SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
KIWI INTERNATIONAL AIR LINES, INC.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
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14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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amount on which the filing fee is calculated and state how it
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KIWI INTERNATIONAL AIR LINES, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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SEPTEMBER 4, 1996
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of KIWI
International Air Lines, Inc., a New Jersey corporation (the
"Corporation"), will be held at the offices of the Corporation,
Hemisphere Center, Routes 1 and 9 South, Newark, New Jersey 07114 on
Wednesday, September 4, 1996, at 10:00 a.m. Eastern Daylight Savings
Time, for the following purposes:
I. To approve the amendment and restatement of the Corporation's
Certificate of Incorporation (a copy of which Restated Certificate is
annexed to the accompanying Proxy Statement as Exhibit A), as
summarized and discussed in the Proxy Statement under Proposal 1.
II. To ratify and approve: (i) all prior issuances of rights or options to
purchase and the issuance of any securities convertible into Class A
Common Stock and Class C Common Stock; (ii) the elimination of
preemptive rights as of April 20, 1994; (iii) the increase in the
number of authorized shares of Class A Common Stock to 15,000,000
shares as of August 11, 1994; and (iv) the creation of nine unexpired
Class II directorships with terms expiring in 1997.
III. To approve the adoption of the Corporation's 1996 Employee Stock
Purchase Plan.
IV. To approve the adoption of the Corporation's 1996 Stock Option Plan.
V. To elect nine Class II Directors to terms expiring at the 1997 Annual
Meeting.
VI. To approve and ratify the selection of Arthur Andersen, LLP as the
Corporation's independent certified accountants.
VII. To transact such other business as may properly come before the
meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on August 1, 1996,
as the record date for the determination of shareholders who are entitled to
notice of, and to vote at, the meeting. A copy of the Annual Report of the
Corporation for the year ended December 31, 1995, is being sent to you herewith.
By Order of the Board of Directors
James Player, Secretary
August ___, 1996
ALL SHAREHOLDERS ENTITLED TO VOTE AT THE MEETING ARE REQUESTED TO COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY. A RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THIS
PURPOSE.
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KIWI INTERNATIONAL AIR LINES, INC.
Hemisphere Center
Routes 1 and 9 South
Newark, New Jersey 07114
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of KIWI International Air Lines, Inc. a New
Jersey corporation (the "Corporation" or the "Company"), to be used at the
Annual Meeting of Shareholders of the Company to be held at the offices of the
Corporation, Hemisphere Center, Routes 1 and 9 South, Newark New Jersey 07114,
on September 4, 1996 at 10:00 am, Eastern Daylight Savings Time. This Proxy
Statement and the enclosed form of proxy are being sent to shareholders on or
about [ ].
You are requested to complete, date and sign the accompanying proxy and
return it promptly in the enclosed envelope. Proxies duly executed and received
in time for the meeting will be voted in accordance with the directions thereon
at the meeting. Such proxies may, nevertheless, be revoked at any time prior to
the voting thereof by filing a written notice of revocation with the Secretary
of the Corporation. Please note that mere presence at the meeting will not be
effective to revoke a proxy. If you attend the meeting and wish to revoke your
proxy, you still must deliver written notice to the Secretary of the Corporation
before the voting thereof.
The Board of Directors has fixed the close of business on August 1, 1996,
as the record date for the determination of shareholders who are entitled to
notice of, and to vote at, the meeting. As of the record date, the Corporation
had outstanding 2,009,208 shares of Class A Common Stock and 1,824,073 shares of
Class C Common Stock, the holders of which are entitled to one vote per share.
All issued and outstanding shares of Class A Common Stock are subject to the
terms and conditions of the Voting Trust Agreement dated as of October 1, 1992
(the "Voting Trust Agreement"). Under the Voting Trust Agreement, all of the
votes cast with respect to outstanding shares of Class A Common Stock shall be
cast in accordance with the affirmative vote of at least a majority of the
Voting Trustees of the Voting Trust. The Voting Trustees presently consist of
eight members of the Board of Directors.
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REI CONVERTIBLE NOTE PURCHASE AND OPTION AGREEMENT
On July 1, 1996, the Company entered into a Convertible Note Purchase and
Option Agreement (the "REI Investment Agreement") with Recovery Equity Investors
II, L.P., a California based investment fund ("REI"), pursuant to which REI
purchased $2,000,000 principal amount of the Company's 6% Convertible Unsecured
Notes Due March 15, 1997 ("Convertible Notes") for a purchase price of
$1,995,000. The Convertible Notes provide for the conversion thereof, at REI's
option, into either (i) the Company's Class C Common Stock at a conversion price
of $1.00 per share, or (ii), if the shareholders of the Company approve the
Amended and Restated Certificate of Incorporation (the "Restated Certificate")
described under Proposal 1 in this Proxy Statement, after the filing of the
Restated Certificate with the New Jersey Secretary of State, convertible
preferred stock having the rights, designations and preferences summarized below
as part of Proposal 1 under the subheading "- Class A Convertible Preferred
Stock", at a conversion price of $1.00 per share.
Pursuant to the REI Investment Agreement, two persons designated by REI,
Jeffrey A. Lipkin and Joseph J. Finn-Egan, have been elected to the Company's
15-member Board of Directors. If REI acquires Convertible Preferred Stock, the
terms thereof will provide for continued Board representation described below.
If and when a Qualifying Public Offering (as such term is defined below as part
of Proposal 1 under the subheading "- Class A Convertible Preferred Stock")
occurs, the Convertible Preferred Stock will, except in certain circumstances,
automatically convert into Class C Common Stock. Thereafter REI and certain
affiliates of REI who may hold Class C Common Stock issued upon conversion of
Convertible Preferred Stock ("Conversion Shares"), shall have a nonassignable
right to cause the Corporation to nominate one director for each 10% of the
total outstanding shares of Class C Common Stock represented by the Conversion
Shares held by REI and its affiliates, but no more than 3 directors, and to have
the Voting Trustees vote for such nominees as long as the Voting Trust exists
(it is scheduled to terminate on December 31, 1997).
Under the REI Investment Agreement, REI purchased for $5,000 options to
invest an additional $8 million in the Company no later than March 15, 1997,
consisting of: (i) an option to purchase, exercisable on or before December 31,
1996, an additional $2 million principal amount of Convertible Notes (the
"Additional Convertible Notes") for a purchase price of $2 million, and (ii) an
option to purchase, exercisable on or before March 15, 1997, up to 6 million
shares of the Company's Convertible Preferred Stock for a purchase price of $6
million. The conversion price on both the Additional Convertible Notes and the
Convertible Preferred Stock is also $1.00 per share, subject to certain
adjustments. On July 24, 1996, REI exercised its option to purchase the
Additional Convertible Notes for $2 million.
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If REI immediately converted its Convertible Notes and its Additional
Convertible Notes, it would own 4 million shares of Class C Common Stock,
representing approximately 51.1% of the combined voting power of all classes of
voting Common Stock which would then be outstanding. The Voting Trust, which now
has the power to vote all 2,009,208 shares of the Company's Class A Common
Stock, would in such case represent approximately 25.6% of the combined voting
power of all classes of voting stock. Assuming exercise of all 3,216,676
outstanding warrants to purchase Class A or Class C Common Stock, and the
issuance of 975,000 shares issuable upon conversion of other outstanding
convertible notes, REI's percentage ownership upon immediate conversion would be
approximately 33.3% of the combined voting power all classes of voting stock,
and the Voting Trust would have the right to vote shares representing
approximately 29.4% of the combined voting power of all classes of voting stock.
REI might not be considered a citizen of the United States as such term is
defined under the Federal Aviation Administration Authorization Act of 1994.
Under the REI Investment Agreement, REI's ability to acquire equity in the
Corporation or to acquire or exercise control of the Corporation is limited so
as not to cause the Corporation to be or become in breach of applicable laws and
restrictions prohibiting and restricting foreign ownership or control of the
Corporation as a U.S. air carrier (such laws and restrictions referred to herein
as the Foreign Ownership Restrictions).
SUMMARY OF MATTERS TO BE PRESENTED TO THE SHAREHOLDERS
At the Annual Meeting of the Shareholders, shareholders will vote upon the
following:
I. Proposal 1. To amend and restate the Corporation's Certificate of
Incorporation (a copy of which Restated Certificate of Incorporation is annexed
hereto as Exhibit A):
(a) to restructure the authorized capital stock of the Corporation to
provide for 15,000,000 shares of Class A Common Stock, 50,000,000
shares Class C Common Stock, 20,000,000 shares of Class A Convertible
Preferred Stock with certain specific terms, rights and preferences
and 30,000,000 shares of undesignated stock of the Corporation as to
which the Board of Directors will have authority (subject to the
rights of the holders of Class A Convertible Preferred Stock) to
determine the class, series, preferences, rights, dividends and
priorities at the time of issuance of any such undesignated shares, to
eliminate authority to issue Class B Common Stock, the Class D Common
Stock
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and to eliminate the preference of Class C Common Stock in the event
of liquidation of the Corporation;
(b) to provide for automatic conversion of all Class A Common Stock into
Class C Common Stock effective January 1, 1998;
(c) to restructure the Board of Directors of the Company as a Board with
three classes of Directors, each class of Directors elected by a vote
of the shareholders of such class, as follows: (i) from the date the
Restated Certificate of Incorporation is adopted until December 31,
1997 to have a Board consisting of between fourteen (14) and nineteen
(19) Directors, a majority of whom shall be Directors elected by
holders of Class A Common Stock and, following issuance of the Class A
Convertible Preferred Stock, at least two (2) of whom shall be
Directors elected by the holder(s) of the Class A Convertible
Preferred Stock; (ii) effective as of the close of the Corporation's
1997 Annual Meeting of shareholders, to have a Board consisting of at
least fifteen (15) directors, comprised of at least eight (8)
directors elected by the holders of Class A Common Stock, five (5)
Directors elected by holders of Class C Common Stock and two (2)
Directors elected by holders of Class A Convertible Preferred Stock;
(iii) effective January 1, 1998, to have a Board consisting of nine
(9), twelve (12) or fifteen (15) Directors (the exact number of which
shall be determined by the Board) of whom two-thirds (2/3) will be
elected by holders of Class C Common Stock (the Class A Common Stock
being then converted into Class C Common Stock) and one-third of whom
will be elected by holders of Class A Convertible Preferred Stock (so
long as no more than 50% of such Preferred Stock has been converted
into Class C Common Stock) and all such directors from January 1, 1998
forward to be classified into staggered terms so that each year only
approximately one-third (1/3) of the entire Board would have their
terms end;
(d) to provide for certain limitations on the liability of Directors,
officers and corporate agents, and to enhance the indemnification
required of Directors, officers and corporate agents, as permitted by
the provisions of Title 14A of the New Jersey Business Corporation
Act; and
(e) to modify the vote requirements of shareholders for certain actions by
the Corporation.
If this Proposal is approved, the applicable amendments to the Company's
Certificate of Incorporation will be effected by a
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Restated Certificate of Incorporation, substantially in the form annexed hereto
as Exhibit A, and such amendments will become effective immediately upon filing
such Restated Certificate of Incorporation with the New Jersey Secretary of
State.
II. Proposal 2. To ratify and approve: (i) all prior issuances of rights or
options to purchase and the issuance of any securities convertible into Class A
Common Stock and Class C Common Stock and of all securities, including the
"Convertible Notes" issued to REI and the Class A Convertible Preferred Stock
issuable to REI upon conversion of the Convertible Notes; (ii) effective as of
April 20, 1994 (the date of filing the first Amendment to the Corporation's
Certificate of Incorporation with the New Jersey Secretary of State) the
elimination of preemptive rights; (iii) effective as of August 11, 1994 (the
date of filing Amendment Number Two to the Corporation's existing Certificate of
Incorporation filed with the New Jersey Secretary of State) the increase in the
number of authorized shares of Class A Common Stock to 15,000,000 shares from
4,000,000 shares; and (iv) the action of the Board in creating nine (9)
unexpired Class II directorships with terms expiring in 1997.
III. Proposal 3. To approve the adoption of the Corporation's 1996 Employee
Stock Purchase Plan;
IV. Proposal 4. To approve the adoption of the Corporation's 1996 Stock Option
Plan;
V. The election of nine Class II Directors to terms expiring at the 1997 Annual
Meeting: four of whom are to be voted for or against by the Voting Trustees on
behalf of the holders of the Class A Common Stock, voting as a class, and five
of whom are to be voted for or against by the holders of the Class C Common
Stock, voting as a class;
VI. The ratification of the selection of Arthur Andersen LLP as independent
auditors for the corporation.
More detailed discussions of Proposals 1, 2, 3 and 4 are set forth below
under the individual headings for each of Proposals 1, 2, 3 and 4. Those
discussions set forth the principal reasons for each Proposal as well as
important factors to be considered by the shareholders in voting on these
Proposals. Information concerning the Election of Directors and the ratification
of the selection of independent auditors follows those discussions.
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I. PROPOSAL 1 -- TO AMEND AND RESTATE THE
CORPORATION'S CERTIFICATE OF INCORPORATION.
The provisions of Proposal 1 are intended to advance the purpose for which
the Corporation is organized, namely, the operation of an air transportation
company including providing passenger service, cargo services and air charter
services. The provisions of Proposal 1 are also intended to accommodate and
comply with the terms of the investment in the Corporation made by REI under the
REI Investment Agreement.
RESTRUCTURING OF THE AUTHORIZED CAPITAL STOCK OF THE CORPORATION
The Corporation's Certificate of Incorporation, as amended, currently
provides for four classes of capital stock, 15,000,000 shares of Class A Common
Stock, 6,000,000 shares of Class B Common Stock (of which none have ever been
issued or outstanding), 10,000,000 shares of Class C Common Stock, and 5,000,000
shares of Class D non-voting Common Stock (of which none have ever been issued
or outstanding), all holders of which are entitled to one vote per share. See
"Proposal 2" below, which relates in part to authorized capital under the
existing Certificate of Incorporation. The Corporation proposes under the
Restated Certificate of Incorporation to have authorized an aggregate of
115,000,000 shares. Of these shares, 15,000,000 shall be Class A Common Stock
(without par value), 50,000,000 shall be Class C Common Stock (without par
value), 20,000,000 shall be Class A Convertible Preferred Stock (without par
value) and 30,000,000 shall be undesignated stock.
The division of the remaining portion of authorized shares of undesignated
stock into series, the determination of the designation and the number of shares
of any series, the determination of the relative right, preferences and
limitations of the shares of any series and any or all of such divisions and
determination, may be accomplished by an amendment to the Restated Certificate
of Incorporation authorized and approved by the Board of Directors of the
Corporation (without the requirement of shareholder approval or consent);
subject, however, to certain voting rights of the Class A Convertible Preferred
Stock as more fully described below. Having undesignated shares authorized will
provide the management of the Corporation with increased flexibility to tailor
securities for particular purposes in the future as the need arises. Such
securities may (subject to those certain voting rights of the Class A
Convertible Preferred Stock described below), have greater rights or preferences
than the outstanding shares of Common Stock. Such undesignated shares may also
allow the Corporation to take certain actions in response to an unsolicited
tender offer, which would adversely affect the willingness of an offeror to make
such an offer or the price of such an offer. The
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Corporation notes that it has no current intention of issuing any undesignated
shares.
Class A Common Stock and Class C Common Stock shall have equal dividend
rights and shall have equal liquidation rights.
- Class A Convertible Preferred Stock
Under the Restated Certificate of Incorporation, 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; provided,
however, that (i) election of directors for the Corporation shall be as set
forth in the Restated Certificate of Incorporation (see structure of Board of
Directors discussed below as part of this Proposal) and (ii) rights to vote
Class A Convertible Preferred Stock shall be limited in certain cases in order
to avoid a breach of applicable Foreign Ownership Restrictions. In addition, the
consent of at least sixty percent (60%) of the holders of the then outstanding
Class A Convertible Preferred Stock is required in order for the Corporation (i)
to issue any senior or pari passu equity securities (or any debt instrument or
other security convertible into such securities), except for securities (other
than Class A Convertible Preferred Stock) issued in consideration for
investments made in the Corporation by legitimate, reputable persons which are
not senior to the Class A Convertible Preferred Stock nor made on terms more
favorable to such investor than those provided to REI under the REI Investment
Agreement, and which would not impair as a result of Foreign Ownership
Restrictions REI's ability to acquire equity of the Corporation, or to exercise
its rights to certain Board representation, under the REI Investment Agreement
(such permitted investments referred to herein as "Qualified Transactions"),
(ii) to issue any additional debt (other than Qualified Transactions or
refinancing of existing debt on terms substantially the same or more favorable
than existing terms) for money borrowed in excess of the aggregate of $1,000,000
prior to the termination of the Voting Trust Agreement, dated October 1, 1992,
between the Voting Trustees and all shareholders of the Class A Common Stock and
previously authorized Class B Common Stock, at a time when the pro forma
"Earnings Before Fixed Charges and Taxes" to "Fixed Charges" (as defined in the
Restated Certificate of Incorporation) ratio is less than 1.25 based upon the
Corporation's annualized performance over the preceding six months, and (iii) to
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.
The holders of record of Class A Convertible Preferred Stock shall be
entitled to participate pari passu with the holders of
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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 dividend is
declared. The Class A Convertible Preferred Stock shall have preference over
Common Stock in the event of liquidation of the Corporation. Subject to the
provisions of the Restated Certificate of Incorporation, each holder of Class A
Convertible Preferred Stock shall have the preemptive right to purchase its pro
rata share of any preferred or common securities offered by the Corporation in a
private unregistered transaction at a price not less favorable than the price at
which such shares are offered for sale to others.
Each holder of Class A Convertible Preferred Stock shall have the right, at
its option, to convert (subject to certain restrictions designed to avoid a
breach of Foreign Ownership Restrictions) all or any portion of such preferred
shares into such number of Class C Common Stock as is obtained by multiplying
the number of shares of Class A Convertible Stock to be converted by the Issue
Price Per Share (as defined in the proposed Restated Certificate of
Incorporation) and dividing the result by the Conversion Price (as defined in
the proposed Restated Certificate of Incorporation), which price shall be
initially equal to the Issue Price per share and shall be adjusted from time to
time as provided in the proposed Restated Certificate of Incorporation.
Effective on the earlier of (i) January 1, 1998 or (ii) a public offering of
Common Stock registered under the Securities Act of 1933, as amended, in which
the Corporation receives gross proceeds of at least $15,000,000 (a "Qualifying
Public Offering"), each share of Class A Common Stock shall be converted
automatically (subject to certain restrictions designed to avoid a breach of
Foreign Ownership Restrictions) into one share of Class C Common Stock, without
any action of the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent.
Provided that a Qualifying Public Offering has not occurred, at any time on
or after August 1, 2001 or upon such events as listed in the Restated
Certificate of Incorporation, the holders of record of Class A Convertible Stock
shall be entitled to have the Corporation redeem all of it Class A Convertible
stock at the greater of (i) the Issue Price Per Share, (as adjusted to reflect
any share split, combination, reclassification or similar event) 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 is received (the "Redemption Price"). At any time on or after August
1, 2002, and so long as a Qualifying Public Offering has not occurred, the
Corporation may elect from time to time to redeem
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all or any portion of the Class A Convertible Preferred Stock at the
Redemption Price.
AUTOMATIC CONVERSION OF CLASS A COMMON STOCK INTO CLASS C COMMON STOCK
As required by the REI Investment Agreement, the Restated Certificate of
Incorporation provides that effective January 1, 1998 each share of Class A
Common Stock will automatically convert into one share of Class C Common Stock
without any action by the holders of such shares. Shares of Class A Common Stock
have been issued only to employees of the Corporation and to Class A Directors.
All other persons who acquired Common Stock of the Corporation were issued Class
C Common Stock. This segregation of Class A Common Stock together with the
existence of the Voting Trust and the requirement in the existing Certificate of
Incorporation that a majority of the Directors of the Corporation be elected by
the class vote of the Class A Common Stock was intended to assure the employee
investors in the Corporation that they, and more particularly, the Trustees of
the Voting Trust, would control the Corporation. As the number of non-employee
investors in the Corporation has grown and especially as the Corporation has
become increasingly dependent upon the investment of outside capital, such as
that by REI evidenced by the Convertible Notes, the Corporation has realized
that such control restrictions are impediments to its ability to raise needed
capital. Therefore, the Corporation agreed to this proposed change in its
Restated Charter.
RESTRUCTURING OF BOARD OF DIRECTORS
The Corporation's Certificate of Incorporation currently provides for the
division of the Board of Directors into two classes with staggered three-year
terms of office. The holders of Class A Common Stock, voting as a class, have
the right to elect a majority of the directors of the Company and the Holders of
Class C Common Stock, voting as a class, have the right to elect a minority of
the directors. Vacancies on the Board of Directors occurring for reasons such as
resignation, removal or death of a director may be filled by appointment by the
Board, evidenced by the affirmative vote of at least a majority of the remaining
members of the Board. Directors so appointed by the Board to fill vacancies
serve as directors until the next Annual Meeting of Shareholders and until their
successors shall be duly elected and qualified.
The By-Laws of the Company currently provide that the Board of Directors
shall consist of fifteen directors. At the 1995 Annual Meeting, nine directors
were elected in addition to three
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directors which were not subject to re-election, resulting in twelve
sitting directors.
The Corporation proposes to amend the Certificate of Incorporation to
change the structure of the Board of Directors including changing the number of
authorized directors from a maximum of fifteen to a minimum of fourteen (14) and
a maximum of nineteen (19) and to provide for classification of the Board of
Directors into separate classes, each class of director elected by a designated
class of shareholder (i.e. Class A Common, Class C Common and Class A
Convertible Preferred Stock). This change in structure will occur in two stages
including a transition period preceding the final Board reformation.
The transition period begins on the effective date of the Restated
Certificate of Incorporation and ends January 1, 1998 and is designated to
coincide with the remaining term of the Voting Trust. During the transition
period, the Board of Directors shall consist of not less than fourteen (14) nor
more than nineteen (19), with the exact number determined by resolutions adopted
from time to time by vote of a majority of the entire Board of Directors. The
directors shall be divided into three classes: Class A; Class C; and Preferred
Class. For the duration of the transition period and all periods thereafter,
only shareholders owning Class A stock or the trustees of a voting trust
organized by such shareholders may vote to elect a Class A director; only
shareholders owning Class C stock may vote to elect a Class C director; and only
shareholders owning Class A Convertible Preferred Stock may vote to elect a
Preferred Class director. During the transition period, a majority of the
directors shall continue to be elected by holders of Class A Common Stock.
Following the issuance of the Class A Convertible Preferred Stock, at least two
(2) directors shall be elected by the holders of the Class A Convertible
Preferred Stock. Effective as of the Corporation's 1997 annual meeting of
shareholders, the Board will consist of at least fifteen (15) directors,
comprised of at least eight (8) directors elected by the holders of Class A
Common Stock, five (5) directors elected by holders of Class C Common Stock and
two (2) directors elected by holders of Class A Convertible Preferred Stock.
The Voting Trust regarding Class A Common Stock is scheduled to terminate
as of December 31, 1997. Thereafter, unless the Voting Trust is restructured or
extended, each holder of Class A Common Stock will vote his or her own shares
directly. The termination of the Voting Trust together with the further
restructure of the Board of Directors to nine (9) members (as discussed below)
will have the effect of ending the voting control of the Class A Common Stock by
the Voting Trust.
Under the Restated Certificate of Incorporation, the modification of
classes of capital stock and the reformation of
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the Board of Directors will be finalized on January 1, 1998 thereby concluding
the transition period. As of such date, the Board of Directors will consist of
nine (9), twelve (12) or fifteen (15) directors (the exact number of which shall
be determined by the Board) of which two-thirds (2/3) of the directors will be
elected by holders of Common Stock (the Class A Common Stock being then
converted into Class C Common Stock) and of which one-third will be elected by
holders of Class A Convertible Preferred Stock (provided that no more than 50%
of such preferred stock shall have been converted to Common Stock) and all such
directors will be classified into staggered terms so that each year only
approximately one-third (1/3) of the entire Board would have their term end.
LIMITED LIABILITY AND INDEMNIFICATION OF DIRECTORS, OFFICERS AND AGENTS
The Corporation's Certificate of Incorporation currently provides for
indemnification of present and former directors and officers of the Company if
they prevail in any matter brought against them and otherwise only as authorized
in specific cases upon a determination by: (i) majority vote of a quorum of the
Board of Directors, who were not parties; (ii), if such a quorum is not
obtainable or even if obtainable and a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (iii) by the
shareholders. The Corporation proposes to provide in the Restated Certificate of
Incorporation for certain limitations on the liability of Directors, officers
and corporate agents, and to enhance the indemnification required of Directors,
officers and corporate agents, as expressly permitted by the New Jersey Business
Corporation Act.
The change in liability standard (if the Restated Certificate of
Incorporation is approved) would mean that a director or officer of the
Corporation would not be personally liable for any breach of any duty (including
any fiduciary duty) owed to the corporation or its shareholders, except in the
case (the "Three Excepted Cases") of (a) a breach of such person's duty of
loyalty to the Corporation or its shareholders, (b) an act or omission not in
good faith or involving a knowing violation of law, or (c) an act or omission
resulting in receipt by such person of an improper personal benefit. A breach of
one's "duty of loyalty" for these purposes means an act or omission which a
person knows or believes to be contrary to the best interests of the Corporation
or its shareholders in connection with a matter in which that person has a
material conflict of interest. If adopted these provisions may make it
materially more difficult for shareholders to recover against directors and
officers who have breached their legal obligations to the Corporation or its
shareholders.
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The enhanced indemnification provided in the Restated Certificate of
Incorporation will require the Corporation to indemnify its directors and
officers against any claim or recovery other than in the Three Excepted Cases.
The enhanced indemnification will also require the Corporation to advance to a
director or officer funds to cover the costs of defending the director or
officer, other than in the Three Excepted Cases. This provision may expose the
Corporation to indemnification liabilities which the Corporation would not
otherwise be obligated to pay.
VOTE REQUIREMENTS OF SHAREHOLDERS
The Corporation's Certificate of Incorporation currently requires the
presence in person or by proxy of the holders of fifty-one percent (51%) of the
total of all classes of stock outstanding entitled to vote as necessary to
constitute a quorum and the affirmative vote of fifty-one percent (51%) of each
class of Common Stock outstanding as necessary for the transaction of certain
described extraordinary matters (including for example mergers, acquisitions,
dissolution and the like), for the amendment of the Certificate of Incorporation
and of any item of business which would legally and properly come before a
meeting of the shareholders for a vote. This provision is deleted from the
Corporation's proposed Restated Certificate of Incorporation and upon the
effectiveness of the same, the Corporation will rely upon the statutory
provisions of the New Jersey Business Corporation Act to determine the quorum
and voting requirements for actions of the Corporation which would legally and
properly come before a meeting of the shareholders for a vote. The New Jersey
Business Corporation Act generally requires the presence in person or by proxy
of a majority of each class of stock entitled to vote in order to have a quorum.
Once a quorum exists the New Jersey law provides that, except in the case of
election of directors, an affirmative vote of a majority of the quorum of each
class is sufficient to authorize an action. Under New Jersey law, directors to
be elected by the vote of a class of stock are elected by a plurality of the
class votes cast. If adopted, the Restated Certificate of Incorporation would
permit holders of a smaller number of shares to approve matters of the type
described as only an affirmative vote of a majority of the quorum (rather than
all of outstanding shares) of each class of voting securities would be required
to approve actions.
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RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION
OF THE AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION PROPOSED BY THIS
PROPOSAL 1. THE BOARD NOTES THAT PROPOSAL 1 (UNDER THE TERMS OF THE
CORPORATION'S EXISTING CERTIFICATE OF INCORPORATION) MUST RECEIVE THE
AFFIRMATIVE VOTE OF THE HOLDERS OF FIFTY-ONE (51%) OF THE OUTSTANDING CLASS A
COMMON STOCK, VOTING AS A CLASS, AND OF THE HOLDERS OF FIFTY-ONE (51%) OF THE
OUTSTANDING CLASS C COMMON STOCK, VOTING AS A CLASS IN ORDER TO BE APPROVED.
II. PROPOSAL 2 -- RATIFICATION AND APPROVAL OF (i) PRIOR ISSUANCES OF
CERTAIN SECURITIES, (ii) THE ELIMINATION AS OF APRIL 20, 1994, OF
PREEMPTIVE RIGHTS TO ACQUIRE THE SECURITIES OF THE CORPORATION, (iii)
THE INCREASE AS OF AUGUST 11, 1994 OF THE AUTHORIZED SHARES OF CLASS A
COMMON STOCK FROM 4,000,000 TO 15,000,000, AND (iv) RATIFICATION OF THE
BOARD ACTION CREATING NINE UNEXPIRED CLASS II DIRECTORSHIPS EXPIRING IN
1997.
PRIOR ISSUANCES OF SECURITIES
The existing Certificate of Incorporation requires the affirmative vote of
the holders of fifty-one (51%) of the outstanding Class A Common Stock and Class
C Common Stock in order to authorize any rights or options to purchase Common
Stock of the Corporation or to issue any securities convertible into the Common
Stock of the Corporation, in any case where such authorization or issuance "...
should legally and properly come before a meeting of the shareholders for a vote
...". The New Jersey Business Corporation Act provides that the authorization
and issuance of rights, options and convertible securities (such as the
Convertible Note issued to REI), can be issued by action of the Board of
Directors of the Corporation, so long as, in the case of convertible securities,
there is a sufficient number of authorized but unissued shares reserved by the
Board for issuance upon conversion, unless otherwise provided in the Certificate
of Incorporation. The Corporation has in practice interpreted the cited
provision of its existing Certificate of Incorporation as being limited to a
requirement for an affirmative vote of its shareholders in those cases where
prior shareholder approval is otherwise required by New Jersey law, rather than
being itself a limitation on the authority of the Board of the Corporation to
issue options, rights, and convertible securities. The Corporation notes in that
regard that there is no general requirement in the existing Certificate of
Incorporation for prior shareholder approval for issuance of Common Stock. The
Corporation also notes that, since its founding in March, 1992 it
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has issued the following options or rights to purchase Common Stock and
securities convertible into Common Stock:
a. Warrants, exercisable up to two years after an offering of the
relevant class of Common Stock has been registered with the SEC, to
purchase 1,431,872 shares of Class A Common Stock and 1,554,804 shares
of Class C Common Stock at $5.00 issued in connection with the
acquisition of like numbers of shares of Common Stock between 1992 and
1994.
b. Five year warrants to purchase 230,000 shares of Common Stock (either
Class A or Class C, depending upon whether the holder is an employee
of the Corporation) at $5.00 per share issued December 1, 1995.
c. Up to $2,000,000 in principal amount of its 10% Convertible Notes (of
which $975,000 in principal amount with a maturity date of October 15,
1996 were issued on June 7, 1996 and up to $1,025,000 additional
principal amount with a maturity date of March 15, 1997 have been
authorized by the Board), convertible into Common Stock (either Class
A or Class C, depending upon whether the holder is an employee of the
Corporation) at $1.00 per share.
d. The Convertible Notes, issued to REI on July 1, 1996, which are
convertible into Class C Common Stock at $1.00 per share or, if the
Restated Certificate of Incorporation is approved, into Class A
Convertible Preferred Stock at $1.00 per share.
e. The option granted on July 1, 1996 under the REI Investment Agreement
to REI to purchase by December 31, 1996 the Additional Convertible
Notes for $2 million and the Additional Convertible Notes issued to
REI on July 24, 1996.
f. The option granted on July 1, 1996 under the REI Investment Agreement
to REI to purchase by March 15, 1997 up to 6,000,000 shares of Class A
Convertible Preferred Stock (if the Restated Certificate of
Incorporation is approved by the Shareholders) for $1.00 per share.
Nonetheless, the existence of the ambiguous provision in the Corporation's
existing Certificate of Incorporation could be used as a basis for a challenge
to the validity of outstanding options, rights and convertible securities,
including the warrants held by existing security holders, Convertible Notes
acquired by REI and the options granted to REI to acquire the Additional Notes
or up to 6,000,000 shares of Class A Convertible Preferred Stock. The
Corporation believes it in the best interest of all of its security holders to
ratify and approve as
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of the time of issuance of each option, right and convertible security
previously issued by the Corporation.
ELIMINATION OF PREEMPTIVE RIGHTS
On April 20, 1994, the Corporation filed a Certificate of Amendment to its
then existing Certificate of Incorporation providing for the deletion of the
section in its then existing Certificate of Incorporation according preemptive
rights to purchase additional shares of stock of the Corporation, whenever
shares were to be issued to a new investor, so as to permit the existing
shareholder to prevent dilution of his or her percentage ownership. Although the
Corporation has no evidence to the contrary, the Corporation is unable to
conclude from the corporate records available to it that the procedural steps
(including notice, description of the matter, voting requirements, etc.) taken
by the Board to recommend the Amendment and by the shareholders to adopt it were
adequate in all respects. The Corporation notes that the form of notice of
meeting in its files does not include a copy of the proposed Amendment or a
summary description of it, as New Jersey law requires, although the form of
proxy used does contain the requisite disclosure. REI required, as part of its
acquisition of the Convertible Notes, that the Shareholders of the Corporation
be requested to ratify and approve the elimination of preemptive rights to
acquire Common Stock of the Corporation as of April 20, 1994.
NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK
On August 11, 1994 the Corporation filed its Second Certificate of
Amendment to Certificate of Incorporation to increase the authorized number of
shares of Class A Common Stock from 4,000,000 to 15,000,000 and also to
authorize 5,000,000 shares of a new Class D Common Stock. No Class D Common
Stock was issued and the Restated Certificate of Incorporation, if adopted, will
eliminate that Class as a class of authorized securities. Although the
Corporation has no evidence of the contrary, the Corporation is unable to
conclude from the corporate records available to it that all the procedural
steps (including notice, description of the matter, voting requirements etc.)
taken by the Board to recommend the Second Amendment and by the shareholders to
adopt it were adequate in all respects. The Corporation notes that the Second
Amendment recites that the Board meeting and shareholder meeting in question
occurred on the same day, August 4, 1994, and that the Corporation does not have
available documentary evidence that the required notice of the meeting was given
to the shareholders or was waived by all of them. As of July 1, 1996 the
Corporation had 2,009,208 shares of Class A Common Stock outstanding. In
addition it had reserved
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1,976,872 shares of Class A Common Stock with respect to the following:
1,431,872 shares with respect to five year warrants (convertible at $5 per
share) issued between 1992 and 1994 in connection with the private placement of
the Corporation's Common Stock; 95,000 shares with respect to five year warrants
(convertible at $5 per share) issued in 1995 in connection with the private
placement of the Corporation's unsecured notes; and 450,000 shares with respect
to the private placement of $450,000 in principal amount of the Corporation's
10% convertible notes due October 15, 1996. As a result, 3,986,080 shares of the
Corporation's Class A Common Stock are either outstanding or reserved. Further
in March 1996, the Corporation offered to holders of $1,260,000 in principal
amount of three year notes of the Corporation an opportunity to exchange those
notes for 252,000 shares of Class A Common Stock and intermediate term warrants
for 252,000 shares of Class A Common Stock convertible at $5.00 per share.
Accordingly, the Corporation would not have had a sufficient number of
authorized but unissued shares of Class A Common Stock available to it to issue
the securities that the Corporation in fact has issued or reserved for issuance
subsequent to August 11, 1994. The Corporation notes that inadequate procedural
steps may in general be waived or subsequently ratified by the shareholders of a
corporation incorporated under New Jersey law. The Corporation believes it in
the best interest of all of its securities holders to ratify and approve the
increase in the number of Class A Common Stock as of August 11, 1994 in order to
confirm the validity of the Corporation's outstanding securities and its capital
base. The Corporation also notes that REI required that this provision be
adopted as part of its acquisition of the Convertible Notes.
CREATION OF NINE UNEXPIRED CLASS II DIRECTORSHIPS
At its meeting on July 16, 1996 the Board of Directors created nine new
Class II directorships, whose unexpired terms are to expire at the 1997 Annual
Meeting of the Corporation. This step is necessary in order to begin the
transition from the existing Board structure (described as part of Proposal 1
under the heading "Structure of Board of Directors"), to that provided for under
the Restated Certificate of Incorporation, if the Restated Certificate of
Incorporation (as set forth in Proposal 1) is approved by the shareholders. The
existing Certificate of Incorporation does not expressly preclude the action
taken by the Board. The existing Certificate of Incorporation provides that (i)
Directors shall be elected to three year terms and (ii) the Directors shall be
classified as Class I, Class II and Class III. As a result of the Board's action
on July 16, 1996, there will not be any Class III Directors and the nine persons
being elected to unexpired Class II directorships are being elected for one, not
three, year terms. The transition to the new Board structure set out in the
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Restated Certificate of Incorporation (if approved by the shareholders) will
meet requirements of the REI Investment Agreement.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
AND RATIFICATION OF THE ISSUANCE OF SECURITIES, ELIMINATION OF PREEMPTIVE RIGHTS
AND INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK AS SET
OUT IN THIS PROPOSAL 2. THE BOARD NOTES THAT PROPOSAL 2 MIGHT BE VIEWED AS AN
"EXTRAORDINARY ISSUE" UNDER THE TERMS OF THE CORPORATION'S EXISTING CERTIFICATE
OF INCORPORATION. ACCORDINGLY PROPOSAL 2 MUST RECEIVE THE AFFIRMATIVE VOTE OF
THE HOLDERS OF FIFTY-ONE PERCENT (51%) OF THE OUTSTANDING CLASS A COMMON STOCK,
VOTING AS A CLASS, AND OF THE HOLDERS OF FIFTY-ONE PERCENT (51%) OF THE
OUTSTANDING CLASS C COMMON STOCK, VOTING AS A CLASS, IN ORDER TO BE ADOPTED.
III. PROPOSAL 3 -- PROPOSAL TO APPROVE THE
COMPANY'S 1996 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors adopted and approved the Corporation's 1996 Employee
Stock Purchase Plan (the "Purchase Plan") on April 23, 1996. Under the Purchase
Plan, the Corporation may from time to time award to employees, officers,
directors and consultants of the Company the right to purchase or acquire, in
the aggregate, up to 3,400,000 shares of the Corporation's Class A Common Stock
and 100,000 shares of the Corporation's Class C Common Stock (each, an "Award").
The purpose of the Purchase Plan is to provide an opportunity for selected
employees, officers, directors, consultants and advisors of the Company to
purchase Common Stock of the Company and to thereby attract, retain and motivate
such persons to devote their best efforts to the business and financial success
of the Corporation. The following is a summary of the Purchase Plan. The
complete text of the Purchase Plan is attached as Exhibit B hereto.
ELIGIBLE PERSONS
Persons eligible to participate in the Purchase Plan include any person who
is employed by the Company or a subsidiary of the Company on a full-time or
part-time basis ("Employees"), directors and officers of the Company, and any
consultant or advisor rendering bona fide services to the Company or any
subsidiary of the Company. The class of Common Stock to be awarded is dependent
upon the employment status of the
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participant at the time of the Award. Awards of Class A Common Stock shall be
made only to those eligible persons who are Employees at the time of the Award,
and Awards of Class C Common Stock shall be made only to those eligible persons
who are not Employees at the time of the Award. There currently are
approximately 1,200 employees of the Company.
NUMBER OF SHARES RESERVED
The number of shares of Class A Common Stock for which Awards may be
granted under the Purchase Plan shall not exceed in the aggregate three million
four hundred thousand (3,400,000) shares, and the number of shares of Class C
Common Stock for which Awards may be granted under the 1996 Stock Purchase Plan
shall not exceed in the aggregate one hundred thousand (100,000) shares. The
total number of shares of Class A Common Stock and Class C Common Stock reserved
for issuance under the Purchase Plan are subject to adjustment under certain
circumstances.
ADMINISTRATIVE AUTHORITY
The Purchase Plan will be administered either by the Board of Directors or
by a committee consisting of two or more persons (who need not be directors)
appointed by the Board of Directors (the "Stock Plan Committee") each of whom
satisfies the requirements to be a "disinterested person" for the purpose of
Rule 16b-3 of the U.S. Securities and Exchange Commission ("SEC"). All expenses
and liabilities incurred in the administration of the Purchase Plan shall be
borne by the Company.
The Board of Directors or the Stock Plan Committee, as the case may be,
shall have full authority to interpret and construe the Plan, any Award granted
under the Plan and any Award agreement evidencing such Awards, and may adopt,
modify and rescind from time to time rules and regulations not inconsistent with
the Purchase Plan as they deem advisable to carry out the purposes of the Plan.
TERMS AND CONDITIONS OF AWARDS
The Purchase Plan leaves broad discretion to the Stock Plan Committee to
select from Eligible Persons those who shall receive Awards to determine the
terms and conditions of the Awards. Such terms would include the amount of the
purchase price (which may be less than the fair market value per share), the
time within which the stock purchase right must be exercised, whether the
purchase price is payable in cash, promissory note or other obligation, by
offset of liabilities due from the Company to the
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recipient, or a combination of these. The terms of Awards also may include
vesting or forfeiture conditions and transfer restrictions applicable to the
shares purchased under any Award.
AMENDMENT OF THE PLAN
The Purchase Plan is subject to amendment from time to time by the Board of
Directors; provided, however, that if required by (i) the Certificate of
Incorporation or By-Laws of the Company, (ii) any shareholders' or voting trust
agreement to which the Company is a party or (iii) to be eligible for safe
harbor treatment under Rule 16b-3 or similar rule adopted by the SEC in the
future, the Board of Directors shall not amend the Purchase Plan without the
approval of shareholders. No amendment made after the date an Award is made
shall adversely affect any right of a participant with respect to such Award
without the written consent of such participant.
PROPOSED AWARDS
The Company is considering Awards for approximately 2,450,000 shares under
the Plan. Under current proposals which have not been approved by the Stock Plan
Committee or, Awards to the following persons or groups of persons are being
considered in the following amounts of shares:
Name and Position Amount of Shares
----------------- ----------------
John G. Murphy --
Chief Executive Officer
Executive Officer as a Group --
Non Executive Director Group 64,040
Non Executive Officer 2,385,960
Employee Group
Neither Class A Common Stock or Class C Common Stock is listed on any
securities exchange, automated, quotation system, or otherwise publicly traded.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION
OF THIS PROPOSAL 3. UNDER THE COMPANY'S CERTIFICATE OF INCORPORATION THE
AFFIRMATIVE VOTE OF HOLDERS OF AT LEAST FIFTY-ONE PERCENT OF THE VOTING POWER OF
ALL CLASSES OF VOTING STOCK PRESENT AND VOTING AT THE MEETING IS REQUIRED IN
ORDER TO APPROVE THE PROPOSAL.
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IV. PROPOSAL 4 -- PROPOSAL TO APPROVE THE
1996 STOCK OPTION PLAN
On April 23, 1996, the Board of Directors authorized and adopted the
Company's 1996 Stock Option Plan, pursuant to which 1,400,000 shares of Class A
Common Stock and 100,000 shares of Class C Common Stock are reserved for
issuance upon the exercise of stock options granted from time to time to
selected "Eligible Persons", Eligible Persons include employees, officers,
directors, consultants and advisors of the Company. Options granted under the
Plan may either be qualified "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") or non-qualified stock options ("NQSOs"), and the differences between
them are discussed below. ISOs and NQSOs are collectively referred to as
"Options" hereinafter. The 1996 Stock Option Plan is intended to replace the
Company's Stock Option Plan adopted in April, 1994 (the "1994 Option Plan"),
which was terminated by the Board on April 23, 1996. No options were granted
under the 1994 Option Plan. The purpose of the 1996 Stock Option Plan is to
attract and retain the services of experienced and talented persons and
encourage their best efforts towards the business and financial success of the
Company. The following is a brief summary of the 1996 Stock Option Plan. The
complete text thereof is attached as Exhibit C hereto.
NUMBER OF SHARES RESERVED
The total number of shares of Class A Common Stock for which Options may be
granted under the 1996 Stock Option Plan shall not exceed, in the aggregate, one
million four hundred thousand (1,400,000) shares, and the total number of shares
of Class C Common Stock shall not exceed in the aggregate one hundred thousand
(100,000) shares. The total number of shares of Class C Common Stock and Class A
Common Stock reserved for issuance is subject to adjustment upon the occurrence
of events such as stock splits or combinations.
The Corporation may, but is not required to, cause shares of Common Stock
issued upon exercise of an Option to be registered with the SEC under the
Securities Act of 1933, as amended, or applicable state securities laws or to be
listed or admitted to trading on any established securities exchange or market
in which the Common Stock is listed or traded. Neither the Class A Common Stock
or Class C Common Stock currently is traded in any public market.
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ADMINISTRATIVE AUTHORITY
The 1996 Stock Option Plan is to be administered by the Board of Directors
or, if established at any time by the Board of Directors, by a committee
consisting of two or more persons (who need not be directors) appointed by the
Board of Directors (the "Stock Option Committee") who satisfy the requirements
of a "disinterested person" for the purpose of Rule 16b-3 of the SEC. All
expenses and liabilities incurred in the administration of the 1996 Stock Option
Plan shall be borne by the Company.
ELIGIBLE PERSONS
An "Eligible Person" means any Employee, officer, consultant, director or
advisor rendering bona fide services to the Company or any subsidiary of the
Company. An Employee means, with respect to an ISO, any person who at the time
the ISO is granted is employed by the Company or a subsidiary on a full-time
basis, and, with respect to a NQSO, any person who, at the time the NQSO is
granted, is employed by the Company or a subsidiary on a full-time or part-time
basis, and any director of the Company or a subsidiary.
TERMS AND CONDITIONS OF OPTIONS
Generally the Options have a term of ten years, subject to earlier
termination as provided in the Plan upon the happening of events such as the
death, disability, retirement or termination of employment of the Option holder.
Options may, but are not required to, have a vesting schedule under which
portions of the total number of Options granted become exercisable upon
succeeding anniversaries of the date of grant. The Options are not transferable
except in the event of death.
The exercise price of ISOs must equal 100% of the fair market value of the
shares subject to the ISO on the date of grant or 110% of fair market value if
granted to the holder of 10% or more of the outstanding voting securities of the
Corporation. The exercise price for NQSOs may be less than the fair market value
of such shares on the date of grant.
The class of Common Stock subject to Options is dependent upon the status
of the selected Eligible Person at the time of the grant of the Option. Options
to purchase Class A Common Stock shall be made to those Eligible Persons who are
Employees at the time of the grant and at the time the Option is exercised, and
Options of Class C Common Stock shall be made only to granted to those Eligible
Persons who are not Employees at the time of the grant.
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The 1996 Stock Option Plan provides that when a participant ceases to be
employed by the Company or any subsidiary for any reason other than death or
disability, the portion of the Option which is exercisable, but not exercised,
as of the date of such termination may only be exercised within a three month
period after such date. In the event of termination of a participant's
employment due to disability or death, the portion of the Option exercisable but
not exercised, as of the date of such termination may only be exercised by an
executor or administrator or beneficiary of the estate of the participant, when
applicable, within one year after such date.
TERMINATION OR AMENDMENT OF THE PLAN
The 1996 Stock Option Plan is subject to termination at any time, or
amendment from time to time by the Board of Directors. However, the Board of
Directors shall not amend the 1996 Stock Option Plan in any manner that requires
the approval of shareholders of the Company pursuant to any law, regulation or
rule to which the Company is subject unless the required approval of
shareholders is obtained within the specified time. In any event, no Amendment
made after the date an Option is granted shall adversely affect any right of a
participant with respect to such Option without the written consent of such
participant.
PROPOSED GRANT OF OPTIONS
The Company agreed to grant stock options for 100,000 shares to John G.
Murphy, its chief executive officer, upon the commencement of his employment in
August, 1995, the terms and conditions of which were not specified, and the
Company anticipates that such options will be granted under the 1996 Option
Plan. Except for Mr. Murphy's option, the number of options or the persons who
may receive options presently is not determinable.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE 1996 STOCK OPTION
The Federal tax treatment to be afforded any Option granted under the 1996
Stock Option Plan is dependent on whether the granted Option is an ISO or NQSO.
The following is a discussion of general Federal tax consequences and all
references herein to tax consequences refer to Federal tax consequences only.
Under the Code, ISOs can be awarded only to Employees. Consultants,
nonemployee Directors and Employees can receive NQSOs.
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On Grant. The grant of an ISO is not a taxable event to the recipient. The
grant of a NQSO will also not be a taxable event provided the option has no
readily ascertainable fair market value at the time of grant. Since the Options
will not be tradeable on an established market nor transferrable by the
recipient, it is unlikely that Options will have readily ascertainable market
value. Unless a participant has paid for the grant of an Option, the participant
will have no basis in the Option.
On Exercise. Generally, on exercise of an ISO, the employee does not
recognize income. However, if a participant is subject to the Alternative
Minimum Tax, this favorable tax treatment is disregarded and the bargain
purchase element at the time of exercise is considered as part of the AMT.
Assuming that the participant is fully vested in the shares on the date of
exercise, on exercise of a NQSO, the participant will realize compensation
income taxable at ordinary income rates. The amount of such compensation will be
equal to the amount by which the fair market value of the stock acquired upon
exercise of the option exceeds the amount required to be paid for such stock.
Because the Stock Option Committee may create restrictions on transfer of
Option shares or require mandatory repurchases of Option shares on termination
of employment, a participant may not be fully vested in his shares on exercise
within the meaning of Code Section 83. If a participant is not fully vested in
the shares, recognition of income will be delayed to such date that the shares
are not subject to a substantial risk of forfeiture unless an Code Section 83(b)
election is made as of the date of exercise. If an 83(b) election is made, the
participant will be considered vested in the Option shares.
The participant's basis in the ISO or vested NQSO shares will be the fair
market value of the shares on the date of exercise. If the Option shares are
fully vested, the holding period will be considered to begin on the date of
exercise.
Future Sale of Option Shares. To receive capital gains treatment on the
disposition of ISO shares, such shares must be held the longer of (i) two years
from the date of the Option grant or (ii) one year from the date of exercise. If
disposed prior to the expiration of this holding period (a "Disqualifying
Disposition"), the amount of the gain recognized on disposition will be treated
as compensation income and taxed at ordinary income rates. The employee must
notify the Company if there is a Disqualifying Disposition of the Shares.
At the time the NQSO shares are subsequently sold or otherwise disposed of
by the participant, the participant will
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recognize a taxable capital gain or loss measured by the difference between his
adjusted basis in the stock and the amount realized in connection with the
disposition. If held for the requisite capital gains period (currently one year)
the rate at which the gain will be taxed will be the capital gains rate, if
lower than his marginal income rate.
Under current Federal tax law, a taxpayer's net capital gain (i.e., the
amount by which the taxpayer's long-term capital gains exceed his capital
losses) is subject to tax at a maximum rate of 28%. Ordinary income is subject
to tax at Federal marginal rates as high as 39.5% Capital losses are currently
deductible against capital gains without limitation, but are currently
deductible against ordinary income in any year only to the extent of $3,000
($1,500 in the case of a married individual filing a separate return). Capital
losses which are not currently deductible by reason of the foregoing limitation
may be carried forward to future years.
Tax Effect on Company. The Company is entitled to a deduction equal to the
amount that a participant includes in income as compensation in the year in
which that compensation is recognized provided applicable Federal rules
pertaining to tax reporting are satisfied and the compensation represents an
ordinary and necessary business expense of the Company.
The comments set forth above are only a summary of certain Federal income
tax consequences relating to the 1996 Stock Option Plan. No consideration has
been given to the effect of state, local and other tax laws on the Plan or the
participants. Because of the complexities involved in the application of the
Federal tax laws to specific circumstances, it is strongly urged that each
participant consult a tax advisor with respect to such participant's own
circumstances.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION
OF THIS PROPOSAL 4. UNDER THE COMPANY'S CERTIFICATE OF INCORPORATION THE
AFFIRMATIVE VOTE OF HOLDERS OF AT LEAST FIFTY-ONE PERCENT OF THE VOTING POWER OF
ALL CLASSES OF VOTING STOCK PRESENT AND VOTING AT THE MEETING IS REQUIRED IN
ORDER TO APPROVE THE PROPOSAL.
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V. ELECTION OF DIRECTORS
The Corporation's Certificate of Incorporation currently provides for the
division of the Board of Directors into three classes with staggered three-year
terms of office. Vacancies on the Board of Directors occurring for reasons such
as the resignation, removal or death of a director may be filled by appointment
by the Board, evidenced by the affirmative vote of at least a majority of the
remaining members of the Board. Directors so appointed by the Board to fill
vacancies serve as directors until the next Annual Meeting of Shareholders and
until their successors shall be duly elected and qualified.
As of the date of this Proxy Statement there are a total of fifteen (15)
persons sitting on the Corporation's Board of Directors of which nine (9) such
persons are subject to reelection at the 1996 Annual Meeting: comprised of four
(4) members who had previously served as Class III directors and five (5)
members having been appointed by the Board as Class II directors and as such are
serving on the Board on an interim basis pending formal election by the
shareholders.
In order to comply with the terms of the REI Investment Agreement and to
facilitate the transition period preceding the final Board reformation as
described as part of the discussion of Proposal 1 under the heading
"Restructuring Of Board Of Directors" set forth above, all nine (9) members of
the Board of Directors subject to reelection at the 1996 Annual Meeting have
been nominated by the Board for re-election to the Board of Directors as members
designated as Class II directors having terms expiring on the 1997 Annual
Meeting. If all such members (and no other persons) are so re-elected at the
1996 Annual Meeting, the Board of Directors will have fifteen (15) members
comprised of twelve (12) members designated as Class II directors having terms
expiring at the 1997 Annual Meeting, three (3) members designated as Class I
directors having terms expiring at the 1998 Annual Meeting and no members
designated as Class III directors. The election of directors at the 1997 Annual
Meeting will then be governed by the provisions of the Corporation's Restated
Certificate of Incorporation, assuming that the same is adopted and approved by
the shareholders at the 1996 Annual Meeting and made effective following its
filing with the Secretary of State of New Jersey.
Of the nine (9) directors subject to re-election at the 1996 Annual
Meeting, four (4) are considered "Class A" directors and are nominated for
election by the Voting Trustees, voting on behalf of holders of Class A Common
Stock, voting as a class, and five (5) are considered "Class C" directors and
are nominated for election by the holders of Class C Common Stock, voting as a
class.
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<PAGE>
All of the four (4) Class A directors subject to reelection are members of
the Voting Trust and the Board anticipates that the Voting Trustees will vote
the Class A Common Stock in favor of such nominees.
The persons named on the enclosed proxy will vote such proxy for the
nominees listed below and on the proxy except where authority has been withheld
as to such nominee. The Board of Directors has no reason to believe that the
nominees for the office of director will not remain available for election as a
director. However, should any of them become unwilling or unable to accept
nomination for election, it is intended that the individuals named in the
enclosed proxy may vote for the election of such other persons as the Board of
Directors may nominate.
NOMINEES AND PRESENT DIRECTORS
The following table presents the name, age and principal occupation of each
nominee and present director.
NEWLY CREATED CLASS II DIRECTORSHIPS EXPIRING AT THE 1997 ANNUAL MEETING
(CLASS II)
<TABLE>
<CAPTION>
First Became
Name Age Principal Occupation Director in
- - ---- ---- -------------------- -------------
<S> <C> <C> <C>
John G. Murphy* 48 President and CEO of the 1996
Corporation
James B. Robbins * 61 Line Pilot 1995
Cecelia Hallman* 44 Flight Attendant 1996
Jeffrey A. Lipkin+o 50 Investment Manager 1996
Joseph J. Finn-Egan+o 63 Investment Manager 1996
Russell Thayer+ 72 Airline Consultant 1992
Norton Waltuch+ 63 Financial Broker 1992
Dumitru Cucu+ 53 Managing Director - Airline 1994
Manufacturer
Jack Gray* 54 Line Pilot 1995
CURRENTLY FILLED DIRECTORSHIPS EXPIRING AT THE 1997 ANNUAL MEETING (CLASS II)
Donald Grisham** 59 Line Pilot 1995
Alan P. Halpert** 57 Chairman and CEO - Stock 1995
Brokerage Firm
Bernard Mann** 66 President and principal owner 1995
-embroidery company
</TABLE>
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<PAGE>
CURRENTLY FILLED DIRECTORSHIPS EXPIRING AT THE 1998 ANNUAL MEETING (CLASS I)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
John Anderson** 64 Line Flight Engineer 1992
Vice President Support
Services
Fred Barber** 57 Line Pilot 1995
James Hawks** 52 Line Pilot 1995
</TABLE>
- - ------------------
* Nominee for election as Class II director by the Voting Trustees, on behalf
of Class A Common Shareholders, voting as a class.
+ Nominee for election as Class II director by the holders of Class C Common
Stock, voting as a class.
** Present directors not subject to election at the 1996 Annual Meeting.
o Designee of REI under the REI Investment Agreement
The affirmative vote of at least a majority of the Voting Trustees, on
behalf of the holders of Class A Common Stock, is necessary to elect those
nominees subject to the class vote of Class A Common Stock. The affirmative vote
of the holders of at least a plurality of the shares of Class C Common Stock
present in person or by proxy, and entitled to vote, is necessary to elect those
nominees subject to the class vote of Class C Common Stock.
BIOGRAPHICAL INFORMATION
Mr. Murphy began service on August 24, 1995, as the Company's President and
Chief Executive Officer. Mr. Murphy has 28 years of aviation management
experience, including senior positions in marketing, administration and sales.
He most recently was Senior Vice President of Marketing and Services with MGM
Grand Air since 1993. Mr. Murphy held various senior management positions in a
24 year career with Pan American World Airways, including Vice President/General
Manager Worldwide Sales and Reservations, Managing Director of the Southwest
U.S. and Managing Director of Pan Am's largest operation - metropolitan New
York's John F. Kennedy, LaGuardia and Newark International airports. Mr. Murphy
performed independent consulting services between 1991 and 1993.
Mr. Robbins was appointed a director of the Corporation on October 19,
1995. He has been a Line Pilot for the Company since 1992, and previously a
pilot with Eastern Airlines since 1959, holding various positions there as a
pilot representative to the Airline Pilots Association.
Ms. Hallman has been a Flight Attendant with the Company since August,
1993. She also has served as Senior Marketing
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<PAGE>
Consultant with Knightsbridge Group, an organizational management firm, since
1994. In 1992 and 1993, Ms. Hallman was a marketing associate with Dean Witter
Reynolds. In 1991 and 1992, she served as the Marketing Director to the U.S.
Senior Open golf tournament held at Sauken Valley Country Club. Ms. Hallman is
also the creator, co-author and publisher of an instructional children's book
entitled Danger Stranger.
Mr. Lipkin has been a director of the Company since July 1, 1996. Since
1987, Mr. Lipkin has been a general partner of Recovery Equity Partners, L.P.,
the general partner of Recovery Equity Investors, L.P., and since 1995, Mr.
Lipkin has been a general partner of Recovery Equity Partners II, L.P., the
general partner of REI. Prior to co-founding Recovery Equity Investors, L.P.
with Mr. Finn-Egan, Mr. Lipkin was a partner in Gaston & Snow, a national law
firm, from 1984 to 1989. Mr. Lipkin was designated by REI pursuant to the terms
of the REI Investment Agreement for election to the Company's Board of
Directors. Mr. Lipkin is also a member of the Board of Directors and Audit
Committee of CMI Corporation and numerous private companies.
Mr. Finn-Egan has been a director of the Company since July 1, 1996. Since
1987, Mr. Finn-Egan has been a general partner of Recovery Equity Partners,
L.P., the general partner of Recovery Equity Investors, L.P., and since 1995 Mr.
Finn-Egan has been a general partner of Recovery Equity Partners II, L.P., the
general partner of REI. Prior to co-founding REI with Mr. Lipkin, Mr. Finn-Egan
was a private investor who principally invested in and managed troubled
companies in a variety of industries. Mr. Finn-Egan was designated by REI
pursuant to the terms of the REI Investment Agreement for election to the
Company's Board of Directors. Mr. Finn-Egan is also a member of the Board of
Directors of CMI Corporation and numerous private companies.
Mr. Thayer has been a director of the Company since its formation. Since
1988, Mr. Thayer has also served as an airline consultant with Airline Economics
and Airline Capital Associates. In 1982, he became Senior Vice President -
Planning and from 1986 through 1988 he became Senior Vice President - Operations
at Pan Am. Prior to that time, Mr. Thayer held various marketing positions with
Eastern Air Lines, American Airlines and Seaboard World Airlines and was the
President and Chief Operating Officer of Braniff Airways.
Mr. Waltuch has been a director of the Company since December 1992. Since
October 1994, he has also been the Chairman of the Board of Northwood Financial
Services, a financial advisor and introducing broker. In addition, Mr. Waltuch
is a member of all leading commodity futures exchanges and has served on the
Board of Directors of the New York Mercantile Exchange, The New York Coffee,
Sugar & Cocoa Exchange, The Citrus Associates of the
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<PAGE>
New York Cotton Exchange and various committees of the New York Commodity
Exchange, The Chicago Board of Trade and the Chicago Mercantile Exchange. From
June 1990 through October 1994, Mr. Waltuch was a Senior Vice President of
Rodman & Renshaw, a member of the New York Stock Exchange. Prior to that time,
he was a Senior Vice President of Drexel Burnham Lambert.
Mr. Cucu has been a director of the Company since February 1994. He is also
Managing Director of Romaero, S.A. ("Romaero"), a Romanian Aircraft Manufacturer
which as of March 1995 owned approximately 5.4% of the Company's outstanding
Class C Common Stock. This position is the equivalent of Chief Executive Officer
in a United States based company. Mr. Cucu has been with Romaero for over thirty
years, and prior to accepting leadership of that company, served as its
Production Director.
Mr. Gray has been a Line Pilot for the Company since November 1992 and a
director since February 1995. After 5 years on extended active duty with the
United States Air Force he joined Eastern Air Lines in 1972 as a pilot. He held
various positions with Eastern Air Lines as a pilot representative, and was on
the Board of Directors of the Airline Pilots Association. Additionally, he
continues his association with the United States Air Force Reserves holding the
rank of Colonel, and was activated during the Persian Gulf War for over one
year.
Mr. Grisham has been a Line Pilot for the Company since its inception and
until recently, the director of Flight Training. He has been a director since
January 1995. Prior to joining the Company, he spent 27 years at Eastern Air
Lines, where he was a pilot. Mr. Grisham is the Founder of Performance Marine
Incorporated, a recreational marine products company which is located in Miami,
Florida.
Mr. Halpert is the Chief Executive Officer and President of Halpert & Co.,
a securities broker-dealer with membership in the New York Stock Exchange. Mr.
Halpert is also Chief Executive Officer and President of Halpert and Associates,
a general insurance agency. In addition, since its inception in 1994, Mr.
Halpert has been a member of the Board of Directors of The Growth & Income Fund,
a real estate investment trust. Mr. Halpert also served as a member of the
Advisory Board to the National Community Bank in West Paterson, New Jersey from
1993 to 1994.
Mr. Mann is the founder and President of Carolace Industries, an embroidery
company located in Ridgefield, New Jersey. Mr. Mann is also the President of
Concorde Stud Farm in Cream Ridge, New Jersey. Mr. Mann is also a director and
co-founder of the Bridge View Bank in Englewood Cliffs, New Jersey and is a
member of the Board of Fort Lee Jewish Community Center. Mr. Mann is part owner
and former President of the New Jersey Nets NBA basketball team. In addition,
Mr. Mann is the owner of
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<PAGE>
the Fort Lee Racquet Club, and a member of the American Arbitration Association.
Mr. Anderson has been a Line Flight Engineer for the Company and a director
since its formation. Prior to joining the Company, he spent 25 years at Eastern
Air Lines after spending 12 years in the United States Air Force where he
advanced to the position of B-58 Aircraft Commander for the Strategic Air
Command. Mr. Anderson also has had management experience with Energetics, Inc.
and served as Eastern Air Lines' New York Captain representative and council
chairman for the Airline Pilots Association. Mr. Anderson is one of the founders
of KIWI International Air Lines, Inc.
Mr. Barber has been a Line Pilot for the Company since November 1992 and a
director since March 1995. He also worked for six months performing sales and
promotional services in Atlanta prior to the Company's commencement of flight
operations. Prior to joining the Company, he was a Line Pilot for Eastern Air
Lines for 23 years. He also worked in sales for Eastern Air Lines.
Mr. Hawks has been a Line Pilot for the Company since January 1994 and a
director since February 1995. From November 1993 through January 1994, he was a
sales associate in the Company's sales department in Atlanta. Before joining the
Company, he owned and operated one hour photo stores (with annual sales of over
$500,000) in Atlanta for nine years until March 1993. Mr. Hawks also worked as a
Pilot for Eastern Air Lines beginning in November 1966.
VI. RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has approved for submission to the shareholders a
proposal to ratify the Board's selection of Arthur Andersen LLP as independent
auditors for the Corporation for the fiscal year ending December 31, 1995.
Arthur Andersen LLP has been the Company's independent auditors for the fiscal
year ended December 31, 1995, 1994 and 1993 respectively, and for the period
from the Company's inception (March 11, 1992) through December 31, 1992.
The affirmative vote of the holders of at least a majority of the combined
number of Shares of Class A Common Stock, Class C Common and Preferred Stock
present at the meeting, in person or by proxy, and entitled to vote is required
to approve the proposal.
The Board of Directors recommends a vote FOR the proposal.
-30-
<PAGE>
A representative of Arthur Andersen LLP is expected to be present at the
meeting with the opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
DIRECTOR AND EXECUTIVE COMPENSATION
COMMITTEES
In 1995 the Board did not have a Compensation Committee in effect. All
decisions regarding compensation of the chief executive officer and other
executive officers were made by the full board. No executive officer of the
Company participated in any decisions of the Board with regard to executive
compensation during 1995.
DIRECTOR COMPENSATION
The Corporation presently reimburses all directors for their expenses
associated with their attendance at meeting of the Board of Directors or any
committee thereof. The Company also pays each outside director a fee of $500 for
each meeting of the Board of Directors or any committee thereof that he attends.
Certain of the outside directors have declined this compensation.
EXECUTIVES
In February, 1995 the Board of Directors undertook a senior management
reorganization in which the chief executive officer, chief operating officer and
certain other management personnel departed the Company. The Company engaged
Aviation Compliance Services, Inc. ("ACS"), an airline management organization,
to furnish management services. Under that arrangement, Messrs. Danny Wright and
James E. Player, ACS employees, became acting President and Chief Executive
Officer and Chief Financial Officer of the Company, respectively, and occupied
other corporate offices. On July 11, 1995 the Company determined that the oral
arrangement for services with ACS had been completed. At the Company's request,
Mr. Player became a direct employee of the Company as its Chief Financial
Officer, acting Secretary and acting Treasurer. The Company paid ACS $125,000
per month for the services of Mr. Wright, Mr. Player and other full-time and
part-time personnel. The Company believes ACS paid Mr. Wright a base salary of
$180,000 on an annual basis and Mr. Player a base salary of $125,000 on an
annual basis.
-31-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and
Principal Other Annual All Other
Position Salary Bonus Compensation Compensation
---------- ------ ----- ------------- ------------
<S> <C> <C> <C>
John G. Murphy $61,026 -- --
President and
Chief Executive
Officer
Robert Iverson $17,625 -- --
President and
Chief Executive
Officer
</TABLE>
Primarily because of the management reorganization, no executive officer of
the Company was paid a salary and bonus in excess of $100,000 for services
rendered in all capacities to the Company for the year ended December 31, 1995.
None of the Company's executive officers received a salary and bonus in excess
of $100,000 for the year ended December 31, 1995. Mr. Player, Chief Financial
Officer, has received a base salary at the annualized rate of $126,000 since
becoming an employee of the Company in July, 1995.
Although the Corporation became a reporting company under the Securities
Exchange Act of 1934, as amended, on July 12, 1995, there is no trading market
for any of the Corporation's securities. Accordingly, no market performance
information is available.
EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL AGREEMENTS
The Company and Mr. Murphy have entered into an employment agreement. The
agreement has a term of two years from his original employment commencement date
of August 31, 1995 and provides for an annual salary of $175,000 during 1995
(prorated from his August start date) and $200,000 during 1996. His salary will
be subject to annual review by the Board thereafter. He is also furnished with a
Company-owned automobile and other fringe benefits to be agreed upon. He will be
granted stock options to purchase 100,000 shares of common stock, which will
vest over a five-year period in agreed upon amounts; and if his employment is
terminated by reason of a change in control, he will be paid cash severance
payment equal to 2 years' salary.
Certain executive officers and key management personnel have written
agreements allowing severance pay of between 3 months' and 12 months' salary if
their employment is terminated without cause.
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<PAGE>
RETIREMENT PLAN
The Company maintains a 401(k) retirement plan for the benefit of its
employees. The Company does not match employee contributions to this plan.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company's registration statement under Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act") of all classes of Common Stock and
warrants to purchase common stock became effective on July 17, 1995. The
directors and executive officers of the Company, and the beneficial owners of 5%
or more of the outstanding shares of any class of the Company's equity
securities, thereby became subject to the reporting requirements of Section
16(a) of the Exchange Act. Under Section 16(a), reporting persons are required
to file Initial Statements of Beneficial Ownership of Securities on Form 3 by
July 17, 1995, the effective date of the registration statement or, if later,
within ten days after such person becomes a director, executive officer or 5%
beneficial owner. Based upon the Company's review of copies of from 3's filed by
reporting persons, each of the following persons did not timely file Form 3's by
July 17, 1995, instead filing them on the dates indicated: Dumitru Cucu --
October 31, 1995; KIWI International Air Lines, Inc. Class A Common Stock/Class
B Common Stock Voting Trust -- October 31, 1995; John Anderson, Fred Barber,
Jack Gray II, Donald Grisham, James B. Hawks, David Porter, Douglas Stratton,
Russell Thayer, Norton Waltuch, Alan Halpert, Bernard Mann and James Player --
all on September 30, 1996. Further, John G. Murphy was required to file a Form 3
on September 8, 1995 and filed it on September 30, 1995; James B. Robbins was
required to file a Form 3 on or before October 29, 1995, and actually filed it
on February 24, 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Common Stock of the Company as of March 25, 1996 by (i) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock of any class of the Company, (ii) each director and executive
officer, and (iii) all executive officers, directors and nominees for director
of the Company as a group.
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<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------------------------------
CLASS A PERCENTAGE CLASS C PERCENTAGE TOTAL PERCENT
BENEFICIAL OWNER(1) SHARES OF CLASS A SHARES OF CLASS C SHARES OF TOTAL(2)
- - ---------------- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Voting Trust(2)(3) 2,009,208 100% 0 -- 2,009,208 52.4%
Romaero, S.A.(4) 0 -- 400,000 20.0% 400,000 9.9%
Pegasus Aircraft Partners II, 0 -- 240,000 12.4% 240,000 6.1%
L.P.(5)
Norton D. Waltuch(6) 0 -- 242,240 12.3% 242,240 6.1%
Donald Grisham(9)(12) 38,000 1.9% 1,100 * 39,100 1.0%
Jim Hawks(7)(9) 100,000 4.8% 0 -- 100,000 2.6%
John P. Anderson(9)(10)(13) 49,778 2.4% 9,500 * 59,278 1.5%
Jack Gray(9)(11) 62,000 3.0% 0 -- 62,000 1.6%
Fred Barber(8)(9) 37,600 1.8% 13,200 * 50,800 1.3%
Russell Thayer(13) 0 * 5,000 * 5,000 *
Dr. Codie D. Bell(14) 40 * 90,400 5.0% 90,440 2.4%
James E. Player(15) 30,000 1.5% 0 -- 30,000 *
Dumitru Cucu(16) 0 -- 0 -- 0 --
Bernard Mann(17) 0 -- 141,000 7.3% 141,000 3.5%
Alan Halpert(18) 0 -- 220,000 11.2% 220,000 5.5%
Clifford Crittenden II(19) 198,400 9.4% 0 -- 198,400 5.0%
James B. Robbins(9)(20) 44,600 2.2% 200 * 44,800 1.2%
Cecelia Hallman 70 * 0 -- 70 *
John G. Murphy(21) 30,000 1.5% 0 -- 30,000 *
Recovery Equity Investors II, 0 -- 10,000,000 84.6% 10,000,000 72.3%
L.P.(22)
Joseph J. Finn-Egan(22)(23) 0 -- 10,000,000 84.6% 10,000,000 72.3%
Jeffrey A. Lipkin(22)(24) 0 -- 10,000,000 84.6% 10,000,000 72.3%
------------ ------- ---------- -------- ---------- -------
Total Shares Controlled by
Directors and Executive
Officers (including those as 2,009,208 434,020 2,443,228
Voting Trustees)(25) ========= ========= =========
Total Shares Outstanding(2) 2,009,208 1,824,073 3,833,281
========= ========= =========
% of Total Shares Controlled
by Directors and Executive
Officers as a Group (including
those as Voting Trustees)(25) 100% 23.8% 63.7%
======= ======== =======
</TABLE>
* Less than 1%
(1) The business address of Romaero, S.A. is Boulevard Ficosului No. 44, Sector
1, Bucharest 71544 Romania. The business address of all other beneficial
owners listed above is c/o KIWI International Air Lines, Inc.,
Hemisphere Center, Routes 1 & 9 South, Newark, New Jersey 07114.
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<PAGE>
(2) Does not include 575,000 shares of Class A Common Stock and 400,000 shares
of Class C Common Stock issuable upon the conversion, at the respective
holders' elections, of convertible notes due October 15, 1996. Also does
not include 95,000 shares of Class A Common Stock and 135,000 shares of
Class C Common Stock purchasable upon the exercise of warrants issued in
December 1995. Also does not include 1,431,872 shares of Class A Common
Stock and 1,554,804 shares of Class C Common Stock purchasable upon the
exercise of warrants issued in connection with the purchase of like numbers
of shares of Common Stock.
(3) All Shares of Class A Common Stock are held subject to a Voting Trust
Agreement among all of the holders of Class A Common Stock. The Voting
Trust Agreement will expire on December 31, 1997, unless extended (with the
consent of the Voting Trustees, by a majority vote of the holders of Class
A Common Stock and Class B Common Stock).
(4) Includes 200,000 shares purchasable upon the exercise of warrants issued in
connection with the issuance of 200,000 shares.
(5) Includes 120,000 shares purchasable upon the exercise of warrants issued in
connection with the issuance of 120,000 shares.
(6) Includes 31,120 shares purchasable upon the exercise of warrants issued in
connection with the purchase of a like number of shares. Also includes an
aggregate of 20,000 shares owned by members of Mr. Waltuch's immediate
family and 20,000 shares purchasable by them upon the exercise of warrants
issued in connection with their purchase of the 20,000. Mr. Waltuch
disclaims beneficial ownership of all of these shares. Also includes 40,000
shares owned by Mr. Waltuch's individual retirement account and 40,000
shares purchasable by it upon the exercise of warrants issued in connection
with the purchase of a like number of shares. Also includes 50,000 shares
issuable upon the conversion, at Mr. Waltuch's election, of convertible
notes due October 15, 1996, and 10,000 shares purchasable upon the exercise
of warrants issued in December 1995.
(7) Includes 50,000 shares issuable upon the conversion, at Mr. Hawks'
election, of convertible notes due October 15, 1996, 20,000 shares
purchasable upon the exercise of warrants issued in connection with the
purchase of a like number of shares and 10,000 shares purchasable upon the
exercise of warrants issued in December 1995.
(8) Includes 6,600 shares of Class C Common Stock owned by a member of Mr.
Barber's immediate family and 6,600 shares purchasable upon the exercise of
warrants issued in connection with the purchase of those shares of Common
Stock. Mr. Barber disclaims beneficial ownership of all of those shares.
Also includes 25,000 shares issuable upon the conversion, at Mr. Barber's
election, of convertible notes due October 15, 1996, 3,800 shares
purchasable upon the exercise of warrants issued in connection with the
purchase of a like number of shares and 5,000 shares purchasable upon the
exercise of warrants issued in December 1995.
(9) Voting Trustees of the Voting Trust Agreement. See Note (3) above.
(10) Includes 25,000 shares issuable upon the conversion, at Mr. Anderson's
election, of convertible notes due October 15, 1996, 9,889 shares
purchasable upon the exercise of warrants issued in connection with the
purchase of a like number of shares and 5,000 shares purchasable upon the
exercise of warrants issued in December 1995.
(11) Includes 25,000 shares issuable upon the conversion, at Mr. Gray's
election, of convertible notes due October 15, 1996, 16,000 shares
purchasable upon the exercise of warrants issued in connection with the
purchase of a like number of shares and 5,000 shares purchasable upon the
exercise of warrants issued in December 1995.
(12) Includes 19,000 shares of Class A Common Stock purchasable upon the
exercise of warrants issued in connection with the purchase of a like
number of shares.
(13) As of July 11, 1995, Russell Thayer became Chairman of the Board. John P.
Anderson, who had been serving as acting Chairman of the Board, stepped
down from that position but remains a Director of the Company.
(14) Includes 20 shares of Class A Common Stock purchasable upon the exercise of
warrants issued in connection with the purchase of a like number of shares.
(15) Consists of 25,000 shares issuable upon the conversion, at Mr. Player's
election, of convertible notes due October 15, 1996, and 5,000 shares
purchasable upon the exercise of warrants issued in December 1995.
(16) Does not include 200,000 shares owned by Romaero, S.A. and 200,000
purchasable upon the exercise of warrants issued in connection with the
issuance of the 200,000 shares. Mr. Cucu is Managing Director of Romaero,
S.A., but disclaims beneficial ownership of these shares.
(17) Includes 50,000 shares issuable upon the conversion, at Mr. Mann's
election, of convertible notes due October 15, 1996, 40,500 shares
purchasable upon the exercise of warrants issued in connection with the
purchase of a like number of shares and 10,000 shares purchasable upon the
exercise of warrants issued in December 1995.
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<PAGE>
(18) Includes 50,000 shares issuable upon the conversion, at Mr. Halpert's
election, of convertible notes due October 15, 1996, 80,000 shares
purchasable upon the exercise of warrants issued in connection with the
purchase of a like number of shares and 10,000 shares purchasable upon the
exercise of warrants issued in December 1995.
(19) Includes 99,200 shares purchasable upon the exercise of warrants issued in
connection with the purchase of a like number of shares.
(20) Includes 25,000 shares of Class A Common Stock issuable upon the
conversion, at Mr. Robbins' election, of convertible notes due October 15,
1996.
(21) Consists of 25,000 shares issuable upon the conversion, at Mr. Murphy's
election, of convertible notes due October 15, 1996, and 5,000 shares
purchasable upon the exercise of warrants issued in December 1995, but does
not include options to purchase 100,000 shares of Class A Common Stock
which were promised as part of the recruitment of Mr. Murphy and which
the Corporation intends to issue upon the approval of the 1996 Stock Option
Plan as set out in Proposal 4 in this Proxy Statement.
(22) Consists of 2,000,000 shares issuable upon the conversion, at REI's
election, of the Convertible Notes and 8,000,000 shares purchase upon the
exercise of both the option by REI to acquire the Additional Convertible
Notes and to acquire 6,000,000 shares of Class A Convertible Preferred
Stock (if the Restated Certificate of Incorporation is approved by the
shareholders).
(23) Mr. Finn-Egan is a general partner of Recovery Equity Partners II, L.P.,
the sole general partner of REI.
(24) Mr. Lipkin is a general partner of Recovery Equity Partners II, L.P., the
sole general partner of REI.
(25) Does not include 575,000 shares of Class A Common Stock and 150,000 shares
of Class C Common Stock issuable upon the conversion, at the respective
holders' elections, of convertible notes due October 15, 1996. Also does
not include 95,000 shares of Class A Common Stock and 30,000 shares of
Class C Common Stock purchasable upon the exercise of warrants issued in
December 1995. Also does not include 1,431,872 shares of Class A Common
Stock and 418,220 shares of Class C Common Stock purchasable upon the
exercise of warrants issued in connection with the purchase of like numbers
of shares of Common Stock.
(25) Does not include 2,000,000 shares issuable upon the conversion, at REI's
election, of the Convertible Notes and 8,000,000 shares purchase upon the
exercise of both the option by REI to acquire the Additional Convertible
Notes and to acquire 6,000,000 shares of Class A Convertible Preferred
Stock (if the Restated Certificate of Incorporation is approved by the
shareholders).
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Romaero Aircraft Purchase
The Company entered into an agreement in February of 1993 with Romaero,
S.A. ("Romaero"), which beneficially owns approximately 20% of the Company's
outstanding Class C Common Stock, for the purchase of 11 BAC 1-11 Series 2500
aircraft ("Airstar 2500") with an option to purchase five (5) additional
aircraft. Dumitru Cucu, a director of the Company, is the Managing Director of
Romaero. The aggregate purchase price for the 11 aircraft is approximately $240
million (subject to increase depending on an escalation factor at the time of
delivery). The agreement provided that the Company's obligation to purchase each
aircraft is contingent upon the Company's obtaining financing for 100% of the
acquisition cost of the aircraft. The aircraft were originally understood by the
Company to be deliverable at the rate of one per calendar quarter after an
initial delivery of one aircraft in November, 1994. The manufacturer has not
delivered any aircraft to date, and the
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Company believes that the manufacturer has yet to secure the substantial capital
investment in its plant in Romania necessary to begin production. The
manufacturer is believed to be continuing to seek the capital funds necessary to
produce the aircraft. In view of the uncertainties relating to the
manufacturer's ability to produce the aircraft in accordance with
specifications, the need to obtain airworthiness certification for any aircraft
in fact produced and uncertainties as to whether financing will be available to
the Company for the acquisition cost (which is a condition to the Company's
obligation to purchase), management believes there is substantial doubt as to
whether and when, if ever, the Company would become obligated to perform under
the Purchase Agreement. In the event that the Airstar 2500 aircraft become
available at favorable financing terms, the Company may elect to accept
delivery. The Company believes that the terms of these transactions were
negotiated effectively the same as arm's length transactions with unrelated
third parties.
Agreement with Aviation Compliance Services, Inc.
On July 11, 1995 the Company determined that the oral arrangement for
services with Aviation Compliance Services, Inc. ("ACS"), an airline management
organization, had been completed. Pursuant to that oral arrangement, from
February 1995 through July 10, 1995, Mr. Danny Wright had served as the
Company's President and Chief Executive Officer and Mr. James Player had served
as the Company's Chief Financial Officer, acting Secretary and acting Treasurer.
Messrs. Wright and Player began service in the stated capacities in February
1995 as part of a management reorganization in which Mr. Robert Iverson, the
Company's former President and Chairman, was terminated. At the Company's
request, Mr. Player became an employee of the Company as its Chief Financial
Officer, Secretary and Treasurer. The Company paid ACS $125,000 per month for
the services of Mr. Wright, Mr. Player and other full-time and part-time
personnel. The Company believes ACS paid Mr. Wright a base salary of $180,000 on
an annual basis and Mr. Player a base salary of $125,000 on an annual basis. The
Company also paid ACS for travel and living expenses of Messrs. Wright and
Player.
Pegasus Aircraft Leases
The Company leases eight of its Boeing 727 aircraft from Pegasus Aircraft
Partners II, L.P. and certain of its affiliates (collectively, "Pegasus"), the
beneficial owners of approximately 12.4% of outstanding shares of Class C
Common. As of March 25, 1996, Pegasus owned 120,000 shares of the Company's
Class C Common Stock. Under the terms of the eight operating lease agreements,
total lease payments to Pegasus amount to $538,500 per month. Additional
maintenance reserve payments are also paid on a monthly basis. The Company
believes that the terms of these
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transactions were negotiated effectively the same as arm's length transactions
with unrelated third parties.
The Company brought legal action in the United States District Court,
District of New Jersey against Pegasus Capital Corporation and its affiliated
partnerships (collectively, the "Aircraft Lessor"), the lessor of eight aircraft
operated by the Company. The suit was brought on September 22, 1995 in response
to actions threatened to be taken by the Aircraft Lessor against the Company
arising from the interpretation of an agreement entered into between the Company
and the Aircraft Lessor in March, 1995 (the "1995 Agreement"). The Aircraft
Lessor claimed the right under the 1995 Agreement to substitute a B727-200
aircraft for one of the existing aircraft leased by the Company from the
Aircraft Lessor. The Company and the Aircraft Lessor had disputes concerning the
interpretation of this and other provisions of the 1995 Agreement, including the
condition and quality of the aircraft which the Aircraft Lessor proposed to
offer in substitution, and the timing of the substitution of the aircraft. The
Aircraft Lessor is seeking damages from the Company, estimated by the Aircraft
Lessor in court submissions at $905,896, for the alleged breach of the 1995
Agreement in refusing delivery of the aircraft offered in substitution. The
Company counterclaimed for damages from the Aircraft Lessor estimated at
$1,615,000 and for unspecified punitive damages.
On or about June 5, 1996, The Aircraft Lessor and the Company agreed to
dismiss without prejudice all claims for damages against one another in order
for negotiations to proceed with respect to proposals for The Aircraft Lessor to
lease three hush-kitted aircraft to the Company, either by arranging for the
hush-kitting of existing aircraft or the replacement of existing leased aircraft
with hush-kitted aircraft. Either party may initiate new court proceedings to
reassert the dismissed claims if agreement is not reached on the aircraft
hush-kitting.
REI Investment Agreement
On July 1, 1996, the Company entered into the REI Investment Agreement with
Recovery Equity Investors II, L.P., a California-based investment fund ("REI"),
pursuant to which REI purchased $2,000,000 principal amount of the Company's 6%
Convertible Notes for a purchase price of $1,995,000. The Convertible Notes
provide for the conversion thereof, at REI's option, into either (i) the
Company's Class C Common Stock at a conversion price of $1.00 per share, or
(ii), if the shareholders of the Company approve the Amended and Restated
Certificate of Incorporation (the "Restated Certificate") described under
Proposal 1 in this Proxy Statement, after the filing of the Restated Certificate
with the New Jersey Secretary of State, convertible preferred stock having the
rights, designations and preferences summarized above as part of Proposal 1
under the subheading "- Class A
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Convertible Preferred Stock", at a conversion price of $1.00 per share.
Pursuant to the REI Investment Agreement, two persons designated by REI,
Jeffrey A. Lipkin and Joseph J. Finn-Egan, have been elected to the Company's
15-member Board of Directors. If REI acquires Convertible Preferred Stock, the
terms thereof will provide for continued Board representation described below.
If and when a Qualifying Public Offering (as such term is defined above as part
of Proposal 1 under the subheading "- Class A Convertible Preferred Stock")
occurs, the Convertible Preferred Stock will, except in certain circumstances,
automatically convert into Class C Common Stock. Thereafter REI and certain
affiliates of REI who may hold Class C Common Stock issued upon conversion of
Convertible Preferred Stock ("Conversion Shares"), shall have a nonassignable
right to cause the Corporation to nominate one director for each 10% of the
total outstanding shares of Class C Common Stock represented by the Conversion
Shares held by REI and its affiliates, but no more than three directors, and to
have the Voting Trustee vote for such nominee as long as the Voting Trust
exists.
Under the REI Investment Agreement, REI purchased for $5,000 options to
invest an additional $8 million in the Company no later than March 15, 1997,
consisting of: (i) an option to purchase, exercisable on or before December 31,
1996, an additional $2 million principal amount of Additional Convertible Notes
for a purchase price of $2 million, and (ii) an option to purchase, exercisable
on or before March 15, 1997, up to 6 million shares of the Company's Class A
Convertible Preferred Stock for a purchase price of $6 million. The conversion
price on both the Additional Convertible Notes and the Convertible Preferred
Stock is also $1.00 per share, subject to certain adjustments. On July 24, 1996,
REI exercised its option to purchase the Additional Convertible Notes for
$2 million.
If REI immediately converted its Convertible Notes, it would own 4 million
shares of Class C Common Stock, representing approximately 51.1% of the combined
voting power of all classes of voting Common Stock which would then be
outstanding. The Voting Trust, which now has the power to vote all 2,009,208
shares of the Company's Class A Common Stock, would in such case represent
approximately 25.6% of the combined voting power of all classes of voting stock.
Assuming exercise of all 3,216,676 outstanding warrants to purchase Class A or
Class C Common Stock, and the issuance of 950,000 shares issuable upon
conversion of other outstanding convertible notes, REI's percentage ownership
upon immediate conversion would be 33.3% of the combined voting power all
classes of voting stock, and the Voting Trust would have the right to vote
shares representing approximately 29.4% of the combined voting power of all
classes of voting stock.
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<PAGE>
REI might not be considered a citizen of the United States as such term is
defined under the Federal Aviation Administration Authorization Act of 1994.
Under the REI Investment Agreement, REI's ability to acquire equity in the
Corporation or to acquire or exercise control of the Corporation is limited so
as not to cause the Corporation to be or become in breach of applicable laws and
restrictions prohibiting and restricting foreign ownership or control of the
Corporation as a U.S. air carrier (such laws and restrictions referred to herein
as the Foreign Ownership Restrictions).
OTHER MATTERS
1997 SHAREHOLDER PROPOSALS
Shareholder proposals submitted for inclusion in the Proxy Statement of the
Board of Directors for the 1996 Annual Meeting of Shareholders, must be received
by the Corporation at Hemisphere Center, Routes 1 & 9 South, Newark, New Jersey
07114, on or before December 20, 1996.
GENERAL
The cost of this solicitation will be borne by the Corporation. Brokers
will be asked to forward solicitation material to be beneficial owners of stock
and will be reimbursed for their out-of-pocket expenses.
By Order of the Board of Directors
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<PAGE>
EXHIBIT A
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 one hundred fifteen million (115,000,000),
which shall consist of (A) sixty-five million (65,000,000) 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) fifty
million (50,000,000) shares of Class C Common Stock, without par value; (B)
twenty million (20,000,000) shares of Class A Convertible Preferred Stock,
without par value (the "Class A Convertible Preferred Stock") and (C) thirty
million (30,000,000) 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 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
<PAGE>
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 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.
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(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 "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),
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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 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
4
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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 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.
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(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 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
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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 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
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among the holders of Class A Convertible Preferred Stock, in proportion to the
total amounts to which the holders of all 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 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
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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 "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
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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 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
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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 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
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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
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
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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 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).
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(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 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
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Preferred Stock at the last address of such holder 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 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.
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(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 (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.
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(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 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
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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.
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
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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.
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
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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 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.
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(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
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 fifteen (15), 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
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JOHN G. MURPHY JOSEPH J. FINN-EGAN
35 Earle Avenue c/o Recovery Equity Investors II, L.P.
Rockville Centre, NY 11570 901 Mariner's Island Blvd.
Suite 465
San Mateo, CA 94404-1592
JEFFREY A. LIPKIN
c/o Recovery Equity Investors II, L.P.
901 Mariner's Island Blvd.
Suite 465
San Mateo, CA 94404-1592
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 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
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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 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 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,
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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.
By:
--------------------------------
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KIWI INTERNATIONAL AIR LINES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
Section 1. PURPOSE.
The purpose of the KIWI International Air Lines, Inc. 1996 Employee Stock
Purchase Plan (the "Plan") is to promote the interests of KIWI International Air
Lines, Inc., a New Jersey corporation (the "Company"), and all subsidiaries
thereof by providing an opportunity to selected employees, officers and
directors of the Company or any subsidiary thereof as of the date of the
adoption of the Plan or at any time thereafter, and consultants or advisors
rendering bona fide services to the Company or any subsidiary thereof, to
acquire Common Stock of the Company. By encouraging such stock ownership, the
Company seeks to attract, retain and motivate such employees and persons and to
encourage such employees and persons to devote their best efforts to the
business and financial success of the Company.
Section 2. DEFINITIONS.
For purposes of the Plan, the following terms used herein shall have the
following meanings, unless a different meaning is clearly required by the
context.
"Award" shall mean an award of the right to purchase or otherwise acquire
Common Stock granted pursuant to the Plan.
"Award Agreement" shall mean a written agreement, contract or other
instrument or document evidencing an Award.
"Board of Directors" shall mean the Board of Directors of the Company.
"Book Value" of a share of Common Stock shall mean, as of any date, the
aggregate book value of all series of common stock of the Company, divided by
the total number of issued and outstanding shares of all series of common stock
of the Company as of such date, determined on the basis of the Company's audited
financial statements as of such date.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Class A Common Stock" shall mean the Class A Common Stock, no par value,
of the Company, which is subject to an Award under this Plan, or the Class A
Common Stock, no par value, of the Company, as a class, as the context may
require.
"Class C Common Stock" shall mean the Class C Common Stock, no par value,
of the Company, which is subject to an Award
<PAGE>
under this Plan, or the Class C Common Stock, no par value, of the Company, as a
class, as the context may require.
"Common Stock" shall mean the Class A Common Stock and/or the Class C
Common Stock which is subject to awards granted under this Plan, or the Class A
Common Stock and/or the Class C Common Stock as separate classes or a single
class, as the context may require.
"Disability" shall mean permanent and total disability within the meaning
of Section 22(e)(3) of the Code.
"Eligible Person" shall mean any Employee, director and officer of the
Company, and any consultant or advisor rendering bona fide services to the
Company or any Subsidiary.
"Employee" shall mean any person who is employed by the Company or any
Subsidiary, on a full-time or part-time basis.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Common Stock shall mean, as of any day,
the average of the last sale prices of sales of shares of Common Stock on all
national securities exchanges on which the Common Stock may at the time be
listed or, if there shall have been no sales on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on such day the Common Stock shall not be so listed, the last sale
price on the NASDAQ system on such day, or, if there shall have been no sales on
such day, the average of the representative bid and asked prices quoted in the
NASDAQ system as of 3:30 p.m., New York time, on such day, or, if on such day
the Common Stock shall not be quoted in the NASDAQ system, the average of the
high and low bid and asked prices on such day in the over-the-counter market as
reported by National Quotation Bureau Incorporated, or any similar successor
organization. If at any time the Common Stock is not listed on any national
securities exchange or quoted in the NASDAQ system or the over-the-counter
market, the Fair Market Value of the shares of Common Stock subject to an Award
shall be the Fair Market Value thereof determined by the Board of Directors in
its absolute discretion, exercised in good faith.
"Participant" shall mean any Eligible Person to whom an Award is granted
pursuant to the Plan.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, as amended, and any successor to
such Rule.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Plan Committee" shall mean the committee of the Board of Directors
referred to in Section 5 hereof.
"Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
capital stock in one of the other corporations in such chain.
"Transfer" shall mean sell, assign, transfer, pledge, convey or otherwise
dispose of, or subject to any lien, encumbrance or security interest of any
kind.
Section 3. ELIGIBILITY.
Subject to Section 6(a), Awards may be made to any Eligible Person. The
Board of Directors shall have the sole authority to select the Eligible Persons
to whom Awards are to be granted hereunder. No person shall have any right to
participate in the Plan. Any Eligible Person selected by the Board of Directors
for participation during any one period will not by virtue of such participation
have the right to be selected as a Participant for any other period.
Section 4. COMMON STOCK SUBJECT TO THE PLAN
4.1. NUMBER OF SHARES. The total number of shares of Class A Common Stock
for which Awards may be granted under the Plan shall not exceed in the aggregate
three million four hundred thousand (3,400,000) shares (subject to adjustment as
provided in Section 8 hereof), and the total number of shares of Class C Common
Stock for which Awards may be granted under the Plan shall not exceed in the
aggregate one hundred thousand (100,000) shares (subject to adjustment as
provided in Section 8 hereof). If any shares of Common Stock subject to an Award
are forfeited prior to the time such shares are issued by the Company to the
Participant under the terms of the Award, such shares shall again become
available for grant pursuant to the Plan.
4.2 SHARES AVAILABLE. The shares of Common Stock that may be subject to
Awards granted under the Plan may be either authorized and unissued shares or
shares reacquired at any time and now or hereafter held as treasury stock, as
the Board of Directors may determine.
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Section 5. ADMINISTRATION OF THE PLAN.
5.1 ADMINISTRATION BY BOARD OF DIRECTORS OR COMMITTEE. The Plan shall be
administered by the Board of Directors or, if established at any time by the
Board of Directors, by a committee thereof, the members of which shall be
appointed by and serve at the pleasure of the Board of Directors (the "Stock
Plan Committee"). The Stock Plan Committee shall consist of two or more persons,
all of whom shall be "disinterested persons" within the meaning of Rule 16b-3,
and once constituted, the Plan shall be thereafter be administered by the Stock
Plan Committee, for so long as the Board of Directors deems it desirable for the
Plan to comply with and qualify under Rule 16b-3. So long as the Plan is
administered in accordance with Rule 16b-3, persons serving or designated to
serve as members of the Committee shall not be granted Awards under the Plan. As
used herein, except in Sections 14 ("Amendment of the Plan"), 16 ("Termination
of the Plan") and 17 ("Effective Date of the Plan"), references to the Board of
Directors shall mean the Board of Directors or the Committee, whichever is then
acting with respect to the administration of the Plan.
5.2 INTERPRETATION. The Board of Directors shall have full authority to
interpret and construe the Plan and any provision thereof, any Award granted
under the Plan or any Award Agreement. The Board of Directors shall have the
authority to adopt, modify or rescind from time to time such rules and
regulations, not inconsistent with the provisions of the Plan, as it may deem
advisable to carry out the purposes of the Plan.
5.3 FINALITY. The interpretation and construction by the Board of Directors
of any provision of the Plan or any rule or regulation adopted thereunder, or of
any Award or Award Agreement, shall be final and conclusive upon all parties.
5.4 AUTHORITY OF THE BOARD OF DIRECTORS. The Board of Directors shall have
the sole authority and discretion under the Plan to take the following actions,
in each case subject to and consistent with the provisions of the Plan: (i) to
select the Participants who are granted Awards under the Plan; (ii) to determine
the number of Awards and the time or times Awards shall be made; (iii) to
establish the terms, conditions, restrictions and limitations of any Award,
including without limitation, (A) the number of shares of Common Stock to be
covered by each Award; (B) the amount to be paid by a Participant to acquire
shares of Common Stock pursuant to an Award; (C) the form of the consideration
that may be used to purchase shares of Common Stock pursuant to any Award
(including, without limitation) the circumstances under which the Company's
issued and outstanding shares of Common Stock may be used by a Participant to
purchase the Common Stock subject to an Award and the circumstances under which
a Participant may elect to
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purchase shares pursuant to an Award by delivery of Participants promissory
note); (D) restrictions or limitations on the vesting of shares of Common Stock
subject to an Award, including by way of illustration and not limitation,
forfeiture and vesting provisions (which may be contingent upon the
Participant's continued employment by the Company or any Subsidiary, the
Participant achieving specified performance goals, the Company meeting specified
financial goals, a change of control of the Company, or other specified events)
and the conditions for the lapse or waiver of such restrictions or limitations,
(E) restrictions or limitations on the rights of a Participant as a holder of
shares of Common Stock acquired pursuant to an Award, including restrictions and
limitation on the right to vote or receive dividends or other distributions in
respect of such shares and (F) Transfer restrictions, including the conditions
upon which shares of Common Stock acquired pursuant to an Award may be
Transferred or shall be subject to repurchase by the Company or subject to a
right of first refusal of the Company (as well as the terms and conditions of
any such right of first refusal); (iv) to prescribe the form of any Award
Agreement, which not need be identical for each Participant; (v) to require that
any recipient of an Award become a party to any stockholders' or voting trust
agreement to which the Company or any subsidiary is a party; (vi) to modify or
accelerate the time at which any or all restrictions, limitations or conditions
imposed with respect to any shares of Common Stock subject to an Award will
lapse or waive any such restrictions, limitations or conditions; (vii) to
determine the Book Value or the Fair Market Value of the Common Stock for
purposes of the Plan and any Award or Award Agreement; and (viii) to determine
all other matters to be determined in connection with an Award and the
administration of the Plan.
Section 6. SPECIFIC TERMS AND CONDITIONS OF AWARDS. The Board of Directors
shall grant Awards to Participants on the following terms and conditions:
(a) Awards of Class A Common Stock shall be made only to Eligible Persons
who are Employees at the time of the Awards and Awards of Class C Common Stock
shall be made only to Eligible Persons who are not Employees at the time of the
Award.
(b) The terms and conditions of each Award granted under the Plan shall be
specified by the Board of Directors and set forth in an Award Agreement between
the Company and the Participant in such form as the Board of Directors shall
approve. The terms and conditions of any Award granted hereunder need not be
identical to those of any other Award granted hereunder. No Participant shall
have any rights to or interest in an Award until it has executed and delivered
an Award Agreement with respect to such an Award.
(c) Shares of Common Stock subject to an Award shall be subject to such
vesting conditions, restrictions on Transfer and
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other restrictions, limitations and conditions as the Board of Directors may
impose, which may lapse separately or in combination at such times, or in
installments or otherwise, as the Board of Directors shall determine at the time
of grant or thereafter.
(d) Except as otherwise determined by the Board of Directors at the time of
grant or thereafter, upon termination of employment (as determined by criteria
established by the Board of Directors) prior to the lapse or waiver of all
vesting conditions imposed on an Award, shares of Common Stock that are at the
time subject thereto shall be forfeited upon such terms and conditions as may be
contained in the Award Agreement pursuant to which such Award was granted;
provided however, that the Board of Directors may provide by rule, regulation or
in any Award Agreement that such conditions shall be waived in whole or in part
in the event of terminations resulting from specified causes, and in other cases
the Board of Directors may waive in whole or in part any restrictions or
conditions on such shares.
Section 7. TRANSFER RESTRICTIONS.
Until all restrictions, limitations and conditions imposed on any Award
have lapsed in accordance with the terms of the Plan and the Award Agreement by
which such Award was granted, the shares of Common Stock subject to such Award
shall not be Transferred otherwise than by will or the laws of descent and
distribution, except to the Company under the terms of the Plan or such Award
Agreement, provided, however, that a Participant may, in the manner established
by the Board of Directors, designate a beneficiary or beneficiaries to exercise
the rights of the Participant with respect to the Award upon the death of the
Participant. A beneficiary, guardian, legal representative or other person
claiming any rights under the Plan from or through a Participant shall be
subject to all the terms, conditions, restrictions and limitations imposed by
the Plan and any Award Agreement applicable to such Participant, as well as any
additional restrictions or limitations deemed necessary or appropriate by the
Board of Directors.
Section 8. ADJUSTMENTS.
In the event that, after the adoption of the Plan by the Board of
Directors, there shall be any change in the outstanding shares of Common Stock
by reason of merger, consolidation, reorganization, recapitalization, stock
split, combination or exchange of shares or declaration of dividends payable in
Common Stock, the Board of Directors shall appropriately adjust the number of
shares of Common Stock for which Awards may be granted under the Plan. If the
Company shall not be the surviving corporation in any merger, consolidation or
reorganization, shares of Common Stock acquired pursuant to an Award which are
converted into common stock or other securities of the surviving corporation
shall be subject
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to the same terms, conditions and restrictions as were applicable to such shares
of Common Stock immediately prior to conversion, except to the extent that such
terms, conditions and restrictions were modified as a result of such merger,
consolidation or reorganization or have lapsed. In the event that at any time an
Award is outstanding, the Company should make an extraordinary dividend or other
extraordinary distribution (whether in cash, property, securities or any
combination thereof) with respect to shares of Common Stock, or repurchase
shares of Common Stock pursuant to a tender offer or exchange offer subject to
Section 13(e) of the Exchange Act or any other offer available to substantially
all holders of the Common Stock (other than repurchases of shares of Common
Stock by the Company in open market transactions), the Board of Directors may
consider the economic impact of such share repurchases and may, in its
discretion, make such adjustments as it deems appropriate under the
circumstances.
Section 9. WITHHOLDING.
To the extent that the Company is required to withhold any Federal, state
or local taxes in respect of any Award granted hereunder or in respect of any
shares of Common Stock acquired pursuant to an Award, whether upon the lapse or
waiver of restrictions thereon or as a result of any election made by a
Participant pursuant to Section 83(b) of the Code or for any other reason, the
Company shall deduct from any payments of any kind otherwise due to such
Participant the aggregate amount of such Federal, state or local taxes required
to be so withheld or, if such payments are insufficient to satisfy such Federal,
state or local taxes, or if no such payments are due or to become due to such
Participant, then, such Participant will be required to pay to the Company, or
make other arrangements satisfactory to the Company regarding payment to the
Company of, the aggregate amount of any such taxes. At the Company's option and
only to the extent permitted by applicable law, a Participant may satisfy a
withholding tax payment obligation by electing to have the Company or any
Subsidiary apply outstanding shares of Common Stock owned by the Participant,
including shares acquired by it pursuant to an Award (provided that all
restrictions and limitations on such shares shall have lapsed or been waived),
against the taxes required to be withheld, and the shares so applied shall be
that number of shares of Common Stock the Fair Market Value of which is equal to
the tax required to be withheld (determined on the date that the amount of
withholding tax is to be determined). All matters with respect to the amount and
payment of taxes to be withheld in respect of any such compensation income shall
be determined by the Board of Directors in its sole discretion.
Section 10. EVIDENCE OF AWARDS; STOCK CERTIFICATES
Awards may be evidenced in any manner the Board of Directors deems
appropriate, including without limitation, Award
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Agreements, book entry registration or the issuance of stock certificates.
Certificates evidencing shares of Common Stock acquired pursuant to an Award
shall bear an appropriate legend referring to the restrictions imposed on such
Stock and such other matters as the Board of Directors may determine. The Board
of Directors may require that stock certificates or other instruments evidencing
the shares of Common Stock issued in respect of Awards shall be held by the
Company or other person, until all restrictions, limitations and conditions
thereon shall have lapsed.
Section 11. COMPLIANCE WITH SECURITIES LAWS
If the shares of Common Stock that have been issued to a Participant
pursuant to the Plan have not been registered under the Securities Act pursuant
to an effective registration statement, such Participant, if the Board of
Directors deems it advisable, may be required to represent and agree in writing
that (i) no such shares acquired by the Participant pursuant to the Plan will be
sold except pursuant to an effective registration statement under the Securities
Act or pursuant to an exemption from registration thereunder and (ii) such
Participant is acquiring such shares for his or her own account and not with a
view to the distribution thereof. The Company shall have the right to require
that any certificate evidencing Common Stock issued pursuant to the Plan bear
any restrictive legend required by law, the Plan or the Award Agreement relating
to such Award. The Company may, but shall not be required to, cause shares of
Common Stock acquired pursuant to an Award to be registered under the Securities
Act or applicable state securities laws or to be listed or admitted to trading
on any established securities exchange or market in which the Common Stock is
listed or traded.
Section 12. RIGHTS AS STOCKHOLDER.
A Participant shall have absolute ownership of such shares of Common Stock,
including the right to vote and receive dividends declared thereon, from the
date on which the Participant's holding of shares of Common Stock is entered
upon the records of the Company or its duly authorized transfer agent, subject
to the terms, conditions, limitations and restrictions set forth in the Plan and
in the Award Agreement relating to such Award. Except as expressly provided in
the Plan or an Award Agreement, no adjustment shall be made for dividends or
other rights for which the record date is prior to the date on which the
Participant's holding of shares is so recorded.
Section 13. EFFECT OF THE PLAN ON EMPLOYMENT RELATIONSHIP.
Neither the Plan nor any Award granted hereunder to a Participant shall be
construed as conferring upon such Participant any right to continue in the
employ of (or otherwise provide
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services to) the Company or any Subsidiary, or limit in any respect the right of
the Company or any Subsidiary to terminate such Participant's employment or
other relationship with the Company or such Subsidiary, as the case may be, at
any time.
Section 14. AMENDMENT OF THE PLAN.
The Board of Directors may amend the Plan from time to time as it deems
desirable, provided, however, that, if required by (i) the certificate of
incorporation or by-laws of the Company, (ii) any stockholders' or voting trust
agreement to which the Company is a party or (iii) Rule 16b-3 (if the Board of
Directors has determined that the Plan should comply with and be qualified under
Rule 16b-3), the Board of Directors shall not amend the Plan without the
approval of stockholders, to the extent required thereby. No amendment made
after the date an Award is made shall adversely affect any right of a
Participant with respect to such Award without the written consent of such
Participant.
Section 15. EXPENSES INDEMNITY
(a) All expenses and liabilities incurred in the administration of the Plan
shall be borne by the Company. The Board of Directors may employ attorneys,
consultants, accountants or other persons in connection with the administration
of the Plan, and shall be entitled to rely upon the advice, opinions or
valuations of any such persons.
(b) No member of the Board of Directors shall be liable for any action,
determination or interpretation taken or made in good faith with respect to the
Plan or any Award granted thereunder.
(c) Each member of the Board of Directors or the Stock Plan Committee
acting in the administration of the plan shall be indemnified by the Company
from all claims, liabilities and expenses he or she may suffer or incur by
reason thereof, to the fullest extent permitted by the New Jersey Business
Corporation Act.
Section 16. TERMINATION OF THE PLAN.
The Board of Directors may terminate the Plan at any time. Unless the Plan
shall theretofore have been terminated by the Board of Directors, the Plan shall
terminate ten years after the date of its initial adoption by the Board of
Directors. No Award may be granted hereunder after termination of the Plan. The
termination of the Plan shall not alter or impair any rights or obligations
under any Award theretofore granted under the Plan.
Section 17. EFFECTIVE DATE OF THE PLAN
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The Plan was adopted by the Board of Directors on April 23, 1996 and shall
be effective as of May 1, 1996, subject to approval on or before May 1, 1997 by
the holders of at least 51% of all classes of capital stock of the Company
present and voting at a meeting of the stockholders of the Company for such
purpose; provided, however, that the failure to obtain such stockholders'
approval within the period specified shall not affect the validity of any Award
granted prior to the earlier to occur of: (i) the date of the meeting at which
stockholders take action to disapprove the Plan, or (ii) May 1, 1997, or any
Common Stock issued pursuant to any such Award.
* * * * *
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EXHIBIT C
KIWI INTERNATIONAL AIR LINES, INC.
1996 STOCK OPTION PLAN
Section 1. Purpose. The purpose of the KIWI International Air Lines, Inc.
Stock Option Plan (the "Plan") is to promote the interests of KIWI International
Air Lines, Inc., a New Jersey corporation (the "Company"), and any and all
subsidiaries thereof, by providing an opportunity to selected employees,
officers and directors of the Company and any subsidiaries thereof as of the
date of the adoption of the Plan or at any time thereafter, and other persons
rendering bona fide services to the Company or any subsidiary thereof, to
purchase Common Stock of the Company. By encouraging such stock ownership, the
Company seeks to attract, retain and motivate such employees and other persons
and to encourage such employees and other persons to devote their best efforts
to the business and financial success of the Company. It is intended that this
purpose will be effected by the granting of "non-qualified stock options" and/or
"incentive stock options" to acquire the Common Stock of the Company. Under the
Plan, the Board of Directors shall have the authority (in its sole discretion)
to grant "incentive stock options" within the meaning of Section 422(b) of the
Code or "non-qualified stock options" as described in Treasury Regulation
Section 1.83-7 or any successor regulation thereto.
Section 2. Definitions. For purposes of the Plan, the following terms used
herein shall have the following meanings, unless a different meaning is clearly
required by the context.
2.1 "Board of Directors" shall mean the Board of Directors of the Company.
2.2 "Class A Common Stock" shall mean the Class A Common Stock, no par
value, of the Company, which is subject to an Option granted under this Plan, or
the Class A Common Stock, no par value, of the Company, as a class, as the
context may require.
2.3 "Class C Common Stock" shall mean the Class C Common Stock, no par
value, of the Company, which is subject to an Option granted under this Plan, or
the Class C Common Stock, no par value, of the Company, as a class, as the
context may require.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.5 "Committee" shall mean the committee of the Board of Directors referred
to in Section 5 hereof.
2.6 "Common Stock" shall mean the Class A Common Stock and/or the Class C
Common Stock which is subject to Options granted under this Plan, or the Class A
Common Stock and/or the Class C
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Common Stock as separate classes or a single class, as the context may require.
2.7 "Disability" shall mean permanent and total disability within the
meaning of Section 22(e)(3) of the Code.
2.8 "Eligible Person" shall mean any Employee (but with respect to ISOs,
only an Employee within the meaning of clause (i) of Section 2.9) or any
consultant, advisor or other person rendering bona fide services to the Company
or any Subsidiary.
2.9 "Employee" shall mean (i) with respect to an ISO, any person who at the
time the ISO is granted is employed by the Company or any Subsidiary on a
full-time basis, and (ii) with respect to a Non-Qualified Option, any person
who, at the time the Non-Qualified Option is granted, is employed by the Company
or any Subsidiary on a full-time basis or part-time basis, and any director of
the Company or any Subsidiary.
2.10 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.11 "Fair Market Value" of a share of Common Stock shall mean, as of any
day, the average of the last sale prices of sales of shares of Common Stock on
all national securities exchanges on which the Common Stock may at the time be
listed or, if there shall have been no sales on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on such day the Common Stock shall not be so listed, the last sale
price on the NASDAQ system on such day, or, if there shall have been no sales on
such day, the average of the representative bid and asked prices quoted in the
NASDAQ system as of 3:30 p.m., New York time, on such day, or, if on such day
the Common Stock shall not be quoted in the NASDAQ system, the average of the
high and low bid and asked prices on such day in the over-the-counter market as
reported by National Quotation Bureau Incorporated, or any similar successor
organization. If at any time the Common Stock is not listed on any national
securities exchange or quoted in the NASDAQ system or the over-the-counter
market, the Fair Market Value of the shares of Common Stock subject to an Option
shall be the Fair Market Value thereof determined by the Board of Directors in
its absolute discretion, exercised in good faith.
2.12 "ISO" shall mean an Option that constitutes and is treated as an
"incentive stock option" as defined in Section 422(b) of the Code.
2.14 "Non-Qualified Option" shall mean an Option that is a "non-qualified
stock option" as described in Treasury Regulation
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Section 1.83-7 or any successor regulation thereto and that shall not constitute
nor be treated as an ISO.
2.15 "Option" shall mean any ISO or Non-Qualified Option granted to an
Eligible Person pursuant to the Plan.
2.16 "Option Agreement" shall mean a written agreement, contract or other
instrument or document evidencing an Option.
2.17 "Participant" shall mean any Eligible Person to whom an Option is
granted pursuant to the Plan.
2.18 "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, as amended, and any successor to
such Rule.
2.19 "Securities Act" shall mean the Securities Act of 1933, as amended.
2.20 "Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
capital stock in one of the other corporations in such chain.
2.21 "Transfer" shall mean sell, assign, transfer, pledge, convey or
otherwise dispose of, or subject to any lien, encumbrance or security interest
of any kind.
Section 3. Eligibility. Options may be granted to any Eligible Person. The
Board of Directors shall have the sole authority to select the Eligible Persons
to whom Options are to be granted hereunder, and to determine whether an
Eligible Person is to be granted a Non-Qualified Option, an ISO or any
combination thereof. No person shall have any right to participate in the Plan.
Any person selected by the Board of Directors for participation during any one
period will not by virtue of such participation have the right to be selected as
a Participant for any other period.
Section 4. Common Stock Subject to the Plan.
4.1 Number of Shares. The total number of shares of Class A Common Stock
for which Options may be granted under the Plan shall not exceed in the
aggregate one million four hundred thousand (1,400,000) shares (subject to
adjustment as provided in Section 7 hereof), and the total number of shares of
Class C Common Stock for which Options may be granted under the Plan shall not
exceed in the aggregate one hundred thousand (100,000) shares (subject to
adjustment as provided in Section 7 hereof).
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4.2 Shares Available. The shares of Class A Common Stock and Class C Common
Stock that may be subject to Options granted under the Plan may be either
authorized and unissued shares or shares reacquired at any time and now or
hereafter held as treasury stock, as the Board of Directors may determine. In
the event that any outstanding Option expires or is terminated for any reason,
the shares allocable to the unexercised portion of such Option may again be
subject to an Option granted under the Plan.
4.3 Special ISO Limitations.
(a) The aggregate Fair Market Value (determined as of the date an ISO is
granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by an Eligible Person during any calendar year
(under the Plan and any other plan of the Company or any Subsidiary) shall not
exceed $100,000.
(b) No ISO shall be granted to an Eligible Person who, at the time the ISO
is granted, owns (actually or constructively under the provisions of Section
424(d) of the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Subsidiary, unless the
exercise price is at least 110% of the Fair Market Value (determined as of the
time the ISO is granted) of the shares of Common Stock subject to the ISO, and
the ISO by its terms is not exercisable more than five years from the date it is
granted.
4.4 ISO Limitations Not Applicable to Non-Qualified Options.
Notwithstanding any other provision of the Plan, the provisions of Sections
4.3(a) and (b) shall not apply, nor shall be construed to apply, to any
Non-Qualified Option granted under the Plan.
Section 5. Administration of the Plan.
5.1 Administration by Board of Directors or Committee. The Plan shall be
administered by the Board of Directors or, if established at any time by the
Board of Directors, by a committee thereof (the "Stock Option Committee"), the
members of which shall be appointed by and serve at the pleasure of the Board of
Directors. The Stock Option Committee shall consist of two or more persons, all
of whom shall be "disinterested persons" within the meaning of Rule 16b-3, and
once constituted, the Plan shall be administered by the Stock Option Committee
for so long as the Board of Directors deems it desirable for the Plan to comply
with and qualify under Rule 16b-3. So long as the Plan is administered in
accordance with Rule 16b-3, persons serving or designated to serve as members of
the Committee shall not be granted Options under the Plan. As used herein,
except in Sections 13 ("Amendment of the Plan"), 15 ("Termination of the Plan")
and 16 ("Effective Date of the Plan"), references to the Board of Directors
shall mean the
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Board of Directors or the Stock Option Committee, whichever is then acting with
respect to the administration of the Plan.
5.2 Interpretation. The Board of Directors shall have full authority to
interpret and construe the Plan and any provision thereof, any Option granted
under the Plan or any Option Agreement. The Board of Directors shall have the
authority, from time to time, to adopt, modify or rescind such rules and
regulations, not inconsistent with the provisions of the Plan, as it may deem
advisable to carry out the purposes of the Plan.
5.3 Finality. The interpretation and construction by the Board of Directors
of any provision of the Plan or any rule or regulation adopted thereunder, or of
any Option or Option Agreement, shall be final and conclusive upon all parties.
5.4 Grant of Options.
The Board of Directors shall have the sole authority and discretion under
the Plan to take the following actions, in each case subject to and consistent
with the provisions of the Plan: (i) to select the Eligible Persons who are to
be granted Options under the Plan; (ii) to designate whether any Option to be
granted under the Plan is to be an ISO of a Non-Qualified Option; (iii) to
establish the number of shares of Common Stock that may be issued under each
Option; (iv) to determine the time and the conditions subject to which Options
may be exercised in whole or in part; (v) to determine the form of the
consideration that may be used to purchase shares of Common Stock upon exercise
of any Option (including the circumstances under which the Company's issued and
outstanding shares of Common Stock, or shares of Common Stock issuable upon
exercise of an Option, may be used by a Participant to purchase shares of Common
Stock in connection with the exercise of an Option); (vi) to impose restrictions
and/or conditions with respect to shares of Common Stock acquired upon exercise
of an Option; (vii) to determine the circumstances under which shares of Common
Stock acquired upon exercise of any Option may be subject to repurchase by the
Company; (viii) to determine the circumstances and conditions subject to which
shares of Common Stock acquired upon exercise of an Option may be transferred,
including, without limitation, the circumstances and conditions subject to which
a proposed sale of shares of Common Stock acquired upon exercise of an Option
may be subject to the Company's right of first refusal (as well as the terms and
conditions of any such right of first refusal); (ix) to establish vesting
provisions for any Option relating to the time when (or the circumstances under
which) the Option may be exercised by a Participant, including, without
limitation, vesting provisions that may be contingent upon (A) the continued
employment of the Participant by the Company or a Subsidiary, (B) the Company
meeting specified financial goals, (C) a change of control of the Company or (D)
the occurrence of other specified events; (x) to require that a Participant who
acquires
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Common Stock upon the exercise of an Option become a party to any voting trust
agreement or shareholders' agreement to which the Company or any Subsidiary is a
party; (xi) to accelerate the time when outstanding Options may be exercised,
(xii) to establish any other terms, restrictions and/or conditions applicable to
any Option not inconsistent with the provisions of the Plan; and (xiii) to
determine all other matters to be determined in connection with Options and the
administration of the Plan.
Section 6. Specific Terms and Conditions of Options.
6.1 All Options. The terms and conditions of each Option granted under the
Plan shall be specified by the Board of Directors and shall be set forth in a
written Option Agreement between the Company and the Participant in such form as
the Board of Directors shall approve. No Participant shall have any rights to or
interest in an Option until it has executed and delivered an Option Agreement
with respect thereto. The terms and conditions of any Option granted hereunder
need not be identical to those of any other Option granted hereunder.
Options shall be subject to the following conditions:
(a) Options to purchase Class A Common Stock shall be granted only to
Eligible Persons who are Employees at the time the Options are granted and at
the time they are exercised and Options to purchase Class C Common Stock shall
be granted only to Eligible Persons who are not Employees at the time the
Options are granted.
(b)(i) In the event the Participant shall cease to be employed by the
Company or any Subsidiary (on a full-time basis in the case of an ISO) for any
reason other than as a result of his or her death or Disability, the unexercised
portion of the Option may only be exercised within the three month period after
the date on which the Participant ceased to be so employed, and only to the
extent that the Participant could have otherwise exercised the Option as of the
date on which he or she ceased to be so employed and had not previously done so.
(ii) In the event the Participant shall cease to be employed by the Company
or any Subsidiary (on a full-time basis in the case of an ISO) by reason of his
or her Disability, the unexercised portion of the Option held by such
Participant at that time may only be exercised within one year after the date on
which the Participant ceased to be so employed, and only to the extent that the
Participant could have otherwise exercised the Option as of the date on which he
or she ceased to be so employed and had not previously done so.
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(iii) In the event the Participant shall die while in the employ of the
Company or a Subsidiary, the unexercised portion of the Option held by such
Participant at the time of his or her death may only be exercised within one
year after the date of the Participant's death, and only to the extent that the
Participant could have otherwise exercised such Option at the time of his or her
death and had not previously done so. In such event, the Option may be exercised
by the executor or administrator of the Participant's estate or by any person or
persons who shall have acquired the Option directly from the Participant by
bequest or inheritance.
(c) The Option shall not be assignable or Transferable by the Participant
otherwise than by will or the laws of descent and distribution, and during the
Participant's lifetime, the Option shall be exercisable only by the Participant.
6.2 ISOs. The terms and conditions of each ISO shall be such that each ISO
issued hereunder shall constitute and shall be treated as an "incentive stock
option" as defined in Section 422(b) of the Code.
Each ISO shall be subject to the following additional conditions:
(a) The option price of the ISO shall be fixed by the Board of Directors
but shall in no event be less than 100% (or 110% in the case of an Eligible
Person referred to in Section 4.3(b) hereof) of the Fair Market Value of the
shares of Common Stock subject to the ISO on the date the ISO is granted.
(b) The term of each ISO (including the date on which such ISO shall expire
and terminate) shall be fixed by the Board of Directors, but the term shall in
no event exceed ten years from the date on which such ISO is granted (or, in the
case of an ISO granted to an Eligible Person referred to in Section 4.3(b)
hereof, such term shall in no event exceed five years from the date on which
such ISO is granted).
6.3 Non-Qualified Options. The terms and conditions of each Non-Qualified
Option may, but need not, contain some or all of the terms and conditions which
are required for incentive stock options as defined in Section 422(b) of the
Code. The terms and conditions of any Non-Qualified Option granted hereunder
need not be identical to those of any other Non-Qualified Option granted
hereunder.
6.4 Additional Terms and Conditions. The Board of Directors may, in any
manner not inconsistent with the Plan, by way of the Option Agreement or
otherwise, establish such other terms, conditions, restrictions and/or
limitations on any Option or the exercise thereof.
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Section 7. Adjustments. In the event that, after the adoption of the Plan
by the Board of Directors, there shall be any change in the outstanding shares
of Common Stock by reason of merger, consolidation, reorganization,
recapitalization, stock split, combination or exchange of shares or declaration
of dividends payable in Common Stock, the Board of Directors shall appropriately
adjust (i) the number of shares of Common Stock (and the option price per share)
subject to the unexercised portion of any outstanding Option (to the nearest
possible full share), provided, however, that the limitations of Section 424 of
the Code shall apply with respect to adjustments made to ISOs; and (ii) the
number of shares of Common Stock for which Options may be granted under the
Plan, as set forth in Section 4.1 hereof, and such adjustments shall be
effective and binding for all purposes of the Plan. If the Company shall not be
the surviving corporation in any merger, consolidation or reorganization, shares
of common stock or other securities of the surviving corporation or any other
property into which the shares of Common Stock subject to an Option are
converted pursuant to the merger, consolidation or reorganization, shall be
subject to the same terms, conditions and restrictions as were applicable to
such shares of Common Stock immediately prior to conversion, except to the
extent that such terms, conditions and restrictions were modified as a result of
such merger, consolidation or reorganization or have lapsed. In the event that
at any time an Option is outstanding, the Company makes an extraordinary
dividend or other extraordinary distribution (whether in cash, property,
securities or any combination thereof) with respect to shares of Common Stock,
or repurchase shares of Common stock pursuant to a tender offer or exchange
offer subject to Section 13(e) of the Exchange Act or any other offer available
to substantially all holders of the Common Stock (other than repurchases of
shares of Common Stock by the Company in open market transactions), the Board of
Directors may consider the economic impact of such share repurchases and may, in
its discretion, make such adjustments to outstanding Options as it deems
equitable under the circumstances.
Section 8. Withholding. To the extent that the Company is required to
withhold any Federal, state or local taxes in respect of an Option or in respect
of any shares of Common Stock acquired upon exercise of the Option, whether as a
result of the exercise of the Option, a "disqualifying disposition" of any
shares of Common Stock acquired upon exercise of the Option (in the case of an
ISO), or for any other reason, the Company shall have the right to deduct from
any payments of any kind otherwise due to the Participant the aggregate amount
of such Federal, state or local taxes required to be so withheld or, if such
payments are insufficient to satisfy such Federal, state or local taxes, or if
no such payments are due or to become due to such Participant, then, may require
the Participant to pay to the Company, or make other arrangements satisfactory
to the Company regarding payment to the Company of, the aggregate amount of any
such taxes. A Participant may satisfy
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a withholding tax payment obligation by electing to have the Company or any
Subsidiary apply outstanding shares of Common Stock owned by the Participant, or
to be acquired by the Participant upon the exercise of the Option, against the
taxes required to be withheld, and shares so applied shall be that number of
shares of Common Stock the Fair Market Value of which is equal to the tax
required to be withheld (determined on the date that the amount of withholding
tax is to be determined). All matters with respect to the amount and payment of
taxes to be withheld in respect of any such compensation income shall be
determined by the Board of Directors, in its sole discretion.
Section 9. Regulatory Approvals. Notwithstanding anything to the contrary
contained in the Plan, the Company shall have no obligation to issue or deliver
certificates evidencing shares of Common Stock upon the exercise of an Option,
or in connection with the resale or other disposition thereof, if the Board of
Directors determines that the registration or qualification under any federal or
state law of any shares of Common Stock to be issued upon the exercise of an
Option, or the approval of any governmental agency, stock exchange or similar
organization, is necessary as a condition of or in connection with the issuance
or delivery of such shares.
Section 10. Compliance with Securities Laws. If the shares of Common Stock
that have been issued to a Participant pursuant to the Plan have not been
registered under the Securities Act pursuant to an effective registration
statement, such Participant, if the Board of Directors deems it advisable, may
be required to represent and agree in writing that (i) no such shares acquired
by the Participant pursuant to the Plan will be sold except pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration thereunder and (ii) such Participant is acquiring
such shares for his or her own account and not with a view to the distribution
thereof. The Company shall have the right to require that any certificate
evidencing Common Stock issued pursuant to the exercise of an Option bear any
restrictive legend required by law, the Plan or the Option Agreement relating to
such Option. The Company may, but shall not be required to, cause shares of
Common Stock issued upon exercise of an Option to be registered under the
Securities Act or applicable state securities laws or to be listed or admitted
to trading on any established securities exchange or market in which the Common
Stock is listed or traded.
Section 11. Rights as Stockholder. The holder of an Option shall have no
rights as a stockholder with respect to any shares of Common Stock issuable upon
the exercise of an Option until the date when he or she has exercised the Option
and his or her holding of such shares is entered upon the records of the Company
or its duly authorized transfer agent. Except as expressly provided in the Plan
or an Option Agreement, no adjustment shall be made for dividends
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or other rights for which the record date is prior to the date on which the
Participant's holding of such shares is so recorded.
Section 12. Effect of the Plan on Employment Relationship. Neither the Plan
nor any Option granted hereunder to a Participant shall be construed as
conferring upon such Participant any right to continue in the employ of (or
otherwise provide services to) the Company or any Subsidiary, or limit in any
respect the right of the Company or any Subsidiary to terminate such
Participant's employment or other relationship with the Company or any
Subsidiary, as the case may be, at any time.
Section 13. Amendment of the Plan. The Board of Directors may amend the
Plan from time to time as it deems desirable; provided, however, that, the Board
of Directors shall not amend the Plan in any manner that requires the approval
of stockholders of the Company pursuant to the Code, the certificate of
incorporation or by-laws of the Company, any stockholders or voting trust
agreement to which the Company is a party or Rule 16b-3 (if the Board of
Directors has determined that the Plan should comply with and be qualified under
Rule 16b-3), unless the required approval of stockholders is obtained within the
time specified. In any event, no amendment made after the date an Option is
granted shall adversely affect any right of the Participant with respect to such
Option without the written consent of such Participant.
Section 14. Expenses, Indemnity. (a) All expenses and liabilities incurred
by the Board of Directors in the administration of the Plan shall be borne by
the Company. The Board of Directors may employ attorneys, consultants,
accountants or other persons in connection with the administration of the Plan.
The Company, and its officers and directors, shall be entitled to rely upon the
advice, opinions or valuations of any such persons.
(b) No member of the Board of Directors or the Stock Option Committee shall
be liable for any action, determination or interpretation taken or made in good
faith with respect to the Plan or any Option granted hereunder.
(c) Each member of the Board of Directors or the Stock Option Commiittee
acting in the administration of the Plan shall be indemnified and held harmless
by the Company from all claims, liabilities and expenses he or she may suffer or
incur by reason thereof, to the fullest extent permitted by the New Jersey
Business Corporation Act.
Section 15. Termination of the Plan. The Board of Directors may terminate
the Plan at any time. Unless the Plan shall theretofore have been terminated by
the Board of Directors, the Plan shall terminate ten years after the date of its
initial adoption by the Board of Directors. No Option may be granted hereunder
after termination of the Plan. The termination of the
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Plan shall not alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
Section 16. Effective Date of the Plan. The Plan shall be effective as of
April 23, 1996, the date on which the Plan was adopted by the Board of
Directors of the Company, subject to approval (not later than 12 months after
the effective date of the Plan) by the holders of at least 51% of all classes of
capital stock of the Company present and voting at a meeting of the stockholders
of the Company. No Option shall be exercisable prior to the approval of the Plan
by stockholders.
11
<PAGE>
KIWI INTERNATIONAL AIR LINES, INC.
Hemisphere Center
Route 1 and 9 South
Newark, New Jersey 07114
PROXY -- CLASS C COMMON STOCK
THIS PROXY IS SOLICITED FROM HOLDERS OF CLASS C COMMON STOCK ON BEHALF OF
THE BOARD OF DIRECTORS OF KIWI INTERNATIONAL AIR LINES, INC.
The undersigned hereby appoints JOHN G. MURPHY and JAMES PLAYER as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all of the shares of Class C Common
Stock of KIWI International Air Lines, Inc. held of record by the undersigned,
at the Annual Meeting of Shareholders of the Company to be held on September 4,
1996 or any adjournment thereof.
1. To approve the amendment and restatement of the Corporation's Certificate of
Incorporation (a copy of which Restated Certificate is annexed to the
accompanying Proxy Statement as Exhibit A), as summarized and discussed in
the Proxy Statement under Proposal I.
|_| FOR |_| AGAINST |_| ABSTAIN
2. To ratify and approve: (i) all prior issuances of rights or options to
purchase and the issuance of any securities convertible into Class A Common
Stock and Class C Common Stock; (ii) the elimination of preemptive rights as
of April 20, 1994; (iii) the increase in the number of authorized shares of
Class A Common Stock to 15,000,000 shares as of August 11, 1994; and (iv)
the creation of nine unexpired Class II directorships with terms expiring in
1997.
|_| FOR |_| AGAINST |_| ABSTAIN
3. To approve the adoption of the Corporation's 1996 Employee Stock Purchase
Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
4. To approve the adoption of the Corporation's 1996 Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
5. Election of nine (9) Class II Directors to terms expiring at the 1997 Annual
Meeting.
For all nominees listed Withhold authority to
below (except as marked vote for all nominees
to the contrary below). listed below, as a group.
|_| |_|
Instruction: To withhold authority to vote for any individual nominee write that
nominee's name on the lines provided below.
NOMINEE TERM EXPIRES
1. John G. Murphy 1997 Annual Meeting (Class II)
2. James B. Robbins 1997 Annual Meeting (Class II)
3. Cecelia Hallman 1997 Annual Meeting (Class II)
4. Jeffrey A. Lipkin 1997 Annual Meeting (Class II)
5. Joseph J. Finn-Egan 1997 Annual Meeting (Class II)
6. Russell Thayer 1997 Annual Meeting (Class II)
7. Norton Waltuch 1997 Annual Meeting (Class II)
8. Dumitru Cucu 1997 Annual Meeting (Class II)
9. Jack Gray 1997 Annual Meeting (Class II)
Withhold authority to vote for: _______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
<PAGE>
6. Proposal to ratify and approve the selection of Arthur Andersen, LLP, as the
Company's independent auditors for 1996.
|_| FOR |_| AGAINST |_| ABSTAIN
7. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This Proxy when properly signed will be voted in the manner directed herein
by the undersigned shareholder.
IF NO DIRECTION is made, this Proxy will be voted "FOR" the election of all
nine nominees for Director and "FOR" Proposals 1, 2, 3, 4 and 6.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF A CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP
OR LIMITED LIABILITY COMPANY, PLEASE SIGN IN THE ENTITY NAME BY AN AUTHORIZED
PERSON.
DATED:____________, 1996
_______________________________
(Signature)
_______________________________
(Signature if held jointly)
_______________________________
Print Name
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENVELOPE PROVIDED
