<PAGE> 1
SC 13D/A
Amendment No. 1 to Schedule 13D
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934 (Amendment No. 1 )*
KIWI International Air Lines, Inc.
----------------------------------
(Name of Issuer)
Class C Common Stock, no par value
----------------------------------
(Title of class of securities)
None
----
(CUSIP Number)
George E.B. Maguire, Esq.
Debevoise & Plimpton, 875 Third Avenue, New York, NY 10022
(212) 909-6000
----------------------------------------------------------
(Name, Address and telephone Number of Person
Authorized to Receive Notices and Communications)
March 15, 1997
--------------
(Date of event which requires filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
- --------
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
The Exhibit Index is located on page 11.
Page 1 of 11 Pages
<PAGE> 2
(1) Names of Reporting Persons
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Recovery Equity Investors II, L.P.; 94-3195147
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned
by Each Reporting None
Person --------------------------------------------------------
(8) Shared Voting Power
None
--------------------------------------------------------
(9) Sole Dispositive Power
None
--------------------------------------------------------
(10) Shared Dispositive Power
None
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
None
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row 11
0%
- --------------------------------------------------------------------------------
(14) Type of Reporting Person
PN
Page 2 of 11 Pages
<PAGE> 3
(1) Names of Reporting Persons
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Recovery Equity Partners II, L.P.; 94-3195148
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned
by Each Reporting None
Person --------------------------------------------------------
(8) Shared Voting Power
None
--------------------------------------------------------
(9) Sole Dispositive Power
None
--------------------------------------------------------
(10) Shared Dispositive Power
None
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
None
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row 11
0%
- --------------------------------------------------------------------------------
(14) Type of Reporting Person
PN
Page 3 of 11 Pages
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(1) Names of Reporting Persons
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Joseph James Finn-Egan; ###-##-####
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States Citizen
- --------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned
by Each Reporting None
Person --------------------------------------------------------
(8) Shared Voting Power
None
--------------------------------------------------------
(9) Sole Dispositive Power
None
--------------------------------------------------------
(10) Shared Dispositive Power
None
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
None
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row 11
0%
- --------------------------------------------------------------------------------
(14) Type of Reporting Person
IN
Page 4 of 11 Pages
<PAGE> 5
(1) Names of Reporting Persons
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Jeffrey A. Lipkin; ###-##-####
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States Citizen
- --------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned
by Each Reporting None
Person --------------------------------------------------------
(8) Shared Voting Power
None
--------------------------------------------------------
(9) Sole Dispositive Power
None
--------------------------------------------------------
(10) Shared Dispositive Power
None
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
None
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row 11
0%
- --------------------------------------------------------------------------------
(14) Type of Reporting Person
IN
Page 5 of 11 Pages
<PAGE> 6
CONTINUATION PAGES OF SCHEDULE 13D
FILED BY RECOVERY EQUITY INVESTORS, II, L.P.;
RECOVERY EQUITY PARTNERS II, L.P.
JOSEPH J. FINN-EGAN
JEFFREY A. LIPKIN
Explanation for Amendment
This amendment amends the original Schedule 13D filed with the
Securities and Exchange Commission on July 11, 1996. Except as set forth herein,
there are no changes to the information reported in the original Schedule 13D,
filed on July 11, 1996.
Pursuant to the Convertible Note Purchase and Option Agreement, dated
as of July 1, 1996 (the "Purchase Agreement"), between KIWI International Air
Lines, Inc., a New Jersey corporation (the "Issuer") and Recovery Equity
Investors II, L.P., a Delaware limited liability partnership ("REI"), on July
24, 1996, REI exercised its option to purchase, for a purchase price of
$2,000,000, an additional $2,000,000 aggregate principal amount of the Issuer's
6% Convertible Unsecured Notes due March 15, 1997 (the "Additional Convertible
Notes").
REI has not otherwise exercised its options under the Purchase
Agreement to aquire Additional Securities (as defined in the original Schedule
13D) or to convert the Convertible Notes. All options to acquire Additional
Securities or to convert the Convertible Notes, under the Purchase Agreement,
expired on March 15, 1997. As a result, the aggregate number of shares of the
Issuer's Class C Common Stock, no par value (the "Class C Common Stock")
beneficially owned by each Reporting Person as of March 15, 1997 is 0.
Item 5. Interest in Security of the Issuer
(a) The aggregate number of shares of Class C Common Stock
beneficially owned by each Reporting Person as of March 15, 1997 is 0.
(b) See the responses of each Reporting Person to Items (7) through
(11) of the portions of the cover page of this Amendment to Schedule 13D which
relate to shares of Class C Common Stock beneficially owned by such Reporting
Person.
(e) Each Reporting Person ceased to be a beneficial owner on March 15,
1997.
Item 7. Material to be Filed as Exhibits.
The following is filed herewith as an Exhibit to this Amendment No. 1
to the original Schedule 13D:
Exhibit 1: Additional Convertible Note
Page 6 of 11 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct and agrees that this statement may be filed jointly
with Recovery Equity Partners II, L.P., Joseph J. Finn-Egan and Jeffrey A.
Lipkin.
Dated: March __, 1997
RECOVERY EQUITY INVESTORS II, L.P.
By: Recovery Equity Partners II, L.P.,
its sole general partner
By: /s/ Joseph J. Finn-Egan
-----------------------------------
Joseph J. Finn-Egan
General Partner
By: /s/ Jeffrey A. Lipkin
-----------------------------------
Jeffrey A. Lipkin
General Partner
Page 7 of 11 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct and agrees that this statement may be filed jointly
with Recovery Equity Investors II, L.P., Joseph J. Finn-Egan and Jeffrey A.
Lipkin.
Dated: March __, 1997
RECOVERY EQUITY PARTNERS II, L.P.
By: /s/ Joseph J. Finn-Egan
-----------------------------------
Joseph J. Finn-Egan
General Partner
By: /s/ Jeffrey A. Lipkin
-----------------------------------
Jeffrey A. Lipkin
General Partner
Page 8 of 11 Pages
<PAGE> 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct and agrees that this statement may be filed jointly
with Recovery Equity Investors II, L.P., Recovery Equity Partners II, L.P., and
Jeffrey A. Lipkin.
Dated: March __, 1997
By: /s/ Joseph J. Finn-Egan
-----------------------------------
Joseph J. Finn-Egan
Page 9 of 11 Pages
<PAGE> 10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct and agrees that this statement may be filed jointly
with Recovery Equity Investors II, L.P., Recovery Equity Partners II, L.P., and
Joseph J. Finn-Egan.
Dated: March __, 1997
By: /s/ Jeffrey A. Lipkin
-----------------------------------
Jeffrey A. Lipkin
Page 10 of 11 Pages
<PAGE> 11
Exhibit Index
Exhibit No. Description
1 Additional Convertible Note.
Page 11 of 11 Pages
<PAGE> 1
EX-1
Convertible Note
EXHIBIT 1
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF (THE
"UNDERLYING SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, UNLESS EITHER THIS NOTE OR THE
UNDERLYING SHARES HAVE BEEN REGISTERED UNDER SAID ACT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENT IS AVAILABLE. IF THIS NOTE OR THE UNDERLYING SHARES ARE
TO BE SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENT, THE COMPANY MAY REQUIRE A WRITTEN OPINION OF COUNSEL, SATISFACTORY
TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED AND
THAT SUCH TRANSFER WILL NOT VIOLATE SAID ACT OR APPLICABLE STATE SECURITIES
LAWS.
NOTE NO. 2
KIWI INTERNATIONAL AIR LINES, INC.
6% Convertible Unsecured Note due March 15, 1997
$2,000,000 July 24, 1996
KIWI INTERNATIONAL AIR LINES, INC., a New Jersey corporation (herein
called the "Company"), for value received, hereby promises to pay to Recovery
Equity Investors II, L.P., or its registered assigns, the principal sum of Two
Million Dollars ($2,000,000) on March 15, 1997 or such later date as may be
designated pursuant to Section 5 hereof (the "Maturity Date"), together with
interest from the date hereof on the amount of said principal sum remaining from
time to time unpaid at the rate of six percent (6%) per annum from the date
hereof until the principal hereof shall be paid in full, said interest to be
payable quarterly on the last day of each March, June, September and December
commencing December 31, 1996 and to pay on any overdue principal and, to the
extent permitted by Applicable Law, any overdue interest at a rate per annum
equal to the lesser of (a) the highest rate allowable by Applicable Law and (b)
eight percent (8%)(the "Default Rate"). Such principal and interest shall be
payable at the Designated Office of the Company in New Jersey and shall be sent
to the Holder hereof at the registered address of such Holder as reflected in
the registry books maintained by the Company.
This Note is one of a duly authorized issue of Notes of the Company
designated as its "6% Convertible Unsecured Notes due March 15, 1997" (herein
called the "Notes"), limited in aggregate principal amount to $10,000,000 as
described in the Convertible Note Purchase
<PAGE> 2
and Option Agreement dated July 1, 1996 (the "Note Purchase Agreement") plus
such additional principal amount as may be issuable in certain circumstances
provided in the form Restated Certificate of Incorporation attached as Exhibit B
to the Note Purchase Agreement upon conversion of the Company's Class A
Convertible Preferred Stock, no par value (the "Preferred Stock") contemplated
by the Note Purchase Agreement. Capitalized terms used but not defined herein
shall have the respective meanings assigned to such terms in the Note Purchase
Agreement.
1. CONVERSION
(a) Optional Conversion. Subject to Section 1(h) hereof, the Holder of
this Note is entitled, at the holder's option, to convert this Note, or any
portion of the principal amount hereof, at any time prior to the Maturity Date
(i) if the Company has not authorized the Preferred Stock, into fully paid and
nonassessable shares of the Company's Class C Common Stock, no par value ("Class
C Common Stock"), or (ii) if the Preferred Stock has been authorized, into fully
paid and nonassessable shares of Preferred Stock, in each case, by (x) the
surrender of this Note to the Company, and (y) the delivery to the Company of a
duly executed conversion notice in the form of Exhibit A hereto. Subject to
Section 1(h) hereof, upon exercise of such conversion right, this Note, or any
portion of the principal amount hereof to be converted, shall be converted into
that number of fully paid and non-assessable shares of Class C Common Stock or
Preferred Stock, as the case may be ("Conversion Shares"), as is obtained by
dividing the principal amount to be converted by the Conversion Price then in
effect. The Conversion Price shall initially be equal to $1.00 and shall be
adjusted as provided in Section 1(b) hereof (such conversion price, as last
adjusted, being referred to herein as the "Conversion Price"). No fractions of
shares will be issued on conversion, but instead of any fractional interest the
Company shall pay cash in an amount equal to the fair market value of such
fractional share at the time of such conversion, as determined in good faith by
a majority of the Directors of the Board of Directors of the Company. Any
partial conversion of this Note shall be for a minimum of $5,000 principal
amount hereof or any integral multiple thereof.
2
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(b) Adjustment of Conversion Price Upon Issuance of Common Shares.
(i) Issuance of Common Shares. Except as provided in Subsection
1(b)(vii) hereof, if and whenever the Company shall issue or sell, or under any
of Subsections 1(b)(ii) through 1(b)(vi) hereof is deemed to have issued or sold
(any such issue or sale or deemed issue or sale, an "Issuance"), any of its
shares of Common Stock ("Common Shares") for a consideration per share less than
the Conversion Price in effect immediately prior to the time of such Issuance,
then the Conversion Price in effect immediately prior to such Issuance shall be
reduced (effective immediately after such Issuance) as follows:
(A) in the case of any such Issuance prior to January 1, 1998, to a
price equal to the quotient obtained by dividing (x) the aggregate
consideration, if any, received, or deemed under any of Subsections
1(b)(ii) through 1(b)(vi) hereof to have been received, by the Company upon
such Issuance by (y) the number of Common Shares issued, or under any of
Subsections 1(b)(i) through 1(b)(vi) deemed to have been issued, in such
Issuance; and
(B) in the case of any such Issuance on or after January 1, 1998, to a
price equal to the Conversion Price in effect immediately prior to such
reduction multiplied by a fraction (not to exceed one) (1) the numerator of
which is an amount equal to the sum of (x) the number of Common Shares
outstanding immediately prior to such Issuance plus (y) the aggregate
consideration, if any, received, or deemed under any of Subsections
1(b)(ii) through 1(b)(vi) hereof to have been received, by the Company upon
such Issuance divided by the Conversion Price in effect immediately prior
to such Issuance and (2) the denominator of which is the sum of (x) the
number of Common Shares outstanding immediately prior to such Issuance plus
(y) the number of Common Shares issued, or under any of Subsections
1(b)(ii) through 1(b)(vi) hereof deemed to have been issued, in such
Issuance.
(ii) Issuance of Rights or Options. In case at any time the
Company shall in any manner grant (whether directly or by assumption in a merger
or otherwise) any rights to subscribe for or to purchase, or any options for the
purchase of, Common Shares or any stock or securities convertible into or
exchangeable for Common Shares (such
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rights or options being hereinafter referred to as "Options" and such
convertible or exchangeable stock or securities being hereinafter referred to as
"Convertible Securities"), whether or not such Options or the right to convert
or exchange any such Convertible Securities are immediately exercisable, and the
price per share for which a Common Share is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (A) the total amount, if any, received or receivable by
the Company as consideration for the granting of such Options, plus the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the aggregate amount of additional consideration, if
any, payable upon the issuance or sale of such Convertible Securities and upon
the conversion or exchange thereof, by (B) the maximum number of Common Shares
issuable upon the full exercise of such Options or upon the full conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
Options) shall be less than the Conversion Price in effect immediately prior to
the time of the granting of such Options, then the maximum number of Common
Shares issuable upon the exercise of such Options or upon the conversion or
exchange of the maximum number of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date such Options were granted and thereafter shall be deemed to
be outstanding; provided, that if such Option expires or terminates unexercised,
the Conversion Price shall be adjusted to reflect that the Common Shares
previously issuable upon exercise of such Option or upon the conversion or
exchange of such Convertible Securities previously issuable upon the exercise of
such Option are no longer deemed to have been issued. Except as otherwise
provided in Subsection 1(b)(iv) hereof, no adjustment of the Conversion Price
shall be made upon the actual issuance of such Common Shares upon the exercise
of such Options or upon the actual issuance of such Common Shares upon
conversion or exchange of such Convertible Securities if an appropriate
adjustment was previously made pursuant to this Subsection 1(b)(ii) upon the
issuance of such options.
(iii) Issuance of Convertible Securities. In case the Company
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are
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immediately exercisable, and the price per share for which a Common Share is
issuable upon such conversion or exchange (determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration for the
issuance or sale of such Convertible Securities, plus the aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (B) the maximum number of Common Shares issuable upon the
conversion or exchange of all such Convertible Securities) shall be less than
the Conversion Price in effect immediately prior to the time of such issuance or
sale, then the maximum number of Common Shares issuable upon the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issuance or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding;
provided that (a) except as otherwise provided in Subsection 1(b)(iv) hereof, no
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Shares upon conversion or exchange of such Convertible Securities if
an appropriate adjustment was previously made pursuant to this Subsection
1(b)(iii) upon the issuance of such Convertible Securities, (b) if any such
issuance or sale of such Convertible Securities is made upon the exercise of any
Options to purchase any such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other provisions of
this Subsection 1(b), no further adjustment of the Conversion Price shall be
made by reason of such issuance or sale, and (c) if the right to exchange or
convert such Convertible Securities expires without such Convertible Securities
being exchanged or converted, the Conversion Price shall be adjusted to reflect
that the Common Shares previously issuable upon conversion or exchange of such
Convertible Securities are no longer deemed to have been issued.
(iv) Change in Option Price or Conversion Rate. In the event that
the purchase price provided for in any Option referred to in Subsection 1(b)(ii)
hereof, the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in Subsection 1(b)(ii) or
1(b)(iii) hereof, or the rate at which any Convertible Securities referred to in
Subsection 1(b)(ii) or 1(b)(iii) hereof are convertible into or exchangeable for
Common Shares, shall change at any time (other than under or by reason of
provisions designed to protect against dilution), the Conversion Price in effect
at the time of such event shall be readjusted to the Conversion
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<PAGE> 6
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such purchase price,
additional consideration or conversion rate, as the case may be, at the time
such Options or Convertible Securities were initially granted, issued or sold.
If the purchase price provided for in any such Option referred to in Subsection
1(b)(ii) hereof or the rate at which any Convertible Securities referred to in
Subsection 1(b)(ii) or 1(b)(iii) hereof are convertible into or exchangeable for
Common Shares shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, in case of the
delivery of Common Shares upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities, the Conversion Price
then in effect hereunder shall be adjusted to such respective amount as would
have been obtained had such Option or Convertible Securities never been issued
as to such Common Shares and had adjustments been made upon the issuance of the
Common Shares delivered as aforesaid, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is hereby reduced.
(v) Consideration. In case any Common Shares, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any Common Shares, Options or Convertible Securities shall be
issued or sold, in whole or in part, for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair market value of such consideration as determined in good
faith by a majority of the Directors on the Board of Directors of the Company,
without deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith.
(vi) Treasury Shares. The disposition of Common Shares owned or
held by or for the account of the Company (other than as a result of a
cancellation of treasury shares) shall be considered an issue or sale of Common
Shares for the purpose of this Subsection 1(b).
(vii) When Adjustment is not Required. Notwithstanding any
provision herein to the contrary, no adjustment shall be made in the Conversion
Price as a result
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of (A) the issuance of Common Shares upon conversion of any Notes or any shares
of Preferred Stock or the issuance of any shares of Preferred Stock upon
conversion of any Convertible Notes; (B) the issuance of up to 91,587 shares and
like number of warrants issued pursuant to the 1994 Offering; (C) the offer or
issuance of securities of the Company in connection with the Offerings
(including, without limitation, any securities issued in connection with the
Offerings under the Employee Stock Plans, as defined below); (D) the issuance of
shares of Class C Common Stock upon conversion of Class A Common Stock into
Class C Common Stock; (E) shares (or Options to acquire shares) sold, granted or
issued (as the case may be) under the Company's 1996 incentive stock option plan
("ISOP") or the Company's 1996 employee stock purchase plan registered under the
Securities Act on Form S-8 (the "SPP", and together with the ISOP, the "Employee
Stock Plans"); or (F) the issuance of Additional Securities pursuant to Section
2A of the Note Purchase Agreement or of Convertible Notes upon conversion of
shares of Preferred Stock pursuant to the Restated Certificate.
(c) Subdivision or Combination of Stock. In case the Company shall at
any time split or subdivide its outstanding Common Shares into a greater number
of shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
Common Shares of the Company shall be combined into a smaller number of shares,
the Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(d) Reorganization, Reclassification, Consolidation or Merger. In the
event of any capital reorganization or reclassification of the outstanding
capital stock of the Company, or any consolidation of the Company with, or
merger of the Company with or into, another corporation or entity, or the sale,
exchange, assignment, lease, transfer or other disposition of all or
substantially all of the assets of the Company, where, in connection with such
event, the holders of Common Shares will be entitled to receive stock,
securities, cash or other property with respect to or in exchange for such
Common Shares, then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale of assets, lawful and adequate provision (in form
and substance reasonably satisfactory to the holders of a majority of the
outstanding principal amount of the Notes) shall be made whereby each holder of
outstanding Notes shall thereafter have the right
7
<PAGE> 8
to receive upon conversion of any Notes held by such holder such shares of
stock, securities, cash or other property as may be issuable or payable with
respect to or in exchange for the number of Common Shares immediately
theretofore so receivable by such holder (taking into account the anti-dilution
adjustments hereof, including an immediate adjustment, by reason of such
consolidation or merger, if the value so reflected is less than the Conversion
Price in effect immediately prior to such consolidation or merger). In the event
of a merger or consolidation of the Company as a result of which a greater or
lesser number of shares of common stock of the surviving corporation are
issuable to holders of Common Shares of the Company outstanding immediately
prior to such merger or consolidation, the Conversion Price in effect
immediately prior to such merger or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Common Shares of the Company. The Company shall not effect any consolidation or
merger contemplated by this Subsection 1(d) unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation or merger shall assume by written instrument (in form and
substance reasonably satisfactory to the holders of a majority of the
outstanding principal amount of Notes, executed and mailed by first class mail,
postage prepaid, to each holder of the outstanding Notes at the last address of
such holder as shown by the records of the Company), the obligation to deliver
to such holders of stock, securities, cash or other property as, in accordance
with the foregoing provisions, such holder may be entitled to receive. Nothing
in this Section 1(d) shall be deemed to constitute a waiver of Section 2(d)
hereof.
(e) Notice of Adjustment. Upon any adjustment of the Conversion Price,
then, and in each such case, the Company shall deliver a written certificate, by
first class mail, postage prepaid, addressed to each Convertible Noteholder at
the last address of such holder shown by the register of books of the Company,
which certificate shall be signed by the President, Chief Executive Officer or
Chief Financial Officer of the Company specifying the Conversion Price resulting
from such adjustment and details of the calculation and the facts upon which the
calculation is based.
(f) Reservation of Conversion Shares.
(i) Reservation of Shares. KIWI will reserve and keep available for
issuance upon conversion of this Note:
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<PAGE> 9
(A) at all times prior to the authorization of the Preferred Stock,
such number of its authorized but unissued shares of Class C Common Stock
as would be sufficient to permit the conversion of the aggregate principal
amount of this Note; and
(B) at all times from and after the authorization of the Preferred
Stock, such number of its authorized but unissued shares of Preferred Stock
as would be sufficient to permit the conversion of the aggregate principal
amount of this Note.
(ii) Further Action. Before taking any action which would cause an
adjustment reducing the Conversion Price, KIWI will take any corporate action
which may be necessary in order that the Company may be in compliance with this
Section 1(f).
(g) Costs of Conversion. The Company shall pay all documentary, stamp
or other similar taxes attributable to the issuance or delivery of Conversion
Shares upon conversion of any of the Convertible Notes. However, the Company
shall not be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for such
Conversion Shares in a name other than that of the holder of the Convertible
Notes in respect of which such Conversion Shares are being issued.
(h) Foreign Ownership Restrictions. If the holder of this Note shall
have elected to convert all or any portion of the principal amount hereof
pursuant to Section 2(a) and the issuance of any of the Conversion Shares
issuable upon such conversion would result in a breach of any Foreign Ownership
Restriction existing at the time of such issuance (the incremental Conversion
Shares resulting in such breach, "Excess Conversion Shares"), the Company will
give the holder of this Note written notice thereof setting forth the number of
Excess Conversion Shares and the holder will not be entitled to convert so much
of the principal amount of this Note (the "Excess Principal Amount") as would
result in the issuance of Excess Conversion Shares and the Company will not give
effect to the conversion of such Excess Principal Amount.
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<PAGE> 10
2. NEGATIVE COVENANTS
The Company covenants that so long as this Note is outstanding:
(a) Authorization and Issuance of Securities. The Company will not
authorize the issuance or sale of debt securities senior to the Notes, or any
rights, options or warrants to acquire any such senior debt securities or any
security convertible into such senior debt security, or (i) until such time as
the Notes are convertible into Preferred Stock, any equity securities senior to
the Class C Common Stock or any rights, options or warrants to acquire any such
senior equity securities or any security convertible into such senior equity
securities, including without limitation, debt instruments convertible into such
senior equity securities or (ii) from and after such time as the Notes are
convertible into Preferred Stock, any equity securities senior or (except in a
Qualified Transaction) pari passu to the Preferred Stock or any rights, options
or warrants to acquire any such senior or (except in a Qualified Transaction)
pari passu equity securities or any security convertible into such senior or
(except in a Qualified Transaction) pari passu equity securities, including
without limitation, debt instruments convertible into such senior or (except in
a Qualified Transaction) pari passu equity securities. Notwithstanding the
foregoing, the Company may incur indebtedness on a secured basis (but not with a
priority in right of payment) to Summit Bank and any bank or similar lender in
addition to Summit Bank to replace or supplement its financing from Summit Bank.
(b) Additional Debt. Except in a Qualified Transaction, the Company
will not contract or incur any additional debt (other than refinancing of debt
outstanding on the date hereof on terms substantially the same or more favorable
to the Company than existing terms) on or after the date hereof for money
borrowed in excess of an aggregate $1,000,000 (and any refinancing of such
amount) prior to the termination of the Voting Trust Agreement, dated October 1,
1992 (the "Shareholders Agreement"), by and between the Voting Trustee and all
Shareholders of the Class A and any previously authorized Class B Common Stock
of the Corporation, at a time when the pro forma "Earnings Before Fixed Charges
and Taxes" to "Fixed Charge" ratio is less than 1.25 based on the Company's
annualized performance over the preceding six months.
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<PAGE> 11
For the purposes of this Section 2(b) the following terms shall have
the following meanings:
"Earnings Before Fixed Charges and Taxes" shall mean, with reference
to any period, the sum of the following for such period, all as determined in
accordance with generally accepted accounting principles ("GAAP"): (A) the
consolidated net earnings of the Company and its Subsidiaries, if any,
excluding: (i) extraordinary gains, (ii) any equity interest of the Company in
the unremitted earnings of any corporation not a Subsidiary and (iii) any gain
on the sale, exchange or other disposition of assets plus (B) provisions for
federal, state and local income taxes plus (C) Fixed Charges.
"Fixed Charges" shall mean, with reference to any period, the sum of
the following for such period, all as determined in accordance with GAAP: (A)
all amounts which would be deducted in computing the consolidated net income of
the Company and its Subsidiaries, if any, on account of interest on obligations
for borrowed money, Capital Lease obligations and guarantees of the foregoing,
including imputed interest in respect of Capital Lease obligations, amortization
of debt discounts and expenses, fees and commissions for letters of credit and
bankers' acceptance financing and the net interest costs of interest rate swaps
and hedges plus (B) all payments by the Company and its Subsidiaries, if any,
pursuant to any lease of real or personal property (other than Capital Lease
obligations) minus the amount of any fixed rents paid to the Company or any
Subsidiary under noncancellable subleases of one year or greater on the
properties subject to such leases.
"Capital Leases" shall mean any lease of property which in accordance
with GAAP should be capitalized on the lessee's balance sheet or for which the
amount of the asset and liability thereunder as if so capitalized should be
disclosed in a note to such balance sheet.
"Subsidiary" shall mean any corporation of which the Company at the
time owns, directly or indirectly, more than 50% of the Voting Stock which has
the power to elect a majority of the board of directors.
(c) Amending the Terms of Preferred Stock. The Company will not,
whether prior to or after the authorization of the Preferred Stock, alter,
modify, amend or adversely affect any term of the Preferred Stock as set forth
in the Restated Certificate.
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<PAGE> 12
(d) Merger, Consolidation, etc. The Company will not engage in any
merger or consolidation or voluntary reorganization, restructuring,
recapitalization, winding up, dissolution or liquidation or any sale, lease,
assignment or other disposition of all or substantially all of the assets of the
Company.
(e) Amending the Certificate or the By-Laws. The Company will not
alter, modify, or amend the Certificate of Incorporation or the By-Laws of the
Company, as in effect on the date hereof, in any way that adversely affects any
term, right or preference of the Preferred Stock it being understood that the
adoption of the Restated Certificate and the Restated By-Laws will not be deemed
to constitute a breach of Section 2(d) or this Section 2(e).
(f) Restrictions on Sale of Common Shares, Options or Convertible
Securities. The Company will not issue or sell Common Shares, Options or
Convertible Securities, in whole or in part, prior to the occurrence of a
Qualifying Public Offering, for a consideration other than cash, except for
Common Shares, Options, Convertible Securities and other securities sold,
granted or issued (as the case may be) (i) under the Employee Stock Plans,
provided, however, that shares issued or issuable pursuant to grants made
thereunder must be for consideration in the form of cash and/or recourse
promissory note(s), (ii) in connection with the Offerings and/or (iii) not
exceeding an additional 91,587 shares (and a like number of warrants) under the
1994 Offering.
(g) Restricted Payments. Except (i) in connection with any mandatory
scheduled reduction in the amount of the guaranty by the New Jersey Economic
Authority and (ii) any prepayment of amounts payable in respect of the IRS
Settlement Agreement made in connection with an agreement with the IRS to abate
certain penalties so as to make the total outstanding amount payable in respect
of the IRS Settlement Agreement not more than $1.5 million upon payment in full
of such amount, the Company will not make any prepayment of any principal amount
of or interest on any Indebtedness (other than Capital Lease obligations) or any
amounts payable pursuant to any lease of real or personal property (including
any Capital Lease obligations), including, but not limited to, any such amounts
payable in connection with an early termination of such lease.
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<PAGE> 13
3. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company fails to make any payment of any principal amount on
this Note when the same becomes due and payable, whether at maturity or at
a date fixed for prepayment or by declaration or otherwise; or
(b) the Company fails to make any payment of any interest on this Note
and such default continues for more than five Business Days after the same
becomes due and payable; or
(c) the Company fails to perform of or comply with any term contained
in the Note Purchase Agreement or in this Note; or
(d) (i) the Company is in default (as principal or as guarantor or
other surety) in the payment of any principal amount of or interest on any
Indebtedness (other than trade accounts payable past due as of the date
hereof and with respect to which the account creditor has taken no action
materially adverse to the Company) that is outstanding in an aggregate
principal amount of at least $100,000 beyond any period of grace provided
with respect thereto or (ii) the Company is in default in the performance
of or compliance with any term of any evidence of any Indebtedness (other
than trade accounts payable past due as of the date hereof and with respect
to which the account creditor has taken no action materially adverse to the
Company) in an aggregate outstanding principal amount of at least $100,000
or of any mortgage, indenture or other agreement relating thereto or any
other condition exists, and as a consequence of any such default or
condition such Indebtedness has become, or has been declared, due and
payable before its stated maturity or before its regularly scheduled dates
of payment; or
(e) the Company (i) is generally not paying, or issuable to, or admits
in writing its inability to pay, its debts as they become due, (ii) files,
or consents by answer or otherwise to the filing against it of, a petition
for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency,
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<PAGE> 14
reorganization, moratorium or other similar law of any jurisdiction, (iii)
makes an assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, (v) is adjudicated as insolvent or to be liquidated, or (vi)
takes corporate action for the purpose of any of the foregoing (other than
actions taken prior to the date hereof for the purposes of matters
described in the preceding clause (ii)); or
(f) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, or constituting an order
for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company, or any such petition
shall be filed against the Company and such petition shall not be dismissed
within 60 days; or
(g) one or more final judgments, decrees or orders for the payment of
money aggregating in excess of $100,000 are rendered against one or more of
the Company and its Subsidiaries, if any, and which judgments, decrees or
orders are not, within 60 days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(h) any of the following shall have occurred: (w) a Change of Control,
(x) a Material Sale Transaction, (y) any proposed merger or consolidation
of the Company approved by the Board of Directors of the Company or (z) any
proposed sale or other disposition of all or substantially all of the
business or assets of the Company approved by the Board of Directors of the
Company.
For purposes of Section 3(h), "Change of Control" and "Material Sale
Transaction" shall mean the following, respectively: (A) A Change of Control
shall be deemed to have occurred at such time as: (x) any person (other than REI
Holders and their transferees), including a group as
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<PAGE> 15
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 40% or more of the combined voting
power of the Company's outstanding voting securities ordinarily having the right
to vote at elections of directors of the Company; or (y) individuals who
constitute the Board of Directors as of the date hereof (each an "Incumbent
Director") cease for any reason to constitute a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date
hereof who is an REI Director or whose election, or nomination for election by
the Company's shareholders, was approved by a vote of Incumbent Directors then
serving on the Board of Directors constituting at least a majority of the
directors other than REI Directors, or who is an "Incumbent Director" under the
Restated Certificate, shall be considered as though such person were an
Incumbent Director. (B) A Material Sale Transaction shall be any transaction
which has not been approved by at least a majority of the REI Directors then
serving on the Board of Directors involving any sale, lease or other disposition
by the Corporation of (xx) 25% or more of its aircraft fleet, or (yy) its
operational rights at any airport (or group of airports within any twelve-month
period) representing 25% or more of its gross revenues for the preceding 12
months.
4. REMEDIES ON DEFAULT, ETC.
(a) Acceleration.
(i) Automatic Acceleration. If an Event of Default with respect to the
Company described in paragraph (e) or (f) of Section 3 hereof (other than an
Event of Default described in clause (i) of paragraph (e) or described in clause
(vi) of paragraph (e) by virtue of the fact that such clause encompasses clause
(i) of paragraph (e)) has occurred, this Note shall then automatically become
immediately due and payable.
(ii) Acceleration By Declaration. If any other Event of Default has
occurred and is continuing, the holder or holders of 25% in aggregate principal
amount of Notes then outstanding may at any time at such holder's or holders'
option, declare all the Notes then outstanding to be immediately due and
payable.
(iii) Acceleration By Each Holder. If any Event of Default described
in paragraph (a) or (b) of Section 3
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<PAGE> 16
has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at such holder's
or holders' option, declare the Note held by it to be immediately due and
payable.
(iv) Effect of Acceleration. Upon this Note becoming due and payable
under this Section 4(a), whether automatically or by declaration, such Note will
forthwith mature and the entire unpaid principal amount of such Note, plus all
accrued and unpaid interest thereon (to the full extent permitted by Applicable
Law), shall be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
The Company acknowledges, and the parties hereto agree, that the holder of this
Note has the right to maintain its investment in the Note free from repayment by
the Company.
(b) Other Remedies. If any Event of Default has occurred and is
continuing, and irrespective of whether this Note has become or has been
declared immediately due and payable under Section 4(a), the holder of this Note
may proceed to protect and enforce the rights of such holder by an action at
law, suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained in the Note Purchase Agreement or in this
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
(c) Rescission. At any time after this Note has been declared due and
payable pursuant to Subsection 4(a)(ii) or 4(a)(iii), the holders of not less
than 60% in aggregate principal amount of the Notes then outstanding, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (i) the Company has paid all overdue interest on the Note, all
principal of and all interest on such overdue principal and (to the extent
permitted by applicable law) any overdue interest in respect of the Note, at the
Default Rate, (ii) all Events of Default, other than non-payment of amounts that
have become due solely by reason of such declaration, have been cured or have
been waived by the holders of not less than 60% in aggregate principal amount of
the Notes then outstanding and (iii) no judgment or decree has been entered for
the payment of any monies due pursuant hereto or to the Note. No recission and
annulment under this Section 4(c) will extend to or affect any
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<PAGE> 17
subsequent Event of Default or impair any right consequent thereon.
(d) No Waiver, Expenses, etc. No course of dealing and no delay on the
part of any holder of any Note in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such holder's rights, powers
or remedies. No right, power or remedy conferred by the Note Purchase Agreement
or by any Note upon any holder thereof shall be exclusive of any other right,
power or remedy referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise. Without limiting the obligations of the
Company, the Company will pay to the holder of each Note on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 4, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
5. EXTENSION OF MATURITY
(a) Failure to Authorize Preferred Stock. If the Company has not authorized
the Preferred Stock by March 14, 1997, the holder of this Note may, by written
notice to the Company, elect to extend the term of this Note to such date on or
before March 15, 2007 as such holder shall designate. If the maturity of the
Notes shall have been extended pursuant to Section 2A.3 of the Note Purchase
Agreement, the Company will give the holder written notice thereof setting forth
the date to which the maturity has been extended and the Maturity Date of this
Note shall be extended to such date.
(b) Excess Principal Amount. If the holder of this Note believes that the
conversion of this Note pursuant to Section 2(a) on March 14, 1997 would result
in the issuance of any Excess Conversion Shares, the holder of this Note may, by
written notice to the Company on or after March 1, 1997, extend the maturity of
this Note to such date on or before March 15, 2007 as such holder shall
designate, but only with respect to so much of the principal amount of this Note
as constitutes Excess Principal Amount as of March 14, 1997. If the holder of
this Note shall have extended the Maturity Date pursuant to this Section 5(b),
such holder shall, upon receipt from time to time of written notice from the
Company that the conversion of any such Excess Principal Amount (or any portion
thereof) would no longer result in the issuance of Excess Conversion Shares the
holder shall
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<PAGE> 18
promptly convert so much of such Principal Amount as would not then result in
the issuance of any Excess Conversion Shares.
6. MISCELLANEOUS
No provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Note at the times, places and rate herein prescribed or to
convert this Note.
The Company may deem and treat the person in whose name this Note is
registered as the absolute owner hereof for the purpose or receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
The Notes shall be governed by and construed in accordance with the
law of the State of New Jersey.
IN WITNESS WHEREOF, KIWI INTERNATIONAL AIR LINES, INC. has caused this
Note to be signed in its name by its President or one of its Vice Presidents and
attested by its Secretary or one of its Assistant Secretaries.
ATTEST:
KIWI INTERNATIONAL AIR LINES,
INC.
____________________________ By:____________________________
James E. Player, Secretary John G. Murphy, President
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<PAGE> 19
Exhibit A
CONVERSION NOTICE
The undersigned Holder of this Note hereby irrevocably exercises the
option to convert this Note into shares of Class A Convertible Preferred Stock
or Class C Common Stock (as the case may be) in accordance with the terms of
this Note and directs that such shares be registered in the name of and
delivered to the undersigned, and that a check in payment for any fractional
share be delivered to the undersigned.
Dated: ____________________ ______________________________
Signature
Holder
Please print name and address
of Holder
______________________________
Name
______________________________
Address
______________________________
______________________________
Social Security or other
Taxpayer Identification Number,
if any
<PAGE> 20
[Individual Acknowledgment]
STATE OF _______________
SS.:
COUNTY OF ______________
On this ____ day of ____________, 19__, before me, the undersigned,
personally appeared ___________, who, I am satisfied, is the person who signed
the foregoing Conversion Notice, and he or she did acknowledge under oath that
he or she signed and delivered the same as his or her voluntary act and deed,
for the uses and purposes expressed in the instrument.
____________________________
Notary Public
[Entity Acknowledgment]
STATE OF _______________
SS.:
COUNTY OF ______________
On this ____ day of ____________, 19__, before me, the undersigned,
personally appeared ___________, the ________________ of __________________,
who, I am satisfied, is the person who signed the foregoing Conversion Notice,
and he or she did acknowledge under oath that he or she signed and delivered the
same in his or her capacity as such officer of such entity, that he or she was
authorized to execute the same on behalf of such entity, and that the foregoing
instrument is the voluntary act and deed of such entity, made by virtue of
proper authority.
____________________________
Notary Public
