Execution Copy
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
September 29, 2003, is made by and among Midwest Express Holdings, Inc., a
Wisconsin corporation (the "Company"), with headquarters located at 0000 Xxxxx
Xxxxxx Xxxxxx, Xxx Xxxxx, XX 00000, Midwest Airlines, Inc., a Wisconsin
corporation and wholly-owned subsidiary of the Company ("Midwest"), Skyway
Airlines, Inc., a Delaware corporation and wholly-owned subsidiary of Midwest
("Skyway"), YX Properties, LLC, a Nebraska limited liability company and an
indirect subsidiary of the Company ("YX") (Midwest, Skyway, and YX are referred
to herein as the "Co-Borrowers"), and the investors named on the signature pages
hereto (each of whom is hereinafter referred to as the "Investor" and all of
whom collectively are hereinafter referred to as the "Investors"). Capitalized
terms used herein and not otherwise defined have the meanings given them in
Article VIII.
RECITALS:
A. The Company, Co-Borrowers and the Investors are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"), and Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act.
B. The Company has authorized a new series of convertible senior secured
notes of the Company in the form attached hereto as Exhibit A (together with any
senior convertible notes issued in replacement thereof in accordance with the
terms thereof, the "Notes"), which Notes shall be convertible into shares of the
Company's common stock, par value $.01 per share (the "Common Stock") (as issued
upon conversion of the Notes, the "Conversion Shares"), in accordance with the
terms of the Notes, and which Notes shall be secured by assets of the Company
and the Co-Borrowers in accordance with the Security Agreement (as defined
herein) and the Mortgage (as defined herein).
C. Each Investor wishes to purchase, and the Company and the Co-Borrowers
wish to sell, upon the terms and conditions stated in this Agreement, the
principal amount of Notes set forth beneath the Investor's name on the signature
pages hereof (which aggregate principal amount for all Investors together is
$25,000,000).
D. At the First Closing (as defined herein), the parties hereto will
execute and deliver a Registration Rights Agreement under which the Company will
agree to provide to the Investors certain rights with respect to registration of
the resale of the Conversion Shares under the Securities Act and applicable
state securities laws, the Security Agreement and the Mortgage.
E. Because the Company and the Co-Borrowers are not in a position to
deliver security for the Notes on the First Closing Date (as defined herein),
the parties are making First Closing deliveries under this Agreement to the
Escrow Agent (as defined herein) under the Escrow Agreement (as defined herein)
such that, under certain circumstances, and subject to the terms and conditions
of this Agreement and the Escrow Agreement, after the First Closing, this
Agreement may terminate as if the First Closing did not occur with respect to
some or all of the First Closing Notes (as defined herein).
AGREEMENT:
In consideration of the premises and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company, the Co-Borrowers and each of the Investors
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES
1.1. Purchase and Sale of Notes. At the First Closing and the Second
Closing (as defined herein), subject to the terms of this Agreement and the
satisfaction or waiver of the conditions set forth in Articles VI and VII, the
Company and the Co-Borrowers will sell to each Investor, and each Investor will
(on a several and not a joint basis) purchase from the Company and the
Co-Borrowers, the principal amount of Notes set forth beneath such Investor's
name on the signature pages hereof respecting the First Closing or the Second
Closing, as the case may be.
1.2. Payment at First Closing. On the First Closing Date (as defined
herein), each Investor shall deliver to the Escrow Agent the aggregate purchase
price for the Notes to be purchased at the First Closing, which shall be equal
to $1.00 for each $1.00 of principal amount of Notes to be purchased by such
Investor at the First Closing (the "First Closing Purchase Price"), by wire
transfer of immediately available funds in accordance with the written wire
instructions set forth in the Escrow Agreement, and the Company will deliver to
the Escrow Agent a note for each Investor (bearing a restrictive legend as set
forth in Section 2.8) in the form of Exhibit A hereto representing the Notes so
purchased by such Investor at the First Closing against delivery of the purchase
price for such Notes to the Escrow Agent (all such Notes so delivered by the
Company for all Investors at the First Closing, collectively, the "First Closing
Notes"). The Notes and the First Closing Purchase Price shall be held by the
Escrow Agent pursuant to the terms of the Escrow Agreement.
1.3. Payment at Second Closing. On the Second Closing Date (as defined
herein), each Investor will pay the aggregate purchase price for the Notes to be
purchased at the Second Closing, which shall be equal to $1.00 for each $1.00 of
principal amount of Notes to be purchased by such Investor at the Second
Closing, by wire transfer of immediately available funds in accordance with the
written wire instructions set forth on the signature page hereto of the Company,
and the Company will deliver to each Investor a note (bearing a restrictive
legend as set forth in Section 2.8) in the form of Exhibit A hereto representing
the Notes so purchased by such Investor at the Second Closing against delivery
of the purchase price therefor as described above.
1.4. Closing Dates. The First Closing will take place at 10:00 a.m. Central
Time on September 29, 2003, or at another date or time agreed upon by each of
the parties to this Agreement (the "First Closing Date"). The Second Closing
will take place at 10:00 a.m. Central Time on the date (the "Second Closing
Date") three (3) Business Days (as defined herein) (a) if Section 10.12(b) does
not apply, after the latest of (i) if the Company receives the Shareholder
Approval referred to in Section 4.9 for the increase in the authorized Common
Stock to 50 million shares, the issuance of the Conversion Shares upon the
conversion of the Notes to be sold pursuant to this Agreement at the Second
Closing and the Concurrent Equity Transaction (as defined herein), the date the
Company receives such approval, (ii) release by the Escrow Agent in full of the
First Closing Notes and to the Company of the entire First Closing Purchase
Price, (iii) if Section 4.12(b) does not apply, the date on which the Concurrent
Equity Transaction closes or (iv) if Section 4.12(b) applies, the last date by
which the Second Closing Investors (as defined herein) may elect to proceed with
the Second Closing by delivering notice to the Company, or at another date or
time agreed upon by each of the parties to this Agreement, or (b) if Section
10.12(b) applies, after the last date by which the Investors may elect to
proceed with the Second Closing pursuant to Section 10.12(b), with respect to
the Investors who so elect (and if any Investor does not so elect, then the
Investors who do so elect shall have the option, exercisable at the Second
Closing, to purchase (pro rata if applicable) additional Notes up to the
aggregate principal amount of the Notes that were to be sold pursuant to this
Agreement at the Second Closing to the Investors who elected not to proceed).
The First Closing and the Second Closing will be held at the offices of the
Company or at such other place as the parties agree.
1.5. Independent Nature. The rights and obligations of each Investor under
this Agreement are several and not joint with the rights and obligations of each
other Investor, and an Investor shall not be responsible in any way for the
performance of the obligations of any other Investor under this Agreement.
Nothing contained herein, and no action taken by any Investor pursuant hereto,
shall constitute the Investors as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Investors are in
any way acting in concert or as a "group" (within the meaning of Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) with
respect to such obligations or the transactions contemplated hereby. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it
shall not be necessary for the other Investors to be joined as an additional
party in any proceeding for such purposes.
ARTICLE II
INVESTOR'S REPRESENTATIONS AND WARRANTIES
Each Investor represents and warrants to the Company and the Co-Borrowers,
severally and solely with respect to itself and its purchases hereunder and not
with respect to any other Investor, that:
2.1. Investment Purpose. The Investor is acquiring the Securities (as
defined herein) for its own account and not with a view to the distribution
thereof; provided, however, that by making the representation herein, the
Investor reserves the right to dispose of the Securities in accordance with or
pursuant to an effective registration statement or an exemption from
registration under the Securities Act. The Investor understands that the
Investor may be required to bear the economic risk of this investment
indefinitely, unless the sale or resale of the Securities is registered pursuant
to the Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available. The Investor further represents
that it does not have any contract, undertaking, agreement or arrangement with
any person or entity to sell, transfer or grant participation to any third
person or entity with respect to any of the Securities; provided, however, that
by making the representations herein, the Investor does not agree to hold any
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
2.2. Investor Status. The Investor is either: (i) a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act; or (ii)
an institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D (referred to herein as an "institutional accredited
investor"). The Investor is not registered as a broker or dealer under Section
15(a) of the Exchange Act or a member of the National Association of Securities
Dealers, Inc. If an Investor is subject to the Employee Retirement Income
Security Act of 1974, as amended, and is acquiring the Securities as a fiduciary
or agent for another investor's account, then the Investor will have sole
investment and voting discretion with respect to such account and will have full
power to make the acknowledgments, representations and agreements contained
herein on behalf of such account.
2.3. Reliance on Exemptions. The Investor understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of the United States federal and state securities laws
and that the Company and the Co-Borrowers are relying upon the truth and
accuracy of, and the Investor's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Investor set
forth herein to determine the availability of such exemptions and the
eligibility of the Investor to acquire the Securities.
2.4. Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and its subsidiaries, and materials relating to the offer and
sale of the Securities, that have been requested by the Investor or its
advisors, if any. The Investor and its advisors, if any, have been afforded
adequate opportunity to ask questions of, and
receive answers from, the Company and the Co-Borrowers. The Investor
acknowledges and understands that its investment in the Securities involves a
significant degree of risk, including the risks reflected in the Company's
Confidential Information Memorandum, dated August 1, 2003, delivered to each
Investor (the "CIM"), and the SEC Documents (as defined herein). The foregoing
representations and any due diligence investigation conducted by the Investor
shall not in any way amend, limit or modify the representations and warranties
of the Company and the Co-Borrowers set forth in Article III, the Registration
Rights Agreement or the Security Agreement nor in any way affect the Investor's
right to rely on such representations and warranties.
2.5. Experience. If the Investor made the investment decision relating to
the investment in the Securities on its own behalf, then the Investor has such
knowledge and experience in financial, business and investment matters,
including the airline industry and businesses and operations of companies that
operate in lines of business similar to the Company, that the Investor believes
it is capable of evaluating the terms and conditions, merits and risks of the
transactions described herein and the investment contemplated hereby, and the
Investor is familiar with the risks associated with such industry and businesses
and has the ability to bear the economic risks of the investment in the
Securities. If an advisor made the investment decision relating to the
investment in the Securities on behalf of the Investor, then the advisor has
such knowledge and experience in financial, business and investment matters,
including the airline industry and businesses and operations of companies that
operate in lines of business similar to the Company, that the advisor believes
it is capable of evaluating the terms and conditions, merits and risks of the
transactions described herein and the investment contemplated hereby, and the
advisor is familiar with the risks associated with such industry and businesses
and believes the Investor has the ability to bear the economic risks of the
investment in the Securities.
2.6. Governmental Review. The Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.
2.7. Transfer or Resale. The Investor understands that:
(a) the delivery of the Securities has not been registered under the
Securities Act or any applicable state securities laws, and consequently,
the Investor may, subject to the Investor's rights under the Registration
Rights Agreement, have to bear the risk of owning the Securities for an
indefinite period of time because the Securities may not be transferred
unless:
(i) the resale of the Securities is registered pursuant to an
effective registration statement under the Securities Act and such
resale is made in accordance with said registration statement;
(ii) the Securities are sold or transferred pursuant to Rule 144
promulgated under the Securities Act ("Rule 144") and the Investor has
delivered to the Company a statement certifying that the proposed sale
or transfer meets the requirements of Rule 144 (which certification
shall be in form and content reasonably acceptable to the Company),
and, if reasonably requested by the Company, a statement describing
the circumstances surrounding the proposed sale or transfer (the form
and content of which shall be reasonably acceptable to the Company)
and, if reasonably requested by the Company after receiving such
statement describing circumstances, an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions
of counsel in comparable transactions and which counsel, including
internal counsel of the Investor, if applicable, shall be reasonably
satisfactory to the Company) to the effect that the proposed sale or
transfer meets the requirements of Rule 144 (collectively, the "144
Documentation");
(iii) the Securities are sold or transferred to an affiliate (as
defined in Rule 144) of the Investor;
(iv) the Securities are sold or transferred in an "offshore
transaction" meeting the requirements of Rule 904 of Regulation S of
the Securities Act ("Rule 904") and in compliance with applicable
local laws and regulations, and the Investor has delivered to the
Company a statement certifying that the proposed sale or transfer
meets the requirements of Rule 904 and applicable local laws and
regulations (which certification shall be in form and content
reasonably acceptable to the Company), and, if reasonably requested by
the Company, a statement describing the circumstances surrounding the
proposed sale or transfer (the form and content of which shall be
reasonably acceptable to the Company) and, if reasonably requested by
the Company after receiving such statement describing circumstances,
an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions and
which counsel, including internal counsel of the Investor, if
applicable, shall be reasonably satisfactory to the Company) to the
effect that the proposed sale or transfer meets the requirements of
Rule 904 and applicable local laws and regulations (collectively, the
"904 Documentation"); or
(v) in connection with a transfer other than in accordance with
clause (i), (ii), (iii), or (iv) herein, a statement certifying that
the proposed disposition may be made pursuant to an exemption from
registration, which exemption is specified (which certification shall
be in form and content reasonably acceptable to the Company), and, if
reasonably requested by the Company, the Investor has delivered to the
Company a statement describing the circumstances surrounding the
proposed disposition (the form and content of which shall be
reasonably acceptable to the Company), and, if reasonably requested by
the Company after receiving such statement describing circumstances,
an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions and
which counsel, including internal counsel of the Investor, if
applicable, shall be reasonably satisfactory to the Company) to the
effect that the proposed disposition may be made pursuant to an
exemption from registration, which exemption is specified
(collectively, the "Other Exemption Documentation"); and
(b) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 (including the holding
period requirement, the volume limitations and the manner of sale
restrictions, if applicable), and if Rule 144 is not applicable, then the
seller (or the person through whom the sale is made) might be deemed to be
an underwriter (as that term is defined in the Securities Act) under the
Securities Act or the rules and regulations of the SEC thereunder; and
(c) except as set forth in the Registration Rights Agreement, neither
the Company, nor the Co-Borrowers, nor any other person is under any
obligation to register the Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
2.8. Legends. The Investor understands that the Securities will bear the
applicable restrictive legend set forth in Section 5.3 unless and until such
time as such Securities may be reissued without restrictive legend pursuant to
the applicable provisions of Section 5.3.
2.9. Organization and Existence. To the extent indicated on the signature
pages hereto, each Investor is either (i) a limited partnership duly organized
and validly existing under the laws of its respective state of formation, (ii) a
limited liability company duly organized and validly existing under the laws of
its respective country or state of formation, (iii) a corporation duly organized
and validly existing
under the laws of its respective country or state of incorporation, (iv) a
series of a registered investment company, (v) a trust fund whose trustee is a
bank or trust company or (vi) an individual. Such Investor represents that it
was not organized solely for the purpose of making an investment in the Company.
2.10. Authorization; Enforcement. This Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Security Agreement and all other
agreements, documents and instruments contemplated hereby and thereby have been
duly and validly authorized, executed and delivered on behalf of the Investor
and are valid and binding agreements of the Investor enforceable against
Investor in accordance with their respective terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except as the enforceability of the
indemnification agreements of the Investor in the Registration Rights Agreement
may be limited by federal or state securities law or public policy relating
thereto.
2.11. No Conflicts; No Violation.
(a) The execution, delivery and performance of this Agreement by the
Investor will not (i) conflict with or result in a violation of any
provision of its charter documents or (ii) result in a violation of any
law, rule, regulation, order, judgment or decree applicable to the Investor
that would have material adverse effect on the Investor's ability to
perform its obligations under this Agreement or any other agreements,
documents or instruments contemplated by this Agreement to which the
Investor is a party.
(b) The Investor is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency for it to
execute, deliver or perform any of its obligations under this Agreement
that the Investor has not obtained or filed or the failure of which to
obtain or file would not have a material adverse effect on the Investor's
ability to perform its obligations under this Agreement.
2.12. Acknowledgments Regarding Placement Agent. The Investor acknowledges
that Xxxxxx X. Xxxxx & Co. Incorporated is acting as placement agent (the
"Placement Agent") for the Securities being sold hereby and will be compensated
by the Company for acting in such capacity. The Investor further acknowledges
that the Placement Agent has acted solely as placement agent for the Company in
connection with the offering of the Securities by the Company and the
Co-Borrowers, that certain of the information and data provided to the Investor
in connection with the transactions contemplated hereby, including but not
necessarily limited to the information and data included in the CIM, have not
been subjected to independent verification by the Placement Agent, and that the
Placement Agent makes no representation or warranty with respect to the accuracy
or completeness of such information, data or other related disclosure material.
The Investor further acknowledges that the provisions of this Section 2.12 are
also for the benefit of, and may also be enforced by, the Placement Agent.
2.13. Representation. The Investor has had an opportunity to consult with
an attorney in connection with the Investor's investment in the Company and its
subsidiaries. The Investor has not relied in any way on the investigation, due
diligence or advice of any other Investor in connection with its decision to
enter into the transactions contemplated by this Agreement. The Investor does
not beneficially own 5% or more of the outstanding shares of Common Stock as
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder.
2.14. Certain Trading Activities. During the thirty (30) calendar days
prior to the date of this Agreement, the Investor has not directly or
indirectly, nor has any Person (as defined herein) acting on behalf of or
pursuant to any understanding with such Investor, engaged in any trading of
Common Stock, including Short Sales (as defined below), and no open position or
Short Sale exists on the date hereof in the
name or on behalf of, or in conjunction with, such Investor. "Short Sales"
include, without limitation, all types of direct and indirect stock pledges,
forward sale contracts, options, puts, calls, short sales, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker-dealers or foreign regulated brokers having
the effect of hedging the Securities purchased or investment made under this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and each of the Co-Borrowers, jointly and severally, represent
and warrant to each of the Investors that:
3.1. Organization and Qualification. The Company and each Co-Borrower is
validly existing under the laws of the jurisdiction in which it is incorporated
or organized, with full power and authority to own, lease, use and operate its
properties and to carry on its business as and where now owned, leased, used,
operated and conducted. The Company and each Co-Borrower is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except where
the failure to be so qualified or in good standing in each such jurisdiction
would not have a Material Adverse Effect (as defined herein).
3.2. Authorization; Enforcement. (a) The Company has all requisite
corporate power and authority (other than the Shareholder Approval that the
Company must receive to enable it to perform its obligations at the Second
Closing) to enter into and to perform its obligations under this Agreement, the
Registration Rights Agreement, the Security Agreement, the Escrow Agreement and
all other agreements, documents and instruments contemplated hereby and thereby,
to consummate the transactions contemplated hereby and thereby and to deliver
the Securities in accordance with the terms hereof; (b) the execution, delivery
and performance of this Agreement, the Registration Rights Agreement, the
Security Agreement, the Escrow Agreement and all other agreements, documents and
instruments contemplated hereby and thereby by the Company and the consummation
by it of the transactions contemplated hereby and thereby including without
limitation the delivery of the Securities have been duly authorized by the
Company's Board of Directors, and no further consent or authorization of the
Company, its Board of Directors or its shareholders is required to authorize the
Company to perform its obligations at the Second Closing (other than the
Shareholder Approval) or the First Closing; (c) this Agreement, the Registration
Rights Agreement, the Security Agreement, the Escrow Agreement and all other
agreements, documents and instruments contemplated hereby and thereby have been
or will be duly executed by the Company; (d) each of this Agreement, the
Registration Rights Agreement, the Security Agreement, the Escrow Agreement and
all other agreements, documents and instruments contemplated hereby and thereby
constitutes or will upon execution constitute a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, or moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity, and except as the
enforceability of the indemnification agreements of the Company in the
Registration Rights Agreement may be limited by federal or state securities laws
or public policy relating thereto; (e) each Co-Borrower has all requisite power
and authority to enter into and to perform its obligations under this Agreement,
the Escrow Agreement, the Security Agreement, the Mortgage and all other
agreements, documents and instruments contemplated hereby and thereby to be
executed by the Co-Borrowers, to consummate the transactions contemplated hereby
and thereby and to deliver the Securities in accordance with the terms hereof;
(f) the execution, delivery and performance of this Agreement, the Escrow
Agreement, the Security Agreement, the Mortgage and all other agreements,
documents and instruments contemplated hereby and thereby to be executed by each
Co-Borrower and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by each Co-Borrower and no further consent
or authorization of any Co-Borrower is required; (g) this Agreement, the Escrow
Agreement, the Security Agreement, the Mortgage and all other agreements,
documents and instruments contemplated
hereby and thereby have been or will be duly executed by each Co-Borrower; and
(h) each of this Agreement, the Escrow Agreement, the Security Agreement, the
Mortgage and all other agreements, documents and instruments contemplated hereby
and thereby constitutes or will upon execution constitute a legal, valid and
binding obligation of each Co-Borrower enforceable against each such Co-Borrower
in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting
the rights of creditors generally and the application of general principles of
equity.
3.3. Issuance of Notes. The Notes are duly authorized by the Company and
the Co-Borrowers (other than the Shareholder Approval that the Company must
receive to enable it to perform its obligations at the Second Closing) and, upon
issuance in accordance with the terms hereof, shall be free from all taxes,
liens and charges with respect to the issue thereof. The Company has duly
authorized and reserved for issuance a number of shares of Common Stock equal to
the number of shares of Common Stock issuable upon conversion of the Notes to be
sold pursuant to this Agreement at the First Closing, and assuming receipt of
the Shareholder Approval, the Company has duly authorized and reserved for
issuance a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon conversion of the Notes to be sold pursuant to this
Agreement at the Second Closing.
3.4. Equity Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (x) 25,000,000 shares of the Common Stock, of
which as of September 24, 2003, 15,517,411 shares were issued and outstanding,
and (y) 5,000,000 shares of preferred stock, without par value, none of which
are issued and outstanding. All of the outstanding shares of Common Stock are
duly authorized, validly issued, fully paid and nonassessable (except as
otherwise provided by Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law). The shares of Common Stock to be issued upon conversion of the
Notes to be sold pursuant to this Agreement at the First Closing have been duly
authorized and, when issued and delivered upon conversion of the Notes in
accordance with the terms of the Notes, will be validly issued, fully paid and
nonassessable (except as otherwise provided by Section 180.0622(2)(b) of the
Wisconsin Business Corporation Law), free from all taxes, liens, claims,
encumbrances and charges with respect to the delivery thereof (other than those
imposed through acts or omissions of an Investor). Assuming receipt of the
Shareholder Approval, the shares of Common Stock to be issued upon conversion of
the Notes to be sold pursuant to this Agreement at the Second Closing have been
duly authorized and, when issued and delivered upon conversion of the Notes in
accordance with the terms of the Notes, will be validly issued, fully paid and
nonassessable (except as otherwise provided by Section 180.0622(2)(b) of the
Wisconsin Business Corporation Law), free from all taxes, liens, claims,
encumbrances and charges with respect to the delivery thereof (other than those
imposed through acts or omissions of an Investor). Each share of Common Stock to
be issued upon conversion of the Notes will be accompanied by four-ninths of a
Right (as defined herein), and such Rights will be validly issued in accordance
with the terms of the Rights Agreement (as defined herein). Other than pursuant
to this Agreement and the Rights and as contemplated by the Company's employee
equity plan being submitted for Shareholder Approval, the warrants issued by the
Company in August 2003 and employee benefit plans or director plans disclosed in
the Company's SEC Documents, and except as disclosed in the Company's SEC
Documents: (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of capital stock of the Company;
(iii) there are no agreements or arrangements under which the Company is
obligated to register the sale of its securities under the Securities Act
(except the Registration Rights Agreement); (iv) there are no outstanding
securities or instruments of the Company or the Co-Borrowers that contain any
redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or the Co-Borrowers are or may become bound to redeem a security of the
Company or the Co-Borrowers; (v) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Notes; (vi) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement;
and (vii) the Company and the Co-Borrowers have no liabilities or obligations
required to be disclosed in the SEC Documents that have not been so disclosed in
the SEC Documents, other than those incurred in the ordinary course of the
Company's or the Co-Borrowers' respective businesses and which, individually or
in the aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished or made available to the Investors true, correct and
complete copies of the Company's Articles of Incorporation, as amended and as in
effect on the date hereof (the "Articles of Incorporation"), and the Company's
Bylaws, as amended and as in effect on the date hereof (the "Bylaws"), and the
terms of all securities convertible into, or exercisable or exchangeable for,
Common Stock and the material rights of the holders thereof in respect thereto.
3.5. Indebtedness and Other Contracts. Except as disclosed in the SEC
Documents or set forth in Schedule 3.5 hereto, neither the Company nor any
Co-Borrower (a) has any outstanding Indebtedness (as defined below), (b) is a
party to any contract, agreement or instrument the violation of which, or
default under which, by the other party(ies) to such contract, agreement or
instrument would result in a Material Adverse Effect, (c) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (d) is a
party to any contract, agreement or instrument relating to any Indebtedness the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. Except as set forth in Schedule 3.5,
neither the Company nor any Co-Borrower has Indebtedness outstanding as of the
date hereof that ranks or will rank senior to or pari passu with the Notes. For
purposes of this Agreement: (x) "Indebtedness" of any Person means, without
duplication, (A) all indebtedness for borrowed money, (B) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course of
business), (C) all reimbursement or payment obligations with respect to letters
of credit, surety bonds and other similar instruments, (D) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement, in the event of default, are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) "Contingent Obligation" means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
3.6. No Conflicts; No Violation.
(a) The execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Security Agreement, the Escrow Agreement
and all other agreements, documents and instruments contemplated hereby and
thereby by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby including, without limitation,
the delivery of the Securities will not (i) with respect to performance and
consummation at the Second Closing (assuming receipt of the Shareholder
Approval) or the First Closing, conflict with or result in a violation of
any provision of the Organizational Documents (as defined herein) of the
Company; (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment (including without limitation, the
triggering of any anti-dilution provision), acceleration or cancellation
of, any agreement, indenture, patent, patent license or instrument to which
the Company is a party, except that partial release by the Escrow Agent to
the Investors of the Notes delivered to the Escrow Agent at the First
Closing and to the Company of the First Closing Purchase Price delivered to
the Escrow Agent at the First Closing before the Company and the
Co-Borrowers have discharged their obligations under the Senior Secured
Revolving Credit Agreement, dated as of August 31, 2003, among the Company,
the several lenders from time to time parties thereto and U.S. Bank
National Association, as amended, would constitute a default under such
credit agreement; or (iii) assuming the accuracy of the representations of
the Investors, result in a violation of any law, rule, regulation, order,
judgment or decree (including United States federal and state securities
laws and regulations and regulations of any self-regulatory organizations
to which the Company or its securities are subject) applicable to the
Company or by which any property or asset of the Company is bound or
affected, except in the case of clauses (ii) or (iii) for such conflicts,
breaches, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) The Company is not in violation of its Organizational Documents
except for any violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company is not in violation of any law,
ordinance or regulation of any governmental entity which violation,
individually or in the aggregate, would result in a Material Adverse
Effect. The Company is not in default (and no event has occurred which with
notice or lapse of time or both could put the Company in default) under any
agreement, indenture or instrument to which the Company is a party or by
which any property or assets of the Company is bound or affected, except
for such defaults as would not, individually or in the aggregate, have a
Material Adverse Effect.
(c) The execution, delivery and performance of this Agreement, the
Security Agreement, the Escrow Agreement, the Mortgage and all other
agreements, documents and instruments contemplated hereby and thereby by
the Co-Borrowers and the consummation by the Co-Borrowers of the
transactions contemplated hereby and thereby including, without limitation,
the delivery of the Securities will not (i) conflict with or result in a
violation of any provision of the Organizational Documents of any
Co-Borrower or (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment (including without limitation, the
triggering of any anti-dilution provision), acceleration or cancellation
of, any agreement, indenture, patent, patent license or instrument to which
any Co-Borrower is a party, except that partial release by the Escrow Agent
to the Investors of the Notes delivered to the Escrow Agent at the First
Closing and to the Company of the First Closing Purchase Price delivered to
the Escrow Agent at the First Closing before the Company and the
Co-Borrowers have discharged their obligations under the Senior Secured
Revolving Credit Agreement, dated as of August 31, 2003, among the Company,
the several lenders from time to time parties thereto and U.S. Bank
National
Association, as amended, would constitute a default under such credit
agreement, or (iii) assuming the accuracy of the representations of the
Investors, result in a violation of any law, rule, regulation, order,
judgment or decree (including United States federal and state securities
laws and regulations and regulations of any self-regulatory organizations
to which the Co-Borrowers or their respective securities are subject)
applicable to any Co-Borrower or by which any property or asset of any
Co-Borrower is bound or affected, except in the case of clauses (ii) or
(iii) for such conflicts, breaches, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or
in the aggregate, have a Material Adverse Effect.
(d) No Co-Borrower is in violation of its Organizational Documents,
except for any violations as would not, individually or in the aggregate,
have a Material Adverse Effect. No Co-Borrower is in violation of any law,
ordinance or regulation of any governmental entity which violation,
individually or in the aggregate, would result in a Material Adverse
Effect. No Co-Borrower is in default (and no event has occurred which with
notice or lapse of time or both could put any Co-Borrower in default) under
any agreement, indenture or instrument to which any Co-Borrower is a party
or by which any property or assets of any Co-Borrower is bound or affected,
except for such defaults as would not, individually or in the aggregate,
have a Material Adverse Effect.
3.7. Approvals. Assuming the accuracy of the representations of the
Investors, except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws and any
listing agreement with any securities exchange or automated quotation system,
neither the Company nor any Co-Borrower is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Mortgage or the
Security Agreement (other than in connection with the filings required to
perfect the interests granted under the Security Agreement), in each case in
accordance with the terms hereof or thereof, or sell the Securities at the First
Closing or the Second Closing in accordance with the terms hereof, except that
the Company must receive the Shareholder Approval to enable it to perform its
obligations at the Second Closing. All consents, authorizations, orders, filings
(other than in connection with the filings required to perfect the interests
granted under the Security Agreement) and registrations that the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof except those relating to the Shareholder
Approval that the Company must receive to enable it to perform its obligations
at the Second Closing.
3.8. SEC Documents; Financial Statements. Since December 31, 2002, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed after December 31,
2002 and prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (including all exhibits
available on the SEC's XXXXX system) incorporated by reference therein being
hereinafter referred to herein as the "SEC Documents"). The Company has
delivered to each Investor, or each Investor has had access to, true and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC (except as disclosed in the SEC Documents), contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents have been prepared in accordance with United States generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and fairly
present
in all material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). There are no unconsolidated special-purpose entities related to
the Company that should be consolidated on the Company's financial statements
under United States generally accepted accounting principles. Except as set
forth in the financial statements included in the SEC Documents, the Company has
no liabilities, contingent or otherwise, other than (A) liabilities incurred in
the ordinary course of business subsequent to June 30, 2003 that would not,
individually or in the aggregate, have a Material Adverse Effect, (B)
liabilities of which the Company has no Knowledge so long as the Company would
not have acquired Knowledge thereof through the exercise of reasonable diligence
or (C) other liabilities that would not, individually or in the aggregate, have
a Material Adverse Effect.
3.9. Absence of Certain Changes. Except as disclosed in the SEC Documents
or as set forth on Schedule 3.7, since December 31, 2002, there has been no
material adverse change or development in the assets, liabilities, business,
properties, operations, financial condition or results of operations of the
Company and its subsidiaries (including the Co-Borrowers), taken as a whole.
3.10. Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, claim, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the Knowledge of the Company, threatened against or
affecting the Company and its subsidiaries or any of its officers or directors
acting as such that is reasonably likely to, individually or in the aggregate,
have a Material Adverse Effect.
3.11. Intellectual Property Rights. The Company and the Co-Borrowers each
own or possess the licenses or rights to use all patents, patent applications,
patent rights, inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names and copyrights necessary
to enable each to conduct its business as now operated (the "Intellectual
Property"), except where the failure to possess such licenses or rights to use
would not have, individually or in the aggregate, a Material Adverse Effect.
There is no claim or action or proceeding pending or, to the Company's
Knowledge, threatened that challenges the right of the Company or the
Co-Borrowers with respect to any Intellectual Property.
3.12. Tax Status. The Company and its subsidiaries have made or filed all
federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which they are subject (unless and
only to the extent that the Company and its subsidiaries have set aside on their
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and have paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith.
To the Knowledge of the Company, there are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction.
3.13. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances within the prior six months that would
require registration under the Securities Act of the delivery of the Securities
to the Investors.
3.14. No General Solicitation. Neither the Company, nor the Co-Borrowers,
nor, to the Knowledge of the Company, any person acting for the Company has
conducted any "general solicitation" (as such term is defined in Regulation D)
with respect to any of the Notes being offered hereby. The Company will not
distribute any offering material in connection with the sale of the Notes prior
to the First Closing Date, other than the CIM, this Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Mortgage, the Security Agreement,
the NYSE (as defined herein) Supplemental Listing Application, and the SEC
Documents.
3.15. No Brokers. The Company will pay all brokerage commissions, finder's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby where the obligation to make such payments arises under
agreements to which the Company or any of the Co-Borrowers is a party. The
Company has no reason to believe that such payments will exceed 6% of the gross
proceeds to the Company from the transactions contemplated by this Agreement.
3.16. Insurance. The Company (including the Co-Borrowers) maintains
insurance of the types and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. The Company has no reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect.
3.17. Environmental Laws. The Company and each of the Co-Borrowers (i) is
in compliance with all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business as presently conducted and (iii) is in compliance with all terms
and conditions of any such permit, license or approval, except where, in each of
the three foregoing clauses, the failure to so comply would not have,
individually or in the aggregate, a Material Adverse Effect.
3.18. Employment Matters. The Company and its subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, individually or in the aggregate, have a Material Adverse Effect. To the
Knowledge of the Company, there are no pending investigations involving the
Company or any of its subsidiaries by the U.S. Department of Labor or any other
governmental agency responsible for the enforcement of such federal, state,
local or foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company or any of its subsidiaries pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against the Company or any of its
subsidiaries. No representation question exists respecting the employees of the
Company or any of its subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of its
subsidiaries. There are no outstanding wage claims of, or other debts owing to,
employees of the Company for services performed.
3.19. NYSE Compliance. The Company has not, in the twenty-four (24) months
preceding the date hereof, received notice from the NYSE that the Company was or
is not in compliance with the listing or maintenance requirements of the NYSE.
The Company has been and is in compliance with all such listing and maintenance
requirements. Assuming the truth of the representations and warranties of each
Investor, with respect to the First Closing, the issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the NYSE,
and with respect to the Second Closing, assuming receipt of the Shareholder
Approval, the issuance and sale of the Securities hereunder does not contravene
the rules and regulations of the NYSE.
3.20. Licenses and Permits. The Company and its subsidiaries have all
licenses, permits, approvals, authorizations and consents necessary to own,
lease, and operate their properties and to conduct their respective businesses
as currently being conducted (collectively, the "Company Permits"), except where
the failure to have such permits would not have, individually or in the
aggregate, a Material Adverse Effect. There is no action pending or, to the
Knowledge of the Company, threatened regarding the suspension or cancellation of
any of the Company Permits the suspension or cancellation of which would have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation
of, any of the Company Permits, except where such violation would not in the
aggregate have a Material Adverse Effect.
3.21. Investment Company Status. The Company is not and upon consummation
of the sale of the Securities will not be an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
3.22. Transactions With Affiliates and Employees. Except as set forth in
the SEC Documents and except for transactions that applicable regulations do not
require to be disclosed in the SEC Documents, none of the officers or directors
of the Company or the Co-Borrowers and, to the Knowledge of the Company, none of
the employees of the Company or the Co-Borrower are presently a party to any
transaction with the Company or the Co- Borrowers (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the Knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest.
3.23. Internal Accounting Controls. The Company and the Co-Borrowers
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (a) transactions are executed in accordance with
management's general or specific authorizations, (b) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
United States generally accepted accounting principles and to maintain asset
accountability, (c) access to assets is permitted only in accordance with
management's general or specific authorization, and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.24. Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, that they have the corporate
power to take on or before the date of this Agreement and without the approval
of the shareholders of the Company to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Articles
of Incorporation or the laws of its state of incorporation that is or could
become applicable to the Investors as a result of the Investors and the Company
fulfilling their obligations or exercising their rights under this Agreement,
the Registration Rights Agreement, the Security Agreement and the Escrow
Agreement, including without limitation the Company's issuance of the Conversion
Shares and the Investors' ownership of such Conversion Shares.
3.25. Disclosure. All disclosure provided to the Investors regarding the
Company, its business and the transactions contemplated hereby furnished by or
on behalf of the Company does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
3.26. Foreign Corrupt Practices. Neither the Company, nor any Co-Borrower,
nor, to the Knowledge of the Company, any director, officer, agent, employee or
other Person acting on behalf of the Company or any Co-Borrower has, in the
course of its actions for, or on behalf of, the Company (a) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (c) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (d) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
ARTICLE IV
COVENANTS
4.1. Best Efforts. Each party will use its best efforts to satisfy in a
timely fashion each of the conditions to be satisfied by it under Articles VI
and VII.
4.2. Form D; Blue Sky Laws. The Company will file a Notice of Sale of
Securities on Form D with respect to the Securities issued on the First Closing
Date or the Second Closing Date, as the case may be, if required under
Regulation D, and provide a copy thereof to each Investor promptly after such
filing. The Company will take such action as it reasonably determines to be
necessary, if any, to qualify the Securities for sale to the Investors under
this Agreement under applicable securities (or "blue sky") laws of the states of
the United States (or to obtain an exemption from such qualification), and will
provide evidence of any such action so taken to the Investors on or prior to the
date of the First Closing or the Second Closing, as applicable. The Company will
file with the SEC a Current Report on Form 8-K disclosing this Agreement and the
transactions contemplated hereby within two (2) Business Days after the First
Closing Date and the Second Closing Date, as applicable, and including with such
Form 8-K full and complete copies of all agreements entered into in connection
with the transactions contemplated hereby.
4.3. Expenses. The Company and the Co-Borrowers are liable for, and will
pay, their own expenses incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, attorneys'
and consultants' fees and expenses. Each Investor is liable for, and will pay,
its own expenses incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other agreements to be executed
in connection herewith, including, without limitation, attorneys' and
consultants' fees and expenses. In accordance with, and subject to, Section
3.15, the Company will pay all brokerage commissions, finder's fees or similar
payments relating to the issuance of the Notes to the Investors or the
transactions contemplated herein under agreements to which the Company or any of
the Co-Borrowers is a party.
4.4. No Integration. The Company and the Co-Borrowers will not make any
offers or sales of any security (other than the Notes and the Common Stock to be
offered and sold pursuant to the Concurrent Equity Transaction) under
circumstances that would cause the offering of the Notes to be integrated with
any other offering of securities by the Company for purposes of any registration
requirement under the Securities Act.
4.5. Sales by Investors. Each Investor will sell any Securities sold by it
in compliance with applicable prospectus delivery requirements, if any, or
otherwise in compliance with the requirements for an exemption from registration
under the Securities Act and the rules and regulations promulgated thereunder.
No Investor will make any sale, transfer or other disposition of the Securities
in violation of federal or state securities laws.
4.6. Use of Proceeds. The Company will use the proceeds from the sale of
the Notes to repay indebtedness or for general corporate and working capital
purposes. The Company will not use the proceeds from the sale of the Notes for
any loan to or investment in any other corporation, partnership, enterprise or
other person (except in connection with its direct or indirect subsidiaries) or
for the repurchase, redemption or retirement of any of its capital stock.
4.7. Press Release. In connection with the First Closing, the Company will
issue no later than September 30, 2003, a press release that discloses all of
the material terms of the transactions contemplated by this Agreement and
includes some disclosure that allows the reader to discern that the Company was
profitable in July and August excluding restructuring adjustments and includes
some disclosure regarding the performance of the Company's business in the third
quarter of 2003, in accordance
with applicable law. No later than October 23, 2003, the Company will issue a
press release with an update of the financial performance of the Company's
business through September 30, 2003, in accordance with applicable law. In
connection with the Second Closing, the Company will issue within one (1)
Business Day after the Second Closing a press release that discloses all of the
material terms of the transactions contemplated by this Agreement not previously
disclosed.
4.8. Non-Public Information. The Company and the Co-Borrowers acknowledge
that as of, and following, the First Closing Date, the Company and the
Co-Borrowers will have an obligation respecting the Investors (as with any other
person) under applicable laws, rules and regulations not to selectively disclose
any material, non-public information in violation of any such applicable law,
rule or regulation, and the Company and the Co-Borrowers shall not disclose any
material, non-public information to any Investor unless such Investor
specifically agrees to receive such information pursuant to a confidentiality
agreement dated after the date hereof.
4.9. Proxy Statement. The Company shall provide each shareholder entitled
to vote at the next meeting of shareholders of the Company, which meeting shall
be held not later than [November 30,] 2003 (the "Shareholder Meeting Deadline"),
a proxy statement soliciting each such shareholder's affirmative vote at such
shareholder meeting for approval of (i) the increase in the authorized Common
Stock to 50 million shares, (ii) the issuance of the Conversion Shares upon the
conversion of the Notes to be sold pursuant to this Agreement at the Second
Closing, (iii) the issuance of certain options to employees and (iv) the
Concurrent Equity Transaction, in each case in accordance with the Articles of
Incorporation and Bylaws and applicable law and the rules and regulations of the
NYSE (such affirmative approval of each of the foregoing being referred to
herein as the "Shareholder Approval"), and the Company shall use its best
efforts to solicit its shareholders' approval of such matters and to cause the
Board of Directors of the Company to recommend to the shareholders that they
approve such matters. From and after the date hereof and prior to the meeting of
shareholders of the Company discussed above, the Company shall not issue any
securities (other than pursuant to contractual arrangements under which the
Company is obligated as of the date hereof or convertible or exchangeable
securities outstanding as of the date hereof, in each case in accordance with
the terms in place on the date hereof).
4.10. Corporate Existence. So long as any Investor beneficially owns any
Notes, the Company shall maintain its corporate existence and shall not sell all
or substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets where
either (a) the consideration received by the Company or its equityholders, as
applicable, is comprised solely of cash, or (b) the surviving or successor
entity in such transaction (i) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith and
(ii) is a publicly traded corporation whose common stock is quoted on or listed
for trading on the NYSE, The Nasdaq Stock Market or the American Stock Exchange.
4.11. Prohibition on Net Short Positions. From and including the date of
this Agreement through and including the date of the Shareholder Meeting
Deadline, each Investor agrees that such Investor shall not maintain a Net Short
Position. "Net Short Position" shall mean that the aggregate number of shares of
Common Stock held in a short position by such Investor exceeds the sum of (i)
the number of shares of Common Stock owned by such Investor, plus (ii) the
number of Conversion Shares issuable (without regard to any limitation on
conversion) to such Investor.
4.12. Termination Fee.
(a) If Shareholder Approval is not obtained for the issuance of the
Conversion Shares upon the conversion of the Notes to be sold pursuant to
this Agreement at the Second Closing, then the Company shall pay in cash to
each of the Investors who were to participate in the Second Closing (the
"Second Closing Investors") a termination fee equal to 2.5% of the face
amount
of the Notes to be purchased by such Investor at the Second Closing (the
"Company Termination Fee").
(b) If (i) Shareholder Approval is obtained for the issuance of the
Conversion Shares upon the conversion of the Notes to be sold pursuant to
this Agreement at the Second Closing, but not for the Concurrent Equity
Transaction, (ii) Shareholder Approval is obtained for the issuance of the
Conversion Shares upon the conversion of the Notes to be sold pursuant to
this Agreement at the Second Closing and the Concurrent Equity Transaction,
but the Concurrent Equity Transaction terminates or (iii) Shareholder
Approval is obtained for the issuance of the Conversion Shares upon the
conversion of the Notes to be sold pursuant to this Agreement at the Second
Closing and the Concurrent Equity Transaction, but the Concurrent Equity
Transaction does not close within five (5) Business Days after the later of
receipt of the Shareholder Approval or release by the Escrow Agent in full
to the Investors of the First Closing Notes and to the Company of the
entire First Closing Purchase Price, then the Company shall send notice of
this fact to the Second Closing Investors (the "Notice of Concurrent Equity
Termination Event"). Upon receipt of the Notice of Concurrent Equity
Termination Event, each of the Second Closing Investors may elect to
proceed with the Second Closing on the Second Closing Date despite the
failure to consummate the Concurrent Equity Transaction by delivering
notice to the Company within six (6) Business Days of receipt of the Notice
of Concurrent Equity Termination Event ("Concurrent Equity Termination
Event Waiver Notice"). If any Second Closing Investor does not deliver a
Concurrent Equity Termination Event Waiver Notice, then the Second Closing
Investors who deliver a Concurrent Equity Termination Event Waiver Notice
shall have the option, exercisable at the Second Closing, to purchase (pro
rata if applicable) additional Notes up to the aggregate principal amount
of the Notes that were to be sold pursuant to this Agreement at the Second
Closing to the terminating Second Closing Investors. If a Second Closing
Investor does not deliver a Concurrent Equity Termination Event Waiver
Notice, then the Company shall pay the Company Termination Fee in cash to
such Second Closing Investor.
(c) The Company shall pay the Company Termination Fee within three (3)
Business Days of the date on which shareholders fail to approve the
issuance of the Conversion Shares upon the conversion of the Notes to be
sold pursuant to this Agreement at the Second Closing or the fourth
Business Day after Investors received the Notice of Concurrent Equity
Termination Event by wire transfer of immediately available funds in
accordance with written wire instructions supplied by the Second Closing
Investors to the Company in writing or, absent such instructions, by check
mailed to the Investor in question. Upon any such payment, the Investor in
question shall have no further rights or obligations under this Agreement,
and the Company shall have no further rights or obligations under this
Agreement in respect of the Investor in question, in each case in respect
of matters relating to the Second Closing.
4.13. Efforts to Secure. If at any time one or more Noteholder Waiver
Triggers have occurred under, and as defined in, the Escrow Agreement and, as a
result, Escrowed Funds (as defined in the Escrow Agreement) have been released
to the Company, but the Security Agreement and Mortgage have not been released
to the Investors, then the Company will use commercially reasonable efforts to
enable the Company and the Co-Borrowers to provide collateral security on
substantially the terms contemplated by the Security Agreement and the Mortgage
to those Investors as to which Escrowed Funds have been released to the Company.
However, in no event shall such obligation require the Company to provide cash
collateral, other collateral or other support for the letters of credit of the
Company and/or the Co-Borrowers that are outstanding at the date of this
Agreement or to violate any restrictions binding upon the Company and/or the
Co-Borrowers or their property.
ARTICLE V
TRANSFER AGENT INSTRUCTIONS; TRANSFER RESTRICTIONS AND LEGENDS
5.1. Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Notes) a register for the Notes in which the Company
shall record the name and address of the Person in whose name each Note has been
issued (including the name and address of each transferee), the principal amount
of Notes held by such Person and the number of Conversion Shares issuable upon
conversion of the Notes held by such Person. The Company shall make the register
available to each Investor or its legal representative for inspection upon
reasonable notice during regular business hours.
5.2. Issuance of Certificates. Upon any conversion of the Notes into Common
Stock, the Company will instruct its transfer agent to issue a certificate,
registered in the name of each Investor or its nominee, for the respective
Common Stock. All such certificates will bear the restrictive legend described
in Section 5.3(b), except as otherwise specified in this Article V. In addition,
the Company will issue irrevocable Transfer Agent Instructions to the transfer
agent in the form of Exhibit B hereto at the First Closing. The Company will not
give to its transfer agent any instruction with respect to the Securities other
than as contemplated by Article V and stop transfer instructions to give effect
to Section 2.7 (prior to registration of the resale of the Conversion Shares
under the Securities Act). Nothing in this Section will affect in any way the
Investors' obligations and agreements set forth in Section 4.5 to comply with
all applicable prospectus delivery requirements, if any, upon the resale of the
Conversion Shares.
5.3. Transfer Restrictions and Legends.
(a) Each Note shall bear the legend set forth below. The Company will
permit the transfer of the Note, and the Company will reissue the Note,
without such legend, in such name(s) as specified by the Investor, if:
(i) the Note was sold under an effective registration statement
filed under the Securities Act and such resale was made in accordance
with said registration statement;
(ii) the Note can be sold under Rule 144(k);
(iii) the Note was sold or transferred under Rule 144 and the
Investor delivered to the Company the 144 Documentation;
(iv) the Note was sold or transferred in a transaction that met
the requirements of Rule 904 and complied with applicable local laws
and regulations and the Investor delivered to the Company the 904
Documentation; or
(v) in connection with a transfer of the Note other than in
accordance with clause (i), (ii), (iii) or (iv), the Investor has
delivered to the Company the Other Exemption Documentation.
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS ("BLUE SKY LAWS"). THE
HOLDER OF THIS NOTE MAY NOT TRANSFER THIS NOTE OR THE COMMON STOCK ISSUABLE
UPON THE CONVERSION OF THIS NOTE WITHOUT SUCH REGISTRATION OR AN EXEMPTION
FROM SUCH REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY
LAWS. THE HOLDER OF THIS NOTE MAY ONLY TRANSFER IT IN ACCORDANCE WITH AND
SUBJECT TO THE TERMS OF THIS NOTE. NOTWITHSTANDING THE FOREGOING, THIS NOTE
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE NOTE."
(b) The Conversion Shares shall bear the legend set forth below. The
Company will permit the transfer of the Conversion Shares, and the transfer
agent will issue one or more certificates, free from any restrictive legend
(unless otherwise required by applicable state securities laws or the laws
of any applicable foreign jurisdiction), in such name and in such
denominations as specified by the Investor, if:
(i) the Conversion Shares were sold under an effective
registration statement filed under the Securities Act and such resale
was made in accordance with said registration statement;
(ii) the Conversion Shares can be sold under Rule 144(k);
(iii) the Conversion Shares were sold or transferred under Rule
144 and the Warrant Holder delivered to the Company the 144
Documentation;
(iv) the Conversion Shares were sold or transferred in a
transaction that met the requirements of Rule 904 and complied with
applicable local laws and regulations and the Investor delivered to
the Company the 904 Documentation; or
(v) in connection with a transfer of the Conversion Shares other
than in accordance with clause (i), (ii), (iii) or (iv), the Investor
has delivered to the Company the Other Exemption Documentation.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS ("BLUE SKY LAWS"). THE HOLDER OF THIS CERTIFICATE MAY
NOT TRANSFER THESE SECURITIES WITHOUT SUCH REGISTRATION OR AN EXEMPTION
FROM SUCH REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY
LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."
5.4. Enforcement of Provision. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Investor by
invalidating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Article V will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Article,
that the Investor will be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligations of the Company and the Co-Borrowers under Article I are
subject to the fulfillment at or before the First Closing or the Second Closing,
as the case may be, of each of the following conditions. These conditions are
for the Company's and the Co-Borrowers' benefit and may be waived by the Company
and the Co-Borrowers in whole or in part at any time in their sole discretion.
Without limitation, the Company and the Co-Borrowers may in their sole
discretion proceed with the First Closing or the Second Closing, as the case may
be, with respect to each Investor as to whom each condition has been satisfied
whether or not conditions have been satisfied as to other Investors:
6.1. With respect to the First Closing only, the Investors have executed
the Escrow Agreement and have delivered such agreement to the Company.
6.2. The Investors have executed the Registration Rights Agreement and the
Security Agreement and have delivered such agreements to the Escrow Agent under
the Escrow Agreement.
6.3. The Investors have delivered the purchase price for the Notes to the
Escrow Agent or the Company, as the case may be, in accordance with this
Agreement.
6.4. The representations and warranties of the Investors are true and
correct in all material respects (except for representations and warranties that
by their terms are qualified by materiality, which shall be true and correct in
all respects) as of the First Closing Date or the Second Closing Date, as the
case may be, as though made at that time (except for representations and
warranties that speak as of a specific date, which representations and
warranties must be correct as of such date), and the Investors have performed
and complied in all material respects with the covenants and conditions required
by this Agreement to be performed or complied with by the Investors at or prior
to the First Closing or the Second Closing, as the case may be.
6.5. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction has been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby that prohibits the consummation of any of the transactions contemplated
by this Agreement.
ARTICLE VII
CONDITIONS TO EACH INVESTOR'S OBLIGATION TO PURCHASE
The obligation of each Investor hereunder to purchase the Securities from
the Company at the First Closing or the Second Closing Date, as the case may be,
is subject to the fulfillment at or before the First Closing or the Second
Closing Date, as the case may be, of each of the following conditions. These
conditions are for each Investor's respective benefit and may be waived by such
Investor at any time in its sole discretion:
7.1. With respect to the First Closing only, the Company has executed the
Escrow Agreement and has delivered such agreement to the Investors.
7.2. With respect to the First Closing only, the Company and the
Co-Borrowers have each executed the Registration Rights Agreement, the Security
Agreement and the Mortgage and have delivered such agreements to the Escrow
Agent under the Escrow Agreement.
7.3. The Company and the Co-Borrowers have delivered to the Escrow Agent or
the Investor, as the case may be, a duly executed note for each Investor,
against payment therefor, representing
the Notes in aggregate amount not less than $15,000,000 with respect to the
First Closing and, subject to reduction through the operation of Section
4.12(b), $10,000,000 with respect to the Second Closing, as specified in Section
1.1.
7.4. The representations and warranties of the Company and the Co-Borrowers
are true and correct in all material respects (except for representations and
warranties that by their terms are qualified by materiality, which shall be true
and correct in all respects) as of the First Closing Date (except for
representations and warranties that speak as of a specific date, which
representations and warranties are correct as of such date), and the Company and
the Co-Borrowers have performed and complied in all material respects with the
covenants and conditions required by this Agreement to be performed or complied
with by the Company at or prior to the First Closing or the Second Closing, as
the case may be.
7.5. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction has been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7.6. Such Investor has received opinions of the Company's counsel, dated as
of the First Closing Date or the Second Closing Date, as the case may be, in
form reasonably satisfactory to the Investors, addressing the matters set forth
in Exhibit C hereto; provided that the opinion to be rendered by Daughtery,
Fowler, Peregrin & Xxxxxx shall only be delivered in connection with the First
Closing and then only upon satisfaction of the Escrow Conditions (as defined
herein).
7.7. The irrevocable Transfer Agent Instructions in substantially the form
attached hereto as Exhibit B has been delivered to the Company's transfer agent
and acknowledged in writing by such transfer agent.
7.8. With respect to the Second Closing only, the Company has delivered
evidence reasonably satisfactory to the Investors of the receipt of Shareholder
Approval as to each proposal other than the proposal respecting the approval of
the issuance of certain options to the Company's employees and, to the extent
that the Investor has delivered a Concurrent Equity Termination Event Waiver
Notice, other than the proposal relating to the Concurrent Equity Transaction.
7.9. At such time as the collateral under the Senior Secured Revolving
Credit Agreement, dated as of August 31, 2001, as amended, among the Company,
the several lenders from time to time parties thereto and U.S. Bank National
Association is released, the representations and warranties with respect to the
collateral contained in the Security Agreement shall be true and correct in all
material respects.
7.10. With respect to the Second Closing only, the Company has entered into
binding agreements with respect to the Concurrent Equity Transaction except to
the extent that the Investor has delivered a Concurrent Equity Termination Event
Waiver Notice.
7.11. The Company has delivered to the Investors such other documents and
certificates relating to the transactions contemplated by this Agreement as the
Buyers may reasonably request.
ARTICLE VIII
DEFINITIONS
8.1. "Agreement" has the meaning set forth in the introduction to this
Agreement.
8.2. "Articles of Incorporation" has the meaning set forth in Section 3.4.
1
8.3. "Bylaws" has the meaning set forth in Section 3.4.
8.4. "Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks in the City of New York are authorized or required by
law to remain closed.
8.5. "CIM" has the meaning set forth in Section 2.4.
8.6. "Claims" or "Claim" has the meaning set forth in Section 9.1.
8.7. "Co-Borrowers" has the meaning set forth in the introduction to this
Agreement.
8.8. "Common Stock" has the meaning set forth in the Recitals.
8.9. "Company" has the meaning set forth in the introduction to this
Agreement.
8.10. "Company Indemnified Person" has the meaning set forth in Section
9.2.
8.11. "Company Permits" has the meaning set forth in Section 3.20.
8.12. "Concurrent Equity Termination Notice" has the meaning set forth in
Section 4.12.
8.13. "Concurrent Equity Transaction" means the Company's private placement
of Common Stock, which private placement relates to aggregate gross proceeds of
$5,000,000 or more. The Concurrent Equity Transaction is subject to receipt of
Shareholder Approval.
8.14. "Contingent Obligation" has the meaning set forth in Section 3.5.
8.15. "Conversion Shares" has the meaning set forth in the Recitals.
8.16. "Environmental Laws" has the meaning set forth in Section 3.17.
8.17. "Escrow Agreement" means the Escrow Agreement dated as of the First
Closing Date, by and among the Company, the Co-Borrowers, the Investors and the
Escrow Agent, in the form attached hereto as Exhibit D.
8.18. "Escrow Agent" means the Escrow Agent, as defined in the Escrow
Agreement.
8.19. "Escrow Conditions" has the meaning set forth in Section 10.12.
8.20. "Escrow Conditions Waiver Notice" has the meaning set forth in
Section 10.12.
8.21. "Escrowed Funds" has the meaning set forth in Section 4.13.
8.22. "Exchange Act" has the meaning set forth in Section 1.5.
8.23. "First Closing" means the closing of the purchase and sale of Notes
in the aggregate principal amount of $15,000,000.
8.24. "First Closing Date" has the meaning set forth in Section 1.4.
8.25. "First Closing Notes" has the meaning set forth in Section 1.2.
8.26. "First Closing Purchase Price" has the meaning set fort in Section
1.2.
8.27. "Indebtedness" has the meaning set forth in Section 3.5.
8.28. "Indemnified Person" has the meaning set forth in Section 9.3.
8.29. "Intellectual Property" has the meaning set forth in Section 3.11.
8.30. "Investor Indemnified Persons" or "Investor Indemnified Person" has
the meaning set forth in Section 9.1.
8.31. "Investors" or "Investor" means the investors whose names are set
forth on the signature pages of this Agreement, and their permitted transferees.
8.32. "Knowledge" means the actual knowledge of the executive officers of
the Company, without independent investigation.
8.33. "Material Adverse Effect" means (a) a material adverse effect on the
assets, liabilities, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole or (b) any adverse effect on the ability
of the Company to perform its obligations pursuant to the transactions
contemplated by this Agreement or under the agreements or instruments to be
entered into or filed in connection herewith.
8.34. "Midwest" has the meaning set forth in the introduction to this
Agreement.
8.35. "Mortgage" means the Mortgage, dated as of the Closing Date, granted
by Skyway for the benefit of the Investors, in the form attached hereto as
Exhibit F.
8.36. "Net Short Position" has the meaning set forth in Section 4.11.
8.37. "Noteholder Waiver Triggers" has the meaning set forth in Section
4.13.
8.38. "Notice of Concurrent Equity Termination Event" has the meaning set
forth in Section 4.12.
8.39. "904 Documentation" has the meaning set forth in Section 2.7.
8.40. "Notes" has the meaning set forth in the Recitals.
8.41. "NYSE" means the New York Stock Exchange.
8.42. "144 Documentation" has the meaning set forth in Section 2.7.
8.43. "Other Exemption Documentation" has the meaning set forth in Section
2.7.
8.44. "Organizational Documents" means, with respect to a corporation, its
charter as filed with the applicable state regulatory authority, including any
amendment filed with respect thereto through the date hereof, and its by-laws,
as the same may have been amended through the date hereof, and with respect to a
limited liability company, its organizational filing made with the applicable
state regulatory authority, as the same may have been amended through the date
hereof, and its limited liability company agreement, operating agreement or
other similar agreement, as the same may be amended through the date hereof.
8.45. "Person" has the meaning set forth in Section 3.5.
8.46. "Placement Agent" has the meaning set forth in Section 2.12.
8.47. "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, by and among the Company and the
Investors, in the form attached hereto as Exhibit E.
8.48. "Regulation D" is defined in the Recitals.
8.49. "Rights" means the Preferred Stock Purchase Rights issued pursuant to
the Rights Agreement.
8.50. "Rights Agreement" means the Rights Agreement, dated February 14,
1996, as amended, between the Company and American Stock Transfer & Trust
Company.
8.51. "Rule 144" has the meaning set forth in Section 2.7.
8.52. "Rule 904" has the meaning set forth in Section 2.7.
8.53. "SEC" is defined in the Recitals.
8.54. "SEC Documents" has the meaning set forth in Section 3.8.
8.55. "Second Closing" means the closing of the purchase and sale of Notes
in the aggregate principal amount of $10,000,000 after the First Closing.
8.56. "Second Closing Date" has the meaning set forth in Section 1.4.
8.57. "Second Closing Investors" has the meaning set forth in Section 4.12.
8.58. "Securities" means, depending on the context, the Notes and/or the
shares of Common Stock (including the associated Rights) issuable upon
conversion of the Notes.
8.59. "Securities Act" is defined in the Recitals.
8.60. "Security Agreement" means the Security Agreement, dated as of the
Closing Date, by and among the Company, the Co-Borrowers and the Collateral
Agent (as defined in the Security Agreement)., as agent for the benefit of the
Investors, in the form attached hereto as Exhibit G.
8.61. "Shareholder Approval" has the meaning set forth in Section 4.9.
8.62. "Shareholder Meeting Deadline" has the meaning set forth in Section
4.9.
8.63. "Short Sales" has the meaning set forth in Section 2.14.
8.64. "Skyway" has the meaning set forth in the introduction to this
Agreement.
8.65. "Transfer Agent Instructions" means the transfer agent instructions
as defined in Exhibit B.
8.66. "YX" has the meaning set forth in the introduction to this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1. Indemnification of the Investors. In consideration of each Investor's
execution and delivery of this Agreement and its acquisition of the Securities
hereunder, the Company and the Co-Borrowers, jointly and severally, will
indemnify and hold harmless each Investor, any directors or officers of such
Investor and any person who controls such Investor within the meaning of the
Securities Act or the Exchange Act or acts as such Investor's investment advisor
(each, an "Investor Indemnified Person" and, collectively, "Investor Indemnified
Persons") against any losses, claims, damages, expenses or liabilities (joint or
several) (collectively, and together with actions, proceedings or inquiries by
any regulatory or self-regulatory organization, whether commenced or threatened
in respect thereof, "Claims" and each a "Claim") to which any of them become
subject insofar as such Claims arise out of or are based upon (a) any breach of
any representation or warranty made by the Company or any Co-Borrower herein or
(b) any breach of any covenant, agreement or obligation of the Company or any
Co-Borrower contained herein. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 9.1 does not
apply to amounts paid in settlement of any Claim if such settlement is made
without the prior written consent of the Company and the Co-Borrowers, which
consent will not be unreasonably withheld or delayed, and the Company and the
Co-Borrowers will not be liable under this Agreement (including this Section
9.1) for any amount with respect to any Claim after the aggregate amount the
Company and the Co-Borrowers have paid pursuant to this Section 9.1 with respect
to all Claims equals an amount equal to the product of three (3) multiplied by
the original aggregate principal amount of all the Notes issued on the Closing
Date. This indemnity obligation will remain in full force and effect regardless
of any investigation made by or on behalf of the Investor Indemnified Persons.
9.2. Indemnification of the Company. In consideration of the Company's and
the Co-Borrowers' execution and delivery of this Agreement and their sale of the
Securities hereunder, each Investor will indemnify and hold harmless, severally
and not jointly, to the same extent and in the same manner set forth in Section
9.1 above, the Company and the Co-Borrowers, each of their directors, each of
their officers and each person, if any, who controls the Company or any of the
Co-Borrowers within the meaning of the Securities Act or the Exchange Act (each
a "Company Indemnified Person") against any Claim to which any of them may
become subject insofar as such Claim arises out of or is based upon (a) any
breach of any representation or warranty made by such Investor herein or (b) any
breach of any covenant, agreement or obligation of such Investor contained
herein. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 9.2 does not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent will not be
unreasonably withheld, and no Investor will be liable under this Agreement
(including this Section 9.2) for the amount of any Claim that exceeds the
principal amount of the Note purchased by such Investor pursuant to this
Agreement. This indemnity will remain in full force and effect regardless of any
investigation made by or on behalf of any Company Indemnified Person.
9.3. Notification and Other Indemnification Procedures. Promptly after
receipt by an Investor Indemnified Person or a Company Indemnified Person, as
the case may be (each an "Indemnified Person"), under this Article IX of notice
of the commencement of any action (including any governmental action) by any
person other than an Indemnified Person, such Indemnified Person will, if a
Claim in respect thereof is to be made against any indemnifying party under this
Article IX, deliver to the indemnifying party a written notice of the
commencement thereof. The indemnifying party may participate in and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly given notice, assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties and the Indemnified Person. In
that case, the indemnifying party will diligently pursue such defense. If, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person and the indemnifying
party would be inappropriate due to actual or potential conflicts of interest
between the Indemnified Person and any other party represented by such counsel
in such proceeding
or the actual or potential defendants in, or targets of, any such action
including the Indemnified Person and such Indemnified Person reasonably
determines that there may be legal defenses available to such Indemnified Person
that are different from or in addition to those available to the indemnifying
party, then the Indemnified Person is entitled to assume such defense and may
retain its own counsel, with the reasonable fees and expenses to be paid by the
indemnifying party (subject to the restrictions on settlement under Section 9.1
or 9.2, as applicable). However, if multiple counsel are retained by the
Investors pursuant to the preceding sentence, the Company will pay only a pro
rata portion of such fees and expenses of any Investor's counsel, where the pro
rata portion to be paid by the Company equals the percentage obtained by
dividing the aggregate principal amount of the Notes purchased by the Investor
in question pursuant to this Agreement by the aggregate principal amount of all
of the Notes purchased pursuant to this Agreement. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action does not relieve an indemnifying party of any
liability to an Indemnified Person under this Article IX, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.
ARTICLE X
GOVERNING LAW; MISCELLANEOUS
10.1. Governing Law; Venue; Waiver of Jury Trial. This Agreement, including
the validity hereof and the rights and obligations of the Company and of the
Investors and all amendments and supplements hereto and all waivers and consents
hereunder, shall be construed in accordance with and governed by the internal
laws of New York (except as it relates to corporate law involving the Company,
in which case it shall be governed by the internal laws of the state of
incorporation of the Company) without giving effect to any choice of law or
conflicts of law provision or rule that would cause the application of the
internal laws of any other jurisdiction.
Notwithstanding anything to the contrary in this Agreement or any other
agreement between any of the parties hereto prior to the date hereof, each of
the parties hereto, to the extent it may do so under applicable law, for
purposes hereof, hereby (i) irrevocably submits itself to the non-exclusive
jurisdiction of the courts of the State of New York sitting in the City of New
York, Borough of Manhattan, and to the non-exclusive jurisdiction of the U.S.
District Court for the Southern District of New York, for the purposes of any
suit, action or other proceeding arising out of this Agreement, the subject
matter hereof or any of the transactions contemplated hereby brought by any
party or parties hereto, or their successors or any permitted and registered
assign; (ii) waives, and agrees not to assert, by way of motion, as a defense,
or otherwise, in any such suit, action or proceeding, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof or any of the transactions contemplated hereby may not be enforced in or
by such courts; provided that nothing in this paragraph shall be construed as a
waiver by any party of any right to seek to remove any such suit, action or
proceeding from a state court to a federal court or from a federal court to a
state court; and (iii) irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof; provided that nothing in this paragraph
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY
LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT
MATTER OF ANY OF THE FOREGOING.
10.2. Counterparts; Signatures by Facsimile. This Agreement may be executed
in two or more counterparts, all of which are considered one and the same
agreement and will become effective when counterparts have been signed by each
party and delivered to the other parties. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
10.3. Headings. The headings of this Agreement are for convenience of
reference only, are not part of this Agreement and do not affect its
interpretation.
10.4. Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law will not
affect the validity or enforceability of any other provision hereof.
10.5. Entire Agreement; Amendments. This Agreement, the Security Agreement,
the Escrow Agreement and the Registration Rights Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, representations, warranties or undertakings, other
than those set forth or referred to herein or therein. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged
with enforcement.
10.6. Notices. Any notices required or permitted to be given under the
terms of this Agreement must be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and will be effective five (5)
calendar days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by facsimile, in each case
addressed to a party. Any notice sent by courier (including a recognized
overnight delivery service) will be deemed received one (1) Business Day after
being sent. The addresses for such communications are:
If to the Company or the
Co-Borrowers: Midwest Express Holdings, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to:
Xxxxx & Lardner
000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Quick, Esq.
Facsimile: (000) 000-0000
If to an Investor: To the address set forth
immediately below such
Investor's name on the
signature pages hereto.
Each party will provide written notice to the other parties of any change in its
address.
10.7. Successors and Assigns. This Agreement is binding upon and inures to
the benefit of the parties and their successors and permitted assigns. The
Company and the Co-Borrowers will not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Investors, which consent will not be unreasonably
withheld, and no Investor may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and the Co-Borrowers,
which consent will not be unreasonably withheld. Notwithstanding the foregoing,
an Investor may assign all or part of its rights and obligations hereunder to
any of its "affiliates," as that term is defined under the Securities Act,
without the consent of the Company and the Co-Borrowers so long as the affiliate
is a "qualified institutional buyer" or an "institutional accredited investor"
as defined in Section 2.2 and agrees in writing to be bound by this Agreement.
This provision does not limit the Investor's right to transfer the Securities
pursuant to the terms of this Agreement or to assign the Investor's rights
hereunder to any such affiliate transferee pursuant to the terms of this
Agreement. Notwithstanding the foregoing, any transferee who purchases the
Securities in a public sale shall not have any rights under this Agreement.
10.8. Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person or entity (except as specifically contemplated in Article IX);
provided, however, that the provisions in Section 2.12 relating to
acknowledgments regarding the Placement Agent are intended for the benefit of
the Placement Agent.
10.9. Survival. The representations and warranties of the Company and the
Co-Borrowers set forth herein will survive for two (2) years following the date
hereof except that (a) if the obligation of the Company to maintain the
effectiveness of the registration statement and keep current a prospectus
thereunder extends beyond this two-year period, then such representations and
warranties shall survive as long as such obligation exists and (b) the
representations and warranties set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.6(a)
and 3.17 shall survive indefinitely. The Company and the Co-Borrowers make no
representations or warranties in any oral or written information provided to
Investors, other than the representations and warranties included herein.
10.10. Further Assurances. Each party will do and perform, or cause to be
done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
10.11. No Strict Construction. The language used in this Agreement is
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
10.12. Termination Relating to Escrow.
(a) If the conditions required for release by the Escrow Agent in full
of the First Closing Notes and of the entire First Closing Purchase Price
(the "Escrow Conditions") have not been satisfied as of November 30, 2003,
then at any time thereafter until the satisfaction of the Escrow
Conditions, at the election of any Investor as set forth in written notice
from such Investor to the Company and the Escrow Agent, the Investor may
terminate this Agreement as to such Investor, in which case (i) the
Investor shall be entitled to an immediate return of the portion of the
First Closing Purchase Price paid by such Investor from the Escrow Agent
together with payment from the Company in an amount equal to the interest
that would have accrued under the Investor's First Closing Note from the
First Closing Date to the date of payment less the earnings allocable to
the Investor under the Escrow Agreement relating to the portion of the
First Closing Purchase Price paid by such Investor and (ii) the remaining
Investors who do not terminate this Agreement shall have the option to
purchase (pro rata if applicable) additional Notes up to the aggregate
principal amount of the First Closing Note the
terminating Investor would have received had the Escrow Conditions been
satisfied, exercisable until the time the Escrow Conditions are satisfied,
and the Notes the terminating Investor would otherwise have been entitled
to purchase in respect of the Second Closing, exercisable at the Second
Closing.
(b) If the Escrow Conditions have not been satisfied as of December
31, 2003, then the Company may at its option, or shall upon the written
request of one or more of the Investors received within five (5) Business
Days of December 31, 2003 (so long as each Investor making such request
agrees in such written request to deliver instructions to the Escrow Agent
under Section 3(a) of the Escrow Agreement or such instructions and an
election to proceed with the Second Closing on the Second Closing Date
despite the failure to satisfy the Escrow Conditions (an "Escrow Conditions
Waiver Notice")), send a written notice to the Investors that the Company
intends to terminate this Agreement as to any Investor who, by the later of
December 31, 2003 or the sixth (6th) business day after receipt of such
notice from the Company, has not delivered instructions to the Escrow Agent
under Section 3(a) of the Escrow Agreement or such instructions and an
Escrow Conditions Waiver Notice (and if any Investor elects not to deliver
instructions to the Escrow Agent under Section 3(a) of the Escrow
Agreement, then the Investors who do so elect shall have the option to
purchase (pro rata if applicable) additional Notes up to the aggregate
principal amount of the First Closing Notes that were not released to the
Investors who elected not to deliver the instructions to the Escrow Agent,
exercisable until the sixth (6th) business day after receipt of such notice
from the Company).
(c) Upon any termination pursuant to Section 10.12(a) or pursuant to
Section 10.12(b) where the Investor in question has not delivered
instructions to the Escrow Agent under Section 3(a) of the Escrow
Agreement, the First Closing shall be deemed not to have occurred with
respect to the Investor in question, such Investor shall have no further
rights or obligations under this Agreement, and the Company shall have no
further rights or obligations under this Agreement in respect of the
Investor in question. Upon any termination pursuant to Section 10.12(b)
where the Investor in question has delivered instructions to the Escrow
Agent under Section 3(a) of the Escrow Agreement but has not delivered an
Escrow Conditions Waiver Notice, the Investor in question shall have no
further rights or obligations under this Agreement, and the Company shall
have no further rights or obligations under this Agreement in respect of
the Investor in question, in each case in respect of matters relating to
the Second Closing. However, termination of this Agreement pursuant to this
Section 10.12 shall not in any way terminate, limit or restrict the rights
and remedies of any party hereto against any other party that has violated,
breached or failed to satisfy any of its representations, warranties or
covenants in this Agreement prior to termination.
* * * * *
IN WITNESS WHEREOF, the undersigned Investors, the Company and the
Co-Borrowers have caused this Agreement to be duly executed as of the date first
above written.
COMPANY:
MIDWEST EXPRESS HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
WIRE TRANSFER INSTRUCTIONS:
Bank Name: U.S. Bank, N.A.
ABA Number: 000000000
Account Number: 121727847
Account Name: Midwest Express Airlines, Inc.
CO-BORROWERS:
MIDWEST AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
SKYWAY AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
YX PROPERTIES, LLC
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx. X. Xxxxxxx
Title: President
[INVESTORS' SIGNATURE PAGES OMITTED]
OMNIBUS SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT
The undersigned hereby executes and delivers the Securities
Purchase Agreement to which this Signature Page is attached, which, together
with all counterparts of this Securities Purchase Agreement and Signature Pages
of the other Investors, the Company and the Co-Borrowers to said Agreement,
shall constitute one and the same document in accordance with the terms of said
Agreement.
[NAME OF INVESTOR]
By:
--------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Address:
-------------------------------------
-------------------------------------
Attention:
-------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
Principal Amount of Notes at First Closing:
Principal Amount of Notes at Second Closing:
Name in Which Notes Are to Be Held (please print):
-------------------------------------------------
Social Security or Tax ID Number:
--------------
WIRE TRANSFER INSTRUCTIONS:
Bank Name:
-------------------------------------
ABA Number:
-------------------------------------
Account Number:
---------------------------------
Account Name:
----------------------------------
EXHIBIT A
Form of Note
See Exhibit 4.3 to this Current Report on Form 8-K.
EXHIBIT B
TRANSFER AGENT INSTRUCTIONS
MIDWEST EXPRESS HOLDINGS, INC.
September 29, 2003
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Re: Private Placement of Convertible Senior Secured Notes
Ladies and Gentlemen:
We refer you to that certain Securities Purchase Agreement, dated as of
September 29, 2003 (the "Securities Purchase Agreement"), by and among Midwest
Express Holdings, Inc., a Wisconsin corporation (the "Company"), Midwest
Airlines, Inc., a Wisconsin corporation and wholly-owned subsidiary of the
Company ("Midwest"), Skyway Airlines, Inc., a Delaware corporation and
wholly-owned subsidiary of Midwest ("Skyway"), YX Properties, LLC, a Nebraska
limited liability company and an indirect subsidiary of the Company ("YX")
(Midwest, Skyway and YX are referred to herein as the "Co-Borrowers"), and the
investors named on the signature pages attached to the Securities Purchase
Agreement (collectively, the "Investors"), pursuant to which the Company and the
Co-Borrowers will issue to the Investors convertible senior secured notes (the
"Notes") in an aggregate principal amount of up to $25,000,000. The Notes are
convertible into shares of common stock of the Company, par value $0.01 per
share (the "Common Stock").
The Company hereby authorizes and instructs you (provided that you are the
transfer agent of the Company at such time) upon delivery to you of a properly
completed and duly executed and acknowledged Conversion Notice, in the form
attached hereto as Exhibit I, to issue (from authorized but unissued shares),
countersign and register certificates representing the shares of Common Stock
issuable upon conversion of the Notes (the "Conversion Shares") in the name of
the Investor in question or such Investor's nominee, as specified on the
Conversion Notice. The certificates representing the Conversion Shares shall
bear the legend set forth on the next page.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS ("BLUE SKY LAWS"). THE HOLDER OF THIS CERTIFICATE MAY
NOT TRANSFER THESE SECURITIES WITHOUT SUCH REGISTRATION OR AN EXEMPTION
FROM SUCH REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY
LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."
The Company further instructs you not to acknowledge or record the transfer
of any Conversion Shares in the shareholder records of the Company or to issue
certificates representing any Conversion Shares to any person or entity other
than the transferor thereof unless the requirements set forth below are
satisfied with respect to such Conversion Shares, in which case such Conversion
Shares are to be transferred free from any restrictive legend (unless otherwise
required by applicable state securities laws or the laws of any applicable
foreign jurisdiction) and registered in such name and in such denominations as
specified by the Investor in question:
1. You receive written notice from the Company that a registration
statement covering resales of the Conversion Shares has been declared effective
by the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), in the form attached hereto as Exhibit II, and
written confirmation from the Investor in question that the resale of such
Conversion Shares was made pursuant to such effective registration statement; or
2. You receive written notice from the Company, accompanied by an opinion
of counsel, that the sale of such Conversion Shares may be effected under Rule
144(k) of the Securities Act; or
3. You receive written notice from the Company that the Company has
received the 144 Documentation, the 904 Documentation or the Other Exemption
Documentation (each as defined in the Securities Purchase Agreement) respecting
the sale of such Conversion Shares.
You are further instructed to notify the Secretary of the Company in
writing of any request that you receive pertaining to the proposed transfer of
any of the Conversion Shares.
These instructions may not be rescinded or revoked other than by means of a
communication signed by the Company and the Investor in whose name the
Conversion Shares in question are registered.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (000) 000-0000 or Xxxxxxx
Quick of Xxxxx & Xxxxxxx, our outside legal counsel, at (000) 000-0000.
Very truly yours,
MIDWEST EXPRESS HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxx
Senior Vice President and
Chief Financial Officer
THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this 29th day of September, 2003
American Stock Transfer & Trust Company
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------------
Title: Vice President
---------------------------------
Enclosures
EXHIBIT I
MIDWEST EXPRESS HOLDINGS, INC.
CONVERSION NOTICE
Reference is made to the Convertible Senior Secured Note (the "Note") issued to
the undersigned by Midwest Express Holdings, Inc. (the "Company"), Midwest
Airlines, Inc., a Wisconsin corporation and wholly-owned subsidiary of the
Company, Skyway Airlines, Inc., a Delaware corporation and wholly-owned
subsidiary of Midwest Airlines, YX Properties, LLC, a Nebraska limited liability
company and an indirect subsidiary of the Company, pursuant to that that certain
Securities Purchase Agreement, dated as of September 29, 2003. In accordance
with and pursuant to the Note, the undersigned hereby elects to convert the
Conversion Amount (as defined in the Note) indicated below into shares of common
stock, par value $.0l per share (the "Common Stock"), of the Company, as of the
date specified below.
Date of conversion:
--------------------------------------------------------
Aggregate Conversion Amount to be converted:
-------------------------------
Please provide or confirm the following information:
Conversion Price:
----------------------------------------------------------
Number of shares of Common Stock to be issued:
-----------------------------
Number of shares of Common Stock beneficially owned prior to
conversion:
----------------------------------------------------------------
Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:
Issue to:
------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Facsimile Number:
-----------------------------
Authorization:
-------------------------------------------------------------
By:
-------------------------------------------------------------------
Title:
----------------------------------------------------------------
Dated:
--------------------------------------------------------------------------
Account Number:
----------------------------------------
(if electronic book entry transfer)
Transaction Code Number:
-----------------------------------------
(if electronic book entry transfer)
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby directs
American Stock Transfer & Trust Company to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions, dated
September 29, 2003, from the Company and acknowledged and agreed to by American
Stock Transfer & Trust Company.
MIDWEST EXPRESS HOLDINGS, INC.
By:__________________________________
Name:____________________________
Title: ____________________________
EXHIBIT II
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: _____________________
Re: Midwest Express Holdings, Inc.
Ladies and Gentlemen:
We are counsel to Midwest Express Holdings, Inc., a Wisconsin corporation
(the "Company"), and have represented the Company in connection with that
certain Securities Purchase Agreement, dated as of September 29, 2003 (the
"Purchase Agreement"), entered into by and among the Company, Midwest Airlines,
Inc., a Wisconsin corporation and wholly-owned subsidiary of the Company
("Midwest"), Skyway Airlines, Inc., a Delaware corporation and wholly-owned
subsidiary of Midwest ("Skyway"), YX Properties, LLC, a Nebraska limited
liability company and an indirect subsidiary of the Company ("YX") (Midwest,
Skyway, and YX are referred to herein as the "Co-Borrowers"), and the buyers
named therein (collectively, the "Investors"), pursuant to which the Company and
the Co-Borrowers issued to the Holders their convertible senior secured notes
(the "Notes"), convertible into shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"). Pursuant to the Purchase Agreement, the
Company entered into a Registration Rights Agreement with the Investors, dated
as of September 29, 2003 (the "Registration Rights Agreement"), pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement) under the
Securities Act of 1933, as amended (the "Securities Act"). In connection with
the Company's obligations under the Registration Rights Agreement, on
___________, 2003, the Company filed a Registration Statement on Form S-1 (File
No. 333-_________) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities. The
Registration Statement names each of the Investors as a selling shareholder
thereunder.
In connection with the Registration Statement, we advise you that a member
of the SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the Securities Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS], and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the Securities Act
pursuant to the Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________
CC: [LIST NAMES OF INVESTORS]
EXHIBIT C
Matters to be Covered in Opinions of Counsel to the Company
Matters to be covered by opinion of Xxxxx & Xxxxxxx
1. Based solely on certificates of the Wisconsin Department of Financial
Institutions dated September 24, 2003, the Company and Midwest are each
corporations validly existing under the laws of the State of Wisconsin and
each has filed its most recent required annual report, and neither has
filed articles of dissolution, with the Wisconsin Department of Financial
Institutions. Based solely on a certificate of the Delaware Secretary of
State dated September 24, 2003, Skyway is a corporation in good standing
and having a legal corporate existence in the state of Delaware and has
filed its most recent required annual report with the Delaware Secretary of
State. Based solely on a certificate of the Nebraska Secretary of State
dated September 24, 2003, YX is a limited liability company in existence
under the laws of the state of Nebraska.
2. The Company and the Co-Borrowers have all requisite corporate or limited
liability company (as the case may be) power and authority to execute and
deliver the Transaction Documents and perform their obligations thereunder
(other than the Shareholder Approval that the Company must receive to
enable it to perform its obligations at the Second Closing). The
Transaction Documents have been duly authorized by all necessary corporate
or limited liability company (as the case may be) action on the part of the
Company and the Co-Borrowers (other than the Shareholder Approval that the
Company must receive to enable it to perform its obligations at the Second
Closing) and have been duly executed and delivered (into escrow, in the
case of the Escrowed Transaction Documents) by the Company and the
Co-Borrowers.
3. Each of the Transaction Documents to which the Company and/or any of the
Co-Borrowers is a party constitutes the legal, valid and binding obligation
of the Company and/or the Co-Borrowers, as applicable, enforceable against
the Company and/or the Co-Borrowers, as applicable, in accordance with
their respective terms subject to, in the case of the Escrowed Transaction
Documents, their delivery to the Investors in accordance with the terms of
the Escrow Agreement.
4. The Conversion Shares initially issuable to the Investors upon conversion
of the Notes (assuming, with respect to the Conversion Shares to be issued
upon conversion of the Second Closing Notes, Shareholder Approval is
obtained respecting the Second Closing) have been duly authorized and, when
issued and paid for in accordance with the terms of the Notes, will be
validly issued, fully paid and nonassessable (except as otherwise provided
by Section 180.0622(2)(b) of the Wisconsin Business Corporation Law).
5. The execution and delivery of, and performance by the Company and the
Co-Borrowers of their respective obligations under, the Transaction
Documents do not (i) constitute a breach or violation of the organizational
documents of the Company and the Co-Borrowers (assuming, with respect to
the Second Closing Notes and the Conversion Shares to be issued upon
conversion of the Second Closing Notes, Shareholder Approval is obtained
respecting the Second Closing); (ii) to our knowledge, constitute a default
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or other written instrument of
the Company or the Co-Borrowers currently in effect that is attached as an
exhibit to the SEC Documents, provided that for purposes of this clause
(ii) we have with your permission excluded the Senior Secured Revolving
Credit Agreement dated August 31, 2001, as amended (the "Credit
Agreement"), among the Company, U.S. Bank National Association, as agent,
and certain lenders, and the guaranties, security agreements and other
documents and agreements ancillary to the Credit Agreement; or (iii) to our
knowledge, result in any violation of any order, judgment, injunction,
decree or other restriction of any court or governmental authority which
order, judgment, injunction, decree or other restriction is specifically
applicable to the Company or a Co-Borrower.
6. The issuance and sale of the Notes under the circumstances contemplated by
the Purchase Agreement is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), pursuant Section
4(2) of the Securities Act.
7. The Mortgage, subject to its delivery to the Agent pursuant to the terms of
the Escrow Agreement, creates a valid and effective mortgage lien and
security interest on Skyway's interest in that part of the Premises (as
defined in the Mortgage) which consists of real property (including
fixtures attached thereto) located in Wisconsin (the "Real Property"), and
is in a form satisfactory for recordation in the office of the register of
deeds for the county in which the Real Property is located.
With respect to after-acquired property that is real property, in order to
give constructive notice of the lien of the Mortgage on such property, it
is necessary that an amendment or supplement thereto specifically
describing the same be recorded in the office of the register of deeds for
the county in which such property is located.
We note that in order to maintain the effectiveness of a lien upon real
property created by a mortgage, Wisconsin Statutes require that every 30
years after the initial recording thereof there appear of record in the
applicable real estate records an instrument affording affirmative and
express notice of the interest created by the mortgage.
8. The Security Agreement, subject to its delivery to the Agent pursuant to
the terms of the Escrow Agreement, creates in favor of the Agent for the
benefit of the Investors, as security for the obligations of the Company
and the Co-Borrowers under the Notes, a security interest in the right,
title and interest of the Company and the Co-Borrowers in the collateral
described therein to the extent article 9 of the Wisconsin UCC is
applicable thereto (the "Article 9 Collateral").
9. The Financing Statements are in proper form for filing. Upon delivery of
the Financing Statements to the Agent pursuant to the terms of the Escrow
Agreement and the filing of the Financing Statements with the Filing
Offices, Agent will have a perfected security interest in that portion of
the Article 9 Collateral in which a security interest is perfected by
filing a financing statement in the states in which the Filing Offices are
located (the "Filing Collateral").
Matters to be covered by opinion of Daugherty, Fowler, Peregrin & Xxxxxx
1. Release A, Release B and the Agreement are in due form for recordation by
and have been duly filed for recordation with the FAA pursuant to and in
accordance with the provisions of 49 U.S.C. Section 44107;
2. Airframe A through Airframe M, both inclusive, are duly registered in the
name of Midwest pursuant to and in accordance with the provisions of 49
U.S.C. Section 44103(a);
3. Airframe N and Airframe O are duly registered in the name of Skyway
pursuant to and in accordance with the provisions of 49 U.S.C. Section
44103(a);
4. Title to Airframe A through Airframe M, both inclusive, is vested in
Midwest and Airframe A through Airframe M, both inclusive, are free and
clear of liens and encumbrances of record except as created by the
Agreement;
5. Title to Airframe N and Airframe O is vested in Skyway and Airframe N and
Airframe O are free and clear of liens and encumbrances of record except as
created by the Agreement;
6. The Engines and the Spare Parts, as maintained by or on behalf of Midwest
and Skyway, at the Designated Locations, are free and clear of liens and
encumbrances of record except as created by the Agreement;
7. The Agreement creates a duly perfected first priority security interest in
the Aircraft and the Spare Parts, as maintained by or on behalf of Midwest
and Skyway, at the Designated Locations, in favor of the Collateral Agent,
it being understood that no opinion is herein expressed as to the validity,
priority or enforceability of such security interest under local law or as
to the recognition of the perfection of such security interest as against
third parties in any legal proceeding outside the United States or at a
time when the Spare Parts, or any part thereof, are not maintained by or on
behalf of Midwest or Skyway at the Designated Locations;
8. The Agreement is not required to be refiled with the FAA or filed or
recorded in any other place within the United States in order to perfect,
or maintain the perfection of, the security interest in the Aircraft and
the Spare Parts, as maintained by or on behalf of Midwest or Skyway at the
Designated Locations, as created thereby; and,
9. No authorization, approval, consent, license or order of, or registration
with, or the giving of notice to, the FAA is required for the valid
authorization, delivery and performance of the Agreement, except for such
filings as are referred to above.
EXHIBIT D
Escrow Agreement
See attached Exhibit 4.5 to this Current Report on Form 8-K.
EXHIBIT E
Registration Rights Agreement
See attached Exhibit 4.2 to this Current Report on Form 8-K.
EXHIBIT F
Mortgage
See attached Exhibit 4.6. to this Current Report on Form 8-K.
EXHIBIT G
Security Agreement
See attached Exhibit 4.4 to this Current Report on Form 8-K.
Schedule 3.5
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Senior and pari passu Indebtedness
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1. Indebtedness under the Senior Secured Revolving Credit Agreement, dated
August 31, 2001, as amended (the "U.S. Bank Credit Agreement"), among the
Company, as borrower, the several lenders identified on the signature pages
to the U.S. Bank Credit Agreement and U.S. Bank National Association, as
agent for the Lenders, which Indebtedness comprises reimbursement
obligations for letters of credit having an approximate outstanding face
amount of $15.5 million, which Indebtedness is a general obligation of the
Company and its subsidiaries (as guarantors), pari passu with
unsubordinated debt, and secured by substantially all assets of the Company
and its subsidiaries. Security interest to be terminated prior to release
from escrow of the Security Agreement in favor of the agent for the
Noteholders.
2. Indebtedness owed to Thrivent for mortgage loan secured by the Company's
corporate headquarters, having an outstanding principal balance of
approximately $2.5 million, which Indebtedness is a general obligation,
pari passu with unsubordinated debt.
3. Indebtedness owed to Xxxxxxxx-Xxxxx, estimated to be in an amount not in
excess of $3 million, for reimbursement of payments that K-C made under
guaranties of leases of three DC-9 aircraft, which amount is a general
unsecured obligation, pari passu with unsubordinated debt.
4. Indebtedness of approximately $27 million for three aircraft financed by
KfW (Skyway 328JETs having tail numbers X000XX, X000XX and N358SK), secured
by such aircraft. Such Indebtedness is pari passu with unsubordinated debt
and is general recourse except that a portion (in the aggregate amount of
$4.5 million for the three aircraft) of the balloon payment at maturity is
limited recourse to the aircraft.
5. Indebtedness under reimbursement agreements and similar arrangements with
respect to letters of credit and surety bonds issued to support
indebtedness or other obligations of the Company or its subsidiaries in an
amount not in excess of $2 million, including obligations with respect to
letters of credit issued by Associated Bank (secured by a lien on deposit
accounts) and surety bonds issued by Westchester and Safeco supported in
part by letters of credit, all of which reimbursement obligations are
general obligations, pari passu with unsubordinated debt.
6. Indebtedness owed to trade creditors for the purchase of goods or services
in the ordinary course and consistent with past practices, which
obligations are unsecured general obligations, pari passu with
unsubordinated debt.
7. Indebtedness owed in respect of 717 aircraft progress payment financing
provided by KfW in an outstanding amount of approximately $32 million,
including reimbursement obligations with respect to the guaranty of such
financing by Rolls Royce, which obligations are general obligations,
secured by the purchase agreement(s) for the applicable 717 aircraft, pari
passu with unsubordinated debt.
8. Indebtedness owed in respect of capital leases of information technology
products with Kronos, SBC Ameritech, Comark and Microsoft Licensing,
undertaken in the ordinary course of business and consistent with past
practice, which Indebtedness is a general obligation, secured by the
covered equipment and/or software, pari passu with unsubordinated debt.
9. Indebtedness comprising reimbursement obligations associated with programs
of the Company or its subsidiaries for the pre-purchase of tickets or
similar prepayment programs, which Indebtedness is a general unsecured
obligation in an amount less than $1 million, pari passu with
unsubordinated debt.
Schedule 3.7
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On September 25, 2003, the Milwaukee Journal Sentinel published a news
article, titled "Midwest Airlines won't fly with Eagle: Shared ticket agreement
to lapse," reporting that Midwest's codeshare agreement with American Eagle will
terminate in February 2004. The Company plans to file a press release to
acknowledge that the codeshare agreement with American Eagle will terminate and
indicate that the Company believes this arrangement will generate revenue in
fiscal 2003 that constitutes less than 1/2 of 1% of the Company's consolidated
2002 revenue.
