Exhibit 10.19.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR
CERTAIN PORTIONS OF THIS DOCUMENT. CONFIDENTIAL
PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
THE WARRANT ISSUED PURSUANT TO THIS PARTICIPATION WARRANT HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. IT MAY
NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO
EFFECTUATE SUCH TRANSACTION.
PARTICIPATION WARRANT AGREEMENT
To Purchase Shares of Common Stock
Dated as of August 31, 1998
XXXXXXXXX.XXX INCORPORATED
a Delaware Corporation
Issue Date: August 31, 1998
THIS CERTIFIES THAT, Delta Air Lines, Inc. (the "Warrant
Holder"), with a place of business at 0000 Xxxxx Xxxxxxxxx, Xxxxxxxxxx Xxxxxxx
International Airport, Xxxxxxx, Xxxxxxx 00000, for value received, is entitled,
upon the terms and subject to the conditions of this Participation Warrant
Agreement (this "Warrant Agreement"), to subscribe for and purchase fully-paid
and non-assessable shares of common stock, par value $.01 per share (the "Common
Stock"), of Xxxxxxxxx.xxx Incorporated, a Delaware corporation (the "Company").
1. ISSUANCE OF WARRANTS. On the Issue Date, the Company will issue to the
Warrant Holder warrants (the "Warrants") to acquire Fifteen Million One Hundred
Fourteen Thousand and Eighty-Three (15,114,083) shares of the Common Stock (the
"Shares"), subject to adjustment as hereinafter provided pursuant to Section 10
herein, which Shares, when issued on a proforma basis, represent 12.5% of the
Fully Diluted Equity (as defined below) of the Company as of the date hereof. As
used in this Warrant Agreement, the term "Fully Diluted Equity" of the Company
shall mean the sum of (i) the number of shares of Common Stock issued and
outstanding as of the date of this Warrant Agreement, (ii) assuming the full
conversion of all Series A Convertible Preferred Stock, par value $.01 per share
(the "Convertible Preferred"), issued and outstanding as of the date of this
Warrant Agreement, the number of shares of Common Stock issuable upon conversion
of such Convertible Preferred, and (iii) assuming the full vesting and exercise
of all options and warrants granted or issued by the Company outstanding as of
the date of this Warrant Agreement to acquire shares of its Common Stock, the
number of shares of Common Stock issuable upon such vesting and exercise. The
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number of Shares subject to the Warrants shall be reduced at the time of the
effectiveness of an initial registration statement covering Common Stock filed
with the Securities and Exchange Commission to take into account the effect of
the treasury stock method of accounting for stock options and warrants. The
amount of such reduction shall be equal to the product of (i) the quotient of
(x) the aggregate exercise price of all the Company stock options and warrants
(including the Warrants), divided by (y) the greater of $5.00 or the public
offering price per share of such offering, multiplied by (ii) .125.
2. EXERCISE PRICE. The Warrants have an exercise price of $1.156862 per share of
Common Stock, as adjusted pursuant to the provisions of Section 10 of this
Warrant Agreement (the "Exercise Price").
3. TERM. Except as otherwise provided for herein, the term of the Warrants and
the right to purchase Shares as granted herein shall be exercisable, at any time
and from time to time, during the period commencing on the Issue Date set forth
above and terminating at 5:00 p.m. New York City local time on the seventh
anniversary of the Issue Date, PROVIDED, HOWEVER, that if the Company has not
completed an initial public offering of shares of Common Stock of the Company
pursuant to an effective Registration Statement under the Securities Act of
1933, as amended ("IPO"), prior to such termination date, then the term of the
Warrants shall be extended on a year to year basis until such time as the
Company has completed its IPO.
4. VESTING.
a. VESTING OF THE FIRST 5% OF EQUITY. The Warrants will begin
to vest when the Company has sold at least $30 million (the "Base Amount") of
tickets issued for travel on the Warrant Holder and/or on the Warrant Holder's
code share partners (such amount being measured by the amount paid by the
Company to the Warrant Holder and its code share partners net of federal excise
taxes on such amount) ("Net Fares") during the period beginning the date hereof
and ending on December 31, 1999 or during calendar years 2000 or 2001 (each, a
"Measuring Period"). The Warrant Holder will earn the right to exercise Warrants
to acquire 1,511,408.25 Shares, subject to adjustment as hereinafter provided
pursuant to Section 10 herein (which Shares, when issued on a proforma basis,
represent approximately 1.25% of the Fully Diluted Equity of the Company as of
the date hereof), for each $5 million in Net Fares over the Base Amount during
each applicable Measuring Period up to a maximum of $50 million in Net Fares, at
which point the Warrant Holder will have earned the right to exercise Warrants
to acquire 6,045,633 Shares (which Shares, when issued on a proforma basis,
represent approximately 5% of the Fully Diluted Equity of the Company as of the
date hereof).
b. VESTING OF NEXT 1.25% OF EQUITY. After the Warrant Holder
has achieved $50 million in Net Fares during any applicable Measuring Period,
the Warrant Holder will earn the right to exercise Warrants to acquire up to an
additional 1,511,409 Shares, subject to adjustment as hereinafter provided
pursuant to Section 10 herein (which Shares, when issued on a proforma basis,
represent approximately 1.25% of the Fully Diluted Equity of the Company as of
the date hereof), for the next $22.5 million in Net Fares during such Measuring
Period. The actual number of Shares the Warrant Holder will earn shall be a
number equal to the product of (a) 1,511,409 Shares, multiplied by
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(b) a fraction, the numerator of which shall be Net Fares during a Measuring
Period over $50 million (up to a maximum of $22.5 million) and the denominator
of which shall be $22.5 million.
c. VESTING OF REMAINING 6.25% OF EQUITY. After the Warrant
Holder has achieved $72.5 million in Net Fares during any applicable Measuring
Period, the Warrant Holder will earn the right to exercise Warrants to acquire
up to an additional 7,557,041 Shares, subject to adjustment as hereinafter
provided pursuant to Section 10 herein (which Shares, when issued on a proforma
basis, represent approximately 6.25% of the Fully Diluted Equity of the Company
as of the date hereof), based on the Qualified Ticket Volume (as defined below)
of sales thereafter achieved. The actual number of Shares the Warrant Holder
will earn shall be a number equal to the product of (a) 7,557,041 Shares
(subject to adjustment as set forth in Section 10 herein) multiplied by (a) a
fraction the numerator of which shall be the actual Qualified Ticket Volume so
achieved during the applicable Measurement Period and the denominator of which
shall be $112.5 million. As used herein, the term "Qualifying Ticket Volume"
shall mean the Net Fares derived from ticket sales on the Warrant Holder and/or
its code share partners on which the Company earns a Gross Margin (as defined
below) of at least [**]; PROVIDED, HOWEVER, that if the Company's total Gross
Margin on such ticket sales during such applicable Measuring Period is greater
than or equal to [**], then all such ticket sales during such Measuring Period
will be deemed to be Qualifying Ticket Volume. As used herein, the term "Gross
Margin" on a ticket sale shall mean the number equal to (for each ticket sale)
100 times the quotient of (a) the price paid by the customer to the Company for
the ticket, less credit card charges incurred by the Company and less the Net
Fares paid by the Company to the Warrant Holder, divided by (b) the price paid
by the customer to the Company for the ticket.
d. ADJUSTMENT OF THRESHOLDS. The $22.5 million and $72.5
million thresholds used in the calculations set forth in Sections 4(b) and 4(c)
above (the "Thresholds") for any Measuring Period will be adjusted for such
applicable Measuring Period and for subsequent Measuring Periods, if any, in the
event that an airline, not presently participating in the Company' airline
service, commences participation at any time during such applicable Measuring
Period, and such additional carrier has a domestic market share of at least 5%
at the time of its initial participation (an "Adjustment Event"). Upon the
occurrence of an Adjustment Event, each of the Thresholds will be adjusted by
multiplying each such number by a fraction, the denominator of which shall be
the sum of the Warrant Holder's domestic market share and the aggregate domestic
market share of the new additional carrier and all other carriers participating
in the Company's airline service, and the numerator of which shall be Warrant
Holder's domestic market share. All market share data required by this Section
4(d) shall be based on U.S. domestic revenue passenger miles as reported by the
Department of Transportation on Form 41 for the twelve (12) month period
immediately prior to the time of the Adjustment Event. The resulting numbers
shall be the adjusted Thresholds. The Thresholds as set forth herein shall be
adjusted each time, if any, that an additional carrier meeting the 5% domestic
market share criteria commences participation in the Company's airline service.
e. MEASURING PERIODS SEPARATE NOT CUMULATIVE. Net Fares and
Qualifying Ticket Volume during each Measuring Period will be measured
separately, not cumulatively. For example, if the Warrant Holder has Net Fares
of $40 million during the first Measuring Period and Net Fares of $45 million
during the second Measuring Period, then the Warrant Holder will earn the right
to exercise Warrants for 2.5% of the Fully Diluted Equity at the end of the
First Measuring Period and
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the right to exercise Warrants for an additional 1.25% of the Fully Diluted
Equity at the end of the second Measuring Period. As a further example, if the
Warrant Holder has Net Fares of $72.5 million during the first Measuring Period,
Qualifying Ticket Volume of $36 million during the second Measuring Period (so
that the sum of Net Fares and Qualifying Ticket Volume during the second
Measuring Period is $108.5 million) and Qualifying Ticket Volume of $54 million
during the third Measuring Period (so that the sum of Net Fares and Qualifying
Ticket Volume during the third Measuring Period is $126.5 million), then the
Warrant Holder will have earned the right to exercise Warrants covering 6.25% of
the Fully Diluted Equity at the end of the first Measuring Period an additional
2% of the Fully Diluted Equity at the end of the second Measuring Period and an
additional 1% of the Fully Diluted Equity at the end of the third Measuring
Period, for an aggregate of 9.25% of the Fully Diluted Equity. For purposes of
these examples, it is assumed that neither an Adjustment Event nor any
adjustment pursuant to Section 10 hereof has occurred.
5. CALL UNDER CERTAIN CONDITIONS. The Company will have the right under certain
conditions to repurchase Warrants to acquire up to 7,557,041 Shares or the
equivalent number of Shares if such Warrants have been exercised, subject to
adjustment as hereinafter provided pursuant to Section 10 herein (which Shares,
when issued on a proforma basis, represent approximately 6.25% of the Fully
Diluted Equity of the Company as of the date hereof), in the event that the
conditions under Sections 5(a) and 5(b) below are met.
a. FIRST CALL. In the event that Qualified Ticket Volume
during the second Measurement Period is less than Qualified Ticket Volume during
the first Measurement Period, then the Company will have a call on that number
of Warrants calculated as follows. First, the amount of equity that the Warrant
Holder would have received, had the calculations made in Section 4(c) been made
as though the Qualifying Ticket Volume in each of the first and second
Measurement Periods had been based on the two-year average of the Qualified
Ticket Volume from such periods, will be calculated (the "First Two Year Equity
Amount"). Then, if the amount of equity the Warrant Holder has actually earned
exceeds the First Two Year Equity Amount, the Company will have a call on the
amount of such excess at the Warrant Holder's cost; PROVIDED, HOWEVER, that the
right to exercise Warrants to acquire the first 7,557,041 of Shares, subject to
adjustment as hereinafter provided pursuant to Section 10 herein, and the
underlying Shares therefor (which Shares, when issued on a proforma basis,
represent approximately 6.25% of the Fully Diluted Equity of the Company as of
the date hereof) earned by the Warrant Holder will not be subject to such call.
b. SECOND CALL. In the event that Qualified Ticket Volume
during the third Measurement Period is less than Qualified Ticket Volume during
the second Measurement Period, then the Company will have a call on that number
of Warrants calculated as follows. First, the amount of equity that the Warrant
Holder would have received, had the calculations made in Section 4(c) been made
as though the Qualifying Ticket Volume in each of the second and third
Measurement Periods had been based on the two-year average of the Qualified
Ticket Volume from such periods, will be calculated (the "Second Two Year Equity
Amount"). Then, if the amount of equity the Warrant Holder has actually earned
(if any), net of any Warrants subject to the call set forth in Section 5(a)
above, exceeds the Second Two Year Equity Amount, the Company will have a call
on the amount of such excess at the Warrant Holder's cost; PROVIDED, HOWEVER,
that the right to exercise Warrants to acquire the first 7,557,041 of Shares,
subject to adjustment as hereinafter provided pursuant to Section
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10 herein, and the underlying Shares therefor (which Shares, when issued on a
proforma basis, represent approximately 6.25% of the Fully Diluted Equity of the
Company as of the date hereof) earned by the Warrant Holder will not be subject
to such call.
6. EXERCISE OF PURCHASE RIGHTS.
a. EXERCISE. Subject to the provisions of Section 4 of this
Warrant Agreement, the purchase rights represented by this Warrant Agreement are
exercisable by the Warrant Holder, in whole or in part, at any time, or from
time to time during the period set forth in Section 3 above, by tendering to the
Company at its principal office: a duly completed and executed notice of
exercise in the form attached hereto as EXHIBIT A (the "Notice of Exercise"),
the Warrants and the Exercise Price. Upon receipt of such items in accordance
with the terms set forth below, the Company shall issue to the Warrant Holder a
certificate for the number of shares of Common Stock purchased. The Warrant
Holder, upon exercise of the Warrants, shall be deemed to have become the holder
of the Shares represented thereby (and such Shares shall be deemed to have been
issued) immediately prior to the close of business on the date or dates upon
which the Warrants are exercised. In the event of any exercise of the rights
represented by the Warrants, certificates for the Shares so purchased shall be
delivered to the Warrant Holder or its designee as soon as practical and in any
event within ten (10) business days after receipt of such notice and, unless the
Warrants have been fully exercised or expired, new Warrants representing the
remaining portion of the Warrants and the underlying Shares, if any, with
respect to which this Warrant Agreement shall not then have been exercised shall
also be issued to the Warrant Holder as soon as possible and in any event within
such ten-day period.
b. METHOD OF EXERCISE. The purchase rights hereby represented
may be exercised, at the election of the Warrant Holder, by the tender of the
Notice of Exercise and the surrender of this Warrant Agreement at the principal
office of the Company and by the payment to the Company, by check, cancellation
of indebtedness or other form of payment acceptable to the Company, of an amount
equal to the then applicable Exercise Price per share multiplied by the number
of Shares then being purchased.
7. RESERVATION OF SHARES. The Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock to provide for the
exercise of the rights to purchase the Shares as provided in this Warrant
Agreement. All of the Shares shall be duly authorized and, when issued upon such
exercise, shall be validly issued, fully paid and nonassessable, and free and
clear of all preemptive rights.
8. NO FRACTIONAL SHARES. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of the Warrant Holder's rights to
purchase the Shares.
9. NO RIGHTS AS SHAREHOLDER. This Warrant Agreement does not entitle the Warrant
Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise of the Warrant Holder's rights to purchase the Shares as
provided for herein.
10. ADJUSTMENT RIGHTS. The Exercise Price and the number of shares of Common
Stock purchasable hereunder are subject to adjustment from time to time, as
follows:
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a. MERGER. If at any time there shall be a merger or
consolidation of the Company with or into another corporation when the Company
is not the surviving corporation, then, as part of such merger or consolidation,
lawful provision shall be made so that the holder of the Warrants evidenced
hereby shall thereafter be entitled to receive upon exercise of rights herein
granted, during the period specified herein and upon payment of the aggregate
Exercise Price, the number of shares of stock or other securities or property of
the successor corporation resulting from such merger or consolidation, to which
a holder of the stock deliverable upon exercise of the rights granted in this
Warrant Agreement would have been entitled in such merger or consolidation if
such rights had been exercised immediately before such merger or consolidation.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Warrant Agreement with respect to the rights and interests of
the holder after the merger or consolidation.
b. RECLASSIFICATION, ETC. If the Company at any time shall, by
subdivision, combination or reclassification of securities or otherwise, change
any of the securities as to which purchase rights under this Warrant Agreement
exist into the same or a different number of securities of any other class or
classes, this Warrant Agreement shall thereafter represent the right to acquire
such number and kind of securities as would have been issuable as the result of
such change with respect to the securities which were subject to the purchase
rights under this Warrant Agreement immediately prior to such subdivision,
combination, reclassification or other change.
c. SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company
at any time shall split or subdivide its Common Stock, the Exercise Price shall
be proportionately decreased and the number of Shares issuable pursuant to this
Warrant Agreement shall be proportionately increased. If the Company at any time
shall combine or reverse split its Common Stock, the Exercise Price shall be
proportionately increased and the number of Shares issuable pursuant to this
Warrant Agreement shall be proportionately decreased.
d. STOCK DIVIDENDS. If the Company at any time shall pay a
dividend payable in Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of stockholders entitled to receive
such dividend, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend and (ii) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such dividend. The Warrant Holder shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest whole share) obtained by
multiplying (i) the Exercise Price in effect immediately prior to such
adjustment by (ii) the number of shares of Common Stock issuable upon the
exercise hereof immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
e. ISSUE OF ADDITIONAL STOCK. For so long as the term of this
Warrant Agreement has not expired, upon each issuance or sale (or deemed
issuance or sale) by the Company of any additional shares of Common Stock (or
securities convertible or exercisable into Common Stock) which results or would
have resulted in a reduction in the Conversion Price of the Convertible
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Preferred (as each such term is defined in the Company's Certificate of the
Powers, Designations, Preferences and Rights of the Series A Convertible
Preferred Stock (the "Certificate of Designation")) under Section 7(d)(ii) of
the Company's Certificate of Designation, then the Exercise Price in effect
immediately prior to each such issuance or sale shall, upon such issue or sale,
be reduced by a percentage equal to the same percentage that the applicable
Conversion Price has been reduced (or would have been reduced) as a result of
such issuance or sale.
f. EXCESS OPTION ADJUSTMENT. If General Atlantic Partners 48,
L.P., a Delaware limited partnership, and GAP Coinvestment Partners, L.P., a New
York limited partnership (together, the "Purchasers") receive additional shares
of Convertible Preferred in payment of Reimbursement Amounts (as such term is
defined in that certain Stock Purchase Agreement, dated July 31, 1998 among the
Company and the Purchasers (the "Stock Purchase Agreement")) owed to such
Purchasers under Section 2.4 of the Stock Purchase Agreement, then Warrant
Holder shall simultaneously receive that number of additional Warrants with an
exercise price of zero dollars equal to the product of (x) 0.000000 and (y) the
number of shares of Convertible Preferred received by the Purchasers pursuant to
such Section 2.4. Such Warrants will vest proportionally to the other Warrants
issued to Warrant Holder. The Company agrees that the provisions of Section 2.4
of the Stock Purchase Agreement will not be amended or changed in any way
without the express consent of the Warrant Holder.
g. NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Exercise Price
or number of shares purchasable hereunder shall be adjusted pursuant to Section
6 hereof, the Company shall issue a certificate signed by its Chief Executive
Officer or Chief Financial Officer setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated and the Exercise Price and number of shares
purchasable hereunder after giving effect to such adjustment, and shall cause a
copy of such certificate to be mailed (by first class mail, postage prepaid) to
the holder of this Warrant.
h. NO CHANGE OF WARRANT NECESSARY. Irrespective of any
adjustment in the Exercise Price or in the number or kind of securities issuable
upon exercise of the Warrant, unless the Warrant Holder otherwise requests, this
Warrant Agreement may continue to express the same price and number and kind of
shares of Common Stock as are stated in this Warrant Agreement as initially
executed.
11. REDEMPTION. Subject to the Company's repurchase rights prescribed in Section
5 hereof, the Warrants represented by this Warrant Agreement are not redeemable
by the Company.
12. COMPLIANCE WITH SECURITIES ACT; TRANSFERABILITY OF WARRANT OR SHARES OF
COMMON STOCK.
a. COMPLIANCE WITH SECURITIES ACT. The Warrant Holder, by
acceptance hereof, agrees that the Warrants, and the shares of Common Stock to
be issued upon exercise of the Warrants, are being acquired for investment and
that such Warrant Holder will not offer, sell or otherwise dispose of the
Warrants, or any shares of Common Stock to be issued upon exercise of the
Warrants except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), or any applicable
state securities laws. The Warrants and all shares
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of Common Stock issued upon exercise of the Warrants (unless registered under)
the Securities Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAW. THEY MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION."
b. RESTRICTIONS ON TRANSFERABILITY. The Warrant Holder shall
be subject to all restrictions upon the sale or other disposition of the
Warrants and/or the shares of Common Stock to be issued upon exercise of the
Warrants, all as more fully set forth in or referred to in the Stockholders
Agreement, dated July 31, 1998, by and among the Company and the stockholders
named therein, as amended on the Issue Date to include the Warrant Holder as a
party thereto (the "Stockholders Agreement"). The Stockholders Agreement is
incorporated herein by reference and is an integral part of this Warrant
Agreement. The Warrants and all shares of Common Stock issued upon exercise of
the Warrants shall be stamped or imprinted with an additional legend
substantially in the following form.
"THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR
OTHER DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY
THE TERMS OF THE STOCKHOLDERS AGREEMENT, DATED JULY 31, 1998,
AMONG XXXXXXXXX.XXX INCORPORATED AND THE STOCKHOLDERS NAMED
THEREIN, AS AMENDED. THE COMPANY WILL NOT REGISTER THE
TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS
AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE
TERMS OF THE STOCKHOLDERS AGREEMENT. THE COMPANY WILL MAIL A
COPY OF SUCH AGREEMENT, TOGETHER WITH A COPY OF THE EXPRESS
TERMS OF THE SECURITIES AND THE OTHER CLASS OR CLASSES AND
SERIES OF SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO
ISSUE, TO THE RECORD HOLDER OF THIS CERTIFICATE, WITHOUT
CHARGE, WITHIN FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR."
c. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANTS. The
Warrants cannot be exchanged, transferred or assigned otherwise than in
accordance with the provisions of the Stockholders Agreement. If the provisions
of the Stockholders Agreement are complied with, upon
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surrender of the Warrants to the Company with the Assignment Form annexed hereto
as EXHIBIT B duly executed, and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant Agreement in
the name of the heir, devisee or assignee named in such instrument of assignment
and this Warrant Agreement shall promptly be canceled.
13. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby incorporates herein the representations and
warranties made by the Company to the Purchasers in the Stock Purchase Agreement
and extends such representations and warranties to the Warrant Holder. The
Company expressly confirms to the Warrant Holder that such representations and
warranties are true and correct at and on the date hereof as if made at and on
such date as modified by this Warrant Agreement.
14. REPRESENTATIONS AND WARRANTIES OF THE WARRANT HOLDER.
The Warrant Holder hereby represents and warrants to the Company as
follows:
a. EXISTENCE AND POWER. The Warrant Holder is a (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and (ii) has the corporate power and
authority to execute, deliver and perform its obligations under this Warrant
Agreement.
b. AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by the Warrant Holder of this Warrant Agreement and the
transactions contemplated hereby (i) have been duly authorized by all necessary
corporate action of the Warrant Holder and (ii) do not contravene the terms of
the Certificate of Incorporation or By-laws of the Warrant Holder, each as
amended as of and through the Issue Date.
c. GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No
approval, consent, compliance, exemption or authorization of any governmental
authority or agency, or of any other person or entity, is necessary or required
in connection with the execution, delivery or performance by, or enforcement
against, the Warrant Holder of this Warrant Agreement or the transactions
contemplated hereby.
d. BINDING EFFECT. This Warrant Agreement has been duly
executed and delivered by the Warrant Holder and constitutes the valid and
binding obligations of the Warrant Holder, enforceable against it in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability (regardless of
whether considered in a proceeding at law or in equity).
e. PURCHASE FOR OWN ACCOUNT. The Warrants issued to the
Warrant Holder pursuant to this Warrant Agreement, and the Shares to be issued
upon vesting and exercise thereof, are being or will be acquired for the Warrant
Holder's own account and with no intention of distributing or
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reselling such securities or any part thereof in any transaction that would be
in violation of the securities laws of the United States of America, or any
state.
f. RESTRICTED SECURITIES. The Warrant Holder understands that
the Warrants and the Shares issuable upon vesting and exercise of the Warrants,
will not be registered at the time of their issuance under the Securities Act
for the reason that the sale provided for in this Agreement is exempt pursuant
to Section 4(2) of the Securities Act and that reliance of the Company on such
exemption is predicated in part on such Warrant Holder's representations set
forth herein. The Warrant Holder represents that it is experienced in evaluating
companies such as the Company, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment and has the ability to suffer the total loss of the investment. The
Warrant Holder further represents that it has had the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of the Warrants, the business of the Company, and to obtain
additional information to such Warrant Holder's satisfaction.
g. ACCREDITED INVESTOR. The Warrant Holder is an "Accredited
Investor" within the meaning of Rule 501 of Regulation D under the Securities
Act, as presently in effect.
15. AFFIRMATIVE COVENANTS.
In addition to the following affirmative covenants, until the effective
date of an IPO, or earlier, as applicable, the Company hereby makes to Warrant
Holder the affirmative covenants made by the Company to the Purchasers in
Sections 8.1, 8.2, 8.3(a), 8.3(b) (beginning with the third quarter of the
fiscal year ending 1999) and 8.5 through 8.9 of the Stock Purchase Agreement. In
addition, the Company will provide Warrant Holder with reports each calendar
quarter during the term hereof regarding any changes in stock ownership in the
Company, including changes in shares, options, warrants or other equity
holdings.
a. BOARD REPRESENTATION. Promptly after the execution hereof,
the Company agrees to obtain an amendment to the Stockholders Agreement in form
and substance satisfactory to Warrant Holder, requiring that each Stockholder
(as therein defined) shall vote its Shares at any Stockholder's meeting called
for the purpose to elect directors to the Board of Directors and to take all
other actions necessary to ensure the election to the Board of Directors of one
(1) individual designated by Warrant Holder if the Company by the third
anniversary of the execution of this Warrant Agreement shall not have had
declared effective by the Securities and Exchange Commission an initial
registration statement covering the Common Stock and Warrant Holder owns Shares
equal to or exceeding 5% of the Fully Diluted Equity. The Company shall do
everything reasonably in its power to ensure that Warrant Holder is provided
with such representation on the Board of Directors including, without
limitation, including at least one (1) designee of Warrant Holder in any
nominees of the Board of Directors of the Company as Warrant Holder is entitled
to.
b. MFN STATUS. If the Company enters into any transaction with
another airline, hotel, rental car or other travel provider (the "Travel
Provider") with provisions, taken as a whole, which are more favorable to the
Travel Provider than the provisions available to Warrant Holder in the
transaction of which this Warrant Agreement is a part, then Warrant Holder shall
be
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10
entitled to the benefit of such more favorable provisions and the applicable
documents between Company and Warrant Holder shall be appropriately amended.
Provisions as used in this paragraph, include, without limitation, the
percentage of the equity of the Company which can be earned or acquired, the
method, rate and manner of earning equity or the right to acquire equity of the
Company including vesting and exercise price, antidilution adjustments,
covenants, board representation, registration rights, or the provisions of the
Airline Participation Agreement and side letter.
c. NO EQUITY PREFERENCE TO TRAVEL PROVIDERS. The Company will
not enter into any transaction with a Travel Provider in which the Company
issues, or agrees to issue, equity or rights to acquire equity where the
provisions in such transaction, including, without limitation, the percentage of
the equity of the Company which can be earned or acquired, the method, rate and
manner of earning equity or the right to acquire equity of the Company including
vesting and exercise price, antidilution adjustments, covenants, board
representation or registration rights, are more favorable to the Travel Provider
than the provisions available to Warrant Holder in the transaction of which this
Warrant Agreement is a part.
16. MISCELLANEOUS.
a. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made (or confirmed) herein shall survive the
execution and delivery of this Agreement, any investigation by or on behalf of
the Warrant Holder or acceptance of the Warrants, until 60 days after receipt of
the Company's financial statements for the year ended December 31, 1999, and at
the end of such period, such representations and warranties and related
indemnification rights and obligations with respect thereto shall expire;
PROVIDED, HOWEVER, that the representations and warranties set forth in Sections
3.1, 3.2, 3.4, 3.7(a) and 3.9 of the Stock Purchase Agreement and confirmed
herein shall survive without any expiration and the representation and
warranties set forth in Section 3.12 of the Stock Purchase Agreement and
confirmed herein shall survive until the expiration of the applicable statute of
limitations.
b. NO CONSEQUENTIAL DAMAGES. No Party hereto shall be entitled
to consequential damages as a result of any breach of a covenant, representation
or warranty contained herein.
c. NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
i. if to the Company, to:
xxxxxxxxx.xxx Incorporated
0 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xx. Xxxx X. Xxxxxxx
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11
with a copy to:
Xxxxxxxx & Xxxxxxxx
Four Xxxxxxxx Xxxxx
X.X. Xxx 000
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
and to:
Skadden, Arps, Slate, Meagher, & Xxxx, L.L.P.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx Xxxxx Chuff, Esq.
ii. if to the Warrant Holder, to:
Delta Air Lines, Inc.
0000 Xxxxx Xxxxxxxxx
Xxxxxxxxxx Xxxxxxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Executive Vice President -
Chief Financial Officer
with a copy to:
Delta Air Lines, Inc.
0000 Xxxxx Xxxxxxxxx
Xxxxxxxxxx Xxxxxxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Senior Vice President -
General Counsel
All such notices and communications shall be deemed to have
been duly given when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if telecopied.
d. SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws,
the Warrant Holder may assign any of its rights under any of the Transaction
Documents to any of its Affiliates. The Company may not assign any of its rights
under this Agreement without the written consent of the Warrant Holders. Except
as provided in the
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12
indemnification provisions governing the transactions contemplated herein and
set forth in a letter between the Company and the Warrant Holder, dated the date
hereof, no Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement. The rights
of Warrant Holder with respect to representation on the Company's board set
forth in Section 15(a) hereof shall not be assignable and any attempt to do so
shall be void and of no further consequence.
e. AMENDMENT AND WAIVER.
i. No failure or delay on the part of the Company, or
the Warrant Holder 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 remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company and the Warrant Holder at law, in equity or otherwise.
ii. Any amendment, supplement or modification of or
to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by the Company or the Warrant Holder
from the terms of any provision of this Agreement, shall be effective only if it
is made or given in writing and signed by the Company and the Warrant Holder.
f. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
g. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY
JURISDICTION.
h. SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
i. ENTIRE AGREEMENT. This Agreement, together with the
exhibits and schedules hereto, the letter dated the date hereof between the
Company and Warrant Holder containing, among other things, the indemnification
provisions governing the transactions contemplated herein, the Airline
Participation Agreement, dated the date hereof between the Company and the
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13
Warrant Holder and the Warrants (together, the "Transaction Documents"), is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement, together with
the exhibits and schedules hereto and the other Transaction Documents,
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
j. PUBLICITY. Except as may be required by applicable
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
PROVIDED, HOWEVER, that nothing in this Agreement shall restrict the Warrant
Holder from disclosing information (a) that is already publicly available and
(b) to its attorneys, accountants, consultants and other advisors to the extent
necessary to obtain their services in connection with the Warrant Holder's
investment or participation in the Company. If any announcement is required by
law to be made by any party hereto concerning this Agreement or the transactions
contemplated hereby, prior to making such announcement such party will deliver a
draft of such announcement to the other parties and shall give the other parties
an opportunity to comment thereon.
k. CHARGES; TAXES AND EXPENSES. Issuance of certificates for
shares upon the exercise of this Warrant Agreement shall be made without charge
to the Warrant Holder for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificates, all of which taxes and expenses
shall be paid by the Company.
l. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or a legal holiday.
m. LOST WARRANTS. The Company covenants to the Warrant Holder
that, upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant Agreement and, in the
case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender and cancellation of this Warrant Agreement, the Company will make
and deliver a new Warrant Agreement of like tenor, in lieu of the lost, stolen,
destroyed or mutilated document.
n. FURTHER ASSURANCES. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
various obligations made herein, as may be reasonably required or desirable to
carry out or to perform the provisions of this Agreement and to consummate and
make effective as promptly as possible the transactions contemplated by this
Agreement.
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14
IN WITNESS WHEREOF, this Warrant Agreement has been duly
executed and delivered by the authorized officers of each of the undersigned.
XXXXXXXXX.XXX INCORPORATED
By: /S/ XXXXXXX XXXXX
----------------------------
Title: President
----------------------------
DELTA AIR LINES, INC.
By: /S/ XXXXXXXXX X. XXXX
----------------------------
Xxxxxxxxx X. Xxxx
Title: Executive Vice President and
Chief Marketing Officer
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15
EXHIBIT A
NOTICE OF EXERCISE
To: Xxxxxxxxx.xxx Incorporated
1. The undersigned hereby elects to purchase __________ shares
of the Common Stock of Xxxxxxxxx.xxx Incorporated pursuant to the terms of the
Warrant Participation Agreement, dated as of August 17, 1998, by and between
Xxxxxxxxx.xxx Incorporated and the undersigned, and tenders herewith payment of
the purchase price of such shares in full.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned.
DELTA AIR LINES, INC.
By:
----------------------------
(Print Name of Signatory)
----------------------------
(Title of Signatory)
Date:
------------------------
1
EXHIBIT B
ASSIGNMENT FORM
TO: Xxxxxxxxx.xxx Incorporated
The undersigned hereby assigns and transfers unto _________________ of
__________________ (Please typewrite or print in block letters) the right to
purchase _________ shares of the common stock of Xxxxxxxxx.xxx Incorporated
subject to the Warrant Participation Agreement, dated as of August 17, 1998, by
and between Xxxxxxxxx.xxx Incorporated and the undersigned (the "Warrant
Agreement").
This assignment complies with the provisions of Section 12(c) of the Warrant
Agreement and is accompanied by funds sufficient to pay all applicable transfer
taxes.
DELTA AIR LINES, INC.
By:
-------------------------
(Print Name of Signatory)
-------------------------
(Title of Signatory)
Date:
-------------------
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