VANGUARD AIRLINES, INC.
NOTE EXCHANGE AGREEMENT
THIS NOTE EXCHANGE AGREEMENT (the "Agreement") is
entered into as of March 20, 1998, by and between Vanguard
Airlines, Inc., a Delaware corporation (the "Company") and the
Holders (each a "Holder" and collectively, the "Holders") set
forth on the Schedule of Holders attached as Exhibit A hereto.
RECITALS
WHEREAS, each Holder is the holder of multiple demand
notes issued by the Company (the "Existing Notes") which Existing
Notes are listed on Exhibit B hereto; and
WHEREAS, certain of the Holders are concurrently
entering into a Unit Purchase Agreement (the "Purchase
Agreement") pursuant to which they have agreed to provide
additional financing to the Company; and
WHEREAS, the Holders have agreed to exchange their
Existing Notes for new notes in the form attached hereto as
Exhibit C (the "New Notes") which provide for automatic
conversion of the New Notes at such time as the Company has an
adequate number of authorized shares available for issuance under
the terms of the New Notes and under the terms of all of its
other securities, agreements, commitments and plans.
NOW, THEREFORE, in consideration of the mutual promises
and covenants hereinafter set forth, the Company and the Holders
hereby agree as follows:
1. Subject to the terms and conditions of this Agreement, each
Holder agrees, severally and not jointly, to exchange at the
Closing (as defined below) all of its Existing Notes and the
Company agrees to issue to each Holder at the Closing a New
Note in the principal amount set forth on Exhibit_A hereto
which principal amount shall be equal to the sum of the
principal balance and accrued and unpaid interest as of the
date of the Closing on the Existing Notes held by the
Holder. The New Note shall be exchanged by each Holder by
surrendering to the Company for cancellation such Holder's
Existing Notes.
2. Closing. The exchange and issuance shall take place at the
offices of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx &
Xxxxxxxxx, LLP, 155_Constitution Drive, Menlo Park,
California, at 2:00 p.m., on March_20, 1998, or at such
other time and place as the Company and the Holders mutually
agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company
shall deliver to each Holder a New Note in the amount set
forth opposite such Holder's name on Exhibit A. Each such
Holder shall surrender to the Company for cancellation at
the Closing such Holder's Existing Notes.
3. Representations and Warranties of the Company. In
connection with the transactions provided for herein, the
Company hereby represents and warrants to the Holders that:
4. Organization, Good Standing, and Qualification. The Company
is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to carry on
its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material
adverse effect on its business or properties.
5. Authorization. Subject to receipt of the Stockholder
Approval (as defined in the Purchase Agreement) and the
filing of the Amendment (as defined in the Purchase
Agreement), all corporate action on the part of the Company,
its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder, and
the delivery of the New Notes being exchanged hereunder and
the Common Stock issuable upon conversion of the New Notes
has been taken or will be taken prior to the Closing, and
this Agreement and the New Notes constitute valid and
legally binding obligations of the Company, enforceable in
accordance with its terms, except (i)_as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii)_as
limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
6. Valid Issuance of Common Stock. Subject to the receipt of
the Stockholder Approval and the filing of the Amendment,
the Common Stock issuable upon conversion of the New Notes
issued under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with
the terms of the Restated Certificate of Incorporation of
the Company, will be duly and validly issued, fully paid,
and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this
Agreement and the New Note and under applicable state and
federal securities laws.
7. Representations and Warranties of the Holders. In
connection with the transactions provided for herein, each
Holder hereby represents and warrants to the Company that:
8. Authorization. This Agreement constitutes such Holder's
valid and legally binding obligation, enforceable in
accordance with its terms.
9. Purchase Entirely for Own Account. Holder acknowledges that
this Agreement is made with Holder in reliance upon Holder's
representation to the Company that the New Notes and the
Common Stock issuable upon conversion of the New Notes
(collectively, the "Securities") will be acquired for
investment for Holder's own account and not with a view to
the resale or distribution of any part thereof, and that
Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same. By
executing this Agreement, Holder further represents that
Holder does not have any contract, undertaking, agreement,
or arrangement with any person to sell, transfer, or grant
participations to such person or to any third person, with
respect to the Securities. Holder represents that it has
full power and authority to enter into this Agreement.
10. Investment Experience. Holder is an investor in securities
of companies in the development stage and acknowledges that
it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in
financial or business matters that it is capable of
evaluating the merits and risks of the investment in the
Securities.
11. Restricted Securities. Holder understands that the
Securities are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable
regulations such securities may be resold without
registration under the Securities Act of 1933, as amended
(the "Act"), only in certain limited circumstances. In this
connection, Holder represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
12. Legends. It is understood that the Securities may bear the
following legend:
"The securities represented hereby have not
been registered under the Securities Act of
1933, as amended (the "Act"), or the laws of
any state. They may not be sold, offered for
sale, pledged, hypothecated, or otherwise
transferred except pursuant to an effective
registration statement under the Act or an
opinion of counsel satisfactory to the
Company that registration is not required
under such Act or unless sold pursuant to
Rule 144 under such Act."
13. California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT
BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR
SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION
BY SECTION_25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
14. Conditions of Holders' Obligations at Closing. The
obligations of each Holder under Section_1 of this Agreement
are subject to the fulfillment on or before the Closing of
each of the following conditions, the waiver of which shall
not be effective against any Holder who does not consent
thereto:
15. Representations and Warranties. The representations and
warranties of the Company contained in Section_3 shall be
true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as
of the date of such Closing.
16. Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied
with by it on or before the Closing.
17. Qualifications. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of
the United States or of any state that are required in
connection with the lawful issuance of the Securities
pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
18. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Holder under this
Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions by that Holder:
19. Representations and Warranties. The representations and
warranties of the Holders contained in Section_4 shall be
true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as
of such Closing.
20. Qualifications. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of
the United States or of any state that are required in
connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained
and effective as of the Closing.
Miscellaneous.
21. Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
22. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as
applied to agreements among California residents, made and
to be performed entirely within the State of California.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
24. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
25. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and
shall be deemed effectively given upon personal delivery to
the party to be notified, by confirmed facsimile
transmission to the party to be notified or upon deposit
with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to such party
at the address set forth on Exhibit A hereto, or at such
other address as such party may designate by ten (10) days'
advance written notice to the other parties.
26. Finder's Fee. Each party represents that it neither is or
will be obligated for any finder's fee or commission in
connection with this transaction. Holder agrees to
indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature
of a finder's fee (and the costs and expenses of defending
against such liability or asserted liability) for which
Holder or any of its officers, partners, employees, or
representatives is responsible.
The Company agrees to indemnify and hold harmless
Holder from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which
the Company or any of its officers, employees, or representatives
is responsible.
27. Expenses. The Company shall pay the costs and expenses that
it incurs, and will pay the reasonable fees and expenses of
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx,
LLP, counsel to the Investors, with respect to the
negotiation, execution, delivery and performance of this
Agreement, not to exceed $5,000.
28. Entire Agreement; Amendments and Waivers. This Agreement
constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof. Any
term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and
the Holders of twothirds in principal amount of the New
Notes (or the Common Stock issuable upon conversion of the
New Notes). Any waiver or amendment effected in accordance
with this Section shall be binding upon each holder of any
securities issued under this Agreement at the time
outstanding (including securities into which such securities
have been converted), each future holder of all such
securities, and the Company.
29. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in
accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
VANGUARD AIRLINES, INC.
By:
Title:
Address:
HOLDERS:
X.X. Xxxx Co., Inc.,
as Nominee 1998-19
By:
Title:
The Xxxxxxxxx 1980 Revocable Trust
By:
Title:
Xxxxxxxxx & Xxxxx California
By:
Title:
H&Q TSP II Investors, L.P.
By:
Title:
EXHIBIT A
SCHEDULE OF HOLDERS
Name and Address Principal Amount of New Note
X.X. Xxxx Co., Inc.,
as Nominee 1998-19 $2,276,682.99
Attn: Xxxxxx X. Xxxx, Xx.
X.X. Xxxx Co., Inc.
000 Xxxx Xxxxxx Xxxx, Xxxxx 0
Xxxxxx Xxxxxx, XX 00000
The Xxxxxxxxx 1980 Revocable Trust $3,328,528.00
Attn: Xxxxxxx X. Xxxxxxxxx
X.X. Xxxxxxxxx
000 00xx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Xxxxxxxxx & Xxxxx California $4,603,664.31
Attn: Xxxxxxx Xxxxx
Xxxxxxxxx & Xxxxx, LLC
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
H&Q TSP II Investors, L.P. $216,999.82
Attn: Xxxxxxx Xxxxx
Xxxxxxxxx & Xxxxx, LLC
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
EXHIBIT B
Existing NOTES
Name of Holder Date of Existing Notes Principal Amount
X.X. Xxxx Co., Inc. September 11, 1997 $ 90,000
September 19, 1997 $150,000
October 6, 1997 $600,000
October 14, 1997 $240,000
October 23, 1997 $172,500
November 6, 1997 $300,000
November 13, 1997 $300,000
November 25, 1997 $150,000
December 10, 1997 $ 29,891
The Xxxxxxxxx 1980 August 21, 1997 $240,000
Revocable Trust
August 22, 1997 $150,000
September 4, 1997 $720,000
September 11, 1997 $ 38,246
September 19, 1997 $150,000
October 6, 1997 $600,000
October 14, 1997 $240,000
October 23, 1997 $172,500
November 6, 1997 $300,000
November 13, 1997 $300,000
November 25, 1997 $150,000
Xxxxxxxxx & Xxxxx September 4, 1997 $583,783.50
California
September 11, 1997 $1,120,000
September 19, 1997 $200,000
October 6, 1997 $800,000
October 14, 1997 $320,000
October 23, 1997 $230,000
November 6, 1997 $400,000
November 13, 1997 $400,000
November 25, 1997 $200,000
H&Q TSP II May 29, 1997 $120,820.50
Investors, L.P.
EXHIBIT C
FORM OF NEW NOTE
