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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 0-26106
KIWI INTERNATIONAL AIR LINES, INC.
Incorporated in the State of New Jersey
22-3158467
(I.R.S. Employer
Identification Number)
HEMISPHERE CENTER
Newark, NJ 07114-0006
(Principal Executive Office)
Telephone Number: (201) 645-1133
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
As of September 30, 1996, there were outstanding 2,009,208 shares of Class
A Common Stock (no par value) and 1,824,073 shares of Class C Common Stock (no
par value) of the registrant.
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KIWI INTERNATIONAL AIR LINES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I FINANCIAL INFORMATION:
<S> <C>
ITEM 1 Financial Statements:
Statements of Operations - Three Months and Nine Months Ended
September 30, 1996 and 1995................................................ 3
Balance Sheets - September 30, 1996 and December 31,1995................... 4
Statements of Cash Flows - Nine Months Ended September 30, 1996 and
1995....................................................................... 5
Notes to Financial Statements.............................................. 6
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three and Nine Months Ended September 30, 1996 and 1995.................... 8
PART II OTHER INFORMATION:
ITEM 1 Legal Proceedings.......................................................... 12
ITEM 4. Submission of Matters to a Vote of Security Holders........................ 12
ITEM 5 Other Information.......................................................... 13
ITEM 6 Exhibits and Reports on Form 8-K........................................... 13
Signatures................................................................. 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KIWI INTERNATIONAL AIR LINES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
OPERATING REVENUE:
Passenger revenue $36,036,554 $40,729,129 $131,332,641 $115,096,895
Other revenues 1,940,172 1,665,791 9,591,396 8,205,361
Total operating income 37,976,726 42,394,920 140,924,037 123,302,256
OPERATING EXPENSES:
Flying operations 16,762,622 15,023,354 52,889,604 40,777,004
Maintenance 6,553,247 5,143,506 20,155,595 17,408,956
Passenger service 3,832,161 4,579,584 13,756,727 12,514,296
Aircraft traffic and servicing 6,780,384 6,669,101 21,060,266 18,368,482
Promotion and sales 8,196,752 8,494,665 27,810,764 24,481,192
General and administrative 2,875,429 3,341,292 9,281,545 10,287,804
Depreciation and amortization 316,532 174,537 836,236 451,850
Total operating expenses 45,317,127 43,426,039 145,790,736 124,289,584
Operating income (loss) (7,340,401) (1,031,119) (4,866,699) (987,328)
NONOPERATING INCOME (EXPENSE):
Interest expense (193,501) (140,643) (497,946) (315,711)
Interest income 63,946 115,221 292,254 287,382
Other nonoperating income
(expense) (105,387) 41,255 (227,712) 151,171
Total nonoperating income
(expense) (234,942) 15,833 (433,404) 122,842
Net income (loss) $(7,575,343) $(1,015,286) $(5,300,103) $(864,486)
Weighted average number
of shares of common
stock outstanding 3,870,036 3,873,606 3,871,623 3,867,542
Net income (loss) per
share of common stock
outstanding $ (1.96) $ (0.26) $ (1.37) $ (0.22)
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
KIWI INTERNATIONAL AIR LINES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 337,756 $ 1,114,872
Restricted cash 919,875 1,007,501
Accounts, receivable, net 10,732,141 12,849,563
Inventory 878,521 954,263
Prepaid maintenance 12,709,055 11,422,747
Prepaid expenses and other current assets 2,948,948 1,913,673
Total current assets 28,526,296 29,262,619
EQUIPMENT, at cost:
Flight and other equipment 8,214,215 6,959,490
Less: Accumulated depreciation (2,115,802) (1,347,627)
Net equipment 6,098,413 5,611,863
OTHER ASSETS 1,391,856 1,194,193
Total Assets $36,016,565 $36,068,675
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short term debt (Including current
portion of long term debt)
Note Payable - REI $ 4,700,000 $ -
Note Payable - Long Haymes
Carr LINTAS 1,915,463 -
Notes - Held by Employees 1,217,666 1,255,000
Note Payable - 10% Offering 1,175,000 1,100,000
Note Payable - Unibank 8/96 1,003,540 -
Notes Payable - Summit Bank 617,662 538,542
Other Short term Debt 562,048 796,335
Advance ticket sales 15,484,275 16,600,717
Accounts payable 11,477,513 10,952,230
Excise tax and PFC's payable 2,522,113 5,203,448
Accrued maintenance 9,382,333 8,967,502
Accrued payroll tax and employee benefits 2,676,709 2,766,565
Accrued other liabilities 8,319,560 7,393,390
Total current liabilities 61,053,882 55,573,729
LONG TERM DEBT, net of current portion
Notes Payable - Summit Bank 451,389 964,889
Other long term debt 729,325 418,010
Total long term debt 1,180,714 1,382,899
Total Liabilities 62,234,596 56,956,628
STOCKHOLDERS' INVESTMENT:
Class A Common Stock 9,982,390 9,982,390
Class C Common Stock 7,804,020 7,804,020
Stock subscriptions 483,268 513,243
Accumulated deficit (44,487,709) (39,187,606)
Net stockholders' investment (26,218,031) (20,887,953)
Total liabilities and stockholders'
investment $36,016,565 $36,068,675
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
KIWI INTERNATIONAL AIR LINES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $(5,300,103) $ (864,486)
Adjustments to reconcile net income to net cash generated by
(used in) operating activities:
Depreciation and amortization 768,175 451,910
Changes in operating assets and liabilities
(Increase) decrease in restricted cash 87,626 (64,200)
(Increase) in accounts receivable, net 2,117,422 (6,294,463)
(Increase) decrease in inventory 75,742 (157,599)
(Increase) in prepaid maintenance (1,286,308) 6,808,641
(Increase) in prepaid expenses and other current assets (1,035,275) (11,104,088)
(Increase) in other assets (197,663) (350,842)
Increase in advance ticket sales (1,116,442) 8,408,217
Increase (decrease) in accounts payable 525,283 (2,739,701)
Increase (decrease) in accrued excise tax and PFC's payable (2,681,335) 539,076
Increase in accrued maintenance 414,831 4,308,405
Increase in accrued payroll tax and employee benefits (89,856) 1,249,473
Increase in accrued other liabilities 926,170 15,112
Net cash generated by (used in) operating activities (6,791,732) 205,455
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of equipment, net (1,254,725) (1,580,436)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long term debt
REI 4,700,000 -
Long Haymes Carr LINTAS 1,915,463 -
Unibank 1,003,540 -
10% Offering 75,000 -
Repayment of borrowings on debt and capital lease obligations (394,687) (507,064)
Proceeds from issuance (return) of stock subscriptions (29,975) 52,349
Net cash used in financing activities 7,269,341 (454,715)
Decrease in cash and cash equivalents (777,116) (1,829,697)
CASH AND CASH EQUIVALENTS, beginning of period 1,114,872 2,718,132
CASH AND CASH EQUIVALENTS, end of period $ 337,756 $ 888,435
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
KIWI INTERNATIONAL AIR LINES, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
(1) OVERVIEW
The interim financial statements included herein have been prepared by
the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K filed with the SEC on April 11, 1996 (Commission File
No. 0-26106). This financial information reflects, in the opinion of management,
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position and results of operations for the interim
periods. The results of operations for such interim periods are not necessarily
indicative of the results for the full year.
(2) REORGANIZATION CASE
On September 30, 1996, the Company filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
in Newark, New Jersey (Case No. 96-28679/RG). Under Chapter 11, certain claims
against the Company in existence prior to the filing of the petition for relief
under the federal bankruptcy laws are stayed while the Company continues
business operations as Debtor-in-possession.
In the Chapter 11 case, substantially all liabilities as of the date of
the Filing are subject to resolution under a plan of reorganization to be voted
upon by the Company's creditors and stockholders and confirmed by the Bankruptcy
Court. Schedules will be filed by the Company with the Bankruptcy Court setting
forth the assets and liabilities of the Company as of the date of the Filing as
shown by the Company's accounting records. Differences between amounts shown by
the Company and claims filed by creditors will be investigated and resolved. The
ultimate amount and settlement terms for such liabilities are subject to a plan
of reorganization and accordingly, are not presently determinable.
Under the Bankruptcy Code, the Company may elect to assume or reject
leases, employment contracts, service contracts and other executory pre-petition
contracts, subject to Bankruptcy Court review. The Company cannot presently
determine or reasonably estimate the ultimate liability which may result from
the filing of claims for any rejected contracts and no provisions have yet been
made for these items.
The Bankruptcy Court authorized the Company to use the cash generated
by its operations to continue to fund its business obligations on an interim
basis, and to pay necessary operating costs. The various Bankruptcy Court
authorizations provide the Company with cash and liquidity so that it can
conduct its operations on an interim basis. Beyond the interim period currently
authorized by the Bankruptcy Court, the Company expects to fund its working
capital and capital expenditures requirements through either cash generated by
the Company's receipts or through credit facilities as necessary(see
"Discontinued Operations" and "Subsequent Event" below). However, there can be
no assurance that the Company will be able to obtain such credit facilities or,
if obtained, that such facilities will be sufficient to enable the Company to
meet its liquidity requirements. The Company's financing requirements for
long-term growth, future capital expenditures and debt service cannot be
determined until a plan of reorganization is developed and confirmed by the
Bankruptcy Court.
6
<PAGE>
(3) DISCONTINUED OPERATIONS
On September 30, 1996, the Company discontinued scheduled operations to
Orlando, Tampa, West Palm Beach, Florida, Las Vegas and Bermuda, continuing
scheduled service between Newark, NJ, Atlanta and Chicago (Midway). In all the
Company's schedule was reduced to 24 daily flights, down from 65 daily flights
in September. Only eight of its fifteen leased Boeing 727 jets, remain in
service.
(4) DEBT
During December of 1995 and January of 1996, the Company raised
$1,150,000 from a Private Note Offering. Each Unit sold under the Offering
consisted of: i) $25,000 principal amount of 10% Convertible Secured Notes due
June 1, 1996, convertible into Class A or C Common Stock at $5.00 per share, and
ii) five year warrants to purchase 5,000 shares of Class A or C Common Stock at
$5.00 per share. The Company paid the entire outstanding $1,150,000 principal
amount and all accrued interest on June 5, 1996.
During June 1996, the Company offered $2,000,000 and sold $975,000
principal amount of its 10% Convertible Unsecured Notes due October 15, 1996.
These notes allow the holder thereof to convert the principal amount thereof
into Class A or Class C Common Stock at a conversion price of $1.00 per share.
As of July 17, 1996 the Company offered the remaining $1,025,000 of its
10% Convertible Unsecured Notes with a later maturity date of March 15, 1997, as
required by an agreement with Recovery Equity Investors II, L.P. ("REI"), a
California based investment fund. During August 1996, the Company sold $200,000
of its these notes. As of September 30, 1996 the remaining $825,000 of its 10%
Convertible Unsecured Notes with a later maturity date of March 15, 1997, remain
unsold.
On July 1, 1996 and July 24, 1996, the Company received investments of
$2.0 million each, for an aggregate of $4.0 million, from REI. These investments
were in the form of 6% Convertible Unsecured Notes due March 15, 1997. The 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)
convertible preferred stock ("Convertible Preferred Stock").
On September 3, 1996, the Company received an investment of $700,000
from REI. This investment was in the form of 7% Secured Notes due October 21,
1996. The notes were to be repaid in seven consecutive weekly payments of
$100,000 on Monday of each week, commencing on September 7, 1996.
During July 1996, the Company converted a $2.25 million account payable
to Long Haymes Carr LINTAS to a 8.25% note payable. The note was to be paid in
22 equal weekly installments of $100,000 commencing July 10, 1996 and a final
payment of $50,000 plus all accrued interest on this note to be paid on the
maturity date. During August 1996, the Company converted a $1 million account
payable to Unibank A/S to a 12% Unsecured Note with monthly installments
scheduled to commence on October 2, 1996.
(6) SUBSEQUENT EVENT
On October 15, 1996 the Company halted all scheduled service. The
Company had insufficient working capital to continue to operate scheduled
service between Atlanta, Chicago and Newark. Since October 15, 1996 the Company
continues to operate charter flights. The Company continues its efforts to
arrange credit facilities.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
On September 30, 1996, the Company filed a petition for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court in Newark, NJ (the "Filing"). The Company chose to seek court protection
from creditors in order to conduct their operations while seeking financing in
preparation of the creation of a reorganization plan. As part of the Filing, the
Bankruptcy Court authorized the Company to use the cash generated by the
Company's receipts to fund its business obligations on an interim basis. While
the Company would have preferred, and attempted, to reorganize their operations
in a non-bankruptcy court proceeding, it viewed the Filing as the only viable
alternative given the adverse impact on the business of inadequate liquidity.
After recording three consecutive profitable quarters the Company had
received aggregate investments of $4.0 million, from REI in July. However, REI
declined to exercise its option to invest up to an additional $6 million,
following a period in which a ValuJet plane crashed in the Florida Everglades,
killing all 110 people on board. The crash caused a general concern about the
safety of discount carriers, affecting the number passengers electing to fly
low-fare airlines. Additional concerns about airline safety were raised after
the TWA Flight 800 crash in July. Although, the Company retains a perfect safety
record, zero accidents and injuries in its four years, it was adversely affected
by such general concerns. Also, the Federal Aviation Administration requested
the Company to ground four of its aircraft amid questions about pilot training
and record keeping, forcing the Company to reduce its schedule 20 percent during
the highly profitable vacation season. The Company was permitted to resume full
operations on August 20, 1996. Those two events seriously reduced the number of
passengers projected to have flown with the Company in the third quarter.
Undercapitalized, the Company had been negotiating new payment schedules with
its vendors, but the Company's largest aircraft lessor, Pegasus Capital
Corporation ("Pegasus"), refused to re-negotiate a restructuring plan. The
Company chose, as the only viable alternative, to seek court protection from
creditors in order to conduct its operations while seeking financing. The
Company is currently seeking at least $5 million in debtor-in-possession
financing in an effort to reorganize.
The following discussion provides an assessment of the Company's
results of operations, financial condition and liquidity and capital resources
and should be read with the Unaudited Consolidated Financial Statements of the
Company and Notes thereto included elsewhere herein. (All references to
"Note(s)" are the Notes to Unaudited Consolidated Financial Statements.)
8
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
The Company recorded net losses of $7.5 million and $4.9 million on
revenues of $38.0 million and $140.9 million for the three and nine months ended
September 30, 1996, respectively. The figures for the nine month period include
a positive one-time $2.5 million adjustment to other operating revenue. The
revenue adjustment reflects the recognition, in the second quarter of 1996, of
revenue from tickets sold in periods prior to June 30, 1995. The revenue was not
previously realized because it represented sales to ticket holders who had not
yet used their tickets. The revenue is now being recognized because sufficient
time has elapsed that the ticket holders are no longer eligible to request a
refund. Prior to the adjustment, total revenues for the nine months ended
September 30, 1996 were $138.4 million, and operating losses were $7.4 million.
The Company experienced improvement in its load factors for both the
three and nine month periods ended September 30, 1996. For the three and nine
months ended September 30, 1996, load factors increased to 55.7% and 59.7%,
compared to 48.7% and 52.2% for the same periods in 1995. The increase in load
factors was offset by a decrease in yield per revenue passenger mile (RPM). The
Company's yield per RPM decreased by 16.1% to $0.1159 from $0.1382 for the three
months ended September 30, 1996. Yield per RPM also decreased by 13.7% to
$0.1191 from $0.1380 for the nine months ended September 30, 1996. The decrease
in the Company's yield per RPM is attributable to a reduction in average fares
of approximately $11 to $13 between 1995 and 1996, and the commencement of
service to Las Vegas from Atlanta and Chicago in February of 1996.
While the Company has experienced improvement since 1994, cumulative
operating losses since inception are significant. At September 30, 1996, the
Company's accumulated deficit was approximately $44,487,000. The Company has
limited resources and will be dependent upon future successful financing, both
to effectively manage the accumulated deficit and for future capital expansion
requirements.
RESULTS OF OPERATIONS
The table below sets forth selected financial data of the Company for
the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
Percent of Percent of Percent of Percent of
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Operating Revenues $37,976,726 100.0% $42,394,920 100.0% $140,924,037 100.0% $123,302,256 100.0%
Expense Category:
Flight operations 7,047,183 18.6% 6,859,118 16.2% 21,619,282 15.3% 18,664,702 15.1%
Aircraft fuel 9,715,439 25.6% 8,164,236 19.3% 31,270,322 22.2% 22,112,302 17.9%
Maintenance 6,553,247 17.3% 5,143,506 12.1% 20,155,595 14.3% 17,408,956 14.1%
Passenger services 3,832,161 10.1% 4,579,584 10.8% 13,756,727 9.8% 12,514,296 10.1%
Aircraft and traffic services 6,780,384 17.9% 6,669,101 15.7% 21,060,266 14.9% 18,368,482 14.9%
Sales and marketing 2,082,784 5.5% 1,795,071 4.2% 6,601,504 4.7% 5,568,710 4.5%
Reservations/Revenue management 6,113,968 16.1% 6,699,594 15.8% 21,209,260 15.1% 18,912,482 15.3%
General and Administrative services 2,875,429 7.6% 3,341,292 7.9% 9,281,545 6.6% 10,287,804 8.3%
Depreciation and amortization 316,532 0.8% 174,537 0.4% 836,236 0.6% 451,850 0.4%
Total operating expenses $45,317,127 119.3% $43,426,039 102.4% $145,790,737 103.5% $124,289,584 100.8%
</TABLE>
Total operating revenue for the nine months ended September 30, 1996
increased 14.3% as compared to the same period in 1995, to $140,924,037. The
total number of passengers carried increased to 1,497,394 for the nine months
ended September 30, 1996 as compared to 1,167,751 for the corresponding period
in 1995. However, total operating revenue for the three months ended September
30, 1996 decreased 10.4% as compared to the same period in 1995, to $37,976,726.
Although operations had increased in 1996, the FAA's action against the Company
reduced operations by 20% in the third quarter and the TWA and ValuJet incidents
seriously affected bookings in the three months ended September 30, 1996.
9
<PAGE>
The increase in revenue for the nine month period was due primarily to
the growth of the Company's operations. Total available seat miles (ASM)
increased 15.7% to 1,848,267,000 and revenue passenger miles (RPM) increased
32.2% to 1,102,871,000 for the nine months ended September 30, 1996. For the
three months ended September 30, 1996 total available seat miles (ASM) decreased
0.05% to 558,361,000 and revenue passenger miles (RPM) increased 0.85% to
310,952,000 for the three months ended September 30, 1996. These RPM and ASM
figures equate to average load factors of 55.7% and 59.7% for the three and nine
months ended September 30, 1996, respectively. The average passenger fare
decreased 13.7% and 11.0% to $83.05 and $87.71 for the three and nine months
ended September 30, 1996, from $96.26 and $98.56 for the comparable periods in
1995. This decrease can be attributed in part to a more competitive fare
environment in the Company's markets during 1996, in comparison with 1995.
The Company had an average cost per available seat mile (ASM) of
$0.0812 and $0.0789 for the three and nine month periods ended September 30,
1996, compared to $0.0739 and $0.0802 for the same periods in 1995. The decrease
in cost per ASM for the nine month period indicates the Company's efforts to
control costs and keep them in line with the high level of service provided. The
increase in cost per ASM for the three month period appears to deter from this
effort however, the reduction in operations due to the FAA's actions against the
company reduce the ASM's, while maintaining costs, leading to the overall
increase in cost per ASM for the three month period ended September 30, 1996.
For the nine month period ended September 30, 1996 all expense
categories related to flight operations and passenger services have increased
due to the increase in the volume of operations. The average number of flights
per month increased to 1,944 in 1996 from 1,626 in 1995. Aircraft fuel expense
also increased significantly due to a 18% increase in the price per gallon of
aircraft fuel for the three and nine months ended September 30, 1996 compared to
the same periods in 1995. The average fuel price increased approximately $0.10
per gallon in 1996 of which $0.043 per gallon was a result of the discontinuance
of the federal fuel tax exemption in October of 1995.
All other expenses increased through the ordinary course of business,
consistent with the growth in the number of flights operated and passengers
carried by the Company between the periods in 1996 compared to 1995.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had cash and cash equivalents of
approximately $337,756 and a working capital deficit of $32,527,585. At December
31, 1995, the Company had cash and cash equivalents of approximately $1,114,872
and a working capital deficit of $26,311,110. Historically, the Company has
operated with a working capital deficit.
The Company recorded a net loss of $5.3 million, decreased prepaids and
other current assets by $1.2 million, experienced a decrease advance ticket
sales of $1.1 million and decreased prepaid maintenance, net of accrued
maintenance, by $870,000 for the nine months ended September 30, 1996. Partially
offsetting these negative cash flows, the Company decreased accounts receivable
by $2.1 million and increased accounts payable and other accrued liabilities by
$1.4 million for the nine months ended September 30, 1996. During this period,
the Company used $1.25 million, net of sales, for the purchase of equipment and
received $7.3 million in financing activities.
During 1996, the Company deposited approximately $1,075,000 into a
trust account to be used for the repayment of 10% Convertible Secured Notes
which matured on June 1, 1996. The Company used the funds accumulated in the
trust account to repay the $1,150,000 of Secured Notes. The Notes were repaid on
June 5, 1996.
10
<PAGE>
During June 1996, the Company offered $2,000,000 and sold $975,000
principal amount of its 10% Convertible Unsecured Notes due October 15, 1996.
These notes allow the holder thereof to convert the principal amount thereof
into Class A or Class C Common Stock at a conversion price of $1.00 per share.
During August 1996, the Company sold $200,000 of its 10% Convertible Unsecured
Notes due March 15, 1997. As of September 30, 1996 the remaining $825,000 of its
10% Convertible Unsecured Notes with a later maturity date of March 15, 1997,
remain unsold.
The Company is a party to an agreement with First Bank National
Association ("First Bank") pursuant to which First Bank processes certain credit
card sales for the Company. Pursuant to the agreement, the Bank holds back funds
relating to collections on account of sales slips submitted to it by the Company
as security for the due and punctual payment of and performance by the Company
of all its obligations under the agreement. The holdback amount was
approximately $5.5 million at September 30, 1996, as determined in accordance
with a formula set forth in the agreement, which is intended to cover 115% of
First Bank's estimated maximum exposure. In comparison, the holdback amount was
approximately $8.7 million at September 30, 1995.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pending litigation against the Company is currently stayed by reason
of the Filing, and is subject to resolution under a plan of reorganization.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on September 20,
1996 in order to elect directors and to vote upon certain other proposals. Set
forth below is a description of the results of voting at the meeting with
respect to the election of directors and such other proposals.
I. Proposal to approve the amendment and restatement of the Corporation's
Certificate of Incorporation.
FOR AGAINST
Class A 2,009,208 0
Class C 985,689 203,600
II. Proposal 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 unexplored Class II directorships
with terms expiring in 1997.
FOR AGAINST
Class A 2,009,208 0
Class C 985,689 203,600
III. Proposal to approve the adoption of the Corporation's 1996 Employee
Stock Purchase Plan.
FOR AGAINST
Class A 2,009,208 0
Class C 997,889 184,900
IV. Proposal to approve the adoption of the Corporation's 1996 Stock
Option Plan.
FOR AGAINST
Class A 2,009,208 0
Class C 997,889 184,900
V. Election of nine (9) Class II directors to terms expiring at the 1997
Annual Meeting.
Nominee Votes
For Withhold
John G. Murphy Class A 2,009,208 - 0 -
Class C 995,789 193,500
James B. Robbins Class A 2,009,208 - 0 -
Class C 901,389 287,900
Cecelia Hallman Class A 2,009,208 - 0 -
Class C 1,001,889 193,400
12
<PAGE>
Jeffrey A. Lipkin Class A 2,009,208 - 0 -
Class C 1,097,189 92,100
Joseph J. Finn-Eagan Class A 2,009,208 - 0 -
Class C 1,097,189 92,100
Russell Thayer Class A 2,009,208 - 0 -
Class C 1,011,289 178,000
Norton Waltuch Class A 2,009,208 - 0 -
Class C 1,079,489 109,800
Dumitru Cucu Class A 2,009,208 - 0 -
Class C 1,088,389 100,900
Jack Gray Class A 2,009,208 - 0 -
Class C 889,389 299,900
The terms of office of each of the following directors (who were not
up for election) continued after the meeting: Alan Halpert, Bernard Mann,
James Hawks, and Donald Grisham.
VI. Proposal to ratify and approve the selection of Arthur Anderson, LLP, as
the Company's independent auditors for 1996.
FOR AGAINST
Class A 2,009,208 0
Class C 1,186,289 2,200
ITEM 5. OTHER INFORMATION
COMMENCEMENT OF CHAPTER 11 REORGANIZATION CASE
On September 30, 1996, the Company filed a petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code (Case No. 96-28679/RG). Upon filing
the petition, the Company retained possession of its assets and properties as
debtor-in-possession.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith:
3.1 Amendment and Restated Certificate of Incorporation
3.2 Amended and Restated By-Laws
(b) Reports of Form 8-K Filed During the Quarter Ended June 30, 1996
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIWI INTERNATIONAL AIR LINES, INC.
November 15, 1996 By: /S/ JOHN G. MURPHY
------------------
John G. Murphy, President
and Chief Executive Officer
November 15, 1996 By:/S/ GREGORY W. BUHLER.
----------------------
Gregory W. Buhler, Vice President
General Counsel and Secretary
14
<PAGE>
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 eighty three million
(83,000,000), which shall consist of (A) fifty million (50,000,000) 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)
thirty-five million (35,000,000) shares of Class C Common Stock, without par
value; (B) twelve million (12,000,000) shares of Class A Convertible Preferred
Stock, without par value (the "Class A Convertible Preferred Stock") and (C)
twenty-one million (21,000,000) shares of stock which shall be without
designation until further action by the Board of Directors, subject to the
rights of the holders of Class A Convertible Preferred Stock under clause (i) of
Section 6 of the provisions of this Article Fourth setting forth the express
terms of the Class A Convertible Stock, as follows: The division of authorized
shares of such undesignated stock into class and series, the determination of
the designation of the relative rights, preferences and limitations of such
stock, and any such divisions and determinations, may be accomplished by an
amendment to this Restated Certificate of Incorporation authorized and approved
by the Board of Directors of the Corporation (without the requirement of
shareholder approval or consent).
The express terms of the Common Stock are as follows:
(a) The Class A Common Stock shall (i) be subordinate to the
Class A Convertible Preferred Stock in the event of liquidation, but
rank pari passu with the Class C Common Stock, and (ii) have dividend
rights equal to those of the Class A Convertible Preferred Stock and
the Class C Common Stock. Effective January 1, 1998 (the "Class A
Common Conversion Date"), each share of Class A Common Stock shall be
converted automatically into one share of Class C Common Stock, without
any action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent. On or after the Class A Common
Conversion Date, the Corporation shall not issue or reissue shares of
Class A Common Stock. Prior to the Class A Common Conversion Date, the
Corporation shall reserve and keep available and free of preemptive
rights out of its authorized but unissued Class C Common Stock, solely
for the purpose of effecting the conversion of the Class A Common
Stock, such number of its shares of Class C Common Stock as shall be
sufficient to effect the
<PAGE>
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.
(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), 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
<PAGE>
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 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
<PAGE>
maximum rate permitted by applicable law. The term "Prime Rate" means the
base rate on corporate loans, posted by at least 75% of the United States'
largest banks as published in the Money Rates column of the Wall Street Journal.
(e) Redemption Price. The "Redemption Price" payable with
respect to each Class A Convertible Preferred Share shall be equal to the
greater of (i) the Issue Price Per Share (as adjusted to reflect any share
split, combination, reclassification or similar event involving the Class A
Convertible Preferred Shares) plus all accrued and unpaid dividends thereon
through the date on which such Class A Convertible Preferred Stock is actually
redeemed or (ii) the per share fair market value of such Class A Convertible
Preferred Stock on the date the Redemption Election or the Holder Redemption
Election, as the case may be, is received, by the shareholder or the
Corporation, respectively, as determined in accordance with this Section 2(e) by
an appraiser mutually acceptable to the Corporation and the holders of the Class
A Convertible Preferred Stock. The fees of such appraiser shall be paid by the
Corporation. Any appraiser selected pursuant hereto shall be (x) a commercial
bank of recognized national standing with an investment banking division, (y) an
accounting firm of recognized national standing or (z) an investment banking
firm of national recognized standing. If the Corporation and the holders of
Class A Convertible Preferred Stock fail to agree, within ten days of receipt of
a Redemption Election, on an appraiser, each of the Corporation and the holders
of the Class A Convertible Preferred Stock shall select an appraiser within
three days after such ten-day period who shall select a third appraiser who
shall determine such fair market value within forty-five days after the
Redemption Notice, and the determination of such appraiser shall be final and
binding upon the Corporation and the holders of Class A Convertible Preferred
Stock. The determination of the per share fair market value of the Series A
Convertible Preferred Stock by such appraiser will not give effect to (1) the
lack of a public market for such shares, (2) the fact that such shares are not
registered under the Securities Act of 1933, as amended, or are subject to any
other restriction on transfer or (3) the fact that such shares would represent a
minority interest in the Corporation. For purposes of this Restated Certificate
of Incorporation, "Issue Price Per Share" shall be, with respect to any share of
Class A Convertible Preferred Stock, an amount equal to the Conversion Price
under the Corporation's 6% Convertible Unsecured Notes due March 15, 1997 (the
"Convertible Notes") in effect at the time of issuance of such share of Class A
Convertible Preferred Stock, provided that, for the purposes of determining the
Redemption Price of the Excess Preferred Shares (as defined in Subsection
4(k)(iii)) for the purposes of Subsection 4(k)(iii), the "Issue Price Per Share"
with respect to any Excess Preferred Share shall be an amount equal to the
weighted average of the respective Conversion Prices under the Convertible Notes
in effect at the respective times of issuance of all shares of Class A
Convertible Preferred Stock then outstanding.
(f) Redemption Procedures. On a Redemption Date, the holder of
the shares of Class A Convertible Preferred Stock being redeemed shall surrender
the certificate or certificates representing the shares being redeemed (together
with a proper assignment of such certificates to the Corporation in exchange for
payment of the applicable Redemption Price for such shares). In the event that
the Corporation is unable to pay, legally prevented from paying or fails to pay
the Redemption Price for all of the shares of Class A Convertible Preferred
Stock required to be redeemed on such Redemption Date, the Corporation shall
reissue and deliver to such holder on such Redemption Date a certificate
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,
<PAGE>
before any payment or declaration and setting apart for payment of any amount
shall be made in respect of the Common Shares of the Corporation's capital
stock, an amount equal to the higher of (i) Issue Price Per Share (as adjusted
to reflect any share split, combination, reclassification or similar event
involving the Class A Convertible Preferred Stock) plus all accrued and unpaid
dividends thereon or (ii) the amount that would be distributable to holders of
the Class A Convertible Preferred Stock if such Class A Convertible Preferred
Stock had been converted into Class C Common Shares in accordance with Section 4
hereof (such amount, the "Liquidation Preference"). In the event the assets of
the Corporation available for distribution to the holders of Class A Convertible
Preferred Stock upon any liquidation, dissolution or winding up of the
Corporation shall be insufficient to permit payment in full of the Liquidation
Preference amounts to which the holders of Class A Convertible Preferred Stock
shall be entitled, then the entire assets of the Corporation available for
distribution shall be distributed ratably among the holders of Class A
Convertible Preferred Stock, in proportion to the total amounts to which the
holders of all 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 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
<PAGE>
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
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 conversion or exchange of such
<PAGE>
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 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
<PAGE>
issuable pursuant to grants made thereunder must be for consideration in the
form of cash and/or recourse promissory note(s), (ii) in connection with the
Offerings (as defined below) and/or (iii) not exceeding an additional 91,587
shares (and like number of warrants) under the 1994 Offering (as defined below).
In case any Common Shares, Options or Convertible Securities shall be issued or
sold, in whole or in part, for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be deemed to
be the fair market value of such consideration as determined in good faith by a
majority of the Directors on the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. For
purposes of this Restated Certificate of Incorporation, the term "1994 Offering"
shall mean the 1994 unregistered offerings of certain shares of Class A Common
Stock and Class C Common Stock and a like number of warrants and certain debt
securities of KIWI (which offerings were designed to comply with the exemption
from registration with the SEC under Regulation D promulgated under the
Securities Act) and the term "Offerings" shall mean (x) offerings to (A) the
holders of approximately $1,260,000 of the Corporation's 8% 3-Year Capital Notes
pursuant to the Exchange Offer Memorandum dated as of March 15, 1996, (B)
holders of the Corporation's stock purchase warrants to reduce the warrant
exercise price to $1.00 per share, (C) employees of approximately 2,699,200
shares of Class A Common Stock for approximately $4,175,000 in cash proceeds,
the principal amount of promissory notes received and the amount of liabilities
offset by the Corporation in exchange for shares offered and sold under the
Offerings and (y) shares of the Corporation's Common Stock issuable upon the
conversion of the Corporation's 10% Convertible Unsecured Notes due October 15,
1996.
(vi) Treasury Shares. The disposition of Common Shares owned or held by
or for the account of the Corporation (other than as a result of a cancellation
of treasury shares) shall be considered an issue or sale of Common Shares for
the purpose of this Subsection 4(d).
(vii) When Adjustment is not Required. Notwithstanding any provision
herein to the contrary, no adjustment shall be made in the Conversion Price as a
result of (A) the issuance of Common Shares upon conversion of any Class A
Convertible Preferred Stock or any Convertible Notes or the issuance of
Preferred Stock upon conversion of any Convertible Notes; (B) the issuance of up
to 91,587 shares and like number of warrants issued pursuant to the 1994
Offering; (C) the offer or issuance of securities of the Corporation in
connection with the Offerings (including, without limitation, any securities
issued in connection with the Offerings under the Employee Stock Plans, as
defined below); (D) the issuance of shares of Class C Common Stock upon
conversion of Class A Common Stock into Class C Common Stock; (E) shares (or
Options to acquire shares) sold, granted or issued (as the case may be) under
the Corporation's 1996 incentive stock option plan ("ISOP") or the Corporation's
1996 employee stock purchase plan registered under the Securities Act on Form
S-8 (the "SPP", and together with the ISOP, the "Employee Stock Plans"); and/or
(F) the issuance of any Additional Securities (as such term is defined in the
Note Purchase Agreement) including, without limitation, the issuance of up to
$10,000,000 aggregate principal amount of Convertible Notes (inclusive of all
Convertible Notes previously issued) and such additional Convertible Notes as
may be issued pursuant to Subsection 4(k).
(e) Subdivision or Combination of Stock. In case the Corporation shall
at any time split or subdivide its outstanding Common Shares into a greater
number of shares, the Conversion Price for the Class A Convertible Preferred
Stock in effect immediately prior to such subdivision shall be proportionately
reduced, and, conversely, in case the outstanding Common Shares of the
Corporation shall be combined into a smaller number of shares, the Conversion
Price in 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
<PAGE>
holder's option, (A) such shares of stock, securities, cash or other property as
may be issuable or payable with respect to or in exchange for the number of
Common Shares immediately theretofore so receivable by such holder (taking into
account the anti-dilution adjustments hereof, including an immediate adjustment,
by reason of such consolidation or merger, if the value so reflected is less
than the Conversion Price in effect immediately prior to such consolidation or
merger) or (B) the Liquidation Preference to which such holder of Class A
Convertible Preferred Stock would be entitled in accordance with Section 3
hereof. In the event of a merger or consolidation of the Corporation as a result
of which a greater or lesser number of shares of common stock of the surviving
corporation are issuable to holders of Common Shares of the Corporation
outstanding immediately prior to such merger or consolidation, the Conversion
Price in effect immediately prior to such merger or consolidation shall be
adjusted in the same manner as though there were a subdivision or combination of
the outstanding Common Shares of the corporation. The Corporation shall not
effect any consolidation or merger contemplated by this Subsection 4(f) unless
prior to the consummation thereof the successor corporation (if other than the
Corporation) resulting from such consolidation or merger shall assume by written
instrument (in form and substance reasonably satisfactory to the holders of a
majority of the outstanding Class A Convertible Preferred Stock), executed and
mailed by first class mail, postage prepaid, to each holder of Class A
Convertible Preferred Stock at the last address of such holder 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.
<PAGE>
(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.
(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
<PAGE>
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 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 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;
<PAGE>
(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 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.
<PAGE>
(ii) At no time shall the number of shares of common stock issued
and issuable pursuant to grants made under the ISOP exceed in
the aggregate 10% of the then outstanding shares of Common and
Preferred Stock.
(iii) The total number of shares issued and issuable pursuant to
grants made under the SPP (other than shares issued pursuant
to the Offerings) will not exceed 1,000,000.
(c) Notwithstanding anything to the contrary in the foregoing Section
7(a), no holder of Class A Convertible Preferred Stock shall have any preemptive
right or other right to purchase any Common Shares or other securities as a
result of (A) the issuance of Common Shares upon conversion of any Class A
Convertible Preferred Stock or any Convertible Notes or the issuance of
Preferred Stock upon conversion of any Convertible Notes; (B) the issuance of up
to 91,587 shares and 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:
<PAGE>
CAPT. JOHN P. ANDERSON CAPT. JAMES B. ROBBINS
16 Diann Drive 1488 Gilbert Road
Montville, NJ 07045 Kennesaw, GA 30152
CAPT. FRED L. BARBER DUMITRU CUCU, Romaero SA
4324 Autumn Hill Drive BLVD Ficusului, NO 44, Sector 1
Stone Mountain, GA 30083 Bucharest, Romania 71544
CAPT. JACK E. GRAY II ALAN HALPERT
804 Oakdale Road, N.E. 19 Fordham Road
Atlanta, GA 30307-1200 Livingston, NJ 07039
CAPT. DON GRISHAM BERNARD MANN
3972 Estepona Avenue 1145 Buckingham Road
Miami, FL 33178 Fort Lee, NJ 07024
CECELIA HALLMAN RUSSELL THAYER
334 S. Route 100 171 Hulfish Street
Breingsville, PA 18031 Princeton, NJ 08542-3709
CAPT. JAMES B. HAWKS NORTON WALTUCH
210 Highridge Court 180 South Woodland Street
Roswell, GA 30076 Englewood, NJ 07631
JOHN G. MURPHY JOSEPH J. FINN-EGAN
35 Earle Avenue c/o Recovery Equity Investors
Rockville Centre, NY 11570 II, L.P.
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
<PAGE>
seats should become vacant prior to the 1998 Shareholder Meeting, such vacancies
shall be filed by the vote of the remaining Type Class A directors on the Board
and the term of such director filling such vacancies shall continue until the
1998 Shareholder Meeting (without the need for re-election or confirmation at
any earlier shareholders' meeting). However, prior to January 1, 1998, the
majority of Class A directors serving on the Board of Directors may vote to
remove any Class A director with or without cause.
(b) Effective as of the 1997 Shareholder Meeting (which shall occur on
or before June 30, 1997), unless there shall have occurred a Qualifying Public
Offering, members of the Board of Directors (including, without limitation,
those members elected at such 1997 Shareholder Meeting) will consist of at least
eight (8) Type Class A directors, five (5) (but no more than five) Type Class C
directors and two (2) (but no more than two) Type Preferred Class directors. Of
the Type Class A directors elected at the 1997 Shareholder Meeting, at least
five (5) such Type Class A directors shall have terms expiring effective January
1, 1998. Of the Type Class C directors elected at the 1997 Shareholder Meeting,
at least two (2) such Type Class C directors shall have terms expiring 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.
(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
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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, 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 September, 1996.
KIWI INTERNATIONAL AIR LINES, INC.
By:
John G. Murphy, President
RESTATED BY-LAWS
OF
KIWI INTERNATIONAL AIR LINES, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held either within or without the State of New Jersey,
at such time and place as the Board of Directors may designate in the call or in
a waiver of notice thereof, or in the absence of Board action designating the
time for such meeting, on the last Thursday of April of each year (or if such
day be a legal holiday, then on the next succeeding day not a holiday) at 10:00
o'clock in the forenoon, for the purpose of electing directors and for the
transaction of such other business as may properly be brought before the
meeting.
Section 2. Delayed Annual Meeting. If for any reason the annual meeting
of the stockholders shall not be held on the day designated pursuant to Section
1 of this Article, or on any subsequent day to which it shall have been duly
adjourned, such meeting may be called and held as a special meeting, and the
same proceedings may be had and the same business may be transacted at such
meeting as at any annual meeting.
Section 3. Special Meetings. Special meetings of the stockholders may
be called by the Board of Directors or by the President, at such times and at
such place either within or without the State of New Jersey as may be stated in
the call or in a waiver of notice thereof.
Section 4. Notice of Meetings. Notice of the time, place and purpose of
every meeting of stockholders shall be delivered personally or mailed not less
than ten days nor more than sixty days previous thereto to each stockholder of
record entitled to vote, at his post office address appearing upon the records
of the Corporation or at such other address as shall be furnished in writing by
him to the Corporation for such purpose. Such further notice shall be given as
may be required by law or by these Restated By-Laws. Any meeting may be held
without notice if all stockholders entitled to vote either are present in person
or by proxy, or waive notice in writing, either before or after the meeting.
Section 5. Quorum. The holders of record of at least a majority of the
shares of the stock of the Corporation issued and outstanding and entitled to
vote, present in person or by proxy, shall, except as otherwise provided by law
or by the Corporation's Certificate of Incorporation (as the same is amended and
restated from time to time the "Certificate of Incorporation") or by these
Restated By-Laws, constitute a quorum at all meetings of the stockholders; if
there be no such quorum, the holders of a majority of such shares so present or
represented may adjourn the meeting from time to time until a quorum shall have
been obtained.
Section 6. Organization of Meetings. Meetings of the stockholders shall
be presided over by the Chairman of the Board, if there be one, or if he is not
present, by the President, or if he is not present, by a chairman to be chosen
at the meeting. The Secretary of the Corporation, or in his absence an Assistant
Secretary, shall act as Secretary of the meeting, if present.
Section 7. Voting. At each meeting of stockholders, except as otherwise
provided by statute or the Certificate of Incorporation, every holder of record
of stock entitled to vote shall be entitled to one vote in person or by proxy
for each share of such stock standing in his name on the records of the
Corporation. Except as otherwise provided by statute, the Certificate of
Incorporation, or these Restated By-Laws, elections of directors shall be
determined by a plurality of the votes cast thereat (and in cases where the
Certificate of Incorporation or applicable law requires that certain directors
or class of directors be elected by a specific class of shareholders, then by a
plurality of the votes of such shareholder class cast thereat) and all other
action shall be determined by a majority of the votes cast
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at such meeting. Each proxy to vote shall be either in writing and signed, or
given by telegram, radio, radiogram, cable or equivalent communication made by
the stockholder or by his duly authorized agent.
At all elections of directors, the voting shall be in such other manner
as may be determined by the Board of Directors, unless a shareholder present in
person or by proxy entitled to vote at such election demands election by ballot.
With respect to any other matter presented to the stockholders for their
consideration at a meeting, any stockholder entitled to vote may, on any
question, demand a vote by ballot.
A complete list of the stockholders entitled to vote at each such
meeting, arranged in alphabetical order (within each class, series or group of
shareholders maintained by the Corporation for convenience of reference) with
the address of each, and the number of shares registered in the name of each
stockholder, shall be prepared by the Secretary and shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 8. Inspectors of Election. The Board of Directors in advance of
any meeting of stockholders may appoint one or more Inspectors of Election to
act at the meeting or any adjournment thereof. If Inspectors of Election are not
so appointed, the chairman of the meeting may, and on the request of any
stockholder entitled to vote, shall, appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discharge of his duties,
shall take and sign an oath to faithfully execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his ability. If appointed, Inspectors of Election shall take charge of the polls
and, when the vote is completed, shall make a certificate of the result of the
vote taken and of such other facts as may be required by law.
Section 9. Action by Consent. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, if, prior
to such action, a written consent or consents thereto, setting forth such
action, is or are signed by the holders of record of all of the shares of stock
of the Corporation or, in the alternative, by the holders of record of so many
of the shares of the stock of the Corporation (whether as a whole, within each
class of stock, or both) as are required by law or by the Certificate of
Incorporation or by these Restated By-laws for the taking of such action by
written consent, if, either the Corporation solicits for such consents or
proxies for consents from the holders of all of the shares of stock of the
Corporation, issued, outstanding and entitled to vote, or promptly notifies all
non-consenting holders of stock of the Corporation as required by law. Any such
solicitation or notice to non-consenting stockholders hereunder shall specify at
least the action to which the consent relates, its proposed effective date, any
conditions precedent to such action, the date of tabulation of consents, and the
rights of all stockholders who are entitled to dissent from such action, if any,
together with the requisite procedure for assertion and enforcement of those
rights. In the case of a merger, consolidation, or sale, lease, exchange or
other disposition of substantially all of the assets of the Corporation, any
required or permitted stockholder action may be taken by a prior written consent
or consents to such action, setting forth the action to be taken, signed either
by the holders of all of the shares of every class of issued and outstanding
stock of the Corporation, or by the holders of all of the shares of stock of the
Corporation, issued, outstanding and entitled to vote, with the same notice to
all other holders of stock of the Corporation as is required hereunder to be
sent to non-consenting stockholders.
ARTICLE II
DIRECTORS
Section 1. Number, Term, Vacancies, Quorum. The number of directors
which shall comprise the Board of Directors, the term period for which directors
shall hold office and the manner in which vacancies are filled on the Board
shall be as provided in the Certificate of Incorporation.
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A majority of the members of the Board of Directors then holding office
shall constitute a quorum, which in no case shall be less than one-third of the
total number of directors or less than two directors, except that when the
entire Board consists of one Director, then one director shall constitute a
quorum for the transaction of business, but if at any meeting of the Board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained.
Section 2. Meetings, Notice. Meetings of the Board of Directors shall
be held at such place either within or without the State of New Jersey, as may
from time to time be fixed by resolution of the Board, or as may be specified in
the call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of three directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board or of any special meeting when its
time and place are determined in advance by a quorum of the Board. Any meeting
may be held without notice, if all directors are present, or if notice is waived
in writing, either before or after the meeting, by those not present. Any
meeting of the Board may be held by means of conference telephone or any other
means of communication by which all persons participating in the meeting are
able to hear each other.
Section 3. Committees. The Board of Directors may, in its discretion,
by resolution passed by a majority of the whole Board, designate from among its
members one or more committees which shall consist of one or more directors. The
Board may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committees shall have and may exercise such powers as shall
be conferred or authorized by the resolution appointing them. A majority of any
such committee may determine its action and fix the time and place of its
meetings, including meetings by telephone conference call or similar means of
communication, unless the Board of Directors shall otherwise provide. The Board
shall have power at any time to change the membership of any such committee, to
fill vacancies in it, or to dissolve it.
Section 4. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if prior to such action a written consent or
consents thereto is signed by all members of the Board, or of such committee as
the case may be, and such written consent or consents is filed with the minutes
of proceedings of the Board or committee.
Section 5. Compensation. The Board of Directors may determine, from
time to time, the amount of compensation which shall be paid to its members. The
Board of Directors shall also have power, in its discretion, to allow a fixed
sum and expenses for attendance at each regular or special meeting of the Board,
or of any committee of the Board; in addition, the Board of Directors shall also
have power, in its discretion, to provide for and pay to directors rendering
services to the Corporation not ordinarily rendered by directors, as such,
special compensation appropriate to the value of such services, as determined by
the Board from time to time.
ARTICLE III
OFFICERS
Section 1. Titles and Election. The officers of the Corporation, who
shall be chosen by the Board of Directors at its first meeting after each annual
meeting of stockholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
Section 2. Terms of Office. The officers shall hold office until their
successors are chosen and qualify.
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Section 3. Removal. Any officer may be removed, either with or without
cause, at any time, by the affirmative vote of a majority of the Board of
Directors.
Section 4. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignations
shall take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 5. Vacancies. If the office of any officer or agent becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office or otherwise, the directors may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy occurred.
Section 6. Chairman of the Board. The Chairman of the Board of
Directors, if one be elected, shall preside at all meetings of the Board of
Directors and of the stockholders, and he shall have and perform such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 7. President. The President shall be the chief executive
officer of the Corporation and, in the absence of the Chairman, shall preside at
all meetings of the Board of Directors, and of the stockholders. He shall
exercise the powers and perform the duties usual to the chief executive officer
and, subject to the control of the Board of Directors, shall have general
management and control of the affairs and business of the Corporation; he shall
appoint and discharge employees and agents of the Corporation (other than
officers elected by the Board of Directors) and fix their compensation; and he
shall see that all orders and resolutions of the Board of Directors are carried
into effect. He shall have the power to execute bonds, mortgages and other
contracts, agreements and instruments of the Corporation, and shall do and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
Section 8. Vice Presidents. If chosen, the Vice Presidents, in the
order of their seniority, shall, in the absence or disability of the President,
exercise all of the powers and duties of the President. Such Vice Presidents
shall have the power to execute bonds, notes, mortgages and other contracts,
agreements and instruments of the Corporation, and shall do and perform such
other duties incident to the office of Vice President and as the Board of
Directors, or the President, shall direct.
Section 9. Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and record all notes and the minutes
of proceedings in a book to be kept for that purpose. He shall give, or cause to
be given, notice of all meetings of the stockholders and of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors. The Secretary shall affix the corporate seal to any instrument
requiring it, and when so affixed, it shall be attested by the signature of the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
who may affix the seal to any such instrument in the event of the absence or
disability of the Secretary. The Secretary shall have and be the custodian of
the stock records and all other books, records and papers of the Corporation
(other than financial) and shall see that all books, reports, statements,
certificates and other documents and records required by law are properly kept
and filed.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the directors whenever they may require it, an account of all his transactions
as Treasurer and of the financial condition of the Corporation.
Section 11. Duties of Officers may be Delegated. In case of the absence
or disability of any officer of the Corporation, or for any other reason that
the Board may deem sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any director.
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ARTICLE IV
INDEMNIFICATION
Section 1. Indemnification. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that he is or was a
director, officer or trustee of the Corporation or of any constituent
corporation absorbed by the Corporation in a consolidation or merger or is or
was serving at the request of the Corporation or of any absorbed constituent
corporation as a director, officer, employee, agent of or participant in another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise, or the legal representative of such a person against expenses,
costs, disbursements (including attorneys' fees), judgments, fines and amounts
actually and reasonably incurred by him in good faith and in connection with
such action, suit or proceeding unless a judgment or other final adjudication
adverse to such person establishes that his acts or omissions (a) were in breach
of his duty of loyalty to the Corporation or its shareholders, (b) were not in
good faith or involved a knowing violation of law or (c) resulted in receipt by
the corporate agent of an improper personal benefit. As used in this Section, an
act or omission in breach of a person's duty of loyalty means an act or omission
which that person knows or believes to be contrary to the best interests of the
Corporation or its shareholders in connection with a manner in which he has a
material conflict of interest.
Section 2. Specific Authorization. Any indemnification under Section 1
of this Article (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, trustee, employee, agent, or the legal
representative thereof, is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Section 1. Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or even if obtainable if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
Section 3. Advance of Expenses. Expenses incurred by any person
entitled to be indemnified under Section 1 shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized in the specific case, (such authorization to be made in the same
manner as a determination that indemnification is proper under Section 2 of this
Article), upon receipt of an undertaking by or on behalf of the director,
officer, trustee, employee, or the legal representative thereof, to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation pursuant to Section 1.
Section 4. Right of Indemnity not Exclusive. The indemnification
provided by this Article shall not exclude any other rights to which those
seeking indemnification may be entitled under the certificate of incorporation
of the Corporation or any By-Law agreement, vote of stockholders or otherwise,
and shall continue as to a person who has ceased to be a director, officer,
trustee, employee, agent or the legal representative thereof, and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
Section 5. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, trustee,
employee or agent of the Corporation or of any constituent corporation absorbed
by the Corporation by consolidation or merger or the legal representative of
such person or is or was serving at the request of the Corporation or of any
absorbed constituent corporation as a director, officer, trustee, employee or
agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise, or the legal representative of any such person
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such or by reason of his being or having
been such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article, Section 14A:3-5 of
the New Jersey Business Corporation Act, or otherwise.
Section 6. Invalidity of any Provision of this Article. The invalidity
or unenforceability of any provision of this Article shall not affect the
validity or enforceability of the remaining provisions of this Article.
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ARTICLE V
CAPITAL STOCK
Section 1. Certificates. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
(including punch cards, magnetically coded or otherwise treated forms to
facilitate machine or automatic processing) as the Board of Directors may from
time to time prescribe. Each certificate of stock shall in any event state upon
its face all matters required by law. Each certificate of stock issued at any
time the Corporation is authorized to issue shares of more than one class of
stock shall set out on it the designations, rights, preferences and limitations
of each class and series then authorized and the power of the Board of Directors
to divide any such shares and to change such designations, rights, preferences
and limitations. The certificates of stock shall be signed by the Chairman of
the Board, if any, or by the President or a Vice President and by the Secretary,
or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed
with the seal of the Corporation or a facsimile thereof, and countersigned and
registered in such manner, if any, as the Board of Directors may by resolution
prescribe. Where any such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or registered by a registrar other than
the Corporation or its employee, the signature of any such officer may be a
facsimile signature. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
Corporation.
Section 2. Transfer. The shares of stock of the Corporation shall be
transferred only upon the books of the Corporation by the holder thereof in
person or by his attorney, upon surrender for cancellation of certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require.
Section 3. Record Dates. The Board of Directors may fix in advance a
date, not less than ten nor more than sixty days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the distribution or allotment of any rights, or the date when any
change, conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to receive any distribution or allotment of such rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, and in such case only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote,
at such meeting, or to receive payment of such dividend, or to receive such
distribution or allotment of rights or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after such record date fixed as aforesaid.
Section 4. Lost Certificates. In the event that any certificate of
stock is lost, stolen, destroyed or mutilated, the Board of Directors may
authorize the issuance of a new certificate of the same tenor and for the same
number of shares in lieu thereof. The Board may in its discretion, before the
issuance of such new certificate, require the owner of the lost, stolen,
destroyed or mutilated certificate, or the legal representative of the owner, to
make an affidavit or affirmation setting forth such acts as to the loss,
destruction or mutilation as it deems necessary, and to give the Corporation a
bond in such reasonable sum as it directs to indemnify the Corporation.
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ARTICLE VI
CONTRACTS AND FINANCIAL TRANSACTIONS
Section 1. Contracts. When the execution of any contract, conveyance,
or other instrument, has been authorized by the Board of Directors, or in the
case of such contract, conveyance or other instrument, between the Corporation
and any director or any corporation, firm, association or entity in which a
director of the Corporation has a direct or indirect interest, has been
authorized as set out in the New Jersey Business Corporation Act, without
specification as to the executing officer, the President, or a Vice President
may execute the same in the name and on behalf of the Corporation, and the
Secretary, an Assistant Secretary or the Secretary-Treasurer may attest to that
execution and affix the corporate seal thereto.
Section 2. Checks, Notes, Etc. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money, may
be signed by the President or any Vice President and may also be signed by such
other officer or officers, agent or agents, as shall be thereunto authorized
from time to time by the Board of Directors.
Section 3. Loans to Directors, Officers and Employees. The Board of
Directors may authorize the loaning of money, guaranteeing of obligations or
other assistance to any other officer or employee of the Corporation or of any
subsidiary whenever in judgment of the Board such loan, guarantee or assistance
may reasonably be expected to benefit the Corporation, provided, however, if
such officer or employee is also a director, such loan, guarantee or assistance
must be approved by a majority of the entire Board. Any such loan, guarantee or
assistance may be made with or without interest, and may be unsecured, or
secured in such manner as the Board shall approve.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. Registered Office and Agent. The registered office of the
Corporation shall be located at 721 Route 202-206, P.O. Box 1018, Somerville,
New Jersey 08876. The Corporation may have other offices either within or
without the State of New Jersey at such places as shall be determined from time
to time by the Board of Directors or the business of the Corporation may
require. The registered agent at such office is G. Robert Marcus, Esq.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of
Directors.
Section 3. Corporate Seal. The seal of the Corporation shall be
circular in form and contain the name of the Corporation, and the year and state
of its incorporation. Such seal may be altered from time to time at the
discretion of the Board of Directors.
Section 4. Books. There shall be kept at such office of the Corporation
as the Board of Directors shall determine, within or without the State of New
Jersey, correct books and records of account of all its business and
transactions, minutes of the proceedings of its stockholders, Board of Directors
and committees, and the stock book, containing the names and addresses of the
stockholders, the number of shares held by them, respectively, and the dates
when they respectively became the owners of record thereof, and in which the
transfer of stock shall be registered, and such other books and records as the
Board of Directors may from time to time determine.
Section 5. Voting of Stock. Unless otherwise specifically authorized by
the Board of Directors, all rights and powers, including any right to vote,
incident to any stock owned by the Corporation, other than stock of the
Corporation, shall be exercised in person or by proxy, by the President or any
Vice President of the Corporation on behalf of the Corporation in no more
restricted manner or limited extent than would apply to any owner thereof.
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ARTICLE VIII
AMENDMENTS
Section 1. Amendments. The vote of the holders of at least a majority
of the shares of stock of the Corporation, issued and outstanding and entitled
to vote, shall be necessary at any meeting of stockholders to amend or repeal
these Restated By-Laws or to adopt new Restated By-Laws. These Restated By-Laws
may also be amended or repealed, or new Restated By-Laws adopted, at any meeting
of the Board of Directors by the vote of at least a majority of the entire
Board; provided that any by-law adopted by the Board may be amended or repealed
by the stockholders in the manner set forth above.
Any proposal to amend or repeal these Restated By-Laws or to adopt new
Restated By-Laws shall be stated in the notice of the meeting of the Board of
Directors or the stockholders, or in the waiver of notice thereof, as the case
may be, unless all of the directors or the holders of record of all of the
shares of stock of the Corporation, issued and outstanding and entitled to vote,
are present at such meeting.
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