SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): June 5, 1997
Western Pacific Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-27238 86-0758778
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File num Identification No.)
2864 South Circle Drive, Suite 1100
Colorado Springs, Colorado 80906
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 579-7737
N/A
Former name or former address, if changed since last report
<PAGE>
Item 5. Other Events.
On June 5, 1997, the Company completed a private placement with a group
of institutional investors (the "Private Placement") whereby the Company sold
(i) 10,000 shares of its Series C Convertible Preferred Stock, par value $.0.001
per share (the "Series C Preferred"), (ii) warrants to purchase an aggregate of
213,333 shares of the Company's Common Stock, par value $0.001 per share (the
"Common Stock") at an exercise price of $11.25 per share (the "A-Warrants"), and
(iii) warrants to purchase an aggregate of 111,110 shares of Common Stock at an
exercise price of $6.80625 per share (the "B-Warrants," and together with the
Series C Preferred and the A-Warrants, the "Securities"), for an aggregate
purchase price of $10 million. The institutional investor group consisted of
Lionhart Global Appreciation Fund, a company organized under the laws of the
British Virgin Islands ("Lionhart"), RGC International Investors, LDC, a company
organized under the laws of the Cayman Islands ("RGC") and CC Investments, LDC,
a company organized under the laws of the Cayman Islands ("CC Investments"). In
addition, in connection with the Private Placement, the Company issued an
additional 256,198 B-Warrants and paid cash in the amount of $350,000 to GEM
Investment Management, Ltd. as a placement fee. The Company intends to use the
proceeds from the Private Placement for general working capital purposes and to
support the Company's recently announced plans to enter the Denver market.
In connection with the sale of the Securities, the Company agreed to
file a registration statement with the Securities and Exchange Commission within
45 days to register the Common Stock issuable upon conversion of the Series C
Preferred and exercise of the A-Warrants and B-Warrants.
In connection with the Private Placement, the Company filed a
Certificate of Designations, Preferences and Rights of the Series C Preferred
with the Secretary of State of Delaware on June 5, 1997 (the "Certificate of
Designations"), and a Certificate of Correction with respect to the Certificate
of Designations on June 9, 1997. The Series C Preferred has a stated value of
$1,000 per share, with a premium amount accruing on such stated value at a rate
of 8.0% per annum (the "Premium Accrual"). The Series C Preferred is nonvoting
and ranks pari passu with the Company's Series B Preferred Stock (the "Series B
Preferred"). The Series C Preferred is subject to voluntary conversion at the
option of the holders during its three-year term, and will automatically convert
into Common Stock on June 5, 2000. The conversion price will be the lower of (i)
a fixed price (the "Fixed Price") of $6.1875 (110% of the closing bid price of
the Company's Common Stock on June 4, 1997), or (ii) an amount which will
initially equal a 10.0% discount (declining over ten months to 20.0%) of the
average of the closing bid prices of the Common Stock for the 20 consecutive
trading days preceding a notice of conversion.
The conversion price of the Series C Preferred is subject to possible
upward and downward performance adjustments. If, at the time of conversion, the
closing bid price of the Common Stock has increased by more than 45.0% over the
original Fixed Price (the "Upward Adjustment Threshold"), the Fixed Price shall
automatically increase so that the holder of the Series C Preferred being
converted relinquishes 60% of the increase in value of the Common Stock over the
Upward Adjustment Threshold. Following September 3, 1997, if at any date the
closing bid price of the Common Stock falls below 50.0% of the Fixed Price for a
period of 20 consecutive trading days, the holders of a majority in interest of
the Series C Preferred may request, within three days of such date, that the
Company reset the Fixed Price of the Series C Preferred to equal such 20 day
average. If the Company declines the request reset the fixed conversion price,
then the annual Premium Accrual on the Series C Preferred will increase from
8.0% to 11.0%, to be applied on a retroactive basis.
The Series C Preferred is subject to optional redemptions by the
Company, and, upon the occurrence of certain events specified in the Certificate
of Designations, must be redeemed by the Company at the amounts set forth in the
Certificate of Designations. In addition, upon certain redemptions, the Company
is obligated to deliver warrants to the holders of the shares being redeemed
providing for the issuance upon exercise of a number of shares of Common Stock
which otherwise would have been issued upon conversion of the Series C Preferred
being redeemed. The warrants shall be substantially in the form of the
A-Warrants described below, shall expire on June 5, 2000 and shall be
exercisable for a price equal to the Fixed Price at the time of issuance of the
warrants (as adjusted, if necessary, pursuant to the performance adjustment
provisions described above). In addition, at the option of two-thirds of the
holders of Series C Preferred, the Series C Preferred must be redeemed by the
Company for an amount equal to its Liquidation Preference (without the issuance
of any additional warrants) if Robert Peiser ceases to be employed as the
Company's Chief Executive Officer at any time prior to May 31, 1998.
The Certificate of Designations provides that certain redemption
provisions regarding the Series C Preferred are subject to that certain
Agreement Among Preferred Stockholders, entered into among the Company, the
Series C Preferred investors and the holders of the Company's Series B Preferred
Stock (the "Agreement Among Preferred Stockholders"). Pursuant to the Agreement
Among Preferred Stockholders, the parties mutually agreed that if the Company
redeems one series of preferred stock due to certain mandatory or optional
redemption provisions and a similar provision does not apply to the other series
of preferred stock, the holders of the other series of preferred stock will,
under certain circumstances, be entitled to participate in such redemption.
The A-Warrants are convertible into shares of Common Stock at a price
of $11.25 per share (subject to certain adjustments), and expire on June 5,
2002. The B-Warrants are convertible into shares of Common Stock at a price of
$6.8025 per share (subject to certain adjustments), and expire on June 5, 2000.
The exercise price of the B-Warrants is subject to an upward performance
adjustment providing that if at the time of exercise the closing bid price of
the Common Stock has increased by more than 45.0% over $6.8025 (the "Warrant
Threshold Level"), the exercise price shall automatically increase so that the
holder of the B-Warrant being exercised relinquishes 60% of the increase in
value of the Common Stock over the Warrant Threshold Level.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
Exhibit
Number Description of Document
99.1 Securities Purchase Agreement, dated June 5, 1997, by and
among the Company,RGC, CC Investors and Lionhart.
99.2 Certificate of Designation, Preferences and Rights of Series
C Preferred Stock.
99.3 Certificate of Correction to Certificate of Designation,
Preferences and Rights of Series C Preferred Stock
99.4 Form of Stock Purchase Warrant (A-Warrant).
99.5 Form of Stock Purchase Warrant (B-Warrant).
99.6 Agreement Among Preferred Stockholders, dated June 5, 1997, by
and among the Company, RGC, CC Investors, Lionhart, Hunt
Petroleum of Texas, Inc. and GFI Company.
99.7 Registration Rights Agreement, dated June 5, 1997, by and
among the Company, RGC, CC Investors and Lionhart.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 13, 1997 WESTERN PACIFIC AIRLINES, INC.
By: /s/ Robert A. Peiser
Robert A. Peiser, President
and Chief Executive Officer
<PAGE>
EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 5,
1997 by and among Western Pacific Airlines, Inc. a Delaware corporation, with
headquarters located at 2864 South Circle Drive, Suite 1100, Colorado Springs,
Colorado 80906 (the "Company"), and each of the purchasers set forth on the
signature pages hereto (each, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized a new series of preferred stock, designated as its
Series C Convertible Preferred Stock (the "Preferred Stock"), having the rights,
preferences and privileges set forth in the Certificate of Designations, Rights
and Preferences attached hereto as Exhibit "A" (the "Certificate of
Designation");
C. The Preferred Stock is convertible into shares of Common Stock, par
value $.001 per share, of the Company (the "Common Stock"), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designation;
D. The Company has authorized the issuance to the Buyers (i) an aggregate of
213,333 Warrants, in the form attached hereto as Exhibit "B" (the "A-Warrants")
and (ii) an aggregate of 111,110 Warrants, in the form attached hereto as
Exhibit "C" (the "B-Warrants") (the A-Warrants and the B-Warrants are
collectively referred to as (the "Warrants"));
E. The Buyers desire to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement, (i) an aggregate of Ten
Thousand (10,000) shares of Preferred Stock, (ii) A-Warrants to purchase an
aggregate of 213,333 shares of Common Stock, and (iii) B-Warrants to purchase an
aggregate of 111,110 shares of Common Stock, for an aggregate purchase price of
Ten Million Dollars ($10,000,000);
F. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of shares of Preferred Stock and Warrants set forth
immediately below its name on the signature pages hereto; and
G. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit "D" (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares and Warrants. The Company
shall issue and sell to each Buyer and each Buyer severally agrees to purchase
from the Company such number of shares of Series C Preferred Stock
(collectively, together with any Preferred Stock issued in replacement thereof
or as a dividend thereon or otherwise with respect thereto in accordance with
the terms thereof, the "Preferred Shares") and Warrants, and at the aggregate
purchase price, as is set forth immediately below such Buyer's name on the
signature pages hereto. The issuance, sale and purchase of the Preferred Shares
and the Warrants shall take place at the closing (the "Closing"). Subject to the
satisfaction (or waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, at the Closing, the Company shall issue and sell to each Buyer
and each Buyer shall purchase from the Company the aggregate number of Preferred
Shares and Warrants which such Buyer is purchasing hereunder. The aggregate
number of Preferred Shares to be issued at the Closing is Ten Thousand (10,000).
The Warrants to be issued at the Closing consist of an aggregate of 213,333
A-Warrants, and an aggregate of 111,110 B-Warrants. The aggregate purchase price
for the Preferred Shares and the Warrants to be issued at Closing is Ten Million
Dollars ($10,000,000).
b. Form of Payment. On the Closing Date (as defined below),
(i) each Buyer shall pay the purchase price for the Preferred Shares and
Warrants to be issued and sold to it at the Closing (the "Purchase Price") by
wire transfer of immediately available funds to the Company, in accordance with
the Company's written wiring instructions, against delivery of a duly executed
certificate(s) representing such number of Preferred Shares and Warrants which
such Buyer is then purchasing, and (ii) the Company shall deliver such
certificate(s) and the Warrants against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Preferred Shares and the Warrants pursuant
to this Agreement (the "Closing Date") shall be 12:00 noon Eastern Standard Time
on June 5, 1997 (subject to a two (2) business day grace period at either
party's option) or such other mutually agreed upon time. The Closing shall occur
on the Closing Date at the offices of the Company, 2864 South Circle Drive,
Suite 1100, Colorado Springs, Colorado 80906.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer severally represents and warrants to the Company that:
a. Investment Purpose. The Buyer is purchasing the Preferred
Shares, the shares of Common Stock issuable upon conversion thereof (the
"Conversion Shares"), the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") (collectively, the "Securities")
for its own account for investment only and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered under
the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. The Buyer understands and agrees that
(i) except as provided in the Registration Rights Agreement, the Securities have
not been and are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently registered
thereunder, or (b) the Buyer shall have delivered to the Company an opinion of
counsel (which opinion shall be reasonably acceptable to the Company) to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (c) sold pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule); (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to the Registration Rights Agreement). In addition to the
foregoing, the Buyer understands and agrees that the Buyer will not transfer
either the Preferred Shares or the Warrants unless (i) either (a) at least fifty
percent (50%) of the Preferred Shares or 50% of the Warrants received by such
Buyer pursuant to this Agreement are transferred or (b) if a transfer has
previously been made pursuant to clause (a) above, all of the remaining
Preferred Shares or Warrants, as the case may be, of such Buyer are transferred
or (ii) the Buyer is transferring such Preferred Shares or Warrants to an
affiliate of the Buyer; provided, that the Buyer agrees to cause any transferee
to be bound by the terms of this Agreement including, but not limited to,
Section 8(g) hereof. In determining compliance with the foregoing sentence, the
holdings of the Buyer and its affiliates shall be deemed one and the same.
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account, subject to the limitations on transfer contained herein
applicable to transferees of the Securities.
g. Legends. The Buyer understands and agrees that the
certificates for the Preferred Shares, Warrants and, until such time as the
Conversion Shares and Warrant Shares have been registered under the 1933
Act, as contemplated by the Registration Rights Agreement,the Conversion Shares
and Warrant Shares, may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The securities
have been acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form, substance
and scope reasonably acceptable to the Company, that registration is
not required under said Act or unless sold pursuant to Rule 144 under
said Act."
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
the sale of such Security is registered under the 1933 Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
reasonably acceptable to the Company, to the effect that a public sale or
transfer of such Security may be made without registration under the 1933 Act or
(c) such holder provides the Company with an opinion of counsel that such
Security can be sold pursuant to Rule 144 under the 1933 Act (or a successor
rule thereto) without any restriction as to the number of Securities acquired as
of a particular date that can then be immediately sold. The Buyer agrees to sell
all Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable prospectus delivery
requirements.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity.
i. Residency. The Buyer is a resident of the jurisdiction
set forth immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that the statements
contained in this Article III are true and correct, except as set forth in the
disclosure schedules delivered by the Company to the Investors concurrently
herewith (the "Disclosure Schedules"). All exceptions noted in the Disclosure
Schedules are numbered to correspond to the applicable Sections to which such
exception refers. The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and each of its
Subsidiaries, if any, is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of
the Subsidiaries (as defined below) of the Company and the jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. "Material Adverse Effect"
means any material adverse effect on the operations, assets, financial condition
or prospects of the Company or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.
b. Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
of the transactions contemplated hereby and thereby and to issue the Securities,
in accordance with the terms hereof and thereof, (ii) the execution and delivery
of this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation the filing of the Certificate of
Designation and the issuance of the Preferred Shares and the Warrants and the
issuance and reservation for issuance of the Conversion Shares and Warrant
Shares issuable upon conversion or exercise thereof) have been duly authorized
by the Company's Board of Directors and no further consent or authorization of
the Company, its Board or Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered and the Certificate of
Designation has been duly filed by the Company, and (iv) each of this Agreement
and the Certificate of Designation constitutes, and upon execution and delivery
by the Company of the Registration Rights Agreement and the Warrants, each of
such instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 20,000,000 shares of Common Stock
of which (a) 13,527,977 shares are issued and outstanding, (b) 3,154,916 shares
are reserved for issuance pursuant to the Company's stock option plans, (c)
926,291 shares are reserved for issuance pursuant to securities (other than the
Preferred Shares and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and (d) 2,294,321 shares are reserved
for issuance upon conversion of the Preferred Shares and exercise of the
Warrants (subject to adjustment pursuant to the Company's covenant set forth in
Section 4(h) below) and another 2,592,909 shares are reserved for issuance upon
conversion of the Preferred Shares and exercise of the Warrants, subject to the
approval of the proposed increase in authorized capital to be voted upon at the
meeting of the Company's shareholders to be held on June 19, 1997; and (ii)
3,047,000 shares of preferred stock, of which 200,000 shares are issued and
outstanding (exclusive of the Preferred Shares). All of such outstanding shares
of capital stock are, or upon issuance will be (assuming issuance and delivery
of such shares against payment therefor), duly authorized, validly issued, fully
paid and nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in Schedule 3(c), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any, shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
and (ii) there are no agreements or arrangements under which the Company or any
of its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement). The
Company has furnished to the Buyer true and correct copies of the Company's
Restated Certificate of Incorporation as in effect on the date hereof
("Certificate of Incorporation"), the Company's By-laws, as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto. The Company shall provide the Buyer with a
written update of this representation signed by the Company's Chief Executive or
Chief Financial Officer on behalf of the Company as of the Closing Date.
d. Issuance of Shares. The Preferred Shares, Conversion Shares
and Warrant Shares are duly authorized and, upon issuance in accordance with the
terms of this Agreement, upon conversion of the Preferred Shares and upon proper
exercise of the Warrants, as applicable, the Preferred Shares, Conversion Shares
and Warrant Shares (assuming issuance and delivery of such Warrant Shares
against payment therefor in accordance with the Warrants) shall be validly
issued, fully paid and non-assessable, and free from all taxes, liens and
charges with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of stockholders of the Company. The term
Conversion Shares includes the shares of Common Stock issuable upon conversion
of the Preferred Shares, including without limitation, such additional shares,
if any, as are issuable as a result of the events described in Section 2(c) of
the Registration Rights Agreement and Article VI.E of the Certificate of
Designation. The Company has reviewed the conversion and exercise provisions set
forth in the Certificate of Designation and Warrants and understands and
acknowledges the potentially dilutive effect to the Common Stock of the issuance
of the Conversion Shares and Warrant Shares upon conversion or exercise, as
applicable, of the Preferred Shares and the Warrants.
e. No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation and the issuance and reservation for issuance of the Preferred
Shares, Conversion Shares and Warrant Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of Incorporation or
By-laws or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or
both could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including, but not limited to, federal and state securities laws and
regulations and laws, rules and regulations under the jurisdiction of the
Federal Aviation Administration (the "FAA") or federal and state departments of
transportation ("DOTs")) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries are not being conducted, and shall not be
conducted so long as a Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity, except for violations
which either singly or in the aggregate do not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
1933 Act and any applicable state securities laws, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Registration Rights Agreement or the
Warrants in accordance with the terms hereof or thereof. The Company is not in
violation of the listing requirements of the Nasdaq National Market ("Nasdaq")
and does not reasonably anticipate that the Common Stock will be delisted by
Nasdaq in the foreseeable future.
f. SEC Documents, Financial Statements. Since December 5,
1995, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company has delivered or made available to
each Buyer true and complete copies of the SEC Documents, except for such
exhibits and incorporated documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to March
31, 1997 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company.
g. Absence of Certain Changes. Since December 31, 1996, there
has been no adverse change and no adverse development in the assets,
liabilities, business, properties, operations, financial condition, results of
operations or prospects of the Company, which could be reasonably expected to
have a Material Adverse Effect, except as disclosed in Schedule 3(g) or in the
SEC Documents.
h. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body (including but not
limited to the FAA and DOTs) pending or, to the knowledge of the Company or any
of its Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries that could have a Material Adverse Effect. Schedule 3(h) contains a
complete list and summary description of any pending or, to the knowledge of the
Company, threatened proceeding against the Company or any of its Subsidiaries,
without regard to whether it would have a Material Adverse Effect.
i. Patents, Copyrights, etc. The Company owns or possesses the
requisite licenses or rights to use all patents, patent rights, inventions,
know-how, trade secrets, trademarks, service marks, service names, trade names
and copyrights necessary to enable it to conduct its business as now operated
(and, except as set forth in Schedule 3(i) hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or to the
Company's knowledge threatened which challenges the right of the Company or of a
subsidiary with respect to any patents, patent rights, licenses, inventions,
know-how, trademarks, service marks, service names, trade names and copyrights
necessary to enable it to conduct its business as now operated (and, except as
set forth in Schedule 3(i) hereof, to the Company's knowledge, as presently
contemplated to be operated in the future); of the Company's knowledge, the
Company's or its Subsidiaries' current and intended products, services and
processes do not infringe on any patents, patent rights, licenses, inventions,
know-how, trademarks, service marks, service names, tradenames, copyrights or
other rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.
j. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's executive officers has or is expected in the future to
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is a party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
k. Tax Status. Except as set forth on Schedule 3(k), the
Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. Except as set forth on Schedule 3(k), there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
l. Certain Transactions. Except as set forth on Schedule 3(l)
or in the SEC Documents and except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed on Schedule 3(c) or in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
m. Disclosure. All information relating to or concerning the
Company set forth in this Agreement and provided to the Buyers pursuant to
Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or exists
with respect to the Company or its business, properties, prospects, operations
or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed (assuming for this purposes that the
Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).
n. Acknowledgment Regarding Buyers' Purchase of Preferred
Shares. The Company acknowledges and agrees that the Buyers are acting solely in
the capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers' purchase of the
Preferred Shares. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
o. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers.
p. No Brokers. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with Gem Advisors, Inc., whose commissions and fees
will be paid for by the Company.
q. Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (including, but not limited
to, airframe or airworthiness certifications, safety certifications, air crew
certifications, engineer and maintenance certifications and other similar
certifications required by the FAA and DOTs) (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. During the period
commencing on March 31, 1997 and ending on the date hereof, neither the Company
nor any of its Subsidiaries has received any notification with respect to
possible conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations (including, but
not limited to, correspondence from the FAA or any DOTs), which conflicts,
defaults or violations would not have a Material Adverse Effect.
r. Environmental Matters.
(i) Except as set forth in Schedule 3(r),there are,to
the Company's knowledge, with respect to the Company or any of its Subsidiaries
or any predecessor of the Company,no past or present violations of Environmental
Laws (as defined below), releases of any material into the environment, actions,
activities, circumstances,conditions,events,incidents,or contractual obligations
which may give rise to any common law environmental liability or any liability
under any Environmental Laws and neither the Company nor any of its Subsidiaries
has received any written notice with respect to any of the foregoing, nor is any
action pending or, to the Company's knowledge, threatened in connection with any
of the foregoing. The term "Environmental Laws "means all federal, state, local
or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation,ambient air,surface water,groundwater
land surface or subsurface strata),including,without limitation,laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively,
"Hazardous Materials") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used
or disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by
the Company or any of its Subsidiaries, and no Hazardous Materials were
released by the Company or, to the knowledge of the Company, by any third party
on or about any real property previously owned, leased or used by the Company
or any of its Subsidiaries during the period the property was owned, leased or
used by the Company or any of its Subsidiaries, except in the normal course
of the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in Schedule 3(r), to the
knowledge of the Company there are no underground storage tanks on or under any
real property owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
(iv) Notwithstanding anything to the contrary
contained in this Section 3(r), any representation or warranty made by the
Company in this Section 3(r) as to its Subsidiaries will not be deemed to be
breached in the absence of a Material Adverse Effect.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before each Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to such Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as the Registration Statement is required to remain effective pursuant to
the Registration Rights Agreement, the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. The Company currently meets, and will take all
necessary action to continue to meet, the "registrant eligibility" requirements
set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds from
the sale of the Preferred Shares and the Warrants for working capital and
general corporate purposes and shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other person (except in connection with its currently existing
direct or indirect Subsidiaries).
e. Additional Equity Capital. Subject to the exceptions
described below, the Company agrees that during the period beginning on the date
hereof and ending on the later of (i) ninety (90) days from the date hereof and
(ii) thirty (30) days following the effective date of the Registration Statement
to be filed pursuant to Section 2(a) of the Registration Rights Agreement (the
"Lock-Up Period"), the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, obtain or enter into any agreement to obtain
additional equity financing (including debt financing with an equity component)
where the equity is (x) issued on Floating Rate Convertible Terms (as defined
below) and (y) to be registered for resale under the 1933 Act within six (6)
months of issuance. In addition, subject to the exceptions described below, the
Company will not conduct any equity financing (including debt with an equity
component) ("Future Offerings") during the period beginning on the Closing Date
and ending one hundred eighty (180) days thereafter unless it shall have first
provided to each Buyer written notice of its intent to seek such financing. The
limitations referred to in this paragraph are collectively referred to as the
"Capital Raising Limitations". The Capital Raising Limitations shall not apply
to any transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (other than a continuance offer pursuant to Rule
415 under the 1933 Act) or (ii) issuances of securities as consideration for a
merger, consolidation or sale of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company. The Capital Raising Limitations
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan approved by a majority of the Company's disinterested directors.
"Floating Rate Convertible Terms" means terms which include the right to buy an
indeterminate number of shares of Common Stock upon conversion, redemption or
exercise of the Securities or other rights based upon a floating rate
conversion, redemption or exercise price derived from the future market price of
the Common Stock.
f. Expenses. Each party to this Agreement shall to bear its
own expenses,whether or not the transactions contemplated hereby are consummated
g. Financial Information. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; and (ii) within one (1) day after release,
copies of all press releases issued by the Company. The Company shall use its
commercially reasonable efforts to send to each Buyer, as soon as practicable
after their release, any press releases of any of its Subsidiaries.
h. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
and the full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith (based on the Conversion Price of the Preferred Shares and
the exercise price of the Warrants in effect from time to time). The Company
shall not reduce the number of shares of Common Stock reserved for issuance upon
conversion of the Preferred Shares and the full exercise of the Warrants without
the consent of each Buyer, which consent will not be unreasonably withheld. The
Company shall use its best efforts at all times to maintain the number of shares
of Common Stock so reserved for issuance at no less than two (2) times the
number that is then actually issuable upon full conversion of the Preferred
Shares and exercise of the Warrants (based on the Conversion Price of the
Preferred Shares and the exercise price of the Warrants in effect from time to
time). So long as the Company has reserved all of the shares of Common Stock it
is capable of reserving as of the date hereof, a portion of the shares of Common
Stock so reserved pursuant to this Section 4(h) may be reserved subject to the
approval of the proposed increase in authorized capital to be voted upon at the
meeting of the Company's shareholders to be held on June 19, 1997.
i. Listing. The Company shall promptly secure the listing of
the Conversion Shares and Warrant Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Preferred
Shares and Warrant Shares issuable upon exercise of the Warrants. The Company
will take all action necessary to obtain and maintain (until such time as all of
the Preferred Shares are converted or the Warrant Shares are exercised) the
listing and trading of its Common Stock on Nasdaq, the Nasdaq SmallCap Market
("Nasdaq SmallCap"), the New York Stock Exchange ("NYSE"), or the American Stock
Exchange ("AMEX") and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and such
exchanges, as applicable.
j. Corporate Existence. So long as a Buyer beneficially owns
any Preferred Shares or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger, consolidation or sale of all or substantially
all of the Company's assets, as long as the surviving or successor entity in
such transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose Common Stock is listed for trading on Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.
k. Redemptions of Series B Preferred Stock. From the Closing
Date until eighteen (18) months thereafter, the Company shall not redeem any
Series B Preferred Stock (or redeem or repay any security into which such Series
B Preferred Stock may have been converted or exchanged), unless it shall
simultaneously offer to the holders of the Preferred Shares the right to be
redeemed on a pro rata basis with the Series B Preferred Stock at a price per
share equal to the Liquidation Preference (as defined in the Certificate of
Designation); provided, however, that the Company shall not be required to offer
such redemption if the average closing bid price of the Common Stock over the
ten (10) trading day period ending one day prior to the date of such redemption
is two times (2x) the Fixed Conversion Price (as defined in the Certificate of
Designation). In the event of such redemption, the holders of the Preferred
Shares shall also relinquish the Warrants without payment on a pro rata basis
based on the number of Preferred Shares held by each holder. During the period
this Section 4(k) is in effect, the Warrants shall be transferable only if they
are transferred along with the Preferred Shares on a pro rata basis; provided,
however, that if the Investors unanimously agree to permanently waive the
covenants of the Company contained in this Section 4(k), the restrictions on
transfer of the Warrants contained in this sentence shall not be applicable.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of each Buyer or its nominee, for
the Conversion Shares and Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon proper conversion of the Preferred
Shares or proper exercise of the Warrants (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares and Warrant Shares, prior to
registration of the Conversion Shares and Warrant Shares under the 1933 Act),
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
securities laws upon resale of the Securities. If a Buyer provides the Company
with an opinion of counsel, reasonably satisfactory to the Company in form,
substance and scope, that registration of a resale by such Buyer of any of the
Securities is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by such Buyer. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the
Buyers' by obliterating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares and the Warrants to the Buyers at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
a. Each Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
b. Each Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.
c. The aggregate amount of the Purchase Price received by the
Company from all Buyers shall be Ten Million Dollars ($10,000,000) and, in the
event that subscriptions for less than $10,000,000 are received by the Company
for the purchase of the Preferred Shares and the Warrants, the Company will
return to the Initial Investors who have wired funds to the Company all of the
funds received.
d. The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Delaware.
e. The representations and warranties of each Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and each Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the applicable Buyer at or prior to the Closing Date. The
Company shall have received a certificate from each Buyer, dated as of the
Closing Date, to the foregoing effect.
f. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred Shares
and the Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions, provided that these conditions
are for such Buyer's sole benefit and may be waived by such Buyer at any time in
its sole discretion:
a. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Buyer.
b. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware, and a
copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
c. The Company shall have delivered to such Buyer
duly executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares being so purchased and the Warrants being so
purchased in accordance with Section 1(b) above.
d. Trading in the Common Stock on Nasdaq shall not
have been suspended by the SEC or Nasdaq.
e. The Irrevocable Transfer Agent Instructions,
in form and substance satisfactory to a majority-in-interest of the Buyers,
shall have been delivered to and acknowledged in writing by the Company's
Transfer Agent.
f. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date ) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer.
g. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
Exhibit "E" attached hereto.
h. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the Closing Date.
i. No litigation, statute, rule,regulation,executive
order, decree, ruling or injunction shall have been enacted, entered,promulgated
or endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
j. The Company shall have entered into a written
agreement with the holders of the Series B Preferred Stock pursuant to which
such holders shall have agreed (i) to vote all of the shares of Common Stock
owned by them (to the Company's knowledge representing approximately 32% of
the currently issued and outstanding shares of Common Stock) in favor of the
Company's proposal to increase its authorized shares of Common Stock to
40,000,000 shares (as described in the Company's 1997 Proxy Statement filed
with the SEC) and (ii) pending the increase in the authorized number of shares
of Common Stock, to release for the Company's use 2,000,000 shares of Common
Stock reserved for issuance upon exercise of the warrants issuable to them
in order to accommodate the conversion of the Preferred Shares and Warrants.
8. MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in
Wilmington, Delaware with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby.
b. Counterparts. This Agreement may be executed in two
or more counterparts,all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party
and delivered to the other party.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of,or affect the interpretation
of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
Western Pacific Airlines, Inc.
2864 South Circle Drive, Suite 1100
Colorado Springs, CO 80906
Attention: Chief Executive Officer
Facsimile: (719) 527-7259
With copy to:
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, IL 60602
Attention: Allan J. Reich, Esq.
Facsimile: (312) 580-0923
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Buyer may assign its rights hereunder without
the consent of the Company to (i) any person that purchases, in a private
transaction from a Buyer, (a) at least 50% of the Preferred Shares or at least
50% of the Warrants received by such Buyer pursuant to this Agreement or (b) if
a sale of the Preferred Shares or the Warrants has previously been made pursuant
to clause (a) above, all of the remaining Preferred Shares or Warrants, as the
case may be, of such Buyer are sold or (ii) any affiliate of such Buyer;
provided, that in the case of a sale made pursuant to clause (i) above, the
transferee of the Buyer agrees, in the case of a proposed subsequent transfer by
such transferee, to transfer all of the Preferred Shares or Warrants held by
such transferee. In determining compliance with the foregoing sentence, the
holdings of the Buyer and its affiliates shall be deemed one and the same.
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Securities may be pledged as collateral in connection with a bona fide
margin account, subject to the limitations on transfer contained herein
applicable to transferees of the Securities.
h. Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. The representations and warranties and the
agreements and covenants set forth in this Agreement shall survive the Closing
hereunder notwithstanding any due diligence investigation conducted by or on
behalf of the parties hereto.
j. Publicity. The Company and each of the Buyers shall have
the right to approve before issuance any press releases, SEC, Nasdaq or NASD
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of each of the Buyers, to make any press release or
SEC, Nasdaq or NASD filings with respect to such transactions as is required by
applicable law and regulations (although each of the Buyers shall be consulted
by the Company in connection with any such press release prior to its release
and shall be provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
WESTERN PACIFIC AIRLINES, INC.
By:
Name: Robert A. Peiser
Its: President and Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp.
SIGNATURE:
By:
Name: Wayne D. Bloch
Its: Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
440 E. Swedesford Road
Suite 2025
Wayne, PA 19087
Facsimile: (610) 971-2212
Telephone: (610) 902-0200
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Preferred Stock: 4,000
Number of Warrants:
A Warrants: 85,333
B Warrants: 44,444
Aggregate Purchase Price: $4,000,000
<PAGE>
CC INVESTMENTS, LDC
By: CSS Corporation Ltd., Corporate Secretary
SIGNATURE:
By:
Name:
Its:
RESIDENCE: Cayman Islands
ADDRESS:
c/o Citco Fund Services (Cayman Islands) Ltd.
Attention: William Keunen
Corporate Centre, West Bay Road
P.O. Box 31106
Grand Cayman, Cayman Islands
Facsimile: (345) 949-3977
Telephone: (345) 949-3877
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Preferred Stock: 4,000
Number of Warrants:
A Warrants: 85,333
B Warrants: 44,444
Aggregate Purchase Price: $4,000,000
<PAGE>
LIONHART GLOBAL APPRECIATION FUND
SIGNATURE:
By:
Name:
Its:
RESIDENCE: British Virgin Islands
ADDRESS:
Citco Buildings, Wickhams Cay
P.O. Box 662
Road Town
Tortola, BV1
Attn: Terry Duffy
Facsimile: 011-441-819-476936
Telephone: 011-441-819-476934
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Preferred Stock: 2,000
Number of Warrants:
A Warrants: 42,667
B Warrants: 22,222
Aggregate Purchase Price: $2,000,000
<PAGE>
EXHIBIT 99.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
WESTERN PACIFIC AIRLINES, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Western Pacific Airlines, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation on May 21, 1997 pursuant to authority
of the Board of Directors as required by Section 151(g) of the General
Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Restated Certificate of
Incorporation, the Board of Directors hereby authorizes a series of the
Corporation's previously authorized Preferred Stock, par value $.001 per share
(the "Preferred Stock"), and hereby states the designation and number of shares,
and fixes the relative rights, preferences, privileges, powers and restrictions
thereof as follows:
Series C Convertible Preferred Stock:
I. Designation and Amount
The designation of this series, which consists of 10,000
shares of Preferred Stock, is Series C Convertible Preferred Stock (the "Series
C Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
II. Rank
The Series C Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.001 per share (the "Common Stock"); (ii)
prior to any class or series of capital stock of the Corporation hereafter
created specifically ranking, by its terms, junior to the Series C Preferred
Stock (collectively, with the Common Stock, "Junior Securities"); (iii) pari
passu with the Corporation's Series B Preferred Stock and any class or series of
capital stock of the Corporation hereafter created specifically ranking, by its
terms, on parity with the Series C Preferred Stock (all of the foregoing in this
clause (iii) being referred to as "Pari Passu Securities"); and (iv) junior to
any class or series of capital stock of the Corporation hereafter created (with
the consent of the holders of Series C Preferred Stock obtained in accordance
with Article IX hereof) specifically ranking, by its terms, senior to the Series
C Preferred Stock ("Senior Securities"), in each case as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
III. Dividends
The Series C Preferred Stock shall not bear any dividends. In
no event, so long as any Series C Preferred Stock shall remain outstanding,
shall any dividend whatsoever be declared or paid upon, nor shall any
distribution be made upon, any Junior Securities, nor shall any shares of Junior
Securities be purchased or redeemed by the Corporation nor shall any moneys be
paid to or made available for a sinking fund for the purchase or redemption of
any Junior Securities, without, in each such case, the written consent of the
holders of a majority of the outstanding shares of Series C Preferred Stock,
voting together as a class, provided, however, that the Corporation shall be
entitled to repurchase shares of its Common Stock from Perot Systems Corporation
("Perot") pursuant to the terms of that certain Technology Agreement dated March
28, 1997 between Perot and the Corporation (as in effect on the date of filing
of this Certificate) and further, provided, that the Company shall be permitted
to declare and pay dividends on Junior Securities after any fiscal year in which
annual net income is greater than Fifty Million Dollars ($50,000,000).
IV. Liquidation Preference
A. If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or State bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation (other than Senior Securities) upon
liquidation, dissolution or winding up unless prior thereto (or, in the case of
Pari Passu Securities, simultaneously therewith), the holders of shares of
Series C Preferred Stock, subject to Article VI, shall have received the
Liquidation Preference (as defined in Article IV.C) with respect to each share,
but such holders will not be entitled to any further payment in respect of such
liquidation, dissolution or winding up. If upon the occurrence of a Liquidation
Event, the assets and funds available for distribution among the holders of the
Series C Preferred Stock and holders of Pari Passu Securities shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series C Preferred Stock and the Pari Passu
Securities shall be distributed ratably among such shares in proportion to the
ratio that the Liquidation Preference payable on each such share bears to the
aggregate liquidation preference payable on all such shares.
B. At the option of the holders of 66 2/3% of the outstanding Series C
Preferred Stock, the sale, conveyance or disposition of all or substantially all
of the assets of the Corporation, the effectuation by the Corporation of a
transaction or series of related transactions in which more than 50% of the
voting power of the Corporation is disposed of, or the consolidation, merger or
other business combination of the Corporation with or into any other Person (as
defined below) or Persons when the Corporation is not the survivor shall either:
(i) be deemed to be a liquidation, dissolution or winding up of the Corporation
pursuant to which the Corporation shall be required to distribute the
Liquidation Preference with respect to each outstanding share of Series C
Preferred Stock in accordance with and subject to the terms of this Article IV;
or (ii) be treated pursuant to Article VI.C(d) hereof. "Person" shall mean any
individual, corporation, limited liability company, partnership, association,
trust or other entity or organization.
C. For purposes hereof, the "Liquidation Preference" with respect to a
share of the Series C Preferred Stock shall mean an amount equal to the sum of
(i) the Stated Value thereof, plus (ii) an amount equal to eight percent (8%)
per annum of such Stated Value for the period beginning on the date of issuance
of such share and ending on the date of final distribution to the holder thereof
(pro rated for any portion of such period). The liquidation preference with
respect to any Pari Passu Securities shall be as set forth in the certificate of
designation filed in respect thereof.
V. Redemption
A. If any of the following events (each, a "Mandatory Redemption Event")
shall occur:
(i) The Corporation fails to issue shares of Common Stock to the holders of
Series C Preferred Stock upon exercise by the holders of their conversion rights
in accordance with the terms of this Certificate of Designation (for a period of
at least ninety (90) days if such failure is solely as a result of the
circumstances governed by the second paragraph of Article VI.F below and the
Corporation is using all commercially reasonable efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable), fails to
transfer or to cause its transfer agent to transfer any certificate for shares
of Common Stock issued to the holders upon conversion of the Series C Preferred
Stock as and when required by this Certificate of Designation or the
Registration Rights Agreement, dated as of June 5, 1997, by and among the
Corporation and the other signatories thereto (the "Registration Rights
Agreement"), fails to remove any restrictive legend on any certificate or any
shares of Common Stock issued to the holders of Series C Preferred Stock upon
conversion of the Series C Preferred Stock as and when required by this
Certificate of Designation, the Securities Purchase Agreement dated as of June
5, 1997, by and between the Corporation and the other signatories thereto (the
"Purchase Agreement") or the Registration Rights Agreement, or fails to fulfill
its obligations pursuant to Section 4(i) or Section 4(k) of the Purchase
Agreement (or makes any announcement that it does not intend to honor the
obligations described in this paragraph) and any such failure shall continue
uncured (or any announcement not to honor its obligations shall not be
rescinded) for ten (10) business days;
(ii) The Corporation fails to obtain effectiveness with the Securities and
Exchange Commission (the "SEC") of the Registration Statement (as defined in the
Registration Rights Agreement) prior to October 31, 1997 or such Registration
Statement lapses in effect during the Registration Period (as defined in the
Registration Rights Agreement) (or sales otherwise are prohibited from being
made thereunder) (a "Sale Restriction Day") for more than forty-five (45)
consecutive days or ninety (90) days in any twelve (12) month period after such
Registration Statement becomes effective; provided, however, that the Automatic
Conversion Date set forth in Article VII hereof shall be extended by the number
of Sale Restriction Days which exceed a total of forty-five (45) days;
(iii) The Corporation shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee
for it or for all or substantially all of its property or business; or such a
receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Corporation; provided, however,
that in the case of any involuntary bankruptcy, such involuntary bankruptcy
shall continue undischarged or undismissed for a period of sixty (60) days; or
(v) The Corporation shall fail to maintain the listing of the Common Stock
on the Nasdaq National Market ("Nasdaq"), the Nasdaq SmallCap Market, the New
York Stock Exchange or the American Stock Exchange and such failure shall remain
uncured for at least thirty (30) days, then, upon the occurrence and during the
continuation without cure of any Mandatory Redemption Event specified in
subparagraphs (i), (ii) or (v) at the option of the holders of at least 66 2/3%
of the then outstanding shares of Series C Preferred Stock by written notice
(the "Mandatory Redemption Notice") to the Corporation of such Mandatory
Redemption Event, or upon the occurrence of any Mandatory Redemption Event
specified in subparagraphs (iii) or (iv), the Corporation shall purchase, on the
date specified in such notice (the "Mandatory Redemption Date"), each holder's
shares of Series C Preferred Stock for an amount per share equal to the greater
of (1) the sum of (a) 125% multiplied by the Stated Value of the shares to be
redeemed, plus (b) an amount equal to eight percent (8%) per annum of such
Stated Value for the period beginning on the issuance of such shares and ending
on the Mandatory Redemption Date and (2) the "parity value" of the shares to be
redeemed, where parity value means the product of (a) the number of shares of
Common Stock issuable upon conversion of such shares in accordance with Article
VI below (treating the Trading Day immediately preceding the Mandatory
Redemption Date as the "Conversion Date" (as hereinafter defined)), assuming
that the Applicable Percentage (as defined in Article VI.B.) is 80% and also
assuming that the 8% increase referred to in Article IV.C. is paid in cash,
multiplied by (b) the closing sale price for the Common Stock on the principal
trading market for such shares on such "Conversion Date" (the greater of such
amounts being referred to as the "Mandatory Redemption Amount"). In the event
that the 8% increase referred to above is not paid in cash, such amount shall be
added to the Mandatory Redemption Amount.
In the case of a Mandatory Redemption Event, if the
Corporation fails to pay the Mandatory Redemption Amount for each share within
twenty (20) business days of written notice that such amount is due and payable,
then (assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series C Preferred Stock shall have the right
at any time, so long as the Mandatory Redemption Event continues, to require the
Corporation, upon written notice, to immediately issue (in accordance with and
subject to the terms of Article VI below), in lieu of the Mandatory Redemption
Amount, with respect to each outstanding share of Series C Preferred Stock held
by such holder, the number of shares of Common Stock of the Corporation equal to
the Mandatory Redemption Amount divided by the Conversion Price then in effect.
B. If the Series C Preferred Stock ceases to be convertible as
a result of the limitations described in the second paragraph of Article VI.A
below (a "19.99% Redemption Event"), and the Corporation has not prior to, or
within ninety (90) days of, the date that such 19.99% Redemption Event arises,
(i) obtained approval of the issuance of the Conversion Shares by the requisite
vote of the holders of the then-outstanding Common Stock (not including any
shares of Common Stock held by present or former holders of Series C Preferred
Stock that were issued upon conversion of Series C Preferred Stock) or (ii)
received other permission pursuant to Nasdaq Requirement 4460(i) allowing the
Corporation to resume issuances of shares of Common Stock upon conversion of
Series C Preferred Stock, then the Corporation shall be obligated to redeem
immediately all of the then outstanding Series C Preferred Stock, in accordance
with this Article V.B. An irrevocable Redemption Notice shall be delivered
promptly to the holders of Series C Preferred Stock at their registered address
appearing on the records of the Corporation and shall state (1) that 19.99% of
the Outstanding Common Amount (as defined in Article VI.A below) has been issued
upon exercise of the Series C Preferred Stock, (2) that the Corporation is
obligated to redeem all of the outstanding Series C Preferred Stock and (3) the
Mandatory Redemption Date, which shall be a date within twenty (20) days of the
date of the Redemption Notice. On the Mandatory Redemption Date, the Corporation
shall make payment of the Mandatory Redemption Amount (as defined in Article
V.A. above) in cash.
C. So long as no Mandatory Redemption Event shall have
occurred and be continuing, upon at least thirty (30) business days advance
written notice to the holders of the Series C Preferred Stock fixing a Mandatory
Redemption Date, the Corporation shall have the right to redeem all or any
portion of the Series C Preferred Stock on the Mandatory Redemption Date for
cash equal to the Mandatory Redemption Amount; provided, however, that if the
Corporation shall redeem less than all of the Series C Preferred Stock, such
redemption shall be made pro rata among the holders of the Series C Preferred
Stock.
D. The payment of the Mandatory Redemption Amount pursuant to
terms of paragraphs A, B and C of this Article V shall, in all cases, be
accompanied by delivery of a number of warrants equal to 100% of the Mandatory
Redemption Amount divided by the applicable Conversion Price determined in
accordance with Article VI below (treating the Trading Day immediately preceding
the Mandatory Redemption Date as the "Conversion Date"). The warrants shall be
substantially in the form attached as Exhibit B to the Purchase Agreement shall
expire on the Automatic Conversion Date set forth in Article VII below and shall
be exercisable at the Fixed Conversion Price (as defined in Article VI.A. below)
in effect on the Mandatory Redemption Date.
E. In the event that Robert A. Peiser shall, at any time prior
to May 31, 1998, cease to be employed on a full-time basis as the Chief
Executive Officer of the Corporation, the Corporation shall, within ten (10)
business days of the date on which the holders of 66 % of the outstanding Series
C Preferred Stock so request, purchase the outstanding shares of Series C
Preferred Stock for an amount per share equal to the Liquidation Preference and
the holders shall be required to relinquish any unexercised warrants issued to
the holders pursuant to the Purchase Agreement, on a pro rata basis based on the
number of shares of Series C Preferred Stock redeemed.
F. The provisions of this Article V and Article IV.B. are
subject to that certain Agreement Among Preferred Stockholders dated as of June
5, 1997 by and among the Corporation, the holders of Series B Preferred Stock
and the holders of Series C Preferred Stock, as the same may be modified or
amended after the date thereof.
VI. Conversion at the Option of the Holder
A. Each holder of shares of Series C Preferred Stock may, at
its option at any time and from time to time after the effective date of the
Registration Statement (or earlier in the event of the occurrence of a
transaction described in Article VI.C(d) below), upon surrender of the
certificates therefor, convert any or all of its shares of Series C Preferred
Stock into Common Stock as follows (an "Optional Conversion"). Each share of
Series C Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (1) the sum of
(a) the Stated Value thereof, plus, (b) the Premium Amount (as defined below)
(unless the Corporation elects to pay the Premium Amount in cash as provided
below), by (2) the then effective Conversion Price (as defined below); provided,
however, that, unless the Holder delivers a waiver in accordance with the
immediately following sentence, in no event shall a holder of shares of Series C
Preferred Stock be entitled to convert any such shares in excess of that number
of shares upon conversion of which the sum of (x) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the shares of Series C Preferred Stock) and (y) the
number of shares of Common Stock issuable upon the conversion of the shares of
Series C Preferred Stock with respect to which the determination of this proviso
is being made, would result in beneficial ownership by a holder and such
holder's affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, (i)
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (x) of such proviso and (ii) a holder may
waive the limitations set forth therein by written notice to the Corporation
upon not less than sixty-one (61) days prior written notice (with such waiver
taking effect only upon the expiration of such sixty-one (61) day notice
period). The "Premium Amount" means the product of the Stated Value, multiplied
by .08, multiplied by (N/365), where "N" equals the number of days elapsed from
the date of issuance of the Series C Preferred Stock to and including the
Conversion Date (as defined in Article VI.B. below). The Corporation shall have
the right to elect to pay the Premium Amount in cash, in lieu of conversion to
Common Stock in accordance with this Article VI.A. If the Corporation elects to
pay the Premium Amount in cash, such cash shall be paid simultaneously with the
delivery to the holder of the certificates representing the Common Stock
issuable upon conversion in accordance with Article VI.E below. At the written
request of any holder, the Corporation shall advise such holder in writing,
within ten (10) business days of such request, whether conversion of the Premium
Amount will be paid in Common Stock or cash, and such election shall be binding
for a period of thirty (30) days after the Corporation's response. Failure to
respond by the Corporation within ten (10) business days shall be deemed to be
an election to convert the Premium Amount to Common Stock for any conversions
within thirty (30) days of the request.
Notwithstanding anything to the contrary contained herein, if,
at any time, the aggregate number of shares of Common Stock then issued upon
conversion of the Series C Preferred Stock equals 19.99% of the "Outstanding
Common Amount" (as hereinafter defined), the Series C Preferred Stock shall,
from that time forward, cease to be convertible into Common Stock in accordance
with the terms of this Article VI and Article VII below, unless the Corporation
(i) has obtained approval of the issuance of the Conversion Shares by the
requisite vote of the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of Series
C Preferred Stock that were issued upon conversion of Series C Preferred Stock),
or (ii) shall have otherwise obtained permission to allow such issuances from
Nasdaq in accordance with Nasdaq Requirement 4460(i). For purposes of this
paragraph, "Outstanding Common Amount" means (i) the number of shares of the
Common Stock outstanding on the date of issuance of the Series C Preferred Stock
pursuant to the Purchase Agreement plus (ii) any additional shares of Common
Stock issued thereafter in respect of such shares pursuant to a stock dividend,
stock split or similar event. The maximum number of shares of Common Stock
issuable as a result of the 19.99% limitation set forth herein is hereinafter
referred to as the "Maximum Share Amount."
B. The "Conversion Price" shall be the lesser of (i) the
Applicable Percentage (as hereinafter defined) of the average of the closing bid
prices for the Common Stock as reported by Nasdaq, or on the principal
securities exchange or other securities market on which the Common Stock is then
being traded, for the twenty (20) consecutive Trading Days ending one Trading
Day prior to the date (the "Conversion Date") the Conversion Notice is sent by a
holder to the Corporation via facsimile, (the "Variable Conversion Price"), and
(ii) $6.4625 (the "Fixed Conversion Price") (subject to adjustments from time to
time pursuant to the provisions of Article VI.C below). "Trading Day" shall mean
any day on which the Common Stock is traded for any period on Nasdaq, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded. "Applicable Percentage" shall mean ninety percent
(90%), less 1% effective on the fifteenth day of each month beginning on June
15, 1997, but no less than eighty percent (80%).
C. The Conversion Price shall be subject to adjustment from time to time as
follows:
(a) Performance Adjustments to Original Fixed Conversion Price. In the
event that the Market Price (as defined in Article VI.D.) of the Common Stock
increases by more than forty-five percent (45%) above the original Fixed
Conversion Price, the holders of Series C Preferred Stock shall have the right
to receive in the form of an adjustment to the original Fixed Conversion Price
forty percent (40%) of the amount in excess of forty-five percent (45%). In such
event, the original Fixed Conversion Price shall be adjusted to be:
C ((C/F)(0.4) + (1.45)(0.6))
Where: C = the bid price of the Common Stock at the time of conversion; and
F = the original Fixed Conversion Price at the time of issuance of the Series C
Preferred Stock.
In the event that the closing bid price of the Common Stock on
Nasdaq or on the principal securities exchange on which the Common Stock is
traded is below fifty percent (50%) of the Fixed Conversion Price for any twenty
(20) consecutive Trading Days (such twenty-day period beginning not less than
ninety (90) days after the original issuance of the Series C Preferred Stock) (a
"Trigger Event"), the holders of a majority-in-interest of the Series C
Preferred Stock may request within three (3) business days of such Trigger Event
that the original Fixed Conversion Price be reset to equal the average closing
bid price for the Common Stock for such twenty (20) consecutive Trading Day
period (the "Trigger Price"); provided, however, if on the day such request is
made the closing bid price of the Common Stock exceeds one hundred ten percent
(110%) of the Trigger Price the reset shall be to 110% of the Trigger Price or,
if 110% of the Trigger Price is 50% or more of the Fixed Conversion Price, no
reset shall be deemed requested. In the event that the Corporation does not
honor such request (other than as a result of the circumstances described in the
proviso to the immediately preceding sentence), the eight percent (8%) increase
in the Stated Value referred to in the Articles IV.C. and V.A., respectively,
shall be increased to eleven percent (11%) and the reference to .08 in the
definition of Premium Amount in Article VI.A. shall be increased to .11, and
such revisions shall be applied retroactively.
(b) Adjustment to Fixed Conversion Price Due to Stock Split, Stock
Dividend, Etc. If at any time when the Series C Preferred Stock is issued and
outstanding, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, combination, reclassification, below-Market Price
rights offering to all holders of Common Stock or other similar event, the Fixed
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the Fixed
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify its transfer agent ("Transfer Agent") of such change on
or before the effective date thereof.
(c) Adjustment to Variable Conversion Price. If at any time when Series C
Preferred Stock is issued and outstanding, the number of outstanding shares of
Common Stock is increased or decreased by a stock split, stock dividend,
combination, reclassification, below-Market Price rights offering to all holders
of Common Stock or other similar event, which event shall have taken place
during the reference period for determination of the Conversion Price for any
Optional Conversion or Automatic Conversion of the Series C Preferred Stock,
then the Variable Conversion Price shall be calculated giving appropriate effect
to the stock split, stock dividend, combination, reclassification or other
similar event for all twenty (20) Trading Days immediately preceding the
Conversion Date. In such event, the Corporation shall notify the Transfer Agent
of such change on or before the effective date thereof.
(d) Adjustment Due to Merger, Consolidation, Etc. If, at any time when
Series C Preferred Stock is issued and outstanding and prior to the conversion
of all Series C Preferred Stock, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Corporation shall be changed
into the same or a different number of shares of another class or classes of
stock or securities of the Corporation or another entity, or in case of any sale
or conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
the holders of Series C Preferred Stock shall thereafter have the right to
receive upon conversion of the Series C Preferred Stock, upon the bases and upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore issuable upon conversion, such stock, securities
or assets which the holders of Series C Preferred Stock would have been entitled
to receive in such transaction had the Series C Preferred Stock been converted
in full immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holders
of Series C Preferred Stock to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Conversion Price and of the
number of shares of Common Stock issuable upon conversion of the Series C
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities or assets thereafter deliverable upon the
conversion hereof. The Corporation shall not effect any transaction described in
this subsection (d) unless (a) it first gives, to the extent practical, thirty
(30) days' prior written notice (but in any event at least fifteen (15) business
days prior written notice) of such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the holders of Series C Preferred Stock shall be entitled to
convert the Series C Preferred Stock) and (b) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of this subsection (d). The above provisions shall similarly apply
to successive consolidations, mergers, sales, transfers or share exchanges.
(e) Other Securities Offerings. If, at any time during the period ending
six (6) months after the original date of issuance of the Series C Preferred
Stock, the Corporation sells Common Stock or securities or options convertible
into, exercisable for, or exchangeable for, Common Stock, other than a sale
pursuant to a bona fide registered public offering of Common Stock by the
Corporation (not including a continuous offering pursuant to Rule 415 under the
Securities Act of 1933, as amended), other than (i) shares or options issued
pursuant to the Corporation's employee, director or consultant stock option
plans, (ii) shares to be issued pursuant to the exercise of currently
exercisable warrants held by the holders of Series B Preferred Stock on the date
hereof, and (iii) sales of shares to underwriters, then, if the effective or
maximum sales price of the Common Stock with respect to such transaction
(including the effective or maximum conversion, exercise or exchange price)
("Other Price") is less than the effective conversion price of the Series C
Preferred Stock at such time (including, in each case, any discount attributable
to the value of warrants issued to the holders of Series C Preferred Stock and
to the holders of such other shares or options giving rise to the Other Price),
the Corporation shall adjust the effective conversion price applicable to the
Series C Preferred Stock not yet converted in form and substance reasonably
satisfactory to the holders of Series C Preferred Stock so that the effective
conversion price applicable to the Series C Preferred Stock after giving effect
to the value of the warrant provided to the holder of Series C Preferred Stock
shall not, in any event, be greater, after giving effect to all other
adjustments contained herein, than the Other Price. For purposes of determining
the discount of any warrants issued by the Corporation during the period
specified above or in valuing the warrants provided to the holders of Series C
Preferred Stock, such warrants shall be valued based upon the Black Scholes
valuation model where the interest rate used will be the government bond yield
for the applicable term corresponding to the remaining term of the warrants and
the volatility figure used will be forty percent (40%). This paragraph shall not
apply to a financing transaction consisting of a private placement of the
Corporation's securities in connection with a strategic alliance, or as
consideration for a merger or acquisition. For this purpose, a strategic
alliance shall mean a transaction in which the acquiror of the Corporation's
securities has a prospective or existing business relationship material to the
Corporation with the Corporation independent of such acquiror's acquisition of
the Corporation's securities similar to the Corporation's existing relationships
with Mercury Air Group, Inc., Perot, Hunt Petroleum of Texas, Inc. and GFI
Company.
D. For purposes of Article VI.C(a), (b) and (c) above, "Market
Price," which shall be measured as of the Conversion Date, in the case of
Article VI.C.(a), and as of the record date in respect of the rights offering,
in the case of Article VI.C(b) and (c), means (i) the average of the last
reported sale prices for the shares of Common Stock as reported by Nasdaq, as
applicable, for the twenty (20) trading days immediately preceding such date, or
(ii) if Nasdaq is not the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period, or (iii) if market value
cannot be calculated as of such date on any of the foregoing bases, the Market
Price shall be the fair market value as reasonably determined in good faith by
(a) the Board of Directors of the Corporation or, (b) at the option of a
majority-in-interest of the holders of the outstanding Series C Preferred Stock
by an independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the Corporation agreed upon
by the Corporation and a majority-in-interest of the holders of the outstanding
Series C Preferred Stock, with the cost of such valuation to be borne equally by
the Corporation and the holders of the Series C Convertible Preferred Stock.
E. In order to convert Series C Preferred Stock into full
shares of Common Stock, a holder of Series C Preferred Stock shall: (i) submit a
copy of the fully executed notice of conversion in the form attached hereto as
Exhibit A ("Notice of Conversion") to the Corporation by facsimile dispatched on
the Conversion Date (or by other means resulting in notice to the Corporation on
the Conversion Date) at the office of the Corporation or its designated Transfer
Agent for the Series C Preferred Stock that the holder elects to convert the
same, which notice shall specify the number of shares of Series C Preferred
Stock to be converted, the applicable Conversion Price and a calculation of the
number of shares of Common Stock issuable upon such conversion (together with a
copy of the first page of each certificate to be converted) prior to Midnight,
New York City time (the "Conversion Notice Deadline") on the date of conversion
specified on the Notice of Conversion; and (ii) surrender the original
certificates representing the Series C Preferred Stock being converted (the
"Preferred Stock Certificates"), duly endorsed, along with a copy of the Notice
of Conversion to the office of the Corporation or the Transfer Agent for the
Series C Preferred Stock as soon as practicable thereafter. The Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion, unless either the Preferred Stock
Certificates are delivered to the Company or its Transfer Agent as provided
above, or the holder notifies the Corporation or its Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (a) below). In the case of a dispute as to the calculation of the
Conversion Price, the Corporation shall promptly issue such number of shares of
Common Stock that are not disputed in accordance with subparagraph (b) below.
The Corporation shall submit the disputed calculations to its outside accountant
via facsimile within two (2) business days of receipt of the Notice of
Conversion. The Corporation shall endeavor in good faith to use its best efforts
to cause its accountant to audit the calculations and notify the Corporation and
the holder of the results no later than 48 hours from the time it receives the
disputed calculations. The accountant's calculation shall be deemed conclusive
absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by the Corporation of
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series C Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity reasonably satisfactory to the
Corporation, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Corporation shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date.
(b) Delivery of Common Stock Upon Conversion. Upon the surrender of
certificates as described above together with a Notice of Conversion, the
Corporation shall issue and, within two (2) business days after such surrender
(or, in the case of lost, stolen or destroyed certificates, after provision of
agreement and indemnification pursuant to subparagraph (a) above) (the "Delivery
Period"), deliver (or cause its Transfer Agent to so issue and deliver) to or
upon the order of the holder (i) that number of shares of Common Stock for the
portion of the shares of Series C Preferred Stock converted as shall be
determined in accordance herewith and (ii) a certificate representing the
balance of the shares of Series C Preferred Stock not converted, if any. In
addition to any other remedies available to the holder, including actual damages
and/or equitable relief, the Corporation shall pay to a holder $500 per day in
cash for each day beyond the two (2) day grace period following the Delivery
Period that the Corporation fails to deliver Common Stock issuable upon
surrender of shares of Series C Preferred Stock with a Notice of Conversion
until such time as the Corporation has delivered all such Common Stock. Such
cash amount shall be paid to such holder by the fifth day of the month following
the month in which it has accrued or, at the option of the holder (by written
notice to the Corporation by the first day of the month following the month in
which it has accrued), shall be convertible into Common Stock in accordance with
the terms of this Article VI.
In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Corporation's Transfer Agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder and its
compliance with the provisions contained in Article VI.A. and in this Article
VI.E., the Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery and
penalties described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
(c) No Fractional Shares. If any conversion of Series C Preferred Stock
would result in a fractional share of Common Stock or the right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion, of the Series C
Preferred Stock shall be the next higher number of shares.
(d) Conversion Date. The "Conversion Date" shall be the date specified in
the Notice of Conversion, provided that the advance copy of the Notice of
Conversion is submitted by facsimile (or by other means resulting in notice) to
the Corporation or its Transfer Agent before Midnight, New York City time, on
the Conversion Date. The person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such securities as of the Conversion Date and all
rights with respect to the shares of Series C Preferred Stock surrendered shall
forthwith terminate except the right to receive the shares of Common Stock or
other securities or property issuable on such conversion and except that the
holders preferential rights as a holder of Series C Preferred Stock shall
survive to the extent the corporation fails to deliver such securities.
F. A number of shares of the authorized but unissued Common
Stock sufficient to provide for the conversion of the Series C Preferred Stock
outstanding at the then current Conversion Price shall at all times be reserved
by the Corporation, free from preemptive rights, for such conversion or
exercise. As of the date of issuance of the Series C Preferred Stock, 2,294,321
authorized and unissued shares of Common Stock have been duly reserved for
issuance upon conversion of the Series C Preferred Stock and another 2,592,909
shares are reserved for issuance upon conversion of the Series C Preferred
Stock, subject to approval of the proposed increase in authorized capital to be
voted upon at the meeting of the Company's shareholders to be held on June 19,
1997 (the "Reserved Amount"). The Reserved Amount shall be increased from time
to time in accordance with the Company's obligations pursuant to Section 4(h) of
the Purchase Agreement. In addition, if the Corporation shall issue any
securities or make any change in its capital structure which would change the
number of shares of Common Stock into which each share of the Series C Preferred
Stock shall be convertible at the then current Conversion Price, the Corporation
shall at the same time also make proper provision so that thereafter there shall
be a sufficient number of shares of Common Stock authorized and reserved, free
from preemptive rights, for conversion of the outstanding Series C Preferred
Stock.
If at any time a holder of shares of Series C Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article VI (a "Conversion
Default"), the Corporation shall issue to the holder (or holders, if more than
one holder submits a Notice of Conversion in respect of the same Conversion
Date, pro rata based on the ratio that the number of shares of Series C
Preferred Stock then held by each such holder bears to the aggregate number of
such shares held by such holders) all of the shares of Common Stock which are
available to effect such conversion. The number of shares of Series C Preferred
Stock included in the Notice of Conversion which exceeds the amount which is
then convertible into available shares of Common Stock (the "Excess Amount")
shall, notwithstanding anything to the contrary contained herein, not be
convertible into Common Stock in accordance with the terms hereof until (and at
the holder's option at any time after) the date additional shares of Common
Stock are authorized by the Corporation to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date elected by the holder in respect
thereof. The Corporation shall use commercially reasonable efforts to effect an
increase in the authorized number of shares of Common Stock as soon as possible
following a Conversion Default. In addition, the Corporation shall pay to the
holder payments ("Conversion Default Payments") for a Conversion Default in the
amount of (a) (N/365), multiplied by (b) the sum of the Stated Value plus the
Premium Amount per share of Series C Preferred Stock through the Authorization
Date (as defined below), multiplied by (c) the Excess Amount on the day the
holder submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date"), multiplied by (d) .24, where (i) N = the number of
days from the Conversion Default Date to the date (the "Authorization Date")
that the Corporation authorizes a sufficient number of shares of Common Stock to
effect conversion of the full number of shares of Series C Preferred Stock. The
Corporation shall send notice to the holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of holder's
accrued Conversion Default Payments. The accrued Conversion Default Payment for
each calendar month shall be paid in cash or shall be convertible into Common
Stock at the Conversion Price, at the Corporation's option, as follows:
(a) In the event the Corporation elects to make such payment in cash, cash
payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and
(b) In the event the Corporation elects to make such payment in Common
Stock, the holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of Conversion) at any time after the
fifth day of the month following the month in which it has accrued in accordance
with the terms of this Article VI (so long as there is then a sufficient number
of authorized shares).
Nothing herein shall limit the holder's right to pursue actual damages for
the Corporation's failure to maintain a sufficient number of authorized shares
of Common Stock, and each holder shall have the right to pursue all remedies
available at law or in equity (including a decree of specific performance and/or
injunctive relief).
G. Upon the occurrence of each adjustment or readjustment of the Conversion
Price pursuant to this Article VI, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series C Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series C Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of a share of Series C Preferred Stock.
VII. Automatic Conversion
So long as the Registration Statement is effective and there is not then a
continuing Mandatory Redemption Event, each share of Series C Preferred Stock
issued and outstanding on June 5, 2000, subject to any adjustment pursuant to
Article V.A.(ii) (the "Automatic Conversion Date"), automatically shall be
converted into shares of Common Stock on such date at the then effective
Conversion Price in accordance with, and subject to, the provisions of Article
VI hereof (the "Automatic Conversion"). The Automatic Conversion Date shall be
the Conversion Date for purposes of determining the Conversion Price and the
time within which certificates representing the Common Stock must be delivered
to the holder.
VIII. Voting Rights
The holders of the Series C Preferred Stock have no voting power
whatsoever, except as otherwise provided by the General Corporation Law of the
State of Delaware ("DGCL"), in this Article VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide each holder of
Series C Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of the Series C
Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the shares of the Series C
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series C Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL holders
of the Series C Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series C Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible using the record date for the
taking of such vote of shareholders as the date as of which the Conversion Price
is calculated. Holders of the Series C Preferred Stock shall be entitled to
notice of all shareholder meetings or written consents (and copies of proxy
materials and other information sent to shareholders) with respect to which they
would be entitled to vote, which notice would be provided pursuant to the
Corporation's bylaws and the DGCL.
IX. Protective Provisions
So long as shares of Series C Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the holders of at least a majority of the
then outstanding shares of Series C Preferred Stock:
(a) alter or change the rights, preferences or privileges of the Series C
Preferred Stock or any Senior Securities so as to affect adversely the Series C
Preferred Stock;
(b) create any new class or series of capital stock having a preference
over the Series C Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation (as previously defined in Article
II hereof, "Senior Securities");
(c) increase the authorized number of shares of Series C Preferred Stock;
or
(d) do any act or thing not authorized or contemplated by this Certificate
of Designation which would result in taxation of the holders of shares of the
Series C Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
In the event holders of at least a majority of the then outstanding shares
of Series C Preferred Stock agree to allow the Corporation to alter or change
the rights, preferences or privileges of the shares of Series C Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series C Preferred Stock,
then the Corporation will deliver notice of such approved change to the holders
of the Series C Preferred Stock that did not agree to such alteration or change
(the "Dissenting Holders") and Dissenting Holders shall have the right for a
period of thirty (30) days to convert pursuant to the terms of this Certificate
of Designation as they exist prior to such alteration or change or continue to
hold their shares of Series C Preferred Stock.
X. Pro Rata Allocations
The Maximum Share Amount and the Reserved Amount (including any increases
thereto) shall be allocated by the Corporation pro rata among the holders of
Series C Preferred Stock based on the number of shares of Series C Preferred
Stock then held by each holder relative to the total aggregate number of shares
of Series C Preferred Stock then outstanding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation this 5th day of June, 1997.
WESTERN PACIFIC AIRLINES, INC.
By: /s/ Robert A. Peiser
Robert A. Peiser
President and Chief Executive Officer
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series C Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of Western Pacific Airlines, Inc. (the "Corporation") according
to the conditions of the Certificate of Designation of Series C Preferred Stock,
as of the date written below. If securities are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. A copy of each Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Series C Preferred Stock shall be made pursuant to
registration of the securities under the Securities Act of 1933, as amended (the
"Act"), or pursuant to an exemption from registration under the Act.
Date of Conversion:___________________________
Applicable Conversion Price:____________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:____________________________________
Name:_______________________________________
Address:______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series C Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to the Holder by means of an overnight courier not later than two (2) business
days following receipt of the original Preferred Stock Certificate(s) to be
converted, and shall make payments pursuant to the Certificate of Designation
for the number of business days such issuance and delivery is late. All Premium
Amounts to be paid in cash shall be delivered simultaneously with the
certificates representing the Common Stock issuable on conversion.
<PAGE>
EXHIBIT 99.3
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR
IN THE CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF SERIES C
PREFERRED CONVERTIBLE PREFERRED STOCK
OF
WESTERN PACIFIC AIRLINES, INC.
Western Pacific Airlines, Inc. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY: 1. The name of the Corporation is Western Pacific
Airlines, Inc. 2. The Certificate of Designations, Preferences and Rights of
Series C Preferred Convertible Preferred Stock of the Corporation (the
"Certificate") was filed with the Secretary of State of the State of Delaware on
June 5, 1997, and the Certificate requires correction as permitted by Section
103(f) of the General Corporation Law of the State of Delaware. 3. The
inaccuracy or defect of the Certificate is as follows: The Fixed Conversion
Price (as defined in the Certificate) is incorrectly stated as "$6.4625,"
instead of the correct Fixed Conversion Price, $6.1875. 4. Accordingly, Article
VI.B of the Certificate is hereby corrected to insert "$6.1875" in place of
"$6.4625" as the Fixed Conversion Price. IN WITNESS WHEREOF, the Corporation has
caused this Certificate of Correction to be executed by its duly authorized
officer this 6th day of June, 1997.
WESTERN PACIFIC AIRLINES, INC.
By: /s/ Robert A. Peiser
Robert A. Peiser
President and Chief Executive Officer
<PAGE>
EXHIBIT 99.4
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS
OF JUNE 5, 1997, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SUCH ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY
WITH APPLICABLE STATE SECURITIES LAWS.
Right to Purchase
Warrant No.: A-_________
Shares of Common Stock, par value $.001 per share
STOCK PURCHASE WARRANT (A-WARRANT)
THIS CERTIFIES THAT, for value received, _________________________ or
its registered assigns, is entitled to purchase from Western Pacific Airlines,
Inc., a Delaware corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, ___________ (_______) fully
paid and nonassessable shares of the Company's Common Stock, par value $.001 per
share (the "Common Stock"), at an exercise price of $11.25 per share (the
"Exercise Price"). The term "Warrant Shares", as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term Warrants means this Warrant.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
<PAGE>
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in no event shall
the Holder of this Warrant be entitled to exercise a number of Warrants (or
portions thereof) in excess of the number of Warrants (or portions thereof) upon
exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and unconverted shares of Series C Preferred Stock) and
(ii) the number of shares of Common Stock issuable upon exercise of the Warrants
(or portions thereof) with respect to which the determination described herein
is being made, would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided
in clause (i) hereof.
2. Period of Exercise. This Warrant is exercisable at any time or from time
to time on or after the date on which this Warrant is issued and delivered and
before 5:00 p.m., New York City time on the fifth (5th) anniversary of the date
of issuance (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, upon delivery of the payment
therefor, be validly issued, fully paid, and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company shall at
all times have authorized, and reserved for the purpose of issuance upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant; provided, however, that certain of the
shares of Common Stock so reserved may be reserved subject to the approval of
the proposed increase in authorized capital to be voted upon at the meeting of
the Company's shareholders to be held on June 19, 1997.
(c) Listing. The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of the Warrant upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance upon exercise of
this Warrant) and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise Price
and the number of Warrant Shares shall be subject to adjustment from time to
time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the date hereof, the Company issues or
sells, or in accordance with Paragraph 4(b) hereof is deemed to have issued or
sold, any shares of Common Stock for no consideration or for a consideration per
share (before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price (as
hereinafter defined) on the date of issuance (a "Dilutive Issuance"), then
immediately upon the Dilutive Issuance, the Exercise Price will be reduced to a
price determined by multiplying the Exercise Price in effect immediately prior
to the Dilutive Issuance by a fraction, (i) the numerator of which is an amount
equal to the sum of (x) the number of shares of Common Stock actually
outstanding immediately prior to the Dilutive Issuance, plus (y) the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance, divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of determining
the adjusted Exercise Price under Paragraph 4(a) hereof, the following will be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner issues or
grants any warrants, rights or options, whether or not immediately exercisable,
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock ("Convertible Securities") (such warrants,
rights and options to purchase Common Stock or Convertible Securities are
hereinafter referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the Market
Price on the date of issuance or grant of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
will, as of the date of the issuance or grant of such Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is a change at
any time in (i) the amount of additional consideration payable to the Company
upon the exercise of any Options; (ii) the amount of additional consideration,
if any, payable to the Company upon the conversion or exchange of any
Convertible Securities; or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (other than under or by
reason of provisions designed to protect against dilution), the Exercise Price
in effect at the time of such change will be readjusted to the Exercise Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
If, in any case, the total number of shares of Common Stock issuable upon
exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued, granted or sold for cash, the consideration
received therefor for purposes of this Warrant will be the amount received by
the Company therefor, before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or incurred by the
Company in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, the amount of the consideration
other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company will be the Market
Price thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of consideration
therefor will be deemed to be equal to the Market Value of such Common Stock,
Options or Convertible Securities, as the case may be, on the date of issuance.
The fair value of any consideration other than cash or securities will be
determined in good faith by the Board of Directors of the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment to the
Exercise Price will be made (i) upon the exercise of any warrants, options or
convertible securities granted, issued and outstanding on June 5, 1997
including, without limitation, the Series C Preferred Stock; (ii) upon the grant
or exercise of any stock or options which may hereafter be granted or exercised
under any employee benefit plan of the Company now existing or to be implemented
in the future, so long as the issuance of such stock or options is approved by a
majority of the independent members of the Board of Directors of the Company or
a majority of the members of a committee of independent directors established
for such purpose; (iii) upon the exercise of the Warrants; or (iv) upon the
issuance by the Company of up to $20 Million of Common Stock (or securities
convertible into Common Stock) during the one-year period beginning on the date
of this Agreement ("Permitted Issuances"); provided, that such Permitted
Issuances may not be issued at a discount to Market Price greater than, in the
aggregate, 15% of the Market Price of such Common Stock (excluding from the
determination of any discount warrants having an exercise price at or above
Market Price on the date of issuance thereof); provided, further, that any
adjustments to the Exercise Price resulting from Permitted Issuances issued at
discounts which, in the aggregate, exceed the 15% discount in the foregoing
proviso, shall only be to the extent that such discounts exceed the 15%
discount.
(c) Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Paragraph 4, the number of shares of
Common Stock issuable upon exercise of this Warrant shall be adjusted by
multiplying a number equal to the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Common Stock issuable upon exercise
of this Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of the
Company with, or merger of the Company into any other corporation, or in case of
any sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company,
then as a condition of such consolidation, merger or sale or conveyance,
adequate provision will be made whereby the holder of this Warrant will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire. In the event that such consolidation, merger or sale or conveyance
involves a privately-held company, the Company shall have the option, in lieu of
the foregoing provisions of this paragraph, on the date of consummation of such
transaction, to purchase this Warrant from the holder at the fair value thereof,
based upon the Black Scholes valuation model where the interest rate used will
be the one-year government bond yield and the volatility figure used will be
forty percent (40%).
(f) Distribution of Assets. In case the Company shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which requires
any adjustment of the Exercise Price, then, and in each such case, the Company
shall give notice thereof to the holder of this Warrant, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the Exercise
Price shall be made in an amount of less than 1% of the Exercise Price in effect
at the time such adjustment is otherwise required to be made, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock payable in
shares of stock of any class or make any other distribution (including dividends
or distributions payable in cash out of retained earnings) to the holders of the
Common Stock;
(ii) the Company shall offer for subscription pro rata to the holders of
the Common Stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all its assets to, another
corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) Certain Events. If any event occurs of the type contemplated by the
adjustment provisions of this Paragraph 4 but not expressly provided for by such
provisions, the Company will give notice of such event as provided in Paragraph
4(g) hereof, and the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of shares of Common Stock
acquirable upon exercise of this Warrant so that the rights of the Holder shall
be neither enhanced nor diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of shares of
Common Stock actually outstanding (not including shares of Common Stock held in
the treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i) hereof, the
maximum total number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such Options, if any, and
(y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of the last
reported sale prices for the shares of Common Stock as reported by the Nasdaq
National Market for the five (5) trading days immediately preceding such date,
or (ii) if the Nasdaq National Market is not the principal trading market for
the shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period, or (iii)
if market value cannot be calculated as of such date on any of the foregoing
bases, the Market Price shall be the fair market value as reasonably determined
in good faith by (a) the Board of Directors of the Corporation or, at the option
of a majority-in-interest of the holders of the outstanding Warrants by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the corporation; provided, that the
cost of such investment banker shall be borne equally by the Company and the
holders of the Warrants (pro rata based on the number of Warrants held). The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4, includes the Common
Stock, par value $.001 per share, and any additional class of stock of the
Company having no preference as to dividends or distributions on liquidation,
provided that the shares purchasable pursuant to this Warrant shall include only
shares of Common Stock, par value $.001 per share, in respect of which this
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(e)
hereof, the stock or other securities or property provided for in such
Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to the
holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement including, but not limited to,
Section 8(g) thereof permitting transfer of this Warrant only (i) if (x) at
least 50% of the Warrants received by the holder are transferred or (y) if a
transfer has previously been made pursuant to clause (x) above, all of the
remaining Warrants of such holder are transferred or (ii) to an affiliate of the
holder; provided, that the holdings of a holder and its affiliates shall be
treated as one and the same and further, provided, that in the case of a
transfer pursuant to clause (i) above, the transferee of the holder agrees, in
the case of a subsequent transfer by such transferee, to transfer all of the
Warrants held by such transferee. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Paragraph 8
are assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of June 5, 1997, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant
in connection with any transfer, exchange, or replacement as provided in this
Paragraph 7, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder), shall not be registered under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as
a condition of allowing such exercise, transfer, or exchange, (i) that the
holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel, which opinion and counsel are acceptable to the
Company, to the effect that such exercise, transfer, or exchange may be made
without registration under said Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act. The first holder of this Warrant, by
taking and holding the same, represents to the Company that such holder is
acquiring this Warrant for investment and not with a view to the distribution
thereof. 8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.
9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 2864 South Circle Drive,
Suite 1100, Colorado Springs, Colorado 80906, Attention: President, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be amended
by an instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained
in this Warrant, if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under the Securities
Act, this Warrant may be exercised by presentation and surrender of this Warrant
to the Company at its principal executive offices with a written notice of the
holder's intention to effect a cashless exercise, including a calculation of the
number of shares of Common Stock to be issued upon such exercise in accordance
with the terms hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be entitled
by a fraction, the numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price per share of
Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
WESTERN PACIFIC AIRLINES, INC.
By: ___________________________
Name: ___________________________
Title: ___________________________
Agreed to and Accepted
By:______________________________
, Initial Holder
Dated as of June __, 1997
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:________________________________
Signature:___________________________
Address:_____________________________
Note: The above signature should correspond exactly with the name on the
face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
- ------------------
Name: ____________________
Signature: _______________________
Title of Signing Officer or Agent (if any): ________________________________
Address: ________________________
Note: The above signature should correspond exactly with the name on the
face of the within Warrant.
<PAGE>
EXHIBIT 99.5
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS
OF JUNE 5, 1997, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SUCH ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY
WITH APPLICABLE STATE SECURITIES LAWS.
Right to Purchase
Warrant No.: B-__________
Shares of Common Stock, par value $.001 per share
STOCK PURCHASE WARRANT (B-WARRANT)
THIS CERTIFIES THAT, for value received, _________________________ or
its registered assigns, is entitled to purchase from Western Pacific Airlines,
Inc., a Delaware corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, ___________ (_______) fully
paid and nonassessable shares of the Company's Common Stock, par value $.001 per
share (the "Common Stock"), at an exercise price of $6.80625 per share (the
"Exercise Price"). The term "Warrant Shares", as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term Warrants means this Warrant.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any
<PAGE>
business day at the Company's principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
and upon (i) payment to the Company in cash, by certified or official bank check
or by wire transfer for the account of the Company of the Exercise Price for the
Warrant Shares specified in the Exercise Agreement or (ii) if the resale of the
Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in
no event shall the Holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and unconverted shares of the Company's Series C Preferred
Stock, if any, held by the Holder hereof) and (ii) the number of shares of
Common Stock issuable upon exercise of the Warrants (or portions thereof) with
respect to which the determination described herein is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder, except as otherwise provided in clause (i) hereof.
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
and before 5:00 p.m., New York City time on the fifth (5th) anniversary of the
date of issuance (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, upon delivery of the
payment therefor, be validly issued, fully paid, and nonassessable and free from
all taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant; provided, however, that
certain of the shares of Common Stock so reserved may be reserved subject to the
approval of the proposed increase in authorized capital to be voted upon at the
meeting of the Company's shareholders to be held on June 19, 1997.
(c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance
upon exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise Price
and the number of Warrant Shares shall be subject to adjustment from time to
time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the date hereof, the Company issues or
sells, or in accordance with Paragraph 4(b) hereof is deemed to have issued or
sold, any shares of Common Stock for no consideration or for a consideration per
share (before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price (as
hereinafter defined) on the date of issuance (a "Dilutive Issuance"), then
immediately upon the Dilutive Issuance, the Exercise Price will be reduced to a
price determined by multiplying the Exercise Price in effect immediately prior
to the Dilutive Issuance by a fraction, (i) the numerator of which is an amount
equal to the sum of (x) the number of shares of Common Stock actually
outstanding immediately prior to the Dilutive Issuance, plus (y) the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance, divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of determining
the adjusted Exercise Price under Paragraph 4(a) hereof, the following will be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner issues or
grants any warrants, rights or options, whether or not immediately exercisable,
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock ("Convertible Securities") (such warrants,
rights and options to purchase Common Stock or Convertible Securities are
hereinafter referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the Market
Price on the date of issuance or grant of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
will, as of the date of the issuance or grant of such Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is a change at
any time in (i) the amount of additional consideration payable to the Company
upon the exercise of any Options; (ii) the amount of additional consideration,
if any, payable to the Company upon the conversion or exchange of any
Convertible Securities; or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (other than under or by
reason of provisions designed to protect against dilution), the Exercise Price
in effect at the time of such change will be readjusted to the Exercise Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
If, in any case, the total number of shares of Common Stock issuable upon
exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued, granted or sold for cash, the consideration
received therefor for purposes of this Warrant will be the amount received by
the Company therefor, before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or incurred by the
Company in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, the amount of the consideration
other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company will be the Market
Price thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of consideration
therefor will be deemed to be equal to the Market Value of such Common Stock,
Options or Convertible Securities, as the case may be, on the date of issuance.
The fair value of any consideration other than cash or securities will be
determined in good faith by the Board of Directors of the Company.
(vi) Performance Adjustments to Exercise Price. In the event that the
Market Price of the Common Stock increases by more than forty-five percent (45%)
above the Exercise Price, the Holders of this Warrant shall have the right to
receive in the form of an adjustment to the original Exercise Price forty
percent (40%) of the amount in excess of forty-five percent (45%). In such
event, the Exercise Price shall be adjusted to be:
C
((C/E)(0.4) + (1.45)(0.6))
Where: C = the bid price of the Common Stock at the time of conversion; and
E = the Exercise Price.
(vii) Exceptions to Adjustment of Exercise Price. No adjustment to the
Exercise Price will be made (i) upon the exercise of any warrants, options or
convertible securities granted, issued and outstanding on June 5, 1997
including, without limitation, the Series C Preferred Stock; (ii) upon the grant
or exercise of any stock or options which may hereafter be granted or exercised
under any employee benefit plan of the Company now existing or to be implemented
in the future, so long as the issuance of such stock or options is approved by a
majority of the independent members of the Board of Directors of the Company or
a majority of the members of a committee of independent directors established
for such purpose; (iii) upon the exercise of the Warrants; or (iv) upon the
issuance by the Company of up to $20 Million of Common Stock (or securities
convertible into Common Stock) during the one-year period beginning on the date
of this Agreement ("Permitted Issuances"); provided, that such Permitted
Issuances may not be issued at a discount to Market Price greater than, in the
aggregate, 15% of the Market Price of such Common Stock (excluding from the
determination of any discount warrants having an exercise price at or above
Market Price on the date of issuance thereof); provided, further, that any
adjustments to the Exercise Price resulting from Permitted Issuances issued at
discounts which, in the aggregate, exceed the 15% discount in the foregoing
proviso, shall only be to the extent that such discounts exceed the 15%
discount.
(c) Subdivision or Combination of Common Stock. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire. In the event that such consolidation, merger or sale or conveyance
involves a privately-held company, the Company shall have the option, in lieu of
the foregoing provisions of this paragraph, on the date of consummation of such
transaction, to purchase this Warrant from the holder at the fair value thereof,
based upon the Black Scholes valuation model where the interest rate used will
be the one-year government bond yield and the volatility figure used will be
40%.
(f) Distribution of Assets. In case the Company shall declare
or make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders entitled
to such distribution, but prior to the date of distribution, the holder of this
Warrant shall be entitled upon exercise of this Warrant for the purchase of any
or all of the shares of Common Stock subject hereto, to receive the amount of
such assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock payable in
shares of stock of any class or make any other distribution (including dividends
or distributions payable in cash out of retained earnings) to the holders of the
Common Stock;
(ii) the Company shall offer for subscription pro rata to the holders of
the Common Stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all its assets to, another
corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company; then, in each such case, the Company shall give to
the holder of this Warrant (a) notice of the date on which the books of the
Company shall close or a record shall be taken for determining the holders of
Common Stock entitled to receive any such dividend, distribution, or
subscription rights or for determining the holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription rights
or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) Certain Events. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the
Holder shall be neither enhanced nor diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of shares of
Common Stock actually outstanding (not including shares of Common Stock held in
the treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i) hereof, the
maximum total number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such Options, if any, and
(y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of the last
reported sale prices for the shares of Common Stock as reported by the Nasdaq
National Market for the five (5) trading days immediately preceding such date,
or (ii) if the Nasdaq National Market is not the principal trading market for
the shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period, or (iii)
if market value cannot be calculated as of such date on any of the foregoing
bases, the Market Price shall be the fair market value as reasonably determined
in good faith by (a) the Board of Directors of the Corporation or, at the option
of a majority-in-interest of the holders of the outstanding Warrants by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the corporation; provided, that the
cost of such investment banker shall be borne equally by the Company and the
holders of the Warrants (pro rata based on the number of Warrants held). The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4, includes the Common
Stock, par value $.001 per share, and any additional class of stock of the
Company having no preference as to dividends or distributions on liquidation,
provided that the shares purchasable pursuant to this Warrant shall include only
shares of Common Stock, par value $.001 per share, in respect of which this
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(e)
hereof, the stock or other securities or property provided for in such
Paragraph. 5. Issue Tax. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or assignment shall
be subject to the conditions set forth in Paragraph 7(f) hereof and to the
applicable provisions of the Securities Purchase Agreement including, but not
limited to, Section 8(g) thereof permitting transfer of this Warrant only (i) if
(x) at least 50% of the Warrants received by the holder are transferred or (y)
if a transfer has previously been made pursuant to clause (x) above, all of the
remaining Warrants of such holder are transferred or (ii) to an affiliate of the
holder; provided, that the holdings of a holder and its affiliates shall be
treated as one and the same and further, provided, that in the case of a
transfer pursuant to clause (i) above, the transferee of the holder agrees, in
the case of a subsequent transfer by such transferee, to transfer all of the
Warrants held by such transferee. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Paragraph 8
are assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of June 5, 1997, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel, which opinion and counsel are
acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said Act and under applicable
state securities or blue sky laws, (ii) that the holder or transferee execute
and deliver to the Company an investment letter in form and substance acceptable
to the Company and (iii) that the transferee be an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act. The first holder of
this Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Warrant for investment and not with a view to the
distribution thereof.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.
9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 2864 South Circle Drive,
Suite 1100, Colorado Springs, Colorado 80906, Attention: President, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be amended
by an instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained
in this Warrant, if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under the Securities
Act, this Warrant may be exercised by presentation and surrender of this Warrant
to the Company at its principal executive offices with a written notice of the
holder's intention to effect a cashless exercise, including a calculation of the
number of shares of Common Stock to be issued upon such exercise in accordance
with the terms hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be entitled
by a fraction, the numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price per share of
Common Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
WESTERN PACIFIC AIRLINES, INC.
By: ___________________________
Name: ___________________________
Title: ___________________________
Agreed to and Accepted
By:______________________________
, Initial Holder
Dated as of June __, 1997
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:________________________________
Signature:___________________________
Address:_____________________________
- -----------------------------
Note: The above signature should correspond exactly with the name on the
face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
- ------------------
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any): ________________________________
Address: ________________________
- ------------------------
Note: The above signature should correspond exactly with the name on the
face of the within Warrant.
EXHIBIT 99.6
AGREEMENT AMONG PREFERRED STOCKHOLDERS
THIS AGREEMENT AMONG PREFERRED STOCKHOLDERS ("Agreement") dated as of
June 5, 1997, is entered into by and among Western Pacific Airlines, Inc., a
Delaware corporation (the "Corporation"), Hunt Petroleum of Texas, Inc., a
Delaware corporation ("Hunt"), GFI Company, a Nevada corporation ("GFI"), RGC
International Investors, LDC, a company organized under the laws of the Cayman
Islands ("Rose Glen"), CC Investments, LDC, a company organized under the laws
of the Cayman Islands ("Castle Creek") and Lionhart Global Appreciation Fund
("Lionhart").
R E C I T A L S:
WHEREAS, Hunt and GFI are the holders of all the issued and outstanding
shares of Series B Preferred Stock of the Corporation, par value $0.001 per
share (the "Series B Preferred Shares");
WHEREAS, Rose Glen, Castle Creek and Lionhart (collectively, the
"Investors") desire to enter into a transaction whereby, among other things, the
Investors shall purchase an aggregate of 10,000 shares of the Series C Preferred
Stock of the Corporation, par value $0.001 per share (the "Series C Preferred
Shares"), and certain warrants;
WHEREAS, as a condition precedent to the purchase of the Series C
Preferred Shares, the Investors have required that the Corporation enter into an
agreement with the holders of Series B Preferred Shares (the "Series B
Agreement") whereby such holders will agree (i) to vote all of the shares of
Common Stock owned by them in favor of the Corporation's proposal to increase
its authorized shares of Common Stock, par value $0.001 per share (the "Common
Stock") to 40,000,000 shares, and (ii) pending the increase in the authorized
number of shares of Common Stock, to release for the Corporation's use 2,000,000
shares of Common Stock reserved for issuance upon exercise of certain warrants
to purchase Common Stock held by Hunt and GFI, respectively; and
WHEREAS, as a condition to entering into the Series B Agreement, Hunt
and GFI have required that the Investors enter into this Agreement in order to
grant the holders of Series B Preferred Shares certain tag-along redemption
rights and, in order to induce Hunt and GFI to enter into the Series B
Agreement, the Investors and the Corporation have agreed to grant the holders of
Series B Preferred Shares such redemption rights, all on the terms and
conditions set forth herein.
A G R E E M E N T S:
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Series B Tag-Along Redemption Rights. Each of the parties hereto
hereby agrees that, notwithstanding any of the provisions set forth in the
Amended and Restated Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), including, without limitation, the Certificate
of Designations, Preferences and Rights for the Corporation's Series B Preferred
Stock (the "Series B Certificate of Designation") and the Certificate of
Designations, Preferences and Rights for the Corporation's Series C Preferred
Stock (the "Series C Certificate of Designation"), the holders of Series B
Preferred Shares shall have the following rights:
(a) If the Series C Preferred Shares, pursuant to the Series C
Certificate of Designation, at any time prior to the scheduled conversion
thereof (i) become subject to a mandatory redemption by the Corporation without
any action by the holders thereof, or (ii) pursuant to a right granted by the
Series C Certificate of Designation, the holders thereof elect to have such
Series C Preferred Shares redeemed by the Corporation, including, without
limitation, redemptions pursuant toArticle IV or Article V of the Series C
Certificate of Designation (each an "Early Redemption Event"), then the
Corporation shall notify the holders of outstanding Series B Preferred Shares in
writing within two (2) days of such Early Redemption Event. For a period of
fifteen (15) days after the date of such notice (the "Tag-Along Period"), at the
option the holder of such outstanding Series B Preferred Shares, such holder may
elect to have the Corporation purchase such holder's Series B Preferred Shares
for an amount per share equal to the "Liquidation Preference" thereof (as such
term is defined in the Series B Certificate of Designation); provided, however,
that (i) if the duration of the Tag-Along Period extends beyond the scheduled
Series C Preferred Share redemption date for an Early Redemption Event, the
Tag-Along Period shall be reduced to the extent necessary so that the last day
of the Tag-Along Period is two (2) business days prior to such scheduled
redemption date, and (ii) any redemption of Series B Preferred Shares pursuant
to this Section 1(a) shall be conducted on a pro rata basis with the holders of
Series C Preferred Shares that are subject to such Early Redemption Event and
any other "Parity Shares" (as such term is defined in the Series B Certificate
of Designation) that are being simultaneously redeemed by the Corporation
pursuant to similar rights (such pro rata basis being determined based upon the
dollar amount originally paid to the Corporation for such shares). Any such
redemption pursuant to this Section 1(a) shall be effected within the same time
period as called for pursuant to the Series C Preferred redemption event which
is the cause for the Early Redemption Event (the "Tag-Along Redemption Period").
(b) Upon the payment of the Liquidation Preference by the Corporation
to a holder of Series B Preferred Shares which are to be redeemed pursuant to
this Section 1, dividends with respect to such redeemed shares shall cease to
accumulate after the redemption date, such shares shall no longer be deemed
outstanding, the holders thereof shall cease to be stockholders of the
Corporation (assuming all of each such holder's Series B Preferred Shares are
redeemed), and all rights whatsoever with respect to the shares to be redeemed
(except the right of the holders to receive the Liquidation Preference without
interest upon surrender of their certificates therefor) shall terminate. If
funds legally available for such purpose are not sufficient for redemption of
the Series B Preferred Shares which were to be redeemed, then all shares shall
be redeemed pro rata to the extent the Corporation has funds legally available
to redeem any such shares and the certificates representing shares not redeemed
shall be deemed not to be surrendered, such shares shall remain outstanding, the
right of the holder to receive payment of the Liquidation Preference for such
shares shall be suspended, the right of holders of Series B Preferred Shares
thereafter shall continue to be only those of a holder of Series B Preferred
Shares, and the Tag-Along Redemption Period shall be extended until ten (10)
days after the holder of such shares receives written notice from the
Corporation stating that the Corporation currently has sufficient funds
available to redeem such holder's shares.
2. Series C Tag-Along Redemption Rights. Each of the parties hereto
hereby agrees that, notwithstanding any of the provisions set forth in the
Certificate of Incorporation, including, without limitation, the Series B
Certificate of Designation and the Series C Certificate of Designation, the
holders of Series C Preferred Shares shall have the following rights:
(a) Except for redemptions of the Series B Preferred Stock at the
option of the Corporation, which shall be governed by Section 4(k) of the
Securities Purchase Agreement, and except for redemptions pursuant to Section 6
of the Series B Certificate of Designation, if the Series B Preferred Shares,
pursuant to the Series B Certificate of Designation, at any time (i) become
subject to a mandatory redemption by the Corporation without any action by the
holders thereof, or (ii) pursuant to a right granted by the Series B Certificate
of Designation, the holders thereof elect to have such Series B Preferred Shares
redeemed by the Corporation (and in the case of each of clause (i) and (ii)
above, the holders of Series C Preferred Shares are not otherwise entitled to
have their Series C Preferred Shares redeemed under similar provisions of the
Series C Certificate of Designation) (each an "Series B Early Redemption
Event"), then the Corporation shall notify the holders of outstanding Series C
Preferred Shares in writing within two (2) days of such Series B Early
Redemption Event. For a period of fifteen (15) days after the date of such
notice (the "Series B Tag-Along Period"), at the option the holder of such
outstanding Series C Preferred Shares, such holder may elect to have the
Corporation purchase such holder's Series C Preferred Shares for an amount per
share equal to the "Liquidation Preference" thereof (as such term is defined in
the Series C Certificate of Designation); provided, however, that (i) if the
duration of the Series B Tag-Along Period extends beyond the scheduled Series B
Preferred Share redemption date for a Series B Early Redemption Event, the
Series B Tag-Along Period shall be reduced to the extent necessary so that the
last day of the Series B Tag-Along Period is two (2) business days prior to such
scheduled redemption date, and (ii) any redemption of Series C Preferred Shares
pursuant to this Section 2(a) shall be conducted on a pro rata basis with the
holders of Series B Preferred Shares that are subject to such Series B Early
Redemption Event and any other "Parity Shares" (as such term is defined in the
Series B Certificate of Designation) that are being simultaneously redeemed by
the Corporation pursuant to similar rights (such pro rata basis being determined
based upon the dollar amount originally paid to the Corporation for such
shares). Any such redemption pursuant to this Section 2(a) shall be effected
within the same time period as called for pursuant to the Series B Preferred
redemption event which is the cause for the Series B Early Redemption Event (the
"Series B Tag-Along Redemption Period").
(b) Upon the payment of the Liquidation Preference by the Corporation
to a holder of Series C Preferred Shares which are to be redeemed pursuant to
this Section 2, such shares shall no longer be deemed outstanding, the holders
thereof shall cease to be stockholders of the Corporation (assuming all of each
such holder's Series C Preferred Shares are redeemed), and all rights whatsoever
with respect to the shares to be redeemed (except the right of the holders to
receive the Liquidation Preference upon surrender of their certificates
therefor) shall terminate, including, without limitation, any rights to have
additional warrants issued to the holder pursuant to Article V.D of the Series C
Certificate of Designation. If funds legally available for such purpose are not
sufficient for redemption of the Series C Preferred Shares which were to be
redeemed, then all shares shall be redeemed pro rata to the extent the
Corporation has funds legally available to redeem any such shares and the
certificates representing shares not redeemed shall be deemed not to be
surrendered, such shares shall remain outstanding, the right of the holder to
receive payment of the Liquidation Preference for such shares shall be
suspended, the right of holders of Series C Preferred Shares thereafter shall
continue to be only those of a holder of Series C Preferred Shares, and the
Series B Tag-Along Redemption Period shall be extended until ten (10) days after
the holder of such shares receives written notice from the Corporation stating
that the Corporation currently has sufficient funds available to redeem such
holder's shares.
3. Time of the Essence; Right to Specific Performance.
(a) The parties agree that time is of the essence with respect to any of
the time periods set forth in Sections 1 and 2 hereof.
(b) The parties agree that irreparable harm would occur in the event
that any of the provisions of Sections 1 and 2 hereof are not performed in
accordance with the terms therein set forth and that any party hereto shall be
entitled to specific performance of the terms and provisions of such Section, in
addition to any other remedy available to such party in law or equity.
4. Subsequent Transferees. Each of the Investors hereby agrees not to
assign, transfer, sell or otherwise convey any Series C Preferred Shares unless
and until the proposed transferee for such Series C Preferred Shares has agreed
in writing to join in and be bound by the terms and conditions of this
Agreement.
5. Miscellaneous.
(a) Termination. This Agreement will automatically terminate at such time
as (i) all of issued and outstanding Series B Preferred Shares and/or Series C
Preferred Shares have been redeemed by the Corporation; or (ii) upon the
conversion of all of the issued and outstanding Series C Preferred Shares into
shares of Common Stock (the "Scheduled Termination"). Prior to the Scheduled
Termination, this Agreement may only be terminated by a written instrument
executed by the Corporation, the holders of a majority in interest of the Series
B Preferred Shares then outstanding and the holders a majority in interest of
the Series C Preferred Shares then outstanding.
(b) Waiver, Modification in Writing. No failure or delay on the part of any
party hereto in exercising any right, power or remedy hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given without the written consent of the Corporation, the holders of a majority
in interest of the Series B Preferred Shares then outstanding and the holders of
a majority in interest of the Series C Preferred Shares then outstanding. Any
amendment, supplement or modification of or to any provision of this Agreement,
or any waiver of any provision of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on any party hereto in any case shall entitle the other party to any other or
further notice or demand in similar or other circumstances.
(c) Communications. All notices and demands provided for hereunder shall be
in writing, and shall be given by registered or certified mail, return receipt
requested, telex, telegram, telecopy, courier service of personal delivery, and
addressed to the relevant party or parties at the following address:
If to the Corporation:
Western Pacific Airlines, Inc.
2864 Circle Drive
Suite 1100
Colorado Springs, Colorado 80906
Telecopier No.: (719) 527-7259
Telephone No.: (719) 527-7421
Attention: Chief Executive Officer
With a copy to:
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
Telecopier No.: (312) 580-0923
Telephone No.: (312) 580-2000
Attention: Allan J. Reich, Esq.
If to Hunt, GFI or an Investor:
To the address set forth below such party's name on the
signature pages hereto.
or to such other address as Hunt, GFI, an Investor or the Corporation, as the
case may be, may designate in writing to the other parties hereto, which notice
shall be deemed given when received.
(d) Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken together,
shall constitute one and the same agreement.
(e) Binding Effect; Assignment. The rights and obligations of the parties
under this Agreement may not be assigned; provided, however, that the
Corporation may assign its rights hereunder to any successor entity to the
Corporation, whether pursuant to a sale of substantially all of the
Corporation's assets, or the merger or consolidation of the Corporation, that
agrees to be bound by the terms and conditions hereof or is so bound by
operation by law. Except as expressly provided in this Agreement, this Agreement
shall not be construed so as to confer any right or benefit upon any person
other than the parties to this Agreement, and their respective successors and
permitted assigns. This Agreement shall be binding upon the Corporation, Hunt,
GFI and each of the Investors, and their respective successors and permitted
assigns.
(f) Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF DELAWARE, AND FOR ALL PURPOSES SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
(g) Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(h) Headings. The Section headings used or contained in this Agreement are
for convenience of reference only and shall not affect the construction of this
Agreement.
(i) Integration. This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and there are no promises or
undertakings with respect thereto relative to the subject matter hereof not
expressly set forth or referred to herein.
* * * * *
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the date first
written above.
WESTERN PACIFIC AIRLINES, INC. HUNT PETROLEUM OF TEXAS, INC.
By: ____________________________ By: ____________________________
Its: ____________________________ Its: ____________________________
Address:
c/o Hunt Petroleum Corporation
1601 Elm, 50th Floor
Dallas, Texas 75201
Telecopier: (214)-922-1060
Attn: Mr. Ivan Irwin, Jr., Vice Chairman
GFI COMPANY RGC INTERNATIONAL INVESTORS,
LDC
By: Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By: ____________________________ By: ____________________________
- ----------------------------------------------------------------------------
Its: ____________________________ Its: ____________________________
- ---------------------------------------------------------------------------
Address: Address:
- -------------------------------------------------------------
Hughes Center 440 E. Swedesford Road
- ---------------------------------------------------------------------------
3753 Howard Hughes Parkway Suite 2025
- ------------------------------------------------------
Las Vegas, Nevada 89109 Wayne, Pennsylvania 19087
- ------------------------------------------------------------------------------
Telecopier: (701) 892-3950 Telecopier: (610) 971-2212
- -------------------------------------------------------------------------------
Attn: David C. Story Attn: Wayne D. Bloch, Managing Director
CC INVESTMENTS, LDC LIONHART GLOBAL APPRECIATION FUND
By: By:
Its: Its:
Address: Address
Citco Buildings, Wickhams Cay
P.O. Box 662
Road Town
Tortola, British Virgin Islands
Telecopier: 011-441-819-476936
Attn: Terry Duffy
EXHIBIT 99.7
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 5,
1997 by and among Western Pacific Airlines, Inc., a Delaware corporation, with
headquarters located at 2864 South Circle Drive, Suite 1100, Colorado Springs,
CO 80906 (the "Company"), and each of the undersigned (together with their
respective affiliates and any assignee or transferee of all of their respective
rights hereunder, the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) shares of its Series C
Convertible Preferred Stock (the "Preferred Stock") that is convertible into
shares (the "Conversion Shares") of the Company's common stock (the "Common
Stock"), upon the terms and subject to the limitations and conditions set forth
in the Certificate of Designations, Preferences and Rights with respect to such
Preferred Stock (the "Certificate of Designation"), and (ii) warrants to acquire
a number of shares of Common Stock (the "Warrant Shares") equal to 213,333 (the
"A-Warrants") and warrants to acquire Warrant Shares equal to 111,110 (the
"B-Warrants") (the A-Warrants and the B-Warrants are collectively known as (the
"Warrants")), upon the terms and subject to the limitations and conditions set
forth in the A-Warrants and B-Warrants, respectively, dated June 5, 1997.
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement and the Stock Purchase Warrants, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "1933 Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the following
meanings:
(i) "Investors" means the Initial Investors and any transferee or assignee
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
<PAGE>
(ii) "register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares and Warrant
Shares issued or issuable upon conversion of the Preferred Stock or exercise of
the Warrants, as the case may be, and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.
(iv) "Registration Statement" means a registration statement of the Company
under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or prior to the date which is forty-five (45) days after the date of the Closing
under the Securities Purchase Agreement (the "Closing Date"), file with the SEC
a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the Registrable Securities underlying the securities issued at the
Closing, which Registration Statement, to the extent allowable under the 1933
Act and the Rules promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Stock or exercise of the Warrants (i) to prevent dilution resulting from stock
splits, stock dividends or similar transactions or (ii) by reason of changes in
the Conversion Price of the Preferred Stock or the Exercise Price of the
Warrants in accordance with the terms thereof. The number of shares of Common
Stock initially included in such Registration Statement shall be no less than
two (2) times the number of Conversion Shares and Warrant Shares that are then
issuable upon conversion of the Preferred Stock and exercise of the Warrants.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of a
majority-in-interest of the Initial Investors (as long as such Initial Investors
own, in the aggregate, at least 50% of the then outstanding Registrable
Securities), shall have the right to select one legal counsel and an investment
banker or bankers and manager or managers to administer the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. Notwithstanding the foregoing, the Company shall be
under no obligation to conduct an underwritten offering pursuant to the
Registration Statement.
c. Payments by the Company. The Company shall use its
commercially reasonable efforts to obtain effectiveness of the Registration
Statement as soon as practicable. If (i) the Registration Statement(s) covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not declared effective by the SEC within one hundred
twenty (120) days after the Closing Date (other than by reason of delay caused
by (a) a change in a relevant policy, procedure, interpretation, position,
practice or rule of the SEC announced after the Closing Date, or (b) any act or
failure to act by the Investors or their representatives including any review by
such Investors' counsel pursuant to Section 3(h)) or if, after the Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant
to the Registration Statement (by reason of stop order, or the Company's failure
to update the Registration Statement), or (ii) the Common Stock is not listed or
included for quotation on the Nasdaq National Market (the "Nasdaq-NMS"), the
Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX") after being so listed or
included for quotation, then the Company will make payments to the Investors in
such amounts and at such times as shall be determined pursuant to this Section
2(c) as partial relief for the damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity). The Company shall pay to each holder of Registrable Securities an
amount equal to the aggregate "Purchase Price" (as defined below) of the
Preferred Stock and Warrants held by such Investors (including, without
limitation, Preferred Stock and Warrants that have been converted or exercised
into Conversion Shares or Warrant Shares then held by such Investors) (the
"Aggregate Share Price") multiplied by one and one-half hundredth (.015) times
the sum of: (i) the number of months (prorated for partial months) after the end
of such 120-day period and prior to the date the Registration Statement is
declared effective by the SEC; provided, however, that there shall be excluded
from such period any delays which are solely attributable to changes required by
the Investors in the Registration Statement with respect to information relating
to the Investors, including, without limitation, changes to the plan of
distribution, or to the failure of the Investors to conduct their review of the
registration statement pursuant to Section 3(h) below in a reasonably prompt
manner; (ii) the number of months (prorated for partial months) that sales
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective; and (iii) the number of months (prorated
for partial months) that the Common Stock is not listed or included for
quotation on the Nasdaq-NMS, Nasdaq SmallCap, or AMEX after the Registration
Statement has been declared effective. (For example, if the Registration
Statement becomes effective one (1) month after the end of such 120-day period,
the Company would pay $15,000 for each $1,000,000 of Aggregate Share Price; if
thereafter, sales could not be made pursuant to the Registration Statement for
an additional period of one (1) month, the Company would pay an additional
$15,000 for each $1,000,000 of Aggregate Share Price.) Such amounts shall be
paid in cash or, at each Investor's option, may be convertible into Common Stock
at the "Conversion Price" (as defined in the Certificate of Designation). Any
shares of Common Stock (including Common Stock underlying Warrants) issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities, it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth under Article VI of the
Certificate of Designation), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within five (5) days after the
end of each period that gives rise to such obligation; provided, that, if any
such period extends for more than thirty (30) days, interim payments shall be
made for each such thirty (30) day period. The term "Purchase Price" means the
purchase price paid by the Investors for the Preferred Stock and the Warrants.
d. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within fifteen (15) days after
the effective date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
however, that any exclusion of Registrable Securities shall be made pro rata
with holders of other securities having the right to include such securities in
the Registration Statement other than holders of securities entitled to
inclusion of their securities in such Registration Statement by reason of demand
registration rights. No right to registration of Registrable Securities under
this Section 2(d) shall be construed to limit any registration required under
Section 2(a) hereof. If an offering in connection with which an Investor is
entitled to registration under this Section 2(d) is an underwritten offering,
then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
e. Eligibility for Form S-3. The Company represents and
warrants that it meets the registrant eligibility and transaction requirements
for the use of Form S-3 for registration of the sale by the Initial Investor and
any other Investor of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC
not later than forty-five (45) days after the Closing Date, a Registration
Statement with respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its commercially reasonable efforts to cause
such Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing, and keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as is the
earlier of (i) the date on which all of the Registrable Securities have been
sold and (ii) the date on which the Registrable Securities (in the opinion of
counsel to the Company in substance reasonably acceptable to a
majority-in-interest of the Initial Investors) may be sold without volume
limitations in a public transaction pursuant to an available exemption from the
requirements of registration under the 1933 Act; provided, that such date shall
not extend more than three (3) years from the date of this Agreement (the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein not misleading.
After the Registration Period and, in the event that the Registration Statement
has lapsed during the Registration Period, the cashless exercise provisions
pursuant to Section 11(c) of the Warrants shall become effective.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Preferred Stock and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefore, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in any
event within twenty (20) business days after the necessity therefor arises
(based on the market price of the Common Stock and other relevant factors on
which the Company reasonably elects to rely). The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. The provisions of
Section 2(c) above shall be applicable with respect to such obligation, with the
one hundred twenty (120) days running from the day after the date on which the
Company reasonably first determines (or reasonably should have determined) the
need therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
e. In the event Investors who hold a majority-in-interest of
the Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors, so long as such Initial Investors
own, in the aggregate, at least 50% of the then outstanding Registrable
Securities) select underwriters for the offering, the Company shall in good
faith endeavor to negotiate to enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by the Registration Statement to be
listed on each national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the Nasdaq-NMS or, if not eligible for
the Nasdaq-NMS on the Nasdaq SmallCap and, without limiting the generality of
the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as Exhibit 1 and an opinion of such counsel in the form
attached hereto as Exhibit 2.
p. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority-in-interest of
the Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, shall be borne by the Company
and the fees and disbursements of counsel selected by the Initial Investors
pursuant to Section 2(b) hereof, shall be borne by such Investors.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), if any, and (iii)
any underwriter (as defined in the 1933 Act) for the Investors; and the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any, (each,
an "Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advise, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors, as long as such Initial Investors
own, in the aggregate, at least 50% of the then outstanding Registrable
Securities), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor, during the Registration Period, so long as
such Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase Agreement
including, but not limited to, Section 8(g) thereof permitting transfer of the
Preferred Shares or Warrants only (x) if (I) at least 50% of the Preferred
Shares or Warrants received by the Investor are transferred or (II) if a
transfer has previously been made pursuant to clause (I) above, all of the
remaining Preferred Shares or Warrants, as the case may be, of such Investor are
transferred or (y) to an affiliate of the Investor; provided, that the holdings
of an Investor and its affiliates shall be treated as one and the same and
further, provided, that in the case of a proposed transfer pursuant to clause
(x) above, the transferee of the Investor agrees, in the case of a subsequent
transfer by such transferee, to transfer all of the Preferred Shares or Warrants
held by such transferee and (vi) such transferee shall be an "accredited
investor" as that term defined in Rule 501 of Regulation D promulgated under the
1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns Registrable Securities
and provided that Initial Investors own, in the aggregate, at least 50% of the
then outstanding Registrable Securities) and Investors who hold a majority
interest of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If to the Company:
Western Pacific Airlines, Inc.
2864 South Circle Drive, Suite 1100
Colorado Springs, CO 80906
Attention: Chief Executive Officer
Facsimile: (719) 527-7259
With copy to:
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, IL 60602
Attention: Allan J. Reich
Facsimile: (312) 580-0923
If to a Investor: To the address set forth immediately below such
Investor's name on the signature pages to the Securities Purchase Agreement.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in Wilmington, Delaware
with respect to any dispute arising under this Agreement or the transactions
contemplated hereby.
e. This Agreement and the Securities Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if all shares of Preferred Stock and Warrants then outstanding have been
converted into or exercised for Registrable Securities.
WITNESS WHEREOF, the Company and the undersigned Initial Investor have caused
this Agreement to be duly executed as of the date first above written.
WESTERN PACIFIC AIRLINES, INC.
By: /s/ Robert A. Peiser
Name: Robert A. Peiser
Its: President and Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp.
By: /s/ Wayne D. Bloch
Name: Wayne D. Bloch
Its: Managing Director
CC INVESTMENTS, LDC
By: CSS Corporation Ltd., Corporate Secretary
By: /s/ JW Reuben
Name:
Its:____________________________________________
LIONHART GLOBAL APPRECIATION FUND
By: /s/ Terrence Duffy
Name:
Its:____________________________________________
