exv10w51



 






Exhibit 10.51




$125,000,000




ATLANTIC COAST AIRLINES HOLDINGS, INC.




6% CONVERTIBLE NOTES DUE 2034




PURCHASE AGREEMENT




February 19, 2004




 









 





      February 19, 2004


Morgan Stanley & Co. Incorporated

1585 Broadway

New York, New York 10036



Dear Sirs and Mesdames:




     Atlantic Coast Airlines Holdings, Inc., a Delaware corporation (the
“Company”), proposes to issue and sell to Morgan Stanley & Co. Incorporated
(the “Initial Purchaser”) $125,000,000 principal amount of its 6% Convertible
Notes due 2034 (the “Firm Securities”) to be issued pursuant to the provisions
of an Indenture dated as of February 25, 2004 (the “Indenture”) between the
Company and U.S. Bank National Association, as Trustee (the “Trustee”). The
Company also proposes to issue and sell to the Initial Purchaser not more than
an additional $25,000,000 principal amount of its 6% Convertible Notes due 2034
(the “Additional Securities”) if and to the extent that the Initial Purchaser
shall have determined to exercise the right to purchase such 6% Convertible
Notes due 2034 granted to the Initial Purchaser in Section 2 hereof. The Firm
Securities and the Additional Securities are hereinafter collectively referred
to as the “Securities”. The Securities will be convertible into shares of
common stock, par value $.02 per share, of the Company (the “Underlying
Securities”).



     The Securities and the Underlying Securities will be offered without being
registered under the Securities Act of 1933, as amended (the “Securities Act”),
only to qualified institutional buyers in compliance with the exemption from
registration provided by Rule 144A under the Securities Act.



     The Initial Purchaser and their direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement dated the date
hereof between the Company and the Initial Purchaser (the “Registration Rights
Agreement”).



     In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum (the “Preliminary Memorandum”) and will prepare
a final offering memorandum (the “Final Memorandum” and, with the Preliminary
Memorandum, each a “Memorandum”) including or incorporating by reference a
description of the terms of the Securities and the Underlying Securities, the
terms of the offering and a description of the Company. As used herein, the
term “Memorandum” shall include in each case the documents incorporated by
reference therein. The terms “supplement”, “amendment” and “amend” as used
herein with respect to a Memorandum shall include all documents deemed to be
incorporated by reference in the Preliminary



 









 




Memorandum or Final Memorandum
that are filed subsequent to the date of such Memorandum with the Securities
and Exchange Commission (the “Commission”) pursuant to the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).




     1. Representations and Warranties. The Company represents and warrants to,
and agrees with, the Initial Purchaser that:




     (a) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in either Memorandum complied
or will comply when so filed in all material respects with the Exchange
Act and the applicable rules and regulations of the Commission
thereunder and (ii) the Preliminary Memorandum at its date did not
contain and the Final Memorandum, in the form used by the Initial
Purchaser to confirm sales as of its date and on the Closing Date (as
defined in Section 4), will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in either Memorandum based upon information relating to the
Initial Purchaser furnished to the Company in writing by such Initial
Purchaser expressly for use therein.




     (b) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in each Memorandum and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.




     (c) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority
to own its property and to conduct its business as described in each
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital
stock of each



 









 




subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned
directly by the Company, free and clear of all liens, encumbrances,
equities or claims.





     (d) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Memorandum.




     (e) The shares of common stock of the Company outstanding prior to
the issuance of the Securities have been duly authorized and are validly
issued, fully paid and non-assessable and not subject to any preemptive
or similar rights.




     (f) This Agreement has been duly authorized, executed and delivered
by the Company.




     (g) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchaser in accordance with
the terms of this Agreement, will be valid and binding obligations of
the Company, enforceable in accordance with their terms, subject to the
effects of applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and equitable principles of general
applicability, and will be entitled to the benefits of the Indenture and
the Registration Rights Agreement pursuant to which such Securities are
to be issued.




     (h) The Underlying Securities issuable upon conversion of the
Securities have been duly authorized and reserved and, when issued upon
conversion of the Securities in accordance with the terms of the
Securities, will be validly issued, fully paid and non-assessable, and
the issuance of the Underlying Securities will not be subject to any
preemptive or similar rights.




     (i) Each of the Indenture and the Registration Rights Agreement has
been duly authorized, executed and delivered by, and is a valid and
binding agreement of, the Company, enforceable in accordance with its
terms, subject to the effects of applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally and equitable
principles of general applicability and except as rights to
indemnification and contribution under the Registration Rights Agreement
may be limited under applicable law.




     (j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the



 









 






Indenture, the Registration Rights Agreement and the Securities will not
contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, the Indenture, the
Registration Rights Agreement or the Securities, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities.




     (k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Preliminary Memorandum.




     (l) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its subsidiaries
is subject other than proceedings accurately described in all material
respects in each Memorandum and proceedings that are not reasonably
likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole, or on the power or ability of the
Company to perform its obligations under this Agreement, the Indenture,
the Registration Rights Agreement or the Securities or to consummate the
transactions contemplated by the Final Memorandum.




     (m) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.



 









 






     (n) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.




     (o) The Company is not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Final Memorandum will not be, required to register as
an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.




     (p) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an “Affiliate”) of the
Company has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be
integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the Securities or
(ii) offered, solicited offers to buy or sold the Securities by any form
of general solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act.




     (q) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchaser in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act
of 1939, as amended.




     (r) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.




     (s) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in the Memorandum,
or, to the knowledge of the Company, is imminent; and the Company is not
aware of any existing, threatened or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or
contractors that could have a material adverse affect on the Company and
its subsidiaries, taken as a whole.



 









 






     (t) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an “Authorization”) of, and has made all filings with
and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals as are
necessary to own, lease, license and operate its respective properties
and to conduct its business, except to the extent the failure to have
any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole,
and neither the Company nor any of the subsidiaries has received
notification of any revocation or modification of any such Authorization
or has reason to believe that any such Authorization will not be renewed
in the ordinary course, except where such revocation, modification or
non-renewal would not reasonably be expected to, singularly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole. Each such Authorization is valid and in
full force and effect and each of the Company and its subsidiaries is in
compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including,
without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both,
would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both,
would reasonably be expected to result in any other material impairment
of the rights of the holder of any such Authorization; except to the
extent such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, reasonably be
expected to have a material adverse effect on the Company and its
subsidiaries, taken as a whole.



     2. Agreements to Sell and Purchase. Upon the basis of the representations
and warranties herein contained, but subject to the conditions hereinafter
stated, the Company hereby agrees to sell to the Initial Purchaser, and the
Initial Purchaser agrees to purchase from the Company $125,000,000 principal
amount of Firm Securities at a purchase price of 97.5% of the principal amount
thereof (the “Purchase Price”) plus accrued interest, if any, to the Closing
Date.



     On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Initial Purchaser the Additional Securities, and the Initial Purchaser
shall have the right to purchase up to $25,000,000 principal amount of
Additional Securities



 









 




at the Purchase Price plus accrued interest, if any, to
the date of payment and delivery. The Initial Purchaser may exercise this right
in whole or from time to time in part by giving written notice not later than
30 days after the date of this Agreement. Any exercise notice shall specify
the principal amount of Additional Securities to be purchased by the Initial
Purchaser and the date on which such Additional Securities are to be purchased.
Each purchase date must be at least one business day after the written notice
is given and may not be earlier than the closing date for the Firm Securities
nor later than ten business days after the date of such notice. On each day,
if any, that Additional Securities are to be purchased (an “Option Closing
Date”), the Initial Purchaser agrees to purchase the principal amount of
Additional Securities set forth on such written notice.




     The Company hereby agrees that, without the prior written consent of the
Initial Purchaser, it will not, during the period ending 90 days after the date
of the Final Memorandum, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of, directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the common
stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of common stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the sale of the
Securities under this Agreement or (B) the issuance by the Company of the
Underlying Securities in accordance with the provisions of the Indenture or (C)
the issuance of by the Company of any shares of common stock upon the exercise
of an option or warrant or the conversion of a security outstanding on the date
hereof of which the Initial Purchaser has been advised in writing or (D) any
securities or options to purchase any securities of the Company granted or sold
pursuant to any employee equity compensation plan described in the Memorandum
or the documents incorporated by reference therein.



     3. Terms of Offering. The Initial Purchaser has advised the Company that
it will make an offering of the Securities purchased hereunder on the terms to
be set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into as in the Initial Purchaser’s judgment is advisable.



     4. Payment and Delivery. Payment for the Firm Securities shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Securities for the account of the Initial
Purchaser at 10:00 a.m., New York City time, on February 25, 2004, or at such
other time on the same or such other date, not later than March 3, 2004, as
shall be designated in writing by the Initial Purchaser. The time and date of
such payment are hereinafter referred to as the “Closing Date.”



 









 





     Payment for any Additional Securities shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Securities for the account of the Initial Purchaser at 10:00
a.m., New York City time, on the date specified in the corresponding notice
described in Section 2 or at such other time on the same or on such other date,
in any event not later than 30 days after the Closing Date, as shall be
designated in writing by the Initial Purchaser.



     The Securities shall be in definitive form or global form, as specified by
the Initial Purchaser, and registered in such names and in such denominations
as the Initial Purchaser shall request in writing not later than one full
business day prior to the Closing Date or the applicable Option Closing Date,
as the case may be. The Securities shall be delivered to the Initial Purchaser
on the Closing Date or an Option Closing Date, as the case may be, for the
account of the Initial Purchaser, with any transfer taxes payable in connection
with the transfer of the Securities to the Initial Purchaser duly paid, against
payment of the Purchase Price therefor plus accrued interest, if any, to the
date of payment and delivery.



     5. Conditions to the Initial Purchaser’s Obligations. The obligations of
the Initial Purchaser to purchase and pay for the Firm Securities on the
Closing Date are subject to the following conditions:




     (a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:




          (i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating
accorded the Company or any of the Company’s securities or in
the rating outlook for the Company by any “nationally recognized
statistical rating organization,” as such term is defined for
purposes of Rule 436(g)(2) under the Securities Act; and




          (ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Preliminary Memorandum
provided to prospective purchasers of the Securities that, in
your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Securities on the
terms and in the manner contemplated in the Final Memorandum.



 









 






     (b) The Initial Purchaser shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in Section 5(a)(i) and to the
effect that the representations and warranties of the Company contained
in this Agreement are true and correct as of the Closing Date and that
the Company has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied hereunder on or
before the Closing Date.




     The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.




     (c) The Initial Purchaser shall have received on the Closing Date
an opinion of Gibson, Dunn & Crutcher LLP, outside counsel for the
Company, dated the Closing Date, to the effect set forth in Exhibit A.
Such opinion shall be rendered to the Initial Purchaser at the request
of the Company and shall so state therein.




     (d) The Initial Purchaser shall have received on the Closing Date
an opinion of Richard J. Kennedy, Vice President, General Counsel and
Secretary of the Company, dated the Closing Date, to the effect set
forth in Exhibit B. Such opinion shall be rendered to the Initial
Purchaser at the request of the Company and shall so state therein




     (e) The Initial Purchaser shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Initial Purchaser,
dated the Closing Date, to the effect set forth in Exhibit C.




     (f) The Initial Purchaser shall have received on each of the date
hereof and the Closing Date a letter, dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Initial Purchaser, from KPMG, independent public accountants,
containing statements and information of the type ordinarily included in
accountants’ “comfort letters” to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into each Memorandum; provided that the letter
delivered on the Closing Date shall use a “cut-off date” not earlier
than the date hereof.




     (g) The “lock-up” agreements, each substantially in the form of
Exhibit D hereto, between the Initial Purchaser and certain
shareholders, officers and directors of the Company relating to sales
and certain other dispositions of shares of common stock or certain
other securities, delivered to the Initial Purchaser on or before the
date hereof, shall be in full force and effect on the Closing Date.



 









 





     The obligation of the Initial Purchaser to purchase Additional Securities
hereunder is subject to the delivery to the Initial Purchaser on the applicable
Option Closing Date of such documents as it may reasonably request with respect
to the good standing of the Company, the due authorization, execution and
authentication of the Additional Securities to be sold on such Option Closing
Date and other matters related to the execution and authentication of such
Additional Securities.



     6. Covenants of the Company. In further consideration of the agreements of
the Initial Purchaser contained in this Agreement, the Company covenants with
the Initial Purchaser as follows:




     (a) To furnish to the Initial Purchaser in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c), 1,100 copies of the Final Memorandum and any supplements
and amendments thereto as the Initial Purchaser may reasonably request.




     (b) Before amending or supplementing either Memorandum, to furnish
to the Initial Purchaser a copy of each such proposed amendment or
supplement and not to use any such proposed amendment or supplement to
which the Initial Purchaser reasonably objects.




     (c) If, during such period after the date hereof and prior to the
date on which all of the Securities shall have been sold by the Initial
Purchaser, any event shall occur or condition exist as a result of which
it is necessary to amend or supplement the Final Memorandum in order to
make the statements therein, in the light of the circumstances when the
Final Memorandum is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Initial Purchaser, it is necessary to
amend or supplement the Final Memorandum to comply with applicable law,
forthwith to prepare and furnish, at its own expense, to the Initial
Purchaser, either amendments or supplements to the Final Memorandum so
that the statements in the Final Memorandum as so amended or
supplemented will not, in the light of the circumstances when the Final
Memorandum is delivered to a purchaser, be misleading or so that the
Final Memorandum, as amended or supplemented, will comply with
applicable law.




     (d) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser shall reasonably request.



 









 






     (e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under
this Agreement, including: (i) the fees, disbursements and expenses of
the Company’s counsel and the Company’s accountants in connection with
the issuance and sale of the Securities and all other fees or expenses
in connection with the preparation of each Memorandum and all amendments
and supplements thereto, including all printing costs associated
therewith, and the delivering of copies thereof to the Initial
Purchaser, in the quantities herein above specified, (ii) all costs and
expenses related to the transfer and delivery of the Securities to the
Initial Purchaser, including any transfer or other taxes payable
thereon, (iii) the cost of printing or producing any Blue Sky or legal
investment memorandum in connection with the offer and sale of the
Securities under state securities laws and all expenses in connection
with the qualification of the Securities for offer and sale under state
securities laws as provided in Section 6(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the
Initial Purchaser in connection with such qualification and in
connection with the Blue Sky or legal investment memorandum, (iv) the
fees and expenses, if any, incurred in connection with the admission of
the Securities for trading in PORTAL or any appropriate market system,
(v) the costs and charges of the Trustee and any transfer agent,
registrar or depositary, (vi) the cost of the preparation, issuance and
delivery of the Securities, (vii) the document production charges and
expenses associated with printing this Agreement and (viii) all other
cost and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 8, and the last paragraph of Section 10, the Initial
Purchaser will pay all of their costs and expenses, including fees and
disbursements of their counsel, transfer taxes payable on resale of any
of the Securities by them and any advertising expenses connected with
any offers they may make.




     (f) Neither the Company nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which could be integrated
with the sale of the Securities in a manner which would require the
registration under the Securities Act of the Securities.




     (g) Not to solicit any offer to buy or offer or sell the Securities
or the Underlying Securities by means of any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the



 









 






Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act.




     (h) While any of the Securities or the Underlying Securities remain
“restricted securities” within the meaning of the Securities Act, to
make available, upon request, to any seller of such Securities the
information specified in Rule 144A(d)(4) under the Securities Act,
unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.




     (i) If requested by the Initial Purchaser, to use its reasonable
best efforts to permit the Securities to be designated PORTAL securities
in accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the
PORTAL Market.




     (j) During the period of two years after the Closing Date or any
Option Closing Date, if later, the Company will not, and will not permit
any of its affiliates (as defined in Rule 144 under the Securities Act)
to resell any of the Securities or the Underlying Securities which
constitute “restricted securities” under Rule 144 that have been
reacquired by any of them.




     (k) Not to take any action prohibited by Regulation M under the
Exchange Act in connection with the distribution of the Securities
contemplated hereby.



     7. Offering of Securities; Restrictions on Transfer. (a) The Initial
Purchaser represents and warrants that it is a qualified institutional buyer as
defined in Rule 144A under the Securities Act (a “QIB”). The Initial Purchaser
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, such Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it will solicit offers for such Securities only
from, and will offer such Securities only to, persons that it reasonably
believes to be QIBs.



     8. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless the Initial Purchaser, each person, if any, who controls the
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, and each affiliate of the Initial Purchaser
within the meaning of Rule 405 under the Securities Act from and against any
and all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue




 









 





statement of a material fact
contained in either Memorandum (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact necessary to make
the statements therein in the light of the circumstances under which they were
made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Initial
Purchaser furnished to the Company in writing by the Initial Purchaser
expressly for use therein.



     (b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to the Initial Purchaser, but only with reference to
information relating to the Initial Purchaser furnished to the Company in
writing by or on behalf of the Initial Purchaser expressly for use in either
Memorandum or any amendments or supplements thereto.



     (c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the “indemnified party”)
shall promptly notify the person against whom such indemnity may be sought (the
“indemnifying party”) in writing and the indemnifying party, upon request of
the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the Initial Purchaser, in
the case of parties indemnified pursuant to Section 8(a), and by the Company,
in the case of parties indemnified pursuant to Section 8(b). The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written



 









 





consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.



     (d) To the extent the indemnification provided for in Section 8(a) or 8(b)
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchaser on
the other hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company on the
one hand and of the Initial Purchaser on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Initial
Purchaser on the other hand in connection with the offering of the Securities
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of the Securities (before deducting expenses) received by the
Company and the total discounts and commissions received by the Initial
Purchaser as set forth in the Final Memorandum, bear to the aggregate offering
price of the Securities. The relative fault of the Company on the one hand and
of the Initial Purchaser on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Initial Purchaser and the
parties’ relative



 









 





intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.



     (e) The Company and the Initial Purchaser agree that it would not be just
or equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in Section 8(d) shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total price at which the Securities resold
by it in the initial placement of such Securities were offered to investors
exceeds the amount of any damages that the Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.



     (f) The indemnity and contribution provisions contained in this Section 8
and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation
made by or on behalf of the Initial Purchaser, any person controlling the
Initial Purchaser or any affiliate of the Initial Purchaser or by or on behalf
of the Company, its officers or directors or any person controlling the Company
and (iii) acceptance of and payment for any of the Securities.



     9. Termination. The Initial Purchaser may terminate this Agreement by
notice given to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on, or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the Nasdaq National Market,
the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade, (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
material disruption in securities settlement, payment or clearance services in
the United States shall have occurred, (iv) any moratorium on
commercial banking activities shall have been declared by Federal or New
York State authorities or (v) there shall have occurred any outbreak or
escalation of



 









 





hostilities, or any change in financial markets or any calamity
or crisis that, in the judgment of the Initial Purchaser, is material and
adverse and which, singly or together with any other event specified in this
clause (v), makes it, in the judgment of the Initial Purchaser, impracticable
or inadvisable to proceed with the offer, sale or delivery of the Securities on
the terms and in the manner contemplated in the Final Memorandum.



     10. Effectiveness; Effect of Termination. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.



     If this Agreement shall be terminated by the Initial Purchaser because of
any failure or refusal on the part of the Company to comply with the terms or
to fulfill any of the conditions of this Agreement, or if for any reason the
Company shall be unable to perform its obligations under this Agreement, the
Company will reimburse the Initial Purchaser for all out-of-pocket expenses
(including the fees and disbursements of their counsel) reasonably incurred by
the Initial Purchaser in connection with this Agreement or the offering
contemplated hereunder. If this Agreement is terminated by reason of the
default of the Initial Purchaser, the Company shall not be obligated to
reimburse the Initial Purchaser on account of such expenses.



     11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.



     12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.



     13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.



 









 





	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	ATLANTIC COAST AIRLINES HOLDINGS, INC.
	 
	 	 
	

	 	By:



	

	 	Name:
	

	 	Title:
	 
	 	 
	Accepted as of the date hereof
	 	 
	 
	 	 
	MORGAN STANLEY & CO. INCORPORATED
	 	 
	 
	 	 
	By: 

Name:
	 	 
	Title:
	 	 







 









 






EXHIBIT A




OPINION OF GIBSON, DUNN & CRUTCHER LLP




     The opinion of Gibson, Dunn & Crutcher, LLP, to be delivered pursuant to
Section 5(c) of the Purchase Agreement shall be to the effect that:



     A. The Purchase Agreement has been duly authorized, executed and delivered
by the Company.



     B. The shares of common stock of the Company initially issuable upon
conversion of the Securities have been duly authorized and reserved for
issuance and, when issued and delivered in accordance with the provisions of
the Securities and the Indenture, will be validly issued, fully paid and
non-assessable.



     C. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchaser in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to the effects of
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally and equitable principles of general applicability and will be
entitled to the benefits of the Indenture and the Registration Rights Agreement
pursuant to which such Securities are to be issued.



     D. Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms, subject to
the effects of applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and equitable principles of general applicability
and except that such counsel shall render no opinion regarding rights to
indemnification and contribution under the Registration Rights Agreement.



     E. The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Purchase Agreement, the Indenture,
the Registration Rights Agreement and the Securities will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or, to the best of such counsel’s knowledge, any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
identified in the Company’s most recent SEC filing on Form 10-K as constituting
an agreement material to the Company and its subsidiaries, taken as a whole,
or, to the best of such counsel’s knowledge, any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any U.S. or New York state governmental body or agency is
required for the



 









 





performance by the Company of its obligations under the Purchase
Agreement, the Indenture , the Registration Rights Agreement or the Securities,
except such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Securities and by
Federal and state securities laws with respect to the Company’s obligations
under the Registration Rights Agreement.



     F. The Company is not, and after giving effect to the offering and sale of
the Securities and the application of the proceeds thereof as described in the
Final Memorandum will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.



     G. Based upon the representations, warranties and agreements of the
Company in Sections 1(p), 1(r), 6(f) and 6(g) of the Purchase Agreement and of
the Initial Purchaser in Section 7 of the Purchase Agreement, it is not
necessary in connection with the offer, sale and delivery of the Securities to
the Initial Purchaser under the Purchase Agreement or in connection with the
initial resale of such Securities by the Initial Purchaser in accordance with
Section 7 of the Purchase Agreement to register the Securities under the
Securities Act of 1933 or to qualify the Indenture under the Trust Indenture
Act of 1939, it being understood that no opinion is expressed as to any
subsequent resale of any Security or Underlying Security.



          In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent auditors of the Company and the Initial
Purchaser’s representatives and their counsel at which the contents of the
Memorandum and related matters were discussed. Because the purpose of such
counsel’s professional engagement was not to establish or confirm factual
matters and because the scope of such counsel’s examination of the affairs of
the Company did not permit us to verify the accuracy, completeness or
fairness of the statements set forth in the Memorandum, such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Memorandum except
insofar as such statements specifically relate to us and except to the extent
set forth in clause (G) above.



          In addition, such counsel shall also state that on the basis of the
foregoing, and except for the financial statements and schedules and the
notes thereto, no facts have come to such counsel’s attention that would lead
such counsel to believe that the Memorandum as of the date thereof or as of
the Closing Date contains an untrue statement of a material fact or omitted
or omits, as the case may be, to state a material fact necessary in order to
make the



2









 





statements therein, in the light of the circumstances under which they
were made, not misleading.



          In addition, such counsel shall also state that on the basis of the
foregoing and in reliance thereon, and subject to the assumptions,
exceptions, qualifications and limitations set forth in the letter, such
counsel is of the opinion that (i) insofar as the statements in the Final
Memorandum under the captions “Description of Securities,” “Description of
Capital Stock” and “Plan of Distribution” (but only as to the description of
the Purchase Agreement and the Lock-up Agreement) purport to describe
specific provisions of the Securities, the Stock and the legal matters or
documents described therein, such statements present in all material respects
an accurate summary of such provisions, (ii) insofar as the statements in the
Final Memorandum under the caption “Certain United States Federal Income Tax
Considerations” purport to describe the provisions of the United States
federal tax laws referred to therein, such statements present in all material
respects an accurate summary of such provisions, and (iii) the Exchange Act
Reports when they were filed with the Commission, complied on their face as
to form in all material respects with the requirements of the Exchange Act,
and the rules and regulations of the Commission thereunder.



          With respect to all of the above, such counsel shall express no opinion or
belief concerning the financial statements (and related notes thereto) and
schedules and other information of an accounting or financial nature included
or incorporated by reference in the Memorandum or documents incorporated by
reference therein, or omitted therefrom.



3









 





EXHIBIT B




OPINION OF RICHARD J. KENNEDY




     The opinion of Richard J. Kennedy, to be delivered pursuant to Section
5(d) of the Purchase Agreement shall be to the effect that:



     A. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, with the requisite the corporate power and authority to own its
property and to conduct its business as described in the Final Memorandum.



     B. Each subsidiary of the Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own its property and to conduct its business as described in the
Final Memorandum; all of the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are fully paid
and non-assessable, and are owned directly by the Company, free and clear of
all liens, encumbrances, equities or claims.



     C. The statements relating to legal matters, documents or proceedings in
“Item 3 — Legal Proceedings” of the Company’s most recent annual report on Form
10-K included or incorporated by reference in the Final Memorandum, fairly
summarize in all material respects such matters, documents or proceedings and
includes all information that is required to be disclosed under Item 103 of
Regulation S-K and such counsel does not know of any other legal or
governmental proceedings pending or to his knowledge threatened to which the
Company or any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject proceedings, which such
counsel believes are likely to have a material adverse effect on the power or
ability of the Company to perform its obligations under the Purchase Agreement,
the Indenture, the Registration Rights Agreement or the Securities or to
consummate the transactions contemplated by the Final Memorandum.



 









 





EXHIBIT C




OPINION OF DAVIS POLK & WARDWELL




     The opinion of Davis Polk & Wardwell to be delivered pursuant to Section
5(e) of the Purchase Agreement shall be to the effect that:



     A. The Purchase Agreement has been duly authorized, executed and delivered
by the Company.



     B. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchaser in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally
and equitable principles of general applicability, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement pursuant to
which such Securities are to be issued.



     C. The Underlying Securities issuable upon conversion of the Securities
have been duly authorized and reserved and, when issued upon conversion of the
Securities in accordance with the terms of the Securities, will be validly
issued, fully paid and non-assessable, and the issuance of the Underlying
Securities will not be subject to any preemptive or similar rights.



     D. Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally and equitable principles of general applicability, and except as
rights to indemnification and contribution under the Registration Rights
Agreement may be limited under applicable law.



     E. The statements relating to legal matters, documents or proceedings
included in the Final Memorandum under the captions “Description of
Securities,” “Description of Capital Stock,” “Plan of Distribution” and
“Transfer Restrictions,” fairly summarize in all material respects such
matters, documents or proceedings.



     F. Nothing has come to the attention of such counsel to cause such counsel
to believe that (except for the financial statements and financial schedules
and other financial and statistical data, as to which such counsel need not
express any belief) the Final Memorandum when issued contained, or as of the
date such opinion is delivered contains, any untrue statement of a material
fact or omitted or



2









 





omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.



     With respect to the matters referred to in the paragraph above, Davis Polk
& Wardwell may state that their beliefs are based upon their participation in
the preparation of the Final Memorandum (and any amendments or supplements
thereto) and review and discussion of the contents thereof (including the
review of, but not participation in the preparation of, the incorporated
documents), but are without independent check or verification except as
specified.



     G. Based upon the representations, warranties and agreements of the Company in
Sections 1(p), 1(r), 6(f) and 6(g) of the Purchase Agreement and of the
Initial Purchaser in Section 7 of the Purchase Agreement, it is not necessary
in connection with the offer, sale and delivery of the Securities to the
Initial Purchaser under the Purchase Agreement or in connection with the
initial resale of such Securities by the Initial Purchaser in accordance with
Section 7 of the Purchase Agreement to register the Securities under the
Securities Act of 1933 or to qualify the Indenture under the Trust Indenture
Act of 1939, it being understood that no opinion is expressed as to any
subsequent resale of any Security or Underlying Security.



3









 





EXHIBIT D




[FORM OF LOCK-UP LETTER]




February  , 2004




Morgan Stanley & Co. Incorporated

1585 Broadway

New York, NY 10036




Dear Sirs and Mesdames:




     The undersigned understands that Morgan Stanley & Co. Incorporated
(“Morgan Stanley”) proposes to enter into a Purchase Agreement (the “Purchase
Agreement”) with Atlantic Coast Airlines Holdings Inc., a Delaware corporation
(the “Company”), providing for the offering (the “Offering”) by Morgan Stanley,
of $125,000,000 principal amount of Convertible Debt Securities of the Company
(the “Securities”). The Securities will be convertible into shares of Common
Stock par value $0.02 of the Company (the “Common Stock”).



     To induce Morgan Stanley to continue their efforts in connection with the
Offering, the undersigned hereby agrees that, without the prior written consent
of Morgan Stanley, it will not, during the period commencing on the date hereof
and ending 90 days after the date of the final offering memorandum relating to
the Offering (the “Final Memorandum”), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (a) the sale of any
Securities to Morgan Stanley pursuant to the Purchase Agreement or (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Offering; (c) the transfer
of shares of Common Stock as a bona fide gift or gifts, provided that the donee
or donees thereof agree to be bound in writing by the restrictions set forth
herein; or (d) transfers of shares of Common Stock or Common Stock equivalents
to a trust where the beneficiaries of the trust



 









 





are drawn solely from a group consisting of the undersigned and immediate
family members of the undersigned provided that (i) the trust agrees to enter
into a lock-up letter substantially in the form of this letter and (ii) the
undersigned shall not be required to, and shall not voluntarily, file a report
on Form 4 under Section 16(a) of the Securities Exchange Act of 1934 reporting
a reduction in beneficial ownership of shares of Common Stock during the
restricted period referred in the foregoing sentence. Immediate family member
of a person means the spouse, lineal descendants, father, mother, brother,
sister, father-in-law, mother-in-law, brother-in-law and sister-in-law of such
person



     In addition, the undersigned agrees that, without the prior written
consent of Morgan Stanley, it will not, during the period commencing on the
date hereof and ending 90 days after the date of the Final Memorandum, make any
demand for or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. The undersigned also agrees and consents to the
entry of stop transfer instructions with the Company’s transfer agent and
registrar against the transfer of the undersigned’s shares of Common Stock
except in compliance with the foregoing restrictions.



     The undersigned understands that the Company and Morgan Stanley are
relying upon the agreement set forth in this letter (the “Lock-Up Agreement”)
in proceeding toward consummation of the Offering. The undersigned further
understands that this Lock-Up Agreement is irrevocable and shall be binding
upon the undersigned’s heirs, legal representatives, successors and assigns.



     Notwithstanding anything to the contrary herein, this Lock-Up Agreement
shall terminate on March 15, 2004, in the event the closing of the Offering has
not been consummated on or before such date. Whether or not the Offering
actually occurs depends on a number of factors, including market conditions.
Any Offering will only be made pursuant to a Purchase Agreement, the terms of
which are subject to negotiation between the Company and Morgan Stanley.



     This Lock-Up Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflict of laws.



	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	

	

	 	(Name)
	 
	 	 
	

	 	

	

	 	(Address)