Item 1.01
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Entry into a Material Definitive Agreement.
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On April 1, 2016, Alaska Air Group, Inc., a Delaware
corporation (
Alaska Air Group
or the
Company
), Virgin America Inc., a Delaware corporation, (
Virgin America
), and Alpine Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of Alaska Air Group (
Merger Sub
), entered into an Agreement and Plan of Merger (the
Merger Agreement
), pursuant to which, subject to satisfaction or waiver of the conditions therein, Alaska Air Group will
acquire Virgin America by means of a merger of Merger Sub with and into Virgin America (the
Merger
), with Virgin America surviving the Merger as a direct wholly-owned subsidiary of Alaska Air Group.
At the effective time of the Merger (the
Effective Time
), each share of voting common stock of Virgin America (the
Voting Common
Stock
) and each share of non-voting common stock of Virgin America (the
Non-Voting Common Stock
and, together with the Voting Common Stock, the
Virgin America Common Stock
, and shares of Virgin America
Common Stock are hereinafter referred to as the
Shares
) issued and outstanding immediately prior to the Effective Time (other than Shares held by Virgin America, Alaska Air Group or its subsidiaries, Merger Sub, or Virgin America
stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be converted into a right to receive $57.00 per share in cash, without interest (the
Merger Consideration
).
Immediately prior to the Effective Time of the Merger: (i) each unexpired and unexercised option to purchase Shares (
Option
), whether
or not then exercisable or vested, will vest and be cancelled and, in exchange therefor, each former holder of any such Option will be entitled to receive an amount in cash (without interest, and subject to deduction for any required withholding
tax) equal to the product of (A) the total number of Shares previously subject to such Option and (B) the excess, if any, of the Merger Consideration over the exercise price per Share previously subject to such Option; (ii) each
outstanding award of restricted stock units will vest, become free of any restrictions and will be cancelled in exchange for the right to receive a payment (without interest, and subject to deduction for any required withholding tax) equal to the
Merger Consideration; and (iii) each outstanding award of Virgin America Common Stock that is subject to restrictions based on performance or continuing service (the
RSAs
) will vest (treating for this purpose any
performance-based vesting condition to which such RSA is subject as having been attained at maximum level), become free of any restrictions and be converted into the right to receive the Merger Consideration.
Each of Virgin America and Alaska Air Group made certain representations, warranties and covenants in the Merger Agreement, including, among others, covenants
by Virgin America to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the consummation of the Merger.
Conditions to the Merger
The completion of the
Merger is subject to certain conditions, including approval by the holders of the Voting Common Stock, the absence of any material adverse effect on Virgin Americas business, expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and receipt of any required approvals from the U.S. Federal Aviation Administration and the U.S. Department of Transportation.
No Solicitation; Stockholders Meeting; Efforts
Virgin America has also agreed, subject to certain exceptions, not to solicit or enter into discussions concerning, or provide confidential information in
connection with, any alternative transaction. Subject to certain exceptions, the Merger Agreement also requires Virgin America to call and hold a stockholders meeting and for Virgin Americas board of directors (the
Virgin
America Board
) to recommend that Virgin Americas stockholders adopt the Merger Agreement. Prior to adoption of the Merger Agreement by Virgin Americas stockholders, the Virgin America Board may, in certain circumstances, change
its recommendation that Virgin Americas stockholders adopt the Merger Agreement, subject to complying with certain notice and other specified conditions set forth in the Merger Agreement, including giving Alaska Air Group the opportunity to
propose changes to the Merger Agreement. In addition, each of the parties have agreed to use their reasonable best efforts to cause the Merger to be consummated.
Other Terms of the Merger Agreement
The Merger
Agreement may be terminated under certain circumstances by Virgin America, including in the event that Virgin America receives an unsolicited alternative acquisition proposal that Virgin America concludes, after following certain procedures, is a
Superior Proposal (as defined in the Merger Agreement). If Virgin America receives a Superior Proposal, Alaska Air Group must be given the opportunity to match the Superior Proposal. In addition, Alaska Air Group may terminate the Merger Agreement
under certain circumstances, including if the Virgin America Board changes its recommendation that stockholders adopt the Merger Agreement, if after a request from Alaska Air Group the Virgin America Board fails to reaffirm its recommendation of the
Merger following an alternative acquisition proposal or if there is a breach of Virgin Americas obligations relating to non-solicitation of an
alternative acquisition proposal or the procedures to be followed following receipt of an unsolicited alternative acquisition proposal. Upon termination of the Merger Agreement under certain
circumstances, Virgin America may be required to pay Alaska Air Group a termination fee equal to $78.5 million.
The foregoing description of the Merger
Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
The Merger Agreement has been attached as an exhibit to provide investors and security holders with information regarding its terms. It is not intended to
provide any other factual information about Virgin America or Alaska Air Group. The representations, warranties and covenants contained in the Merger Agreement were made only for the purposes of such agreement and as of specified dates, were solely
for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to
the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the
Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Virgin America, Alaska Air Group or any of their respective
subsidiaries or affiliates. In addition, the assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in a confidential disclosure schedule that the parties have exchanged. Accordingly,
investors should not rely on the representations and warranties as characterizations of the actual state of facts, since (i) they were made only as of the date of such agreement or a prior, specified date, (ii) in some cases they are
subject to qualifications with respect to materiality, knowledge and/or other matters and (iii) they may be modified in important part by the underlying confidential disclosure schedule. Moreover, information concerning the subject matter of
the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Virgin Americas or Alaska Air Groups public disclosures.
Support Agreement
On April 1, 2016, Alaska
Air Group entered into a support agreement (the
Support Agreement
) with Cyrus Aviation Holdings, LLC and Cyrus Capital Partners, L.P. (together, the
Supporting Stockholder
). As of April 1, 2016, the
Supporting Stockholder owned approximately 27.9% of the Voting Common Stock (based on the number of outstanding shares of Voting Common Stock as represented in the Merger Agreement).
The Support Agreement requires the Supporting Stockholder to vote (or cause to be voted) the Supporting Stockholders Subject Shares (as defined in the
Support Agreement) (i) in favor of the adoption and approval of the Merger Agreement and approval of the Merger and the other transactions contemplated by the Merger Agreement, (ii) in favor of any proposal to adjourn or postpone any
meeting of the stockholders of Virgin America to solicit additional votes if there are not sufficient votes for the adoption of the Merger Agreement on the date on which such meeting is held, (iii) in favor of any other matter necessary for
consummation of the transactions contemplated by the Merger Agreement that is considered at such meeting, and (iv) against any Acquisition Proposal (as defined by the Merger Agreement) and against certain other actions that would reasonably be
expected to interfere with the consummation of the Merger. Pursuant to the Support Agreement, the Supporting Stockholder waives appraisal rights and provides an irrevocable proxy appointing Alaska Air Group as the Supporting Stockholders proxy
and attorney-in-fact to vote the Supporting Stockholders Subject Shares in accordance with the foregoing.
The Support Agreement and the irrevocable
proxy granted pursuant to the Support Agreement will terminate upon the earliest to occur of (a) the Effective Time, (b) the termination of the Merger Agreement in accordance with its terms, and (c) the entry without the prior written
consent of the Supporting Stockholder of any amendment to the Merger Agreement which results in a decrease in, or change in the composition of, the Merger Consideration.
Until the Support Agreement terminates in accordance with its terms, the Supporting Stockholder (x) is prohibited from transferring any Subject Shares
beneficially owned by the Supporting Stockholder, subject to certain exceptions, and (y) agreed to certain restrictions on soliciting, or entering into discussions and negotiations with respect to, Acquisition Proposals.
The foregoing description of the Support Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the
Support Agreement, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.