-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B5cXWq8e/c6RnRqY86tmIsG1nrpGjgfU/Zt/EEBqYvQ8yy/WGf8UyNOs5+r9bEQS oA9jbixLtuLcvATWl0DCDg== 0000950144-96-001089.txt : 19960322 0000950144-96-001089.hdr.sgml : 19960322 ACCESSION NUMBER: 0000950144-96-001089 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960320 ITEM INFORMATION: Other events FILED AS OF DATE: 19960321 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD AIRLINES INC /NEW/ CENTRAL INDEX KEY: 0000278327 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 431145889 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07815 FILM NUMBER: 96536980 BUSINESS ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N SIXTH ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3145893261 MAIL ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N 6TH ST CITY: ST LOUIS STATE: MO ZIP: 63101 8-K 1 TRANS WORLD AIRLINES FORM 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------------- DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 20, 1996 TRANS WORLD AIRLINES, INC. (Exact Name of Registrant as Specified in its Charter) ----------------------- DELAWARE 1-7815 43-1145889 (State or other jurisdiction of (Commission File (I.R.S. Employer incorporation or organization) Number) Identification No.) One City Centre 515 N. 6th Street St. Louis, Missouri 63101 (314) 589-3000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------------------- ================================================================================ 2 ITEM 5. In connection with the 1992 bankruptcy proceedings of Trans World Airlines, Inc. (the "Company" or "TWA"), the Company entered into certain $200 million Loan and Note Agreements (the "Icahn Loans") with Karabu Corp. ("Karabu"), an entity affiliated with Mr. Carl C. Icahn ("Icahn"), the former chairman and controlling shareholder of the Company. The Icahn Loans are secured by substantially all of the receivables and certain flight equipment of the Company pursuant to, among other agreements, a Security Agreement - Trust Deed, dated as of January 5, 1993, between the Company and State Street Bank and Trust Company of Connecticut, National Association, as Trustee (the "Icahn Security Agreement"). As of January 1995, the total principal amount of indebtedness to Karabu under the Icahn Loans approximated $190 million. In 1995, Icahn advised the Company that as part of the Company's financial restructuring Karabu would be willing to extend the maturity of the loans if, among other things, TWA would grant to certain affiliates of Icahn the right to sell certain discounted tickets for travel on TWA. Following extended negotiations, on June 14, 1995, the Company, Icahn, Karabu and another affiliate of Mr. Icahn entered into (i) an Extension, Refinancing and Consent Agreement, which, among other things, extended the maturity of the Icahn Loans to January 8, 2001 and (ii) the Karabu Ticket Program Agreement (the "Ticket Agreement") whereby, the Company granted to Karabu, Icahn and certain affiliates of Icahn the limited right to sell certain types of discounted tickets for travel on TWA to certain specified customers. Tickets sold by the Company to Karabu under the Ticket Agreement are priced at levels intended to approximate current competitive discount fares available in the airline industry. The Company believes under applicable provisions of the Ticket Agreement, Karabu may not market or sell such tickets to the general public through travel agents. Karabu and certain other Icahn affiliates, however, have been marketing tickets to the general public through travel agents. In December 1995, based upon these actions TWA filed a lawsuit against Karabu, Icahn and certain affiliated companies seeking damages and to enjoin the defendants from further violations of the Ticket Agreement. Icahn countered by threatening to file his own lawsuit and to declare a default under the Icahn Loans based upon a variety of claims related to his interpretation of provisions of the Icahn Security Agreement as well as alleged violations by the Company under the Ticket Agreement. On or about December 15, 1995, the parties entered into a standstill agreement whereby TWA agreed to withdraw its compliant against Icahn and the Icahn affiliated entities and to seek to negotiate a settlement of their differences and respective claims. After several extensions the standstill agreement expired on March 20, 1996. On March 20, 1996, TWA was named as a defendant in a complaint (a copy of which (without exhibits) is filed as Exhibit 99.1 to, and forms a part of this current report, (the "Icahn Complaint")) filed in the United States District Court for the Southern District of New York by Global Discount Travel Services LLC, Global Travel Services, Inc. and Karabu Corp, each affiliates of Icahn (the "Icahn Entities"), alleging, among other things, that the Company has violated certain federal antitrust laws, breached the Ticket Agreement and interfered with certain existing and prospective commercial relations of the Icahn Entities. The Icahn Complaint is based upon Icahn's interpretation that the Ticket Agreement permits the sale of tickets thereunder to the general public through travel agents and upon certain actions taken by the Company to mitigate the adverse effects 3 of the Icahn Entities' ongoing marketing and sales of tickets to the general public through travel agents. The Icahn Complaint seeks injunctive relief and actual and punitive monetary damages, as well as the Icahn Entities' costs of litigation. The Company believes that it has meritorious defenses to the allegations contained in the Icahn Complaint and intends to vigorously defend itself against such allegations. There can, however, be no assurance as to the ultimate outcome with respect to the allegations contained in the Icahn Complaint. If the Company were not to prevail on one or more of the counts alleged in the Icahn Complaint and a substantial monetary judgment or injunctive relief were entered against the Company, such judgment or relief could have a material adverse effect upon the financial condition and operations of the Company. Also on March 20, 1996, the Company filed a Petition (a copy of which (without exhibits) is filed as Exhibit 99.2 to, and forms a part of this current report (the "TWA Petition")) in the Circuit Court of the City of St. Louis, State of Missouri, against Icahn, Karabu, Global Discount Travel, L.L.C., Global Travel Services, Inc. and ACF Industries, Incorporated, each of the entities being affiliates of Icahn (collectively, the "Icahn Defendants"), alleging the Icahn Defendants are violating the Ticket Agreement and otherwise tortiously interfering with the Company's business expectancy and contractual relationships as the result of, among other things, the Icahn Defendants continuing marketing and sale of tickets purchased under the Ticket Agreement to the general public through travel agents in violation of the Ticket Agreement. The Petition seeks a declaratory judgment finding that the Icahn Defendants have violated the Ticket Agreement, and seeks liquidated, compensatory and punitive damages, as well as the Company's costs and attorneys fees. The Company believes the allegations contained in the TWA Petition are meritorious and that the Company should ultimately prevail on its claims. If, however, the Company were not to ultimately prevail on its claims before the court or otherwise, and the Company did not otherwise take appropriate action to mitigate the effect of the sale of tickets to the general public by the Icahn Defendants, the Company could suffer significant loss of revenue so as to reduce overall passenger yields on a continuing basis during the term of the Ticket Program. In addition, TWA is also seeking from the court in Delaware which supervised TWA's 1992-93 reorganization proceedings a restraining order against Karabu. The purpose of the restraining order being sought is to prevent Mr. Icahn or Karabu from issuing or causing to be issued under the Icahn Loans any default notice based upon Icahn's interpretation of the loan documents which he contends gives Karabu a right of prior approval of any changes to TWA's maintenance program with respect to certain of its flight equipment. The Delaware Bankruptcy Court retained jurisdiction from TWA's '92-93 reorganization case for the purpose of, among other things, interpreting certain documents issued in connection with that case and the plan of reorganization. Icahn has also alleged other violations of the Icahn Loans, including, among other things, that the Company has not been maintaining, as required by the terms of the Icahn Loans, certain aircraft which have been retired from service and stored and which are pledged as security for the Icahn Loans. To endeavor to eliminate this issue from the various dispute with Icahn and the Icahn Entities, the Company has deposited an amount equal to the appraised fair market value of such aircraft with the security trustee and requested the release of the liens on such aircraft. To date the trustee has not released such liens. The Company believes that no default exists under 2 4 the Icahn Security Agreement. However, there can be no assurance that the Delaware bankruptcy court will grant the relief sought by the Company or that the Company's position with respect to any other claims of Icahn or the Icahn Entities will ultimately be held to be correct. An Event of Default (as defined in the Icahn Security Agreement) under the Icahn Security Agreement would constitute a default under the instruments governing the Company's outstanding debt and equity securities and leases of certain of the Company's flight equipment. 3 5 EXHIBITS 99.1 Complaint, filed with the United States District Court for the Southern District of New York on March 20, 1996, in the matter of Global Discount Travel Services LLC, Global Discount Travel Marketing Services, Inc. and Karabu Marketing, Inc., Plaintiffs, vs. Trans World Airlines, Inc., Defendant (96 CIV 2030). 99.2 Petition, filed in the Circuit Court of the City of St. Louis, State of Missouri on March 20, 1996, in the matter of Trans World Airlines, Inc., Plaimntiff vs. Carl Icahn, Karabu Corp., Global Discount Travel Services L.L.C., Global Discount Travel Marketing Services, Inc. and ACF Industries, Incorporated, Defendants. 4 6 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TRANS WORLD AIRLINES, INC. Date: March 21, 1996 By: /s/ Richard P. Magurno --------------------------------- Richard P. Magurno Senior Vice President and General Counsel 5 EX-99.1 2 COMPLAINT 1 EXHIBIT 99.1 7 2 Theodore Altman, Esq. (TA-8368) GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN 114 WEST 47TH STREET NEW YORK, NEW YORK 10034 (212) 626-0800 - and - Mitchell Blumenthal, Esq. (MB-1494) Alexander Anolik ALEXANDER ANOLIK A Professional Law Corporation 693 Sutter Street, Sixth Floor San Francisco, California 94102 (415) 673-3333 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - ---------------------------------) GLOBAL DISCOUNT TRAVEL SERVICES ) LLC, GLOBAL TRAVEL MARKETING ) SERVICES, INC. AND KARABU ) MARKETING CORP., ) 96 Civ. _____________ ) Plaintiffs ) ) - against - ) ) TRANS WORLD AIRLINES, INC., ) ) Defendants. ) ___________________________ ) COMPLAINT Plaintiffs, Global Discount Travel Services LLC ("Global Discount"), Global Travel Marketing Services, Inc. ("Global Travel" and together with Global Discount, "Global") and Karabu 8 3 Corp. ("Karabu"), by the undersigned attorneys, allege upon knowledge as to themselves, and otherwise upon information and belief, as follows: SUMMARY OF THE ACTION --------------------- 1. Plaintiffs are owned or controlled by Carl C. Icahn and are sometimes referred to herein as the "Icahn Companies". Defendant Trans World Airlines, Inc. ("TWA") and the Icahn Companies are parties to various agreements, including the Karabu Ticket Program Agreement (the "Ticket Agreement") and loan agreements pursuant to which the Icahn Companies extended $200 million in loans to TWA and on which there remains an outstanding balance of approximately $190 million (the "Karabu Loans" or the "Loan Agreements"). TWA and the Icahn Companies are also parties to a standstill agreement which is expired (the "Standstill Agreement"). TWA has breached and continues to breach the Ticket Agreement and repeatedly breached the Standstill Agreement. TWA's misconduct concerning the Ticket Agreement includes a pattern of interference with and harassment of Global designed to cripple Global and its business. In furtherance of that goal, TWA has engaged in, and continues to engage in, monopolistic and anti-competitive practices in violation of federal anti-trust laws. 2. TWA's predatory practices include, but are not limited to: seizure of and threats to seize the TWA ticket imprinting plate from Travel Agents (as defined in the Ticket Agreement) who deal with Global, and other attempts to coerce Travel Agents to cease marketing Global tickets to the general public. 3. TWA's actions (a) provide a basis for the Icahn Companies to obtain $10 million in liquidated damages under the Ticket Agreement, (b) lead to defaults by TWA on the $190 million balance of the Karabu Loans, (c) give rise to attendant consequences to TWA, including 9 4 potential cross-defaults on other TWA debt, which likely exceed $1 billion, and (d) entitle plaintiffs to the entry of an injunction against TWA to prevent ongoing and irreparable harm to plaintiffs' operations and business relationships 4. TWA's destructive actions are not based on any good faith belief in the soundness of its position. Rather, they result from internecine fighting among warring camps in TWA's headquarters where those who favored the Global relationship lost out to those who wished to eliminate it. 5. The Ticket Agreement provides for the purchase and resale by the Icahn Companies of discounted TWA air travel tickets. The Ticket Agreement was part of the inducement offered by TWA to obtain the Icahn Companies' forgiveness for TWA's default for failure to pay $190 million due and owing on the Karabu Loans. The Ticket Agreement was designed to and did provide an alternate source of repayment of the Karabu Loans. Absent the Icahn Companies' agreement to extend and refinance the Karabu Loans, the TWA plan of reorganization, proposed and approved by the bankruptcy court in or about September 1995, would not have been feasible. 6. TWA has engaged and is engaged in a deliberate campaign to dishonor and avoid the Ticket Agreement and is engaged in a brazen attempt to rewrite the Ticket Agreement, all with the purpose and intent of disrupting and destroying Global's ticket business. JURISDICTION AND VENUE ---------------------- 7. This proceeding is brought pursuant to the provisions of Section 4 of the Clayton act (15 U.S.C. Section 15), for violations of Sections 1 and 2 of the Sherman Act (15 U.S.C. Section Section 1, 2), and under principles of supplemental and pendent jurisdiction (14 U.S.C. Section 1367) for breach of contract and intentional interference with existing and prospective contractual relations. 10 5 8. Jurisdiction is conferred upon this Court pursuant to 28 U.S.C. Section Section 1331, 1337 and Section 2201; Section 4 of the Clayton Act (15 U.S.C. Section 15); and under principles of supplemental and pendent jurisdiction of claims arising under state law, pursuant to 28 U.S.C. Section 1367. 9. Venue is proper within this judicial district pursuant to 28 U.S.C. Section 1391(a) and pursuant to the Judicial Improvements Act of 1990, 104 Stat. 5114. Commerce between this judicial district and other states of the United States has been directly restrained by the offenses hereinafter stated. 10. All of the parties are engaged in interstate commerce and offenses hereinafter stated as violations of the Sherman Act have occurred in interstate commerce, and have either affected or directly restrained interstate commerce. PARTIES ------- 11. Plaintiff Global Discount is a Nevada limited liability company engaged in the sale of discounted TWA airline tickets and operation of a reservation center established to facilitate the distribution of discounted TWA airline tickets. 12. Plaintiff Global Travel is a Nevada corporation with its principal place of business in New York, New York. It is a travel marketing service company which markets the sale of air transportation with discounted TWA airline tickets obtained by and distributed through Global Discount pursuant to the Ticket Agreement. 13. Plaintiff Karabu is a Delaware corporation, with its principal place of business in Mount Kisco, New York, and an affiliate of Global Discount and Global Travel. 11 6 14. Defendant Trans World Airlines, Inc. ("TWA") is a Delaware Corporation licensed to do business and doing business in New York, New York. 15. Various other corporations, individuals and other entities not named as defendants in this action performed acts and made statements in furtherance of the illegal conspiracy and other offenses alleged in this Complaint. Plaintiffs are not fully aware at this time of the identity of other members of the conspiracy who actively participated in certain of the offenses hereinafter alleged, nor the extent, if any, to which the defendant or others not presently name, were subjected to undue influence, pressure, duress, or coercion to join in the offenses hereinafter alleged. Plaintiffs will seek leave of court to amend this Complaint if the circumstances warrant. BACKGROUND AND CHARGING ALLEGATIONS ----------------------------------- 16. TWA and the Icahn Companies are parties to (a) a loan agreement and related security agreement (collectively referred to herein as the "Receivables Agreement"), a note agreement and related security agreement-trust deed (collectively referred to herein as the "Asset Agreements"), (b) the Ticket Agreement and (c) a standstill agreement (the "Standstill Agreement"), an agreement entered into so that the parties may attempt to negotiate a means for receiving their disputes under the Ticket Agreement. The Receivables Agreements and the Asset Agreements collectively constitute the "Karabu Loans" or the "Loan Agreements". 17. The Karabu Loans were entered into on or about January 5, 1993. The parties to the Receivables Agreements are TWA and Karabu. Loans made by Karabu to TWA under the Receivables Agreement are secured by TWA accounts receivable. The parties to the Asset Agreements are Karabu, TWA and State Street Bank & Trust Company of Connecticut, National Association, as Security Trustee. Loans made by Karabu to TWA pursuant to the Asset 12 7 Agreements are secured by TWA aircraft and engines. Karabu's loans to TWA pursuant to the Karabu Loans totaled $200 million and were due in January 1995. Karabu's loans to TWA provided TWA with financing without which its could not have successfully achieved its first reorganization under the Bankruptcy Act in 1993. 18. On or about March 28, 1994, TWA and Karabu amended and supplemented the Loan Agreements, among other things, to cross-collateralize and cross-default the Karabu Loans. 19. By the end of 1994, TWA again was suffering severe financial problems. Accordingly, TWA again found it necessary to contemplate filing for protection under the Bankruptcy Act in order to reorganize and continue its business. As a part of its overall plan to reorganize its more than $2 billion in debt, TWA requested that Karabu forgive its default and agree to amend and supplement the Loan Agreements to provide, among other things, for the extension of maturity of the Karabu Loans. TWA and Karabu thereupon entered into negotiations which resulted in agreements described in paragraph 20 below. Upon obtaining these agreements from Karabu, TWA filed a consensual plan and for the second time in two years reorganized under the Bankruptcy Act. 20. On or about June 14, 1995, TWA and Karabu entered into an Extension, Refinancing Consent Agreement (the "Extension Agreement") which, among other things, extended the maturity of the Karabu Loans. In connection with and in consideration of the Extension Agreement, on or about June 14, 1995, TWA and Karabu entered into the Ticket Agreement, pursuant to which Karabu obtains and sells discounted TWA airline tickets, including tickets on all regularly scheduled TWA flights (except to an from St. Louis, Missouri) at a price equal to 55% of the published fares ("System Tickets"). Under the Ticket Agreement, System Tickets 13 8 may be sold through various means, including specifically through Travel Agents. The Ticket Agreement, by its terms, is governed by New York Law. 21. Upon execution of these agreements, the Icahn Companies, including Global, engaged in a major capital spending program and devoted millions of dollars to establish a reservations center and a marketing and distribution network to conduct the business contemplated by the Ticket Agreement. On or about August 14, 1995, Global Discount, through the execution of a Joinder Agreement, elected to be joined as a party to the Ticket Agreement as if an original signatory thereto. 22. Shortly after execution of the Ticket Agreement, warring camps developed within TWA and those who favored the Global relationship lost out to those who wished to eliminate it. Thereupon, TWA commenced and vigorously pursued, both in the open and secretly, a pattern of devious misconduct and breaches of the Ticket Agreement designed to disrupt and destroy Global's business and Global's current and prospective business relationships. TWA's tactics have had their intended impact in that, among other things, the financial uncertainties they have caused for Global are a major roadblock to Global's conduct and expansion of its business. 23. At first, TWA secretly sought out and punished Travel Agents who would, did and continue to do business with Global. For example, during 1995, TWA had been operating under, and agreed to renew for 1996, its bulk ticket sales agreement with WTI, a Minneapolis-based Travel Agent which does business world-wide as Hobbit Travel and Trilogy Tours. In or about November 1995, however, TWA informed WTI that TWA revoked its decision to renew its "Domestic 48" agreement with WTI because WTI was doing so much business in that area with Global. 14 9 24. TWA has also, more openly and in clear defiance of the Ticket Agreement discriminated against and harassed Global and travel agencies that do business with Global and has wrongfully asserted and repeated its claim that Global may not sell System Tickets through Travel Agents to the general public but only to corporate customers. 25. Global has and continues to seek to overcome the roadblocks TWA improperly has thrown in its path, including TWA's specious claim that Global's sales of Systems Tickets through Travel Agents to the general public are not permitted under the Ticket Agreement. TWA has engaged in an unconscionable attempt to rewrite the Ticket Agreement to materially curtail the business opportunities contemplated by the Ticket Agreement. 26. Through the remainder of 1995, the disputes between TWA and Global continued to escalate, and in December 1995 TWA filed a lawsuit against Global and Global served a notice of breach of the Ticket Agreement on TWA. In an effort to resolve their differences, the parties, on or about December 15, 1995, entered into the Standstill Agreement pursuant to which TWA withdrew its lawsuit and Global simultaneously withdrew its default notice. Each such withdrawal was without prejudice to the rights of any party. 27. The Standstill Agreement prohibited assertion of claims concerning the Ticket Agreement during the Standstill period. Each party agreed that it would "not initiate any action to commence suit ... in any local, state or federal court against the other or transmit any notification of breach or default to the other with respect to the Ticket Agreement or any provisions thereof ... [during the Standstill period]." The Standstill Agreement also prohibited press statements except for the press release agreed to by the parties. The Standstill Agreement was scheduled to terminate 12:01 a.m. of March 20, 1996 unless sooner terminated. 15 10 28. Following entry into the Standstill Agreement, TWA continued its breaches of the Ticket Agreement and repeatedly breached the Standstill Agreement. TWA's predatory practices in breach of the Ticket Agreement include, but are not limited to: TWA's seizure of Colpitts World Travel's ("Colpitts") TWA ticket imprinting plate; TWA's seizure of Hobbit Travel's ("Hobbitt") TWA ticket imprinting plate; TWA's seizure of Mr. Cheap's Travel's TWA ticket imprinting plate; TWA's restoration of Colpitts' TWA ticket imprinting plate upon Colpitts' acceding to TWA's demands regarding doing business with Global; TWA's restoration of Hobbit's TWA ticket imprinting plate upon Hobbit's acceding to TWA's demands regarding doing business with Global; each threat by TWA to a Travel Agent that TWA would seize its TWA ticket imprinting plate unless the Travel Agent acceded to TWA's demands regarding doing business with Global; TWA's attempts to cause Omega World Travel to cease marketing Global Tickets to the general public; TWA's attempts to cause The Travel Company to cease marketing Global Tickets to the general public; TWA's dissemination of misleading information concerning the applicability to Global tickets of TWA's requirement that any Travel Agent which issues or reissues a ticket prior to departure involving TWA published airfares be the same agency that created the booking; and TWA's anti- competitive and monopolistic practices, and unlawful restraint of trade. Such conduct by TWA has precluded, interfered with or threatened (a) Global's business and relations with Travel Agents and consumers, (b) Karabu's relations with its creditors, (c) Global's financing of its operations, and (d) Global's expansion of its operations. 29. As a result of TWA's harassment of Global and its employees and persons who do business with Global, TWA has (a) committed and engaged in conduct constituting breaches of 16 11 the Ticket Agreement which have caused and are reasonably expected to cause material damage to plaintiffs or to deprive plaintiffs of material benefit intended to be provided under the Ticket Agreement, (b) has engaged and continues to engage in a series of related actions, inactions or omissions which taken together, either have caused or are reasonably likely to cause material damage to plaintiffs, and (c) has materially interfered and continues to materially interfere with plaintiffs' ability to market and sell Tickets (as defined in the Ticket Agreement) as contemplated by the Ticket Agreement. 30. TWA has attempted and continues to attempt, in writing and otherwise, to pressure Global into ceasing sales of System Tickets to non-corporate customers of Travel Agents. 31. Under any reading of the Ticket Agreement, passengers of all kinds (End Users) may buy System tickets from plaintiffs or from Travel Agents. TWA's attempts to disrupt and preclude Global's sales of Systems Tickets through Travel Agents to such passengers are in flagrant defiance of the Ticket Agreement. 32. TWA's repeated and continuing breaches of the Ticket Agreement caused Global to serve TWA with Default Notices under the Ticket Agreement. Said Notices are attached hereto as Exhibit A and incorporated herein by reference. 33. All of the foregoing constitute a further breach by TWA of the Ticket Agreement's implied duty of fair dealing. This breach of the implied duty of fair dealing is evidenced by all of the foregoing conduct of TWA and is continuing to date. 34. TWA's breaches of the Standstill Agreement include (1) a series of letter which it labeled "notice of breach" and in which it wrongfully claimed that Global violated the Ticket 17 12 Agreement and (2) misstatements to the press concerning the Ticket Agreement when the Standstill Agreement prohibited it from making any statements at all. RELEVANT MARKET AND MARKET POWER -------------------------------- 35. The relevant geographic market consists of the United States. TWA flies into and out of most major cities within the United States, and has its hub at SouthTrust. Louis, Missouri. Alternatively, the United States constitutes a separate and distinct relevant sub-market of an international market, in that TWA exercises substantial market power in the relevant product markets described below both in the United States and in the international market for the provision of airline carrier service. 36. Defendant TWA controls 100% of the market for its own travel vouchers, including those travel vouchers issued to Karabu. In addition, defendant controls 100% of the market for 600,000 vouchers and the sale of new tickets with accompanying special incentives, each described immediately below. TWA exercises a substantial market power in these markets by virtue of its predominate market share in the relevant product market and by virtue of the conduct alleged more specifically herein. 37. TWA exercises substantial market power in the relevant product market for the provision of airline carrier services on TWA individual carrier stock. This market includes the Global tickets at issue in this litigation. In direct competition with the tickets offered by Global Discount and Global Travel, TWA issued discount vouchers for travel on TWA in a relevant product subclass of 600,000 Ticket Vouchers, each with a face value of $50, which may be used for up to 50% discount off the cost of a TWA airline ticket for transportation on TWA flights. In addition, on February 29, 1996, Maureen Manget, the director of travel agency marketing for 18 13 TWA, sent to all Airlines Reporting Corporation ("ARC") Travel Agents within the United States (approximately 30,000 in number) special certificates for immediate discounts that any agent could pass along to its clients when a flight was booked originating from any of 21 domestic U.S. cities listed on such certificates, with a value of anywhere from $50 to $100 off the price of a qualifying round-trip TWA ticket purchased through the agency. Moreover, the certificates could be used to any one of 100 TWA destinations worldwide. (A copy of such letter and sample certificate is attached hereto as Exhibit B.) These new travel vouchers and certificates were designed to directly compete and interfere with Global's relationships. 38. TWA also exercises substantial market power in the distinct relevant market for TWA-issued travel vouchers by currently taking the position that any Travel Agent dealing with Global is subject to immediate termination as a TWA- appointed agency. TWA has not imposed any such restriction on any Travel Agent in connection with the sale of the $600,000 numbered travel vouchers described above, nor in the issuance and sale of travel on TWA with any travel voucher issued per the Manget letter of February 29, 1996. Plaintiffs have no alternative market for the tickets obtained pursuant to the Ticket Agreement in that they are good for transportation on TWA only. Competition in this market has been further restrained by TWA's illegal termination and threats to terminate Travel Agents dealing or attempting to deal with Global, while no restriction is placed on the issuance of otherwise valid TWA travel discount vouchers issued by TWA. In addition to the relevant product market described above, a distinct relevant sub-market exists, consisting of special agreement between TWA and large-volume travel agencies and corporations, whereby TWA promises to give such travel agency or corporation an 19 14 excess override commission over and above the industry-standard 10% commission for the extensive promotion of TWA- originating flights. 39. The tickets and services provided in the above-described markets and sub-markets associated with TWA-issued ticket stock are not reasonably interchangeable with analogous goods and services associated with any other airline, in that these tickets are good for travel on TWA only. As more specifically described above, these Global tickets were issued, in part, to enable TWA to retire its debt to Karabu. Once a customer has purchased these tickets from Global, due to the restrictions imposed by TWA in the issuance and sale of the tickets, these tickets are nonrefundable and nonexchangeable, and, accordingly, the customer is committed to use TWA in this regard competition from other carriers is no longer relevant or practicable. COUNT I ------- (Violation of Sections 1 and 2 of the Sherman Act) -------------------------------------------------- 40. Within the past four years, and continuing to the present, defendant has been engaged in a prolonged series of attempts to monopolize, and has acquired and maintained a monopoly of the relevant markets as defined above, and has contracted, combined and conspired to restrain and monopolize interstate commerce in the relevant markets in violation of Sections 1 and 2 of the Sherman Act (15 U.S.C. Section 1,2). 41. The aforesaid attempts to monopolize, and the monopolization, combination and conspiracy to monopolize and restrain trade, have as their purpose and effect the elimination of competition in the relevant markets; the ability to control which defendant's tickets may be sold and to whom defendant's tickets may be sold and to whom defendant's tickets may be sold; the adoption of and imposition of unreasonably restrictive rules in the purchase and sale of 20 15 defendant's tickets in the primary and secondary markets; the damage to or elimination of competition in the relevant market; the denial of entry channels to new competitors in the market; the denial of access to defendant's tickets in the primary and secondary markets through the implementation of purported rules prohibiting the sale of TWA tickets by plaintiffs and others similarly situated; the illegal tying of defendant's booking and ticketing rules in the primary and secondary markets; the imposition of double penalties on Travel Agents booking Global tickets, even when issued by Global, by virtue of the posting and implementation on February 14, 1996 by TWA of an anti-competitive and illegal rule purportedly governing such ticket issuance; and, as recently as March 13, 1996, the termination of the ability of Travel Agents to book Global tickets, in violation of federal and state law. 42. TWA has done those things which have been heretofore stated and it conspired and combined to do, and pursuant to the monopolization, conspiracy and restraining of trade did take the actions against plaintiffs alleged in paragraphs 1 through 39, above. 43. The intended effects of TWA's violations of Sections 1 and 2 of the Sherman Act were to create a monopoly and to permit defendant to exercise monopoly power over the total aspects of the relevant markets, as defined above, by eliminating the competition of plaintiffs and other similarly situated. Defendant, both singularly and in tandem, has attempted to monopolize, and did monopolize, and did conspire to enact overly restrictive rules regarding the purchase of its tickets, and encored such rules only against plaintiffs and those in contract with plaintiffs. Such overly restrictive policies, enacted solely upon TWA's pure whim, caprice, favoritism and/or devious maneuvering, will have the intended effect of driving plaintiffs out of business unless the actions of TWA are restrained and enjoined. 21 16 EFFECT ON COMPETITION --------------------- 44. The offenses herein alleged have directly caused injury to competition in the relevant markets. By illegally raising plaintiffs' cost of doing business and restricting plaintiffs' ability to freely compete, TWA has restrained competition, which plaintiffs would otherwise provide, to the grand detriment of purchasers of plaintiffs' products and services. Defendant's offenses have restricted product availability and increased prices in the relevant markets by, inter alia, restraining plaintiffs' ability to sell tickets obtained from defendant unless plaintiffs terminate their contracts with Travel Agents nationwide, and preventing plaintiffs from selling lower priced tickets to the public through Travel Agents as provided by the Ticket Agreement. Such restraints have had the purpose and effect of creating a monopoly in the relevant markets to the injury of purchasers in those markets by denying them the price, ticket availability and quality and services which would be provided by an unrestrained, competitive market. Such restraints have foreclosed a substantial volume of interstate commerce. Plaintiffs' customers and potential customers throughout the United States have been damaged by defendant's violations. 45. In addition, the offenses herein alleged have directly caused injury to plaintiffs by denying them access to or the liberty to operate in a competitive market-place on competitive markets. But for the combination of the defendant, with others presently unnamed and unknown, plaintiffs would have enjoyed the fruits of their labor in expanding their ongoing business. TWA's actions against plaintiffs have interfered with the operation of a competitive market, and as a result, plaintiffs are in danger of losing their business in its entirety unless the actions of TWA are restrained and enjoined. 22 17 46. Plaintiffs would not have made the substantial capital expenditures to expand their business, or suffered the substantial losses from the operation of the business, had the restraints currently imposed by TWA existed from the outset. But for the offenses herein alleged, plaintiffs would today be a successful travel marketing company, and would be worth millions of dollars as an ongoing, viable business entity. 47. To further injure plaintiffs, defendant has engaged in discriminatory pricing tactics against plaintiffs; has refused to honor contracts of Travel Agents appointed by TWA to represent it, which Travel Agents purchased tickets from plaintiffs; has illegally tied the booking and sale of Global tickets; and has threatened to terminate and did terminate Travel Agents otherwise dealing with plaintiffs on competitive merits. As part and parcel of its anti- competitive scheme to drive plaintiffs and others acting as plaintiffs' agents out of the relevant market, TWA has illegally pegged and stabilized prices, and has further engaged in acts detrimental to plaintiffs. COUNT II -------- (Breach of Contract) -------------------- 48. Plaintiffs repeat and reallege the allegations contained in Paragraphs 1 through 47 as if fully set forth herein. 49. By virtue of its conduct described in Paragraphs 1 through 47 above, TWA is in breach of the express provisions of the Ticket Agreement and the Standstill Agreement. 50. TWA's conduct also constitutes a breach of TWA's obligations of good and fair dealing under the Ticket Agreement and the Standstill Agreement. 23 18 51. As a result of TWA's conduct described above, plaintiffs have been damaged and will continue to be damaged in an amount to be determined at trial. COUNT III --------- (Interference with Existing and Prospective Commercial Relations) --------------------------------- 52. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 51 as if fully set forth herein. 53. By virtue of its conduct described in paragraphs 1 through 51 above, TWA has unlawfully interfered with plaintiffs' current business and current and prospective business relations. 54. As a direct and proximate result of TWA's conduct described above, plaintiffs have been and continue to be damaged in an amount to be proven at trial. 55. TWA had no privilege or justification to interfere with plaintiffs' business and prospective business. Moreover, the aforementioned conduct of TWA has done with malice and with a reckless disregard for plaintiffs' rights, entitling plaintiffs to exemplary or punitive damages. COUNT IV -------- (Injunction) ------------ 56. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 55 as if fully set forth herein. 57. By virtue of TWA's conduct described in Paragraphs 1 through 55 above, plaintiffs' current business and current and prospective business relations are being harmed irreparably and in a manner which cannot be adequately compensated by an award of money damages. 24 19 58. By virtue of TWA's conduct described above, plaintiffs are entitled to a preliminary and permanent injunction barring TWA from continuing to interfere with, disrupt and harass plaintiffs, plaintiffs' current business and plaintiffs' current and prospective business relations. JURY TRIAL DEMAND ----------------- Pursuant to Federal Rule of Civil Procedure 38(b), plaintiffs demand a trial by jury on all issues so triable. WHEREFORE, plaintiffs request judgment as follows: 1) That the Court decree that defendant has violated Sections 1 and 2 of the Sherman Act, and that these offenses have proximately caused damage to plaintiff; 2) That the Court decree that defendant has interfered with plaintiffs' existing and prospective business advantage, that it has breached its obligation owing to plaintiffs, and that it has committed other unfair practices against plaintiffs in violation of New York law; 3) For punitive and exemplary damages, trebled as required by Section 4 of the Clayton Act (15 U.S.C. Section 15); 4) For costs of litigation, including reasonable attorney's fees as required by Section 4 of the Clayton Act; 5) For an order enjoining defendant, preliminarily and permanently, from engaging in further anti-competitive and other damaging acts toward plaintiffs; and 6) For such other and further relief as the Court deems just, proper, fair and equitable under the circumstances. GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN /s/ Theodore Altman ------------------- 25 20 Theodore Altman, Esq. (TA-8368) 114 West 47th Street New York, NY 10036 (212) 626-0800 Mitchell Blumenthal (MB-1494) /s/ Alexander Anolik -------------------- Alexander Anolik ALEXANDER ANOLIK A Professional Law Corporation 693 Sutter Street, Sixth Floor San Francisco, CA 94102 (415) 673-3333 Attorneys for Plaintiffs 26 EX-99.2 3 PETITION 1 EXHIBIT 99.2 27 2 IN THE CIRCUIT COURT OF THE CITY OF ST. LOUIS STATE OF MISSOURI TRANS WORLD AIRLINES, INC., ) a corporation, ) ) Plaintiff, ) ) v. ) ) CARL ICAHN, ) ) Serve at: 100 S. Bedford Road ) Mount Kisco, NY 10549 ) ) Cause No. KARABU CORP., ) ) Div. No. Serve at: Richard T. Buonato ) 100 S. Bedford Road ) IN EQUITY Mount Kisco, NY 10549 ) ) GLOBAL DISCOUNT TRAVEL SERVICES. L.L.C., ) ) Serve at: Gordon Silver & Beesley Ltd. ) 300 Howard Hughes Parkway ) 14th Fl. ) Las Vegas, NV 89101 ) ) GLOBAL TRAVEL MARKETING SERVICES, INC., ) ) Serve at: Gordon Silver & Beesley Ltd. ) 300 Howard Hughes Parkway ) 14th Fl. ) Las Vegas, NV 89101 ) ) ACF INDUSTRIES, INCORPORATED, ) ) Serve at: Janet A. Kniffen ) 3301 Rider Trail South ) Earth City, MO 63045 ) ) Defendants. ) PETITION FOR DECLARATORY JUDGMENT AND OTHER RELIEF COMES NOW plaintiff Trans World Airlines, Inc. ("TWA") and for its Petition and cause of action against defendants states: 28 3 1. THE PARTIES 1. Plaintiff TWA is a Delaware corporation with its corporate headquarters in the City of St. Louis, Missouri. TWA operates an airline providing domestic and international air travel to the public. 2. Defendant Carl Icahn ("Icahn") is an individual residing in New York. He is a wealthy, private investor, specializing in corporate takeovers. 3. Defendant Karabu Corporation ("Karabu") is a Delaware corporation with offices located in Mt. Kisco, New York. Karabu is a secured creditor of TWA. Its collateral includes TWA accounts receivable and aircraft. Karabu is a party to a contract with TWA known as the Karabu Ticket Program Agreement (the "Ticket Agreement"). 4. Defendant Global Discount Travel Services L.L.C. ("Global Discount") is a Nevada limited liability company with offices located in Las Vegas, Nevada. Global Discount operates a reservation center established by Icahn and Karabu to distribute discounted TWA airline tickets pursuant to the Ticket Agreement. Global Discount, through execution of a Joinder Agreement, agreed to be bound by all of the terms, conditions and restrictions of the Ticket Agreement. 5. Defendant Global Travel Marketing Services, Inc. ("Global Travel") is a Nevada corporation with its offices located in Las Vegas, Nevada. Global Travel is a travel marketing service company established by Icahn and Karabu to offer programs for the sale of discounted TWA airline tickets distributed by Global Discount through the Ticket Agreement. 6. Defendant ACF Industries, Incorporated ("ACF") is a New Jersey corporate with offices located in St. Louis County, Missouri. ACF is qualified to do business in Missouri. Upon information and belief, ACF and its officers, employees and agents are actively involved with Icahn, Karabu, Global Discount and Global Travel in the acquisition and distribution of discounted TWA airline tickets pursuant to the Ticket Agreement. 29 4 7. Defendant Icahn, personally and through affiliated entities, owns or controls Karabu, Global Discount, Global Travel and ACF. Defendants Icahn, Karabu, Global Discount, Global Travel and ACF are collectively referred to herein as the "Icahn Defendants." 8. Each of the defendants, in person or through other defendants acting as agents, has transacted business and committed tortious acts within the State of Missouri, as described herein. Service may be obtained pursuant to RSMo Section 506.500 and Missouri Rule of Civil Procedure 54.06. The causes of action asserted in this Amended Petition accrued in the City of St. Louis, Missouri. 2. BACKGROUND A. EVENTS LEADING UP TO THE TICKET AGREEMENT 9. In 1986, defendant Icahn obtained majority control of TWA and became Chairman of the Board. Icahn took the Company private in 1988. After assuming control, Icahn caused TWA to incur large amounts of debt. As a result, in January 1992, TWA was forced to file for bankruptcy under Chapter 11 of the Bankruptcy Code. One year later, Icahn was forced to relinquish control and ownership of the Company. 10. In connection with the 1992 bankruptcy proceeding, Icahn's affiliate, defendant Karabu, became a secured creditor of TWA under Loan and Note Agreements and related Security Agreements executed on or about January 5, 1993. TWA's total indebtedness to Karabu under such agreements was approximately $190 million, due and owing in January 1995. 11. As the due date on the Karabu loans approached, Icahn advised TWA that he would be willing to extend the maturity date of the loans if TWA gave him the right to sell discounted TWA airline tickets. TWA required the extension of the maturity date and other Icahn consents as part of an overall financial restructuring that TWA was negotiating with its creditors, to be presented as a "prepackaged" bankruptcy plan for approval by the bankruptcy court in St. Louis in the summer 30 5 of 1995. During the negotiations, Icahn threatened to enforce Karabu's security interest in accounts receivable and aircraft, which would cut off all cash for TWA operations. 12. After ten moths of negotiations, on or about June 14, 1995, TWA entered into two related agreements with Karabu, Icahn and related entities: (a) the Ticket Agreement, attached hereto as Exhibit A, and (b) an Extension and Consent Agreement, attached hereto as Exhibit B. In broad terms, the agreements give Karabu, Icahn and their affiliates the limited right to sell certain types of discounted TWA airline tickets to specified customers. In exchange, Karabu and Icahn agreed to extend the maturity date of the Karabu loans. TWA, Karabu and Icahn also agreed that the amounts owed by Karabu to TWA for the discounted tickets could be applied to reduce the balance due on the Karabu loans and, at Karabu's option, to be used to satisfy Karabu's minimum funding obligations to the Pension Benefit Guaranty Corporation arising out of the 1992 bankruptcy. B. THE TICKET AGREEMENT 13. The Ticket Agreement was primarily designed to reduce TWA's debt obligations to Karabu through incremental ticket sales. In order to accomplish this objective, the parties agreed to substantial restrictions on Karabu and Icahn's rights to sell discounted TWA airline tickets. These restrictions were established so as to prevent Karabu and Icahn from undercutting TWA's own ticket sales and to ensure TWA's continued viability as an airline. At the same time, sales by Icahn and Karabu of discounted fares would generate incremental revenue for TWA, which could be credited as prepayments against the outstanding balance of TWA's debt obligations to Icahn and Karabu, or be paid over by Karabu for TWA's account as prepayments of certain pension related obligations under a 1993 settlement with the Pension Benefit Guaranty Corporation. 14. The Ticket Agreement permits Karabu and Icahn to sell two principal categories of tickets: (a) Domestic Consolidator Fares and (b) System Fares. 31 6 15. Consolidator fares are deeply discounted bulk fare rates, subject to a number of limitations, that are made available for sale to the general public by business entities known as consolidators who have entered into specific agreements with TWA allowing for the sale of such tickets. The Domestic Consolidator Fares which are set out in the Ticket Agreement have been discounted by 60% from specific categories of published fares and are made available for sale to the general public subject to limitations on the total amount which may be sold and the travel points between which they may be sold. Karabu and Icahn were limited to selling $610 million of Domestic Consolidator Fares over the approximately 8 year term of the Ticket Agreement (Ticket Agreement, Paragraphs 2(i) and (ii)) and they could only sell tickets for domestic travel to and from 12 cities in which TWA has relatively small market shares (Ticket Agreement, Paragraph 3(e) and Exhibits A and B). The purpose of these limitations was to assist TWA in obtaining new incremental sales in these markets, and to prevent Karabu and Icahn from undercutting TWA in its stronger markets. The Domestic Consolidator Fares are not the subject of dispute in this litigation. 16. System Fare tickets are tickets discounted by 45% from all published fares which TWA offers for sale and are available for sale on all of TWA's domestic and international flights. Although the Ticket Agreement does not limit the total value or geographic scope of Karabu's or Icahn's sales of System Fare tickets, the Ticket Agreement provides that such tickets can only be sold to certain End Users -- corporate accounts, as described below. Again, the primary purpose of the End User limitation was to assist TWA in developing new, incremental business. C. THE TICKET AGREEMENT'S RESTRICTION ON THE SALE OF SYSTEM FARE TICKETS 17. Under the Ticket Agreement Karabu and Icahn can only sell System Fare tickets to corporate accounts -- accounts used by business entities for business travel. TWA itself has numerous similar discount ticket sales programs with corporations and businesses throughout the country. 32 7 18. Paragraph 8 of the Ticket Agreement restricts Karabu's and Icahn's distribution of Icahn System Fare tickets to the "End User." Karabu and Icahn have contended that "End User" includes members of the general public and that therefore they have the right to sell System Fare tickets not just through agreements with corporations and businesses but to any person and in direct competition with TWA's own sales to the general public. That interpretation would nullify the restrictions in the Ticket Agreement on the sale and distribution of System Fare tickets and would render many of its key provisions meaningless. 19. For example, Paragraph 8 of the Ticket Agreement establishes the exclusive mechanism for the payment of System Fare tickets sold by Karabu and Icahn. System Fare tickets may only be sold through Universal Air Travel Plan accounts ("UATP Accounts"). A UATP account is an account established with TWA for the exclusive purpose of purchasing airline tickets. TWA issues "credit cards" against the UATP account to be used by corporations and their employees to purchase TWA tickets. Paragraph 8 specifically provides, with respect to System Fare tickets, that such UATP Accounts may only be established for Karabu and Icahn with sub-accounts for corporate users. (Under the Ticket Agreement, Karabu holds the master UATP account; the corporate End Users hold sub-accounts.) Paragraph 8 also specifically excludes travel agents from eligibility to hold UATP Accounts. System Fare tickets may not be purchased by any means other than through the Karabu UATP account or an End User sub-account. There is no provision anywhere in the Ticket Agreement for the use of either the Karabu master UATP account or any corporate sub-account for the sale of System Fare tickets to the general public. 20. Paragraph 12 of the Ticket Agreement sets out the remedies for misuse of the UATP credit card accounts. Paragraph 12 (page 18) provides that it would be a breach of the Ticket Agreement if a travel agent or Icahn or Karabu were to sell System Fare tickets to a person "other than the UATP cardholder or employees of the UATP cardholder. . ." (emphasis added). The clear 33 8 intent of this provision was that the End Users described in Paragraph 8, which are synonymous with the UATP cardholders in Paragraph 12, were businesses with employees, not members of the general public. 21. Furthermore, that provision of Paragraph 8 which limits Karabu's and Icahn's sale of System Fare tickets to the "End User" specifically excludes Consolidator Fares, which are in fact available for sale to the general public. If the term "End User" meant "member of the general public," as Karabu and Icahn suggest, the exclusion of Consolidator Fares from the limitation in Paragraph 8 would be meaningless. D. DEFENDANTS' SALES OF SYSTEM FARE TICKETS IN VIOLATION OF THE TICKET AGREEMENT 22. Karabu and Icahn, through their affiliated companies, defendants Global Discount, Global Travel and ACF, have breached the Ticket Agreement by selling System Fare tickets to the general public, directly and through travel agents and by offering System Fare tickets for sale through consolidators. Defendants' breach has injured TWA by diverting its customers and interfering with TWA's prospective economic relationships with those customers. 23. The Icahn Defendants have no right to market or sell System Fare tickets to travel agents or consolidators. Paragraph 8 of the Ticket Agreement specifically provides that System Fare Tickets may not be marketed or sold to travel agents or consolidators. The Icahn Defendants are promoting the sale of System Fare tickets to the general public through travel agents. For example, they are distributing brochures, attached hereto as Exhibit C, which offer System Fare tickets to the general public through travel agents. Defendants are offering these tickets throughout the United States and Canada, including the State of Missouri. 24. The "Individual Program" outlined in one brochure provides that an "individual customer," who is identified as the "Travel Agent's customer," will receive on the "designated airline" a 25% discount on all "published airfares," a range of fares that goes beyond the limited 34 9 Domestic or other Consolidator Fares. Although the brochure does not identify TWA by name, the Icahn Defendants do not have access to the tickets of any other carrier. 25. Through these brochures, the Icahn Defendants are solicitating travel agents to sign Agreements with Global Discount, which provide, in part, for the payment of a 10% commission upon the resale of System Fare tickets. The Icahn Defendants have solicited and entered into such arrangements with travel agents in Missouri and elsewhere. Attached hereto as Exhibit D are copies of forms of two travel agency agreements entered into by Global Discount with travel agents: an Independent Travel Agency Agreement and a Travel Agency Agreement for Associations. These agreements provide for the sale of the System Fare tickets to the general public in violation of the Ticket Agreement. 26. The Icahn Defendants are also promoting the sale of System Fare tickets to airline ticket "networks" that market and sell tickets on a bulk basis to travel agents. These networks are advertising the System Fare tickets on a national basis and throughout Canada. Attached hereto as Exhibit E is a copy of promotional materials sent to travel agents by Global Travel Network describing its promotional campaign for the sale of System Fare tickets. 27. During the period from August 1, 1995 through January 22, 1996, through the dissemination of the aforesaid brochure and otherwise, the Icahn Defendants have sold tickets with an approximate total retail value of $24,435,340. Virtually all of these tickets were System Fare tickets sold in violation of the Ticket Agreement. 28. TWA has put the Icahn Defendants on notice that sales of System Fare tickets to the general public violates paragraph 8 of the Ticket Agreement. Attached as Exhibit F are seven letters from TWA, dated September 22, 1995, October 24, 1995, November 29, 1995, January 5, 1996, January 9, 1996, January 11, 1996 and January 18, 1996 to the Icahn Defendants. These letters notify the Icahn Defendants that: (a) the sale of System Fare tickets by an Icahn Defendant or a 35 10 travel agent to members of the general public is a breach of the Ticket Agreement; (b) individual passengers are not "End Users" under paragraph 8 of the Ticket Agreement; (c) sales of System Fare tickets to travel agents who then resell them to the public "would clearly violate the Karabu Ticket Agreement"; and (d) the sale of System Fare tickets by an Icahn Defendant to consolidators violates the Ticket Agreement. 29. Despite their receipt of TWA's notices, the Icahn Defendants have continued to breach the express terms of the Ticket Agreement, and to injure TWA's business and its prospective economic relationships with its customers. 30. On or about December 7, 1995, TWA filed a Petition against the Icahn Defendants in this Court seeking a declaratory judgment of TWA's rights and remedies as to System Fare ticket sales under the Ticket Agreement. By letter dated December 8, 1995, Karabu claimed that TWA's action constituted a breach of the exclusive remedies provision of the Ticket Agreement and claimed a default. On or about December 15, 1995, TWA and Karabu entered into a Standstill Agreement, pursuant to which TWA withdrew its lawsuit without prejudice to refile and Karabu withdrew the default letter, in contemplation of negotiations between the parties to resolve their dispute. Copies of the letters establishing the Standstill Agreement and extending it until February 6, 1996 are attached hereto as Exhibit G. The Icahn Defendants have claimed that TWA has breached the Standstill Agreement in its conduct since execution of the Standstill Agreement, including the issuing of notices of violation of the Ticket Agreement, which TWA denies. The erroneous allegations by the Icahn Defendnats have created a genuine dispute which is appropriate for determination by the Court. The Standstill Agreement expired on February 6, 1996, and, in light of the failure of the discussions between the parties, TWA has now reinstituted its action against the Icahn Defendants. E. THE ICAHN DEFENDANTS' ADDITIONAL VIOLATIONS OF THE TICKET AGREEMENT 36 11 31. In addition to the violations of the Ticket Agreement by the Icahn Defendants alleged above, the Icahn Defendants have breached the Ticket Agreement in additional ways as set forth below. 32. Karabu and Global Discount have issued or caused to be issued "back-to-back" tickets in violation of Paragraph 3(a) of the Ticket Agreement. Paragraph 3(a) provides, in part, that all tickets sold under the Ticket Agreement are subject to the terms and conditions required by TWA on the sales of tickets generally. "Back-to-Back" ticketing is a scheme used by travel agents and others to avoid certain conditions applicable to discount fares that require a Saturday night "stay-over" or a stay of a minimum number of days. The passenger is booked and ticketed on separate itineraries on flights which allow the passenger to travel at the discounted fare without satisfying the fare condition. The passenger purchases two sets of round-trip tickets that meet the stay requirement if the passenger traveled as booked. Instead, the passenger takes the outbound flight on one ticket and the inbound flight on the other ticket, thus avoiding the stay requirements. This practice causes TWA to lose revenue because the passenger avoids paying the higher fare applicable to the intended itinerary. 33. On December 27, 1995, TWA notified Karabu and Global Discount that Global Discount had issued back-to- back tickets in breach of Paragraph 3(a) of the Ticket Agreement. Karabu and Icahn have conceded that such back-to-back tickets have been issued but deny that such ticketing practices violate the Ticket Agreement. 34. Karabu and Global have also made false reservations on TWA flights in order to block space that would otherwise be available for sale by TWA itself. The flight reservations are ostensibly made by Karabu and Global Discount for "test" purposes but are not thereafter canceled. On January 8, 1996, TWA notified Karabu and Global Discount that such practices breached the 37 12 Ticket Agreement. On January 12, 1996, Icahn acknowledged that Global Discount had denied that it had breached the Ticket Agreement. 35. Karabu and Global Discount have also bartered or exchanged tickets for value in breach of the Ticket Agreement. Global Discount has issued tickets to the Time Warner Company, payment for which was ostensibly charged to a Time Warner barter account with Global Discount. The tickets were in fact purchased from TWA by use of the Global Discount UATP sub-account established for Global Discount's employee travel. TWA notified Karabu and Icahn on January 9, 1996, that such practices are in contravention of the accounting procedures established in the Ticket Agreement and have caused material damage to TWA in violation of Paragraph 12(a)(i). On January 12, 1996, Icahn denied that this barter account violated the Ticket Agreement. 36. Other breaches by the Icahn Defendants of the Ticket Agreement include the following: (a) Global Discount has issued System Fare tickets in violation of various fare rules, in response to which TWA has sent several default notices; (b) Karabu and Global Discount have sold System Fare tickets to travel agents in violation of Paragraph 8; and (c) Global Discount has marketed System Fare tickets to travel agents by offering a fare advantage for its clients against TWA's own fares in violation of Paragraph 12(a)(i). TWA has notified the Icahn Defendants of these breaches in a series of letters commencing in September 1995 and continuing to the date of this action. F. THE ICAHN DEFENDANTS' ALLEGATIONS OF BREACHES BY TWA 37. The Icahn Defendants have not only breached the Ticket Agreement, but, in respect to TWA's notifications and prior Petition, have erroneously alleged that TWA has breached the Ticket Agreement. These allegations have created a genuine dispute concerning these matters which is appropriate for determination by this Court. 38 13 38. Karabu and Global Discount claim that, in breach of its obligations under the Ticket Agreement, TWA has discriminated against Global Discount by refusing to allow Global Discount to hire TWA employees on a part-time basis. TWA has a standing policy against allowing its employees to work for travel agencies, which has been waived in the past on a case-by-case basis under appropriate circumstances. The type of dual employment contemplated by Global Discount presents an inherent conflict of interest, which is heightened by the disputes between the parties as to interpretation of the Ticket Agreement. Defendants' claim of discrimination under these circumstances has no merit. 39. Karabu and Global Discount claim that, in breach of its obligations under the Ticket Agreement, TWA has discriminated against Global Discount by refusing to afford Global Discount and its customers the same services available to other travel agents and their customers. In particular, Karabu and Global Discount have claimed that TWA refused to waive advance purchase fare requirements. The Ticket Agreement clearly states that all fare rules and restrictions are applicable to the tickets sold except for the bargained for waiver of refund conditions which is set out in Paragraph 3(a). The waiver of other restrictions is not part of the bargained-for exchange reflected in the Ticket Agreement and this claim has no basis. 40. Karabu and Global Discount claim that TWA has failed to reschedule customers holding tickets purchased through Global Discount when their flights have been canceled due to inclement weather. Global Discount customers have not been treated disparately and TWA arranged for the customers in question to be booked on other airlines, in accordance with industry policy pertaining to canceled flights. Again, this allegation has no merit. G. KARABU'S AND GLOBAL DISCOUNT'S VIOLATIONS OF THE ARC AGREEMENT 41. In connection with its operations under the Ticket Agreement, Global Discount has been appointed as a travel agent by the Airline Reporting Corporation ("ARC"), a clearinghouse for 39 14 airline ticket and other travel documents issued by or for travel on various airlines. Appointed travel agents sign, and are bound by, a contract with ARC (the "ARC Agreement") that sets terms and conditions on the sale of airline tickets. As an accommodation to Karabu in the interim period between execution of the Ticket Agreement and Global Discount's appointment as an ARC travel agent, TWA and Karabu entered into a side letter agreement effective June 14, 1995 (the "Interim Agreement"), by which Karabu agreed to comply with, among other things, the ARC rules for appointed travel agents, including the ARC Agreement. Pursuant to the Interim Agreement, TWA extended certain accommodations to Karabu, such as providing use of TWA ticketing equipment, use of its computer support personnel and service contracts, and training for Global Discount's agents, which enable Global Discount to operate during the interim period pending its receipt of ARC approval as a travel agent. The Interim Agreement ended upon Global Discount's receipt of its ARC approval. TWA has in all respects complied with its obligations under the Interim Agreement. By virtue of the Interim Agreement and its appointment as an ARC-approved travel agent, Karabu and Global Discount are bound by the terms of the ARC Agreement. 42. In pertinent part, the ARC Agreement permits appointed travel agents to sell tickets to their customers at prices and on terms authorized by TWA. The ARC Agreement further requires travel agents to comply with all instructions of TWA with respect to the sale of TWA tickets. 43. TWA is a shareholder of ARC, the ARC Agreement was made on behalf of TWA, and TWA is entitled to assert claims directly against Karabu and Global for their conduct involving sale or transfer of TWA tickets in violation of the ARC Agreement. 44. The marketing and sales of System Fare tickets by Global and Karabu as described herein violate the ARC Agreement. COUNT I ------- (AS AGAINST ALL DEFENDANTS) --------------------------- 40 15 DECLARATORY JUDGMENT 45. TWA incorporates by reference paragraphs 1 through 44 above. 46. There exists a justiciable controversy between TWA and the defendants concerning the interpretation of the Ticket Agreement and the permissible conduct thereunder by the Icahn Defendants. 47. In addition, the Icahn Defendants have breached the Ticket Agreement as alleged in paragraphs 22 through 36 above. 48. TWA has a legally protectable interest under the Ticket Agreement in precluding the sale of System Fare tickets to the general public by the Icahn Defendants or by other travel agents. TWA has an interest in maintaining control over fares for travel on TWA and protecting its prospective economic relationships with customers. 49. Without resolution of this controversy, TWA will be deprived of material benefits contemplated by the Ticket Agreement. TWA has no adequate remedy at law. 50. Due to the continuing conduct of the defendants, after notice or constructive notice of TWA's position, this controversy is ripe for judicial decision. 51. Defendants have or may claim an interest which may be affected by the declaration of rights and other relief sought herein by TWA. 52. TWA seeks an interpretation of the Ticket Agreement consistent with the allegations in this Amended Petition and a declaration of the respective rights of the parties. 53. TWA is entitled to a judgment declaring that: (a) defendants' sale of System Fare tickets to the general public, directly or through travel agents, violates the Ticket Agreement; (b) sales of System Fare tickets to individual customers are not permissible sales to an "End User" under the Ticket Agreement; (c) System Fare tickets may be sold only to UATP Account holders; (d) System Fare tickets may not be marketed and/or sold to travel agents or consolidators; (e) the 41 16 following conduct of the Icahn Defendants violates the Ticket Agreement: (i) the issuance of back-to-back tickets, (ii) the use of barter or exchange as compensation for tickets, (iii) the issuance of tickets in violation of TWA's fare restrictions and rules, (iv) the selling of System Fare tickets to travel agents, and (v) the marketing of System Fare tickets to travel agents for sale to the general public. 54. TWA is entitled to a judgment declaring that: (a) TWA has not breached the Ticket Agreement by refusing to allow Global Discount to hire TWA employees on a part-time basis; (b) TWA has not breached the Ticket Agreement nor discriminated against Global Discount by refusing to waive TWA fare restrictions and rules applicable to System Fare tickets; (c) TWA has not discriminated against customers of Global Discount, or any other travel agent, who have purchased System Fare tickets and has treated these customers in accordance with TWA and industry policies; and (d) TWA has not breached the Standstill Agreement. 55. The sale of System Fare tickets by the defendants, and the continuing marketing and sales efforts by defendants, involve numerous and complicated transactions which require an accounting to determine the harm to TWA and the benefits obtained by defendants from such wrongful conduct. TWA has no adequate remedy at law. COUNT II -------- (AS AGAINST ALL DEFENDANTS) BREACH OF THE TICKET AGREEMENT ------------------------------ 56. TWA incorporates by reference paragraphs 1 through 55 above. 57. The Icahn Defendants have materially breached the Ticket Agreement, as described in paragraphs 22 through 30 and paragraphs 31 through 36 above. 42 17 58. As a direct result of these breaches of the Ticket Agreement, TWA has been damaged and will continue to be damaged. TWA is entitled to damages in addition to declaratory relief and an accounting. COUNT III --------- (AS AGAINST ALL DEFENDANTS) CONVERSION ---------- 59. TWA incorporates by reference paragraphs 1 through 44 above. 60. At all times relevant, TWA had rights of immediate possession of the seats on TWA flights such that they were available for sale to the general public at published fares. 61. Defendants have sold tickets for seats on TWA flights at fares priced below TWA's published fares. 62. Defendants have made use of available seats on TWA flights to the exclusion of TWA's right to sell tickets for those seats to the general public at published fares. 63. Defendants' intentional interference with TWA's rights and use of available seats on TWA flights constitutes conversion of personal property to defendants' use and benefit. 64. The value of the property rights converted by defendants is the amount of the published fares for tickets to the seats on TWA flights sold by defendants. 65. TWA has been damaged by defendants' conversion and TWA is entitled to compensatory and punitive damages for such conversion. COUNT IV -------- (AS AGAINST ALL DEFENDANTS) TORTIOUS INTERFERENCE WITH BUSINESS EXPECTANCY ---------------------------------------------- 66. TWA incorporates by reference paragraphs 1 through 44 set forth above. 43 18 67. TWA has existing and prospective economic relationships with its customers that constitute a valid business expectancy that such customers will purchase tickets for air travel on TWA at published fares, providing significant revenues to TWA. 68. With knowledge of this business expectancy, and without justification under the Ticket Agreement, defendants intentionally interfered and continue to intentionally interfere with TWA's business expectancy through efforts to sell System Fare tickets other than to UATP Account holders in the manner set forth above. 69. Such interference is intended to cause injury to TWA and will cause damage to TWA by diverting customers away from the purchase of tickets from TWA at published fares. 70. As a direct and proximate result of defendants' intentional and tortious conduct, TWA has suffered and will continue to suffer economic damages and lose revenues it otherwise would have obtained from the sale of tickets to customers. 71. TWA is entitled to compensatory and punitive damages and an accounting from each of the defendants to determine the extent of harm to TWA. COUNT V ------- (AS AGAINST ALL DEFENDANTS) TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS ------------------------------------------------ 72. TWA incorporates by reference the allegations of paragraphs 1 through 44 above. 73. The Icahn Defendants have intentionally interfered with TWA's valid contractual relations with travel agents who are parties to the ARC Agreement, by inducing these travel agents to breach their duties under the ARC Agreement. Such inducement caused the travel agents to breach duties they owed to TWA under the ARC Agreement. As a result of the Icahn Defendants' conduct, TWA has suffered and continues to suffer economic damages and loss revenues it would have obtained from its contractual relations with ARC-approved travel agents. 44 19 74 . TWA is entitled to compensatory and punitive damages and an accounting from the Icahn Defendants to determine the extent of harm to TWA. COUNT VI (AS AGAINST ALL DEFENDANTS) LIQUIDATED DAMAGES 75. TWA incorporates by reference the allegations of paragraphs 1 through 44 above. 76. The Ticket Agreement provides for liquidated damages in the amount of Ten Million dollars ($10,000,000.00) following a judgment declaring breach where the conduct is not discontinued or the breach not cured within the time periods set forth therein. 77. TWA is entitled to liquidated damages in the amount of Ten Million Dollars ($10,000,000.00) for each and every uncured breach of the Ticket Agreement by the Icahn Defendants. COUNT VII (AS AGAINST KARABU AND GLOBAL DISCOUNT) BREACH OF THE ARC AGREEMENT 78. TWA incorporates by reference the allegations of paragraphs 1 through 44 above. 79. The conduct of Karabu and its affiliated travel agency, Global Discount, constitutes a breach of the ARC Agreement. 80. TWA, and ARC on behalf of TWA, have fully performed all conditions precedent to performance by Karabu and Global Discount under the ARC Agreement. 81. As a direct result of Karabu's and Global Discount's continuing breach, TWA has been harmed and will continue to be harmed. 82. TWA is entitled to declaratory relief against and an accounting from Karabu and Global Discount to determine the extent of harm to TWA. 45 20 COUNT VIII (AS AGAINST KARABU AND GLOBAL DISCOUNT) UNJUST ENRICHMENT 83. TWA incorporates by reference the allegations of paragraphs 1 through 44 above. 84. Karabu and Global Discount have been unjustly enriched by their wrongful and unauthorized conduct described herein above. 85. TWA is entitled to restitution or disgorgement of all revenues gained by Karabu and Global Discount from the sale or marketing of System Fares and to an accounting for all such revenues. WHEREFORE, TWA requests judgment against each of the defendants as follows: 1. as against all defendants, a declaration of the rights and other legal relations between the parties in accordance with Counts I and II hereof; 2. as against Karabu and Global Discount, a judgment declaring them to be in breach of the ARC Agreement; 3. as against the all defendants, liquidated damages pursuant to Count VI; 4. for restitution and disgorgement of all revenues gained by Karabu and Global Discount and denied to TWA by their conduct described herein above; 5. as against all defendants, an accounting to TWA of all revenues generated by each defendant as a result of its sales or marketing of TWA tickets in violation of their agreements and obligations to TWA; 6. as against all defendants, damages, both compensatory and punitive, with interest as allowed by law; 7. as against all defendants, for an award of TWA's costs and attorneys' fees; and 8. for such other and further relief as this Count deems just and proper. 46 21 BRYAN CAVE LLP By /s/ Thomas E. Wack ---------------------------- Thomas E. Wack Mo. Bar #21849 Kevin M. Abel Mo. Bar #39568 One Metropolitan Square 211 North Broadway Suite 3600 St. Louis, Missouri 63102 Telephone: (314) 259-2000 Facsimile: (314) 259-2020 Attorneys for Plaintiff 47 -----END PRIVACY-ENHANCED MESSAGE-----