Schedule 13E-4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
KIWI INTERNATIONAL AIR LINES, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
KIWI INTERNATIONAL AIR LINES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Statement)
10% CONVERTIBLE SUBORDINATED SECURED NOTES DUE JUNE 1, 1996
- --------------------------------------------------------------------------------
(Title of Class of Securities)
NONE
- --------------------------------------------------------------------------------
(CUSIP Number of Class of Securities)
JAMES E. PLAYER, CHIEF FINANCIAL OFFICER
KIWI INTERNATIONAL AIR LINES, INC., HEMISPHERE CENTER
ROUTES 1 & 9 SOUTH NEWARK, NEW JERSEY 07114 (201) 645-1133
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized or
Receive Notices and Communications on Behalf of the Person(s)
Filing Statement)
MAY 22, 1996
- --------------------------------------------------------------------------------
(Date Tender Offer First Published, Sent or Given to Security Holders)
Calculations of Filing Fee
- --------------------------------------------------------------------------------
Transaction Valuation $1,150,000.00 Amount of Filing Fee $230.00
- --------------------------------------------------------------------------------
With copies to:
Douglas R. Brown, Esq.
Norris, McLaughlin & Marcus
721 Route 202-206
P.O. Box 1018
Somerville, New Jersey 08876-1018
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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SCHEDULE 13E-4
This Issuer Tender Offer Statement on Schedule 13E-4 relates to an offer
(the "Conversion Price Reduction Offer") by KIWI International Air Lines, Inc.,
a New Jersey corporation (the "Company"), upon the terms and conditions set
forth in its Offering Circular (the "Offering Circular") included herewith as an
exhibit, to reduce the conversion price applicable to the Company's 10%
Convertible Subordinated Secured Notes due June 1, 1996 (the "Convertible
Notes") from $5.00 per share to $1.00 per share until June 1, 1996. Each holder
of Convertible Notes who elects to convert, shall have until June 20, 1996 to
exercise its withdrawal rights and upon such withdrawal, the Company shall be
obligated to pay principal and interest (through June 1, 1996) to the holders of
the Convertible Notes.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the Company is KIWI International Air Lines, Inc. The
address of its principal executive office is Hemisphere Center, Routes 1 & 9
South, Newark, New Jersey 07114.
(b) The securities being sought are any and all outstanding Convertible
Notes. As of the date hereof, there is $1,150,000 aggregate principal amount of
Convertible Notes outstanding. The Company seeks to induce the holders of
Convertible Notes to convert the principal amount thereof prior to their June 1,
1996 maturity date into shares of Common Stock by reducing the conversion price
from $5.00 to $1.00 per share, thereby increasing the number of shares such
holder otherwise could have received upon conversion, without requiring the
payment of any additional cash.
The following officers and directors of the Company beneficially own
Convertible Notes in the respective principal amounts indicated, and are thus
eligible to take part in this offer.
OFFICER/DIRECTOR PRINCIPAL AMOUNT
---------------- ----------------
Jack E. Gray II (Director) $25,000
James B. Hawks (Director) 50,000
Norton D. Waltuch (Director) 50,000
Fred Barber 25,000
James E. Player (Chief Financial Officer) 25,000
John G. Murphy (President & CEO) 25,000
2
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OFFICER/DIRECTOR PRINCIPAL AMOUNT
---------------- ----------------
Bernard Mann (Director) $50,000
Alan Halpert (Director) 50,000
John P. Anderson (Director) 25,000
The Company does not know whether, and to what extent, any of these persons
will accept the Conversion Price Reduction Offer.
(c) There is currently no established public trading market for the
Convertible Notes or the Common Stock issuable upon the conversion thereof.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The consideration offered by the Company consists solely of shares of
Common Stock. If the Conversion Price Reduction Offer is accepted by all of the
holders of Convertible Notes, the Company will issue, in the aggregate,
1,150,000 shares of Class A Common Stock and Class C Common Stock. The Company
cannot predict the extent to which holders of Convertible Notes will accept the
Conversion Price Reduction Offer, and therefore the actual number of shares of
Common Stock which will be issued. To the extent Convertible Notes are not
converted, they are required to be repaid on the June 1, 1996 maturity date
thereof. Other than the expenses of the Conversion Price Reduction Offer, the
Company will not incur any monetary obligations in connection with the
Conversion Price Reduction Offer. The Company will pay such expenses from its
working capital.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The purpose of the Conversion Price Reduction Offer is to induce the
conversion of Convertible Notes prior to their maturity, and therefore reduce
the amount of cash the Company otherwise would be required to pay to retire
Convertible Notes.
Except as described in the Offering Circular, there are no present plans or
proposals which relate to or would result in:
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<PAGE>
(a) The acquisition by any person, other than the Company, of additional
securities of the Company, or the disposition of such securities of the Company
by any such person;
(b) Any extraordinary corporate transaction, such as a merger,
reorganization, or liquidation, involving the Company or any of its
subsidiaries;
(c) Any sale or transfer of a material amount of assets of the Company or
any of its subsidiaries;
(d) Any change in the present Board of Directors or management of the
Company, including but not limited to, any plans or proposals to change the
number or the term of directors, to fill any existing vacancy on the Board or to
change any material term of the employment contract of any executive officer;
(e) Any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company;
(f) Any other material change in the Company's corporate structure or
business;
(g) Any changes in the Company's charter, by-laws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) The delisting of any class of equity security of the Company from any
national securities exchange, or the cessation of quotations of any such class
of securities in any inter-dealer quotations system of a registered national
securities association;
(i) Any class of equity security of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"); or
(j) The suspension of the Company's obligation to file reports pursuant to
Section 15(d) of the 1934 Act.
As to matters set forth in clauses (a), (d) and (g), reference is hereby
made to the section of the Offering Circular captioned "Recent
Developments--Possible Preferred Stock Investment" for a discussion of a
possible transaction which, if concluded on the terms set forth in a letter of
intent entered into by the Company and the purchaser thereunder, would contain
provisions affecting those matters.
4
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ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Neither the Company nor, to the best knowledge of the Company, any of the
executive officers or directors of the Company or any affiliate of any of the
foregoing, has engaged in any transactions involving the Convertible Notes
during the 40 business days prior to the date hereof.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER'S SECURITIES.
The Company was established in 1992 by commercial airline pilots, primarily
from Eastern Air Lines, with the purpose and philosophy of establishing employee
ownership and perpetuating control of the Company's board of directors by the
stockholder pilots and other employee owners. The Company's issued and
outstanding Common Stock consists of Class A Common and Class C Common Stock.
Under the Company's Certificate of Incorporation, holders of Class A Common,
which only has been offered and sold to Company employees, are entitled to elect
a majority of the Board of Directors of the Company from time to time. Further,
holders of Class A Common Stock have been required to deliver their shares into
a voting trust (the "Voting Trust") which allows the voting trustees to vote all
shares deposited into the Voting Trust with respect to all matters submitted to
a vote of stockholders, including the election of directors. The voting trustees
consist of those members of the Board of Directors from time to time who were
elected to their seats on the Board by the Voting Trust, on behalf of Class A
Common shareholders. Therefore, the voting trustees, if they act in concert, can
effectively perpetuate their seats on the Board of Directors for the duration of
the term of the Voting Trust. The Voting Trust is scheduled to expire on
December 31, 1997, subject to certain rights of the Class A Common stockholders
(by majority vote) to extend the term thereof for an additional term not
exceeding five years. Because the Board of Directors is classified into three
classes of directors, having staggered terms of three years each, the voting
trustees can perpetuate their board seats for terms which may in certain cases
extend beyond the expiration of the Voting Trust. Holders of Class C Common
shares are entitled to elect only a minority of the directors from time to time.
Holders of Class A Common Stock have since the Company's inception been
required to enter into a Shareholder's Agreement which prohibits the transfer of
their shares of Common Stock except to the Company or to other holders of Class
A Common Stock. The shareholders' agreement has a stated expiration date of
December 31, 2002, unless extended for one year terms by the majority vote of
persons subject to the agreement.
5
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Reference is hereby made to the section of the Offering Circular captioned
"Recent Developments--Possible Preferred Stock Investment" for a discussion of
a possible transaction which, if concluded on the terms set forth in a letter of
intent entered into by the Company and the purchaser thereunder, would contain
provisions relating to voting and transfer of certain Company securities.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Not applicable.
ITEM 7. FINANCIAL INFORMATION.
(a)(1) The audited financial statements for the fiscal years December 31,
1995 and 1994, respectively, as set forth in the Company's Annual Report on Form
10-K, are incorporated herein by reference.
(a)(2) The unaudited balance sheet as of March 31, 1996 and comparative
year-to-date statements of operations, cash flow, stockholders' equity and
earnings per share amounts as set forth in the Company's Quarterly Report on
Form 10-Q are incorporated by reference.
(a)(3) N/A--information not provided as there was a net loss and/or no
fixed charges in the relevant period.
(a)(4) The Company's book value per share as of the most recent fiscal year
end and as of the date of the latest interim balance sheet provided under Item
7(a)(2) are as follows:
December 31, 1995 March 31, 1996
----------------- --------------
$(5.39) ($5.07)
(b)(1) The potential effect of the Conversion Price Reduction Offer on the
Company's balance sheet as of March 31, 1996, on a pro forma basis is reflected
under the "Capitalization" section of the Offering Circular under the
assumptions set forth therein, which section is incorporated herein by
reference.
(b)(2) The Conversion Price Reduction Offer will affect the Company's
earnings per share but will not affect the Company's results of operations or
ratio of earnings
6
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to fixed charges as no pro forma investment income from any proceeds received
from Convertible Note holders who elect to convert is included in the pro forma
results of operations. The following chart indicates the pro forma effect of the
Conversion Price Reduction Offer on the Company's weighted average number of
shares outstanding and earnings per share for the periods indicated, assuming
that the Conversion Price Reduction Offer is accepted by all of the holders of
the outstanding Convertible Notes or by holders of 50% in principal amount of
the outstanding Convertible Notes:
Year Ended Three Months Ended
December 31, 1995 March 31, 1996
----------------- ------------------
All of the Holders of the
Convertible Notes Accept
the Exchange Offer:
- --------------------------
Weighted Average 3,964,985 5,024,797
Number of Shares
Outstanding
Earnings (Loss) $(0.19) $0.25
Per Share
Holders of 50% of the
Convertible Notes Accept
the Exchange Offer:
- --------------------------
Weighted Average 3,917,068 4,449,797
Number of Shares
Outstanding
Earnings (Loss) $(0.20) $0.28
Per Share
The Company does not know whether any or how many of the holders of the
Convertible Notes will accept the Conversion Price Reduction Offer.
(b)(3) The Company's pro forma book value per share as of the most recent
fiscal year end and as of the date of the latest interim balance sheet provided
under Item 7(a)(2) giving effect to the Exchange Offer are as follows:
All of the Holders of the Convertible Holders of 50% of the Convertible
Notes Accept the Exchange Offer Notes Accept the Exchange Offer
- -------------------------------------- -------------------------------------
Year Ended Three Months Ended Year Ended Three Months Ended
December 31, 1995 March 31, 1996 December 31, 1995 March 31, 1996
- ----------------- ------------------ ----------------- ------------------
$(3.93) $(3.68) $(4.56) $(4.28)
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ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) Other than compliance with certain requirements of federal and state
securities laws, the Company is not aware of any federal or state regulatory
requirements that must be complied with or approvals that must be obtained in
connection with the Exchange Offer.
(c) Not applicable.
(d) None.
(e) Reference is made to the Offering Circular which is incorporated herein
by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) (i) Offering Circular.
(ii) Form of transmittal letter by Company to holders of Convertible
Notes.
(iii) Form of Conversion Notice to be completed by holders of
Convertible Notes.
(iv) Form of Acknowledgment and Acceptance of Voting Trust
Agreement and Shareholders Agreement (Holders of Convertible
Notes converting to Class A Shares only).
(v) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995 is incorporated herein by reference.
(vi) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996 is incorporated herein by reference.
(b) Not applicable.
(c) (i) Form of Voting Trust Agreement dated October 1, 1992 is
incorporated herein by reference to Exhibit 9.1 to the
Company's Registration Statement on Form 10 filed May 18,
1995.
(ii) Form of Shareholder's Agreement is incorporated herein by
reference to Exhibit 4.4 to the Company's Registration
Statement on Form 10 filed May 18, 1995.
8
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(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
KIWI INTERNATIONAL AIR LINES, INC.
By: /s/ JAMES E. PLAYER
------------------------------
James E. Player
Chief Financial Officer
Dated: May 22, 1996
9
OFFERING CIRCULAR
KIWI INTERNATIONAL AIR LINES, INC.
NOTICE OF REDUCTION
OF NOTE CONVERSION PRICE
KIWI International Air Lines, Inc. (the "Company") hereby offers upon the
terms and subject to the conditions set forth in the Offering Circular (the
"Conversion Price Reduction Offer") to reduce the conversion price of its
outstanding 10% Convertible Subordinated Secured Notes due June 1, 1996
(collectively, the "Notes" or the "Convertible Notes") for a period commencing
on the date hereof and ending on June 1, 1996, the maturity date of the Notes
(the "Offer Period"). During the Offer Period, holders of Notes will be able to
exercise the conversion privilege under the terms of the Notes at a reduced
conversion price of $1.00 per share (the "Reduced Conversion Price").
The Company originally issued, in the aggregate, $1,150,000 principal
amount of the Notes with a conversion price of $5.00 per share in a private
placement. Neither the Notes nor the Common Stock issuable upon conversion of
the Notes has been registered under the Securities Act of 1933, as amended.
THE CONVERSION PRICE REDUCTION OFFER INVOLVES A HIGH DEGREE OF RISK AND
INVESTORS MUST BE CAPABLE OF SUSTAINING A LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS." THE CONVERSION PRICE REDUCTION OFFER WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON JUNE 1, 1996
(the "EXPIRATION DATE")
================================================================================
Commissions and
Price to Investor Expense Allowance Proceeds to Company(1)
----------------- ----------------- ----------------------
Per Share $ 1.00 None $ 1.00
Maximum Offering $1,150,000 None $1,150,000
================================================================================
(2) Before deducting expenses payable by the Company estimated at $5,000.
THE CONVERSION PRICE REDUCTION OFFER HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS OFFERING
CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------
THE DATE OF THIS OFFERING CIRCULAR IS MAY 22, 1996.
<PAGE>
The original conversion price of the Notes was determined by the Company.
The Reduced Conversion Price was also determined by the Company arbitrarily, and
is not related to the Company's net asset value, net worth or any other
established criterion of value. Neither the Notes nor the Common Stock issuable
upon the conversion of the Notes is listed or registered for trading on any
securities exchange, automatic quotation system or otherwise on any public
trading market.
The Conversion Price Reduction Offer is subject to a number of conditions,
and the Company reserves the right to modify or cancel the Conversion Price
Reduction Offer, in its discretion.
The acceptance of this offer may be withdrawn by the holder at any time
prior to 5:00 p.m., New York City time, on June 20, 1996 (the "Withdrawal
Date"). See "Offering Circular Summary" and "Warrant Reduction Offer."
The delivery of this Offering Circular shall not, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof.
The Conversion Price Reduction Offer is not being made to, nor will the
Company accept the exercise from, holders of Notes in any jurisdiction in which
the Conversion Price Reduction Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such jurisdiction.
If you require assistance in connection with this Conversion Price
Reduction Offer, please contact Neil Modzelewski at the Company at (201)
779-8527.
-------------------------------
ii
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York
10048; and Room 1204, Everett McKinley Dirkson Building, 219 South Dearborn
Street, Chicago, Illinois 60604. Copies of such material may be obtained by mail
from the Public Reference Section of the Commission, located at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company has agreed to make available, prior to the consummation of the
transactions contemplated herein, to each offeree or his representative(s) or
both, the opportunity to ask questions of, and receive answers from, it or any
person acting on its behalf concerning the terms and conditions of the
Conversion Price Reduction Offer, and to obtain any additional information, to
the extent it possesses such information or can acquire it without unreasonable
effort or expense, necessary to verify the accuracy of the information set forth
herein. Any representations (whether oral or written), other than those
contained in documents and written answers to questions furnished by the Company
upon request, have not been authorized by the Company and are not to be relied
upon.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the Exchange
Act with the Commission are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
(2) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Offering Circular to the extent that a statement contained
herein modifies or supersedes such statement. Copies of all documents
incorporated by reference (other than exhibits to those documents unless the
exhibits are specifically incorporated by reference in those documents) will be
provided without charge upon request to Secretary, KIWI International Air Lines,
Inc., Hemisphere Center, Routes 1 & 9 South, Newark, New Jersey 07114-0006;
(201) 645-1133.
iii
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TABLE OF CONTENTS
Page
----
Offering Circular Summary ................................................ 1
The Conversion Price Reduction Offer...................................... 3
Risk Factors.............................................................. 5
Dilution.................................................................. 7
Capitalization............................................................ 8
Recent Developments....................................................... 9
Federal Income Tax Aspects ............................................... 10
EXHIBITS
Form 10-K for the Year ended December 31, 1995............................ A
Form 10-Q for the Fiscal Quarter ended March 31, 1996..................... B
iv
<PAGE>
OFFERING CIRCULAR SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Offering Circular or incorporated by
reference. Certain capitalized terms used in the summary are defined in this
Offering Circular.
THE COMPANY
The Company was organized as a New Jersey corporation in 1992 for the
purpose of providing air transport services. KIWI has a fleet of 15 leased
Boeing 727 aircraft and now provides scheduled air service on up to 82 one-way
flight segments daily on routes which include Newark, Atlanta, Chicago, Orlando,
Tampa, West Palm Beach, Bermuda and Las Vegas. The Company's operating
philosophy is to provide affordable full service air transportation to price
sensitive customers in selected high density origin and destination markets,
while maintaining a competitive cost structure.
The Company's executive offices are located at Hemisphere Center, Routes 1
& 9 South, Newark, New Jersey 07114-0006, telephone (201) 645-1133.
THE CONVERSION PRICE REDUCTION OFFER
The Offer ........ The conversion price of the Convertible Notes is being
reduced from $5.00 per share to $1.00 per share, effective
immediately and continuing until 5:00 p.m. New York time on
June 1, 1996, which is the maturity date of the Convertible
Notes. Holders of Convertible Notes may convert the
principal amount thereof in whole, or in parts (but only in
increments of $5,000) into Class A Common Stock or Class C
Common Stock at the Reduced Conversion Price. See "The
Conversion Reduction Offer--Terms of the Offer."
Purpose .......... To encourage holders of the Convertible Notes to convert and
to provide the Company with additional financing for its
current and future operations. See "The Conversion Price
Reduction Offer--Purpose."
Expiration........ 5:00 p.m. New York City time, on June 1, 1996 (the
"Expiration Date"). See "The Conversion Price Reduction
Offer--Expiration Date."
Use of Proceeds... The proceeds will be used primarily for working capital and
general corporate purposes. (See "Use of Proceeds").
Risk Factors..... .The Conversion Price Reduction Offer is highly speculative
and involves a high degree of risk. See "Risk Factors." In
particular, the Company is experiencing a need for
additional capital. See "Risk Factors--Working Capital
Needs; Lack of Liquidity."
How to Exercise
Conversion
Rights .......... Any holder of Convertible Notes wishing to exercise
conversion rights under the Conversion Price Reduction Offer
should do the following:
-1-
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Holders who are NOT KIWI employees--should (i) complete the
Conversion Notice, and (ii) return the original Convertible
Note and the Conversion Notice to the Company.
Holders who ARE KIWI employees--should (i) complete the
Conversion Notice, (ii) sign the Acknowledgement and
Acceptance of Voting Trust Agreement and Shareholders'
Agreement and (iii) return the original Convertible Note,
the Conversion Notice, the Acknowledgement and Acceptance to
the Company.
Withdrawal Rights. Exercise of conversion rights pursuant to the Conversion
Price Reduction Offer may be withdrawn prior to 5:00 p.m.,
New York City time, on June 20, 1996 (the "Withdrawal
Date"), by delivering written notice of withdrawal to the
Company by mail prior to that time. See "The Conversion
Price Reduction Offer--Withdrawal Rights."
Acceptance of All
Offers of
Conversion
Rights........... The Company will accept any and all conversions duly made
and not withdrawn on or prior to the Withdrawal Date,
subject to certain conditions. See "The Conversion Price
Reduction Offer--Conditions of the Conversion Price
Reduction Offer."
Delivery
of Securities.... The Company will deliver the registered certificates for the
shares of Common Stock issuable upon conversion of the
Convertible Notes as soon as possible after the Withdrawal
Date. Converting holders who are employees of the Company
are required by the terms of the Notes to deposit shares
issued on the conversion of the Notes into a voting trust.
The trustees of the voting trust will issue voting trust
certificates evidencing receipt of such shares in trust. See
"Conversion Price Reduction Offer--Delivery of
Securities."
-2-
<PAGE>
THE CONVERSION PRICE REDUCTION OFFER
Terms of the Offer. Upon the terms and subject to the conditions herein set
forth, the Company has reduced the price of its Common Stock issuable upon
conversion of the Convertible Notes to $1.00 per share (the "Reduced Conversion
Price") from the conversion price of $5.00 per share in effect prior to the
Conversion Price Reduction Offer.
The Company will accept any and all exercises of conversion rights that are
properly exercised during the Conversion Price Reduction Offer Period, subject
to the conditions set forth herein. As of the date of this Offering Circular,
the total principal amount outstanding under the Convertible Notes was
$1,150,000.
Purpose. The Company has decided to reduce the conversion price during the
Conversion Price Reduction Offer Period in order to encourage holders of the
Convertible Notes to exercise their conversion privileges and to provide the
Company with additional financing for its current and future operations. The
Conversion Price Reduction Offer provides holders of Convertible Notes an
opportunity to exercise the conversion privilege at a reduced exercise price. To
the extent conversion privileges are exercised, the Conversion Price Reduction
Offer will convert the Convertible Noteholders' investment in the Company into
Common Stock and the Company will benefit from the resulting proceeds. Regarding
the intended use of the proceeds, see "Use of Proceeds."
Expiration Date. The Conversion Price Reduction Offer will expire at 5:00 p.m.
New York City Time on June 1, 1996. The Expiration Date is also the maturity
date of the Convertible Notes. Any holder electing not to convert the principal
amount hereof pursuant to this Offer will be paid the principal amount thereof,
plus all accrued and unpaid interest thereon, in accordance with the terms of
the Notes.
How to Exercise. The exercise of conversion rights by a holder pursuant to the
Conversion Price Reduction Offer in accordance with the procedures set forth
below will, subject to acceptance by the Company, constitute an agreement
between the holder and the Company subject to the terms and conditions set forth
herein.
By Mail To exercise conversion rights by mail the holder must do the
following:
Holders who are NOT KIWI employees--must (i) complete the Conversion
Notice, and (ii) return the original Convertible Note and the signed
Conversion Notice to:
KIWI International Air Lines, Inc.
Hemisphere Center
Routes 1 & 9 South
Newark, New Jersey 07114
Attn: Mr. Neil Modzelewski
Holders who ARE KIWI employees--should (i) complete the Conversion
Note, (ii) sign the Acknowledgement and Acceptance of Voting Trust
Agreement and Shareholders' Agreement, and (iii) return the original
Convertible Note, the Conversion Notice and the Acknowledgement and
Acceptance, to:
KIWI International Air Lines, Inc.
Hemisphere Center
Routes 1 & 9 South
Newark, New Jersey 07114
Attn: Mr. Neil Modzelewski
-3-
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Withdrawal Rights. Any Convertible Noteholder who has exercised conversion
rights may withdraw the exercise at any time prior to 5:00 p.m., New York City
time, on June 20, 1996 (the "Withdrawal Date") by delivering written notice of
withdrawal to the Company by certified mail, return receipt requested, prior to
that time. To be effective, a notice of withdrawal must indicate the Convertible
Notes to which it relates and be signed by the holder. Holders who properly
withdraw their conversion prior to the Withdrawal Date will be paid the
principal amount of their Convertible Note, and accrued and unpaid interest
thereon through June 1, 1996 with interest thereon.
Conditions of the Conversion Price Reduction Offer. Notwithstanding any other
provisions of the Conversion Price Reduction Offer, the Company may modify or
cancel the Conversion Price Reduction Offer and is not required to accept for
exercise any conversion rights if, prior to the Expiration Date:
(i) there shall be pending, instituted or threatened any legal action or
administrative proceeding before any court or governmental agency, by any
person, challenging the Conversion Price Reduction Offer, or, in the sole
judgment of the Board of Directors of the Company, otherwise adversely affecting
the transactions contemplated by the Conversion Price Reduction Offer;
(ii) there exists, in the sole judgment of the Board of Directors of the
Company, any actual or threatened legal impediment to the conversion of the
Convertible Notes or the issuance of the underlying Common Stock pursuant to
this Conversion Price Reduction Offer;
(iii) there shall have occurred any change or development affecting the
business or financial affairs of the Company which, in the sole judgment of the
Board of Directors of the Company, would or might prohibit, restrict or delay
consummation of the Conversion Price Reduction Offer or materially impair the
contemplated benefits of the Conversion Price Reduction Offer to the Company.
In the event that the Company terminates the Conversion Price Reduction
Offer pursuant to any of the conditions set forth above, the Company will ensure
the prompt return of the Convertible Notes to the respective holders who
exercised conversion rights thereunder, or payment thereof on or after the
Maturity Date of the Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of conversion rights will be resolved by the Company,
whose determination will be final and binding. The Company reserves the absolute
right to reject any or all exercises that are not in proper form. The Company
also reserves the right to waive any irregularities or conditions of exercise as
to conversion of particular Convertible Notes. The Company's interpretation of
the terms and conditions of the Conversion Price Reduction Offer will be final
and binding, and any irregularities in connection with exercises must be cured
within such time as the Company shall determine. The Company shall be under no
duty to given notification of defects in exercises and shall incur no
liabilities for failure to give such notification. Exercise of such conversion
rights will not be deemed to have been made until the irregularities have been
cured or waived.
Offer is Nontransferable. The terms of this offer are personal to the registered
holders of the Convertible Notes and are nontransferable.
Delivery of Securities. Upon the terms and subject to the conditions of the
Conversion Price Reduction Offer, and upon the acceptance of the offers of
conversion rights validly exercised and not withdrawn, the Convertible Notes
will be cancelled and the Company shall deliver the shares of Common Stock
issuable upon conversion of the Convertible Notes promptly after the Expiration
Date. For purposes of the Conversion Price Reduction Offer, the Company shall be
deemed to have accepted for conversion validly exercised Convertible Notes when,
as and if the Company has given oral or written notice thereof to its transfer
agent to deliver the shares of Common Stock issuable upon conversion of the
Convertible Notes. Under the terms of the Convertible Notes, holders who are
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<PAGE>
employees of the Company may convert their Convertible Notes only into Class A
Common Stock and are required to deposit the shares issuable upon conversion
into a voting trust under the Voting Trust Agreement (as defined therein). The
Company shall deliver certificates evidencing such Class A Common Stock to the
voting trustees thereunder. The voting trustees shall deliver to the Convertible
Noteholders voting trust certificates evidencing the deposit of such shares into
the voting trust.
Questions. Please call Neil Modzelewski at the Company (201-799-8527) if you
have any questions about the conversion of your Convertible Notes.
RISK FACTORS
Substantial Operating Losses and Negative Net Worth; Audit Report Qualification
The Company has incurred operating losses of $3.2 million, $6.7 million and
$24.9 million and $760 thousand in the period from inception (March 11, 1992)
through December 31, 1992 and the years ended December 31, 1993, 1994 and 1995,
respectively. The Company earned an operating profit of $1.36 million in the
first quarter of 1996. The Company had a negative net worth of $19.6 million at
March 31, 1996. The substantial operating losses and accumulated deficit through
1995 and the negative cash flow and negative working capital at December 31,
1994 and 1995, caused the Company's independent auditors to qualify its audit
reports for 1994 and 1995 financial statements by expressing "substantial doubt
about the Company's ability to continue as a going concern". The Company's past
financial performance and audit report qualification have had adverse effects on
the Company's ability to obtain bank financing and to negotiate financial
arrangements with vendors, aircraft and other equipment lessors, credit card
services and others. See "Recent Developments, Legal Proceedings, Pegasus
Litigation". Although the Company's operating performance has substantially
improved during 1995 and the first quarter of 1996, no assurances can be given
that the Company will achieve profitable operations at levels necessary to
effectively manage its deficit and to cause its auditors to remove the "going
concern" qualification from financial statements in future periods.
Working Capital Needs, Lack of Liquidity
The Company continues to experience a lack of liquidity. The severity of
the Company's operating losses experienced in 1994 was substantially controlled
in 1995, and the Company has been able to negotiate certain restructured payment
arrangements with aircraft lessors, the Internal Revenue Service and other trade
creditors. Nevertheless, the Company needs to continue to improve cash generated
from operations, and does not presently have available lines of credit or access
to debt financing from its existing senior creditors. The Company is reliant
during periods of reduced cash flows on the cooperation of aircraft lessors,
airport authorities; vendors and others in extending favorable payment terms. In
addition to funding operations and fixed charges, the Company requires
additional cash in the near term to pay the costs of aircraft "C-check"
maintenance examinations, to plan for compliance with FAA hush-kitting
milestones by the end of 1996, and to finance planned capital expansion
requirements. Efforts to obtain financing from outside sources have been
adversely affected by the severe operating losses incurred through 1994. A
longer term solution to liquidity problems will require continued improvement in
operating performance, and substantial infusions of capital. There can be no
assurances that the sources of cash necessary to improve the Company's liquidity
will be available.
Industry Competition
The airline industry is highly competitive and susceptible to price
discounting. The Company competes primarily with major airlines including
Continental, USAir, Inc., Delta Air Lines, United Airlines, American Airlines,
ATA, and other smaller airlines such as ValuJet, and certain public charter
companies which currently serve the Company's current and proposed routes. Other
successful regional airlines such as Southwest Airlines, which has announced
plans to compete in the Company's Florida routes, may also pose competition. In
recent
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<PAGE>
years, major air carriers have engaged in a series of fare wars and fare sales.
While intended to increase market shares, these events may adversely affect
yields and earnings for the major participants and their competition. Moreover,
these fare wars cause other competitors in specific markets, such as the
Company, to match fare discounts, and thus adversely affect yields. Due to the
Company's small size, limited resources and general inability to cross-subsidize
its routes, the Company may suffer the negative financial consequences of any
fare war to a greater extent than many of its competitors.
Control of Board of Directors
The Company was established in 1992 by commercial airline pilots, primarily from
Eastern Air Lines, with the purpose and philosophy of employee ownership and
perpetuating control of the Company's board of directors by the stockholder
pilots and other employee owners. The Company's issued and outstanding Common
Stock consists of Class A and Class C Common Stock. Under the Company's
Certificate of Incorporation, holders of Class A Common, which only has been
offered and sold to Company employees, are entitled to elect a majority of the
Board of Directors of the Company from time to time. Further, holders of Class A
Common Stock have been required to deliver their shares into a voting trust (the
"Voting Trust") which allows the voting trustees to vote all shares deposited
into the Voting Trust with respect to all matters submitted to a vote of
stockholders, including the election of directors. The voting trustees consist
of those members of the Board of Directors from time to time who were elected to
their seats on the Board by the Voting Trust, on behalf of Class A shareholders.
Therefore, the voting trustees, if they act in concert, can effectively
perpetuate their seats on the Board of Directors for the duration of the term of
the Voting Trust. The Voting Trust is scheduled to expire on December 31, 1997,
subject to certain rights of the Class A Common Stockholders (by majority vote)
to extend the term thereof for an additional term not exceeding five years.
Because the Board of Directors is classified into three classes of directors,
having staggered terms of three years each, the voting trustees can perpetuate
their board seats for terms which may in certain cases extend beyond the
expiration of the Voting Trust. Holders of Class C shares are entitled to elect
only a minority of the directors from time to time.
Restrictions on Transfer
Because the Conversion Price Reduction Offer is being conducted without
registration under exemption from Federal and state securities laws, investors
are required to participate in this offering for investment purposes, and not
with a view to reselling or otherwise distributing the securities offered
hereby. Therefore, investors may be required to hold their investments for an
indefinite period of time.
Investors who acquire Class A Common Stock are subject to substantial
restrictions upon the transfer of such shares under the Company's Certificate of
Incorporation and By-laws, and under the Shareholders' Agreement which each
investor is required to enter into.
No Public Market for Securities; Arbitrary Pricing
There has been no public market for the Company's Common Stock, and none will
develop as a result of this Offering. The Reduced Conversion Price was
determined arbitrarily by the Company. The Company is actively seeking infusions
of equity capital. There can be no assurance that future issuances of Class A
Common or Class C Common Stock of the Company, or of options, rights or warrants
to purchase such Common Stock, or of preferred stock, debt or other securities
convertible into such Common Stock will not be done at purchase prices lower
than the Reduced Conversion Price per share, in which case investors in this
Offering would experience dilution.
-6-
<PAGE>
DILUTION
At March 31, 1996, the Company had a net tangible book value of
($19,621,586) or ($5.07) per share, based on 3,874,130 shares of Class A Common
Stock and Class C Common Stock outstanding, in the aggregate,adjusted to include
shares subscribed and paid for, but not issued. Net tangible book value per
share represents the Company's total assets, less intangible assets and total
liabilities, divided by the number of shares of Common Stock outstanding.
Without taking into account any changes in net tangible book value after March
31, 1996, and giving effect to the issuance of all 1,150,000 shares of Common
Stock issuable upon conversion of the Convertible Notes at the Reduced
Conversion Price of $1.00 per share and the receipt of the gross proceeds
therefrom, the pro forma net tangible book value at March 31, 1996 would have
been ($18,471,586) or ($3.68) per share. This represents an immediate increase
in net tangible book value of $1.39 per share to existing Common Stock holders
and an immediate dilution of $4.68 per share from the Reduced Conversion Price
to investors in this Offering. Dilution per share represents the difference
between the Reduced Conversion Price per share offered hereby and the pro forma
tangible book value per share of Common Stock immediately after the Conversion
Price Reduction Offer, assuming it is fully subscribed. The following table
illustrates this per share dilution:
Reduced Conversion Price $1.00
Net tangible book value per share
before offering ($5.07)
Increase in net tangible book value per
share attributed to the estimated gross
proceeds of this offering $1.39
Pro forma net tangible book value per share
after the offering ($3.68)
Dilution of net tangible book value per share
to persons exercising the Conversion
Reduction Offer $4.68
The preceding calculation assumes that the entire aggregate outstanding
principal amount of $1,150,000 will be converted at the Reduced Conversion
Price, as to which there can be no assurance. If less than all of the
outstanding principal amount of the Convertible Notes are exercised, the per
share dilution to persons who exercise will be greater than shown above.
The preceding calculation assumes no exercise of the presently outstanding
3,231,676 Warrants to purchase shares of Class A Common Stock and Class C Common
Stock. The Company plans to offer to reduce the exercise price on all such
Warrants to $1.00 per share for a period ending on or about July 31, 1996. The
preceding calculation also does not include as of such date the shares of Common
Stock reserved for issuance upon exercise of options granted from time to time
under the Company's 1996 Stock Option Plan (no options under such Plan presently
are outstanding) or pursuant to awards granted under the Company's 1996 Employee
Stock Purchase Plan ("ESPP"). The Company has granted, or presently intends to
grant, awards under the ESPP, entitling the recipients to purchase approximately
2,699,200 shares of Common Stock for an aggregate purchase price of $4,175,000.
Since the Company has a negative net tangible book value per share, the
exercise of such stock purchase awards and Warrants will have an antidilutive
effect to persons who acquire shares upon the conversion of their Convertible
Notes under this Offering.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
13, 1996 and as adjusted to reflect the conversion of, alternatively: (i) all of
the Convertible Notes and (ii) 50% in principal amount of the Convertible Notes,
at the Reduced Conversion Price.
At March 31, 1996
----------------------------------------
Liabilities and Stockholders Actual As Adjusted
Investment (Unaudited) ---------------------
---------- -----------
All 50%
------- -------
10% Convertible Subordinated $1,150,000 -- --
Secured Notes due June 1, 1996
Class A Common Stock, $9,982,390 $10,532,390 (1)
value, 15,000,000 shares
authorized, 1,996,478 shares
outstanding
Class C Common Stock, no par $7,804,020 $ 8,404,020 (1)
value, 10,000,000 shares
authorized, 1,776,904 shares
outstanding
Total Common Stock(2) $17,786,410 $18,936,410 $18,361,410
Stock Subscriptions(3) $ 503,743 $ 503,743 $ 503,743
Accumulated Deficit ($37,927,056) ($37,927,056) ($37,927,056)
Net Stockholders(1) Investment ($19,636,903) ($18,466,903) ($19,061,903)
- -----------
(1) The Convertible Notes convert into Class A Common Stock if the holder is an
employee of the Company and Class C Commons Stock if the holder is not an
employee of the Company. $550,000 principal amount of the Convertible Notes
are held by Company employees and $600,000 principal amount is held by
non-employees. If less than all of the Convertible Note are converted, the
Company cannot predict what portion of the stock issuable upon conversion
would be Class A Commons and Class C Commons, respectively.
(2) Assumes no exercise of 3,231,676 outstanding warrants as of March 31, 1996.
(3) Represents 100,748 shares of Common Stock subscribed and paid for, but not
yet issued.
-8-
<PAGE>
RECENT DEVELOPMENTS
Possible Preferred Stock Investment
On May 9, 1996, the Company entered into a letter of intent with a
prospective investor (the "Purchaser") for the private placement of $10,000,000
of the Company's convertible voting preferred stock which is expected to
represent a percentage of the Company's combined outstanding voting equity
securities of between 25% and 33%. The actual percentage interest represented by
the preferred stock will depend on the number of shares of Common Stock issued,
and the amount of proceeds received by the Company from: (i) conversion of the
Convertible Notes, (ii) an exchange offer to holders of the Company's 8% capital
notes pursuant to the Exchange Offer Memorandum dated March 15, 1996, (iii)
stock purchase awards for up to 2,669,200 shares of Common Stock pursuant to the
Company's 1996 Employee Stock Purchase Plan, and (iv) an offer to holders of
outstanding warrants to purchase up to 3,300,000 shares of Common Stock to
reduce the exercise price thereof from $5.00 per share to $1.00 per share.
The terms of the preferred stock will include, among other things: (i) a
liquidation preference in the aggregate amount of $10,000,000, (ii) the right to
receive dividends when, as and if paid on Common Stock, on a pro rata basis,
(iii) conversion privileges at the rate of one share of Common Stock for each
share of preferred stock, (iv) the right to elect two directors prior to the
expiration of the Voting Trust on December 31, 1997 and thereafter the right to
elect three directors on a nine-person Board.
The purchase of preferred stock is subject to a number of conditions,
including among other things: (i) the completion of Purchaser's due diligence
investigation of the Company and Purchaser's satisfaction with the results of
such investigation, (ii) approval by the Company's stockholders at its 1996
Annual Meeting (expected to occur in early July, 1996) of certain amendments to
the Company's Certificate of Incorporation, (iii) the Purchaser must be
satisfied that the Company has resources available to hush-kit sufficient number
aircraft in order to comply with the January 1, 1997 milestones of Federal noise
reduction laws without the use of proceeds of the preferred stock investment or
the Company's internally generated funds, (iv) the absence of material adverse
changes in the Company's business, operations, prospects or financial condition.
There can be no assurance whether the Company will be able to satisfy all
of the closing conditions and complete the offer and sale of the preferred stock
to the Purchaser.
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<PAGE>
Legal Proceedings--Pegasus Litigation
Pegasus Capital Corporation and certain of its affiliated partnerships
(collectively, "Pegasus") have been involved in a legal proceeding with the
Company since September, 1995 concerning certain aircraft leased by Pegasus to
the Company. Reference is hereby made to "Item 3. Legal Proceedings--Aircraft
Lease Dispute" in the Company's Annual Report on Form 10-K included as an
exhibit to this Offering Circular for a description of the proceeding.
On May 14, 1996, Pegasus sought leave to amend its counterclaim against the
Company to allege that the Company was delinquent in making payments due under
three aircraft lease agreements on various dates between May 1, 1996 and May 15,
1996 totalling approximately $770 thousand, and seeking an immediate order of
the Court declaring the Company is in default of the leases, that Pegasus is
entitled to repossess the three aircraft in question, and that Pegasus is
entitled to seek recovery at trial of unspecified amounts for alleged
compensatory damages, legal fees, costs of repossession, storage and
refurbishment of the aircraft and other alleged incidental damages.
The Court has scheduled a hearing on Pegasus' request on May 30, 1996. If
the Court were to grant Pegasus' request to repossess the three aircraft, it
would have a material adverse effect on the Company.
FEDERAL INCOME TAX ASPECTS
There may be material income tax consequences resulting from an election to
participate in this Conversion Price Reduction Offer. It is impractical to
comment on all aspects of Federal, state and local tax laws that might affect a
Noteholder on the exchange described in this Memorandum, and each Noteholder is
strongly urged to discuss the income tax consequences with his or her tax
advisor before making the election to participate. This section of the
Memorandum addresses the material Federal income tax aspects of the exchange.
These Federal income tax aspects may be further modified or clarified by changes
in the Internal Revenue Code of 1986, as amended, by tax legislation, Treasury
Department Regulations, judicial interpretations or IRS rulings. Any such
changes may be applied retroactively. Moreover, because controversy and
uncertainty may exist in the areas of the Federal income tax laws that affect
the exchange, there can be no assurance that the IRS will not challenge a tax
reporting position taken by an investor through litigation or administrative
procedures.
Noteholders who are residents of states which have state and/or local
income taxes will need to evaluate the consequences
10
<PAGE>
of the exchange under the applicable state and local laws. Such analysis is
beyond the scope of this section. Each Noteholder should consult his or her tax
advisor concerning the state and local tax consequences of the exchange.
The Company believes that the reduction of the conversion price of the
Convertible Notes from $5.00 to $1.00 would not in itself require the holders of
the Convertible Notes to recognize income.
Holders who elect to convert the Convertible Notes in whole or in part
would recognize income to the extent (if any) to which the fair market value per
share of the Company's Common Stock exceeds the Reduced Conversion Price of
$1.00. There is no public trading market for the Company's Common Stock to
provide a reference for the fair market value. In the absence of a public
trading market, the determination of fair market value is highly subjective and
imprecise. The IRS has identified several factors it uses in determining the
fair market value of shares of private companies, none of which is itself
determinative. Among those are the price at which securities of comparable
industry participants are traded in the public markets, a company's net worth,
prospective earning power, dividend paying capacity, the economic outlook for
the industry, the price at which private purchases of stock of the entity are
conducted in arm's length transactions (with appropriate consideration for
factors such as the size of the block purchased, the ability to control the
Company, preferred liquidation terms, preferred voting rights, and contractual
rights to register the shares for resale). The value determined by these factors
may be adjusted with respect to any single holder by applying discounts for
minority interests and lack of marketability.
The Company has historically issued all of its shares of Common Stock
(other than certain founders' shares) at $5.00 per share, which was determined
arbitrarily, without reference to any extrinsic means of valuation. The Board of
Directors has also established the Reduced Conversion Price of $1.00 per share
arbitrarily. It has not obtained any professional appraisal or valuation of such
shares for the purpose of this offering. There have been no recent sales of the
Company's securities with arm's length purchasers. However, the Company has
received a letter of intent for an investment of $10,000,000 in preferred stock.
See "Recent Developments--Possible Preferred Stock Investment". The number of
shares subject to that purchase, and therefore the effective cost per share,
will be determined after the Company concludes certain offerings described in
that Section (the "Offerings"). The Company estimates that if the Offerings are
fully subscribed, the preferred stock purchaser would receive approximately 25%
of the outstanding capital stock of the Company, at an effective cost of $2.70
per share. If there were no stock issued and sold in the Offerings, the
preferred stock
11
<PAGE>
purchaser would receive approximately 33% of the outstanding capital stock of
the Company at an effective cost of $5.17 per share. It is impossible to
predict the number of shares which will be issued in the Offerings and the
amount of the consideration which will be received by the Company therefor. As a
result, it is impossible to predict the effective cost per share to the
preferred stock purchaser within the estimated range described above.
There are a number of contingencies to the preferred stock purchase,
including the purchaser's subjective satisfaction with the results of its due
diligence investigation, and the consummation of the investment is therefore not
assured. If the possible preferred stock purchase does in fact occur, it is
possible that the IRS could use the effective cost per share to the preferred
stock purchaser as a reference point in determining the fair market value of the
Common Stock received by holders upon the conversion of their Notes. In such
case, certain terms and conditions of the preferred stock purchase, such as the
liquidation preference, the contractual right to Board seats, the large number
of shares purchased and resulting ability to influence management, the
contractual right to have the Company register the shares for resale under State
and Federal securities laws, may justify a premium value for the shares
purchased in the preferred stock investment, compared with the shares of Common
Stock issuable upon conversion of the Notes. Nevertheless, there can be no
assurance that the IRS will not challenge a position taken by any holder who
converts their Convertible Notes that the fair market value of shares received
upon conversion is greater than $1.00, and assert that holders are required to
recognize income in the amount of the gain recognized (i.e., the difference
between $1.00 per share and the higher fair market value) upon the conversion.
The amount of the recognized gain would be subject to tax at ordinary income
rates, and would be included in the holder's basis of the shares acquired upon
conversion.
12
May 22, 1996
TO: Holders of KIWI's 10% Convertible Subordinated Secured Notes
Due June 1, 1996 (the "Convertible Notes")
Dear Investor
KIWI is pleased to notify you that the conversion price on the Convertible
Notes are being reduced from $5.00 per share to $1.00 per share, Enclosed with
this letter is an offering circular which describes the offer in detail and
describes important recent developments concerning the Company, and copies of
the Company's Form 10-K Annual Report for 1995 and Form 10-Q for the quarter
ended March 31, 1996 to update you on the Company since the materials you
received last November.
The Convertible Notes come due June 1, 1996. If you wish to convert at
$1.00 per share, please sign and send to us the Conversion Notice by then. You
also will need to return the original form of Note. Even if you send in the
Conversion Notice by June 1, 1996, you may nevertheless withdraw your election
to convert by notifying us in writing on or before June 20, 1996. the principal
amount of your Convertible Note will then be repaid to you. All monies in the
sinking fund held by Fidelity National Bank, the trustee of the Notes, will
continue to be held until June 20 in order to support your withdrawal rights.
Interest on the Convertible Notes will only be paid through June 1, 1996 in any
case.
If you do not wish to convert, the principal amount of your Convertible
Notes will then be due at June 1, 1996,
The Company's management is ready to answer any questions you may have
concerning the offer and the enclosed materials.
Very truly yours,
The Board of Directors
CONVERSION NOTICE
Note No. _____
The undersigned Holder of this Note hereby irrevocably exercises the option
to convert this Note into shares of Common Stock in accordance with the terms of
the Indenture referred to in this Note and directs that such shares be
registered in the name of and delivered to the undersigned (or, if the
undersigned is an employee of the Company, registered and delivered to the
Trustees under the Voting Trust Agreement, as defined in the Indenture), and
that a check in payment for any fractional share be delivered to the
undersigned.
The undersigned (check one): Partial Conversions Only.
Amount to be Converted
[ ] is (must be $5,000 multiples):
[ ] is not
$________________________________
an employee of the Company.
Dated:
- ------------------------------------ --------------------------------
Signature
HOLDER
Please print name and address of
Holder:
--------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
Social Security or other
Taxpayer Identification Number,
if any
FORM OF ACKNOWLEDGEMENT AND ACCEPTANCE OF VOTING TRUST AGREEMENT
AND SHAREHOLDERS' AGREEMENT.
[To Be Executed if the Holder is
an Employee of the Company]
In connection with the issuance to the undersigned of Class A Common Stock
of KIWI International Air Lines, Inc. (the "Company"), I hereby acknowledge the
applicability of and expressly agree to be bound by the terms of (a) that
certain Voting Trust Agreement dated October 1, 1992 among the Voting Trustees
and all shareholders of Class A and Class B Common Stock of the Company (the
"Voting Trust Agreement"), and (b) that certain Shareholders' Agreement dated
October 1, 1992 among the Company and shareholders of Class A and Class B Common
Stock of the Company (the "Shareholders' Agreement").
The terms of the Voting Trust Agreement expressly require that as a holder
of Class A Common Stock of the Company, I assign and deliver all certificates
evidencing such shares to the Trustees of the Voting Trust. I do hereby assign
the same to such Trustees, and I authorize and direct the Company to instruct
the Company's stock registrar and transfer agent to deliver stock certificates
evidencing such shares to the Voting Trustees.
I further acknowledge that I have received a copy of the Voting Trust
Agreement and of the Shareholders' Agreement and have read and understand the
terms thereof.
Dated:
- -------------------------------------- ------------------------------------
Signature
HOLDER
Please print name and address of
Holder:
------------------------------------
Name
------------------------------------
Address
------------------------------------
------------------------------------
Social Security or other
Taxpayer Identification Number,
if any
