EXHIBIT 10.4
WARRANT ISSUANCE AGREEMENT
THIS WARRANT ISSUANCE AGREEMENT (the "Agreement") is made and entered into
as of ___________, 2001, by and between Chautauqua Airlines, Inc. a New York
corporation ("Chautauqua"), and America West Airlines, Inc., a Delaware
corporation ("AWA").
RECITALS
WHEREAS, Chautauqua and AWA are entering into concurrently herewith a Code
Share and Revenue Sharing Agreement (the "Code Share Agreement"); and
WHEREAS, Chautauqua desires to issue to AWA a warrant (the "Warrant") to
purchase shares of common stock, $0.01 par value (the "Common Stock"), of
Chautauqua on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties, and covenants hereinafter set forth and
for other good valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. ISSUANCE OF WARRANT
1.1 ISSUANCE OF WARRANT. Upon the closing date (the "Issuance Date")
of the initial public offering of shares of Common Stock of Chautauqua (the
"IPO"), Chautauqua shall issue to AWA a warrant (the "Warrant") to purchase the
number of shares of Common Stock (the "Warrant Shares") determined as set forth
below at the exercise price (the "Exercise Price") determined as set forth
below.
1.2 NUMBER OF WARRANT SHARES. The number of Warrant Shares shall be
determined as follows:
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COMMITTED AIRCRAFT % OF IPO SHARES
---------------------------------------------------------
Less than 12 0
---------------------------------------------------------
12 2.000
---------------------------------------------------------
14 2.635
---------------------------------------------------------
16 3.400
---------------------------------------------------------
18 3.825
---------------------------------------------------------
20 4.250
---------------------------------------------------------
22 5.255
---------------------------------------------------------
24 6.000
---------------------------------------------------------
Where "Committed Aircraft" for the purpose of this Section 1.2 means the number
of aircraft committed into flight services by AWA pursuant to the Code Share
Agreement as of the Issuance Date and remaining committed into flight services
as of that date and "IPO Shares" means the greater of (a) the number of shares
of Common Stock offered to the public, including any
1.
overallotment option granted to the underwriters whether or not exercised,
pursuant to the IPO and (b) thirty five percent (35%) of the number of shares
outstanding immediately prior to the closing of the IPO on a fully diluted basis
(assuming the exercise or conversion of any outstanding rights, options and
convertible securities).
1.3 EXERCISE PRICE. The Exercise Price shall be the price to the
underwriters in the IPO (the "IPO Price").
1.4 FORM OF WARRANT. The Warrant will be in the form attached hereto
as Exhibit A.
2. REGISTRATION RIGHTS
2.1 IPO NOTICE. Chautauqua will give AWA not less than sixty (60)
days prior written notice before the closing date of its IPO.
2.2 DEMAND REGISTRATION
2.2.1 If Chautauqua shall receive a written request from AWA
that Chautauqua file a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), covering the registration of at least a
majority of the Warrant Shares then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed five million dollars ($5,000,000)), then Chautauqua
shall expeditiously effect the registration under the Securities Act of all
shares of Common Stock (including any Warrant Shares) that AWA has requested to
be registered (the "Registrable Securities").
2.2.2 If AWA intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise
Chautauqua as a part of its request made pursuant to this Section 2.2 and
Chautauqua shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by AWA (which
underwriter or underwriters shall be reasonably acceptable to Chautauqua).
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises Chautauqua that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then Chautauqua
shall so advise AWA, and the number of Registrable Securities that may be
included in the underwriting shall be allocated among AWA, Chautauqua and any
other stockholders including shares of Common Stock in such registration on a
PRO RATA basis based on the number of shares of Common Stock held by all such
holders.
2.2.3 The Company shall not be required to effect a
registration pursuant to this Section 2.2:
(a) prior to the earlier of (i) the third anniversary of
the date of this Agreement or (ii) one hundred eighty (180) days following the
effective date of the registration statement pertaining to the IPO; and
(b) after the Company has effected one registration
pursuant to this Section 2.2, and such registration has been declared or ordered
effective;
2.3 PIGGYBACK REGISTRATIONS.
2.3.1 In addition to the notice requirement set forth in
Section 2.1, Chautauqua shall notify AWA in writing at least fifteen (15) days
prior to the filing of any
2.
registration statement under the Securities Act for purposes of a public
offering of securities of Chautauqua (including, but not limited to,
registration statements relating to secondary offerings of securities of
Chautauqua, but excluding registration statements relating to any employee
benefit plan or to any corporate reorganization) and will afford AWA an
opportunity to include in such registration statement all or part of any shares
of Common Stock held by AWA. If AWA desires to include in any such registration
statement any shares of Common Stock held by AWA it shall, within ten (10) days
after the above-described notice from Chautauqua, so notify Chautauqua in
writing. If AWA decides not to include any shares of Common Stock in any
registration statement filed by Chautauqua, AWA shall nevertheless continue to
have the right to include any shares of Common Stock in any subsequent
registration statement or registration statements as may be filed by Chautauqua
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.
2.3.2 Notwithstanding any other provision of this Agreement,
if the underwriter with respect to an underwritten offering (other then an
underwritten offering pursuant to Section 2.2) determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the holders of Common
Stock (including AWA) on a PRO RATA basis based on the total number of shares of
Common Stock held by such holder.
2.4. FORM S-3 REGISTRATION. If Chautauqua shall receive from AWA a
written request or requests that Chautauqua effect a registration on Form S-3
(or any successor to Form S-3) or any similar short-form registration statement
and any related qualification or compliance with respect to all or a part of the
Common Stock owned by AWA, the Company will as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of the Registrable Securities; PROVIDED, HOWEVER, that Chautauqua shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(a) if Form S-3 is not available for such offering by AWA, or
(b) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for AWA pursuant to this Section 2.4, or
(c) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
Subject to the foregoing, Chautauqua shall file such Form S-3 registration
statement as soon as practicable after receipt of the request of AWA.
Registrations effected pursuant to this Section 2.4 shall not be counted as a
demand for registration effected pursuant to Section 2.2.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided
herein, all expenses incurred in connection with any registration, qualification
or compliance pursuant to Sections 2.2, 2.3 or 2.4, including, without
limitation all registration and filing fees, printing expenses, fees and
disbursements of counsel for Chautauqua, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the selling stockholders, blue sky fees and expenses and the expense of any
special audits incident to or
3.
required by any such registration shall be borne by Chautauqua. All underwriting
discounts and selling commissions incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered PRO
RATA on the basis of the number of shares so registered.
3. SALE EVENT
3.1 SALE EVENT. At any time prior to the closing of the IPO, in the
event that Chautauqua (a) liquidates, (b) dissolves, (c) winds up, (d)
consolidates or merges with or into any other entity, or effects any other
corporate reorganization, in which the stockholders of Chautauqua immediately
prior to such consolidation, merger or reorganization, own less than fifty
percent (50%) of the voting power of the surviving entity immediately after such
consolidation, merger or reorganization, (e) effects any transaction or series
of related transactions in which in excess of fifty percent (50%) of the voting
power of Chautauqua is transferred, or (f) sells, leases or otherwise disposes
of all or substantially all of its assets (each a "Sale Event"), then upon the
closing of such Sale Event (the "Sale Event Closing"), Chautauqua will pay or
will cause to be paid to AWA an amount equal to the percentage of the
consideration received in the Sale Event as determined as follows:
---------------------------------------------------------
COMMITTED AIRCRAFT % OF CONSIDERATION
---------------------------------------------------------
Less than 12 0
---------------------------------------------------------
12 2.000
---------------------------------------------------------
14 2.635
---------------------------------------------------------
16 3.400
---------------------------------------------------------
18 3.825
---------------------------------------------------------
20 4.250
---------------------------------------------------------
22 5.255
---------------------------------------------------------
24 6.000
---------------------------------------------------------
Where "Committed Aircraft" for the purpose of this Section 3.1 means the number
of aircraft committed into flight services by AWA pursuant to the Code Share
Agreement as of the date immediately prior to the Sale Event Closing and
remaining committed into flight services as of that date and "Consideration"
means thirty-five percent (35%) of the value of the aggregate consideration
received by Chautauqua and the stockholders of Chautauqua upon the Sale Event
Closing in excess of one hundred fifty million dollars ($150,000,000). For the
purpose of determining the aggregate consideration received by Chautauqua and
the stockholders of Chautauqua, (a) to the extent it consists of cash, it shall
be computed at the gross amount of cash received by Chautauqua and the
stockholders without any deduction for payment of expenses or otherwise, (b) to
the extent it consists of securities that are traded on a national securities
exchange or admitted to unlisted trading privileges on such an exchange, or are
listed on the Nasdaq National Market, it shall be valued at the average of the
last reported sale price of such security for the five (5) trading days ended
the day before the Sale Event Closing, and (c) to the extent that it consists of
property other than cash or such securities, it shall be valued as
4.
Chautauqua and AWA may mutually agree; PROVIDED that both parties shall
negotiate in good faith, and if the parties are unable to reach an agreement as
to value, either party shall have the right within thirty (30) days of the Sale
Event Closing to commence an action seeking declaratory judgment with respect to
such value.
3.2 NOTICE OF SALE EVENT. Chautuaqua will give AWA not less than
thirty (30) days prior written notice before a Sale Event Closing.
4. MISCELLANEOUS
4.1 BINDING AGREEMENT. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of
Delaware as applied to agreements among
Delaware
residents, made and to be performed entirely within the State of
Delaware.
4.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to Chautauqua
at Chautauqua Airlines, Inc., 0000 Xxxxx Xxxx Xxxxxx Xxxx, Xxxxxxxxxxxx,
Xxxxxxx, 00000, Fax No.: (000) 000-0000, Attention: President, with a copy to
Wexford Capital LLC, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx, 00000, Fax
No.: (000) 000-0000, Attention: General Counsel and AWA at America West
Airlines, Inc., 000 Xxxx Xxx Xxxxxx Xxxxxxx, Xxxxx, Xxxxxxx, 00000, Fax No.:
(000) 000-0000, Attention: General Counsel, with a copy to Xxxxxx Godward LLP,
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, 00000, Fax No.: (000) 000-0000,
Attention: Xxxxxx Xxxxxxxxx, or at such other address as Chautauqua or AWA may
designate by ten (10) days advance written notice to the other party hereto.
4.6 MODIFICATION; WAIVER. No modification or waiver of any provision
of this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by Chautauqua and AWA.
4.7 ENTIRE AGREEMENT. This Agreement and the Exhibit hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other party in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein.
5.
IN WITNESS WHEREOF, the parties have executed this
WARRANT ISSUANCE
AGREEMENT as of the date first written above.
CHAUTAUQUA AIRLINES, INC. AMERICA WEST AIRLINES, INC.
By: By:
--------------------------- ---------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
6.
EXHIBIT A
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
CHAUTAUQUA AIRLINES, INC.
WARRANT TO PURCHASE COMMON STOCK
________ ____, _____
THIS CERTIFIES THAT, for value received, America West Airlines, Inc., with
its principal office at 000 Xxxx Xxx Xxxxxx Xxxxxxx, Tempe Arizona, 85281, or
assigns (the "Holder" or "Purchaser"), is entitled to subscribe for and purchase
at the Exercise Price (defined below) from Chautauqua Airlines, a New York
corporation, with its principal office at 0000 Xxxxx Xxxx Xxxxxx Xxxx,
Xxxxxxxxxxxx, Xxxxxxx, 00000 (the "Company"), ____________ shares of common
stock of the Company, par value $0.01 per share (the "Common Stock"), as
provided herein.
1. DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:
(a) "Exercise Period" shall mean the time period commencing with the
date of this Warrant and ending on the date three years from the closing date of
the initial public offering of the Common Stock (the "IPO").
(b) "Exercise Price" shall mean _______, subject to adjustment
pursuant to the terms herein.
(c) "Exercise Shares" shall mean the shares of the Company's Common
Stock issuable upon exercise of this Warrant, subject to adjustment pursuant to
the terms herein.
2. EXERCISE OF WARRANT.
2.1 EXERCISE. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached
hereto;
(b) Payment of the Exercise Price either (i) in cash or by
check, or (ii) by cancellation of indebtedness; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a certificate
or certificates for the Exercise Shares so purchased, registered in the name of
the Holder or persons affiliated with the Holder, if the Holder so designates,
shall be issued and delivered to the Holder within a reasonable time after the
rights represented by this Warrant shall have been so exercised.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.2 NET EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Common Stock is
greater than the Exercise Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant by payment of cash, the Holder may elect (the
"Conversion Right") to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Notice of Exercise in which event the Company shall issue to the Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
For purposes of the above calculation, the fair market value of one share
of Common Stock shall be:
(a) the product of (i) the average daily Market Price (as
defined below) during the period of the most recent 10 days, ending on the last
business day before the effective date of exercise of the Conversion Right, on
which the national securities exchanges were open for trading and (ii) the
number of shares of the Common Stock (as defined herein) into which each
Exercise Share is convertible on such date; or
(b) if no class of Common Stock is then listed or admitted to
trading on any national securities exchange or quoted in the over-counter
market, the fair market value shall be the Market Price on the last business day
before the effective date of exercise of the Conversion Right.
If the Common Stock is traded on a national securities exchange or
admitted to unlisted trading privileges on such an exchange, or is listed on the
National Market System (the "National Market System") of the Nasdaq, the Market
Price as of a specified day shall be the last reported sale price of Common
Stock on such exchange or on the National Market System on such date or if no
such sale is made on such day, the mean of the closing bid and asked prices for
such day on such exchange or on the National Market System. If the Common Stock
is not so listed or admitted to unlisted trading privileges, the Market Price as
of a specified day shall be the mean
2.
of the last bid and asked prices reported on such date (x) by the Nasdaq or (y)
if reports are unavailable under clause (x) above by the National Quotation
Bureau Incorporated. If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and ask prices are not reported, the Market
Price as of a specified day shall be determined in good faith by the Board of
Directors of the Company.
3. COVENANTS OF THE COMPANY.
3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and
agrees that all Exercise Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Common Stock to provide for the exercise of the rights represented
by this Warrant. If at any time during the Exercise Period the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit
exercise of this Warrant, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
3.2 NO IMPAIRMENT. Except and to the extent as waived or consented
to by the Holder, the Company will not, by amendment of its
[Articles/Certificate] of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in the carrying out of all the provisions
of this Warrant and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment, PROVIDED that nothing herein shall in any manner restrict the
Company from undertaking a Sale Event (as defined in the
Warrant Issuance
Agreement, dated as of _____, between the Company and the Holder (the "
Warrant
Issuance Agreement")) based on the good faith determination by the Company's
Board of Directors that such transaction is in the best interests of the Company
if the Company complies fully with Section 3 of the
Warrant Issuance Agreement.
3.3 NOTICES OF RECORD DATE. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Company shall mail to the Holder, at least
ten (10) days prior to the date specified herein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend or
distribution.
3.4 NOTICE OF EXPIRATION. If this Warrant has not been fully
exercised on or before the date thirty (30) days prior to the end of the
Exercise Period, the Company shall thereafter provide Holder with at least
twenty (20) days advance written notice of the date on which this Warrant is to
expire. If the Company fails to provide such notice, the Exercise Period shall
be extended until the date thirty (30) days after the date said notice is
provided to Holder.
4. REPRESENTATIONS OF HOLDER.
4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder
represents and warrants that it is acquiring the Warrant solely for its account
for investment and not with a
3.
view to or for sale or distribution of said Warrant or any part thereof, other
than potential transfers between affiliates. The Holder also represents that the
entire legal and beneficial interests of the Warrant and Exercise Shares the
Holder is acquiring is being acquired for, and will be held for, its account
only.
4.2 SECURITIES ARE NOT REGISTERED.
(a) The Holder understands that the Warrant and the Exercise
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act") on the basis that no distribution or public offering of the stock of
the Company is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present intention of acquiring the securities for a fixed or determinable
period in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the securities. The
Holder has no such present intention, other than potential transfers between
affiliates.
(b) The Holder recognizes that the Warrant and the Exercise
Shares must be held indefinitely unless they are subsequently registered under
the Act or an exemption from such registration is available.
(c) The Holder is aware that neither the Warrant nor the
Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met, including, among other things, the existence of a
public market for the shares, the availability of certain current public
information about the Company, the resale following the required holding period
under Rule 144 and the number of shares being sold during any three month period
not exceeding specified limitations. Holder is aware that the conditions for
resale set forth in Rule 144 have not been satisfied and that the Company
presently has no plans to satisfy these conditions in the foreseeable future.
4.3 DISPOSITION OF WARRANT AND EXERCISE SHARES.
(a) The Holder further agrees not to make any disposition of
all or any part of the Warrant or Exercise Shares in any event unless and until:
(i) The Company shall have received a letter secured by
the Holder from the Securities and Exchange Commission stating that no action
will be recommended to the Commission with respect to the proposed disposition;
or
(ii) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(iii) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition; provided, however, that
such statement will not be required if the disposition is permitted under Rule
144 of the Act.
(b) Notwithstanding the provisions of paragraph (a) above, the
Holder may assign this Warrant and the Exercise Shares to any affiliate.
4.
5. ADJUSTMENT OF EXERCISE PRICE.
5.1 STOCK DIVIDENDS; SPLITS; ETC. In the event of changes in the
outstanding Common Stock of the Company after the date hereof by reason of stock
dividends, splits, recapitalizations, reclassifications, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of shares available under the Warrant in the aggregate and
the Exercise Price shall be correspondingly adjusted to give the Holder of the
Warrant, on exercise for the same aggregate Exercise Price (the "Aggregate
Exercise Price"), the total number, class, and kind of shares as the Holder
would have owned had the Warrant been exercised prior to the event and had the
Holder continued to hold such shares until after the event requiring adjustment.
The form of this Warrant need not be changed because of any adjustment in the
number of Exercise Shares subject to this Warrant.
5.2 SALE OF SHARES BELOW SERIES PREFERRED CONVERSION PRICE.
(a) If at any time or from time to time after the date hereof,
the Company issues or sells, or is deemed to have issued or sold, Additional
Shares of Common Stock (as defined below), for an Effective Price (as defined
below) less than the then effective Exercise Price, then and in each such case,
the then existing Exercise Price shall be reduced, as of the opening of business
on the date of such issue or sale, to a price determined as set forth below and
the Holder shall have the right to purchase on exercise of the Warrant the
number of shares of Common Stock obtained by dividing the Aggregate Exercise
Price by the Exercise Price as reduced. The Exercise Price shall be reduced by
multiplying the Exercise Price in effect immediately prior to such issuance or
sale by a fraction equal to:
(i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (B) the number of shares of Common Stock which the
Aggregate Consideration received (as defined below) by the Company for the total
number of Additional Shares of Common Stock so issued would purchase at such
Exercise Price, and
(ii) the denominator of which shall be the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total number of Additional Shares of Common Stock
so issued.
For the purposes of the preceding sentence, the number of shares of Common
Stock deemed to be outstanding as of a given date shall be the sum of (A) the
number of shares of Common Stock outstanding, and (B) the number of shares of
Common Stock which could be obtained through the exercise or conversion of all
other rights, options and convertible securities outstanding on the day
immediately preceding the given date.
(b) For the purpose of making any adjustment required under
this Section 5.2, the aggregate consideration received by the Company for any
issue or sale of securities (the "Aggregate Consideration") shall: (i) to the
extent it consists of cash, be computed at the net amount of cash received by
the Company after deduction of any underwriting or similar commissions,
compensation or concessions paid or allowed by the Company in connection with
such issue or sale but without deduction of any expenses payable by the Company,
(ii) to the extent it consists of property other than cash, be computed at the
fair value of that property as determined in good faith by the Board of
Directors, and (iii) if Additional
5.
Shares of Common Stock, Convertible Securities (as defined below) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the adjustment required under this
Section 5.2, if after the date hereof the Company issues or sells (x) stock or
other securities convertible into Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as "Convertible
Securities") or (y) rights or options for the purchase of Additional Shares of
Common Stock or Convertible Securities and if the Effective Price of such
Additional Shares of Common Stock is less than the Exercise Price, in each case
the Company shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Company for the
issuance of such rights or options or Convertible Securities plus:
(i) in the case of such rights or options, the minimum
amounts of consideration, if any, payable to the Company upon the exercise of
such rights or options; and
(ii) in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Company upon the conversion
thereof (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities); PROVIDED that if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Company shall be deemed to have received the
minimum amounts of consideration without reference to such clauses.
(iii) If the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; PROVIDED FURTHER, that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities.
(iv) No further adjustment of the Exercise Price, as
adjusted upon the issuance of such rights, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional Shares of Common
Stock or the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Exercise Price as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Exercise
Price which would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the
6.
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.
7. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle
the Holder to any voting rights or other rights as a stockholder of the Company.
8. TRANSFER OF WARRANT. Subject to applicable laws, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder.
9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
10. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at Chautauqua Airlines, Inc., 0000 Xxxxx Xxxx Xxxxxx Xxxx, Xxxxxxxxxxxx,
Xxxxxxx, 00000, Fax No.: (000) 000-0000, Attention: President, with a copy to
Wexford Capital LLC, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx, 00000, Fax
No.: (000) 000-0000, Attention: General Counsel and the Holder at America West
Airlines, Inc., 000 Xxxx Xxx Xxxxxx Xxxxxxx, Xxxxx, Xxxxxxx, 00000, Fax No.:
(000) 000-0000, Attention: General Counsel, with a copy to Xxxxxx Godward llp,
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, 00000, Fax No. (415)
000-0000, Attention: Xxxxxx Xxxxxxxxx, or at such other address as the Company
or the Holder may designate by ten (10) days advance written notice to the other
party hereto.
7.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
12. GOVERNING LAW. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by the laws of the State of
Delaware.
8.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of .
CHAUTAUQUA AIRLINES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
9.
NOTICE OF EXERCISE
TO: CHAUTAUQUA AIRLINES, INC.
(1) |_| The undersigned hereby elects to purchase ________ shares of
the Common Stock of Chautauqua Airlines, Inc. (the "Company") pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
|_| The undersigned hereby elects to purchase ________ shares of
the Common Stock of Chautauqua Airlines, Inc. (the "Company") pursuant to the
terms of the net exercise provisions set forth in Section 2.2 of the attached
Warrant, and shall tender payment of all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
________________________________
(Name)
________________________________
________________________________
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; (ii) the undersigned is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision regarding its investment in the
Company; (iii) the undersigned is experienced in making investments of this type
and has such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned's own interests; (iv) the undersigned understands
that the shares of Common Stock issuable upon exercise of this Warrant have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), by reason of a specific exemption from the registration provisions of the
Securities Act, which exemption depends upon, among other things, the bona fide
nature of the investment intent as expressed herein, and, because such
securities have not been registered under the Securities Act, they must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available; and (v) the undersigned is aware
that the aforesaid shares of Common Stock may not be sold pursuant to Rule 144
adopted under the Securities Act unless certain conditions are met and until the
undersigned has held the shares for the number of years prescribed by Rule 144,
that among the conditions for use of the Rule is the availability of current
information to the public about the Company and the Company has not made such
information available and has no present plans to do so.
----------------------- ----------------------------
(Date) (Signature)
----------------------------
(Print name)
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
Name:
_______________________________________________________________________
(Please Print)
Address:
____________________________________________________________________
(Please Print)
Dated: _________________
Holder's
Signature:
_____________________________________
Holder's
Address:
_______________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
