EXECUTION COPY
ESCROW AGREEMENT
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This Escrow Agreement (the "Escrow Agreement"), made and entered into this
29th day of September, 2003, by and among Midwest Express Holdings, Inc., a
Wisconsin corporation ("Holdings"), Midwest Airlines, Inc., a Wisconsin
corporation ("Midwest"), Skyway Airlines, Inc., a Delaware corporation
("Skyway"), YX Properties, LLC, a Nebraska limited liability company ("YX," and
together with Midwest and Skyway, the "Co-Borrowers"), the parties identified as
Noteholders on the signature pages hereto (collectively, the "Noteholders"), and
Xxxxxx X. Xxxxx & Co. Incorporated (the "Escrow Agent").
RECITALS
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WHEREAS, Holdings, Co-Borrowers and the Noteholders have entered into that
certain Securities Purchase Agreement dated as of September 29, 2003 (the
"Securities Purchase Agreement"), providing for the issuance and sale by
Holdings and Co-Borrowers of $25,000,000 principal amount of 6.75% Convertible
Senior Secured Notes due October 1, 2008 (the "Notes");
WHEREAS, Holdings, Co-Borrowers and the Noteholders intend that the
obligations of Holdings and Co-Borrowers under the Notes are to be secured
pursuant to the terms of a Security Agreement dated as of September 29, 2003
(the "Security Agreement") among Holdings, Co-Borrowers, SF Capital Partners,
Ltd. (as Collateral Agent for the Noteholders) and the Noteholders and pursuant
to the terms of a Mortgage dated as of September 29, 2003 (the "Mortgage") by
Skyway to SF Capital Partners, Ltd., as agent for the benefit of the
Noteholders; and
WHEREAS, pursuant to the Securities Purchase Agreement, Holdings,
Co-Borrowers and the Noteholders wish the Escrow Agent to serve as escrow agent
on the terms and conditions provided below.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and obligations contained herein, Holdings, Co-Borrowers, the
Noteholders and the Escrow Agent agree as follows:
1. Holdings, Co-Borrowers and the Noteholders appoint the Escrow Agent as
their escrow agent for the following purposes:
(a) to hold, pursuant to this Escrow Agreement: (i) the Security
Agreement; (ii) the Mortgage; (iii) Notes in the aggregate principal
amount of $15,000,000; (iv) the Registration Rights Agreement dated as
of September 29, 2003 among Holdings and the Noteholders; (v) all
UCC-1 financing statements and Federal Aviation Administration lien
registration statements; and (vi) all other documents or deliveries in
connection with the First Closing (as defined in Section 8.20 of the
Securities Purchase Agreement) other than the Securities Purchase
Agreement and this Escrow Agreement (the "First Closing Deliveries");
(b) to hold, pursuant to this Escrow Agreement, $15,000,000 and any
accumulated interest and other earnings thereon (the "Escrowed
Funds"); and
(c) to invest and reinvest the Escrowed Funds, as instructed in writing by
Holdings, in:
(i) marketable obligations of the United States having a maturity of
not more than one year from the date of acquisition;
(ii) marketable obligations directly and fully guaranteed by the
United States having a maturity of not more than one year from
the date of acquisition;
(iii) bankers' acceptances and certificates of deposit and other
interest-bearing obligations issued by any bank organized under
the laws of the United States or any state thereof with capital,
surplus and undivided profits aggregating at least $100,000,000,
in each case having a maturity of not more than one year from the
date of acquisition;
(iv) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (i), (ii)
and (iii) entered into with any bank of the type described in
clause (iii) above; or
(v) commercial paper rated A-1 or the equivalent thereof by Standard
& Poor's Corporation or P-1 or the equivalent thereof by Xxxxx'x
Investors Service, Inc.
In the absence of any such written instructions from Holdings, the
Escrowed Funds shall be invested in the General Treasury Prime Money
Market Fund, Inc. Class B. Notwithstanding the references in this
Escrow Agreement to the Securities Purchase Agreement, Holdings,
Co-Borrowers and the Noteholders acknowledge that, subject to Section
2.12 of the Securities Purchase Agreement, the Escrow Agent is neither
party to the Securities Purchase Agreement for any purpose nor
responsible for its interpretation or enforcement.
2. The Escrow Agent shall deliver the Escrowed Funds and the First Closing
Deliveries as follows:
(a) Escrowed Funds and one executed set of the First Closing Deliveries to
Holdings, and one executed set of the First Closing Deliveries to each
Noteholder (provided, however, that any Note shall be delivered only
to the applicable Noteholder), promptly upon receipt of a certificate
dated not more than ten calendar days prior to such receipt, referring
to this Escrow Agreement and stating that:
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(i) the signatory is a duly authorized officer of Holdings;
(ii) The collateral agent for the benefit of the Noteholders under the
Security Agreement and the Mortgage (the "Collateral Agent")
shall receive, upon release of the First Closing Deliveries and
the making of any appropriate filings and recordings, a valid and
perfected security interest in the Collateral (as defined in the
Security Agreement) in accordance with all of the terms and
conditions of the Security Agreement, and a valid mortgage lien
on the Premises (as defined in the Mortgage), free and clear of
all mortgages, deeds of trust, liens, security interests and
other charges or encumbrances except Permitted Liens (as defined
in the Security Agreement) and, in the case of the Mortgage,
matters of record; and
(iii) the Noteholders shall each receive, upon release of the First
Closing Deliveries (and making of appropriate recordings with the
Federal Aviation Administration), an opinion rendered by
Daugherty, Fowler, Peregrin & Xxxxxx in the form attached to the
Securities Purchase Agreement as Exhibit C and addressed to the
Noteholders (the "Aviation Opinion"); or
(b) If a Noteholder Waiver Trigger (as defined below) occurs with respect
to any Noteholder, then:
(i) Escrowed Funds in proportion to the Distribution Percentage (set
forth on the appropriate signature page hereto) allocable to such
Noteholder (including all interest and other earnings thereon)
shall be delivered to Holdings;
(ii) one set of First Closing Deliveries, other than the Security
Agreement, executed or delivered by such Noteholder (including
one signature counterpart of each executed by such Noteholder)
shall be delivered to Holdings; and
(iii) one set of First Closing Deliveries, other than the Security
Agreement, Mortgage and any related financing statements or
filing documents, executed or delivered by Holdings or any
Co-Borrower (including one signature counterpart of each executed
by Holdings or any Co-Borrower) shall be delivered to such
Noteholder; or
(c) If a Noteholder Return Trigger or Company Return Trigger (as such
terms are defined below) occurs with respect to any Noteholder, then:
(i) Escrowed Funds in proportion to the Distribution Percentage (set
forth on the appropriate signature page hereto) allocable to such
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Noteholder (including all interest and other earnings thereon)
shall be delivered to each such Noteholder;
(ii) all First Closing Deliveries and signature counterparts thereto
delivered or executed by such Noteholder shall be delivered to
such Noteholder; and
(iii) all remaining First Closing Deliveries and signature
counterparts thereto delivered or executed by Holdings, Midwest,
Skyway or YX shall be delivered to Holdings; or
(d) If Escrow Agent receives written evidence that Holdings or any
Co-Borrower has filed a voluntary petition under, or is subject to an
order for relief pursuant to, Title 11 of the United States Code,
then:
(i) all Escrowed Funds (including all interest and other earnings
thereon) shall be delivered to the Noteholders whose Escrowed
Funds have not yet been released to Holdings, pro rata in
proportion to their respective Distribution Percentages (set
forth on the appropriate signature page hereto);
(ii) all First Closing Deliveries and signature counterparts thereto
delivered or executed by any Noteholder shall be delivered to
such Noteholder; and
(iii) all remaining First Closing Deliveries and signature
counterparts thereto delivered or executed by Holdings, Midwest,
Skyway or YX shall be delivered to Holdings.
3. (a) A "Noteholder Waiver Trigger", with respect to any Noteholder, shall
occur on the first date, if any, on which each of the following is true: (i) the
certificate of Holdings referred to in Section 2(a) above has not been delivered
to the Escrow Agent, (ii) a Company Return Trigger has not occurred with respect
to such Noteholder and (iii) the Escrow Agent has received from such Noteholder
a certificate, dated not more than ten calendar days prior to such receipt,
referring to this Escrow Agreement and stating that (A) the signatory is a duly
authorized officer of such Noteholder and (B) such Noteholder has elected to
release its Escrowed Funds (and all interest and other earnings thereon
allocable to such Noteholder) to Holdings notwithstanding that the certificate
of Holdings referred to in Section 2(a) above has not been delivered to the
Escrow Agent.
(b) A "Noteholder Return Trigger", with respect to any Noteholder, shall
occur on the first date, if any, after November 30, 2003 on which each of the
following is true: (i) the certificate of Holdings referred to in Section 2(a)
above has not been delivered to the Escrow Agent, (ii) a Company Return Trigger
has not occurred with respect to such Noteholder and (iii) the Escrow Agent has
received from such Noteholder a certificate, dated not more than ten calendar
days prior to such receipt, referring to this Escrow Agreement and stating that
(A) the signatory is a duly authorized officer of such Noteholder and (B) such
Noteholder has elected to terminate the Securities Purchase Agreement as to such
Noteholder.
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(c) A "Company Return Trigger", with respect to any Noteholder, shall occur
on the first date, if any, on or after December 31, 2003 on which each of the
following is true: (i) a Noteholder Waiver Trigger has not occurred with respect
to such Noteholder and (ii) the Escrow Agent has received from Holdings a
certificate dated not more than ten calendar days prior to such receipt,
referring to this Escrow Agreement and such Noteholder and stating that (A) the
signatory is a duly authorized officer of Holdings, (B) Holdings has elected to
terminate the Securities Purchase Agreement as to such Noteholder and (C)
Holdings has given notice to such Noteholder (a copy of which notice has been
provided to the Escrow Agent) of Holdings' election to terminate the Securities
Purchase Agreement as to such Noteholder and at least six business days have
elapsed since the date on which such notice was received or deemed received
pursuant to the notice provisions of the Securities Purchase Agreement.
4. Escrowed Funds that have not been released to Holdings pursuant to
Section 2(a) or (b) above shall be and remain the property of the Noteholders as
to which Escrowed Funds have not been released (according to their respective
interests), subject to the terms of this Escrow Agreement. Subject to the next
sentence, First Closing Deliveries deposited with the Escrow Agent by any party
and not released pursuant to Section 2(a) or (b) shall not be deemed to have
been delivered to any other party. Notwithstanding the foregoing, those
provisions (and only those provisions) of the Security Agreement appointing the
Collateral Agent and providing for the rights, responsibilities and replacement
of the Collateral Agent shall be effective as of the date of this Escrow
Agreement as if the Security Agreement had been delivered by each of the parties
thereto to each of the other parties thereto. No person may give any notice,
instruction or direction to exercise any right of conversion under any Note that
has not been released pursuant to Section 2(a) or (b).
5. The Escrow Agent hereby accepts its obligations under this Escrow
Agreement and represents that it has the corporate power and legal authority to
enter into this Escrow Agreement and perform its obligations hereunder. The
Escrow Agent further agrees that all property held by the Escrow Agent hereunder
shall be segregated from all other property held by the Escrow Agent and shall
be identified as being held in connection with this Escrow Agreement.
Segregation may be accomplished by appropriate identification on the books and
records of the Escrow Agent. The Escrow Agent agrees that its documents and
records with respect to the transactions contemplated hereby will be available
upon prior written request for examination by authorized representatives of
Holdings, Co-Borrowers and the Noteholders during regular business hours.
6. The Escrow Agent shall be entitled to receive from Holdings, from time
to time, reimbursement for any reasonable costs and expenses incurred by it
under this Escrow Agreement. The Escrow Agent shall not have a lien upon, or any
other right whatsoever to payment from, the Escrowed Funds held hereunder by the
Escrow Agent, for or on account of such right to payment and reimbursement or
otherwise.
7. The Escrow Agent shall not have any duties or responsibilities hereunder
except as expressly set forth herein and shall have no responsibility for
ascertaining or taking any action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to the Escrowed Funds, other than
investments made by it pursuant to Section 1(c) above, whether or not the Escrow
Agent has or is deemed to have knowledge or notice of such matters,
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or taking any steps to preserve rights against any parties with respect to any
Escrowed Funds. The Escrow Agent is not responsible in any manner whatsoever for
any failure or inability of any party other than the Escrow Agent to honor any
of the provisions of this Escrow Agreement. The Escrow Agent may consult with,
and obtain advice from, legal counsel in the event of any dispute under, or
concerning the construction of any of the provisions of or any of the Escrow
Agent's duties under, this Escrow Agreement, and the Escrow Agent will incur no
liability and will be fully protected in acting and refraining from acting in
good faith in accordance with the opinion and instruction of such counsel.
8. The Escrow Agent shall be entitled to rely upon any notice, certificate,
affidavit, letter, document or other communication which is believed by the
Escrow Agent to be genuine and to have been signed or sent by the proper party
or parties, and may rely on statements contained therein without further inquiry
or investigation. The Escrow Agent shall not be deemed to have notice of or
knowledge about any matter unless provided in writing in accordance with Section
14 of this Escrow Agreement.
9. The Escrow Agent shall not be liable for any action taken in accordance
with the terms of this Escrow Agreement, including without limitation, any
investment made in accordance with Section 1(c) or release in accordance with
Section 2. The Escrow Agent shall not be liable for any other action or failure
to act under or in connection with this Escrow Agreement, except for its own
gross negligence or willful misconduct.
10. In the event that any escrow property shall be attached, garnished or
levied upon by any court order, or the delivery thereof shall be stayed or
enjoined by an order of a court, or any order, judgment or decree shall be made
or entered by any court order affecting the property deposited under this
Agreement, the Escrow Agent is hereby expressly authorized, in its sole
discretion exercised in good faith, to obey and comply with all writs, orders or
decrees so entered or issued, which it is advised by legal counsel of its own
choosing are binding upon it, and in the event that the Escrow Agent in good
faith obeys or complies with any such writ, order or decree it shall not be
liable to any of the parties hereto or to any other person, firm or corporation,
by reason of such compliance, notwithstanding that such writ, order or decree
may be subsequently reversed, modified, annulled, set aside or vacated.
11. In the event of any disagreement between Holdings or Co-Borrowers and
the Noteholders, or any other person, resulting in an adverse claim to the
Escrowed Funds or First Closing Deliveries, the Escrow Agent shall be entitled
at its option to refuse to comply with any such claim and shall not be liable
for damages or interest to any such person or persons for its failure to comply
with such adverse claims; and the Escrow Agent shall be entitled to continue to
so refrain until:
(a) The rights of the adverse claimants shall have been finally
adjudicated by a court of competent jurisdiction; or
(b) All differences are settled and the Escrow Agent has received a notice
to that effect signed by all interested persons.
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In the event of such disagreement, the Escrow Agent in its discretion may file a
suit in interpleader for the purpose of having the respective rights of the
claimants of such funds or other property adjudicated.
12. Holdings and Co-Borrowers, and each of them, hereby agree to indemnify
the Escrow Agent, and hold the Escrow Agent harmless, from and against any and
all claims, costs, expenses, demands, judgments, losses, damages and
liabilities, including without limitation reasonable attorneys' fees and
disbursements, arising out of or in connection with this Escrow Agreement or any
action or failure to act by the Escrow Agent under or in connection with this
Escrow Agreement, including without limitation any action brought by the Escrow
Agent pursuant to Section 11 above, except such as may be caused by the gross
negligence or willful misconduct of the Escrow Agent.
13. The Escrow Agent (in this Section, the "Existing Escrow Agent") may at
any time resign by giving written notice of such resignation to Holdings and the
Noteholders, and such resignation shall be effective 30 calendar days following
the date such notice is given. If any such resignation of the Existing Escrow
Agent shall occur, a successor Escrow Agent (the "Successor Escrow Agent") will
be appointed by Holdings and the Noteholders. Any such Successor Escrow Agent
shall deliver to Holdings and the Noteholders a written instrument accepting
such appointment and upon such delivery will succeed to all rights and duties of
the Existing Escrow Agent under this Escrow Agreement (and shall be deemed to be
the "Escrow Agent" for all purposes of this Escrow Agreement) and will be
entitled to receive from the Existing Escrow Agreement the Escrowed Funds (and
any earnings thereon) and the First Closing Deliveries, to hold pursuant to this
Escrow Agreement, upon which receipt the Existing Escrow Agent shall have no
further obligation under this Escrow Agreement. If Holdings and the Noteholders
are unable to agree upon a Successor Escrow Agent or have failed to appoint a
Successor Escrow Agent prior to the expiration of 30 calendar days following the
date of the notice of resignation, the Existing Escrow Agent shall petition any
court of competent jurisdiction for the appointment of a Successor Escrow Agent
or other appropriate relief, and any such resulting appointment will be binding
upon all parties to this Escrow Agreement. Upon acknowledgment by any Successor
Escrow Agent of receipt of the Escrowed Funds (including any earnings thereon)
and the First Closing Deliveries, the Existing Escrow Agent will be fully
relieved of all duties, responsibilities and obligations under this Escrow
Agreement, except with respect to actions previously taken or omitted to be
taken by the Existing Escrow Agent.
14. All communications or notices required under this Escrow Agreement
shall be deemed to have been given on the date when deposited in the United
States mail, postage prepaid, and addressed as follows:
(a) if to Holdings:
0000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Attn: Chief Financial Officer
with a copy to:
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0000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Attn: General Counsel
(b) if to the Noteholders:
SF Capital Partners Ltd.
0000 Xxxxx Xxxx Xxxxx
Xxxxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx; and
Xxxxxxx Xxxxx & Company, L.L.C
000 Xxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
(c) if to the Escrow Agent:
Xxxxxx X. Xxxxx & Co. Incorporated
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx
15. This Escrow Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
16. This Escrow Agreement shall be governed by, and be construed and
interpreted in accordance with, the internal laws of the State of New York,
without any reference to principles of conflict of law.
17. This Escrow Agreement may be entered into in any number of counterparts
to include facsimile, each of which shall be deemed to be an original and all of
which taken together shall constitute one and the same Escrow Agreement.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
or caused this Escrow Agreement to be executed and delivered by their duly
authorized officers on the date first above written.
MIDWEST EXPRESS HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
MIDWEST AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
SKYWAY AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
YX PROPERTIES, LLC
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: President
[SIGNATURE PAGES OF NOTEHOLDERS OMITTED]
NOTEHOLDER
[NAME OF NOTEHOLDER]
By:
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Name:
Title:
Distribution Percentage:
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XXXXXX X. XXXXX & CO. INCORPORATED
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Director, Private Placement Group
