<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO.....)*
KIWI International Air Lines, Inc.
(NAME OF ISSUER)
Class C Common Stock, no par value
(TITLE OF CLASS OF SECURITIES)
None
(CUSIP NUMBER)
George E.B. Maguire, Esq.
Debevoise & Plimpton, 875 Third Avenue, New York, NY 10022
(212) 909-6000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
July 1, 1996
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
[ ].
Check the following box if a fee is being paid with this statement [x].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of less than five percent of
such class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
- ------------------
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
The Exhibit Index is located on page 19.
Page 1 of 19 Pages
<PAGE> 2
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Recovery Equity Investors II, L.P.; 94-3195147
- ------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ x ]
- ------------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------------
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 10,000,000 Shares of Class C Common Stock
PERSON
----------------------------------------------------
(8) SHARED VOTING POWER
None
----------------------------------------------------
(9) SOLE DISPOSITIVE POWER
10,000,000 Shares of Class C Common Stock
----------------------------------------------------
(10) SHARED DISPOSITIVE POWER
None
- ------------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares of Class C Common Stock
- ------------------------------------------------------------------------------
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
- ------------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
84.6%*
- ------------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
PN
- -------------------
* See response to Item 5 below.
Page 2 of 19 Pages
<PAGE> 3
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Recovery Equity Partners II, L.P.; 94-3195148
- ------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ x ]
- ------------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------------
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ------------------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 10,000,000 Shares of Class C Common Stock
PERSON
----------------------------------------------------
(8) SHARED VOTING POWER
None
----------------------------------------------------
(9) SOLE DISPOSITIVE POWER
10,000,000 Shares of Class C Common Stock
----------------------------------------------------
(10) SHARED DISPOSITIVE POWER
None
- ------------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares of Class C Common Stock
- ------------------------------------------------------------------------------
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
- ------------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
84.6%*
- ------------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
PN
- --------
* See response to Item 5 below.
Page 3 of 19 Pages
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(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Joseph James Finn-Egan; ###-##-####
- ------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ x ]
- ------------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------------
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
- ------------------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING None
PERSON
----------------------------------------------------
(8) SHARED VOTING POWER
10,000,000 Shares of Class C Common Stock
----------------------------------------------------
(9) SOLE DISPOSITIVE POWER
None
----------------------------------------------------
(10) SHARED DISPOSITIVE POWER
10,000,000 Shares of Class C Common Stock
- ------------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares of Class C Common Stock
- ------------------------------------------------------------------------------
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
- ------------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
84.6%*
- ------------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
IN
- --------
* See response to Item 5 below.
Page 4 of 19 Pages
<PAGE> 5
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Jeffrey A. Lipkin; ###-##-####
- ------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ x ]
- ------------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------------
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States Citizen
- ------------------------------------------------------------------------------
NUMBER OF SHARES (7) SOLE VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING None
PERSON
----------------------------------------------------
(8) SHARED VOTING POWER
10,000,000 Shares of Class C Common Stock
----------------------------------------------------
(9) SOLE DISPOSITIVE POWER
None
----------------------------------------------------
(10) SHARED DISPOSITIVE POWER
10,000,000 Shares of Class C Common Stock
- ------------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,000,000 Shares of Class C Common Stock
- ------------------------------------------------------------------------------
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
- ------------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
84.6%*
- ------------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
IN
- --------
* See response to Item 5 below.
Page 5 of 19 Pages
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CONTINUATION PAGES OF SCHEDULE 13D
FILED BY RECOVERY EQUITY INVESTORS, II, L.P.;
RECOVERY EQUITY PARTNERS II, L.P.
JOSEPH J. FINN-EGAN
JEFFREY A. LIPKIN
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Class C Common Stock, no par
value (the "Class C Common Stock"), of KIWI International Air Lines, Inc., a New
Jersey corporation (the "Issuer"). The address of the principal executive
offices of the Issuer is Hemisphere Center, U.S. 1 & 9 South, Newark, New Jersey
07114-0006.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed by:
(a) Recovery Equity Investors II, L.P., a Delaware limited
partnership ("REI"). REI is a private venture capital partnership. The
business address of REI is 901 Mariner's Island Blvd., Suite 465, San
Mateo, California 94404-1592.
(b) Recovery Equity Partners II, L.P., a Delaware limited
partnership ("REP"), and REI's sole general partner. REP's sole
function is to act as the general partner of REI. The business address
of REP is 901 Mariner's Island Blvd., Suite 465, San Mateo, California
94404-1592.
(c) Joseph J. Finn-Egan, a general partner of REP. Mr.
Finn-Egan's principal occupation is his position as general partner of
REP. The address of Mr. Finn-Egan's principal business and his
principal office is 901 Mariner's Island Blvd., Suite 465, San
Mateo, California 94404-1592. Mr. Finn-Egan is a United States citizen.
(d) Jeffrey A. Lipkin, a general partner of REP. Mr. Lipkin's
principal occupation is his position as a general partner of REP. The
address of Mr. Lipkin's principal business and of his principal office
is 901 Mariner's Island Blvd., Suite 465, San Mateo, California
94404-1592. Mr. Lipkin is a United States citizen.
During the last five years, none of REI, REP, Mr. Finn-Egan
nor Mr. Lipkin has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
Page 6 of 19 Pages
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subject to, federal or state securities laws or finding any violation with
respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On July 1, 1996, pursuant to a Convertible Note Purchase and
Option Agreement, dated as of July 1, 1996 (the "Purchase Agreement"), between
the Issuer and REI, REI purchased:
(a) for a purchase price of $1,995,000, an aggregate $2,000,000
principal amount of the Issuer's 6% Convertible Unsecured
Notes due March 15, 1997 (such class of notes, the
"Convertible Notes", and the Convertible Notes purchased by
REI on July 1, 1996, the "Initial Convertible Notes"), and
(b) for a purchase price of $5,000, the option to purchase on the
terms provided in the Purchase Agreement the following
securities of the Issuer (such securities, the "Additional
Securities"):
(i) for a purchase price of $2,000,000, an additional
$2,000,000 aggregate principal amount of Convertible
Notes (the "Additional Convertible Notes"),
(ii) for a purchase price of $6,000,000, that number of
shares of the Issuer's Class A Convertible Preferred
Stock, no par value, to be authorized by the Issuer
(such class of preferred stock, the "Preferred
Stock", and the shares of Preferred Stock purchasable
as described in this clause (ii), the "Preferred
Shares"), equal to (x) 6,000,000 divided by (y) the
Conversion Price (as defined below) in effect under
the Convertible Notes at the time of issuance of the
Preferred Shares, and
(iii) in certain circumstances, in lieu of all or a portion
of the Preferred Shares, for a purchase price equal
to the principal amount thereof, additional
Convertible Notes (the "Substitute Convertible
Notes") in an aggregate principal amount equal to (x)
the number of Preferred Shares in lieu of which such
Convertible Notes are being purchased, multiplied by
(y) the Conversion Price then in effect.
The funds used to purchase the Initial Convertible Notes were
obtained, and the funds used to purchase any Additional Securities will be
obtained, from the working capital of REI.
The Convertible Notes are convertible at any time prior to
maturity (A) if the Preferred Stock has not been authorized, into shares of
Class C Common Stock, and (B) if the Preferred Stock has been authorized, into
shares of Preferred Stock. Shares of Preferred Stock, when authorized and
issued, will be convertible at any time into shares of Class C
Page 7 of 19 Pages
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Common Stock. In the case of both the Convertible Notes and the Preferred Stock,
the conversion price will be $1.00 per share, subject to adjustment (as so
adjusted from time to time, the "Conversion Price") for issuances on and after
July 1, 1996 below the Conversion Price in effect at the time of such issuances.
Convertible Notes are convertible into that number of shares of Class C Common
Stock or Preferred Stock, as the case may be, equal to (x) the principal amount
of Convertible Notes being converted divided by (y) the Conversion Price then in
effect. Shares of Preferred Stock will be convertible into that number of shares
of Class C Common Stock equal to (x) the number of shares of Preferred Stock
being converted multiplied by the Conversion Price in effect at the time such
shares of Preferred Stock were issued divided by (y) the Conversion Price then
in effect.
Upon conversion of Convertible Notes or shares of Preferred
Stock, no additional consideration will be given other than the surrender of the
Convertible Notes or shares of Preferred Stock so converted.
ITEM 4. PURPOSE OF TRANSACTIONS.
REI entered into the Purchase Agreement and purchased the
Initial Convertible Notes and the options to acquire the Additional Securities
in connection with REI's general investment activities.
The Purchase Agreement sets forth the terms and conditions on
which REI may purchase the Additional Securities. If REI elects to purchase the
Additional Convertible Notes, notice must be given to the Issuer prior to
January 1, 1997. REI may exercise its option to purchase the Preferred Shares
only if it has exercised its option to purchase the Additional Convertible Notes
and notice must be given to the Issuer prior to March 16, 1997. If REI elects to
purchase the Preferred Shares and the issuance of any of the Preferred Shares
would result in a breach of any Foreign Ownership Restriction (as defined below)
in effect at the time of such issuance, REI may elect to purchase Substitute
Convertible Notes in lieu of any Shares the issuance of which would result in
such breach. In addition, if REI elects to purchase the Preferred Shares and the
Issuer shall have failed to authorize the Preferred Stock, REI may elect to
purchase, in lieu of the Preferred Shares, Substitute Convertible Notes.
The Preferred Stock has not yet been authorized and there is
currently available for issuance upon conversion of Convertible Notes not more
than 5,250,000 authorized and unissued shares of Class C Common Stock that are
not currently reserved for specific purposes other than issuance upon conversion
of Convertible Notes. The Issuer has agreed pursuant to the Purchase Agreement
to submit to its annual meeting of shareholders (expected to occur prior to
September 1, 1996), and recommend for approval, a Restated Certificate of
Incorporation in the form attached to the Purchase Agreement as Exhibit B
thereto (the "Restated Certificate"), providing for, among other things,
authorization of the Preferred Stock and an increase in its authorized Class C
Common Stock sufficient to provide for the issuance and conversion of the
Preferred Shares and the conversion of the Convertible Notes and any shares of
Preferred Stock issuable upon conversion of the
Page 8 of 19 Pages
<PAGE> 9
Convertible Notes. The Issuer has also agreed to submit to a special meeting of
its Board of Directors, and recommend for approval, Restated By-Laws in the form
attached to the Purchase Agreement as Exhibit C thereto (the "Restated
By-Laws").
The right to convert Convertible Notes, the right to purchase
the Preferred Shares and the right to convert shares of Preferred Stock are
limited by the terms of the Convertible Notes, the Purchase Agreement and the
Restated Certificate, respectively. Pursuant to these limitations, no holder may
convert Convertible Notes or Preferred Stock and REI may not acquire any portion
of the Preferred Shares, if the issuance of shares of Class C Common Stock or
Preferred Stock, as the case may be, would result in a breach of any United
States statutory or United States Department of Transportation regulatory
restrictions on foreign ownership or control of the Issuer or its securities,
which breach would result in the loss of the Issuer's operating certificates or
authorities (such statutory and regulatory restrictions, "Foreign Ownership
Restrictions"). Generally, Foreign Ownership Restrictions currently in effect
require that persons who are not "citizens of the United States" for the
purpose of such Foreign Ownership Restrictions ("U.S. Citizens"), in the
aggregate, not own more than 25% of the voting securities, of a United States
air carrier such as the Issuer, that the President and two-thirds or more of
the board of directors and other managing officers of the United States air
carrier be U.S. Citizens and that persons who are not U.S. citizens not
otherwise have the ability to exert significant control over the United States
air carrier. REI, although a Delaware limited partnership, as a result of the
ownership of certain of its limited partnership interests, might not currently
be considered a U.S. Citizen. Accordingly, REI's right to convert Convertible
Notes and shares of Preferred Stock and to purchase the Preferred Shares would
be subject to the limitations described above. Pursuant to the Purchase
Agreement, the Issuer has agreed to limit ownership of its equity securities
by persons other than REI who are not U.S. Citizens to not more than 10% of
its total outstanding equity.
The Issuer has agreed in the Purchase Agreement to use its
efforts to complete the offering and sale of certain additional securities,
including (a) an aggregate $2,000,000 principal amount of its 10% Convertible
Unsecured Notes, convertible into shares of Common Stock at a conversion price
of $1.00 per share, (b) approximately 6,400,000 shares of Common Stock issuable
to its current shareholders and warrantholders, (c) securities other than
Preferred Stock in connection with an investment or investments by certain
qualified investors on terms no more favorable to such investors than those
applicable to REI (a "Qualified Transaction") and (d) subordinated debt
securities on terms reasonably satisfactory to REI and the Issuer to be issued
in connection with financing provided by a major aircraft manufacturer.
The Issuer is restricted by the terms of the Purchase Agreement from soliciting
or engaging in any other transactions involving the issuance of its securities
in transactions involving in the aggregate more than $1,000,000, except
additional issuances, subject to certain limitations, pursuant to grants under
its employee stock purchase or option plans at a price per share equal to or
greater than the Conversion Price in effect at the time of such grants.
Page 9 of 19 Pages
<PAGE> 10
The Issuer has further agreed in the Purchase Agreement that
until the Restated Certificate becomes effective, it will not engage in, and its
Board of Directors will not approve, any transaction (a "Specified Corporate
Transaction") (x) which would impair REI's right to have issued to it the
Preferred Shares, any shares of Preferred Stock issuable upon conversion of
Convertible Notes or any shares of Class C Common Stock issuable upon conversion
of Preferred Stock, (y) any transaction that would constitute a "Business
combination" as defined in N.J.S.A. 14A:10A-3 if entered into with an
"Interested stockholder" as defined in N.J.S.A. 14A:10A-3, or (z) involving the
issuance of shares of Class C Common Stock, or requiring that any shares of
Class C Common Stock be reserved for issuance, unless such transaction referred
to in this clause (z) is conditioned upon the effectiveness of the Restated
Certificate.
Pursuant to the Restated Certificate, the holders of Preferred
Stock will have the right, subject to certain exceptions, to purchase their pro
rata share of any preferred or common securities offered by the Issuer in any
private unregistered transaction prior to a Qualifying Public Offering (as
defined below).
The terms of the Convertible Notes and the terms of the
Preferred Stock both prohibit the Issuer from (a) issuing any equity securities,
or any rights, options or warrants to acquire any equity securities that are
senior to, or (except in a Qualified Transaction) pari pasu with, the Preferred
Stock, (b) prior to the termination of the Voting Trust Agreement (as defined
below), except in a Qualified Transaction, incurring more than an additional
aggregate $1,000,000 of indebtedness for borrowed money (other than refinancings
of debt outstanding on July 1, 1996) unless the Issuer's ratio of "Earnings
Before Fixed Charges and Taxes" to "Fixed Charges" on a pro forma basis and
based on the Issuer's annualized performance over the preceding six months is
1.25 to 1 or greater and (c) engaging in any merger or consolidation,
liquidation or sale or other disposition of all or substantially all of its
assets.
In addition, the occurrence of a "Change of Control" or a
"Material Sale Transaction" will constitute an event of default under the
Convertible Notes and require, at the holder's option, the redemption of
outstanding shares of Preferred Stock. For the purposes of the Convertible Notes
and the Preferred Stock, a "Change of Control" will be deemed to have occurred
upon the acquisition by an individual or group (other than REI Holders and
their transferees) of 40% or more of the combined voting power of the Issuer's
outstanding voting securities or if the Issuer's current Directors or approved
successors cease to constitute a majority of the Board of Directors. A
"Material Sale Transaction" is a transaction which has not been approved by a
majority of the REI Directors (as defined below) then serving on the Issuer's
Board of Directors involving a sale or other disposition by the Issuer of 25%
or more of its aircraft fleet or operational rights at any airport (or group
of airports within any 12-month period) representing 25% or more of its gross
revenues for the preceding 12 months.
In connection with the issuance of the Initial Convertible
Notes to REI, two persons designated by REI were appointed to the Board of
Directors. The Issuer has agreed in the Purchase Agreement that, for so long as
REI, or any affiliate wholly-owned by REI or
Page 10 of 19 Pages
<PAGE> 11
any of REI's partners (each, an "REI Holder"), hold any Convertible Notes or
shares of Class C Common Stock issued upon conversion of Convertible Notes and
no shares of Preferred Stock have been issued or the Preferred Stock no longer
has the right, as a class, to elect a specified number of Directors, the Issuer
will cause to be nominated for Director (i) prior to January 1, 1998, two
nominees designated by the REI Holders and (ii) thereafter, three nominees
designated by the REI Holders, provided that, following the occurrence of a
registered public offering of the Issuer's common stock in which the Issuer
receives gross proceeds of at least $15,000,000 (a "Qualifying Public
Offering"), the number of Directors which may be designated by REI Holders will
not exceed more than one Director for each 10% of the Issuer's outstanding
common stock beneficially owned by the REI Holders. The Issuer is restricted by
the terms of the Purchase Agreement from granting, prior to a Qualifying Public
Offering, other special Board representation rights, except rights granted to
employee shareholders providing for the designation of one nominee Director for
each 10% of the Issuer's outstanding common stock held by employee shareholders
at the time of such designation and as may otherwise be approved by the Issuer's
Board of Directors, including a majority of the REI Directors.
REI has agreed in the Purchase Agreement that, for so long as
shares of Class C Common Stock or (if the Preferred Stock no longer has the
right, as a class, to elect a specified number of Directors) Preferred Stock are
held by any REI Holder and a Qualifying Public Offering has not occurred, such
REI Holder will vote for the nominees for 3 director positions nominated by
Directors other than those Directors (the "REI Directors") designated by REI
Holders or elected by the holders of Preferred Stock voting as class.
The composition of the Issuer's Board of Directors will be
amended by the Restated Certificate. From the effectiveness of the Restated
Certificate until January 1, 1998, the Board of Directors shall consist of not
fewer than 14 nor more than 19 directors, as determined from time to time by
resolution of the Board of Directors. On and after January 1, 1998, the Board of
Directors shall consist of either 9, 12 or 15 directors, as determined from time
to time by resolution of the Board of Directors. Effective as of the 1998 annual
meeting of shareholders, the Board of Directors will be classified into three
classes serving staggered three-year terms. Pursuant to the Restated
Certificate, until more than 50% of the Preferred Stock issued by the Issuer
shall have been converted to Class C Common Stock, the holders of Preferred
Stock will have the right, as a class, to elect two Directors prior to January
1, 1998 and thereafter Directors constituting one-third of the Board of
Directors, which Directors will be distributed among the classes of Directors so
as to be serving staggered three-year terms.
As of the effective date of the Restated Certificate, the
aggregate number of shares which the Issuer shall have authority to issue will
be 74,000,000, which will include 12,000,000 shares of Preferred Stock,
15,000,000 shares of Class A Common Stock, no par value (the "Class A Common
Stock"), 26,000,000 shares of Class C Common Stock and 21,000,000 shares
without designation. The terms of the Class A Common Stock will be amended
upon effectiveness of the Restated Certificate to provide for the automatic
conversion as of January 1, 1998 on a share-for-share basis of all outstanding
shares of Class A Common Stock into shares of Class C Common
Page 11 of 19 Pages
<PAGE> 12
Stock. Upon such conversion, the Class A Common Stock will be eliminated. The
Class B and Class D Shares will be eliminated effective upon the filing of the
Restated Certificate.
The holders of the Issuer's shares of Class A Common Stock are
party to a Voting Trust Agreement, dated October 1, 1992 (the "Voting Trust
Agreement"), under which those Directors who are holders of shares of Class A
Common Stock act as voting trustees (the "Voting Trustees"). Pursuant to the
Voting Trust Agreement, the Voting Trustees have the power to vote all
outstanding shares of Class A Common Stock on any matter requiring the vote of
such class of securities. The Voting Trustees have agreed pursuant to the
Purchase Agreement not to consent to any extension of the Voting Trust Agreement
beyond its initial term ending December 31, 1997. The Voting Trustees have also
agreed in the Purchase Agreement (a) to approve the Restated Certificate at the
annual meeting of shareholders, (b) prior to the effectiveness of the Restated
Certificate, not to approve any Specified Corporate Transaction, (c) not to
solicit any transaction which the Issuer is prohibited from soliciting or
entering into as described above and (d) prior to January 1, 1998, to vote for
the nominees for Director designated by the REI Holders as described above.
In connection with the purchase of the Initial Convertible
Notes and the option to purchase the Additional Securities, REI and the Issuer
entered into a Registration Rights Agreement, dated as of July 1, 1996 (the
"Registration Rights Agreement"), pursuant to which REI and its assignees have
the right, after the occurrence of a Qualifying Public Offering, to 3 demand
registrations and unlimited piggy-back registrations of shares of Class C Common
Stock issuable upon conversion of the Convertible Notes and Preferred Stock.
REI has agreed in the Purchase Agreement not to transfer any
Convertible Notes except to certain qualified holders and not to transfer to any
industry competitor of the Issuer unless the Issuer's Board of Directors has
approved such transfer or the issuance to such competitor of other securities
of the Issuer. In addition, REI has agreed that, prior to the earlier to occur
of (a) July 1, 2002 and (b) a Qualifying Public Offering, it will not transfer
to a third party (other than an REI Holder) any shares of Preferred Stock or
shares of Class C Common Stock issued upon conversion of Convertible Notes or
Preferred Stock without first offering such shares to the Issuer.
Except as described in this Item 4, none of REI, REP, Mr.
Finn-Egan nor Mr. Lipkin have any current plans or proposals which relate or
would result in:
(a) the acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer;
(c) a sale or transfer of a material amount of assets of the
Issuer;
Page 12 of 19 Pages
<PAGE> 13
(d) any change in the present board of directors or management of
the Issuer, including any plans or proposals to change the
number or term of directors or to fill any existing vacancies
on the board;
(e) any material change in the present capitalization or dividend
policy of the Issuer;
(f) any other material change in the Issuer's business or
corporate structure;
(g) changes in the Issuer's charter, by-laws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person;
(h) causing a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system or
a registered national securities association;
(i) a class of equity securities of the Issuer becoming eligible
for termination of registration pursuant to Section 12(g)(4)
of the Securities Exchange Act of 1934; or
(j) any action similar to any of those enumerated above.
Copies of the Purchase Agreement, the Initial Convertible
Note, the form of Convertible Note, the form of Restated Certificate, the form
of Restated By-Laws and the Registration Rights Agreement are attached hereto as
Exhibits 1, 2, 3, 4, 5 and 6, respectively, and the foregoing descriptions of
each such document are subject to and qualified in their entirety by reference
to each such document.
ITEM 5 INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number of shares of Class C Common Stock
beneficially owned by each Reporting Person as of July 1, 1996 is 10,000,000, or
approximately 84.6% of such class of securities. The number of shares of Class C
Common Stock, and the percentage of such class of securities, beneficially owned
by the Reporting Person reflects the acquisition of all of the Additional
Securities. Without taking into account the Additional Securities, the aggregate
number of shares of Class C Common Stock beneficially owned by each Reporting
Person as of July 1, 1996 is 2,000,000, or approximately 52.3% of such class of
securities. Assuming the conversion of all outstanding shares of Class A Common
Stock into an equal number of shares of Class C Common Stock, the percentage of
Class C Common Stock beneficially owned by each Reporting Person as of July 1,
1996 would be approximately 72.3%, taking into account all Additional
Securities, and approximately 34.3%, without regard to the Additional
Securities.
Page 13 of 19 Pages
<PAGE> 14
REI's beneficial ownership of Class C Common Stock may be
limited by the terms of the Convertible Notes, the Purchase Agreement and the
Restated Certificate to the extent such beneficial ownership would result in a
breach of Foreign Ownership Restrictions, as described in Item 4 above. In
addition, such beneficial ownership will be limited until the effectiveness of
the Restated Certificate by the fact that the Preferred Stock has not yet been
authorized and there is currently a limited number of shares of Class C Common
Stock available for issuance upon conversion of Convertible Notes, as described
in Item 4 above.
(b) See the responses of each Reporting Person to Items (7)
through (11) of the portions of the cover page of this Schedule 13D which relate
to shares of Class C Common Stock beneficially owned by such Reporting Person.
The possible limitations on beneficial ownership of Class C
Common Stock referred to in the preceding paragraph (a) may also limit REI's
right to vote shares of Class C Common Stock .
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENT, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
See the response to Item 4 above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following are filed herewith as Exhibits to this Schedule
13D:
1. Convertible Note Purchase and Option Agreement,
dated as of July 1, 1996, between the Issuer
and REI (with Exhibits attached thereto).
2. Initial Convertible Note.
3. Form of Convertible Note (included as Exhibit A-1 to
Exhibit 1 hereto).
4. Form of Restated Certificate of Incorporation of the
Issuer (included as Exhibit B to Exhibit 1 hereto).
5. Form of Restated By-Laws of the Issuer (included as
Exhibit C to Exhibit 1 hereto)
6. Registration Rights Agreement, dated as of July 1,
1996, between the Issuer and REI.
Page 14 of 19 Pages
<PAGE> 15
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct and agrees that this statement may be
filed jointly with Recovery Equity Partners II, L.P., Joseph J. Finn-Egan and
Jeffrey A. Lipkin.
Dated: July 11, 1996
RECOVERY EQUITY INVESTORS II, L.P.
By: Recovery Equity Partners II, L.P.,
its sole general partner
By: Joseph J. Finn-Egan
--------------------
Joseph J. Finn-Egan
General Partner
By: Jeffrey A. Lipkin
------------------
Jeffrey A. Lipkin
General Partner
Page 15 of 19 Pages
<PAGE> 16
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct and agrees that this statement may be
filed jointly with Recovery Equity Investors II, L.P., Joseph J. Finn-Egan and
Jeffrey A. Lipkin.
Dated: July 11, 1996
RECOVERY EQUITY PARTNERS II, L.P.
By: Joseph J. Finn-Egan
--------------------
Joseph J. Finn-Egan
General Partner
By: Jeffrey A. Lipkin
---------------------
Jeffrey A. Lipkin
General Partner
Page 16 of 19 Pages
<PAGE> 17
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct and agrees that this statement may be
filed jointly with Recovery Equity Investors II, L.P., Recovery Equity Partners
II, L.P., and Jeffrey A. Lipkin.
Dated: July 11, 1996
By: Joseph J. Finn-Egan
--------------------
Joseph J. Finn-Egan
Page 17 of 19 Pages
<PAGE> 18
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct and agrees that this statement may be
filed jointly with Recovery Equity Investors II, L.P., Recovery Equity Partners
II, L.P., and Joseph J. Finn-Egan.
Dated: July 11, 1996
By: Jeffrey A. Lipkin
------------------
Jeffrey A. Lipkin
Page 18 of 19 Pages
<PAGE> 19
EXHIBIT INDEX
Exhibit No. Description
1 Convertible Note Purchase and Option
Agreement, dated as of July 1, 1996
between the Issuer and REI (with
exhibits attatched thereto)
2 Initial Convertible Note
3 Form of Convertible Note (included as
Exhibit A-1 to Exhibit 1 hereto)
4 Form of Restated Certificate of
Incorporation of the Issuer (included
as Exhibit B to Exhibit 1 hereto)
5 Form of Restated By-Laws of the Issuer
(included as Exhibit C to Exhibit 1
hereto)
6 Registration Rights Agreement, dated as
of July 1, 1996, between the Issuer and
REI
Page 19 of 19 Pages
<PAGE> 1
[Conformed Copy]
================================================================================
RECOVERY EQUITY INVESTORS II, L.P.
KIWI INTERNATIONAL AIR LINES, INC.
- --------------------------------------------------------------------------------
CONVERTIBLE NOTE PURCHASE AND OPTION AGREEMENT AMENDING
AND RESTATING THAT CERTAIN CLASS A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT DATED AS OF JUNE 19, 1996
- --------------------------------------------------------------------------------
Dated as of July 1, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. AMENDMENT AND RESTATEMENT AUTHORIZATION OF
SECURITIES; ETC.................................................................... 1
SECTION 2. SALE AND PURCHASE OF CONVERTIBLE NOTES;
GRANT OF OPTION TO PURCHASE ADDITIONAL
SECURITIES......................................................................... 2
2.1. Convertible Notes...................................................... 2
SECTION 2A. ADDITIONAL INVESTMENTS AT REI'S OPTION............................................. 2
2A.1 Convertible Notes...................................................... 2
2A.2. Preferred Stock........................................................ 3
2A.3. Convertible Notes in Lieu of
Preferred Stock.................................................................... 3
2A.4. Section 2A Closings......................................................... 4
SECTION 3. CLOSING............................................................................ 5
SECTION 4. CONDITIONS TO CLOSING.............................................................. 5
4.1. Conditions to REI's Obligation to
Close. ............................................................................ 5
4.1.1. Representations and Warranties.......................................... 5
4.1.2. Compliance Certificate.................................................. 6
4.1.3. Opinions of Counsel..................................................... 6
4.1.4. Purchase and Sale Permitted by
Applicable Law.................................................................. 6
4.1.5. Registration Rights Agreements.......................................... 6
4.1.6. Approvals............................................................... 6
4.1.7. No Injunction........................................................... 7
4.1.8. Corporate Documents..................................................... 7
4.1.9. Elections of Directors.................................................. 7
4.1.10. Outstanding Shares..................................................... 7
4.1.11. Insurance.............................................................. 7
4.1.12. Pegasus................................................................ 7
4.1.13. Proceeds from Notes Offering............................................ 7
4.1.14. Quiet Enjoyment........................................................ 7
4.2. Conditions to KIWI's Obligation to
Close. ............................................................................ 8
4.2.1. No Injunction........................................................... 8
SECTION 5. REPRESENTATIONS AND WARRANTIES OF KIWI............................................. 8
5.1. Organization and Standing;
Certificate of Incorporation and By-Laws........................................... 8
5.2. Qualification................................................................ 8
5.3. Corporate Power.............................................................. 8
5.4. No Subsidiaries.............................................................. 9
5.5. Capitalization............................................................... 9
</TABLE> i
<PAGE> 3
<TABLE>
<S> <C>
5.6. Other Agreements............................................................. 10
5.7. Authorization................................................................ 10
5.8. No Conflicts................................................................. 11
5.9. Business; Financial Statements............................................... 11
5.10. Changes, etc................................................................ 13
5.11. Tax Returns and Payments.................................................... 13
5.12. Indebtedness................................................................ 14
5.13. Required Prepayments........................................................ 14
5.14. Title to Properties; Liens.................................................. 14
5.15. Litigation, etc............................................................. 14
5.16. Compliance with Other
Instruments, etc................................................................... 14
5.17. Consents.................................................................... 15
5.18. Permits, Licenses, Patents,
Trademarks, etc.................................................................... 15
5.19. Securities Law Compliance................................................... 15
5.20. Use of Proceeds............................................................. 16
5.21. Status Under Certain Federal
Statutes........................................................................... 16
5.22. ERISA....................................................................... 17
5.23. Employment Agreements and Labor
Issues............................................................................. 17
5.24. Disclosure.................................................................. 18
5.25. Operations.................................................................. 18
5.26. Insurance................................................................... 19
5.27. Material Contracts.......................................................... 19
5.28. Brokers and Finders......................................................... 20
5.29. Pegasus Settlement.......................................................... 20
5.30. Conversion of New Notes..................................................... 20
5.31. Regulations G, T, X and U................................................... 21
SECTION 6. PURCHASER'S REPRESENTATIONS ................................................................. 21
6.1. Investment................................................................... 21
6.2. Securities Law Matters....................................................... 21
6.3. Rule 144..................................................................... 21
6.4. Accredited Investor, etc..................................................... 21
SECTION 7. COVENANTS ................................................................................... 22
7.1. Covenants of KIWI............................................................ 22
7.1.1. Debt Offering .......................................................... 22
7.1.2. Restated Certificate, Omnibus
Consent; By-laws ............................................................... 22
7.1.3. Limitations on Offerings; Notes
Offering ....................................................................... 22
7.1.4. Employee Stock Plans ................................................... 23
7.1.5. No Solicitation ........................................................ 23
7.1.6. Inspection ............................................................. 24
7.1.7. Financial Statements ................................................... 25
7.1.8. Election of Directors .................................................. 25
7.1.9. Public Announcements ................................................... 27
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
7.1.10. Further Actions.......................................................... 27
7.1.11. Weekly Reports........................................................... 27
7.1.12. Other Board Rights, etc.................................................. 28
7.1.13. Actions by July 31, 1996................................................. 28
7.1.14. Hush-Kitting Plan........................................................ 29
7.1.15. Renewed Insurance........................................................ 29
7.1.16. Pegasus.................................................................. 30
7.1.17. Certain Securities Matter................................................ 30
7.1.18. Reservation and Authorization of
Conversion Shares................................................................. 30
7.1.19. Limitation on Foreign Ownership.......................................... 31
7.1.20. Consultants.............................................................. 32
7.1.21. Limitation on Corporate
Transactions...................................................................... 32
7.2. Covenants of REI...................................................................... 32
7.2.1. Public Announcements...................................................... 32
7.2.2. Further Actions........................................................... 33
7.2.3. Election of Directors..................................................... 33
7.3. Covenants of the Voting Trustees...................................................... 33
7.3.1. Termination of Voting Trust............................................... 33
7.3.2. Restated Certificate and Omnibus
Consent........................................................................... 33
7.3.3. Election of Directors..................................................... 33
7.3.4. Limitation on Corporate
Transactions...................................................................... 34
7.3.5. Public Announcements...................................................... 34
7.3.6. No Solicitation........................................................... 34
7.4. Mutual Covenant........................................................................ 34
SECTION 8. REGISTER OF CONVERTIBLE NOTES;
RESTRICTIONS ON TRANSFER OF SECURITIES;
REGISTRATION UNDER SECURITIES ACT, ETC .................................................... 34
8.1. Provisions Relating to the
Convertible Notes........................................................................... 34
8.1.1. Convertible Note Register;
Ownership of Convertible Notes.................................................... 34
8.1.2. Transfer and Exchange of Notes............................................ 35
8.1.3. Restrictive Legend........................................................ 35
8.1.4. Limitation on Transfer to
Competitors....................................................................... 35
8.2. Provisions Relating to the Shares...................................................... 35
8.2.1. Restrictive Legends; Termination
of Restrictions, etc.............................................................. 35
8.2.2. Right of First Offer...................................................... 36
SECTION 9. DEFINITIONS................................................................................ 37
SECTION 10. EXPENSES, ETC.............................................................................. 48
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 11. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES............................................................................................. 48
SECTION 12. AMENDMENTS AND WAIVERS..................................................................... 48
SECTION 13. NOTICES, ETC............................................................................... 49
SECTION 14. MISCELLANEOUS.............................................................................. 50
</TABLE>
iv
<PAGE> 6
EXHIBITS
Exhibit A - Form of Convertible Note
Exhibit B - Restated Certificate
Exhibit C - Restated By-laws
Exhibit D - Registration Rights Agreement
v
<PAGE> 7
KIWI INTERNATIONAL AIR LINES, INC.
Hemisphere Center
U.S. 1 & 9 South
Newark, NJ 07114-0006
Dated as of July 1, 1996
Recovery Equity Investors II, L.P.
901 Mariner's Island Blvd.
Suite 465
San Mateo, California 94404-1592
Dear Purchaser:
KIWI International Air Lines, Inc., a New Jersey corporation ("KIWI"),
hereby agrees with you as follows:
SECTION 1. AMENDMENT AND RESTATEMENT AUTHORIZATION OF SECURITIES; ETC.
1.1. Amendment and Restatement. This Agreement amends and
restates, in its entirety, that certain Class A Convertible Preferred Stock
Purchase Agreement dated as of June 19, 1996 between KIWI and you.
1.2. Authorization of Convertible Notes. KIWI has authorized the issue
and sale on the terms and conditions of this Agreement of up to $10,000,000
aggregate principal amount of its 6% Convertible Unsecured Notes due March 15,
1997 in the form of Exhibit A hereto (the "Convertible Notes," such term to
include any such notes issued in substitution therefor pursuant to Section 8)
and such additional principal amount of Convertible Notes as may be issuable
upon conversion of shares of Preferred Stock as provided in the Restated
Certificate.
1.3. Authorization of Shares. Prior to September 1, 1996, subject to
approval by its shareholders, KIWI will authorize the issuance and sale, on the
terms and conditions of this Agreement, of that number of shares provided in
Section 2A.2 of its Class A Convertible Preferred Stock, no par value (the
"Preferred Stock"), having the relative rights, preferences and limitations set
forth in the form of Restated Certificate of Incorporation attached hereto as
Exhibit B (the "Restated Certificate").
<PAGE> 8
1.4. Capitalized Terms, etc. Certain capitalized terms used in this
Agreement are defined in Section 9; references to a "Section" or an "Exhibit"
or a "Schedule" are, unless otherwise specified, to a Section of this Agreement
or an Exhibit attached to this Agreement or to a Schedule included in the
Disclosure Schedule dated June 19, 1996 previously delivered to you.
SECTION 2. SALE AND PURCHASE OF CONVERTIBLE NOTES; GRANT
OF OPTION TO PURCHASE ADDITIONAL SECURITIES.
2.1. Convertible Notes. Subject to the terms and conditions of this
Agreement, KIWI will issue and sell to you, and you will purchase from KIWI, at
the Closing Convertible Notes in the aggregate principal amount of $2,000,000 at
a purchase price of $1,995,000 (such Convertible Notes, the "Initial Convertible
Notes").
2.2. Additional Securities. In consideration of the payment of
$5,000, KIWI will grant to you the option to purchase, on the terms and
conditions of Section 2.2.1. 2A, the Additional Securities.
2.3. Allocation of Consideration. KIWI and you will each report the
federal, state and local and other tax consequences of the purchase and sale of
the Initial Convertible Securities and the grant of the option to purchase the
Additional Securities in a manner consistent with this Section 2.
SECTION 2A. ADDITIONAL INVESTMENTS AT REI'S OPTION.
You will have the option, but no obligation, to purchase, and KIWI
will issue and sell to you, subject to the terms and conditions of this Section
2A, the following additional securities of KIWI (the "Additional Securities"):
2A.1 Convertible Notes. If you have purchased the Initial Convertible
Notes, you may elect, by written notice (an "Exercise Notice") delivered to KIWI
prior to January 1, 1997, to purchase from KIWI additional Convertible Notes in
an aggregate principal amount of $2,000,000 at a purchase price of $2,000,000
(such Convertible Notes, the "Additional Convertible Notes"). The initial
Conversion Price under the Additional Convertible Notes in effect upon the
issuance thereof shall be equal to the Conversion Price then in effect under the
Initial Convertible Notes.
2
<PAGE> 9
2A.2. Preferred Stock. If you have elected to purchase Additional
Convertible Notes in accordance with Section 2A.1, you may, by Exercise Notice
delivered to KIWI prior to March 16, 1997, elect to purchase from KIWI for an
aggregate purchase price of $6,000,000 that number of duly authorized shares of
Preferred Stock, if any, equal to the quotient obtained by dividing (a)
6,000,000 by (b) the Conversion Price in effect under the Convertible Notes at
the time of issuance of such shares of Preferred Stock in accordance with
Section 2A.4 (such shares of Preferred Stock, the "Shares").
2A.3. Convertible Notes in Lieu of Preferred Stock. (a) If you shall
elect to purchase the Shares in accordance with Section 2A.2 and the issuance of
any of the Shares would result in a breach of any Foreign Ownership Restriction
in effect at the time of such issuance (the incremental Shares resulting in such
breach, "Excess Shares"), (i) KIWI will give you written notice setting forth
the number of Excess Shares and you will not purchase, and KIWI will not sell to
you, such Excess Shares, (ii) you will be entitled to purchase at the Section 2A
Closing with respect to the Shares all of the Shares other than the Excess
Shares and (iii) you may, by Exercise Notice delivered to KIWI at or prior to
the Section 2A Closing with respect to the Shares, elect to purchase from KIWI,
in lieu of the Excess Shares, additional Convertible Notes in an aggregate
principal amount equal to the product of (x) the number of Excess Shares
multiplied by (y) the Conversion Price in effect under the Convertible Notes at
the time of the Section 2A Closing with respect to the Shares, at a purchase
price of 100% of the principal amount thereof.
(b) If you shall have elected to purchase the Shares in accordance
with Section 2A.2 and on the date a Section 2A Closing with respect thereto
would have occurred KIWI shall have failed to authorize the issuance and sale of
the Shares, you may (i) by Exercise Notice delivered to KIWI at or prior to such
Section 2A Closing, elect to purchase from KIWI, in lieu of the Shares,
additional Convertible Notes in an aggregate principal amount of $6,000,000 at a
purchase price of 100% of the principal amount thereof (such Convertible Notes
and any Convertible Notes issued pursuant to Section 2A.3(a), "Substitute
Convertible Notes"), and/or (ii) extend the maturity of all Convertible Notes to
such date on or before March 15, 2007 as you shall designate.
(c) If you purchase Substitute Convertible Notes pursuant to Section
2A.3(b) and the issuance and sale of the Shares shall be authorized thereafter,
but prior to
3
<PAGE> 10
September 1, 1996, KIWI may, by written notice delivered to you prior to
September 30, 1996, require you to convert so much of the principal amount of
such Substitute Convertible Notes as would not result in a breach of any Foreign
Ownership Restriction in effect at the time of such conversion.
(d) The initial Conversion Price under the Substitute Convertible
Notes in effect upon the issuance thereof shall be equal to the Conversion
Price then in effect under the Initial Convertible Notes.
2A.4. Section 2A Closings. (a) The closing of the purchase of any
Additional Securities (each, a "Section 2A Closing") will take place at the
principal office of KIWI at 10:00 a.m. on the 10th Business Day after the date
on which KIWI receives the applicable Exercise Notice, unless KIWI and you agree
on a different place or time.
(b) At each Section 2A Closing:
(i) KIWI will (A) deliver to you, as the case may be,(x) a Convertible
Note or Convertible Notes in the aggregate principal amount to be purchased
by you, dated the date of such Section 2A Closing (the "Section 2A Closing
Date") and registered in your name, or (y) a certificate or certificates
representing the Shares and registered in your name, (B) make to you with
respect to KIWI's issuance and sale to you of such Additional Securities the
representations and warranties contained in Sections 5.1, 5.2, 5.3, 5.7,
5.8, 5.9 (other than the last sentence of Section 5.9(b)), 5.17, 5.19 and
5.21, (C) deliver to you an Officer's Certificate, dated the Section 2A
Closing Date, setting forth such factual exceptions to the other
representations and warranties contained in Section 5 (including the last
sentence of Section 5.9(b)) as necessary for such representation and
warranties to be true and correct at the time of the Section 2A Closing and
(D) use reasonable efforts to deliver an opinion or opinions of counsel, in
form and substance satisfactory to you, covering such matters with respect
to the purchase and sale of such Additional Securities as is customary and
(E) deliver such Officer's Certificates covering such matters, and such
counterpart originals or certified or other copies of such documents, as you
may reasonably request in connection therewith; and
4
<PAGE> 11
(ii) you will (A) pay to KIWI the applicable purchase price by wire
transfer in immediately available funds to such bank account as shall be
designated by KIWI to you in writing at least 5 days prior to such Section
2A Closing, and (B) make to KIWI with respect to your purchase of such
Additional Securities the representations and warranties contained in
Section 6.
(c) You may withdraw an Exercise Notice by written notice delivered to
KIWI any time prior to the purchase and sale of the applicable Additional
Securities. KIWI's obligation to issue and sell to you the Additional Securities
at a Section 2A Closing is subject to (i) the condition set forth in Section
4.2.1 and (ii) with respect to the issue and sale of the Shares (x) the approval
of the Restated Certificate by KIWI's shareholders (voting together as a single
class and as separate classes) and (y) the purchase of the Additional
Convertible Notes by you in accordance with this Section 2A at or prior to the
issuance and sale of the Shares.
SECTION 3. CLOSING.
The sale of the Initial Convertible Notes to you shall take place at
the offices of KIWI, Hemisphere Center, U.S. 1&9 South, Newark, New Jersey, at
10:00 a.m., New York City time, at a closing (the "Closing") on July 1, 1996
(the "Closing Date"). At the Closing, (a) KIWI will deliver to you a Convertible
Note or Convertible Notes in an aggregate principal amount of $2,000,000, dated
the Closing Date and registered in your name, against payment at the Closing of
$1,995,000 by wire transfer in immediately available funds to such bank account
as shall be designated by KIWI to you in writing, and (b) in consideration of
the grant to you of the option to purchase the Additional Securites pursuant to
Section 2A, you will pay to KIWI $5,000 by wire transfer in immediately
available funds to such bank account as shall be designated by KIWI to you in
writing.
SECTION 4. CONDITIONS TO CLOSING.
4.1. Conditions to REI's Obligation to Close. Your obligation to
purchase the Initial Convertible Notes at the Closing is subject to the
fulfillment to your satisfaction (or waiver by you) at or prior to the Closing
of the following conditions:
4.1.1. Representations and Warranties. The representations
and warranties of KIWI contained in Section
5
<PAGE> 12
5 shall be true and correct when made and shall be true and correct at the time
of the Closing with the same force and effect as if they had been made at and as
of the Closing Date.
4.1.2. Compliance Certificate. KIWI shall have delivered to
you an Officer's Certificate, dated the Closing Date, certifying that the
conditions specified in this Section 4.1. have been fulfilled.
4.1.3. Opinions of Counsel. You shall have received favorable
opinions in form and substance satisfactory to you from (a) Norris, McLaughlin &
Marcus, counsel to KIWI, and (b) Debevoise & Plimpton, your special counsel in
connection with the transactions contemplated by this Agreement.
4.1.4. Purchase and Sale Permitted by Applicable Law. At
the time of the Closing, your purchase, and KIWI's issuance and sale, of the
Initial Convertible Notes shall be permitted by all laws and regulations to
which you and KIWI are subject.
4.1.5. Registration Rights Agreements. The Registration
Rights Agreement shall have been duly authorized, executed and delivered by each
of the parties thereto (other than yourself).
4.1.6. Approvals. All authorizations, approvals or permits,
if any, of any Governmental Authority that are necessary or appropriate to
permit the issue and sale of the Initial Convertible Notes, the conversion of
the Initial Convertible Notes into Conversion Shares or the issuance of such
Conversion Shares upon such conversion shall have been duly obtained and shall
be in full force and effect and shall not contain any condition or restriction
that materially impairs KIWI's ability to carry on its business as presently
conducted or that prevents or limits the transactions contemplated by this
Agreement in any material respect, except that KIWI's authority to issue any
shares of Class C Common Stock in excess of 5,250,000 authorized and unissued
shares not currently reserved for specific purposes other than issuance upon
conversion of Convertible Notes or Preferred Stock (the "Available Class C
Shares") or any shares of Preferred Stock is subject to the approval of KIWI's
shareholders of the Restated Certificate and the filing of the Restated
Certificate together with a certificate in support thereof as required by
N.J.S.A. 14A:9-5(5) with the Secretary of State of the State of New Jersey.
6
<PAGE> 13
4.1.7. No Injunction. There shall be in effect no judgment,
injunction, order or decree issued by any court of competent jurisdiction
enjoining, or imposing (or which would impose) substantial damages in connection
with the consummation of the transactions contemplated by this Agreement and
there shall not be pending any motion or similar proceeding for any such
judgment, order or decree.
4.1.8. Corporate Documents. All corporate documents and
instruments incident to the transaction contemplated hereby shall be reasonably
satisfactory in form and substance to you and your counsel, and you and your
counsel shall have received all such information and counterpart originals or
certified or other copies of such documents as you or they may reasonably
request in connection herewith.
4.1.9. Elections of Directors. Two nominees designated by
you in writing to KIWI shall have been duly elected to KIWI's Board of
Directors.
4.1.10. Outstanding Shares. You shall have received an
Officer's Certificate and a certificate of the Transfer Agent certifying as to
the total number of shares of Common Stock outstanding as of the Business Day
immediately prior to the Closing Date.
4.1.11. Insurance. KIWI shall have no reason to believe that
it will be unable to renew on or prior to July 6, 1996 its insurance coverage
pursuant to insurance policies, on terms meeting the requirements of Section
5.26 and otherwise reasonably satisfactory to you (the "Renewed Insurance
Policies").
4.1.12. Pegasus. There shall have been no (a)voluntary or
involuntary return of KIWI aircraft leased through Pegasus or (b) settlement of
any claims arising out of the facts alleged in KIWI International Air Lines,
Inc. v. Pacific Aviation Holding Co., United States District Court, District of
New Jersey, Civil Action No. 95-4922 (the "Pegasus Litigation") unless you shall
have previously consented to such return or settlement in writing.
4.1.13. Proceeds from Notes Offering. KIWI shall have
received for its unrestricted use cash proceeds of not less than $975,000 from
the Notes Offering.
4.1.14. Quiet Enjoyment. KIWI shall be enjoying peaceful
and undisturbed possession under all leases (including Aircraft Leases and Gate
Leases) necessary
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to conduct its business in all material respects in the same manner as
previously conducted, and all such leases shall be valid and subsisting and in
full force and effect.
4.2. Conditions to KIWI's Obligation to Close. KIWI's obligation to
issue and sell to you the Initial Convertible Notes at the Closing is subject to
the fulfillment to KIWI's satisfaction at or prior to the Closing of the
following condition:
4.2.1. No Injunction. There shall be in effect no judgment,
injunction, order or decree issued by any court of competent jurisdiction
enjoining, or imposing (or which would impose) substantial damages in connection
with the consummation of the transactions contemplated by this Agreement and
there shall not be pending any motion or similar proceeding for any such
judgment, order or decree.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF KIWI.
KIWI represents and warrants to you as follows:
5.1. Organization and Standing; Certificate of Incorporation and
By-Laws. KIWI is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey. KIWI has delivered to you a
complete and correct copy of its Certificate of Incorporation and By-Laws and,
in each case, all amendments to the date of this Agreement.
5.2. Qualification. KIWI is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction set forth in
Schedule 5.2 and in each other jurisdiction (other than the jurisdiction of its
incorporation) in which a failure to be so qualified would have or result in a
Material Adverse Effect.
5.3. Corporate Power. KIWI has all requisite corporate power and
authority to own and operate its assets and properties, and to conduct its
business as now conducted and, except as would not have or result in a Material
Adverse Effect, as proposed to be conducted, and to execute and deliver this
Agreement and the Registration Rights Agreement and, to perform its obligations
thereunder and consummate the transactions contemplated thereby, including, but
not limited to, the issuance and sale of the Initial Convertible Notes and any
Additional Securities and the issuance of any Conversion Shares, except that
KIWI's authority to issue any shares of Preferred Stock or shares of Class C
Common Stock in excess of the Available Class C
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Shares is subject to the approval by KIWI's shareholders of the Restated
Certificate and the filing of the Restated Certificate together with a
certificate in support thereof as required by N.J.S.A. 14 A:9-5(5) with the
Secretary of State of the State of New Jersey.
5.4. No Subsidiaries. KIWI has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
Person.
5.5. Capitalization. (a) As of the date hereof, subject to the
effectiveness of Omnibus Consent, KIWI's authorized capital stock consists of
(i) 15,000,000 shares of Class A Common Stock, no par value, (the "Class A
Common Stock") of which 1,989,078 shares are issued and outstanding, (ii)
6,000,000 shares of Class B Common Stock, no par value, (the "Class B Common
Stock") of which no shares are issued and outstanding, (iii) 10,000,000 shares
of Class C Common Stock, no par value, of which 1,770,904 shares are issued and
outstanding, (iv) 5,000,000 shares of Class D Non-Voting Common Stock, no par
value, (the "Class D Common Stock") of which no shares are issued and
outstanding. All the aforesaid issued and outstanding shares have been, subject
to the effectiveness of the Omnibus Consent, duly authorized and validly issued,
and are fully paid and nonassessable, and are owned of record and (to KIWI's
knowledge) beneficially by the stockholders and in the amounts set forth in
Schedule 5.5(a).
(b) Other than (i) the Warrants to Purchase Class A Common Stock and
Warrants to Purchase Class C Common Stock (collectively, the "Warrants") which
have been issued in the amounts set forth on Schedule 5.5(c)(i), (ii) up to
91,587 shares and a like number of warrants to be issued in connection with the
1994 Offering and (iii) pursuant to the Offerings, and subject to the
effectiveness of the Omnibus Consent, except as set forth on Schedule 5.5(c)(ii)
there are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon KIWI for the
purchase or acquisition of any shares of its capital stock, except with respect
to the Initial Convertible Notes and any Additional Securities in accordance
with the provisions of this Agreement and the Restated Certificate. To KIWI's
knowledge, no stockholder has granted options or other rights to purchase any
Common Stock from any other stockholder.
(c) KIWI holds no shares of its capital stock in its treasury. The
Common Stock and the Warrants have been
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<PAGE> 16
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended ("Securities Exchange Act").
5.6. Other Agreements. Other than the Voting Trust Agreement, the
Class A Common Stock Shareholders Agreement and the Class C Common Stock
Shareholders Agreement dated June 30, 1992 (the rights and obligations of the
parties under which have terminated and are no longer of any force or effect),
KIWI is not aware of and has not entered into any other agreement affecting the
rights or obligations of its shareholders as shareholders. KIWI has not entered
into any agreements which provide any Person with rights to demand or
participate in any registration of KIWI's common stock.
5.7. Authorization. The execution and delivery by KIWI of this
Agreement and the Registration Rights Agreement and the consummation of the
transactions contemplated thereby, including, but not limited to, the issuance
and sale of the Initial Convertible Notes and any Additional Securities and the
issuance of any Conversion Shares, have been duly authorized by all requisite
corporate action of KIWI, except that KIWI's authority to issue any shares of
Preferred Stock or shares of Class C Common Stock in excess of the Available
Class C Shares is subject to the approval by KIWI's shareholders of the Restated
Certificate and the filing of the Restated Certificate together with a
certificate in support thereof as required by N.J.S.A. 14A:9-5(5) with the
Secretary of State of the State of New Jersey. This Agreement, the Registration
Rights Agreement and the Initial Convertible Notes have been, duly executed and
delivered by KIWI. This Agreement, the Registration Rights Agreement and the
Initial Convertible Notes are legal, valid and binding obligations of KIWI
enforceable against it in accordance with their respective terms. The Additional
Convertible Notes and the Substitute Convertible Notes, if and when issued in
compliance with the provisions of this Agreement, will have been duly executed
and delivered and will be legal, valid and binding obligations of KIWI
enforceable against it in accordance with their respective terms. The Shares, if
and when issued in compliance with the provisions of this Agreement, will have
been duly authorized and validly issued, and will be fully paid, nonassessable
and free and clear of all Liens. The Conversion Shares have been duly authorized
and validly reserved for issuance and, upon issuance, will be validly issued,
fully paid, nonassessable and free and clear of all Liens, except that KIWI's
authority to issue any shares of Preferred Stock or shares of Class C Common
Stock in excess of the Available Class C Shares is subject to the approval
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<PAGE> 17
by KIWI's shareholders of the Restated Certificate the filing of the Restated
Certificate and a certificate in support thereof as required by N.J.S.A.
14A:9-5(5) with the Secretary of State of the State of New Jersey. Subject to
the effectiveness of the Omnibus Consent, no stockholder of KIWI has or will
have any preemptive right or rights of first refusal by reason of the issuance
of the Shares or any Conversion Shares.
5.8. No Conflicts. The execution, delivery and performance by KIWI of
this Agreement and the Registration Rights Agreement, and the consummation of
the transactions contemplated thereby (including, but not limited to, the
issuance and sale of the Initial Convertible Notes and any Additional Securities
and the issuance of any Conversion Shares), will not result in any violation of
or be in conflict with, or result in a breach of, or constitute a default under,
or give rise to a right of acceleration or termination under, any term or
provision of (a) KIWI's Certificate of Incorporation or By-Laws, provided that,
with respect to the issuance of any shares of Preferred Stock or shares of Class
C Common Stock in excess of the Available Class C Shares, the Restated
Certificate shall have been approved by KIWI's shareholders and filed together
with a certificate in support thereof as required by N.J.S.A. 14A:9-5(5) with
the Secretary of State of the State of New Jersey, or (b) except as disclosed on
Schedule 5.13, any Applicable Law, any Contract, the Renewed Insurance Policies,
or any other contract, agreement or commitment or judgment, decree, order or
other restriction to which KIWI is a party or by which it or any of its
properties or assets is bound, which, in the case of this clause (b), would have
or result in a Material Adverse Effect.
5.9. Business; Financial Statements. (a) KIWI has delivered to you
complete and correct copies of (i) its annual reports to stockholders for the
fiscal years ended December 31, 1993 through 1995 (the "Annual Reports") and a
year-end report for partial fiscal year ending December 31, 1992, (ii) its
annual reports on Form 10/A and Form 10-K for fiscal years ending December 31,
1994 and 1995, respectively, as filed with the SEC and any subsequent periodic
reports or filings made with the SEC (including but not limited to filings made
with respect to the Offerings)(the "Reported Forms"), and (iii) the Investment
Summary.
(b) There are included in the Reported Forms audited financial
statements of KIWI for the fiscal years ended December 31, 1994 and 1995, and
KIWI has delivered to you its audited financial statements for the
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<PAGE> 18
partial fiscal year ended December 31, 1992 and the fiscal year ended December
31, 1993 (collectively, the "Audited Financial Statements"). In each case, the
Audited Financial Statements include a balance sheet and statements of
operations, changes in stockholders' equity and cash flows and are accompanied
by an MD&A and the report thereon of Arthur Andersen LLP, independent public
accountants. KIWI has also delivered to you a complete and correct copy of its
quarterly report on Form 10-Q for the fiscal quarter ended March 31, 1996 as
filed with the Securities and Exchange Commission. The Form 10-Q contains
unaudited financial statements of KIWI for the fiscal quarter ended March 31,
1996 and KIWI has delivered to you its unaudited financial statements for the
monthly periods ended January 31, 1996 through May 31, 1996 (collectively, the
"Unaudited Financial Statements"). In each case, the Unaudited Financial
Statements include a balance sheet and statements of operations, changes in
stockholders' equity, cash flows and are accompanied by an MD&A. The Audited
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods specified and fairly present KIWI's
financial position and results of operations as of the dates and for the periods
specified. The Unaudited Financial Statements have been, and, when delivered,
the Subsequent Monthly Financial Statements will have been, prepared in all
material respects on a basis consistent with the Audited Financial Statements,
except that the Unaudited Financial Statements do not, and, when delivered, the
Subsequent Monthly Financial Statements will not, contain notes and may be
subject to normal audit adjustments. Except as disclosed to you, there are no
material liabilities of KIWI, whether contingent or otherwise, that have not
been disclosed on the Audited Financial Statements or the Unaudited Financial
Statements other than liabilities incurred since May 31, 1996 in the ordinary
course of business that, individually or in the aggregate, have not had or
resulted in, and could not reasonably be expected to have or result in, a
Material Adverse Effect.
(c) The forecasts contained in the 1996 Business Plan as superceded
for the months of June, July and August 1996 by KIWI's Revised Business Plan
June 25 Version-Base Case, previously delivered to you, have been prepared on
the basis of assumptions which KIWI believes are reasonable, reflect KIWI's good
faith projections, except as disclosed in the Disclosure Supplement, and have
been prepared on a basis consistent with GAAP applied on a basis consistent with
the Audited Financial Statements.
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5.10. Changes, etc. Since December 31, 1995, except as set forth on
Schedule 5.10 or disclosed in the Disclosure Supplement, (a) there has been no
change in the assets, liabilities or financial condition of KIWI, other than
changes in the ordinary course of business which, individually or in the
aggregate, have not had or resulted in, and could not reasonably be expected to
have or result in, a Material Adverse Effect, (b) neither the business,
operations or affairs nor any of the properties or assets of KIWI have been
affected by any occurrence or development (whether or not insured against) which
has been, either individually or in the aggregate, has had or resulted in, or
could reasonably be expected to have or result in, a Material Adverse Effect and
(c) KIWI has not directly or indirectly declared, set aside, made or paid any
dividend or other distribution in cash or other property in respect of any of
KIWI's capital stock or any direct or indirect redemption, purchase or other
acquisition of any of such stock or any warrants, options or other rights to
acquire such stock.
5.11. Tax Returns and Payments. (a) KIWI has filed all tax returns and
reports required by law to be filed by KIWI with the United States Internal
Revenue Service (the "IRS") or the State of New Jersey, Florida, Georgia or
Illinois or (except to the extent that the failure to file would not have a
Material Adverse Effect) any other jurisdiction; and, except as disclosed on
Schedule 5.11(a), KIWI has paid all taxes, assessments and other governmental
charges levied upon it or any of its properties, assets, income or franchises
which are due and payable, other than those (i) covered by the IRS Settlement
Agreement and (ii) which are not past due or are presently being contested in
good faith by appropriate proceedings diligently conducted for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
have been made. Except as disclosed on Schedule 5.11(a), no Governmental
Authority is now asserting against KIWI any deficiency or claim for additional
taxes other than as expressly provided in the IRS Settlement Agreement. Except
as disclosed on Schedule 5.11(a), KIWI has not agreed to extend the period of
assessment or collection of any taxes and has not filed any power of attorney
with respect to taxes with the IRS or any other Governmental Authority.
(b) Except as disclosed on Schedule 5.11(b), no audit by any
Governmental Authority is pending with respect to KIWI's liability for taxes.
Audits of KIWI's tax returns and reports by the relevant Governmental Authority
have been completed for each period set forth on Schedule 5.11(b).
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5.12. Indebtedness. Schedule 5.12 sets forth a complete and correct
list of KIWI's outstanding Indebtedness and commitments to incur Indebtedness,
and identifies each contract, agreement or other instrument, including all
amendments, relating thereto (collectively, the "Debt Agreements").
5.13. Required Prepayments. Except as set forth on Schedule 5.13, KIWI
will not be required as a result of the receipt of proceeds of the sale of the
Convertible Notes or the Shares or the exercise of Rights issued pursuant to the
Offerings to prepay any Indebtedness or other obligation or suffer the reduction
of any outstanding guarantee of any Person with respect to Indebtedness or other
obligations of KIWI.
5.14. Title to Properties; Liens. KIWI owns or leases all assets or
properties necessary to conduct its business as currently conducted and proposed
to be conducted. KIWI owns no real property. KIWI has a valid leasehold
interest in its leased real property, and good and sufficient title to its owned
or leased personal property, in each case, subject to no Liens except for those
specified on Schedule 5.14 and Permitted Exceptions and liens on aircraft leased
by KIWI as may be recorded with the FAA in the ordinary course of its business.
5.15. Litigation, etc. Except as set forth on Schedule 5.15 hereto,
there is no action, suit, proceeding or investigation pending or, to KIWI's
knowledge, threatened (or any basis therefor known to KIWI) which seeks to
enjoin, or questions the validity of, or seeks substantial damages in connection
with, the transactions contemplated hereby, or which, individually or in the
aggregate, could reasonably be expected to have or result in a Material Adverse
Effect.
5.16. Compliance with Other Instruments, etc. KIWI is not in violation
of any term of (i) its Certificate of Incorporation or By-Laws, or (ii) except
as set forth on Schedule 5.16 or disclosed in the Disclosure Supplement, any
other contract, agreement or other instrument to which it is a party or by which
it or any of its properties or assets is bound or any Applicable Law or
applicable order, judgment or decree of any court, arbitrator or Governmental
Authority, the consequences of which, in the case of clause (ii), individually
or in the aggregate, have had or resulted in, or could reasonably be expected to
have or result in, a Material Adverse Effect.
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5.17. Consents. None of (i) the execution, delivery nor performance of
this Agreement or the Registration Rights Agreement, (ii) the offer, issuance or
sale of the Initial Convertible Notes or any Additional Securities or the
issuance of any Conversion Shares or (iii) the consummation of any other
transaction contemplated hereby, requires any consent, approval, authorization,
license, clearance, order or permit of, or filing or registration with, or
notification or declaration to, any Governmental Authority or other Person,
except that KIWI's authority to issue any shares of Preferred Stock or shares of
Class C Common Stock in excess of the Available Class C Shares is subject to the
approval by KIWI's shareholders of the Restated Certificate the filing of the
Restated Certificate and certificate in support thereof as required by N.J.S.A.
14A:9-5(5) of with the Secretary of State of the State of New Jersey.
5.18. Permits, Licenses, Patents, Trademarks, etc. (a) KIWI has all
franchises, permits, licenses and other similar authority necessary for the
operation of the business as presently conducted, and KIWI is not in default in
any material respect thereunder.
(b) KIWI owns or possesses the right to use all patents, trademarks,
service marks, trade names and copyrights, technology, know-how and processes,
and all rights with respect to the foregoing, which are necessary for the
operation of the business as presently conducted, without any conflict known to
KIWI in any material respect with the rights of others. No material violation
exists with respect to any material patent, trademark, trade name or service
mark owned or used by KIWI (i) to KIWI's knowledge, by any Person of any right
of KIWI, or (ii) by KIWI of any right of any Person.
5.19. Securities Law Compliance. (a) The offer of the Initial
Convertible Notes and the Additional Securities has been, and the issuance and
sale of the Initial Convertible Notes and any Additional Securities will be,
made in compliance with all applicable federal and state securities laws. KIWI
has not directly or indirectly offered the Initial Convertible Notes or any
Additional Securities or any part thereof or any similar securities for sale to,
or solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, anyone other than you. The offer, issuance
and sale of the Initial Convertible Notes and any Additional Securities and the
issuance of any Conversion Shares as contemplated by this Agreement are exempt
from the
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registration requirements of the Securities Act and from any registration or
filing requirements of any applicable state securities law, and neither KIWI nor
anyone acting on its behalf will take any action hereafter that would cause the
loss of such exemption. KIWI is not required to qualify an indenture with
respect to the Convertible Notes under the Trust Indenture Act of 1939, as
amended.
(b) The offer, issuance and sale of any securities pursuant to the
Offerings and upon exercise of any Rights issued pursuant to the Offerings have
been, and will be, made in compliance with the requirements of the Securities
Act.
5.20. Use of Proceeds. KIWI will apply the proceeds of the sale of the
Initial Convertible Notes to pay past due obligations and any remaining balance
to meet current working capital needs. KIWI reasonably believes that such
proceeds will be sufficient to stabilize KIWI's relations with its obligors
under its material Contracts and permit KIWI to continue to receive in all
material respects the benefits thereunder at least through July 31, 1996. KIWI
will apply the proceeds of the sale of and any Additional Securities to pay past
due obligations and meet the then current working capital needs and any balance
remaining thereafter to strengthen its financial position, fund its growing
capital requirements and further develop its business. Schedule 5.20 sets forth
KIWI's best estimates of the application of the first $15,000,000 of cash
proceeds remaining after application in accordance with the preceding three
sentences from the sale of the Initial Convertible Notes, any Additional
Securities and the Offerings, including, but not limited to, those obligations
which will require application of such proceeds within the next twelve months.
5.21. Status Under Certain Federal Statutes. KIWI is not (a) an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, (b) a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (c) a "public utility" as such term is defined in the Federal
Power Act, as amended or (d) a "rail carrier", or a "person controlled by or
affiliated with a rail carrier" within the meaning of Title 49, U.S.C., or a
"carrier" to which 49 U.S.C. 11301(b)(1) is applicable.
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5.22. ERISA. (a) Schedule 5.22(a) sets forth a true and complete list
of each "employee benefit plan", as such term is defined in section 3(3) of the
ERISA, and each bonus, deferred compensation, severance, change of control,
stock option or other equity-based employee benefit or compensation plan,
arrangement or agreement maintained, established entered into or required to be
contributed to by KIWI (collectively, the "Plans"). No trade or business,
whether or not incorporated, would be treated as a single employer together with
KIWI at any date of determination under section 414 of the Code.
(b) No Plan is subject to section 412 of the Code or section 302 or
Title IV of ERISA.
(c) No liability has been or is expected to be incurred by KIWI
(either directly or indirectly, including as a result of an indemnification
obligation) under or pursuant to Title I or IV of ERISA or the penalty, excise
tax or joint and several liability provisions of the Code relating to employee
benefit plans.
(d) Each of the Plans has been operated and administered in all
respects in compliance with all Applicable Laws, except for any failure so to
comply that, individually or together with all other such failures, has not and
will not result in a material liability or obligation on the part of KIWI, and
has not had or resulted in, and will not have or result in, a material adverse
effect on KIWI. There are no material pending or, to the best knowledge of KIWI,
threatened claims by or on behalf of any of the Plans, by any Employee or
otherwise involving any such Plan or the assets of any Plan (other than routine
claims for benefits).
(e) The execution and delivery of this Agreement and the issue and
sale of the Initial Convertible Notes and any Additional Securities pursuant
hereto will not involve any transaction which is subject to the prohibitions of
Section 406 of ERISA or in connection with which a tax could be imposed pursuant
to Section 4975 of the Code.
5.23. Employment Agreements and Labor Issues. Except as disclosed on
Schedule 5.23, (a) KIWI is in compliance with all terms and conditions of
employment of its employees (including without limitation wages and hours); (b)
KIWI has not and is not engaged in any unfair labor practice; (c) there is no
unfair labor practice complaint against KIWI pending before the National Labor
Relations Board, the EEOC, or the New Jersey Labor Board; (d) there is no labor
strike, dispute, slowdown or stoppage
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actually pending or, to the best knowledge, information and belief of KIWI
threatened against or involving any of them; (e) no question exists respecting
the representation of employees of KIWI for labor unions or other similar
organizational purposes; and (f) KIWI is not currently bound by any collective
bargaining agreement and is not currently experiencing any material organization
effort or any work stoppage. KIWI is not involved in any material labor
dispute, nor to the knowledge of KIWI is any such dispute threatened.
5.24. Disclosure. Except as otherwise disclosed in the Schedules, the
Disclosure Supplement, none of the Annual Reports, the Investment Summary, the
Reported Forms, this Agreement or any other historical financial statement,
document, certificate or instrument delivered to you by or on behalf of KIWI in
connection with the transactions contemplated hereby, taken as a whole,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading.
5.25. Operations. (a) Schedule 5.25(a) identifies by aircraft model
and registration number KIWI's aircraft fleet and sets forth and identifies the
lessor and lease agreement, including all amendments, with respect to each such
aircraft (such leases, the "Aircraft Leases").
(b) KIWI does not hold any International Route Authority other than
those evidenced by the Scheduled Order relating to KIWI's route to Bermuda.
Other than the Scheduled Order, no orders of the DOT are currently in effect
which relate to any International Route Authorities held by KIWI.
(c) Schedule 5.25(c) sets forth all Gates held or used by KIWI and
identifies the lessor and lease agreement, including all amendments, with
respect to each Gate (such leases, the "Gate Leases").
(d) Schedule 5.25(d) identifies by address all of the KIWI's leased
real property (other than Gates) and identifies the lessor and lease agreement,
including all amendments, with respect thereto (such leases, the "Facilities
Leases").
(e) Schedule 5.25(e) identifies all of the alliance agreements KIWI
may have with other travel providers, including, without limitation, alliance
agreements
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with JAL airlines, Hertz, and Virgin Atlantic airlines (collectively, the
"Alliance Agreements").
(f) KIWI is a US Citizen and a duly certificated "air carrier" within
the meaning of the Aviation Act authorized to transport passengers and cargo in
domestic and international air transportation and certificated under Sections
401 and 604(b) of the Aviation Act. All such certificates are in full force and
effect and duly issued to KIWI by the DOT (or the Civil Aeronautics Board) and
the FAA, and KIWI has in full force and effect and duly issued to it all
licenses, permits, authorizations, certificates of compliance, certificates of
public convenience and necessity and other certificates (including, without
limitation, air carrier operating certificates and operations specifications
issued by the FAA pursuant to Part 121 of the Regulations of the FAA and all
applicable aircraft registration requirements of the FAA, including those set
forth in Part 47 of the regulations of the FAA) which are required by the DOT or
the FAA for the conduct of the Business as now conducted. There are no license
fees owed on KIWI's DOT or FAA licenses. KIWI is in compliance with all material
requirements of the certificates and authorizations issued to it by the DOT and
the FAA.
5.26. Insurance. Schedule 5.26 sets forth the insurance policies
maintained by KIWI (the "Insurance Policies") as of the date hereof. As of the
date hereof, the Insurance Policies are in full force and effect, and are free
from any right of termination on the part of the insurance carriers and such
policies, with respect to their amounts and types of coverage, are adequate to
insure fully against risks to which KIWI is normally exposed in the operation of
its business. KIWI's insurance coverage will not be adversely affected by its
decision to change insurance brokers.
5.27. Material Contracts. Except for (x) the Aircraft Leases, Gate
Leases, Facilities Leases, the Plans, the Alliance Agreements and Insurance
Policies (collectively, the "Specified Contracts") and (y) any of the following
which has been fully performed or terminated and in respect of which KIWI has no
continuing rights, obligations or liabilities, set forth in Schedule 5.27 is a
complete and correct list of: (i) each agreement, contract or commitment
relating to the employment of any officer or director by KIWI, (ii) each
agreement, indenture or other instrument pursuant to which KIWI has incurred any
restrictions with respect to the payment of dividends or any other distribution
in respect of its capital stock,
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(iii) each agreement, contract or commitment relating to capital expenditures in
excess of $100,000, (iv) each KIWI loan or advance to, or investment by KIWI in,
any Person or any agreement, contract or commitment relating to the making of
any such loan, advance or investment by KIWI, (v) each guarantee by a third
party in respect of any Indebtedness or other obligation of KIWI, (vi) each
management service, consulting or any other similar type contract, (vii) each
agreement, contract or commitment limiting the ability of KIWI to engage in any
line of business or to compete with any person, and (viii) each agreement,
contract or commitment that involves payments to or by KIWI of $100,000 or more
in any calendar year and is not cancelable by it without penalty within 30 days
(the foregoing referred to in clauses (i) through (viii), together with the
Specified Contracts are referred to collectively as the "Contracts"). Except as
set forth in the Disclosure Supplement, each of the Contracts is, in all
material respects, in full force and effect, and there exists no default or
event of default or event, occurrence, condition or act that, with the giving of
notice or the lapse of time, or both, would become a default or event of default
thereunder, other than any default or event of default that has not had resulted
in, and could not reasonably be expected to have or result in a Material Adverse
Effect.
5.28. Brokers and Finders. There is no broker or finder or other
similar person who would have any valid claim against KIWI for a fee, commission
or brokerage in connection with this Agreement or the transactions contemplated
hereby as a result of any agreement, understanding or action by KIWI other than
Acanthus Capital Group, Inc. ("Acanthus"). Other than that certain letter
agreement and related indemnity letter, each dated January 26, 1996, and an
agreement to pay Acanthus an amount equal to 3% of any consideration received by
KIWI from you in connection with the purchase of the Initial Convertible Notes
and any Additional Securities pursuant to Section 2A, no other contract,
agreement or commitment between KIWI and Acanthus exists.
5.29. Pegasus Settlement. Except as described on Schedule 5.29, as
of the date hereof, there has been no settlement of any claims arising out of
the facts alleged in KIWI International Air Lines, Inc. v. Pacific Aviation
Holding Co., United States District Court, District of New Jersey, Civil Action
No. 95-4922.
5.30. Conversion of New Notes. The New Notes are convertible into
Common Stock at KIWI's option
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contingent solely upon (i) the receipt by KIWI of $10,000,000 from REI of equity
financing and (ii) the giving of notice by KIWI. KIWI has issued an aggregate
$975,000 principal amount of New Notes pursuant to the Notes Offering and an
aggregate $1,025,000 principal amount of New Notes are unsubscribed. To KIWI's
belief, the holders of not less than an aggregate $500,000 principal amount of
such outstanding New Notes will consent to the Amended New Note Terms.
5.31. Regulations G, T, X and U. The issue and sale of the
Convertible Notes will not violate Regulation G, T, X or U of the Board of
Governors of the Federal Reserve System.
SECTION 6. PURCHASER'S REPRESENTATIONS.
You represent and warrant to KIWI as follows:
6.1. Investment. You are purchasing the Initial Convertible Notes for
your own account for investment and not with a view to or for sale in connection
with any distribution thereof that would be in violation of the Securities Act,
provided that the disposition of your property shall at all times be within your
control.
6.2. Securities Law Matters. You understand that the Initial
Convertible Notes (and any Conversion Shares that may be issued upon conversion
of the Initial Convertible Notes) have not been registered under the Securities
Act.
6.3. Rule 144. You acknowledge that the Initial Convertible Notes to
be purchased by you must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
You have been advised or are aware of the provisions of Rule 144 promulgated
under the Act, which permits limited resale of securities purchased in a private
placement subject to the satisfaction of certain conditions and that such Rule
may not become available for resale of the Initial Convertible Notes.
6.4. Accredited Investor, etc. You are an "accredited investor" within
the meaning of Rule 501 promulgated under the Securities Act and were not
organized for the specific purpose of acquiring the Shares. You have sufficient
knowledge and experience in investing in companies similar to KIWI in terms of
KIWI's stage of development so as to be able to evaluate the risks and
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merits of your investment in KIWI and you are able financially to bear the risks
thereof. You have had an opportunity to discuss KIWI's business, management and
financial affairs with KIWI's management. To your knowledge, you would be
considered an "institutional buyer" within the meaning of Section 359-e(1)(a) of
Article 23-A of the New York General Business Law.
SECTION 7. COVENANTS.
7.1. Covenants of KIWI. KIWI hereby covenants
and agrees as follows:
7.1.1. Debt Offering. KIWI will use its commercially
reasonable efforts to raise $10 million, or more, in an offering of subordinate
debt securities from a major aircraft manufacturer on terms reasonably
satisfactory to you and KIWI.
7.1.2. Restated Certificate, Omnibus Consent; By-laws.
KIWI will submit the Restated Certificate and Omnibus Consent for approval at
the annual shareholders meeting and recommend its approval to such shareholders.
Upon such approval, KIWI shall duly file the Restated Certificate with the
Secretary of State of New Jersey. KIWI will submit the Restated By-laws for
approval at a special meeting of the Board of Directors and recommend its
approval to the Board of Directors.
7.1.3. Limitations on Offerings; Notes Offering. (a)
KIWI will use its best efforts to complete the Offerings by October 15, 1996.
KIWI will not make any other offering of KIWI's securities or rights to acquire
KIWI's securities in exchange for, or in connection with the compromise of, the
claims of the holders of KIWI's 8% 3-Year Capital Notes or stock purchase
warrants or to KIWI's employees solicited in the Offerings with respect to the
claims of such employees addressed in the Offerings.
(b) KIWI will offer the unsubscribed principal amount of New Notes
only upon amended terms extending the maturity thereof to March 15, 1997 and
providing for the conversion of such New Notes at KIWI's option upon the receipt
of $10,000,000 additional debt or equity financing from any source (the "Amended
New Note Terms"). KIWI will, in compliance with applicable federal and state
securities laws, seek the agreement of all holders of outstanding New Notes to
amend the terms of such New Notes to adopt the Amended New Note Terms. KIWI will
use its commercially reasonable efforts to complete the offering of the amended
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New Notes and the solicitation of consents to the Amended New Note Terms by July
31, 1996.
7.1.4. Employee Stock Plans. (a) KIWI will not make
grants under the Employee Stock Plans in excess of the following:
(i) In any fiscal year, the number of shares of common stock issuable
pursuant to grants made in such year under the Employee Stock Plans (other
than shares issued pursuant to the Offerings) at a consideration per share
less than the fair market value of a share of common stock at the time of
such grants shall not exceed in the aggregate (x) in the case of fiscal year
1996, 2% of the then-outstanding shares of common and preferred stock and
(y) in the case of each fiscal year thereafter, 1% of the then-outstanding
shares of common and preferred stock.
(ii) At no time shall the number of shares of common stock issued and
issuable pursuant to grants made under the ISOP exceed in the aggregate
10% of the then-outstanding shares of common and preferred stock.
(iii) The total number of shares issued and issuable pursuant to
grants made under the SPP (other than shares issued pursuant to the
Offerings) will not exceed 1,000,000.
(b) Until the occurrence of a Qualifying Public Offering, except
pursuant to the Offerings and the Additional Offering, if any, KIWI will not, at
any time,(i)issue any shares of common stock issuable pursuant to grants made
under the Employee Stock Plans at a price per share below the Conversion Price
in effect at the time of such grant or (ii) grant pursuant to the Employee Stock
Plans any options, warrants or other rights to acquire shares of common stock at
a price per share below the Conversion Price in effect at the time of such
grant.
(c) Prior to a Qualifying Public Offering, KIWI will not, without your
prior written consent, enter into any stock purchase plan, any incentive stock
option plan or any other type of equity-based compensation plan other than the
Employee Stock Plans.
7.1.5. No Solicitation. (a) Except as provided in
this Section 7.1.5, so long as you hold any Convertible Notes, (i) neither
KIWI nor its officers or directors, nor KIWI's authorized representatives or
agents,
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will solicit, directly or indirectly, or enter into any discussions,
negotiations or sharing of information with any Person with respect to, any
Specified Transaction except, subject to Section 7.1.21, a Qualified Transaction
with a Qualified Person and (ii) KIWI will not enter into any Specified
Transaction except, subject to Section 7.1.21, a Qualified Transaction with a
Qualified Person.
(b) Subject to Section 7.1.21, KIWI will use its best efforts to
locate and solicit Qualified Persons to invest on the same terms as provided in
this Agreement (except that KIWI shall not issue shares of Preferred Stock in
any such transaction) or on terms no more favorable to such Qualified Persons (a
"Qualified Transaction"). KIWI will keep you fully informed of all contacts
made, and the progress of all discussion, with potential investors pursuant to
this Section 7.1.5(b).
(c) For purposes of this Section 7.1.5, "Qualified Person" means a
legitimate, reputable Person that is either (i) a US Citizen or (ii) engaged in
a Qualified Transaction that will not impair as a result of Foreign Ownership
Restrictions (x) your ability to hold or acquire the Shares or any Conversion
Shares or (y) your rights to representation on KIWI's Board of Directors
pursuant to Sections 7.8 and 7.3.7 or, as a holder of Preferred Stock, pursuant
to the Restated Certificate.
7.1.6. Inspection. For so long as you are the holder of
Registrable Shares representing 10% or more of KIWI's total common stock on an
as-converted basis, KIWI will, upon reasonable notice, give any authorized
representatives designated by you full access during normal business hours to
visit and inspect any of the properties of KIWI, including the books of account
of KIWI, and to make copies and take extracts therefrom, and to discuss KIWI's
affairs, finances and accounts with its officers and independent public
accountants (and by this provision KIWI authorizes such accountants to discuss
with such representatives the affairs, finances and accounts of KIWI). You
agree not to interfere with Kiwi's normal operations during any inspection by
you or your representatives. KIWI will keep you regularly informed as to the
affairs of its business. You shall keep confidential any confidential or
proprietary information obtained pursuant to this Section 7.1.6, provided that
you shall not be obligated to keep confidential information that is or becomes
public knowledge other than through you or your representatives or agents, (b)
is or becomes available on an unrestricted basis from a source other than KIWI,
or (c) is required to be disclosed
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pursuant to court order or government action or otherwise by Applicable Law;
provided, however, that you will notify KIWI, if possible, prior to any such
disclosure in order to provide KIWI with a reasonable opportunity to challenge
such disclosure obligation.
7.1.7. Financial Statements. So long as you hold any
Convertible Notes, Shares or Conversion Shares, KIWI will deliver to you (i) on
or before the 21st day of each month, unaudited financial statements of the
business as at and for the monthly period ending the last day of the preceding
month (the "Subsequent Monthly Financial Statements"), which shall include a
balance sheet and statements of income, cash flows and shall be accompanied by
an MD&A, and (ii) promptly after filing, any Reported Forms filed with the SEC
subsequent to the date of this Agreement. At the time that the Subsequent
Monthly Financial Statements and such Reported Forms are delivered to you, KIWI
shall, by such delivery, be deemed to have made the representations and
warranties to you with respect to such Subsequent Monthly Financial Statements
and such Reported Forms set forth in Section 5.9.
7.1.8. Election of Directors. (a) For so long as you or
any affiliate wholly-owned by you or any of your partners in REI (each, an "REI
Holder") hold any Convertible Notes or any Conversion Shares and no shares of
Preferred Stock have been issued pursuant to Section 2A.2 or upon conversion of
any Convertible Notes, KIWI will cause to be nominated for director (i) at each
general election of directors after the Closing and prior to January 1, 1998,
two nominees designated in writing to KIWI by the holder or holders of 60% of
the Conversion Shares held, or issuable upon conversion of Convertible Notes
held, by REI Holders and (ii) thereafter, three nominees designated in writing
to KIWI by the holder or holders of 60% of such Conversion Shares, and (iii) as
necessary to fill any vacancy upon the death, resignation or removal of any such
nominee, such nominee or nominees as are designated by the holders of 60% of
such Conversion Shares; provided that, notwithstanding the foregoing, from and
after the occurrence of a Qualifying Public Offering, (A) the number of
directors which may be designated pursuant to this Section 7.1.8(a) shall not
exceed (x) two directors, if the Conversion Shares held, or issuable upon
conversion of Convertible Notes held, by REI Holders constitute less than 20% of
KIWI's outstanding Common Stock (assuming conversion of all Convertible Notes)
and (y) one director, if the Conversion Shares held, or issuable upon conversion
of Convertible Notes held, by REI Holders constitute less than 10% of KIWI's
outstanding
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Common Stock (assuming conversion of all Convertible Notes) and (B) such rights
to designate directors pursuant to this Section 7.1.8(a) shall terminate at such
time as Conversion Shares held, or issuable upon conversion of Convertible Notes
held, by REI Holders constitute less than 5% of KIWI's outstanding Common Stock
(assuming conversion of all Convertible Notes).
(b) If shares of Preferred Stock have been issued pursuant to Section
2A.2 or upon conversion of Convertible Notes and any such shares have been
converted into shares Class C Common Stock ("Class C Conversion Shares") and,
pursuant to the Restated Certificate, the holders of Preferred Stock are no
longer entitled to vote as a class for the election of directors, then for so
long as any Class C Conversion Shares are held by any REI Holder, KIWI will
cause to be nominated for director (i) at each general election of directors
after the Closing and prior to January 1, 1998, two nominees designated in
writing to KIWI by the holder or holders of 60% of the Class C Conversion Shares
held, or issuable upon conversion of Convertible Notes or Shares held, by REI
Holders and (ii) thereafter, three nominees designated in writing to KIWI by the
holder or holders of 60% of the Class C Conversion Shares held, or issuable upon
conversion of Convertible Notes or Shares held, by REI Holders, and (iii) as
necessary to fill any vacancy upon the death, resignation or removal of any such
nominee, such nominee or nominees as are designated by the holders of 60% of the
Class C Conversion Shares held, or issuable upon conversion of Convertible Notes
or Shares held, by REI Holders; provided that, notwithstanding the foregoing,
from and after the occurrence of a Qualifying Public Offering, (A) the number of
directors which may be designated pursuant to this Section 7.1.8(b) shall not
exceed (x) two directors, if the Class C Conversion Shares held, or issuable
upon conversion of Convertible Notes or Shares held, by REI Holders constitute
less than 20% of KIWI's outstanding Common Stock (assuming conversion of all
shares of Preferred Stock, including shares of Preferred Stock issued or
issuable upon conversion of Convertible Notes, and Convertible Notes) and (y)
one director, if the Class C Conversion Shares held, or issuable upon conversion
of Convertible Notes or Shares held, by REI Holders constitute less than 10% of
KIWI's outstanding Common Stock (assuming conversion of all shares of Preferred
Stock, including shares of Preferred Stock issued or issuable upon conversion of
Convertible Notes, and Convertible Notes) and (B) such rights to designate
directors pursuant to this Section 7.1.8(b) shall terminate at such time as
Class C Conversion Shares held, or issuable upon conversion of
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Convertible Notes or Shares held, by REI Holders constitute less than 5% of
KIWI's outstanding Common Stock (assuming conversion of all shares of Preferred
Stock, including shares of Preferred Stock issued or issuable upon conversion of
Convertible Notes, and Convertible Notes); and provided, further, that any
Specified Director serving as a director at the time the right to designate
directors pursuant to this Section 7.1.8(b) arises shall, until the expiration
of such director's term or earlier death, resignation or removal, be deemed to
have been designated pursuant to this Section 7.1.8(b) in satisfaction of the
provisions hereof.
(c) For the purposes of Section 7.1.8(b), "Specified Director" means
any director (i) elected pursuant to Section 4.1.9 or Section 7.1.8(a), (ii)
elected or designated pursuant to the Restated Certificate by the holders of the
Preferred Stock voting as a class , (iii) appointed pursuant to paragraph (c) of
Article Sixth of the Restated Certificate on or before January 1, 1998 by
directors described in the preceding clause (ii) or (iv) elected pursuant to the
Restated Certificate by a majority of directors then serving who have been
elected or appointed in the manner described in any of the preceding clauses
(i), (ii) or (iii) to fill any vacancy created by any director elected or
appointed in such manner.
7.1.9. Public Announcements. Except as required by
Applicable Law, KIWI will not, and will not authorize any Person on its behalf
to, make any public announcements in respect of this Agreement or the
transactions contemplated hereby without your prior written consent except
that KIWI may describe the general terms of the transaction in its offering
materials relating to the Offerings, except that KIWI shall not identify you in
any such materials without your prior written consent, which shall not be
unreasonably withheld.
7.1.10. Further Actions. (a) KIWI agrees to use all
reasonable good faith efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated
hereby.
(b) KIWI will, as promptly as practicable, file or supply, or cause to
be filed or supplied, all applications, notifications and information required
to be filed or supplied by KIWI pursuant to Applicable Law in connection with
this Agreement and the consummation of the transactions contemplated hereby.
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7.1.11. Weekly Reports. So long as you hold any Convertible Notes,
KIWI will deliver to you on or before Tuesday of each week: (a) a report showing
the aging of KIWI's payables outstanding at the close of business on the last
Business Day of the prior week, including identification of each payable in
excess of $50,000 and outstanding for more than 90 days, together with a summary
of any actions taken during such prior week by any creditor with respect to
KIWI's outstanding payables,(b) a report of flight bookings for such prior week
and for the corresponding week of the prior month and the prior year and (c) a
summary of any material changes in business or assets.
7.1.12. Other Board Rights, etc. Prior to a Qualifying Public
Offering, KIWI will not enter into any voting trust, shareholders agreement or
other contract, agreement or commitment providing for, or otherwise grant to any
shareholders any rights regarding, the nomination or election of Directors,
except (a) as provided herein and in the Restated Certificate, (b) rights
granted to holders of Common Stock who are employees of KIWI (the "Employee
Shareholders") providing for the designation of one nominee director for each
10% (or part thereof) of KIWI's outstanding Common Stock held by Employee
Shareholders at the time of such designation, and (c) as approved by KIWI's
Board of Directors, including a majority of the REI Directors.
7.1.13. Actions by July 31, 1996. KIWI will use commercially
reasonable efforts to deliver to you not later than July 31, 1996, and in any
event will deliver to you not later than September 15, 1996, the following, each
in form and substance reasonably satisfactory to you:
(a) NJEDA Guaranty. A written waiver and agreement from the
New Jersey Economic Development Authority (the "NJEDA") (i) waiving (A)
any reduction of the NJEDA guaranty amounts in connection with the
transactions contemplated hereby and (B) any existing KIWI defaults with
respect to any guaranty provided by the NJEDA for the benefit of KIWI
and (ii) agreeing to (A) postpone until the first anniversary of the
Closing Date any scheduled reduction in (x) its guaranty in the current
amount equal to 90% of $1,000,000 made in connection with the Loan and
Security Agreement dated October 23, 1992, as amended, by and between
KIWI and Summit Bank, (y) its guaranty in the current amount of $300,000
relating to a 1995 loan from Summit Bank and (z) its guaranty in the
current amount equal to 84% of $1,700,000 relating to
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a bond issued by Mountbatten Surety Company for the benefit of KIWI in
favor of the Airlines Reporting Corporation, (B) reduce the aggregate
amounts of such guarantees (as reduced from time to time in accordance
with this clause (ii), the "Aggregate Guarantee Amount") not more
frequently than each anniversary of the Closing Date and by no more than
$1 million on each of the first, second and third anniversary of the
Closing Date and (C) continue to make the Aggregate Guarantee Amount
available for such purposes or for additional or replacement bank credit
facilities approved by the NJEDA.
(b) Operating Plan. A descriptive operating and strategic
plan for fiscal years 1996 through and including 1999, supporting the
1996 Business Plan.
(c) Hush-Kitting. A written plan for the hush-kitting of
aircraft (the "Hush-Kitting Plan") in order to comply with Stage 3 noise
pollution directives by January 1, 1997.
(d) IRS Settlement. The written confirmation of the IRS that
the total outstanding amount payable in respect of the IRS Settlement
Agreement is not more than $2.3 million (including penalties) and a
sufficient amount of penalties including therein shall be abated so as
to make the total outstanding amount payable in respect of the IRS
Settlement Agreement not more than $1.5 million upon payment in full of
such amount.
(e) Return Condition Schedule. A schedule detailing, with
respect to each Aircraft Lease: (a) the return conditions contained in
such Aircraft Lease, (b) current forecasts for performing all relevant
maintenance items, including without limitation "C" - Checks, "D" -
Checks and required engine overhauls, (c) costs additional to those
reflected in the 1996 Business Plan, if any, resulting from KIWI's
compliance with the return conditions of such Aircraft Lease, and (e) to
the extent any early termination of an Aircraft Lease is contemplated,
an estimate of all amounts owing, including without limitation,
liquidated damages owing under such Aircraft Lease, on account of such
early termination.
7.1.14. Hush-Kitting Plan. KIWI will comply in all material respects
with the Hush-Kitting Plan.
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7.1.15. Renewed Insurance. KIWI will enter into the Renewed
Insurance Policies on or before July 6, 1996 and will keep the Renewed Insurance
Policies in full force and effect.
7.1.16. Pegasus. KIWI will not, without your prior written consent,
voluntarily return any of the KIWI aircraft leased through Pegasus or settle any
claims arising out of the facts alleged in the Pegasus Litigation.
7.1.17. Certain Securities Matter. KIWI will take all such actions
as you may reasonably request with respect to KIWI's prior issuance of
securities.
7.1.18. Reservation and Authorization of Conversion Shares. (a) KIWI
will reserve and keep available for issuance upon conversion of Convertible
Notes:
(i) at all times prior to the effectiveness of the Restated
Certificate, such number of its authorized but unissued shares of
Class C Common Stock as would be sufficient to permit the conversion
of an aggregate principal amount of Convertible Notes equal to the
amount, if any, by which (A) $4 million exceeds (B) the aggregate
principal amount of Convertible Notes previously converted into
Conversion Shares, provided that, if your option to purchase the
Additional Convertible Notes shall have expired unexercised, the
amount specified in the preceding clause (A) will be reduced,
effective the date of such expiration, to $2 million; and
(ii) at all times from and after the effectiveness of the
Restated Certificate, in addition to the shares of Preferred Stock
reserved for issuance pursuant to Sections 7.1.18(b), such number of
its authorized but unissued shares of Preferred Stock as would be
sufficient to permit the conversion of an aggregate principal amount
of Convertible Notes equal to the amount if any by which (A) $10
million exceeds (B) the aggregate principal amount of Convertible
Notes previously converted into Conversion Shares, provided that (x)
if your option to purchase Additional Convertible Notes shall have
expired unexercised, the amount specified in the preceding clause (A)
will be reduced, effective the date of such expiration, to $2 million
and (y) if the Additional Convertible Notes shall have been issued
pursuant to Section 2A and either you shall have purchased Shares or
Substitute Convertible Notes or your option to do
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so shall have expired unexercised, then the amount specified in the
preceding clause (A) will be reduced, effective the date of the issuance of
such Shares and/or Substitute Convertible Notes or of the expiration of
your option to purchase such Additional Securities, to $4 million plus the
aggregate principal amount of any Substitute Convertible Notes issued.
(b) At all times from and after the effectiveness of the Restated
Certificate until the issuance of the Shares, or expiration of your option to
purchase the Shares, pursuant to Section 2A, in addition to the shares of
Preferred Stock reserved for issuance pursuant to Section 7.1.18(a)(ii), KIWI
will reserve and keep available for issuance such number of shares of Preferred
Stock as would be issuable upon exercise of your option to purchase the Shares.
(c) At all times from and after the effectiveness of the Restated
Certificate, KIWI will reserve and keep available for issuance upon conversion
of Preferred Stock such number of its authorized but unissued shares of Class C
Common Stock as would be sufficient to permit the conversion of all outstanding
shares of Preferred Stock and all shares of Preferred Stock reserved for
issuance pursuant to Sections 7.1.18(a)(ii) and (b).
(d) Before taking any action which would cause an adjustment reducing
the Conversion Price, KIWI will take any corporate action which may be necessary
in order that KIWI may be in compliance with this Section 7.1.18.
7.1.19. Limitation on Foreign Ownership. So long as any Convertible
Notes or Shares are outstanding or any REI Holder holds any Conversion Shares,
KIWI will not issue or sell, or permit a transfer, to any Person that is not a
US Citizen of (a) any equity securities of KIWI, if, as a result of such
issuance, sale or transfer, Persons who are not US Citizens would hold equity
securities of KIWI (other than any Shares or Conversion Shares), representing in
the aggregate more than 10% of KIWI's total outstanding equity, or (b) any
options or warrants to acquire any equity securities of KIWI, or any security
convertible into equity securities of KIWI unless a condition to the exercise or
conversion thereof is that the issuance of any equity securities of KIWI upon
such exercise or conversion would not impair as a result of Foreign Ownership
Restrictions (i) your ability to hold or acquire the Shares or any Conversion
Shares or (ii) your rights to representation on KIWI's Board of Directors
pursuant to Sections 7.1.8 and 7.3.3 or, as a
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holder of Preferred Stock, pursuant to the Restated Certificate.
7.1.20. Consultants. KIWI will engage through December 31, 1996 and
subject to such services being available on commercially reasonable terms (a)
SH&E to provide consulting services relating to yield management through Don
Garvett and (b) Price Waterhouse to provide financial consulting services
through Mike Cox, in each case, it being understood that such engagement by KIWI
will not prevent you from also engaging such consultants.
7.1.21. Limitation on Corporate Transactions. Prior to the date on
which the Restated Certificate shall have been approved by KIWI's shareholders
and filed together with a certificate in support thereof as required N.J.S.A.
14A:9-5(5) with the Secretary of State of the State of New Jersey, KIWI will not
engage in, and KIWI's Board of Directors will not approve, any transaction
(each, a "Specified Corporate Transaction")(a) which would impair your right to
have issued to you (i) the Shares, (ii) any shares of Preferred Stock issuable
(assuming due authorization of the Preferred Stock) upon the conversion of the
Initial Convertible Notes and any other Convertible Notes which you have been
granted the option to purchase pursuant to Section 2A and (iii) any shares of
Class C Common Stock issuable upon conversion of the shares of Preferred Stock
referred to in the preceding clauses (i) and (ii), (b) any transaction with any
Person that would constitute a "Business combination" as defined in N.J.S.A.
14A:10A-3 if such Person were an "Interested stockholder" as defined in N.J.S.A.
14A:10A-3, or (c) involving the issuance, of shares of Class C Common Stock or
requiring that any shares of Class C Common Stock be reserved for issuance
unless such transaction referred to in this clause (c) is conditioned upon the
effectiveness of the Restated Certificate.
7.2. Covenants of REI. You hereby covenant and agree as follows:
7.2.1. Public Announcements. Except as required by
Applicable Law, you will not, and will not permit any Person on your behalf to,
make any public announcements in respect of this Agreement or the transactions
contemplated hereby without the prior written consent of KIWI.
7.2.2. Further Actions. (a) You agree to use all
reasonable good faith efforts to take all actions
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and to do all things necessary, proper or advisable to consummate the
transactions contemplated hereby.
(b) You will, as promptly as practicable, file or supply, or cause to
be filed or supplied, all applications, notifications and information required
to be filed or supplied by you pursuant to Applicable Law in connection with
this Agreement and the consummation of the transactions contemplated hereby.
7.2.3. Election of Directors. For so long as any
Conversion Shares are held by any REI Holder and a Qualifying Public Offering
has not occurred, such holder or holders will vote their Conversion Shares
(other than shares of Preferred Stock, unless, pursuant to the Restated
Certificate, the holders of Preferred Stock are no longer entitled to vote as a
class for the election of directors) for the nominees for three director
positions nominated by the Directors of KIWI's Board of Directors (other than
the REI Directors).
7.3. Covenants of the Voting Trustees. The Voting Trustees hereby
covenant and agree as follows:
7.3.1. Termination of Voting Trust. The Voting Trustees
will not consent to any extension of the life of the Voting Trust beyond
December 31, 1997.
7.3.2. Restated Certificate and Omnibus Consent. The
Voting Trustees will vote for the approval of the Restated Certificate and the
Omnibus Consent at the annual meeting of KIWI's shareholders.
7.3.3. Election of Directors. If the REI Holders are
entitled to designate directors pursuant to Section 7.1.9(a) or (b) and a
Qualifying Public Offering has not occurred, the Voting Trustees will nominate
and vote for (a) at each general election of Directors of KIWI after the Closing
and prior to January 1, 1998, the two nominees (or such lesser number as the REI
Holders may be entitled to designate pursuant to Sections 7.1.9(a) or (b), as
the case may be) designated in writing by the REI Holders pursuant to Section
7.1.9(a) or (b), as the case may be, and (b) as necessary to fill any vacancy
upon the death, resignation or removal of any such nominee, such nominee or
nominees as designated in writing by the REI Holders pursuant to Section
7.1.9(a) or (b), as the case may be.
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7.3.4. Limitation on Corporate Transactions. Prior to the
date on which the Restated Certificate shall have been approved by KIWI's
shareholders and filed together with a certificate in support thereof as
required N.J.S.A. 14A:9-5(5) with the Secretary of State of the State of New
Jersey, the Voting Trustees will not approve any Specified Corporate
Transaction.
7.3.5. Public Announcements. Except as required by
Applicable Law, the Voting Trustees will not, and will not authorize any Person
on their behalf to, make any public announcements in respect of this Agreement
or the transactions contemplated hereby without your prior written consent.
7.3.6. No Solicitation. So long as you hold any
Convertible Notes, neither the Voting Trust nor its trustees, nor its authorized
representatives or agents, will solicit, directly or indirectly, or enter into
any discussions, negotiations or sharing of information with any Person with
respect to any Specified Transaction, except with a Qualified Person in respect
of a Qualified Transaction.
7.4. Mutual Covenant. KIWI and you each hereby covenant and agree to
cooperate in the negotiation of, and to use all reasonable efforts to conclude,
appropriate amendments on mutually satisfactory terms to this Agreement, the
form of Convertible Note, the Restated Certificate, the Restated By-laws and any
other related document delivered or to be delivered in connection herewith if
necessary to ensure that neither your ownership, nor ownership by any other REI
Holder or permitted transferee, of the Initial Convertible Notes, any Additional
Securities and any Conversion Shares, nor the right of the REI Holders to
representation on KIWI's Board of Directors pursuant to Sections 7.1.8 and 7.3.3
or, as a holder of Preferred Stock, pursuant to the Restated Certificate,
results in a breach by KIWI of any Foreign Ownership Restriction.
SECTION 8. REGISTER OF CONVERTIBLE NOTES; RESTRICTIONS ON
TRANSFER OF SECURITIES; REGISTRATION UNDER
SECURITIES ACT, ETC.
8.1. Provisions Relating to the Convertible Notes. The following
provisions shall apply to the Convertible Notes:
8.1.1. Convertible Note Register; Ownership
of Convertible Notes. KIWI will keep at its principal
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office a register in which KIWI will provide for the registration of the
Convertible Notes and the registration of transfers of the Convertible Notes.
KIWI may treat the Person in whose name any Convertible Note is registered on
such register as the owner thereof for the purpose of receiving payment of the
principal and interest on such Convertible Note and for all other purposes,
whether or not such Convertible Note shall be overdue, and KIWI shall not be
affected by any notice to the contrary. All references in this Agreement to a
"holder" of any Convertible Note shall mean the Person in whose name such
Convertible Note is at the time registered on such register.
8.1.2. Transfer and Exchange of Notes. Upon surrender of any
Convertible Note for registration of transfer or for exchange to KIWI at its
principal office, KIWI at its expense will execute and deliver in exchange
therefor a new Convertible Note or Convertible Notes in denominations of at
least $100,000 (except one Note may be issued in a lesser principal amount if
the unpaid principal amount of the surrendered Note is not evenly divisible by,
or is less than, $100,000), as requested by the holder or transferee, which
aggregate the unpaid principal amount of such surrendered Convertible Note,
registered as such holder or transferee may request, dated so that there will be
no loss of interest on such surrendered Convertible Note and otherwise of like
tenor.
8.1.3. Restrictive Legend. Each Convertible Note issued upon
registration of transfer or exchange shall be stamped or otherwise imprinted
with the restrictive legend contained on the form of Convertible Note attached
as Exhibit A hereto.
8.1.4. Limitation on Transfer to Competitors. You will not,
without the prior consent of KIWI's Board of Directors, transfer any Convertible
Notes to any industry competitor of KIWI, unless KIWI's Board of Directors has
already approved the issuance or sale to such industry competitor of other debt
or equity securities of KIWI, or to any Person other then a legitimate,
reputable Person, that is either (i) a U.S. Citizen or (ii) the transfer to
which of such Convertible Notes will not result in a breach of any Foreign
Ownership Restriction in effect at the time of such transfer.
8.2. Provisions Relating to the Shares. The following provisions
shall apply to the Shares and any Conversion Shares if and when issued:
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8.2.1. Restrictive Legends; Termination of
Restrictions, etc. Each instrument or certificate representing the Shares or
any Conversion Shares and each instrument or certificate issued in substitution
therefor or upon transfer thereof shall be stamped or otherwise imprinted with
the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES THAT MAY BE
ISSUED UPON THE CONVERSION OF SUCH SHARES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE
SAME IS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS, IN THE REASONABLE OPINION OF THE COMPANY'S COUNSEL, AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN THAT CERTAIN CLASS A CONVERTIBLE NOTE PURCHASE AND
OPTION AGREEMENT DATED AS OF JULY 1, 1996 TO WHICH THE COMPANY IS A PARTY.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER OF THIS CERTIFICATE
PROMPTLY FOLLOWING WRITTEN REQUEST DELIVERED TO THE COMPANY.
8.2.2. Right of First Offer. (a) Prior to
the earlier of (i) the sixth anniversary of the Closing Date and (ii) the
occurrence of a Qualifying Public Offering, before transferring any Shares or
Conversion Shares have been converted to a third party (other than an affiliate
wholly-owned by you or any of your partners in REI), you will offer such shares
(the "Offered Shares") to KIWI at a specified price and on specified material
terms in a written notice (such notice, the "Offer Notice").
(b) KIWI may, by written notice given to you (an "Acceptance"), within
30 days after receipt of the Offer Notice, elect to purchase all, but not less
than all, of the Offered Shares for the purchase price specified in the Offer
Notice ("Offer Purchase Price") and on the payment terms set forth in the Offer
Notice (or, at your option, for a payment of the Offer Purchase Price in cash).
Acceptance will constitute KIWI's irrevocable agreement to purchase the Offered
Shares. A closing of the purchase of the Offered Shares shall take place at the
principal office of KIWI at 10:00 a.m. on the 40th Business Day after the date
on which KIWI received the Offer Notice, unless KIWI and you agree on a
different place or time.
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(c) You may not transfer any shares during the 30-day period
immediately following KIWI's receipt of the Offer Notice unless you shall have
received KIWI's written notice that it shall not elect to purchase the Offered
Shares (a "No-Exercise Notice"). If KIWI does not elect to purchase the Offered
Shares as provided in Section 8.2(b), you may, subject to applicable law, sell
the Offered Shares to a third party for not less than the Offer Purchase Price
and on terms not materially different from the terms specified in the Offer
Notice, provided such sale is completed within 180 days after the earlier to
occur of (i) your receipt of a No-Exercise Notice and (ii) 30 days after KIWI's
receipt of the Offer Notice.
SECTION 9. DEFINITIONS.
As used herein the following terms have the following respective
meanings:
Acanthus: the meaning specified in Section 5.28.
Acceptance: the meaning specified in Section 8.2.2(b).
Additional Securities: the meaning specified in Section 2A.
Additional Convertible Notes: the meaning specified in 2A.1.
Aggregate Guarantee Amount: the meaning specified in Section
7.1.13(a).
Agreement: this Convertible Note Purchase and Option Agreement, dated
as of July 1, 1996, between you and KIWI.
Aircraft Lease: the meaning specified in Section 5.25(a).
Alliance Agreements: the meaning specified in Section 5.25(e).
Amended New Note Terms: the meaning specified in Section 7.1.3(b).
Annual Reports: the meaning specified in Section 5.9(a)
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Applicable Law: all applicable laws (including, without limitation,
any Environmental Laws), treaties, judgements, decrees, injunctions, writs and
orders of any court, governmental agency or authority and rules, regulations,
orders, directives, licenses and permits of any governmental body,
instrumentality, agency or authority and all interpretations, implementations
and enforcement of any of the foregoing, whether or not enforceable as a matter
of law, by any court, government body, instrumentality agency or authority.
Audited Financial Statements: the meaning specified in Section 5.9
(b).
Available Class C Shares: the meaning specified in Section 4.1.6.
Aviation Act: the Federal Aviation Act of 1958, as amended from time
to time, or any similar legislation of the United States enacted in substitution
or replacement thereof.
Business Day: any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City are required or authorized by law to be
closed.
Capital Lease: a lease that would be capitalized on a balance sheet
of the lessee prepared in accordance with GAAP.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601 et seq.
Class A Shareholders Agreement: the Shareholders Agreement dated
October 1, 1992 relating to the holders of Class A Common Stock of KIWI.
Class A Common Stock: the meaning specified in 5.5(a).
Class B Common Stock: the meaning specified in 5.5(a).
Class C Common Stock: the authorized shares of Class C Common Stock,
no par value.
Class C Conversion Shares: the meaning specified in Section 7.1.8(b).
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Class D Common Stock: the meaning specified in 5.5(a).
Closing: the meaning specified in Section 3.
Closing Date: the meaning specified in Section 3.
Code: the Internal Revenue Code of 1986, as amended from time to time.
Common Stock: shall mean (a) prior to the filing of the Restated
Certificate, the Class A Common Stock, the Class B Common Stock, the Class C
Common Stock and the Class D Common Stock and (b) subsequent to the filing of
the Restated Certificate, the Class A Common Stock, the Class C Common Stock and
any class of Common Stock duly designated by KIWI's Board of Directors pursuant
to the Restated Certificate.
Contract: the meaning specified in Section 5.27.
Conversion Price: the meaning specified in the Convertible Notes.
Conversion Shares: any shares of Common Stock or Preferred Stock
issued upon conversion of Convertible Notes or Preferred Stock.
Convertible Notes: the meaning specified in Section 1.2.
Disclosure Schedule: the meaning specified in Section 1.
Disclosure Supplement: the written update of certain matters relating
to the representations and warranties contained in Section 5 dated July 1, 1996
previously delivered to you.
Dollar and sign "$": lawful money of the United States of America.
DOT: the United States Department of Transportation, any predecessor
regulatory authority which it was established to replace and any successor
regulatory authority established to replace it.
EEOC: Equal Employment Opportunity Commission.
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Employee Offerings: any investments pursuant to rights or equity
offerings to existing holders of Class A Common Stock and to existing employees
not involving in the aggregate material Proceeds.
Employee Shareholders: the meaning specified in Section 7.1.12.
Employee Stock Plans: the SPP and the ISOP.
Environmental Laws: all Applicable Laws, relating to the protection
of the environment, to human health and safety, or to any emission, discharge,
generation, processing, storage, holding, abatement, existence, Release,
threatened Release or transportation of any Hazardous Substances, including,
without limitation, (a) CERCLA, the Resource Conservation and Recovery Act, and
the Occupational Safety and Health Act, (b) all other requirements pertaining to
reporting, licensing, permitting, investigation or remediation of emissions,
discharges, releases or threatened releases of Hazardous Substances into the
air, surface water, ground water or land, or relating to the manufacture,
processing, distribution, use, sale, treatment, receipt, storage, disposal,
transport or handling of Hazardous Substances, and (c) all other requirements
pertaining to the protection of the health and safety of employees or the
public.
ERISA: the Employee Retirement Income Security Act of 1974, as amended
from time to time.
Exercise Notice: the meaning specified in Section 2A.1.
FAA: the United States Federal Aviation Administration and any
successor regulatory authority established to replace it.
Facilities Leases: the meaning specified in Section 5.25(d).
Foreign Ownership Restrictions: shall mean all United States statutory
or United States Department of Transportation regulatory or interpretive
restrictions on foreign ownership or control of KIWI or its securities, the
breach of which would result in the loss of KIWI's operating certificates or
authorities.
GAAP: generally accepted accounting principles as in effect in the
United States from time to time.
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Gates: all of the rights, title, interests and privileges of KIWI in
all airline passenger ground facilities at airports, including, without
limitation, gates, associated passenger loading bridges, baggage handling and
sortation equipment, baggage conveyors, ticket and service counters and
associated back office space.
Gate Leases: the meaning specified in Section 5.25(c).
Governmental Authority: any court, any supra-national, national,
federal, state or local government or governmental authority or instrumentality,
whether domestic or foreign.
Hazardous Substance: any "hazardous substance," "oil" or "pollutant or
contaminant," as those terms are defined in 40 C.F.R. Section 302.4; as well as
any other substance that is defined or regulated under any applicable
Environmental Law as a hazardous or toxic substance, a hazardous, industrial,
toxic or special waste, a hazardous material, or any hazardous constituent
thereof.
Hush-Kitting Plan: the meaning specified in Section 7.1.13(c).
Indebtedness: (a) any indebtedness for borrowed money which such
Person has directly or indirectly created, incurred or assumed;
(b) any indebtedness, whether or not for borrowed money, secured by
any Lien in respect of property owned by such Person, whether or not such Person
has assumed or become liable for the payment of such indebtedness, provided that
the amount of such indebtedness if not so assumed shall in no event be deemed to
be greater than the fair market value from time to time (as determined in good
faith by such Person) of the property subject to such Lien;
(c) any indebtedness (other than current accounts payable for
services or goods provided in the ordinary course of business) whether or not
for borrowed money, with respect to which such Person has become directly or
indirectly liable and which represents the deferred purchase price (or a portion
thereof) or has been incurred to finance the purchase price (or a portion
thereof) of any property or service or business acquired by such Person, whether
by purchase, consolidation, merger or otherwise;
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(d) any obligations under Capital Leases to the extent such
obligations would, in accordance with GAAP, appear on a balance sheet of such
Person;
(e) any indebtedness of the character referred to in clause (a), (b),
(c) or (d) of this definition deemed to be extinguished under GAAP but for which
such Person remains legally liable;
(f) any contingent obligation in respect of Letters of Credit; and
(g) any indebtedness of any other Person of the character referred to
in clause (a), (b), (c), (d) or (e) of this definition with respect to which the
Person whose Indebtedness is being determined has become liable by way of a
guarantee.
Insurance Policies: the meaning specified in Section 5.26.
International Route Authority: the right and authority (including, but
not limited to, rights and authorities pursuant to certificates issued under
Section 401 of the Aviation Act and exemptions from certification granted under
Section 416 of the Aviation Act) issued by the DOT to an air carrier to engage
in foreign air transportation of persons, property and mail on a designated
international route and all renewals and extensions thereof, together with all
designations held by such carrier to serve any foreign country or point named on
such designated route, any and all frequency and airport slot allocations held
by such carrier authorizing service to any foreign country or point named on
such designated route, any and all rights of such carrier to provide air
transportation service to any foreign country or point named on such designated
route that is not included in an air transport agreement or that is in addition
to the rights available to United States-designated airlines under applicable
air transport agreements, any and all rights to fly over any foreign country or
point named on such designated route and all right and authority of such
carrier to operate between and beyond all foreign countries and points named on
such designated route, including, but not limited to, the right to operate
between and beyond such countries and points on a fifth-freedom and blind sector
basis and all other rights, permits and licenses, certificates and other
authorizations issued by any Governmental Authority that relate to or are
necessary or desirable for operating on such designated route, including but not
limited to, any related landing authorization.
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Investment Summary: that certain investment proposal memorandum dated
February 29, 1996 from Acanthus Capital Group.
IRS: the meaning specified in Section 5.11(a).
IRS Settlement Agreement: Form 433-D Installment Agreement, dated
August 30, 1995, between KIWI and the Internal Revenue Service.
ISOP: the incentive stock option plan for KIWI employees contemplated
to be provided by KIWI in 1996.
Lien: as to any Person, any mortgage, lien (statutory or otherwise),
pledge, reservation, right of entry, encroachment, easement, right of way,
restrictive covenant, license, charge, security interest or other encumbrance
in or on, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease with respect to, any property or asset
owned or held by such Person, or the signing or filing of a financing statement
with respect to any of the foregoing which names such Person as debtor, or the
signing of any security agreement with respect to any of the foregoing
authorizing any other party as the secured party thereunder to file any
financing statement or any other agreement to give or grant any of the
foregoing. For the purposes of this Agreement, a Person shall be deemed to be
the owner of any asset which it has placed in trust for the benefit of the
holders of Indebtedness of such Person and such trust shall be deemed to be a
Lien if such Indebtedness is deemed to be extinguished under GAAP and such
Person remains legally liable therefor.
Material Adverse Change: a material adverse change since December 31,
1995 in KIWI's business, operations, assets, condition (financial or
otherwise), results of operations or prospects.
Material Adverse Effect: a material adverse effect on KIWI's business,
operations, assets, condition (financial or otherwise), results of operations or
prospects.
MD&A: with respect to KIWI's financial statements as of any date and
for any period, management's discussion and analysis of KIWI's financial
condition and results of operations as of such date and for such period.
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Multiemployer Plan: a Plan which is a "multi-employer plan" within the
meaning of Section 4001(a)(3) of ERISA.
1996 Business Plan: KIWI's Revised Business Plan, June 17, version,
dated June 19, 1996, previously delivered to you.
1994 Offering: the 1994 unregistered offerings of certain shares of
Class A Common Stock and Class C Common Stock and a like number of Warrants and
certain debt securities of KIWI (which offerings were designed to comply with
the exemption from registration with the SEC under Regulation D promulgated
under the Securities Act.)
NJEDA: the meaning specified in Section 7.1.13(a).
N.J.S.A.: New Jersey Statutes Annotated.
New Notes: the notes issued by KIWI in connection with the Notes
Offering.
No-Exercise Notice: the meaning specified in Section 8.2.2(b).
Notes Offering: a new offering by KIWI of up to $2,000,000 principal
amount of 10% Convertible Unsecured notes due October 15, 1997, which notes are
(a) convertible into shares of Common Stock at the holders' option at any time
prior to maturity at a conversion price of $1.00 per share and (b) convertible
at KIWI's option at a conversion price of $1.00 per share, provided that KIWI
shall have received an equity investment of not less than $10,000,000 in gross
proceeds from REI in any equity financing.
Offerings: (a) offerings to (i) the holders of approximately
$1,260,000 of KIWI's 8% 3-Year Capital Notes pursuant to the Exchange Offer
Memorandum dated as of March 15, 1996, (ii) employees of approximately 2,699,200
shares of Class A Common Stock for approximately $4,175,000 in Proceeds, and
(iii) holders of KIWI's stock purchase warrants to reduce the warrant exercise
price to $1.00 per share, and (b) the conversion of the New Notes into shares of
Common Stock in accordance with the terms of the New Notes.
Offer Notice: the meaning specified in Section 8.2.2(a).
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Offer Purchase Price: the meaning specified in Section 8.2.2(b).
Offered Shares: the meaning specified in Section 8.2.2(a).
Officers' Certificate: a certificate executed on KIWI's behalf by its
Chief Executive Officer, Chief Financial Officer, President or any Senior Vice
President.
Omnibus Consent: resolutions duly adopted by the Board of Directors
and by the holders of not less than a majority of outstanding shares of each of
the Class A Common Stock and the Class C Common Stock to ratify (a) all past
stock issuances which are not inconsistent with Section 5.5 and (b) the
Certificate of Amendment filed April 20, 1994, repealing preemptive rights and
the Second Certificate of Amendment filed August 11, 1994, increasing the
authorized share capital.
Options: as to any Person, rights, options or warrants to subscribe
for, purchase or otherwise acquire either shares of equity Preferred Stock of
KIWI.
Pegasus: collectively, Pegasus Capital Corporation, a California
corporation, Pacific Aviation Holding Company, a California corporation, and
First Security Bank of Utah, national association (not in its individual
capacity but solely in its capacity as owner trustee under each of the following
Trust Agreements: Trust Agreement 258 dated as of December 23,1988 (related to
N258US); Trust Agreement 267 dated as of December 23,1988 (related to N267US);
Trust Agreement 501 dated as of June 25, 1993 (related to N352PA); Trust
Agreement 32719 dated as of September 20, 1989 (related to N32719); and Trust
Agreement 357 dated as of February 5, 1993 (related to N357KP)).
Pegasus Litigation: the meaning specified in Section 4.1.12.
Permitted Exceptions: franchises, grants, authorizations, approvals,
licenses, permits, easements, rights-of-way, consents, certificates and orders
which, if not obtained or given, have not had or resulted in, and could not
reasonably be expected to have or result in, a Material Adverse Effect.
Person: a corporation, a firm, a joint venture, an association, a
partnership, an organization, a business, a trust or other entity or enterprise,
an individual, a
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government or political subdivision thereof or a governmental agency,
department or instrumentality.
Plans: the meaning specified in Section 5.22(a).
Preferred Stock: the meaning specified in Section 1.3.
Proceeds: cash proceeds, the principal amount of promissory notes
received and the amount of liabilities offset by KIWI in exchange for shares
offered and sold under the Offerings.
Qualified Person: the meaning specified in Section 7.1.5(c).
Qualified Transaction: the meaning specified in Section 7.1.5(b).
Qualifying Public Offering: a public offering of Common Stock
registered under the Securities Act in which KIWI receives total gross proceeds
of at least $15,000,000.
Registration Rights Agreement: the Registration Rights Agreement
between KIWI and you in the form of Exhibit C hereto.
Registrable Shares: the meaning specified in the Registration Rights
Agreement.
REI: Recovery Equity Investment II, L.P.
REI Directors: (i) directors elected or designated pursuant to Section
4.1.9 or by holders of Preferred Stock or (ii) directors designated by REI
Holders pursuant to Section 7.1.8 or Section 7.3.3 and (iii) directors nominated
by the directors described in clause (i) and/or clause (ii).
REI Holder: the meaning specified in Section 7.1.8(a).
Release: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment.
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Renewed Insurance Policies: the meaning specified in Section 4.1.11.
Reported Forms: the meaning specified in Section 5.9(a).
Restated By-Laws: shall mean the Restated By-Laws of KIWI
International Air Lines, Inc. to be presented to the Board of Directors of KIWI
in the form of Exhibit C hereto.
Restated Certificate: the meaning specified in Section 1.3.
Rights: those rights to acquire shares of Common Stock granted to KIWI
shareholders pursuant to the Offerings or an Additional Offering.
Scheduled Order: the order of the DOT relating to KIWI's International
Route Authorities.
SEC: the Securities and Exchange Commission.
Section 2A Closing: the meaning specified in Section 2A.4.
Section 2A Closing Date: the meaning specified in Section 2A.4.
Securities Act: the Securities Act of 1933, as amended.
Securities Exchange Act: the meaning specified in Section 5.5(c).
Shares: the meaning specified in Section 2A.2.
Specified Contracts: the meaning specified in Section 5.27.
Specified Corporate Transaction: the meaning specified in Section
7.1.21.
Specified Director: the meaning specified in Section 7.1.8(c).
Specified Transaction: (a) any investment or investments in KIWI
involving in the aggregate more than $1,000,000 other than pursuant to (w) the
Offerings, (x) the 1994 Offering (but not involving the issuance of more than
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91,587 shares and a like number of warrants), (y) the Employee Offerings or (z)
the Employee Stock Plans, (b) any merger, consolidation or business combination
involving KIWI or (c) any disposition in one or more transactions of all or
substantially all of KIWI's assets or business.
SPP: the stock purchase plan for KIWI employees contemplated to be
provided by KIWI in 1996.
Subsequent Monthly Financial Statements: the meaning specified in
Section 7.1.7.
Title 14: Title 14 of the Code of Federal Regulations, Part 93,
Subparts K and S, as amended from time to time.
Unaudited Financial Statements: the meaning specified in Section
5.9(b).
US Citizen: a "citizen of the United States" within the meaning of the
Aviation Act.
Voting Trust: shall mean the Voting Trust Agreement, dated October 1,
1992, by the Voting Trustees and all the Shareholders of the Class A and Class B
Common Stock of KIWI.
Voting Trustees: shall mean all the owners of Class A and Class B
Common Stock who serve on the Board of Directors of KIWI, and any and all
successors.
Warrants: the meaning specified in Section 5.5(b).
SECTION 10. EXPENSES, ETC.
Each party hereto shall be responsible for its own expenses incurred
in connection with this Agreement and the consummation of the transaction
contemplated hereby. This provision shall survive the termination of this
Agreement.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained in this Agreement shall
survive any investigation at any time made by you or on your behalf and the
Closing and will expire on the earlier to occur of (a)(i) in the case of
representations and warranties relating to taxes, ERISA and
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compliance with Environmental Laws, the expiration of the applicable statute of
limitations and (ii) in all other cases, 11:59 p.m. on the third anniversary of
the Closing Date and (b) the occurrence of a Qualifying Public Offering.
SECTION 12. AMENDMENTS AND WAIVERS.
No term of this Agreement may be amended or waived except with the
written consent of KIWI and you.
Any amendment or waiver effected in accordance with this Section 12
shall be binding upon each holder of Initial Convertible Notes, upon each holder
of any Additional Securities or Conversion Shares and upon KIWI.
SECTION 13. NOTICES, ETC.
All notices and other communications given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given (a) on receipt,
if delivered personally, (b) three Business Days after it has been mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, (c) the next Business Day after it has been sent by nationally
recognized overnight courier (appropriately marked for overnight delivery); or
(d) upon transmission, if it is sent by telecopy (with request for immediate
confirmation of receipt in a manner customary for communications of such type):
(i) if to KIWI:
Hemisphere Center
U.S. 1 & 9 South
Newark, N.J. 07114-0006
with a copy to:
Norris, McLaughlin & Marcus
P.O. Box 1018
Somerville, N.J. 08826-1018
Telecopier: (708) 722-0755
Attention: G. Robert Marcus
49
<PAGE> 56
(ii) if to you:
901 Mariner's Island Blvd.
Suite 465
San Mateo, California 94404-1592
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopier: (212) 909-6836
Attention: George Maguire
or, in each case, at such other address as may be specified in writing (in
accordance with the terms of this notice provision) to the other parties hereto.
SECTION 14. MISCELLANEOUS.
This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective successors and assigns of the parties hereto,
whether so expressed or not, and, in particular, shall inure to the benefit of
and be enforceable by, and binding upon, any holder or holders at any time of
the Initial Convertible Notes and any Additional Securities or any part thereof.
Notwithstanding the preceding sentence, you shall not assign (a) your right
hereunder to acquire from KIWI any of the Initial Convertible Notes or any
Additional Securities other than to an affiliate wholly-owned by you, which
affiliate shall agree to make all of the representations made by you hereunder,
or (b) any other rights hereunder except to permitted transferees of the Initial
Convertible Notes and any Additional Securities, provided that you shall not
assign your rights under Section 7.1.8, Section 7.3.3 or Section 7.1.12 to any
such transferee other than an REI Holder. This Agreement embodies the entire
agreement and understanding between you and KIWI and supersedes all prior
agreements and understandings relating to the subject matter hereof. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed in
any number of counter-parts, each of which shall be an original, but all of
which together shall constitute one instrument.
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<PAGE> 57
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW JERSEY.
[The remainder of this page is intentionally left blank.]
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<PAGE> 58
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to
the undersigned, whereupon this letter shall become a binding agreement
between you and the undersigned.
Very truly yours,
KIWI INTERNATIONAL AIR LINES, INC.
By: /s/ John G. Murphy
--------------------------
Name: John G. Murphy
Title: President and CEO
The foregoing Agreement is hereby accepted and agreed to as of the date first
above written.
RECOVERY EQUITY INVESTORS II, L.P.,
By: Recovery Equity Partners II, L.P.,
its sole general partner
By: /s/ Jeffrey A. Lipkin
------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
By: /s/ Joseph J. Finn-Egan
------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
Section 7.3 of this Agreement is hereby accepted and agreed to as of the date
first above written.
The Voting Trustees
/s/ John P. Anderson
- -----------------------
Capt. John P. Anderson,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
[Signature Page 1 to Note Purchase and Option Agreement]
<PAGE> 59
/s/ Fred L. Barber
- --------------------------------
Capt. Fred L. Barber,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
/s/ Jack E. Gray II
- --------------------------------
Capt. Jack E. Gray, II,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
/s/ Don Grisham
- --------------------------------
Capt. Don Grisham,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
/s/ Cecilia Hallman
- --------------------------------
Cecilia Hallman,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
/s/ James B. Hawks
- --------------------------------
Capt. James B. Hawks,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
/s/ John G. Murphy
- --------------------------------
John G. Murphy,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
/s/ James B. Robbins
- --------------------------------
Capt. James B. Robbins,
as trustee under the Voting Trust Agreement
dated as of October 1, 1992.
[Signature Page 2 to Note Purchase and Option Agreement]
<PAGE> 60
[Exhibit A-1]
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF (THE
"UNDERLYING SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, UNLESS EITHER THIS NOTE OR THE
UNDERLYING SHARES HAVE BEEN REGISTERED UNDER SAID ACT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENT IS AVAILABLE. IF THIS NOTE OR THE UNDERLYING SHARES ARE
TO BE SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENT, THE COMPANY MAY REQUIRE A WRITTEN OPINION OF COUNSEL, SATISFACTORY
TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED AND
THAT SUCH TRANSFER WILL NOT VIOLATE SAID ACT OR APPLICABLE STATE SECURITIES
LAWS.
NOTE NO. ___________
KIWI INTERNATIONAL AIR LINES, INC.
6% Convertible Unsecured Note due March 15, 1997
$____________ ________, 1996
KIWI INTERNATIONAL AIR LINES, INC., a New Jersey corporation (herein
called the "Company"), for value received, hereby promises to pay to
_______________, or its registered assigns, the principal sum of _____________
Dollars ($______) on March 15, 1997 or such later date as may be designated
pursuant to Section 5 hereof (the "Maturity Date"), together with interest from
the date hereof on the amount of said principal sum remaining from time to time
unpaid at the rate of six percent (6%) per annum from the date hereof until the
principal hereof shall be paid in full, said interest to be payable quarterly on
the last day of each March, June, September and December commencing December 31,
1996 and to pay on any overdue principal and, to the extent permitted by
Applicable Law, any overdue interest at a rate per annum equal to the lesser of
(a) the highest rate allowable by Applicable Law and (b) eight percent (8%)(the
"Default Rate"). Such principal and interest shall be payable at the Designated
Office of the Company in New Jersey and shall be sent to the Holder hereof at
the registered address of such Holder as reflected in the registry books
maintained by the Company.
This Note is one of a duly authorized issue of Notes of the Company
designated as its "6% Convertible Unsecured Notes due March 15, 1997" (herein
called the "Notes"), limited in aggregate principal amount to $10,000,000 as
described in the Convertible Note Purchase
<PAGE> 61
and Option Agreement dated July 1, 1996 (the "Note Purchase Agreement") plus
such additional principal amount as may be issuable in certain circumstances
provided in the form Restated Certificate of Incorporation attached as Exhibit B
to the Note Purchase Agreement upon conversion of the Company's Class A
Convertible Preferred Stock, no par value (the "Preferred Stock") contemplated
by the Note Purchase Agreement. Capitalized terms used but not defined herein
shall have the respective meanings assigned to such terms in the Note Purchase
Agreement.
1. CONVERSION
(a) Optional Conversion. Subject to Section 1(h) hereof, the Holder of
this Note is entitled, at the holder's option, to convert this Note, or any
portion of the principal amount hereof, at any time prior to the Maturity Date
(i) if the Company has not authorized the Preferred Stock, into fully paid and
nonassessable shares of the Company's Class C Common Stock, no par value ("Class
C Common Stock"), or (ii) if the Preferred Stock has been authorized, into fully
paid and nonassessable shares of Preferred Stock, in each case, by (x) the
surrender of this Note to the Company, and (y) the delivery to the Company of a
duly executed conversion notice in the form of Exhibit A hereto. Subject to
Section 1(h) hereof, upon exercise of such conversion right, this Note, or any
portion of the principal amount hereof to be converted, shall be converted into
that number of fully paid and non-assessable shares of Class C Common Stock or
Preferred Stock, as the case may be ("Conversion Shares"), as is obtained by
dividing the principal amount to be converted by the Conversion Price then in
effect. The Conversion Price shall initially be equal to [*] and shall be
adjusted as provided in Section 1(b) hereof (such conversion price, as last
adjusted, being referred to herein as the "Conversion Price"). No fractions of
shares will be issued on conversion, but instead of any fractional interest the
Company shall pay cash in an amount equal to the fair market value of such
fractional share at the time of such conversion, as determined in good faith by
a majority of the Directors of the Board of Directors of the Company. Any
partial conversion of this Note shall be for a
- --------------
[* Insert(a) in the case of the Initial Convertible Notes, $1.00 and (b)
in the case of all other Convertible Notes, the Conversion Price then
in effect under any then Outstanding Convertible Notes.]
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<PAGE> 62
minimum of $5,000 principal amount hereof or any integral multiple thereof.
(b) Adjustment of Conversion Price Upon Issuance of Common Shares.
(i) Issuance of Common Shares. Except as provided in Subsection
1(b)(vii) hereof, if and whenever the Company shall issue or sell, or under any
of Subsections 1(b)(ii) through 1(b)(vi) hereof is deemed to have issued or sold
(any such issue or sale or deemed issue or sale, an "Issuance"), any of its
shares of Common Stock ("Common Shares") for a consideration per share less than
the Conversion Price in effect immediately prior to the time of such Issuance,
then the Conversion Price in effect immediately prior to such Issuance shall be
reduced (effective immediately after such Issuance) as follows:
(A) in the case of any such Issuance prior to January 1, 1998, to a
price equal to the quotient obtained by dividing (x) the aggregate
consideration, if any, received, or deemed under any of Subsections
1(b)(ii) through 1(b)(vi) hereof to have been received, by the Company upon
such Issuance by (y) the number of Common Shares issued, or under any of
Subsections 1(b)(i) through 1(b)(vi) deemed to have been issued, in such
Issuance; and
(B) in the case of any such Issuance on or after January 1, 1998, to a
price equal to the Conversion Price in effect immediately prior to such
reduction multiplied by a fraction (not to exceed one) (1) the numerator of
which is an amount equal to the sum of (x) the number of Common Shares
outstanding immediately prior to such Issuance plus (y) the aggregate
consideration, if any, received, or deemed under any of Subsections
1(b)(ii) through 1(b)(vi) hereof to have been received, by the Company upon
such Issuance divided by the Conversion Price in effect immediately prior
to such Issuance and (2) the denominator of which is the sum of (x) the
number of Common Shares outstanding immediately prior to such Issuance plus
(y) the number of Common Shares issued, or under any of Subsections
1(b)(ii) through 1(b)(vi) hereof deemed to have been issued, in such
Issuance.
(ii) Issuance of Rights or Options. In case at any time the Company
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any
3
<PAGE> 63
rights to subscribe for or to purchase, or any options for the purchase of,
Common Shares or any stock or securities convertible into or exchangeable for
Common Shares (such rights or options being hereinafter referred to as "Options"
and such convertible or exchangeable stock or securities being hereinafter
referred to as "Convertible Securities"), whether or not such Options or the
right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which a Common Share is issuable upon
the exercise of such Options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
Options, plus the aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the case of such Options
which relate to Convertible Securities, the aggregate amount of additional
consideration, if any, payable upon the issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (B) the maximum
number of Common Shares issuable upon the full exercise of such Options or upon
the full conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options) shall be less than the Conversion Price in effect
immediately prior to the time of the granting of such Options, then the maximum
number of Common Shares issuable upon the exercise of such Options or upon the
conversion or exchange of the maximum number of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been issued
for such price per share as of the date such Options were granted and thereafter
shall be deemed to be outstanding; provided, that if such Option expires or
terminates unexercised, the Conversion Price shall be adjusted to reflect that
the Common Shares previously issuable upon exercise of such Option or upon the
conversion or exchange of such Convertible Securities previously issuable upon
the exercise of such Option are no longer deemed to have been issued. Except as
otherwise provided in Subsection 1(b)(iv) hereof, no adjustment of the
Conversion Price shall be made upon the actual issuance of such Common Shares
upon the exercise of such Options or upon the actual issuance of such Common
Shares upon conversion or exchange of such Convertible Securities if an
appropriate adjustment was previously made pursuant to this Subsection 1(b)(ii)
upon the issuance of such options.
(iii) Issuance of Convertible Securities. In case the Company shall
in any manner issue (whether
4
<PAGE> 64
directly or by assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per share for
which a Common Share is issuable upon such conversion or exchange (determined by
dividing (A) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of such Convertible Securities, plus the
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (B) the maximum number of Common
Shares issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Conversion Price in effect immediately prior
to the time of such issuance or sale, then the maximum number of Common Shares
issuable upon the conversion or exchange of all such Convertible Securities
shall be deemed to have been issued for such price per share as of the date of
the issuance or sale of such Convertible Securities and thereafter shall be
deemed to be outstanding; provided that (a) except as otherwise provided in
Subsection 1(b)(iv) hereof, no adjustment of the Conversion Price shall be made
upon the actual issuance of such Common Shares upon conversion or exchange of
such Convertible Securities if an appropriate adjustment was previously made
pursuant to this Subsection 1(b)(iii) upon the issuance of such Convertible
Securities, (b) if any such issuance or sale of such Convertible Securities is
made upon the exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Conversion Price have been or are to be
made pursuant to other provisions of this Subsection 1(b), no further adjustment
of the Conversion Price shall be made by reason of such issuance or sale, and
(c) if the right to exchange or convert such Convertible Securities expires
without such Convertible Securities being exchanged or converted, the Conversion
Price shall be adjusted to reflect that the Common Shares previously issuable
upon conversion or exchange of such Convertible Securities are no longer deemed
to have been issued.
(iv) Change in Option Price or Conversion Rate. In the event that
the purchase price provided for in any Option referred to in Subsection 1(b)(ii)
hereof, the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in Subsection 1(b)(ii) or
1(b)(iii) hereof, or the rate at which any Convertible Securities referred to in
Subsection 1(b)(ii) or 1(b)(iii) hereof are convertible into or exchangeable for
Common Shares, shall change at any time
5
<PAGE> 65
(other than under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such event shall be
readjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
purchase price, additional consideration or conversion rate, as the case may be,
at the time such Options or Convertible Securities were initially granted,
issued or sold. If the purchase price provided for in any such Option referred
to in Subsection 1(b)(ii) hereof or the rate at which any Convertible Securities
referred to in Subsection 1(b)(ii) or 1(b)(iii) hereof are convertible into or
exchangeable for Common Shares shall be reduced at any time under or by reason
of provisions with respect thereto designed to protect against dilution, then,
in case of the delivery of Common Shares upon the exercise of any such Option or
upon conversion or exchange of any such Convertible Securities, the Conversion
Price then in effect hereunder shall be adjusted to such respective amount as
would have been obtained had such Option or Convertible Securities never been
issued as to such Common Shares and had adjustments been made upon the issuance
of the Common Shares delivered as aforesaid, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is hereby reduced.
(v) Consideration. In case any Common Shares, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any Common Shares, Options or Convertible Securities shall be
issued or sold, in whole or in part, for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair market value of such consideration as determined in good
faith by a majority of the Directors on the Board of Directors of the Company,
without deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith.
(vi) Treasury Shares. The disposition of Common Shares owned or
held by or for the account of the Company (other than as a result of a
cancellation of treasury shares) shall be considered an issue or sale of Common
Shares for the purpose of this Subsection 1(b).
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<PAGE> 66
(vii) When Adjustment is not Required. Notwithstanding any
provision herein to the contrary, no adjustment shall be made in the Conversion
Price as a result of (A) the issuance of Common Shares upon conversion of any
Notes or any shares of Preferred Stock or the issuance of any shares of
Preferred Stock upon conversion of any Convertible Notes; (B) the issuance of up
to 91,587 shares and like number of warrants issued pursuant to the 1994
Offering; (C) the offer or issuance of securities of the Company in connection
with the Offerings (including, without limitation, any securities issued in
connection with the Offerings under the Employee Stock Plans, as defined below);
(D) the issuance of shares of Class C Common Stock upon conversion of Class A
Common Stock into Class C Common Stock; (E) shares (or Options to acquire
shares) sold, granted or issued (as the case may be) under the Company's 1996
incentive stock option plan ("ISOP") or the Company's 1996 employee stock
purchase plan registered under the Securities Act on Form S-8 (the "SPP", and
together with the ISOP, the "Employee Stock Plans"); or (F) the issuance of
Additional Securities pursuant to Section 2A of the Note Purchase Agreement or
of Convertible Notes upon conversion of shares of Preferred Stock pursuant to
the Restated Certificate.
(c) Subdivision or Combination of Stock. In case the Company shall at
any time split or subdivide its outstanding Common Shares into a greater number
of shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
Common Shares of the Company shall be combined into a smaller number of shares,
the Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(d) Reorganization, Reclassification, Consolidation or Merger. In the
event of any capital reorganization or reclassification of the outstanding
capital stock of the Company, or any consolidation of the Company with, or
merger of the Company with or into, another corporation or entity, or the sale,
exchange, assignment, lease, transfer or other disposition of all or
substantially all of the assets of the Company, where, in connection with such
event, the holders of Common Shares will be entitled to receive stock,
securities, cash or other property with respect to or in exchange for such
Common Shares, then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale of assets, lawful and adequate provision (in form
and substance reasonably
7
<PAGE> 67
satisfactory to the holders of a majority of the outstanding principal amount of
the Notes) shall be made whereby each holder of outstanding Notes shall
thereafter have the right to receive upon conversion of any Notes held by such
holder such shares of stock, securities, cash or other property as may be
issuable or payable with respect to or in exchange for the number of Common
Shares immediately theretofore so receivable by such holder (taking into account
the anti-dilution adjustments hereof, including an immediate adjustment, by
reason of such consolidation or merger, if the value so reflected is less than
the Conversion Price in effect immediately prior to such consolidation or
merger). In the event of a merger or consolidation of the Company as a result of
which a greater or lesser number of shares of common stock of the surviving
corporation are issuable to holders of Common Shares of the Company outstanding
immediately prior to such merger or consolidation, the Conversion Price in
effect immediately prior to such merger or consolidation shall be adjusted in
the same manner as though there were a subdivision or combination of the
outstanding Common Shares of the Company. The Company shall not effect any
consolidation or merger contemplated by this Subsection 1(d) unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger shall assume by written instrument
(in form and substance reasonably satisfactory to the holders of a majority of
the outstanding principal amount of Notes, executed and mailed by first class
mail, postage prepaid, to each holder of the outstanding Notes at the last
address of such holder as shown by the records of the Company), the obligation
to deliver to such holders of stock, securities, cash or other property as, in
accordance with the foregoing provisions, such holder may be entitled to
receive. Nothing in this Section 1(d) shall be deemed to constitute a waiver of
Section 2(d) hereof.
(e) Notice of Adjustment. Upon any adjustment of the Conversion Price,
then, and in each such case, the Company shall deliver a written certificate, by
first class mail, postage prepaid, addressed to each Convertible Noteholder at
the last address of such holder shown by the register of books of the Company,
which certificate shall be signed by the President, Chief Executive Officer or
Chief Financial Officer of the Company specifying the Conversion Price resulting
from such adjustment and details of the calculation and the facts upon which the
calculation is based.
(f) Reservation of Conversion Shares.
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<PAGE> 68
(i) Reservation of Shares. KIWI will reserve and keep available for
issuance upon conversion of this Note:
(A) at all times prior to the authorization of the Preferred Stock,
such number of its authorized but unissued shares of Class C Common Stock
as would be sufficient to permit the conversion of the aggregate principal
amount of this Note; and
(B) at all times from and after the authorization of the Preferred
Stock, such number of its authorized but unissued shares of Preferred Stock
as would be sufficient to permit the conversion of the aggregate principal
amount of this Note.
(ii) Further Action. Before taking any action which would cause an
adjustment reducing the Conversion Price, KIWI will take any corporate action
which may be necessary in order that the Company may be in compliance with this
Section 1(f).
(g) Costs of Conversion. The Company shall pay all documentary, stamp
or other similar taxes attributable to the issuance or delivery of Conversion
Shares upon conversion of any of the Convertible Notes. However, the Company
shall not be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for such
Conversion Shares in a name other than that of the holder of the Convertible
Notes in respect of which such Conversion Shares are being issued.
(h) Foreign Ownership Restrictions. If the holder of this Note shall
have elected to convert all or any portion of the principal amount hereof
pursuant to Section 2(a) and the issuance of any of the Conversion Shares
issuable upon such conversion would result in a breach of any Foreign Ownership
Restriction existing at the time of such issuance (the incremental Conversion
Shares resulting in such breach, "Excess Conversion Shares"), the Company will
give the holder of this Note written notice thereof setting forth the number of
Excess Conversion Shares and the holder will not be entitled to convert so much
of the principal amount of this Note (the "Excess Principal Amount") as would
result in the issuance of Excess Conversion Shares and the Company will not give
effect to the conversion of such Excess Principal Amount.
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<PAGE> 69
2. NEGATIVE COVENANTS
The Company covenants that so long as this Note is outstanding:
(a) Authorization and Issuance of Securities. The Company will not
authorize the issuance or sale of debt securities senior to the Notes, or any
rights, options or warrants to acquire any such senior debt securities or any
security convertible into such senior debt security, or (i) until such time as
the Notes are convertible into Preferred Stock, any equity securities senior to
the Class C Common Stock or any rights, options or warrants to acquire any such
senior equity securities or any security convertible into such senior equity
securities, including without limitation, debt instruments convertible into such
senior equity securities or (ii) from and after such time as the Notes are
convertible into Preferred Stock, any equity securities senior or (except in a
Qualified Transaction) pari passu to the Preferred Stock or any rights, options
or warrants to acquire any such senior or (except in a Qualified Transaction)
pari passu equity securities or any security convertible into such senior or
(except in a Qualified Transaction) pari passu equity securities, including
without limitation, debt instruments convertible into such senior or (except in
a Qualified Transaction) pari passu equity securities. Notwithstanding the
foregoing, the Company may incur indebtedness on a secured basis (but not with a
priority in right of payment) to Summit Bank and any bank or similar lender in
addition to Summit Bank to replace or supplement its financing from Summit Bank.
(b) Additional Debt. Except in a Qualified Transaction, the Company
will not contract or incur any additional debt (other than refinancing of debt
outstanding on the date hereof on terms substantially the same or more favorable
to the Company than existing terms) on or after the date hereof for money
borrowed in excess of an aggregate $1,000,000 (and any refinancing of such
amount) prior to the termination of the Voting Trust Agreement, dated October 1,
1992 (the "Shareholders Agreement"), by and between the Voting Trustee and all
Shareholders of the Class A and any previously authorized Class B Common Stock
of the Corporation, at a time when the pro forma "Earnings Before Fixed Charges
and Taxes" to "Fixed Charge" ratio is less than 1.25 based on the Company's
annualized performance over the preceding six months.
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<PAGE> 70
For the purposes of this Section 2(b) the following terms shall have
the following meanings:
"Earnings Before Fixed Charges and Taxes" shall mean, with reference to
any period, the sum of the following for such period, all as determined in
accordance with generally accepted accounting principles ("GAAP"): (A) the
consolidated net earnings of the Company and its Subsidiaries, if any,
excluding: (i) extraordinary gains, (ii) any equity interest of the Company in
the unremitted earnings of any corporation not a Subsidiary and (iii) any gain
on the sale, exchange or other disposition of assets plus (B) provisions for
federal, state and local income taxes plus (C) Fixed Charges.
"Fixed Charges" shall mean, with reference to any period, the sum of
the following for such period, all as determined in accordance with GAAP: (A)
all amounts which would be deducted in computing the consolidated net income of
the Company and its Subsidiaries, if any, on account of interest on obligations
for borrowed money, Capital Lease obligations and guarantees of the foregoing,
including imputed interest in respect of Capital Lease obligations, amortization
of debt discounts and expenses, fees and commissions for letters of credit and
bankers' acceptance financing and the net interest costs of interest rate swaps
and hedges plus (B) all payments by the Company and its Subsidiaries, if any,
pursuant to any lease of real or personal property (other than Capital Lease
obligations) minus the amount of any fixed rents paid to the Company or any
Subsidiary under noncancellable subleases of one year or greater on the
properties subject to such leases.
"Capital Leases" shall mean any lease of property which in accordance
with GAAP should be capitalized on the lessee's balance sheet or for which the
amount of the asset and liability thereunder as if so capitalized should be
disclosed in a note to such balance sheet.
"Subsidiary" shall mean any corporation of which the Company at the
time owns, directly or indirectly, more than 50% of the Voting Stock which has
the power to elect a majority of the board of directors.
(c) Amending the Terms of Preferred Stock. The Company will not,
whether prior to or after the authorization of the Preferred Stock, alter,
modify, amend or adversely affect any term of the Preferred Stock as set forth
in the Restated Certificate.
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<PAGE> 71
(d) Merger, Consolidation, etc. The Company will not engage in any
merger or consolidation or voluntary reorganization, restructuring,
recapitalization, winding up, dissolution or liquidation or any sale, lease,
assignment or other disposition of all or substantially all of the assets of the
Company.
(e) Amending the Certificate or the By-Laws. The Company will not
alter, modify, or amend the Certificate of Incorporation or the By-Laws of the
Company, as in effect on the date hereof, in any way that adversely affects any
term, right or preference of the Preferred Stock it being understood that the
adoption of the Restated Certificate and the Restated By-Laws will not be deemed
to constitute a breach of Section 2(d) or this Section 2(e).
(f) Restrictions on Sale of Common Shares, Options or Convertible
Securities. The Company will not issue or sell Common Shares, Options or
Convertible Securities, in whole or in part, prior to the occurrence of a
Qualifying Public Offering, for a consideration other than cash, except for
Common Shares, Options, Convertible Securities and other securities sold,
granted or issued (as the case may be) (i) under the Employee Stock Plans,
provided, however, that shares issued or issuable pursuant to grants made
thereunder must be for consideration in the form of cash and/or recourse
promissory note(s), (ii) in connection with the Offerings and/or (iii) not
exceeding an additional 91,587 shares (and a like number of warrants) under the
1994 Offering.
(g) Restricted Payments. Except (i) in connection with any mandatory
scheduled reduction in the amount of the guaranty by the New Jersey Economic
Authority and (ii) any prepayment of amounts payable in respect of the IRS
Settlement Agreement made in connection with an agreement with the IRS to abate
certain penalties so as to make the total outstanding amount payable in respect
of the IRS Settlement Agreement not more than $1.5 million upon payment in full
of such amount, the Company will not make any prepayment of any principal amount
of or interest on any Indebtedness (other than Capital Lease obligations) or any
amounts payable pursuant to any lease of real or personal property (including
any Capital Lease obligations), including, but not limited to, any such amounts
payable in connection with an early termination of such lease.
3. EVENTS OF DEFAULT
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<PAGE> 72
An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company fails to make any payment of any principal amount on
this Note when the same becomes due and payable, whether at maturity or at
a date fixed for prepayment or by declaration or otherwise; or
(b) the Company fails to make any payment of any interest on this Note
and such default continues for more than five Business Days after the same
becomes due and payable; or
(c) the Company fails to perform of or comply with any term contained
in the Note Purchase Agreement or in this Note; or
(d) (i) the Company is in default (as principal or as guarantor or
other surety) in the payment of any principal amount of or interest on any
Indebtedness [(other than trade accounts payable past due as of the date
hereof and with respect to which the account creditor has taken no action
materially adverse to the Company)][**] that is outstanding in an aggregate
principal amount of at least $100,000 beyond any period of grace provided
with respect thereto or (ii) the Company is in default in the performance
of or compliance with any term of any evidence of any Indebtedness [(other
than trade accounts payable past due as of the date hereof and with respect
to which the account creditor has taken no action materially adverse to the
Company)][**] in an aggregate outstanding principal amount of at least
$100,000 or of any mortgage, indenture or other agreement relating thereto
or any other condition exists, and as a consequence of any such default or
condition such Indebtedness has become, or has been declared, due and
payable before its stated maturity or before its regularly scheduled dates
of payment; or
(e) the Company (i) is generally not paying, or issuable to, or admits
in writing its inability to pay, its debts as they become due, (ii) files,
or consents by answer or otherwise to the filing against it of, a petition
for relief or reorganization or arrangement or
- -----------------
[** Insert in Initial Convertible Notes only.]
13
<PAGE> 73
any other petition in bankruptcy, for liquidation or to take advantage of
any bankruptcy, insolvency, reorganization, moratorium or other similar law
of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing [(other than actions taken prior to the
date hereof for the purposes of matters described in the preceding clause
(ii)][***]; or
(f) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, or constituting an order
for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company, or any such petition
shall be filed against the Company and such petition shall not be dismissed
within 60 days; or
(g) one or more final judgments, decrees or orders for the payment of
money aggregating in excess of $100,000 are rendered against one or more of
the Company and its Subsidiaries, if any, and which judgments, decrees or
orders are not, within 60 days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(h) any of the following shall have occurred: (w) a Change of Control,
(x) a Material Sale Transaction, (y) any proposed merger or consolidation
of the Company approved by the Board of Directors of the Company or (z) any
proposed sale or other disposition of all or substantially all of the
business or assets of the Company approved by the Board of Directors of the
Company.
- -------------------
[*** Insert in Initial Convertible Notes only]
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<PAGE> 74
For purposes of Section 3(h), "Change of Control" and "Material Sale
Transaction" shall mean the following, respectively: (A) A Change of Control
shall be deemed to have occurred at such time as: (x) any person (other than REI
Holders and their transferees), including a group as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended ("Exchange Act"), becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 40% or more of the combined voting power of the Company's
outstanding voting securities ordinarily having the right to vote at elections
of directors of the Company; or (y) individuals who constitute the Board of
Directors as of the date hereof (each an "Incumbent Director") cease for any
reason to constitute a majority of the Board of Directors, provided that any
person becoming a director subsequent to the date hereof who is an REI Director
or whose election, or nomination for election by the Company's shareholders, was
approved by a vote of Incumbent Directors then serving on the Board of Directors
constituting at least a majority of the directors other than REI Directors, or
who is an "Incumbent Director" under the Restated Certificate, shall be
considered as though such person were an Incumbent Director. (B) A Material Sale
Transaction shall be any transaction which has not been approved by at least a
majority of the REI Directors then serving on the Board of Directors involving
any sale, lease or other disposition by the Corporation of (xx) 25% or more of
its aircraft fleet, or (yy) its operational rights at any airport (or group of
airports within any twelve-month period) representing 25% or more of its gross
revenues for the preceding 12 months.
4. REMEDIES ON DEFAULT, ETC.
(a) Acceleration.
(i) Automatic Acceleration. If an Event of Default with respect to the
Company described in paragraph (e) or (f) of Section 3 hereof (other than an
Event of Default described in clause (i) of paragraph (e) or described in clause
(vi) of paragraph (e) by virtue of the fact that such clause encompasses clause
(i) of paragraph (e)) has occurred, this Note shall then automatically become
immediately due and payable.
(ii) Acceleration By Declaration. If any other Event of Default has
occurred and is continuing, the holder or holders of 25% in aggregate principal
amount of Notes then outstanding may at any time at such holder's or
15
<PAGE> 75
holders' option, declare all the Notes then outstanding to be immediately due
and payable.
(iii) Acceleration By Each Holder. If any Event of Default described in
paragraph (a) or (b) of Section 3 has occurred and is continuing, any holder or
holders of Notes at the time outstanding affected by such Event of Default may
at any time, at such holder's or holders' option, declare the Note held by it to
be immediately due and payable.
(iv) Effect of Acceleration. Upon this Note becoming due and payable
under this Section 4(a), whether automatically or by declaration, such Note will
forthwith mature and the entire unpaid principal amount of such Note, plus all
accrued and unpaid interest thereon (to the full extent permitted by Applicable
Law), shall be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
The Company acknowledges, and the parties hereto agree, that the holder of this
Note has the right to maintain its investment in the Note free from repayment by
the Company.
(b) Other Remedies. If any Event of Default has occurred and is
continuing, and irrespective of whether this Note has become or has been
declared immediately due and payable under Section 4(a), the holder of this Note
may proceed to protect and enforce the rights of such holder by an action at
law, suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained in the Note Purchase Agreement or in this
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
(c) Rescission. At any time after this Note has been declared due and
payable pursuant to Subsection 4(a)(ii) or 4(a)(iii), the holders of not less
than 60% in aggregate principal amount of the Notes then outstanding, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (i) the Company has paid all overdue interest on the Note, all
principal of and all interest on such overdue principal and (to the extent
permitted by applicable law) any overdue interest in respect of the Note, at the
Default Rate, (ii) all Events of Default, other than non-payment of amounts that
have become due solely by reason of such declaration, have been cured or have
been waived by the
16
<PAGE> 76
holders of not less than 60% in aggregate principal amount of the Notes then
outstanding and (iii) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Note. No recission and annulment under
this Section 4(c) will extend to or affect any subsequent Event of Default or
impair any right consequent thereon.
(d) No Waiver, Expenses, etc. No course of dealing and no delay on
the part of any holder of any Note in exercising any right, power or remedy
shall operate as a waiver thereof or otherwise prejudice such holder's rights,
powers or remedies. No right, power or remedy conferred by the Note Purchase
Agreement or by any Note upon any holder thereof shall be exclusive of any other
right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company, the Company will pay to the holder of each Note on
demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under this
Section 4, including, without limitation, reasonable attorneys' fees, expenses
and disbursements.
5. EXTENSION OF MATURITY
(a) Failure to Authorize Preferred Stock. If the Company has not
authorized the Preferred Stock by March 14, 1997, the holder of this Note may,
by written notice to the Company, elect to extend the term of this Note to such
date on or before March 15, 2007 as such holder shall designate. If the maturity
of the Notes shall have been extended pursuant to Section 2A.3 of the Note
Purchase Agreement, the Company will give the holder written notice thereof
setting forth the date to which the maturity has been extended and the Maturity
Date of this Note shall be extended to such date.
(b) Excess Principal Amount. If the holder of this Note believes that
the conversion of this Note pursuant to Section 2(a) on March 14, 1997 would
result in the issuance of any Excess Conversion Shares, the holder of this Note
may, by written notice to the Company on or after March 1, 1997, extend the
maturity of this Note to such date on or before March 15, 2007 as such holder
shall designate, but only with respect to so much of the principal amount of
this Note as constitutes Excess Principal Amount as of March 14, 1997. If the
holder of this Note shall have extended the
17
<PAGE> 77
Maturity Date pursuant to this Section 5(b), such holder shall, upon receipt
from time to time of written notice from the Company that the conversion of any
such Excess Principal Amount (or any portion thereof) would no longer result in
the issuance of Excess Conversion Shares the holder shall promptly convert so
much of such Principal Amount as would not then result in the issuance of any
Excess Conversion Shares.
6. MISCELLANEOUS
No provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Note at the times, places and rate herein prescribed or to
convert this Note.
The Company may deem and treat the person in whose name this Note is
registered as the absolute owner hereof for the purpose or receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
The Notes shall be governed by and construed in accordance with the law
of the State of New Jersey.
IN WITNESS WHEREOF, KIWI INTERNATIONAL AIR LINES, INC. has caused this
Note to be signed in its name by its President or one of its Vice Presidents and
attested by its Secretary or one of its Assistant Secretaries.
ATTEST:
KIWI INTERNATIONAL AIR LINES,
INC.
__________________________ By: _________________________
James E. Player, Secretary John G. Murphy, President
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<PAGE> 78
Exhibit A
CONVERSION NOTICE
The undersigned Holder of this Note hereby irrevocably exercises the
option to convert this Note into shares of Class A Convertible Preferred Stock
or Class C Common Stock (as the case may be) in accordance with the terms of
this Note and directs that such shares be registered in the name of and
delivered to the undersigned, and that a check in payment for any fractional
share be delivered to the undersigned.
Dated: ____________________ ____________________________
Signature
Holder
Please print name and address
of Holder
________________________________
Name
________________________________
Address
________________________________
________________________________
Social Security or other
Taxpayer Identification Number,
if any
<PAGE> 79
[Individual Acknowledgment]
STATE OF _______________
SS.:
COUNTY OF ______________
On this ____ day of ____________, 19__, before me, the undersigned,
personally appeared ___________, who, I am satisfied, is the person who signed
the foregoing Conversion Notice, and he or she did acknowledge under oath that
he or she signed and delivered the same as his or her voluntary act and deed,
for the uses and purposes expressed in the instrument.
____________________________
Notary Public
[Entity Acknowledgment]
STATE OF _______________
SS.:
COUNTY OF ______________
On this ____ day of ____________, 19__, before me, the undersigned,
personally appeared ___________, the ________________ of __________________,
who, I am satisfied, is the person who signed the foregoing Conversion Notice,
and he or she did acknowledge under oath that he or she signed and delivered the
same in his or her capacity as such officer of such entity, that he or she was
authorized to execute the same on behalf of such entity, and that the foregoing
instrument is the voluntary act and deed of such entity, made by virtue of
proper authority.
____________________________
Notary Public
<PAGE> 80
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
OF
KIWI INTERNATIONAL AIR LINES, INC.
Pursuant to the provisions of Section 14A:9-5 of the New Jersey
Business Corporation Act, the undersigned Corporation adopts the following
Restated Certificate of Incorporation:
FIRST: The name of the corporation is KIWI International Air Lines,
Inc. (the "Corporation").
SECOND: The purposes for which the corporation is organized are to
engage in: (i) the operation of an air transportation company, including without
limitation, providing scheduled passenger service, cargo services and air
charter services and all activities and undertakings related to the foregoing,
consistent with the scope of applicable (if any) regulatory requirements imposed
by federal, state or international authorities having jurisdiction over
operations or property of the Corporation; and (ii) any activity within the
purposes for which corporations may be organized under Title 14A, Corporations,
General, of the New Jersey Statutes.
THIRD: The address of the Corporation's registered office is 721 Route
202-206, P.O. Box 1018, Somerville, New Jersey 08876-1018, and the name of the
Corporation's registered agent at such address is G. Robert Marcus.
FOURTH: As of the effective date of the filing of this Restated
Certificate of Incorporation, the aggregate number of shares which the
Corporation shall have authority to issue shall be seventy-four million
(74,000,000), which shall consist of (A) forty-one million (41,000,000) shares
of Common Stock without par value (the "Common Shares") consisting of (i)
fifteen million (15,000,000) shares of Class A Common Stock, without par value;
and (ii) twenty-six million (26,000,000) shares of Class C Common Stock, without
par value; (B) twelve million (12,000,000) shares of Class A Convertible
Preferred Stock, without par value (the "Class A Convertible Preferred Stock")
and (C) twenty-one million (21,000,000) shares of stock which shall be without
designation until further action by the Board of Directors, subject to the
rights of the holders of Class A Convertible Preferred Stock under clause (i) of
Section 6 of the provisions of this Article Fourth setting forth the express
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<PAGE> 81
terms of the Class A Convertible Stock, as follows: The division of authorized
shares of such undesignated stock into class and series, the determination of
the designation of the relative rights, preferences and limitations of such
stock, and any such divisions and determinations, may be accomplished by an
amendment to this Restated Certificate of Incorporation authorized and approved
by the Board of Directors of the Corporation (without the requirement of
shareholder approval or consent).
The express terms of the Common Stock are as follows:
(a) The Class A Common Stock shall (i) be subordinate to the
Class A Convertible Preferred Stock in the event of liquidation, but
rank pari passu with the Class C Common Stock, and (ii) have dividend
rights equal to those of the Class A Convertible Preferred Stock and
the Class C Common Stock. Effective January 1, 1998 (the "Class A
Common Conversion Date"), each share of Class A Common Stock shall be
converted automatically into one share of Class C Common Stock, without
any action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent. On or after the Class A Common
Conversion Date, the Corporation shall not issue or reissue shares of
Class A Common Stock. Prior to the Class A Common Conversion Date, the
Corporation shall reserve and keep available and free of preemptive
rights out of its authorized but unissued Class C Common Stock, solely
for the purpose of effecting the conversion of the Class A Common
Stock, such number of its shares of Class C Common Stock as shall be
sufficient to effect the conversion of all outstanding shares of Class
A Common Stock. If the number of authorized but unissued shares of
Class C Common Stock shall not be sufficient to effect the conversion
of all outstanding shares of Class A Common Stock, the Corporation
shall take such action as may be necessary to increase its authorized
but unissued shares of Class C Common Stock to such number of shares as
shall be sufficient for such purpose. Promptly after the Class A Common
Conversion Date, the Corporation shall promptly give written notice of
such event to all holders of Common Stock formerly designated as Class
A Common Stock. As soon as practicable after giving such notice, the
Corporation shall issue and deliver or cause to be issued and delivered
a certificate or certificates for the number of full Class C Common
Shares issuable upon conversion of the Class A Common Stock to Class C
Common Stock, together with any cash payment to be made in lieu
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<PAGE> 82
of fractional shares, as provided below, in exchange for the
certificates representing the Class A Common Stock converted pursuant
to this paragraph, together with proper assignments of such
certificates. No fractional shares of Class C Common Stock or scrip
representing fractional shares shall be issued upon conversion of any
of the Class A Common Stock. Instead, the Corporation shall pay cash in
an amount equal to the fair market value of such fractional share at
the time of such conversion, as determined in good faith by a majority
of the Directors of the Board of Directors of the Corporation.
(b) The Class C Common Stock shall (i) be subordinate to the
Class A Convertible Preferred Stock in the event of liquidation but
rank pari passu with the Class A Common Stock and (ii) have dividend
rights equal to those of the Class A Common Stock and the Class A
Convertible Preferred Stock.
Upon the filing in the Office of the Secretary of State of the State of
New Jersey of this Restated Certificate of Incorporation, the shares of Class A
Common Stock and Class C Common Stock then outstanding shall automatically
without any further action on the part of the holders thereof, have the relative
rights, preferences and limitations set forth above.
The express terms of the Class A Convertible Preferred Stock are as
follows:
1. Dividends. The holders of record of Class A Convertible Preferred
Stock shall be entitled to participate pari passu with the holders of Common
Shares in any and all dividends or other distributions declared on the Common
Shares, based on the number of Common Shares into which the Class A Convertible
Preferred Stock could be converted on the record date for such dividend or, if
no record date is established, the date on which such dividend is declared. Any
such dividends or other distributions shall be paid at the same time as payment
is made with respect to the Common Shares. The dividends will be received when,
as and if declared by the Board of Directors out of funds legally available
therefor.
2. Redemption. (a) Corporation's Option to Redeem. At any time on or
after August 1, 2002, provided that a public offering of Common Stock registered
under the Securities Act of 1933, as amended (the "Securities Act") in which the
Company receives gross proceeds of at least $15,000,000 (a
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<PAGE> 83
"Qualifying Public Offering") has not occurred, the Corporation may elect to
redeem all of the Class A Convertible Preferred Stock at the Redemption Price
(as defined in Section 2(e) hereof) by delivering a written notice of such
election, which shall be irrevocable upon receipt thereof (a "Redemption
Election") to the holder(s) of the Class A Convertible Preferred Stock.
(b) Shareholder's Option to Redeem. Provided that a Qualifying
Public Offering has not occurred, at any time on or after August 1, 2001 or upon
(i) a Change of Control of the Corporation, (ii) a Material Sale Transaction,
(iii) any proposed merger or consolidation of the Corporation approved by the
Board of Directors of the Corporation, (iv) any proposed sale or other
disposition of all or substantially all of the business or assets of the
Corporation approved by the Board of Directors of the Corporation or (v) any
voluntary or involuntary bankruptcy filing, liquidation, dissolution or winding
up of the Corporation (or any proposal to take any such action described in this
clause (v) which has been approved by the Board of Directors of the
Corporation), the holders of record of the Class A Convertible Preferred Stock
shall be entitled to have the Corporation redeem all of the Class A Convertible
Preferred Stock at the Redemption Price. Such election shall be made by
delivering a written notice of such election, which shall be irrevocable upon
receipt thereof (a "Holder Redemption Election") to the Corporation, provided
that, notwithstanding the foregoing, if the Redemption Price is not paid in full
on the Redemption Date (as defined in Section 2(c) hereof), as such Redemption
Date may be postponed pursuant to Section 2(c) hereof, such Holder Redemption
Election may be withdrawn by the holders of record of the Class A Convertible
Preferred Stock by delivering a written notice of such withdrawal to the
Corporation any time thereafter and prior to receipt of payment in full of the
Redemption Price, together with all interest accrued thereon in accordance with
Section 2(d) hereof. For purposes of this Section 2, "Change of Control" and
"Material Sale Transaction" shall mean the following, respectively: (A) A Change
of Control shall be deemed to have occurred at such time as: (x) any person,
including a group as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended ("Exchange Act") other than any REI Holder (as such term is
defined in the Convertible Note Purchase and Option Agreement dated July 1, 1996
(the "Note Purchase Agreement") between the Corporation and Recovery Equity
Investors II, L.P.) or any group of REI Holders or any of their transferees,
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 40% or more of the combined
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<PAGE> 84
voting power of the Corporation's outstanding voting securities (other than
Class A Convertible Preferred Stock) ordinarily having the right to vote at
elections of directors of the Corporation; or (y) individuals who constitute the
Board of Directors as of the date hereof or would constitute Incumbent Directors
as defined in the Corporation's 6% Convertible Unsecured Notes due March 15,
1997 (the "Convertible Notes") (each an "Incumbent Director") cease for any
reason to constitute a majority of the Board of Directors, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was approved by a
vote of Incumbent Directors then serving on the Board of Directors constituting
at least a majority of the directors then comprising the Type Class (as
described in Article Sixth below) to which such director was elected, shall be
considered as though such person were an Incumbent Director; (B) A Material Sale
Transaction shall be any transaction which has not been approved by at least a
majority of the "Type Preferred Class" directors or "Preferred Directors" (as
such terms are defined in Article Sixth below) then serving on the Board of
Directors involving any sale, lease or other disposition by the Corporation of
(xx) 25% or more of its aircraft fleet, or (yy) its operational rights at any
airport (or group of airports within any twelve-month period) representing 25%
or more of its gross revenues for the preceding 12 months. Any right of
redemption arising from time to time pursuant to an event or occurrence under
clause (i), (ii), (iii), (iv) or (v) of this Subsection 2(b) that is not
exercised within sixty (60) days immediately following the date upon which at
least a majority of the holders of record of Class A Convertible Preferred Stock
shall have received from the Corporation written notice of such event or
occurrence, shall automatically terminate without any further notice or action
by the Corporation or its shareholders; provided, however that any such
termination of such redemption right shall not impair or otherwise affect any
right of redemption by the holders of record of the Class A Convertible
Preferred Stock arising pursuant to any such subsequent event or occurrence or
otherwise arising on or after August 1, 2001.
(c) Timing of Redemption. Any redemption effected pursuant to
this Section 2 shall occur on the 60th day (or, if such day is not a business
day, the next business day after the 60th day) after the date on which
shareholders or the Corporation, as the case may be, receive the Redemption
Election or the Holder Redemption Election (such date, the "Redemption Date"),
provided, however, that the Redemption Date may be postponed for up to an
additional 60 calendar days
5
<PAGE> 85
to permit the appraiser selected pursuant to Section 2(e) below to determine the
fair market value of the Class A Convertible Preferred Stock. For purposes of
this Section 2, "business day" means a business day in the City of New York.
(d) Late Interest. In the event that, on any Redemption Date, the
funds of the Corporation are not legally available for the redemption of the
Class A Convertible Preferred Stock being redeemed, such funds which are legally
available therefor shall be applied to the redemption of such Class A
Convertible Preferred Stock on a pro rata basis from the holders of the Class A
Convertible Preferred Stock. Thereafter, any funds which become legally
available for the redemption of Class A Convertible Preferred Stock shall
immediately be set aside and promptly applied to the redemption of any remaining
Class A Convertible Preferred Stock until all remaining Class A Convertible
Preferred Stock that have been the subject of a Redemption Election have been
redeemed. The aggregate Redemption Price for Class A Convertible Preferred Stock
which are not redeemed by the Corporation as required on a Redemption Date shall
bear interest from such Redemption Date (or such later date to which the
Redemption Date may be postponed pursuant to Section 2(c) hereof) until such
Redemption Price has been paid in full at a per annum rate equal to twenty
percent (20%) in excess of the Prime Rate (as defined below) as the same may
change from time to time hereafter; provided, however, that such interest rate
shall in no event exceed the maximum rate permitted by applicable law. The term
"Prime Rate" means the base rate on corporate loans, posted by at least 75% of
the United States' largest banks as published in the Money Rates column of the
Wall Street Journal.
(e) Redemption Price. The "Redemption Price" payable with respect
to each Class A Convertible Preferred Share shall be equal to the greater of (i)
the Issue Price Per Share (as adjusted to reflect any share split, combination,
reclassification or similar event involving the Class A Convertible Preferred
Shares) plus all accrued and unpaid dividends thereon through the date on which
such Class A Convertible Preferred Stock is actually redeemed or (ii) the per
share fair market value of such Class A Convertible Preferred Stock on the date
the Redemption Election or the Holder Redemption Election, as the case may be,
is received, by the shareholder or the Corporation, respectively, as determined
in accordance with this Section 2(e) by an appraiser mutually acceptable to the
Corporation and the holders of the Class A Convertible Preferred Stock. The fees
of such appraiser shall be paid by the Corporation. Any
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<PAGE> 86
appraiser selected pursuant hereto shall be (x) a commercial bank of recognized
national standing with an investment banking division, (y) an accounting firm of
recognized national standing or (z) an investment banking firm of national
recognized standing. If the Corporation and the holders of Class A Convertible
Preferred Stock fail to agree, within ten days of receipt of a Redemption
Election, on an appraiser, each of the Corporation and the holders of the Class
A Convertible Preferred Stock shall select an appraiser within three days after
such ten-day period who shall select a third appraiser who shall determine such
fair market value within forty-five days after the Redemption Notice, and the
determination of such appraiser shall be final and binding upon the Corporation
and the holders of Class A Convertible Preferred Stock. The determination of the
per share fair market value of the Series A Convertible Preferred Stock by such
appraiser will not give effect to (1) the lack of a public market for such
shares, (2) the fact that such shares are not registered under the Securities
Act of 1933, as amended, or are subject to any other restriction on transfer or
(3) the fact that such shares would represent a minority interest in the
Corporation. For purposes of this Restated Certificate of Incorporation, "Issue
Price Per Share" shall be, with respect to any share of Class A Convertible
Preferred Stock, an amount equal to the Conversion Price under the Corporation's
6% Convertible Unsecured Notes due March 15, 1997 (the "Convertible Notes") in
effect at the time of issuance of such share of Class A Convertible Preferred
Stock, provided that, for the purposes of determining the Redemption Price of
the Excess Preferred Shares (as defined in Subsection 4(k)(iii)) for the
purposes of Subsection 4(k)(iii), the "Issue Price Per Share" with respect to
any Excess Preferred Share shall be an amount equal to the weighted average of
the respective Conversion Prices under the Convertible Notes in effect at the
respective times of issuance of all shares of Class A Convertible Preferred
Stock then outstanding.
(f) Redemption Procedures. On a Redemption Date, the holder of
the shares of Class A Convertible Preferred Stock being redeemed shall surrender
the certificate or certificates representing the shares being redeemed (together
with a proper assignment of such certificates to the Corporation in exchange for
payment of the applicable Redemption Price for such shares). In the event that
the Corporation is unable to pay, legally prevented from paying or fails to pay
the Redemption Price for all of the shares of Class A Convertible Preferred
Stock required to be redeemed on such Redemption Date, the Corporation shall
reissue and deliver to such holder on such Redemption Date a certificate
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representing the number of shares of Class A Convertible Preferred Stock for
which the Redemption Price has not been paid in full. Following any redemption
of shares of Class A Convertible Preferred Stock in accordance with this Section
2, the Corporation shall not reissue any shares so redeemed.
(g) Notices. For the purposes of this Section 2, all notices
shall be in writing and shall be deemed to have been duly given (a) on receipt,
if delivered personally, (b) three Business Days after it has been mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, (c) the next Business Day after it has been sent by nationally
recognized overnight courier (appropriately marked for overnight delivery); or
(d) upon transmission, if it is sent by telecopy (with request for immediate
confirmation of receipt in a manner customary for communications of such type):
if to the Corporation, KIWI International Air Lines, Inc., Hemisphere Center,
U.S. 1 & 9 South, Newark, N.J. 07114-0006, telecopier: (201) 645-1144, attention
President; and if to the holders of Class A Convertible Preferred Stock, at
their last address of record.
3. Liquidation, etc. In the event of any bankruptcy, liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
each holder of Class A Convertible Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to holders of
the Corporation's capital stock, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of the Common Shares of
the Corporation's capital stock, an amount equal to the higher of (i) Issue
Price Per Share (as adjusted to reflect any share split, combination,
reclassification or similar event involving the Class A Convertible Preferred
Stock) plus all accrued and unpaid dividends thereon or (ii) the amount that
would be distributable to holders of the Class A Convertible Preferred Stock if
such Class A Convertible Preferred Stock had been converted into Class C Common
Shares in accordance with Section 4 hereof (such amount, the "Liquidation
Preference"). In the event the assets of the Corporation available for
distribution to the holders of Class A Convertible Preferred Stock upon any
liquidation, dissolution or winding up of the Corporation shall be insufficient
to permit payment in full of the Liquidation Preference amounts to which the
holders of Class A Convertible Preferred Stock shall be entitled, then the
entire assets of the Corporation available for distribution shall be distributed
ratably among the holders of Class A Convertible Preferred Stock, in proportion
to the total amounts to which the holders of all
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such Class A Convertible Preferred Stock are entitled upon liquidation,
dissolution or winding up. Unless the holders of sixty percent (60%) of the
Class A Convertible Preferred Stock consent to a distribution pursuant to this
Section 3 in property, all distributions pursuant to this Section 3 to holders
of Class A Convertible Preferred Stock shall be made in cash. Whenever payable
in property other than cash, the value of such distribution shall be the fair
market value of such property as determined in good faith by not less than
three-fourths of the Directors then serving on the Board of Directors of the
Corporation.
4. Conversion Rights. (a) Optional Conversion. Subject to the terms and
conditions of this Section 4 (including, without limitation, Subsection
4(k)(i)), the holder of any Class A Convertible Preferred Stock shall have the
right at its option at any time prior to actual payment for redemption, to
convert all or any portion of its shares of Class A Convertible Preferred Stock
into such number of fully paid and nonassessable Class C Common Shares as is
obtained by multiplying the number of shares of Class A Convertible Preferred
Stock to be converted by Issue Price Per Share and dividing the result by the
Conversion Price which shall initially be equal to the Issue Price Per Share and
shall be adjusted as provided in this Section 4, (such conversion price, as last
adjusted, being referred to herein as the "Conversion Price").
(b) Automatic Conversion.
(i) Subject to Subsection 4(k), all outstanding Class A
Convertible Preferred Stock shall be converted automatically into the
number of Class C Common Shares into which such Class A Convertible
Preferred Stock are then convertible pursuant to this Section 4,
without any action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent, at the time of a Qualifying Public
Offering.
(ii) Upon the occurrence of an event triggering the automatic
conversion of Class A Convertible Preferred Stock as provided in the
preceding subparagraph (i), the Corporation shall promptly give written
notice (an "Automatic Conversion Notice") to all holders of Class A
Preferred Shares of such event. As soon as practicable after giving
such notice, the Corporation shall issue and deliver or cause to be
issued and delivered a certificate or certificates for the number of
full Class C Common
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Shares issuable upon such conversion, together with any cash payment to
be made in lieu of fractional shares as provided in Subsection 4(h) of
this Article Two in exchange for the certificates representing the
Class A Convertible Preferred Stock converted pursuant to this
Subsection 4(b), together with proper assignments of such certificates.
(c) Mechanics of Conversion. The rights of conversion under
Subsection 4(a) shall be exercised by a holder of Class A Convertible Preferred
Stock by surrendering the certificates representing such shares, together with
written notice of such holder's election to convert such shares (the "Conversion
Notice"), and a proper assignment of such certificates to the Corporation. The
Conversion Notice shall state the names and addresses in which and to which the
certificates representing the Class C Common Shares issuable upon such
conversion shall be issued, delivered or paid, as the case may be. The date upon
which the certificates representing the Class A Convertible Preferred Stock to
be converted, the Conversion Notice and the proper assignment have all been
received by the Corporation is referred to herein as the "Conversion Date." As
promptly as practicable after the Conversion Date, the Corporation shall issue
and deliver or cause to be issued and delivered, as specified in the Conversion
Notice, certificates for the number of full Class C Common Shares issuable upon
such conversion together with any cash instead of fractional shares as provided
in Subsection 4(h). Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the holder of the converted Class A Convertible Preferred
Stock shall cease and the person or persons in whose name or names any
certificate or certificates for Class C Common Shares shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the Common Shares represented thereby. Following any conversion of shares of
Class A Convertible Preferred Stock, in accordance with this Section 4, the
Corporation shall not reissue any shares so converted.
(d) Adjustment of Conversion Price Upon Issuance of Common
Shares.
(i) Issuance of Common Shares. Except as provided in
Subsection 4(d)(vii), if and whenever the Corporation shall issue or sell, or
under any of Subsections 4(d)(ii) through 4(d)(vi) is deemed to have issued or
sold (any such issue or sale or deemed issue or sale, an
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"Issuance"), any of its Common Shares for a consideration per share less than
the Conversion Price in effect immediately prior to the time of such Issuance,
then the Conversion Price in effect immediately prior to such Issuance shall be
reduced (effective immediately after such Issuance) as follows:
(A) in the case of any such Issuance prior to January 1,
1998, to a price equal to the quotient obtained by dividing (x) the aggregate
consideration, if any, received, or deemed under any of Subsections 4(d)(ii)
through 4(d)(vi) hereof to have been received, by the Corporation upon such
Issuance by (y) the number of Common Shares issued, or under any of Subsections
4(d)(i) through 4(d)(vi) deemed to have been issued, in such Issuance; and
(B) in the case of any such Issuance on or after January
1, 1998, to a price equal to the Conversion Price in effect immediately prior to
such reduction multiplied by a fraction (not to exceed one) (1) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
outstanding immediately prior to such Issuance plus (y) the aggregate
consideration, if any, received, or deemed under any of Subsections 4(d)(ii)
through 4(d)(vi) to have been received, by the Corporation upon such Issuance
divided by the Conversion Price in effect immediately prior to such Issuance and
(2) the denominator of which is the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such Issuance plus (y) the number of
shares of Common Stock issued, or under any of Subsections 4(d)(ii) through
4(d)(vi) deemed to have been issued, in such Issuance.
(ii) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to purchase, or any options
for the purchase of, Common Shares or any stock or securities convertible into
or exchangeable for Common Shares (such rights or options being hereinafter
referred to as "Options" and such convertible or exchangeable stock or
securities being hereinafter referred to as "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which a
Common Share is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(A) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the aggregate amount of
additional consideration
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payable to the Corporation upon the exercise of all such Options, plus, in the
case of such Options which relate to Convertible Securities, the aggregate
amount of additional consideration, if any, payable upon the issuance or sale of
such Convertible Securities and upon the conversion or exchange thereof, by (B)
the maximum number of Common Shares issuable upon the full exercise of such
Options or upon the full conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Conversion Price in effect immediately prior to the time of the granting of such
Options, then the maximum number of Common Shares issuable upon the exercise of
such Options or upon the conversion or exchange of the maximum number of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date such Options
were granted and thereafter shall be deemed to be outstanding; provided, that if
such Option expires or terminates unexercised, the Conversion Price shall be
adjusted to reflect that the Common Shares previously issuable upon exercise of
such Option or upon the conversion or exchange of such Convertible Securities
previously issuable upon the exercise of such Option are no longer deemed to
have been issued. Except as otherwise provided in Subsection 4(d)(iv), no
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Shares upon exercise of such Options or upon the actual issuance of
such Common Shares upon conversion or exchange of such Convertible Securities if
an appropriate adjustment was previously made pursuant to this Subsection
4(d)(ii) upon the issuance of such Options.
(iii) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Share is issuable upon
such conversion or exchange (determined by dividing (A) the total amount, if
any, received or receivable by the Corporation as consideration for the issuance
or sale of such Convertible Securities, plus the aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the maximum number of Common Shares issuable upon the
conversion or exchange of all such Convertible Securities) shall be less than
the Conversion Price in effect immediately prior to the time of such issuance or
sale, then the maximum number of Common Shares issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have
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been issued for such price per share as of the date of the issuance or sale of
such Convertible Securities and thereafter shall be deemed to be outstanding;
provided that (a) except as otherwise provided in Subsection 4(d)(iv), no
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Shares upon conversion or exchange of such Convertible Securities if
an appropriate adjustment was previously made pursuant to this Subsection
4(d)(iii) upon the issuance of such Convertible Securities, (b) if any such
issuance or sale of such Convertible Securities is made upon the exercise of any
Options to purchase any such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other provisions of
this Subsection 4(d), no further adjustment of the Conversion Price shall be
made by reason of such issuance or sale, and (c) if the right to exchange or
convert such Convertible Securities expires without such Convertible Securities
being exchanged or converted, the Conversion Price shall be adjusted to reflect
that the Common Shares previously issuable upon conversion or exchange of such
Convertible Securities are no longer deemed to have been issued.
(iv) Change in Option Price or Conversion Rate. In the
event that the purchase price provided for in any Option referred to in
Subsection 4(d)(ii), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in Subsections
4(d)(ii) or 4(d)(iii), or the rate at which any Convertible Securities referred
to in Subsection 4(d)(ii) or 4(d)(iii) are convertible into or exchangeable for
Common Shares, shall change at any time (other than under or by reason of
provisions designed to protect against dilution), the Conversion Price in effect
at the time of such event shall be readjusted to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such purchase price, additional
consideration or conversion rate, as the case may be, at the time such Options
or Convertible Securities were initially granted, issued or sold. If the
purchase price provided for in any such Option referred to in Subsection
4(d)(ii) or the rate at which any Convertible Securities referred to in
Subsection 4(d)(ii) or 4(d)(iii) are convertible into or exchangeable for Common
Shares shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, in case of the
delivery of Common Shares upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities, the Conversion Price
then in effect hereunder shall be adjusted to such respective amount as would
have been obtained had such Option or
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Convertible Securities never been issued as to such Common Shares and had
adjustments been made upon the issuance of the Common Shares delivered as
aforesaid, but only if as a result of such adjustment the Conversion Price then
in effect hereunder is hereby reduced.
(v) Consideration. In case any Common Shares, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith. Unless the holders of sixty percent (60%) of the Class A Convertible
Preferred Stock consent, at no time shall Common Shares, Options or Convertible
Securities be issued or sold, in whole or in part, prior to the occurrence of a
Qualifying Public Offering, for a consideration other than cash, except for
Common Shares, Options, Convertible Securities and other securities sold,
granted or issued (as the case may be) (i) under the Employee Stock Plans (as
defined in Subsection 4(d)(vii)), provided, however, that shares issued or
issuable pursuant to grants made thereunder must be for consideration in the
form of cash and/or recourse promissory note(s), (ii) in connection with the
Offerings (as defined below) and/or (iii) not exceeding an additional 91,587
shares (and like number of warrants) under the 1994 Offering (as defined below).
In case any Common Shares, Options or Convertible Securities shall be issued or
sold, in whole or in part, for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be deemed to
be the fair market value of such consideration as determined in good faith by a
majority of the Directors on the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. For
purposes of this Restated Certificate of Incorporation, the term "1994 Offering"
shall mean the 1994 unregistered offerings of certain shares of Class A Common
Stock and Class C Common Stock and a like number of warrants and certain debt
securities of KIWI (which offerings were designed to comply with the exemption
from registration with the SEC under Regulation D promulgated under the
Securities Act) and the term "Offerings" shall mean (x) offerings to (A) the
holders of approximately $1,260,000 of the Corporation's 8% 3-Year Capital Notes
pursuant to the Exchange Offer Memorandum dated as of March 15, 1996, (B)
holders of the Corporation's stock purchase warrants to reduce the warrant
exercise price to $1.00 per share, (C) employees of approximately 2,699,200
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shares of Class A Common Stock for approximately $4,175,000 in cash proceeds,
the principal amount of promissory notes received and the amount of liabilities
offset by the Corporation in exchange for shares offered and sold under the
Offerings and (y) shares of the Corporation's Common Stock issuable upon the
conversion of the Corporation's 10% Convertible Unsecured Notes due October 15,
1996.
(vi) Treasury Shares. The disposition of Common Shares
owned or held by or for the account of the Corporation (other than as a result
of a cancellation of treasury shares) shall be considered an issue or sale of
Common Shares for the purpose of this Subsection 4(d).
(vii) When Adjustment is not Required. Notwithstanding
any provision herein to the contrary, no adjustment shall be made in the
Conversion Price as a result of (A) the issuance of Common Shares upon
conversion of any Class A Convertible Preferred Stock or any Convertible Notes
or the issuance of Preferred Stock upon conversion of any Convertible Notes; (B)
the issuance of up to 91,587 shares and like number of warrants issued pursuant
to the 1994 Offering; (C) the offer or issuance of securities of the Corporation
in connection with the Offerings (including, without limitation, any securities
issued in connection with the Offerings under the Employee Stock Plans, as
defined below); (D) the issuance of shares of Class C Common Stock upon
conversion of Class A Common Stock into Class C Common Stock; (E) shares (or
Options to acquire shares) sold, granted or issued (as the case may be) under
the Corporation's 1996 incentive stock option plan ("ISOP") or the Corporation's
1996 employee stock purchase plan registered under the Securities Act on Form
S-8 (the "SPP", and together with the ISOP, the "Employee Stock Plans"); and/or
(F) the issuance of any Additional Securities (as such term is defined in the
Note Purchase Agreement) including, without limitation, the issuance of up to
$10,000,000 aggregate principal amount of Convertible Notes (inclusive of all
Convertible Notes previously issued) and such additional Convertible Notes as
may be issued pursuant to Subsection 4(k).
(e) Subdivision or Combination of Stock. In case the
Corporation shall at any time split or subdivide its outstanding Common Shares
into a greater number of shares, the Conversion Price for the Class A
Convertible Preferred Stock in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
Common Shares of the Corporation shall be combined into a smaller number of
shares, the Conversion Price in
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effect immediately prior to such combination shall be proportionately increased.
(f) Reorganization, Reclassification, Consolidation or Merger. In
the event of any capital reorganization or reclassification of the outstanding
capital stock of the Corporation, or any consolidation of the Corporation with,
or merger of the Corporation with or into, another Corporation or entity, or the
sale, exchange, assignment, lease, transfer or other disposition of all or
substantially all of the assets of the Corporation, where, in connection with
such event, the holders of Common Shares will be entitled to receive stock,
securities, cash or other property with respect to or in exchange for such
Common Shares, then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale of assets, lawful and adequate provision (in form
and substance reasonably satisfactory to the holders of a majority of the
outstanding Class A Convertible Preferred Stock) shall be made whereby each
holder of Class A Convertible Preferred Stock shall thereafter have the right to
receive, at such holder's option, (A) such shares of stock, securities, cash or
other property as may be issuable or payable with respect to or in exchange for
the number of Common Shares immediately theretofore so receivable by such holder
(taking into account the anti-dilution adjustments hereof, including an
immediate adjustment, by reason of such consolidation or merger, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation or merger) or (B) the Liquidation Preference to which such holder
of Class A Convertible Preferred Stock would be entitled in accordance with
Section 3 hereof. In the event of a merger or consolidation of the Corporation
as a result of which a greater or lesser number of shares of common stock of the
surviving corporation are issuable to holders of Common Shares of the
Corporation outstanding immediately prior to such merger or consolidation, the
Conversion Price in effect immediately prior to such merger or consolidation
shall be adjusted in the same manner as though there were a subdivision or
combination of the outstanding Common Shares of the corporation. The Corporation
shall not effect any consolidation or merger contemplated by this Subsection
4(f) unless prior to the consummation thereof the successor corporation (if
other than the Corporation) resulting from such consolidation or merger shall
assume by written instrument (in form and substance reasonably satisfactory to
the holders of a majority of the outstanding Class A Convertible Preferred
Stock), executed and mailed by first class mail, postage prepaid, to each holder
of Class A Convertible Preferred Stock at the last address of such holder
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as shown by the records of the Corporation, the obligation to deliver to such
holders such shares of stock, securities, cash or other property as, in
accordance with the foregoing provisions, such holder may be entitled to
receive.
(g) Notice of Adjustment. Upon any adjustment of the Conversion
Price, then, and in each such case, the Corporation shall deliver a written
certificate, by first class mail, postage prepaid, addressed to each holder of
Class A Convertible Preferred Stock at the last address of such holder shown by
the records of the Corporation, which certificate shall be signed by the
President, Chief Executive Officer or Chief Financial Officer of the Corporation
specifying the Conversion Price resulting from such adjustment and details of
the calculation and the facts upon which the calculation is based.
(h) Fractional Shares. No fractional shares of Class C Common
Stock or scrip representing fractional shares shall be issued upon conversion of
any of the Class A Convertible Preferred Stock. Instead, the Corporation shall
pay cash in an amount equal to the fair market value of such fractional share at
the time of such conversion, as determined in good faith by a majority of the
Directors of the Board of Directors of the Corporation.
(i) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available and free of preemptive rights out of its
authorized but unissued shares of Class C Common Stock, solely for the purpose
of effecting the conversion of the Class A Convertible Preferred Stock, such
number of shares of its Class C Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class A
Convertible Preferred Stock. If at any time the number of authorized but
unissued shares of Class C Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Class A Convertible Preferred
Stock, the Corporation shall take such action as may be necessary to increase
its authorized but unissued shares of Class C Common Stock to such number of
shares as shall be sufficient for such purpose.
(j) Costs of Conversion. The Corporation shall pay all
documentary, stamp or other similar taxes attributable to the issuance or
delivery of Common Shares (or other shares or other securities) of the
Corporation upon conversion of any of the Class A Convertible Preferred Stock.
However, the Corporation shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance
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or delivery of any certificate for such shares in a name other than that of the
holder of the Class A Convertible Preferred Stock in respect of which such
shares are being issued.
(k) Foreign Ownership Restrictions.
(i) Optional Conversions. If the holder of any shares of
Class A Convertible Preferred Stock shall have elected to convert all or any
portion of such shares pursuant to Subsection 4(a) and the issuance of any of
the shares of Class C Common Stock issuable upon such conversion would result in
a breach of any Foreign Ownership Restriction (as defined in the Note Purchase
Agreement) existing at the time of such issuance (the incremental shares of
Class C Common Stock resulting in such breach, "Excess Conversion Shares"), such
holder will not be entitled to convert into shares of Class C Common Stock so
many of such holder's shares of Class A Convertible Preferred Stock (the "Excess
Preferred Shares") as would result in the issuance of Excess Conversion Shares
and the Corporation will not give effect to such conversion and will give such
holder notice thereof setting forth the number of Excess Preferred Shares and
the basis for the determination that such shares constitute Excess Preferred
Shares.
(ii) Automatic Conversion. If an event triggering the
automatic conversion of the outstanding shares of Class A Convertible Preferred
Stock as provided in Subsection 4(b)(i) shall have occurred and the issuance of
any of the shares of Class C Common Stock issuable upon such conversion would
result in a breach of any Foreign Ownership Restriction existing at the time of
such issuance, the aggregate Excess Preferred Shares will not be converted
pursuant to Subsection 4(b)(i) and will remain outstanding with all of the
relative rights, preferences and limitations set forth herein, but only until
such time (and each time from time to time) as any or all of such Excess
Preferred Shares ("Shares Newly Eligible for Conversion") may be converted into
Class C Common Stock without resulting in a breach of any Foreign Ownership
Restriction, at which time (and each time from time to time) all such Shares
Newly Eligible for Conversion shall convert to Class C Common Stock in
accordance with the provisions of Subsection 4(b)(i). For the purposes of this
Subsection 4(k)(ii) each holder of shares of Class A Convertible Preferred Stock
then outstanding will be deemed to hold that number of such aggregate Excess
Preferred Shares that is equal to the product obtained by multiplying (A) the
number of such aggregate Excess Preferred Shares by (B) the quotient (such
holder's "Pro Rata Share") obtained by dividing
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(x) the number of shares of Class A Convertible Preferred Stock held by such
holder by (y) the total number of shares of Class A Convertible Preferred Stock
then outstanding. The Corporation shall set forth in the Automatic Conversion
Notice the number of aggregate Excess Conversion Shares, the basis for the
determination that such shares constitute Excess Preferred Shares and such
holder's Pro Rata Share thereof.
(iii) Mandatory Conversion.
(A) If an event triggering an adjustment of the
Conversion Price as provided in this Subsection 4 shall have occurred and giving
effect to such adjustment would result in a breach of any Foreign Ownership
Restriction existing at the time of such adjustment, such adjustment shall
nevertheless be made as provided in this Subsection 4 and the Corporation shall
convert into Convertible Notes the number of shares of Class A Convertible
Preferred Stock that would constitute Excess Preferred Shares (and such shares
will constitute "Excess Preferred Shares" for the purposes of this Subsection
4(k)(iii)) if all shares of Class A Convertible Preferred Stock then outstanding
were converted into shares of a nonvoting class of common stock of the
Corporation. The aggregate principal amount of Convertible Notes into which such
aggregate Excess Preferred Shares will be converted will be an amount equal to
the product obtained by multiplying (x) the number of such aggregate Excess
Preferred Shares by (y) the Redemption Price thereof. For the purposes of this
Subsection 4(k)(iii) each holder of shares of Class A Convertible Preferred
Stock then outstanding will be deemed to hold its Pro Rata Share of such
aggregate Excess Preferred Shares.
(B) Upon the occurrence of any event causing a required
conversion of Class A Preferred Stock as provided in the preceding subparagraph
(A), (x) such conversion shall be deemed to have occurred as of the date of such
event, (y) the Corporation will promptly give written notice to all holders of
Class A Preferred Stock of such event setting forth the number of aggregate
Excess Conversion Shares, the basis for the determination that such shares
constitute Excess Preferred Shares and such holder's Pro Rata Share thereof and
(z) as soon as practicable after giving such notice and the determination of the
Redemption Price of such Excess Preferred Shares, the Corporation shall issue
and deliver or cause to be issued and delivered to each holder of such Excess
Preferred Shares a Convertible Note or Convertible Notes in the aggregate
principal amount of such holder's Pro Rata Share of the aggregate principal
amount of Convertible
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Notes to be issued upon conversion of all such Excess Preferred Shares, dated
the date of such event requiring such conversion and registered in the name of
such holder, in exchange for the certificates representing such holder's Excess
Preferred Shares, together with proper assignments of such certificates.
5. Voting Rights.
In addition to the voting rights expressly provided in Section 6 of
this Article Fourth and as otherwise provided by law, for so long as any shares
of Class A Convertible Preferred Stock remain issued and outstanding, each
holder of Class A Convertible Preferred Stock shall be entitled to vote on
(subject to the following sentence) all matters submitted to a vote of the
holders of Common Shares and shall be entitled to that number of votes equal to
the lesser of (a) the largest number of whole shares of Class C Common Stock
(such holder's "As-Converted Votes") into which such holder's Class A
Convertible Preferred Stock could be converted pursuant to the provisions of
Section 4 of this Article Fourth on the record date for the determination of
shareholders entitled to vote on such matter or, if no record date is
established, on the date such vote is taken or any written consent of
shareholders is first executed and (b) such holder's Pro Rata Share of the
Aggregate Preferred Votes (as defined in the following sentence). When voting
together with the holders of Common Stock as a single class, the holders of
Class A Preferred Stock shall be entitled in the aggregate in respect of the
shares of Class A Preferred Stock they hold to no more than that number of votes
(the "Aggregate Preferred Votes") equal to the lesser of (i) the aggregate
As-Converted Votes of all such holders and (ii) such aggregate As-Converted
Votes reduced by that number of votes which if such holders were then entitled
to vote would result in a breach of any Foreign Ownership Restriction then in
effect at the time of such vote. Notwithstanding the foregoing, or anything
herein to the contrary, the rights of the Class A Convertible Preferred Stock to
vote and elect directors on the Board of Directors of the Corporation shall be
limited to the express provisions of Article SIXTH of this Restated Certificate
of Incorporation. Except as otherwise expressly provided herein and as otherwise
required by law, the holders of Class A Convertible Preferred Stock and Common
Shares shall vote together as a single class on all matters to which such
holders are entitled to vote.
6. Restrictions and Limitations Requiring Holders of Class A
Convertible Preferred Stock to Vote as a Class.
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So long as any Class A Convertible Preferred Stock remains
outstanding, the Corporation must obtain the vote or written consent of at least
sixty percent (60%) of the holders of the then outstanding Class A Convertible
Preferred Stock (in addition to any other vote required by law) in order to:
(i) authorize the issuance or sale of any senior or, except for a
Qualified Transaction (as such term is defined in the Note Purchase Agreement)
which does not include Class A Convertible Preferred Stock, of any pari passu
equity securities, or any rights, options or warrants to acquire any such
securities or any security convertible into such senior or pari passu equity
securities, including without limitation, debt instruments convertible into such
senior or pari passu equity;
(ii) contract or incur any additional debt (other than a Qualified
Transaction which does not include Class A Convertible Preferred Stock or
refinancing of debt outstanding on the date hereof on terms substantially the
same or more favorable to the Corporation than existing terms) on or after the
date hereof for money borrowed in excess of an aggregate $1,000,000 (and any
refinancing of such amount) prior to the termination of the Voting Trust
Agreement, dated October 1, 1992 (the "Shareholders Agreement"), by and between
the Voting Trustee and all Shareholders of the Class A and any previously
authorized Class B Common Stock of the Corporation, at a time when the pro forma
"Earnings Before Fixed Charges and Taxes" to "Fixed Charge" ratio is less than
1.25 based on the Corporation's annualized performance over the preceding six
months;
(iii) alter, modify, amend or adversely affect any term of the
Class A Convertible Preferred Stock as specified in this Restated Certificate of
Incorporation;
(iv) engage in any merger or consolidation or voluntary
reorganization, restructuring, recapitalization, winding up, dissolution or
liquidation or any sale lease, assignment or other disposition of all or
substantially all of the assets of the Corporation; and
(v) otherwise alter, modify or amend this Restated Certificate of
Incorporation or the By-Laws of the Corporation as in effect on the date hereof
in any way that adversely affects any term, right or preference of the Series A
Convertible Preferred Stock.
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For the purposes of this Section 6(a) the following terms shall have
the following meanings:
"Earnings Before Fixed Charges and Taxes" shall mean, with reference to
any period, the sum of the following for such period, all as determined in
accordance with generally accepted accounting principles ("GAAP"): (A) the
consolidated net earnings of the Corporation and its Subsidiaries, if any,
excluding: (i) extraordinary gains, (ii) any equity interest of the Corporation
in the unremitted earnings of any corporation not a Subsidiary and (iii) any
gain on the sale, exchange or other disposition of assets plus (B) provisions
for federal, state and local income taxes plus (C) Fixed Charges.
"Fixed Charges" shall mean, with reference to any period, the sum of
the following for such period, all as determined in accordance with GAAP: (A)
all amounts which would be deducted in computing the consolidated net income of
the Corporation and its Subsidiaries, if any, on account of interest on
obligations for borrowed money, Capital Lease obligations and guarantees of the
foregoing, including imputed interest in respect of Capital Lease obligations,
amortization of debt discounts and expenses, fees and commissions for letters of
credit and bankers' acceptance financing and the net interest costs of interest
rate swaps and hedges plus (B) all payments by the Corporation and its
Subsidiaries, if any, pursuant to any lease of real or personal property (other
than Capital Lease obligations) minus the amount of any fixed rents paid to the
Corporation or any Subsidiary under noncancellable subleases of one year or
greater on the properties subject to such leases.
"Capital Leases" shall mean any lease of property which in accordance
with GAAP should be capitalized on the lessee's balance sheet or for which the
amount of the asset and liability thereunder as if so capitalized should be
disclosed in a note to such balance sheet.
"Subsidiary" shall mean any corporation of which the Corporation at the
time owns, directly or indirectly, more than 50% of the Voting Stock which has
the power to elect a majority of the board of directors.
7. Preemptive Rights. (a) Subject to the provisions of this Section 7,
each holder of Class A Convertible Preferred Stock shall, prior to the
occurrence of a Qualifying Public Offering, have the preemptive right to
purchase its pro rata share of any preferred or common securities offered by the
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Corporation in a private unregistered transaction at a price or prices not less
favorable to the holders of such Class A Convertible Preferred Stock than the
price at which such shares or other securities are offered for sale to others.
(b) Notwithstanding anything to the contrary in the foregoing
Section 7(a), no holder of Class A Convertible Preferred Stock shall have any
preemptive right to purchase any shares (or Options to acquire shares) issued or
issuable pursuant to offers, grants or sales made under the Employee Stock
Plans; but only to the extent that each of the following is met:
(i) In any fiscal year, the number of shares of common stock
issuable pursuant to grants made in such year under the Employee
Stock Plans (other than shares issued pursuant to the Offerings) at
a consideration per share less than the fair market value of a
share of common stock at the time of such grants shall not exceed
in the aggregate (A) in the case of fiscal year 1996, 2% of the
then outstanding shares of common and preferred stock and (B) in
the case of each fiscal year thereafter, 1% of the then outstanding
shares of common and preferred stock. For grants made in fiscal
year 1996, the determinations of fair market value and outstanding
shares shall be made after giving effect to the Offerings and the
purchase of Class A Convertible Preferred Stock contemplated
hereby.
(ii) At no time shall the number of shares of common stock
issued and issuable pursuant to grants made under the ISOP exceed
in the aggregate 10% of the then outstanding shares of Common and
Preferred Stock.
(iii) The total number of shares issued and issuable pursuant
to grants made under the SPP (other than shares issued pursuant to
the Offerings) will not exceed 1,000,000.
(c) Notwithstanding anything to the contrary in the foregoing
Section 7(a), no holder of Class A Convertible Preferred Stock shall have any
preemptive right or other right to purchase any Common Shares or other
securities as a result of (A) the issuance of Common Shares upon conversion of
any Class A Convertible Preferred Stock or any Convertible Notes or the issuance
of Preferred Stock upon conversion of any Convertible Notes; (B) the issuance of
up to 91,587 shares and
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like number of warrants issued pursuant to the 1994 Offering; (C) the offer or
issuance of securities of the Corporation in connection with the Offerings; (D)
the issuance of shares of Class C Common Stock upon conversion of Class A Common
Stock into Class C Common Stock; and/or (E) the issuance of any Additional
Securities (as such term is defined in the Note Purchase Agreement) including,
without limitation, the issuance of up to $10,000,000 aggregate principal amount
of Convertible Notes (inclusive of all Convertible Notes previously issued) and
such additional Convertible Notes as may be issued pursuant to Subsection 4(k).
FIFTH: The number of directors constituting the present Board of
Directors is twelve (12), and the names and addresses of the current directors
are as follows:
CAPT. JOHN P. ANDERSON CAPT. JAMES B. ROBBINS
16 Diann Drive 1488 Gilbert Road
Montville, NJ 07045 Kennesaw, GA 30152
CAPT. FRED L. BARBER DUMITRU CUCU, Romaero SA
4324 Autumn Hill Drive BLVD Ficusului, NO 44, Sector 1
Stone Mountain, GA 30083 Bucharest, Romania 71544
CAPT. JACK E. GRAY II ALAN HALPERT
804 Oakdale Road, N.E. 19 Fordham Road
Atlanta, GA 30307-1200 Livingston, NJ 07039
CAPT. DON GRISHAM BERNARD MANN
3972 Estepona Avenue 1145 Buckingham Road
Miami, FL 33178 Fort Lee, NJ 07024
CECELIA HALLMAN RUSSELL THAYER
334 S. Route 100 171 Hulfish Street
Breingsville, PA 18031 Princeton, NJ 08542-3709
CAPT. JAMES B. HAWKS NORTON WALTUCH
210 Highridge Court 180 South Woodland Street
Roswell, GA 30076 Englewood, NJ 07631
JOHN G. MURPHY
35 Earle Avenue
Rockville Centre, NY 11570
SIXTH: (a) From the date of effectiveness of this Restated Certificate
of Incorporation until the earlier of (i) January 1, 1998 or (ii) a Qualifying
Public Offering, the Board of Directors shall consist of not less than fourteen
(14) nor more than nineteen (19) directors and the exact number shall be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board
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of Directors. The directors shall be divided into three classes, designated Type
Class A, Type Class C and Type Preferred Class. Only shareholders owning Class A
Common Stock voting as a class (or the trustees under the Shareholders
Agreement) may vote to elect a Type Class A director; only shareholders owning
Class C Common Stock voting as a class may vote to elect a Type Class C
director; and only shareholders owning Convertible Preferred Stock voting as a
class may vote to elect a Type Preferred Class director. Through and until
January 1, 1998, a majority of the Board shall be comprised of Type Class A
directors. Upon the issuance of Class A Convertible Preferred Stock, the Board
of Directors shall appoint to the Board two (2) directors who shall be selected
by the holders of not less than a majority of the issued and outstanding shares
of Class A Convertible Preferred Stock, and the term of such two (2) directors
shall continue to, and expire at, the Corporation's 1997 annual shareholders'
meeting (the "1997 Shareholder Meeting"). Unless removed by a majority of the
Class A Directors serving on the Board, the terms for the three Class A
directors elected to the Board of Directors as then designated Class I directors
prior to the effective date of this Restated Certificate of Incorporation, shall
continue without interruption or termination until their expiration at the
Corporation's 1998 annual shareholders' meeting (the "1998 Shareholder
Meeting"). If any such Class A director's seats should become vacant prior to
the 1998 Shareholder Meeting, such vacancies shall be filed by the vote of the
remaining Type Class A directors on the Board and the term of such director
filling such vacancies shall continue until the 1998 Shareholder Meeting
(without the need for re-election or confirmation at any earlier shareholders'
meeting). However, prior to January 1, 1998, the majority of Class A directors
serving on the Board of Directors may vote to remove any Class A director with
or without cause.
(b) Effective as of the 1997 Shareholder Meeting (which shall occur
on or before June 30, 1997), unless there shall have occurred a Qualifying
Public Offering, members of the Board of Directors (including, without
limitation, those members elected at such 1997 Shareholder Meeting) will consist
of at least eight (8) Type Class A directors, five (5) (but no more than five)
Type Class C directors and two (2) (but no more than two) Type Preferred Class
directors. Of the Type Class A directors elected at the 1997 Shareholder
Meeting, at least five (5) such Type Class A directors shall have terms expiring
effective January 1, 1998. Of the Type Class C directors elected at the 1997
Shareholder Meeting, at least two (2) such Type Class C directors shall have
terms expiring
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effective January 1, 1998, not more than three type Class C directors on the
entire Board shall have terms expiring after January 1, 1998 and no such Type
Class C directors shall have terms expiring after the 1998 Shareholder Meeting.
The two Type Preferred Class directors elected at the 1997 Shareholder Meeting
shall have terms expiring effective as of the date of the 1998 Shareholder
Meeting.
(c) On and after January 1, 1998, (i) unless otherwise determined
by a vote of not less than three-fourths of the directors on the Board of
Directors, the Board of Directors shall consist of either nine (9), twelve (12)
or fifteen (15) directors and the exact number shall be determined from time to
time by resolution adopted by affirmative vote of the majority of the entire
Board of Directors, (ii) the holders of Common Stock (which as of January 1,
1998 shall consist solely of Class C Common pursuant to Article Fourth above)
shall be entitled to vote as a class to elect the number of directors which is
at least, but not more than, two thirds of the total number of directors on the
Board of Directors (such Board members elected from time to time by the holders
of Common Stock are designated herein as the "Common Directors"), and (iii) for
so long as not more than fifty percent (50%) of the Class A Convertible
Preferred Stock issued by the Corporation has been converted to Common Stock,
the holders of Class A Convertible Preferred Stock shall be entitled to vote as
a class, requiring the vote or written consent of at least fifty-one percent
(51%) of such holders, in order to elect the number of directors which is at
least, but not more than, one-third of the total number of directors on the
Board of Directors (such Board members elected from time to time by the holders
of Class A Convertible Preferred Stock are described herein as the "Preferred
Directors"). Effective as of the 1998 Shareholder Meeting, the Common Directors
and the Preferred Directors together shall be divided into three classes,
designated Term Class I, Term Class II, and Term Class III. Each such class
shall consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors and shall consist, as
nearly as possible, of directors two-thirds of which are Common Directors and
one-third of which are Preferred Directors. The 1998 Shareholder Meeting shall
occur on or before June 30, 1998. On or before January 1, 1998, the Board of
Directors shall appoint to the Board such additional Type Preferred Class
directors (if any) as may be necessary for the Corporation to be in compliance
with clause (iii) above in this paragraph, and all such additional directors
shall be appointed by the Type Preferred Class directors then serving on the
Board of Directors.
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(d) At the 1998 Shareholder Meeting, Term Class I directors shall
be elected for a one-year term, Term Class II directors for a two-year term and
Term Class III directors for a three-year term. At each succeeding annual
meeting of shareholders beginning in 1999, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term. If the number of directors is changed, any increase or decrease shall be
apportioned among the Term Classes (i.e. I, II and III) so as to maintain the
number of directors in such Class as nearly proportionate as possible, but in no
event shall the size of the Board be decreased to less than nine (9) directors.
(e) Unless otherwise provided herein, a director shall hold office
until the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. A director may
only be removed for cause by a majority vote of the votes cast by the holders of
the class of stock entitled to vote for the election of such director. Any
director of any Type Class (i.e. Class A, Class C or Preferred Class) elected to
fill a vacancy on the Board resulting from the death, resignation, retirement,
disqualification or removal of any director prior to the expiration of his or
her term shall be appointed by those directors on the Board of Directors who are
members of the same Type Class (i.e. Class A, Class C or Preferred Class) to
which such former director creating the vacancy was a member. Any director
elected to fill any such vacancy shall hold office for a term that shall
coincide with the remaining term (i.e. Class I, II or III term) of the former
director whose position he or she has filled. If the number of directors is
changed prior to January 1, 1988, any increase or decrease shall be apportioned
among the Classes (A, C and Preferred) so as to maintain the proportional
balance among each Type Class as nearly as possible to that authorized and
required as of the date of such change. Any such additional director elected to
fill a vacancy resulting from such increase in the size of the Board of
Directors shall hold office until the next annual meeting of the Corporation's
shareholders, but in the case of any such increase occurring after the 1997
Shareholder Meeting but before January 1, 1998, such additional director shall
hold office until January 1, 1998.
SEVENTH: To the extent permitted by New Jersey law, no director or
officer of the Corporation shall be personally liable to the Corporation or its
shareholders for damages for breach of any duty owed to the Corporation or its
shareholders
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except that this Article shall not relieve a director or officer from liability
for any breach of duty based on an act or omission (a) in breach of such
person's duty of loyalty to the Corporation or its shareholders, (b) not in good
faith or involving a knowing violation of law or (c) resulting in receipt of
such person of an improper personal benefit. For purposes of the foregoing
sentence, an act or omission in breach of a person's duty of loyalty means an
act or omission which that person knows or believes to be contrary to the best
interests of the Corporation or its shareholders in connection with a matter in
which he has a material conflict of interest.
EIGHTH: The Corporation shall indemnify each person who is or was a
director, officer, employee or agent of the Corporation or of any constituent
entity absorbed into the Corporation by consolidation or merger and any person
who is or was a director, officer, trustee, employee or agent or any other
enterprise service at the request of the Corporation or of such constituent
entity against all liabilities and expenses incurred in any proceeding, whether
or not a proceeding by or in the right of the Corporation, except that no
indemnification shall be made to or on behalf of any such person if a judgment
or other final adjudication adverse to that person establishes that his or her
acts or omissions (a) were in breach of her or her duty of loyalty to the
Corporation, (b) were not in good faith or involved a knowing violation of law,
or (c) resulted in receipt by such person of an improper personal benefit. For
purposes of the foregoing sentence, an act or omission in breach of a person's
duty of loyalty means an act or omission which that person knows or believes to
be contrary to the best interests of the Corporation or its shareholders in
connection with a matter in which he has a material conflict of interest.
NINTH: Pursuant to Subsection 14A:9-5(6) of the New Jersey Business
Corporation Act, this Restated Certificate of Incorporation shall become
effective on the date of filing of this Restated Certificate of Incorporation in
the office of the Secretary of State.
IN WITNESS WHEREOF, the undersigned has signed this Restated
Certificate of Incorporation on this __ day of ___________, 1996.
KIWI INTERNATIONAL AIR LINES,
INC.
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By:__________________________
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EXHIBIT C
RESTATED BY-LAWS
OF
KIWI INTERNATIONAL AIR LINES, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders
of the Corporation shall be held either within or without the State of New
Jersey, at such time and place as the Board of Directors may designate in the
call or in a waiver of notice thereof, or in the absence of Board action
designating the time for such meeting, on the last Thursday of April of each
year (or if such day be a legal holiday, then on the next succeeding day not a
holiday) at 10:00 o'clock in the forenoon, for the purpose of electing directors
and for the transaction of such other business as may properly be brought before
the meeting.
Section 2. Delayed Annual Meeting. If for any reason the annual
meeting of the stockholders shall not be held on the day designated pursuant to
Section 1 of this Article, or on any subsequent day to which it shall have been
duly adjourned, such meeting may be called and held as a special meeting, and
the same proceedings may be had and the same business may be transacted at such
meeting as at any annual meeting.
Section 3. Special Meetings. Special meetings of the stockholders
may be called by the Board of Directors or by the President, at such times and
at such place either within or without the State of New Jersey as may be stated
in the call or in a waiver of notice thereof.
Section 4. Notice of Meetings. Notice of the time, place and
purpose of every meeting of stockholders shall be delivered personally or mailed
not less than ten days nor more than sixty days previous thereto to each
stockholder of record entitled to vote, at his post office address appearing
upon the records of the Corporation or at such other address as shall be
furnished in writing by him to the Corporation for such purpose. Such further
notice shall be given as may be required by law or by these Restated By-Laws.
Any meeting may be held without notice if all stockholders entitled to vote
either are present in person or by proxy, or waive notice in writing, either
before or after the meeting.
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Section 5. Quorum. The holders of record of at least a majority of
the shares of the stock of the Corporation issued and outstanding and entitled
to vote, present in person or by proxy, shall, except as otherwise provided by
law or by the Corporation's Certificate of Incorporation (as the same is amended
and restated from time to time the "Certificate of Incorporation") or by these
Restated By-Laws, constitute a quorum at all meetings of the stockholders; if
there be no such quorum, the holders of a majority of such shares so present or
represented may adjourn the meeting from time to time until a quorum shall have
been obtained.
Section 6. Organization of Meetings. Meetings of the stockholders
shall be presided over by the Chairman of the Board, if there be one, or if he
is not present, by the President, or if he is not present, by a chairman to be
chosen at the meeting. The Secretary of the Corporation, or in his absence an
Assistant Secretary, shall act as Secretary of the meeting, if present.
Section 7. Voting. At each meeting of stockholders, except as
otherwise provided by statute or the Certificate of Incorporation, every holder
of record of stock entitled to vote shall be entitled to one vote in person or
by proxy for each share of such stock standing in his name on the records of the
Corporation. Except as otherwise provided by statute, the Certificate of
Incorporation, or these Restated By-Laws, elections of directors shall be
determined by a plurality of the votes cast thereat (and in cases where the
Certificate of Incorporation or applicable law requires that certain directors
or class of directors be elected by a specific class of shareholders, then by a
plurality of the votes of such shareholder class cast thereat) and all other
action shall be determined by a majority of the votes cast at such meeting. Each
proxy to vote shall be either in writing and signed, or given by telegram,
radio, radiogram, cable or equivalent communication made by the stockholder or
by his duly authorized agent.
At all elections of directors, the voting shall be in such other manner
as may be determined by the Board of Directors, unless a shareholder present in
person or by proxy entitled to vote at such election demands election by ballot.
With respect to any other matter presented to the stockholders for their
consideration at a meeting, any stockholder entitled to vote may, on any
question, demand a vote by ballot.
A complete list of the stockholders entitled to vote at each such
meeting, arranged in alphabetical order (within each class, series or group of
shareholders maintained by the Corporation for convenience of reference) with
the address of each, and the number of shares registered in the name of each
stockholder, shall be
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prepared by the Secretary and shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 8. Inspectors of Election. The Board of Directors in
advance of any meeting of stockholders may appoint one or more Inspectors of
Election to act at the meeting or any adjournment thereof. If Inspectors of
Election are not so appointed, the chairman of the meeting may, and on the
request of any stockholder entitled to vote, shall, appoint one or more
Inspectors of Election. Each Inspector of Election, before entering upon the
discharge of his duties, shall take and sign an oath to faithfully execute the
duties of Inspector of Election at such meeting with strict impartiality and
according to the best of his ability. If appointed, Inspectors of Election shall
take charge of the polls and, when the vote is completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by law.
Section 9. Action by Consent. Any action required or permitted to
be taken at any meeting of stockholders may be taken without a meeting, if,
prior to such action, a written consent or consents thereto, setting forth such
action, is or are signed by the holders of record of all of the shares of stock
of the Corporation or, in the alternative, by the holders of record of so many
of the shares of the stock of the Corporation (whether as a whole, within each
class of stock, or both) as are required by law or by the Certificate of
Incorporation or by these Restated By-laws for the taking of such action by
written consent, if, either the Corporation solicits for such consents or
proxies for consents from the holders of all of the shares of stock of the
Corporation, issued, outstanding and entitled to vote, or promptly notifies all
non-consenting holders of stock of the Corporation as required by law. Any such
solicitation or notice to non-consenting stockholders hereunder shall specify at
least the action to which the consent relates, its proposed effective date, any
conditions precedent to such action, the date of tabulation of consents, and the
rights of all stockholders who are entitled to dissent from such action, if any,
together with the requisite procedure for assertion and enforcement of those
rights. In the case of a merger, consolidation, or sale, lease, exchange or
other disposition of substantially all of the assets of the Corporation, any
required or permitted stockholder action may be taken by a
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prior written consent or consents to such action, setting forth the action to be
taken, signed either by the holders of all of the shares of every class of
issued and outstanding stock of the Corporation, or by the holders of all of the
shares of stock of the Corporation, issued, outstanding and entitled to vote,
with the same notice to all other holders of stock of the Corporation as is
required hereunder to be sent to non-consenting stockholders.
ARTICLE II
DIRECTORS
Section 1. Number, Term, Vacancies, Quorum. The number of directors
which shall comprise the Board of Directors, the term period for which directors
shall hold office and the manner in which vacancies are filled on the Board
shall be as provided in the Certificate of Incorporation.
A majority of the members of the Board of Directors then holding office
shall constitute a quorum, which in no case shall be less than one-third of the
total number of directors or less than two directors, except that when the
entire Board consists of one Director, then one director shall constitute a
quorum for the transaction of business, but if at any meeting of the Board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained.
Section 2. Meetings, Notice. Meetings of the Board of Directors
shall be held at such place either within or without the State of New Jersey, as
may from time to time be fixed by resolution of the Board, or as may be
specified in the call or in a waiver of notice thereof. Regular meetings of the
Board of Directors shall be held at such times as may from time to time be fixed
by resolution of the Board, and special meetings may be held at any time upon
the call of three directors, the Chairman of the Board, if one be elected, or
the President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board or of any special meeting when its
time and place are determined in advance by a quorum of the Board. Any meeting
may be held without notice, if all directors are present, or if notice is waived
in writing, either before or after the meeting, by those not present. Any
meeting of the Board may be held by means of conference telephone or any other
means of communication by which all persons participating in the meeting are
able to hear each other.
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Section 3. Committees. The Board of Directors may, in its
discretion, by resolution passed by a majority of the whole Board, designate
from among its members one or more committees which shall consist of one or more
directors. The Board may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committees shall have and may exercise such
powers as shall be conferred or authorized by the resolution appointing them. A
majority of any such committee may determine its action and fix the time and
place of its meetings, including meetings by telephone conference call or
similar means of communication, unless the Board of Directors shall otherwise
provide. The Board shall have power at any time to change the membership of any
such committee, to fill vacancies in it, or to dissolve it.
Section 4. Action by Consent. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting, if prior to such action a written consent or
consents thereto is signed by all members of the Board, or of such committee as
the case may be, and such written consent or consents is filed with the minutes
of proceedings of the Board or committee.
Section 5. Compensation. The Board of Directors may determine, from
time to time, the amount of compensation which shall be paid to its members. The
Board of Directors shall also have power, in its discretion, to allow a fixed
sum and expenses for attendance at each regular or special meeting of the Board,
or of any committee of the Board; in addition, the Board of Directors shall also
have power, in its discretion, to provide for and pay to directors rendering
services to the Corporation not ordinarily rendered by directors, as such,
special compensation appropriate to the value of such services, as determined by
the Board from time to time.
ARTICLE III
OFFICERS
Section 1. Titles and Election. The officers of the Corporation,
who shall be chosen by the Board of Directors at its first meeting after each
annual meeting of stockholders, shall be a President, a Treasurer and a
Secretary. The Board of Directors from time to time may elect a Chairman of the
Board, one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers
and such other officers and agents as it shall deem necessary, and may define
their powers and duties. Any number of offices may be held by the same person.
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Section 2. Terms of Office. The officers shall hold office until
their successors are chosen and qualify.
Section 3. Removal. Any officer may be removed, either with or
without cause, at any time, by the affirmative vote of a majority of the Board
of Directors.
Section 4. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors or to the Secretary. Such
resignations shall take effect at the time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5. Vacancies. If the office of any officer or agent becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office or otherwise, the directors may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy occurred.
Section 6. Chairman of the Board. The Chairman of the Board of
Directors, if one be elected, shall preside at all meetings of the Board of
Directors and of the stockholders, and he shall have and perform such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 7. President. The President shall be the chief executive
officer of the Corporation and, in the absence of the Chairman, shall preside at
all meetings of the Board of Directors, and of the stockholders. He shall
exercise the powers and perform the duties usual to the chief executive officer
and, subject to the control of the Board of Directors, shall have general
management and control of the affairs and business of the Corporation; he shall
appoint and discharge employees and agents of the Corporation (other than
officers elected by the Board of Directors) and fix their compensation; and he
shall see that all orders and resolutions of the Board of Directors are carried
into effect. He shall have the power to execute bonds, mortgages and other
contracts, agreements and instruments of the Corporation, and shall do and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
Section 8. Vice Presidents. If chosen, the Vice Presidents, in the
order of their seniority, shall, in the absence or disability of the President,
exercise all of the powers and duties of the President. Such Vice Presidents
shall have the power to execute bonds, notes, mortgages and other contracts,
agreements and instruments of the Corporation, and shall do and perform such
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other duties incident to the office of Vice President and as the Board of
Directors, or the President, shall direct.
Section 9. Secretary. The Secretary shall attend all sessions of
the Board and all meetings of the stockholders and record all notes and the
minutes of proceedings in a book to be kept for that purpose. He shall give, or
cause to be given, notice of all meetings of the stockholders and of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors. The Secretary shall affix the corporate seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer who may affix the seal to any such instrument in the event
of the absence or disability of the Secretary. The Secretary shall have and be
the custodian of the stock records and all other books, records and papers of
the Corporation (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the directors whenever they may require it, an account of all his transactions
as Treasurer and of the financial condition of the Corporation.
Section 11. Duties of Officers may be Delegated. In case of the
absence or disability of any officer of the Corporation, or for any other reason
that the Board may deem sufficient, the Board may delegate, for the time being,
the powers or duties, or any of them, of such officer to any other officer, or
to any director.
ARTICLE IV
INDEMNIFICATION
Section 1. Indemnification. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director, officer or trustee of the Corporation or of any constituent
corporation absorbed by the Corporation in a consolidation or merger or is or
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was serving at the request of the Corporation or of any absorbed constituent
corporation as a director, officer, employee, agent of or participant in another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, or the legal representative of such a person against expenses,
costs, disbursements (including attorneys' fees), judgments, fines and amounts
actually and reasonably incurred by him in good faith and in connection with
such action, suit or proceeding unless a judgment or other final adjudication
adverse to such person establishes that his acts or omissions (a) were in breach
of his duty of loyalty to the Corporation or its shareholders, (b) were not in
good faith or involved a knowing violation of law or (c) resulted in receipt by
the corporate agent of an improper personal benefit. As used in this Section, an
act or omission in breach of a person's duty of loyalty means an act or omission
which that person knows or believes to be contrary to the best interests of the
Corporation or its shareholders in connection with a manner in which he has a
material conflict of interest.
Section 2. Specific Authorization. Any indemnification under
Section 1 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, trustee, employee, agent, or the legal
representative thereof, is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Section 1. Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or even if obtainable if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
Section 3. Advance of Expenses. Expenses incurred by any person
entitled to be indemnified under Section 1 shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized in the specific case, (such authorization to be made in the same
manner as a determination that indemnification is proper under Section 2 of this
Article), upon receipt of an undertaking by or on behalf of the director,
officer, trustee, employee, or the legal representative thereof, to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation pursuant to Section 1.
Section 4. Right of Indemnity not Exclusive. The indemnification
provided by this Article shall not exclude any other rights to which those
seeking indemnification may be entitled under the certificate of incorporation
of the Corporation or any By-Law
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agreement, vote of stockholders or otherwise, and shall continue as to a person
who has ceased to be a director, officer, trustee, employee, agent or the legal
representative thereof, and shall inure to the benefit of the heirs, executors,
and administrators of such a person.
Section 5. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, trustee,
employee or agent of the Corporation or of any constituent corporation absorbed
by the Corporation by consolidation or merger or the legal representative of
such person or is or was serving at the request of the Corporation or of any
absorbed constituent corporation as a director, officer, trustee, employee or
agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise, or the legal representative of any such person
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such or by reason of his being or having
been such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article, Section 14A:3-5 of
the New Jersey Business Corporation Act, or otherwise.
Section 6. Invalidity of any Provision of this Article. The
invalidity or unenforceability of any provision of this Article shall not affect
the validity or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
(including punch cards, magnetically coded or otherwise treated forms to
facilitate machine or automatic processing) as the Board of Directors may from
time to time prescribe. Each certificate of stock shall in any event state upon
its face all matters required by law. Each certificate of stock issued at any
time the Corporation is authorized to issue shares of more than one class of
stock shall set out on it the designations, rights, preferences and limitations
of each class and series then authorized and the power of the Board of Directors
to divide any such shares and to change such designations, rights, preferences
and limitations. The certificates of stock shall be signed by the Chairman of
the Board, if any, or by the President or a Vice President and by the Secretary,
or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed
with the seal of the Corporation or a facsimile thereof, and countersigned and
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registered in such manner, if any, as the Board of Directors may by resolution
prescribe. Where any such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or registered by a registrar other than
the Corporation or its employee, the signature of any such officer may be a
facsimile signature. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
Corporation.
Section 2. Transfer. The shares of stock of the Corporation shall
be transferred only upon the books of the Corporation by the holder thereof in
person or by his attorney, upon surrender for cancellation of certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require.
Section 3. Record Dates. The Board of Directors may fix in advance
a date, not less than ten nor more than sixty days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the distribution or allotment of any rights, or the date when any
change, conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to receive any distribution or allotment of such rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, and in such case only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote,
at such meeting, or to receive payment of such dividend, or to receive such
distribution or allotment of rights or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after such record date fixed as aforesaid.
Section 4. Lost Certificates. In the event that any certificate of
stock is lost, stolen, destroyed or mutilated, the Board of Directors may
authorize the issuance of a new certificate of the same tenor and for the same
number of shares in lieu
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thereof. The Board may in its discretion, before the issuance of such new
certificate, require the owner of the lost, stolen, destroyed or mutilated
certificate, or the legal representative of the owner, to make an affidavit or
affirmation setting forth such acts as to the loss, destruction or mutilation as
it deems necessary, and to give the Corporation a bond in such reasonable sum as
it directs to indemnify the Corporation.
ARTICLE VI
CONTRACTS AND FINANCIAL TRANSACTIONS
Section 1. Contracts. When the execution of any contract,
conveyance, or other instrument, has been authorized by the Board of Directors,
or in the case of such contract, conveyance or other instrument, between the
Corporation and any director or any corporation, firm, association or entity in
which a director of the Corporation has a direct or indirect interest, has been
authorized as set out in the New Jersey Business Corporation Act, without
specification as to the executing officer, the President, or a Vice President
may execute the same in the name and on behalf of the Corporation, and the
Secretary, an Assistant Secretary or the Secretary-Treasurer may attest to that
execution and affix the corporate seal thereto.
Section 2. Checks, Notes, Etc. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money, may
be signed by the President or any Vice President and may also be signed by such
other officer or officers, agent or agents, as shall be thereunto authorized
from time to time by the Board of Directors.
Section 3. Loans to Directors, Officers and Employees. The Board of
Directors may authorize the loaning of money, guaranteeing of obligations or
other assistance to any other officer or employee of the Corporation or of any
subsidiary whenever in judgment of the Board such loan, guarantee or assistance
may reasonably be expected to benefit the Corporation, provided, however, if
such officer or employee is also a director, such loan, guarantee or assistance
must be approved by a majority of the entire Board. Any such loan, guarantee or
assistance may be made with or without interest, and may be unsecured, or
secured in such manner as the Board shall approve.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. Registered Office and Agent. The registered office of
the Corporation shall be located at 721 Route 202-206, P.O. Box 1018,
Somerville, New Jersey 08876. The Corporation may have other offices either
within or without the State of New Jersey at such places as shall be determined
from time to time by the Board of Directors or the business of the Corporation
may require. The registered agent at such office is G. Robert Marcus, Esq.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 3. Corporate Seal. The seal of the Corporation shall be
circular in form and contain the name of the Corporation, and the year and state
of its incorporation. Such seal may be altered from time to time at the
discretion of the Board of Directors.
Section 4. Books. There shall be kept at such office of the
Corporation as the Board of Directors shall determine, within or without the
State of New Jersey, correct books and records of account of all its business
and transactions, minutes of the proceedings of its stockholders, Board of
Directors and committees, and the stock book, containing the names and addresses
of the stockholders, the number of shares held by them, respectively, and the
dates when they respectively became the owners of record thereof, and in which
the transfer of stock shall be registered, and such other books and records as
the Board of Directors may from time to time determine.
Section 5. Voting of Stock. Unless otherwise specifically
authorized by the Board of Directors, all rights and powers, including any right
to vote, incident to any stock owned by the Corporation, other than stock of the
Corporation, shall be exercised in person or by proxy, by the President or any
Vice President of the Corporation on behalf of the Corporation in no more
restricted manner or limited extent than would apply to any owner thereof.
ARTICLE VIII
AMENDMENTS
Section 1. Amendments. The vote of the holders of at least a
majority of the shares of stock of the Corporation, issued and outstanding and
entitled to vote, shall be necessary at any
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meeting of stockholders to amend or repeal these Restated By-Laws or to adopt
new Restated By-Laws. These Restated By-Laws may also be amended or repealed, or
new Restated By-Laws adopted, at any meeting of the Board of Directors by the
vote of at least a majority of the entire Board; provided that any by-law
adopted by the Board may be amended or repealed by the stockholders in the
manner set forth above.
Any proposal to amend or repeal these Restated By-Laws or to adopt new
Restated By-Laws shall be stated in the notice of the meeting of the Board of
Directors or the stockholders, or in the waiver of notice thereof, as the case
may be, unless all of the directors or the holders of record of all of the
shares of stock of the Corporation, issued and outstanding and entitled to vote,
are present at such meeting.
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[Exhibit D]
================================================================================
RECOVERY EQUITY INVESTORS II, L.P.
KIWI INTERNATIONAL AIR LINES, INC.
REGISTRATION RIGHTS AGREEMENT
Dated as of July 1, 1996
================================================================================
<PAGE> 123
TABLE OF CONTENTS
Page
----
1. Definitions..............................................................1
2. Registration under Securities Act, etc...................................5
2.1 Registration on Demand.........................................5
2.2 Incidental Registration........................................7
2.3 Registration Procedures........................................8
2.4 Underwritten Offerings. ......................................13
2.5 Preparation; Reasonable Investigation.........................15
2.6 Indemnification...............................................15
3. Expenses................................................................18
4. Rules 144 and 144A......................................................18
5. Amendments and Waivers..................................................18
6. Nominees for Beneficial Owners..........................................18
7. Notices.................................................................19
8. Remedies................................................................20
9. No Inconsistent Agreements..............................................20
10. No Adjustments to Shares................................................20
11. Miscellaneous...........................................................20
<PAGE> 124
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 1, 1996, among
KIWI International Air Lines Inc., a New Jersey corporation (the "Company"), and
Recovery Equity Investors II, L.P., a Delaware limited partnership (the
"Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, the Company is a party to the Convertible Note
Purchase and Option Agreement, dated as of July 1, 1996 (the "Note Purchase
Agreement"), between the Company and the Purchaser, pursuant to which the
Company has agreed to issue, and the Purchaser has agreed to purchase,
$2,000,000 aggregate principal amount of the Company's 6% Convertible Notes due
March 15, 1997 (the "Convertible Notes"; such Convertible Notes to be initially
purchased by the Purchaser, the "Initial Convertible Notes");
WHEREAS, pursuant to the Note Purchase Agreement, the
Purchaser has been granted the option to purchase from the Company (i) an
additional $2,000,000 aggregate principal amount of Convertible Notes (the
"Additional Convertible Notes"), and (ii) certain shares of KIWI's Class A
Convertible Preferred Stock, no par value (the "Preferred Stock"), or, subject
to certain conditions, in lieu thereof, an additional $6,000,000 aggregate
principal amount of Convertible Notes (the "Substitute Convertible Notes");
WHEREAS, in order to induce the Purchaser to enter into the
Note Purchase Agreement, the Company has agreed to provide the registration
rights as set forth herein;
WHEREAS, the execution and delivery of this Agreement is a
condition to the purchase by the Purchaser of the Initial Convertible Notes;
NOW, THEREFORE, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following respective meanings:
Additional Convertible Notes: As defined in the second recital
of this Agreement.
Business Day: Each day other than a Saturday, a Sunday or any
other day on which banking institutions in the
<PAGE> 125
City of New York are authorized or obligated by law or executive order to be
closed.
Class C Common Stock: The Company's Class C Common Stock, no
par value.
Commission: The Securities and Exchange Commission and any
successor federal agency having similar powers.
Common Stock: The Company's Class A Common Stock, no par value
and the Class C Common Stock.
Company: As defined in the introductory paragraph of this
Agreement.
Company Shares: As defined in Section 2.1(d).
Convertible Notes: As defined in the first recital of this
Agreement, including, but not limited to the Initial Convertible Notes, any
Additional Convertible Notes and any Substitute Convertible Notes.
Demand Notice: As defined in Section 2.1(a).
Initial Convertible Notes: As defined in the first recital of
this Agreement.
Initiating Holders: Any holder or holders of Registrable
Shares holding at least 50% of the Registrable Shares outstanding at the time of
any request pursuant to Section 2.1.
NASD: National Association of Securities Dealers, Inc.
NASDAQ: The NASDAQ Stock Market, Inc.
Note Purchase Agreement: As defined in the first recital of
this Agreement.
Person: An individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organi zation or a government or any
department or agency thereof.
Preferred Stock: As defined in the second recital of this
Agreement.
Qualifying Public Offering: A public offering of Common Stock
registered under the Securities Act in which
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the Company receives total gross proceeds of at least $15,000,000.
Registrable Shares: (a) Any shares of Common Stock issued or
issuable upon conversion of Convertible Notes or Shares, (b) any shares of
Common Stock otherwise issued in connection with any stock split or subdivision
of, or dividend or distribution upon, Shares or (c) any shares of Common Stock
purchased by the holder of any Convertible Notes or Shares pursuant to
preemptive rights with respect to such Convertible Notes or Shares provided in
the Restated Certificate of Incorporation and (d) any securities issued or
issuable with respect to any shares of Common Stock referred to in the foregoing
clauses (i) upon any conversion or exchange thereof, (ii) by way of stock
dividend or stock split, (iii) in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or (iv)
otherwise. Any particular Registrable Shares shall cease to be Registrable
Shares when (x) a registration statement with respect to the sale of such
Registrable Shares shall have become effective under the Securities Act and such
Registrable Shares shall have been disposed of in accordance with such
registration statement, (y) such Registrable Shares shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, or (z) such Registrable Shares shall have ceased to be
outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
(a) registration and filing fees, including National Association of Securities
Dealers' fees and fees and expenses associated with filings required to be made
with any national securities exchange or national computerized market system
(including, if required, the fees and expenses of any "qualified independent
underwriter" and its counsel), (b) fees and expenses of complying with
securities or blue sky laws, including reasonable fees and disbursements of
counsel effecting blue sky qualifications, (c) word processing, duplicating and
printing expenses, messenger and delivery expenses, (d) fees and disbursements
of counsel for the Company, of its independent public accountants (including
the expenses of any special audits or "comfort" letters required by or incident
to such performance and compliance), of underwriters and of any Person,
including special experts, retained by the Company in connection with such
performance and compliance, but not including (x) fees and disbursements of
counsel for the holders of Registrable Shares or (y) any underwriting
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discounts or commissions attributable to the sale of Registrable Shares.
Required Holders: The holders of at least 75% of the
Registrable Shares.
Restated Certificate of Incorporation: The Restated
Certificate of Incorporation of the Company in the form of Exhibit B to the Note
Purchase Agreement to be duly filed with the office of the Secretary of State of
New Jersey upon approval thereof by the Company's shareholders.
Securities Act: The Securities Act of 1933, as amended or any
similar replacement federal statute, as at the time in effect, and any reference
to a particular Section of such Act shall include a reference to the comparable
Section, if any, of any such similar replacement federal statute.
Shares: Any shares of Preferred Stock issued pursuant to the
Note Purchase Agreement or issued or issuable upon conversion of Convertible
Notes, and any other securities (other than Common Stock) issued in connection
with any stock split or subdivision of, or distribution or dividend upon, the
Preferred Stock.
Substitute Convertible Notes: As defined in the second recital
of this Agreement.
2. Registration under Securities Act, etc.
2.1 Registration on Demand. (a) Demand. At any time after the
occurrence of a Qualifying Public Offering, upon the written request of one or
more Initiating Holders (such written request, a "Demand Notice") that the
Company effect the registration under the Securities Act of all or a part of
such Initiating Holders' Registrable Shares and specifying the intended method
or methods of disposition thereof, the Company will promptly, but in any event
within ten days, give written notice of such requested registration to all
holders of Registrable Shares and thereupon will use its best efforts to effect
the registration under the Securities Act of:
(i) the Registrable Shares which the Company has
been requested to register pursuant to the
Demand Notice, and
(ii) all other Registrable Shares which the Com pany has
been requested to register by the
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holders thereof by written request given to the
Company within ten days after the Company has given
such written notice, which request shall specify the
intended method of disposition of such Registrable
Shares,
all to the extent required to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Shares so to be registered.
(b) Limitation on Registration Rights. Not withstanding
Section 2.1(a), the Company shall not be required to effect a registration
pursuant to Section 2.1(a):
(i) until a period of 180 days shall have elapsed from
the effective date of the most recent registration
previously effected pursuant to Section 2.1(a),
(ii) if the aggregate number of Registrable Shares to be
included in such registration represent less than 25%
of the aggregate Registrable Shares issued by the
Company, and
(iii) if it has previously effected three registrations
pursuant to Section 2.1(a).
(b) Registration Statement Form. Each registration requested
pursuant to Section 2.1(a) shall be effected by the filing of a registration
statement on Form S-1, Form S-2 or Form S-3 (or any other form which includes
substantially the same information as would be required to be included in a
registration statement on such forms as presently constituted), unless the use
of a different form is (i) required by law or (ii) permitted by law and agreed
to in writing by the holders of more than 50% of the Registrable Shares to be
included in such registration. The Company will use its best efforts to qualify
for registration on Form S-2 or Form S-3 (or any other comparable form
hereafter adopted).
(c) Effective Registration Statement. A registration
requested pursuant to Section 2.1(a) shall not be deemed to have been effected
unless it has become effective and remained effective for a period of at least
180 days or, if earlier, until all the Registrable Shares covered thereby have
been sold.
(d) Registration Rights Exclusive. The Company will not
register securities for sale for the account of any
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Person other than holders of Registrable Shares, except for shares of Common
Stock to be sold for the account of the Company to the extent permitted by
Section 2.1(f) (the "Company Shares"), and will not register any securities
other than Registrable Shares in any registration of Registrable Shares effected
pursuant to Section 2.1(a) (except for the Company Shares), unless permitted to
do so by the written consent of the holders of more than 50% of the Registrable
Shares to be included in such registration. Without the prior written consent of
the holders of the Registrable Shares, the Company will not grant to any Person
the right to demand a registration of securities prohibited by this Section
2.1(d).
(e) Other Requests. Upon the written request of one or more
holders of Registrable Shares (other than Initiating Holders) received after a
Qualifying Public Offering requesting that the Company effect the registration
under the Securities Act of all or part of such holders' Registrable Shares and
specifying the intended method or methods of disposition thereof, the Company
will promptly, but in any event within ten days give written notice of such
requested registration, including the names and addresses of such requesting
holders, to all holders of Registrable Shares but shall not have any obligation
to effect any registration pursuant to such request until it has received a
request of Initiating Holders pursuant to Section 2.1(a).
(f) Pro Rata Allocation. If a registration pursuant to Section
2.1(a) involves an underwritten offering and the holders of a majority of the
Registrable Shares to be included in such registration, in consultation with the
managing underwriter, determine, and so advise the Company in writing (with a
copy to each holder of Registrable Shares to be included in such registration),
that the number of securities to be included in such underwritten offering
should be limited due to market conditions or otherwise, the Company will
include in such registration, to the extent of the number of securities which
the Company is so advised should be included in such offering, (i) first,
Registrable Shares requested to be included in such registration, pro rata among
the holders thereof on the basis of the number of shares of Common Stock
requested by such holders to be registered, (ii) second, securities that the
Company proposes to issue and sell for its own account, if any, and (iii) third,
if the holders of more than 50% of the Registrable Shares to be included in such
registration have consented in writing pursuant to Section 2.1(d) to the
inclusion of other securities in such registration, all other securities
proposed to be registered, if any.
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2.2 Incidental Registration. (a) Participation in Other
Registrations. After the occurrence of a Qualifying Public Offering, any time
the Company determines to register any of its equity securities under the
Securities Act (other than pursuant to Section 2.1(a) or on Form S-8, Form S-4
or any successor forms thereto), whether or not for sale for its own account, it
will each such time give prompt written notice to all holders of Registrable
Shares of its intention to do so, which notice shall be given to all such
holders at least 30 days prior to the date such registration is proposed to be
consummated. Upon the written request of any such holder made within 30 days
after the receipt of any such notice (which request shall specify the
Registrable Shares intended to be disposed of by such holder and the intended
method of disposition thereof), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable Shares which the
Company has been so requested to register by the holders thereof, to the extent
required to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Shares so to be registered, provided
that if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable Shares and,
thereupon, shall be relieved of its obligation to register any Registrable
Shares in connection with such registration, without prejudice, however, to the
rights of any holder or holders of Registrable Shares to request that such
registration be effected as a registration upon request pursuant to Section
2.1(a).
(b) Underwriter. If the securities proposed to be registered
by the Company are to be disposed of in an underwritten offering, such notice of
the Company's intention to register such securities shall designate the
proposed underwriters of such offering (which shall be one or more underwriting
firms of recognized national standing) and shall contain the Company's agreement
to use its best efforts, if requested to do so, to arrange for such under-
writers to include in such underwriting the Registrable Shares which the Company
has been so requested to register pursuant to Section 2.2(a).
(c) Effectiveness. No registration effected pursuant to
Section 2.2(a) shall relieve the Company from its obligation to effect
registrations pursuant to Section 2.1(a).
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(d) Pro Rata Allocation. If a requested registration pursuant
to Section 2.2(a) involves an underwritten offering and the managing underwriter
shall advise the Company in writing (with a copy to each holder of Registrable
Shares requesting registration) that, in its opinion, the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering within a commercially reasonable price range (such writing
to state the basis of such opinion and the approximate number of shares of
securities which may be in cluded in such offering without such effect), the
Company will include in such registration, to the extent of the number of
securities which the Company is so advised can be sold in such offering, (i)
first, securities that the Company proposes to issue and sell for its own
account, (ii) second, Registrable Shares requested to be registered by the
holders thereof pursuant to Section 2.2(a), pro rata among such holders on the
basis of the number of shares of Common Stock requested by such holders to be
registered, and (iii) third, all other securities proposed to be registered. The
Company shall not grant to any other Person any right to participate in a
registered offering other than on the terms described in the immediately
preceding sentence.
2.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Shares under the Securities Act as provided in Section 2, the Company will
promptly:
(a) prepare and file with the Commission as soon as
practicable (and in any event, within 75 days after receipt of a
request for registration pursuant to Section 2.1(a) or the end of the
period within which to request registration pursuant to Section 2.2(a),
as the case may be) a registration statement with respect to such
Registrable Shares and use its best efforts to cause such registration
statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the Securities Act and the rules
and regulations thereunder with respect to the disposition of all
Registrable Shares and other securities covered by such registration
statement until the earlier of (i) such time as all of such Registrable
Shares have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration state-
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ment and (ii) the expiration of six months after such registration
statement becomes effective; and will furnish to each such seller prior
to the filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any such
amendment or supplement to which any such seller or holder shall have
reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(c) furnish to each seller of such Registrable Shares such
number of conformed copies of such regis tration statement and of each
such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus) in conformity with the requirements of the
Securities Act, such documents, if any, incorporated by reference in
such registration statement or prospectus, and such other documents, as
such seller may reasonably request;
(d) promptly prior to the filing of any document which is to
be incorporated by reference into the registration statement or the
prospectus (after initial filing of the registration statement),
provide copies of such document to counsel to each seller of Regis-
trable Shares, make the Company's representatives available for
discussion of such document and make such changes in such document
prior to the filing thereof as counsel for such selling holders may
reasonably request within 5 days of receipt thereof;
(e) use its best efforts to register or qualify all
Registrable Shares and other securities covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions as each seller of such Registrable Shares shall
reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect,
and do any and all other acts and things which may be reasonably
necessary to enable such seller to consummate the disposition in such
jurisdictions of its Registrable Shares covered by such registration
statement, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subdi-
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<PAGE> 133
vision (e) be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(f) cooperate with the sellers of such Registrable Shares to
facilitate the timely preparation and delivery of certificates
representing Registrable Shares to be sold, which certificates shall
not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company or similar depository
institution, and enable such Registrable Shares to be registered in
such names as such sellers may request at least two Business Days prior
to any sale of Registrable Shares;
(g) use its best efforts to cause such Registrable Shares to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable each seller thereof to
consummate the disposition of such Registrable Shares;
(h) furnish to each seller of such Registrable Shares a signed
counterpart, addressed to such seller, of (i) an opinion of counsel for
the Company, dated the effective date of such registration statement
(and, if such registration includes an underwritten offering, dated the
date of the closing under the underwriting agreement) and (ii) a
"comfort" letter, dated the effective date of such registration
statement (and, if such registration includes an underwritten offering,
dated the date of the closing under the underwriting agreement), signed
by the independent public accountants who have certified the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters
in under written offerings of securities;
(i) immediately notify each seller of such Registrable Shares
and (if requested by any such seller) confirm such advice in writing,
(i) when or if the prospectus or any prospectus supplement or post-
effective amendment has been filed, and, with respect to the
registration statement or any post-effective amend-
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<PAGE> 134
ment, when the same has become effective, (ii) of any request by the
Commission for amendments or supplements to the registration statement
or the prospectus or for additional information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of
the registration statement or the initiation of any proceedings for
that purpose, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose and (v) of the existence of any fact
which makes any statement made in the registration statement, the
prospectus or any document incorporated therein by reference untrue or
which requires the making of any changes in the registration statement,
the prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading;
(j) if any fact contemplated by clause (v) of Section 2.3(i)
shall exist, prepare a supplement or post-effective amendment to the
registration statement or the related prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchaser of the Registrable
Shares the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(k) use reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment;
(l) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its shareholders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first month of the first
fiscal quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 under the Securities Act;
(m) provide and cause to be maintained transfer agents and
registrars for all Registrable Shares covered by such registration
statement from and after a date not later than the effective date of
such regis-
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<PAGE> 135
tration statement and obtain a CUSIP number for such Registrable
Shares; and
(n) cause all Registrable Shares covered by such registration
statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed or, if no such
securities are then listed, on a national exchange selected by the
Company, if such listing is then permitted under the rules of such
exchange, or, if such listing is not practicable, to cause all such
Registrable Shares to be designated as a NASDAQ "national market system
security" within the meaning of Rule 11(A)(a)2-1 under the Exchange Act
or, failing that, to secure NASDAQ authorization for such Registrable
Shares and, without limiting the foregoing, to arrange for at least two
market makers to register as such with respect to such securities
within the NASD.
Each seller of Registrable Shares as to which any registration
is being effected agrees by acquisition of such Registrable Shares to furnish
the Company such information regarding such seller and the distribution of such
Registrable Shares as the Company may from time to time reasonably request in
writing and as shall be required by law or by the Commission in connection
therewith.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Shares, or any amendment
of or supplement to the prospectus used in connection therewith, which refers to
any seller of any Registrable Shares covered thereby by name, or otherwise
identify such seller as the holder of securities of the Company, without the
consent of such seller, such consent not to be unreasonably withheld.
Each holder of Registrable Shares agrees by acquisition of
such Registrable Shares that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in clause (v) of Section 2.3(i),
such holder will forthwith discontinue disposition of Registrable Shares
pursuant to the registration statement covering such Registrable Shares until
such holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 2.3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the prospectus may be resumed, and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company, such holder
will deliver to the Company (at the Company's ex-
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<PAGE> 136
pense) all copies, other than permanent file copies then in such holder's
possession, of the prospectus covering such Registrable Shares current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time periods regarding the effectiveness of registration statements
set forth in Section 2.3(b) shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
clause (v) of Section 2.3(i) to and including the date when each seller of
Registrable Shares covered by such registration statement shall have received
the copies of the supplemented or amended prospectus contemplated by Section
2.3(j) or the Advice.
2.4 Underwritten Offerings.
(a) Underwriting Agreement. If requested by the underwriters
for any underwritten offering of Registrable Shares on behalf of a holder or
holders of Registrable Shares pursuant to a registration requested under
pursuant to Section 2.1(a) or Section 2.2(a), the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.6, provisions
for the delivery of officers' certificates, opinions of counsel and accountants'
"comfort" letters and hold-back arrangements. The holders on whose behalf
Registrable Shares are to be distributed by such underwriters shall be parties
to any such underwriting agreement and the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters, shall also be made to and for the benefit of such holders of
Registrable Shares and any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement shall also be
conditions precedent to the obligations of such holders of Registrable Shares.
Such holders of Registrable Shares shall not be required by the Company to make
any representations or warranties to or agreements with the Company or the
underwriters other than reasonable representations, warranties or agreements re-
garding such holder, such holder's Registrable Shares and such holder's intended
method or methods of disposition and any other representation required by law.
(b) Selection of Underwriters. Whenever a registration
requested pursuant to Section 2.1(a) is for an
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<PAGE> 137
underwritten offering, the holders of a majority of the Registrable Shares
included in such registration shall have the right to select the managing
underwriter(s) to administer the offering, subject to the approval of the Com-
pany, such approval not to be unreasonably withheld.
(c) Holdback Agreements. (i) If any registration pursuant to
Section 2.1(a) shall be in connection with an underwritten public offering, each
holder of Registrable Shares agrees by acquisition of such Registrable Shares,
if so required by the managing underwriter, not to effect any public sale or
distribution of Registrable Shares (other than as part of such underwritten
public offering) or other equity securities of the Company within seven days
prior to the effective date of such registration statement or 90 days after the
effective date of such registration statement.
(ii) The Company agrees not to effect any public sale or
distribution of its equity securities during the seven days prior to and the
earlier of 180 days after any underwritten registration pursuant to Section
2.1(a) has become effective and the date on which all securities under such
registration statement are sold, except as part of such underwritten
registration and except pursuant to registrations on Form S-8, Form S-4 or any
successor forms thereto.
2.5 Preparation; Reasonable Investigation. In
connection with the preparation and filing of each registration statement
registering Registrable Shares under the Securities Act, the Company will give
the holders of Registrable Shares on whose behalf such Registrable Shares are
to be so registered and their underwriters, if any, and their respective counsel
and accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the Com-
mission, and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such holders and such underwriters or their respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification. (a) Indemnification by the Company. In
the event of any registration of any Registrable Shares under the Securities
Act pursuant to Section 2.1(a) or 2.2(a), the Company shall indemnify and hold
harmless the seller of such Registrable Shares, its offi-
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<PAGE> 138
cers, directors and employees and each Person, if any, who controls such seller
within the meaning of Section 15 of the Securities Act, against all losses,
claims, damages, liabilities (or proceedings in respect thereof) and expenses
(under the Securities Act or common law or otherwise), joint or several, arising
out of or based upon any untrue statement or alleged untrue statement of a fact
contained in any registration statement or prospectus (and as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus or caused by any omission or alleged
omission to state therein a fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities (or proceedings in respect thereof) or expenses are
caused by any untrue statement or alleged untrue statement contained in or by
any omission or alleged omission from information furnished in writing to the
Company by such holder expressly for use therein. If the offering pursuant to
any registration statement provided for herein is made through underwriters, no
action or failure to act on the part of such underwriters (whether or not such
underwriter is an affiliate of any holder of Registrable Shares) shall affect
the obligations of the Company to indemnify any seller of Registrable Shares or
any other Person pursuant to the preceding sentence. If the offering pursuant to
any registration statement provided for under this Agreement is made through
underwriters, the Company agrees to enter into an underwriting agreement in
customary form with such underwriters and the Company agrees to indemnify such
underwriters, their officers, directors and employees and each Person, if any,
who controls such underwriters within the meaning of Section 15 of the Securi-
ties Act to the same extent as hereinbefore provided with respect to
indemnification of the holders of Registrable Shares.
(b) Indemnification by the Sellers. In connection with any
registration statement in which a holder of Registrable Shares is participating,
each such holder agrees by acquisition of such Registrable Shares to indemnify
and hold harmless the Company, its officers and directors and each Person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages, liabilities, (or proceedings in
respect thereof) and expenses (under the Securities Act or common law or
otherwise), joint or several, arising out of or based upon any untrue statement
or alleged untrue statement of a fact contained in any registration statement or
prospectus (and as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto)
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<PAGE> 139
or any preliminary prospectus or caused by any omission or alleged omission to
state therein a fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement is contained in or such omission is from information so furnished in
writing by such holder expressly for use therein.
(c) Notice of Claims, etc. Any Person entitled to
indemnification under the provisions of this Section 2.6 shall (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim, permit such indemnifying party to assume the
defense of such claim, with counsel reasonably satisfactory to the indemnified
party; and if such defense is so assumed, such indemnifying party shall not
enter into any settlement without the consent of the indemnified party if such
settlement attributes liability to the indemnified party and such indemnifying
party shall not be subject to any liability for any settlement made without its
consent (which shall not be unreasonably withheld); and any underwriting
agreement entered into with respect to any registration statement provided for
under this Agreement shall so provide. In the event an indemnifying party shall
not be entitled, or elects not, to assume the defense of a claim, such
indemnifying party shall not be obligated to pay the fees and expenses of more
than one counsel or firm of counsel for all parties indemnified by such
indemnifying party in respect of such claim, unless in the reasonable judgment
of any such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties in respect of such
claim. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a participating holder of Registrable
Shares its officers, directors or any Person, if any, who controls such holder
as aforesaid, and shall survive the transfer of such Shares by such holder.
(d) Other Indemnifications. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.6 (with appropriate
modifications) shall be given by the Company to each seller of Registrable
Shares, on the one hand, and by each seller of Registrable Shares to the
Company, on the other hand, with respect to any required registration or other
qualification of such Registrable Shares under any federal or state law or
regulation of any governmental authority other than the Securities Act.
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<PAGE> 140
(e) Payment. The indemnification required by this Section 2.6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(f) Other Remedies. If for any reason the foregoing indemnity
is unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other from
the offering of Registrable Shares (taking into account the portion of the
proceeds of the offering realized by each such party) or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, or provides a
lesser sum to the indemnified party than the amount hereinafter calculated, in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other but also the relative fault of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations.
3. Expenses. The Company will pay all Registration Expenses
in connection with registrations of Registrable Shares pursuant to Section
2.1(a) and Section 2.2(a).
4. Rules 144 and 144A. The Company will file the reports
required to be filed by it under the Securities Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of any holder of
Registrable Shares, make publicly available other information), and will take
such further action as any holder of Registrable Shares may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, (b) Rule 144A under the
Securities Act, as such Rule may be amended from time to time, or (c) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Shares, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
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<PAGE> 141
5. Amendments and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act of the Required
Holders. Each holder of any Registrable Shares at the time shall be bound by any
amendment, consent or waiver authorized by this Section 5, whether or not such
Registrable Shares shall have been marked to indicate such amendment, consent or
waiver.
6. Nominees for Beneficial Owners. In the event that any
Registrable Shares are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Shares for purposes of any request or other action by any holder or
holders of Registrable Shares pursuant to this Agreement or any determination of
any number or percentage of Registrable Shares held by any holder or holders of
Registrable Shares contemplated by this Agreement. If the beneficial owner of
any Registrable Shares so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Shares.
7. Notices. All notices and other communications given
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given (a) on receipt, if delivered personally, (b) three Business Days
after it has been mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (c) the next Business Day after it has been
sent by nationally recognized overnight courier (appropriately marked for
overnight delivery); or (d) upon transmission, if it is sent by telecopy (with
request for immediate confirmation of receipt in a manner customary for
communications of such type):
(i) if to the Company:
KIWI International Air Lines, Inc.
Hemisphere Center
U.S. 1 & 9 South
Newark, N.J. 07114-0006
with a copy to:
Norris, McLaughlin & Marcus
P.O. Box 1018
Sommerville, N.J. 08826-1018
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<PAGE> 142
Telecopier: (708) 722-0755
Attention: Robert Marcus
(ii) if to the Purchaser:
Recovery Equity Investors II, L.P.
901 Mariner's Island Blvd.
Suite 465
San Mateo, California 94404-1592
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopier: (212) 909-6836
Attention: George Maguire
(iii) if to any other holder of Registrable Shares, to such
address as shall have been provided in accordance with this
Section 7.
or, in each case, at such other address as may be specified in writing (in
accordance with the terms of this Section 7).
8. Remedies. Each holder of Registrable Shares in addition to
being entitled to exercise all rights provided herein and granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
9. No Inconsistent Agreements. The Company will not, on or
after the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Shares in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the holders of Registered Shares hereunder do not
in any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any other agreements.
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<PAGE> 143
10. No Adjustments to Shares. The Company will not take any
action, or permit any change to occur, with respect to the Registrable Shares
which would materially adversely affect the ability of the holders of
Registrable Shares to effect the registration and sale of Registrable Shares
pursuant to Section 2 of this Agreement.
11. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, whether so expressed or not, and, in particular,
shall inure to the benefit of and be enforceable by, and binding upon, any
holder or holders of Registrable Shares. This Agreement embodies the entire
agreement and understanding between the Company and the other parties hereto
and supersedes all prior agreements and understandings relating to the subject
matter hereof. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW JERSEY. In the event that any one or
more of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
The headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
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<PAGE> 144
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
KIWI INTERNATIONAL AIRLINES, INC.
By:
--------------------------------------------
Name: John G. Murphy
Title: President & CEO
RECOVERY EQUITY INVESTORS II, L.P.:
By: Recovery Equity Partners II, L.P,
its sole general partner
By:
-----------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
By:
-----------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
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[Conformed Copy]
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF (THE
"UNDERLYING SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, UNLESS EITHER THIS NOTE OR THE
UNDERLYING SHARES HAVE BEEN REGISTERED UNDER SAID ACT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENT IS AVAILABLE. IF THIS NOTE OR THE UNDERLYING SHARES ARE
TO BE SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENT, THE COMPANY MAY REQUIRE A WRITTEN OPINION OF COUNSEL, SATISFACTORY
TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED AND
THAT SUCH TRANSFER WILL NOT VIOLATE SAID ACT OR APPLICABLE STATE SECURITIES
LAWS.
NOTE NO. 1
KIWI INTERNATIONAL AIR LINES, INC.
6% Convertible Unsecured Note due March 15, 1997
$2,000,000 July 1, 1996
KIWI INTERNATIONAL AIR LINES, INC., a New Jersey corporation (herein
called the "Company"), for value received, hereby promises to pay to Recovery
Equity Investors II, L.P., or its registered assigns, the principal sum of Two
Million Dollars ($2,000,000) on March 15, 1997 or such later date as may be
designated pursuant to Section 5 hereof (the "Maturity Date"), together with
interest from the date hereof on the amount of said principal sum remaining from
time to time unpaid at the rate of six percent (6%) per annum from the date
hereof until the principal hereof shall be paid in full, said interest to be
payable quarterly on the last day of each March, June, September and December
commencing December 31, 1996 and to pay on any overdue principal and, to the
extent permitted by Applicable Law, any overdue interest at a rate per annum
equal to the lesser of (a) the highest rate allowable by Applicable Law and (b)
eight percent (8%)(the "Default Rate"). Such principal and interest shall be
payable at the Designated Office of the Company in New Jersey and shall be sent
to the Holder hereof at the registered address of such Holder as reflected in
the registry books maintained by the Company.
This Note is one of a duly authorized issue of Notes of the Company
designated as its "6% Convertible Unsecured Notes due March 15, 1997" (herein
called the "Notes"), limited in aggregate principal amount to
<PAGE> 2
$10,000,000 as described in the Convertible Note Purchase and Option Agreement
dated July 1, 1996 (the "Note Purchase Agreement") plus such additional
principal amount as may be issuable in certain circumstances provided in the
form Restated Certificate of Incorporation attached as Exhibit B to the Note
Purchase Agreement upon conversion of the Company's Class A Convertible
Preferred Stock, no par value (the "Preferred Stock") contemplated by the Note
Purchase Agreement. Capitalized terms used but not defined herein shall have the
respective meanings assigned to such terms in the Note Purchase Agreement.
1. CONVERSION
(a) Optional Conversion. Subject to Section 1(h) hereof, the
Holder of this Note is entitled, at the holder's option, to convert this Note,
or any portion of the principal amount hereof, at any time prior to the Maturity
Date (i) if the Company has not authorized the Preferred Stock, into fully paid
and nonassessable shares of the Company's Class C Common Stock, no par value
("Class C Common Stock"), or (ii) if the Preferred Stock has been authorized,
into fully paid and nonassessable shares of Preferred Stock, in each case, by
(x) the surrender of this Note to the Company, and (y) the delivery to the
Company of a duly executed conversion notice in the form of Exhibit A hereto.
Subject to Section 1(h) hereof, upon exercise of such conversion right, this
Note, or any portion of the principal amount hereof to be converted, shall be
converted into that number of fully paid and non-assessable shares of Class C
Common Stock or Preferred Stock, as the case may be ("Conversion Shares"), as is
obtained by dividing the principal amount to be converted by the Conversion
Price then in effect. The Conversion Price shall initially be equal to $1.00 and
shall be adjusted as provided in Section 1(b) hereof (such conversion price, as
last adjusted, being referred to herein as the "Conversion Price"). No fractions
of shares will be issued on conversion, but instead of any fractional interest
the Company shall pay cash in an amount equal to the fair market value of such
fractional share at the time of such conversion, as determined in good faith by
a majority of the Directors of the Board of Directors of the Company. Any
partial conversion of this Note shall be for a minimum of $5,000 principal
amount hereof or any integral multiple thereof.
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(b) Adjustment of Conversion Price Upon Issuance of Common
Shares.
(i) Issuance of Common Shares. Except as provided in
Subsection 1(b)(vii) hereof, if and whenever the Company shall issue or sell, or
under any of Subsections 1(b)(ii) through 1(b)(vi) hereof is deemed to have
issued or sold (any such issue or sale or deemed issue or sale, an "Issuance"),
any of its shares of Common Stock ("Common Shares") for a consideration per
share less than the Conversion Price in effect immediately prior to the time of
such Issuance, then the Conversion Price in effect immediately prior to such
Issuance shall be reduced (effective immediately after such Issuance) as
follows:
(A) in the case of any such Issuance prior to January 1, 1998,
to a price equal to the quotient obtained by dividing (x) the aggregate
consideration, if any, received, or deemed under any of Subsections
1(b)(ii) through 1(b)(vi) hereof to have been received, by the Company
upon such Issuance by (y) the number of Common Shares issued, or under
any of Subsections 1(b)(i) through 1(b)(vi) deemed to have been issued,
in such Issuance; and
(B) in the case of any such Issuance on or after January 1, 1998,
to a price equal to the Conversion Price in effect immediately prior to
such reduction multiplied by a fraction (not to exceed one) (1) the
numerator of which is an amount equal to the sum of (x) the number of
Common Shares outstanding immediately prior to such Issuance plus (y)
the aggregate consideration, if any, received, or deemed under any of
Subsections 1(b)(ii) through 1(b)(vi) hereof to have been received, by
the Company upon such Issuance divided by the Conversion Price in
effect immediately prior to such Issuance and (2) the denominator of
which is the sum of (x) the number of Common Shares outstanding
immediately prior to such Issuance plus (y) the number of Common Shares
issued, or under any of Subsections 1(b)(ii) through 1(b)(vi) hereof
deemed to have been issued, in such Issuance.
(ii) Issuance of Rights or Options. In case at any time
the Company shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to purchase, or any options
for the purchase of, Common Shares or any stock or securities convertible into
or exchangeable for Common Shares (such
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<PAGE> 4
rights or options being hereinafter referred to as "Options" and such
convertible or exchangeable stock or securities being hereinafter referred to as
"Convertible Securities"), whether or not such Options or the right to convert
or exchange any such Convertible Securities are immediately exercisable, and the
price per share for which a Common Share is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (A) the total amount, if any, received or receivable by
the Company as consideration for the granting of such Options, plus the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the aggregate amount of additional consideration, if
any, payable upon the issuance or sale of such Convertible Securities and upon
the conversion or exchange thereof, by (B) the maximum number of Common Shares
issuable upon the full exercise of such Options or upon the full conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
Options) shall be less than the Conversion Price in effect immediately prior to
the time of the granting of such Options, then the maximum number of Common
Shares issuable upon the exercise of such Options or upon the conversion or
exchange of the maximum number of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date such Options were granted and thereafter shall be deemed to
be outstanding; provided, that if such Option expires or terminates unexercised,
the Conversion Price shall be adjusted to reflect that the Common Shares
previously issuable upon exercise of such Option or upon the conversion or
exchange of such Convertible Securities previously issuable upon the exercise of
such Option are no longer deemed to have been issued. Except as otherwise
provided in Subsection 1(b)(iv) hereof, no adjustment of the Conversion Price
shall be made upon the actual issuance of such Common Shares upon the exercise
of such Options or upon the actual issuance of such Common Shares upon
conversion or exchange of such Convertible Securities if an appropriate
adjustment was previously made pursuant to this Subsection 1(b)(ii) upon the
issuance of such options.
(iii) Issuance of Convertible Securities. In case the
Company shall in any manner issue (whether directly or by assumption in a merger
or otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are
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immediately exercisable, and the price per share for which a Common Share is
issuable upon such conversion or exchange (determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration for the
issuance or sale of such Convertible Securities, plus the aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (B) the maximum number of Common Shares issuable upon the
conversion or exchange of all such Convertible Securities) shall be less than
the Conversion Price in effect immediately prior to the time of such issuance or
sale, then the maximum number of Common Shares issuable upon the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issuance or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding;
provided that (a) except as otherwise provided in Subsection 1(b)(iv) hereof, no
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Shares upon conversion or exchange of such Convertible Securities if
an appropriate adjustment was previously made pursuant to this Subsection
1(b)(iii) upon the issuance of such Convertible Securities, (b) if any such
issuance or sale of such Convertible Securities is made upon the exercise of any
Options to purchase any such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other provisions of
this Subsection 1(b), no further adjustment of the Conversion Price shall be
made by reason of such issuance or sale, and (c) if the right to exchange or
convert such Convertible Securities expires without such Convertible Securities
being exchanged or converted, the Conversion Price shall be adjusted to reflect
that the Common Shares previously issuable upon conversion or exchange of such
Convertible Securities are no longer deemed to have been issued.
(iv) Change in Option Price or Conversion Rate. In the
event that the purchase price provided for in any Option referred to in
Subsection 1(b)(ii) hereof, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in
Subsection 1(b)(ii) or 1(b)(iii) hereof, or the rate at which any Convertible
Securities referred to in Subsection 1(b)(ii) or 1(b)(iii) hereof are
convertible into or exchangeable for Common Shares, shall change at any time
(other than under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such event shall be
readjusted to the Conversion
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Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such purchase price,
additional consideration or conversion rate, as the case may be, at the time
such Options or Convertible Securities were initially granted, issued or sold.
If the purchase price provided for in any such Option referred to in Subsection
1(b)(ii) hereof or the rate at which any Convertible Securities referred to in
Subsection 1(b)(ii) or 1(b)(iii) hereof are convertible into or exchangeable for
Common Shares shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, in case of the
delivery of Common Shares upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities, the Conversion Price
then in effect hereunder shall be adjusted to such respective amount as would
have been obtained had such Option or Convertible Securities never been issued
as to such Common Shares and had adjustments been made upon the issuance of the
Common Shares delivered as aforesaid, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is hereby reduced.
(v) Consideration. In case any Common Shares, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any Common Shares, Options or Convertible Securities shall be
issued or sold, in whole or in part, for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair market value of such consideration as determined in good
faith by a majority of the Directors on the Board of Directors of the Company,
without deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith.
(vi) Treasury Shares. The disposition of Common Shares
owned or held by or for the account of the Company (other than as a result of a
cancellation of treasury shares) shall be considered an issue or sale of Common
Shares for the purpose of this Subsection 1(b).
(vii) When Adjustment is not Required. Notwithstanding any
provision herein to the contrary, no adjustment shall be made in the Conversion
Price as a result
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of (A) the issuance of Common Shares upon conversion of any Notes or any shares
of Preferred Stock or the issuance of any shares of Preferred Stock upon
conversion of any Convertible Notes; (B) the issuance of up to 91,587 shares and
like number of warrants issued pursuant to the 1994 Offering; (C) the offer or
issuance of securities of the Company in connection with the Offerings
(including, without limitation, any securities issued in connection with the
Offerings under the Employee Stock Plans, as defined below); (D) the issuance of
shares of Class C Common Stock upon conversion of Class A Common Stock into
Class C Common Stock; (E) shares (or Options to acquire shares) sold, granted or
issued (as the case may be) under the Company's 1996 incentive stock option plan
("ISOP") or the Company's 1996 employee stock purchase plan registered under the
Securities Act on Form S-8 (the "SPP", and together with the ISOP, the "Employee
Stock Plans"); or (F) the issuance of Additional Securities pursuant to Section
2A of the Note Purchase Agreement or of Convertible Notes upon conversion of
shares of Preferred Stock pursuant to the Restated Certificate.
(c) Subdivision or Combination of Stock. In case the Company
shall at any time split or subdivide its outstanding Common Shares into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and, conversely, in case the
outstanding Common Shares of the Company shall be combined into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
(d) Reorganization, Reclassification, Consolidation or Merger.
In the event of any capital reorganization or reclassification of the
outstanding capital stock of the Company, or any consolidation of the Company
with, or merger of the Company with or into, another corporation or entity, or
the sale, exchange, assignment, lease, transfer or other disposition of all or
substantially all of the assets of the Company, where, in connection with such
event, the holders of Common Shares will be entitled to receive stock,
securities, cash or other property with respect to or in exchange for such
Common Shares, then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale of assets, lawful and adequate provision (in form
and substance reasonably satisfactory to the holders of a majority of the
outstanding principal amount of the Notes) shall be made whereby each holder of
outstanding Notes shall thereafter have the right
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<PAGE> 8
to receive upon conversion of any Notes held by such holder such shares of
stock, securities, cash or other property as may be issuable or payable with
respect to or in exchange for the number of Common Shares immediately
theretofore so receivable by such holder (taking into account the anti-dilution
adjustments hereof, including an immediate adjustment, by reason of such
consolidation or merger, if the value so reflected is less than the Conversion
Price in effect immediately prior to such consolidation or merger). In the event
of a merger or consolidation of the Company as a result of which a greater or
lesser number of shares of common stock of the surviving corporation are
issuable to holders of Common Shares of the Company outstanding immediately
prior to such merger or consolidation, the Conversion Price in effect
immediately prior to such merger or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Common Shares of the Company. The Company shall not effect any consolidation or
merger contemplated by this Subsection 1(d) unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation or merger shall assume by written instrument (in form and
substance reasonably satisfactory to the holders of a majority of the
outstanding principal amount of Notes, executed and mailed by first class mail,
postage prepaid, to each holder of the outstanding Notes at the last address of
such holder as shown by the records of the Company), the obligation to deliver
to such holders of stock, securities, cash or other property as, in accordance
with the foregoing provisions, such holder may be entitled to receive. Nothing
in this Section 1(d) shall be deemed to constitute a waiver of Section 2(d)
hereof.
(e) Notice of Adjustment. Upon any adjustment of the
Conversion Price, then, and in each such case, the Company shall deliver a
written certificate, by first class mail, postage prepaid, addressed to each
Convertible Noteholder at the last address of such holder shown by the register
of books of the Company, which certificate shall be signed by the President,
Chief Executive Officer or Chief Financial Officer of the Company specifying the
Conversion Price resulting from such adjustment and details of the calculation
and the facts upon which the calculation is based.
(f) Reservation of Conversion Shares.
(i) Reservation of Shares. KIWI will reserve and keep available
for issuance upon conversion of this Note:
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<PAGE> 9
(A) at all times prior to the authorization of the Preferred
Stock, such number of its authorized but unissued shares of Class C
Common Stock as would be sufficient to permit the conversion of the
aggregate principal amount of this Note; and
(B) at all times from and after the authorization of the
Preferred Stock, such number of its authorized but unissued shares of
Preferred Stock as would be sufficient to permit the conversion of the
aggregate principal amount of this Note.
(ii) Further Action. Before taking any action which would cause an
adjustment reducing the Conversion Price, KIWI will take any corporate action
which may be necessary in order that the Company may be in compliance with this
Section 1(f).
(g) Costs of Conversion. The Company shall pay all documentary,
stamp or other similar taxes attributable to the issuance or delivery of
Conversion Shares upon conversion of any of the Convertible Notes. However, the
Company shall not be required to pay any taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificate for such
Conversion Shares in a name other than that of the holder of the Convertible
Notes in respect of which such Conversion Shares are being issued.
(h) Foreign Ownership Restrictions. If the holder of this Note
shall have elected to convert all or any portion of the principal amount hereof
pursuant to Section 2(a) and the issuance of any of the Conversion Shares
issuable upon such conversion would result in a breach of any Foreign Ownership
Restriction existing at the time of such issuance (the incremental Conversion
Shares resulting in such breach, "Excess Conversion Shares"), the Company will
give the holder of this Note written notice thereof setting forth the number of
Excess Conversion Shares and the holder will not be entitled to convert so much
of the principal amount of this Note (the "Excess Principal Amount") as would
result in the issuance of Excess Conversion Shares and the Company will not give
effect to the conversion of such Excess Principal Amount.
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2. NEGATIVE COVENANTS
The Company covenants that so long as this Note is outstanding:
(a) Authorization and Issuance of Securities. The Company will
not authorize the issuance or sale of debt securities senior to the Notes, or
any rights, options or warrants to acquire any such senior debt securities or
any security convertible into such senior debt security, or (i) until such time
as the Notes are convertible into Preferred Stock, any equity securities senior
to the Class C Common Stock or any rights, options or warrants to acquire any
such senior equity securities or any security convertible into such senior
equity securities, including without limitation, debt instruments convertible
into such senior equity securities or (ii) from and after such time as the Notes
are convertible into Preferred Stock, any equity securities senior or (except in
a Qualified Transaction) pari passu to the Preferred Stock or any rights,
options or warrants to acquire any such senior or (except in a Qualified
Transaction) pari passu equity securities or any security convertible into such
senior or (except in a Qualified Transaction) pari passu equity securities,
including without limitation, debt instruments convertible into such senior or
(except in a Qualified Transaction) pari passu equity securities.
Notwithstanding the foregoing, the Company may incur indebtedness on a secured
basis (but not with a priority in right of payment) to Summit Bank and any bank
or similar lender in addition to Summit Bank to replace or supplement its
financing from Summit Bank.
(b) Additional Debt. Except in a Qualified Transaction, the
Company will not contract or incur any additional debt (other than refinancing
of debt outstanding on the date hereof on terms substantially the same or more
favorable to the Company than existing terms) on or after the date hereof for
money borrowed in excess of an aggregate $1,000,000 (and any refinancing of such
amount) prior to the termination of the Voting Trust Agreement, dated October 1,
1992 (the "Shareholders Agreement"), by and between the Voting Trustee and all
Shareholders of the Class A and any previously authorized Class B Common Stock
of the Corporation, at a time when the pro forma "Earnings Before Fixed Charges
and Taxes" to "Fixed Charge" ratio is less than 1.25 based on the Company's
annualized performance over the preceding six months.
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For the purposes of this Section 2(b) the following terms shall
have the following meanings:
"Earnings Before Fixed Charges and Taxes" shall mean, with
reference to any period, the sum of the following for such period, all as
determined in accordance with generally accepted accounting principles ("GAAP"):
(A) the consolidated net earnings of the Company and its Subsidiaries, if any,
excluding: (i) extraordinary gains, (ii) any equity interest of the Company in
the unremitted earnings of any corporation not a Subsidiary and (iii) any gain
on the sale, exchange or other disposition of assets plus (B) provisions for
federal, state and local income taxes plus (C) Fixed Charges.
"Fixed Charges" shall mean, with reference to any period, the sum
of the following for such period, all as determined in accordance with GAAP: (A)
all amounts which would be deducted in computing the consolidated net income of
the Company and its Subsidiaries, if any, on account of interest on obligations
for borrowed money, Capital Lease obligations and guarantees of the foregoing,
including imputed interest in respect of Capital Lease obligations, amortization
of debt discounts and expenses, fees and commissions for letters of credit and
bankers' acceptance financing and the net interest costs of interest rate swaps
and hedges plus (B) all payments by the Company and its Subsidiaries, if any,
pursuant to any lease of real or personal property (other than Capital Lease
obligations) minus the amount of any fixed rents paid to the Company or any
Subsidiary under noncancellable subleases of one year or greater on the
properties subject to such leases.
"Capital Leases" shall mean any lease of property which in
accordance with GAAP should be capitalized on the lessee's balance sheet or for
which the amount of the asset and liability thereunder as if so capitalized
should be disclosed in a note to such balance sheet.
"Subsidiary" shall mean any corporation of which the Company at
the time owns, directly or indirectly, more than 50% of the Voting Stock which
has the power to elect a majority of the board of directors.
(c) Amending the Terms of Preferred Stock. The Company will not,
whether prior to or after the authorization of the Preferred Stock, alter,
modify, amend or adversely affect any term of the Preferred Stock as set forth
in the Restated Certificate.
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(d) Merger, Consolidation, etc. The Company will not engage in
any merger or consolidation or voluntary reorganization, restructuring,
recapitalization, winding up, dissolution or liquidation or any sale, lease,
assignment or other disposition of all or substantially all of the assets of the
Company.
(e) Amending the Certificate or the By-Laws. The Company will not
alter, modify, or amend the Certificate of Incorporation or the By-Laws of the
Company, as in effect on the date hereof, in any way that adversely affects any
term, right or preference of the Preferred Stock it being understood that the
adoption of the Restated Certificate and the Restated By-Laws will not be deemed
to constitute a breach of Section 2(d) or this Section 2(e).
(f) Restrictions on Sale of Common Shares, Options or Convertible
Securities. The Company will not issue or sell Common Shares, Options or
Convertible Securities, in whole or in part, prior to the occurrence of a
Qualifying Public Offering, for a consideration other than cash, except for
Common Shares, Options, Convertible Securities and other securities sold,
granted or issued (as the case may be) (i) under the Employee Stock Plans,
provided, however, that shares issued or issuable pursuant to grants made
thereunder must be for consideration in the form of cash and/or recourse
promissory note(s), (ii) in connection with the Offerings and/or (iii) not
exceeding an additional 91,587 shares (and a like number of warrants) under the
1994 Offering.
(g) Restricted Payments. Except (i) in connection with any
mandatory scheduled reduction in the amount of the guaranty by the New Jersey
Economic Authority and (ii) any prepayment of amounts payable in respect of the
IRS Settlement Agreement made in connection with an agreement with the IRS to
abate certain penalties so as to make the total outstanding amount payable in
respect of the IRS Settlement Agreement not more than $1.5 million upon payment
in full of such amount, the Company will not make any prepayment of any
principal amount of or interest on any Indebtedness (other than Capital Lease
obligations) or any amounts payable pursuant to any lease of real or personal
property (including any Capital Lease obligations), including, but not limited
to, any such amounts payable in connection with an early termination of such
lease.
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3. EVENTS OF DEFAULT
An "EVENT OF DEFAULT" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company fails to make any payment of any principal amount
on this Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company fails to make any payment of any interest on this
Note and such default continues for more than five Business Days after
the same becomes due and payable; or
(c) the Company fails to perform of or comply with any term
contained in the Note Purchase Agreement or in this Note; or
(d) (i) the Company is in default (as principal or as guarantor
or other surety) in the payment of any principal amount of or interest
on any Indebtedness (other than trade accounts payable past due as of
the date hereof and with respect to which the account creditor has
taken no action materially adverse to the Company) that is outstanding
in an aggregate principal amount of at least $100,000 beyond any period
of grace provided with respect thereto or (ii) the Company is in
default in the performance of or compliance with any term of any
evidence of any Indebtedness (other than trade accounts payable past
due as of the date hereof and with respect to which the account
creditor has taken no action materially adverse to the Company) in an
aggregate outstanding principal amount of at least $100,000 or of any
mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of any such default or condition
such Indebtedness has become, or has been declared, due and payable
before its stated maturity or before its regularly scheduled dates of
payment; or
(e) the Company (i) is generally not paying, or issuable to, or
admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency,
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reorganization, moratorium or other similar law of any jurisdiction,
(iii) makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or to
be liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing (other than actions taken prior to the date hereof for
the purposes of matters described in the preceding clause (ii); or
(f) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company, a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property,
or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company, or any such petition shall be filed against
the Company and such petition shall not be dismissed within 60 days; or
(g) one or more final judgments, decrees or orders for the
payment of money aggregating in excess of $100,000 are rendered against
one or more of the Company and its Subsidiaries, if any, and which
judgments, decrees or orders are not, within 60 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay; or
(h) any of the following shall have occurred: (w) a Change of
Control, (x) a Material Sale Transaction, (y) any proposed merger or
consolidation of the Company approved by the Board of Directors of the
Company or (z) any proposed sale or other disposition of all or
substantially all of the business or assets of the Company approved by
the Board of Directors of the Company.
For purposes of Section 3(h), "Change of Control" and "Material
Sale Transaction" shall mean the following, respectively: (A) A Change of
Control shall be deemed to have occurred at such time as: (x) any person (other
than REI Holders and their transferees), including a group as
14
<PAGE> 15
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 40% or more of the combined voting
power of the Company's outstanding voting securities ordinarily having the right
to vote at elections of directors of the Company; or (y) individuals who
constitute the Board of Directors as of the date hereof (each an "Incumbent
Director") cease for any reason to constitute a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof who is an REI Director or whose election, or nomination for election by
the Company's shareholders, was approved by a vote of Incumbent Directors then
serving on the Board of Directors constituting at least a majority of the
directors other than REI Directors, or who is an "Incumbent Director" under the
Restated Certificate, shall be considered as though such person were an
Incumbent Director. (B) A Material Sale Transaction shall be any transaction
which has not been approved by at least a majority of the REI Directors then
serving on the Board of Directors involving any sale, lease or other disposition
by the Corporation of (xx) 25% or more of its aircraft fleet, or (yy) its
operational rights at any airport (or group of airports within any twelve-month
period) representing 25% or more of its gross revenues for the preceding 12
months.
4. REMEDIES ON DEFAULT, ETC.
(a) Acceleration.
(i) Automatic Acceleration. If an Event of Default with respect
to the Company described in paragraph (e) or (f) of Section 3 hereof (other than
an Event of Default described in clause (i) of paragraph (e) or described in
clause (vi) of paragraph (e) by virtue of the fact that such clause encompasses
clause (i) of paragraph (e)) has occurred, this Note shall then automatically
become immediately due and payable.
(ii) Acceleration By Declaration. If any other Event of Default
has occurred and is continuing, the holder or holders of 25% in aggregate
principal amount of Notes then outstanding may at any time at such holder's or
holders' option, declare all the Notes then outstanding to be immediately due
and payable.
(iii) Acceleration By Each Holder. If any Event of Default
described in paragraph (a) or (b) of Section 3
15
<PAGE> 16
has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at such holder's
or holders' option, declare the Note held by it to be immediately due and
payable.
(iv) Effect of Acceleration. Upon this Note becoming due and
payable under this Section 4(a), whether automatically or by declaration, such
Note will forthwith mature and the entire unpaid principal amount of such Note,
plus all accrued and unpaid interest thereon (to the full extent permitted by
Applicable Law), shall be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of which are hereby
waived. The Company acknowledges, and the parties hereto agree, that the holder
of this Note has the right to maintain its investment in the Note free from
repayment by the Company.
(b) Other Remedies. If any Event of Default has occurred and is
continuing, and irrespective of whether this Note has become or has been
declared immediately due and payable under Section 4(a), the holder of this Note
may proceed to protect and enforce the rights of such holder by an action at
law, suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained in the Note Purchase Agreement or in this
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
(c) Rescission. At any time after this Note has been declared
due and payable pursuant to Subsection 4(a)(ii) or 4(a)(iii), the holders of not
less than 60% in aggregate principal amount of the Notes then outstanding, by
written notice to the Company, may rescind and annul any such declaration and
its consequences if (i) the Company has paid all overdue interest on the Note,
all principal of and all interest on such overdue principal and (to the extent
permitted by applicable law) any overdue interest in respect of the Note, at the
Default Rate, (ii) all Events of Default, other than non-payment of amounts that
have become due solely by reason of such declaration, have been cured or have
been waived by the holders of not less than 60% in aggregate principal amount of
the Notes then outstanding and (iii) no judgment or decree has been entered for
the payment of any monies due pursuant hereto or to the Note. No recission and
annulment under this Section 4(c) will extend to or affect any
16
<PAGE> 17
subsequent Event of Default or impair any right consequent thereon.
(d) No Waiver, Expenses, etc. No course of dealing and no delay
on the part of any holder of any Note in exercising any right, power or remedy
shall operate as a waiver thereof or otherwise prejudice such holder's rights,
powers or remedies. No right, power or remedy conferred by the Note Purchase
Agreement or by any Note upon any holder thereof shall be exclusive of any other
right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company, the Company will pay to the holder of each Note on
demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under this
Section 4, including, without limitation, reasonable attorneys' fees, expenses
and disbursements.
5. EXTENSION OF MATURITY
(a) Failure to Authorize Preferred Stock. If the Company has not
authorized the Preferred Stock by March 14, 1997, the holder of this Note may,
by written notice to the Company, elect to extend the term of this Note to such
date on or before March 15, 2007 as such holder shall designate. If the maturity
of the Notes shall have been extended pursuant to Section 2A.3 of the Note
Purchase Agreement, the Company will give the holder written notice thereof
setting forth the date to which the maturity has been extended and the Maturity
Date of this Note shall be extended to such date.
(b) Excess Principal Amount. If the holder of this Note believes that
the conversion of this Note pursuant to Section 2(a) on March 14, 1997 would
result in the issuance of any Excess Conversion Shares, the holder of this Note
may, by written notice to the Company on or after March 1, 1997, extend the
maturity of this Note to such date on or before March 15, 2007 as such holder
shall designate, but only with respect to so much of the principal amount of
this Note as constitutes Excess Principal Amount as of March 14, 1997. If the
holder of this Note shall have extended the Maturity Date pursuant to this
Section 5(b), such holder shall, upon receipt from time to time of written
notice from the Company that the conversion of any such Excess Principal Amount
(or any portion thereof) would no longer result in the issuance of Excess
Conversion Shares the holder shall
17
<PAGE> 18
promptly convert so much of such Principal Amount as would not then result in
the issuance of any Excess Conversion Shares.
6. MISCELLANEOUS
No provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Note at the times, places and rate herein prescribed or to
convert this Note.
The Company may deem and treat the person in whose name this Note is
registered as the absolute owner hereof for the purpose or receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
The Notes shall be governed by and construed in accordance with the law
of the State of New Jersey.
IN WITNESS WHEREOF, KIWI INTERNATIONAL AIR LINES, INC. has caused this
Note to be signed in its name by its President or one of its Vice Presidents and
attested by its Secretary or one of its Assistant Secretaries.
ATTEST:
KIWI INTERNATIONAL AIR LINES,
INC.
/s/ James E. Player By: /s/ John G. Murphy
- -------------------------- -------------------------
James E. Player, Secretary John G. Murphy, President
18
<PAGE> 19
Exhibit A
CONVERSION NOTICE
The undersigned Holder of this Note hereby irrevocably exercises
the option to convert this Note into shares of Class A Convertible Preferred
Stock or Class C Common Stock (as the case may be) in accordance with the terms
of this Note and directs that such shares be registered in the name of and
delivered to the undersigned, and that a check in payment for any fractional
share be delivered to the undersigned.
Dated: ____________________ _______________________
Signature
Holder
Please print name and address
of Holder
______________________________
Name
______________________________
Address
______________________________
______________________________
Social Security or other
Taxpayer Identification Number,
if any
<PAGE> 20
[Individual Acknowledgment]
STATE OF _______________
SS.:
COUNTY OF ______________
On this ____ day of ____________, 19__, before me, the undersigned,
personally appeared ___________, who, I am satisfied, is the person who signed
the foregoing Conversion Notice, and he or she did acknowledge under oath that
he or she signed and delivered the same as his or her voluntary act and deed,
for the uses and purposes expressed in the instrument.
__________________________
Notary Public
[Entity Acknowledgment]
STATE OF _______________
SS.:
COUNTY OF ______________
On this ____ day of ____________, 19__, before me, the undersigned,
personally appeared ___________, the ________________ of __________________,
who, I am satisfied, is the person who signed the foregoing Conversion Notice,
and he or she did acknowledge under oath that he or she signed and delivered the
same in his or her capacity as such officer of such entity, that he or she was
authorized to execute the same on behalf of such entity, and that the foregoing
instrument is the voluntary act and deed of such entity, made by virtue of
proper authority.
__________________________
Notary Public
<PAGE> 1
[Conformed Copy]
================================================================================
RECOVERY EQUITY INVESTORS II, L.P.
KIWI INTERNATIONAL AIR LINES, INC.
REGISTRATION RIGHTS AGREEMENT
Dated as of July 1, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions......................................................... 1
2. Registration under Securities Act, etc.............................. 5
2.1 Registration on Demand.................................... 5
2.2 Incidental Registration................................... 7
2.3 Registration Procedures................................... 8
2.4 Underwritten Offerings. .................................. 13
2.5 Preparation; Reasonable Investigation..................... 15
2.6 Indemnification........................................... 15
3. Expenses............................................................ 18
4. Rules 144 and 144A.................................................. 18
5. Amendments and Waivers.............................................. 18
6. Nominees for Beneficial Owners...................................... 18
7. Notices............................................................. 19
8. Remedies............................................................ 20
9. No Inconsistent Agreements.......................................... 20
10. No Adjustments to Shares............................................ 20
11. Miscellaneous....................................................... 20
</TABLE>
<PAGE> 3
[Conformed Copy]
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 1, 1996, among KIWI
International Air Lines Inc., a New Jersey corporation (the "Company"), and
Recovery Equity Investors II, L.P., a Delaware limited partnership (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Company is a party to the Convertible Note Purchase and
Option Agreement, dated as of July 1, 1996 (the "Note Purchase Agreement"),
between the Company and the Purchaser, pursuant to which the Company has agreed
to issue, and the Purchaser has agreed to purchase, $2,000,000 aggregate
principal amount of the Company's 6% Convertible Notes due March 15, 1997 (the
"Convertible Notes"; such Convertible Notes to be initially purchased by the
Purchaser, the "Initial Convertible Notes");
WHEREAS, pursuant to the Note Purchase Agreement, the Purchaser has
been granted the option to purchase from the Company (i) an additional
$2,000,000 aggregate principal amount of Convertible Notes (the "Additional
Convertible Notes"), and (ii) certain shares of KIWI's Class A Convertible
Preferred Stock, no par value (the "Preferred Stock"), or, subject to certain
conditions, in lieu thereof, an additional $6,000,000 aggregate principal amount
of Convertible Notes (the "Substitute Convertible Notes");
WHEREAS, in order to induce the Purchaser to enter into the Note
Purchase Agreement, the Company has agreed to provide the registration rights as
set forth herein;
WHEREAS, the execution and delivery of this Agreement is a condition to
the purchase by the Purchaser of the Initial Convertible Notes;
NOW, THEREFORE, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following respective meanings:
Additional Convertible Notes: As defined in the second recital of this
Agreement.
Business Day: Each day other than a Saturday, a Sunday or any other day
on which banking institutions in the
<PAGE> 4
City of New York are authorized or obligated by law or executive order to be
closed.
Class C Common Stock: The Company's Class C Common Stock, no par value.
Commission: The Securities and Exchange Commission and any successor
federal agency having similar powers.
Common Stock: The Company's Class A Common Stock, no par value and the
Class C Common Stock.
Company: As defined in the introductory paragraph of this Agreement.
Company Shares: As defined in Section 2.1(d).
Convertible Notes: As defined in the first recital of this Agreement,
including, but not limited to the Initial Convertible Notes, any Additional
Convertible Notes and any Substitute Convertible Notes.
Demand Notice: As defined in Section 2.1(a).
Initial Convertible Notes: As defined in the first recital of this
Agreement.
Initiating Holders: Any holder or holders of Registrable Shares holding
at least 50% of the Registrable Shares outstanding at the time of any request
pursuant to Section 2.1.
NASD: National Association of Securities Dealers, Inc.
NASDAQ: The NASDAQ Stock Market, Inc.
Note Purchase Agreement: As defined in the first recital of this
Agreement.
Person: An individual, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization or a government or any department or
agency thereof.
Preferred Stock: As defined in the second recital of this Agreement.
Qualifying Public Offering: A public offering of Common Stock
registered under the Securities Act in which
2
<PAGE> 5
the Company receives total gross proceeds of at least $15,000,000.
Registrable Shares: (a) Any shares of Common Stock issued or issuable
upon conversion of Convertible Notes or Shares, (b) any shares of Common Stock
otherwise issued in connection with any stock split or subdivision of, or
dividend or distribution upon, Shares or (c) any shares of Common Stock
purchased by the holder of any Convertible Notes or Shares pursuant to
preemptive rights with respect to such Convertible Notes or Shares provided in
the Restated Certificate of Incorporation and (d) any securities issued or
issuable with respect to any shares of Common Stock referred to in the foregoing
clauses (i) upon any conversion or exchange thereof, (ii) by way of stock
dividend or stock split, (iii) in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or (iv)
otherwise. Any particular Registrable Shares shall cease to be Registrable
Shares when (x) a registration statement with respect to the sale of such
Registrable Shares shall have become effective under the Securities Act and such
Registrable Shares shall have been disposed of in accordance with such
registration statement, (y) such Registrable Shares shall have been distributed
to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, or (z) such Registrable Shares shall have ceased to be
outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
(a) registration and filing fees, including National Association of Securities
Dealers' fees and fees and expenses associated with filings required to be made
with any national securities exchange or national computerized market system
(including, if required, the fees and expenses of any "qualified independent
underwriter" and its counsel), (b) fees and expenses of complying with
securities or blue sky laws, including reasonable fees and disbursements of
counsel effecting blue sky qualifications, (c) word processing, duplicating and
printing expenses, messenger and delivery expenses, (d) fees and disbursements
of counsel for the Company, of its independent public accountants (including the
expenses of any special audits or "comfort" letters required by or incident to
such performance and compliance), of underwriters and of any Person, including
special experts, retained by the Company in connection with such performance and
compliance, but not including (x) fees and disbursements of counsel for the
holders of Registrable Shares or (y) any underwriting
3
<PAGE> 6
discounts or commissions attributable to the sale of Registrable Shares.
Required Holders: The holders of at least 75% of the Registrable
Shares.
Restated Certificate of Incorporation: The Restated Certificate of
Incorporation of the Company in the form of Exhibit B to the Note Purchase
Agreement to be duly filed with the office of the Secretary of State of New
Jersey upon approval thereof by the Company's shareholders.
Securities Act: The Securities Act of 1933, as amended or any similar
replacement federal statute, as at the time in effect, and any reference to a
particular Section of such Act shall include a reference to the comparable
Section, if any, of any such similar replacement federal statute.
Shares: Any shares of Preferred Stock issued pursuant to the Note
Purchase Agreement or issued or issuable upon conversion of Convertible Notes,
and any other securities (other than Common Stock) issued in connection with any
stock split or subdivision of, or distribution or dividend upon, the Preferred
Stock.
Substitute Convertible Notes: As defined in the second recital of this
Agreement.
2. Registration under Securities Act, etc.
2.1 Registration on Demand. (a) Demand. At any time after the
occurrence of a Qualifying Public Offering, upon the written request of one or
more Initiating Holders (such written request, a "Demand Notice") that the
Company effect the registration under the Securities Act of all or a part of
such Initiating Holders' Registrable Shares and specifying the intended method
or methods of disposition thereof, the Company will promptly, but in any event
within ten days, give written notice of such requested registration to all
holders of Registrable Shares and thereupon will use its best efforts to effect
the registration under the Securities Act of:
(i) the Registrable Shares which the Company has been requested to
register pursuant to the Demand Notice, and
(ii) all other Registrable Shares which the Company has been requested
to register by the
4
<PAGE> 7
holders thereof by written request given to the Company within
ten days after the Company has given such written notice, which
request shall specify the intended method of disposition of such
Registrable Shares,
all to the extent required to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Shares so to be registered.
(b) Limitation on Registration Rights. Notwithstanding Section
2.1(a), the Company shall not be required to effect a registration pursuant to
Section 2.1(a):
(i) until a period of 180 days shall have elapsed from the effective
date of the most recent registration previously effected pursuant
to Section 2.1(a),
(ii) if the aggregate number of Registrable Shares to be included in
such registration represent less than 25% of the aggregate
Registrable Shares issued by the Company, and
(iii) if it has previously effected three registrations pursuant to
Section 2.1(a).
(b) Registration Statement Form. Each registration requested pursuant
to Section 2.1(a) shall be effected by the filing of a registration statement on
Form S-1, Form S-2 or Form S-3 (or any other form which includes substantially
the same information as would be required to be included in a registration
statement on such forms as presently constituted), unless the use of a different
form is (i) required by law or (ii) permitted by law and agreed to in writing by
the holders of more than 50% of the Registrable Shares to be included in such
registration. The Company will use its best efforts to qualify for registration
on Form S-2 or Form S-3 (or any other comparable form hereafter adopted).
(c) Effective Registration Statement. A registration requested pursuant
to Section 2.1(a) shall not be deemed to have been effected unless it has become
effective and remained effective for a period of at least 180 days or, if
earlier, until all the Registrable Shares covered thereby have been sold.
(d) Registration Rights Exclusive. The Company will not register
securities for sale for the account of any
5
<PAGE> 8
Person other than holders of Registrable Shares, except for shares of Common
Stock to be sold for the account of the Company to the extent permitted by
Section 2.1(f) (the "Company Shares"), and will not register any securities
other than Registrable Shares in any registration of Registrable Shares effected
pursuant to Section 2.1(a) (except for the Company Shares), unless permitted to
do so by the written consent of the holders of more than 50% of the Registrable
Shares to be included in such registration. Without the prior written consent of
the holders of the Registrable Shares, the Company will not grant to any Person
the right to demand a registration of securities prohibited by this Section
2.1(d).
(e) Other Requests. Upon the written request of one or more holders of
Registrable Shares (other than Initiating Holders) received after a Qualifying
Public Offering requesting that the Company effect the registration under the
Securities Act of all or part of such holders' Registrable Shares and specifying
the intended method or methods of disposition thereof, the Company will
promptly, but in any event within ten days give written notice of such requested
registration, including the names and addresses of such requesting holders, to
all holders of Registrable Shares but shall not have any obligation to effect
any registration pursuant to such request until it has received a request of
Initiating Holders pursuant to Section 2.1(a).
(f) Pro Rata Allocation. If a registration pursuant to Section 2.1(a)
involves an underwritten offering and the holders of a majority of the
Registrable Shares to be included in such registration, in consultation with the
managing underwriter, determine, and so advise the Company in writing (with a
copy to each holder of Registrable Shares to be included in such registration),
that the number of securities to be included in such underwritten offering
should be limited due to market conditions or otherwise, the Company will
include in such registration, to the extent of the number of securities which
the Company is so advised should be included in such offering, (i) first,
Registrable Shares requested to be included in such registration, pro rata among
the holders thereof on the basis of the number of shares of Common Stock
requested by such holders to be registered, (ii) second, securities that the
Company proposes to issue and sell for its own account, if any, and (iii) third,
if the holders of more than 50% of the Registrable Shares to be included in such
registration have consented in writing pursuant to Section 2.1(d) to the
inclusion of other securities in such registration, all other securities
proposed to be registered, if any.
6
<PAGE> 9
2.2 Incidental Registration. (a) Participation in Other Registrations.
After the occurrence of a Qualifying Public Offering, any time the Company
determines to register any of its equity securities under the Securities Act
(other than pursuant to Section 2.1(a) or on Form S-8, Form S-4 or any successor
forms thereto), whether or not for sale for its own account, it will each such
time give prompt written notice to all holders of Registrable Shares of its
intention to do so, which notice shall be given to all such holders at least 30
days prior to the date such registration is proposed to be consummated. Upon the
written request of any such holder made within 30 days after the receipt of any
such notice (which request shall specify the Registrable Shares intended to be
disposed of by such holder and the intended method of disposition thereof), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Shares which the Company has been so requested
to register by the holders thereof, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Shares so to be registered, provided that if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Shares and, thereupon, shall be
relieved of its obligation to register any Registrable Shares in connection with
such registration, without prejudice, however, to the rights of any holder or
holders of Registrable Shares to request that such registration be effected as a
registration upon request pursuant to Section 2.1(a).
(b) Underwriter. If the securities proposed to be registered by the
Company are to be disposed of in an underwritten offering, such notice of the
Company's intention to register such securities shall designate the proposed
underwriters of such offering (which shall be one or more underwriting firms of
recognized national standing) and shall contain the Company's agreement to use
its best efforts, if requested to do so, to arrange for such underwriters to
include in such underwriting the Registrable Shares which the Company has been
so requested to register pursuant to Section 2.2(a).
(c) Effectiveness. No registration effected pursuant to Section 2.2(a)
shall relieve the Company from its obligation to effect registrations pursuant
to Section 2.1(a).
7
<PAGE> 10
(d) Pro Rata Allocation. If a requested registration pursuant to
Section 2.2(a) involves an underwritten offering and the managing underwriter
shall advise the Company in writing (with a copy to each holder of Registrable
Shares requesting registration) that, in its opinion, the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering within a commercially reasonable price range (such writing
to state the basis of such opinion and the approximate number of shares of
securities which may be included in such offering without such effect), the
Company will include in such registration, to the extent of the number of
securities which the Company is so advised can be sold in such offering, (i)
first, securities that the Company proposes to issue and sell for its own
account, (ii) second, Registrable Shares requested to be registered by the
holders thereof pursuant to Section 2.2(a), pro rata among such holders on the
basis of the number of shares of Common Stock requested by such holders to be
registered, and (iii) third, all other securities proposed to be registered. The
Company shall not grant to any other Person any right to participate in a
registered offering other than on the terms described in the immediately
preceding sentence.
2.3 Registration Procedures. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Shares under
the Securities Act as provided in Section 2, the Company will promptly:
(a) prepare and file with the Commission as soon as practicable (and in
any event, within 75 days after receipt of a request for registration
pursuant to Section 2.1(a) or the end of the period within which to request
registration pursuant to Section 2.2(a), as the case may be) a registration
statement with respect to such Registrable Shares and use its best efforts
to cause such registration statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the Securities Act and the rules and
regulations thereunder with respect to the disposition of all Registrable
Shares and other securities covered by such registration statement until
the earlier of (i) such time as all of such Registrable Shares have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration state-
8
<PAGE> 11
ment and (ii) the expiration of six months after such registration
statement becomes effective; and will furnish to each such seller prior to
the filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any such amendment
or supplement to which any such seller or holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or of
the rules or regulations thereunder;
(c) furnish to each seller of such Registrable Shares such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number
of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus) in
conformity with the requirements of the Securities Act, such documents, if
any, incorporated by reference in such registration statement or
prospectus, and such other documents, as such seller may reasonably
request;
(d) promptly prior to the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
(after initial filing of the registration statement), provide copies of
such document to counsel to each seller of Registrable Shares, make the
Company's representatives available for discussion of such document and
make such changes in such document prior to the filing thereof as counsel
for such selling holders may reasonably request within 5 days of receipt
thereof;
(e) use its best efforts to register or qualify all Registrable Shares
and other securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each seller of
such Registrable Shares shall reasonably request, to keep such registration
or qualification in effect for so long as such registration statement
remains in effect, and do any and all other acts and things which may be
reasonably necessary to enable such seller to consummate the disposition in
such jurisdictions of its Registrable Shares covered by such registration
statement, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
subdi-
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<PAGE> 12
vision (e) be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(f) cooperate with the sellers of such Registrable Shares to facilitate
the timely preparation and delivery of certificates representing
Registrable Shares to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company or similar depository institution, and enable such
Registrable Shares to be registered in such names as such sellers may
request at least two Business Days prior to any sale of Registrable Shares;
(g) use its best efforts to cause such Registrable Shares to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable each seller thereof to consummate
the disposition of such Registrable Shares;
(h) furnish to each seller of such Registrable Shares a signed
counterpart, addressed to such seller, of (i) an opinion of counsel for the
Company, dated the effective date of such registration statement (and, if
such registration includes an underwritten offering, dated the date of the
closing under the underwriting agreement) and (ii) a "comfort" letter,
dated the effective date of such registration statement (and, if such
registration includes an underwritten offering, dated the date of the
closing under the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements included
in such registration statement, covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten offerings of securities;
(i) immediately notify each seller of such Registrable Shares and (if
requested by any such seller) confirm such advice in writing, (i) when or
if the prospectus or any prospectus supplement or post-effective amendment
has been filed, and, with respect to the registration statement or any
post-effective amend-
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<PAGE> 13
ment, when the same has become effective, (ii) of any request by the
Commission for amendments or supplements to the registration statement or
the prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Shares
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and (v) of the existence of any fact which
makes any statement made in the registration statement, the prospectus or
any document incorporated therein by reference untrue or which requires the
making of any changes in the registration statement, the prospectus or any
document incorporated therein by reference in order to make the statements
therein not misleading;
(j) if any fact contemplated by clause (v) of Section 2.3(i) shall
exist, prepare a supplement or post-effective amendment to the registration
statement or the related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchaser of the Registrable Shares the prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(k) use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment;
(l) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its shareholders,
as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months,
beginning with the first month of the first fiscal quarter after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 under the Securities Act;
(m) provide and cause to be maintained transfer agents and registrars
for all Registrable Shares covered by such registration statement from and
after a date not later than the effective date of such regis-
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<PAGE> 14
tration statement and obtain a CUSIP number for such Registrable Shares;
and
(n) cause all Registrable Shares covered by such registration statement
to be listed on each securities exchange on which similar securities issued
by the Company are then listed or, if no such securities are then listed,
on a national exchange selected by the Company, if such listing is then
permitted under the rules of such exchange, or, if such listing is not
practicable, to cause all such Registrable Shares to be designated as a
NASDAQ "national market system security" within the meaning of Rule
11(A)(a)2-1 under the Exchange Act or, failing that, to secure NASDAQ
authorization for such Registrable Shares and, without limiting the
foregoing, to arrange for at least two market makers to register as such
with respect to such securities within the NASD.
Each seller of Registrable Shares as to which any registration is being
effected agrees by acquisition of such Registrable Shares to furnish the Company
such information regarding such seller and the distribution of such Registrable
Shares as the Company may from time to time reasonably request in writing and as
shall be required by law or by the Commission in connection therewith.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Shares, or any amendment
of or supplement to the prospectus used in connection therewith, which refers to
any seller of any Registrable Shares covered thereby by name, or otherwise
identify such seller as the holder of securities of the Company, without the
consent of such seller, such consent not to be unreasonably withheld.
Each holder of Registrable Shares agrees by acquisition of such
Registrable Shares that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in clause (v) of Section 2.3(i),
such holder will forthwith discontinue disposition of Registrable Shares
pursuant to the registration statement covering such Registrable Shares until
such holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 2.3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the prospectus may be resumed, and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company, such holder
will deliver to the Company (at the Company's ex-
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<PAGE> 15
pense) all copies, other than permanent file copies then in such holder's
possession, of the prospectus covering such Registrable Shares current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time periods regarding the effectiveness of registration statements
set forth in Section 2.3(b) shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
clause (v) of Section 2.3(i) to and including the date when each seller of
Registrable Shares covered by such registration statement shall have received
the copies of the supplemented or amended prospectus contemplated by Section
2.3(j) or the Advice.
2.4 Underwritten Offerings.
(a) Underwriting Agreement. If requested by the underwriters for any
underwritten offering of Registrable Shares on behalf of a holder or holders of
Registrable Shares pursuant to a registration requested under pursuant to
Section 2.1(a) or Section 2.2(a), the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.6, provisions for the delivery of
officers' certificates, opinions of counsel and accountants' "comfort" letters
and hold-back arrangements. The holders on whose behalf Registrable Shares are
to be distributed by such underwriters shall be parties to any such underwriting
agreement and the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters, shall also
be made to and for the benefit of such holders of Registrable Shares and any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement shall also be conditions precedent to the
obligations of such holders of Registrable Shares. Such holders of Registrable
Shares shall not be required by the Company to make any representations or
warranties to or agreements with the Company or the underwriters other than
reasonable representations, warranties or agreements regarding such holder, such
holder's Registrable Shares and such holder's intended method or methods of
disposition and any other representation required by law.
(b) Selection of Underwriters. Whenever a registration requested
pursuant to Section 2.1(a) is for an
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<PAGE> 16
underwritten offering, the holders of a majority of the Registrable Shares
included in such registration shall have the right to select the managing
underwriter(s) to administer the offering, subject to the approval of the
Company, such approval not to be unreasonably withheld.
(c) Holdback Agreements. (i) If any registration pursuant to Section
2.1(a) shall be in connection with an underwritten public offering, each holder
of Registrable Shares agrees by acquisition of such Registrable Shares, if so
required by the managing underwriter, not to effect any public sale or
distribution of Registrable Shares (other than as part of such underwritten
public offering) or other equity securities of the Company within seven days
prior to the effective date of such registration statement or 90 days after the
effective date of such registration statement.
(ii) The Company agrees not to effect any public sale or distribution
of its equity securities during the seven days prior to and the earlier of 180
days after any underwritten registration pursuant to Section 2.1(a) has become
effective and the date on which all securities under such registration statement
are sold, except as part of such underwritten registration and except pursuant
to registrations on Form S-8, Form S-4 or any successor forms thereto.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Shares under the Securities Act, the Company will give the holders of
Registrable Shares on whose behalf such Registrable Shares are to be so
registered and their underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders and such underwriters or their respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 Indemnification. (a) Indemnification by the Company. In the event
of any registration of any Registrable Shares under the Securities Act pursuant
to Section 2.1(a) or 2.2(a), the Company shall indemnify and hold harmless the
seller of such Registrable Shares, its offi-
14
<PAGE> 17
cers, directors and employees and each Person, if any, who controls such seller
within the meaning of Section 15 of the Securities Act, against all losses,
claims, damages, liabilities (or proceedings in respect thereof) and expenses
(under the Securities Act or common law or otherwise), joint or several, arising
out of or based upon any untrue statement or alleged untrue statement of a fact
contained in any registration statement or prospectus (and as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus or caused by any omission or alleged
omission to state therein a fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities (or proceedings in respect thereof) or expenses are
caused by any untrue statement or alleged untrue statement contained in or by
any omission or alleged omission from information furnished in writing to the
Company by such holder expressly for use therein. If the offering pursuant to
any registration statement provided for herein is made through underwriters, no
action or failure to act on the part of such underwriters (whether or not such
underwriter is an affiliate of any holder of Registrable Shares) shall affect
the obligations of the Company to indemnify any seller of Registrable Shares or
any other Person pursuant to the preceding sentence. If the offering pursuant to
any registration statement provided for under this Agreement is made through
underwriters, the Company agrees to enter into an underwriting agreement in
customary form with such underwriters and the Company agrees to indemnify such
underwriters, their officers, directors and employees and each Person, if any,
who controls such underwriters within the meaning of Section 15 of the
Securities Act to the same extent as hereinbefore provided with respect to
indemnification of the holders of Registrable Shares.
(b) Indemnification by the Sellers. In connection with any registration
statement in which a holder of Registrable Shares is participating, each such
holder agrees by acquisition of such Registrable Shares to indemnify and hold
harmless the Company, its officers and directors and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages, liabilities, (or proceedings in respect
thereof) and expenses (under the Securities Act or common law or otherwise),
joint or several, arising out of or based upon any untrue statement or alleged
untrue statement of a fact contained in any registration statement or prospectus
(and as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto)
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<PAGE> 18
or any preliminary prospectus or caused by any omission or alleged omission to
state therein a fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement is contained in or such omission is from information so furnished in
writing by such holder expressly for use therein.
(c) Notice of Claims, etc. Any Person entitled to indemnification under
the provisions of this Section 2.6 shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, permit such indemnifying party to assume the defense of such
claim, with counsel reasonably satisfactory to the indemnified party; and if
such defense is so assumed, such indemnifying party shall not enter into any
settlement without the consent of the indemnified party if such settlement
attributes liability to the indemnified party and such indemnifying party shall
not be subject to any liability for any settlement made without its consent
(which shall not be unreasonably withheld); and any underwriting agreement
entered into with respect to any registration statement provided for under this
Agreement shall so provide. In the event an indemnifying party shall not be
entitled, or elects not, to assume the defense of a claim, such indemnifying
party shall not be obligated to pay the fees and expenses of more than one
counsel or firm of counsel for all parties indemnified by such indemnifying
party in respect of such claim, unless in the reasonable judgment of any such
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties in respect of such claim. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of a participating holder of Registrable Shares its
officers, directors or any Person, if any, who controls such holder as
aforesaid, and shall survive the transfer of such Shares by such holder.
(d) Other Indemnifications. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.6 (with appropriate
modifications) shall be given by the Company to each seller of Registrable
Shares, on the one hand, and by each seller of Registrable Shares to the
Company, on the other hand, with respect to any required registration or other
qualification of such Registrable Shares under any federal or state law or
regulation of any governmental authority other than the Securities Act.
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<PAGE> 19
(e) Payment. The indemnification required by this Section 2.6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(f) Other Remedies. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other from
the offering of Registrable Shares (taking into account the portion of the
proceeds of the offering realized by each such party) or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, or provides a
lesser sum to the indemnified party than the amount hereinafter calculated, in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other but also the relative fault of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations.
3. Expenses. The Company will pay all Registration Expenses in
connection with registrations of Registrable Shares pursuant to Section 2.1(a)
and Section 2.2(a).
4. Rules 144 and 144A. The Company will file the reports required to be
filed by it under the Securities Act and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Shares, make
publicly available other information), and will take such further action as any
holder of Registrable Shares may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Shares without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, (b) Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or (c) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable Shares,
the Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
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<PAGE> 20
5. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act of the Required
Holders. Each holder of any Registrable Shares at the time shall be bound by any
amendment, consent or waiver authorized by this Section 5, whether or not such
Registrable Shares shall have been marked to indicate such amendment, consent or
waiver.
6. Nominees for Beneficial Owners. In the event that any Registrable
Shares are held by a nominee for the beneficial owner thereof, the beneficial
owner thereof may, at its election, be treated as the holder of such Registrable
Shares for purposes of any request or other action by any holder or holders of
Registrable Shares pursuant to this Agreement or any determination of any number
or percentage of Registrable Shares held by any holder or holders of Registrable
Shares contemplated by this Agreement. If the beneficial owner of any
Registrable Shares so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Shares.
7. Notices. All notices and other communications given pursuant to this
Agreement shall be in writing and shall be deemed to have been duly given (a) on
receipt, if delivered personally, (b) three Business Days after it has been
mailed by first-class, registered or certified mail, return receipt requested,
postage prepaid, (c) the next Business Day after it has been sent by nationally
recognized overnight courier (appropriately marked for overnight delivery); or
(d) upon transmission, if it is sent by telecopy (with request for immediate
confirmation of receipt in a manner customary for communications of such type):
(i) if to the Company:
KIWI International Air Lines, Inc.
Hemisphere Center
U.S. 1 & 9 South
Newark, N.J. 07114-0006
with a copy to:
Norris, McLaughlin & Marcus
P.O. Box 1018
Sommerville, N.J. 08826-1018
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<PAGE> 21
Telecopier: (708) 722-0755
Attention: Robert Marcus
(ii) if to the Purchaser:
Recovery Equity Investors II, L.P.
901 Mariner's Island Blvd.
Suite 465
San Mateo, California 94404-1592
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopier: (212) 909-6836
Attention: George Maguire
(iii) if to any other holder of Registrable Shares, to such address as
shall have been provided in accordance with this Section 7.
or, in each case, at such other address as may be specified in writing (in
accordance with the terms of this Section 7).
8. Remedies. Each holder of Registrable Shares in addition to being
entitled to exercise all rights provided herein and granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
9. No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the holders of Registrable
Shares in this Agreement or otherwise conflicts with the provisions hereof. The
rights granted to the holders of Registered Shares hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's securities under any other agreements.
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<PAGE> 22
10. No Adjustments to Shares. The Company will not take any action, or
permit any change to occur, with respect to the Registrable Shares which would
materially adversely affect the ability of the holders of Registrable Shares to
effect the registration and sale of Registrable Shares pursuant to Section 2 of
this Agreement.
11. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not, and, in particular, shall inure
to the benefit of and be enforceable by, and binding upon, any holder or holders
of Registrable Shares. This Agreement embodies the entire agreement and
understanding between the Company and the other parties hereto and supersedes
all prior agreements and understandings relating to the subject matter hereof.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF NEW JERSEY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
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<PAGE> 23
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
KIWI INTERNATIONAL AIRLINES, INC.
By: /s/ John G. Murphy
--------------------------------------
Name: John G. Murphy
Title: President & CEO
RECOVERY EQUITY INVESTORS II, L.P.:
By: Recovery Equity Partners II, L.P,
its sole general partner
By: /s/ Jeffrey A. Lipkin
----------------------------------
Name: Jeffrey A. Lipkin
Title: General Partner
By: /s/ Joseph J. Finn-Egan
----------------------------------
Name: Joseph J. Finn-Egan
Title: General Partner
21
