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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): NOVEMBER 18, 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 number) Identification No.)
2864 South Circle Drive
COLORADO SPRINGS, CO 80906
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 579-7737
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Former name or former address, if changed since last report
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Item 5. OTHER EVENTS.
On November 18, 1997, Western Pacific Airlines, Inc., a Delaware
corporation (the "Registrant") filed a Motion for Order Authorizing Debtor to
Obtain Post-Petition Financing (the "Motion") with the United States Bankruptcy
Court for the District of Colorado (the "Court"). The Motion requests the Court
to issue an order authorizing the Registrant to obtain post-petition financing
from Smith Management Company or its designated affiliates ("SMC") as described
in a Term Sheet (the "Term Sheet") attached to the Motion. The first portion of
the post-petition financing consists of a $30.0 million debtor-in-possession
facility (the "DIP Facility") to enable the Registrant to continue its flight
operations in the ordinary course of business pending confirmation of a plan of
reorganization. SMC proposes to fund $10.0 million of the DIP Facility
immediately upon entry of a final order by the Court approving the Motion. The
Registrant has requested the Court to schedule the final hearing for the Motion
on December 3, 1997.
In addition, the Term Sheet provides a mechanism by which the Registrant
may propose a plan of reorganization whereby SMC would provide an "exit"
financing facility of $40.0 to $50.0 million to replace the DIP Facility, on
terms to be negotiated more fully as part of a plan of reorganization (the "Exit
Facility"). As described in the Term Sheet, there are certain conditions
precedent to SMC's entering into the Exit Facility, including, without
limitation, its receipt of "all or substantially all of the equity interest in
the reorganized" Registrant.
The Registrant's management believes, after consulting with bankruptcy
counsel, that it is likely that any plan of reorganization that may ultimately
be confirmed will provide for the cancellation of the Registrant's outstanding
equity securities (including its Common Stock).
A copy of the Motion and the Registrant's press release dated November 18,
1997 are attached as Exhibits 10.1 and 10.2 hereto respectively, and are hereby
incorporated by reference (A copy of the Term Sheet is included as Exhibit A to
the Motion).
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
Exhibits.
(c) Exhibits
10.1 Motion for Order Authorizing Debtor to Obtain Post-Petition
Financing Pursuant To 11 U.S.C. Section 364(c), (d) as filed
with the United States Bankruptcy Court for the District of
Colorado.
10.2 Press Release of the Registrant dated November 18, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 19, 1997 WESTERN PACIFIC AIRLINES, INC.
By: /S/ROBERT A. PEISER
Name: Robert A. Peiser
Title: President and Chief Executive Officer
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INDEX
Exhibit
NUMBER DESCRIPTION OF DOCUMENT
10.1 Motion for Order Authorizing Debtor to Obtain Post-Petition
Financing Pursuant
To 11 U.S.C. Section 364(c), (d) as filed with the United States
Bankruptcy Court for the District of Colorado.
10.2 Press Release of the Registrant dated November 18, 1997.
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Exhibit 10.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF COLORADO
In re
Case No. 97-24701-SBB
WESTERN PACIFIC AIRLINES, INC., a Chapter 11
Delaware Corporation,
MC No. FB-25
Employer I.D. No. 86-0758778
Debtor
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MOTION FOR ORDER AUTHORIZING DEBTOR
TO OBTAIN POST-PETITION FINANCING
PURSUANT TO 11 U.S.C. SECTION 364(C), (D)
Western Pacific Airlines, Inc. ("Western Pacific") hereby moves, pursuant
to 11 U.S.C. Sections 364(c), (d) and (e) and Rules 4001(c) and 9014 of the
Federal Rules of Bankruptcy Procedure and Rule 202 of the Local Bankruptcy
Rules, for an Order authorizing Western Pacific to obtain post-petition
financing from Smith Management Company or its designated affiliate (the
"Lender") on terms more fully described below, and in support hereof states as
follows:
I. INTRODUCTION
1. By this Motion, Western Pacific seeks Court approval of a $30 million Debtor
in Possession financing facility which, if approved, will enable Western Pacific
to continue its business as usual, including all normal flight operations
pending confirmation of a plan of reorganization. Moreover, the Lender's term
sheet provides a framework for an "exit" financing package of $40 to $50 million
to replace the $30 million Debtor in Possession facility, on terms to be
negotiated more fully as part of a plan of reorganization.
2. The Lender proposes to fund $10 million immediately upon entry of a final
order approving this Motion (assuming other conditions precedent to funding are
met), with up to $6 million of this amount available for Section 1110 cure
payments. Western Pacific requests that the Motion be scheduled for final
hearing on December 3, 1997.
II. BACKGROUND
3. Western Pacific filed its voluntary petition on October 5, 1997, under the
provisions of Chapter 11 of the Bankruptcy Code. Western Pacific is in
possession of this property and is operating its business pursuant to Sections
1107 and 1108 of the Bankruptcy Code.
4. This Court has subject matter jurisdiction pursuant to 28 U.S.C. Section
1334. This matter is a core proceeding pursuant to 28 U.S.C. Section 157
(b)(2)(D), and the Court has authority to enter a final order on this Motion.
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5. Western Pacific is the largest low cost regional airline headquartered in
Colorado. Western Pacific has a fleet of 19 aircraft and conducts an average of
90 scheduled flights daily to 14 cities across the United States. Total
operating revenues for the year-to-date 1997 (through September 30, 1997) are
approximately $138 million. Western Pacific has over 1500 employees, located
mainly in Colorado.
6. A working capital shortage, among other things, forced Western Pacific to
commence this reorganization case. Although it has been successful operating to
date without post-petition financing, infusion of cash into Western Pacific is
critical to its continued business operations. First, Western Pacific is
required under Section 1110 of the Bankruptcy Code to partially cure defaults
under its leases of aircraft and equipment subject to Section 1110 on or before
December 4, 1997. Second, Western Pacific requires additional working capital to
commence other payments, for example to airports pursuant to Section 365(d)(3)
of the Bankruptcy Code.
7. Because of adverse publicity regarding the lack of post-petition financing
and the looming Section 1110 deadline of December 4, 1997, Western Pacific's
bookings have declined. Western Pacific firmly believes that bookings will
recover when it can demonstrate the financial ability to reorganize by the
infusion of the requested financing. Absent such an infusion of cash into the
business, Western Pacific's efforts to reorganize will fail.
III. PROPOSED DIP FINANCING
8. Western Pacific and the Lender have agreed for the extension of certain
post-petition financing (the "DIP Facility") to Western Pacific pursuant to the
terms and conditions set forth in a term sheet (the "Term Sheet"), a copy of
which is attached hereto and incorporated herein as Exhibit A. The Term Sheet is
subject to final documentation.
9. As set forth more fully in the Term Sheet, the DIP Facility will be in
amount of $30 million, available in two tranches as follows:
(a) $10 million would be available on or before December 4, 1997, of which
approximately $6 million will be available for Section 1110 payments. Conditions
precedent to this initial tranche of funding are (i) due diligence and
documentation acceptable to Lender; (ii) filing of a plan of reorganization
acceptable to Lender in all respects; (iii) establishment of a claims bar date;
(iv) entry of a final order in form and substance satisfactory to Lender
granting the relief requested in the Motion; and (v) entry of an order approving
the facility fees and expenses, a motion to approve which is submitted
contemporaneously herewith.
(b) $20 million would be available on or after December 20, 1997, in
accordance with a weekly budget acceptable to Lender. Conditions precedent to
this second tranche of funding are (i) filing of a disclosure statement
acceptable to Lender in all respects; (ii) establishment of a hearing date for
approval of the disclosure statement for no later than January 31, 1998, (iii)
evidence acceptable to Lender that significant creditors support the proposed
plan of reorganization, and (iv) no material adverse change in Western Pacific's
business or financial operations.
10. Advances made pursuant to the DIP Facility will bear interest at the prime
rate plus 2 1/2 percent per annum. After an event of default, the interest rate
will increase to 16 percent per annum.
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11. The Term Sheet provides that the Lender's claim on account of the DIP
Facility shall be granted priority over all other administrative expenses
specified in 11 U.S.C. Sections 503(b) and 507(b), pursuant to 11 U.S.C. Section
364(c)(1). As more fully set forth in the Term Sheet, advances pursuant to the
DIP Facility shall also be secured by a first lien on all of Western Pacific's
unencumbered assets, including all of Western Pacific's rights under aircraft
leases and all outstanding capital stock of Western Pacific subsidiaries, and by
a junior security interest on all other assets of Western Pacific, pursuant to
11 U.S.C. Section 364(c)(2), (3). In addition, depending upon the results of the
Lender's due diligence, Lender reserves the right to seek a first and prior lien
pursuant to 11 U.S.C. Section 364(d) on Western Pacific's account, known as the
"Collateral Account," at Bank One Texas, N.A.
12. The Lender has stated that it presently intends to make a long-term
investment in Western Pacific, assuming satisfactory completion of the steps in
the Term Sheet. Thus, the Term Sheet provides for a mechanism for Western
Pacific to propose a plan of reorganization in which the Lender would provide an
exit financing facility of $40 to $50 million, on terms to be negotiated with
parties in interest.
13. The Term Sheet provides that advances pursuant to the DIP Facility will be
repaid in full on the earlier of: (a) March 16, 1998 (or April 16, 1998 if
extended as provided below); (b) the expiration of Western Pacific's exclusive
period to file a plan of reorganization; (c) consummation of a plan of
reorganization; and (iv) occurrence of an event of default.
14. The Term Sheet also provides for a facility fee of $125,000 payable on
November 21, 1997 and another $125,000 payable upon approval of this Motion. The
Term Sheet also provides for a termination fee of $150,000 fee will be payable
upon entry of an order approving any debtor in possession financing other than
that made available pursuant to the Term Sheet. In addition, the Term Sheet
provides that Smith will be entitled to its reasonable out-of-pocket fees and
expenses. (Western Pacific requests approval of the fees and expenses described
in this paragraph by separate motion, to be heard November 21, 1997.)
15. The Term Sheet provides for a commitment fee, upon approval of this Motion,
in the amount of 1/2 of 1 percent per annum on the unused amount of the DIP
Facility.
16. In addition, the Lender will be entitled to $1,000,000 plus 10% of each
class of equity in the reorganized Western Pacific payable on the date, if any,
on which (i) the Court enters an order approving exit financing other than that
made available by Lender or (ii) Western Pacific files a plan of reorganization
that is not acceptable to Lender in all material respects (in its sole
discretion). The latter event can only occur if Western Pacific files an amended
plan of reorganization after the final hearing on this Motion, since the filing
of a plan acceptable to the Lender before the final hearing is a prerequisite to
funding.
17. Western Pacific presently has a five-seat Board of Directors, with two of
the seats vacant. The Term Sheet provides that, as a condition to funding, the
Lender will be entitled to nominate two directors to Western Pacific's Board of
Directors to fill such vacancies. Western Pacific also agrees, if requested by
Lender, to increase its Board of Directors to up to seven members, with Lender
provided the right to nominate the additional two members.
18. Other terms and conditions of the DIP Facility are set forth in the Term
Sheet.
19. In addition to the conditions set forth in the Term Sheet, the proposed
financing remains contingent upon final approval of Western Pacific's Board of
Directors. Western Pacific anticipates such approval prior to November 21, 1997.
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IV. THE PROPOSED DIP FACILITY SHOULD BE APPROVED
20. As noted, failure to obtain substantial debtor in possession financing will
defeat Western Pacific's efforts to reorganize its business. Western Pacific's
requirement to cure aircraft and engine lease obligations pursuant to 11 U.S.C.
Section1110 creates a need for additional cash prior to December 4, 1997, and
thereafter, in addition to other working capital requirements. Western Pacific
believes that the financing proposed herein will be sufficient to allow it to
make sufficient payments on its aircraft leases, to meet Western Pacific's
working capital requirements, and to permit a successful reorganization.
21. Since commencement of this case, Western Pacific has actively searched for
investors and has engaged in serious discussions and due diligence with more
than one potential investor. Western Pacific, in its reasonable business
judgment, believes that the financing proposed herein is in the best interests
of the estate. Western Pacific has been unable to obtain financing solely on an
unsecured, administrative, or superpriority basis, pursuant to 11 U.S.C. Section
364(b) or (c). Western Pacific further believes that provisions described in
this Motion regarding proposal of a plan of reorganization are necessary to
obtain the proposed financing. Given the relative lack of hard collateral (not
uncommon for an air carrier), financing is generally only available from
investors interested in ownership of the reorganized debtor. The linkage of
financing and the plan process reflects the justifiable long-term interests of
the Lender and the requirement of any potential lender with which Western
Pacific has dealt.
22. The Lender is acting in good faith in extending credit on the terms
described in this Motion and the Term Sheet. The Lender and Western Pacific have
negotiated the terms of the DIP Facility and the Term Sheet at arms length and
in accordance with reasonable business terms. Accordingly, the Lender is
entitled to the protections afforded under 11 U.S.C. Section 364(e).
V. REQUEST FOR DECEMBER 3, 1997 HEARING
23. Pursuant to Fed. R. Bankr. P. 4001(c)(2), the Court may commence a final
hearing on this Motion 15 days after service. This Motion is being served by
hand delivery or facsimile to the parties appearing on the Limited Service List
pursuant to this Court's Case Management Order as well as to all parties not
included thereon which Western Pacific has been able to identify as claiming an
interest in any of its assets. Thus, the Court may hold a final hearing on this
Motion on December 3, 1997.
24. As noted above, Western Pacific requires the proposed cash infusion prior
to December 4, 1997, in order to ensure the ability to maintain its business
operations. Western Pacific anticipates, however, that it will have adequate
cash to maintain operations until such date. Therefore, Western Pacific does not
believe that it requires a hearing on the Motion prior to December 3, 1997,
(other than a hearing on November 21, 1997, for approval of certain fees in
connection herewith), but Western Pacific requires a hearing on December 3,
1997.
25. Western Pacific believes that the hearing on this Motion, if held December
3, 1997, will be a final hearing pursuant to Fed. R. Bankr. P. 4001(c)(2). To
the extent necessary, Western Pacific nevertheless requests that the Court hold
a preliminary hearing on the Motion on such date in order to authorize financing
necessary to avoid immediate and irreparable harm to the estate.
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WHEREFORE Western Pacific requests that the Court hold a hearing on
December 3, 1997 at 9:00 a.m. to authorize Western Pacific to obtain
post-petition financing in an amount up to $30 million upon the terms and
conditions set forth in the Term Sheet, and that the Court grant such other
relief as is just and equitable.
Dated this 18th day of November, 1997.
FAEGRE & BENSON LLP
Christian C. Onsager, #6889
Michael J. Pankow, #21212
370 17th Street, Suite 2500
Denver, CO 80202
(303) 592-9000
ATTORNEYS FOR WESTERN PACIFIC
CERTIFICATE OF SERVICE
It is hereby certified that service of the MOTION FOR ORDER AUTHORIZING
DEBTOR TO OBTAIN POST-PETITION FINANCING PURSUANT TO 11 U.S.C. SECTION 364(C),
(D) has been made by telecopy or U.S. Mail, postage prepaid, this 18th day of
November, 1997 on all persons and entities appearing on the Limited Service List
No. 5 dated November 14, 1997.
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SUMMARY TERM SHEET
BORROWER: Western Pacific Airlines, Inc., debtor and
debtor in possession (the "Borrower" or
"Debtor")
LENDER/INVESTOR: Smith Management Company or affiliate
("Smith")
DIP FACILITY: Working capital facility (the "DIP
Facility") for revolving credit loans to
provide working capital requirements for the
Borrower's continued operations in
bankruptcy, including Section 1110 payments.
AMOUNT AND AVAILABILITY OF DIP
FACILITY: $30 million loan facility available in
tranches as follows:
$10 million initial availability to be made
on or before December 4, 1997 of which $6
million shall be used by the Debtor to make
Section 1110 payments, subject to the
following conditions: (i) due diligence and
documentation acceptable to Smith, (ii) the
filing of a plan of reorganization (the
"PLAN") by the Debtor acceptable to Smith in
all respects, (iii) the establishment of a
bar date in respect of pre-petition claims
and (iv) entry of a final order approving
the DIP Facility. Per-draw minimum of
$500,000. The remaining $20 million to be
made available by Smith on or after December
20, 1997, in accordance with a weekly budget
acceptable to Smith, subject to the
following conditions: (a) filing of a
disclosure statement by the Debtor
acceptable to Smith in all respects,
("DISCLOSURE STATEMENT"), (b) establishment
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of a hearing date on the Disclosure
Statement no later than January 31, 1998,
(c) evidence acceptable to Smith that
significant creditors and lessors support
the Plan and (d) no material adverse change
in the Debtor's business or financial
operations. Per-draw minimum of $500,000.
EXIT FACILITY: $40 to 50 million facility (the "EXIT
FACILITY") to be made available to the
reorganized Debtor (i) to fund the Plan,
(ii) for working capital purposes, (iii) to
repay all amounts outstanding under the DIP
Facility and (iv) to make an equity
contribution to the reorganized Debtor in
exchange for all or substantially all of the
equity interests in the reorganized Debtor,
subject to the following conditions: (a)
entry of a final order confirming the Plan
or another reorganization plan acceptable in
all material respects to Smith in its sole
discretion, (b) the assumption by the Debtor
of certain contracts and/or leases on terms
acceptable to Smith and (c) due diligence
and documentation acceptable to Smith.
Per-draw minimum of $500,000.
INTEREST: As to the DIP Facility, prime plus 2 1/2
percent per annum; after an Event of
Default, 16 percent per annum; rates for any
debt portion of Exit Facility to be
determined.
MATURITY: Borrowings under the DIP Facility are to be
repaid in full on the date which is earlier
of (i) March 16, 1998, (ii) the expiration
of the Borrower's exclusive period to file a
plan of reorganization, (iii) consummation
of the Plan and (iv) the occurrence of an
Event of Default. The portion of the Exit
Facility representing a working capital loan
facility shall be repaid as provided in the
Plan.
COLLATERAL AND First lien on all unencumbered assets,
SUPERIORITY CLAIM: including all of Debtor's rights under
aircraft leases; priming lien on other
assets as specified by Smith; first priority
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lien on all of the outstanding capital stock
of the Borrower's subsidiaries; and a junior
lien on all other assets of the Borrower.
Upon either (a) an Event of Default or (b)
termination of the DIP Facility, the
automatic stay shall be lifted without
further action on the part of Smith (other
than five business days' prior notice to the
Borrower and any creditors' committee) to
permit Smith to foreclose on its collateral;
provided that the Borrower and any
creditors' committee shall have such five
business days to prevent such lifting of the
automatic stay on the sole basis that such
Event of Default or termination event has
not occurred. All liens shall be
automatically perfected pursuant to
bankruptcy court order; however, the
automatic stay shall be modified to permit
other perfection. Superiority administrative
claim pursuant to Section 364(c)(1) of the
Bankruptcy Code over expenses of the kind
specified in Sections 503(b), 506(c), 507(b)
and 726(b) of the Bankruptcy Code [, other
than the fees of the U.S. Trustee and
professional fees not to exceed $______].
COMMITMENT FEE: 1/2 of 1 percent per annum on unused amount
of DIP Facility and, upon its availability,
the Exit Facility, payable monthly in
arrears from the date of acceptance of
commitment letter.
FACILITY FEE: $250,000, half of which shall be payable
upon the Borrower's acceptance of the terms
herein, but subject to bankruptcy court
approval, which shall be obtained on an
emergency basis by no later than November
21, 1997, with the balance payable upon
bankruptcy court's approval of the DIP
Facility.
TERMINATION FEES: 1. $150,000 payable on the date, if any, on
which the bankruptcy court enters an order
approving any debtor-in-possession financing
other than that which has been made
available hereunder; and
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2. $1,000,000 PLUS 10% of each class of
equity of the reorganized entity payable on
the date, if any, on which (i) the
bankruptcy court enters an order approving
exit financing other than that made
available by Smith or (ii) the Borrower
shall file a plan of reorganization, other
than the Plan, that is not acceptable to
Smith in all material respects in its sole
discretion, which fee shall be pre-approved
by the bankruptcy court in connection with
the DIP Facility.
EXTENSION FEE: $1,000,000 payable on March 16, 1998 unless
the DIP Facility has been repaid in full and
terminated prior to such date (and Smith
shall upon payment of such fee extend the
stated maturity of such facility to April
16, 1998), which fee shall be pre-approved
by the bankruptcy court in connection with
the DIP Facility.
ADDITIONAL CONDITIONS OF 1. Smith must receive ten (10) days notice
DIP AND EXIT FACILITIES: of the Borrower's intent to file a plan of
reorganization, together with a copy
thereof;
2. The Borrower shall not permit another
person or entity to obtain a security
interest in its assets or a claim in any
manner superior to that obtained by Smith in
connection with the DIP and Exit Facilities;
3. The order(s) of the bankruptcy court
approving the DIP and Exit Facility shall be
satisfactory to Smith and its counsel in all
respects;
4. Receipt of forecasts of the Borrower's
business, and of budgeted cash needs,
satisfactory to Smith;
5. Debtor will, through action of its Board
of Directors (as currently constituted),
appoint two Smith nominees as directors of
Debtor to serve in Class I and III, to
replace vacancies therein, and thereafter
expand the Board, at Smith's option, by up
to two seats; Smith will have the right to
nominate two additional directors of Debtor
who will be elected to Class I and II to
fill such additional vacancies therein;
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6. All documentation to be satisfactory to
Smith and its counsel; and
7. Satisfactory completion (in Smith's sole
discretion) of business, operational and
legal due diligence of the Borrower.
BUDGET: The Borrower will observe a budget to be
negotiated (the "Budget"). The Budget will
allow for ongoing payments of professional
and United States Trustee fees, subject to
bankruptcy court approval, in an amount not
to exceed $______ (including retainers paid
prior to the Petition Date and all amounts
paid thereafter).
REPRESENTATIONS AND WARRANTIES: Definitive documentation shall contain such
representations and warranties as are
customarily found in DIP/Exit facilities and
additional representations and warranties
appropriate in Smith's judgment for this
transaction.
COVENANTS: Definitive documentation shall contain such
negative, affirmative and financial
covenants as are customarily found in
DIP/Exit facilities and others appropriate
in Smith's judgment for this transaction
including, without limitation:
1. monthly financial reporting;
2. negative pledge;
3. no other financing under Section 364 of
the Bankruptcy Code; and
4. the Borrower shall not issue any press
release in which Smith or any affiliate or
agent of Smith is mentioned without Smith's
prior review and approval (not to be
unreasonably withheld).
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EVENTS OF DEFAULT: Definitive documentation shall contain such
events of default as are customarily found
in DIP/Exit facilities and others
appropriate in Smith's judgment for this
transaction including, without limitation:
1. non-payment of amounts due under DIP and
Exit Facilities;
2. breach of any covenant contained in DIP
and Exit Facilities or related documents;
3. dismissal of bankruptcy case, conversion
to Chapter 7, appointment of a bankruptcy
trustee or examiner with expanded powers,
termination of the Borrower's exclusive
right to file a plan of reorganization, or
the granting of any other priming lien or
superiority administrative expense claim;
4. any stay or modification of the orders of
the bankruptcy court authorizing or
approving the DIP or Exit Facilities;
5. the Borrower's failure to observe the
Budget in any material respect;
6. the Borrower's failure to file and/or
obtain approval of the Disclosure Statement
or the Plan in accordance with an agreed
upon schedule; and
7. the filing of a plan of reorganization
(or of an amendment to the Plan) that is not
satisfactory in all material respects to
Smith in its sole discretion.
ADVANCES AFTER INITIAL FUNDING: Definitive documentation shall contain such
conditions precedent to subsequent
incremental advances under the DIP and Exit
Facilities as are customarily found in
DIP/Exit facilities and others appropriate
in Smith's judgment to this transaction.
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GOVERNING LAW: The DIP and Exit Facilities and all related
documentation shall be construed in
accordance with New York law.
EXPENSES: All reasonable out-of-pocket costs and
expenses (including fees and disbursements
of counsel) incurred in connection with the
preparation, review, negotiation, execution
and delivery of this Term Sheet, the
definitive financing agreements and the
other documents related thereto, as well as
the subsequent administration thereof,
monitoring of the Borrower's performance
thereunder and related participation in the
bankruptcy case, in each case, to be
approved by the bankruptcy court by no later
than November 21, 1997. On or before
December 4, 1997, the Debtor shall deliver
to Smith a "stay-ahead" retainer in the
amount of $100,000 to be applied toward the
fees and expenses incurred by Smith in
accordance with this paragraph. Smith shall
provide the bankruptcy court, the Debtor,
the U.S. Trustee and any creditors'
committee with periodic statements showing
the nature, amount and any balance due in
respect of any fees and expenses incurred by
Smith in accordance herewith. The balance of
any such fees and expenses shall be paid by
the Debtor within thirty days after receipt
unless such creditors' committee or the U.S.
Trustee shall have filed a formal objection
thereto within such thirty day period.
Thereafter, if the parties are unable to
reach agreement in respect thereof, a
hearing before the bankruptcy court solely
on the issue of the reasonableness of such
fees and expenses will be held.
MISCELLANEOUS: Standard provisions providing for the sale
of participations and commitments.
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Exhibit 10.2
FOR IMMEDIATE RELEASE
Elise Eberwein
(719) 527-7363
e-mail: [email protected]
WESTERN PACIFIC AIRLINES RECEIVES FINANCING OFFER
Funds To Provide "Debtor in Possession" And Exit Financing
COLORADO SPRINGS, COLO. - NOVEMBER 18, 1997 - WESTERN PACIFIC AIRLINES
(NASDAQ: WPAC) today announced that it has filed a motion with the United States
Bankruptcy Court for the District of Colorado in Denver for approval of proposed
"debtor in possession" ("DIP") and reorganization financing. The financing would
be provided by New York-based Smith Management Company ("SMC") and calls for an
initial DIP loan of $10 million on or before December 4, 1997 to be used to pay
a portion of the airline's post-petition aircraft lease obligations and to
provide general working capital. At the airline's option, up to an additional
$20 million of DIP financing would be available on or after December 20, 1997 to
be used as general working capital.
Pursuant to the proposal, to provide for the airline's emergence from
Chapter 11, SMC would provide a total investment of $40 to $50 million which
will be used to repay the DIP financing, fund a plan of reorganization, provide
working capital and to make an equity contribution to the reorganized Company in
exchange for all or substantially all of the equity of the reorganized airline.
Both investments are subject to negotiation of final documentation, additional
due diligence and Court and creditor approval.
Western Pacific President and Chief Executive Officer Robert A. Peiser,
said, "We are delighted with the vote of confidence that the SMC investment
provides, especially in light of its airline expertise. Their analysis and the
resultant investment confirms our belief in the Denver strategy and we look
forward to working together."
SMC is a private, diversified investment management firm located in New
York, New York. In January 1996, through its affiliate, Airline Investors
Partnership, L.P., SMC made a controlling investment in Hawaiian Airlines, Inc.
(ASE; PSE: HA), the nation's twelfth largest air carrier. John W. Adams,
President of Smith Management Company, serves as Chairman of the Board of
Hawaiian Airlines, Inc.
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Adams said, "From prior business associations, we have come to respect Bob
Peiser's management talents and his past performance strengthens our willingness
to invest in Western Pacific. The analysis and due diligence we have conducted
to date lead us to believe Western Pacific presents a business opportunity with
significant potential."
Under the terms of the agreement, SMC will designate two members to
Western Pacific's Board of Directors and retain the right to nominate two
additional directors at a later time.
Peiser continued, "While DIP financing is extremely important, it is the
commitment for exit financing that provides the foundation for Western Pacific's
future. This investment will provide us with the necessary time and stability in
Denver needed in order to realize the full potential of our business strategy.
"We have already made significant improvements in the operation, revenue
development and marketing arenas. We believe that this investment would allow us
to build upon that base and realize our full potential."
Western Pacific Airlines, the nation's sixteenth largest airline, is
headquartered in Colorado Springs, Colorado. Western Pacific currently serves 13
markets non-stop from its Denver hub and currently operates 18 Boeing 737-300
aircraft. The airline was recently named "Best Domestic Low-Fare Upstart
Airline" by Entrepreneur Magazine. For more information, please visit Western
Pacific's web site at http://www.westpac.com.
STATEMENTS CONTAINED IN THIS PRESS RELEASE WHICH ARE NOT HISTORICAL FACTS ARE
FORWARD LOOKING STATEMENTS AS THAT ITEM IS DEFINED IN THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM ESTIMATED RESULTS. SUCH RISKS AND UNCERTAINTIES ARE DETAILED IN THE
COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
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