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EXHIBIT 10.39
REIMBURSEMENT AGREEMENT
BY AND AMONG
AIR SOUTH AIRLINES, INC.
AND
XXXXXXXXX & XXXXX CALIFORNIA
A WHOLLY OWNED SUBSIDIARY OF
XXXXXXXXX & XXXXX GROUP
DATED AS OF DECEMBER 3, 1996
RELATING TO THE ISSUANCE OF A
$4,000,000
LETTER OF CREDIT
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .................................................... 1
Section 1.1 Definitions .......................................... 1
Section 1.2 Construction ......................................... 3
ARTICLE II LETTER OF CREDIT .............................................. 4
Section 2.1 Amount and Terms of Letter of Credit.................. 4
Section 2.2 Drawings and Reinstatement............................ 4
Section 2.3 Fees and Other Payment................................ 4
Section 2.4 Reimbursement......................................... 4
Section 2.5 Security.............................................. 5
Section 2.6 Place of Payment...................................... 6
Section 2.7 Termination of Agreement.............................. 6
Section 2.8 Reimbursement Loans................................... 6
ARTICLE III CONDITIONS PRECEDENT TO ISSUANCE OF LETTER OF CREDIT........... 7
Section 3.1 Documents To Be Received ............................. 7
Section 3.2 Other Conditions Precedent............................. 8
ARTICLE IV OBLIGATIONS OF THE CORPORATION ................................. 9
Section 4.1 Obligations of the Corporation......................... 9
ARTICLE V REPRESENTATIONS AND WARRANTIES .................................. 10
Section 5.1 Representations and Warranties of the Corporation...... 10
ARTICLE VI COVENANTS OF THE CORPORATION ................................... 11
Section 6.1 Affirmative Covenants.................................. 11
Section 6.2 Negative Covenants .................................. 13
ARTICLE VII EVENTS OF DEFAULT ............................................. 13
Section 7.1 Events of Default...................................... 13
ARTICLE VIII RIGHTS AND REMEDIES .......................................... 14
Section 8.1 Rights and Remedies.................................... 14
ARTICLE IX MISCELLANEOUS .................................................. 14
Section 9.1 Modification of Agreement.............................. 14
Section 9.2 Waiver of Rights by Lender; Remedies................... 15
Section 9.3 Notices................................................ 15
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TABLE OF CONTENTS
(CONTINUED)
Page
Section 9.4 Indemnification.........................................16
Section 9.5 Liability of Lender.....................................16
Section 9.6 Participations..........................................17
Section 9.7 Satisfaction Requirement................................17
Section 9.8 Governing Law...........................................17
Section 9.9 Waiver of Jury Trial....................................17
Section 9.10 Jurisdiction: Service of Process........................18
Section 9.11 Survival of Agreement...................................18
Section 9.12 Severability............................................18
Section 9.14 Counterparts............................................18
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EXHIBITS
EXHIBIT A Form of Reimbursement Loan Note
EXHIBIT B Form of Letter of Credit
EXHIBIT C Form of Certificate Relating to Accuracy of Certain Corporation
Representations Contained in, and the Authorization to Execute,
Certain Documents
EXHIBIT D Form of Warrant
EXHIBIT E Credit Card Agreement between First Bank National Association and
Air South, Inc.
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REIMBURSEMENT AGREEMENT
This REIMBURSEMENT AGREEMENT dated as of December 3, 1996, is made by and
between AIR SOUTH AIRLINES, INC., a Delaware corporation having its principal
place of business at 0000 Xxxxxxx Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxxx,
00000 ("Corporation"), in favor of XXXXXXXXX & XXXXX CALIFORNIA, a wholly owned
subsidiary of Xxxxxxxxx & Xxxxx Group ("Lender").
RECITALS
A. Corporation has requested that Lender arrange for the issuance of a
letter of credit to be issued in favor of First Bank National Association for
the account of Corporation in the aggregate amount of Four Million Dollars
($4,000,000).
B. Lender is willing to arrange for the issuance of said Letter of
Credit, but only upon the condition, among others, that Corporation shall have
executed and delivered to Lender this Reimbursement Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Lender to cause the issuance of the
Letter of Credit and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound,
the parties hereto represent, warrant, covenant and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Unless otherwise defined herein the following
terms shall have the following meanings (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"ACT OF BANKRUPTCY" shall mean the Corporation shall commence a
voluntary case or other proceeding in seeking liquidation, reorganization,
arrangement, readjustment of its debts or for any other relief under the federal
bankruptcy laws, including the Federal Bankruptcy Code, as amended, or under any
other insolvency act or law, state or federal, now or hereafter existing, or
shall take any other action indicating its consent to, approval of, or
acquiescence in, any such petition or proceedings; the Corporation shall apply
for, or consent to or acquiesce in, the appointment of a receiver, liquidator,
custodian, sequestrator, or a trustee for all or a substantial part of its
property; the Corporation shall make an assignment for the benefit of its
creditors; the Corporation shall be unable, or shall admit in writing its
inability, to pay its debts when due; or a petition in bankruptcy shall be filed
against the Corporation, as a debtor, under any applicable bankruptcy,
insolvency or similar law as now or hereafter in
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effect which shall not be discharged by a court of competent jurisdiction within
sixty (60) days of the date of such filing.
"AIR SOUTH, INC." means Air South Airlines, Inc.
"AGREEMENT" shall mean this Reimbursement Agreement together with
all duly authorized and executed amendments thereto.
"APPLICATION" shall mean that certain Application and Agreement for
Standby Letter of Credit dated November 20, 1996 by and between Issuing Bank and
Lender.
"BANK" shall mean First Bank National Association, a national
banking association with its principal office located at 000 Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 or any surviving, resulting or transferee
entity.
"BRIDGE LOANS" shall mean those certain demand notes executed and
delivered by Corporation to Lender as of October 31, 1996, November 6, 1996 and
November 13, 1996.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or
Sunday, (ii) a day on which banking institutions in the States of California,
Minnesota or South Carolina are authorized or required by law or executive order
not to be open for the conduct of their commercial banking business, or (iii) a
day on which the federal reserve bank for the federal reserve district in which
Bank is located is closed.
"COLLATERAL" shall have the meaning assigned to such term in
Section 2 of the Security Agreement.
"CREDIT CARD AGREEMENT" means that certain Agreement between First
Bank National Association and Air South, Inc. effective as of August 1, 1994,
attached as EXHIBIT E hereto, as the same may from time to time be amended,
modified, supplemented or restated.
"DATE OF DELIVERY" shall mean December 4, 1996 or any other date
agreed upon by the Corporation and Lender as the date upon which the initial
Letter of Credit shall be issued.
"DEFAULT RATE" shall mean a rate per annum equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
"DEPOSIT" shall have the meaning assigned to such term in Section 1
of the Credit Card Agreement.
"DRAWING" shall mean a drawing under the Letter of Credit in
accordance with its terms.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 7.1
hereof.
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"INTEREST RATE" shall mean ten percent (10%) per annum.
"ISSUING BANK" shall mean Bank of America National Trust and
Savings Association acting through its Chicago branch, or any surviving,
resulting or transferee entity.
"LETTER OF CREDIT" shall mean the Letter of Credit arranged by
Lender and issued by Issuing Bank pursuant to the Application on the Date of
Delivery, as the same may from time to time be amended, modified, supplemented
or restated, and shall include any substitute Letter of Credit issued pursuant
to Lender's obligations hereunder.
"MAXIMUM CREDIT" shall mean, as of any date of calculation, the
maximum amount available to be drawn under the Letter of Credit. Initially, the
Maximum Credit shall be $4,000,000.
"PERSON" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock corporation, estate, entity or governmental agency.
"REIMBURSEMENT LOAN NOTE" shall mean the note evidencing the
Reimbursement Loans, substantially in the form attached hereto as EXHIBIT A.
"REIMBURSEMENT LOANS" shall mean a reimbursement loan described in
SECTION 2.8 hereof.
"SECURITY AGREEMENT" shall mean that certain Security Agreement
dated December 3, 1996 made by Corporation in favor of Lender.
"TERMINATION DATE" shall mean the date determined in the manner
provided in Section 2.7 hereof.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, the
Security Agreement, the Reimbursement Loan Note, and any other agreement entered
into between Corporation and Lender, and any certificate or instrument executed
by Lender, in connection with said agreements and note, as the same may from
time to time be amended, modified, supplemented or restated.
SECTION 1.2 CONSTRUCTION. In this Agreement, unless the context otherwise
requires:
(A) Articles and Sections referred to by number shall mean the
corresponding Articles and Sections of this Agreement.
(B) The terms "hereby," "hereof," hereto," "herein," "hereunder,"
and any similar terms, as used in this Agreement refer to this Agreement, and
the term "hereafter shall mean after, and the term "heretofore" shall mean
before the date of execution of this Agreement.
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(C) Words of the masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders. Words importing
the singular number shall include the plural number and vice versa, and words
importing persons shall include corporations and associations, including public
bodies, as well as natural persons.
ARTICLE II
LETTER OF CREDIT
SECTION 2.1 AMOUNT AND TERMS OF LETTER OF CREDIT. At the request of
Corporation, Lender agrees, on the terms and subject to the conditions set forth
in this Agreement, including without limitation the conditions set forth in
ARTICLE III hereof, to on or before the Date of Delivery cause the issuance of
the Letter of Credit by Issuing Bank, in favor of Bank for the account of
Corporation, to secure, and to provide a source of payment of, the Deposit. The
Letter of Credit will be issued in an initial amount equal to the Maximum
Credit. The Letter of Credit shall be issued in favor of Bank for the account of
the Corporation substantially in the form of EXHIBIT B hereto.
SECTION 2.2 DRAWINGS AND REINSTATEMENT.
(A) Drawings under the Letter of Credit are intended to be made by
Bank for the account of the Corporation and to be honored by Issuing Bank, all
pursuant to the provisions, on the terms and subject to the conditions set forth
in the Letter of Credit. The honoring of any Drawing shall automatically reduce
by like amount the Maximum Credit. No Drawing under the Letter of Credit shall
be honored in an amount exceeding the Maximum Credit.
(B) The Maximum Credit, or any lesser amount, may be reinstated by
Lender at its sole option, provided Lender has been reimbursed by Corporation
any such amounts to be reinstated.
SECTION 2.3 FEES AND OTHER PAYMENT.
(A) The Corporation hereby agrees to pay to or reimburse Lender:
(I) On or before the Date of Delivery, the origination fee
paid to Issuing Bank in an amount equal to $200;
(II) On or before the Date of Delivery, an amount equal to all
costs and expenses (including attorneys' fees and expenses) incurred by Lender
in connection with the preparation and negotiation of this Agreement, the
Reimbursement Loan Note, the other Transaction Documents and the closing of the
transactions contemplated hereby.
(III) On demand from time to time from Lender, any fees or
other amounts (not otherwise reimbursed by Corporation to Lender pursuant to
SECTION 2.4 hereof) required to be paid by Lender to the Issuing Bank in
connection with the Letter of Credit,
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including, without limitation, a one percent (1%) per annum fee, payable
quarterly by Lender to Issuing Bank;
(IV) On demand from time to time by Lender, an amount equal to
all costs and expenses (including attorneys fees and expenses) (not otherwise
reimbursed by Corporation to Lender pursuant to SECTION 2.4 hereof) incurred by
Lender relative to a Drawing under the Letter of Credit.
(V) On demand from time to time by Lender, an amount equal to
all costs and expenses (including attorneys' fees and expenses) incurred by
Lender relative to the Letter of Credit (not otherwise reimbursed by Corporation
to Lender pursuant to this SECTION 2.3 or SECTION 2.4) or each Reimbursement
Loan or the enforcement or preservation of any rights of Lender under this
Agreement, the other Transaction Documents, each Reimbursement Loan or the
Reimbursement Loan Note, or in connection with the exercise or waiver of any of
Lender's discretionary rights under this Agreement, the Reimbursement Loan Note
or under the other Transaction Documents;
(VI) On demand from time to time by Lender, interest, at the
Default Rate, on any and all amounts unpaid by the Corporation when due under
this Agreement or the Reimbursement Loan Note, but in no event shall such rates
exceed the maximum rate of nonusurious interest allowed from time to time by
law, as is now or, to the extent allowable by law, as hereinafter may be in
effect, to be paid by the Corporation;
Each such payment or reimbursement shall be deemed to be earned in
full on the date on which such amount is due and payable by the Corporation.
(B) The Corporation agrees to pay, on demand from time to time by
the Lender, all reasonable costs and expenses incurred by the Lender, in
connection with (i) any transfer or amendment of the Letter of Credit or
amendment of this Agreement, (ii) any review by the Lender of the documents
necessary for Lender to honor a Drawing under the Letter of Credit, or relative
to the Lender's curing of any event of default by Borrower under any of the
Transaction Documents, (iii) the exercise, enforcement or preservation of any
rights of Lender under this Agreement, (iv) any action or proceeding relating to
a court order, injunction, or other process or decree restraining or seeking to
restrain Lender from paying any amount under the Letter of Credit, and (v) the
waiver or amendment of any of the Lender's rights under any of the Transaction
Documents; provided, however, that no payment shall be required under this
SECTION 2,3(b) in respect of any cost or expense Lender has incurred because of
its gross negligence or willful misconduct if so determined by a court of
competent jurisdiction.
SECTION 2.4 REIMBURSEMENT. The Corporation agrees to pay to or reimburse
Lender in full for any and all Drawings made under the Letter of Credit on the
date any Drawing is made. Any amount drawn under the Letter of Credit shall be,
to the extent permitted by and in accordance with SECTION 2.8 HEREOF,
automatically converted into a Reimbursement Loan. A Reimbursement Loan, when
made, will satisfy the reimbursement obligation of the Corporation to Lender in
the principal amount of such Reimbursement Loan.
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SECTION 2.5 SECURITY. The obligations of the Corporation under this
Agreement, including, without limitation, the Corporation's obligations to make
payments under SECTIONS 2.3 and 2.4 hereof, are secured by the Collateral
identified and described as security therefore in the Security Agreement.
SECTION 2.6 PLACE OF PAYMENT. All payments to be made by the Corporation to
the Lender hereunder shall be made in lawful currency of the United States of
America and in immediately available funds by wire to the following account:
Xxxxxxxxx and Xxxxx Group
c/o Citibank, F.S.B.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
ABA: 000000000
Account#: 601022205
Account Name: H&Q Management Corporation
or at such other address as Lender may specify from time to time by notice to
the Corporation.
SECTION 2.7 TERMINATION OF AGREEMENT. This Agreement (except for the
obligations of the Corporation set forth in SECTIONS 2.3(b) and 9.4) shall
terminate at such time as the Letter of Credit shall have expired and when all
amounts due and payable to Lender hereunder shall be paid in full (the
"Termination Date").
SECTION 2.8 REIMBURSEMENT LOANS.
(A) Lender agrees, upon the terms, subject to the conditions and
relying upon the representations and warranties set forth in this Agreement and
the other Transaction Documents, that, unless an Event of Default shall have
occurred and be continuing Drawing under the Letter of Credit that is not repaid
in full by the Corporation on the date thereof shall automatically be converted
into a Reimbursement Loan. On and as of the date of the making of each
Reimbursement Loan: (i) the Corporation shall be deemed to have (A) remade,
ratified and confirmed all representations and warranties of the Corporation
contained in SECTION 5.1 of this Agreement, and (B) certified compliance with
all covenants contained in ARTICLE VI hereof;
(B) The principal amount of the Reimbursement Loans shall not
exceed the Maximum Credit available under the Letter of Credit on such date. All
the Reimbursement Loans shall be evidenced by a single Reimbursement Loan Note
substantially in the form of EXHIBIT A hereto with appropriate insertions, duly
executed and delivered by the Corporation to Lender, dated by Lender on the
attached schedule the date of each Drawing under the Letter of Credit that gives
rise to a Reimbursement Loan, and payable to Lender or its assigns in an amount
equal to the amount drawn on the Letter of Credit that is not reimbursed as
provided in the first sentence of SECTION 2.4 of this Agreement. The principal
amount of each Reimbursement Loan, together with any unpaid and accrued interest
thereon, shall be due and
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payable on the later of (a) the first anniversary of such Reimbursement Loan or
(b) such time as the Letter of Credit shall have expired.
(C) The Reimbursement Loans shall bear interest at the Interest
Rate. Such Interest shall be calculated on the basis of a 365 or 366 day year
and actual number of days elapsed. Lender shall, and is hereby authorized by the
Corporation to, date the schedule attached to the Reimbursement Loan Note the
dare of any Drawing under the Letter of Credit that is not reimbursed as
provided in the first sentence of SECTION 2.4 of this Agreement and insert the
amount (or the portion thereof nor so reimbursed, as the case may be), and
endorse on such schedule an appropriate notation evidencing the date and amount
of each repayment and any other information provided for on such schedule;
provided, however, that the failure of Lender to insert any such date or amount
or set forth such repayments and other information on such schedule shall not in
any manner affect the obligation of the Corporation to repay the related
Reimbursement Loans in accordance with the terms of this Agreement.
(D) Lender agrees that the Corporation may prepay a Reimbursement
Loan in whole or in part without premium or penalty at any time.
ARTICLE III
CONDITIONS PRECEDENT TO ISSUANCE
OF LETTER OF CREDIT
SECTION 3.1 DOCUMENTS TO BE RECEIVED. Lender's obligations to cause the
issuance of the Letter of Credit as set forth in SECTION 2.1 hereof are subject
to the conditions precedent that, on or prior to the Date of Delivery, Lender
shall receive the following documents, all in form and substance satisfactory to
Lender:
(A) executed counterparts of the this Agreement, the Security
Agreement and the Reimbursement Loan Note, which shall be duly executed and
dated by the Corporation (except for the schedule attached thereto, which shall
be undated and blank as to amount);
(B) a certificate of the appropriate officer(s) of the Corporation
certifying (i) that the statements contained in SECTIONS 3.2(a) and 5.1 are true
and correct, (ii) the name and true signatures of the officers of the
Corporation authorized to sign this Agreement and the other documents to be
delivered by the Corporation hereunder and (iii) as to such other matters as
Lender shall determine, in substantially the form attached hereto as EXHIBIT C;
(C) all filings, notices and recordings necessary to perfect the
security interest granted Lender pursuant to the Security Agreement shall have
been delivered to Lender;
(D) the Warrant duly executed and delivered by Corporation in the
form attached hereto as EXHIBIT D;
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(E) the Notification of Assignment and Irrevocable Distribution
Instructions duly executed and delivered by Corporation and acknowledged,
consented and agreed to by Bank in the form attached as Exhibit A to the
Security Agreement;
(F) an Intercreditor Agreement duly executed and delivered by
Jobs-Economic Development Authority ("JEDA") and NationsBank N.A. in a form and
substance satisfactory to Lender;
(G) such other documents, certificates, instruments, approvals or
filings as Lender may reasonably deem necessary or appropriate.
SECTION 3.2 OTHER CONDITIONS PRECEDENT. The Lender's obligation to cause
the issuance of the Letter of Credit as set forth in Section 2.1 hereof shall be
subject to the additional conditions precedent that:
(A) the following statements shall be true and correct on the Date
of Delivery and Lender shall have received a certificate signed by a duly
authorized officer of the Corporation, dated the Date of Delivery to the
following effect and to such other effects as the Lender may request,
substantially in the form attached hereto as EXHIBIT C:
(I) the representations and warranties of the Corporation set
forth in SECTION 5.1 hereof and in the other Transaction Documents are true and
correct as of the Date of Delivery as though made on and as of such date;
(II) no event has occurred and is continuing, or would result
directly or indirectly from the issuance of the Letter of Credit, which
constitutes an Event of Default hereunder or which would constitute such an
Event of Default, but for the requirement that notice be given or time elapse,
or both; and
(III) no "event of default" (however defined or designated) has
occurred under any of the Transaction Documents, and no event has occurred and
is continuing which would constitute such an event of default, but for the
requirement that notice be given or time elapse, or both.
(B) On or before the Date of Delivery, the Corporation shall have
duly adopted a resolution authorizing the execution, delivery and performance by
the Corporation of the Transaction Documents to which it is a party, and on and
after the Date of Delivery such resolution shall continue to be in full force
and effect.
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ARTICLE IV
OBLIGATIONS OF THE CORPORATION
SECTION 4.1 OBLIGATIONS OF THE CORPORATION.
(A) The obligations of the Corporation under this Agreement shall
be absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including without limitation the following circumstances:
(I) any lack of validity or enforceability of any of the
Transaction Documents (other than this Agreement) or any other agreement or
instrument contemplated thereby or related thereto;
(II) any amendment or waiver of or any consent to departure
from all or any of the documents contemplated hereby;
(III) the existence of any claim, setoff, defense or other
rights which the Corporation may have at any time against any beneficiary or any
transferee of the Letter of Credit (or any persons or entities for whom such
beneficiary may be acting), the Lender or any other Person, whether in
connection with the Transaction or any unrelated transaction;
(IV) any breach of contract or other dispute between the
Corporation and any beneficiary of the Letter of Credit (or any persons or
entities for whom any such beneficiary may be acting), Lender, Issuing Bank,
Bank or any other Person;
(V) any statement or any other document presented under the
Transaction Documents proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(VI) payment by the Issuing Bank under the Letter of Credit
against presentation of a sight draft or certificate which does not comply with
the terms of the Letter of Credit, provided that such payment shall not have
constituted an act of gross negligence or willful misconduct by Lender as
determined by a court of competent jurisdiction; or
(VII) any delay, extension of time, renewal, compromise or
other indulgence or modification granted or agreed to by Lender, with or without
notice to or approval by the Corporation, as the case may be, in respect of any
of the Corporation's indebtedness to Lender under this Agreement.
(B) Lender shall not be deemed to have waived or released any of
its rights or remedies (whether specified in or arising under this Agreement or
otherwise available to it by law or agreement) unless it signs a written waiver
or release. Delay or failure to act on the Lender's part shall not constitute a
waiver of or otherwise preclude enforcement of any of its
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rights and remedies. All of Lender's rights and remedies shall be cumulative and
may be exercised singularly or concurrently. Lender need not resort to any
particular right or remedy before exercising or enforcing any other, and
Lender's resort to any right or remedy shall not preclude the exercise or
enforcement of each other right and remedy.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation represents and warrants as follows:
(A) ORGANIZATION AND POWERS. The Corporation is a corporation, duly
organized and validly existing under the laws of the State of Delaware and is
authorized to transact business and exercise its power under the applicable laws
of any state in which the conduct of its business or its ownership of property
requires that it be so qualified.
(B) AUTHORIZATION AND ABSENCE. The execution, delivery and
performance of the Transaction Documents (i) have been duly authorized by all
necessary action on the part of the Corporation, (ii) do not and will not
conflict with, or result in a violation of, any provision of law, or any order,
writ, rule or regulation of any court or governmental agency or instrumentality
binding upon or applicable to the Corporation and (iii) do not and will not
conflict with, result in a violation of, or constitute a default under, any
resolution, material agreement or instrument to which the Corporation is a party
or by which the Corporation or any of its property is bound.
(C) BINDING OBLIGATION. Each of the Transaction Documents will be a
valid and binding obligation of the Corporation enforceable in accordance with
its terms.
(D) GOVERNMENTAL CONSENT OR APPROVAL. No consent, approval, permit,
authorization or order of, or registration or filing with, any court or
governmental agency, authority or other instrumentality not already obtained,
given or made is required on the part of the Corporation for the execution,
delivery and performance by the Corporation of any of the Transaction Documents.
(E) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court,
arbitrator, governmental or other board, body or official, pending or, to the
best knowledge of the Corporation, threatened against or affecting the
Corporation, questioning the validity of any proceeding taken or to be taken by
the Corporation in connection with the execution, delivery and performance by
the Corporation of the Transaction Documents or seeking to prohibit, restrain or
enjoin the execution, delivery or performance by the Corporation of any of the
foregoing. nor, to the best knowledge of the Corporation, is there any basis
therefor, wherein an unfavorable decision, ruling or finding would (i) adversely
affect the validity or enforceability of, or the authority or ability of the
Corporation to perform its obligations under the Transaction Documents or (ii)
have a material
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adverse effect on the ability of the Corporation to conduct its business as
currently conducted or as proposed or contemplated to be conducted.
(F) NO DEFAULTS BY THE CORPORATION. Other than as set forth on the
Schedule of Exceptions attached hereto (the "Schedule"), the Corporation is not
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which the Corporation is a party or by which the Corporation or any of its
property is bound, except for such defaults as would not have a material adverse
effect on the ability of the Corporation to conduct its business as currently
conducted or as proposed or contemplated to be conducted.
(G) INCORPORATION OF REPRESENTATIONS. The Corporation hereby makes
to the Lender the same representations and warranties as are made by the
Corporation and set forth in any other Transaction Documents, which
representations and warranties, as well as the defined terms contained therein
(or in such defined terms), are hereby incorporated by reference with the same
effect as if each and every such representation and warranty and defined term
were set forth herein in its entirety. No amendment to such representations and
warranties or defined terms made pursuant thereto shall be effective to amend
such representations and warranties and defined terms as incorporated by
reference herein without the consent of Lender.
(H) COMPLIANCE WITH LAWS. The Corporation is in material compliance
with all provisions of applicable law.
ARTICLE VI
COVENANTS OF THE CORPORATION
SECTION 6.1 AFFIRMATIVE COVENANTS. So long as the Termination Date has not
occurred or so long as any amount is due and owing to Lender hereunder, the
Corporation will, unless Lender otherwise shall consent in writing:
(A) DELIVERY OF INFORMATION, REPORTS AND OPINIONS. Furnish to
Lender the following: (i) as soon as possible and in any event within two (2)
Business Days after the occurrence of (A) each Event of Default or any event or
condition that, with the passage of time or the giving of notice or both, would
constitute an Event of Default, under this Agreement, and (B) each "event of
default" (however defined or designated) or any event or condition that, with
the passage of time or the giving of notice or both, would constitute an "event
of default" under any Transaction Document, a statement of an officer of the
Corporation setting forth details thereof and the action which the Corporation
proposes to take with respect thereto; (ii) audited financial statements, if
any, of the Corporation within ten (10) days after the Corporation's receipt of
the same from the respective accountants; (iii) a copy of the annual budget, if
any, for the Corporation within ten (10) days after the adoption of such budget;
and (iv) as promptly as practicable, written notice to the Lender of all
proceedings before any court or governmental authority which, if adversely
determined, would materially and adversely affect the ability of the Corporation
to pay when due the principal of or any interest on the Reimbursement Loan Note.
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(B) PAYMENT OF INDEBTEDNESS. Other than as set forth on the
Schedule, duly and punctually pay or cause to be paid all principal and interest
on the indebtedness of the Corporation legally due and owing to third parties,
comply with and perform all conditions, terms and obligations of the notes or
bonds evidencing such indebtedness and the security agreements, deeds of trust
and mortgages securing such indebtedness, and upon being notified of a default
or having made a determination not to pay an indebtedness when due, promptly
inform Lender of any such default, or anticipated default, under any such note,
bond, security agreement, deed of trust or mortgage, and forward to the Lender a
copy of any notice of default or notice of an event that might result in default
under any such note, bond, security agreement, deed of trust or mortgage;
(C) ACCESS TO RECORDS AND AUDIT. Upon reasonable notice to
Corporation (unless an Event of Default has occurred and is continuing, in which
case no notice is necessary) Corporation shall permit Lender to at all times
have full and free access during normal business hours to all the books and
records and correspondence of Corporation, and Lender or any agents or
representatives of Lender may examine the same, take extracts therefrom and make
photocopies thereof, and Corporation agrees to render to Lender, at
Corporation's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto; and cause Bank to permit Lender to
have all rights of Borrower to audit, copy or make extracts of the records of
Bank as are specified under Section 10 of the Credit Card Agreement;
(D) RELATED COVENANTS. Fully and faithfully perform each of the
covenants and agreements required of it pursuant to the provisions of the
Transaction Documents;
(E) FURTHER ACTION. At any and all times, insofar as it may be
authorized to do so by law, pass, make, do, execute, acknowledge and deliver all
and every such further resolutions, acts, deeds, conveyances, assignments,
recordings, filings, transfers and assurances as may be necessary or reasonably
desirable for the better assuring, conveying, granting, assigning and confirming
the amounts due hereunder and under the Reimbursement Loan Note, or intended so
to be, or which the Corporation may hereafter become bound to pledge or assign
thereto;
(F) COMPLIANCE WITH LAWS. Comply in all material respects with all
applicable (A) laws (including, rules, regulations, writs, decrees and orders of
all Federal, state, local or foreign courts or governmental agencies,
authorities, instrumentalities or regulatory bodies and (B) rules, regulations
and requirements necessary to maintain its operating and business licenses,
authorizations and permits; and
(G) INCORPORATION OF COVENANTS. The Corporation hereby makes to
Lender the same covenants as are made by the Corporation and set forth in any
other Transaction Document, which covenants, as well as the defined terms
contained therein (or in such defined terms), are hereby incorporated by
reference with the same effect as if each and every such covenant and defined
term were set forth herein in its entirety. No amendment to such covenants or
defined terms made pursuant thereto shall be effective to amend such covenants
and defined terms as incorporated by reference herein without the consent of the
Lender.
12.
17
SECTION 6.2 NEGATIVE COVENANTS. So long as the Termination Date has not
occurred or any amount remains due and owing to Lender hereunder, unless the
Lender otherwise shall consent in writing, the Corporation agrees not to issue
any indebtedness which would be secured (whether on a senior, parity or junior
lien basis) by any pledge of or security interest in the Collateral.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall be an "Event of Default" hereunder unless waived by Lender pursuant
to SECTION 9.1 hereof:
(A) the Corporation shall fail to pay when due any amount specified
under the terms of this Agreement, including, without limitation, amounts due
under the Reimbursement Loan Note;
(B) any representation or warranty made by the Corporation pursuant
to SECTION 5.1 hereof or under the Security Agreement or any certification made
by the Corporation hereunder shall prove to have been incorrect in any material
respect when made;
(C) the Corporation shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement (other than those
specifically referenced in SECTION 7.l(a) and (b) above) and such failure shall
remain unremedied for thirty (30) days after written notice thereof shall have
been given to the Corporation, by Lender;
(D) an "event of default" (however defined or designated) under any
Transaction Document shall have occurred and be continuing;
(E) an event of default under any indebtedness of the Corporation
from time to time outstanding or under any agreement to which Borrower is a
party with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000)
or that could materially and adversely affect the ability of the Corporation to
pay when due the principal of or any interest on the Reimbursement Loan Note.
(F) any material provision of this Agreement or the other
Transaction Documents shall at any time for any reason cease to be valid and
binding on the Corporation, or shall be declared to be null and void, or the
validity or enforceability thereof shall be contested by the Corporation or any
governmental agency or authority, and the happening of the events heretofore set
forth in this SUBSECTION (f) shall materially and adversely affect Lender's
rights under this Agreement or under any other Transaction Document, or the
Corporation shall deny that it has any or further liability or obligation under
this Agreement or any other Transaction Document;
13.
18
(G) Lender shall fail to have a valid and enforceable perfected
first priority security interest under the Security Agreement, subject only to
the Permitted Liens;
(H) The occurrence of (or with the giving of notice, lapse of time,
determination of materiality or the fulfillment of any other applicable
condition or any combination of the foregoing, might constitute) a default by
Borrower under, or the termination of, the Credit Card Agreement; or
(I) an Act of Bankruptcy.
ARTICLE VIII
RIGHTS AND REMEDIES
SECTION 8.1 RIGHTS AND REMEDIES.
(A) DEFAULTS UNDER THIS AGREEMENT. Upon the occurrence of an Event
of Default hereunder, or at any time thereafter while such default continues,
Lender, in its sole discretion, may do any one or more of the following:
(I) send notice of such Event of Default to the Corporation;
(II) declare the Reimbursement Loan Note, if outstanding, and
any and all amounts due and owing under this Agreement or under the other
Transaction Documents, to be immediately due and payable;
(III) terminate the Letter of Credit; and
(IV) exercise any rights and remedies available to it by law or
under this Agreement, the Security Agreement, any other Transaction Document or
any other agreement, document or instrument contemplated hereby.
(B) DEFAULTS UNDER THE CREDIT CARD AGREEMENT. Lender may cure an
event of default under the Credit Card Agreement; provided, however, that
nothing contained herein shall obligate Lender to cure any such event of
default.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 MODIFICATION OF AGREEMENT. No modification or waiver of any
provision of this Agreement, and no consent to any departure by the Corporation
therefrom, shall be effective unless the same shall be in writing and signed by
Lender and the Corporation and no modification or waiver of any provision of the
Letter of Credit, and no consent to any departure by the Corporation or Bank
therefrom, shall in any event be effective unless the same shall be
14.
19
in writing and signed by Lender. Any such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on the Corporation in any case shall entitle the Corporation to or any
other or further notice or demand in the same, similar or other circumstances.
SECTION 9.2 WAIVER OF RIGHTS BY LENDER; REMEDIES. No course of dealing or
failure or delay on the part of Lender in exercising any right, power or
privilege hereunder or under the Letter of Credit shall operate as a waiver
hereof or thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise or the exercise of any other right, power or
privilege. The rights of Lender under this Agreement are cumulative and not
exclusive of any rights or remedies which Lender would otherwise have.
SECTION 9.3 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed effectively
given: (i) upon personal delivery to the party to be notified; (ii) upon receipt
at the address specified below after having been sent by certified or registered
mail, return receipt requested, postage prepaid; or (iii) 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 party to be notified at the address set forth below:
If to the Corporation:
Air South Airlines, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Chairman
Fax: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Monteith Law Offices
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
(which shall not constitute notice)
If to Lender:
Xxxxxxxxx & Xxxxx California
x/x Xxxxxxxxx & Xxxxx LLC
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Fax: (000) 000-0000
15.
20
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile No.: (000) 000-0000
(which shall not constitute notice)
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 9.4 INDEMNIFICATION. In addition to other amounts payable by the
Corporation under this Agreement, the Corporation hereby agrees to the fullest
extent permitted by applicable law, to protect, defend, indemnify and hold
harmless Lender, its assignees, the Issuing Bank, and their respective
directors, officers, employees, agents, counsel, successors and assigns from and
against any and all claims, demands, judgments, damages, actions, injuries,
losses, liabilities, penalties, costs, charges and expenses whatsoever which
such Person may (or which may be claimed against such Person whatsoever),
including, without limitation, the fees and expenses of counsel for such Person
by reason of or in connection with: (a) the issuance of the Letter of Credit;
(b) any breach by Corporation of any representation, warranty, covenant, term or
condition in, or the occurrence of any default under this Agreement, the
Reimbursement Loan Note or the other Transaction Documents, including all
reasonable fees or expenses resulting from the settlement or defense of any
claims or liabilities arising as a result of any such breach or default;
provided, however, that the Corporation shall not be required to indemnify any
such Person for any claims, demands, damages, losses, liabilities, costs,
charges and expenses to the extent, but only to the extent, caused by (i) the
gross negligence of Lender, as determined by a court of competent jurisdiction,
in determining whether a sight draft or certificate presented under the Letter
of Credit complied with the terms of the Letter of Credit; (ii) Lender's willful
failure, as determined by a court of competent jurisdiction, to cause payment
under the Letter of Credit after the presentation to it by Lender of a sight
draft and all required certificates strictly complying with the terms and
conditions of the Letter of Credit. The indemnification obligations in this
SECTION 9.4 shall survive the expiration of this Agreement or the Letter of
Credit.
SECTION 9.5 LIABILITY OF LENDER. The Corporation assumes all risks of the
acts or omissions of Bank and any transferee of the Letter of Credit with
respect to its use of the Letter of Credit or the proceeds thereof; provided,
however, this assumption is not intended to, and shall not, preclude the
Corporation from pursuing such rights and remedies as it may have against Bank
at law or under the Credit Card Agreement or any other agreement. Neither the
Lender nor any Person participating in the Letter of Credit or the Reimbursement
Loan Note shall be liable or responsible for: (a) the use which may be made of
the Letter of Credit or the
16.
21
proceeds thereof or for any acts or omissions of Bank and any transferee of the
Letter of Credit in connection therewith; (b) the validity, sufficiency or
genuineness of documents presented under the Letter of Credit, or of any
endorsement(s) thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; provided, however,
(a) and (b) to the contrary notwithstanding, the Corporation shall have a claim
against the Lender, and the Lender shall be liable to the Corporation, to the
extent, but only to the extent, of any direct, as opposed to consequential,
damages suffered by the Corporation which the Corporation proves, as determined
by a court of competent jurisdiction, were caused by (i) Lender's gross
negligence or (ii) Lender's willful act that prevents payment under the Letter
of Credit after the presentation to Issuing Bank by the Bank (or a successor
under the Credit Card Agreement to whom the Letter of Credit has been
transferred in accordance with its terms) of a sight draft and all required
certificates strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, the Lender may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; provided, however, that if Lender shall receive
timely written notification from each of Bank or the Corporation and that
sufficiently identifies (in the reasonable opinion of Lender) documents that
thereafter may be presented to Issuing Bank or Lender which are not to be
honored, Lender agrees to use its best efforts to avoid honoring such documents
thereafter. Lender assumes no responsibility for any failure or delay in the
transmission to Bank of funds drawn under the Letter of Credit through the
federal funds wire system.
SECTION 9.6 PARTICIPATIONS. Lender may participate to other Persons and
institutions of the Lender's choosing all or any portion of its obligations
under the Letter of Credit and the obligations of the Corporation under the
Reimbursement Loan Note. No such participation shall relieve the Lender of its
obligations hereunder nor shall it cause an increase in Corporation's
obligations under this Agreement, including under SECTION 2.3(b) above.
SECTION 9.7 SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Lender, the determination of such
satisfaction shall be made by Lender in its sole and exclusive judgment
exercised in good faith.
SECTION 9.8 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Agreement, the Reimbursement Loan
Note and the other Transaction Documents, and any obligations arising hereunder
or thereunder, shall be governed by, and construed and enforced in accordance
with, the laws of the State of California applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflict of laws.
SECTION 9.9 WAIVER OF JURY TRIAL. The Corporation hereby waives trial by
jury in any litigation in any court with respect to, in connection with, or
arising out of this Agreement, the Reimbursement Loan Note, the other
Transaction Documents or any instrument or document delivered pursuant to this
Agreement, the Reimbursement Loan Note or the other Transaction Documents, or
the validity, protection, interpretation, collection or enforcement thereof, or
any
17.
22
other claim or dispute howsoever arising, between the Corporation, on the one
hand, and Lender, on the other hand.
SECTION 9.10 JURISDICTION: SERVICE OF PROCESS. The Corporation hereby
irrevocably consents to the jurisdiction of the Courts of the State of
California, County of San Francisco and of any Federal Court located in the
county of San Francisco California, and agree that venue in each of such Courts
is proper in connection with any action or proceeding arising out of or relating
to this Agreement, the other Transaction Documents, or any document or
instrument delivered pursuant to this Agreement or the other Transaction
Documents. Nothing herein shall affect the right of Lender to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Corporation in any other jurisdiction.
SECTION 9.11 SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made in this Agreement shall survive the issuance
of the Letter of Credit by Issuing Bank and shall continue in full force and
effect so long as the Letter of Credit shall be unexpired or any sums drawn or
due hereunder or under the Reimbursement Loan Note shall be outstanding and
unpaid, regardless of any investigation made by any Person and so long as any
amount payable hereunder remains unpaid. Whenever in this Agreement Lender is
referred to, such reference shall be deemed to include the successors and
assigns of Lender, and all covenants, promises and agreements by or on behalf of
the Corporation which are contained in this Agreement shall inure to the benefit
of the successors and assigns of Lender and such other Persons as are
indemnified herein, subject to such limitations as are set forth in SECTION 9.6
above regarding participations. The rights and duties of the Corporation,
however, may not be assigned or transferred, except as specifically provided in
this Agreement or with the prior written consent of the Lender, and all
obligations of the Corporation shall continue in full force and effect
notwithstanding any assignment by the Corporation of any of their respective
rights or obligations under any of the Transaction Documents or the
Reimbursement Loan Note or any entering into, or consent by the Corporation
supplement or amendment to any of the Transaction Documents .
SECTION 9.12 SEVERABILITY. Any provision of this Security Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 9.13 HEADINGS. The various headings in this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of this
agreement or any provisions hereof.
SECTION 9.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification thereof has
been received by Corporation and Lender.
18.
23
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its duly authorized officer on the date first set
forth above.
CORPORATION: AIR SOUTH AIRLINES, INC.
By:/s/ Xxxxxx X. Xxxxxx
---------------------------------
Printed Name: Xxxxxx X. Xxxxxx
-------------------------
Title: Vice President
---------------------------------
ATTEST:
/s/ Xxxxx Xxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Secretary
XXXXXXXXX AND XXXXX CALIFORNIA, a wholly
owned subsidiary of Xxxxxxxxx & Xxxxx Group
By:/s/ Xxxxxx Xxxxxxxxxxxx
-----------------------------------
Printed Name:/s/Xxxxxx Xxxxxxxxxxxx
-------------------------
Title: Attorney in fact
--------------------------------
19.
24
SCHEDULE OF EXCEPTIONS
SCHEDULE 3.1(F)
THE COMPANY IS CURRENTLY UNABLE TO PROVIDE AN INTERCREDITOR
AGREEMENT TO LENDER EXECUTED BY JEDA AND NATIONSBANK. THE COMPANY AGREES TO USE
ITS BEST EFFORTS TO PROVIDE SUCH AGREEMENT IN A FORM AND SUBSTANCE SATISFACTORY
TO LENDER ON OR BEFORE DECEMBER 31, 1996.
SCHEDULE 5.L(F)
THE COMPANY IS CURRENTLY IN DEFAULT UNDER THE FOLLOWING INSTRUMENTS
OR CONTRACTS:
(A) AIR SOUTH, INC. HUD SECTION 108 LOAN
(B) REVOLVING CREDIT FACILITY WITH NATIONSBANK, N.A.
SCHEDULE 6.1.(B)
IT IS UNDERSTOOD THAT THE COMPANY IS CURRENTLY AND GENERALLY IN ARREARS
ON ACCOUNTS PAYABLE TO NUMEROUS GENERAL CREDITORS NOT EXCEEDING $8,200,000.00.
SUCH ACCOUNTS ARE NOT EVIDENCED BY NOTES, BONDS, SECURITY AGREEMENTS, DEEDS OF
TRUST OR MORTGAGES.
25
EXHIBIT A
FORM OF
REIMBURSEMENT LOAN NOTE
$4,000,000 San Francisco, California
December 3, 1996
FOR VALUE RECEIVED, AIR SOUTH AIRLINES, INC., a Delaware corporation (the
"Corporation") hereby unconditionally promises to pay to the order of XXXXXXXXX
& XXXXX CALIFORNIA, a wholly owned subsidiary of Xxxxxxxxx & Xxxxx Group
("Lender"), or their assigns, in lawful money of the United States of America
and in immediately available funds, the sum of Four Million Dollars ($4,000,000)
or so much thereof as from time to time may be advanced hereunder pursuant to
Section 2.8 of that certain Reimbursement Agreement, dated as of December 3,
1996, by and among the Corporation and Lender, as amended from time to time (the
"Agreement"), in connection with drawings under that certain Letter of Credit
Xx. 0000000 dated December 4, 1996, issued by the BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION in favor of FIRST BANK NATIONAL ASSOCIATION (including
any amendment thereof or substitute therefor) (the "Letter of Credit") in
accordance with the terms and conditions set forth in the Agreement. Borrower
shall also pay interest (calculated on the basis of a 365 or 366 day year and
actual number of days elapsed) on such sum or the portion thereof from time to
time outstanding hereunder, monthly, at the rates and in accordance with the
terms and conditions set forth in the Agreement.
This Reimbursement Loan Note is issued under and is subject to the terms
and conditions of the Agreement. All definitions, terms, conditions, rights and
provisions set forth in the Agreement, are hereby incorporated herein in their
entirety.
Annexed hereto and made a part hereof is a schedule (the "Loan and
Repayment Schedule") on which shall be shown all advances by Lender pursuant to
the Agreement (each such advance, a "Reimbursement Loan") and all repayments of
principal made to Lender hereunder. The Corporation hereby appoints Lender as
its agent to endorse the date and the amount of each such Reimbursement Loan or
principal repayment made hereunder. Such endorsement shall constitute prima
facie evidence of the accuracy of the information endorsed; provided, however,
that failure to make any such endorsement (or any errors in notation) shall not
affect in any manner the obligations of Corporation with respect to the amounts
payment hereunder.
This Reimbursement Loan Note is subject to acceleration upon the occurrence
of certain events as provided in the Agreement. The Corporation shall have the
right to prepay this Reimbursement Loan Note in whole or in part, without
penalty or premium, at any time.
All payments or prepayments of principal of and interest on this
Reimbursement Loan Note shall be payable to the Account of Lender as specified
in Section 2.6 of the Agreement.
1.
26
All payments and prepayments hereon shall be applied first, to costs and
expenses and other amounts due and owing to Lender under the Agreement; second,
to accrued interest then payable; and third to principal of the Reimbursement
Loans in chronological order of funding of the Reimbursement Loans and within
each Reimbursement Loan in inverse chronological order of principal
amortization.
The full amount of this Reimbursement Loan Note is secured by the
Collateral identified and described as security therefor in that certain
Security Agreement executed and delivered by Corporation as of December 3, 1996.
Corporation shall not, directly or indirectly, suffer or permit to be created or
to remain, and shall promptly discharge, any lien on or in the Collateral, or in
any portion thereof, except as permitted pursuant to the Security Agreement. In
addition, Corporation shall not suffer any other matter whereby an interest of
Lender under the Security Agreement in the collateral or in any lien pursuant to
the Security Agreement or any part of the foregoing might by impaired, except as
permitted pursuant to such Security Agreement .
The Corporation hereby waives presentment, demand, protest, notice of
protest or other notice of dishonor of any kind or of non-payment of this
Reimbursement Loan Note, and promises to pay all reasonable costs of collection
when incurred, including, without limitation, reasonable attorneys' fees, costs
and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
No extension of the time for the payment of this Reimbursement Loan Note or
any installment hereof made by agreement with any Person now or hereafter liable
for the payment of this Reimbursement Loan Note shall operate to release or
discharge the original liability under this Reimbursement Loan Note, either in
whole or in part, of the Corporation.
This Reimbursement Loan Note is to be construed according to the laws of
the State of California, without regard to principles of conflict of laws.
The provisions of this Note shall inure to the benefit of and be binding on
any successor to Lender and shall extend to any holder hereof.
CORPORATION: AIR SOUTH AIRLINES, INC.
By:_______________________________
Printed Name:_____________________
Title:____________________________
2.
27
IRREVOCABLE STANDBY LETTER OF CREDIT
Draft
NO.__________
Copy
First Bank National Association
000 Xxxxxx Xxx Xx - XXXX0000
Xxxxxxxxxxx, XX 00000-0000
We hereby issue our irrevocable Standby Letter of Credit No._____in your favour
and for account of:
Air South, Inc.
0000 Xx. Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
for the aggregate amount of USD [$XXX,XXX,XXX (Spelled Amount)]
This Letter of Credit will have an initial expiration date of [Date], and is
automatically renewable for successive one year periods unless [Bank Name] shall
have notified you in writing 120 days before the initial or any subsequent
expiration date that they elect not to renew this Letter of Credit.
Funds under this Letter of Credit are available to you against one or more of
your sight draft(s) drawn on us, mentioning thereon our Letter of Credit
No.__________accompanied by your written drawing certification, purportedly
signed by a duly authorized officer, in the following form:
"DRAWING CERTIFICATION"
Date:__________________
To: [Bank Name]
[Bank Address]
Re: Irrevocable Standby Letter of Credit No.__________
Please be advised that we are hereby drawing under the above referenced letter
of credit and that:
First Bank National Association is making this drawing pursuant to the terms of
a merchant processing agreement between First Bank National Association and Air
South, Inc., dated July 12, 1994 and that we as the beneficiary are entitled to
the amount of the attached draft.
Signature:_______________________________
First Bank National Association
Signed by:
Title:
The amount which may be drawn by you under this Letter of Credit shall be
automatically reduced by the amount of any drawing hereunder. Partial drawings
are permitted.
We hereby engage with you that all drafts drawn and presented under and in
accordance with the terms of this Letter of Credit will be duly honored by us.
This Letter of Credit is subject to the Uniform Customs and Practice for
"Documentary Credits" (1993 Revision), International Chamber of Commerce
Publication no. 500.
Authorized Signature
_________________________________________
28
EXHIBIT C
FORM OF
CERTIFICATE RELATING TO ACCURACY OF CERTAIN CORPORATION
REPRESENTATIONS CONTAINED IN, AND THE
AUTHORIZATION TO EXECUTE, CERTAIN DOCUMENTS
We, the undersigned, DO HEREBY CERTIFY to Xxxxxxxxx & Xxxxx California, a
wholly owned subsidiary of Xxxxxxxxx & Xxxxx Group (the "Lender") that:
1. We are the duly qualified and acting Vice President, and
Secretary, respectively, of Air South Airlines, Inc. (the "Corporation").
2. The statements contained in Sections 3.2 and 5.1 of the
Reimbursement Agreement (the "Agreement"), dated as of December 3, 1996 by and
among the Corporation and the Lender are true and correct as of the date hereof.
3. The names and true signatures of the officers of the Corporation
authorized to sign the Agreement, and the other documents to be delivered by the
Corporation under the Agreement, are as follows:
NAME SIGNATURE TITLE
Xxxx Xxxxx ___________________________ Chairman of the
Board, President
and CEO
Xxxxxx Xxxx ___________________________ Vice President
Xxxxx Xxxxxxxx ___________________________ Secretary
Xxxxxx X. Xxxxxx ___________________________ Vice President
4. All conditions precedent to the issuance of the Letter of Credit
have been satisfied by the Corporation.
5. No Event of Default has occurred and is continuing, or no event
which would result directly or indirectly from the execution and delivery of the
Agreement by the Corporation or the issuance of the Letter of Credit which
constitutes an Event of Default or which would constitute such an Event of
Default but for the requirement that notice be given or time elapse, or both.
6. All capitalized terms not otherwise defined shall have the
meaning ascribed thereto in the Agreement.
1.
29
IN WITNESS WHEREOF, we have hereunto set our hands and the seal of the
Corporation on December 3, 1996.
AIR SOUTH AIRLINES, INC.
By:______________________________________
Printed Name: Xxxxxx X. Xxxxxx
Title: Vice President
By:______________________________________
Printed Name: Xxxxx Xxxxxxxx
Title: Secretary
2.
30
EXHIBIT D
FORM OF WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND AS REQUIRED BY BLUE SKY LAWS IS IN EFFECT
AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE
SECURITIES ACT AND BLUE SKY LAWS.
AIR SOUTH AIRLINES, LNC,
WARRANT FOR THE PURCHASE
OF SHARES OF COMMON STOCK
No. CW-__________ December 3, 1996
AIR SOUTH AIRLINES, INC., a Delaware corporation (the "COMPANY"), hereby
certifies that, for value received, XXXXXXXXX & XXXXX CALIFORNIA, a wholly owned
subsidiary of Xxxxxxxxx & Xxxxx Group or any transferee who has received this
warrant (the "WARRANT") in compliance with applicable law and the terms hereof
(the "HOLDER"), is entitled, on the terms set forth below, to purchase from the
Company, on or before the Expiration Time (as defined in Section 18 below)
sixteen million (16,000,000) shares of Common Stock, par value $0.001 per share,
of the Company at a price of twenty-five cents ($0.25) per share, subject to
adjustment as provided below (the "EXERCISE PRICE").
1. REIMBURSEMENT AGREEMENT. This Warrant is the "Warrant" referred to in
Section 3.l(d) of that certain Reimbursement Agreement dated as of December 3,
1996, by and between the Company and Xxxxxxxxx & Xxxxx California, a wholly
owned subsidiary of Xxxxxxxxx & Xxxxx Group (the "REIMBURSEMENT AGREEMENT"). Any
capitalized term used but not defined herein shall have the meaning ascribed to
it in the Reimbursement Agreement.
2. EXERCISE OF WARRANT.
(A) INITIAL VESTING. The Holder may exercise this Warrant, in whole
or in part, at any time or from time to time on any business day prior to the
Expiration Date (as defined herein), for six million four hundred thousand
(6,400,000) shares of Common Stock.
(B) SUBSEQUENT VESTING. On any business day beginning 30 days after
the end of each Measurement Period (as defined below) and prior to the
Expiration Date, the Holder may exercise this Warrant, in whole or in part, at
any time or from time to time, as to an additional number of shares of Common
Stock equal to (i) the product of (A) the average daily Gross Exposure (as
defined in the Credit Card Agreement (or the schedules or exhibits thereto),
1.
31
subject to Section 9(b) hereof) during the Measurement Period and (B) one-tenth
(0.1), divided by (ii) twenty-five cents ($0.25). Notwithstanding the preceding
sentence, in no event shall this Warrant be execrable for more than sixteen
million (16,000,000) shares of Common Stock. For the purposes of this Warrant,
"MEASUREMENT PERIOD" shall mean the 90 day period commencing on the date of this
Warrant and each succeeding 90 day period thereafter prior to the Termination
Date.
(C) The Holder may exercise any shares then execrable by surrendering
this Warrant to the Company at its principal office, with a duly executed
Subscription Form (in substantially the form attached hereto), together with
payment of the sum obtained by multiplying the number of shares of Common Stock
to be purchased by the Exercise Price then in effect. Promptly after such
exercise, the Company shall issue and deliver to or upon the order of the Holder
a certificate or certificates for the number of shares of Common Stock issuable
upon such exercise, and the Company will pay all issue or transfer taxes in
connection with the issue thereof. To the extent permitted by law, this Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided herein, even if
the Company's stock transfer books are at that time closed, and the Holder shall
be treated for all purposes as the holder of record of the Common Stock to be
issued upon such exercise as of the close of business on such date. Upon any
partial exercise, the Company will issue to or upon the order of the Holder a
new Warrant for the number of shares of Common Stock as to which this Warrant
has not been exercised.
(D) NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Common Stock subject to
this Warrant is greater than the Exercise Price (at the Date of Determination,
as defined below), in lieu of exercising this Warrant for cash, the Holder may
elect 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 Form of
Subscription and notice of such election (the date of such delivery being
referred to herein as the "DATE OF DETERMINATION") 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 Determination)
A = the fair market value of one share of the Common Stock (at
the Date of Determination)
2.
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B = Exercise Price (as adjusted to the Date of Determination)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith as
of the Date of Determination; provided, however, when there is a public market
for the Company's Common Stock, the fair market value per share shall be the
average of the closing prices of the Company's Common Stock quoted on the Nasdaq
National Market or on the primary securities exchange on which the Common Stock
is then listed, whichever is applicable, as published in the Wall Street Journal
for the ten (10) trading days prior to the Date of Determination.
3. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of shares of Common Stock subject to this Warrant
(and all other adjustment to exercise price and shares herein as appropriate)
shall be subject to adjustment from time to time as follows:
(A) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If at any time the
Company:
(I) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(II) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(III) combines its outstanding shares of Common Stock into a
smaller number of shares;
(IV) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(V) issues by reclassification of its Common Stock any shares of
its capital stock;
then the Exercise Price in effect immediately prior to such action shall be
adjusted so that the Holder may receive upon exercise of the Warrant and payment
of the same aggregate consideration the number of shares of capital stock of the
Company which the Holder would have owned immediately following such action if
the Holder had exercised the Warrant immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
3.
33
(B) REORGANIZATION, CONSOLIDATION OR MERGER. In the event of any
consolidation or merger of the Company with or into another corporation (other
than a merger in which merger the Company is the continuing corporation and that
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock issuable upon exercise of this Warrant) or
in the event of any sale, lease, transfer or conveyance to another corporation
of the property and assets of the Company as an entirety or substantially as an
entirety, the Company shall cause effective provisions to be made so that the
Holder shall have the right thereafter, by exercising this Warrant, to purchase
the kind and amount of shares of stock and other securities and property
(including cash) receivable upon such capital reorganization and other change,
consolidation, merger, sale, lease, transfer or conveyance by a holder of the
number of shares of Common Stock that might have been received upon exercise of
this Warrant immediately prior to such capital reorganization, change,
consolidation, merger, sale, lease, transfer or conveyance. Any such provision
shall include provisions for adjustments in respect of such shares of stock and
other securities and property that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section 3(b) shall similarly apply to successive capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales, leases, transfers or conveyances. In the event
that in connection with any such capital reorganization, or change,
consolidation, merger, sale, lease, transfer or conveyance, additional shares of
Common Stock shall be issued in exchange, conversion, substitution or payment,
in whole or in part, for, or of, a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Section 3(a) hereof.
(C) PRICE ADJUSTMENTS. If on any Price Adjustment Date (as defined
below) the number of shares of Common Stock of the Company authorized for
issuance pursuant to the Company's Certificate of Incorporation as in effect on
such date is insufficient to permit the valid issuance on such date of the total
number of shares of Common Stock issuable upon the direct or indirect exercise
and/or conversion of any and all securities of the Company then outstanding into
Common Stock, then the Exercise Price in effect on such date shall be reduced by
five cents ($0.05) per share, provided, that, in no event shall the Exercise
Price be reduced to less than the par value of the Common Stock per share. As
used in this Warrant, "PRICE ADJUSTMENT DATE" shall mean February 28, 1997 and
the last day of each succeeding month thereafter.
(D) MINIMAL ADJUSTMENTS. No adjustment in the Exercise Price and/or
the number of shares of Common Stock subject to this Warrant need be made if
such adjustment would result in a change in the Exercise Price of less than one
percent (1%) or the Exercise Price (the "ADJUSTMENT THRESHOLD AMOUNT") or a
change in the number of subject shares of less than one (1) share. Any
adjustment which is less than the Adjustment Threshold Amount and not made shall
be carried forward and shall be made, together with any subsequent adjustments,
at the time when (a) the aggregate amount of all such adjustments is equal to at
least the Adjustment Threshold Amount or (b) the Warrant is exercised.
(E) DEFERRAL OF ISSUANCE OR PAYMENT. In any case in which an event
covered by this Section 3 shall require that an adjustment in the Exercise Price
be made effective as of
4.
34
a record date, the Company may elect to defer until the occurrence of such event
(i) issuing to the Holder, if this Warrant is exercised after such record date,
the shares of Common Stock and other capital stock of the Company, if any,
issuable upon such exercise over and above the shares of Common Stock or other
capital stock of the Company, if any, issuable upon such exerice on the basis of
the Exercise Price in effect prior to such adjustment, and (ii) paying to the
Holder by check any amount in lieu of the issuance of fractional shares pursuant
to Section 7 hereof.
(F) WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for a
change in the par value or no par value of the Common Stock. To the extent the
Warrants become exercisable into cash, no adjustment need be made thereafter as
to the cash, and interest will not accrue on the cash.
(G) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 3, the
Company, at its expense, shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to the Holder a
certificate setting forth such adjustment or readjustment and showing the facts
upon which such adjustment or readjustment is based. The Company shall, upon
written request at any time of the Holder, furnish or cause to be furnished to
the Holder a like certificate setting forth (a) such adjustments and
readjustments, (b) the then effective Exercise Price and number of shares of
Common Stock subject to the Warrant, and (c) the then effective amount of
securities (other than Common Stock) and other property, if any, which would be
received upon exercise of the Warrant.
4. REGISTRATION RIGHTS. Shares of the Company's Common Stock issued or
issuable pursuant to the exercise of this Warrant shall be deemed to be
"Registrable Securities" for purposes of that certain Warrant Purchase
Agreement, entered into as of April 26, 1996, by and between the Company and
Holder, as such agreement may be subsequently amended or restated or
consolidated with other similar agreements granting registration rights in the
securities of the Company.
5. RIGHTS OF THE HOLDER. The Holder shall not, solely by virtue of this
Warrant, be entitled to any rights of a stockholder in the Company, either at
law or equity, and the rights of the Holder are limited to those expressed in
this Warrant. Nothing contained in this Warrant shall be construed as conferring
upon the Holder hereof the right to vote or to consent or to receive notice as a
stockholder of the Company on any matters or with respect to any rights
whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby
or the shares of Common Stock purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised in accordance with its
terms.
6. NO IMPAIRMENT. The Company will not, by any voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as
5.
35
may be necessary or appropriate in order to protect the rights of the Holder
against dilution or other impairment.
7. NO FRACTIONAL SHARES. No fractional share shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of exercise (as determined in good
faith by the Board of Directors of the Company). The fair market value of a
fraction of a share is determined by multiplying the fair market price of a full
share by the fraction of a share, rounded to the nearest cent.
8. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will
at all times reserve and keep available, solely for issuance and delivery upon
the exercise of this Warrant, all such shares of Common Stock or other shares of
capital stock, from time to time issuable upon the exercise of this Warrant. If
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the exercise of this Warrant, the Company will use
its best efforts to 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. All
shares that may be issued upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth herein, will be free
from all taxes, liens and charges in respect of the issue of such shares (other
than taxes in respect of any transfer occurring contemporaneously with such
exercise and payment or otherwise specified herein). All such shares shall be
duly authorized and when issued, sold and delivered in accordance with the terms
of the Warrant for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer set forth in this Warrant and
applicable state and federal securities laws.
9. COVENANTS OF THE COMPANY.
(A) The Company shall use its best efforts to amend the Articles of
Incorporation of the Company in such a manner so that no reduction of the
Exercise Price pursuant to Section 3(c) hereof shall occur at any time.
(B) The Company shall cause a report of the daily Gross Exposure in
each Measurement Period (each, an "EXPOSURE REPORT") to be delivered by First
Bank National Association to the Holder at the address specified in Section 14
hereof within 30 days of the end of such Measurement Period so long as this
Warrant remains subject to additional vesting. In the event that the Holder has
not received an Exposure Report within 30 days after the end or any Measuring
Period, then, notwithstanding anything else contained herein, for the purposes
of this Warrant, the daily Gross Exposure throughout such period shall be deemed
to be four million dollars ($4,000,000).
6.
36
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to and for the benefit of the
Purchaser as follows:
(A) ORGANIZATION, GOOD STANDING, QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. The Company has full power and authority to own and
operate its properties and assets, and to carry on its business as currently
conducted and as currently proposed to be conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or its business.
(B) AUTHORIZATION. All corporate action on the part of the Company,
its directors and its stockholders necessary for the authorization, execution,
issuance and delivery by the Company of this Warrant and the performance of the
Company's obligations hereunder. This Warrant, when executed and delivered by
the Company, shall constitute a valid and binding obligation of the Company
enforceable in accordance with its terms. Assuming an amendment of the
Certificate of Incorporation of the Company to increase the number of authorized
shares of Common Stock (as so amended, the "Amended Certificate of
Incorporation"), the shares of Common Stock issuable upon exercise of this
Warrant, when issued in compliance with the provisions of this Warrant and the
Amended Certificate of Incorporation, will be validly issued, fully paid and
nonassessable and free of any liens or encumbrances.
(C) MATERIAL CONTRACTS. All material contracts, agreements and
instruments to which the Company is a party are in full force and effect in all
material respects, and are valid, binding and enforceable by the Company in
accordance with their respective terms, subject to the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
and rules of law concerning equitable remedies and no event of default, and no
event which, with the passing of time or the giving of notice, or both, would
constitute an event of default has occurred or is continuing under any such
contract, agreement or instrument.
(D) COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
of any term of its Certificate of Incorporation, By-Laws or any statute, rule or
regulation applicable to the Company. The execution, delivery and performance of
this Agreement, the creation and issuance of this Warrant and the issuance of
the shares of Common Stock pursuant to an exercise of the Warrant in accordance
with the Amended Certificate of Incorporation will not result in any such
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance, or charge
upon any of the properties or assets of the Company or contravene any provision
of, or constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound.
7.
37
(E) GOVERNMENTAL CONSENTS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
in accordance with the valid execution, delivery, offer, sale or issuance of
this Warrant and the capital stock issuable upon exercise of the Warrant, have
been obtained, except for the filing of notices pursuant to Regulation D under
the Securities Act, and any filing required under applicable state securities
laws which will be effective by the time required thereby.
(F) LITIGATION. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company in any court or before any governmental commission, board
or authority which, if adversely determined, will have a material adverse effect
on business, financial condition or prospects of the Company or the ability of
the Company to perform its obligations under this Agreement.
(G) OFFERING. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 19 hereof, the offer, issue,
and sale of the Warrant are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit, or qualification requirements of all applicable state
securities laws.
11. NOTICES OF RECORD DATE. Upon (a) 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 or other distribution
or (b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any transfer
of all or substantially all the assets of the Company to any other person, or
any voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to the Holder at least twenty (20) days, or such
longer period as is required by law, prior to the record date, a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (ii) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (iii) the date, if any, that is to be fixed as
to when the holders of record of Common Stock (or other capital stock at that
time receivable upon exercise of the Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up.
12. EXCHANGES OF WARRANT. Upon surrender for exchange of this Warrant (in
negotiable form, if not surrendered by the Holder named on the face hereof) to
the Company at its principal office, the Company, at its expense, will issue and
deliver a new Warrant or Warrants calling in the aggregate for the same number
of shares of Common Stock, in the denomination or denominations requested, to or
on the order of such Holder upon payment by
8.
38
such Holder of any applicable transfer taxes; provided that any transfer of the
Warrant shall be subject to the conditions on transfer set forth herein.
13. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement in such reasonable amount as the Company may determine,
or (in the case of mutilation) upon surrender and cancellation hereof, the
Company, at its expense, shall issue a replacement.
14. NOTICES. Any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit with the United States Post Office, postage prepaid, addressed
to the Company at 0000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxxx
00000 or to the Holder at Xxx Xxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxx Xxxxxx, or at such other address as the Company or any Holder
may designate by ten (10) days advance written notice to the other party.
15. MODIFICATION; WAIVER. Except as provided in this Warrant, no
modification or waiver of any provision of this Warrant or consent to departure
therefrom shall be effective unless in writing and approved by the Company and
the Holder.
16. TITLES AND SUBTITLES. The titles and subtitles used in this Warrant
are used for convenience only and are not to be considered in construing or
interpreting this Warrant.
17. GOVERNING LAW. This Warrant shall be construed in accordance with and
governed by and under the laws of the State of California as applied to
contracts made and to be performed entirely within the State of California.
18. EXPIRATION TIME. This Warrant will be wholly void and of no effect
after 5:00 p.m. (San Francisco time) December 3, 2006 (the "EXPIRATION TIME").
19. TRANSFER RESTRICTIONS. The Company is relying upon an exemption from
registration of this Warrant and the shares of Common Stock issuable upon
exercise hereof under the Securities Act and applicable state securities laws.
The Holder by acceptance hereof represents that the Holder understands that
neither this Warrant nor the Common Stock issuable upon exercise hereof has been
registered with the Securities and Exchange Commission nor under any state
securities law. By acceptance hereof, the Holder represents and warrants that
(a) it is acquiring the Warrant (and the shares of Common Stock or other
securities issuable upon exercise hereof) for its own account for investment
purposes and not with a view to distribution, (b) has received all such
information as the Holder deems necessary and appropriate to enable the Holder
to evaluate the financial risk inherent in making an investment in the Company,
and satisfactory and complete information concerning the business and financial
condition of the Company in response to all inquiries in respect thereof, (c)
the Holder's acquisition of shares upon exercise hereof will be a highly
speculative investment, (d) the Holder is able, without impairing its financial
condition, to hold such shares for an indefinite period of time and to suffer a
complete loss of the Holder's investment, and (e) the Holder has such knowledge
and
9.
39
experience in financial and business matters that it is capable of evaluating
the merits and risks of acquisition of this Warrant and the shares issuable upon
exercise hereof and of making an informed investment decision with respect
thereto.
This Warrant may not be exercised and neither this Warrant nor any of the
shares issuable upon exercise of the Warrant, nor any interest in either, may be
sold, assigned, pledged, hypothecated, encumbered or in any other manner
transferred or disposed of, in whole or in part, except in compliance with
applicable United States federal and state securities or Blue Sky laws and the
terms and conditions hereof. Each Warrant or each certificate representing
shares of Common Stock or other securities issued upon exercise of this Warrant
shall have conspicuously endorsed on its face, at the time of its issuance, such
legends as counsel to the Company deems necessary or appropriate, including
without limitation the legend set forth on the top of the first page of this
Warrant. Any certificate for any securities issued at any time in exchange or
substitution for any certificate for any shares of Common Stock bearing such
legend shall also bear such legend unless, in the opinion of counsel for the
Company, the securities represented thereby need no longer be subject to the
restriction contained herein.
Without in any way limiting the foregoing, the Holder agrees not to make
any disposition of all or any portion of the Securities unless and until:
A. There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
B. (i) The Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the Securities Act.
C. Notwithstanding the provisions of paragraphs (i) and (ii) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by the Holder to (i) an underwriter acceptable to the Company for
immediate exercise by such underwriter in connection with a fully underwritten
public offering of the Company's Common Stock underlying this Warrant (ii) a
partner (or retired partner) or "affiliate" (as defined under the Securities
Exchange Act of 1934) of Xxxxxxxxx & Xxxxx Group or (iii) transfers by gift,
will or intestate succession to any spouse or lineal descendants or ancestors of
any such partner, retired partner or affiliate, if all transferees agree in
writing to be subject to the terms hereof to the same extent as if they were a
purchaser hereunder.
10.
40
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered on the date first set forth above.
AIR SOUTH AIRLINES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
WARRANT
41
SUBSCRIPTION FORM
[To be executed if holder desires to exercise the Warrant]
The undersigned, holder of this Warrant, (1) hereby irrevocably elects to
exercise the right of purchase represented by this Warrant for, and to purchase
thereunder,__________ full shares of the Common Stock of Air South Airlines,
Inc. provided for therein, (2) makes payment in full (as permitted in Section 2
of the Warrant) of the purchase price of such shares, (3) requests that
certificates for such shares be issued in the name of
______________________________________________________________________
(Please print name and address)
______________________________________________________________________
(Please insert social security or other identifying number)
and (4) if said number of shares shall not be all the shares purchasable
thereunder, requests that a new Warrant for the unexercised portion of this
Warrant be issued in the name of and delivered to:
______________________________________________________________________
______________________________________________________________________
(Please print name and address)
Dated :________________________ _______________________________
By:____________________________
_______________________________
Title
