY, INCLUDING THE AIA 727 FLEET,
ARISING OUT OF THE OWNERSHIP, MANAGEMENT, POSSESSION, USE,
CONTROL, MAINTENANCE OR OPERATION OF THE AIA 727 FLEET
BEFORE CLOSING, EVEN IF SUCH INJURY, DEATH, DAMAGE OR
DESTRUCTION IS CAUSED BY AIRCARGO'S OR XXXXX XXXX'X ACTUAL
OR IMPUTED NEGLIGENCE; EXCEPT THAT AIA'S, KFS'S AND
KALITTA'S OBLIGATIONS UNDER THIS PARAGRAPH ARE LIMITED TO
AN AGGREGATE OF $200,000,000, AND THIS INDEMNITY WILL NOT
EXTEND TO ANY CLAIM FOR INJURY, DEATH, DAMAGE OR
DESTRUCTION CAUSED BY AIRCARGO'S OR XXXXX XXXX'X GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, OR WHICH IS COVERED BY
WORKER'S COMPENSATION INSURANCE; AND
2. FOR DEBT, CONTRACTUAL OBLIGATION, TAX OR GOVERNMENTAL
CHARGE OR PENALTY THAT IS BASED UPON ANY UNDERTAKING OR
ACTION BY AIA, KFS OR KALITTA AT ANY TIME BEFORE OR AFTER
CLOSING THAT IS NOT ATTRIBUTABLE TO AN OBLIGATION KNOWINGLY
INCURRED BY AIRCARGO OR KITTY HAWK OR FULLY DISCLOSED BY
AIA AND EXPRESSLY ASSUMED BY AIRCARGO AT CLOSING; INCLUDING
WITHOUT LIMITATION ALL CLAIMS UNDER CUSTOMER CONTRACTS OR
FROM ACMI SUPPORT OPERATIONS THAT ARE ATTRIBUTABLE TO
OCCURRENCES BEFORE CLOSING.
10
B. AIRCARGO AND KITTY HAWK WILL JOINTLY AND SEVERALLY INDEMNIFY
AIA, KFS AND THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES AND REPRESENTATIVES, AND HOLD THEM HARMLESS, FROM AND
AGAINST LIABILITY, LOSS AND COST OF DEFENSE UPON ALL CLAIMS:
1. FOR INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO OR
DESTRUCTION OF ANY PROPERTY ARISING OUT OF THE OWNERSHIP,
MANAGEMENT, POSSESSION, USE, CONTROL, MAINTENANCE OR
OPERATION OF THE AIA 727 FLEET AFTER CLOSING, EVEN IF SUCH
INJURY, DEATH, DAMAGE OR DESTRUCTION IS CAUSED BY AIA'S,
KFS'S OR KALITTA'S ACTUAL OR IMPUTED NEGLIGENCE; EXCEPT
THAT AIRCARGO'S AND XXXXX XXXX'X OBLIGATIONS UNDER THIS
PARAGRAPH ARE LIMITED TO AN AGGREGATE OF $200,000,000, AND
THIS INDEMNITY WILL NOT EXTEND TO ANY CLAIM FOR INJURY,
DEATH, DAMAGE OR DESTRUCTION CAUSED BY AIA'S, KFS'S OR
KALITTA'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR WHICH
IS COVERED BY WORKER'S COMPENSATION INSURANCE; AND
2. UNDER THE CUSTOMER CONTRACTS IDENTIFIED IN EXHIBIT C THAT
ARE ATTRIBUTABLE TO AIRCARGO'S PERFORMANCE OR
NON-PERFORMANCE AFTER CLOSING.
4.17 COMMISSION OR FINDERS' FEE. No party will owe any commission or
finder's fee under this agreement. Each party will indemnify the other and hold
it harmless against liability, loss and cost of defense upon any claim to a
commission or finders fee based upon agreement of the indemnitor.
4.18 CALL/PUT OPTIONS.
A. AIA has the option (the "call option") to repurchase no later
than March 31, 1998 all of the AIA 727 fleet except the three
aircraft and their engines, avionics and appliances (the
"initial aircraft") designated under Exhibit F as the first
three aircraft of the AIA 727 fleet to be transitioned to
Aircargo's operation specifications (the AIA 727 fleet less the
initial aircraft is the "option fleet").
1. AIA may exercise the call option only by giving notice (a
"call notice") to Aircargo no later than February 28, 1998.
If AIA gives a call notice, AIA will be responsible at its
expense for preparation and fees for any HSR reports
required for closing under the call option, and closing
will be conditioned on its being permissible under HSR.
2. At closing under the call option, AIA must tender the
repurchase price (the "call-option price") under the call
option. The call-option price will be the sum of (i) the
purchase price under P. 4.2, less the sum of the
11
scheduled values under Exhibit A for the initial aircraft,
and (ii) Aircargo's unamortized portion of any expenditure
made after closing to install hushkits, to comply with FAA
airworthiness directives, or to perform major maintenance
on any aircraft or engine of the option fleet.
3. If any aircraft or engine of the option fleet has suffered
a casualty loss after closing and before closing under the
call option, Aircargo will not be obligated to redeliver or
replace the lost aircraft or engine, and the call-option
price will be reduced by the scheduled value for the lost
aircraft or engine that is set out in Exhibit A.
4. The call-option price will be payable in cash in
immediately-available funds.
5. At closing under the call option, Aircargo will convey and
deliver to AIA the option fleet in its then condition,
without express or implied warranty of condition,
merchantability or fitness except that it has authorized
AIA to perform or has otherwise performed all maintenance
required under P. 4.14(F), and otherwise only warranting no
deficiency in title or encumbrance by through or under
Aircargo; and all indemnity and post-closing obligations by
Aircargo under this agreement will be deemed modified so
that they do not extend to any occurrence after closing of
the call option except as to the initial aircraft.
6. AIA will at closing under the call option assume and agree
to perform without interruption all lease and operating
agreements (including without limitation customer contracts
and ACMI support operations) upon which Aircargo is then
obligated and for which Aircargo is then using any of the
option fleet, except any leases and operating agreements
negotiated by Aircargo after closing (i) that are not
renewals, extensions or novations of customer contracts and
(ii) that Aircargo wishes to continue to perform with other
aircraft or through subcontract.
7. AIA will after closing under the call option indemnify and
hold Aircargo and its shareholders, directors, officers,
employees and representatives harmless from and against all
claims attributable to ownership, use or operation of any
part of the option fleet after closing of the call option.
8. The call option will terminate and may not be exercised
(i) if any representation or warranty by AIA, KFS or
Kalitta under this agreement is untrue in any material
respect, (ii) if AIA, KFS or Kalitta
12
breaches any covenant under P. 4.19, (iii) if AIA breaches
any post-closing obligation under this agreement and fails
to cure such breach within 10 days after Aircargo gives
notice to AIA of the breach, and (iv) if AIA loses its
certificates or authority to operate Boeing 727 aircraft.
9. Except for a collateral assignment to an institutional
lender, AIA may not assign the call option by operation of
law or otherwise except to Kalitta or KFS, and neither of
them may further assign the call option by operation of law
or otherwise without Aircargo's prior written consent.
B. Aircargo has the option (the "put option") to require AIA to
repurchase no later than December 31, 1997 all of the option
fleet as defined in P. 4.18(A) if (i) in Aircargo's reasonable
opinion any airworthiness directive issued by the FAA materially
diminishes the utility or value of the option fleet, or (ii) AIA
refinances any material part of its existing institutional debt
and for any reason except Xxxxx Xxxx'x material breach the
parties do not close by November 30, 1997 under a definitive
agreement for Xxxxx Xxxx'x acquisition of one or more of the
Kalitta companies.
1. Aircargo may exercise the put option only by giving notice
(a "put notice") to AIA no later than November 30, 1997. If
Aircargo gives a put notice, Aircargo will be responsible
at AIA's expense for preparation and fees for any HSR
reports required for closing under the put option, and
closing will be conditioned on its being permissible under
HSR.
2. At closing under the put option, AIA must tender the
repurchase price (the "put-option price") under the put
option. The put-option price will be the sum of (i) the
purchase price under P. 4.2, less the sum of scheduled
values for the initial aircraft and the put-option retained
aircraft that are set out in Exhibit A, and (ii) Aircargo's
unamortized portion of any expenditure made after closing
to install hushkits, to comply with FAA airworthiness
directives, or to perform major maintenance on any aircraft
or engine of the option fleet.
3. If any aircraft or engine of the option fleet has suffered
a casualty loss after closing and before closing under the
put option, Aircargo will not be obligated to redeliver or
replace the lost aircraft or engine, and the put-option
price will be reduced by the scheduled value for the lost
aircraft or engine that is set out in Exhibit A.
4. The put-option price will be payable in cash in
immediately-available funds.
5. At closing under the put option, Aircargo will convey and
deliver to AIA the option fleet in its then condition,
without express or implied warranty of condition,
merchantability or fitness except that it has authorized
AIA to perform or has otherwise performed all maintenance
required under P. 4.14(F), and otherwise only warranting no
deficiency in title or encumbrance by through or under
Aircargo; and all indemnity and post-closing obligations by
Aircargo under this agreement will be deemed modified so
that they do not extend to any occurrence after closing of
the put option except as to the initial and put-option
retained aircraft.
6. AIA will at closing under the put option assume and agree
to perform without interruption all lease and operating
agreements (including without limitation customer contracts
and ACMI support operations) upon which Aircargo is then
obligated and for which Aircargo is then using any of the
option fleet, except any leases and operating agreements
negotiated by Aircargo after closing (i) that are not
renewals, extensions or novations of customer contracts and
(ii) that Aircargo wishes to continue to perform with other
aircraft or through subcontract.
7. AIA will after closing under the put option indemnify and
hold Aircargo and its shareholders, directors, officers,
employees and representatives harmless from and against all
claims attributable to ownership, use or operation of any
part of the option fleet after closing of the put option.
13
4.19 PROHIBITIONS AGAINST SHOPPING.
A. AIA, KFS and Kalitta jointly and severally represent and warrant
to Aircargo and Kitty Hawk that (i) they have made no agreement
to sell the stock, business or any material asset of any of the
Kalitta companies to another, or to merge, consolidate or
combine assets or business of any of the Kalitta companies with
another, except any asset sale shown in the Fieldstone model
identified in the letter of intent, and (ii) that none of them
are currently engaged in negotiations or discussions concerning
any other sale of the stock, or the sale, merger or combination
of any material asset or business of any of the Kalitta
companies to or with another (except the possible collateral
transfer of certain aircraft to a trustee in connection with
certain bond financing).
B. AIA, KFS and Kalitta jointly and severally promise Aircargo and
Kitty Hawk that until March 31, 1998, or until earlier exercise
and closing of an option under P. 4.18, none of them will
solicit, discuss, negotiate or agree to (i) the sale of any
stock or other equity interest in any of the Kalitta companies
except under the letter of intent identified in P. 2.1, (ii) a
merger or combination of any material asset or business, or any
exchange of shares, of any of the Kalitta companies except under
the letter of intent identified in P. 2.1, or (iii) a sale or
disposition of any of the business or operating aircraft assets
of any of the Kalitta companies (a) except under the letter of
intent identified in P. 2.1, (b) except for the possible
collateral transfer of certain aircraft to a trustee in
connection with certain bond financing, and (c) except asset
sails shown in the Fieldstone model identified in the letter of
intent, or sales of L-1011's or DC-8's to generate cash to
service debt or as required for ongoing operations of any of the
Kalitta companies.
C. AIA, KFS and Kalitta jointly and severally promise Aircargo and
Kitty Hawk that until March 31, 1998, or until earlier exercise
and closing of an option under P. 4.18, they will give prompt
notice to Aircargo if any of them receives any communication
from anyone who is not a party to this agreement and who
proposes any discussion, negotiation or agreement prohibited
under P. 4.19(B).
D. The third sentence of P. 4.2 of the letter of intent identified
in P. 2.1 is amended to incorporate the representations,
warranties and covenants in P. 4.19(A), (B) and (C) above, which
are effective both under this agreement and under the letter of
intent as so amended.
E. Aircargo and Kitty Hawk jointly and severally promise AIA, KFS
and Kalitta that until December 31, 1997 neither of them will
agree (i) to any merger or combination of any material asset or
business of Kitty Hawk except under the letter of intent
identified in P. 2.1, or (ii) to any acquisition of any material
equity interest in any business entity or any operating segment
of any business entity except under the letter of intent
identified in P. 2.1.
5.0 GENERAL PROVISIONS
5.1 AMENDMENTS AND WAIVERS. To amend this agreement or waive any
provision of this agreement, both parties must sign a written amendment or
waiver that identifies by section or paragraph number the provision that it
purports to amend or waive. No noncomplying course of dealing may be construed
to amend or waive any provisions of this agreement.
5.2 ASSIGNMENT. No party may assign its rights under this agreement
except as provided in P. 4.18(A)(9) without the prior written consent of all
other parties. Any attempted assignment
14
in violation of the preceding sentence will be ineffective to transfer any
rights under this agreement to the purported assignee.
5.3 NOTICES. Notices required or permitted under this agreement must be
in writing. Notices may be given by Federal Express, fee prepaid, addressed to
the intended recipient at its address in P. 1.2, or to such other notice
address as that party designates by notice to the other parties, and any notice
so given will be effective one business day after deposit with Federal Express.
A business day is any day other than a Saturday, Sunday, or legal holiday in
Texas. A notice given by other means will be effective only when actually
received by the addressee.
5.4 REMEDIES. Each party to this agreement will be entitled to all
remedies at law and in equity for breach of obligations under this agreement.
No provision of P. 4.18(A)(7) or P. 4.19 is intended to limit the full
availability of all other legal and equitable remedies.
5.5 DISCLOSURE. Kitty Hawk may at any time after execution of this
agreement disclose the existence and terms of this agreement and the letter of
intent identified in P. 2.1 by releasing a public announcement in the form of
the draft press release in Exhibit G, and by such other methods in Xxxxx Xxxx'x
reasonable opinion are required or prudent. This provision modifies obligations
under P. 4.1 of the letter of intent and under P. 3.3 of the nondisclosure
agreement identified in P. 4.1 of the letter of intent.
5.6 CONSTRUCTION.
A. When used in this agreement, defined terms (in quotation marks
within parentheses immediately following the defining term or
phrase) have the defined meanings unless the context clearly
indicates otherwise. Defined terms may be used in the singular
or plural. Unless otherwise clearly indicated, paragraph ("P. ")
references are to paragraphs of this agreement.
B. Texas law and the Federal Arbitration Act govern the effect and
construction of this agreement.
C. Any action upon a claim arising out of this agreement must be
commenced by filing of an arbitration claim under P. 5.7 within
two years after the cause of action accrues.
D. If any provision of this agreement is invalid or unenforceable,
the remaining provisions of this agreement will be enforceable.
15
E. This agreement binds and benefits the parties and their
respective successors and permitted assigns.
F. This agreement is the entire agreement between the parties with
respect to the AIA 727 fleet, and merges and supersedes all
former agreements, letters, promises or representations, whether
oral or written, express or implied, that relate to the AIA 727
fleet; with the exceptions that (i) P. 4.1 and P. P. 4.3 through
4.8 of the letter of intent are unaffected by this agreement and
remain in full force and effect in accordance with their
respective terms, (ii) P. 4.2 of the letter of intent as
modified by P. 4.19 above remains in full force and effect
independently of this agreement, (iii) all provisions of the
confidentiality agreement identified in P. 4.1 of the letter of
intent are unaffected by this agreement and remain in full force
and effect in accordance with their respective terms, except to
the extent they are modified by P. 5.5, and (iv) this agreement
in no way affects or amends any obligation of any party under or
in connection with the Settlement Agreement executed in August
1994 related to the U.S. Postal Service's ANET 93-01
solicitation.
G. All representations and warranties contained in this agreement
will survive investigation and closing.
H. No waiver of a claim or default under this agreement may be
construed to be a waiver of any other claim or default.
I. No rule of construction resolving any ambiguity against a
drafting party will apply.
J. Titles and headings are only for convenient reference and are
not to be construed in interpretation.
K. Exhibits A, B, C, D, E, F and G are attached to this agreement
and are incorporated as part of this agreement.
L. This agreement is not intended to create any relationship
between AIA and Aircargo except that of seller and buyer.
Neither this agreement nor any performance under it, including
without limitation any performance under P. 4.14, is intended to
create any partnership or joint venture relationship of any
kind.
M. Notwithstanding termination of any obligations under this
agreement, the provisions of P. 4.19 and section 5.0 will
continue to be effective except to the extent that any of them
is amended in accordance with P. 5.1.
5.7 BINDING AGREEMENT TO ARBITRATE DISPUTES. All disputes under or
relating to this agreement must exclusively be resolved by binding arbitration
under the Commercial Arbitration Rules of the American Arbitration Association
(the "AAA") in effect at the time the arbitration proceeding commences, except
that (i) P. P. 5.1 through 5.6 will govern the effect and construction of this
agreement, (ii) the locale of the arbitration must be the locale of the party
against whom arbitration is first demanded, (iii) any award must state material
findings of fact and conclusions of law, (iv) a party may seek preliminary
injunctive or other equitable relief from any court of competent jurisdiction
to preserve the status quo pending selection of an arbitrator, (v) an
arbitrator may by interim or final award grant declarative and injunctive and
other equitable relief (the parties acknowledge
16
that remedies at law are unlikely to be adequate to protect against or remedy
breach of this agreement), and (vi) a prevailing party in litigation to require
arbitration or to obtain preliminary relief pending establishment of an
arbitration panel, in arbitration, or in litigation to confirm or enforce an
arbitration award will be entitled to recover its reasonable attorneys' fees
and costs. An arbitration award will be final and binding on all parties, and
judgment upon such arbitration award may be entered in any court having
jurisdiction.
AMERICAN INTERNATIONAL AIRWAYS, INC.
By:
------------------------------------
XXXXXX XXXXXXX,
PRESIDENT
KALITTA FLYING SERVICES, INC.
By:
------------------------------------
XXX XXXXXXXXX,
PRESIDENT
---------------------------------------
XXXXXX XXXXXXX
KITTY HAWK, INC.
By:
------------------------------------
M. XXX XXXXXXXXXXX
CHAIRMAN AND CEO
KITTY HAWK AIRCARGO, INC.
By:
------------------------------------
M. XXX XXXXXXXXXXX
CHAIRMAN AND CEO
