Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction — Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3/A Pre-Effective Amendment to Registration Statement 59 370K
for Securities Offered Pursuant to a
Transaction
6: EX-4.11 Stock Purchase Warrant 9 39K
7: EX-4.12 Stock Purchase Warrant 9 39K
2: EX-4.2 Amendment to Warrant Agreement 2 13K
3: EX-4.3 Warrant Agreement Dated October 24, 1996 27 105K
4: EX-4.4 Amendment to Warrant Agreement 2 13K
5: EX-4.8 Class B Warrant Certificate 6 23K
8: EX-5.1 Opinion of Irell & Manella, LLP 1 11K
14: EX-10.10 Office Lease 56 169K
15: EX-10.11 Single Tenant Lease 47 157K
16: EX-10.14 Strategic Alliance Agreement 69 264K
17: EX-10.15 Registration Rights Agreement 16 71K
18: EX-10.16 Amendment to Shareholders' Agreement 4 19K
19: EX-10.17 Agreement - Donald H. Goldman 9 46K
9: EX-10.2 Severance Agreement - Steven Fieldman 9 46K
10: EX-10.4 Employment Agreement - John Alderfer 15 68K
11: EX-10.5 Severance Agreement - Lance Fieldman 9 47K
12: EX-10.7 Amended Intellectual Property License 8 31K
13: EX-10.9 Sublease and Consent 9 46K
20: EX-23.2 Consent of Kpmg Peat Marwick 1 9K
21: EX-23.3 Consent of Richard Eisner 1 9K
22: EX-23.5 Consent of John Pritzker 1 9K
23: EX-23.6 Consent of Adam Aron 1 9K
24: EX-99.1 Letter of Transmittal 21 77K
EXHIBIT 10.14
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STRATEGIC ALLIANCE AGREEMENT
between
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
AND
HYATT VENTURES, INC.
Dated as of November 12, 1996
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TABLE OF CONTENTS
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[Download Table]
ARTICLE I........................ 1
STRATEGIC ASSISTANCE; INVESTMENT OBLIGATION; WARRANTS. 1
1.1 Hyatt Commitment................................... 1
1.2 IFT Cooperation.................................... 2
1.3 Investment in IFT.................................. 2
1.4 Warrants........................................... 2
ARTICLE II......................... 3
JOINT INVESTMENT OPPORTUNITIES................ 3
2.1 Hyatt Investment Option............................ 3
2.2 General Procedures................................. 4
2.3 Specific Procedures................................ 4
2.4 Formation of Joint Ventures........................ 5
2.5 Economic Benefits.................................. 5
2.6 Local Partners..................................... 6
2.7 Conversion of Hyatt Interests...................... 6
2.8 Mechanics of Conversion............................ 7
2.9 Limitation on Conversion Rights.................... 9
ARTICLE III.......................... 9
TERMS OF SALE TO JOINT VENTURES.................. 9
3.1 Sales by IFT....................................... 9
3.2 Timing of Payments to IFT.......................... 10
3.3 Further Actions.................................... 10
3.4 Representations and Warranties to JV Customers 10
ARTICLE IV.......................... 11
OTHER AGREEMENTS....................... 11
4.1 Board of Directors................................. 11
4.2 Executive Committee................................ 11
4.3 Election and Removal............................... 11
4.4 Consultation Right................................. 11
4.5 Registration Rights................................ 11
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4.6 Confidentiality.................................... 12
4.7 Standstill......................................... 12
4.8 Audit.............................................. 13
ARTICLE V........................... 14
REPRESENTATIONS AND WARRANTIES OF IFT............ 14
5.1 Corporate Existence and Power...................... 14
5.2 Corporate Authorization............................ 15
5.3 Consents; Approvals................................ 15
5.4 Non-Contravention.................................. 15
5.5 Capitalization..................................... 16
5.6 SEC Filings........................................ 16
5.7 Financial Statements............................... 17
5.8 Disclosure Documents............................... 17
5.9 Intellectual Property.............................. 17
5.10 Absence of Certain Changes......................... 18
5.11 Litigation......................................... 18
5.12 Compliance with Laws and Agreements................ 18
5.13 Finders' Fees...................................... 19
5.14 Full Disclosure; No Misrepresentations............. 19
ARTICLE VI......................... 19
REPRESENTATIONS AND WARRANTIES OF HYATT........... 19
6.1 Corporate Existence and Power...................... 19
6.2 Corporate Authorization............................ 19
6.3 Consents; Approvals................................ 19
6.4 Non-Contravention.................................. 20
6.5 Disclosure Documents............................... 20
6.6 Litigation......................................... 20
6.7 Finders' Fees...................................... 20
6.8 Full Disclosure; No Misrepresentations............. 20
ARTICLE VII........................ 21
INDEMNIFICATION...................... 21
7.1 Indemnification of Hyatt........................... 21
7.2 Procedure for Claims............................... 21
7.3 Indemnification of IFT............................. 23
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ARTICLE VIII.................... 24
GENERAL PROVISIONS.................. 24
8.1 Expenses........................................... 24
8.2 Notices............................................ 24
8.3 Public Announcements............................... 25
8.4 Headings........................................... 25
8.5 Severability....................................... 25
8.6 Entire Agreement................................... 25
8.7 Assignment......................................... 25
8.8 Amendment; Waiver.................................. 26
8.9 Governing Law; Forum............................... 26
8.10 Counterparts....................................... 26
8.11 Attorneys' Fees.................................... 26
8.12 Further Action..................................... 26
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STRATEGIC ALLIANCE AGREEMENT
THIS STRATEGIC ALLIANCE AGREEMENT (this "AGREEMENT"), dated as of November
12, 1996 by and between Interactive Flight Technologies, Inc., a Delaware
corporation ("IFT") and Hyatt Ventures, Inc., a Delaware corporation ("HYATT").
W I T N E S S E T H:
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WHEREAS, IFT is engaged in the development, manufacture, marketing, sale
and distribution of computer-based in-flight entertainment networks (the
"ENTERTAINMENT NETWORK") currently for use primarily by airline passengers,
including a new generation of the Entertainment Network ("IFEN-2") which IFT
desires to market, sell and distribute to airlines and other potential IFT
customers (collectively, "IFT CUSTOMERS");
WHEREAS, Hyatt and certain of its affiliates and designees (the "HYATT
GROUP") have experience, relationships and resources which may be helpful to IFT
in marketing, selling and distributing the IFEN-2 system, together with all of
its updates, upgrades, modifications, enhancements and derivatives (the
"SYSTEM"); and
WHEREAS, IFT and Hyatt have agreed to form a strategic alliance with
respect to the System on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements of the
parties contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
STRATEGIC ASSISTANCE; INVESTMENT OBLIGATION; WARRANTS
Section 1.1 Hyatt Commitment. During the Alliance Period (as defined
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below), Hyatt, through the Hyatt Group, shall, at the request of IFT, use its
best commercial efforts to assist IFT in advancing IFT's current and future
business with respect to the System, including, without limitation, consulting
with and assisting IFT in (a) development of relationships with international
and U.S. domestic air carriers, (b) negotiation of contractual relationships
with international and U.S. air carriers, (c) development of relationships and
contractual arrangements with non-air carrier potential users of the System, (d)
development of relationships and contractual arrangement with entrepreneurial
and institutional financing sources, (e) development of relationships and
contractual arrangements with service providers and vendors, such as credit card
companies and telecommunications companies and (f) development and
implementation of
marketing programs. Hyatt shall assign at least one person to discharge its
responsibilities under this Section 1.1, which person shall devote that portion
of his time as is reasonably necessary to fulfill Hyatt's obligations under this
Section. IFT agrees that it shall reimburse Hyatt for all reasonable and
documented out-of-pocket costs and expenses incurred by or on behalf of Hyatt in
connection with the performance of Hyatt's obligations under this Section 1.1;
provided, however, that to the extent any such expenses can be properly
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identified as having been incurred in connection with a specific Joint Venture,
such Joint Venture shall reimburse IFT for 100% any amounts previously
reimbursed to Hyatt pursuant to this Section 1.1. Anything to the contrary
herein notwithstanding, in the event of a Change of Control (as defined in
Section 4.7 below), Hyatt may, at its option, terminate its obligations under
this Section 1.1. For the purposes of this Agreement, "ALLIANCE PERIOD" shall
mean the period beginning on the date hereof and ending on the date either party
delivers written notice (a "TERMINATION NOTICE") terminating the Alliance
Period; provided, however, that a Termination Notice may not be delivered until
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the later to occur of (i) the date two years from the date hereof and (ii) the
date on which the Hyatt Group (A) no longer owns equity interests in any of the
Joint Ventures formed pursuant to Sections 2.3 below and (B) owns shares, and
warrants or options to acquire shares, comprising in the aggregate less than 5%
of the issued and outstanding shares of IFT's Class A Common Stock, par value
$0.01 per share (the "CLASS A COMMON STOCK").
Section 1.2 IFT Cooperation. IFT shall use its best commercial efforts to
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cooperate with Hyatt in Hyatt's performance of its obligations pursuant to
Section 1.1 above.
Section 1.3 Investment in IFT. During the period beginning on the date
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hereof and ending 90 days therefrom, Hyatt (itself or through the Hyatt Group),
shall invest or cause to be invested an aggregate of $1,000,000 in the
acquisition of shares of Class A Common Stock through open market purchases;
provided, however, that Hyatt shall not be obligated to make any such purchase
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at a price per share in excess of $14.15.
Section 1.4 Warrants.
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(a) Reservation of Warrants. In consideration of Hyatt's willingness
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to enter into and perform its obligations under this Agreement, IFT agrees,
subject to the terms of Section 1.4(b) and (c) below, to issue to Hyatt (or
its designees) warrants substantially in the form attached hereto as
Exhibit 1.4 (the "WARRANTS") to acquire up to 1,340,222 shares of Class A
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Common Stock at an exercise price of $9.875 per share, subject to
adjustment in accordance with the antidilution provisions of the Warrants.
IFT agrees to reserve shares of Class A Common Stock to meet its
obligations under the Warrants, and all shares of Class A Common Stock
issued upon exercise of the Warrants shall be duly and validly issued,
fully paid and nonassessable, free of any Liens (as defined in Section 5.4
below), not subject to any preemptive rights and shall be listed on any
exchanges on which the Class A Common Stock is then listed.
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(b) Issuance of Warrants. During the period beginning on the date
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hereof and ending on the second anniversary of the date hereof (the
"WARRANT VESTING PERIOD"), IFT shall issue one-ninetieth of the Warrants to
Hyatt (or its designees) for each airplane with respect to which IFT or a
Joint Venture (as defined in Section 2.4 below) obtains a binding
commitment from an IFT Customer, other than an Excluded Customer, for the
installation of the System; provided, however, that during the Warrant
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Vesting Period, upon the occurrence of any of the events described in
clauses (i) and (ii) of Section 4.3 (Merger; Consolidation; Sale of Assets)
of the Warrants or any distribution described in Section 4.4 (Other
Distributions) of the Warrants, which distribution exceeds 5% of the book
value of IFT, 100% of the Warrants to which Hyatt is entitled under this
Agreement shall become fully vested. For the purposes of this Agreement,
"EXCLUDED CUSTOMER" means (i) Swissair, (ii) Debonair, (iii) Alitalia, (iv)
Petrol Air, (v) Futura Airlines, (vi) Air Europa and (vii) Oasis Airlines.
(c) Term. All Warrants issued in accordance with Section 1.4(b)
----
above, shall expire and shall become void at 5:00 p.m. (Pacific time) on
the fifth anniversary of the date hereof.
ARTICLE II
JOINT INVESTMENT OPPORTUNITIES
Section 2.1 Hyatt Investment Option. During the Alliance Period, Hyatt
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shall, at its option, have the right (each such right being hereinafter referred
to as an "INVESTMENT OPTION") to invest up to one-third of the financing
required by IFT to effect the installation of the System (a) on the aircraft
fleets of any five IFT Customers in the airline industry, excluding Qantas
Airlines ("QANTAS"), or, if a Joint Venture is not formed with respect to Qantas
on or prior to February 28, 1997, any six IFT Customers in the airline industry
and (b) for two other IFT Customers or opportunities outside of the airline
industry. The Investment Option shall terminate upon termination of the Alliance
Period, except with respect to potential IFT Customers with which IFT is then in
negotiation and in which Hyatt had previously indicated a significant interest
under Section 2.3 below. IFT and Hyatt will use their reasonable best efforts to
agree upon the terms of and to form a Joint Venture with respect to Qantas. The
Investment Option shall not apply to IFT Customers (other than Qantas) which are
contractually obligated to make full payment to IFT within 60 days of completion
of the installation of the System of at least the fully burdened cost of goods
of such System less, the lesser of (x) $20,000,000 and (y) 20% of the fully
----
burdened cost of goods of such System. For purposes of determining "FULLY
BURDENED COST" of goods and/or services, IFT will establish, in consultation
with and subject to the reasonable approval of Hyatt, a method of project
management accounting under which IFT will allocate all costs incurred with
regard to the sales and other activities relating to a JV Customer (whether
incurred before or after the formation of the relevant Joint Venture for such JV
Customer), including, without limitation, out-of-pocket costs, costs of
consultants, subcontractors and advisors, direct labor, material and other costs
(including
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the cost of warranty service performance), and an allocation of indirect costs,
but excluding (i) R&D costs relating to the design of the System generally (as
opposed to R&D costs relating to design modifications or enhancements undertaken
for a specific project) and (ii) costs of warranty service performance arising
out of or related to System design defects (as opposed to routine part failures
or defects in any JV Customer specific design modifications or enhancements).
Section 2.2 General Procedures. The parties acknowledge that the
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Investment Options are intended to be afforded and exercised in a manner such
that Hyatt shall have as reasonable an opportunity as is practicable (in light
of the circumstances and timing of the specific IFT Customer opportunity) to
participate in negotiations and discussions with potential IFT Customers, to
perform due diligence regarding and evaluations in connection with any proposed
transaction(s) with potential IFT Customers and to exercise the Investment
Option. However, the parties also acknowledge that such opportunities and
rights of Hyatt must be afforded and exercised in such a manner as to permit IFT
to reasonably solicit potential IFT Customers and to conduct negotiations
regarding (and consummate) sales of the System in connection with which Hyatt
does not elect to exercise its Investment Option.
IFT shall use its commercial best efforts to assist Hyatt in Hyatt's due
diligence review and evaluation with respect to the Investment Options. IFT
further agrees to grant Hyatt and its representatives reasonable access to IFT's
personnel and advisors in connection with Hyatt's evaluation of each such
Investment Option.
Section 2.3 Specific Procedures. IFT shall keep Hyatt apprised of all
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material contacts and discussions with potential IFT Customers to which an
Investment Option may apply. Hyatt agrees to notify IFT in writing as promptly
as is practical of the names of any of the potential IFT Customers with respect
to which Hyatt does not have a significant interest in exercising the Investment
Option. IFT will be free to pursue such potential IFT Customers without being
subject to the Investment Option; provided, however, that if Hyatt determines
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thereafter that it has a significant interest in such potential IFT Customer, it
may rescind its earlier indication of lack of interest unless there would be any
material adverse impact on alternative arrangements IFT has made or is then
making in good faith with respect to such potential IFT Customers.
In connection with any potential IFT Customers with respect to which Hyatt
has a significant interest in exercising the Investment Option, IFT and Hyatt
shall use reasonable efforts to share any relevant information which either may
have, with respect to, and with the goal of assisting each other in evaluating
transactions with, potential IFT Customers. At such time as it becomes critical
for IFT (in IFT's reasonable judgment) to establish the financing approach for
any particular IFT Customer to which an Investment Option applies, IFT will
provide Hyatt with a written notice (the "NOTICE") of the amount of financing
which IFT will require in respect of such IFT Customer and the material terms of
the transaction with respect to which such financing is sought. Hyatt may
exercise an Investment Option by written notice to IFT within a reasonable time
(taking into account the needs of IFT and Hyatt) but in any case within 30
business days following receipt of the Notice by Hyatt. If Hyatt exercises an
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Investment Option with respect to any IFT Customer, it may at the same time
indicate an interest in providing any additional financing that IFT would
otherwise seek from outside parties at arms length terms to be mutually agreed
by the parties in good faith. If Hyatt is not interested in providing such
additional financing or if the parties are unable to reach agreement with
respect to such additional financing after 30 days of good faith negotiation,
then Hyatt shall provide capital only as required by the relevant Investment
Option and IFT will be free to raise any additional financing needed from third
parties. By written notice promptly delivered to IFT, Hyatt may change its
position with respect to the exercise or non-exercise of an Investment Option,
but only (a) in the case of any opportunity with respect to which it has
exercised an Investment Option, if that transaction fails to close in a timely
manner for any reason other than a material breach by Hyatt of its obligation to
fund the applicable Joint Venture (as defined in Section 2.4 below) and to
otherwise use its reasonable efforts to cooperate with IFT in negotiations with
the relevant potential IFT Customer (as contemplated hereby) or if there is a
material adverse change in the opportunity from that understood by the parties
at the time of the exercise by Hyatt of an Investment Option and Hyatt promptly
notifies IFT after learning of such change, or (b) in the case of any
opportunity with respect to which Hyatt failed or elected not to exercise an
Investment Option, to the extent that there would not be a material adverse
impact on alternative arrangements IFT has made or is then making in good faith.
Section 2.4 Formation of Joint Ventures. In the event Hyatt timely
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exercises an Investment Option with respect to any IFT Customer (a "JV
CUSTOMER"), IFT and Hyatt (together with any local partners, to the extent
approved in accordance with Section 2.6 below) shall form an entity (each, a
"JOINT VENTURE") relative to (a) the installation of the System in the
applicable JV Customer's fleet with respect to airline customers or (b) other
similar installations and/or deliveries of the System with respect to any non-
airline JV Customers. Each Joint Venture (which the parties currently
anticipate will be organized as a limited liability company, limited partnership
or equivalent entity) will be governed by an agreement (a "JOINT VENTURE
AGREEMENT") acceptable to IFT and Hyatt with terms and provisions substantially
similar to the form of operating agreement attached hereto as Exhibit 2.4. Each
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Joint Venture Agreement shall include, without limitation, provisions regarding
(i) board (or similar governing body) representation in accordance with equity
interests, (ii) tax efficient allocations of profits and losses; (iii) major
decisions which require approval of all IFT and Hyatt (A) board (or similar
governing body) members or (B) equity holders, (iv) procedures for resolution of
deadlocks (v) transfer restrictions, including a right of first refusal, (vi)
drag-along and tag-along rights and (vii) dilution procedures in the event a
participant fails to contribute committed capital.
Section 2.5 Economic Benefits. The parties acknowledge and agree that
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under certain circumstances approved in advance and in writing by IFT and Hyatt,
it may be necessary or advantageous for IFT (or an IFT affiliate) to enter into
contractual arrangements with one or more JV Customers in lieu or on behalf of a
Joint Venture. Under such circumstances IFT shall accept all of the economic
benefits derived from any such contractual arrangements between IFT (or an IFT
affiliate) and any such JV Customer in trust for the benefit of, and as agent
for, the
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applicable Joint Venture, and shall take all actions reasonably necessary to
assure that such economic benefits are transferred to and obtained by the Joint
Venture.
Section 2.6 Local Partners. In the event that IFT and Hyatt reasonably
--------------
agree that it is necessary or otherwise desirable in order to operate in a non-
U.S. IFT Customer's principal geographic area or otherwise to facilitate sales
of the System to such IFT Customer to seek the participation of a local partner
(a "LOCAL PARTNER") in a Joint Venture that is formed to do business with a non-
U.S. JV Customer, IFT and Hyatt agree that the interests in the Joint Venture,
after giving effect to the participation of the Local Partner, shall be two-
thirds IFT and one-third Hyatt, respectively.
Section 2.7 Conversion of Hyatt Interests.
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(a) Conversion Right. Subject to the provisions of Section 2.9 below,
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with respect to any Joint Venture, at any time and from time to time
following (i) with respect to airline customers, completion of installation
of the System on all aircraft initially contemplated (either specifically
identified by tail number or otherwise limited by a specified number of
aircraft) at the time of formation of such Joint Venture and (ii) with
respect to non-airline customers, a mutually agreed upon milestone of
similar import to that described in the immediately preceding clause (i),
Hyatt or the relevant member of the Hyatt Group (the "JV HOLDER") shall
have the option to convert (each a "CONVERSION OPTION") an amount not less
than 50% (or such lesser portion as is necessary to comply with Section
2.9) of its initial equity interest in such Joint Venture (each an "EQUITY
INTEREST") into that number of shares of Class A Common Stock determined by
dividing (A) the aggregate value of the Equity Interest in the applicable
Joint Venture (as determined in accordance with the terms of Section 2.7(b)
below), by (B) the Current Market Price (as defined in Section 2.7(c)
below) of a share of Class A Common Stock as of the Conversion Date (as
defined in Section 2.8(a) below).
(b) Determination of Joint Venture Value. The aggregate value of the
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Equity Interest in the applicable Joint Venture as of the Conversion Date
shall be determined either (i) by mutual agreement of IFT and the JV Holder
or (ii) absent such agreement within five business days of IFT's receipt of
a Conversion Notice, by a nationally recognized investment banking firm or
nationally recognized valuation firm (in either case, the "APPRAISER"),
based upon the discounted cash flow of the relevant Joint Venture, without
consideration of a minority discount. In the event that IFT and the JV
Holder cannot mutually agree on an Appraiser within 10 business days of
IFT's receipt of a Conversion Notice from the JV Holder, each of IFT and
the JV Holder shall submit the names of three proposed Appraisers. Promptly
following submission of the names of the proposed Appraisers, the Appraiser
shall be selected from such names by lottery. Each of IFT and the JV Holder
shall cooperate with the Appraiser. The Appraiser shall submit its
determination within 30 days of its engagement by the parties, which
determination shall be conclusive and binding on IFT and the JV Holder. The
expenses of the Appraiser shall be borne equally by IFT and the JV Holder.
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(c) For the purposes of this Agreement, "CURRENT MARKET PRICE" of a
share of Class A Common Stock at any date shall be (i) in the event that
the Class A Common Stock is not then being publicly traded in the over-the-
counter market or on a nationally recognized exchange, the fair market
value (which shall not be less than book value) on the date for which such
determination is to be made as determined in good faith by the Board of
Directors of IFT after consultation with IFT's investment bankers or (ii)
in the event that the Class A Common Stock is then being publicly traded in
the over-the-counter market or on a nationally recognized exchange, the
average of the last reported sale prices per share for the 45 consecutive
Trading Days (as defined below) preceding the date of such computation.
The last reported sale price for each day shall be (A) the last sale price,
or the closing bid price if no sale occurred, of the Class A Common Stock
on the principal securities exchange on which the Class A Common Stock is
listed, (B) if not listed as described in clause (A), the last reported
sale price of the Class A Common Stock on any national stock exchange, if
traded thereon, or on the Automated Quotation System of the National
Association of Securities Dealers, Inc. (the "NASDAQ SYSTEM"), or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, or (C) if not quoted as described
in clauses (i) or (ii), the mean of the high and low bid quotations for the
Class A Common Stock as reported by the National Quotation Bureau
Incorporated if at least two securities dealers have inserted bid
quotations for the Class A Common Stock on at least five of the ten
preceding days. If the Class A Common Stock is quoted on a national
securities or central market system, in lieu of a market or quotation
system described above, the last reported sale price shall be determined in
the manner set forth in clause (C) of the preceding sentence if bid and
asked quotations are reported but actual transactions are not, and in the
manner set forth in clause (A) of the preceding sentence if actual
transactions are reported. If none of the conditions set forth above is
met, the last reported sale price of the Class A Common Stock on any day or
the average of such last reported sale prices for any period shall be the
fair market value of such class of stock as determined by a member firm of
the New York Stock Exchange, Inc. selected by the IFT. As used herein the
term "TRADING DAYS" means (x) if the Class A Common Stock is quoted on the
NASDAQ System or any similar system of automated dissemination of
quotations of securities prices, days on which trades may be made on such
system, or (y) if not quoted as described in clause (x), days on which
quotations are reported by the National Quotation Bureau Incorporated, or
(z) if the Class A Common Stock is listed or admitted for trading on any
national securities exchange, days on which such national securities
exchange is open for business.
Section 2.8 Mechanics of Conversion.
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(a) Notice of Conversion. In order to exercise a Conversion Option
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described in Section 2.7(a) above, the JV Holder shall deliver to IFT a
written notice (a "CONVERSION NOTICE") including the following information
(i) the name of the relevant Joint Venture, (ii) the percentage of its
Equity Interest that the JV Holder wishes to convert, (ii) the conversion
date, which date shall be a day following the date on which
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IFT receives the Conversion Notice (the "CONVERSION DATE"), (iv) the JV
Holder's proposed valuation of the Joint Venture (the "PROPOSED VALUATION")
and (v) if calculable based on the chosen Conversion Date, a calculation of
the number of shares of Class A Common Stock that the JV Holder believes it
is entitled to receive upon conversion. Within five business days of IFT's
receipt of a Conversion Notice, IFT will notify the JV Holder in writing as
to whether IFT agrees or disagrees with the Proposed Valuation. In the
event IFT disagrees with the Proposed Valuation, the JV Holder and IFT
shall within 10 business days of IFT's receipt of the Conversion Notice
agree upon an Appraiser, or if they are unable to agree on an Appraiser,
the Appraiser shall be selected in accordance with Section 2.7(a) above.
(b) Issuance of Shares. Upon the earlier to occur of (i) the
------------------
agreement of IFT with the Proposed Valuation or (ii) the determination of
the aggregate value of the JV Holder's Equity Interest by the Appraiser,
but subject to delivery by the JV Holder of customary representations and
warranties concerning investment intent and compliance with federal and
state securities laws, IFT shall promptly take all actions necessary to
effect the conversion described in the applicable Conversion Notice and
issue and deliver to the JV Holder the applicable number of whole shares of
Class A Common Stock, together with cash in the amount required to pay for
any fractional shares of Class A Common Stock otherwise issuable upon
conversion.
(c) Effective Time of Conversion. Each conversion of Equity Interests
----------------------------
by a JV Holder shall be deemed to have been effected, and such JV Holder
shall be deemed to be a shareholder of IFT for all purposes, immediately
prior to the close of business on the date on which all conditions set
forth in Section 2.8(b) are satisfied, and the Persons in whose name(s) any
certificate for shares of Class A Common Stock are issued shall be deemed
to have become the holder(s) of record of the shares of Class A Common
Stock at such time. All shares of Class A Common Stock delivered upon
conversion pursuant to a Conversion Notice, shall be duly and validly
issued, fully paid and non-assessable, free of any Liens (as defined in
Section 6.4 below) and not subject to any preemptive rights.
(d) Company to Reserve Stock. IFT shall at all times following the
------------------------
date hereof use its reasonable best efforts (including, without limitation,
promptly taking such corporate action as may be necessary to increase its
authorized but unissued securities), based on its good faith determination
of the values of the applicable Joint Ventures, to reserve and keep
available for issue upon exercise of Conversion Options such number of its
authorized but unissued shares of Class A Common Stock as will be
sufficient to permit the conversion in full of all outstanding Equity
Interests subject to the Conversion Option, and shall use its reasonable
best efforts to cause all shares of Class A Common Stock issued upon
exercise of Conversion Options to be listed on any exchanges on which the
Class A Common Stock is then listed.
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(e) Taxes on Conversion. IFT will pay any and all documentary stamp
-------------------
or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Class A Common Stock on a JV Holder's exercise of its
Conversion Option (but excluding taxes arising out of the transfer of
shares by the JV Holder).
(f) Reclassification, Consolidation, Merger or Sale. In case of any
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reclassification or change of outstanding shares of Class A Common Stock
(other than a change in par value, or as a result of a subdivision or
combination), or in case of any consolidation of IFT with, or merger of IFT
with or into, any other entity that results in a reclassification, change,
conversion, exchange or cancellation of outstanding shares of Class A
Common Stock or any sale or transfer of all or substantially all of the
assets of IFT, each JV Holder shall have the right thereafter to convert
its Equity Interests into the kind and amount of securities, cash and other
property which such JV Holder would have been entitled to receive upon such
reclassification, change, consolidation, merger, sale or transfer such JV
Holder had held the Class A Common Stock issuable upon the conversion of
the Equity Interests immediately prior to the reclassification, change,
consolidation, merger, sale or transfer.
Section 2.9 Limitation on Conversion Rights. A JV Holder may not
-------------------------------
exercise its rights of conversion under Section 2.7 above if, after giving
effect to a proposed conversion, the aggregate ownership of Class A Common Stock
by Hyatt or the Hyatt Group (exclusive of shares of Class A Common Stock
acquired (a) pursuant to Section 1.3 above, (b) as a result of the exercise of
the Warrants described in Section 1.4 above or (c) acquired in connection with
financing provided by Hyatt pursuant to Section 2.3 hereof) would exceed 20% of
the aggregate number of shares of voting securities of IFT then outstanding,
calculated on a fully diluted basis.
ARTICLE III
TERMS OF SALE TO JOINT VENTURES
Section 3.1 Sales by IFT. IFT shall sell to each Joint Venture and each
------------
Joint Venture shall purchase from IFT such Joint Venture's requirements related
to the System and all goods and services ancillary thereto to be sold,
transferred or provided by each Joint Venture to such Joint Venture's JV
Customer. All such goods and services (including, without limitation, the
System, spare parts, software, hardware, installation, programming and
maintenance) shall be provided to the relevant Joint Venture by IFT at a price
equal to 115% of IFT's fully burdened cost of such goods and services; provided,
--------
however, that such fully burdened cost of goods and services may include, with
-------
respect to a particular JV Customer, costs of research and development required
specifically to address the unique needs of such JV Customer, but shall under no
circumstances include any allocation of or for IFT's costs of general research
and development, regardless of when such costs were incurred. The foregoing
notwithstanding, in the event that a Joint Venture is able to acquire goods
and/or services not comprising the System but related to the operation thereof
on more favorable terms to the Joint Venture than those
9
offered by IFT, the Joint Venture shall so inform IFT. In the event that IFT
promptly is willing to sell such goods and/or services to the Joint Venture on
terms (including delivery schedule) which are equal or are more favorable to the
Joint Venture than the third-party's terms, the Joint Venture will purchase such
goods and services from IFT. Otherwise the Joint Venture will be free to
purchase such goods and/or services from the third party.
Section 3.2 Timing of Payments to IFT. Absent other arrangements made
-------------------------
between IFT and the relevant Joint Venture, each Joint Venture shall remit to
IFT, on a shipset-by-shipset basis, 50% of the cost of initial System
installation 60 days prior to scheduled delivery and installation of the System
to the JV Customer and the remaining 50% upon completion of the delivery and
installation of the System. All payments shall be made against IFT invoices in
immediately available U.S. funds by electronic wire transfer to an account
designated by IFT to each Joint Venture in writing at least three business days
prior to the due date of any amounts due hereunder. All other amounts due from a
Joint Venture to IFT hereunder shall be invoiced by IFT upon delivery of the
goods to the JV Customer or performance of services for the JV Customer, and
paid by the Joint Venture "net 30."
Section 3.3 Further Actions. IFT shall use best commercial efforts to
---------------
assist each Joint Venture to market, sell and distribute the System to its JV
Customer and to provide all services ancillary thereto, including, without
limitation, (a) granting limited licenses with respect to the System to the
Joint Ventures, (b) providing access to IFT marketing, sales, maintenance and
technical support personnel and (c) providing legal, accounting and finance
support, in each case subject to reimbursement by such Joint Venture for 115%
the fully burdened costs of providing such assistance and services as provided
in Section 2.1.
Section 3.4 Representations and Warranties to JV Customers. IFT hereby
----------------------------------------------
agrees that Hyatt and each JV Holder shall be third-party beneficiaries of, and
shall have no responsibility or liability for any representations, warranties,
covenants and agreements that each Joint Venture (or IFT) is required to make to
each JV Customer in connection with the sale of the System (and performance of
ancillary services with respect thereto) to each JV Customer, other than with
respect to the costs of providing warranty service to JV Customers on account of
routine parts failures or defects or general system maintenance, which costs
shall be borne by the relevant Joint Venture. Further IFT agrees that it shall
indemnify and hold the Hyatt Indemnified Parties (as defined in Section 7.1(b)
below) harmless against any claims made by or through any such JV Customer in
respect of such representations, warranties, covenants and agreements as though
such claims were Third Party Claims (as defined in Section 7.2(b) below). The
foregoing notwithstanding, Hyatt agrees that IFT shall not be required to
indemnify the Hyatt Indemnified Parties on account of Third Party Claims made by
JV Customers for the costs of warranty service associated with routine parts
failures or defects or general System maintenance.
Section 3.5 Invoice Disputes. In the event that there is a dispute
----------------
between IFT and a Joint Venture regarding amounts owed by a Joint Venture to
IFT, the Joint Venture shall pay any undisputed amounts owed by such Joint
Venture to IFT, and with respect to disputed amounts, a representative of IFT
and one of the Hyatt Designees (or a person designated by such
10
Hyatt Designee) on behalf of the Joint Venture shall use their reasonable best
efforts to resolve the dispute promptly. In the event such persons cannot
resolve the dispute with 60 days of the date on which the disputed amount became
past due, the IFT representative and the Hyatt Designee (or his designee) on
behalf of the Joint Venture shall select an arbitrator (the "ARBITRATOR")
pursuant to the Appraiser selection method described in Section 2.7(b) above.
The Arbitrator shall submit its determination within 30 days of its engagement
to resolve the dispute, which determination shall be conclusive and binding on
IFT and the Joint Venture. The expenses of the Arbitrator shall be borne by the
non-prevailing party.
ARTICLE IV
OTHER AGREEMENTS
Section 4.1 Board of Directors. During the Alliance Period, Hyatt shall
------------------
have the right to designate and IFT agrees to cause the nomination of, no less
than two individuals (the "HYATT DESIGNEES") as members of the Board of
Directors of IFT (the "BOARD"). In the event that the number of directors
constituting the whole Board is increased above nine members, Hyatt shall be
entitled to nominate, and IFT agrees to cause the election of no less than two-
ninths of members of the Board rounded up, in the case of a fractional number,
to the next whole number.
Section 4.2 Executive Committee. During the Alliance Period, if an
-------------------
Executive Committee of the Board exists or is created, IFT agrees to cause the
appointment of at least one Hyatt Designee to the Executive Committee (or
equivalent committee) of the Board.
Section 4.3 Election and Removal. If any Hyatt Designee shall be unable
--------------------
or unwilling to serve as a director of IFT or on the Executive Committee of the
Board, Hyatt shall be entitled to promptly designate a replacement designee to
be elected or appointed. Hyatt may cause any Hyatt Designee to be removed with
or without cause, with any vacancy on the Board or on the Executive Committee of
the Board so created to be filled as provided in the immediately preceding
sentence.
Section 4.4 Consultation Right. During the Alliance Period, IFT shall
------------------
timely consult with Hyatt regarding the selection, engagement, retention and
proposed discharge of any member of IFT's senior management.
Section 4.5 Registration Rights. All shares of Class A Common Stock
-------------------
received by Hyatt and/or the Hyatt Group in connection with the transactions
contemplated by this Agreement including, without limitation, by virtue of
Sections 1.4, 2.3 and 2.7 hereof, shall have the benefit of, and be subject to
the terms of that certain Registration Rights Agreement dated as of the date
hereof (the "REGISTRATION RIGHTS AGREEMENT") among IFT, Hyatt and the other
Persons who become parties hereto. The Registration Rights Agreement shall
provide, among other things, for the Hyatt (or members of the Hyatt Group) to
have four demand and
11
unlimited piggyback registration rights, and shall otherwise be substantially in
the form of Exhibit 4.5 attached hereto.
-----------
Section 4.6 Confidentiality. In the course of the transactions
---------------
contemplated by this Agreement, Hyatt may from time to time have access to
Proprietary Information (as defined below) of IFT. Hyatt agrees that all
Proprietary Information which it has received or may receive shall be considered
the property of IFT and proprietary of IFT, whether or not so marked. Hyatt
agrees that it shall use its reasonable best efforts to (a) protect and preserve
all Proprietary Information, (b) not disclose or otherwise transfer any
Proprietary Information to any third party without the written consent of IFT,
(c) not use any Proprietary Information, except in connection with the
transactions contemplated by this Agreement, (d) limit the dissemination of any
Proprietary Information only to those persons whose duties require a knowledge
of such Proprietary Information for the purposes permitted hereunder, and (e)
return or destroy all Proprietary Information and any copies thereof immediately
upon request therefor. "PROPRIETARY INFORMATION" means all oral, written or
recorded information about or related to IFT or its technology or business which
is hereafter furnished by its officers, directors, employees or agents,
regardless of the manner in which it is furnished, together with any summaries,
extracts, analyses or other documents prepared by Hyatt which contain, reflect
or are generated from such information, regardless of whether explicitly
identified as, or known to Hyatt to be, confidential. However, "Proprietary
Information" does not include information which (w) is or becomes generally
available to the public other than as a result of a disclosure directly or
indirectly by Hyatt or any of Hyatt's employees, officers, directors or agents,
(x) was independently acquired or developed by Hyatt without breach of this
Agreement, (y) becomes available to Hyatt on a non-confidential basis from a
person or entity other than IFT or its advisors who to Hyatt's knowledge is not
and was not bound by a confidentiality agreement with IFT, or, to Hyatt's
knowledge, is not and was not otherwise prohibited from transmitting the
information to Hyatt or (z) is required to be disclosed by law or legal process.
The provisions of this Section 4.6 shall survive for a period of two years
following the earlier to occur of the termination of this Agreement and the
termination of the Alliance Period (except with respect to trade secrets and
technical data that constitute Proprietary Information, which shall survive
indefinitely).
Section 4.7 Standstill. For a period of four years from the date hereof,
----------
except (a) pursuant to the transactions expressly contemplated by this
Agreement, (b) in the case of insolvency, bankruptcy, reorganization or similar
proceeding involving IFT or any of its subsidiaries or affiliates, (c) in the
event of a Change of Control (as defined below), or (d) with the approval of a
majority of directors of IFT other than the Hyatt Designees, Hyatt and its
controlled affiliates will not (and will not assist or encourage its affiliates
to), directly or indirectly acquire or agree, offer, seek or propose to acquire,
or cause to be acquired, ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) of any voting securities issued by IFT, or any
rights or options to acquire such ownership, including from a third party. As
used above, "CHANGE OF CONTROL" means the actual or publically announced
proposed acquisition (including without limitation beneficial ownership as
defined in Rule 13d-3 under the Exchange
12
Act) by any person or group (as defined in Rule 13d-3 under the Exchange Act) of
voting securities representing at least 30% of the votes entitled to be cast at
any meeting of IFT stockholders, provided such person is not a holder of Class B
Common Stock, par value $0.01 per share (the "CLASS B COMMON STOCK") as of the
date hereof, Hyatt or an affiliate of Hyatt (or, in the case of a group, such
group is dominated or led by a Person (as defined in Section 5.1 below) or
Persons who are not currently in control of IFT or Hyatt).
Section 4.8 Audit.
-----
(a) Audit Mechanics. No more frequently than once during each six
---------------
month period during the Alliance Period, Hyatt may cause its
representatives to perform an audit of the books and records of IFT to
ensure compliance by IFT with the provisions of Sections 2.1 and 3.1
hereof. IFT shall cooperate with Hyatt and its representatives in respect
of any such audit and shall further grant reasonable access to Hyatt and
its representatives to IFT books, records and personnel in connection
therewith. Hyatt agrees to cause its representatives to be bound by the
provisions of Section 4.6 prior to the audit.
(b) Violation of Section 2.1. In the event that the results of an
------------------------
audit demonstrate that with respect to the last sentence of Section 2.1
above, IFT has failed to offer Hyatt an Investment Option, then IFT shall
grant Hyatt the option to acquire from IFT that portion of the improperly
excluded transaction which Hyatt would otherwise have been eligible to
acquire at IFT's original cost, less 25%. In the event Hyatt exercises such
option, IFT and Hyatt shall form a Joint Venture as though IFT had properly
offered the IFT Customer to Hyatt as an Investment Option. Under no
circumstances shall a Joint Venture formed pursuant to this Section 4.8(b)
constitute the exercise by Hyatt of an Investment Option for the purposes
of Section 2.1 above.
(c) Violation of Section 3.1. In the event that the results of an
------------------------
audit demonstrate that with respect to the prices set forth in Section 3.1
below, IFT has overcharged or undercharged a Joint Venture for goods or
services, IFT shall promptly remit to the relevant Joint Venture (or such
Joint Venture shall promptly remit to IFT, as applicable) the full amount
of such overcharge or undercharge, together with interest on such amount at
the rate of 10% per annum from the date that the overcharged or
undercharged amount was paid by the Joint Venture to IFT.
(d) Cost of Audits. All costs and expenses of each audit shall be
--------------
borne (i) by Hyatt in the event no remedy is available under Section 4.8(b)
or Section 4.8(c) as a result of the audit or the audit reveals an
overpayment of less than 5% of the amount due during the period and (ii) by
IFT in the event that Hyatt is entitled to a remedy under Section 4.8(b) or
the audit reveals discrepancies of more than 5% of the total during the
period which give rise to a remedy under Section 4.8(c).
13
Section 4.9 Directors Options. Promptly following the execution of this
-----------------
Agreement, IFT shall grant an aggregate of 250,000 options (the "OPTIONS") to
the Hyatt Designees as a group (to be allocated in Hyatt's sole discretion) at
an exercise price not to exceed $9.785 per share, which Options shall otherwise
be in form and substance identical to options granted to other members of the
Board. The shares of Class A Common Stock underlying the Option shall at all
times following the date hereof be covered by an effective registration
statement on Form S-8 (or any successor form). IFT agrees to reserve shares of
Class A Common Stock to meet its obligations under the Options, and all shares
of Class A Common Stock issued upon exercise of the Options shall be duly and
validly issued, fully paid and nonassessable, free of any Liens (as defined in
Section 5.4 below), not subject to any preemptive rights and shall be listed on
any exchanges on which the Class A Common Stock is then listed.
Section 4.10 D&O Insurance. IFT will maintain policies of Directors and
-------------
Officers liability insurance in amounts not less than $10,000,000 in the
aggregate with reputable carriers, such policies and carriers to be reasonably
satisfactory to Hyatt.
Section 4.11 Pre-Closing Activities. IFT hereby acknowledges and agrees
----------------------
that any assistance rendered by Hyatt and/or members of the Hyatt Group to IFT
prior to the date hereof has been rendered the request of IFT, and that any and
all actions taken, or omitted to be taken by IFT arising out of or related to
such assistance were the independent actions of IFT. IFT hereby agrees to
indemnify and hold the Hyatt Indemnified Parties (as defined in Section 7.1(b))
harmless with respect to any Claims (as defined in Section 7.1(b)) which may be
asserted against or sustained or incurred by the Hyatt Indemnified Parties in
connection with, or arising out of, or relating to such assistance and any
actions taken, or omitted to be taken by IFT in respect of such assistance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF IFT
IFT hereby represents and warrants to Hyatt and members of the Hyatt Group
that become JV Holders, except as set forth on Schedule V attached hereto as
----------
follows:
Section 5.1 Corporate Existence and Power. IFT is duly incorporated,
-----------------------------
validly existing and in good standing under the laws of the State of Delaware,
and has all corporate powers and authority and all governmental licenses,
authorizations, consents and approvals (collectively, the "PERMITS") required to
carry on its business as now conducted, except where the failure to obtain such
Permits, individually or in the aggregate, would not have a Material Adverse
Effect (as defined below) on IFT. IFT is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. IFT has heretofore delivered to Hyatt true and
complete copies of IFT's
14
certificate of incorporation and bylaws as currently in effect. IFT has no
subsidiaries and, other than in the ordinary course of business, has made no
investment in any Person. For purposes of this Agreement, a "MATERIAL ADVERSE
EFFECT" means, with respect to any Person, a material adverse effect, on the
condition (financial or otherwise), business, assets or properties of such
Person and its subsidiaries taken as a whole or on the ability of such Person to
perform its obligations hereunder. For purposes of this Agreement, any reference
to any event, change or effect being "MATERIAL" with respect to any Person means
an event, change or effect, whether existing or prospective, which is material
in relation to the condition (financial or otherwise), business, assets or
properties of such Person and its subsidiaries taken as a whole or on the
ability of such Person to perform its obligations hereunder. For the purposes of
this Agreement "PERSON" means any individual, partnership, firm, corporation,
limited liability company or partnership, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Exchange Act.
Section 5.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by IFT of this Agreement, the Warrants and the Registration Rights
Agreement and the consummation by IFT of the transactions contemplated hereby
and thereby are within IFT's corporate powers and, except for any required
approval by IFT's stockholders in connection with the election of the Hyatt
Designees to the Board, have been duly authorized by all necessary corporate
action. Each of this Agreement, the Warrants and the Registration Rights
Agreement constitutes a valid and binding agreement of IFT, enforceable against
IFT in accordance with its terms except as such enforcement may be subject to
(a) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (whether considered in a proceeding in equity or at law).
Section 5.3 Consents; Approvals. The execution, delivery and
-------------------
performance by IFT of this Agreement, the Warrants and the Registration Rights
Agreement and consummation of the transactions contemplated hereby and thereby
by IFT require no action by or in respect of, notices to, or filing with, any
governmental body, agency, official or authority or any third party.
Section 5.4 Non-Contravention. The execution, delivery and performance
-----------------
by IFT of this Agreement, the Warrants and the Registration Rights Agreement and
the consummation by IFT of the transactions contemplated hereby and thereby do
not and will not (except in the case of clauses (b), (c) and (d) of this Section
5.4, for any such matters that, individually or in the aggregate, have not had,
and will not have, a Material Adverse Effect on IFT) (a) contravene or conflict
with the certificate of incorporation or bylaws of IFT, (b) assuming compliance
with the matters referred to in Section 5.3, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to IFT or any of its
properties or assets, (c) constitute a default under or give rise to a right of
termination, cancellation, restriction or acceleration of any right or
obligation of IFT or to a loss of any benefit to which IFT is entitled under any
provision of any agreement, contract or other instrument binding upon or
applicable to IFT or any of its properties or assets
15
or any license, franchise, permit or other similar authorization held by or
applicable to IFT, or (d) result in the creation or imposition of any Lien on
any asset of IFT. For purposes of this Agreement, "LIEN" means, with respect to
any asset, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
Section 5.5 Capitalization. The authorized capital stock of IFT
--------------
consists of 40,000,000 shares of Class A Common Stock, 3,960,000 shares of Class
B Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Stock"). As of the date hereof (i) 8,102,060 shares of
Class A Common Stock are issued and outstanding, (ii) 3,960,000 shares of Class
B Common Stock are issued and outstanding and no shares of the Preferred Stock
are issued and outstanding. As of the date hereof 12,282,546 shares of Class A
Common Stock are reserved for issuance pursuant to the exercise of outstanding
warrants (and warrants which IFT is currently obligated to issue) and Unit
Purchase Options (including warrants underlying the Unit Purchase Options). An
additional 2,274,200 shares of Class A Common Stock are reserved for issuance
under IFT's 1994 Stock Option Plan of which 1,584,200 shares are subject to
currently outstanding options. All outstanding shares of capital stock of IFT
have been duly authorized and validly issued, are fully paid and nonassessable
and are free from preemptive rights. Except as set forth in this Section, there
are outstanding (a) no other shares of capital stock or other voting securities
of IFT, (b) no securities of IFT convertible into or exchangeable for shares of
capital stock or voting securities of IFT, and (c) no other options or other
rights to acquire from IFT, and no obligation of IFT to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of IFT (the items in clauses (a), (b) and (c)
being referred to collectively as the "COMPANY SECURITIES"). There are no
outstanding obligations of IFT to repurchase, redeem or otherwise acquire any
Company Securities.
Section 5.6 SEC Filings.
-----------
(a) IFT has delivered to Hyatt (i) the annual reports on Form 10-K for
its fiscal year ended October 31, 1995 (ii) its quarterly report on Form
10-Q for its fiscal quarter ended July 31, 1996, (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of IFT held since January 1, 1996, and (iv)
all of its other reports, statements, schedules and registration statements
filed by IFT with the Securities and Exchange Commission (the "SEC") since
January 1, 1993 (collectively, "SEC REPORTS").
(b) As of its filing date, each SEC Report filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading, it being understood that in making the representation in
this Section 5.6(b), IFT reserves the right to assert defenses, if any, it
could have asserted if a violation of Section 10(b) of the Exchange Act had
been alleged.
16
(c) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act of 1933, as amended (THE
"SECURITIES ACT"), as of the date such statement or amendment became
effective did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, it being understood that in
making the representation in this Section 5.6(c), IFT reserves the right to
assert defenses, if any, it could have asserted if a violation of Sections
11 or 12 of the Securities Act had been alleged.
Section 5.7 Financial Statements. The audited financial statements and
--------------------
unaudited interim financial statements of IFT included in its annual reports on
Form 10-K and the quarterly reports on Form 10-Q referred to in Section 5.6 are
true and correct and fairly present, in conformity with generally accepted
accounting principles, applied on a consistent basis (except as may be indicated
in the notes thereto), the financial position of IFT as of the dates thereof and
results of operations and changes in financial position for the periods then
ended (subject to non-material normal year-end adjustments in the case of any
unaudited interim financial statements). For purposes of this Agreement,
"BALANCE SHEET" means IFT's balance sheet as of July 31, 1996, including the
notes thereto, as set forth in IFT's 10-Q referred to in Section 5.6 and
"BALANCE SHEET DATE" means the date of the Balance Sheet.
Section 5.8 Disclosure Documents.
--------------------
(a) Each document required to be filed by IFT with the SEC in
connection with the transactions contemplated by this Agreement (the "IFT
DISCLOSURE DOCUMENTS"), will, when filed, comply as to form in all material
respects with the applicable requirements of the Exchange Act.
(b) The IFT Disclosure Documents will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading. The representations and warranties
contained in this Section 6.8 will not apply to statements or omissions
included in IFT Disclosure Documents based upon information furnished to
IFT in writing by Hyatt specifically for use therein.
Section 5.9 Intellectual Property. IFT owns or has the right to use
---------------------
(without material payment) the Intellectual Property (as defined below) as is
necessary or appropriate for the conduct of its business as it is now being
conducted and for the conduct of the business of the Joint Ventures
(collectively, the "IFT INTELLECTUAL PROPERTY"). To IFT's knowledge after due
inquiry, no infringement or unauthorized use by IFT of any Intellectual Property
of any third party exists, has occurred or is threatened. Other than as
disclosed in IFT's reports or statements previously filed pursuant to the
Exchange Act, no current or former shareholder, officer, director, consultant,
employee or affiliate of IFT has any right, title or interest in any material
IFT Intellectual Property. For the purposes of this Agreement, "Intellectual
Property" means any and all of a Person's right, title and interest in and to
United States and foreign
17
patents, copyrights, mask works, trade and service names and marks, whether or
not registered, pending, issued or applied for; technical knowledge; works,
processes and designs; hardware; software (in source code and object code form,
including all related annotations and listings); inventions; trade secrets and
other intellectual property rights; all things authored, made for hire,
discovered, developed, designed or acquired by a Person or, to the extent that a
Person has any right, title or interest thereto, any of their respective agents,
contractors and employees in any stage of development, regardless of whether any
or all of the foregoing constitutes copyrightable or patentable subject matter
or is in tangible or intangible form; and all embodiments, expressions,
representations, fruits and products of any of the foregoing.
Section 5.10 Absence of Certain Changes. Since the Balance Sheet Date
--------------------------
and prior to the Effective Time, IFT has conducted its business in the ordinary
course consistent with past practice and there has not been:
(a) any event, occurrence or development which has had or would
reasonably be expected to have a Material Adverse Effect on IFT; or
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of IFT or any
repurchase, redemption or other acquisition by IFT of any outstanding
shares of capital stock or other securities of, or other ownership
interests in, IFT.
Section 5.11 Litigation. There is no action, suit, investigation or
----------
proceeding (or any basis therefor) pending against or, to the knowledge of IFT,
threatened against or affecting, IFT or any of its properties before any court
or arbitrator or any governmental body, agency or official which, if determined
or resolved adversely to IFT, could reasonably be expected to have a Material
Adverse Effect on IFT, nor is there any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against IFT having, or which, insofar as can
reasonably be foreseen, may have, any such effect.
Section 5.12 Compliance with Laws and Agreements. Except as disclosed in
-----------------------------------
the SEC Reports and except in the case of clauses (a) and (b) (ii), (b) (iii)
and (b) (iv) of this Section 5.12 for breaches, violations and defaults which in
the aggregate do not, and insofar as reasonably can be foreseen could not, have
a Material Adverse Effect on IFT, (a) IFT is not in violation of, nor has it
violated, nor to its best knowledge is it under investigation with respect to,
nor has it received notice or been charged with any violation of, any applicable
provisions of any laws, statutes, ordinances or regulations including, without
limitation, applicable gaming law and (b) IFT is not in breach or violation of
or in default in the performance or observance of any term or provision of, and
no event has occurred which, with lapse of time or action by a third party,
could result in a default under, (i) the certificate of incorporation, bylaws or
similar governing documents of IFT, (ii) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which IFT is a party or by which it is bound or to which any
of its property is subject, (iii) any order, writ, injunction,
18
decree, statute, rule or regulation applicable to IFT or any of its properties
or assets, or (iv) any certificate, license, Permit, registration, accreditation
or other consent or approval of governmental agencies or accreditation
organizations.
Section 5.13 Finders' Fees. Except for Houlihan, Lokey, Howard & Zukin a
-------------
copy of whose engagement agreement has been heretofore provided to Hyatt, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf, of IFT who might be entitled to
any fee or commission upon consummation of the transactions contemplated by this
Agreement.
Section 5.14 Full Disclosure; No Misrepresentations. No information
--------------------------------------
contained in the representations and warranties of IFT set forth in this
Agreement or in any of the certificates, schedules, exhibits or other documents
and instruments to be delivered to Hyatt hereunder contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statement contained herein or therein, in light of the circumstances under which
they were made, not misleading. To the knowledge of IFT, there is no fact or
condition which has not been heretofore disclosed to Hyatt in writing which has
a Material Adverse Effect on IFT, or would reasonably be expected to have a
Material Adverse Effect on IFT.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF HYATT
Hyatt hereby represents and warrants to IFT as follows:
Section 6.1 Corporate Existence and Power. Hyatt is a corporation
-----------------------------
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all corporate powers and authority and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except where the failure to obtain such items,
individually or in the aggregate, would not have a Material Adverse Effect on
Hyatt.
Section 6.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by Hyatt of this Agreement and the Registration Rights Agreement and
the consummation by Hyatt of the transactions contemplated hereby and thereby
are within the corporate powers of Hyatt and have been duly authorized by all
necessary corporate action. Each of this Agreement and the Registration Rights
Agreement constitutes a valid and binding agreement of each of Hyatt enforceable
against Hyatt in accordance with its terms, except as such enforcement may be
subject to (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (whether considered in a proceeding in
equity or at law).
19
Section 6.3 Consents; Approvals. The execution, delivery and
-------------------
performance by Hyatt of this Agreement and the Registration Rights Agreement and
the consummation by Hyatt of the transactions contemplated hereby and thereby
require no action by or in respect of, notices to or filing with, any
governmental body, agency, official or authority or any third party provided,
--------
however, under certain circumstances Hyatt or members of the Hyatt Group may be
-------
required to comply with the notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
Section 6.4 Non-Contravention. The execution, delivery and
-----------------
performance by Hyatt of this Agreement and the Registration Rights Agreement and
the consummation by Hyatt of the transactions contemplated hereby and thereby do
not and will not (except in the case of clauses (b), (c) and (d) of this Section
6.4, for any such matters that, individually or in the aggregate, have not had,
and will not have, a Material Adverse Effect on Hyatt) (a) contravene or
conflict with the certificate of incorporation or bylaws of Hyatt, (b) assuming
compliance with the matters referred to in Section 6.3, contravene or conflict
with any provision of law, regulation, judgment, order or decree binding upon or
applicable to Hyatt or any of its respective properties, (c) constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Hyatt or to a loss of any benefit to
which Hyatt is entitled under any agreement, contract or other instrument
binding upon or applicable to Hyatt or (d) result in the creation or imposition
of any Lien on any asset of Hyatt.
Section 6.5 Disclosure Documents. The information with respect to
--------------------
Hyatt and its subsidiaries, the Hyatt Group and the Hyatt Designees that Hyatt
furnishes to IFT in writing specifically for use in any IFT Disclosure Document
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
Section 6.6 Litigation. There is no action, suit, investigation or
----------
proceeding (or any basis therefor) pending against or, to the knowledge of
Hyatt, threatened against, or affecting, Hyatt which, if resolved adversely to
Hyatt, would reasonably be expected to prohibit or prevent Hyatt's ability to
consummate the transactions contemplated hereby.
Section 6.7 Finders' Fees. There is no investment banker, broker,
-------------
finder or other intermediary engaged by or on behalf of Hyatt who might be
entitled to any fee or commission upon consummation of the transactions
contemplated by this Agreement.
Section 6.8 Full Disclosure; No Misrepresentations. No information
--------------------------------------
contained in the representations and warranties of Hyatt set forth in this
Agreement or in any of the certificates, schedules, exhibits or other documents
and instruments to be delivered to IFT hereunder contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statement contained herein or therein, in light of the circumstances under which
they were made, not misleading. To the knowledge of Hyatt, there is no fact or
condition which has not been heretofore disclosed to IFT in writing which has a
Material Adverse Effect on Hyatt, or would reasonably be expected to have a
Material Adverse Effect on Hyatt.
20
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification of Hyatt.
------------------------
(a) Survival. All agreements, covenants, representations and
--------
warranties contained herein and made in writing by or on behalf of the
parties hereto in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(b) Hyatt's Right to Indemnification. Subject to the provisions of
--------------------------------
this Article VIII, IFT hereby agrees to indemnify and hold harmless Hyatt,
the Hyatt Group, the Hyatt Designees and their respective officers,
directors, shareholders, partners, employees, agents, attorneys,
affiliates, successors, predecessors and assigns (collectively, the "HYATT
INDEMNIFIED PARTIES") from and against (i) any and all losses, obligations,
liabilities, damages, claims, deficiencies, costs and expenses (including,
but not limited to, the amount of any settlement entered into pursuant
hereto and all reasonable legal and other expenses incurred in connection
with the investigation, prosecution or defense of the matter but excluding
consequential damages) (collectively "CLAIMS"), which may be asserted
against or sustained or incurred by the Hyatt Indemnified Parties in
connection with, arising out of, or relating to (A) any breach or alleged
breach of any of the representations, warranties, agreements and covenants
made by IFT herein or in any certificate or other document delivered to any
Hyatt Indemnified Party by or on behalf of IFT in connection with this
Agreement; or (B) any false, incorrect or misleading representation or
warranty made by or on behalf of IFT herein or in any certificate or other
document delivered to any Hyatt Indemnified Party by or on behalf of IFT in
connection with this Agreement; and (ii) any and all costs and expenses
(including, but not limited to, reasonable legal expenses) incurred by any
Hyatt Indemnified Party in connection with the enforcement of its rights
under this Agreement.
Section 7.2 Procedure for Claims.
--------------------
(a) Notice of Claim. Promptly, but in any event within 10 days after
---------------
obtaining knowledge of any claim or demand which may give rise to, or could
reasonably give rise to, a claim for indemnification hereunder (referred to
herein as an "INDEMNIFICATION CLAIM"), Hyatt shall give written notice to
IFT of such Indemnification Claim ("NOTICE OF CLAIM"). A Notice of Claim
shall be given with respect to all Indemnification Claims; provided,
--------
however, that the failure to give a timely Notice of Claim to IFT shall not
-------
relieve IFT from any liability that it may have to the Hyatt Indemnified
Parties hereunder to the extent that IFT is not prejudiced by such failure.
The Notice of Claim shall set forth the amount (or a reasonable estimate)
of the loss, damage or expense suffered, or which may be suffered, by the
Hyatt Indemnified Party
21
as a result of such Indemnification Claim and the aggregate amount of all
Indemnification Claims to date and a brief description of the facts giving
rise to such Indemnification Claim. Hyatt shall furnish to IFT such
information (in reasonable detail) as Hyatt may have with respect to such
Indemnification Claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same).
(b) Third Party Claims.
------------------
(i) If the claim or demand set forth in the Notice of Claim
is a claim or demand asserted by a third party (a "THIRD PARTY
CLAIM"), IFT shall have fifteen days (or such shorter period (but not
less than ten days) if an answer or other response or filing with
respect to the pleadings served by the third party is required prior
to the fifteenth day) after the date of receipt by IFT of the Notice
of Claim (the "NOTICE DATE") to notify Hyatt in writing of the
election by IFT to defend the Third Party Claim on behalf of the Hyatt
Indemnified Parties.
(ii) If IFT elects to defend a Third Party Claim on behalf
of the Hyatt Indemnified Parties, Hyatt shall make available to IFT
and its agents and representatives all records and other materials in
Hyatt's possession which are reasonably required in the defense of the
Third Party Claim and IFT shall pay any expenses payable in connection
with the defense of the Third Party Claim as they are incurred
(whether incurred by Hyatt or IFT).
(iii) If IFT has assumed control of the defense, IFT may
contest or settle the Third Party Claim on such terms as IFT may
choose, provided that IFT will not have the right, without Hyatt's
-------------
prior written consent, to settle any such claim if such settlement (i)
arises from or is part of any criminal action, suit or proceeding,
(ii) contains a stipulation to, confession of judgment with respect
to, or admission or acknowledgement of, any liability or wrongdoing on
the part of any Hyatt Indemnified Party, (iii) relates to any foreign
federal, state or local tax matters, (iv) provides for injunctive
relief, or other relief other than damages, which is binding on any
Hyatt Indemnified Party, (v) does not fully release all Hyatt
Indemnified Parties with respect to the relevant Third Party Claim or
(vi) has any res judicata or collateral estoppel effect that could be
adverse to any Hyatt Indemnified Party.
(iv) If IFT elects to defend a Third Party Claim, the Hyatt
Indemnified Parties shall have the right to participate in the defense
of the Third Party Claim, at the Hyatt Indemnified Parties' expense
(and without the right to indemnification for such expense under this
Agreement); provided, however, that the reasonable fees and expenses
-------- -------
of counsel retained by the Hyatt Indemnified
22
Parties shall be at the expense of IFT if (A) the use of the counsel
chosen by IFT to represent the Hyatt Indemnified Parties would present
such counsel with a conflict of interest; (B) the parties to such
proceeding include both Hyatt Indemnified Parties and IFT and there
may be legal defenses available to Hyatt Indemnified Parties which are
different from or additional to those available to IFT; (C) within ten
days after being advised by IFT of the identity of counsel to be
retained to represent Hyatt Indemnified Parties, Hyatt shall have
objected to the retention of such counsel for valid reasons (which
shall be stated in a written notice to IFT), and IFT shall not have
retained different counsel reasonably satisfactory to Hyatt; or (iv)
IFT shall authorize the Hyatt Indemnified Parties to retain separate
counsel at the expense of IFT.
(v) If IFT elects to defend a Third Party Claim, and does
not defend a Third Party Claim in good faith, the Hyatt Indemnified
Parties shall have the right, in addition to any other right or remedy
it may have hereunder, at the sole and exclusive expense of IFT, to
defend such Third Party Claim; provided, however, that such expenses
-------- -------
shall be payable by IFT only if and when such Third Party Claim
becomes payable.
(c) Cooperation in Defense. Hyatt shall cooperate with IFT in the
----------------------
defense of Third Party Claims. Subject to the foregoing, (i) the
Hyatt Indemnified Parties shall not have any obligation to participate
in the defense of or to defend any Third Party Claim and (ii) the
Hyatt Indemnified Parties' defense of or its participation in the
defense of any Third Party Claim shall not in any way diminish or
lessen its right to indemnification as provided in this Agreement.
Section 7.3 Indemnification of IFT. Subject to the provisions of this
----------------------
Article VIII, Hyatt agrees to indemnify and hold harmless IFT, its officers,
directors, shareholders, employees, agents, attorneys, affiliates, successors,
predecessors and assigns (collectively, the "IFT INDEMNIFIED PARTIES") from and
against (a) Claims which may be asserted against or sustained or incurred by the
IFT Indemnified Parties in connection with, arising out of, or relating to (i)
any breach or alleged breach of any of the representations, warranties,
agreements and covenants made by Hyatt herein or in any certificate or other
document delivered to IFT by or on behalf of Hyatt in connection with this
Agreement; or (ii) any false, incorrect or misleading representation or warranty
made by or on behalf of Hyatt herein or in any certificate delivered to IFT by
or on behalf of Hyatt in connection with this Agreement and (b) any and all
costs and expenses (including, but, not limited to, reasonable legal expenses)
incurred by the IFT Indemnified Parties in connection with the enforcement of
its rights under this Agreement. The procedures for indemnification of the IFT
Indemnified Parties by Hyatt shall be the same as those set forth in Section
7.2, including the restriction on settling Third Party Claims set forth in
Section 7.2(b)(iii).
23
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 8.1 Expenses. Except as otherwise specified in this Agreement,
--------
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
Section 8.2 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by reputable overnight courier service, by cable, by telecopy, by
telegram, by telex or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.2):
(a) if to Hyatt:
Hyatt Ventures, Inc.
200 West Madison, Suite 3800
Chicago, Illinois 60606
Telecopy: 312/750-8545
Attention: Harold S. Handelsman
with a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Telecopy: 312/269-1747
Attention: Michael A. Pucker
(b) if to IFT:
Interactive Flight Technologies, Inc.
4041 N. Central Avenue, Suite 2000
Phoenix, Arizona 85012
Telecopy: 602/274-8372
Attention: President
24
with a copy to:
Irell & Manella, LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Telecopy: 310/203-7199
Attention: Theodore E. Guth
Section 8.3 Public Announcements. Neither party shall issue or cause
--------------------
(or permit any of its respective affiliates to issue or cause) the publication
of any press release or other public announcement with respect to, or otherwise
make any public statement concerning, the transactions contemplated by this
Agreement without the prior consent of the other party, which consent shall not
be unreasonably withheld, except as may be required by law or regulation or by
obligations pursuant to any listing agreement with any national securities
exchange or the NASDAQ National Market System; provided, however, that in the
-------- -------
event such disclosure is so required the disclosing party shall give notice of
such disclosure to the non-disclosing party.
Section 8.4 Headings. The descriptive headings contained in this
--------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 8.5 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
Section 8.6 Entire Agreement. This Agreement and all of the other
----------------
documents to be entered into between the parties referred to herein, which are
incorporated herein by this reference, constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and thereof and
supersedes all prior agreements and undertakings, both written and oral, between
IFT and Hyatt with respect to the subject matter hereof and thereof.
Section 8.7 Assignment. This Agreement and the rights and duties
----------
hereunder may not be assigned or delegated by operation of law or otherwise
without the express written consent of IFT and Hyatt (which consent may be
granted or withheld in the sole discretion of IFT or Hyatt, as applicable);
provided, however, that Hyatt may without the prior written consent of IFT
-------- -------
assign any or all of its rights and delegate its duties hereunder to any member
of the Hyatt Group.
25
Section 8.8 Amendment; Waiver. This Agreement may not be amended or
-----------------
modified except by an instrument in writing signed by, or on behalf of, IFT and
Hyatt. Either party to this Agreement may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered by the other party pursuant hereto
or (c) waive compliance with any of the agreements or conditions of the other
party contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights.
Section 8.9 Governing Law; Forum. This Agreement shall be governed by,
--------------------
and construed in accordance with, the laws of the State of Delaware, applicable
to contracts executed in and to be performed entirely within that state. The
parties irrevocably agree that all actions arising directly or indirectly as a
result or in consequence of this Agreement and the transactions contemplated
hereby, shall be instituted and litigated only in federal, state or local courts
sitting in the City of Wilmington, Delaware and each of the parties hereby
consents to the exclusive jurisdiction and venue of any such court, and waives
any objection based on forum nonconveniens.
-------------
Section 8.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 8.11 Attorneys' Fees. If any legal action or other proceeding is
---------------
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
Section 8.12 Further Action. Each of the parties hereto shall use all
--------------
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, Each of IFT and Hyatt has caused this Agreement to be
executed by its duly authorized officer, in each case as of the date first
written above.
HYATT VENTURES, INC.
By: __________________________________________
Title:
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
By: __________________________________________
Title:
SIGNATURE PAGE TO STRATEGIC ALLIANCE AGREEMENT
EXHIBIT 1.4
-----------
TO
--
STRATEGIC ALLIANCE AGREEMENT
----------------------------
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
STOCK PURCHASE WARRANT
THE WARRANTS EVIDENCED HEREBY AND THE SHARES OF STOCK
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED OR SOLD WITHOUT REGISTRATION UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE UNDER SUCH ACT OR THE RULES OR
REGULATIONS PROMULGATED THEREUNDER
WARRANT TO PURCHASE ____ SHARES OF CLASS A COMMON STOCK
AS DESCRIBED HEREIN
Issue Date: ___________, 199_.
Expiration Date: ___________, 2001.
This certifies that, for value received, _________________, a ________
corporation, and permitted successors and assigns ("HOLDER") is entitled to
purchase from Interactive Flight Technologies, Inc., a Delaware corporation,
(the "COMPANY") up to and including _______________ fully paid and nonassessable
shares (the "NUMBER OF SHARES") of the Class A Common Stock of the Company, $.01
par value (the "CLASS A COMMON STOCK"), on the terms set forth herein at an
exercise price of $9.875 per share (the "PURCHASE PRICE"). The Number of Shares
and the Purchase Price may be adjusted from time to time as described in this
Warrant.
1. EXERCISE.
--------
1.1 TIME FOR EXERCISE. This Warrant may be exercised in whole or in part
-----------------
at any time, and from time to time, during the period commencing on the date of
this Warrant and expiring on ______, 2001.
1.2 MANNER OF EXERCISE. This Warrant shall be exercised by delivering it
------------------
to the Company with the exercise form duly completed and signed, specifying the
number of shares as to which the Warrant is being exercised at that time (the
"EXERCISE NUMBER"). The Holder shall simultaneously deliver to the Company
cash, shares of Common Stock then held by Holder, or a certified check or wire
transfer in an amount equal to the Exercise Number multiplied by the Purchase
Price, and the Holder shall be entitled to receive the full Exercise Number of
shares of Class A Common Stock.
1.3 EFFECTIVE DATE OF EXERCISE. Promptly (but in any case within five (5)
--------------------------
business days) after any exercise, the Company shall deliver to the Holder (i)
duly executed certificates in the name or names specified in the exercise notice
representing the aggregate number of shares issuable upon such exercise, and
(ii) if this Warrant is exercised only in part, a new Warrant of like tenor
exercisable for the balance of the Number of Shares. Such certificates shall be
deemed to have been issued, and the person receiving them shall be deemed to be
a holder of record of such shares, as of the close of business on the date the
actions required in Section 1.2 shall have been completed or, if on that date
the stock transfer books of the Company are closed, as of the next business day.
2. TRANSFER OF WARRANTS AND STOCK.
------------------------------
2.1 TRANSFER RESTRICTIONS. Neither this Warrant nor the securities
---------------------
issuable upon its exercise may be sold, transferred or pledged unless the
Company shall have been supplied with reasonably satisfactory evidence that such
transfer is not in violation of the Securities Act of 1933, as amended, and any
applicable state securities laws. The Company may place a legend to that effect
on this Warrant, any replacement Warrant and each certificate representing
shares issuable upon exercise of this Warrant. Subject to the satisfaction of
this condition only, this Warrant shall be freely transferable by the Holder.
2.2 MANNER OF TRANSFER. Upon delivery of this Warrant to the Company with
------------------
the assignment form duly completed and signed, the Company will promptly (but in
any case within five (5) business days) execute and deliver to each transferee
and, if applicable, the Holder, Warrants of like tenor evidencing the rights (i)
of the transferee(s) to purchase the Number of Shares specified for each in the
assignment forms, and (ii) of the Holder to purchase any untransferred portion,
which in the aggregate shall equal the Number of Shares of the original Warrant.
The Company may decline to proceed with any partial transfer if any new Warrant
would represent the right to purchase fewer than 1,000 shares of Class A Common
Stock (such number to be adjusted as provided in Section 4). If this Warrant
is properly assigned in compliance with this Section 2, it may be exercised by
an assignee without having a new Warrant issued.
2.3 LOSS, DESTRUCTION OF WARRANT CERTIFICATES. Upon receipt of (i)
-----------------------------------------
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant and (ii) except in the case of mutilation, an
indemnity or security reasonably satisfactory to the Company, the Company will
promptly (but in any case within five (5) business days) execute and deliver a
replacement Warrant of like tenor representing the right to purchase the same
Number of Shares.
3. COST OF ISSUANCES. The Company shall pay all expenses, transfer taxes and
-----------------
other charges payable in connection with the preparation, issuance and delivery
of stock certificates or replacement Warrants, except for any transfer tax or
other charge imposed as a result of (a) any issuance of certificates in any name
other than the name of
2
the Holder, or (b) any transfer of the Warrant. The Company shall not be
required to issue or deliver any stock certificate or Warrant until it receives
reasonably satisfactory evidence that any such tax or other charge has been paid
by the Holder.
4. ANTI-DILUTION PROVISIONS. If any of the following events occur at any time
------------------------
hereafter during the life of this Warrant, then the Purchase Price and the
Number of Shares immediately prior to such event shall be changed as described
in order to prevent dilution:
4.1 DIVIDENDS: STOCK SPLITS ETC.. In case the Company shall (a) pay a
----------------------------
dividend in shares of Common Stock or make a distribution in shares of Common
Stock, (b) subdivide or reclassify its outstanding shares of Common Stock into a
greater number of shares, (c) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the Number of Shares purchasable
upon the exercise of this Warrant immediately prior thereto shall be adjusted so
that the Number of Shares purchasable upon exercise of this Warrant shall be
determined by multiplying the Number of Shares theretofore purchasable upon the
exercise of this Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately following such action
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately prior thereto. Such adjustment shall be made whenever
any event listed above shall occur and shall become effective immediately after
the record date in the case of a dividend and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If the Company declares a dividend in money on its Common
Stock and at substantially the same time offers its stockholders a right to
purchase new shares of Common Stock from the proceeds of such dividend, or for
an amount substantially equal to such dividend, all shares of Common Stock so
issued shall for purposes hereof be deemed issued as a stock dividend.
4.2 ISSUANCE OF RIGHTS OR WARRANTS TO HOLDERS. In case the Company shall
-----------------------------------------
issue rights, options or warrants to all holders of its shares of Common Stock
entitling them (for a period expiring within 45 days after the record date
therefor) to subscribe for or purchase shares of Common Stock at a price per
share which is lower at the record date mentioned below than the then Current
Market Price per share of Common Stock (as hereinafter defined), the Number of
Shares thereafter purchasable upon the exercise of this Warrant shall be
determined by multiplying the Number of Shares theretofore purchasable upon
exercise of this Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock so offered would
purchase at the then Current Market Price per share of Common Stock.
4.3 MERGER; CONSOLIDATION; SALE OF ASSETS. In case of (i) the
-------------------------------------
consolidation or the merger of the Company or (ii) the sale of all or
substantially all of the properties
3
and assets of the Company to any Person, this Warrant shall, after such
consolidation, merger or sale, entitle the Holder to receive upon exercise the
number of shares of stock or other securities or property (including cash) of
the Person resulting from such consolidation or surviving such merger or to
which such sale shall be made, or of the parent of such Person, as the case may
be, which the holder of securities deliverable upon exercise of this Warrant (at
the time of such consolidation, merger or sale) would have been entitled to
receive upon such consolidation, merger or sale; and in any such case the
provisions of Section 4 with respect to the rights and interests thereafter of
the holders of Warrants shall be appropriately adjusted so as to be applicable,
as nearly as practicable, to any shares of stock or other securities or any
property (including cash) thereafter deliverable upon exercise of this Warrant.
The Person resulting from such sale or consolidation or surviving such merger or
to which such sale shall be made shall execute and deliver to the Holder a
supplemental agreement as provided in Section 5.5 below. Any adjustment
pursuant to this Section 4.3 which shall be approved in good faith by the Board
of Directors of the Company pursuant to a resolution delivered to the Holder
shall be conclusive for all purposes hereof. For the purposes of this Agreement
"Person" means any individual, partnership, firm, corporation, limited liability
company or partnership, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
4.4 OTHER DISTRIBUTIONS. In case the Company shall distribute to all
-------------------
holders of its shares of Common Stock shares of stock other than Common Stock or
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or retained earnings and
dividends or distributions referred to in Section 4.1 above) or rights, options
or warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred to in
Section 4.2 above), then in each case the Number of Shares thereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the Number of Shares theretofore purchasable upon the exercise of this Warrant,
by a fraction of which the numerator shall be the Current Market Price per share
of Common Stock on the record date mentioned below in this Section 4.4, and of
which the denominator shall be the Current Market Price per share of Common
Stock on such record date, less the then fair value (as reasonably determined by
the Board of Directors of the Company in good faith, whose determination shall
be conclusive absent manifest error, irrespective of the accounting treatment
thereof) of the portion of the shares of stock other than Common Stock or assets
or evidences of indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible or exchangeable securities
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
distribution.
4.5 BELOW MARKET ISSUANCES OF COMMON STOCK. Other than pursuant to (a) a
--------------------------------------
public offering of Common Stock in connection with which the Company has engaged
underwriters on a firm commitment or best efforts basis or (b) a sale of Common
Stock
4
to one or more qualified institutional buyers pursuant to Rule 144A of the
Securities Act of 1933, as amended (the "Securities Act"), in the event that the
Company shall issue shares of Common Stock (excluding shares issued as a
consequence of any transaction described in Sections 4.1, 4.2, 4.4 or 4.6) or
issued upon exercise or conversion of, or in exchange for, any securities issued
pursuant to said Sections, for a consideration per share of Common Stock less
than the Current Market Price per share of Class A Common Stock on the date the
Company fixes the offering price of such additional shares, the Purchase Price
shall be adjusted immediately after the issuance of such additional shares so
that it shall equal the price determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares plus the number of shares of Common Stock
which the aggregate consideration received (determined as provided in Section
4.8) for the issuance of such additional shares would purchase at such Current
Market Price per share of Class A Common Stock, and the denominator of which
shall be the number of shares outstanding immediately after the issuance of such
additional shares.
4.6 BELOW MARKET ISSUANCE OF OTHER SECURITIES. Other than pursuant to (a)
-----------------------------------------
a public offering of securities convertible into or exchangeable for Common
Stock in connection with which the Company has engaged underwriters on a firm
commitment or best efforts basis or (b) a sale of Common Stock to one or more
qualified institutional buyers pursuant to Rule 144A of the Securities Act, in
the event that the Company shall issue any securities convertible into or
exchangeable for shares of Common Stock (excluding securities issued in
transaction described in Sections 4.2 and 4.3 above) for an aggregate
consideration (determined as provided in Section 4.8 which, when divided by the
number of shares of Common Stock initially deliverable upon conversion or
exchange of such securities, is less than the Current Market Price per share of
Class A Common Stock in effect immediately prior to the issuance of such
securities, the Purchase Price shall be adjusted immediately thereafter so that
it shall equal the price determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the issuance
of such securities plus the number of shares of Common Stock which the aggregate
consideration received (determined as provided in Section 4.8 from the issuance
of such securities would purchase at the Current Market Price per share of Class
A Common Stock and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the maximum
number of shares of Common Stock deliverable upon conversion of or in exchange
for such securities at the initial conversion or exchange price or rate.
4.7 ADDITIONAL ADJUSTMENT OF PURCHASE PRICE. Whenever the Number of
---------------------------------------
Shares purchasable upon the exercise of this Warrant is adjusted, as provided
herein, the Purchase Price payable upon exercise of this Warrant shall be
adjusted by multiplying such Purchase Price immediately prior to such adjustment
by a fraction, of which the numerator shall be the Number of Shares purchasable
upon the exercise of this Warrant
5
immediately prior to such adjustment, and of which the denominator shall be the
Number of Shares so purchasable immediately thereafter.
4.8 GUIDELINES FOR COMPUTATIONS. For purposes of any computation
---------------------------
respecting consideration received pursuant to Sections 4.5 and 4.6, the
following shall apply:
(a) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(b) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
in good faith by the Board of Directors of the Company (irrespective of the
accounting treatment thereof) and described in a Board resolution; and
(c) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received from the issuance of such securities shall be deemed to be the
consideration received by the Company for the issuance of such securities
plus the additional minimum consideration, if any, to be received by the
Company upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in clauses (a) and (b)
above).
4.9 NO DE MINIMIS ADJUSTMENTS. No adjustment in the Purchase Price shall
-------------------------
be required unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments which by reason
of this Section 4.9 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 4.9 shall be made to the nearest one-twentieth of a cent or to the
nearest one-hundredth of a share, as the case may be.
4.10 TREASURY SHARES. For the purpose of Section 4, shares of Common
---------------
Stock or other securities held in the treasury of the Company shall not be
deemed to be outstanding, and the sale or other disposition of any shares of
Common Stock or other securities held in the treasury of the Company shall be
deemed an issuance thereof.
4.11 CORPORATE ACTION. Before taking any action which would cause an
----------------
adjustment reducing the Purchase Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of this Warrant, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Purchase Price.
6
4.12 INDEPENDENT PUBLIC ACCOUNTANTS. The certificate of a "Big Six" firm
------------------------------
of independent public accountants selected by the Board of Directors of the
Company shall be conclusive evidence of the correctness of any computation made
under this Section 4.
4.13 NOTICE OF CERTAIN EVENTS. In case at any time prior to the expiration
------------------------
date of this Warrant:
(i) the Company shall authorize the granting to all the holders
of Common Stock of rights to subscribe for or purchase any shares of stock
of any class or of any other rights; or
(ii) there shall be any reclassification of the Common Stock of
the Company (other than a subdivision or combination of its outstanding
Common Stock); or
(iii) there shall be any capital reorganization by the Company;
or
(iv) there shall be a consolidation or merger involving the
Company or sale of all or substantially all of the Company's property and
assets (except a merger or other reorganization in which the Company shall
be the surviving corporation or a consolidation, merger or sale with a
wholly-owned subsidiary); or
(v) there shall be voluntary or involuntary dissolution,
liquidation and winding up by the Company or dividend or distribution to
holders of Common Stock (other than the Company's customary cash and stock
dividends);
then in any one or more of said cases, the Company shall cause to be delivered
to the Holder, at the earliest practicable time (and, in any event, not less
than 25 days before any record date or other date set for definitive action),
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or such
reorganization, sale, consolidation, merger, dissolution, liquidation or winding
up shall take place, as the case may be. Such notice shall also set forth such
facts as shall indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Purchase Price and the kind and
amount of the shares of stock and other securities and property deliverable upon
exercise of the Warrants. Such notice shall also specify the date, if known, as
of which the holders of record of the Common Stock shall participate in said
dividend, distribution or subscription rights or shall be entitled to exchange
their shares of the Common Stock for securities or other property (including
cash) deliverable upon such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be (on which date, in
the event of voluntary or involuntary dissolution, liquidation, or winding up of
the Company, other than dissolution, liquidation or winding up following a
7
consolidation or merger of the Company with or into, or sale of substantially
all of its assets to, another corporation, the rights to exercise this Warrant
shall terminate).
4.14 EXERCISE OF EXISTING RIGHTS. The Number of Shares shall be increased
---------------------------
from time to time by 11.111% of the number of shares issued upon exercise of the
Company's presently outstanding warrants, Unit Purchase Options, or stock
options. The Number of Shares shall be reduced from time to time by 11.111% of
the number of shares of Class B Common Stock which are returned to Company and
placed in its treasury under Section 4(f) of the Restated Escrow Agreement,
dated as of November 30, 1994 (as amended by the Amended Escrow Agreement dated
as of February 29, 1996), among the Company and certain holders of Class B
Common Stock; provided, however, that any such reduction arising with respect to
--------
Class B Common Stock beneficially held by any particular holder shall be offset
by 11.111% of the number shares issued upon exercise of any stock options,
warrants or other similar rights hereafter granted by the Company to such
holder. The Purchase Price shall not be affected by this Section 4.14.
4.15 OTHER SECURITIES ADJUSTMENTS. If as a result of this Section 4, a
----------------------------
Holder is entitled to receive any securities other than Class A Common Stock
upon exercise of this Warrant, the number and purchase price of such securities
shall thereafter be adjusted from time to time in the same manner as provided
pursuant to this Section 4 for Class A Common Stock. The allocation of
purchase price between various securities shall be made in writing by the Board
of Directors of the Company in good faith at the time of the event by which the
Holder became entitled to receive new securities, and a copy sent to the Holder.
4.16 NOTICES OF ADJUSTMENTS. When any adjustment is required to be made
----------------------
under this Section 4, the Company shall promptly (i) determine such
adjustments, (ii) prepare and retain on file a statement describing in
reasonable detail the method used in arriving at the adjustment; and (iii) cause
a copy of such statement, together with any agreement required by Section 5.5,
to be mailed to the Holder within 10 days after the date on which the
circumstances giving rise to such adjustment occurred.
4.17 COMPUTATIONS AND ADJUSTMENTS. Upon each computation of an adjustment
----------------------------
under this Section 4, the Purchase Price shall be computed to the nearest cent
and the Number of Shares shall be calculated to the next highest whole share.
However, the fractional amount shall be used in calculating any future
adjustments. No fractional shares of Class A Common Stock shall be issued in
connection with the exercise of this Warrant, but the Company shall, in the case
of the final exercise under this Warrant, make a cash payment for any fractional
shares based on the Current Market Price of the Class A Common Stock on the date
of exercise. Notwithstanding any changes in the Purchase Price or the Number of
Shares, this Warrant, and any Warrants issued in replacement or upon transfer
thereof, may continue to state the initial Purchase Price and the Number of
Shares. Alternatively, the Company may elect to issue a new Warrant or Warrants
of like tenor for the additional shares of Class A Common Stock purchasable
8
hereunder or, upon surrender of the existing Warrant, to issue a replacement
Warrant evidencing all the Warrants to which the Holder is entitled after such
adjustments.
4.18 EXERCISE BEFORE PAYMENT DATE. In the event that this Warrant is
----------------------------
exercised after the record date for any event requiring an adjustment, but prior
to the actual event, the Company may elect to defer the adjusted amount to the
Holder until the actual event occurs; provided, however, that the Company shall
deliver a Due Bill or other appropriate instrument to the Holder transferrable
to the same extent as the other Securities issuable on exercise evidencing the
Holder's right to receive such additional amount upon the occurrence of the
event requiring such adjustment.
4.19 CURRENT MARKET PRICE. "CURRENT MARKET PRICE" for the Class A Common
--------------------
Stock on any given date means (i) the average closing price for the prior ten
trading days for the Class A Common Stock on the principal stock exchange on
which the Class A Common Stock is traded or (ii) if not so traded, the closing
price (or, if no closing price is available, the average of the bid and asked
prices) for such period on the NASDAQ if the Class A Common Stock is listed on
the NASDAQ or (iii) if not listed on any exchange or quoted on the NASDAQ, such
value as may be determined in good faith by the Company's Board of Directors,
which determination shall be conclusively binding on the parties.
5. COVENANTS. The Company agrees that:
---------
5.1 RESERVATION OF STOCK. During the period in which this Warrant may be
--------------------
exercised, the Company will reserve sufficient authorized but unissued
securities to enable it to satisfy its obligations on exercise of this Warrant
and shall use its reasonable best efforts to cause all shares of Class A Common
Stock issued upon the exercise of this Warrant to be listed on any exchanges on
which the Class A Common Stock is then listed. If at any time the Company's
authorized securities shall not be sufficient to allow the exercise of this
Warrant, the Company shall take such corporate action as may be necessary to
increase its authorized but unissued securities to be sufficient for such
purpose;
5.2 NO LIENS, ETC. All securities that may be issued upon exercise of
-------------
this Warrant will, upon issuance, be validly issued, fully paid, nonassessable
and free from all taxes, liens and charges with respect to the issue thereof,
and shall be listed on any exchanges on which that class of securities is
listed;
5.3 FURNISH INFORMATION. The Company will promptly deliver to the Holder
-------------------
copies of all financial statements, reports and proxy statements which the
Company shall have sent to its stockholders generally; and
5.4 STOCK AND WARRANT TRANSFER BOOKS. Except upon dissolution,
--------------------------------
liquidation or winding up or for ordinary holidays and weekends, the Company
will not at any time close its stock or warrant transfer books so as to result
in preventing or delaying the exercise or transfer of this Warrant.
9
5.5 MERGER; CONSOLIDATION OR SALE OF ASSETS OF THE COMPANY. Except in the
------------------------------------------------------
case of a merger or consolidation where the consideration is payable entirely in
cash or obligations, the Company will not merge or consolidate with or into any
Person, or sell or otherwise transfer its property, assets and business
substantially as an entirety to a successor Person, unless the Person resulting
from such merger or consolidation (if not the Company), or such successor
Person, shall expressly assume, by supplemental agreement reasonably
satisfactory in form to the then Majority Holders and executed and delivered to
the Holders, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company. "MAJORITY HOLDERS", as of any date, shall mean holders of warrants
issued pursuant to the Strategic Alliance Agreement dated as of November 12,
1996, between the Company and Hyatt Ventures, Inc. (pursuant to which this
Warrant was issued) which are exercisable for a majority of the shares then
purchasable under all warrants issued pursuant to the Strategic Alliance
Agreement.
6. STATUS OF HOLDER.
----------------
6.1 NOT A STOCKHOLDER. Unless the Holder exercises this Warrant in
-----------------
writing, the Holder shall not be entitled to any rights (i) as a stockholder of
the Company with respect to the shares as to which the Warrant is exercisable
including, without limitation, the right to vote or receive dividends or other
distributions, or (ii) to receive any notice of any proceedings of the Company
except as otherwise provided in this Warrant.
6.2 LIMITATION OF LIABILITY. Unless the Holder exercises this Warrant in
-----------------------
writing, the Holder's rights and privileges hereunder shall not give rise to any
liability for the Purchase Price or as a stockholder of the Company, whether to
the Company or its creditors.
7. REGISTRATION RIGHTS. The shares purchasable upon exercisable of this
-------------------
Warrant shall be Registrable Securities as defined in that certain Registration
Rights Agreement between the Company and Hyatt Ventures, Inc., dated as of even
date herewith (the "REGISTRATION RIGHTS AGREEMENT").
8. GENERAL PROVISIONS.
------------------
8.1 COMPLETE AGREEMENT; MODIFICATIONS. This Warrant and any documents
---------------------------------
referred to herein or executed contemporaneously herewith constitute the
parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. This Warrant may not be amended, altered or modified except by a
writing signed by the parties.
8.2 COOPERATION. Each party hereto agrees to execute any and all further
-----------
documents and writings and to perform such other reasonable actions which may be
or become necessary or expedient to effectuate and carry out this Warrant.
10
8.3 NOTICES. All notices under this Warrant shall be in writing and shall
-------
be delivered by personal service or telecopy or certified mail return receipt
requested (if such service is not available, then by first class mail), postage
prepaid, to such address as may be designated from time to time by the relevant
party, and which shall initially be:
(i) If to the Company:
Interactive Flight Technologies, Inc.
4041 N. Central Avenue, Suite 2000
Phoenix, Arizona 85012
Attention: Michail Itkis, Chief Executive Officer
Telecopy: 602/274-8372
With a copy to:
Irell & Manella
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Attention: Theodore E. Guth
Telecopy: 310/203-7199
(ii) If to ___________:
200 West Madison, 38th Floor
Chicago, Illinois 60606
Attention: Harold S. Handelsman
Telecopy: 312/750-8545
With a copy to:
Neal, Gerber & Eisenberg
2 North La Salle, Suite 2200
Chicago, Illinois 60602
Attention: Michael A. Pucker
Telecopy: 312/269-1747
Any notice sent by certified mail shall be deemed to have been given three
(3) days after the date on which it is mailed. All other notices shall be
deemed given when received. No objection may be made to the manner of delivery
of any notice actually received in writing by an authorized agent of a party.
8.4 NO THIRD-PARTY BENEFITS; SUCCESSORS AND ASSIGNS. None of the
-----------------------------------------------
provisions of this Warrant shall be for the benefit of, or enforceable by, any
third-party beneficiary. Except as provided herein to the contrary, this
Warrant shall be binding
11
upon and inure to the benefit of the parties, their respective successors and
permitted assigns.
8.5 GOVERNING LAW. This Warrant concerns a Delaware corporation, and all
-------------
questions with respect to the Warrant and the rights and liabilities of the
parties will be governed by the laws of Delaware regardless of the choice of law
provisions of Delaware or any other jurisdiction. Any and all disputes between
the parties which may arise pursuant to this Warrant not covered by arbitration
will be heard and determined before an appropriate federal or state court
located in Wilmington, Delaware. The parties hereto acknowledge that such
courts have the jurisdiction to interpret and enforce the provisions of this
Warrant and the parties waive any and all objections that they may have as to
personal jurisdiction or venue in any of the above courts.
8.6 WAIVERS STRICTLY CONSTRUED. With regard to any power, remedy or right
--------------------------
provided herein or otherwise available to any party hereunder (i) no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party; and (ii) no alteration, modification or impairment
shall be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
8.7 SEVERABILITY. The validity, legality or enforceability of the
------------
remainder of this Warrant shall not be affected even if one or more of its
provisions shall be held to be invalid, illegal or unenforceable in any respect.
8.8 ATTORNEYS' FEES. Should any litigation or arbitration be commenced
---------------
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provisions of this Warrant or the rights
and duties of any person or entity hereunder, the party or parties prevailing in
such proceeding shall be
12
entitled, in addition to such other relief as may be granted, to the attorneys'
fees and court costs incurred by reason of such litigation.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
effective as of ___________________.
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
BY ____________________________
Michail Itkis
Chief Executive Officer
Attest:
_______________________________
[name]
Secretary
13
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers to the transferee named below the rights to purchase ___
of the Number of Shares under this Warrant, together with all rights, title and
interest therein. The rights to purchase the remaining Number of Shares shall
remain the property of the undersigned.
Dated: _______________
[NAME OF HOLDER]
By: ____________________________
Signature
Name:__________________________
(Please Print)
Address:_______________________
_______________________
_______________________
Employer Identification Number,
Social Security Number or other
identifying number: ____________
TRANSFEREE:
Name: __________________________
(Please Print)
Address: _______________________
_______________________
_______________________
Employer Identification Number,
Social Security Number or other
identifying number:_____________
14
EXERCISE FORM
-------------
To Be Executed
Upon Exercise of Warrant
The undersigned hereby exercises the Warrant with regard to _____________
shares of Class A Common Stock and herewith makes payment of the purchase price
in full. The undersigned requests that certificate(s) for such shares and the
Warrant for any unexercised portion of this Warrant be issued to the Holder.
Dated: __________________
[NAME OF HOLDER]
By: ____________________________
Signature
Name:__________________________
(Please Print)
Address:_______________________
_______________________
_______________________
Employer Identification Number,
Social Security Number or other
identifying number: ___________
15
EXHIBIT 2.4 TO STRATEGIC ALLIANCE AGREEMENT
================================================================================
LIMITED LIABILITY COMPANY AGREEMENT
OF
IFT VENTURES I, LLC
[DATE]
================================================================================
LIMITED LIABILITY COMPANY AGREEMENT
OF
IFT VENTURES, LLC
TABLE OF CONTENTS
-----------------
[Download Table]
Page
----
ARTICLE I DEFINED TERMS; EXHIBITS, SCHEDULES, ETC................... 1
1.1 Definitions............................................... 1
1.2 Other Defined Terms....................................... 4
1.3 References................................................ 4
ARTICLE II ORGANIZATION.............................................. 5
2.1 Organization of Company................................... 5
2.2 Name...................................................... 5
2.3 Purpose; Character of the Business........................ 5
2.4 Principal Office.......................................... 5
2.5 Registered Agent and Registered Office.................... 5
ARTICLE III CAPITAL CONTRIBUTIONS; ETC................................ 5
3.1 Mandatory Capital Contributions........................... 5
3.2 Voluntary Capital Contributions from Members.............. 5
3.3 Withdrawal; Return of Capital; Interest................... 6
ARTICLE IV ALLOCATION OF NET INCOME AND NET LOSS; ETC................ 6
4.1 Net Income and Net Loss................................... 6
4.2 Tax Withholding........................................... 7
4.3 Capital Accounts.......................................... 7
ARTICLE V DISTRIBUTIONS............................................. 7
ARTICLE VI ACCOUNTING AND ADMINISTRATIVE MATTERS..................... 7
6.1 Books and Records......................................... 7
6.2 Reports................................................... 8
6.3 Tax Matters Partner....................................... 8
6.4 Tax Elections and Returns................................. 8
6.5 Reimbursement............................................. 8
ARTICLE VII MANAGEMENT OF COMPANY..................................... 9
7.1 Management................................................ 9
7.2 Actions Requiring Member Approval......................... 9
7.3 Member Meetings........................................... 10
7.4 Notice.................................................... 10
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[Download Table]
Page
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7.5 Quorum and Voting......................................... 10
7.6 Telephonic Meetings....................................... 10
7.7 Compensation.............................................. 11
7.8 Removal of Manager........................................ 11
ARTICLE VIII LIMITATION ON LIABILITY AND INDEMNIFICATION............... 11
8.1 Indemnification and Contribution.......................... 11
8.2 Payment of Expenses in Advance............................ 11
8.3 Provisions Not Exclusive.................................. 11
ARTICLE IX TRANSFER OF MEMBERSHIP INTERESTS; DEADLOCK; NO
RESIGNATION............................................... 11
9.1 Restriction on Transfer................................... 11
9.2 Permitted Transfers....................................... 12
9.3 New Members............................................... 13
9.4 Deadlock.................................................. 14
9.5 No Resignation or Retirement.............................. 14
ARTICLE X DISSOLUTION AND TERMINATION............................... 14
10.1 Dissolution............................................... 14
10.2 Accounting................................................ 15
10.3 Liquidating Trustee....................................... 15
10.4 Liquidating Distribution.................................. 16
10.5 Distributions in Kind..................................... 16
ARTICLE XI MISCELLANEOUS............................................. 17
11.1 Amendments................................................ 17
11.2 Further Assurances........................................ 17
11.3 Notices................................................... 17
11.4 Governing Law............................................. 17
11.5 Captions.................................................. 17
11.6 Pronouns.................................................. 17
11.7 Successors and Assigns.................................... 17
11.8 Extension not a Waiver.................................... 18
11.9 Severability.............................................. 18
11.10 Entire Agreement.......................................... 18
11.11 Counterparts.............................................. 18
11.12 No Third Party Beneficiary................................ 18
-ii-
LIMITED LIABILITY COMPANY AGREEMENT
OF
IFT VENTURES I, LLC
-------------------
OPERATING AGREEMENT dated as of ________________, between Interactive
Flight Technologies, Inc. ("IFT") and _____________ ("INVESTOR").
W I T N E S S E T H:
-------------------
WHEREAS, the parties hereto desire to organize a limited liability
company (the "COMPANY") under the Act governed by the terms set forth herein;
and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound hereby, agree as follows:
ARTICLE I
---------
DEFINED TERMS; EXHIBITS, SCHEDULES, ETC.
----------------------------------------
1.1 DEFINITIONS. As used in this Agreement, the
-----------
following terms shall have the respective meanings indicated below:
"ACT" means the Delaware Limited Liability Company
---
Act, as the same may be amended from time to time.
"AFFILIATE" means,
---------
(i) with respect to an individual, the Relatives of
such individual;
(ii) with respect to a trust or trustee, the Relatives of the
individual who is the grantor of the trust and/or another trust for
the benefit of such individual and/or such individual's Relatives;
(iii) with respect to an entity, any Person who or which,
directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, such entity (the
term "CONTROL" for these purposes meaning the ability, whether by
ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to
select the managing or general partner of a partnership, or otherwise
to select, or have the power to remove and then
select, a majority of those Persons exercising governing authority
over an entity).
"AGREEMENT" means this Operating Agreement, as originally executed and
---------
as amended, modified, supplemented or restated from time to time, as the context
requires.
"BANKRUPTCY" means an event that causes a Person
----------
to cease to be a Member as provided in Section 18-304 of the Act.
"BONA FIDE PURCHASER" means any Person (other than a Seller's
-------------------
Affiliates) who or which has delivered a good faith written offer to purchase
all, but not less than all, of such Seller's Membership Interest; provided,
--------
however, that such Person has the requisite financial resources necessary to
-------
purchase such Seller's Membership Interest.
"BUDGET" means the Company's budget to be prepared annually by IFT and
------
submitted to the Members for approval at least 30 days prior to the beginning of
a fiscal year.
"BUSINESS" means the business of entering into and performing under
--------
contracts for acquiring, installing and maintaining the System in the
______________ Airlines fleet of aircraft.
"BUSINESS DAY" means any day on which banks are
------------
open for business in Phoenix, Arizona and Chicago, Illinois.
"CAPITAL ACCOUNT" means, with respect to any Member, the separate
---------------
"book" account which the Company shall establish and maintain for such Member in
accordance with Section 704(b) of the Code and Section 1.704-1(b)(2)(iv) of the
Regulation and such other provisions of Section 1.704-1(b) of the Regulation
that must be complied with in order for the Capital Accounts to be determined in
accordance with the provisions of the Regulation. In furtherance of the
foregoing, the Capital Accounts shall be maintained in compliance with Section
1.704-1(b)(2)(iv) of the Regulation, and the provisions hereof shall be
interpreted and applied in a manner consistent therewith.
"CAPITAL CALL" means a notice from the Company to the Members
------------
requesting additional capital contributions pursuant to Section 3.2 of this
Agreement setting forth (i) the amount of funds required by the Company; (ii)
the funding date, not sooner than 30 days from date of delivery of the Capital
Call; and (iii) each Member's share of the required amount of funds.
"CAPITAL CONTRIBUTION" means, with respect to each Member, the amount
--------------------
of money contributed to the Company by such Member from time to time.
"CERTIFICATE" means the Certificate of Organization of the Company as
-----------
filed by the Secretary of State of Delaware, as the same may be amended or
restated from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
----
replacement or successor law thereto.
"DISTRIBUTABLE CASH" means, with respect to any Fiscal Year or other
------------------
applicable fiscal period, the excess, if any, of (a) all cash receipts of the
Company from all sources for such period, including without limitation receipts
from operations, contributions of capital by the Members, proceeds of borrowing
or from the issuance of securities by the Company, deposits and all other
Company cash sources and all Company cash reserves on hand at the beginning of
such period over (b) all cash expenses and capital expenditures of the Company
for such period, all payments of principal and interest on account of Company
indebtedness and such reasonable cash reserves as the Members deem necessary for
any Company needs.
"ENTITY" means any corporation, general partnership, limited
------
partnership, limited liability company, joint venture, trust, business trust,
cooperative or association.
"FINANCIAL STATEMENTS" means, for any Fiscal Year, the [AUDITED]
--------------------
financial statements (consisting of a balance sheet, statement of operations,
statement of Members' equity and statement of cash flows) of the Company. The
Financial Statements shall be prepared in accordance with generally accepted
accounting principles and shall be consistent with the books and records of the
Company.
"FISCAL YEAR" means the calendar year or such other fiscal year as the
-----------
Members may select in its discretion from time to time in accordance with the
Code and the Regulations.
"LIQUIDATING TRUSTEE" means such Person as is selected at the time of
-------------------
dissolution by the Members, which Person may include an Affiliate of any Member.
The Liquidating Trustee shall be empowered to give and receive notices, reports
and payments in connection with the dissolution, liquidation and/or winding-up
of the Company and shall hold and exercise such other rights and powers as are
necessary or required to permit all parties to deal with the Liquidating Trustee
in connection with the dissolution, liquidation, and/or winding-up of the
Company.
"MANAGER" shall mean IFT unless IFT's Membership Percentage falls
-------
below fifty percent (50%), in which case "MANAGER" shall mean any Member owning
at least twenty percent of the Membership Percentages selected by Members owning
a majority of the Membership Percentages.
"MEMBERS" means Persons who have been admitted to the Company as
-------
provided in Section 18-301 of the Act and whose names are set forth on Schedule
--------
A attached hereto.
-
"MEMBERSHIP INTEREST" means a Member's interest in the Company which
-------------------
shall entitle the Member to (i) an interest in the Net Income, Net Loss,
Distributable Cash, and net proceeds of liquidation of the Company, as set forth
herein; (ii) any right to vote
as set forth herein or as required under the Act; and (iii) any right to
participate in the management of the Company as set forth herein or as required
under the Act. A Membership Interest is personal property and a Member shall
have no interest in the specific assets or property of the Company.
"MEMBERSHIP PERCENTAGE" means, with respect to each Member, such
---------------------
Member's percentage ownership interest in the Company set forth on Schedule A
----------
attached hereto, adjusted as provided in Section 3.2 hereof.
"NET INCOME" or "NET LOSS" means, for each Fiscal Year or other
---------- --------
applicable period, an amount equal to the Company's net taxable income or loss
for such year or period determined in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Section 703(a) of the Code shall be included in
taxable income or loss), with the following adjustments: (a) by including as an
item of gross income any tax-exempt income received by the Company and (b) by
treating as a deductible expense any expenditure of the Company described in
Section 705(a)(2)(B) of the Code (including amounts paid or incurred to organize
the Company (unless an election is made pursuant to Code Section 709(b)) or to
promote the sale of Membership Interests and by treating deductions for any
losses incurred in connection with the sale or exchange of Company property
disallowed pursuant to Section 267(a)(1) or Section 707(b) of the Code as
expenditures described in Section 705(a)(2)(B) of the Code.
"PERSON" means any natural person or Entity.
------
"PRIME RATE" means the prime rate or reference
----------
rate announced by Bank of America, N.A. from time to time.
"REGULATIONS" means the proposed, temporary and final regulations
-----------
promulgated by the Treasury Department pursuant to the Code, as amended from
time to time.
"RELATIVES" means, with respect to any specified individual, the
---------
spouse, children (both natural and adopted), and grandchildren of such
individual.
"SYSTEM" means the IFEN-2 system, and all of its
------
updates, upgrades, modifications, enhancements and derivatives.
"TRANSFER" means assign, sell, pledge, encumber, give or otherwise
--------
transfer, dispose of or alienate, or grant an option or contractual agreement to
do any of the foregoing, but shall not include any transfer to a legal
representative or successor trustee.
1.2 OTHER DEFINED TERMS. Capitalized terms not defined in Section 1.1
-------------------
shall have the meanings set forth in the other sections of this Agreement.
1.3 REFERENCES. References to an "Exhibit" or to a "Schedule" are, unless
----------
otherwise specified, to one of the exhibits or schedules attached to this
Agreement, and references to an "Article" or a "Section" are, unless otherwise
specified, to one of the articles or sections of this Agreement. Each Exhibit
and Schedule attached hereto and referred to herein is hereby incorporated
herein by such reference.
ARTICLE II
----------
ORGANIZATION
------------
2.1 ORGANIZATION OF COMPANY. The Members hereby agree to organize the
-----------------------
Company as a limited liability company under the Act effective upon the filing
of the Certificate by IFT with the Secretary of State of the State of Delaware
immediately after execution hereof. Except as provided herein or in the
Certificate the rights and obligations of the Members are as provided under the
Act.
2.2 NAME. The name of the Company is "IFT Ventures I,
----
LLC" or such other name as may be selected by the Members.
2.3 PURPOSE; CHARACTER OF THE BUSINESS. The purpose and business of the
----------------------------------
Company is to engage in the Business and to engage in any lawful transaction
permitted by the Act in connection therewith.
2.4 PRINCIPAL OFFICE. The location of the Company's principal office is
----------------
4041 N. Central Avenue, Suite 2000, Phoenix, Arizona 85012, or such other place
as may be selected by the Members.
2.5 REGISTERED AGENT AND REGISTERED OFFICE. The statutory agent for
--------------------------------------
service of process and the registered office of the Company shall be The
Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, New Castle
County, Delaware, 19805-1297 or such other statutory agent and registered office
as the Members may determine from time to time.
ARTICLE III
-----------
CAPITAL CONTRIBUTIONS; ETC.
---------------------------
3.1 MANDATORY CAPITAL CONTRIBUTIONS.
-------------------------------
(a) Concurrently with the execution hereof, IFT shall contribute
$_______ and Investor shall contribute $_______ in immediately available
funds as their initial Capital Contributions;
(b) On _____________, IFT shall contribute $________ and Investor
shall contribute $_________ in immediately available funds.
3.2 VOLUNTARY CAPITAL CONTRIBUTIONS FROM MEMBERS.
--------------------------------------------
(a) Upon receipt of a Capital Call approved by the Members, the
Members shall be obligated to contribute to the Company the amount required
by the Capital Call in cash, pro rata in accordance with their respective
Membership Percentages, no later than the funding date set forth therein.
(b) If any Member shall fail to timely make a Capital Contribution
required pursuant to Sections 3.1(b) and 3.2(a) (the "Defaulting Member"),
the Company shall give notice of such failure to the non-defaulting Member,
and the non-defaulting Member shall have the right to convert its Capital
Contribution into a loan to the Company and to lend to the Company the
amount of the Capital Call the Defaulting Member failed to contribute (the
"Member Loan"). The Member Loan shall bear interest at the greater of (i)
20% or (ii) the Prime Rate plus 6%, shall compound monthly and shall be
repaid in full (together with accrued interest thereon) prior to any
distributions to the Members.
(c) The non-defaulting Member shall thereafter have the right at any
time to convert the Member Loan into an equity interest in the Company. In
the event, the conversion right is exercised, the non-Defaulting Member's
Membership Percentage shall be increased to equal a fraction, expressed as
a percentage, (i) the numerator of which is the sum of (A) the product of
(1) the outstanding balance of the Member Loan and interest thereon and (2)
125%; and (B) the non-Defaulting Member's aggregate Capital Contributions
and (ii) the denominator of which is the sum of (A) all Capital
Contributions of the Members and (B) the outstanding balance of the Member
Loan and interest thereon. The non-Defaulting Member's Membership
Percentage shall be decreased by the amount the non-Defaulting Member's
Membership Percentage is increased.
(d) If a Member's Membership Percentage has been reduced to zero, it
shall be deemed to have withdrawn from the Company.
(e) Nothing contained herein shall limit the other remedies of the
Company and the non-defaulting Member at law or in equity on account of any
failure to make a Capital Contribution.
3.3 WITHDRAWAL; RETURN OF CAPITAL; INTEREST. Except as specifically
---------------------------------------
provided herein, no Member shall be entitled to any distributions from the
Company or to withdraw any part of such Member's Capital Contribution prior to
the Company's dissolution and liquidation, or when such withdrawal of capital is
permitted, to demand distribution of property other than money. No Member shall
be entitled to interest on its Capital Contribution.
ARTICLE IV
----------
ALLOCATION OF NET INCOME AND NET LOSS; ETC.
-------------------------------------------
4.1 NET INCOME AND NET LOSS
-----------------------
(a) Subject to Section 4.1(b), Net Income and Net Loss for any Fiscal
Year or other applicable period shall be allocated among the Members pro
rata in accordance with their respective Membership Percentages.
(b) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of income and gain shall be
specifically allocated to the Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, any deficit in its
Capital Account as quickly as possible, provided that an allocation
pursuant to this Section 4.1(b) shall be made only if and to the extent
that the Member would have a Capital Account deficit after all other
allocations provided for in this Article IV have been tentatively made as
if this Section 4.1(b) were not in the Agreement.
4.2 TAX WITHHOLDING. The Company shall be authorized to pay, on behalf of
---------------
any Member, any amounts to any federal, state, local or foreign taxing
authority, as may be necessary for the Company to comply with tax withholding
provisions of the Code or other applicable income tax or revenue laws of any
taxing authority. To the extent the Company pays any such amounts that it may
be required to pay on behalf of a Member, such amounts shall be treated as a
distribution to such Member and shall reduce the amount otherwise distributable
to such Member.
4.3 CAPITAL ACCOUNTS. The Company shall maintain a Capital Account for
----------------
each Member.
ARTICLE V
---------
DISTRIBUTIONS
-------------
Any distributions to the Members shall be made solely to the extent of
Distributable Cash and shall be made pro rata among the Members in accordance
with their Membership Percentages. The timing and amount of distributions shall
be determined by the Manager. Notwithstanding anything to the contrary
contained herein, no distribution may be made while any Member Loan is
outstanding or if, after giving effect to the distribution, (i) the Company
would not be able to pay its debts as they become due in the ordinary course of
business or (ii) the Company's total assets would be less than the sum of its
total liabilities.
ARTICLE VI
----------
ACCOUNTING AND ADMINISTRATIVE MATTERS
-------------------------------------
6.1 BOOKS AND RECORDS. The Manager shall cause the Company to maintain,
-----------------
or cause to be maintained, full, true, complete and correct books of account of
the
Company, in accordance with generally accepted accounting principles applied
on a consistent basis. The books of account shall contain particulars of all
monies, goods or effects belonging to or owing to or by the Company, or paid,
received, sold or purchased in the course of the Company's business, and all of
such other transactions, matters and things relating to the business of the
Company as are usually entered in books of accounts kept by persons engaged in a
business of a like kind and character. In addition, the Manager shall cause the
Company to keep all records required to be kept pursuant to the Act. Each
Member shall, upon prior written notice and during normal business hours, have
access thereto for the purpose of inspecting or, at the expense of such Member,
copying the same. Any Member reviewing the books and records of the Company
pursuant to the preceding sentence shall do so in a manner which does not unduly
interfere with the conduct of the Company's business.
6.2 REPORTS. The Manager shall cause the Company to prepare, or cause to
-------
be prepared, and furnish to each Person who was a Member during a Fiscal Year,
within ninety (90) days after the close of such Fiscal Year, (i) Financial
Statements for such Fiscal Year and (ii) a Schedule K1 or such other form as
shall be necessary to advise all Members relative to their investment in the
Company for federal, state, local and foreign income tax reporting purposes.
6.3 TAX MATTERS PARTNER. The Manager shall be the "Tax Matters Partner,"
--------------------
as such term is defined in Section 6231(a)(7) of the Code. In the event of an
income tax audit of any tax return of the Company, the filing of any amended
return or claim for refund in connection with any item of income, gain, loss,
deduction or credit reflected on any tax return of the Company, or any
administrative or judicial proceedings arising out of or in connection with any
such audit, amended return, claim for refund or denial of such claim, any
decision which could materially affect a Member's tax liability shall require
the affirmative approval of all the Members.
6.4 TAX ELECTIONS AND RETURNS. All elections required or permitted to be
-------------------------
made by the Company under any applicable tax laws shall be made by the Members;
provided, however, the Company shall, if requested by the transferee of a
Company Interest, file an election on behalf of the Company pursuant to Section
754 of the Code to adjust the basis of the Company property in the case of a
transfer of a Membership Interest made in accordance with the provisions of this
Agreement. The Manager shall be responsible for preparing all federal and state
tax returns for the Company and furnishing required schedules showing
allocations of tax items to all other Members within the period of time
prescribed by law (including any extensions permitted by applicable law).
6.5 REIMBURSEMENT. The Company shall, on a [quarterly] basis, pay to the
-------------
Manager a management fee equal to 100% of its reasonable out-of-pocket costs
incurred in connection with, or allocable to, performance of its duties as
Manager under this Agreement.
ARTICLE VII
-----------
MANAGEMENT OF COMPANY
---------------------
7.1 MANAGEMENT.
----------
(a) Except as otherwise provided herein, the Company shall be managed
by the Manager or, in the absence of a Manager, by Members owning a
majority of the Membership Percentages.
(b) The Manager shall be obligated to use its reasonable good faith
efforts to cause the Company to obtain all necessary licenses and permits
for the operation of the Business, including, without limitation, all
gaming related licenses and permits and to comply with all laws, rules and
regulations relating to the Business.
7.2 ACTIONS REQUIRING MEMBER APPROVAL. The following actions shall
---------------------------------
require the affirmative approval of all of the Members:
(a) the sale, exchange, lease or other disposition of all or
substantial portion of the property of the Company;
(b) acting as a surety, guarantor, endorser or accommodation endorser
for any Person or lend any money;
(c) incurring any debt or obligation in excess of $__________;
(d) placing any liens or encumbrances on the assets of the Company;
(e) admitting any Person as an additional Member;
(f) taking any action for the (i) commencement of a voluntary case
under any applicable bankruptcy, insolvency or similar law now or hereafter
in effect, (ii) consent to the entry of any order for relief in an
involuntary case under any such law, (iii) consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee
or sequestrator (or similar official) of the relevant company or of any
substantial part of the property thereof, (iv) making by the relevant
company of a general assignment for the benefit of creditors, or (v) making
of any other arrangement or composition with creditors generally to modify
the terms of payment of, or otherwise restructure their obligations;
(g) amending or modifying this Agreement;
(h) entering into any contract with a Member or Affiliate of a
Member;
(i) entering into any material contract for the installation or
maintenance of the System;
(j) entering into any contract for the sale of the System;
(k) acquiring other entities or businesses;
(l) making any voluntary Capital Calls;
(m) approving the Budget;
(n) selecting the Company's auditor;
(o) selecting the Liquidating Trustee; and
(p) except as set forth under Section 6.5, reimbursing any Member for
out-of-pocket expenses incurred by such Member on behalf of the company in
excess of $_________ in any fiscal year (to the extent that such costs are
not being reimbursed, the Member shall be relieved from its obligations to
incur costs); and
(q) materially modifying, changing or amending any agreement or
arrangement which is the subject of the matters referred to in subclauses
(a) through (p) above.
7.3 MEMBER MEETINGS. An annual meeting of the Members shall be held,
---------------
without any notice other than this provision, on the first Monday of April of
each year. Special meetings of the Members may be called by any Member.
7.4 NOTICE. Notice of a special meeting shall be given to each Member at
------
least five Business Days prior to the date designated therein for such meeting.
A Member may waive notice of any meeting. The attendance of a Member at any
meeting shall constitute a waiver of notice of such meeting, except where the
Member attends a meeting for the express purpose of objecting to the transaction
of any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any meeting of the Members
need be specified in the notice or waiver of notice of such meeting.
7.5 QUORUM AND VOTING. Members owing a majority of the Membership
-----------------
Percentages shall constitute a quorum for the transaction of business at any
meeting of the Members provided that (i) each Member received notice of such
meeting in accordance with Section 7.4 or (ii) at least one representative of
each of the Members not receiving such notice is present, and, except as
provided in Section 7.2 hereof, the vote of a majority of the Membership
Percentages shall be the act of the Company.
7.6 TELEPHONIC MEETINGS. Any meetings of the Members may be held, or any
-------------------
Member may participate in any meeting of the Members, by use of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
7.7 COMPENSATION. The Members shall not receive compensation for their
------------
services to the Company in such capacity but, by resolution of the Members, may
be paid their reasonable expenses, if any, for attending any meeting of the
Members.
7.8 REMOVAL OF MANAGER. IFT may be removed as Manager by Investor if
------------------
Manager (a) commits a felony; (b) exposes the Company to criminal liability; (c)
engages in conduct constituting bad faith, gross negligence or willful
misconduct, which conduct is likely to result in a material detriment to the
Company or (d) becomes a Defaulting Member. In any such event, Investor shall
become the Manager.
ARTICLE VIII
------------
LIMITATION ON LIABILITY AND INDEMNIFICATION
-------------------------------------------
8.1 INDEMNIFICATION AND CONTRIBUTION. The Company shall indemnify, defend
--------------------------------
and hold harmless the Members from and against any claims, causes of action,
costs or expenses, including but not limited to reasonable attorneys fees
("Losses"), asserted against him or incurred by him in such capacity arising out
of his status as such other than Losses arising from his gross negligence,
willful misconduct or breach of this Agreement or the Alliance Agreement dated
as of November 12, 1996 between IFT and Hyatt Ventures, Inc. (the "Alliance
Agreement").
8.2 PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in defending a
------------------------------
civil or criminal action, suit or proceeding may be paid out of Company funds in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by the Member, to repay such amount unless it shall ultimately
be determined that it is entitled to be indemnified by the Company.
8.3 PROVISIONS NOT EXCLUSIVE. The indemnification provided by this
------------------------
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, agreement, vote of Members or
otherwise.
ARTICLE IX
----------
TRANSFER OF MEMBERSHIP INTERESTS;
---------------------------------
DEADLOCK; NO RESIGNATION
------------------------
9.1 RESTRICTION ON TRANSFER. Except for (i) Transfers to Affiliates of
-----------------------
Investor and (ii) the transfer by Investor of its Membership Interest to IFT in
exchange for stock of IFT, as contemplated by the Alliance Agreement between IFT
and Investor's Affiliate and (iii) sales pursuant to Section 9.2 hereof, for
which no approval is required, no
Member shall, directly or indirectly, voluntarily or involuntarily, Transfer to
any Person by whatever means all or any portion of its Membership Interest
unless approved in writing by all the Members. To the extent permitted by law,
any Transfer in violation of this Agreement shall be null and void. In the event
that a Member Transfers any of its Membership Interests to an Affiliate, the
transferring Member and each of its Affiliate transferees shall be deemed to be
a single Person for purposes of Section 9.2 hereof.
9.2 PERMITTED TRANSFERS.
-------------------
(a) Offer from Bona Fide Purchaser. After the first anniversary of
------------------------------
this Agreement, if a Member (for purposes of this Section 9.2, "Seller")
desires to effect the sale of all (but not less than all) of its Membership
Interest for cash and receives a written offer (the "OFFER") from a Bona
Fide Purchaser, Seller shall, at least 90 days prior to the proposed sale,
(i) notify the other Member(s) (the "OTHER MEMBER(S)") of its intention to
sell, (ii) notify the Other Member if the Seller desires to exercise its
Bring-Along Right described in Section 9.2(d) (below the "Bring-Along
Notice"), and (iii) provide the Other Member with a copy of the contract
for the sale of such interest (collectively, the "TRANSFER NOTICE").
(b) Right of First Refusal. The Other Member(s), or its designee,
----------------------
shall have the right to purchase Seller's entire Membership Interest at the
same price and on the same terms as contained in the Transfer Notice (the
"RIGHT OF FIRST REFUSAL"). The Other Member must exercise its Right of
First Refusal, if at all, by giving notice of exercise (the "PURCHASE
NOTICE") to the Seller within 30 days after delivery of the Transfer
Notice, and such sale shall be consummated on the date on which the sale
would otherwise have been consummated pursuant to the offer subject to the
making of any filings with, and receipt of, all governmental consents and
approvals.
(c) Tag-Along Right. The Other Member(s), in lieu of delivering the
---------------
Purchase Notice, may exercise the option to sell its entire Membership
Interest to the Bona Fide Purchaser (the "TAG-ALONG RIGHT") on the same
terms, conditions and price (mathematically adjusted to reflect differing
Membership Percentages) as set forth in the Transfer Notice by giving
Seller notice (the "TAG-ALONG NOTICE") within 30 days after the transmittal
of a copy of the Transfer Notice. Delivery of the Tag-Along Notice shall
constitute a binding agreement by the Other Member(s) to sell its entire
Membership Interest to the Bona Fide Purchaser, on the same terms and
conditions specified in the Transfer Notice.
(d) Bring-Along Right. In the event the Seller has delivered the
-----------------
Bring-Along Notice as part of the Transfer Notice and the Other Member(s)
has not exercised its Right of First Refusal or Tag-Along Right, the Other
Member(s) shall be required to sell its entire Membership Interest to the
Bona Fide Purchaser on the same terms and conditions and at the same price
(mathematically adjusted
to reflect differing Membership Percentages) as set forth in the Transfer
Notice simultaneously with the sale of the Seller's interest to the Bona
Fide Purchaser.
(e) Consummation of Purchase.
------------------------
(i) If the Other Member(s) fails to exercise its Right of First
Refusal, then the Seller may sell its Membership Interest on the terms
specified in the Transfer Notice, provided (A) if the Other Member has
exercised its Tag-Along Right or Seller has exercised its Drag Along Right,
the Other Member shall participate in such sale as provided in Section
9.2(c) or (d), as the case may be; and (B) such sale is consummated no
later than the later to occur of (x) the date set forth for closing in the
Transfer Notice; or (y) 90 days after delivery of the Transfer Notice. If
the sale is not consummated within the period of time specified in the
preceding sentence, then no sale may be consummated with respect to any
portion of the Seller's Membership Interest except upon compliance again
with the provisions of this Section 9.2 to the extent this Section 9.2
would otherwise be applicable.
(ii) If the Other Member(s) exercises its Right of First Refusal,
Seller shall sell and the Other Member(s) shall purchase the Seller's
entire Membership Interest pursuant to the terms set forth in the Transfer
Notice on the date on which the sale would otherwise have been consummated
pursuant to the offer.
(iii) Any closing hereunder shall take place at the principal offices
of the Company or such other place as is specified in the Transfer Notice
if the purchaser is the Bona Fide Purchaser.
(iv) The parties hereto shall deliver such instruments and other
documentation as may be reasonably required to effect the transfers
required hereby.
(v) The consideration for any Transfers under this Section 9.2 shall
be solely cash.
9.3 NEW MEMBERS. Any Person, not then a Member, to whom a Membership
-----------
Interest shall be Transferred in accordance with the provisions of this Article
IX shall agree in writing to be subject to the terms hereof and shall become a
substituted Member hereunder. All reasonable costs and expenses incurred by the
Company in connection with any Transfer, and, if applicable, the admission of a
Person as a substituted Member, shall be paid by the Transferring Member. If
any Membership Interest is Transferred other than in accordance with the
provisions hereof and the transferee is not admitted as a substituted Member,
such transferee shall be deemed a mere assignee of profits only without any
right, power or authority of a Member hereunder and shall bear
losses in the same manner as its predecessor in interest; the transferor of such
interest shall thereafter be considered to have no further rights or interest in
the Company with respect to the interest Transferred, but shall nonetheless be
subject to its obligations under this Agreement with respect to such interest.
Upon admission of a transferee as a substituted Member, the transferor shall
withdraw from the Company, and be relieved of any corresponding obligations, to
the extent of its Transferred Membership Interest.
9.4 DEADLOCK. If, after making a good faith effort, the Members have
--------
failed to agree on any of the matters which, in the reasonable opinion of
Investor, could have a material adverse impact on the Company (a "DEADLOCK"),
IFT shall, after receipt of a written notice from Investor that it desires to
have its Membership Interest purchased, purchase Investor's entire Membership
Interest at a price equal to the appraised value thereof, such value to be
determined pursuant to Section 2.6(b) of the Alliance Agreement; provided,
however, that Investor may withdraw its notice within five days after the
determination of appraised value, and in such event, the issue or issues which
were the subject of the Deadlock shall be decided in favor of EFT. The purchase
price shall be payable by IFT, at its election, either entirely in cash or one-
third in cash and two-thirds in a promissory note in the form of Exhibit 9.4
-----------
attached hereto. The unpaid principal amount of said note shall bear interest
at the Prime Rate plus 2% per annum with the principal and accrued interest
being due eighteen months after delivery of the note. Any portion of such
principal amount and accrued interest shall be prepayable without penalty at any
time at the election of IFT. The note shall be secured by the assets of the
Company, and if the Company is dissolved as a result of the purchase of the
Investor's Membership's Interest or otherwise, such assets may be distributed to
IFT, but shall continue to be subject to the security interest. The closing of
the sale of Investor's Membership Interest and this Section 9.4 shall take place
forty-five Business Days after the determination of the value of the Membership
Interest.
9.5 NO RESIGNATION OR RETIREMENT. Each Member agrees that it will not
----------------------------
voluntarily resign or retire from the Company, except in connection with a
permitted Transfer as provided in Article IX. Any Member who resigns or retires
from the Company in contravention of this Agreement will be liable to the
Company for any damages occasioned by such resignation or retirement and, in
addition to any remedies the Company may have at law or in equity, the Company
may offset against any amounts it may owe to such resigning or retiring Member
(in connection with a distribution or otherwise) any such damages occasioned by
such resignation or retirement. Any Member who attempts to resign or retire
from the Company in contravention of this Section shall no longer be entitled to
vote his or its Membership Interest.
ARTICLE X
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DISSOLUTION AND TERMINATION
---------------------------
10.1 DISSOLUTION. The Company shall continue in effect until dissolved upon
-----------
the first to occur of the following:
(a) the death, expulsion, Bankruptcy, court declaration of
incompetence with respect to, or dissolution of any Member, unless the
Company is continued by the consent of at least a "MAJORITY-IN-INTEREST"
(within the meaning of Rev. Proc. 94-46, 1994-2 C.B. 688) of the remaining
Members within ninety (90) days following, or notice thereof, the
occurrence of any such event;
(b) the unanimous written consent of the Members to dissolve the
Company;
(c) the entry of a decree of judicial dissolution of the Company
under Section 18-802 of the Act;
(d) sale or other disposition of all or substantially all of the
Company's assets; or
(e) [THIRTY YEARS FROM DATE OF THIS AGREEMENT]
10.2 ACCOUNTING. Upon the dissolution of the Company, a proper accounting
----------
(which shall be certified) shall be made of the assets and liabilities of the
Company and the Capital Account of each Member as of the date of dissolution and
of the items of Net Income and Net Loss of the Company from the date of the last
previous accounting to the date of dissolution. Financial Statements presenting
such accounting shall be prepared.
10.3 LIQUIDATING TRUSTEE.
-------------------
(a) Upon the dissolution of the Company, the affairs of the Company
shall be wound up and terminated and the Members shall continue to share
Net Income, Net Loss, Distributable Cash and other items of the Company
during the winding-up period in accordance with the provisions of Articles
IV and V hereof. The winding-up of the affairs of the Company and the
distribution of its assets shall be conducted exclusively by the
Liquidating Trustee, who is hereby authorized to do all acts authorized by
law for these purposes. The Liquidating Trustee, in carrying out such
winding up and distribution, shall have full power and authority to sell,
assign, transfer and encumber all or any of the Company assets; provided,
--------
however, the Liquidating Trustee shall not sell any assets unless:
-------
(i) the Liquidating Trustee shall have in good faith
solicited bids from unrelated third parties; and
(ii) such transactions shall be made by the Liquidating Trustee
solely on an "arm's length" basis and at the best price and on the
best terms and conditions that are available.
(b) Upon the completion of the winding up of the Company and the
distribution of all Company assets, the Company shall terminate and the
Liquidating Trustee shall have the authority to execute and record any and
all other documents required to effectuate the termination of the Company.
(c) The Liquidating Trustee shall be indemnified and held harmless by
the Company from and against any and all claims, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the Liquidating Trustee's taking of or failure to take any
action authorized under, or within the scope of, this Agreement; provided,
--------
however, that the Liquidating Trustee shall not be entitled to
-------
indemnification for:
(i) matters entirely unrelated to the Liquidating Trustee's
actions under the provisions of this Agreement; or
(ii) fraud, willful misconduct or criminal activity.
10.4 LIQUIDATING DISTRIBUTION. In the event of the dissolution of the
------------------------
Company for any reason, the Company assets shall be liquidated for distribution
in the following rank and order:
(a) first, to the payment and discharge of all the Company's debts
and liabilities in the order of priority as provided by the Act;
(b) second, to the establishment of any necessary reserves to provide
for contingent liabilities, if any; and
(c) third, to the Members in proportion to their Capital Accounts
after giving effect to the allocations set forth in Article IV hereof,
treating any distribution of property as a sale thereof at fair market
value.
Such distributions shall be made on or before a date (the "FINAL LIQUIDATION
DATE") no later than the later to occur of (i) the last day of the taxable year
of the Company in which the liquidation of the Company occurs and (ii) ninety
(90) days after such liquidation. If the Liquidating Trustee, in its
discretion, determines that the distributions will not be timely made, it may
distribute all of the assets and liabilities of the Company in trust, with the
Liquidating Trustee, or such other Person as may be selected by the Liquidating
Trustee as trustee; the purpose of the trust is to allow the Company to comply
with the timing requirements. The trustee of said trust shall distribute the
former Company assets (however constituted, enhanced or otherwise) as promptly
as he deems proper and in the same manner as directed in this Section (without
regard to this sentence or the preceding two sentences) and otherwise as
required hereunder. The trust shall be terminated as soon as possible after the
trust property is distributed to the beneficiaries thereof.
10.5 DISTRIBUTIONS IN KIND. Company property distributed in kind shall be
---------------------
transferred and conveyed to the distributees as tenants in common subject to any
liabilities attached thereto so as to vest in them undivided interests in the
whole of such property in proportion to their respective rights to share in the
proceeds of the sale of such property in accordance with this Article.
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1 AMENDMENTS. This Agreement may be amended, modified or changed only in
----------
accordance with Section 7.2(g).
11.2 FURTHER ASSURANCES. Each Member agrees to execute, acknowledge,
------------------
deliver, file, record and publish such further certificates, amendments to
certificates, instruments and documents, and do such other acts and things as
may be required by law, or as may be required to carry out the intent and
purposes of this Agreement.
11.3 NOTICES. All notices, demands, consents, approvals, requests, offers
-------
or other communications which any of the parties to this Agreement may desire or
shall be required to be given hereunder shall be in writing and shall be given
(a) by registered or certified mail, return receipt requested, (b) by personal
delivery, (c) delivery via reputable private air freight service, the cost and
expense of such delivery to be borne by the sending party, or (d) by electronic
communication (telex or facsimile transmission). All notices shall be addressed
to the recipient at the address contained on the books of the Company. Any
Member may designate another address (or change its address) for notices
hereunder by delivery of a written notice to all other Members in accordance
with the provisions of this section. Any notice sent in compliance with the
above provisions shall be deemed delivered and received, except for electronic
communications, on the third business day next succeeding the day on which it
was sent, or, if sooner, on the actual date received, and, in the case of
electronic communications, only on the date the sending party receives
acknowledgement of receipt of such notice.
11.4 GOVERNING LAW. This Agreement is made pursuant to and shall be
-------------
governed by and construed in accordance with the laws of the State of Delaware,
without regard to the conflict of laws principles thereof.
11.5 CAPTIONS. All articles and section headings or captions contained in
--------
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
11.6 PRONOUNS. As used herein, all pronouns shall include the masculine,
--------
feminine, neuter, singular and plural thereof wherever the context and facts
require such construction.
11.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
----------------------
parties hereto and their respective executors, administrators, legal
representatives, heirs, successors and assigns, and shall inure to the benefit
of the parties hereto, and, except as otherwise herein expressly provided, their
respective executors, administrators, legal representatives, successors and
assigns.
11.8 EXTENSION NOT A WAIVER. No delay or omission in the exercise of any
----------------------
power, remedy or right herein provided or otherwise available to a party or to
the Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same. Any extension of time or other indulgences
granted to a Member hereunder shall not otherwise alter or affect any power,
remedy or right of any other Member or of the Company or of the obligations of
the Member to whom such extension or indulgence is granted.
11.9 SEVERABILITY. If any provision of this Agreement or application to
------------
any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such Person or circumstances,
other than as to which it is so determined invalid or unenforceable, shall not
be affected thereby, and each provision shall be valid and shall be enforced to
the fullest extent permitted by law.
11.10 ENTIRE AGREEMENT. This Agreement, and the schedules and exhibits
----------------
hereto, contain the entire understanding and agreement of the parties hereto
relating to the subject matter hereof and all prior agreements relative hereto
which are not contained herein.
11.11 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall be deemed one agreement, but no counterpart shall be
binding unless an identical counterpart shall have been executed and delivered
by each of the other parties hereto.
11.12 NO THIRD PARTY BENEFICIARY. The provisions of this Agreement shall
--------------------------
be solely for the benefit of the parties hereto and their respective successors
and assigns.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
THE MEMBERS:
-----------
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
-------------------------------------
By:
--------------------------------
SCHEDULE A
TO OPERATING AGREEMENT
OF IFT VENTURES I, LLC
MEMBER MEMBERSHIP
------ ----------
PERCENTAGE
----------
Interactive Flight 2/3
Technologies, Inc.
4041 N. Central Ave.
Suite 2000
Phoenix, Arizona 85012
------------------------- 1/3
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Dates Referenced Herein and Documents Incorporated by Reference
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