EXHIBIT 10.28
================================================================
AMENDED AND RESTATED
WARRANT AGREEMENT
Between
FRONTIER AIRLINES, INC.
and
WEXFORD MANAGEMENT LLC, as AGENT
Dated as of February 27, 1998
================================================================
(i)
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions; Accounting Terms and Determinations...................1
1.01 Definitions.........................................................1
1.02 Accounting Terms and Determinations.................................7
SECTION 2. Purchase and Sale of Warrant.......................................8
2.01 Authorization and Issuance of Original Warrant......................8
2.02 Issuance of the Original Warrant....................................8
2.03 Authorization and Issuance of Replacement Warrant...................8
2.04 Issuance of the Replacement Warrant.................................8
2.05 Securities Act Compliance; Brokers..................................8
SECTION 3. Representations and Warranties.....................................9
3.01 Existence; Qualification............................................9
3.02 No Breach...........................................................9
3.03 Corporate Action....................................................9
3.04 Approvals..........................................................10
3.05 Investment Company Act.............................................10
3.06 Capitalization.....................................................10
3.07 Private Offering...................................................11
3.08 Litigation.........................................................11
3.09 Rights Agreement...................................................11
3.10 Brokers............................................................11
SECTION 4. Restrictions on Transferability...................................11
4.01 Transfers Generally................................................11
4.02 Transfers of Restricted Securities Pursuant to Registration
Statements, Rule 144 and Rule 144A...............................12
4.03 Restrictive Legends................................................12
4.04 Termination of Restrictions........................................12
SECTION 5. Dispositions of Securities........................................12
5.01 Dispositions of Securities.........................................12
SECTION 6. Adjustments of Warrant Stock Issuable Upon Exercise...............13
6.01 Number of Shares; Exercise Price...................................13
6.02 Adjustment of Exercise Price.......................................13
6.03 Treatment of Options and Convertible Securities....................15
6.04 Treatment of Stock Dividends, etc. ................................17
(ii)
Page
----
6.05 Computation of Consideration.......................................17
6.06 Adjustments for Combinations, Subdivisions, etc. ..................19
6.07 Dilution in Case of Other Securities...............................19
6.08 Consolidation, Merger, Sale of Assets, Reorganization etc. ........19
6.09 Other Dilutive Events..............................................21
6.10 No Dilution or Impairment..........................................21
6.11 Accountants' Report as to Adjustments..............................21
6.12 Notices of Corporate Action........................................22
SECTION 7. Holders' Rights...................................................23
7.01 Delivery Expenses..................................................23
7.02 Taxes..............................................................23
7.03 Replacement of Instruments.........................................23
7.04 Indemnification....................................................23
7.05 Inspection Rights..................................................24
SECTION 8. Other Covenants of Company........................................24
8.01 Availability of Information........................................24
8.02 Repurchases and Redemption.........................................25
8.03 Transactions with Affiliates.......................................25
8.04 Restrictions on Performance........................................25
8.05 Modification of Other Equity Documents.............................25
8.06 Ownership of Subsidiaries..........................................26
8.07 Reservation of Stock. etc. ........................................26
8.08 Listing on Securities Exchanges....................................26
SECTION 9. Miscellaneous....................................................26
9.01 Waiver.............................................................26
9.02 Notices............................................................26
9.03 Expenses, Etc. ....................................................27
9.04 Amendments, Etc. ..................................................28
9.05 Successors and Assigns.............................................28
9.06 Survival...........................................................28
9.07 Specific Performance...............................................28
9.08 WAIVER OF JURY TRIAL...............................................28
9.09 Consent to Jurisdiction and Service of Process. ...................29
9.10 Limitation of Liability............................................29
9.11 Captions...........................................................29
9.12 Counterparts.......................................................29
9.13 Governing Law......................................................29
9.14 Severability.......................................................29
9.15 Entire Agreement...................................................30
(iii) Page
----
▇▇▇▇▇ ▇ - ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇ - ▇▇▇▇▇▇▇▇▇▇▇ FROM MANAGEMENT
AMENDED AND RESTATED WARRANT AGREEMENT dated as of February 27, 1998
between FRONTIER AIRLINES, INC., a Colorado corporation (the "Company"), and
-------
WEXFORD MANAGEMENT LLC, a Connecticut limited liability company, as Agent (the
"Investor").
---------
WHEREAS, in connection with (i) the issuance on December 2, 1997 by
the Company of a Senior Secured Promissory Note (the "Senior Secured Note") in
-------------------
the amount of $5,000,000 to the Investor and (ii) the proposed delivery by the
Investor of a commitment letter with respect to additional financial
accommodations in favor of the Company aggregating up to $10,000,000 (the
"Additional Financing"), as more fully described in that certain letter
---------------------
agreement, dated December 2, 1997, between the Company and the Investor (the
"Letter Agreement"), on December 2, 1997, the Company issued to the Investor a
-----------------
warrant to purchase 3,000,000 shares of Common Stock, a copy of which is
attached hereto as Exhibit A and entered into a Warrant Agreement dated as of
---------
December 17, 1997 (the "Original Agreement");
WHEREAS, pursuant to a letter agreement dated February 27, 1998 (the
"March Letter Agreement"), the parties have agreed, among other things, to
terminate the Letter Agreement and to amend and restate the Original Agreement;
and
WHEREAS, in consideration of the extension of credit evidenced by the
Senior Secured Note and the March Letter Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties have agreed, pursuant to the March Letter Agreement,
to enter into this Amended and Restated Warrant Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; Accounting Terms and Determinations.
------------------------------------------------
1.01 Definitions. As used herein, the following terms shall have the
-----------
following meanings (all terms defined in this Section 1 or in other provisions
of this Agreement in the singular to have the same meanings when used in the
plural and vice versa):
"Acquiring Person" shall mean the continuing or surviving corporation
----------------
of a consolidation or merger with the Company (if other than the Company), the
transferee of substantially all of the properties and assets of the Company, the
corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
or, in the case of a capital reorganization or reclassification, the Company.
"Acquisition Price" shall mean, as applied to the Common Stock, with
-----------------
respect to any transaction to which Section 6.08 applies, (a) the price per
share equal to the greater of the following, determined in each case as of the
date immediately preceding the date of consummation of such transaction: (i)
the Market Price of the Common Stock and (ii) the highest amount of
Warrant Agreement
-----------------
2
cash plus the Fair Value of the highest amount of securities or other property
which a Holder of Warrants would have been entitled as a shareholder to receive
upon such consummation if such Holder had exercised its Warrants immediately
prior thereto, or (b) if a purchase, tender or an exchange offer is made by the
Acquiring Person (or by any of its affiliates) to the holders of the Common
Stock and such offer is accepted by the holders of more than 50% of the
outstanding shares of Common Stock, the greater of (i) the price determined in
accordance with the foregoing subdivision (a) and (ii) the price per share equal
to the greater of the following, determined in each case as of the date
immediately preceding the acceptance of such offer by the holders of more than
50% of the outstanding shares of Common Stock: (x) the Market Price of the
Common Stock and (y) the highest amount of cash plus the Fair Value of the
highest amount of securities or other property which a Holder of Warrants would
have been entitled as a shareholder to receive pursuant to such offer if such
Holder had exercised its Warrants immediately prior to the expiration of such
offer and accepted the same.
"Additional Shares of Common Stock" shall mean all shares (including
---------------------------------
treasury shares) of Common Stock issued or sold (or, pursuant to Section 6.03 or
6.04, deemed to be issued) by the Company after the Initial Date hereof, whether
or not subsequently reacquired or retired by the Company other than (a) shares
of Common Stock issued upon the exercise of Warrants, (b) shares of Common Stock
issued or authorized prior to December 2, 1997 under the Option Plan and (c)
shares of Common Stock issuable on conversion or exercise of the Convertible
Securities or Options set forth in Schedule 3.06 attached hereto.
-------------
"Affiliate" shall mean, with respect to a specified Person, another
---------
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Base Price" shall mean, on any date specified herein, the greater of
----------
(i) the Current Market Price and (ii) the Exercise Price.
"Business Day" shall mean any day that is not a Saturday, Sunday or
------------
other day on which commercial banks in New York City are authorized or required
by law to remain closed.
"Commission" shall mean the Securities and Exchange Commission or any
----------
other similar or successor agency of the federal government administering the
Securities Act and/or the Exchange Act.
"Common Stock" shall mean the Common Stock of the Company, no par
------------
value per share, or any other common stock or other securities receivable
thereon, or into which the Common Stock is convertible or exchangeable, as a
result of any recapitalization, reclassification, merger or consolidation of, or
disposition of assets by, the Company.
Warrant Agreement
-----------------
3
"Company" shall have the meaning assigned to such term in the preamble
-------
of this Agreement.
"Control" shall mean the possession, directly or indirectly, of the
-------
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" shall have meanings correlative
----------- ----------
thereto.
"Convertible Securities" shall mean evidences of indebtedness,
----------------------
interests or other securities or rights which are exchangeable for or
exercisable or convertible into Additional Shares of Common Stock other than the
Warrants.
"Current Market Price" shall mean, on any date specified herein, (a)
--------------------
with respect to Common Stock or to Voting Common Stock (or equivalent equity
interests) of an Acquiring Person or its Parent, (i) the average daily Market
Price during the period of the most recent 20 consecutive Business Days ending
on such date, or (ii) if shares of Common Stock or such Voting Common Stock (or
equivalent equity interests), as the case may be, are not then listed or
admitted to trading on any national securities exchange and if the closing bid
and asked prices thereof are not then quoted or published in the over-the-
counter market, the Market Price on such date; and (b) with respect to any other
securities, the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Exercise Notice" shall have the meaning assigned to such term in
---------------
Warrant No. Wex-2, a copy of which is attached as Exhibit B hereto.
---------
"Exercise Price" shall have the meaning assigned to such term in
--------------
Section 6.01 hereof.
"Expiration Date" shall have the meaning assigned to such term in
---------------
Warrant No. Wex-2, a copy of which is attached hereto as Exhibit B.
---------
"Fair Value" shall mean, with respect to any securities or other
----------
property, the fair value thereof as of a date which is within 15 days of the
date as of which the determination is to be made (a) determined by the Board of
Directors of the Company or (b), if the Requisite Holders of Warrants shall
object in writing to such determination within ten Business Days after notice of
such determination, as determined by an agreement between the Company and the
Requisite Holders of Warrants or (c) if the Company and the Requisite Holders of
Warrants fail to agree, determined jointly by an independent investment banking
firm retained by the Company and by an independent investment banking firm
retained by the Requisite Holders of Warrants, either of
Warrant Agreement
-----------------
4
which firms may be an independent investment banking firm regularly retained by
the Company or any such holder or (d) if the Company or such holders shall fail
so to retain an independent investment banking firm within five Business Days of
the retention of such firm by such holders or the Company, as the case may be,
determined solely by the firm so retained or (e) if the firms so retained by the
Company and by such holders shall be unable to reach a joint determination
within 15 Business Days of the retention of the last firm so retained,
determined by another independent investment banking firm (whose fees shall be
paid equally by such holders, on the one hand, and the Company, on the other)
which is not a regular investment banking firm of the Company or any such holder
chosen by the first two such firms.
"GAAP" shall mean generally accepted accounting principles,
----
consistently applied throughout the specified period.
"Governmental Authority" shall mean the government of the United
----------------------
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory, monetary or administrative powers or functions of
or pertaining to government.
"Holder" shall mean any Person who acquires Warrants or Warrant Stock
------
pursuant to the provisions of this Agreement, including any transferees of
Warrants or Warrant Stock; provided, however, that a holder of Warrant Stock
-------- -------
purchased pursuant to an effective registration statement or pursuant to Rule
144 shall not be deemed a Holder.
"include" and "including" shall be construed as if followed by the
------- ---------
phrase "without being limited to".
"Initial Date" shall have the meaning assigned in such term in Section
------------
6.02 hereof.
"Investor" shall have the meaning assigned to such term in the
--------
preamble of this Agreement.
"Letter Agreement" shall have the meaning assigned to such term in the
----------------
preamble of this Agreement.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For purposes of this Agree ment, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
Warrant Agreement
-----------------
5
"Market Price" shall mean, on any date specified herein, (a) with
------------
respect to Common Stock or Voting Common Stock (or equivalent equity interests)
of an Acquiring Person or its Parent, the amount per share equal to (i) the last
sale price of shares of such security, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and asked prices
thereof on such date, in each case as officially reported on the principal
national securities exchange on which the same are then listed or admitted to
trading, or (ii) if no shares of such security are then listed or admitted to
trading on any national securities exchange, the last reported sale price as
officially reported by the Nasdaq National Market System or, (iii) if not quoted
on the Nasdaq National Market System, the average closing bid and asked prices
as furnished by the NASD through the Nasdaq National Market System or similar
organization if the NASDAQ is no longer reporting such information, or (iv) if
no closing bid and asked prices thereof are then so quoted or published in the
over-the-counter market, the Fair Value thereof as of a date which is within 15
days of the date as of which the determination is to be made; and (b) with
respect to any other securities, the Fair Value thereof as of a date which is
within 15 days of the date as of which the determination is to be made.
"NASD" shall mean the National Association of Securities Dealers.
----
"NASDAQ" shall mean the National Association of Securities Dealers
------
automated quotation system.
"Option Plan" shall mean the Company's 1994 Stock Option Plan.
-----------
"Options" shall mean all rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"Original Warrant" shall mean the Warrant evidenced by Warrant
----------------
Certificate No. Wex-1, a copy of which is attached hereto as Exhibit A;
---------
"Other Equity Documents" shall mean the Option Plan, the certificate
----------------------
of incorporation of the Company, the by-laws of the Company, the Rights
Agreement and any other instrument or document of organization or governance of
the Company.
"Other Securities" shall mean any stock (other than Common Stock) and
----------------
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6.08 or otherwise.
"Parent" as to any Acquiring Person, any corporation which (a)
------
controls the Acquiring Person directly or indirectly through one or more
intermediaries, (b) is required to
Warrant Agreement
-----------------
6
include the Acquiring Person in its consolidated financial statements under GAAP
and (c) is not itself included in the consolidated financial statements of any
other Person (other than its consolidated subsidiaries).
"Person" shall mean any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement dated as of December 17, 1997, between the Company and the Investor.
"Requisite Holders of Warrants" shall mean the holders of at least a
-----------------------------
majority of all the Warrants at the time outstanding determined on the basis of
the number of shares of Warrant Stock or Other Securities deliverable upon
exercise thereof; provided, that Warrants held by the Company or any of its
--------
Subsidiaries shall be excluded from both the numerator and denominator of any
calculation of the Requisite Holders of Warrants.
"Restricted Certificate" shall mean a certificate for Warrant Stock or
----------------------
Warrants bearing or required to bear the restrictive legend set forth in Section
4.03.
"Restricted Securities" shall mean Restricted Warrant Stock and
---------------------
Restricted Warrants.
"Restricted Warrant Stock" shall mean Warrant Stock evidenced by a
------------------------
Restricted Certificate.
"Restricted Warrants" shall mean Warrants evidenced by a Restricted
-------------------
Certificate.
"Rights Agreement" shall mean the Rights Agreement dated as of
----------------
February 20, 1997 between the Company and American Securities Transfer & Trust,
Inc., as amended.
"Rule 144" shall mean Rule 144 promulgated by the Commission under the
--------
Securities Act (or any successor or similar rule then in force).
"Rule 144A" shall mean Rule 144A promulgated by the Commission under
---------
the Securities Act (or any successor or similar rule then in force).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Secured Note" shall have the meaning assigned to such term in
-------------------
the preamble of this Agreement.
Warrant Agreement
-----------------
7
"Shareholder" shall mean any Person who directly or indirectly owns
-----------
any shares of Common Stock (including Warrant Stock).
"Subsidiary" of a Person means (a) any corporation more than 50% of
----------
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (b) any company, partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a direct
or indirect Subsidiary of the Company.
"Voting Common Stock" shall mean, with respect to any corporation,
-------------------
association or other business entity, stock of any class or classes (or
equivalent interest), if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies, entitled
to vote for the election of a majority of the directors (or persons performing
similar functions) of such corporation, association or business entity, even if
the right so to vote has been suspended by the happening of such a contingency.
"Warrant Stock" shall mean all shares of Common Stock issuable from
-------------
time to time upon exercise of the Warrant.
"Warrant," "Warrants" and "Replacement Warrant" and "Replacement
------- -------- --------------------- ------------
Warrants" shall mean Warrant No. Wex-2 issued by the Company to the Investor on
---------
the date hereof, a copy of which is attached hereto as Exhibit B, evidencing
rights to purchase up to an aggregate of 1,750,000 shares of Warrant Stock and
other securities, cash or other property as shall result from the adjustment
specified in Section 6, and all Warrants issued upon transfer, division or
combination of, or in substitution for, any thereof.
1.02 Accounting Terms and Determinations. Except as otherwise may be
-----------------------------------
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to any Holder of Warrant shall be
prepared, in accordance with GAAP. All calculations made for the purposes of
determining compliance with the terms of this Agreement shall (except as
otherwise may be expressly provided herein) be made by application of GAAP.
SECTION 2. Purchase and Sale of Warrant.
----------------------------
2.01 Authorization and Issuance of Original Warrant. On or prior to
----------------------------------------------
December 2, 1997, the Company authorized: (a) the issuance of the Original
Warrant evidenced by Warrant Certificate No. Wex-1, a copy of which is attached
hereto as Exhibit A; and (b) the issuance of
---------
Warrant Agreement
-----------------
8
such number of shares of Common Stock as shall be necessary to permit the
Company to comply with its obligations to issue shares of Warrant Stock pursuant
to the Original Warrant.
2.02 Issuance of the Original Warrant. (a) On December 2, 1997, in
--------------------------------
consideration of the purchase by the Investor of the Senior Secured Note and the
Additional Financing, the Company delivered to the Investor Warrant Certificate
No. Wex-1, registered in the name of the Investor.
2.03 Authorization and Issuance of Replacement Warrant. On or prior
-------------------------------------------------
to February 27, 1998, the Company authorized the issuance of the Replacement
Warrant evidenced by Warrant Certificate No. Wex-2, a copy of which is attached
hereto as Exhibit B.
---------
2.04 Issuance of the Replacement Warrant. (a) On the date hereof,
-----------------------------------
in consideration of the purchase by the Investor of the Senior Secured Note and
the March Letter Agreement, the Company delivered to the Investor Warrant
Certificate No. Wex-2, registered in the name of the Investor.
2.05 Securities Act Compliance; Brokers. (a) The Investor
----------------------------------
understands that the Company has not registered the Warrant or the Warrant Stock
under the Securities Act or applicable state securities laws, and the Investor
agrees that neither the Warrant nor the Warrant Stock shall be sold or
transferred or offered for sale or transfer without registration or
qualification under the Securities Act or applicable state securities laws or
the availability of an exemption therefrom, all as more fully provided in
Section 4.
(b) The Investor purchased the Warrant for its own account for
investment and not with a view to the distribution of the Warrant or any part
thereof, it being understood that the right to dispose of the Warrant shall be
entirely within the discretion of the Investor. Nothing in this paragraph (b)
is meant to limit or restrict the rights granted to the Investor under the
Registration Rights Agreement.
(c) The Investor is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act.
(d) All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Investor directly with the
Company without the intervention of any Person on behalf of the Investor in such
manner as to give rise to any valid claim by any Person against the Company for
a finder's fee, brokerage commission or similar payment.
SECTION 3. Representations and Warranties. The Company represents
------------------------------
and warrants as follows:
Warrant Agreement
-----------------
9
3.01 Existence; Qualification. The Company is duly organized,
------------------------
validly existing and in good standing under the laws of the State of Colorado.
The Company is duly qualified, licensed or admitted to do business and is in
good standing as a foreign corporation in every jurisdiction in which the nature
of the business conducted by it makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on the
Company, and has all requisite corporate power and authority to transact its
business as now conducted in all such jurisdictions.
3.02 No Breach. The execution, delivery and performance of this
---------
Agreement, the Warrant and the Registration Rights Agreement by the Company and
the consummation by it of the transactions contemplated hereby and thereby will
not (a) violate the articles of incorporation or by-laws or any other instrument
or document of organization or governance of the Company, (b) violate, or result
in a breach of or default under, any other material instrument or agreement to
which the Company is a party or is bound, (c) violate any judgment, order,
injunction, decree or award against or binding upon the Company, (d) result in
the creation of any material Lien upon any of the properties or assets of the
Company (other than as contemplated by the Senior Secured Note or the Additional
Financing), or (e) violate any law, rule or regulation applicable to the
Company.
3.03 Corporate Action. The Company has all necessary corporate power
----------------
and authority to execute, deliver and perform its obligations under this
Agreement, the Warrant and the Registration Rights Agreement; the execution,
delivery and performance by the Company of this Agreement, the Warrant and the
Registration Rights Agreement have been duly authorized by all necessary action
(including all Shareholder action) on the part of the Company; this Agreement,
the Warrant and the Registration Rights Agreement have been duly executed and
delivered by the Company and constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms; the shares of Warrant Stock covered by the Warrant have been
duly and validly authorized and reserved for issuance and shall, when paid for,
issued and delivered in accordance with the Warrant, be duly and validly issued,
fully paid and nonassessable and free and clear of any Liens; and none of the
Warrant Stock issued pursuant to the terms hereof will be in violation of any
preemptive rights of any Shareholder.
3.04 Approvals. Except in connection with the registration rights
---------
provided for pursuant to the terms of the Registration Rights Agreement, no
authorizations, approvals or consents of, and no filings or registrations with,
any Governmental Authority or any other Person are necessary for the execution,
delivery or performance by the Company of this Agreement, the Warrant or the
Registration Rights Agreement or for the validity or enforceability hereof or
thereof. Any such action required to be taken as a condition to the execution
and delivery of this Agreement or the Registration Rights Agreement, or the
execution, issuance and delivery of the Warrant, has been duly taken by all such
Governmental Authorities or other Persons, as the case may be.
Warrant Agreement
-----------------
10
3.05 Investment Company Act. The Company is not an "investment
----------------------
company", or a company "controlled by" an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.06 Capitalization.
--------------
(a) On the date hereof, the total number of shares of Common Stock
that the Company has authority to issue is 40,000,000 of which 9,233,563 are
outstanding. Upon the issuance of the Warrant under this Agreement, other than
the Warrant, and other than as set forth in Schedule 3.06 attached hereto, the
-------------
Company shall not have outstanding any Convertible Securities or Options
exercisable or convertible into or exchangeable for any interests or other
equity rights of the Company, nor shall it have outstanding any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, any interests or equity
rights of the Company or Convertible Securities exercisable or convertible into
or exchangeable for any interests or equity rights of the Company.
(b) Except as set forth in Schedule 3.06 attached hereto, other than
-------------
this Agreement and the Registration Rights Agreement, there is not in effect on
the date hereof any agreement by the Company pursuant to which any holders of
securities of the Company have a right to cause the Company to register such
securities under the Securities Act or any agreement to which the Company or (to
its knowledge) any of its Shareholders is a party relating to the voting,
transfer or sale of such securities.
(c) There is not in effect on the date hereof any agreement by the
Company or any of its Shareholders which (i) restricts the transferability of
the Warrant and/or the Warrant Stock (whether or not in connection with a
transfer of the Senior Secured Note or any note or other instrument issued in
connection with the Additional Financing), except as provided in Sections 4 and
5, (ii) restricts the transferability of the right of the Holder in this
Agreement to any transferee of all or a portion of the Holder's Warrant and/or
Warrant Stock, or (iii) requires any consent or other approval of any Person to
the exercise of the Warrant by the Holder or the issuance of Warrant Stock upon
such exercise.
3.07 Private Offering.
----------------
(a) Based on the representations of the Investor in Sections 2.03(a)-
----------------
(c) hereof, the issuance and sale of the Warrant to the Investor hereunder were
---
exempt from the registration and prospectus delivery requirements of the
Securities Act.
(b) All equity interests of the Company heretofore issued and sold by
the Company were issued and sold in accordance with, or were exempt from, the
registration and prospectus delivery requirements of the Securities Act.
Warrant Agreement
-----------------
11
3.08 Litigation.
----------
There is no action, suit, proceeding or investigation pending or, to
the best of the Company's knowledge after due inquiry, threatened against the
Company before any Governmental Authority seeking to enjoin the transactions
contemplated by this Agreement or the Warrant.
3.09 Rights Agreement. Neither the ownership nor exercise of the
----------------
Warrant or any portion thereof by the Investor or any Holder will result in a
"Distribution Date" or a "Triggering Event" (as defined in the Rights
Agreement), or in the Investor or such Holder being deemed an "Acquiring Person"
under the Rights Agreement.
3.10 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by the Company directly
with the Investor without the intervention of any Person on behalf of the
Company in such manner as to give rise to any valid claim by any Person against
the Investor or the Holder for a finder's fee, brokerage commission or similar
payment.
SECTION 4. Restrictions on Transferability.
-------------------------------
4.01 Transfers Generally. Except as otherwise provided in Section 5,
-------------------
the Restricted Securities shall be transferable only upon the conditions
specified in this Section 4 and in the Registration Rights Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and applicable state securities laws in respect of the transfer
of any Restricted Securities.
4.02 Transfers of Restricted Securities Pursuant to Registration
-----------------------------------------------------------
Statements, Rule 144 and Rule 144A. The Restricted Securities may be offered or
----------------------------------
sold by the Holder thereof pursuant to (a) an effective registration statement
under the Securities Act, (b) to the extent applicable, Rule 144 or Rule 144A or
(c) any other legally available means of transfer; provided, that the Holder
--------
receives an opinion of counsel to the effect that the proposed transfer may
legally be effected without registration of such Registrable Securities under
the Securities Act.
4.03 Restrictive Legends. Unless and until otherwise permitted by
-------------------
this Section 4, each certificate for any Warrants issued to any subsequent
transferee of Warrant Certificate No. Wex-1, each certificate for any Warrant
Stock issued upon exercise of any Warrant and each certificate for any Warrant
Stock issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH
Warrant Agreement
-----------------
12
SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
4.04 Termination of Restrictions. All of the restrictions imposed by
---------------------------
this Section 4 upon the transferability of the Restricted Securities shall cease
and terminate as to any par ticular Restricted Security when such Restricted
Security shall have been effectively registered under the Securities Act and
applicable state securities laws and sold by the Holder thereof in accordance
with such registration or sold under and pursuant to Rule 144 or is eligible to
be sold under and pursuant to paragraph (k) of Rule 144. Whenever the
restrictions imposed by this Section 4 shall terminate as to any Restricted
Security as hereinabove provided, the Holder thereof shall be entitled to
receive from the Company, without expense, a new certificate evidencing such
Restricted Security not bearing the restrictive legend otherwise required to be
borne by a certificate evidencing such Restricted Security.
SECTION 5. Dispositions of Securities.
--------------------------
5.01 Dispositions of Securities.
--------------------------
(a) Notwithstanding anything herein in this Agreement or the Warrant
to the contrary, but subject to compliance with the Securities Act, applicable
state securities laws and the requirement as to placement of a legend on
certificates for Restricted Securities specified in Section 4.03, the Warrant
and all rights thereunder are transferable (subject to any restrictive legends
thereon), in whole or in part, upon surrender of the Warrant to the Company,
together with a written assignment of the Warrant duly executed by the Holder
thereof or such Holder's agent or attorney. Such written assignment shall be in
the form of the Assignment Form attached as Annex 1 hereto. Upon such
-------
surrender, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denominations specified in such
instrument of assignment, and the original Warrant shall promptly be canceled.
(b) The Warrant may be exchanged for other Warrants of the same series
upon presentation to the Company, together with a written notice specifying the
denominations in which new Warrants are to be issued, signed by the Holder
thereof. The Company shall execute and deliver a new Warrant or Warrants to the
Holder in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. The Company shall pay all expenses, taxes
(including transfer taxes) and other charges payable in connection with the
preparation, issuance and delivery of the Warrants, including any transfer or
exchange thereof.
(c) The Company shall maintain books for the registration and transfer
of the Warrants, and shall allow each Holder of Warrants to inspect such books
at such reasonable times as such Holder shall request.
Warrant Agreement
-----------------
13
SECTION 6. Adjustments of Warrant Stock Issuable Upon Exercise.
---------------------------------------------------
6.01 Number of Shares; Exercise Price. The number of shares of
--------------------------------
Warrant Stock which a Holder of Warrants shall be entitled to receive upon each
exercise thereof shall be determined by multiplying the number of shares of
Warrant Stock which would otherwise (but for the provisions of this Section 6)
be issuable upon such exercise, as designated by the Holder thereof in its
Exercise Notice, by a fraction of which (i) the numerator is $3.00 and (ii) the
denominator is the Exercise Price in effect on the date of such exercise. The
"Exercise Price" shall initially be $3.00 per share, shall be adjusted and
readjusted from time to time as provided in this Section 6 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 6.
6.02 Adjustment of Exercise Price.
----------------------------
(a) Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company, at any time or from time to time after December 2, 1997 (the "Initial
-------
Date"), shall issue or sell Additional Shares of Common Stock (including
----
Additional Shares of Common Stock deemed to be issued pursuant to Section 6.03
or 6.04) without consideration or for a consideration per share less than the
Base Price in effect, in each case, on the date of and immediately prior to such
issue or sale, then, and in each such case,
(i) in the event that the number of shares to be so issued or sold,
together with all other Additional Shares of Common Stock issued or sold or
deemed issued by the Company subsequent to the Initial Date for a consideration
per share less than the Base Price (collectively, the "Below Base Price Shares")
-----------------------
is less than 250,000, such Exercise Price shall be reduced, concurrently with
such issue or sale, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Exercise Price by a fraction,
(A) the numerator of which shall be (x) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (y) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the Base Price, and
(B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale, and
(ii) in the event that the number of Below Base Price Shares issued or
sold or deemed issued by the Company subsequent to the Initial Date is equal to
or greater than 250,000, the Exercise Price shall be reduced to an amount equal
to the lowest consideration per share (as determined under Section 6.05)
received by the Company for any such issue or sale,
Warrant Agreement
-----------------
14
provided that, for the purposes of this Section 6.02(a), immediately after any
--------
Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 6.03 or 6.04, such Additional Shares shall be deemed to be outstanding,
and treasury shares shall not be deemed to be outstanding.
(b) Dividends and Distributions. In case the Company at any time or
---------------------------
from time to time after the Initial Date shall declare, order, pay or make a
dividend or other distribution (including, without limitation, any distribution
of other or additional stock or other securities or property or Options by way
of dividend or spin-off, reclassification, recapitalization or similar corporate
rearrangement) on any Common Stock, other than a dividend payable in Additional
Shares of Common Stock or in Options for Common Stock, then, unless the Company
permits the Holders to participate in such dividend or distribution based on the
number of shares of Warrant Stock then underlying each Warrant, the Exercise
Price in effect immediately prior to the close of business on the record date
fixed for the determination of holders of any class of securities entitled to
receive such dividend or distribution shall be reduced, effective as of the
close of business on such record date, to a price (calculated to the nearest
.001 of a cent) determined by multiplying such Exercise Price by a fraction,
(A) the numerator of which shall be the Current Market Price in effect
on such record date or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the
value of such dividend or distribution applicable to one share of Common
Stock, and
(B) the denominator of which shall be such Current Market Price.
6.03 Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the Initial Date shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be issued for purposes of
Section 6.02 as of the time of such issue, sale, grant or assumption or, in case
such a record date shall have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), provided that such Additional
--------
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 6.05) of such shares
would be less than the Base Price in effect, in each case, on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the
Warrant Agreement
------------------
15
commencement of ex-dividend trading), as the case may be, and provided, further,
-------- -------
that in any such case in which Additional Shares of Common Stock are deemed to
be issued,
(a) no further adjustment of the Exercise Price shall be made upon the
subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase or decrease in the
consideration payable to the Company, or increase or decrease in the number
of Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Exercise Price computed upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options, or the rights of
conversion or exchange under such Convertible Securities, which are
outstanding at such time;
(c) upon the expiration of any such Options or of the rights of
conversion or exchange under any such Convertible Securities which shall
not have been exercised (or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date, or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or of Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was (x) an amount equal to (1) the consideration actually received by
the Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus (2) the consideration actually
received by the Company upon such exercise, minus (3) the
consideration paid by the Company for any purchase of such Options
which were not exercised, or (y) an amount equal to (1) the
consideration actually received by the Company for the issue, sale,
grant or assumption of all such Convertible
Warrant Agreement
-----------------
16
Securities which were actually converted or exchanged, plus (2) the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, minus (3) the consideration paid by
the Company for any purchase of such Convertible Securities the rights
of conversion or exchange under which were not exercised, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was an amount equal to (x) the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus (y) the consideration
deemed to have been received by the Company (pursuant to Section 6.05)
upon the issue or sale of the Convertible Securities with respect to
which such Options were actually exercised, minus (z) the
consideration paid by the Company for any purchase of such Options
which were not exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Exercise Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Exercise Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
In case at any time after the Initial Date the Company shall be
required to increase the number of Additional Shares of Common Stock subject to
any Option or into which any Convertible Securities are convertible or
exchangeable pursuant to the operation of anti-dilution provisions applicable
thereto, such Additional Shares shall be deemed to be issued for purposes of
Section 6.02 as of the time of such increase.
6.04 Treatment of Stock Dividends, etc. In case the Company at any
----------------------------------
time or from time to time after the Initial Date shall declare or pay any
dividend or other distribution on any class of stock of the Company payable in
Common Stock, then, and in each such case, Additional Shares of Common Stock
shall be deemed to have been issued immediately after the close of business on
the record date for the determination of holders of any class of securities
entitled to receive such dividend; provided, however, that no Additional Shares
-------- -------
of Common Stock shall be deemed to have been issued in the case of any such
dividend if the Company shall have declared
Warrant Agreement
-----------------
17
such dividend payable, and paid such dividend, with respect to all shares of
Warrant Stock then underlying the Warrants.
6.05 Computation of Consideration. For the purposes of this Section 6:
----------------------------
(a) The consideration for the issue or sale of any Additional Shares
of Common Stock or for the issue, sale, grant or assumption of any Options
or Convertible Securities, irrespective of the accounting treatment of such
consideration, shall
(i) insofar as it consists of cash, be computed at the amount of
cash received by the Company, after deducting any expenses paid or
incurred by the Company or any commissions or compensation paid or
concessions or discounts allowed to underwriters, dealers or others
performing similar services and any accrued interest or dividends in
connection with such issue or sale,
(ii) insofar as it consists of consideration (including
securities) other than cash, be computed at the Fair Value thereof at
the time of such issue or sale, after deducting any expenses paid or
incurred by the Company for any commissions or compensation paid or
concessions or discounts allowed to underwriters, dealers or others
performing similar services and any accrued interest or dividends in
connection with such issue or sale, and
(iii) in case Additional Shares of Common Stock are issued or sold
or Convertible Securities are issued, sold, granted or assumed
together with other stock or securities or other assets of the Company
for a consideration which covers both, be the proportion of such
consideration so received, computed as provided in subdivisions (i)
and (ii) above, allocable to such Additional Shares of Common Stock or
Convertible Securities, as the case may be.
(b) Subject to the proviso contained in Section 6.04, all Additional
Shares of Common Stock, Options or Convertible Securities issued in payment
of any dividend or other distribution on any class of stock of the Company
shall be deemed to have been issued without consideration.
(c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to Section 6.03, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to
Warrant Agreement
-----------------
18
any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise in full of
such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a), by
(ii) the maximum number of shares of Common Stock (as set forth in
the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(d) Additional Shares of Common Stock issued or deemed to have been
issued pursuant to the operation of anti-dilution provisions applicable to
Convertible Securities, Options or other securities of the Company (either
as a result of the adjustments provided for by the Warrants or otherwise)
shall be deemed to have been issued without consideration.
6.06 Adjustments for Combinations, Subdivisions, etc. In case the
------------------------------------------------
outstanding shares of Common Stock shall be combined or consolidated into a
lesser number of shares of Common Stock (by reclassification or otherwise) or
shall be subdivided into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock),
the Exercise Price in effect immediately prior to such combination or
consolidation or subdivision shall, concurrently with the effectiveness of such
combination or consolidation or subdivision, be proportionately increased or
decreased, as the case may be.
6.07 Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 6.08)
or to subscription, purchase or other acquisition pursuant to any Options issued
or granted by the Company (or any such other issuer or Person) for a
consideration such as to dilute, on a basis consistent with the standards
established in the other provisions of this Section 6, the purchase rights
granted by the Warrants, then, and in each such case, the computations,
adjustments and readjustments provided for in this Section 6 with respect to the
Exercise Price shall be made as nearly as possible in the manner so provided and
applied to determine the amount of Other Securities from time to time receivable
upon the exercise of the Warrants, so as to protect the holders of the Warrants
against the effect of such dilution.
6.08 Consolidation, Merger, Sale of Assets, Reorganization etc. (a)
----------------------------------------------------------
General Provisions. In case the Company, after the Initial Date, (i) shall
------------------
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (ii) shall permit
any other Person to consolidate with or merge into the Company and
Warrant Agreement
-----------------
19
the Company shall be the continuing or surviving Person but, in connection with
such consolidation or merger, Common Stock or Other Securities shall be changed
into or exchanged for cash, stock or other securities of any Person or any other
property, or (iii) shall transfer all or substantially all of its properties and
assets to any other Person, or (iv) shall effect a capital reorganization or
reclassification of Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of Additional Shares
of Common Stock for which adjustment in the Exercise Price is provided in
Section 6.02(a) or 6.02(b)), then, and in the case of each such transaction, the
Company shall give written notice thereof to each Holder of Warrants not less
than 45 days prior to the consummation thereof and proper provision shall be
made so that, upon the basis and the terms and in the manner provided in this
Section 6.08, each Holder of Warrants, upon the exercise thereof at any time
after the consummation of such transaction, shall be entitled to receive, at the
aggregate Exercise Price in effect at the time of such consummation for all
Common Stock (or Other Securities) issuable upon such exercise immediately prior
to such consummation, in lieu of the Common Stock (or Other Securities) issuable
upon such exercise prior to such consummation, the following:
the highest amount of cash, securities or other property to which such
Holder would actually have been entitled as a shareholder upon such
consummation if such Holder had exercised such Warrants immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in this Section 6,
provided that if a purchase, tender or exchange offer shall have been made
--------
to and accepted by the holders of Common Stock under circumstances in
which, upon completion of such purchase, tender or exchange offer, the
maker thereof, together with members of any group (within the meaning of
Rule 13d-5(b)(l) under the Exchange Act) of which such maker is a part, and
together with any affiliate or associate of such maker (within the meaning
of Rule 12b-2 under the Exchange Act) and any members of any such group of
which any such affiliate or associate is a part, own beneficially (within
the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the
outstanding shares of Common Stock, and if any Holder of Warrants so
designates in such notice given to the Company, such Holder shall be
entitled to receive the highest amount of cash, securities or other
property to which such Holder would actually have been entitled as a
shareholder if such Holder had exercised its Warrants prior to the
expiration of such purchase, tender or exchange offer, accepted such offer
and all of the Common Stock held by such Holder had been purchased pursuant
to such purchase, tender or exchange offer, subject to adjustments (from
and after the consummation of such purchase, tender or exchange offer) as
nearly equivalent as possible to the adjustments provided for in this
Section 6; provided that, if any of the transactions described in
--------
subdivisions (i) through (iv) of this Section 6.08(a) involve the issuance
of Voting Common Stock, the Company shall not effect any of such
transactions unless, immediately after the date of the consummation of such
transaction, the Acquiring Person or its Parent is required to file, by
virtue of having an outstanding class of Voting Common Stock (or equivalent
equity interests), reports with the Commission pursuant to section 13 or
section 15(d) of the Exchange Act, and such
Warrant Agreement
-----------------
Voting Stock (or equivalent equity interest) is listed or admitted to
trading on a national securities exchange or is included for trading on the
NASDAQ National Market or Small Cap Market.
(b) Assumption of Obligations. Notwithstanding anything contained in
-------------------------
this Agreement to the contrary, the Company will not effect any of the
transactions described in subdivisions (i) through (iv) of Section 6.08(a)
unless, prior to the consummation thereof, each Person (other than the Company)
which may be required to deliver any cash, stock or other securities or other
property upon the exercise of any Warrants as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
such Warrants, (i) the obligations of the Company under this Agreement (and if
the Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Agreement) and (ii) the obligation to
deliver to such holder such cash, stock or other securities or other property
as, in accordance with the foregoing provisions of this Section 6.08, such
Holder may be entitled to receive.
6.09 Other Dilutive Events. In case any event shall occur as to
---------------------
which the provisions of this Section 6 is not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by the Warrants in accordance with the essential intent and
principles of this Section 6, then, in each such case, an adjustment on a basis
consistent with the essential intent and principles established in this Section
6, necessary to preserve, without dilution, the purchase rights represented by
the Warrants shall be made.
6.10 No Dilution or Impairment. The Company will not, by amendment
-------------------------
of its articles of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Agreement, 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 may be necessary or appropriate in order to protect the rights of the
holders of Warrants against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of Warrants to exceed the
amount payable therefor upon such exercise, and, if the Exercise Price in effect
at any time shall be reduced to such par value, the Company will promptly cause
the par value of such shares to be reduced to $0.01, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock upon the exercise
of all of the Warrants from time to time outstanding, (c) will not take any
action which results in any adjustment of the Exercise Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of all of the Warrants would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the Company's certificate
of incorporation and available for the purpose of issue upon such exercise, (d)
will not issue any capital stock of any class which has the right to more than
one vote per
Warrant Agreement
-----------------
21
share and (e) will not issue any security other than Common Stock unless the
rights of the holders thereof shall be limited to a fixed sum or percentage of
par value or a sum determined by reference to a formula based on a published
index of interest rates, an interest rate publicly announced by a financial
institution or a similar indicator of interest rates in respect of interest or
participation in dividends and to a fixed sum or percentage of par value as
principal or in any distribution of assets.
6.11 Accountants' Report as to Adjustments. In each case of any
-------------------------------------
adjustment or readjustment in the shares of Warrant Stock (or Other Securities)
issuable upon the exercise of the Warrants, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
the Warrants and cause independent public accountants of recognized national
standing selected by the Company (which may be the regular auditors of the
Company) to verify such computation and prepare a report setting forth such
adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including without limitation a statement of (a) the consideration
received or to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (c) the Exercise Price
in effect immediately prior to such issue or sale and as adjusted and readjusted
on account thereof. The Company will forthwith mail a copy of each such report
to each holder of a Warrant and will, upon the written request at any time of
any Holder of a Warrant, furnish to such Holder a like report setting forth the
Exercise Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its
principal office and will cause the same to be available for inspection at such
office during normal business hours by any Holder of a Warrant or any
prospective purchaser of a Warrant designated by the Holder thereof.
6.12 Notices of Corporate Action. In the event of
---------------------------
(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 any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
Warrant Agreement
-----------------
22
the Company will mail to each Holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date therein specified, in the case of any
date referred to in the foregoing subdivision (i), and at least 45 days prior to
the date therein specified, in the case of the date referred to in the foregoing
subdivision (ii).
SECTION 7. Holders' Rights.
---------------
7.01 Delivery Expenses. If any Holder surrenders any certificate for
-----------------
Warrants or Warrant Stock to the Company or a transfer agent of the Company for
exchange for instruments of other denominations or registered in another name or
names, the Company shall cause such new instruments to be issued and shall pay
the cost of delivering to or from the office of such Holder from or to the
Company or its transfer agent, duly insured, the surrendered instrument and any
new instruments issued in substitution or replacement for the surrendered
instrument.
7.02 Taxes. The Company shall pay all taxes (other than federal,
-----
state or local income taxes) which may be payable in connection with the
execution and delivery of this Agreement or the issuance of the Warrants and
Warrant Stock hereunder or in connection with any modification of this Agreement
or the Warrants and shall hold each Holder harmless without limitation as to
time against any and all liabilities with respect to all such taxes. The
obligations of the Company under this Section 7.02 shall survive any redemption,
repurchase or acquisition of Warrants or Warrant Stock by the Company, any
termination of this Agreement, and any cancellation or termination of the
Warrants.
7.03 Replacement of Instruments. Upon receipt by the Company of
--------------------------
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any certificate or instrument evidencing any
Warrants or Warrant Stock, and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that, if the Company's Common Stock is not at
--------
the time publicly traded and the owner of the same is Investor or an
institutional lender or investor, its own agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender or cancellation thereof,
Warrant Agreement
-----------------
23
the Company, at its expense, shall execute, register and deliver, in lieu
thereof, a new certificate or instrument for (or covering the purchase of) an
equal number of Warrants or Warrant Stock.
7.04 Indemnification. The Company shall indemnify and hold harmless
---------------
each of the Investor and the Holders and each of their respective directors,
officers, employees, shareholders, members, Affiliates and agents (each, an
"indemnified person") on demand from and against any and all losses, claims,
-------------------
damages, liabilities (or actions or other proceedings commenced or threatened in
respect thereof) and expenses that arise out of, result from, or in any way
relate to, this Agreement or the Warrants or Warrant Stock, or in connection
with the other transactions contemplated hereby and thereby, other than such
losses, claims, damages, liabilities and expenses relating to the value of the
Warrants or Warrant Stock or other securities issued to the Investor or the
Holders in connection with this Agreement, the Warrants or the Warrant Stock or
the other transactions contemplated hereby or thereby unless such losses,
claims, damages, liabilities, and expenses are directly related to a breach by
the Company of this Agreement or other agreements entered into in connection
with the other transactions contemplated hereby or thereby, and to reimburse
each indemnified person, upon its demand, for any legal or other expenses
incurred in connection with investigating, defending or participating in the
defense of any such loss, claim, damage, liability, action or other proceeding
(whether or not such indemnified person is a party to any action or proceeding
out of which any such expenses arise), other than any of the foregoing claimed
by any indemnified person to the extent there has been a final judicial
determination not subject to appeal that it was incurred by reason of the gross
negligence or willful misconduct of such indemnified person. No indemnified
person shall be responsible or liable to either the Company or any other Person
for any damages which may be alleged as a result of or relating to this
Agreement or the Warrants or Warrant Stock (other than in connection with a
breach of this Agreement), or in connection with the other transactions
contemplated hereby and thereby other than any of the foregoing claimed by any
indemnified person to the extent there has been a final judicial determination
not subject to appeal that it was incurred by reason of the gross negligence or
willful misconduct of such indemnified person.
7.05 Inspection Rights. From and after the date hereof, the Company
-----------------
shall afford any Holder or its authorized agents, access, at reasonable times,
upon reasonable prior notice, (i) to inspect the books and records of the
Company, (ii) to discuss with management of the Company the business and affairs
of the Company and (iii) to inspect the properties of the Company.
SECTION 8. Other Covenants of Company. The Company agrees with each
--------------------------
Holder that, so long as any of the Warrants and/or Warrant Stock shall be
outstanding:
8.01 Availability of Information. The Company will cooperate with
---------------------------
each holder of any Restricted Securities in supplying such information as may be
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale
Warrant Agreement
-----------------
24
of any Restricted Securities. The Company will furnish to each holder of any
Warrants, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with the NASD, any securities exchange or with the Commission.
8.02 Repurchases and Redemption. Except as otherwise specifically
--------------------------
provided herein, and other than repurchases or redemptions of shares of Common
Stock from management pursuant to the terms set forth in Annex 2 hereto, the
-------
Company shall not effect any repurchase or redemption of shares of Common Stock,
or Options or Convertible Securities (other than pursuant to their respective
terms), and shall cause its Subsidiaries not to effect any repurchase or
redemption of shares of Common Stock, or Options or Convertible Securities
(other than pursuant to their respective terms), from any Shareholder or holder
of Options or Convertible Securities, without the prior written consent of the
Requisite Holders of Warrants.
8.03 Transactions with Affiliates. Except as expressly permitted by
----------------------------
this Agreement, the Company shall not, nor shall it permit its Subsidiaries to,
directly or indirectly, sell, lease or otherwise transfer any property or assets
to, or purchase, lease or otherwise acquire any property or assets from, or
otherwise engage in any other transactions with or for the benefit of, any of
its Affiliates, except (a) in the ordinary course of business at prices and on
terms and conditions not less favorable to the Company or such Subsidiary than
could be obtained on an arm's-length basis from unrelated third parties, (b)
transactions between or among the Company and its wholly-owned Subsidiaries not
involving any other Affiliate and (c) any transactions or arrangements existing
on the date hereof.
8.04 Restrictions on Performance. The Company shall not at any time
---------------------------
after the Initial Date enter into an agreement or other instrument limiting in
any manner its ability to perform its obligations under this Agreement or the
Warrants, or making such performance or the issuance of Warrant Stock upon the
exercise of any Warrant a default under any such agreement or instrument other
than the Senior Secured Note or any other instrument issued by the Company in
the Additional Financing.
8.05 Modification of Other Equity Documents. The Company shall not
--------------------------------------
amend or consent to any modification, supplement or waiver of any provision of
any Other Equity Documents in any manner which would have an adverse effect on
the Holders, in each case without the prior written consent of the Requisite
Holders of Warrants. Without limiting the generality of the foregoing, the
Company shall not amend, or consent to any modification, supplement or waiver of
any provision of any Other Equity Documents in a way which would (i) restrict
the transferability of the Warrants and the Warrant Stock, (ii) restrict the
transferability of the rights of any Holder in this Agreement to any transferee
of all or a portion of such Holder's Warrants and/or Warrant Stock or (iii)
require any consent or other approval of any Person to the exercise of the
Warrants by any Holder, the issuance of Warrant Stock upon such exercise or the
Warrant Agreement
-----------------
25
admission of such Holder as a member of the Company upon such exercise. Anything
in the Rights Agreement to the contrary notwithstanding, on issuance of shares
of Common Stock on exercise of Warrants prior to the redemption or exercise of
Rights (as defined in the Rights Agreement), the Company shall issue Rights, or
after the Distribution Date (as therein) Rights Certificates, in connection with
such exercise.
8.06 Ownership of Subsidiaries. The Company will, and will cause
-------------------------
each of its Subsidiaries to take such action as will be necessary from time to
time to ensure that the Company or a Subsidiary owns 100% of each class of
capital stock of each Subsidiary.
8.07 Reservation of Stock. etc. The Company will at all times
--------------------------
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Warrant Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding.
All shares of Common Stock (or Other Securities) shall be duly authorized and,
when issued upon such exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on the part of the
holders thereof.
8.08 Listing on Securities Exchanges. The Company will list on each
-------------------------------
national securities exchange on which any Common Stock may at any time be
listed, subject to official notice of issuance upon exercise of the Warrants,
and will maintain such listing of, all shares of Warrant Stock from time to time
issuable upon exercise of the Warrants. The Company will also so list on each
national securities exchange, and will maintain such listing of, any Other
Securities if at the time any securities of the same class shall be listed on
such national securities exchange by the Company.
SECTION 9. Miscellaneous.
-------------
9.01 Waiver. No failure on the part of any Holder to exercise and no
------
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement or the Warrants shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or the Warrant preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
9.02 Notices.
-------
(a) All notices, requests and other communications provided for
herein and the Warrants (including any waivers or consents under this Agreement
and the Warrants) shall be given or made in writing,
(i) if to the Company:
Warrant Agreement
-----------------
26
Frontier Airlines, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Investor:
Wexford Management LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) if to any other Person who is the registered Holder of any
Warrants or Warrant Stock, to the address for such Holder as it
appears in the stock or warrant ledger of the Company;
or, in the case of any Holder, at such other address as shall be designated by
such party in a notice to the Company; or, in the case of the Company, at such
other address as the Company may designate in a notice to the Investor and all
other Holders.
(b) All such notices, requests and other communications shall be: (i)
personally delivered, sent by courier guaranteeing overnight delivery or sent by
registered or certified mail, return receipt requested, postage prepaid, in each
case given or addressed as aforesaid; and (ii) effective upon receipt.
9.03 Expenses, Etc. The Company agrees to pay or reimburse the
--------------
Investor and, if applicable, the Holders for: (a) all reasonable out-of-pocket
costs and expenses of the Investor and the Holders incurred in connection with
the negotiation, preparation, execution and delivery of this Agreement and the
issuance of Warrants hereunder in accordance with the terms of paragraph 8 of
the Senior Secured Note; and (b) all reasonable costs and expenses of the
Investor
Warrant Agreement
-----------------
27
and the Holders (including reasonable legal fees and expenses) in
connection with (i) any default by the Company hereunder or under the Warrants
or any enforcement proceedings resulting therefrom, and (ii) the enforcement of
this Section 9.03.
9.04 Amendments, Etc. Except as otherwise expressly provided in this
----------------
Agreement, any provision of this Agreement may be amended or modified only by an
instrument in writing signed by the Company and the Requisite Holders of
Warrants and, to the extent any such amendment or modification could have an
adverse effect on the rights hereunder of the holders of Warrant Stock, a
majority of such holders; provided, however, that no such amendment or waiver
-------- -------
shall, without the written consent of all Holders of Warrants and Warrant Stock,
amend this Section 9.04 or the definition of "Requisite Holders of Warrants".
9.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns including, without limitation, all Holders of Warrants.
9.06 Survival. All representations and warranties made by the
--------
Company herein or in any certificate or other instrument delivered by it or on
its behalf under this Agreement shall be considered to have been relied upon by
the Investor and shall survive the issuance of the Warrants or the Warrant Stock
regardless of any investigation made by or on behalf of the Investor. All
statements in any such certificate or other instrument so delivered shall
constitute representations and warranties by the Company hereunder. All
representations and warranties made by the Investor herein shall be considered
to have been relied upon by the Company and shall survive the issuance to the
Investor of the Warrants or the Warrant Stock regardless of any investigation
made by the Company or on its behalf.
9.07 Specific Performance. Damages in the event of breach of this
--------------------
Agreement by a Holder or the Company would be difficult, if not impossible, to
ascertain, and it is therefore agreed that each Holder and the Company, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof, and each Holder and the Company hereby waives
any and all defenses it may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right will not preclude the Holders or the Company from
pursuing any other rights and remedies at law or in equity which the Holders or
the Company may have.
9.08 WAIVER OF JURY TRIAL. THE COMPANY AND THE INVESTOR HEREBY
--------------------
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF ,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE WARRANTS OR ANY OTHER DOCUMENT
DELIVERED IN
Warrant Agreement
-----------------
28
CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE COMPANY OR THE
INVESTOR RELATING HERETO.
9.09 Consent to Jurisdiction and Service of Process. Each party
----------------------------------------------
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court for the Southern District of New York or any court of the State
of New York located in the Borough of Manhattan in the City of New York in any
action, suit or proceeding arising out of or relating to this Agreement or the
Warrants or any of the transactions contemplated hereby, and agrees that any
such action, suit or proceeding shall be brought only in such court, provided,
--------
however, that such consent to jurisdiction is solely for the purpose referred to
-------
in this Section and shall not be deemed to be a general submission to the
jurisdiction of said courts or in the State of New York other than for such
purpose. Each party hereby irrevocably waives, to the fullest extent permitted
by Law, any objection that it may now or hereafter have to the laying of the
venue of any such action, suit or proceeding brought in such a court and any
claim that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum.
9.10 Limitation of Liability. No provision hereof, in the absence of
-----------------------
affirmative action by any Holder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company, by any creditor of
the Company or any other Person.
9.11 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provi sion of this Agreement.
9.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart signature page or counterpart.
9.13 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of New York without giving
effect to the conflicts of law principles thereof.
9.14 Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the
Warrent Agreement
-----------------
illegal, invalid or unenforceable provision or by its severance herefrom and (d)
in lieu of such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
9.15 Entire Agreement. This Agreement supersedes all prior
----------------
discussions and agreements between the parties with respect to the subject
matter hereof, and together with the Warrant and the Registration Rights
Agreement contains the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant
Agreement as of the date first above written.
FRONTIER AIRLINES, INC.
By ____________________
Name:
Title:
WEXFORD MANAGEMENT LLC
By _____________________
Name:
Title:
Warrant Agreement
-----------------
Annex 1
to
Warrant Agreement
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the rights
of the undersigned under this Warrant with respect to the number of shares of
Warrant Stock covered thereby set forth hereinbelow unto:
Number of Shares
Name of Assignee Address of Common Stock
--------------------------------------------------------------------------------
Dated:__________________
________________________________
Signature of Registered Holder
________________________________
Name of Registered Holder
(Please Print)
Witness:
______________________
EXHIBIT A
WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares of Common Stock: 3,000,000 Warrant No. Wex-1
WARRANT
to Purchase Common Stock of
FRONTIER AIRLINES, INC.
THIS IS TO CERTIFY THAT WEXFORD MANAGEMENT LLC, as Agent ("Wexford"),
-------
or its registered assigns (the "Holder"), is entitled to purchase in whole or in
------
part from FRONTIER AIRLINES, INC., a Colorado corporation (the "Company"), at
-------
any time and from time to time on or after the date hereof with respect to
1,000,000 warrants and on or after December 17, 1997 with respect to the
remaining 2,000,000 warrants, subject to cutback as provided in Exhibit A (as
defined below), but not later than 5:00 p.m., New York City time, on December
15, 2001 (the "Expiration Date"), three million shares of common stock of the
---------------
Company (the "Common Stock") at a purchase price of $3.00 per share (the
"Exercise Price"), subject to the terms and conditions set forth herein and in
---------------
the Warrant Agreement to be entered into between the Company and Wexford (the
"Warrant Agreement") and prior to the execution and delivery thereof, subject to
------------------
the terms and conditions set forth on Exhibit A to the Letter Agreement entered
into between the Company and Wexford ("Exhibit A"), each such purchase of Common
---------
Stock to be made, and to be deemed effective for the purpose of determining the
date of exercise, only upon surrender of this Warrant to the Company at ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with the Form of Exercise attached
hereto, or a reasonable facsimile thereof (the "Exercise Notice"), duly
---------------
completed and signed, and upon payment in full to the Company of the Exercise
Price by one or more of the following: (i) in cash or (ii) by certified or
official bank check to the order of the Company or (iii) by wire transfer of
immediately available funds to an account designated by the Company, or (iv) by
tender of unpaid principal and interest thereon owing under the Senior Secured
Note and any New Senior Secured Notes, or (v) in the event the then Current
Market Price is greater than $5.00, by delivery of this Warrant Certificate to
the Company for cancellation in accordance with the following formula: in
exchange for each share of Common Stock issuable on exercise of each Warrant
represented by this Warrant Certificate that is being exercised, such holder
shall receive such number of shares of Common Stock as is equal to the product
of (x) the number of shares of Common Stock issuable upon exercise of the
Warrants being exercised at such time multiplied by (y) a fraction, the
numerator of which is the Current Market Price per share of Common Stock at such
time minus the Exercise
Price per share of Common Stock at such time, and the denominator of which is
the Current Market Price per share of Common Stock at such time. For purposes of
this Warrant, "Current Market Price", shall mean, with respect to a share of
--------------------
Common Stock as of any date, the average of the daily market prices for each day
during the 20 consecutive trading days commencing 30 Business Days before such
date as of which such a price can be established in the manner set forth below.
The market price for each such Business Day shall be the last sale price on such
day as reported in the Consolidated Last Sale Reporting System or as quoted in
the National Association of Securities Dealers Automated Quotation System, or if
such last sale price is not available, the average of the closing bid and asked
prices as reported in either such system, or in any other case the higher bid
price quoted for such day as reported by The Wall Street Journal and the
National Quotation Bureau pink sheets.
Upon receipt thereof, the Company shall, as promptly as practicable
and in any event within five Business Days thereafter, execute or cause to be
executed and deliver or cause to be delivered to the Holder a stock certificate
or certificates representing the aggregate number of shares of Common Stock
issuable upon such exercise ("Warrant Stock") and any other property to which
-------------
such Holder is entitled.
The stock certificate or certificates for Warrant Stock so delivered
shall be in such denominations as may be specified in the Exercise Notice and
shall be registered in the name of the Holder or such other name or names as
shall be designated in such Exercise Notice. Such stock certificate or
certificates shall be deemed to have been issued and the Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares, including, to the extent permitted by law and to the
extent such shares represent voting stock of the Company, the right to vote such
shares or to consent or to receive notice as a shareholder, as of the date on
which the last of the Exercise Notice, payment of the Exercise Price and this
Warrant is received by the Company as aforesaid. If this Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock and other securities,
execute and deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder.
All shares of Common Stock issuable upon the exercise of this Warrant
shall, upon payment therefor in accordance herewith, be duly and validly issued,
fully paid and nonassessable and free and clear of any liens, charges or other
encumbrances of any nature.
Upon the execution and delivery of the Warrant Agreement, this Warrant
shall be exchanged at the office of the Company referred to above for new
Warrants in substantially the form hereof and representing the same aggregate
number of Warrants evidenced by this Warrant.
This Warrant is issued in accordance with Exhibit A and is subject to
the terms and provisions of Exhibit A, which terms and provisions are hereby
incorporated by reference herein
and made a part hereof. Every holder of this Warrant consents to all of the
terms contained in Exhibit A by acceptance hereof.
The Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant are subject to adjustment in certain events as
provided in Exhibit A and as to be provided in the Warrant Agreement.
The Company shall not be required to issue a fractional share of
Common Stock upon exercise of this Warrant. As to any fraction of a share which
the Holder hereof would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Current Market Price per share of
Common Stock on the date of exercise.
The Warrants and the Warrant Stock shall be transferable on or after
December 17, 1997 subject only to applicable securities laws. Upon any such
transfer a new Warrant or new Warrants of different denominations, representing
in the aggregate a like number of Warrants, will be issued to the transferee.
Every Holder hereof, by accepting this Warrant, consents and agrees with the
Company and with every subsequent Holder of this Warrant that until due
presentation for the registration of transfer of this Warrant on the Warrant
register maintained by the Company, the Company may deem and treat the Person in
whose name this Warrant is registered as the absolute and lawful owner for all
purposes whatsoever and the Company shall not be affected by any notice to the
contrary. The Company agrees to provide registration rights on the terms
contained in Exhibit A.
Nothing contained in the Warrant Agreement or in this Warrant shall be
construed as conferring on the holder of any Warrants or his or her transferee
any rights whatsoever as a shareholder of the Company.
No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of such Holder, shall give rise to any liability of
such Holder for the Exercise Price or as a shareholder of the Company, whether
such liability is asserted by the Company, by any creditor of the Company or any
other Person.
Any notices and other communications pursuant to the provisions hereof
shall be sent in accordance with Paragraph 10 of the Senior Secured Note of the
Company dated the date hereof in favor of Wexford (the "Senior Secured Note").
This Warrant shall be deemed a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of laws thereof.
Each term used herein without definition shall have the meaning
assigned thereto in the Senior Secured Note.
IN WITNESS WHEREOF, the Company has duly executed this Warrant.
Dated: December 2, 1997
FRONTIER AIRLINES, INC.
By___________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Annex A
to
Warrant
FORM OF EXERCISE
----------------
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of Common Stock of Frontier Airlines, Inc., and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant, and requests that (i) certificates and/or
other instrument covering such Common Stock be issued in accordance with the
instructions given below and (ii) if such Common Stock shall not include all of
the Common Stock to which the Holder is entitled under this Warrant, that a new
Warrant of like tenor and date for the unpurchased balance of the Common Stock
issuable hereunder be delivered to the undersigned.
Dated: _________________
________________________________
(Signature of Registered Holder)
Instructions for issuance and
registration of Common Stock:
_____________________________
Name of Registered Holder
(please print)
Social Security or Other Identifying
Number:_____________________________
Please deliver certificate to
the following address:
_____________________________________
Street
_____________________________________
City, State and Zip Code
EXHIBIT B
WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
No. of Shares of Common Stock: 1,750,000 Warrant No. Wex-2
WARRANT
to Purchase Common Stock of
FRONTIER AIRLINES, INC.
THIS IS TO CERTIFY THAT WEXFORD MANAGEMENT LLC, as Agent ("Wexford"),
-------
or its registered assigns (the "Holder"), is entitled to purchase in whole or in
------
part from FRONTIER AIRLINES, INC., a Colorado corporation (the "Company"), at
-------
any time and from time to time on or after the date hereof, but not later than
5:00 p.m., New York City time, on December 15, 2001 (the "Expiration Date"),
---------------
1,750,000 shares of common stock of the Company (the "Common Stock") at a
purchase price of $3.00 per share (the "Exercise Price"), subject to the terms
--------------
and conditions set forth herein and in the Amended and Restated Warrant
Agreement dated as of February 27, 1998 between the Company and Wexford (the
"Warrant Agreement"), each such purchase of Common Stock to be made, and to be
------------------
deemed effective for the purpose of determining the date of exercise, only upon
surrender of this Warrant to the Company at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with the Form of Exercise attached hereto, or a reasonable
facsimile thereof (the "Exercise Notice"), duly completed and signed, and upon
---------------
payment in full to the Company of the Exercise Price by one or more of the
following: (i) in cash or (ii) by certified or official bank check to the order
of the Company or (iii) by wire transfer of immediately available funds to an
account designated by the Company, or (iv) by tender of unpaid principal and
interest thereon owing under the Senior Secured Note, or (v) in the event the
then Current Market Price is greater than $5.00, by delivery of this Warrant
Certificate to the Company for cancellation in accordance with the following
formula: in exchange for each share of Common Stock issuable on exercise of each
Warrant represented by this Warrant Certificate that is being exercised, such
holder shall receive such number of shares of Common Stock as is equal to the
product of (x) the number of shares of Common Stock issuable upon exercise of
the Warrants being exercised at such time multiplied by (y) a fraction, the
numerator of which is the Current Market Price per share of Common Stock at such
time minus the Exercise Price per share of Common Stock at such time, and the
denominator of which is the Current Market Price per share of Common Stock at
such time. For purposes of this Warrant, "Current Market Price", shall mean,
--------------------
with respect to a share of Common Stock as of any date, the
average of the daily market prices for each day during the 20 consecutive
trading days commencing 30 Business Days before such date as of which such a
price can be established in the manner set forth below. The market price for
each such Business Day shall be the last sale price on such day as reported in
the Consolidated Last Sale Reporting System or as quoted in the National
Association of Securities Dealers Automated Quotation System, or if such last
sale price is not available, the average of the closing bid and asked prices as
reported in either such system, or in any other case the higher bid price quoted
for such day as reported by The Wall Street Journal and the National Quotation
Bureau pink sheets.
Upon receipt thereof, the Company shall, as promptly as practicable
and in any event within five Business Days thereafter, execute or cause to be
executed and deliver or cause to be delivered to the Holder a stock certificate
or certificates representing the aggregate number of shares of Common Stock
issuable upon such exercise ("Warrant Stock") and any other property to which
-------------
such Holder is entitled.
The stock certificate or certificates for Warrant Stock so delivered
shall be in such denominations as may be specified in the Exercise Notice and
shall be registered in the name of the Holder or such other name or names as
shall be designated in such Exercise Notice. Such stock certificate or
certificates shall be deemed to have been issued and the Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares, including, to the extent permitted by law and to the
extent such shares represent voting stock of the Company, the right to vote such
shares or to consent or to receive notice as a shareholder, as of the date on
which the last of the Exercise Notice, payment of the Exercise Price and this
Warrant is received by the Company as aforesaid. If this Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock and other securities,
execute and deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder.
All shares of Common Stock issuable upon the exercise of this Warrant
shall, upon payment therefor in accordance herewith, be duly and validly issued,
fully paid and nonassessable and free and clear of any liens, charges or other
encumbrances of any nature.
The Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant are subject to adjustment in certain events as
provided in the Warrant Agreement.
The Company shall not be required to issue a fractional share of
Common Stock upon exercise of this Warrant. As to any fraction of a share which
the Holder hereof would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Current Market Price per share of
Common Stock on the date of exercise.
The Warrants and the Warrant Stock are transferable subject only to
applicable securities laws. Upon any such transfer a new Warrant or new
Warrants of different denominations, representing in the aggregate a like number
of Warrants, will be issued to the transferee. Every Holder hereof, by
accepting this Warrant, consents and agrees with the Company and with every
subsequent Holder of this Warrant that until due presentation for the
registration of transfer of this Warrant on the Warrant register maintained by
the Company, the Company may deem and treat the Person in whose name this
Warrant is registered as the absolute and lawful owner for all purposes
whatsoever and the Company shall not be affected by any notice to the contrary.
The Warrants and the Warrant Stock are subject to registration rights under the
Registration Rights Agreement dated as of December 17, 1997 between the Company
and Wexford.
Nothing contained in the Warrant Agreement or in this Warrant shall be
construed as conferring on the holder of any Warrants or his or her transferee
any rights whatsoever as a shareholder of the Company.
No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of such Holder, shall give rise to any liability of
such Holder for the Exercise Price or as a shareholder of the Company, whether
such liability is asserted by the Company, by any creditor of the Company or any
other Person.
Any notices and other communications pursuant to the provisions hereof
shall be sent in accordance with Paragraph 10 of the Senior Secured Note of the
Company dated the date hereof in favor of Wexford (the "Senior Secured Note").
This Warrant shall be deemed a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of laws thereof.
Each term used herein without definition shall have the meaning
assigned thereto in the Senior Secured Note.
IN WITNESS WHEREOF, the Company has duly executed this Warrant.
Dated: February 27, 1998
FRONTIER AIRLINES, INC.
By___________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Annex A
to
Warrant
FORM OF EXERCISE
----------------
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of Common Stock of Frontier Airlines, Inc., and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant, and requests that (i) certificates and/or
other instrument covering such Common Stock be issued in accordance with the
instructions given below and (ii) if such Common Stock shall not include all of
the Common Stock to which the Holder is entitled under this Warrant, that a new
Warrant of like tenor and date for the unpurchased balance of the Common Stock
issuable hereunder be delivered to the undersigned.
Dated: _________________
________________________________
(Signature of Registered Holder)
Instructions for issuance and
registration of Common Stock:
_____________________________
Name of Registered Holder
(please print)
Social Security or Other Identifying
Number:_____________________________
Please deliver certificate to
the following address:
_____________________________________
Street
_____________________________________
City, State and Zip Code